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As filed with the Securities and Exchange Commission on July 25, 2006

Registration No. 333-134669

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2
to
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

AIRCASTLE LIMITED

(Exact name of registrant as specified in its charter)


Bermuda 7359 98-0444035
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)

c/o Aircastle Advisor LLC
300 First Stamford Place
5th Floor
Stamford, Connecticut 06902
(203) 504-1020

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

David Walton, Esq.
Chief Operating Officer and General Counsel
c/o Aircastle Advisor LLC
300 First Stamford Place
5th Floor
Stamford, Connecticut 06902
(203) 504-1020

(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)

Copies to:


Joseph A. Coco, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
(212) 735-3000
Edward F. Petrosky, Esq.
J. Gerard Cummins, Esq.
Sidley Austin LLP
787 Seventh Avenue
New York, New York 10019
(212) 839-5300

Approximate date of commencement of proposed sale to the public:     As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ]

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

Calculation of Registration Fee


Title of Each Class of
Securities to be Registered
Proposed Maximum
Aggregate
Offering Price (1)(2)
Amount of
Registration
Fee (1)(3)
Common shares, par value $0.01 per share $ 230,000,000
$ 24,610
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any.
(3) $18,725 has been previously paid. $5,885 is being paid herewith.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   




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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities, in any state or jurisdiction where the offer or sale is not permitted.

Subject to completion, dated July 25, 2006.

Prospectus

9,090,900 shares

Aircastle Limited

Common shares

This is an initial public offering of common shares of Aircastle Limited.

All of the common shares are being sold by Aircastle. After this offering, funds managed by affiliates of Fortress Investment Group LLC will beneficially own approximately 80% of Aircastle's common shares. These funds are not selling any shares in this offering.

Prior to this offering, there has been no public market for the common shares. It is currently estimated that the public offering price per share will be between $21.00 and $23.00. Aircastle has applied to list the common shares on the New York Stock Exchange under the symbol ‘‘AYR.’’


  Per Share Total
Public offering price $         
$         
Underwriting discounts and commissions $
$
Proceeds to Aircastle (before expenses) $
$

We have granted the underwriters a 30-day option to purchase up to 1,363,635 additional common shares at the public offering price less underwriting discounts and commissions for the purpose of covering over-allotments, if any.

Investing in our common shares involves a high degree of risk. See ‘‘Risk Factors’’ beginning on page 11.

Neither the Securities and Exchange Commission, state securities regulators, the Minister of Finance and the Registrar of Companies in Bermuda, the Bermuda Monetary Authority nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares against payment in New York, New York on            , 2006.


JPMorgan Bear, Stearns & Co. Inc. Citigroup

Calyon Securities (USA) Inc. Deutsche Bank Securities

        , 2006




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We have not authorized anyone to provide you with different information or to make representations as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus may be used only where it is legal to sell these securities. The information in this prospectus is only accurate on the date of this prospectus.

Consent under the Exchange Control Act 1972 (and its related regulations) has been obtained from the Bermuda Monetary Authority for the issue and transfer of our common shares to and between non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock exchange, which includes the New York Stock Exchange, or NYSE. This prospectus will be filed with the Registrar of Companies in Bermuda in accordance with Bermuda law. In granting such consent and in accepting this prospectus for filing, neither the Bermuda Monetary Authority nor the Registrar of Companies in Bermuda accepts any responsibility for our financial soundness or the correctness of any of the statements made or opinions expressed in this prospectus.




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Prospectus Summary

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the section entitled ‘‘Risk Factors’’ and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision to purchase common shares. Unless the context suggests otherwise, references in this prospectus to ‘‘Aircastle,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us,’’ and ‘‘our’’ refer to Aircastle Limited and its subsidiaries. References in this prospectus to ‘‘AL’’ refer only to Aircastle Limited. References in this prospectus to ‘‘Aircastle Bermuda’’ refer to Aircastle Holding Corporation Limited and its subsidiaries. References in this prospectus to ‘‘Fortress’’ refer to Fortress Investment Group LLC, affiliates of which manage the Fortress shareholders, and certain of its affiliates and references to the ‘‘Fortress shareholders’’ refer to AL shareholders which are affiliates of Fortress. Throughout this prospectus, when we refer to our aircraft, we include aircraft that we have transferred into grantor trusts or similar entities, for purposes of financing such assets through securitization. These grantor trusts or similar entities are consolidated for purposes of our financial statements. All amounts in this prospectus are expressed in U.S. dollars and the financial statements have been prepared in accordance with U.S. generally accepted accounting principles (‘‘GAAP’’).

Aircastle Limited

We are a global company that acquires and leases high-utility commercial jet aircraft to passenger and cargo airlines throughout the world. High-utility aircraft are generally modern, operationally efficient jets with a large operator base and long useful lives. As of March 31, 2006, our aircraft portfolio consisted of 42 aircraft that were leased to 24 lessees located in 16 countries and managed through our offices in the United States, Ireland and Singapore. All of our aircraft are subject to net operating leases whereby the lessee is generally responsible for maintaining the aircraft and paying operational and insurance costs although, in a majority of cases, we are obligated to pay a portion of specified maintenance or modification costs. We also make investments in other aviation assets, including debt securities secured by commercial jet aircraft. As of July 18, 2006, we had acquired and committed to acquire aviation assets having an aggregate purchase price equal to $1.3 billion and $305.3 million, respectively, for a total of approximately $1.6 billion. In addition, as of July 18, 2006, we have entered into non-binding letters of intent to acquire an additional 8 aircraft subject to lease. These letters of intent will not become binding commitments for us or the seller until internal approvals, due diligence and certain other steps are completed. Our revenues and income from continuing operations for the quarter ended March 31, 2006 were $33.0 million and $7.8 million, respectively.

We expect to benefit from the size and growth of the commercial aircraft market and to increase our revenues and earnings by acquiring additional aviation assets. The current worldwide commercial aircraft fleet consists of more than 17,000 aircraft with an aggregate estimated value in excess of $330 billion and is expected to grow at a compound annual growth rate of 6.1% through 2015. The market is highly fragmented, with over 1,800 owners. Operating lessors, including us, own approximately 30.1% of the global fleet. The continued growth in air traffic, driven in large part by emerging markets with strong economic growth and rising levels of per capita air travel, has increased the demand, and lease rates, for certain high-utility aircraft types.

We intend to pay regular quarterly dividends to our shareholders. We plan to grow our dividends per share through the acquisition of additional aviation assets using cash on hand and available credit facilities. We expect to finance our acquisitions on a long-term basis using low-cost, non-recourse securitizations. Securitizations allow companies to raise long-term capital by

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pledging cash flows of an asset pool, such as aircraft leases. In June 2006, we closed our first securitization, a $560 million transaction comprising 40 aircraft, which we refer to as Securitization No. 1. On July 20, 2006, our board of directors declared a dividend of $0.35 per common share for the three months ended June 30, 2006, which is payable on July 31, 2006. In addition, our board of directors is expected to declare a dividend of $0.175 per common share to shareholders of record as of August 1, 2006, which is payable on August 15, 2006, for the period commencing on July 1, 2006 and ending on August 15, 2006. We are paying this dividend so that holders of our common shares prior to this offering will receive a distribution for the period prior to this offering. These dividends may not be indicative of the amount of any future dividends.

Competitive Strengths

We believe that the following competitive strengths will allow us to capitalize on the growth opportunities in the global aviation industry:

•  Diversified portfolio of high-utility aircraft.     We have a portfolio of 42 high-utility aircraft, as of March 31, 2006, that is diversified with respect to geographic markets, lease maturities and aircraft type. Our lease expirations are well dispersed, with a weighted average remaining lease term of 4.2 years at March 31, 2006, and only six of our aircraft require re-deployment within the next 12 months. We believe that our focus on portfolio diversification reduces the risks associated with lessee defaults and any adverse geopolitical or economic issues and results in generally predictable cash flows.
•  Disciplined acquisition approach and broad sourcing network.     We evaluate the risk-adjusted return of any potential acquisition first as a discrete investment and then from a portfolio management perspective. To evaluate potential acquisitions, we employ a rigorous due diligence process focused on: (i) cash flow generation with careful consideration of macro trends, industry cyclicality and product life cycles; (ii) aircraft specifications and maintenance condition; (iii) when applicable, lessee credit worthiness and the local jurisdiction's rules for enforcing a lessor's rights; and (iv) legal and tax implications. We source our acquisitions through well-established relationships with airlines, other aircraft lessors, financial institutions and other aircraft owners.
•  Scaleable business platform.     We operate globally through offices in the United States, Ireland and Singapore, using a modern asset management system designed specifically for aircraft operating lessors and capable of handling a significantly larger aircraft portfolio. We believe that our facilities, systems and personnel currently in place are capable of supporting an increase in our revenue base and asset base without a proportional increase in overhead costs.
•  Experienced management team with significant technical expertise.     Our management team has significant experience in the acquisition, leasing, financing, technical management, restructuring/repossession and sale of aviation assets.
•  Innovative long-term debt financing structure.     We closed Securitization No. 1 on June 15, 2006. We have structured the securitization to provide for the release to us during the first five years of the cash flows attributable to the underlying aircraft after payment of expenses, interest and scheduled principal payments.

Growth Strategy

We plan to grow our business and increase our dividends per share by employing the following business strategies:

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•  Selectively acquire commercial jet aircraft and other aviation assets.     We believe the large and growing aircraft market provides significant acquisition opportunities. We plan to leverage our experience to make opportunistic acquisitions of other asset-backed aviation assets, including debt securities secured by aviation assets and other non-aircraft aviation assets. As of July 18, 2006, we had acquired or committed to acquire approximately $1.6 billion in aviation assets in 34 separate transactions.
•  Reinvest amounts approximately equal to non-cash depreciation expense in additional aviation assets.     Through our strategy of reinvesting amounts approximately equal to non-cash depreciation expense, we will seek to maintain our asset base and grow our dividends.
•  Maintain an efficient capital structure.     We expect to finance acquisitions on a long-term basis using aircraft lease portfolio securitizations. We believe that our long-term debt structure and dividend payment strategy result in a low cost of capital and a high degree of financial flexibility, allowing us to grow our business and dividends.

Industry Trends

The following industry dynamics create a favorable environment in which to expand our business, including:

•  Large and growing commercial aircraft fleet.     The current worldwide commercial aircraft fleet consists of more than 17,000 aircraft with an aggregate estimated value in excess of $330 billion. According to The Airline Monitor, the worldwide commercial aircraft fleet is expected to increase to approximately 23,000 aircraft by 2015.
•  Increasing use of operating leases.     The high cost of aircraft fleet renewal and expansion, and the competitive environment of the commercial airline industry have led many airlines to outsource aircraft ownership to operating lessors like us. Over the last ten years, the percentage of the global commercial aircraft fleet owned by operating lessors increased from 17.6% to 30.1%, while the percentage owned by airlines declined from 55.5% to 48.4%. Operating leasing is an attractive alternative to ownership for airlines because leasing (i) increases fleet flexibility, (ii) requires a lower capital commitment and (iii) significantly reduces aircraft residual value risk.
•  Increasing air traffic and demand for commercial aircraft.     Global passenger and cargo traffic has grown rapidly in recent years, driven by factors such as globalization, strong economic growth in developing countries, and liberalization of global aviation markets. According to the Economist Intelligence Unit, over the next five years global gross domestic product, or GDP, is expected to grow at an average rate of 4.2% per year. Since 1994, for every 1.0% increase in global GDP, passenger and freight traffic have, on average, grown by 1.4% and 1.6%, respectively.
•  Improving lease rates.     Following a downturn from 2001 to 2003, the global commercial aviation industry has experienced a broad based recovery of aircraft values and lease rates. The relative increase in lease rates, however, has exceeded the increase in values for certain aircraft types. As a result, lease rate factors, or the ratio between lease rates and current market values, have been increasing for popular aircraft models such as 737 classics, A320s and 767-300ERs. It is possible, however, that higher lease rates could drive demand toward other aircraft models, new aircraft orders or other financing alternatives, and away from operating leasing for one or more of these popular aircraft models.

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Recent Developments

    Securitization

On June 15, 2006 we closed Securitization No. 1. The securitization generated gross proceeds of $560 million through the issuance of floating-rate aircraft lease-backed securities. We expect to refinance the securitization on or prior to June 2011. We have entered into a series of interest rate hedging contracts which result in a fixed-rate financing cost of 6.6% per annum, including recurring administrative costs and amortization of issuance expenses. The obligations under the aircraft lease-backed securities are secured by the ownership interests in our subsidiaries that own 40 of our aircraft, or Portfolio No. 1, and the related aircraft leases. A portion of the proceeds from Securitization No. 1 were used to repay amounts outstanding under our $525 million senior secured credit facility, which we refer to as Credit Facility No.1.

The aircraft in Portfolio No. 1 had an aggregate initial appraised value, or Initial Appraised Value, of $1.022 billion, based on the lesser of the mean and the median of the base values with respect to such aircraft determined in three base value appraisals from three internationally recognized appraisal firms as of dates from October to December 2005.

    Second Quarter Financial Results

Our net income for the quarter ended June 30, 2006 was $5.1 million. Revenues for the quarter ended June 30, 2006 were $42.1 million. Revenues for the six months ended June 30, 2006 were $75.1 million. EBITDA for the quarter ended June 30, 2006 was $30.2 million and included $4.3 million of expense related to common shares purchased by employees and a director nominee and $1.8 million of charges related to the write-off of deferred fees related to Credit Facility No. 1. Our basic and diluted income per share from net income for the quarter ended June 30, 2006 was $0.12 and $0.11, respectively.

A reconciliation of EBITDA to net income for the quarter ended June 30, 2006 is as follows:


  Three Months
Ended
June 30, 2006
  (in thousands)
Net income $ 5,050
Depreciation 11,848
Amortization (1,515
)
Interest, net 13,164
Income tax provision 1,663
EBITDA $ 30,210

Please see ‘‘Summary Consolidated Financial Information’’ for a discussion of EBITDA as a non-GAAP financial measure and how management uses EBITDA.

Fortress

Fortress is a leading global alternative investment management firm founded in 1998 with over $21 billion of equity capital currently under management. Fortress is headquartered in New York City and has affiliates with offices in Dallas, Frankfurt, Geneva, Hong Kong, London, Rome, San Diego, Sydney and Toronto. Fortress manages capital for a diverse group of investors, including pension funds, university endowments and foundations, financial institutions, funds-of-funds and high-net-worth individuals.

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Additional Information

We are a Bermuda exempted company and were incorporated on October 29, 2004 under the provisions of Section 14 of the Companies Act 1981 of Bermuda. To date, Fortress has contributed approximately $400 million in equity capital to us. Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda, and our principal executive offices are located at c/o Aircastle Advisors LLC, 300 First Stamford Place, 5th Floor, Stamford, Connecticut 06902. Our subsidiaries also maintain offices at Harcourt Centre, Harcourt Road, Dublin 2 Ireland; and 6 Battery Road, #30-00, Singapore, 049909. Our main telephone number is 203-504-1020. Our internet address is www.aircastle.com. Information on our website does not constitute part of this prospectus.

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The Offering

Common shares offered by us in this offering 9,090,900 shares
Common shares to be issued and outstanding after this offering 50,082,900 shares
Use of proceeds We expect to use the net proceeds from this offering to repay approximately $143.2 million of the amount outstanding under our $750 million senior secured revolving credit facility, which we refer to as Credit Facility No. 2, and for general corporate purposes. See ‘‘Use of Proceeds.’’
Dividend policy On July 20, 2006, our board of directors declared a dividend of $0.35 per common share, or an aggregate of $14.4 million, for the three months ended June 30, 2006, which is payable on July 31, 2006. In addition, our board of directors is expected to declare a dividend of $0.175 per common share, or an aggregate of $7.2 million, to shareholders of record as of August 1, 2006, which is payable on August 15, 2006, for the period commencing on July 1, 2006 and ending on August 15, 2006. We are paying this dividend so that holders of our common shares prior to this offering will receive a distribution for the period prior to this offering. These dividends may not be indicative of the amount of any future dividends. Purchasers in this offering will not be entitled to receive these dividends. We intend to continue to pay regular quarterly dividends to our shareholders. We plan to grow our dividends through the acquisition of additional aviation assets. The payment of dividends is subject to the discretion of our board of directors and will depend on many factors, including our ability to make and finance acquisitions, our ability to negotiate favorable lease and other contractual terms, the financial condition and liquidity of our lessees, unexpected or increased expenses, the level and timing of capital expenditures, principal repayments and other capital needs, the value of our aircraft portfolio, our results of operations, financial condition and liquidity, general business conditions, restrictions imposed by financing arrangements, legal restrictions on the payment of dividends and other factors that our board of directors deems relevant. In any quarterly period, we may pay dividends in excess of net income for such period as determined in accordance

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with GAAP. See ‘‘Dividend Policy.’’ We expect that our dividends will not be eligible for either the dividends-received deduction for corporate U.S. Holders or treatment as ‘‘qualified dividend income’’ (which is taxable at rates generally applicable to long-term capital gains) for U.S. Holders taxed as individuals.
Proposed New York Stock Exchange symbol ‘‘AYR’’
Risk factors Please read the section entitled ‘‘Risk Factors’’ beginning on page 11 for a discussion of some of the factors you should carefully consider before deciding to invest in our common shares.
Important tax considerations We expect that we will be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. In order to avoid possible deferred tax and interest charges under the U.S. Internal Revenue Code and regulations thereunder, you will need to make a ‘‘qualified electing fund,’’ or QEF, election, with respect to your investment in common shares and with respect to each of our PFIC subsidiaries. Investors who are U.S. persons should consult with their tax advisors as to whether or not to make such election and the related consequences and should carefully review the information set forth under ‘‘Material Tax Considerations — Material United States Federal Income Tax Considerations — Consequences to U.S. Holders — Passive Foreign Investment Company Status and Related Tax Consequences’’ for additional information.

The number of common shares to be issued and outstanding after this offering is based on 40,992,000 common shares issued and outstanding as of July 21, 2006, and excludes (i) an additional 3,138,000 common shares which remain available for issuance under our equity and incentive plan and (ii) restricted shares to be granted to certain of our directors upon the consummation of this offering. See ‘‘Management — Compensation of Directors.’’

Except as otherwise indicated, all information in this prospectus:

•  assumes an initial public offering price of $22.00 per share, the midpoint of the price range set forth on the cover page of this prospectus; and
•  assumes no exercise by the underwriters of their option to purchase an additional 1,363,635 common shares from us to cover over-allotments.

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Summary Consolidated Financial Information

The following tables summarize the consolidated financial information for our business. You should read these tables along with ‘‘Management's Discussion and Analysis of Financial Condition and Results of Operations,’’ ‘‘Business’’ and our consolidated historical and pro forma financial statements and the related notes included elsewhere in this prospectus.

We derived the summary historical consolidated statements of operations data and consolidated statements of cash flows data for the period from inception through December 31, 2004 and the year ended December 31, 2005 and the summary historical consolidated balance sheets data as of December 31, 2004 and 2005, set forth below, from our audited consolidated financial statements included elsewhere in this prospectus. AL was incorporated and commenced operations on October 29, 2004. The statements of operations data and consolidated statements of cash flows data for the three months ended March 31, 2005 and 2006 and the balance sheets data as of March 31, 2006 are derived from our unaudited consolidated interim financial statements included elsewhere in this prospectus. The results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.


  Period from
October 29
(Commencement
of Operations)
Through
December 31,
Year Ended
December 31,
Three Months
Ended March 31,
  2004 2005 2005 2006
  (Dollars in thousands, except per share data)
Consolidated Statements of Operations
Data:
       
Total revenues $ 78
$ 36,026
$ 2,187
$ 33,012
Selling, general and administrative expenses 1,117
12,595
1,548
5,954
Depreciation 390
14,460
1,462
9,915
Interest expense, net (9)
7,739
313
7,717
Income (loss) from continuing operations (1,465)
(879)
(1,374)
7,781
Discontinued operations
1,107
3,399
Net income (loss) (1,465)
228
(1,374)
11,180
Basic income (loss) per share:  
 
 
 
Income (loss) from continuing operations $ (.04)
$ (.02)
$ (.03)
$ .19
Discontinued operations $
$ .03
$
$ .08
Net income (loss) $ (.04)
$ .01
$ (.03)
$ .27
Diluted earnings (loss) per share:  
 
 
 
Income (loss) from continuing operations $ (.04)
$ (.02)
$ (.03)
$ .19
Discontinued operations $
$ .03
$
$ .08
Net income (loss) $ (.04)
$ .01
$ (.03)
$ .27
Other Operating Data:  
 
 
 
EBITDA(1) (1,054)
22,994
754
26,313
Consolidated Statements of Cash Flows Data:  
 
 
 
Cash flows provided by (used in) operating activities $ 4,290
$ 20,562
$ (1,886)
$ 13,904
Cash flows used in investing activities (97,405)
(742,144)
(51,313)
(255,159)
Cash flows provided by financing activities 93,115
801,525
96,656
188,866

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  As of December 31, As of March 31,
  2004 2005 2006
  (Dollars in thousands)
Consolidated Balance Sheets Data:  
 
 
Flight equipment held for lease, net of accumulated depreciation $ 94,430
$ 746,124
$ 941,692
Debt securities, available for sale
26,907
120,558
Total assets 104,981
967,532
1,218,462
Borrowings under credit facilities
490,588
568,859
Repurchase agreements
8,665
84,434
Shareholders' equity (2) 99,235
410,936
475,800
Other Data:  
 
 
Number of aircraft (at end of period) 3
32
42
Total debt to total capitalization N/A
54.9
%
57.9
%

(1) EBITDA is a measure of operating performance that is not calculated in accordance with GAAP. EBITDA should not be considered a substitute for net income, income from operations or cash flows provided by or used in operations, as determined in accordance with GAAP. EBITDA is a key measure of our operating performance used by management to focus on consolidated operating performance exclusive of income and expense that relate to the financing and capitalization of the business.

We define EBITDA as income (loss) from continuing operations before income taxes, interest expense and depreciation and amortization. We use EBITDA to assess our consolidated financial and operating performance, and we believe this non-GAAP measure, is helpful in identifying trends in our performance. This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed. EBITDA provides us with a measure of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our operating results. Accordingly, this metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. EBITDA is one of the metrics used by senior management and our board of directors to review the consolidated financial performance of the business.

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The table below shows the reconciliation of net income (loss) to EBITDA for the three months ended March 31, 2005 and 2006 and the period from October 29 through December 31, 2004 and the year ended December 31, 2005.


  Period from
October 29, 2004
(Commencement of
Operations) Through
December 31, 2004
Year Ended
December 31,
2005
    
    
Three Months Ended March 31,
  2005 2006
  (Dollars in thousands)
Net income (loss) $ (1,465
)
$ 228
$ (1,374
)
$ 11,180
Depreciation 390
14,460
1,462
9,915
Amortization 30
734
184
(104
)
Interest, net (9
)
7,739
313
7,717
Income tax provision
940
169
1,004
Earnings from discontinued operations, net taxes
(1,107
)
(3,399
)
EBITDA $ (1,054
)
$ 22,994
$ 754
$ 26,313

(2) The following table sets forth (a) our capitalization at March 31, 2006, (b) our pro forma capitalization as of such date to give effect to: (i) the use of a portion of proceeds from Securitization No. 1 to repay $487.0 million of indebtedness under Credit Facility No. 1 and to return $36.9 million to Fortress in exchange for the cancellation of 3,693,200 common shares; (ii) the payment of a dividend from cash on hand in the amount of $0.35 per common share, or an aggregate of $14.4 million, declared by our board of directors on July 20, 2006 and payable on July 31, 2006; (iii) the payment of a dividend from cash on hand in the amount of $0.175 per common share, or an aggregate of $7.2 million, expected to be declared by our board of directors and payable on August 15, 2006; and (iv) the purchase of 277,000 common shares by employees and a director nominee in May, 2006 and (c) our pro forma capitalization as of such date as adjusted to give effect to this offering at an assumed initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and the use of proceeds therefrom.


  Actual Pro Forma Pro Forma,
As Adjusted
 
Borrowings under credit facilities $ 568,859
$ 81,886
$ 73,332
 
Securitization debt
560,000
560,000
 
Repurchase agreements 84,434
84,434
84,434
 
Common shares 444
410
501
 
Additional paid-in capital 438,189
407,385
589,294
 
Retained earnings 9,943
(18,038
)
(18,038
)
 
Accumulated other comprehensive income 27,224
27,224
27,224
 
Total shareholders' equity 475,800
416,981
598,981
 
Total capitalization $ 1,129,093
$ 1,143,301
$ 1,316,747
 

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Risk Factors

Investing in our common shares involves a high degree of risk. You should carefully consider the following risk factors, as well as other information contained in this prospectus, before deciding to invest in our common shares. Generally, the risks facing us fall into five categories – Risks Related to Our Business, Risks Related to the Aviation Industry, Risks Related to Our Organization and Structure, Risks Related to this Offering, and Risks Related to Taxation. The occurrence of any of the following risks could materially and adversely affect our business, prospects, financial condition, results of operations and cash flow, in which case, the trading price of our common shares would decline and you could lose all or part of your investment.

Risks Related to Our Business

Risks related to our operations

We have limited operating history and we are therefore subject to the risks generally associated with the formation of any new business.

We were incorporated in October 2004, prior to which we had no operations or assets. We are therefore subject to the risks generally associated with the formation of any new business, including the risk that we will not be able to implement our business strategies. Because of our limited operating history, it will be difficult for investors to assess the quality of our management team and our results of operations, and our financial performance to date may not be indicative of our long-term future performance. Furthermore, due to the lack of comparative annual historical financial statements, investors will find it more difficult to evaluate our performance and assess our future prospects than it would be were such information available. In addition, over our brief history we have incurred net losses of approximately $1.5 million for the period from October 29, 2004 through December 31, 2004, net income of only $228,000 for the year ended December 31, 2005, and net income of approximately $11.2 million for the three months ended March 31, 2006. We may not be able to achieve, maintain and/or increase profitability in the future.

We have significant customer concentration and the loss of one or more of our major customers could have a material adverse effect on our cash flow and earnings and our ability to meet our debt obligations and pay dividends on our common shares.

Lease rental revenue from our four largest customers, US Airways, Inc., Hainan Airlines, Swiss International and Air India, accounted for 50.1% of our total revenue for the three months ended March 31, 2006. The lease rental revenue, as a percent of our total revenue, for these four customers for that period was 28.1%, 11.5%, 5.5% and 5.0%, respectively. These customers operate under 13 operating lease agreements that have terms ranging from 1.5 to 8.0 years. In addition, US Airways, Inc. reorganized under Chapter 11 in August 2002 and exited bankruptcy in March 2003. US Airways, Inc. again reorganized in September 2004 and, in September 2005, exited bankruptcy and merged with America West Airlines. The loss of one or more of these customers or their inability to make operating lease payments due to financial difficulties, bankruptcy or otherwise could have a material adverse effect on our cash flow and earnings and our ability to meet our debt obligations and pay dividends on our common shares.

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Under our current business model, we will need additional capital to finance our growth, and we may not be able to obtain it on terms acceptable to us, or at all, which may limit our ability to grow and compete in the aviation market.

Continued expansion of our business through the acquisition of additional aircraft and other aviation assets will require additional capital, particularly if we were to accelerate our acquisition plans. Financing may not be available to us or may be available to us only on terms that are not favorable. In addition, the terms of certain of our outstanding indebtedness restrict, among other things, our ability to incur additional debt. Our Credit Facility No. 2, subject to certain limited exceptions, prohibits us from incurring additional recourse debt or guaranteeing the indebtedness of our subsidiaries. If we are unable to raise additional funds or obtain capital on terms acceptable to us, we may have to delay, modify or abandon some or all of our growth strategies. Further, if additional capital is raised through the issuance of additional equity securities, the percentage ownership of our then current common shareholders would be diluted. Newly issued equity securities may have rights, preferences or privileges senior to those of our common shares. See ‘‘Description of Share Capital.’’

We may not be able to issue aircraft lease-backed securities on attractive terms, which may require us to seek more costly or dilutive financing for our investments or to liquidate assets.

We intend to continue to finance our aircraft portfolio on a long-term basis through the aircraft securitization market. We use short-term credit facilities to finance the acquisition of aircraft until we accumulate a sufficient quantity, quality and diversity of aircraft, at which time we intend to refinance these facilities through a securitization, such as an issuance of aircraft lease-backed securities, or other long-term financing. As a result, we are subject to the risk that we will not be able to acquire, during the period that our credit facilities are available, a sufficient amount of eligible aircraft to maximize the efficiency of an issuance of aircraft lease-backed securities. We also may not be able to obtain additional credit facilities or may not be able to renew or refinance any of our existing credit facilities should we need more time to acquire aircraft necessary for a long-term securitization financing. In addition, we anticipate refinancing our securitization transactions within five years of closing each such transaction. The inability to renew or refinance our credit facilities may require us to seek more costly or dilutive financing for our aircraft or to liquidate assets. In addition, conditions in the capital markets may make the issuance of aircraft lease-backed securities more costly or otherwise less attractive to us when we do have a sufficient pool of aircraft or during the period of time when we anticipate refinancing a securitization portfolio. We also may not be able to structure any future securitizations to allow for distributions of excess securitization cash flows to us. If we are unable to access the securitization market to finance these assets, we may be required to seek other forms of more costly, dilutive or otherwise less attractive financing or otherwise to liquidate the assets.

An increase in our borrowing costs may adversely affect our earnings and cash available for distribution to our shareholders.

We enter into repurchase agreements to finance a portion of the purchase price of our debt securities. Our repurchase agreements typically have initial terms to maturity of between six months and one year. We utilize credit facilities to finance a portion of the purchase price of our aircraft. Our credit facilities have had initial terms to maturity of between one and two years. As our repurchase agreements and credit facilities mature, we will be required to either refinance these instruments by entering into new repurchase agreements or credit facilities, which could result in higher borrowing costs, or repay them by using cash on hand or cash from the sale of our assets.

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Our repurchase agreements and credit facilities are LIBOR-based floating-rate obligations and the interest expense we incur will vary with changes in the applicable LIBOR reference rate. As a result, an increase in short-term rates will increase our interest costs and may reduce the spread between the returns on our portfolio investments and the cost of our borrowings. An increase in interest rates would adversely affect the market value of our debt investments that are fixed-rate and/or subject them to prepayment or extension risk, which may adversely affect our earnings and cash available for distribution to our shareholders.

As of March 31, 2006, if interest rates were to increase by 1%, we would expect to incur an increase in interest expense on our repurchase agreements of approximately $25,000 on an annualized basis, net of amounts received from our interest rate hedges. Also, as of March 31, 2006, on a pro forma basis, after giving effect to the use of a portion of the proceeds of Securitization No. 1 to pay down a portion of the outstanding obligations on our credit facilities, if interest rates were to increase by 1%, we would expect to incur an increase in annual interest expense on our credit facilities of approximately $46,000 on an annualized basis, net of amounts received from our interest rate hedges.

Departure of key officers could harm our business and financial results.

Our senior management's reputations and relationships with lessees and sellers of aircraft are a critical element of our business. We encounter intense competition for qualified employees from other companies in the airline leasing industry, and we believe there are only a limited number of available qualified executives in our industry. Our future success depends, to a significant extent, upon the continued service of our senior management personnel, particularly: Ron Wainshal, our Chief Executive Officer; Mark Zeidman, our Chief Financial Officer; and David Walton, our Chief Operating Officer and General Counsel, each of whose services are critical to the successful implementation of our growth strategies. These key officers have been with us as we have substantially grown our operations since the end of 2005 and as a result have been critical to our development. If we were to lose the services of any of these individuals, our business and financial results could be adversely affected. See ‘‘Management.’’

We may not be able to pay or maintain dividends and the failure to do so would adversely affect our share price.

On July 20, 2006, our board of directors declared a dividend of $0.35 per common share, or an aggregate of $14.4 million, for the three months ended June 30, 2006, which is payable on July 31, 2006. In addition, our board of directors is expected to declare a dividend of $0.175 per common share, or an aggregate of $7.2 million, to shareholders of record as of August 1, 2006, which is payable on August 15, 2006, for the period commencing on July 1, 2006 and ending on August 15, 2006. These dividends may not be indicative of the amount of any future dividends. We intend to continue to pay regular quarterly dividends to our shareholders; however, our ability to pay, maintain or expand cash dividends to our shareholders and to execute our dividend payment strategy is subject to the discretion of our board of directors and will depend on many factors, including our ability to make and finance acquisitions, our ability to negotiate favorable lease and other contractual terms, the level of demand for our aircraft, the economic condition of the commercial aviation industry generally, the financial condition and liquidity of our lessees, the lease rates we are able to charge and realize, our leasing costs, unexpected or increased expenses, the level and timing of capital expenditures, principal repayments and other capital needs, the value of our aircraft portfolio, our results of operations, financial condition, liquidity, general business conditions, restrictions imposed by our securitizations or other financing arrangements (including our credit facilities), legal restrictions on the payment of dividends and other factors that our board of directors deems relevant. Some of the factors are beyond our control and a change in any such factor could affect our ability to pay dividends on our common

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shares. In the future we may not be able to pay or maintain dividends. We also may not be able to maintain our current level of dividends or increase them over time. Increases in demand for our aircraft and operating lease payments may not occur, and may not increase our actual cash available for dividends to our common shareholders. See ‘‘Dividend Policy.’’ The failure to maintain or pay dividends would adversely affect our share price.

We are subject to risks related to our indebtedness that may limit our operational flexibility, our ability to compete with our competitors and our ability to pay dividends on our common shares.

General Risks.     Our indebtedness subjects us to certain risks, including:

•  substantially all of our aircraft leases serve as collateral for our secured indebtedness and the terms of certain of our indebtedness require us to use proceeds from sales of aircraft, in part, to repay amounts outstanding under such indebtedness;
•  we may be required to dedicate a substantial portion of our cash flows from operations, if available, to debt service payments, thereby reducing the amount of our cash flow available to pay dividends, fund working capital, make capital expenditures and satisfy other needs;
•  our failure to comply with the terms of our indebtedness, including restrictive covenants contained therein, may result in additional interest being due or defaults that could result in the acceleration of the principal, and unpaid interest on, the defaulted debt, as well as the forfeiture of the aircraft pledged as collateral; and
•  we are not permitted to pay dividends on our common shares to the extent a default or an event of default exists under Credit Facility No. 2.

Risks relating to Securitization No. 1 .    The terms of Securitization No. 1 require us to satisfy certain financial covenants, including the maintenance of debt service coverage ratios. Our compliance with these covenants depends substantially upon the timely receipt of lease payments from our lessees. In particular, during the first five years from issuance, Securitization No. 1 has an amortization schedule that requires that lease payments be applied to reduce the outstanding principal balance of the indebtedness so that such balance remains at 54.8% of the assumed future depreciated value of the portfolio. If the debt service coverage ratio requirements are not met on two consecutive monthly payment dates in the fourth and fifth year following the closing date of Securitization No. 1, and in any month following the fifth anniversary of the closing date, all excess securitization cash flow is required to be used to reduce the principal balance of the indebtedness and will not be available to us for other purposes, including paying dividends to our shareholders.

In addition, under the terms of Securitization No. 1, certain transactions will require the consent or approval of one or more of the securitization trustees, the rating agencies that rated the Portfolio 1 certificates and the financial guaranty insurance policy issuer for the securitization, including (i) sales of aircraft at prices below certain scheduled minimum amounts or, in any calendar year, in amounts in excess of 10% of the portfolio value at the beginning of that year, (ii) the re-leasing of aircraft to the extent not in compliance with the lessee and geographic concentration limits, and the other operating covenants, pursuant to the terms of the securitization (iii) modifying an aircraft if the cost thereof would exceed certain amounts or (iv) entering into any transaction between us and the Securitization No. 1 entities not already contemplated in the securitization. Absent the aforementioned consent, which we may not receive, the lessee and geographic concentration limits under Securitization No. 1 will require us to re-lease the aircraft to a diverse set of customers, and may place limits on our ability to re-lease Portfolio No. 1 aircraft to certain customers in certain jurisdictions, even if to do so would provide the best risk-adjusted returns at that time.

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Risks relating to our credit facilities . The terms of our credit facilities restrict our ability to:

•  create liens on assets;
•  incur additional indebtedness;
•  sell assets;
•  make certain investments or capital expenditures;
•  engage in mergers, amalgamations or consolidations;
•  engage in certain transactions with affiliates;
•  incur secured indebtedness; and
•  receive payments or excess cash flows from subsidiaries.

Credit Facility No. 2 requires us to make principal payments to the extent that amounts outstanding under the facility exceed 85% of the depreciated book value of the aircraft financed with proceeds from the facility. In addition, upon completion of this offering, we will be required to maintain a consolidated net worth of at least $500 million under the terms of Credit Facility No. 2.

The restrictions described above may impair our ability to operate and compete with our direct and indirect competitors and to pay dividends on our common shares.

Risks Related to Our Aviation Assets

The variability of supply and demand for aircraft could depress lease rates for our aircraft, which would have an adverse effect on our financial results and growth prospects and on our ability to meet our debt obligations and to pay dividends on our common shares.

The aircraft leasing and sales industry has experienced periods of aircraft oversupply and undersupply. The oversupply of a specific type of aircraft in the market is likely to depress aircraft lease rates for and the value of that type of aircraft.

The supply and demand for aircraft is affected by various cyclical and non-cyclical factors that are not under our control, including:

•  passenger and air cargo demand;
•  fuel costs and general economic conditions affecting our lessees’ operations;
•  geopolitical events, including war, prolonged armed conflict and acts of terrorism;
•  outbreaks of communicable diseases and natural disasters;
•  governmental regulation;
•  interest rates;
•  airline restructurings and bankruptcies;
•  the availability of credit;
•  manufacturer production levels and technological innovation;
•  retirement and obsolescence of aircraft models;
•  manufacturers merging or exiting the industry or ceasing to produce aircraft types;
•  reintroduction into service of aircraft previously in storage; and
•  airport and air traffic control infrastructure constraints.

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These factors may produce sharp decreases or increases in aircraft values and lease rates, which would impact our cost of acquiring aircraft, and may result in lease defaults and also prevent the aircraft from being re-leased or, if desired, sold on favorable terms. This would have an adverse effect on our financial results and growth prospects and on our ability to meet our debt obligations and to pay dividends on our common shares.

Other factors that increase the risk of decline in aircraft value and lease rates could have an adverse affect on our financial results and growth prospects and on our ability to meet our debt obligations and to pay dividends on our common shares.

In addition to factors linked to the aviation industry generally, other factors that may affect the value and lease rates of our aircraft include:

•  the particular maintenance and operating history of the airframe and engines;
•  the number of operators using that type of aircraft;
•  whether the aircraft is subject to a lease and, if so, whether the lease terms are favorable to the lessor;
•  any renegotiation of a lease on less favorable terms;
•  any regulatory and legal requirements that must be satisfied before the aircraft can be purchased, sold or re-leased; and
•  compatibility of our aircraft configurations or specifications with other aircraft owned by operators of that type.

Any decrease in the values of and lease rates for commercial aircraft which may result from the above factors or other unanticipated factors may have a material adverse effect on our financial results and growth prospects and on our ability to meet our debt obligations and to pay dividends on our common shares.

The concentration of aircraft types in our aircraft portfolio could lead to adverse effects on our business and financial results should any difficulties specific to these particular types of aircraft occur.

As of March 31, 2006, our aircraft portfolio included 14 aircraft types, the three highest concentrations of which together represented 51.8% of our aircraft by net book value:

•  A310-300F constitute 1.7%;
•  A319-100 constitute 5.1%;
•  A320-200 constitute 12.6%;
•  A330-200 constitute 6.2%;
•  A330-300 constitute 23.0%;
•  737-300 constitute 4.5%;
•  737-300QC constitute 4.4%;
•  737-400 constitute 5.9%;
•  737-500 constitute 3.3%;
•  737-700 constitute 2.6%;
•  737-800 constitute 16.2%;
•  767-200ER constitute 1.0%;
•  767-300ER constitute 10.0%; and
•  747-400PC constitute 3.5%.

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Should any of these aircraft types (or other types we acquire in the future) or Airbus or Boeing encounter technical, financial or other difficulties, a diminution in value of such aircraft, an inability to lease the aircraft on favorable terms or at all, or a potential grounding of such aircraft could occur. As a result, the inability to lease the affected aircraft types would likely have an adverse effect on our financial results, to the extent the affected aircraft types comprise a significant percentage of our aircraft portfolio. The composition of our aircraft portfolio may therefore adversely affect our business and financial results. In addition, the abandonment or rejection of the lease of any of the aircraft listed above by one or more carriers in reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code or comparable statutes in non-U.S. jurisdictions may diminish the value of such aircraft and will subject us to re-leasing risks.

The advanced age of some of our aircraft may expose us to higher than anticipated maintenance related expenses, which could adversely affect our financial results and our ability to pursue additional acquisitions.

As of March 31, 2006, the average age of our aircraft portfolio calculated from the date of delivery by manufacturer, and weighted by net book value, was 8.7 years. In general, the costs of operating an aircraft, including maintenance expenditures, increase with the age of the aircraft. Also, older aircraft typically are less fuel-efficient than newer aircraft and may be more difficult to re-lease or sell. Variable expenses like fuel, crew size or aging aircraft corrosion control or modification programs and related airworthiness directives could make the operation of older aircraft less economically feasible and may result in increased lessee defaults. We may also incur some of these increased maintenance expenses and regulatory costs upon acquisition or releasing of our aircraft. Any of these expenses or costs will have a negative impact on our financial results and our ability to pursue additional acquisitions.

We operate in a highly competitive market for investment opportunities in aviation assets and for the leasing of aircraft.

A number of entities compete with us to make the types of investments that we plan to make. We compete with public partnerships, investors and funds, commercial and investment banks and commercial finance companies with respect to our investments in debt securities. We compete with other operating lessors, airlines, aircraft manufacturers, financial institutions (including those seeking to dispose of repossessed aircraft at distressed prices), aircraft brokers and other investors with respect to aircraft acquisitions and aircraft leasing. The aircraft leasing industry may be divided into two leasing segments: (i) leasing of new aircraft acquired directly or indirectly from manufacturers and (ii) leasing or re-leasing of aircraft in the secondary market. Currently, we compete primarily in the latter segment, and our competition is comprised of other aircraft leasing companies, including GE Capital Aviation Services, International Lease Finance Corp., CIT Group, AerCap, Aviation Capital Group, Pegasus, GATX Air, RBS Aviation Capital, AWAS, Babcock & Brown and Singapore Aircraft Leasing Enterprise.

Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments, establish more relationships than us and bid more aggressively on aviation assets available for sale and offer lower lease rates than us. For instance, we may not be able to grant privileged rental rates to airlines in return for equity investments or debt financings in order to lease aircraft and minimize the number of aircraft on the ground (unless such equity investments or debt financings are in connection with the bankruptcy, reorganization or similar process of a lessee in settlement of expected or already delinquent obligations, as permitted under the terms of certain of our indebtedness). Certain of our competitors, however, may enter

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into similar arrangements with troubled lessees to restructure the obligations of those lessees while maximizing the number of aircraft remaining on viable leases to such lessees and minimizing their overall cost. Such disparity could impair our ability to effectively compete in the marketplace, maximize our revenues and grow our business. In addition, some competitors may provide financial services, maintenance services or other inducements to potential lessees that we cannot provide. As a result of competitive pressures, we may not be able to take advantage of attractive investment opportunities from time to time, and we may not be able to identify and make investments that are consistent with our investment objectives. Additionally, we may not be able to compete effectively against present and future competitors in the aircraft leasing market. The competitive pressures we face may have a material adverse effect on our business, financial condition and results of operations.

We may not realize gains or income from our debt investments.

We seek to generate both current income and capital appreciation. The debt securities in which we invest may not appreciate in value, and, in fact, may decline in value and default on interest and/or principal payments. As of March 31, 2006, all of the obligors under our debt investments are U.S. airlines. During the past 15 years a number of North American passenger airlines, including US Airways, Inc, filed Chapter 11 bankruptcy proceedings and several major U.S. airlines ceased operations altogether.

As in Europe, North America has experienced the development of low-cost carriers and the resultant increased competition among such carriers and between such carriers and traditional carriers. This evolution in the North American airline industry may have a material adverse effect on the ability of North American lessees to meet their financial and other obligations under our leases. Accordingly, we may not be able to realize gains or income from our debt investments. Any gains that we do realize may not be sufficient to offset any other losses we experience. Any income that we realize may not be sufficient to offset our expenses.

Declines in the market values of our debt investments may adversely affect periodic reported results and credit availability, which may reduce earnings and, in turn, cash available for distribution to our shareholders.

Our debt investments are, and we believe are likely to continue to be, classified for accounting purposes as available for sale. Changes in the market values of those assets will be directly charged or credited to shareholders' equity. As a result, a decline in values may reduce the book value of our assets. Moreover, if the decline in value of an available for sale security is considered by our management to be other than temporary, such decline will reduce our earnings.

A decline in the market value of our debt investments may adversely affect us particularly in instances where we have borrowed money based on the market value of those debt investments. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we would have to sell those assets or other assets at a time when we might not otherwise choose to do so. A reduction in available credit may reduce our earnings and, in turn, cash available for distribution to shareholders.

Market values of our debt investments may decline for a number of reasons, such as causes related to changes in prevailing market rates, increases in defaults, increases in voluntary prepayments for any debt investments that we have that are subject to prepayment risk, and widening of credit spreads.

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Risks related to our leases

We generally will need to re-lease or sell aircraft as current leases expire to continue to generate sufficient funds to meet our debt obligations, to finance our growth and operations and to pay dividends on our common shares, and we may not be able to re-lease or sell such aircraft on favorable terms, or at all.

Our business strategy entails the need to re-lease aircraft as our current leases expire in order to continue to generate sufficient revenues to meet our debt obligations, to finance our growth and operations and to pay dividends on our common shares. The ability to re-lease aircraft will depend on general market and competitive conditions. If we are not able to re-lease an aircraft, we may need to attempt to sell the aircraft to provide adequate funds for debt payments and to otherwise finance our growth and operations. Further, our ability to re-lease or sell aircraft on favorable terms or at all or without significant off-lease time is likely to be adversely impacted by risks affecting the airline industry.

A schedule of contractual lease expirations by year and aircraft type is presented in the table below. Leases subject to extension options are shown at the expiration of the current lease term. The table assumes that, except as indicated, no lease terminates prematurely, no substitute aircraft are delivered, no aircraft are sold and no additional aircraft are purchased. Contractual revenues represented by expiring leases totaled $2.6 million in 2006, $4.0 million in 2007 and $11.7 million in 2008. More aircraft will need to be re-leased to the extent leases terminate prematurely.

Lease Expiration by Year, at March 31, 2006


  2006 2007 2008 2009 2010 2011 2012 2013 2014
A310-300F 0 0 1 0 0 0 0 0 0
A319-100 0 2 0 0 0 0 0 0 0
A320-200 1 1 0 1 1 0 1 0 0
A330-200 0 0 0 0 1 0 0 0 0
A330-300 0 0 0 0 0 0 4 0 0
737-300 0 0 5 0 0 0 0 0 0
737-300QC 0 0 1 3 0 0 0 0 0
737-400 0 2 0 2 0 0 0 0 0
737-500 0 0 0 1 3 0 1 0 0
737-700 1 0 0 0 0 1 0 0 0
737-800 0 1 0 0 0 2 0 0 2
747-400PC 0 0 1 0 0 0 0 0 0
767-200ER 0 0 1 0 0 0 0 0 0
767-300ER 0 0 0 2 0 0 0 0 0
Total 2 6 9 9 5 3 6 0 2

If lessees are unable to fund their maintenance requirements on our aircraft, our cash flow and our ability to meet our debt obligations or to pay dividends on our common shares could be adversely affected.

The standards of maintenance observed by the various lessees and the condition of the aircraft at the time of sale or lease may affect the future values and rental rates for our aircraft.

Under our leases, the relevant lessee is generally responsible for maintaining the aircraft and complying with all governmental requirements applicable to the lessee and the aircraft,

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including, without limitation, operational, maintenance, and registration requirements and airworthiness directives (although in certain cases we have agreed to share the cost of complying with certain airworthiness directives). Failure of a lessee to perform required maintenance with respect to an aircraft during the term of a lease could result in a diminution in value of such aircraft, an inability to lease the aircraft at favorable rates or at all, or a potential grounding of such aircraft, and will likely require us to incur maintenance and modification costs upon the expiration or earlier termination of the applicable lease, which could be substantial, to restore such aircraft to an acceptable condition prior to sale or re-leasing.

As of March 31, 2006, 25 of our leases provide that the lessee is required to make periodic payments to us during the lease term in order to provide cash reserves for the payment of maintenance tied to the usage of the aircraft. In these leases there is an associated liability for us to reimburse the lessee for such scheduled maintenance performed on the related aircraft, based on formulas tied to the extent of any of the lessee’s maintenance reserve payments. In some cases, we are obligated and in the future may incur additional obligations pursuant to the terms of the leases to contribute to the cost of maintenance work performed by the lessee in addition to maintenance reserve payments.

Our operational cash flow and available liquidity may not be sufficient to fund our maintenance requirements, particularly as our aircraft age. Actual rental and maintenance payments by lessees and other cash that we receive may be significantly less than projected as a result of numerous factors, including defaults by lessees and our potential inability to obtain satisfactory maintenance terms in leases. Seventeen of our leases at March 31, 2006 do not provide for any periodic maintenance reserve payments to be made by lessees to us in respect of their maintenance obligations, and it is possible that future leases will not contain such requirements. Maintenance reserves may not cover the entire expense of the scheduled maintenance they are intended to fund. In addition, maintenance reserves typically cover only certain scheduled maintenance requirements and do not cover all required maintenance and all scheduled maintenance. Furthermore, lessees may not meet their obligations to pay maintenance reserves or perform required scheduled maintenance. Any significant variations in such factors may materially adversely affect our business and particularly our cash position, which would make it difficult for us to meet our debt obligations or to pay dividends on our common shares.

Failure to pay certain potential additional operating costs could result in the grounding of our aircraft and prevent the re-lease, sale or other use of our aircraft, which would negatively affect our financial condition and results of operations.

As in the case of maintenance costs, we may incur other operational costs upon a lessee default or where the terms of the lease require us to pay a portion of those costs. Such costs include:

•  the costs of casualty, liability and political risk insurance and the liability costs or losses when insurance coverage has not been or cannot be obtained as required or is insufficient in amount or scope;
•  the costs of licensing, exporting or importing an aircraft, airport taxes, customs duties, air navigation charges, landing fees and similar governmental or quasi-governmental impositions, which can be substantial; and
•  penalties and costs associated with the failure of lessees to keep the aircraft registered under all appropriate local requirements or obtain required governmental licenses, consents and approvals.

The failure to pay certain of these costs can result in liens on the aircraft and the failure to register the aircraft can result in a loss of insurance. These matters could result in the grounding

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of the aircraft and prevent the re-lease, sale or other use of the aircraft until the problem is cured, which would negatively affect our financial condition and results of operations.

Our lessees may have inadequate insurance coverage or fail to fulfill their respective indemnity obligations, which could result in us not being covered for claims asserted against us and may negatively affect our business, financial condition and results of operations.

While we do not directly control the operation of any of our aircraft, by virtue of holding title to the aircraft (directly or through a securitization related special purpose entity), in certain jurisdictions around the world, aircraft lessors are held strictly liable for losses resulting from the operation of aircraft or may be held liable for those losses on other legal theories.

The lessees are required under our leases to indemnify us for, and insure against, liabilities arising out of the use and operation of the aircraft, including third-party claims for death or injury to persons and damage to property for which we may be deemed liable. Lessees are also required to maintain public liability, property damage and hull all risks and hull war risks insurance on the aircraft at agreed upon levels. However, they are not generally required to maintain political risk insurance. The hull insurance is typically subject to standard market hull deductibles based on aircraft type that generally range from $250,000 to $1,000,000. These deductibles may be higher in some leases, and lessees usually have fleet-wide deductibles for liability insurance and occurrence or fleet limits on war risk insurance. Any hull insurance proceeds in respect of such claims shall be paid first to us as lessor in the event of loss of the aircraft or, in the absence of an event of loss of the aircraft, to the lessee to effect repairs or, in the case of liability insurance, for indemnification of third-party liabilities. Subject to the terms of the applicable lease, the balance of any hull insurance proceeds after deduction for all amounts due and payable by the lessee to the lessor under such lease must be paid to the lessee.

Following the terrorist attacks of September 11, 2001, aviation insurers significantly reduced the amount of insurance coverage available to airlines for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events. At the same time, they significantly increased the premiums for such third-party war risk and terrorism liability insurance and coverage in general. As a result, the amount of such third-party war risk and terrorism liability insurance that is commercially available at any time may be below the amount stipulated in our leases and required by the market in general.

Our lessees’ insurance, including any available governmental supplemental coverage, may not be sufficient to cover all types of claims that may be asserted against us. Any inadequate insurance coverage or default by lessees in fulfilling their indemnification or insurance obligations or the lack of political risk, hull, war or third-party war risk and terrorism liability insurance will reduce the proceeds that would be received by us upon an event of loss under the respective leases or upon a claim under the relevant liability insurance, which could negatively affect our business, financial condition and results of operations.

Failure to obtain certain required licenses and approvals could negatively affect our ability to re-lease or sell aircraft, which would negatively affect our financial condition and results of operations.

A number of leases require specific licenses, consents or approvals for different aspects of the leases. These include consents from governmental or regulatory authorities for certain payments under the leases and for the import, re-export or deregistration of the aircraft. Subsequent changes in applicable law or administrative practice may increase such requirements. In addition, a governmental consent, once given, might be withdrawn. Furthermore, consents needed in connection with future re-leasing or sale of an aircraft may not be forthcoming. Any of these events could adversely affect our ability to re-lease or sell aircraft, which would negatively affect our financial condition and results of operations.

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Due to the fact that many of our lessees operate in emerging markets, we are indirectly subject to many of the economic and political risks associated with competing in such markets.

Emerging markets are countries which have less developed economies that are vulnerable to economic and political problems, such as significant fluctuations in gross domestic product, interest and currency exchange rates, civil disturbances, government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by governments. The occurrence of any of these events in markets served by our lessees and the resulting instability may adversely affect our ownership interest in an aircraft or the ability of lessees which operate in these markets to meet their lease obligations and these lessees may be more likely to default than lessees that operate in developed economies. For the three months ended March 31, 2006, 12 of our lessees which operated 21 aircraft and generated lease rental revenue representing 40.7% of our total revenue, are domiciled or habitually based in emerging markets.

Risks related to our lessees

Lessee defaults and other credit problems could materially adversely affect our business, financial condition and results of operations.

We operate as a supplier to airlines and are indirectly impacted by all the risks facing airlines today. Our ability to succeed is dependent upon (i) the financial strength of our lessees, (ii) the ability to diligence and appropriately assess the credit risk of our lessees and (iii) the ability of lessees to perform their contractual obligations to us. The ability of each lessee to perform its obligations under its lease will depend primarily on the lessee’s financial condition and cash flow, which may be affected by factors beyond our control, including:

•  competition;
•  fare levels;
•  air cargo rates;
•  passenger and air cargo demand;
•  geopolitical and other events, including war, acts of terrorism, outbreaks of epidemic diseases and natural disasters;
•  operating costs (including the price and availability of jet fuel and labor costs);
•  labor difficulties;
•  economic conditions and currency fluctuations in the countries and regions in which the lessee operates; and
•  governmental regulation of or affecting the air transportation business.

As a general matter, airlines with weak capital structures are more likely than well-capitalized airlines to seek operating leases, and, at any point in time, investors should expect a varying number of lessees and sublessees to experience payment difficulties. As a result of their weak financial condition, a large portion of lessees over time may be significantly in arrears in their rental or maintenance payments. Many of our existing lessees are in a weak financial condition and suffer liquidity problems, and this is likely to be the case in the future and with other lessees and sublessees of our aircraft as well. In addition, many of our lessees are exposed to currency risk due to the fact that they earn revenues in their local currencies and certain of their liabilities and expenses are denominated in U.S. dollars, including lease payments to us. Given the size of our aircraft portfolio, we expect that some lessees from time to time, and possibly in the near future, will be slow in making or will fail to make their payments in full under the leases.

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We may not correctly assess the credit risk of each lessee or charge risk-adjusted lease rates, and lessees may not be able to continue to perform their financial and other obligations under our leases in the future. A delayed, missed or reduced rental payment from a lessee decreases our revenues and cash flow and may adversely affect our ability to make payments on our indebtedness and to pay dividends on our common shares. While we may experience some level of delinquency under our leases, default levels may increase over time, particularly as our aircraft portfolio ages and if economic conditions deteriorate. A lessee may experience periodic difficulties that are not financial in nature, which could impair its performance of its maintenance obligations under the leases. These difficulties may include the failure to perform under the required aircraft maintenance program in a sufficient manner and labor-management disagreements or disputes.

We will typically not be in possession of any aircraft while the aircraft are on lease to the lessees. Consequently, our ability to determine the condition of the aircraft or whether the lessees are properly maintaining the aircraft will be limited to periodic inspections we perform or that are performed on our behalf by third-party service providers or aircraft inspectors. A continuous failure by a lessee to meet its maintenance obligations under the relevant lease could:

•  result in a grounding of the aircraft;
•  in the event of a re-lease of the aircraft, cause us to incur costs, which may be substantial, in restoring the aircraft to an acceptable maintenance condition in order to induce a subsequent lessee to lease the aircraft;
•  result in us not being able to re-lease the aircraft promptly or result in a lower rental rate or a shorter term lease following repossession of the aircraft; and
•  adversely affect the value of the aircraft.

In the event that a lessee defaults under a lease, any security deposit paid or letter of credit provided by the lessee may not be sufficient to cover the lessee’s outstanding or unpaid lease obligations and required maintenance expenses.

If our lessees encounter financial difficulties and we decide to restructure our leases with those lessees, this would result in less favorable leases and could result in significant reductions in our cash flow and affect our ability to meet our debt obligations and to pay dividends on our common shares.

When a lessee (i) is late in making payments, (ii) fails to make payments in full or in part under the lease or (iii) has otherwise advised us that it will in the future fail to make payments in full or in part under the lease, we may elect to or be required to restructure the lease. Restructuring may involve anything from a simple rescheduling of payments to the termination of a lease without receiving all or any of the past due amounts. Since our formation in October 2004, none of our lessees have been granted reductions in or deferrals of rental payments due under the leases, although some have been slow in making the required lease payments. If any future requests are made and granted, we expect that the reduced or deferred rental payments would be payable over all or some part of the remaining term of the lease although the terms of any revised payment schedules may be unfavorable and such payments may not be made. We may be unable to agree upon acceptable terms for some or all of the requested restructurings and as a result may be forced to exercise our remedies under those leases. If we, in the exercise of our remedies, repossess the aircraft, we may not be able to re-lease the aircraft promptly at favorable rates, or at all. You should expect that restructurings and/or repossessions with some lessees might occur.

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The terms and conditions of possible lease restructurings may result in significant reductions of rental payments, which may adversely affect our cash flows and our ability to meet our debt obligations and to pay dividends on our common shares.

Significant costs resulting from lease defaults could have an adverse effect on our business.

As of July 18, 2006, none of our lessees owed rental payments, maintenance reserves payments and/or security deposit payments under their respective leases that were past due for a period of 30 days or more. Although we have the right to repossess the aircraft and to exercise other remedies upon a lessee default, repossession of an aircraft after a lessee default would result in us incurring costs in excess of those incurred with respect to an aircraft returned at the end of the lease. Those costs include legal and other expenses of court or other governmental proceedings (including the cost of posting surety bonds or letters of credit necessary to effect repossession of aircraft), particularly if the lessee is contesting the proceedings or is in bankruptcy, to obtain possession and/or de-registration of the aircraft and flight and export permissions. Delays resulting from any of these proceedings would also increase the period of time during which the relevant aircraft is not generating revenue. In addition, we may incur substantial maintenance, refurbishment or repair costs that a defaulting lessee has failed to pay and that are necessary to put the aircraft in suitable condition for re-lease or sale and we may need to pay off liens, taxes and other governmental charges on the aircraft to obtain clear possession and to remarket the aircraft effectively. We may also incur other costs in connection with the physical possession of the aircraft.

We may also suffer other adverse consequences as a result of a lessee default and the related termination of the lease and the repossession of the related aircraft. Our rights upon a lessee default vary significantly depending upon the jurisdiction and the applicable law, including the need to obtain a court order for repossession of the aircraft and/or consents for de-registration or re-export of the aircraft. When a defaulting lessee is in bankruptcy, protective administration, insolvency or similar proceedings, additional limitations may apply. Certain jurisdictions will give rights to the trustee in bankruptcy or a similar officer to assume or reject the lease or to assign it to a third party, or will entitle the lessee or another third party to retain possession of the aircraft without paying lease rentals or performing all or some of the obligations under the relevant lease. Certain of our lessees are owned in whole or in part by government-related entities, which could complicate our efforts to repossess our aircraft in that government's jurisdiction. Accordingly, we may be delayed in, or prevented from, enforcing certain of our rights under a lease and in re-leasing the affected aircraft.

If we repossess an aircraft, we will not necessarily be able to export or de-register and profitably redeploy the aircraft. For instance, where a lessee or other operator flies only domestic routes in the jurisdiction in which the aircraft is registered, repossession may be more difficult, especially if the jurisdiction permits the lessee or the other operator to resist de-registration. Significant costs may also be incurred in retrieving or recreating aircraft records required for registration of the aircraft and obtaining a certificate of airworthiness for the aircraft.

If our lessees fail to appropriately discharge aircraft liens, we might find it necessary to pay such claims, which could have a negative effect on our cash position and our business.

In the normal course of business, liens that secure the payment of airport fees and taxes, custom duties, air navigation charges (including charges imposed by Eurocontrol), landing charges, crew wages, repairer’s charges, salvage or other liens, or ‘‘Aircraft Liens,’’ are likely, depending on the jurisdiction in question, to attach to the aircraft. The Aircraft Liens may secure substantial sums that may, in certain jurisdictions or for limited types of Aircraft Liens (particularly fleet liens), exceed the value of the particular aircraft to which the Aircraft Liens have attached. Although

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the financial obligations relating to these Aircraft Liens are the responsibilities of our lessees, if they fail to fulfill their obligations, Aircraft Liens may attach to our aircraft and ultimately become our responsibility. In some jurisdictions, Aircraft Liens may give the holder thereof the right to detain or, in limited cases, sell or cause the forfeiture of the aircraft.

Until they are discharged, Aircraft Liens could impair our ability to repossess, re-lease or resell our aircraft. Our lessees may not comply with their obligations under their respective leases to discharge Aircraft Liens arising during the terms of their leases, whether or not due to financial difficulties. If they do not, we may, in some cases, find it necessary to pay the claims secured by such Aircraft Liens in order to repossess the aircraft. Such payments would adversely affect our cash position and our business generally.

Failure to register aircraft in certain jurisdictions could result in adverse effects and penalties which could materially affect our business.

Pursuant to our existing leases, all of our aircraft are required to be duly registered at all times with the appropriate governmental civil aviation authority. Generally, in jurisdictions outside the United States, failure to maintain the registration of any aircraft that is on lease would be a default under the applicable lease, entitling us to exercise our rights and remedies thereunder if enforceable under applicable law. If an aircraft were to be operated without a valid registration, the lessee operator or, in some cases, the owner or lessor might be subject to penalties, which could constitute or result in an Aircraft Lien being placed on such aircraft. Lack of registration could have other adverse effects, including the inability to operate the aircraft and loss of insurance coverage, which in turn could have a material adverse effect on our business.

If our lessees fail to comply with government regulations regarding aircraft maintenance, we could be subject to costs that could adversely affect our cash position and our business.

In addition to the general aviation authority regulations and requirements regarding maintenance of aircraft, our aircraft may be subject to further maintenance requirements imposed by airworthiness directives, or ‘‘Airworthiness Directives’’, issued by aviation authorities. Airworthiness Directives typically set forth particular special maintenance actions or modifications to certain aircraft types or models that the owners or operators of aircraft must implement.

Each lessee generally is responsible for complying with all or some of the Airworthiness Directives with respect to the leased aircraft and is required to maintain the aircraft’s airworthiness. However, if a lessee fails to satisfy its obligations, or we have undertaken some obligations as to airworthiness under a lease, we may be required to bear (or, to the extent required under the relevant lease, to share) the cost of any Airworthiness Directives compliance. If any of our aircraft are not subject to a lease, we would be required to bear the entire cost of compliance. Such payments would adversely affect our cash position and our business generally.

Risks associated with the concentration of our lessees in certain geographical regions could harm our business.

Our business is exposed to local economic and political conditions that can influence the performance of lessees located in a particular region. Such adverse economic and political conditions include additional regulation or, in extreme cases, requisition. The effect of these conditions on payments to us will be more or less pronounced, depending on the concentration of lessees in the region with adverse conditions. For the three months ended March 31, 2006, lease rental revenues, as a percentage of total revenues, from lessees in the following regions, were 37.0% in Europe, 24.9% in Asia (including 14.4% in China), 28.1% in North America, and 5.0% in Latin America.

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European Concentration

Lease rental revenues from 16 lessees based in Europe accounted for 37.0% of our total revenues for the three months ended March 31, 2006. Commercial airlines in Europe face, and can be expected to continue to face, increased competitive pressures, in part as a result of the deregulation of the airline industry by the European Union and the resultant development of low-cost carriers.

European countries generally have relatively strict environmental regulations and traffic constraints that can restrict operational flexibility and decrease aircraft productivity, which could significantly increase aircraft operating costs of all aircraft, including our aircraft, thereby adversely affecting lessees. The airline industry in European countries, as in the rest of the world generally, is highly sensitive to general economic conditions. A recession or other worsening of economic conditions or a terrorist attack in one or more of these countries, particularly if combined with either or both high fuel prices and a weak euro or other local currency, may have a material adverse effect on the ability of European lessees to meet their financial and other obligations under our leases.

Asian Concentration

Lease rental revenues from five lessees based in Asia accounted for 24.9% of our total revenues for the three months ended March 31, 2006. The outbreak of SARS in 2003 had the largest negative impact on Asia, particularly China, Hong Kong and Taiwan. More recently, the Asian airline industry is demonstrating signs of recovery; however, a recurrence of SARS or the outbreaks of another epidemic disease, such as avian influenza, which many experts think would originate in Asia, would likely adversely affect the Asian airline industry.

Lease rental revenues from two lessees based in China accounted for 14.4% of our total revenues for the three months ended March 31, 2006, with one lessee, Hainan Airlines, accounting for 11.5% of our total revenues. Major obstacles to the Chinese airline industry’s development exist, including the continuing government control and regulation over the industry. If such control and regulation persists or expands, the Chinese airline industry would likely experience a significant decrease in growth or restrictions on future growth, and it is conceivable that our interests in aircraft on lease to or our ability to lease to Chinese carriers could be adversely affected.

North American Concentration

Lease rental revenues from one lessee based in North America, US Airways, Inc. accounted for 28.1% of our total revenues for the three months ended March 31, 2006. During the past 15 years a number of North American passenger airlines, including US Airways, Inc, filed Chapter 11 bankruptcy proceedings and several major U.S. airlines ceased operations altogether. The outbreak of SARS, the war and prolonged conflict in Iraq and the September 11, 2001 terrorist attacks in the United States have imposed additional financial burdens on most U.S. airlines through tightened security measures and reduced demand for air travel.

Risks Related to the Aviation Industry

As high fuel prices continue to impact the profitability of the airline industry, our lessees might not be able to meet their lease payment obligations, which would have an adverse effect on our financial results and growth prospects.

Fuel costs represent a major expense to companies operating within the airline industry. Fuel prices fluctuate widely depending primarily on international market conditions, geopolitical and

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environmental events and currency/exchange rates. As a result, fuel costs are not within the control of lessees and significant changes would materially affect their operating results.

Factors such as natural disasters can significantly affect fuel availability and prices. In August and September 2005, Hurricanes Katrina and Rita inflicted widespread damage along the Gulf Coast of the United States, causing significant disruptions to oil production, refinery operations and pipeline capacity in the region and to oil production in the Gulf of Mexico. These disruptions have resulted in decreased fuel availability and higher fuel prices.

Fuel prices currently remain at historically high levels. The continuing high cost of fuel has had, and sustained high costs in the future may continue to have, a material adverse impact on airlines’ profitability (including our lessees). Due to the competitive nature of the airline industry, airlines have been and may continue to be unable to pass on increases in fuel prices to their customers by increasing fares in a manner that fully off-set the costs incurred. In addition, airlines may not be able to manage this risk by appropriately hedging their exposure to fuel price fluctuations. If fuel prices remain at historically high levels or increase further due to future terrorist attacks, acts of war, armed hostilities, natural disasters or for any other reason, they are likely to cause our lessees to incur higher costs and/or generate lower revenues, resulting in an adverse impact on their financial condition and liquidity. Consequently, these conditions may (i) affect our lessees' ability to make rental and other lease payments, (ii) result in lease restructurings and/or aircraft repossessions, (iii) increase our costs of servicing and marketing our aircraft, (iv) impair our ability to re-lease the aircraft or re-lease or otherwise dispose of the aircraft on a timely basis at favorable rates or terms, or at all, and (v) reduce the proceeds received for the aircraft upon any disposition. These results could have an adverse effect on our financial results and growth prospects.

If the effects of terrorist attacks and geopolitical conditions continue to adversely impact the financial condition of the airlines, our lessees might not be able to meet their lease payment obligations, which would have an adverse effect on our financial results and growth prospects.

As a result of the September 11, 2001 terrorist attacks in the United States and subsequent terrorist attacks abroad, notably in the Middle East, Southeast Asia and Europe, increased security restrictions were implemented on air travel, airline costs for aircraft insurance and enhanced security measures have increased, passenger demand for air travel has decreased and airlines have faced and continue to face increased difficulties in acquiring war risk and other insurance, at reasonable costs. In addition, war or armed hostilities in the Middle East, North Korea or elsewhere, or the fear of such events, could further exacerbate many of the problems experienced as a result of terrorist attacks. The situation in Iraq continues to be uncertain and tension over Iran's nuclear program continues, and either or both may lead to further instability in the Middle East. Future terrorist attacks, war or armed hostilities, or the fear of such events, could further negatively impact the airline industry and may have an adverse effect on the financial condition and liquidity of our lessees, aircraft values and rental rates and may lead to lease restructurings or aircraft repossessions, all of which could adversely affect our financial results and growth prospects.

Terrorist attacks and geopolitical conditions have negatively affected the airline industry and concerns about geopolitical conditions and further terrorist attacks could continue to negatively affect airlines (including our lessees) for the foreseeable future depending upon various factors, including: (i) higher costs to the airlines due to the increased security measures; (ii) decreased passenger demand and revenue due to the inconvenience of additional security measures; (iii) the price and availability of jet fuel and the cost and practicability of obtaining fuel hedges under current market conditions; (iv) higher financing costs and difficulty in raising the desired amount of proceeds on favorable terms, or at all; (v) the significantly higher costs of aircraft

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insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and other similar perils, and the extent to which such insurance has been or will continue to be available; (vi) the ability of airlines to reduce their operating costs and conserve financial resources, taking into account the increased costs incurred as a consequence of terrorist attacks and geopolitical conditions, including those referred to above; and (vii) special charges recognized by some airlines, such as those related to the impairment of aircraft and other long lived assets stemming from the grounding of aircraft as a result of terrorist attacks, the economic slowdown and airline reorganizations.

Future terrorist attacks, acts of war or armed hostilities may further increase airline costs, depress air travel demand, depress aircraft values and rental rates or cause certain aviation insurance to become available only at significantly increased premiums (which may be for reduced amounts of coverage that are insufficient to comply with the levels of insurance coverage currently required by aircraft lenders and lessors or by applicable government regulations) or not be available at all.

Although the Aircraft Transportation Safety and System Stabilization Act adopted in the United States and similar programs instituted by the governments of some other countries provide for limited government coverage for certain aviation insurance, these programs may not continue or that any such government will pay under these programs in a timely fashion.

If the current industry conditions should continue or become exacerbated due to future terrorist attacks, acts of war or armed hostilities, they are likely to cause our lessees to incur higher costs and to generate lower revenues, resulting in an adverse effect on their financial condition and liquidity. Consequently, these conditions may affect their ability to make rental and other lease payments to us or obtain the types and amounts of insurance required by the applicable leases (which may in turn lead to aircraft groundings), may result in additional lease restructurings and aircraft repossessions, may increase our cost of re-leasing or selling the aircraft and may impair our ability to re-lease or otherwise dispose of the aircraft on a timely basis at favorable rates or on favorable terms, or at all, and may reduce the proceeds received for the aircraft upon any disposition. These results could have an adverse effect on our financial results and growth prospects.

The effects of SARS or other epidemic diseases may negatively impact the airline industry in the future, which might cause our lessees to not be able to meet their lease payment obligations to us, which would have an adverse effect on our financial results and growth prospects.

The 2003 outbreak of SARS was linked to air travel early in its development and negatively impacted passenger demand for air travel at that time. While the World Heath Organization’s travel bans related to SARS have been lifted, SARS had a severe impact on the aviation industry, which was evidenced by a sharp reduction in passenger bookings and cancellation of many flights and employee layoffs. While these effects were felt most acutely in Asia, SARS did spread to other areas, including North America. Since 2003, there have been several outbreaks of avian influenza, beginning in Asia and, most recently, spreading to certain parts of Africa and Europe. Although human cases of avian influenza so far have been limited in number, the World Health Organization has expressed serious concern that a human influenza pandemic could develop from the avian influenza virus. In such an event, numerous responses, including travel restrictions, might be necessary to combat the spread of the disease. Additional outbreaks of SARS or other epidemic diseases such as avian influenza, or the fear of such events, could negatively impact passenger demand for air travel and the aviation industry, which could result in our lessees' inability to satisfy their lease payment obligations to us, which in turn would have an adverse effect on our financial results and growth prospects.

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If recent industry economic losses and airline reorganizations continue, our lessees might not be able to meet their lease payment obligations to us, which would have an adverse effect on our financial results and growth prospects.

As a result of reduced fares, international economic conditions, a significant increase in oil prices, the September 11, 2001 terrorist attacks in the United States, the war and prolonged conflict in Iraq and outbreaks of epidemic diseases such as SARS and avian influenza, the aviation industry as a whole suffered significant losses since 2001 and such losses are expected to continue for the foreseeable future for certain parts of the industry. Many airlines, including a significant number of our lessees, have announced or implemented reductions in capacity, service and workforce in response to industry-wide reductions in passenger demands and fares. In addition, since September 11, 2001, several U.S. airlines have sought to reorganize (and, in certain instances, have reorganized) under Chapter 11 of the U.S. Bankruptcy Code, including United Air Lines, Inc., Delta Air Lines Inc., Northwest Airlines Corp., US Airways, Inc. (one of our largest customers), Hawaiian Airlines, ATA Airlines, Inc., Atlas Air Worldwide Holdings, Inc. and Aloha Airlines, and further U.S. airline reorganizations are possible. Certain European and Latin American airlines, including Sabena Air Lines, Swiss Air Transport Company Limited, Volare Airlines S.p.A., Varig Brazilian Airlines and Avianca, have also filed for protection under applicable bankruptcy laws. In addition, Air Canada (the largest Canadian airline) filed for protection under Canada's Companies' Creditors Arrangement Act. Historically, airlines involved in reorganizations have undertaken substantial fare discounting to maintain cash flows and to encourage continued customer loyalty. Such fare discounting has led to lower profitability for all airlines, including certain of our lessees. The bankruptcies and reduced demand generally have led to the grounding of significant numbers of aircraft and negotiated reductions in aircraft lease rental rates, with the effect of depressing aircraft market values. In addition, requests for additional labor concessions may result in significant labor disputes which could lead to strikes or slowdowns or may otherwise adversely affect labor relations, thereby worsening the financial condition of the airline industry and placing downward pressure on lease rates and aircraft values. Additional reorganizations or liquidations by airlines under Chapter 11 or Chapter 7 of the U.S. Bankruptcy Code or other bankruptcy or reorganization laws in other countries or further rejection of aircraft leases or abandonment of aircraft by airlines in a Chapter 11 proceeding under the U.S. Bankruptcy Code or equivalent laws in other countries may have already exacerbated and would be expected to further exacerbate such depressed aircraft values and lease rates. Additional grounded aircraft and lower market values would adversely affect our ability to sell certain of our aircraft on favorable terms, or at all, or re-lease other aircraft at favorable rates comparable to the then current market conditions, which collectively would have an adverse effect on our financial results and growth prospects.

Risks Related to Our Organization and Structure

If the ownership of our common shares continues to be highly concentrated, it may prevent you and other minority shareholders from influencing significant corporate decisions and may result in conflicts of interest.

Following the completion of this offering, entities affiliated with Fortress will beneficially own 40,000,000 shares, or approximately 80% of our common shares. As a result, Fortress will be able to control fundamental corporate matters and transactions, including: the election of directors; mergers, amalgamations, consolidations or acquisitions; the sale of all or substantially all of our assets; in certain circumstances, the amendment of our bye-laws; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other shareholders. The interests of Fortress may not always coincide with our interests or the interests of our other shareholders. This concentration of ownership may also

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have the effect of delaying, preventing or deterring a change in control of our company. Also, Fortress may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to our other shareholders or adversely affect us or our other shareholders, including investors in this offering. In addition, under our Amended and Restated Shareholders Agreement, which we and the Fortress shareholders will execute upon the completion of this offering, an affiliate of Fortress will be entitled to designate up to four directors for election to our board of directors, depending upon the level of ownership of the Fortress shareholders in us. See ‘‘Certain Relationships and Related Party Transactions — Shareholders Agreements.’’ As a result, the market price of our common shares could decline or shareholders might not receive a premium over the then-current market price of our common shares upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our common shares because investors may perceive disadvantages in owning shares in a company with a significant shareholder. See ‘‘Description of Share Capital — Anti-Takeover Provisions.’’

We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations.

We are a holding company with no material direct operations. Our principal assets are the equity interests we directly or indirectly hold in our operating subsidiaries. As a result, we are dependent on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations and to pay dividends on our common shares. Our subsidiaries are legally distinct from us and may be prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions.

We are a Bermuda company and it may be difficult for you to enforce judgments against us or our directors and executive officers.

We are a Bermuda exempted company and, as such, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. Some of the named experts referred to in this prospectus are not residents of the United States, and a substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. Uncertainty exists as to whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.

Our bye-laws restrict shareholders from bringing legal action against our officers and directors.

Our bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.

We have anti-takeover provisions in our bye-laws that may discourage a change of control.

Our bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors. These provisions provide for:

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•  a classified board of directors with staggered three-year terms;
•  provisions in our bye-laws regarding the election of directors, classes of directors, the term of office of directors and amalgamations to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 66% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;
•  provisions in our bye-laws dealing with the removal of directors and corporate opportunity to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 80% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;
•  the removal of directors by a resolution including the affirmative votes of at least 80% of all votes attaching to all shares in issue entitling the holder to vote on such resolution.
•  our board of directors to determine the powers, preferences and rights of our preference shares and to issue such preference shares without shareholder approval;
•  advance notice requirements by shareholders for director nominations and actions to be taken at annual meetings; and
•  no provision for cumulative voting in the election of directors; all the directors standing for election may be elected by our shareholders by a plurality of votes cast at a duly convened annual general meeting, the quorum for which is two or more persons present in person or by proxy at the start of the meeting and representing in excess of 50% of all votes attaching to all shares in issue entitling the holder to vote at the meeting.

In addition, these provisions may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt that is opposed by Fortress, our management and/or our board of directors. Public shareholders who might desire to participate in these types of transactions may not have an opportunity to do so. These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control or change our management and board of directors and, as a result, may adversely affect the market price of our common shares and your ability to realize any potential change of control premium. See ‘‘Description of Share Capital — Anti-Takeover Provisions.’’

There are provisions in our bye-laws that may require certain of our non-U.S. shareholders to sell their shares to us or to a third party.

Our bye-laws provide that if our board of directors determines that we or any of our subsidiaries do not meet, or in the absence of repurchases of shares will fail to meet, the ownership requirements of a limitation on benefits article of any bilateral income tax treaty with the U.S. applicable to us, and that such tax treaty would provide material benefits to us or any of our subsidiaries, we generally have the right, but not the obligation, to repurchase, at fair market value (as determined pursuant to the method set forth in our bye-laws), common shares from any shareholder who beneficially owns more than 5% of our issued and outstanding common shares and who fails to demonstrate to our satisfaction that such shareholder is either (i) a U.S. citizen or (ii) a qualified resident of the U.S. or the other contracting state of any applicable tax treaty with the U.S. (as determined for purposes of the relevant provision of the limitation on benefits article of such treaty).

We will have the option, but not the obligation, to purchase all or a part of the shares held by such shareholder (to the extent the board of directors, in the reasonable exercise of its discretion, determines it is necessary to avoid or cure such adverse consequences); provided that the board

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of directors will use its reasonable efforts to exercise this option equitably among similarly situated shareholders (to the extent feasible under the circumstances).

Instead of exercising the repurchase right described above, we will have the right, but not the obligation, to cause the transfer to, and procure the purchase by, any U.S. citizen or a qualified resident of the U.S. or the other contracting state of the applicable tax treaty (as determined for purposes of the relevant provision of the limitation on benefits article of such treaty) of the number of issued and outstanding common shares beneficially owned by any shareholder that are otherwise subject to repurchase under our bye-laws as described above, at fair market value (as determined in the good faith discretion of our board of directors). See ‘‘Description of Share Capital — Bye-Laws — Acquisition of Common Shares by Aircastle.’’

Risks Related to This Offering

An active market for our common shares may never develop.

We have applied to have our common shares listed on the NYSE, under the symbol ‘‘AYR.’’ However, our common shares may not be approved for listing on the NYSE or, if approved, a regular trading market of our common shares may not develop on that exchange or elsewhere or, if developed, any market may not be sustained. Accordingly, an active trading market for our common shares may not develop or be maintained, any trading market may not be liquid, and you may be unable to sell your common shares when desired or at all, or you may not be able to obtain desirable prices for your common shares. If our common shares are not listed on the NYSE (or another appointed stock exchange, as defined in the Companies Act 1981 of Bermuda), then the consent of the Bermuda Monetary Authority may need to be obtained prior to the issue or transfer of any of our shares.

The market price and trading volume of our common shares may be volatile, which could result in rapid and substantial losses for our shareholders.

Even if an active trading market for our common shares develops, the market price of our common shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our common shares may fluctuate and cause significant price variations to occur. If the market price of our common shares declines significantly, you may be unable to resell your shares at or above your purchase price, if at all. The market price of our common shares may fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common shares include:

•  variations in our quarterly operating results;
•  failure to meet our earnings estimates;
•  publication of research reports about us, other aircraft lessors or the aviation industry or the failure of securities analysts to cover our common shares after this offering;
•  additions or departures of key management personnel;
•  adverse market reaction to any indebtedness we may incur or preference or common shares we may issue in the future;
•  changes in our divided payment policy or failure to execute our existing policy;
•  actions by shareholders;
•  changes in market valuations of similar companies;

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•  announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments;
•  speculation in the press or investment community;
•  increases in market interest rates that may lead purchasers of our common shares to demand a higher dividend yield;
•  changes or proposed changes in laws or regulations affecting the aviation industry or enforcement of these laws and regulations, or announcements relating to these matters; and
•  general market, political and economic conditions and local conditions in the markets in which our lessees are located.

Future issuances of debt, which would be senior to our common shares upon liquidation, and future offerings of equity securities, which could dilute the percentage ownership of our then current common shareholders and may be senior to our common shares for the purposes of dividends and liquidation distributions, may adversely affect the market price of our common shares.

In the future, we may attempt to increase our capital resources by issuing debt or additional equity securities, including commercial paper, medium-term notes, senior or subordinated notes and series of preference shares or common shares. Upon liquidation, holders of our debt securities and preference shares and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of our common shares. Additional equity offerings may dilute the holdings of our then current common shareholders or reduce the market price of our common shares, or both. Preference shares, if issued, could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability to make a distribution to the holders of our common shares. Because our decision to issue debt or additional equity securities in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future capital raising activities. Thus, holders of our common shares bear the risk of our future debt and equity issuances reducing the market price of our common shares and diluting their percentage ownership in us. See ‘‘Description of Share Capital.’’

The market price of our common shares could be negatively affected by sales of substantial amounts of our common shares in the public markets.

After this offering, there will be 50,082,900 common shares outstanding. There will be 51,446,535 shares issued and outstanding if the underwriters exercise their over-allotment option in full. All the common shares sold in this offering will be freely transferable, except for any shares held by our ‘‘affiliates,’’ as that term is defined in Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. The remaining outstanding common shares will be deemed ‘‘restricted securities’’ as that term is defined in Rule 144 under the Securities Act. See ‘‘Shares Eligible For Future Sale.’’

Pursuant to our Amended and Restated Shareholders Agreement, which we and the Fortress shareholders will execute upon the completion of this offering, the Fortress shareholders and certain of their affiliates and permitted third-party transferees will have the right, in certain circumstances, to require us to register their 40 million common shares under the Securities Act for sale into the public markets. Upon the effectiveness of such a registration statement, all shares covered by the registration statement will be freely transferable. See ‘‘Certain Relationships and Related Party Transactions — Shareholders Agreement.’’

We and our executive officers, directors, shareholders and participants in our directed share program have agreed with the underwriters that, subject to certain exceptions, for a period of

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120 days after the date of this prospectus, we and they will not directly or indirectly offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer, dispose of or hedge, directly or indirectly, our common shares or any securities convertible into or exercisable or exchangeable for our common shares, or enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences associated with the ownership of common shares, or cause a registration statement covering our common shares to be filed, without the prior written consent of the representatives. The 120-day restricted period described above is subject to an automatic extension under certain circumstances. See ‘‘Underwriting.’’ The representatives may waive these restrictions at their discretion.

In addition, following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register an aggregate of 4,000,000 common shares reserved for issuance under our incentive plan. Subject to any restrictions imposed on the shares and options granted under our incentive plan, shares registered under the registration statement on Form S-8 will be available for sale into the public markets subject to the 120-day lock-up agreements referred to above.

The issuance of additional common shares in connection with acquisitions or otherwise will dilute all other shareholdings.

After this offering, assuming the exercise in full by the underwriters of their over-allotment option, we will have an aggregate of 195,415,465 common shares authorized but unissued and not reserved for issuance under our incentive plan. We may issue all of these common shares without any action or approval by our shareholders. We intend to continue to actively pursue acquisitions of aviation assets and may issue common shares in connection with these acquisitions. Any common shares issued in connection with our acquisitions, our incentive plan, the exercise of outstanding share options or otherwise would dilute the percentage ownership held by the investors who purchase common shares in this offering.

Investors in this offering will suffer immediate and substantial dilution.

The initial public offering price of our common shares will be substantially higher than the pro forma, as adjusted net tangible book value per common share issued and outstanding immediately after this offering. Our pro forma net tangible book value per share as of March 31, 2006 was approximately $10.17. Our pro forma net tangible book value per share as of March 31, 2006 represents the book value of our total tangible assets minus the book value of our total liabilities, divided by the number of our common shares then issued and outstanding after giving effect to (i) Securitization No. 1 and the use of proceeds therefrom, (ii) the payment of a dividend from cash on hand in the amount of $0.35 per common share, or an aggregate of $14.4 million, declared by our board of directors and payable on July 31, 2006, (iii) the payment of a dividend from cash on hand in the amount of $0.175 per common share, or an aggregate of $7.2 million, expected to be declared by our board of directors and payable on August 15, 2006 and (iv) the purchase of 277,000 common shares by employees and a director nominee in May 2006. Investors who purchase common shares in this offering will pay a price per share that substantially exceeds the pro forma, as adjusted net tangible book value per common share. If you purchase our common shares in this offering, you will experience immediate and substantial dilution of $10.04 in the pro forma net tangible book value per common share, based upon an assumed initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus). Investors who purchase common shares in this offering will have purchased 18.2% of the shares issued and outstanding immediately after the offering, but will

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have paid 33.2% of the total consideration for all shares then issued and outstanding (assuming no exercise of the underwriters' over-allotment option).

Market interest rates may have an effect on the value of our common shares.

One of the factors that investors may consider in deciding whether to buy or sell our common shares is our dividend rate as a percentage of our share price relative to market interest rates. If market interest rates increase, prospective investors may desire a higher dividend yield on our common shares or seek securities paying higher dividends or interest. As a result, interest rate fluctuations and capital market conditions can affect the market value of our common shares. For instance, if interest rates rise, it is likely that the market price of our common shares will decrease, because potential investors may demand a higher dividend yield on our common shares as market rates on interest-bearing securities, such as bonds, rise.

Risks Related to Taxation

If AL, were treated as engaged in a trade or business in the United States, it would be subject to U.S. federal income taxation on a net income basis, which would adversely affect our business and result in decreased cash available for distribution to our shareholders.

If, contrary to expectations, AL were treated as engaged in a trade or business in the United States, the portion of AL’s net income, if any, that was ‘‘effectively connected’’ with such trade or business would be subject to U.S. federal income taxation at a maximum rate of 35%. In addition, AL would be subject to the U.S. federal branch profits tax on its effectively connected earnings and profits at a rate of 30%. The imposition of such taxes would adversely affect our business and would result in decreased cash available for distribution to our shareholders.

If substantially all of the U.S. source rental income of Aircastle Bermuda is attributable to activities of Aircastle personnel based in the United States, Aircastle Bermuda could be subject to U.S. federal income taxation on a net income basis rather than at a rate of 4% of its U.S. source gross rental income, which would adversely affect our business and result in decreased cash available for distribution to our shareholders.

We have adopted certain operating procedures designed to limit the amount of income generated by Aircastle Bermuda that is treated as effectively connected with a U.S. trade or business. Accordingly, it is generally expected that Aircastle Bermuda’s U.S. source rental income will be subject to U.S. federal taxation, on a gross income basis, at a rate not in excess of 4%. If, contrary to expectations, we do not comply with certain administrative guidelines of the Internal Revenue Service, or the IRS, such that 90% or more of Aircastle Bermuda’s U.S. source rental income were attributable to the activities of personnel based in the United States, Aircastle Bermuda’s U.S. source rental income could be treated as income effectively connected with the conduct of a trade or business in the United States. In such case, Aircastle Bermuda’s U.S. source rental income would be subject to U.S. federal income taxation at a maximum rate of 35%. In addition, Aircastle Bermuda would be subject to the U.S. federal branch profits tax on its effectively connected earnings and profits at a rate of 30%. The imposition of such taxes would adversely affect our business and would result in decreased cash available for distribution to our shareholders.

One or more of our Irish subsidiaries could fail to qualify for treaty benefits, which would subject certain of their income to U.S. federal income taxation, which would adversely affect our business and result in decreased cash available for distribution to our shareholders.

Our Irish subsidiaries do not expect to have any U.S. federal income tax liability with respect to (i) rental income attributable to aircraft used in international traffic or (ii) gain from the sale of aircraft used in international traffic. For this purpose, ‘‘international traffic’’ includes all flights

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other than those that are conducted from one point in the United States to another point in the United States. In order for each of our Irish subsidiaries to avoid U.S. federal income taxation of such income, it may be necessary for such subsidiary to qualify for the benefits of the income tax treaty between the United States and Ireland, or the Irish Treaty. Qualification for the benefits of the Irish Treaty depends on many factors, including being able to establish the identity of the ultimate beneficial owners of our common shares. Each of the Irish subsidiaries may not satisfy all the requirements of the Irish Treaty and thereby may not qualify each year for the benefits of the Irish Treaty. Moreover, the provisions of the Irish Treaty may change. Failure to so qualify could result in the rental income from aircraft used for flights to, from or within the United States being subject to U.S. federal income taxation at a maximum rate of 35% (plus the 30% U.S. federal branch profits tax on effectively connected earnings and profits). The imposition of such taxes would adversely affect our business and would result in decreased cash available for distribution to our shareholders.

We may become subject to an increased rate of Irish taxation which would adversely affect our business and would result in decreased earnings available for distribution to our shareholders.

Our Irish subsidiaries and affiliates are expected to be subject to corporation tax on their income from leasing, managing and servicing aircraft at the 12.5% tax rate applicable to trading income. This expectation is based on certain assumptions, including that we will maintain at least the current level of our business operations in Ireland. If we are not successful in achieving trading status in Ireland the income of our Irish subsidiaries and affiliates will be subject to corporation tax at the 25% rate applicable to non-trading activities which would adversely affect our business and would result in decreased earnings available for distribution to our shareholders.

We may become subject to income or other taxes in the non-U.S. jurisdictions in which our aircraft operate, where our lessees are located or where we perform certain services which would adversely affect our business and result in decreased cash available for distributions to shareholders.

Certain Aircastle entities are expected to be subject to the income tax laws of Ireland and/or the United States. In addition, we may be subject to income or other taxes in other jurisdictions by reason of our activities and operations, where our aircraft operate or where the lessees of our aircraft (or others in possession of our aircraft) are located. Although we have adopted operating procedures to reduce the exposure to such taxation, we may be subject to such taxes in the future and such taxes may be substantial. In addition, if AL does not follow separate operating guidelines relating to managing a portion of its aircraft portfolio through offices in Ireland and Singapore, income from aircraft not owned in such jurisdictions would be subject to local tax. The imposition of such taxes would adversely affect our business and would result in decreased earnings available for distribution to our shareholders.

AL expects to be a PFIC and a controlled foreign corporation, or CFC, for U.S. federal income tax purposes.

We expect to be treated as a PFIC and a CFC for U.S. federal income tax purposes. If you are a U.S. person and own less than 10% of our voting shares and do not make a qualified electing fund, or QEF, election with respect to us and each of our PFIC subsidiaries, you would be subject to special deferred tax and interest charges with respect to certain distributions on our common shares, any gain realized on a disposition of our common shares and certain other events. The effect of these deferred tax and interest charges could be materially adverse to you. Alternatively, if you are such a shareholder and make a QEF election for us and our subsidiaries, or you own 10% or more of our voting shares, you will not be subject to those charges, but could recognize taxable income in a taxable year with respect to our common shares in excess of any distributions that we make to you in that year, thus giving rise to so-called ‘‘phantom income’’ and to a potential out-of-pocket tax liability. See ‘‘Material Tax Considerations—Material United States Federal Income Tax Considerations.’’

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Distributions made to you if you are a U.S. person that is an individual will not be eligible for taxation at reduced tax rates generally applicable to dividends paid by certain United States corporations and ‘‘qualified foreign corporations’’ on or after January 1, 2003. The more favorable rates applicable to regular corporate dividends could cause individuals to perceive investment in our shares to be relatively less attractive than investment in the shares of other corporations, which could adversely affect the value of our shares.

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Special Note Regarding Forward-Looking Statements

Some of the statements under ‘‘Prospectus Summary,’’ ‘‘Risk Factors,’’ ‘‘Management's Discussion and Analysis of Financial Condition and Results of Operations,’’ ‘‘Business’’ and elsewhere in this prospectus may contain forward-looking statements which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as ‘‘outlook,’’ ‘‘believes,’’ ‘‘expects,’’ ‘‘potential,’’ ‘‘continues,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘seeks,’’ ‘‘approximately,’’ ‘‘predicts,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘estimates,’’ ‘‘anticipates’’ or the negative version of those words or other comparable words. Any forward-looking statements contained in this prospectus are based upon the historical performance of us and our subsidiaries and on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us, the underwriters or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, a decrease in the overall demand for commercial aircraft and aircraft leasing, the economic condition of the global airline industry and the ability of our lessees and potential lessees to make operating lease payments to us, acquisition risks, competitive pressures within the industry, risks related to the geographic markets in which we and our lessees operate and other factors described in the section entitled ‘‘Risk Factors’’ beginning on page 11 of this prospectus. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus. We do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have projected. Any forward-looking statements you read in this prospectus reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. You should specifically consider the factors identified in this prospectus that could cause actual results to differ before making an investment decision to purchase our common shares.

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Market and Industry Data and Forecasts

This prospectus includes market share and industry data and forecasts that we have developed from independent consultant reports, publicly available information, various industry publications, other published industry sources and our internal data and estimates. This includes information relating to the aviation industry and operating leasing industry from several independent outside sources including BACK Aviation Solutions or BACK, an aviation consulting firm and aviation market analysis firm; Simat Helliesen & Eichner, Inc, or SH&E, an aviation consulting firm and aviation market analysis firm; International Bureau of Aviation or IBA, an aviation consulting firm; Aviation Specialists Group or ASG, provider of aircraft appraisals, market analysis and aviation industry insight; ESG Aviation Services and The Airline Monitor, an aviation market analysis firm and Economist Intelligence Unit or EIU, provider of country and global data.

Independent consultant reports, industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information.

Our internal data, estimates and forecasts are based upon information obtained from our customers, partners, trade and business organizations and other contacts in the markets in which we operate and our management's understanding of industry conditions.

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Use of Proceeds

The net proceeds to us from the sale of the 9,090,900 common shares offered hereby are estimated to be approximately $183.0 million, assuming an initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us. Our net proceeds will increase by approximately $27.9 million if the underwriters' over-allotment option is exercised in full. We expect to use the net proceeds to repay approximately $143.2 million of the amount outstanding under our $750 million senior secured revolving credit facility, which we refer to as Credit Facility No. 2, and for general corporate purposes. Pending these uses, we intend to invest the net proceeds in short-term interest-bearing instruments or money market accounts.

A $1.00 increase (decrease) in the assumed initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by approximately $8.5 million, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

As of July 18, 2006, we had $143.2 million outstanding under Credit Facility No. 2, which is scheduled to mature on November 15, 2007. Borrowings under Credit Facility No. 2 bear interest at the one-month LIBOR rate plus 1.25% which at July 18, 2006 was 6.45% per annum. Borrowings under Credit Facility No. 2 were used to finance a portion of the net book value of certain of our aircraft. Amounts repaid under Credit Facility No. 2 may be reborrowed from time to time, subject to compliance with borrowing conditions. Certain of the underwriters or their affiliates are lenders under Credit Facility No. 2 and will receive their pro rata share of amounts repaid thereunder with the net proceeds of this offering. See ‘‘Underwriting.’’

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Dividend Policy

On July 20, 2006, our board of directors declared a dividend of $0.35 per common share, or an aggregate of $14.3 million, for the three months ended June 30, 2006, which is payable on July 31, 2006. In addition, our board of directors is expected to declare a dividend of $0.175 per common share, or an aggregate of $7.2 million, to shareholders of record as of August 1, 2006, which is payable on August 15, 2006, for the period commencing on July 1, 2006 and ending on August 15, 2006. We are paying this dividend so that holders of our common shares prior to this offering will receive a distribution for the period prior to this offering. These dividends will be paid using cash on hand and may not be indicative of the amount of any future dividends. Purchasers in this offering will not be entitled to receive these dividends.

We intend to continue to pay regular quarterly dividends to our shareholders. We plan to grow our dividends through the acquisition of additional aviation assets. Through our strategy of reinvesting amounts approximately equal to non-cash depreciation expense, we will seek to maintain our asset base and grow our revenues, earnings and dividends.

The payment of dividends is subject to the discretion of our board of directors and will depend on many factors, including our ability to make and finance acquisitions, our ability to negotiate favorable lease and other contractual terms, the level of demand for our aircraft, the economic condition of the commercial aviation industry generally, the financial condition and liquidity of our lessees, the lease rates we charge and realize, our leasing costs, unexpected or increased expenses, the level and timing of capital expenditures, principal repayments and other capital needs, the value of our aircraft portfolio, our results of operations, financial condition and liquidity, general business conditions, restrictions imposed by financing arrangements (including our credit facilities), legal restrictions on the payment of dividends and other factors that our board of directors deems relevant. We are not permitted to pay dividends on our common shares to the extent a default or an event of default exists under Credit Facility No. 2. Based upon our forward-looking results of operations and expected cash flows, we currently expect to be in compliance with all of the debt covenants, a default under which would prevent us from paying dividends. However, our forward-looking results and expected cash flows are subject to risks and uncertainties described under ‘‘Risk Factors’’ and ‘‘Special Note Regarding Forward-Looking Statements.’’ In addition, we are a holding company with no direct operations and depend on loans, dividends and other payments from our subsidiaries to generate the funds necessary to pay dividends, and our subsidiaries may be prohibited or restricted from paying dividends to us or otherwise making funds available to us under certain conditions. See ‘‘Description of Indebtedness.’’ We expect that in certain quarters we may pay dividends in excess of our net income for such period as determined in accordance with GAAP.

Our dividend policy has certain risks and limitations. While we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay the intended dividends, or if our financial performance does not achieve expected results. To the extent that we do not have cash on hand sufficient to pay dividends, we do not intend to borrow funds to pay any dividends. By paying cash dividends rather than investing that cash in future growth, we risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations or unanticipated capital expenditures, should the need arise.

We expect that our dividends will not be eligible for either the dividends-received deduction for corporate U.S. Holders or treatment as ‘‘qualified dividend income’’ (which is taxable at the rates generally applicable to long-term capital gains) for U.S. Holders taxed as individuals.

Pursuant to Bermuda law, we are restricted from declaring or paying a dividend, or making a distribution out of contributed surplus, if there are reasonable grounds for believing that (i) we are, or would after the payment be, unable to pay our liabilities as they become due, or (ii) the realizable value of our assets would thereby be less than the aggregate of our liabilities, our issued share capital (par value) and our share premium account (share premium being the amount of consideration paid for the subscription of shares in excess of the par value of those shares). As a result, in future years, if the realizable value of our assets decreases, our ability to make or maintain dividend payments may depend on our shareholders' approval of resolutions reducing our share premium account by transferring funds to our contributed surplus account.

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Capitalization

The following table sets forth our capitalization as of March 31, 2006:

•  on an actual basis;
•  on a pro forma basis to give effect to (i) Securitization No. 1, which closed on June 15, 2006, and the use of proceeds therefrom, (ii) the payment of a dividend from cash on hand in the amount of $0.35 per common share or an aggregate of $14.4 million, declared by our board of directors on July 20, 2006 and payable on July 31, 2006, (iii) the payment of a dividend from cash on hand in the amount of $0.175 per common share, or an aggregate of $7.2 million, expected to be declared by our board of directors and payable on August 15, 2006, and (iv) the purchase of 277,000 common shares by employees and a director nominee in May 2006; and
•  on a pro forma basis, as adjusted to give further effect to the sale of common shares in this offering at an assumed offering price of $22.00 (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the underwriters' discounts and commissions and estimated offering expenses payable by us, and application of a portion of the proceeds from this offering towards repayment of amounts outstanding under Credit Facility No. 2.

This table contains unaudited information and should be read in conjunction with ‘‘Management's Discussion and Analysis of Financial Condition and Results of Operations’’ and our historical and pro forma consolidated financial statements and the accompanying notes that appear elsewhere in this prospectus.

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  As of March 31, 2006
  Actual Pro Forma(1) Pro Forma,
As Adjusted(1)(2)(3)
  (Dollars in thousands)
Borrowings under credit facilities:  
 
 
Credit Facility No. 1 $ 486,973
$
$
Credit Facility No. 2 (4) 8,554
8,554
Credit Facility No. 3 73,332
73,332
73,332
Securitization No. 1 (1)
560,000
560,000
Repurchase agreements 84,434
84,434
84,434
Shareholders' equity (5):  
 
 
    Common shares, $0.01 par value: 100,000,000 shares authorized, actual and pro forma, 250,000,000 shares authorized, pro forma, as adjusted; 44,408,200 shares issued and outstanding, actual, 40,992,000 shares issued and outstanding, pro forma, 50,082,900 shares issued and outstanding, pro forma, as adjusted 444
410
501
    Preference shares, $0.01 par value, no shares authorized actual and pro forma, 50,000,000 shares authorized, pro forma, as adjusted; no shares issued and outstanding, actual, pro forma and pro forma, as adjusted
Additional paid-in capital 438,189
407,385
589,294
Retained earnings 9,943
(18,038
)
(18,038
)
Accumulated other comprehensive income 27,224
27,224
27,224
Total shareholders' equity 475,800
416,981
598,981
Total capitalization $ 1,129,093
$ 1,143,301
$ 1,316,747
(1) Pursuant to Securitization No. 1, ACS, a newly formed trust, issued $560 million of floating rate aircraft lease-backed securities secured by ownership interests in certain of our subsidiaries that own 40 of our aircraft and the related aircraft leases. Proceeds from Securitization No. 1, after deducting approximately $13 million in expenses, will be used to repay $487.0 million of indebtedness under, and to terminate, Credit Facility No. 1, to return $36.9 million to the Fortress shareholders in exchange for the cancellation of 3,693,200 of our common shares.
(2) A $1.00 increase (decrease) in the assumed initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) each of additional paid-in capital, total shareholders' equity and total capitalization by approximately $8.5 million, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(3) The pro forma, as adjusted authorized share capital reflects the effectiveness of our amended bye-laws which will be effective as of August 1, 2006.
(4) As of July 18, 2006, we had $143.2 million outstanding under Credit Facility No. 2, which amounts we expect to repay in full with proceeds from this offering.
(5) On January 31, 2006, the Fortress shareholders committed to contribute up to an additional $100 million of equity to AL. On February 8, 2006 the Fortress shareholders contributed $36.9 million pursuant to the aforementioned commitment in exchange for 3,693,200 of our common shares. On July 21, 2006, we returned $36.9 million to the Fortress shareholders in exchange for the cancellation of 3,693,200 of our common shares. After the return of the cash, the $100 million commitment was reinstated in full. This commitment will terminate upon completion of this offering.

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Dilution

If you invest in our common shares, your interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share after this offering. Pro forma net tangible book value per share represents the book value of our total tangible assets less the book value of our total liabilities divided by the number of our common shares then issued and outstanding after giving effect to (i) Securitization No. 1 and the use of proceeds therefrom, (ii) the payment of a dividend from cash on hand in the amount of $0.35 per common share, or an aggregate of $14.4 million, declared by our board of directors and payable on July 31, 2006, (iii) the payment of a dividend from cash on hand in the amount of $0.175 per common share, or an aggregate of $7.2 million, expected to be declared by our board of directors and payable on August 15, 2006, and (iv) the purchase of 277,000 common shares by employees and a director nominee in May 2006.

Our pro forma net tangible book value as of March 31, 2006, was approximately $417.0 million, or approximately $10.17 per share based on the 40,992,000 common shares, including          restricted shares, issued and outstanding as of such date. After giving further effect to our sale of common shares in this offering at the initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting estimated underwriting discounts and estimated expenses related to this offering, our pro forma, as adjusted net tangible book value as of March 31, 2006 would have been $599.0 million or $11.96 per share (assuming no exercise of the underwriters' over-allotment option). This represents an immediate and substantial dilution of $10.04 per share to new investors purchasing common shares in this offering. The following table illustrates this dilution per share:


Assumed initial public offering price per share $ 22.00

Pro forma net tangible book value per share as of March 31, 2006 $ 10.17
Increase in pro forma net tangible book value per share attributable to this offering $ 1.79

Pro forma, as adjusted net tangible book value per share after giving effect to this offering $ 11.96
Dilution per share to new investors $ 10.04

A $1.00 increase (decrease) in the assumed initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would (decrease) increase our pro forma, as adjusted net tangible book value by $8.5 million, the pro forma, as adjusted net tangible book value per share after this offering by $0.17 per share, the pro forma, as adjusted net tangible book value to new investors in this offering by $0.83 per share, and assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, on a pro forma basis as of March 31, 2006, the differences between the number of common shares purchased from us, the total price and the average price per share paid by existing shareholders and by the new investors in this offering, before deducting the underwriting discounts and commissions and estimated offering expenses payable by us, at an assumed initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus).

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  Common Shares Purchased Total Average
Price Per
Share
  Number Percent Amount Percent
      (in Thousands)    
Existing shareholders 40,992,000
81.8
%
$ 401,770
66.8
%
$ 9.80
New investors 9,090,900
18.2
%
200,000
33.2
%
22.00
Total 50,082,900
100.0
%
$ 601,770
100.0
%
$ 12.02

A $1.00 increase (decrease) in the assumed initial public offering price of $22.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) total consideration paid by new investors in this offering, total consideration paid by all shareholders and the average price per share paid by all shareholders by $9.1 million, $9.1 million and $0.18, respectively, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and other expenses of the offering.

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Selected Historical Consolidated Financial Data

The following tables set forth our selected historical consolidated financial data as of December 31, 2004 and 2005 and for the period from our inception to December 31, 2004 and the year ended December 31, 2005 and selected historical consolidated financial data as of and for the three months ended March 31, 2005 and 2006. We commenced operations in October 2004 and therefore the information presented for the year ended December 31, 2004 reflects our results of operations for the period from October 29, 2004 through December 31, 2004 only. You should read this information in conjunction with the information under ‘‘Management's Discussion and Analysis of Financial Condition and Results of Operations,’’ ‘‘Business’’ and our historical consolidated financial statements and the related notes thereto included elsewhere in this prospectus. Our historical consolidated statements of operations data and consolidated balance sheets data as of December 31, 2004 and 2005 and for the period from our inception through December 31, 2004 and the year ended December 31, 2005 have been derived from our audited consolidated financial statements and are included elsewhere in this prospectus. The statement of operations data and consolidated balance sheets data as of and for the three months ended March 31, 2005 and 2006 have been derived from our unaudited consolidated interim financial statements included elsewhere in this prospectus. The results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. Please also see our Unaudited Pro Forma Consolidated Financial Statements beginning on page F-2.

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  Period From
October 29, 2004
(Commencement
of Operations) Through
December 31,
Year Ended
December 31,
Three Months
Ended March 31,
  2004 2005 2005 2006
Statements of Operations Data (Dollars in thousands, except per share data):  
 
 
 
Lease rentals $ 78
$ 32,978
$ 1,862
$ 31,371
Interest income
2,942
325
1,641
Other revenue
106
Total Revenues 78
36,026
2,187
33,012
Depreciation 390
14,460
1,462
9,915
Interest, net of interest income (9
)
7,739
313
7,717
Selling, general and administrative expenses 1,117
12,595
1,548
5,954
Other expenses 45
1,171
69
641
Total expenses 1,543
35,965
3,392
24,227
Income (loss) from continuing operations before income taxes (1,465
)
61
(1,205
)
8,785
Income tax provision
940
169
1,004
Income (loss) from continuing operations (1,465
)
(879
)
(1,374
)
7,781
Earnings from discontinued operations, net of income taxes
1,107
3,399
Net income (loss) $ (1,465
)
$ 228
(1,374
)
11,180
Basic earnings (loss) per share:  
 
 
 
Income (loss) from continuing operations $ (.04
)
$ (.02
)
$ (.03
)
$ .19
Earnings from discontinued operations, net of income taxes
.03
.08
Net income (loss) $ (.04
)
$ .01
$ (.03
)
$ .27
Diluted earnings (loss) per share:  
 
 
 
Income (loss) from continuing operations $ (.04
)
$ (.02
)
$ (.03
)
$ .19
Earnings from discontinued operations, net of income taxes
.03
.08
Net income (loss) $ (.04
)
$ .01
$ (.03
)
$ .27

  As of December 31, As of March 31,
  2004 2005 2006
Consolidated Balance Sheets Data (Dollars in thousands, except per share data):  
 
 
Cash and cash equivalents $
$ 79,943
$ 27,554
Debt securities, available for sale
26,907
120,558
Restricted cash and cash equivalents
40,652
92,666
Flight equipment held for lease, net of accumulated depreciation 94,430
746,124
941,692
Total assets 104,981
967,532
1,218,462
Borrowings under credit facilities
490,588
568,859
Repurchase agreements
8,665
84,434
Security deposits and maintenance payments 3,474
37,089
62,518
Total liabilities 5,746
556,596
742,662
Total shareholders' equity 99,235
410,936
475,800
Total liabilities and shareholders' equity 104,981
967,532
1,218,462
Cash dividends declared per common share

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Management's Discussion and Analysis of
Financial Condition and Results of Operations

This management's discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. Please see ‘‘Special Note Regarding Forward-Looking Statements’’ for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with our historical and pro forma consolidated financial statements and the notes thereto appearing elsewhere in this prospectus, including ‘‘Capitalization,’’ ‘‘Summary Consolidated Financial Information’’ and ‘‘Selected Historical Consolidated Financial and Operating Data.’’ The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those listed under ‘‘Risk Factors’’ and included elsewhere in this prospectus.

OVERVIEW

We are a global company that acquires and leases high-utility commercial jet aircraft to passenger and cargo airlines throughout the world. High-utility aircraft are generally modern, operationally efficient jets with a large operator base and long useful lives. As of March 31, 2006, our aircraft portfolio consisted of 42 aircraft that were leased to 24 lessees located in 16 countries and managed through our offices in the United States, Ireland and Singapore. All of our aircraft are subject to net operating leases whereby the lessee is generally responsible for maintaining the aircraft and paying operational and insurance costs although, in a majority of cases, we are obligated to pay a portion of specified maintenance or modification costs. We also make investments in other aviation assets, including debt securities secured by commercial jet aircraft. As of July 18, 2006, we had acquired and committed to acquire aviation assets having an aggregate purchase price equal to $1.3 billion and $305.3 million, respectively, for a total of approximately $1.6 billion. In addition, as at July 18, 2006 we have entered into non-binding letters of intent to acquire an additional 8 aircraft subject to lease. These letters of intent would not become binding commitments for us or the seller until internal approvals, due diligence and certain other steps are completed. Our revenues and income from continuing operations for the quarter ended March 31, 2006 were $33.0 million and $7.8 million, respectively.

We intend to pay regular quarterly dividends to our shareholders. We plan to grow our dividends per share through the acquisition of additional aviation assets using cash on hand and available credit facilities. We expect to finance our acquisitions on a long-term basis using low-cost, non-recourse securitizations. In June 2006, we closed our first securitization, a $560 million transaction comprising 40 aircraft. On July 20, 2006, our board of directors declared a dividend of $0.35 per common share or an aggregate of $14.4 million for the three months ended June 30, 2006, which is payable on July 31, 2006. In addition, our board of directors is expected to declare a dividend of $0.175 per common share to shareholders of record as of August 1, 2006, which is payable on August 15, 2006, for the period commencing on July 1, 2006 and ending on August 15, 2006. We are paying this dividend so that holders of our common shares prior to this offering will receive a distribution for the period prior to this offering. These dividends may not be indicative of the amount of any future dividends.

Segments

We manage our business and analyze and report our results of operations on the basis of the following two business segments: Aircraft Leasing and Debt Investments. We present our segment information on a contribution margin basis consistent with the information that our

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Chief Executive Officer (the chief operating decision maker) reviews in assessing segment performance and allocating resources. Contribution margin includes revenue, depreciation, interest expense and other expenses that are directly connected to our business segments. We believe contribution margin is an appropriate measure of performance because it reflects the marginal profitability of our business segments excluding overhead.

Aircraft Leasing

All of our aircraft are currently subject to net operating leases whereby the lessee is generally responsible for maintaining the aircraft and paying operational and insurance costs. In many of our leases we are obligated to bear a portion of maintenance costs or costs associated with modifications required by manufacturers or regulators. We retain the benefit, and bear the risk, of re-leasing and the residual value of the aircraft upon expiry or early termination of the lease. As of March 31, 2006, our portfolio consisted of 42 aircraft on lease to 24 lessees in 16 countries with a net book value of $941.7 million. The weighted average (by net book value) age of the aircraft in the portfolio from the date of delivery by manufacturer to March 31, 2006, was 8.7 years. The weighted average (by net book value) remaining lease term as of March 31, 2006 was 4.2 years.

Debt Investments

We also invest in debt securities secured by commercial jet aircraft, including enhanced equipment trust certificates, and other forms of collateralized debt. We believe our experience in the aircraft leasing business coupled with knowledge of structured finance, enables us to make opportunistic investments in this market sector. Our intent is not to actively trade debt investments, and accordingly we have classified debt investments purchased to date as available-for-sale as defined in Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities . As of December 31, 2005, we owned debt securities secured by aircraft with a fair value of $26.9 million. From January 1, 2006 through March 31, 2006 we made two additional investments in debt securities secured by aviation assets. At March 31, 2006, our debt investment portfolio consisted of six such debt securities with a fair value of $120.6 million.

Revenues

Revenues in our Aircraft Leasing segment are comprised of operating lease rentals on flight equipment held for lease. The amount of rent we receive depends on various factors, including the type, size and age of the aircraft in our portfolio. Lease rental revenue is recognized on a straight-line basis over the term of the lease. Our aircraft lease agreements generally provide for the periodic payment of a fixed amount of rent over the life of the lease. However, the amount of rent we receive may vary due to several factors, including the credit worthiness of our lessees and the occurrence of delinquencies and defaults. Our lease rental revenues are also affected by the extent to which aircraft are off-lease, and our ability to remarket aircraft that are nearing the end of their leases in order to minimize their off-lease time. Our success in re-leasing aircraft is affected by market conditions relating to our aircraft and by general industry trends. An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenues.

Revenues in our Aircraft Leasing segment for the quarter ended March 31, 2006 were $31.4 million as compared to $33.0 million for the full year ended December 31, 2005. Our revenues are expected to increase significantly from 2005 to 2006 as a result of aircraft acquisitions in late 2005 as well as actual and planned aircraft acquisitions throughout 2006.

Revenues in our Debt Investment segment are recognized using the effective interest method. Certain investments which represent residual interests are accounted for using a level yield

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methodology based upon a number of cash flow assumptions that are subject to uncertainties and contingencies. Such assumptions include the rate and timing of principal and interest.

Revenues in our Debt Investment segment for the quarter ended March 31, 2006 were $1.6 million as compared to $3.0 million for the full year ended December 31, 2005. We expect revenues to increase in 2006 as a result of the purchase of $92.7 million of debt securities in February 2006.

Operating Expenses

Operating expenses are comprised of depreciation of flight equipment held for lease, interest expense, selling, general and administrative expenses, or SG&A, and other expenses. As we continue to grow, we expect that depreciation of flight equipment held for lease and interest expense will grow proportionately with revenue growth. We also expect that SG&A will decline as a percentage of revenues as we leverage our existing infrastructure over a greater revenue base.

Since our operating lease terms generally require the lessee to pay for operating, maintenance and insurance costs, our portion of other expenses relating to aircraft reflected in our statement of operations has been nominal.

History

We were formed in October 2004 with a capital commitment of $400 million from funds managed by Fortress for the purpose of investing in aviation assets. This commitment was fully contributed by the end of 2005. On January 31, 2006, the Fortress shareholders committed to contribute up to an additional $100 million of equity to us. On February 8, 2006, the Fortress shareholders contributed $36.9 million pursuant to the aforementioned commitment in exchange for 3,693,200 of our common shares. On July 21, 2006, we returned the $36.9 million to the Fortress shareholders in exchange for the cancellation of 3,693,200 of our common shares. After the return of the cash, the $100 million commitment was reinstated in full. This commitment will terminate upon the completion of this offering.

We are incorporated under Bermuda law and have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 28, 2016, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or is payable by us in respect of real property owned or leased by us in Bermuda. All of our aircraft-owning subsidiaries are non-U.S. corporations that, depending upon the flight activities of the leased aircraft, generally earn income from sources outside the United States that are not subject to U.S. federal income tax. Income earned by our non-U.S. subsidiaries that is attributable to leased aircraft used for flights to or from places within the United States may be subject to U.S. federal income tax. In addition, certain of our non-U.S. subsidiaries may be subject to state and local income taxes on a portion of their income as a result of aircraft used for flights to or from particular states or localities. We own our debt securities in a Bermuda corporation. Earnings of this corporation are not subject to U.S. federal income tax because we qualify for the portfolio interest exception. We have a U.S. based subsidiary which provides management services to our non-U.S. subsidiaries and is subject to U.S. federal, state and local income taxes.

Acquisitions and Dispositions

Our financial results are impacted by the timing and size of acquisitions and dispositions we complete. As of July 18, 2006, we had acquired and committed to acquire aviation assets having

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an aggregate purchase price equal to $1.3 billion and $305.3 million, respectively, or a total of $1.6 billion. To date we have sold one aircraft, and one debt security.

We believe the large and growing aircraft market continues to evolve, generating significant additional acquisition opportunities. Our acquisition strategy is flexible and allows us to take advantage of the best available market opportunities. Currently, we are primarily focused on acquiring high-utility commercial jet aircraft and we may also make opportunistic acquisitions of other asset-backed aviation assets. Our business strategy has been to pursue acquisitions through multiple channels across the world, such as sale-leasebacks with airlines and purchases from operating lessors, banks and other aircraft owning entities. We also explore opportunities to purchase aircraft from manufacturers from time to time. Our ability to successfully and efficiently acquire and integrate additional aviation assets on favorable terms will significantly impact our financial results and growth prospects.

Finance

A key aspect of our growth strategy is our capital management approach, which supports the financing of our acquisitions of aircraft and other aviation assets. We typically finance the initial purchase of aircraft and other aviation assets using flexible, committed short-term credit arrangements and cash on hand. We believe our ability to execute acquisitions expeditiously and without financing contingencies has benefited us in competitive bidding situations. Our short-term borrowed funds for our aircraft acquisitions and repurchase obligations for our securities are provided by secured term credit facilities from banks. See ‘‘— Liquidity and Capital Resources — Credit Facilities.’’

We intend to access the securitization market or other cost effective markets to provide long-term financing for our aircraft portfolio. On June 15, 2006, we closed our first securitization of 40 aircraft, which we refer to as Securitization No. 1. The ACS 2006-1 Pass Through Trust, a newly formed trust, issued a single class of G-1 pass through trust certificates, which we refer to as the certificates, representing undivided interests in $560 million of floating rate asset-backed notes, which we refer to as notes, issued by our wholly owned subsidiaries and supported by 40 aircraft which we refer to as Portfolio No. 1. The principal balance of the notes is equal to 54.8% of the Initial Appraised Value of Portfolio No. 1 of $1.022 billion. Initial Appraised Value is the lesser of the mean and the median of base value appraisals obtained from three internationally recognized appraisal firms. during the period October 2005 through December 2005. We retained 100% of the rights to receive future cash flows from Portfolio No. 1 after the payment of claims that are senior to our rights. Almost all claims are senior to our rights to receive future cash flows, including but not limited to payment of expenses related to the aircraft and fees of service providers, interest and principal payments to certificate holders, amounts owed to hedge providers and amounts, if any, owed to the policy provider and liquidity provider under Securitization No. 1 for previously unreimbursed advances.

The notes bear interest at one-month LIBOR plus 0.27%. Financial Guaranty Insurance Company, or FGIC, issued a financial guaranty insurance policy to support the payment of interest when due on the certificates and the payment, on the final distribution date, of the outstanding principal amount of the certificates. The certificates are rated Aaa and AAA by Moody's Investor Service and Standard & Poor's rating services, respectively. We have entered into a series of interest rate hedging contracts intended to hedge the interest rate exposure associated with issuing floating-rate obligations backed by primarily fixed-rate lease assets. These contracts, together with the guarantee premium, the spread referenced above and other costs of trust administration, result in a fixed rate cost of 6.6% per annum, after the amortization of issuance fees and expenses.

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We are currently utilizing a $750 million senior secured credit facility to finance up to 85% of the net book value of certain aircraft not included in Securitization No. 1. For a detailed description of this credit facility, see ‘‘Description of Indebtedness — Credit Facility No. 2.’’ We expect to continue to purchase aircraft using our credit facilities plus cash on hand and, once a portfolio of 30 to 50 aircraft has been acquired, finance the portfolio on a long-term basis using a securitization structure similar to Securitization No. 1.

Based on our expected aircraft acquisition plan, we anticipate completing one or two portfolio securitizations per year and one or two additional equity offerings per year. Our ability to successfully complete these securitizations and equity offerings on favorable terms will have a significant impact on our results of operations and financial condition.

RESULTS OF OPERATIONS

Comparison of the Period from October 29, 2004 (Commencement of Operations) to December 31, 2004 to the Year Ended December 31, 2005

Our financial results for 2004 are not representative of a full year of operations and are not significant because our operations commenced on October 29, 2004. Similarly, our results of operations for the year ended December 31, 2005 are not representative of a full year of operations as we continued to ramp up operations through the purchase of aircraft and the employment of key personnel. In general, the changes for the period from October 29, 2004 (Commencement of Operations) to December 2004 as compared to the year ended December 31, 2005 are not comparable.

During 2004, we operated in one business segment, Aircraft Leasing. In the first quarter of 2005, we commenced a second segment, Debt Investments, engaged in investing in debt securities.

Revenues and Contribution Margin

Contribution margin by segment for the year ended December 31, 2005 is set forth in the table below. See Note 14 to our consolidated financial statements for the reconciliation to operating income and our reasons for using contribution margins to discuss our results of operations.


  Year Ended December 31, 2005
(Dollars in thousands) Aircraft
Leasing
Debt
Investments
Revenues  
 
Lease rentals $ 32,978
$
Interest income
2,942
Other revenues 2
104
Total revenues 32,980
3,046
Expenses  
 
Depreciation 14,295
Interest 8,930
173
Other expenses 1,078
Total expenses 24,303
173
Contribution margin $ 8,677
$ 2,873

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Aircraft Leasing

For the year ended December 31, 2005, the contribution margin of our Aircraft Leasing segment was $8.7 million on $33.0 million of revenue. At December 31, 2005, we owned 32 aircraft held for lease, all of which were on lease. During 2005, the number of aircraft we owned increased from three aircraft at December 31, 2004 to 32 aircraft at December 31, 2005. For the year ended December 31, 2005, our aircraft leasing revenue of $33.0 million, depreciation expense of $14.3 million and interest expense of $8.9 million reflect the growth of operations during 2005.

For the same period, other expenses primarily consisted of aircraft insurance of $526,000, lease rental expenses of $317,000 and flight equipment repairs of $235,000.

We expect revenue and all of our aircraft leasing expenses to increase in 2006 as we continue to acquire and lease more aircraft and record a full year of lease rental revenue and expenses related to aircraft purchased in 2005.

Debt Investments

For the year ended December 31, 2005, the contribution margin of our Debt Investments segment was $2.9 million on $3.0 million of revenue. At December 31, 2005, we owned $26.9 million of aircraft related debt securities. For the year ended December 31, 2005, revenues from Debt Investments consisted of interest income totaling $2.9 million and interest expense consisted of interest on repurchase agreements totaling $173,000.

Selling, General and Administrative and Other Expenses

For the year ended December 31, 2005, selling, general and administrative expenses of $12.6 million primarily consisted of personnel expenses and other SG&A expenses. Personnel expenses totaling $7.4 million consisted of compensation costs of $6.1 million, relocation and recruiting costs of $1.1 million and benefits of $163,000. At December 31, 2005, we had 29 employees. We expect compensation and benefits costs to increase in 2006 as we hire additional personnel and incur a full year of costs related to employees hired in 2005.

For the year ended December 31, 2005, other SG&A expenses totaling $5.2 million consisted of legal, accounting and tax fees and other expenses. Legal fees incurred in 2005 related primarily to the legal organization and administration of Aircastle and its various subsidiaries. We anticipate an increase in legal, accounting and tax fees in 2006 in connection with this offering and operating as a public company.

Income Tax Provision

We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 28, 2016, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda.

All of our aircraft-owning subsidiaries are foreign corporations that, depending upon the flight activities of the leased aircraft, generally earn income from sources outside the United States and therefore are exempt from U.S. federal, state and local income taxes. We have a U.S. based subsidiary which provides management services to our non-U.S. subsidiaries and is subject to U.S. federal, state and local income taxes.

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Our provision for income taxes for the year ended December 31, 2005 was $0.9 million. Income taxes have been provided based upon the tax laws and rates in the countries in which operations are conducted and income is earned. Consequently, the provision for income taxes recorded relates to income earned by certain subsidiaries of the Company which are located in jurisdictions that impose income taxes.

Discontinued Operations

During 2005, we purchased an aircraft and immediately held it for sale. The aircraft is classified on the balance sheet as flight equipment held for sale and all operating activities are classified as discontinued operations. No depreciation expense was recorded on this aircraft.

For the year ended December 31, 2005, earnings from discontinued operations, net of taxes, totaled $1.1 million. The aircraft earned lease rentals in the amount of $1.6 million and incurred interest expense of $404,000 for the year ended December 31, 2005. Income taxes associated with the aircraft was $115,000. The aircraft was sold on March 29, 2006 for a $2.2 million gain and the related debt in the amount of $36.7 million was repaid on March 30, 2006.

Comparison of the Three Months Ended March 31, 2005 to the Three Months Ended March 31, 2006

Our results of operations for the three months ended March 31, 2005 are not comparable to our results of operations for the three months ended March 31, 2006 primarily due to our significant growth. We owned 42 aircraft with a net book value of $941.7 million at March 31, 2006 as compared to six aircraft with a net book value of $123.4 million at March 31, 2005. At March 31, 2005 and 2006, we had borrowed $43.1 million and $568.9 million, respectively, under our credit facilities. We had eight employees at March 31, 2005 as compared to 32 employees at March 31, 2006. In general, the increases for the three months ended March 31, 2006 as compared to the three months ended March 31, 2005 are related to the acquisition of aviation assets, increased borrowings under our credit facilities and the addition of employees.

Revenues and Contribution Margin

Contribution margin by segment for the three months ended March 31, 2005 is set forth in the table below. See Note 14 to our unaudited consolidated financial statements for the reconciliation to operating income and our reasons for using contribution margin to discuss our results of operations.

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(Dollars in thousands) Aircraft
Leasing
Debt
Investments
Revenues  
 
Lease rentals $ 1,862
$
Interest income
325
Total revenues 1,862
325
Expenses  
 
Depreciation 1,462
Interest 342
Other expenses 69
Total expenses 1,873
Contribution margin $ (11
)
$ 325

Aircraft Leasing

For the three months ended March 31, 2005, the contribution margin of our Aircraft Leasing segment was ($11,000) on $1.9 million of revenue. At March 31, 2005, we owned six aircraft, of which three were on lease. For the three months ended March 31, 2005, our aircraft leasing revenue of $1.9 million, depreciation expense of $1.5 million, interest expense of $342,000 and other expenses of $69,000 reflect the growth of operations during this period of time.

Debt Investments

For the three months ended March 31, 2005, the contribution margin of our Debt Investments segment was $325,000 on $325,000 of revenue. At March 31, 2005, we owned $23.1 million of debt securities with no associated debt. At March 31, 2005, the debt securities had $77,000 of unrealized gains as reflected in accumulated other comprehensive income.

Contribution margin by segment for the three months ended March 31, 2006 is set forth in the table below. See Note 14 to our unaudited consolidated financial statements for the reconciliation to operating income and our reasons for using contribution margin to discuss our results of operations.

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(Dollars in thousands) Aircraft
Leasing
Debt
Investments
Revenues  
 
Lease rentals $ 31,371
$
Interest income
1,641
Total revenues 31,371
1,641
Expenses  
 
Depreciation 9,802
Interest 7,912
868
Other expenses 641
Total expenses 18,355
868
Contribution margin $ 13,016
$ 773

Aircraft Leasing

For the three months ended March 31, 2006, the contribution margin of our Aircraft Leasing segment was $13.0 million on $31.4 million of revenue. At March 31, 2006, we owned 42 aircraft held for lease as compared to 32 aircraft held for lease at December 31, 2005 and six aircraft held for lease at March 31, 2005. All of the aircraft were on lease at March 31, 2006. Aircraft leasing revenue of $31.4 million, depreciation expense of $9.8 million, interest expense of $7.9 million and other expenses of $641,000 all increased relative to the three months ended March 31, 2005 due to the increase in the size of our aircraft portfolio.

Debt Investments

For the three months ended March 31, 2006, the contribution margin of our Debt Investments segment was $773,000 on $1.6 million of revenue. The debt securities earned $1.6 million in interest income for the three months ended March 31, 2006. At March 31, 2006, we owned $120.6 million of debt securities with $13.7 million of unrealized gains as reflected in accumulated other comprehensive income at March 31, 2006.

Selling, General and Administrative and Other Expenses

For the three months ended March 31, 2005 and 2006, selling, general and administrative expenses of $1.5 million and $6.0 million, respectively, primarily consisted of personnel expenses and other SG&A expenses. Personnel expenses of $1.2 and $3.8 million, respectively, consisted primarily of compensation costs totaling $633,000 and $3.7 million and relocation and recruiting costs of $571,000 and $91,000, respectively. We expect compensation and benefits costs to increase in 2006 as we hire additional personnel and incur a full year of costs related to employees hired in 2005.

For the three months ended March 31, 2005 and 2006, other SG&A expenses totaling $0.3 million and $2.2 million, respectively, primarily consisted of legal, accounting and tax and other expenses. Legal fees incurred in 2005 and 2006 related primarily to the legal organization and administration of Aircastle and its various subsidiaries. We anticipate an increase in legal, accounting and tax fees in 2006 in connection with this offering and operating as a public company.

Income Tax Provision

We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in

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Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 28, 2016, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda.

All of our aircraft-owning subsidiaries are foreign corporations that, depending upon the flight activities of the leased aircraft, generally earn income from sources outside the United States and therefore are exempt from U.S. federal, state and local income taxes. We have a U.S. based subsidiary which provides management services to our non-U.S. subsidiaries and is subject to U.S. federal, state and local income taxes.

Our provision for income taxes for the three months ended March 31, 2006 was $1 million. Income taxes have been provided based upon the tax laws and rates in the countries in which operations are conducted and income is earned. Consequently, the provision for income taxes recorded relates to income earned by certain subsidiaries of the Company which are located in jurisdictions that impose income taxes.

Discontinued Operations

For the three months ended March 31, 2006, earnings from discontinued operations totaled $3.4 million. During 2005, we purchased an aircraft and immediately held it for sale. The aircraft earned lease rentals in the amount of $2.1 million and incurred interest expense of $528,000. Income taxes associated with the aircraft were $448,000. This aircraft was sold on March 29, 2006 for a $2.2 million gain and the related debt in the amount of $36.7 million was repaid.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP, requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying footnotes. Our estimates and assumptions are based on historical experiences and currently available information. Actual results may differ from such estimates under different conditions, sometimes materially. A summary of our significant accounting policies is presented in Note 2 to our consolidated financial statements included elsewhere in this prospectus. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and require our most subjective judgments, estimates and assumptions. Our most critical accounting policies and estimates are described below.

Lease Revenue Recognition

Our operating lease rentals are recognized on a straight-line basis over the term of the lease. We will neither recognize revenue nor record a receivable from a customer when collectibility is not reasonably assured. Estimating whether collectibility is reasonably assured requires some level of subjectivity and judgment. When collectibility is not certain, the customer is placed on non-accrual status and revenue is recognized when cash payments are received. Management determines whether customers should be placed on non-accrual status. When we are reasonably assured that payments will be received in a timely manner, the customer is placed on accrual status. The accrual/non-accrual status of a customer is maintained at a level deemed appropriate based on factors such as the customer credit rating, payment performance, financial condition and requests for modifications of lease terms and conditions. Events or circumstances outside of historical customer patterns can result in changes to a customer’s accrual status.

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Income and Valuation of Debt Securities

Income on debt securities is recognized using the effective interest method. Certain investments which represent residual interest are accounted for using a level yield methodology based upon a number of cash flow assumptions that are subject to uncertainties and contingencies. Such assumptions include the rate and timing of principal and interest receipts (which may be subject to prepayments and defaults). These assumptions are updated on at least a quarterly basis to reflect changes related to a particular security, actual historical data, and market changes. These uncertainties and contingencies are difficult to predict and are subject to future events and economic and market conditions, which may alter the assumptions. We have classified our investments in debt securities as available for sale. As such, they are carried at fair value with any net unrealized gains and losses reported as a component of accumulated other comprehensive income. Fair value is based primarily upon broker quotations, as well as counterparty quotations, which provide valuation estimates based upon reasonable market order indications or a good faith estimate thereof. These quotations are subject to significant variability based on market conditions, such as interest rates and credit spreads. Changes in market conditions, as well as changes in the assumptions or methodology used to determine fair value, could result in a significant increase or decrease in our results of operations and financial position. At March 31, 2006, each of our debt securities available for sale has unrealized gains.

Flight Equipment

Flight equipment held for lease is stated at cost and depreciated using the straight-line method over a 25 year life from the date of manufacture to estimated residual values.

Estimated residual values are generally determined to be approximately 15% of the manufacturer's estimated realized price for flight equipment when new. Management may, at its discretion, make exceptions to this policy on a case-by-case basis when, in its judgment, the residual value calculated pursuant to this policy does not appear to reflect current expectations of value. Examples of situations where exceptions may arise include but are not limited to:

•  flight equipment where estimates of the manufacturer's realized sales prices are not relevant (e.g., freighter conversions);
•  flight equipment where estimates of the manufacture's realized sales prices are not readily available; and
•  flight equipment which may have a shorter useful life due to obsolescence.

In accounting for flight equipment held for lease, we make estimates about the expected useful lives, the fair value of attached leases and the estimated residual values. In estimating useful lives, fair value of leases and residual values of our aircraft, we rely upon actual industry experience with the same or similar aircraft types and our anticipated utilization of the aircraft.

Determining the fair value of attached leases requires us to make assumptions regarding the current fair values of leases for specific aircraft. We estimate a range of fair values of like aircraft in order to determine if the attached lease is within a fair value range. If a lease is below or above fair value range, we present value the estimated amount below or above fair value range over the remaining term of the lease. Lease premiums or discounts are amortized into lease rental income over the remaining term of the lease.

Our flight equipment held for lease is evaluated for impairment when events and circumstances indicate that the assets may be impaired. Indicators include third party appraisals of our aircraft, adverse changes in market conditions for specific aircraft types and the occurrence of significant adverse changes in general industry and market conditions that could affect the fair value of our aircraft.

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Derivative Financial Instruments

In the normal course of business we utilize derivative instruments to manage our exposure to interest rate risks. We account for derivative instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities , as amended and interpreted (‘‘SFAS No.133’’). In accordance with SFAS No.133, all derivatives are recognized on the balance sheet at their fair value. We obtain the values on a quarterly basis from the counter party of the derivative contracts. When hedge treatment is achieved under SFAS No.133, the changes in fair values related to the effective portion of the derivatives are recorded in other comprehensive income or in income, depending on the designation of the derivative as a cash flow hedge. The ineffective portion of the derivative contract is calculated and recorded in income at each quarter end.

At inception of the hedge, we choose a method of ineffectiveness calculation, which we must use for the life of the contract. For a majority of our hedges, we use the ‘‘change in variable cash flows method’’ for calculation of hedges not considered to be perfectly effective. In the case of swap transactions, the calculation involves a comparison of the present value of the cumulative change in the expected future cash flows on the variable leg of the swap and the present value of the cumulative change in the expected future interest cash flows on the floating-rate liability. The difference is the calculated ineffectiveness and is recorded in income.

We use the ‘‘hypothetical trade method’’ for hedges that do not qualify for the ‘‘change in variable cash flow method’’ under SFAS No.133. The calculation involves a comparison of the change in the fair value of a hypothetical trade to the change in the fair value of the hedge. The difference is the calculated ineffectiveness and is recorded in income.

Share Based Payments

Compensation costs relating to share based payments are recognized based on the fair value of the equity instruments issued in accordance SFAS No. 123(R), Share Based Payment . We use the straight line method of accounting for compensation cost on share based payment awards that contain pro-rata vesting provisions. The fair value of the equity instruments was determined based on a valuation which takes into account various assumptions that are subjective. Such assumptions involved projecting our earnings through the date of the anticipated initial public offering to develop an estimated annualized rate of earnings and annualized earnings and dividends per share. Key assumptions used in developing the projection included expected monthly acquisition volume through the date of an initial public offering, leverage and interest costs, revenues from new aircraft acquisitions and the growth of selling, general and administrative expenses. We anticipate that the current requisite service periods will be obtained for employees with awards.

LIQUIDITY AND CAPITAL RESOURCES

We have been able to meet our liquidity requirements from several sources, including:

•  Lines of credit and other secured borrowings;
•  Equity contributions from our shareholders;
•  Aircraft lease revenues and maintenance payments; and
•  Principal and interest payments received on debt securities.

We expect that cash on hand and cash flow provided by operations, as well as our credit facilities, will satisfy our short-term liquidity needs with respect to our current portfolios of aircraft and debt securities over the next 12 months.

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The acquisition of aircraft and debt securities drives our growth and fuels our long-term need for liquidity. We expect to acquire a substantial amount of aviation assets over the next twelve months but there can be no assurances regarding the timing and amount of such acquisitions. For the first six months of 2006, we acquired $393 million of commercial jet aircraft and $93 million of debt securities secured by commercial jet aircraft, for a total of $486 million. In addition, over the next twelve months, we expect capital expenditures on our owned and committed aircraft portfolio to be approximately $20 million. However, there can be no assurance that we will be able to acquire such additional aircraft or that such capital expenditures will not exceed the expected amount. It is our intention to fund future aircraft acquisitions initially through borrowings under our credit facilities, and to repay all or a portion of such borrowings from time to time with the net proceeds from subsequent securitizations and additional equity issuances. It is also our intention to finance investments in debt securities with borrowings arranged at the time of the investment which may include entering into repurchase agreements. Therefore, our ability to execute our business strategy, particularly the growth of our acquisitions, depends to a significant degree on our ability to obtain additional debt and equity capital. Depending on the volume of aircraft acquisitions and opportunities to invest in debt securities, we will likely seek to execute one or two additional securitizations and may seek to execute one or two secondary equity offerings during the course of the next 12 months. Decisions by investors and lenders to enter into such transactions with us will depend upon a number of factors, such as our historical and projected performance, compliance with the terms of our current credit arrangements, industry and market trends, the availability of capital and the relative attractiveness of alternative investments. We believe that funds will be available to support our growth strategy and will enable us to pay dividends to our common shareholders as contemplated by our dividend policy. However, future deterioration in our performance or our markets could limit our ability to access these sources of financing and/or increase our cost of capital, which may negatively impact our ability to raise additional funds, grow our business and to pay dividends to our common shareholders.

Cash Flows


  Period Ended
December 31,
Year Ended
December 31,
Three Months Ended
March 31,
(Dollars in thousands) 2004 2005 2005 2006
Net cash flow provided by (used in) operating activities $ 4,290
$ 20,562
$ (1,886
)
$ 13,904
Net cash flow used in investing activities (97,405
)
(742,144
)
(51,313
)
(255,159
)
Net cash flow provided by financing activities 93,115
801,525
96,656
188,866

Net cash flow provided by operating activities totaled $4.3 million and $20.6 million for the period ended December 31, 2004 and for the year ended December 31, 2005, respectively. Operating activities used cash of $1.9 million in the first quarter of 2005 and provided cash of $13.9 million of cash in the first quarter of 2006. Operating activities generated cash in all periods except for the first quarter of 2005. Operating activities used cash in the first quarter of 2005 because only three of our six aircraft were on-lease, and because of an increase of $4.0 million in restricted cash related to the execution of Credit Facility No.1 on February 2005 and the resulting requirement to deposit security and maintenance payments into restricted cash accounts. Cash flow provided by operations is primarily generated from rents received pursuant to the lease agreements on our aircraft. It is reduced by interest expense on our borrowings and by selling, general and administrative expenses. The amount of rent we receive depends on various factors, including the type, size and age of our aircraft portfolio. Our aircraft lease agreements generally provide for the periodic payment of a fixed amount of rent over the life of the lease. The amount of rent we receive may vary due to several factors, including the credit-worthiness of our lessees

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and the occurrence of delinquencies and defaults. It is also affected by the extent to which aircraft are off-lease, and our ability to remarket aircraft that are nearing the end of their leases. Our success in re-leasing aircraft on favorable terms is affected by market conditions for our aircraft and by general industry trends. At December 31, 2005 and March 31, 2006, all of our aircraft were on-lease, compared to 65% on-lease (or two out of the three aircraft in our portfolio), based on book value, at December 31, 2004. An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenue and cash flow from rents.

Cash flow from (used in) operations is also affected by the interest expense we pay on our credit facilities and by our decisions to hedge the risk of changing interest rates. All of our debt is currently floating rate and varies with changes in LIBOR. To the extent interest rates increase, we may be liable for more interest payments to our lenders. Our practice has been to hedge the expected future interest payments on a portion of our floating rate liabilities by entering into derivative contracts. However, we remain exposed to changes in interest rates to the extent we decide to remain unhedged and the degree to which our hedges are not perfectly correlated to the hedged future cash flows.

Net cash flow used in investing activities totaled $97.4 million and $742.1 million in 2004 and 2005, respectively, and $51.3 million and $255.2 million for the first quarters of 2005 and 2006, respectively. The period to period increases reflect an increase in investments in aircraft and debt securities available for sale as we have grown our business activities during this time. In the first quarter of 2005 we invested in $27.8 million of aircraft acquisitions and $23.0 million of debt securities as compared to acquisitions of $200.5 million of aircraft and $92.7 million of debt securities in the first quarter of 2006. In 2004, we acquired $97.4 million of aircraft (including $255,000 of capitalized improvements) and no debt securities. In 2005 we acquired $719.6 million of aircraft (including $30.5 million of capitalized improvements) and $29.4 million of debt securities.

Net cash flow provided by financing activities provided most of the cash used to invest in assets. In 2004, Fortress committed to invest $400 million of equity in us. Of this amount, $93.1 million was contributed in 2004 and $306.9 million was contributed in 2005. On January 31, 2006, the Fortress shareholders committed to contribute up to an additional $100 million of equity to us. On February 8, 2006, the Fortress shareholders contributed $36.9 million pursuant to the aforementioned commitment and in exchange for 3,693,200 of our common shares. On July 21, 2006, we returned the $36.9 million to the Fortress shareholders in exchange for the cancellation of 3,693,200 of our common shares. After the return of the cash, the $100 million commitment was reinstated in full. This commitment will terminate upon the completion of this offering. We also rely on variable rate liabilities to fund part of our acquisitions. In 2005, we borrowed a total of $490.6 million on secured credit facilities and $8.7 million on repurchase agreements. During the first quarter of 2006, we received cash from credit facilities of $78.3 million, net of repayments, to finance investments in aircraft, and we received cash from repurchase agreements of $75.8 million, net of repayments, to finance the acquisition of debt securities. The borrowings under our credit facilities were collateralized by leases on our aircraft, ownership interests in the subsidiaries that own the aircraft, cash on deposit in lockbox accounts and other assets held by the collateral agent and rights under the service provider agreement and certain other agreements.

Credit Facilities

At March 31, 2006, we had a $525 million secured credit facility, which we refer to as Credit Facility No. 1, to finance the acquisition of aircraft and related improvements. Of this amount, $487.0 million had been borrowed and $38.0 million was available. The interest rate on this

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facility was one-month LIBOR plus 1.50%, which at March 31, 2006 was 6.25% per annum. This facility was repaid in full with proceeds from Securitization No. 1 in June 2006 and terminated.

On February 28, 2006, we entered into another secured revolving credit facility to finance aircraft acquisitions, which we refer to as Credit Facility No. 2. This facility initially had a $500 million facility limit and an initial term of 18 months. On June 15, 2006, Credit Facility No.2 was amended to increase the maximum committed amount to $750 million and to extend the maturity to November 15, 2007. As of March 31, 2006, we had borrowed $8.6 million under this facility. Borrowings under the credit facility are used to finance up to 85% of the net book value of aircraft. The facility requires the monthly payment of interest and principal, to the extent of 85% of any decrease in the net book value of the assets. Borrowings under the credit facility bear interest at the one-month LIBOR rate plus 1.25% which at March 31, 2006 was 6.08% per annum. Additionally, we are subject to a 0.25% fee on the average daily amount of the unused portion of the facility. The facility limits our ability to pay dividends prior to any initial public offering. After this offering, the facility has no restrictions on the amount of dividends we can pay, provided we are not in default. Additionally, after the offering, we are required to maintain net worth, determined according to GAAP, of no less than $500 million.

Also at March 31, 2006, we had a $73.3 million secured credit facility to finance the acquisition of two aircraft which we refer to as Credit Facility No. 3. This was initially a $110.0 million facility and had also been used to finance the acquisition of a third aircraft, but was repaid in part upon the sale of one of our aircraft on March 29, 2006. The interest rate on the facility is one-month LIBOR plus 1.50%, which at March 31, 2006 was 6.20% per annum. The facility requires a monthly payment of interest, and on July 18, 2006 was amended to increase the maximum committed amount by approximately $25.1 million and to extend the maturity date to March 31, 2007. We expect to either sell and/or obtain alternative sources of financing for these assets prior to the maturity date. However, we can give no assurances that we will be able to do so.

From time to time, we also enter into repurchase agreements to finance certain of our securities available for sale. Repurchase agreements are agreements to sell securities to a counterparty with the simultaneous agreement to repurchase the same or substantially identical securities from the same counterparty at a later date with accrued interest. Repurchase agreements normally do not constitute economic sales and are therefore treated as collateralized financing transactions and are carried at the amount of cash received with the underlying securities sold continuing to be recognized as securities available for sale. Interest incurred on repurchase agreements is reported in interest expense. At March 31, 2006, we had five outstanding repurchase transactions totaling $84.4 million. Four of the agreements provide for the payment of interest at one-month LIBOR plus 0.50% and one of the agreements, totaling $5.9 million, provides for the payment of interest at three-month LIBOR plus 0.75%. At March 31, 2006, the weighted average interest rate on our repurchase agreements was 5.22% per annum. The repurchase agreements provide for an original term to maturity ranging from six months to one year. At March 31, 2006, three of the repurchase transactions totaling $8.8 million were scheduled to mature in June 2006 and two of the repurchase transactions totaling $75.6 million are scheduled to mature in March 2007. Of the three repurchase transactions that were scheduled to mature in June 2006, two, having an aggregate outstanding amount of $3.0 million, were extended to June 2007, and one, having an outstanding amount of $5.8 million, was extended to December 2006. If we cannot renew or replace these repurchase transactions as they mature we will be required to repay them from internal funds or alternative sources of financing, as to which no assurance can be given.

Our debt obligations contain various customary non-financial loan covenants. Such covenants do not, in management’s opinion, materially restrict our investment strategy or our ability to raise capital. We are in compliance with all of our loan covenants as of March 31, 2006.

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The following table provides a summary of our credit facilities at March 31, 2006 and pro forma, as adjusted information as of March 31, 2006 reflecting significant changes subsequent to that date, including the closing of Securitization No. 1 on June 15, 2006 and the use of the net proceeds from this offering (dollars in thousands):


    3/31/06 Pro forma,
as adjusted 3/31/06 (a)
   
Debt Obligation Collateral Commitment Outstanding Commitment Outstanding Interest Rate Final Stated
Maturity (b)
Credit Facility No. 1 Interests in aircraft leases, beneficial
interests in aircraft owning entities
and related interests
$525,000 $486,973 $— $— 1 Month
LIBOR + 1.50%
02/24/07
Credit Facility No. 2 Interests in aircraft leases, beneficial
interests in aircraft owning entities
and related interests
500,000 8,554 750,000 $— 1 Month
LIBOR + 1.25%
11/15/07
Credit Facility No. 3 Interests in aircraft leases, beneficial
interests in aircraft owning entities
and related interests
73,332 73,332 98,448 73,332 1 Month
LIBOR + 1.50%
3/31/07
Securitization No. 1 certificates Interests in aircraft leases, beneficial
interests in aircraft owning entities
and related interests
560,000 560,000 1 Month
LIBOR + 0.27%
06/20/31
Repurchase Agreements Securities available for sale 78,554 78,554 78,554 78,554 1 Month
LIBOR + 0.50%
6/28/07 and
3/1/07
Repurchase Agreement Securities available for sale 5,880 5,880 5,880 5,880 3 Month
LIBOR + 0.75%
12/06/06
    $1,182,766 $653,293 $1,492,882 $717,766    

Notes

(a) The pro forma, as adjusted, information reflects our debt obligations as of March 31, 2006 adjusted for the issuance of $560 million of Securitization No.1 certificates on June 15, 2006 as part of Securitization No. 1, the planned repayment in full of amounts outstanding under Credit Facility No. 1 with a portion of the net proceeds from Securitization No. 1, the planned repayment in full of Credit Facility No. 2 with a portion of the net proceeds of this offering, the increase in the maximum committed amount of Credit Facility No. 2 to $750 million on June 15, 2006, and the increase in the maximum committed amount of Credit Facility No. 3 to $98.4 million and extension of the term of that facility to March 31, 2007.

(b) Information presented for the Final Stated Maturity reflects the extension of the maturity date of Credit Facility No. 2 from August 28, 2007 to November 15, 2007 effective on June 15, 2006 and the extension of the maturity dates of certain of our repurchase agreements from June 28, 2006 to June 28, 2007 and from June 6, 2006 to December 6, 2006.

Securitization

On June 15, 2006, two of our subsidiaries, ACS Aircraft Finance Ireland plc and ACS Aircraft Finance Bermuda Limited, which we refer to together as the ACS Group, issued $560 million of Class A-1 notes, or the notes to a newly formed trust, ACS 2006-1 Pass Through Trust , or the trust. The trust simultaneously issued a single class of Class G-1 pass through trust certificates, or the certificates, representing undivided fractional interests in the notes. Payments on the notes will be passed through to the holders of the certificates. The notes are secured by ownership interests in aircraft-owning subsidiaries of ACS Bermuda and ACS Ireland and the individual aircraft leases, any cash or other assets held by the security trustee and rights under the service provider agreements and certain other agreements and assets. Each of ACS Bermuda and ACS Ireland has fully and unconditionally guaranteed each other's obligations under the notes. However, the

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notes are neither obligations of or guaranteed by Aircastle Limited. The ACS Group used the proceeds from the sale of the notes to acquire directly or indirectly 40 aircraft from us and we paid for certain expenses incurred in connection with the offering of approximately $13 million. We used a portion of the proceeds of Securitizations No. 1 to return $36.9 million to the Fortress shareholders in exchange for the cancellation of 3,693,200 of our common shares and we expect to use $487.0 million of the proceeds to repay in full the amount outstanding under Credit Facility No. 1. The notes provide for monthly payments of interest at a floating rate of one-month LIBOR plus 0.27% and scheduled payments of principal. The scheduled payments of principal have been calculated such that the principal balance of the notes will be equal to 54.8% of the Initial Appraised Value of the aircraft, as such Initial Appraised Value is decreased over time by an assumed amount of depreciation. During the first five years of the transaction, subject to compliance with the debt service coverage ratio test in years four and five, all cash flows attributable to the underlying aircraft after payment of expenses, interest and scheduled principal payments, or excess securitization cash flows, will be available for distribution to us. We intend to use the excess securitization cash flow to pay dividends and to make additional investments. We expect to refinance the notes on or prior to June 2011. In the event that the notes are not repaid on or prior to June 2011, the excess securitization cash flow will be used to repay the principal amount of the notes and will not be available to us to pay dividends to our shareholders. If during year four or five of the transaction, the debt service coverage ratio test fails on two consecutive payment dates, the excess securitization cash flow will be used to repay the principal amount of the notes and will not be available to us to pay dividends to our shareholders.

During the twelve months subsequent to the closing of Securitization No. 1, the gross contracted lease rental revenues payable on Securitization No. 1 are scheduled to be approximately $121.8 million. Cash outflows of the securitization, not including remarketing expenses, are expected to be comprised of operating expenses, interest expense and principal amortization. The operating expenses incurred directly by Securitization No. 1 (exclusive of the servicing and administrative fees paid to us) are expected to be $3.8 million for the twelve month period. Interest expense incurred on the certificates and amortization of principal are expected to be $32.2 million and $21.5 million, respectively, for the twelve month period. Additionally, total depreciation on a GAAP basis for the initial twelve month period is expected to be $39.3 million, or $17.8 million in excess of principal amortization. Actual amounts may differ from estimated amounts. For a more detailed description of the securitization, see ‘‘Description of Indebtedness — Securitization.’’

Contractual Obligations

Our contractual obligations consist of principal and interest payments on variable rate liabilities, binding letters of intent to purchase aircraft and rent payments pursuant to our office leases. Total contractual obligations increased by $142.3 million during the first quarter of 2006 to $865.5 million as compared to year end 2005. The primary reasons for the increase are additional borrowings under our credit facilities to purchase aircraft and an increase in repurchase agreements to finance the acquisition of securities available for sale. The increase in payment obligations maturing in less than one year during the first quarter of 2006 reflects the February 24, 2007 maturity of Credit Facility No. 1.

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We had no contractual obligations at December 31, 2004. The following table presents our actual contractual obligations and their maturity dates as of December 31, 2005:

Payments Due By Period as of December 31, 2005


Contractual Obligations Total Less than
1 year
1-3 years 3-5 years More than
5 years
  (Dollars in thousands)
Credit Facility No. 1 (1)(2) $ 404,257
$ 38,145
$ 366,112
$
$
Credit Facility No. 3 (1) 115,063
115,063
Repurchase agreements (1) 8,864
8,864
Operating leases (3) 3,416
474
969
995
978
Purchase obligations (4) 191,620
191,620
Total $ 723,220
$ 354,166
$ 367,081
$ 995
$ 978
(1) Includes interest on variable rate, LIBOR-based instruments at the December 31, 2005 rate.
(2) We intend to repay in full Credit Facility No. 1 with a portion of the net proceeds of Securitization No. 1.
(3) Represents contractual payments on our office lease in Stamford, Connecticut.
(4) At December 31, 2005 we had binding letters of intent to acquire nine aircraft. All of the aircraft were acquired during 2006.

The following table presents our actual contractual obligations and their maturity dates as of March 31, 2006:

Payments Due By Period as of March 31, 2006


Contractual Obligations Total Less than
1 year
1-3 years 3-5 years More than
5 years
  (Dollars in thousands)
Credit Facility No. 1 (1)(2) $ 492,740
$ 492,740
$
$
$
Credit Facility No. 2 (1) 9,294
1,071
8,223
Credit Facility No. 3 (1) 75,327
75,327
Repurchase agreements (1) 86,126
85,154
972
Operating leases (3) 3,297
476
972
998
851
Purchase obligations (4) 198,700
198,700
Total $ 865,484
$ 853,468
$ 10,167
$ 998
$ 851
(1) Includes interest on variable rate, LIBOR-based instruments at the March 31, 2006 rate.
(2) We intend to repay in full Credit Facility No. 1 with a portion of the net proceeds of Securitization, No. 1.
(3) Represents contractual payments on our office lease in Stamford, Connecticut.
(4) At March 31, 2006, we had binding letters of intent to acquire 10 aircraft.

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The following table provides pro forma as adjusted information regarding our contractual obligations as of March 31, 2006, reflecting significant changes subsequent to that date, including the closing of Securitization No. 1 on June 15, 2006 and the use of the net proceeds from this offering.

Pro Forma As Adjusted Payments Due By Period as of March 31, 2006


Contractual Obligations Total Less than
1 year
1-3 years 3-5 years More than
5 years
  (Dollars in thousands)
Credit Facility No. 1 (1) $
$
$
$
$
Credit Facility No. 2 (2)
Credit Facility No. 3 (4) 75,972
75,972
Securitization No. 1 (3) 885,217
51,203
102,147
107,518
624,349
Repurchase Agreements (4) 85,183
82,238
2,945
Operating Leases (5) 3,297
476
972
998
851
Purchase Obligations (6) 198,700
198,700
Total $ 1,248,369
$ 408,589
$ 106,064
$ 108,516
$ 625,200
(1) Assumes that a portion of the net proceeds from Securitization No. 1 will be used to repay in full Credit Facility No. 1.
(2) Assumes that a portion of the net proceeds of this offering will be used to repay amounts outstanding under Credit Facility No. 2.
(3) Represents the issuance of $560 million of variable rate securities on June 15, 2006, and reflects that the expected final principal payment will occur in October 2015.
(4) Includes interest on variable rate, LIBOR-based instruments at the March 31, 2006 rate.
(5) Represents contractual payments on our office lease in Stamford, Connecticut.
(6) At March 31, 2006, we had binding letters of intent to acquire ten aircraft. Eight of the ten acquisitions closed in the second quarter of 2006, one closed in July 2006 and one has yet to close. The purchase price of the remaining commitments is subject to variable price provisions that typically reduce the final purchase price if the actual closing occurs beyond an initially agreed upon date.

Our hedging transactions using derivative instruments and our securities repurchase transactions also involve counterparty credit risk. The counterparties to our derivative arrangements and repurchase agreements are major financial institutions with high credit ratings. As a result, we do not anticipate that any of these counterparties will fail to meet their obligations. However, there can be no assurance that we will be able to adequately protect against this risk and will ultimately realize an economic benefit from our hedging strategies or recover the full value of the securities underlying our repurchase agreements in the event of a default by a counterparty.

Margin Calls

Our repurchase agreements and interest rate derivative instruments are also subject to margin calls based on the value of the underlying security and the level of interest rates. Margin calls resulting from decreases in the value of our debt investments or mark-to-market losses on our derivative instruments due to decreasing interest rates could require that we post additional collateral. Management believes that we maintain adequate cash reserves and liquidity to meet any reasonably possible margin calls resulting from these risks, but can make no assurances that we will have adequate additional collateral under all potential scenarios.

Capital Expenditures

We make capital expenditures from time to time in connection with improvements made to our aircraft. These expenditures include the cost of major overhauls necessary to place an aircraft in service and modifications made at the request of lessees. In 2004, we incurred $255,000 of capital

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expenditures. In 2005, we made a total of $30.5 million of capital expenditures related to the acquisition of aircraft. For the quarter ended March 31, 2006 we made a total of $1.5 million of capital expenditures related to the acquisition of aircraft.

As of March 31, 2006, the weighted average (by net book value) age of our aircraft was approximately 8.7 years. In general, the costs of operating an aircraft, including maintenance expenditures, increase with the age of the aircraft. Under our leases, the lessee is primarily responsible for maintaining the aircraft. We may incur additional maintenance and modification costs in the future in the event we are required to remarket an aircraft or a lessee fails to meet its maintenance obligations under the lease agreement. Under 23 of our leases, the lessee is required to make periodic payments to us in order to provide for the payment of maintenance tied to the usage of the aircraft. Under 17 of our leases the lessee may be required to make a maintenance payment to us at the end of the lease based upon certain utilization criteria. Two of our leases require that the lessee make both a monthly maintenance payment and an additional maintenance payment to us at the end of the lease term in certain circumstances. At March 31, 2006, we held $38.3 million of maintenance reserves. These maintenance reserves are paid by the lessee to provide for future maintenance events. Provided a lessee performs scheduled maintenance of the aircraft, we are required to reimburse the lessee for scheduled maintenance payments. In certain cases, we are also required to make lessor contributions, in excess of amounts a lessee may have paid, towards the costs of maintenance events performed by or on behalf of the lessee.

Actual maintenance payments in the future may be less than projected as a result of a number of factors, including defaults by the lessees. Maintenance reserves may not cover the entire amount of actual maintenance expenses incurred and there can be no assurance that our operational cash flow and maintenance reserves will be sufficient to fund maintenance requirements, particularly as our aircraft age. See ‘‘Risk Factors — If lessees are unable to fund their maintenance requirements on our aircraft, our cash flow and our ability to meet our debt obligations or to pay dividends on our common shares could be adversely affected.’’

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2004, December 31, 2005, March 31, 2005 or March 31, 2006.

Foreign Currency Risk and Foreign Operations

At March 31, 2006, except for one lease expiring in October 2006, where the lease rentals are payable in euros, all of the leases are payable in U.S. dollars. However, we incurred euro and Singapore dollar denominated expenses in connection with our branch offices in Ireland and Singapore. At the end of March 31, 2006, six of our 32 employees were based in Ireland and one employee was based in Singapore. For the three months ended March 31, 2006, expenses denominated in currencies other than the U.S. dollar, such as payroll and office costs, aggregated approximately $0.7 million in U.S. dollar equivalents and represented approximately 12% of total selling, general and administrative expenses. Our international operations are a significant component of our business strategy and permit us to more effectively source new aircraft, service the aircraft we own and maintain contact with our lessees. Therefore, it is likely that our international operations, and our exposure to foreign currency risk, will increase over time. Although we have not yet entered into foreign currency hedges because our exposure to date has not been significant, if our foreign currency exposure increases we may enter into hedging transactions in the future to mitigate this risk. For the quarter ending March 31, 2006 we incurred a loss of $9,000 on foreign currency transactions.

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Interest Rate Risk

Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk is highly sensitive to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposures relate to our lease agreements, debt investments, floating rate debt obligations and interest rate derivative instruments. Our lease agreements typically require the payment of a fixed amount of rent during the term of the lease. Similarly, our debt securities are generally collateralized largely by fixed rate aircraft leases, and provide for a fixed coupon interest rate. However, our borrowing agreements generally require payments based on a variable interest rate index, such as LIBOR. Therefore, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our securities. We are also exposed to loss on (i) our fixed-pay interest rate swaps to the extent interest rates decrease below the contractual fixed rates of our swaps and (ii) on our other interest rate derivative instruments.

Changes in interest rates may also impact our net book value as our debt securities and hedge derivatives are periodically marked-to-market. Generally, as interest rates increase the value of our fixed rate debt securities decreases. The magnitude of the decrease is a function of the difference between the coupon rate and the current market rate of interest, the average life of the securities and the face amount of the securities. We are also exposed to loss on (i) our fixed-pay interest rate swaps to the extent interest rates decrease below the contractual fixed rates of our swaps and (ii) on our other interest rate derivative instruments. In general, we would expect that over time, decreases in the value of our debt securities attributable to interest rate changes will be offset to some degree by increases in the value of our derivative instruments, and vice versa. However, our policy is to hedge only a portion of the variable rate interest payments on our outstanding and/or expected future debt obligations rather than hedge the amount of our investments, therefore, our assets remain partially unhedged. Furthermore, the relationship between spreads on debt securities and spreads on derivative instruments may vary from time to time, resulting in a net aggregate book value increase or decline. Changes in the general level of interest rates also can affect our ability to acquire new investments and our ability to realize gains from the settlement of such assets.

Hedging

The objective of our hedging policy is to adopt a risk adverse position with respect to changes in interest rates. Accordingly, we have entered into a number of interest rate swaps and interest rate forward contracts to hedge the current and expected future interest rate payments on our variable rate debt. Interest rate swaps are agreements in which a series of interest rate flows are exchanged with a third party over a prescribed period. An interest rate forward contract is an agreement to make or receive a payment at the end of the period covered by the contract, with reference to a change in interest rates. The notional amount on which a swap or forward contract is based is not exchanged. Our swap transactions typically provide that we make fixed rate payments and receive floating-rate payments to convert our floating-rate borrowings to fixed-rate obligations to better match the largely fixed-rate cash flows from our investments in flight equipment and debt securities. Similarly, our interest rate forward contracts typically provide for us to receive a payment if interest rates increase and make a payment if they decrease. However, we can give no assurance that our net income will not be adversely affected during any period as a result of changing interest rates. We held the following interest rate derivative contracts as of March 31, 2006:

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Hedged Item Notional
Amount
Effective
Date
Maturity
Date
Floating
Rate
Fixed
Rate
Fair Value of
Derivative
Asset or
(Liability)
  (Dollars in thousands)
Anticipated securitization (1) $ 400,000
Mar-05 Aug 2010 1-Month LIBOR 4.61
%
$ 9,791
Anticipated securitization (1) 200,000
Nov-05 Aug 2010 1-Month LIBOR 5.03
%
1,733
Credit facility (2) 100,000
Mar-06 Mar 2011 1-Month LIBOR 5.07
%
2,186
Repurchase Agreement (3) 74,000
Feb-06 Jul 2010 1-Month LIBOR 5.02
%
(264
)
Repurchase Agreement (4) 5,000
Dec-05 Sep 2009 3-Month LIBOR 4.94
%
52
Repurchase Agreement (5) 2,900
Jun-05 Mar 2013 1-Month LIBOR 4.21
%
188
Total $ 781,900
       
$ 13,686
(1) At March 31, 2006, we had two ten-year interest rate swaps with an aggregate notional amount of $600 million. The purpose of these swaps is to fix the anticipated future interest payments on the expected issuance of securitized notes. The terms of the interest rate swaps require us to pay a weighted average fixed rate of 4.75% per annum to the counterparty and to receive one-month LIBOR from the counterparty. The combined market value of the two swaps was a receivable of $11.5 million at March 31, 2006. The interest rate swaps were treated as cash flow hedges for accounting purposes with fair value adjustments recorded as a component of other comprehensive income on our balance sheet.
(2) On March 21, 2006, we entered into a series of interest rate forward contracts to hedge the variable interest rate payments on debt we expect to incur to finance aircraft acquisitions over the next year. The notional amounts of the initial forward contracts in that series start at $100 million with respect to the March 2006 forward contract and increase to a maximum of $500 million with respect to the September 2006 forward contract. The terms of the forward contracts provide for a comparison of, on average, a fixed rate of 5.07% per annum and of one month LIBOR. The aggregate market value of the forward contracts at March 31, 2006, was a receivable of $2.2 million. The interest rate forward contracts are treated as cash flow hedges for accounting purposes with fair value adjustments recorded as a component of other comprehensive income in our balance sheet.
(3) In March 2006, we designated an interest rate swap which we had entered into in February 2006 as a hedge of the future variable-rate interest payments on a repurchase agreement we executed to finance our acquisition of securities. The interest rate swap has an initial notional principal amount of $74 million and decreases periodically based on estimated projected principal payments on the securities. The interest rate swap, which matures in July 2010, requires that we make semi-annual payments of a fixed rate of 5.02% per annum and receive monthly an amount based on the one-month LIBOR rate and the then current notional principal amount. At March 31, 2006 the market value of the swap was a payable of $264,000. The interest rate swap is treated as a cash flow hedge for accounting purposes with fair value adjustments recorded as a component of other comprehensive income on our balance sheet.
(4) On December 5, 2005, we entered into a four-year interest rate swap with a notional amount of $5 million to hedge a floating-rate securities repurchase agreement we had entered into to finance our acquisition of securities. The swap requires that we make semi-annual fixed rate payments of 4.942% per annum and receive quarterly floating rate payments equal to three-month LIBOR. The market value of the swap was a receivable of $52,000 at March 31, 2006. The interest rate swap is treated as a cash flow hedge for accounting purposes with fair value adjustments recorded as a component of other comprehensive income on our balance sheet.
(5) On June 28, 2005, we entered into a seven-year interest rate swap with a notional amount of $2.9 million to hedge a floating-rate securities repurchase agreement we had entered into to finance our acquisition of securities. The swap requires that we make quarterly fixed rate payments at 4.205% per annum and receive monthly floating rate payments equal to one-month LIBOR. The market value of the swap was a receivable of $188,000 at March 31, 2006. The interest rate swap is treated as a cash flow hedge for accounting purposes with fair value adjustments recorded as a component of other comprehensive income on our balance sheet.

Related Party Transactions

Prior to this offering, substantially all of the ownership interests in Aircastle were beneficially owned by funds managed by affiliates of Fortress and our employees. In 2004, Fortress committed to invest $400 million of equity in AL, all of which was drawn as of December 31, 2005. On January 31, 2006, the Fortress shareholders committed to contribute up to $100 million of additional equity to us. On February 8, 2006, the Fortress shareholders contributed $36.9 million pursuant to the aforementioned commitment in exchange for 3,693,200 of our common shares. On July 21, 2006, we returned the $36.9 million to the Fortress shareholders in exchange

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for the cancellation of 3,693,200 of our common shares. After the return of the cash, the $100 million commitment was reinstated. This commitment will terminate upon the completion of this offering.

During 2004 and part of 2005, our primary operations were managed by Fortress. Fortress, acting as manager, incurred direct operating costs on our behalf. These operating costs primarily included payroll costs, office supplies and professional fees paid to third parties. These costs are included in selling, general and administrative expenses in the consolidated statement of operations. As of December 31, 2004, ‘‘Due to affiliate’’ represented reimbursable expenditures of $1.1 million paid by Fortress in 2004. As of December 31, 2004, ‘‘Due from shareholder’’ represented cash of $7.6 million held on our behalf by a shareholder managed by Fortress. In 2005, all amounts due to or from affiliates were settled by cash payment. During a portion of 2005, we occupied space in facilities leased by Fortress and rent of $43,000, determined based on actual costs to Fortress, was reimbursed to Fortress.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to the impact of interest rate changes through our securities portfolio, our variable rate liabilities and our interest rate swap and forward contracts. Significant increases in interest rates could decrease the fair value of our debt securities, increase the amount of interest payments on our variable rate debt and reduce the spread we earn between our generally fixed-rate revenues and our variable rate interest expense. We enter into interest rate swaps and forward contracts to minimize the risks associated with variable rate debt.

The following table provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For our debt securities and variable rate liabilities, the table presents principal cash flows by expected maturity date and related weighted-average interest rates as of the end of each period. Weighted-average variable rates are based on implied forward rates as derived from appropriate annual spot rate observations as of the reporting date. For interest rate swaps and forward contracts, the table presents notional amounts by expected maturity date and weighted-average interest rates as of the end of each period.

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  Face/Notional
Amount
March 31, 2006
Face/Notional Amounts Maturing Fair Value
at 3/31/06
  Twelve Months Ending March 31,  
  2007 2008 2009 2010 2011 Thereafter
  (Dollars in thousands)
Fixed-Rate Assets  
 
 
 
 
 
 
 
Securities Available for Sale $ 120,943
$ 34,431
$ 19,604
$ 17,419
$ 26,601
$ 6,473
$ 16,416
$ 120,558
Average coupon rate, end of period (1) 7.78
%
7.79
%
7.80
%
7.81
%
8.04
%
8.14
%
 
 
Variable-Rate Liabilities (2)  
 
 
 
 
 
 
 
Borrowing Under Credit Facilities $ 568,859
$ 560,886
$ 7,993
$
$
$
$
$ 568,859
Average interest rate, end of period (2) 6.24
%
5.64
%
6.38
%
 
 
Repurchase Obligations $ 84,434
$ 8,787
$ 75,647
$
$
$
$
$ 84,434
Average interest rate, end of period (3) 5.25
%
5.64
%
5.63
%
 
 
Interest Rate Swaps Related
to Repurchase Agreements
 
 
 
 
 
 
 
 
Pay fixed/ receive variable $ 81,900
$ 7,000
$ 28,000
$ 11,500
$ 19,500
$ 13,000
$ 2,900
$ (24
)
Average pay fixed rate 4.98
%
4.98
%
4.96
%
4.94
%
4.87
%
4.21
%
 
 
Average receive variable rate, end of period (4)(5) 4.65
%
5.14
%
5.13
%
5.20
%
5.25
%
5.30
%
 
 
Interest Rate Forwards Related
to Credit Facilities
 
 
 
 
 
 
 
 
Notional amount (6) $ 100,000
$
$
$
$
$
$ 500,000
$ 2,186
Average pay fixed rate 5.74
%
5.74
%
5.74
%
5.74
%
5.74
%
5.74
%
 
 
Average receive variable rate, end of period (4)(5) 4.80
%
5.14
%
5.13
%
5.20
%
5.25
%
5.30
%
 
 
Interest Rate Swaps Related
to Anticipated Securitization
 
 
 
 
 
 
 
 
Pay fixed/ receive variable $ 600,000
$ 600,000
$
$
$
$
$
$ 11,524
Average pay fixed rate 4.75
%
 
 
Average receive variable rate, end of period (4)(5) 4.75
%
 
 
(1) Refers to the weighted-average interest rate on the face amount of securities remaining at the end of each period.
(2) Amounts shown as projected future variable-rate liabilities maturing exclude cash interest receipts or payments when due. Amounts will not correspond to the contractual obligations table due to the inclusion of interest payments in the contractual obligations table.
(3) Refers to the weighted-average interest rate on the face amount of variable-rate liabilities outstanding at the end of each period.
(4) Refers to the weighted-average interest rate on the notional amount of interest rate swaps and forward contracts outstanding at the end of each period.
(5) The variable rate on our interest rate swaps and equivalent rate on our forward contracts is reset monthly at one-month LIBOR or quarterly at three-month LIBOR, as applicable.
(6) On March 21, 2006, we entered into a series of interest rate forward contracts to hedge the variability of future interest payments on our credit facilities. The notional amounts of the forward contracts in that series start at $100 million with respect to the March 2006 forward contract and increase to a maximum of $500 million with respect to the September 2006 forward contract.

The fair value of securities available for sale, repurchase obligations and interest rate swaps related to repurchase agreements all increased from December 31, 2005 to March 31, 2006 because of our purchase of additional debt securities in the first quarter of 2006, our execution of repurchase agreements to finance the acquisition of debt securities and our execution of interest rate swaps to hedge the variable interest payments on the LIBOR–based repurchase agreements. The amount of borrowings under credit facilities also increased in the first quarter of 2006 in connection with the financing of additional aircraft acquisitions. Also, in the first quarter of 2006 we entered into a new series of interest rate forward agreements to hedge the variable interest payments on the additional debt we expect to incur from Credit Facility No. 2, which was executed in March 2006.

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Inflation

Inflation generally affects our costs, including SG&A expenses and other expenses. However, we do not believe that our financial results have been, or will be, adversely affected by inflation in a material way.

Management's Use of EBITDA

We define EBITDA as income (loss) from continuing operations before income taxes, interest expense, and depreciation and amortization. We use EBITDA to assess our consolidated financial and operating performance, and we believe this non-GAAP measure is helpful in identifying trends in our performance. This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.

EBITDA provides us with a measure of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our operating results. Accordingly, this metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. EBITDA is one of the metrics used by senior management and the board of directors to review the consolidated financial performance of our business.

Limitations of EBITDA

EBITDA has limitations as an analytical tool. It should not be viewed in isolation or as a substitute for GAAP measures of earnings. Material limitations in making the adjustments to our earnings to calculate EBITDA, and using this non-GAAP financial measure as compared to GAAP net income (loss), include:

•  depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our aircraft, which affects the aircraft's availability for use and may be indicative of future needs for capital expenditures; and
•  the cash portion of income tax (benefit) provision generally represents charges (gains), which may significantly affect our financial results.

An investor or potential investor may find this item important in evaluating our performance, results of operations and financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

EBITDA is not an alternative to net income, income from operations or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. You should not rely on EBITDA as a substitute for any such GAAP financial measure. We strongly urge you to review the reconciliation of EBITDA to GAAP net income (loss), along with our consolidated financial statements included elsewhere in this prospectus. We also strongly urge you to not rely on any single financial measure to evaluate our business. In addition, because EBITDA is not a measure of financial performance under GAAP and is susceptible to varying calculations, the EBITDA measure, as presented in this prospectus, may differ from and may not be comparable to similarly

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titled measures used by other companies. The table below shows the reconciliation of net income (loss) to EBITDA for the three months ended March 31, 2005 and 2006 and the period from October 29 to December 31, 2004 and the year ended December 31, 2005.


(Dollars in thousands) Period from
October 29, 2004
(Commencement of
Operations)
Through
December 31,
Year Ended
December 31,
    
    
    
    
Three Months Ended
March 31,2006
2004 2005 2005 2006
Net income (loss) $ (1,465
)
$ 228
$ (1,374
)
$ 11,180
Depreciation 390
14,460
1,462
9,915
Amortization 30
734
184
(104
)
Interest, net (9
)
7,739
313
7,717
Income tax provision
940
169
1,004
Earnings from discontinued operations, net of income taxes
(1,107
)
(3,399
)
EBITDA $ (1,054
)
$ 22,994
$ 754
$ 26,313

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Industry

We obtained the information in this prospectus about the aviation industry and operating leasing industry from several independent outside sources, including BACK, an aviation consulting and aviation market analysis firm; SH&E, an aviation consulting and aviation market analysis firm; IBA, an aviation consulting firm; ASG, a provider of aircraft appraisals, market analysis and aviation industry insight; ESG Aviation Services and The Airline Monitor, an aviation market analysis firm and EIU, a provider of country and global data.

Aircraft Fleet

According to BACK, the current active worldwide commercial aircraft fleet consists of more than 17,000 aircraft. As illustrated in the table below, approximately 13,000 of these aircraft are Western-built. Of the Western-built fleet, approximately 11,000 aircraft were manufactured by Boeing and Airbus, the two largest aircraft manufacturers. These aircraft are typically compliant with noise (Stage 3) and other environmental standards, relatively fuel efficient and technologically advanced. The remaining aircraft in the global fleet tend to be older, have higher direct operating costs (driven largely by less fuel efficient engines) and a smaller installed base of users.

Active World-Wide Commercial Aircraft Fleet


  Age distribution (years)  
  0-5 5-10 10-15 15+ Total
Airbus and Boeing  
 
 
 
 
New Narrow-Body Models: 737,A318,A319,A320,A321 1,984
2,002
348
254
4,588
Classic 737
290
639
1,407
2,336
Other Narrow-Body Models: 707,717,727,757 115
331
277
694
1,417
Mid-Body Models: 767,A300,A310,A330 270
361
371
493
1,495
Wide-Body Models: 747, 777, A340 315
587
322
295
1,519
Total Airbus and Boeing 2,684
3,571
1,957
3,143
11,355
Freighters (Western-built) 101
159
182
1,295
1,737
Total Western-Built Commercial Aircraft 2,785
3,730
2,139
4,438
13,092
Other Western-Built Commercial Aircraft
132
360
1,260
1,752
Other Eastern-Built Commercial Aircraft and Freighters 27
23
360
2,125
2,535
Total Active Worldwide Commercial Aircraft Fleet 2,812
3,885
2,859
7,823
17,379
Source: BACK Aviation Solutions as of 4/24/06
Note: Excludes Regional and Parked Aircraft

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According to The Airline Monitor , the world fleet is expected to increase to approximately 23,000 aircraft by 2015. Over this period, Boeing and Airbus are expected to increase annual new aircraft deliveries from 785 units in 2006 to 1,100 units in 2015, with an expected average annual value of $76 billion.

According to SH&E, the current fleet of more than 17,000 aircraft has an aggregate estimated value in excess of $330 billion and is expected to grow to approximately $580 billion in 2015, representing a compound annual growth rate of 6.1%.

World Fleet Projections

Source: The Airline Monitor


Both Boeing and Airbus are planning to introduce new aircraft models over the next 5-15 years including the super jumbo A380 and 747-800, the 200-300 seat 787 and A350. Both are also contemplating new models for the next generation of narrow-body aircraft using state-of-the-art composite technology.

Geographic Distribution of Aircraft Fleet

As indicated in the table below, the majority of the global fleet is located in North America and Europe, while the fastest fleet growth since 1995 occurred outside of these regions. In particular, the number of aircraft operating in Asia has increased by approximately 59.3% since 1995, while the fleet operating in the Middle East and Latin America increased by almost 82.0% and 25.2%, respectively, over this same period.

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Historical Geographic Distribution of Aircraft Fleet


Region 1995 2000 2006 1995-2006
total growth
Africa 498
539
765
53.6%
Asia 1,831
2,121
2,916
59.3%
Australia 315
298
530
68.3%
Europe 5,272
5,324
5,651
7.2%
Latin America 842
920
1,054
25.2%
Middle East 538
646
979
82.0%
North America 5,119
5,864
5,484
7.1%
Total 14,415
15,712
17,379
20.6%
Source: BACK Aviation Solutions as of 4/24/06

Current Freighter Fleet


  Current fleet % of total Models
Small Narrow-Body 510
29.4
%
727, 737, DC-9
Medium Narrow-Body 304
17.5
%
707, 757, DC-8
Mid-Body 375
21.6
%
767, A300, A310, DC-10-10
Large Wide-Body 548
31.5
%
747, DC-10-30, DC-10-40, MD-11
Total 1,737
100.0
%
 
Source: BACK Aviation Solutions as of 4/24/06

Freighters are either conversions from passenger aircraft or production freighters, which are aircraft built specifically for freight transportation. Passenger-to-freighter, or PTF, aircraft conversion have traditionally supported aircraft residual values and extended the useful economic lives of the aircraft by 5-10 years. Approximately 75% of freighters were PTF conversions while 25% were production freighters.

The conversion market has become very active with the launch of a number of original equipment manufacturer, or OEM, and third-party PTF programs for such Boeing aircraft as the 737-300, 737-400, 757-200, 767-200, 747-400 and MD-11. Current OEM Airbus programs gaining momentum include those targeting A310-300 and A300-600 aircraft. The increased market activity, combined with competition surrounding conversion slots and sourcing of aircraft conversion candidates, indicates a growing market that will help maintain certain aircraft values.

1,040 aircraft or approximately 60% of the existing global freighter fleet is expected to be scrapped within the next 20 years and replaced by an estimated 1,050 new production freighters and 2,000 PTF conversions. The bulk of these replacement freighters will be mid-body and wide-body aircraft types.

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Aircraft Ownership

As the table below shows, aircraft ownership is highly fragmented, with over 1,800 owners consisting of airlines, operating lessors, banks, manufacturers, governments and others. Airlines are currently the largest aircraft owners, accounting for 48.4% of the global fleet. Since 1995, operating lessors have significantly increased their ownership percentage from 17.6% to 30.1%.

Market Size and Ownership


  1995 Current  
Category Aircraft % total # of owners Aircraft CAGR
('95-'06)
% total # of owners  
Airline 7,998
55.5
%
614 8,415
0.5
%
48.4
%
694  
Operating lessor 2,534
17.6
%
254 5,235
6.8
%
30.1
%
505  
Bank/Manufacturer 2,291
15.9
%
461 2,292
0.0
%
13.2
%
382  
Government 1,459
10.1
%
121 1,287
(1.1
%)
7.4
%
127  
Others 133
0.9
%
110 150
1.1
%
0.9
%
127  
Grand Total 14,415
100.0
%
1,560 17,379
1.7
%
100.0
%
1,835  
Source: BACK Aviation Solutions as of 4/24/06
Note: Excludes Regional Jets and Parked Aircraft

Operating Lessor Market

The high cost of aircraft fleet renewal and expansion, and the competitive environment of the commercial airline industry has led many airlines to outsource aircraft ownership to operating lessors. Airlines find operating leases to be attractive because they (i) maximize fleet flexibility by matching capacity with demand and by maintaining a variety of aircraft types, (ii) require a lower capital commitment, which provides greater financial flexibility and (iii) significantly reduce aircraft residual risk. In addition, as legacy carriers continue to restructure, aircraft operating leasing is being used regularly to finance both new and existing aircraft (sale-leaseback transactions).

As indicated in the graph below, over the last 20 years, the percentage of the global commercial aircraft fleet owned by operating lessors increased from 7.5% in 1986 to 30.1% in April 2006, while the percentage owned by airlines declined from 74.3% to 48.4% over the same time period.

Operating Lessor vs. Airline Ownership


  1986 1990 1995 2000 2006
Operating lessors 7.5
%
12.6
%
17.6
%
21.9
%
30.1
%
Airlines 74.3
%
62.1
%
55.5
%
52.3
%
48.4
%
Sources: BACK Aviation Solutions as of 4/24/06
Note: Excludes Regional Jets and Parked Aircraft. 2006 Data as of April 2006

The two largest competitors in the aircraft leasing industry are GE Commercial Aviation Services, or GECAS, and International Lease Finance Corporation, or ILFC. GECAS, an arm of General Electric, owns/manages over 1,400 aircraft. ILFC, a wholly owned subsidiary of American International Group, Inc., or AIG, owns/manages over 860 aircraft. The remaining population of operating lessors is highly fragmented. As of February 2006, the top 20 lessors owned and managed approximately 5,400 aircraft.

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Top 20 Aircraft Operating Lessors by Active Aircraft Fleet


Leasing company Number of
Aircraft Owned
and Managed
% Owned
Aircraft
% Managed
Aircraft
GECAS 1,405 81.1% 18.9%
ILFC 866 93.0% 7.0%
BAE Systems 375 33.3% 66.7%
Boeing Capital 341 97.1% 2.9%
CIT Group 313 98.1% 1.9%
Aviation Capital Group 224 90.6% 9.4%
Aercap 216 61.6% 38.4%
Raytheon 195 100.0% 0.0%
Pegasus 186 100.0% 0.0%
GATX Air 181 68.5% 31.5%
RBS Aviation Capital 179 100.0% 0.0%
AWAS 155 99.4% 0.6%
Babcock & Brown 149 72.5% 27.5%
Saab Aircraft leasing 141 22.7% 77.3%
ATR Asset Management 118 96.6% 3.4%
Finova Capital 90 100.0% 0.0%
Pembroke 88 93.2% 6.8%
SALE 79 91.1% 8.9%
ORIX 75 100.0% 0.0%
Jetran 63 96.8% 3.2%
Total 5,439    
Source: International Bureau of Aviation, February 2006

Macro Fundamentals

Although the airline industry is cyclical, negative world traffic growth has only occurred twice in modern aviation history: in 1990-1992 with the first Gulf War and in 2001-2003 due to several factors, including the September 11, 2001 terrorist attacks in the United States, global economic recession, military actions in the Middle East, health concerns, SARS, natural disasters and the continuing threat of terrorist attacks.

Global passenger and freight traffic has grown rapidly in recent years, driven by factors such as globalization, strong economic growth in developing countries, and liberalization of global aviation markets. According to the Economist Intelligence Unit, over the next five years, global GDP is expected to grow at an average rate of 4.2% per year. Since 1994, for every 1.0% increase in global GDP, passenger and freight traffic have, on average, grown by 1.4% and 1.6%, respectively. Excluding the downturn in 2001 and 2002, for every 1.0% increase in global GDP, passenger and freight traffic have, on average, grown by 1.7% and 1.9%, respectively.

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Global Passenger Traffic Growth/GDP Growth and Global Freight Traffic Growth/GDP Growth

Source: Economist Intelligence Unit, The Airline Monitor, SH&E

Large emerging market countries such as Russia, China, India and Brazil are projected to have high GDP growth rates over the next five years. In addition, current GDP per capita and the enplanement ratios (enplanements/ population) for these countries are far below the United States, suggesting high growth potential in these markets.

Global Macro Fundamentals and Outlook


  US Russia China India Brazil
GDP Growth estimates (2006 – 2011) 3.9
%
13.1
%
10.9
%
8.5
%
7.8%
2005 GDP/ Capita (US$) 42,101
5,369
1,703
714
4,316    
GDP/Capita Growth estimates (2006 – 2011) 3.0
%
13.6
%
10.3
%
7.0
%
6.5%
2005 Population (000s) 298,213
143,202
1,315,844
1,103,371
186,405    
2005 Enplanement Ratios 242.9
%
15.1
%
10.5
%
2.3
%
21.2%
2005 RPM (millions) 783,567
37,162
127,058
25,292
33,661    
RPM growth estimates (2006 – 2011) 4.0
%
4.2
%
7.8
%
6.4
%
7.0%
Source: International Bureau of Aviation

Airline Industry Developments

Over the last several years, low-cost carriers, or LCCs, have become major players in the airline industry. LCCs offer generally lower fares in exchange for eliminating many traditional passenger services while also driving lower unit costs. The aggressive growth by LCCs in both developed and emerging markets, spurred by some of the highest profit margins in the industry, has created the need for large quantities of additional aircraft.

Although much of the early growth was in North America, the LCC presence has strengthened in other world markets. For example, Asia has experienced significant LCC growth, with 3.6% of intra-regional capacity served by LCCs, up from 0.3% in 2000. Penetration is expected to increase further with new airport developments and liberalization of air traffic rights. Both India and China are expected to be the new frontiers for expansion. Similarly, LCCs as a percent of intra-regional capacity in Europe and Africa/Middle East grew at a compound annual growth rate of 30.0% and 9.3%, respectively, in 2000-2005.

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LCCs as Percent of Intra-Regional Capacity (%)


Region 2000 2005 Compound Annual
Growth Rate
(2000-2005)
North America 13.9
%
26.3
%
13.6%
Europe 7.3
%
27.0
%
30.0%
Asia Pacific 0.3
%
3.6
%
66.7%
Latin America 0.0
%
7.1
%
NM*  
Africa/Middle East 2.6
%
4.0
%
9.3%
Source: SH&E, June 2000 - 2005;                        *    Not Meaningful

Fleet management is especially important for LCCs, as it is critical for them to sustain low operating costs by utilizing new generation aircraft. As the table below indicates, the world's top global LCCs rely heavily on operating leases to develop their fleets and have a significant backlog of aircraft orders.

Selected LCCs Aircraft and Backlog Ownership Profile


  12/31/2005(1)(2) April 2006
Aircraft Backlog
  Current # of Aircraft Leased % Leased
GOL 42
42
100.0
%
66
Air Deccan(1) 29
26
89.7
%
85
Airtran 105
92
87.6
%
46
Easyjet(2) 109
91
83.5
%
67
Southwest 445
93
20.9
%
138
Ryanair 91
17
18.7
%
132
Air Asia 27
N/A
N/A
54
Total 848
361
42.6
%
588
Source: BACK Aviation Solutions as of 4/24/06, Company filings
(1) Air Deccan data is presented as of 3/31/06
(2) Easyjet data is presented as of 9/30/05

Aircraft Prices and Lease Rates

The downturn in the industry due to a series of events such as the September 11, 2001 terrorist attacks in the United States and subsequent global events like the Middle East conflicts and outbreak of SARS had an adverse effect on the global aviation industry, consequently putting pressure on aircraft values and lease rates. Values and lease rates fell from their highs in 2000 to new lows by 2002-2003.

Following this downturn, the global commercial aviation industry has experienced a broad based recovery of aircraft values and lease rates. The graph below displays the recovery in lease rates for various aircraft types over the last 6 years.

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Aircraft Lease Rates (US$000s per month)

Source: Aviation Specialists Group

The relative increase in lease rates however, has exceeded the increase in values for certain aircraft types such as 737 or A320. These are commonly used to replace the MD80, F100 and 717 aircraft that are reaching the end of their useful economic lives or do not operate as efficiently. As a result, lease rate factors, or the ratio between lease rates and current market values, have been increasing for these popular aircraft types as illustrated below.

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Source: SH&E

In addition, there is strong demand for mid-body aircraft types, such as the 767-300ER and A330. The increase in traffic levels has supported the economic use of these mid-body aircraft. These mid-body aircraft are often used as interim stage aircraft prior to delivery of the 787 aircraft (expected at the earliest in 2011), resulting in increased lease rates. In addition, the uncertainty around the delivery schedule for the A350 aircraft has increased the near-term demand for existing mid-body aircraft. Lease rate factors for the B767-300ERs are also at or near their historical highs as illustrated below.

Source: SH&E

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Business

Business Overview

We are a global company that acquires and leases high-utility commercial jet aircraft to passenger and cargo airlines throughout the world. High-utility aircraft are generally modern, operationally efficient jets with a large operator base and long useful lives. As of March 31, 2006, our aircraft portfolio consisted of 42 aircraft that were leased to 24 lessees located in 16 countries and managed through our offices in the United States, Ireland and Singapore. All of our aircraft are subject to net operating leases whereby the lessee is generally responsible for maintaining the aircraft and paying operational and insurance costs although, in a majority of cases, we are obligated to pay a portion of specified maintenance or modification costs. We also make investments in other aviation assets, including debt securities secured by commercial jet aircraft. As of July 18, 2006, we had acquired and committed to acquire aviation assets having an aggregate purchase price equal to $1.3 billion and $305.3 million, respectively, for a total of approximately $1.6 billion. In addition, as at July 18, 2006 we have entered into non-binding letters of intent to acquire an additional 8 aircraft subject to lease. These letters of intent would not become binding commitments for us or the seller until internal approvals, due diligence and certain other steps are completed. Our revenues and income from continuing operations for the quarter ended March 31, 2006 were $33.0 million and $7.8 million, respectively.

We expect to benefit from the size and growth of the commercial aircraft market and to increase our revenues and earnings by acquiring additional aviation assets. The current worldwide commercial aircraft fleet consists of more than 17,000 aircraft with an aggregate estimated value in excess of $330 billion and is expected to grow at a compound annual growth rate of 6.1% through 2015. The market is highly fragmented, with over 1,800 owners, including airlines, other aircraft lessors and financial institutions. Operating lessors, including us, own approximately 30.1% of the global fleet, up from 17.6% in 1996. The continued growth in air traffic, driven in large part by emerging markets with strong economic growth and rising levels of per capita air travel, has increased the demand, and lease rates, for certain high-utility aircraft types. We believe that we are well positioned to take advantage of these favorable industry trends with our international platform, experienced management team and flexible capital structure.

We intend to pay regular quarterly dividends to our shareholders. We plan to grow our dividends per share through the acquisition of additional aviation assets using cash on hand and available credit facilities. We expect to finance our acquisitions on a long-term basis using low-cost, non-recourse securitizations. In June 2006, we closed Securitization No. 1, a $560 million transaction comprising 40 aircraft. On July 20, 2006, our board of directors declared a dividend of $0.35 per common share for the three months ended June 30, 2006, which is payable on July 31, 2006. In addition, our board of directors is expected to declare a dividend of $0.175 per common share to shareholders of record as of August 1, 2006, which is payable on August 15, 2006, for the period commencing on July 1, 2006 and ending on August 15, 2006. We are paying this dividend so that holders of our common shares prior to this offering will receive a distribution for the period prior to this offering. These dividends may not be indicative of the amount of any future dividends.

Competitive Strengths

We believe that the following competitive strengths will allow us to capitalize on the growth opportunities in the global aviation industry:

•  Diversified portfolio of high-utility aircraft.     We have a portfolio of high-utility aircraft that is

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  diversified with respect to geographic markets, lease maturities and aircraft type. As of March 31, 2006, our aircraft portfolio consisted of 42 aircraft, comprising 14 different types that were leased to 24 lessees located in 16 countries and had lease maturities ranging from 2006 to 2014. Our lease expirations are well dispersed, with a weighted average remaining lease term of 4.2 years at March 31, 2006, and only six of our aircraft require re-deployment within the next 12 months. While we seek to place our aircraft on lease to operators and on terms that provide the best risk-adjusted returns, many airlines are in a weak financial condition and suffer from liquidity problems. Accordingly, we believe that our focus on portfolio diversification reduces the risks associated with lessee defaults and any adverse geopolitical or economic issues, and results in generally predictable cash flows.
•  Disciplined acquisition approach and broad sourcing network.     We evaluate the risk-adjusted return of any potential acquisition first as a discrete investment and then from a portfolio management perspective. To evaluate potential acquisitions, we employ a rigorous due diligence process focused on: (i) cash flow generation with careful consideration of macro trends, industry cyclicality and product life cycles; (ii) aircraft specifications and maintenance condition; (iii) when applicable, lessee credit worthiness and the local jurisdiction's rules for enforcing a lessor's rights; and (iv) legal and tax implications. We source our acquisitions through well-established relationships with airlines, other aircraft lessors, financial institutions and other aircraft owners.
•  Scaleable business platform.     We operate globally through offices in the United States, Ireland and Singapore, using a modern asset management system designed specifically for aircraft operating lessors and capable of handling a significantly larger aircraft portfolio. We believe that our facilities, systems and personnel currently in place are capable of supporting an increase in our revenue base and asset base without a proportional increase in overhead costs.
•  Experienced management team with significant technical expertise.     Our management team has significant experience in the acquisition, leasing, financing, technical management, restructuring/repossession and sale of aviation assets. This experience enables us to evaluate a broad range of potential investments in the global aviation industry. With extensive industry contacts and relationships worldwide, we believe our management team is highly qualified to manage and grow our aircraft portfolio. In addition, our senior management personnel have extensive experience managing lease restructurings and aircraft repossessions, which we believe is critical to mitigate any potential default exposure.
•  Innovative long-term debt financing structure.     We closed Securitization No. 1 on June 15, 2006. We have structured Securitization No. 1 to provide for the release to us during the first five years of ‘‘excess securitization cash flows,’’ or the cash flows attributable to the underlying aircraft after payment of expenses, interest and scheduled principal payments. We intend to use this excess securitization cash flow to pay dividends and to make additional investments in aviation assets. By way of comparison, a typical aircraft securitization starts with significantly higher leverage and allows no release of excess securitization cash flows; instead, those cash flows are required to further amortize, and thus lower the leverage on, the securities.

Growth Strategy

We plan to grow our business and increase our dividends per share by employing the following business strategies:

•  Selectively acquire commercial jet aircraft and other aviation assets.     We believe the large and growing aircraft market provides significant acquisition opportunities. We regularly

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  evaluate a large number of potential aircraft acquisition opportunities and expect to continue our investment program through additional aircraft purchases. In addition, we plan to leverage our experience to make opportunistic acquisitions of other asset-backed aviation assets, including debt securities secured by aviation assets and other non-aircraft aviation assets. As of July 18, 2006, we had acquired or committed to acquire approximately $1.6 billion in aviation assets, including 63 commercial jet aircraft and $122.0 million of debt securities secured by commercial jet aircraft, in 34 separate transactions.
•  Reinvest amounts approximately equal to non-cash depreciation expense in additional aviation assets.     Aircraft have a finite useful life. To account for the expected decline in value of our aircraft, our earnings reflect a non-cash depreciation expense in accordance with GAAP. We intend to pay regular quarterly dividends to our shareholders. Through our strategy of reinvesting amounts approximately equal to non-cash depreciation expense, we will seek to maintain our asset base and grow our dividends.
•  Maintain an efficient capital structure.     We expect to finance acquisitions on a long-term basis using aircraft lease portfolio securitizations. We believe that our long-term debt structure and dividend payment strategy result in a low cost of capital and a high degree of financial flexibility, allowing us to grow our business and dividends.

Our Aircraft Portfolio

As of March 31, 2006, our aircraft portfolio consisted of 42 aircraft on lease to 24 lessees in 16 countries. The weighted average (by net book value) age of our aircraft as of March 31, 2006, was 8.7 years and the weighted average (by net book value) remaining lease term for those aircraft was 4.2 years. In addition, subsequent to March 31, 2006, we had acquired an additional 10 aircraft for an aggregate purchase price of $218.9 million and had committed to acquire an additional 11 aircraft for an aggregate purchase price of $305.3 million. In addition, as of July 18, 2006, we have entered into non-binding letters of intent to acquire an additional 8 aircraft subject to lease. These letters of intent will not become binding commitments for us or the seller until internal approvals, due diligence and certain other steps are completed.

As of March 31, 2006 our aircraft portfolio includes (13) Next Generation Boeing / Airbus A320 family aircraft, (9) mid-body Boeing 767ER / Airbus A330 aircraft, (6) cargo aircraft and (14) Boeing 737 Classic aircraft.

The following table sets forth, as of July 18, 2006, certain information with respect to our aircraft portfolio.

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Aircraft Type Year of Delivery by
Manufacturer
Lessee Country of
Domicile
Lease
Expiration
Aircraft Owned as of March 31, 2006      
A310-300F 1989
Turk Hava Yollari Turkey Dec-08
A319-100 2000
SN Brussels Airlines Belgium Mar-07
A319-100 2000
SN Brussels Airlines Belgium Mar-07
A320-200 1999
China Eastern Airlines China Apr-09
A320-200 1998
TAM - Linhas Aereas S.A. Brazil Apr-07
A320-200 1997
Lotus Air Egypt April-12
A320-200 1997
Lotus Air Egypt Mar-12
A320-200 1997
Niki Luftfahrt GMBH Austria Oct-06
A330-200 2000
Swiss International Air Lines Switzerland Mar-10
A330-300 2000
US Airways, Inc. USA Aug-12
A330-300 2000
US Airways, Inc. USA Dec-12
A330-300 2000
US Airways, Inc. USA Oct-12
A330-300 2000
US Airways, Inc. USA Nov-12
737-300 1988
GOL Transportes Aereos S.A. Brazil Jun-08
737-300 1988
GOL Transportes Aereos S.A. Brazil Jul-08
737-300 1990
Capital Aviation Services B.V. Netherlands Nov-08
737-300 1990
Capital Aviation Services B.V. Netherlands Sep-08
737-300 1990
Futura International Airways Spain Dec-08
737-300QC 1987
Hainan Airlines Company Ltd. China Apr-09
737-300QC 1988
Hainan Airlines Company Ltd. China Oct-08
737-300QC 1988
Hainan Airlines Company Ltd. China Jan-09
737-300QC 1989
Hainan Airlines Company Ltd. China Jan-08
737-400 1992
Air One S.P.A. Italy Mar-07
737-400 1992
Air One S.P.A. Italy Mar-07
737-400 1993
Ukraine International Airlines Ukraine Jun-12
737-400 1991
Ukraine International Airlines Ukraine Nov-09
737-400 1992
Aerosvit Airlines JSC Ukraine Nov-09
737-500 1990
Siberia Airlines Russia Oct-10
737-500 1991
Siberia Airlines Russia Oct-10
737-500 1991
Siberia Airlines Russia Nov-10
737-500 1995
British Airways PLC England Mar-09
737-700 1999
Sterling Airlines A/S Denmark Jun-11
737-800 2000
Thomsonfly Limited UK Apr-07
737-800 1999
Hainan Airlines Company Ltd. China May-14
737-800 1999
Hainan Airlines Company Ltd. China Feb-14
737-800 1999
Air Europa Lineas Aereas S.A.U. Spain Nov-11
737-800 1999
Air Europa Lineas Aereas S.A.U. Spain Apr-11
747-400PC 1991
Air India Limited India Apr-08
767-200ER 1990
US Airways, Inc. USA Aug-08
767-300ER 1991
Sahara Airlines Limited India Dec-11
767-300ER 1997
Polskie Linie Lotnicze ‘‘LOT’’ S.A. Poland Dec-09
767-300ER 1990
TUI AG Germany Nov-09
Aircraft Acquired Subsequent to March 31, 2006 through July 18, 2006    
A319-100 2000
SN Brussels Airlines Belgium Mar-07
757-200 1994
US Airways, Inc. USA Feb-07
757-200 1994
US Airways, Inc. USA Feb-07
757-200 1994
US Airways, Inc. USA Feb-07
767-300ER 1988
Air Canada Canada Apr-09
767-300ER 1991
Icelandair ehf Iceland Oct-10
A320-200 2001
Monarch England Apr-08
A320-200 1999
Monarch England Apr-08
A320-200 1999
Lan Chile Chile Nov-08
767-300ER 1996
Air Canada Canada Nov-13

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Acquisitions

We source our acquisitions through well-established relationships with airlines, other aircraft lessors, financial institutions and brokers. We have also acquired aircraft from creditors following foreclosure sales, as well as from liquidators. We have agreed to acquire one aircraft from Drawbridge Special Opportunities Fund LP, an affiliate of Fortress, but have not acquired or committed to acquire any other aircraft from affiliates of ours. We are currently focused on acquiring high-utility aircraft in the secondary market and through sale-leasebacks. While we do not focus on aircraft of a particular age, we acquired most of our aircraft assets five to fifteen years from original manufacture. We believe that sourcing acquisitions both globally and through multiple channels provides for a broad and relatively consistent set of investment opportunities.

We have an experienced acquisitions team based in Stamford, Connecticut; Dublin and Singapore that maintains strong relationships with a wide variety of market participants throughout the world. We believe that our seasoned personnel and extensive industry contacts facilitate our access to acquisition opportunities.

Potential investments are evaluated by teams consisting of marketing, engineering / technical, credit, financial analytic and legal professionals. These teams consider a variety of aspects before we commit to purchase an aircraft, including its price, specification / configuration, age, condition and maintenance history, operating efficiency, lease terms, financial condition and liquidity of the lessee, jurisdiction, industry trends and future redeployment potential and values, among other factors. We believe that utilizing a cross-functional team of experts to consider the investment parameters noted above will help assess more completely the overall risk and return profile of potential acquisitions and will help us move forward expeditiously on letters of intent and acquisition documentation. Our letters of intent are typically non-binding prior to board of directors approval, and upon board of directors approval are binding and subject to the fulfillment of customary closing conditions.

Our aim is to develop and maintain a diverse and stable portfolio and, in that regard, our investment strategy is oriented towards longer term holding horizons rather than shorter-term trading.

Finance

A key aspect of our growth strategy is our flexible capital structure which supports the financing of our acquisitions of aircraft and other aviation assets. We typically finance the initial purchase of aircraft and other aviation assets using committed short-term credit arrangements and cash on hand. We believe our ability to execute acquisitions expeditiously and without financing contingencies has benefited us in competitive bidding situations. Our short-term borrowed funds for our aircraft acquisitions and repurchase obligations for our securities are provided by secured credit facilities from banks. See ‘‘— Liquidity and Capital Resources — Credit Facilities.’’

We intend to access the securitization market to provide long-term financing for our aircraft operating lease portfolio. On June 15, 2006 we closed Securitization No. 1. Securitization No. 1 generated gross proceeds of $560 million through the issuance of floating-rate aircraft lease-backed securities, secured, among other things, by ownership interests in our subsidiaries that own the 40 aircraft included in Portfolio No. 1 and the related leases. The face value of the notes represents 54.8% of the Initial Appraised Value of Portfolio No. 1 of $1.022 billion. We retained 100% of the rights to receive future cash flows from Portfolio No. 1 after the payment of claims that are senior to our rights.

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Based on our expected aircraft acquisition plan, we anticipate completing one or two securitizations per year and one or two additional equity offerings per year. Our ability to successfully complete these securitizations and equity offerings on favorable terms will have a significant impact on our results of operations and financial condition.

Our Leases

As of March 31, 2006, all of the aircraft in our portfolio were subject to operating leases. Under an operating lease, we retain the benefit, and bear the risk, of re-leasing and the residual value of the aircraft upon expiry or early termination of the lease. Operating leasing is an attractive alternative to ownership for airlines because leasing (i) increases fleet flexibility, (ii) requires a lower capital commitment, and (iii) significantly reduces aircraft residual value risk. Under our leases, the lessees agree to lease the aircraft for a fixed term, although in some cases the lessees may have purchase options, termination rights and extension rights, each as more fully discussed below.

Lease rental revenue from our two largest customers, U.S. Airways, Inc. and Hainan Airlines, accounted for 28.1% and 11.5%, respectively, of our total revenues for the three months ended March 31, 2006. As of March 31, 2006, the weighted average (by net book value) remaining term of our leases was 4.2 years with scheduled expirations ranging from 2006 through 2014 and the maturities of our leases by aircraft type were as follows:


  2006 2007 2008 2009 2010 2011 2012 2013 2014
A310-300F 0 0 1 0 0 0 0 0 0
A319-100 0 2 0 0 0 0 0 0 0
A320-200 1 1 0 1 1 0 1 0 0
A330-200 0 0 0 0 1 0 0 0 0
A330-300 0 0 0 0 0 0 4 0 0
737-300 0 0 5 0 0 0 0 0 0
737-300QC 0 0 1 3 0 0 0 0 0
737-400 0 2 0 2 0 0 0 0 0
737-500 0 0 0 1 3 0 1 0 0
737-700 1 0 0 0 0 1 0 0 0
737-800 0 1 0 0 0 2 0 0 2
747-400PC 0 0 1 0 0 0 0 0 0
767-200ER 0 0 1 0 0 0 0 0 0
767-300ER 0 0 0 2 0 0 0 0 0
Total 2 6 9 9 5 3 6 0 2

Lease Payments and Security.     Each of our leases require the lessee to pay periodic rentals during the lease term. Rentals on three of our leases are payable on a floating interest-rate basis and rentals on our remaining leases are fixed for the base lease term. All lease rentals are payable either monthly or quarterly in advance. Except for one lease expiring in October 2006, where the lease rentals are payable in euros, all of the leases are payable in U.S. dollars.

Under our leases, the lessee must pay operating expenses accrued or payable during the term of the lease, which would normally include maintenance, operating, overhaul, airport and navigation charges, certain taxes, licenses, consents and approvals, aircraft registration and aircraft hull and public liability insurance premiums. Under all of our leases, the lessee is required to make payments for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending upon the component, and are required to be made monthly in arrears or at the end of the lease term. Whether to permit a lessee to make maintenance payments at the end of the lease term,

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rather than requiring such payments to be made monthly, will depend on a variety of factors, including the creditworthiness of the lessee, the level of security deposit which may be provided by the lessee and market conditions at the time. If a lessee is making monthly maintenance payments, we would typically be obligated to use the funds paid by the lessee during the lease term to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components, usually shortly following completion of the relevant work. In addition, a majority of our leases contain provisions which may require us to pay a portion of such costs in excess of the amounts paid to us by the lessee on a monthly basis, although the timing of the maintenance, overhaul or replacement of the relevant components and the actual cost of the work will determine the portion of the excess, if any, we must pay. As part of our due diligence review of each aircraft we purchase, we prepare an estimate of the expected maintenance payments and any excess costs which may become payable by us, taking into consideration the then-current maintenance status of the aircraft and the relevant provisions of any existing lease. Based on current estimates, during the next twelve months we expect to pay approximately $10 million in excess maintenance costs not covered by lessee maintenance payments. If our estimates prove to be incorrect, or if the lessee is unable to make maintenance payments that come due, our costs associated with maintenance to the aircraft would increase.

A majority of our leases also contain provisions requiring us to pay a portion of the cost of modifications to the aircraft performed by the lessee at its expense, if such modifications are mandated by recognized airworthiness authorities. Typically these provisions would set a threshold, below which the lessee would not have a right to seek reimbursement and above which we may be required to pay a portion of the cost incurred by the lessee. The lessees are obliged to remove liens on the aircraft other than liens permitted under the leases.

Our leases generally provide that the lessees’ payment obligations are absolute and unconditional under any and all circumstances and require lessees to make payments without withholding payment on account of any amounts the lessor may owe the lessee or any claims the lessee may have against the lessor for any reason, except that under certain of the leases a breach of quiet enjoyment by the lessor may permit a lessee to withhold payment. The leases also generally include an obligation of the lessee to gross up payments under the lease where lease payments are subject to withholdings and other taxes, although there may be some limitations to the gross up obligation, including provisions which do not require a lessee to gross up payments if the withholdings arise out of our ownership or tax structure. In addition, changes in law may result in the imposition of withholding and other taxes and charges that are not reimbursable by the lessee under the lease or that cannot be so reimbursed under applicable law and lessees may fail to reimburse even when obligated under the lease to do so. Our leases also generally require the lessee to indemnify the lessor for tax liabilities relating to the leases and the aircraft including, in most cases, value added tax and stamp duties, but excluding income tax or its equivalent imposed on the lessor. Our leases require the lessees to pay default interest on any overdue amounts.

As of March 31, 2006, lessees under 36 of our leases, representing 71.9% of our total revenue for the three months ended March 31, 2006, had provided cash security deposits and/or letters of credit.

Lessees' Options.     As of March 31, 2006, none of our leases provide the lessee the option to purchase the aircraft at the end of the lease term.

Ten of our leases, as of March 31, 2006, give the lessee the option to extend the term of the lease. The rent payable during the extension period may vary from the rent payable prior to the extension. None of these leases provide the lessee an option to terminate its lease prior to the scheduled expiration date.

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Risk Management

Our objective is to build and maintain an operating lease portfolio which is balanced and diversified and delivers returns commensurate with risk. We have portfolio concentration objectives to assist in portfolio risk management and highlight areas where action to mitigate risk may be appropriate, and take into account the following:

•  individual lessee exposures;
•  average portfolio credit quality;
•  geographic concentrations;
•  lease maturity concentrations; and
•  aircraft model concentrations.

We have a risk management team which undertakes detailed credit due diligence on lessees when aircraft are being acquired with a lease already in place and for placement of aircraft with new lessees following lease expiry or termination.

Lease Management and Remarketing

Our aircraft re-leasing strategy is to develop opportunities proactively, well in advance of lease expiries, to enable consideration of a broad set of alternatives, including both passenger and freighter deployments, and to allow for reconfiguration/ maintenance lead times where needed. We have invested significant resources in developing and implementing what we consider to be a state-of-the-art lease management information system to enable efficient management of aircraft in our portfolio.

Potential re-leasing opportunities are sourced globally and screened with respect to multiple factors, including rental rates, lease term, redeployment costs, lessee credit and jurisdiction, and the level of security deposits, maintenance reserves and other protections.

Remarketing of aircraft for placement on new operating leases is undertaken by a highly experienced marketing team with a well established market profile and extensive contacts. We have representatives based in the United States, Europe and Asia who provide global coverage. Our marketing team has an ongoing dialogue with a wide cross section of airlines, the original equipment manufacturers and other significant industry participants to keep closely apprised of market developments affecting airline fleet requirements and emerging aircraft supply and demand opportunities.

Our current strategy is to focus on the acquisition, leasing and management of owned aircraft rather than seeking to enter third-party aircraft management business. We currently manage five aircraft on behalf of Fortress-related entities, but we are not actively pursuing other third-party aircraft management business.

Our Debt Investments

We also invest in debt securities secured by commercial jet aircraft including enhanced equipment trust certificates and other forms of collateralized debt. We believe our experience in the aircraft leasing business, coupled with our knowledge of structured finance, enables us to make opportunistic investments in this market.

We believe our debt investments complement our aircraft leasing business. Through our aircraft leasing business, we have extensive experience with the pertinent airline credits and valuation of underlying aviation collateral. By leveraging this knowledge and experience we believe we are able to earn attractive risk-adjusted returns.

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As of March 31, 2006, our debt investment portfolio had a fair value of $120.6 million and consisted of six debt securities. A majority of the opportunities available in this segment presently entail U.S. airline obligors. Consistent with our overall investment approach, we consider return thresholds for investments in secured debt on a risk-adjusted basis.

Consistent with our strategy in our aircraft leasing business, we generally invest in secured debt with a long-term holding horizon. Among other factors, we periodically monitor the investment value, collateral coverage and credit standing of the relevant obligors. As part of our portfolio management approach, we will consider liquidating or reducing our exposure to specific securities to the extent collateral coverage, credit profile or other factors deteriorate.   

We utilize a deal team approach to pursue secured debt transactions, wherein functional experts such as technical, credit and legal personnel support our analytics/ valuation and finance functions in order to make investments consistent with our portfolio management strategy. At the current time, funding for our secured debt investments is undertaken on a transaction-specific basis.

Other Aviation Assets

As of July 18, 2006, our overall portfolio of assets includes commercial jet aircraft and asset-backed debt securities, however, we believe that acquisition opportunities may arise in such sectors as jet engine and spare parts leasing and financing, aviation facility financing or ownership, and commercial turboprop aircraft and helicopter leasing and financing. In the future, we may make opportunistic investments in these sectors or in other aviation related assets.

Competition

The aircraft leasing industry is highly competitive. The aircraft leasing industry may be divided into two leasing segments: (i) leasing of new aircraft acquired directly or indirectly from manufacturers and (ii) leasing or re-leasing of aircraft in the secondary market. Currently, we compete primarily in the latter segment, and our competition is comprised of other aircraft leasing companies, including GE Capital Aviation Services, International Lease Finance Corp., CIT Group, AerCap, Aviation Capital Group, Pegasus, GATX Air, RBS Aviation Capital, AWAS, Babcock & Brown and Singapore Aircraft Leasing Enterprise. We believe that only a few comparably sized companies focus primarily on the same segment of the aircraft leasing market as we do. In addition to those companies listed above, a number of other aircraft manufacturers, airlines and other operators, distributors, equipment managers, leasing companies, financial institutions, and other parties engaged in leasing, managing, marketing or remarketing aircraft compete with us, although their focus may be on different market segments. Competition in aircraft leasing is based principally upon the availability, type and condition of aircraft, lease rates and other lease terms. Some of our competitors have, or may obtain, greater financial resources than us and may have a lower cost of capital. However, we believe that we are able to compete favorably in aircraft acquisition and leasing activities due to the reputation and experience of our management, our expertise in acquiring aircraft and our flexibility in structuring lease rates and other lease terms to respond to market dynamics and customer needs. We also face competition in remarketing activities from the same type of competitors. Competition in the sale of aircraft is based principally on the availability, type and condition of aircraft and price.

Employees

We operate in a capital intensive rather than a labor intensive business. As of March 31, 2006, we had 32 full-time employees. Management and administrative personnel will expand, as necessary, to meet our future growth needs. None of our employees are covered by a collective bargaining agreement and we believe that we maintain excellent employee relations. We provide certain employee benefits, including retirement, health, life, disability and accident insurance plans.

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Property and Facilities

We lease approximately 13,000 square feet of office space in Stamford, Connecticut for our corporate operations. This lease expires in December, 2012 and requires payments of approximately $500,000 per year.

In addition, we lease one office in Ireland for our leasing operations in Europe. The lease for the Irish facility expires in October 2006. Upon expiration, the lease for the Irish facility will be automatically renewed for six months unless terminated earlier by either party upon advance written notice prior to the expiration date of the then current term. We lease an office space in Singapore for our leasing operations in Asia. The initial lease for the Singapore facility expired in January 2006. Upon expiration, the lease for the Singapore facility provides that it will be automatically renewed for six month intervals unless terminated earlier by either party upon advance written notice prior to the expiration date of the then current term. The Singapore lease was renewed for another six month term beginning February 1, 2006. We also lease an office space in Oak Brook, Illinois for our leasing operations in North America. The lease for the Oak Brook facility expires in March 2007. Upon expiration, the lease for the Oak Brook facility will be automatically renewed for 12 month intervals unless terminated earlier by either party upon advance written notice prior to the expiration date of the then current term.

We believe our current facilities are adequate for our current needs and that suitable additional space will be available as and when needed.

Insurance

We require our lessees to carry with insurers in the international insurance markets the types of insurance which are customary in the air transportation industry, including airline general third party legal liability insurance, all-risk aircraft hull insurance (both with respect to the aircraft and with respect to each engine when not installed on our aircraft) and war-risk hull and legal liability insurance covering risks such as hijacking, terrorism, confiscation, expropriation, nationalization and seizure. We are named as an additional insured on liability insurance policies carried by our lessees, and we and/or our lender normally are designated as a loss payee in the event of a total loss of the aircraft. Coverage under liability policies generally is not subject to deductibles except those as to baggage and cargo that are standard in the airline industry, and coverage under all-risk aircraft hull insurance policies generally is subject to agreed deductible levels. We maintain contingent liability insurance coverage with respect to our aircraft which is intended to provide coverage in the event the liability insurance maintained by any of our lessees should lapse without notice to us.

We maintain insurance policies to cover risks related to physical damage to our equipment and property (other than aircraft), as well as with respect to third-party liabilities arising through the course of our normal business operations (other than aircraft operations). We also maintain limited business interruption insurance and directors’ and officers’ insurance providing indemnification for our directors, officers and certain employees for certain liabilities.

We believe that the insurance coverage currently carried by Aircastle and our lessees provides adequate protection against the accident-related and other covered risks involved in the conduct of our business. However, there can be no assurance that we have adequately insured against all risks that lessees will at all times comply with their obligations to maintain insurance, that any particular claim will be paid or that we will be able to procure adequate insurance coverage at commercially reasonable rates in the future. Consistent with industry practice, our insurance policies are subject to commercially reasonable deductibles or self-retention amounts.

Government Regulation

The air transportation industry is highly regulated. Since we do not operate aircraft, we generally are not directly subject to most of these laws. However, our lessees are subject to extensive regulation

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under the laws of the jurisdiction in which they are registered or under which they operate. Such laws govern, among other things, the registration, operation and maintenance of our aircraft. Most of our aircraft are registered in the jurisdiction in which the lessee of the aircraft is certified as an air operator. As a result, our aircraft are subject to the air worthiness and other standards imposed by such jurisdictions. Laws affecting the airworthiness of aircraft generally are designed to ensure that all aircraft and related equipment are continuously maintained in proper condition to enable safe operation of the aircraft. Most countries’ aviation laws require aircraft to be maintained under an approved maintenance program having defined procedures and intervals for inspection, maintenance, and repair.

Our lessees are sometimes obliged to obtain governmental approval to import and lease our aircraft, to operate our aircraft on certain routes and to pay us in U.S. dollars. Usually these approvals are obtained prior to lease commencement as a condition to our delivery of the aircraft. Governmental leave to deregister and/or re-export an aircraft at lease expiry or termination may also be required and may not be available in advance of the lease expiration or termination, although we would normally in such a case require powers of attorney or other documentation to assist us in effecting deregistration or export if required.

Legal Proceedings

The Company is not a party to any material legal or adverse regulatory proceedings.

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Management

Directors and Executive Officers

The following table sets forth certain information about our directors and executive officers as of the consummation of this offering, together with their positions and ages. Each of our executive officers holds office until his or her successor is elected or appointed and qualified or until his or her resignation or removal, if earlier. Each director listed below holds office until his or her term expires, until his or her successor is duly elected or appointed or until his or her death, retirement, resignation or removal.


Name Age Position
Wesley R. Edens 44
Chairman of the Board of Directors
Ron Wainshal 42
Chief Executive Officer
Mark Zeidman 54
Chief Financial Officer
David Walton 45
Chief Operating Officer and General Counsel
Joseph Schreiner 48
Executive Vice President, Technical
Jonathan Lang 38
Chief Technology Officer
Joseph P. Adams, Jr. 48
Deputy Chairman of the Board of Directors
Ronald W. Allen 64
Director
Douglas A. Hacker 50
Director
John Z. Kukral 46
Director
Ronald L. Merriman 61
Director
Peter Ueberroth 69
Director

Wesley R. Edens is the Chairman of our board of directors and has served in this capacity since our formation in October 2004. Mr. Edens has been a Principal and the Chairman of the Management Committee of Fortress Investment Group LLC since co-founding the firm in May 1998 through which he manages investments in various asset-related investment vehicles and serves on the board of two registered investment companies, Fortress Registered Investment Trust and Fortress Investment Trust II. He is the Chairman of the board of directors and Chief Executive Officer of Newcastle Investment Corp., an affiliate of Fortress listed on the NYSE. He is also Chairman of the board of directors of Brookdale Senior Living Inc., a senior living company listed on the New York Stock Exchange, since its inception in November 2005, and Chairman of the board of directors of Global Signal Inc., an NYSE listed company, since its reorganization in October 2002 and was Chief Executive Officer of Global Signal, Inc. from February 2004 to April 2006. Since its inception in 2003, he has also served as a director and the Chief Executive Officer of Eurocastle Investment Limited, an affiliate of Fortress which is currently listed on the Amsterdam Euronext Exchange and Chairman of the board of directors of Mapeley Limited, which has been listed on the London Stock Exchange since June 2005.

Ron Wainshal    became our Chief Executive Officer in May 2005. Prior to joining Aircastle, Mr. Wainshal was in charge of the Asset Management group of General Electric Commercial Aviation Service, or GECAS, from 2003 to 2005. Since joining GECAS in 1998, Ron also led many of GECAS' U.S. airline restructuring efforts and its bond market activities, and played a major marketing and structured finance role for GE in the Americas. Before joining GECAS, he was a principal and

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co-owner of a financial advisory company specializing in transportation infrastructure from 1994 to 1998 and prior to that held positions at Capstar Partners and The Transportation Group in New York and Ryder System in Miami. He received a BS in Economics from the Wharton School of the University of Pennsylvania and an MBA from the University of Chicago's Graduate School of Business.

Mark Zeidman became our Chief Financial Officer in August 2005. Prior to joining Aircastle, Mr. Zeidman was Chief Financial Officer and Chief Investment Officer at Ocwen Financial Corporation, a mortgage finance firm listed on the NYSE, from May 1997 to March 2005. Prior to Ocwen, Mr. Zeidman was a managing director at Nomura Securities International from May 1987 to May 1997. Mr. Zeidman brings a strong finance background to Aircastle. He received a BA from the University of Pennsylvania, a Master of International Affairs from the School of International Affairs at Columbia University and an MBA from the Wharton School of Business at the University of Pennsylvania.

David Walton became our General Counsel in March 2005 and our Chief Operating Officer in January 2006. Prior to joining Aircastle, Mr. Walton was Chief Legal Officer of Boullioun Aviation Services, Inc. from 1996 to 2005. Prior to that, Mr. Walton was a partner at the law firm of Perkins Coie in Seattle and Hong Kong. Mr. Walton has over 15 years of experience in aircraft leasing and finance. He received a BA in Political Science from Stanford University and a JD from Boalt Hall School of Law, University of California, Berkeley.

Joseph Schreiner became our Executive Vice President, Technical in October 2004. Prior to joining Aircastle, Mr. Schreiner oversaw the technical department at AAR CORP., a provider of products and services to the aviation and defense industries from 1998 to 2004 where he managed aircraft and engine evaluations and inspections, aircraft lease transitions, reconfiguration and heavy maintenance. Prior to AAR, Mr. Schreiner spent 19 years at Boeing (McDonnell-Douglas) in various technical management positions. Mr. Schreiner received a BS from the University of Illinois and a MBA from Pepperdine University.

Jonathan Lang became our Chief Technology Officer in May 2005. Prior to joining Aircastle, Mr. Lang was Senior Vice President of Information Technology at Paloma Partners, an international hedge fund, from 1994 to 2005. Prior to that, Mr. Lang worked as the Manager of Information Technology for U.S. Homecare, a provider of home health care services. Mr. Lang brings over 16 years of information technology experience to Aircastle. He received a BA in Business Administration from George Washington University.

Joseph P. Adams, Jr. became a Director in October 2004 and the Deputy Chairman of our board of directors in May 2006. He is a managing director of Fortress Investment Group, which he joined in April 2004, and focuses on the acquisitions area. Previously, Mr. Adams was a partner at Brera Capital Partners and at Donaldson, Lufkin & Jenrette (later Credit Suisse First Boston) where he was in the transportation industry group and later in the restructuring group. Mr. Adams was the first Executive Director of the Air Transportation Stabilization Board for 2002. Mr. Adams received a BS in Engineering from the University of Cincinnati and an MBA from Harvard Business School.

Ronald W. Allen will be appointed to our board of directors prior to the completion of this offering. Mr. Allen was a consultant to and Advisory Director of Delta Air Lines, Inc., a major U.S. air transportation company, from July 1997 through July 2005. Mr. Allen continues to serve as an Advisory Director. He retired as Delta's Chairman of the Board, President and Chief Executive Officer in July 1997, and had been its Chairman of the Board and Chief Executive Officer since 1987. He is also a Director of Aaron Rents, Inc., a company engaged in the business of rental, sales and lease ownership and specialty retailing of furniture, electronics and appliances, and has served as a director of the Coca-Cola Company since 1991.

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Douglas A. Hacker will be appointed to our board of directors prior to the completion of this offering. Mr. Hacker is currently an independent business executive and formerly served as Executive Vice President, Strategy for UAL Corporation, an airline holding company, and has served in such position from December 2002 to May 2006. Prior to this position, Mr. Hacker served with UAL Corporation as President, UAL Loyalty Services from September 2001 to December 2002, and as Executive Vice President and Chief Financial Officer from July 1999 to September 2001. In December 2002, UAL Corporation filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code, and emerged from bankruptcy on February 1, 2006. Mr. Hacker also serves as a Director or Trustee of a series of open-end and closed-end investment companies that are part of the Columbia family of mutual funds and as a Director of Nash Finch Company, a food distribution and retail company.

John Z. Kukral will be appointed to our board of directors prior to the completion of this offering. Mr. Kukral is President of Northwood Investors, a real estate investment company. Mr. Kukral started his career at JMB Realty Corporation in 1982 and was most recently (1994 to 2005) with Blackstone Real Estate Advisors where he served as President and CEO from 2002 until his departure in 2005. Mr. Kukral is a Trustee of the Urban Land Institute, a Governor of the Urban Land Foundation, a Trustee of the National Jewish Hospital in Denver, Colorado and past Chairman of the Savoy Group.

Ronald L. Merriman  will be appointed to our board of directors prior to the completion of this offering. Mr. Merriman is a Managing Director of Merriman Partners, providing management consulting services to professional service firms. He served as Managing Director of O'Melveny & Myers LLP, a global law firm, from 2000 to 2003. From 1999 to 2000, Mr. Merriman served as Executive Vice President of Carlson Wagonlit Travel, a global travel management firm. Mr. Merriman also served as Executive Vice President of Ambassadors International, a publicly-traded travel services business, from 1997 to 1999. From 1967 to 1997, Mr. Merriman was employed by KPMG, a global accounting and consulting firm, where he ultimately served as a Vice Chair and member of the Executive Management Committee. He is also a director of Realty Income Corporation, Haemonetics Corporation and Pentair, Inc.

Peter Ueberroth will be appointed to our board of directors prior to the completion of this offering. Mr. Ueberroth is currently, and has been since 1989, the Managing Director of Contrarian Group, Inc., an investment and management company. In 1962, Mr. Ueberroth founded First Travel Corporation and sold it to the Carlson Travel Group in 1980. From 1979 to 1984, Mr. Ueberroth served as president of the Los Angeles Olympic Organizing Committee. From 1984 to 1989, he served as the sixth commissioner of Major League Baseball. In July of 1999, Mr. Ueberroth successfully orchestrated the purchase of the Pebble Beach Company and he now serves as an owner and co-chairman. Mr. Ueberroth also serves as the chairman of the United States Olympic Committee. He is also chairman of Ambassadors International Inc., a travel services company, and a member of the board of directors of Adecco SA, a Swiss staffing company, The Coca-Cola Company and Hilton Hotels Corporation.

Board of Directors

Our bye-laws provide that our board shall consist of not less than three and not more than eight directors as the board of directors may from time to time determine. Our board of directors will initially consist of seven directors. Our board of directors is divided into three classes that are, as nearly as possible, of equal size. Each class of directors is elected for a three-year term of office, but the terms are staggered so that the term of only one class of directors expires at each annual general meeting. The initial terms of the Class I, Class II and Class III directors will expire in 2007, 2008 and 2009, respectively. Messrs. Allen and Hacker will each serve as a Class I director, Messrs.

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Adams, Kukral and Merriman will each serve as a Class II director and Messrs. Edens and Ueberroth will each serve as a Class III director. All officers serve at the discretion of the board of directors. Under our Amended and Restated Shareholders Agreement, which we and the Fortress shareholders will execute upon the completion of this offering, Fortress will be entitled to designate up to four directors for election to our board of directors, depending upon the level of ownership of the Fortress shareholders. Prior to the completion if this offering, we will have seven directors, four of whom we believe will be determined to be ‘‘independent’’ as defined under the rules of the NYSE.

Committees of the Board of Directors

Prior to the consummation of this offering, we will establish the following committees of our board of directors:

The audit committee, which:

•  reviews the audit plans and findings of the independent certified public accountants and our internal audit and risk review staff, and the results of regulatory examinations and tracks management's corrective action plans where necessary;
•  reviews our financial statements, including any significant financial items and/or changes in accounting policies, with our senior management and independent certified public accountants;
•  reviews our risk and control issues, compliance programs and significant tax and legal matters;
•  makes recommendations to our shareholders regarding the annual appointment by our shareholders of the independent certified public accountants (which constitutes the auditor for purposes of Bermuda law) and evaluates their independence and performance, as well as to set clear hiring policies for employees or former employees of our independent certified public accounting firm; and
•  reviews our risk management processes.

We intend to appoint Ronald L. Merriman, as chair, and Douglas A. Hacker and Ronald W. Allen as our audit committee members. All three members are expected to be determined ‘‘independent’’ as defined under NYSE rules and under section 10A-3 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Ronald L. Merriman is expected to be designated as the audit committee financial expert.

The nominating and corporate governance committee, which:

•  reviews the performance of the board of directors and incumbent directors and makes recommendations to our board of directors regarding the selection of candidates, qualification and competency requirements for service on the board of directors and the suitability of proposed nominees;
•  advises the board of directors with respect to the corporate governance principles applicable to AL; and
•  oversees the evaluation of the board of directors and AL's management.

We intend to appoint Ronald W. Allen, as chair, and Ronald L. Merriman and John Z. Kukral as our nominating and corporate governance committee members. All three members are expected to be determined ‘‘independent’’ as defined under NYSE rules and under section 10A-3 of the Exchange Act.

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The compensation committee, which:

•  reviews and recommends to the board of directors the salaries, benefits and share-based grants for all employees, consultants, officers, directors and other individuals compensated by us;
•  reviews and approves corporate goals and objectives relevant to Chief Executive Officer compensation, evaluates the Chief Executive Officer's performance in light of those goals and objectives, and determines the Chief Executive Officer's compensation based on that evaluation; and
•  oversees our compensation and employee benefit plans.

We intend to appoint John Z. Kukral, as chair, and Douglas A. Hacker and Ronald W. Allen as our compensation committee members. All three members are expected to be determined ‘‘independent’’ as defined under NYSE rules and under section 10A-3 of the Exchange Act.

Compensation Committee Interlocks and Insider Participation

Compensation decisions during the year ended December 31, 2005 pertaining to executive officer compensation were made by the chairman of our board of directors, Wesley R. Edens. We have entered into certain transactions with Fortress as described in ‘‘Certain Relationships and Related Party Transactions.’’

Compensation of Directors

We will pay an annual fee to each of Messrs. Allen, Hacker, Merriman, Ueberroth and Kukral equal to $30,000, payable semi-annually. In addition, an annual fee of $5,000 will be paid to the chairs of each of the audit and compensation committees of the board of directors. Fees to independent directors may be paid by issuance of common shares, based on the value of such common shares at the date of issuance, rather than in cash, provided that any such issuance does not prevent such director from being determined to be independent and such shares are granted pursuant to a shareholder-approved plan or the issuance is otherwise exempt from any applicable stock exchange listing requirement. Affiliated directors, however, will not be separately compensated by us. All members of the board of directors will be reimbursed for reasonable costs and expenses incurred in attending meetings of our board of directors.

Messrs. Allen, Hacker, Merriman, Ueberroth and Kukral will each be granted a number of restricted common shares on the date immediately following the consummation of this offering, or as soon as practicable thereafter, equal in value to $300,000, based on the fair market value of our shares on the date of grant. These restricted shares will become vested in three equal portions on the last day of each of our fiscal years 2007, 2008 and 2009, provided the director is still serving as of the applicable vesting date. The directors holding these restricted shares will be entitled to any dividends that become payable on such shares during the restricted period.

Except as otherwise provided by the plan administrator of the Amended and Restated Aircastle Limited 2005 Equity Incentive Plan, on the first business day after our annual general meeting of shareholders and each such annual general meeting thereafter during the term of the Amended and Restated Aircastle Limited 2005 Equity Incentive Plan, each of our independent directors who is serving following such annual general meeting will automatically be granted under our Amended and Restated Aircastle Limited 2005 Equity Incentive Plan a number of our common shares having a fair market value of $15,000 as of the date of grant; however, those of our directors who are granted the restricted common shares described above upon the consummation of this offering will not be eligible to receive these automatic annual grants.

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Executive Officer Compensation

The following summary compensation table sets forth information concerning the cash and non-cash compensation earned by, awarded to or paid to our Chief Executive Officer and our four other most highly compensated executive officers (with their current positions with us) for services rendered to us in 2005. We refer to these executives as our ‘‘named executive officers’’ in other parts of this prospectus.

Summary Compensation Table


    Annual Compensation  
Name and Principal Position Fiscal
Year
Salary
($)
Bonus
($)
Other Annual
Compensation (1)
($)
All Other
Compensation (2)
($)
Ron Wainshal, Chief Executive Officer 2005
123,656
400,000
3,995
Mark Zeidman, Chief Financial Officer 2005
164,063
550,000
1,312 5,334
David Walton, Chief Operating Officer, General Counsel and Secretary 2005
170,580
395,000
22,270 6,690
Joseph Schreiner, Executive Vice President, Technical 2005
200,060
260,000
31,481 6,756
Jonathan Lang, Chief Technology Officer 2005
122,118
150,000
3,940
(1) The reported amounts were reimbursements of relocation expenses.
(2) The following reported amounts were employer contributions to each named executive officer's 401(k) account: Wainshal – $3,709; Zeidman – $4,961; Walton – $6,300; Lang – $3,663; and Schreiner – $6,300. The following reported amounts were insurance premiums paid with respect to term life insurance for each named executive officer: Wainshal – $286; Zeidman – $373; Walton – $390; Lang – $277; and Schreiner – $456.

Option Grants in Last Fiscal Year

No share options were granted during the year ended December 31, 2005.

Equity Incentive Plan

On January 17, 2005, we adopted a new equity incentive plan for our employees, the Aircastle Investment Limited 2005 Equity and Incentive Plan. The Aircastle Investment Limited 2005 Equity and Incentive Plan was approved by our shareholders on January 31, 2006. On July 20, 2006 our board of directors adopted the Amended and Restated Aircastle Limited 2005 Equity Incentive Plan, or the Plan, and our shareholders are expected to approve the Plan prior to the completion of this offering. The purposes of the Plan are to provide additional incentive to selected management employees and directors of, and consultants to, AL or its subsidiaries, to strengthen their commitment, motivate them to faithfully and diligently perform their responsibilities and to attract and retain competent and dedicated persons who are essential to the success of our business and whose efforts will impact in our long-term growth and profitability. To accomplish such purposes, the Plan provides for the issuance of share options, share appreciation rights, restricted shares, deferred shares, performance shares, unrestricted shares and other share-based awards.

While we intend to issue restricted shares and other share-based awards in the future to key employees as a recruiting and retention tool, we have not established specific parameters

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regarding future grants. The following grants of restricted shares, 250,000 shares to Ron Wainshal; 50,000 shares to David Walton and 15,000 shares to Jonathan Lang, made pursuant to the employees' respective employment letters are treated under the accounting rules as made in 2005 and were formalized in 2006. Additionally we made the following grants of restricted shares in the first quarter of 2006: 30,000 shares to Ron Wainshal; 100,000 shares to Mark Zeidman; 25,000 shares to David Walton; and 60,000 shares to Joseph Schreiner. All of the restrictions attaching to the restricted shares subject to the aforementioned grants lapse over four or five years. In April 2006, the following named executive officers purchased restricted common shares pursuant to the Plan, as follows: Ron Wainshal, 20,000 shares; Mark Zeidman, 20,000 shares; David Walton, 5,000 shares; and Joseph Schreiner, 15,000 shares. All of these purchased restricted shares vested immediately. Our board of directors (or the compensation committee of the board of directors, after it has been appointed) will determine the specific criteria surrounding other equity issuances under the Plan in the future. The following generally describes the terms of the Plan.

A total of 4,000,000 common shares has been reserved for issuance under the Plan, subject to annual increases of 100,000 common shares per year, beginning in 2007 through and including 2016. When section 162(m) of the Internal Revenue Code, or the Code, becomes applicable, the maximum aggregate awards that may be granted during any fiscal year to any individual who is likely to be a ‘‘covered employee’’ as defined under section 162(m) will be 2,500,000 shares.

The Plan will initially be administered by our board of directors, although it may be administered by either our board of directors or any committee of our board of directors including a committee that complies with the applicable requirements of section 162(m) of the Code, Section 16 of the Exchange Act and any other applicable legal or stock exchange listing requirements (the board or committee being sometimes referred to as the ‘‘plan administrator’’). The plan administrator may interpret the Plan and may prescribe, amend and rescind rules and make all other determinations necessary or desirable for the administration of the Plan. The Plan permits the plan administrator to select the directors, management employee and consultants who will receive awards, to determine the terms and conditions of those awards, including but not limited to the exercise price, the number of common shares subject to awards, the term of the awards and the vesting schedule applicable to awards, and to amend the terms and conditions of outstanding awards.

We may issue incentive share options or non-qualified share options under the Plan. The incentive share options granted under the Plan are intended to qualify as ‘‘incentive stock options’’ within the meaning of section 422 of the Code and may only be granted to our employees or any employee of any of our subsidiaries. The option exercise price of all share options granted under the Plan will be determined by the plan administrator, except the exercise price of incentive share options granted to shareholders who own greater than 10% of the voting common shares will not be granted at a price less than 110% of the fair market value of our common shares on the date of grant. The term of all share options granted under the Plan will be determined by the plan administrator, but may not exceed ten years (or five years for incentive share options granted to shareholders who own greater than 10% of the voting common shares). To the extent that the aggregate fair market value (as of the date the options were granted) of common shares subject to incentive share options granted to an optionee that first become exercisable in any calendar year exceeds $100,000, the excess options will be treated as non-qualified share options. Each share option will be exercisable at such time and pursuant to such terms and conditions as determined by the plan administrator in the applicable share option agreement.

Unless the applicable share option agreement provides otherwise, in the event of an optionee's termination of employment or service for any reason other than for cause, retirement, disability

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or death, such optionee's share options (to the extent exercisable at the time of such termination) generally will remain exercisable until 90 days after such termination and then expire. Unless the applicable share option agreement provides otherwise, in the event of an optionee's termination of employment or service due to retirement, disability or death, such optionee's share options (to the extent exercisable at the time of such termination) generally will remain exercisable until one year after such termination and will then expire. Share options that were not exercisable on the date of termination for any reason other than for cause will expire at the close of business on the date of such termination. In the event of an optionee's termination of employment or service for cause, such optionee's outstanding share options will expire at the commencement of business on the date of such termination.

Subject to applicable law, in the event of a change in control (as defined below), certain other corporate transactions, changes in corporate structure, special dividends and similar corporate events, the plan administrator has discretion to cancel outstanding awards (except fully vested restricted shares, deferred shares and performance shares) in exchange for payment in cash or other property. Unless otherwise determined by the plan administrator and evidenced in an award agreement, if a change in control transaction occurs that includes a continuation, assumption or substitution with respect to share options and other awards under the Plan, and a plan participant's employment is terminated by the employer other than for cause within the 12 months following the change in control, and, in the case of participants who are entitled to receive severance under an employment agreement upon termination by the participant for good reason (as defined in the participant's employment agreement), upon such a termination for good reason within the 12 months following a change in control, then the participant's outstanding and unvested options will become fully vested and exercisable as of the date of such termination and the restrictions will lapse (or performance goals will be deemed to be achieved) with respect to the shares covered by any other award. The term ‘‘change in control’’ generally means: (i) any person or entity (other than (a) an affiliate of Fortress or any managing director, general partner, director, limited partner, officer or employee of any such affiliate of Fortress or (b) any investment fund or other entity managed directly or indirectly by Fortress or any general partner, limited partner, managing member or person occupying a similar role of or with respect to any such fund or entity) becomes the beneficial owner of securities of AL representing 50% or more of AL's then outstanding voting power; (ii) a change in the majority of the membership of the board of directors without approval of two-thirds of the directors who constituted the board of directors on January 17, 2006, or whose election was previously so approved; (iii) the consummation of an amalgamation or a merger of AL or any subsidiary of AL with any other corporation, other than an amalgamation or merger immediately following which the board of directors of AL immediately prior to the amalgamation or merger constitute at least a majority of the board of directors of the company surviving or continuing after an amalgamation or merger or, if the surviving company is a subsidiary, the ultimate parent; or (iv) AL's shareholders approve a plan of complete liquidation or dissolution of AL or there is consummated an agreement for the sale or disposition of all or substantially all of AL's assets, other than (a) a sale of such assets to an entity, at least 50% of the voting power of which is held by AL shareholders following the transaction in substantially the same proportions as their ownership of AL immediately prior to the transaction or (b) a sale or disposition of such assets immediately following which the board of directors of AL immediately prior to such sale constitute at least a majority of the board of directors of the entity to which the assets are sold or disposed, or, if that entity is a subsidiary, the ultimate parent thereof.

Share appreciation rights, or SARs, may be granted under the Plan either alone or in conjunction with all or part of any share option granted under the Plan, provided that the common shares underlying the SARs are traded on an ‘‘established securities market’’ within the meaning of

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section 409A of the Code. A free-standing SAR granted under the Plan entitles its holder to receive, at the time of exercise, an amount per share equal to the excess of the fair market value (at the date of exercise) of a common share over a specified price fixed by the plan administrator (which shall be no less than fair market value at the date of grant). An SAR granted in conjunction with all or part of a share option under the Plan entitles its holder to receive, at the time of exercise of the SAR and surrender of such all or part of the related share option, an amount per share equal to the excess of the fair market value (at the date of exercise) of a common share over the exercise price of the related share option. In the event of a participant's termination of employment or service, free-standing SARs will be exercisable at such times and subject to such terms and conditions determined by the plan administrator on or after the date of grant, while SARs granted in conjunction with all or part of a share option will be exercisable at such times and subject to terms and conditions as set forth for the related share option. SARs will be designed to comply with section 409A of the Internal Revenue Code.

Restricted shares, deferred shares and performance shares may be granted under the Plan. The plan administrator will determine the purchase price and performance objectives, if any, with respect to the grant of restricted shares, deferred shares and performance shares. Participants with restricted shares and performance shares generally have all of the rights of a shareholder. During the restricted period, deferred shares may be credited with dividend equivalent rights, if the award agreement so provides. If the performance goals and other restrictions are not satisfied, the restricted shares, deferred shares and/or performance shares will be subject to the Company's right of repurchase of such shares. Subject to the provisions of the Plan and applicable award agreement, the plan administrator has sole discretion to provide for the lapse of restrictions in installments or the acceleration or waiver of restrictions (in whole or part) under certain circumstances, including, but not limited to, the attainment of certain performance goals, a participant's termination of employment or service or a participant's death or disability.

Messrs. Allen, Hacker, Merriman, Ueberroth and Kukral will each be granted a number of restricted common shares on the date immediately following the consummation of this offering, or as soon as practicable thereafter, equal in value to $300,000, based on the fair market value of our shares on the date of grant. These restricted shares will become vested in three equal portions on the last day of each of our fiscal years 2007, 2008 and 2009, provided the director is still serving as of the applicable vesting date. The directors holding these restricted shares will be entitled to any dividends that become payable on such shares during the restricted period.

Except as otherwise provided by the plan administrator, on the first business day after our annual general meeting of shareholders in 2007 and each such annual general meeting thereafter during the term of the Plan, each of our non-employee directors will automatically be granted under the Plan a number of unrestricted common shares having a fair market value of $15,000 as of the date of grant; however, those of our directors who are granted the restricted common shares described above upon the consummation of this offering will not be eligible to receive these automatic annual grants.

In the event of a merger, amalgamation, consolidation, reorganization, recapitalization, bonus issue, share dividend or other change in corporate structure affecting the common shares, the plan administrator may make an equitable substitution or proportionate adjustment in (i) the aggregate number of common shares reserved for issuance under the Plan, (ii) the maximum number of common shares that may be subject to awards granted to any participant in any calendar year, (iii) the kind, number and exercise price subject to outstanding share options and SARs granted under the Plan, and (iv) the kind, number and purchase price of common shares subject to outstanding awards of restricted shares, deferred shares, performance shares or other share-based awards granted under the Plan, provided that no such adjustment will cause any

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award under the Plan that is or becomes subject to section 409A of the Code to fail to comply with the requirements of that section. In addition, the plan administrator, in its discretion, may terminate all awards (other than fully vested restricted shares, deferred shares and performance shares) with the payment of cash or in-kind consideration.

The Plan provides that our board of directors may amend, alter or terminate the Plan, but no such action may impair the rights of any participant with respect to outstanding awards without the participant's consent. The plan administrator may amend an award, prospectively or retroactively, but no such amendment may impair the rights of any participant without the participant's consent. Unless the board of directors determines otherwise, shareholder approval of any such action will be obtained if required to comply with applicable law. The Plan will terminate on January 17, 2016.

In connection with the purchase of 77,000 common shares by certain of our employees in April of 2006, the purchasers of those common shares, including Messrs. Wainshal, Zeidman, Walton and Schreiner, will receive a cash bonus sufficient, on an after-tax basis, to cover our withholding obligations with respect to those shares.

Employment Letters, Termination of Employment and Change-in-Control Arrangements

Through our subsidiary, Aircastle Advisor LLC, we have letter agreements with our executive officers named in the Summary Compensation Table which state certain terms and conditions of their employment. These employment letters provide that each named executive officer is an employee ‘‘at will,’’ whose employment may be terminated at any time, either by us or by him.

Ron Wainshal's employment letter provides for a base salary of $200,000 and discretionary bonuses for 2006 and subsequent years. He agreed to invest at least $50,000 in our common shares. We agreed to make a grant of restricted shares, which resulted in grants totaling 280,000 restricted shares pursuant to a separate restricted share agreement discussed below. Mr. Wainshal is eligible to participate in our 401(k) plan and in other benefit plans and arrangements generally made available to our senior executives. Mr. Wainshal's employment letter provides that, if we terminate him without ‘‘cause’’ or he terminates his employment for ‘‘good reason’’ (as such terms are defined in the letter), we will pay him an amount equal to one-half of his base salary at the time of the termination plus $200,000. Mr. Wainshal agrees not to compete with us during his employment, and, if we terminate his employment with ‘‘cause’’ or he terminates his employment other than for ‘‘good reason,’’ he must not compete with us for six months after termination as to any aircraft leasing and/or aircraft finance business. Mr. Wainshal is required to maintain our confidential information in strictest confidence. Mr. Wainshal is prohibited from making critical statements about us that are likely to become public. During his employment and for one year thereafter he will not solicit any of our employees to leave our employment or hire any of our former employees within one year of such employee's termination. Pursuant to a separate restricted share agreement, grants totaling 280,000 restricted shares were made to Mr. Wainshal. In accordance with the restricted share agreement, if we terminate his employment without ‘‘cause’’ or he terminates his employment for ‘‘good reason’’ (as such terms are defined in his employment letter), 50% of the restricted shares that are unvested as of the date of termination (if any) will immediately vest, and if such a termination occurs within 12 months following a change in control of the Company (as defined in our 2005 Equity and Incentive Plan), all of the restricted shares that are unvested as of the termination (if any) will immediately vest.

Mark Zeidman's employment letter provides for a base salary of $200,000, a guaranteed bonus of $550,000 for 2006, and discretionary bonuses for 2007 and subsequent years. He agreed to invest

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at least $100,000 in our common shares. We agreed to make a grant of restricted shares, which resulted in the grant of 100,000 restricted shares pursuant to a separate restricted share agreement discussed below. Mr. Zeidman is eligible to participate in our 401(k) plan and in other benefit plans and arrangements generally made available to our senior executives. Mr. Zeidman's employment letter provides that, if we terminate him without ‘‘cause’’ (as defined in the letter) prior to December 31, 2006, we will pay him an amount equal to the difference between (i) the aggregate amount he would have been paid from the day he started his employment with us through December 31, 2006, on the basis of his base salary and his guaranteed bonus, and (ii) the aggregate amount he was actually paid in salary and bonus through the date of termination. Mr. Zeidman agrees not to compete with us during his employment, and, if we terminate his employment with ‘‘cause’’ or he terminates his employment for any reason, he must not compete with us for six months after termination as to any aircraft leasing and/or aircraft finance business. Mr. Zeidman is required to maintain our confidential information in strictest confidence. During Mr. Zeidman's employment and for one year thereafter he will not solicit any of our employees to leave our employment or hire any of our former employees within one year of such employee's termination. During Mr. Zeidman's employment and for two years thereafter he will not intentionally interfere with, or endeavor to entice away, any of our investors. Pursuant to a separate restricted share agreement, we made a grant of 100,000 restricted shares to Mr. Zeidman. Our restricted share agreement with respect to the grant provides that, if we terminate his employment without ‘‘cause’’ (as defined in our 2005 Equity and Incentive Plan), the restricted shares which are due to vest at the next vesting date under the agreement will immediately vest, and if such a termination occurs within 12 months following a change in control of the Company (as defined in our 2005 Equity and Incentive Plan), all of the restricted shares that are unvested as of the termination (if any) will immediately vest.

David Walton's employment letter provides for a base salary of $200,000 and discretionary bonuses for 2006 and subsequent years. Mr. Walton is eligible to participate in our 401(k) plan and in other benefit plans and arrangements generally made available to our senior executives. Mr. Walton's employment letter provides that, if we terminate him without ‘‘cause’’ (as defined in the letter) prior to December 31, 2007, we will pay him an amount equal to his base salary. Mr. Walton agrees not to compete with us during his employment, and, if we terminate his employment with ‘‘cause’’ or he terminates his employment for any reason, he must not compete with us for three months after termination as to any aircraft leasing and/or aircraft finance business. Mr. Walton is required to maintain our confidential information in strictest confidence. During Mr. Walton's employment and for one year thereafter he will not solicit any of our employees to leave our employment or hire any of our former employees within one year of such employee's termination. Pursuant to a separate restricted share agreement, grants totaling 75,000 restricted shares were made to Mr. Walton. In accordance with the restricted share agreement, if we terminate his employment without ‘‘cause’’ (as defined in our 2005 Equity and Incentive Plan), the restricted shares which are due to vest at the next vesting date under the agreement will immediately vest, and if such a termination occurs within 12 months following a change in control of the Company (as defined in our 2005 Equity and Incentive Plan), all of the restricted shares that are unvested as of the termination (if any) will immediately vest.

Joseph Schreiner's employment letter provides for a base salary of $200,000 and discretionary bonuses. Mr. Schreiner is eligible to participate in the benefit plans and arrangements generally made available to our employees. Mr. Schreiner agrees not to compete with us during his employment, and, if we terminate his employment with ‘‘cause’’ or he terminates his employment for any reason, he must not compete with us for six months after termination as to any aircraft leasing and/or aircraft finance business. Works of authorship, discoveries, computer programs and other intellectual property that Mr. Schreiner makes or conceives during his

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employment with us will constitute ‘‘work for hire’’ under the United States Copyright Act. Mr. Schreiner is required to maintain our confidential information in strictest confidence. During Mr. Schreiner's employment and for one year thereafter he will not solicit any of our employees to leave our employment or hire any of our former employees within one year of such employee's termination. Pursuant to a separate restricted share agreement, a grant of 60,000 restricted shares was made to Mr. Schreiner. In accordance with the restricted share agreement, if we terminate his employment without ‘‘cause’’ (as defined in our 2005 Equity and Incentive Plan), the restricted shares which are due to vest at the next vesting date under the agreement will immediately vest, and if such a termination occurs within 12 months following a change in control of the Company (as defined in our 2005 Equity and Incentive Plan), all of the restricted shares that are unvested as of the termination (if any) will immediately vest.

Jonathan Lang's employment letter provides for a base salary of $200,000 and discretionary bonuses for 2006 and subsequent years. Mr. Lang is eligible to participate in the benefit plans and arrangements generally made available to our employees. Mr. Lang agrees not to compete with us during his employment, and, if we terminate his employment with ‘‘cause’’ (as defined in the letter) or he terminates his employment for any reason, he must not compete with us for six months after termination as to any aircraft leasing and/or aircraft finance business. Works of authorship, discoveries, computer programs and other intellectual property that Mr. Lang makes or conceives during his employment with us will constitute ‘‘work for hire’’ under the United States Copyright Act. Mr. Lang is required to maintain our confidential information in strictest confidence. During Mr. Lang's employment and for one year thereafter he will not solicit any of our employees to leave our employment or hire any of our former employees within one year of such employee's termination. Pursuant to a separate restricted share agreement, a grant of 15,000 restricted shares was made to Mr. Lang. In accordance with the restricted share agreement, if we terminate his employment without ‘‘cause’’ (as defined in our 2005 Equity and Incentive Plan), the restricted shares which are due to vest at the next vesting date under the agreement will immediately vest, and if such a termination occurs within 12 months following a change in control of the Company (as defined in our 2005 Equity and Incentive Plan), all of the restricted shares that are unvested as of the termination (if any) will immediately vest.

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Certain Relationships and Related Party Transactions

The following is a summary of material provisions of various transactions we have entered into with our executive officers, directors or 5% or greater shareholders since our formation in October 2004. We believe the terms and conditions set forth in such agreements are reasonable and customary for transactions of this type.

Our Formation/Original Capital Investment

Aircastle was incorporated by Fortress in Bermuda on October 29, 2004 to enter into the aircraft leasing business. Wesley R. Edens, our Chairman of the Board of Directors is a Principal and Chairman of the Management Committee of Fortress Investment Group LLC and Joseph P. Adams, Jr., our Deputy Chairman, is a Managing Director of Fortress Investment Group LLC. On November 19, 2004, AL entered into subscription agreements with Fortress affiliated shareholders under which AL sold 12,000 of AL's common shares to such shareholders at a purchase price of $1.00 per share for aggregate consideration of $12,000. Fortress also contributed an additional $100.7 million to AL in 2004 and an additional $299.3 million in 2005 pursuant to our Shareholders Agreement, dated November 24, 2004, and our Amended and Restated Shareholders Agreement dated, June 23, 2005. The Fortress shareholders committed to contribute up to an additional $100 million of equity to AL pursuant to our Second Amended and Restated Shareholders Agreement, dated January 31, 2006. The Second Amended and Restated Shareholders Agreement provided for an increase in the authorized number of our common shares from 12,000 common shares of $1.00 par value to 100 million common shares of $0.01 par value, and the subdivision of issued and outstanding common shares from 12,000 common shares of $1.00 par value to 40,000,000 common shares of $0.01 par value. On February 8, 2006 the Fortress shareholders contributed $36.9 million pursuant to the aforementioned commitment in exchange for 3,693,200 of our common shares. On July 21, 2006, we returned $36.9 million to the Fortress shareholders in exchange for the cancellation of 3,693,200 of our common shares. After the return of the cash, the $100 million commitment was reinstated. This commitment will terminate upon completion of this offering in connection with the execution of the shareholders agreement described below.

Shareholders Agreement

General

Upon the completion of this offering, we will enter into an Amended and Restated Shareholders Agreement, or the Shareholders Agreement, with Fortress Investment Fund III LP, Fortress Investment Fund III (Fund B) LP, Fortress Investment Fund III (Fund C) LP, Fortress Investment Fund III (Fund D) L.P., Fortress Investment Fund III (Fund E) LP, Fortress Investment Fund III (Coinvestment Fund A) LP, Fortress Investment Fund III (Coinvestment Fund B) LP, Fortress Investment Fund III (Coinvestment Fund C) LP, Fortress Investment Fund III (Coinvestment Fund D) L.P., Drawbridge Special Opportunities Fund LP, Drawbridge Special Opportunities Fund Ltd. and Drawbridge Global Macro Master Fund Ltd., which we refer to, collectively, as the Initial Shareholders. The Shareholders Agreement will amend and restate our Second Amended and Restated Shareholders Agreement referred to above.

As discussed further below, the Shareholders Agreement provides certain rights to the Initial Shareholders with respect to the designation of directors for election to our board of directors as well as registration rights for certain of our securities owned by them.

The Shareholders Agreement provides that the Initial Shareholders and their respective affiliates and permitted transferees will vote or cause to be voted all of our voting shares beneficially owned by each and to take all other reasonably necessary action so that no amendment is made to AL's memorandum of association or bye-laws in effect as of the date of the Shareholders

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Agreement that would add restrictions to the transferability of our shares by an Initial Shareholder or its permitted transferee which are beyond those provided for in our memorandum of association, bye-laws, the Shareholders Agreement or applicable securities laws, or that nullify the rights set out in the Shareholders Agreement of any Initial Shareholder or their permitted transferee unless such amendment is approved by such shareholder.

Designation and Election of Directors

The Shareholders Agreement requires that the Initial Shareholders and their respective affiliates and permitted transferees vote or cause to be voted all of our voting shares beneficially owned by each and to take all other reasonably necessary action so as to elect to our board of directors so long as the Initial Shareholders beneficially own (i) more than 50% of the voting power of AL, four directors (or, if the board of directors consists of eight directors, five directors) designated by FIG Advisors LLC, an affiliate of Fortress which we refer to as FIG Advisors, or such other party designated by Fortress; (ii) between 25% and 50% of the voting power of AL, three directors designated by FIG Advisors; (iii) between 10% and 25% of the voting power of AL, two directors designated by FIG Advisors; and (iv) between 5% and 10% of the voting power of AL, one director designated by FIG Advisors. The Initial Shareholders also agree to vote their shares or otherwise take all necessary action to cause (i) the removal, with or without cause, of any director previously nominated by FIG Advisors upon notice from FIG Advisors of its desire to remove such a director and (ii) in the event a designee of FIG Advisors ceases to serve as a director during his term in office, the filling of such vacancy with an individual designated by FIG Advisors.

In accordance with the Shareholders Agreement, FIG Advisors will designate Wesley R. Edens, Joseph P. Adams, Jr., Peter Ueberroth and John L. Kukral for election to our board of directors.

If at any time the number of our directors entitled to be designated by FIG Advisors to the Shareholders Agreement shall decrease, within ten days thereafter, FIG Advisors shall cause the appropriate number of directors to resign and any such vacancy shall be filled by a majority vote of our board of directors.

Registration Rights

Demand Rights.     We have granted to the Initial Shareholders, for so long as such shareholders collectively and beneficially own an amount of our common shares (whether owned at the time of this offering or subsequently acquired) at least equal to 5% or more of our common shares issued and outstanding immediately after the consummation of this offering (a ‘‘Registrable Amount’’), ‘‘demand’’ registration rights that allow them at any time after six months following the consummation of this offering to request that we register under the Securities Act an amount equal to or greater than 5% of our common shares that they own. Each of the Initial Shareholders is entitled to an aggregate of two demand registrations, which can be a shelf registration. We are also not required to effect any demand registration within six months of a ‘‘firm commitment’’ underwritten offering to which the requestor held ‘‘piggyback’’ rights and which included at least 50% of the securities requested by the requestor to be included. We are not obligated to grant a request for a demand registration within four months of any other demand registration, and may refuse a request for demand registration if in our reasonable judgment, it is not feasible for us to proceed with the registration because of the unavailability of audited financial statements.

Piggyback Rights.     For so long as they beneficially own an amount of our common shares at least equal to 1% of our common shares issued and outstanding immediately after the consummation of this offering, the Initial Shareholders also have ‘‘piggyback’’ registration rights that allow them to include the common shares that they own in any public offering of equity

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securities initiated by us (other than those public offerings pursuant to registration statements on Forms S-4 or S-8) or by any of our other shareholders that have registration rights. The ‘‘piggyback’’ registration rights of these shareholders are subject to proportional cutbacks based on the manner of the offering and the identity of the party initiating such offering.

Shelf Registration.     We have granted each of the Initial Shareholders or any of their respective transferees, for so long as they beneficially own a Registrable Amount, the right to request a shelf registration on Form S-3 providing for offerings of our common shares to be made on a continuous basis until all shares covered by such registration have been sold, subject to our right to suspend the use of the shelf registration prospectuses for a reasonable period of time (not exceeding 60 days in succession or 90 days in the aggregate in any 12 month period) if we determine that certain disclosures required by the shelf registration statements would be detrimental to us or our shareholders. In addition, the Initial Shareholders may elect to participate in such shelf registrations within ten days after notice of the registration is given.

Indemnification; Expenses.     We have agreed to indemnify each of the Initial Shareholders against any losses or damages resulting from any untrue statement or omission of material fact in any registration statement or prospectus pursuant to which they sell our common shares, unless such liability arose from such shareholder's misstatement or omission, and each such shareholder has agreed to indemnify us against all losses caused by its misstatements or omissions. We will pay all expenses incidental to our performance under the Shareholders Agreement, and the Initial Shareholders will pay their respective portions of all underwriting discounts, commissions and transfer taxes relating to the sale of their common shares under the Shareholders Agreement.

Other Transactions with Fortress

During 2004 and 2005, Fortress provided certain support services to us. These direct operating costs in the amount of approximately $1.1 million in 2004 and $0.3 million in 2005, primarily included payroll and benefit costs, office supplies and professional fees paid to third parties. These expenses were charged to us at cost and are included in selling, general and administrative expenses in our consolidated statement of operations in the year in which such expenses were incurred. As of March 31, 2006, approximately $0.2 million remains payable to Fortress. None of these services or benefits will continue following completion of this offering, except for the provision of certain employee benefits at cost. We expect to establish our own employee benefit plans after completion of this offering and to terminate the services provided by Fortress.

For the year ended December 31, 2005, we paid approximately $0.2 million for legal fees related to the establishment and financing activities of related Bermuda companies and approximately $0.2 million for Bermuda corporate services related to our Bermuda companies to a law firm and a secretarial services provider, respectively, affiliated with a Bermuda resident director serving on certain subsidiary company boards. The Bermuda director serves as an outside director of these subsidiaries.

Our employees participate in various benefit plans sponsored by Fortress, including a voluntary savings plan (401(k) plan) and other health and benefit plans. See ‘‘Management — Equity Incentive Plans’’. We reimbursed Fortress approximately $0.2 million in 2005 for the cost of our employees’ coverage in the various health and benefit plans. Similarly, we will reimburse Fortress for the matching 401(k) plan contribution, of up to 3% of eligible earnings paid by them on behalf of our employees, when that contribution is actually funded. At March 31, 2006, our estimated contribution was approximately $71,400 and was recorded as an accrued liability. After the completion of this offering we expect to establish our own 401(k) savings plan and to terminate the services and benefits provided by Fortress.

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In addition, in May 2006, two of our operating subsidiaries entered into service agreements to provide certain remarketing, administrative and technical services to a Fortress entity. Aircastle Advisor LLC, and Aircastle Advisor (Ireland) Limited, each an AL subsidiary, provide services to FIT Aero Investments Limited, an affiliate of Fortress which we refer to as FIT Aero, with respect to four aircraft owned by FIT Aero and leased to third parties. Aircastle Advisor LLC's responsibilities include remarketing the aircraft for lease, invoicing the lessees for expenses and rental payments, reviewing maintenance reserves, reviewing the credit of lessees, arranging for the periodic inspection of the aircraft and securing the return of the aircraft when necessary. Aircastle Advisor (Ireland) Limited's responsibilities include remarketing the aircraft for lease or sale and certain related technical and other services. The agreements also provide that FIT Aero will pay Aircastle Advisor LLC 3.0% of the collected rentals with respect to leases of the aircraft under service, plus expenses incurred during the service period and Aircastle Advisor (Ireland) Limited 2.5% of the gross sales proceeds of the sale of any of the aircraft under service plus expenses incurred during the service period. As of July 15, 2006, Aircastle Advisor LLC had accrued $88,950 in fees due from FIT Aero. Another Aircastle subsidiary, Aircastle Advisor (Ireland) Limited, provides lease marketing and sales remarketing services and certain related services with respect to the same four aircraft owned by FIT Aero. Both service agreements were effective as of January 1, 2006 and have a term of 24 months, but will continue thereafter unless one party terminates the agreement by providing the other with advance written notice.

We have entered into a letter of intent with an affiliate of Drawbridge Special Opportunities Fund LP, one of our shareholders and an affiliate of Fortress, to purchase an aircraft for $11,450,000. The purchase is subject to customary conditions, such as satisfactory inspection, due diligence, completion of satisfactory sale documentation and novation or assignment of the lease governing the aircraft.

Other Transactions

On April 28, 2006, we entered into a subscription agreement with a family trust of Peter Ueberroth, who has been nominated and will be appointed to our board of directors prior to the completion of this offering. Under the subscription agreement, we sold 200,000 of our common shares to the trust for aggregate consideration of $1,000,000, effective as of May 19, 2006.

Douglas A. Hacker, who will join our board of directors prior to the completion of this offering, served as an Executive Vice President, Strategy of UAL Corporation , the parent company of United Airlines, until May 2006. Mortgage and lease payments from United Airlines provide the primary source of payment under two tranches of an enhanced equipment trust certificate, or EETC, held by us as a debt investment. The two tranches of the EETC have an aggregate principal amount of approximately $92.3 million.

Other Investment Activities of our Principal Shareholders

The Fortress shareholders and their affiliates engage in a broad spectrum of activities, including investment advisory activities, and have extensive investment activities that are independent from, and may from time to time conflict with ours. The Fortress shareholders and certain of its affiliates are, or sponsor, advise or act as investment manager to, investment funds, portfolio companies of private equity investment funds and other persons or entities that have investment objectives that may overlap with ours and that may, therefore, compete with us for investment opportunities.

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Principal Shareholders

Prior to this offering, substantially all of the ownership interests in AL were beneficially owned by affiliates of Fortress Investment Holdings LLC and our employees.

The following table sets forth the total number of common shares beneficially owned, and the percent so owned, as adjusted to reflect the sale of the shares offered hereby, by (i) each person known by us to be the beneficial owner of more than five percent of our common shares, (ii) each of our directors and named executive officers and (iii) all directors and executive officers as a group.

The percentage of beneficial ownership of our common shares before this offering is based on 40,992,000 common shares issued and outstanding as of July 21, 2006. The percentage of beneficial ownership of our common shares after this offering is based on 50,082,900 common shares issued and outstanding. The table assumes that the underwriters will not exercise their over-allotment option to purchase up to 1,363,635 common shares and does not include the restricted shares to be issued to certain of our directors upon consummation of this offering. See ‘‘Management — Compensation of Directors.’’


  Amount and Nature of Beneficial Ownership (1)
  Before Offering After Offering
Name of Beneficial Owner (1) Number of
Shares (2)
Percent (3) Number of
Shares (2)
Percent
Executive Officers and Directors (4)  
 
 
 
Wesley R. Edens (5) 40,000,000
97.6
%
40,000,000
79.9
%
Ron Wainshal 300,000
*
300,000
*
Mark Zeidman 120,000
*
120,000
*
David Walton 80,000
*
80,000
*
Joseph Schreiner 75,000
*
75,000
*
Jonathan Lang 15,000
*
15,000
*
Joseph P. Adams, Jr.
*
Peter Ueberroth 200,000
*
200,000
*
Ronald W. Allen
Douglas A. Hacker
John Z. Kukral
Ronald L. Merriman
All directors and executive officers as a group (12 persons) 40,790,000
99.5
%
40,790,000
81.4
%
5% Shareholders  
 
 
 
Fortress Investment Holdings LLC (5) 40,000,000
97.6
%
40,000,000
79.9
%
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Common shares subject to options or warrants currently exercisable, or exercisable within 60 days of the date hereof, are deemed outstanding for computing the percentage of the person holding such options or warrants but are not deemed outstanding for computing the percentage of any other person.
(2) Consists of common shares held, including restricted shares, shares underlying share options exercisable within 60 days and shares underlying warrants exercisable within 60 days.
(3) Percentage amount assumes the exercise by such persons of all options and warrants exercisable within 60 days to acquire common shares and no exercise of options or warrants by any other person.
(4) The address of each officer or director listed in the table below is: c/o Aircastle Advisor LLC, 300 First Stamford Place, 5 th Floor, Stamford, CT 06902.

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(5) Includes 10,109,187.50 shares held by Fortress Investment Fund III LP (‘‘Fund III’’), 8,643,528.00 shares held by Fortress Investment Fund III (Fund B) LP (‘‘Fund B’’), 1,807,436.60 shares held by Fortress Investment Fund III (Fund C) LP (‘‘Fund C’’), 4,148,448.00 shares held by Fortress Investment Fund III (Fund D) L.P. (‘‘Fund D’’), 291,399.90 shares held by Fortress Investment Fund III (Fund E) LP (‘‘Fund E’’), 850,005.50 shares held by Fortress Investment Fund III (Coinvestment Fund A) LP (‘‘Coinvestment Fund A’’), 1,669,951.90 shares held by Fortress Investment Fund III (Coinvestment Fund B) LP (‘‘Coinvestment Fund B’’), 430,101.60 shares held by Fortress Investment Fund III (Coinvestment Fund C) LP (‘‘Coinvestment Fund C’’), 2,049,941.00 shares held by Fortress Investment Fund III (Coinvestment Fund D) L.P. (‘‘Coinvestment Fund D’’), 3,750,000.00 shares held by Drawbridge Special Opportunities Fund LP (‘‘Special Opportunities LP’’), 1,250,000 shares held by Drawbridge Special Opportunities Fund Ltd. (‘‘Special Opportunities Ltd.’’), and 5,000,000.00 shares held by Drawbridge Global Macro Master Fund Ltd (‘‘Global Macro Master’’). Drawbridge Special Opportunities GP LLC (‘‘Special Opportunities GP’’) is the general partner of Special Opportunities LP. Fortress Principal Investment Holdings IV LLC (‘‘FPIH IV’’) is the sole managing member of Special Opportunities GP. Pursuant to management agreements, Drawbridge Special Opportunities Advisors LLC (‘‘Special Opportunities Advisors’’) is the manager of each of Special Opportunities LP and Special Opportunities Ltd. Global Macro Master is wholly-owned by Drawbridge Global Macro Fund LP (‘‘Global Macro LP’’) and Drawbridge Global Macro Fund Ltd. (‘‘Global Macro Ltd.’’). Drawbridge Global Macro GP LLC (‘‘Global Macro GP’’) is the general partner of Global Macro LP. Fortress Principal Investment Holdings II LLC (‘‘FPIH II’’) is the sole managing member of Global Macro GP. Pursuant to management agreements, Drawbridge Global Macro Advisors LLC (‘‘Global Macro Advisors’’) is the manager of each of Global Macro LP, Global Macro Ltd. and Global Macro Master. Fortress Investment Group LLC (‘‘FIG’’) is the sole managing member of both Special Opportunities Advisors and Global Macro Advisors. Fortress Fund III GP LLC (‘‘FF III GP LLC’’) is the general partner of each of Fund III, Fund B, Fund C, Fund D, Fund E, Coinvestment Fund A, Coinvestment Fund B, Coinvestment Fund C and Coinvestment Fund D (collectively, the ‘‘Fund III Funds’’). FPIH II is the sole managing member of Fortress Investment Fund GP (Holdings) LLC which is the sole managing member of FF III GP LLC. Pursuant to a management agreement, FIG is the manager of each of the Fund III Funds. FIG is 100% owned by Fortress Investment Holdings LLC (‘‘FIH’’). FIH, FPIH II and FPIH IV are each owned by certain individuals, including Wesley R. Edens, our Chairman of the board. By virtue of their ownership interests in FIH, FPIH II and FPIH IV, Mr. Edens may be deemed to beneficially own the shares listed as beneficially owned by FIH, FPIH II and FPIH IV. Mr. Edens disclaims beneficial ownership of such shares. The address of FIH is 1345 Avenue of the Americas, 46 th Floor, New York, New York 10105. The address of the other entities listed above is c/o Fortress Investment Holdings LLC, 1345 Avenue of the Americas, 46 th Floor, New York, New York 10105.

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Description of Indebtedness

Credit Facility No. 2

General.     Certain of Aircastle's wholly-owned subsidiaries entered into a senior secured revolving credit facility, which we refer to as Credit Facility No. 2, with JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending Inc., and Citibank, N.A. Credit Facility No. 2 initially provided for loans in an aggregate amount of up to $500.0 million. Effective June 15, 2006 the maximum committed amount under Credit Facility No. 2 was increased to $750 million. Borrowings under Credit Facility No. 2 are used to finance up to 85% of the net book value of aircraft. As of July 15, 2006, we had $143.2 million outstanding under this facility. Subject to compliance with customary conditions precedent and to the extent of availability, revolving loans are available at any time prior to the final maturity of Credit Facility No. 2. Subject to certain exceptions, amounts repaid under Credit Facility No. 2 may be reborrowed prior to the final maturity of Credit Facility No. 2, provided that the availability requirements are met. All borrowings under Credit Facility No. 2 are subject to the satisfaction of customary conditions, including the absence of a default and the accuracy of representations and warranties.

Interest Rate.     Borrowings under Credit Facility No. 2 bear interest (a) in the case of loans with an interest rate based on the applicable base rate, or ABR, the ABR plus an applicable margin or (b) in the case of loans with an interest rate based on the eurodollar rate, the eurodollar rate plus an applicable margin. The ABR is determined by reference to the higher of (i) the prime rate of JPMorgan Chase Bank, N.A. and (ii) the federal funds rate plus ½ of 1%. The eurodollar rate is determined by reference to one-month LIBOR adjusted by the maximum rate, established by the Board of Governors of the Federal Reserve System, at which reserves are required to be maintained. The applicable margin is 0.25% with respect to ABR borrowings and 1.25% with respect to eurodollar borrowings. Additionally, we are subject to a 0.25% fee on any unused portion of the total committed facility. We are also required to pay customary agency fees and an exit fee in the amount of 0.25% of the original aggregate commitments upon the repayment in full and termination of Credit Facility No. 2.

Prepayment.     Advances under the credit facility may be prepaid without penalty upon notice, subject to certain conditions. The credit facility requires mandatory prepayments of borrowings under Credit Facility No. 2:

•  upon the sale of certain assets by a borrower, including any aircraft or aircraft engines financed or refinanced with proceeds from Credit Facility No. 2;
•  upon the refinancing of indebtedness under Credit Facility No. 2;
•  if the aggregate principal amount of loans outstanding under Credit Facility No. 2 is greater than 85% of the borrowing base (as defined in Credit Facility No. 2);
•  if the estimated amount of out of pocket costs incurred by a borrower in connection with the acquisition of an aircraft or an aircraft engine financed with proceeds from Credit Facility No. 2 exceed the actual amount of out of pocket costs included in the purchase price of such asset;
•  upon the occurrence of an event of loss (as defined in Credit Facility No. 2) with respect to an aircraft or aircraft engine financed with proceeds from Credit Facility No. 2; and
•  upon the securitization of any interests or leases with respect to aircraft or aircraft engines financed with proceeds from Credit Facility No. 2.

Maturity Date.     Credit Facility No. 2 was amended on June 15, 2006 to extend the maturity date to November 15, 2007.

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Guarantors.     All obligations of each borrower under Credit Facility No. 2 are unconditionally guaranteed by Aircastle, each of Aircastle's direct subsidiaries, Aircastle Investment Holdings 2 Limited, Aircastle Ireland No. 3 Limited, each borrowing affiliate (as defined therein), each subsidiary of a beneficiary and the other borrowers under the facility.

Collateral.     Borrowings under Credit Facility No. 2 are secured by first priority perfected security interests in and pledges or assignments of equity ownership and beneficial interests in certain Aircastle entities, including certain of our affiliates and subsidiaries and the borrowers and borrowing affiliate (as defined in Credit Facility No. 2) under Credit Facility No. 2, as well as by the borrowers' interests in leases of assets.

Certain Covenants.     Credit Facility No. 2 contains a number of covenants that, among other things, restrict, subject to certain exceptions, the ability of the borrowers and all of the guarantors (other than Aircastle and any other guarantor that is a direct subsidiary of AL), to:

•  sell assets;
•  incur additional indebtedness;
•  create liens on assets, including assets financed with proceeds from Credit Facility No. 2;
•  make investments, loans, guarantees or advances;
•  make certain acquisitions;
•  incur secured indebtedness;
•  engage in amalgamations, mergers or consolidations;
•  engage in certain transactions with affiliates;
•  change the business conducted by the borrowers and their respective subsidiaries;
•  cause, suffer or permit any change of control (as defined in Credit Facility No. 2) or wind up, liquidate, or dissolve.
•  make certain capital expenditures, other than those related to the purchase, maintenance or conversion of assets financed with proceeds from Credit Facility No. 2;
•  own, operate or lease assets financed with proceeds from Credit Facility No. 2; and
•  enter into a securitization transaction involving assets financed with proceeds from Credit Facility No. 2 unless certain conditions are met.

In addition, Credit Facility No. 2 requires us to maintain a minimum ratio of certain aircraft assets to principal amount of loans outstanding under Credit Facility No. 2 of 85%.

The terms of the guaranty by AL contains a number of covenants that, among other things, restrict, subject to certain exceptions, the ability of AL and in some cases its subsidiaries to:

•  create liens on assets;
•  incur additional indebtedness;
•  sell, lease, transfer or otherwise dispose of assets;
•  make certain investments;
•  engage in amalgamations, mergers or consolidations;

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•  engage in certain transactions with affiliates;
•  incur secured indebtedness;
•  pay dividends;
•  redeem or repurchase the capital stock of any guarantor that is a parent of any borrower;
•  make other restricted payments; and
•  restrict payments from subsidiaries.

However, in the event of an initial public offering by AL, the restriction on restricted payments by AL ceases to be in effect. Additionally, upon completion of such initial public offering, AL must maintain a consolidated net worth (as defined in the guaranty) of at least $500.0 million.

Credit Facility No. 2 also contains certain customary affirmative covenants and events of default.

Credit Facility No. 3

General.     In October 2005, certain of our subsidiaries entered into a senior secured credit facility, which we refer to as Credit Facility No. 3, with Wells Fargo Bank Northwest, National Association, as trustee, and Citibank, N.A., as lender and agent, to finance the acquisition of three aircraft. Credit Facility No. 3 initially provided for a term loan of up to $110.0 million. As of July 18, 2006, $73.3 million was outstanding under Credit Facility No. 3 after taking into account the sale of one of the aircraft financed with proceeds from the facility and the subsequent repayment of a portion of the term loan with the proceeds of such sale. Effective July 18, 2006, the maximum committed amount under Credit Facility No. 3 was increased by approximately $25.1 million.

Interest Rate.     Borrowings under Credit Facility No. 3 bear interest (a) in the case of loans with an interest rate based on the ABR plus an applicable margin or (b) in the case of loans with an interest rate based on the eurodollar rate, the eurodollar rate plus an applicable margin. The ABR is determined by reference to the higher of (i) the base rate of Citibank, N.A. and (ii) the federal funds rate plus ½ of 1%. The eurodollar rate is determined by reference to one-month LIBOR adjusted by the maximum rate, established by the Board of Governors of the Federal Reserve System, at which reserves are required to be maintained. The applicable margin is 0.50% with respect to ABR borrowings and 1.50% with respect to eurodollar borrowings. Currently, borrowings under Credit Facility No. 3 bear interest at one-month LIBOR plus 1.50%, which at March 31, 2006 was 6.20% per annum. We are also required to pay customary agency fees.

Prepayment.     Borrowings under the credit facility may be prepaid without penalty upon notice, subject to conditions. Credit Facility No. 3 requires mandatory prepayments of borrowings:

•  upon the sale of certain assets by a borrower, including any aircraft financed with proceeds from the credit facility;
•  upon the sale of all of the beneficial interest or ownership of a borrower;
•  upon an event of loss (as defined in the lease governing the applicable aircraft) with respect to the aircraft financed with proceeds from the credit facility; and
•  of certain amounts from cash accounts that serve as collateral for borrowings under Credit Facility No. 3; and
•  upon completion of this offering, in an amount such that the aggregate amount of borrowings under Credit Facility No. 3 does not exceed the applicable aircraft borrowing base (as defined in Credit Facility No. 3) (after this offering) of eligible aircraft which have not been released from the lien of Credit Facility No. 3.

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Maturity Date.     The facility matures on March 31, 2007.

Guarantors.     All obligations of each borrower under Credit Facility No. 3 are unconditionally guaranteed by Aircastle Ireland Holding Limited, Aircastle Ireland No. 2 Limited, any applicable lease intermediaries (as defined in the credit facility) and the other borrowers under Credit Facility No. 3. Also, AL has agreed not to commence a bankruptcy case (directly or indirectly through the borrowers or guarantors) against the borrowers or guarantors under Credit Facility No. 3.

Collateral.     Borrowings under Credit Facility No. 3 are secured by first priority perfected security interests in and pledges or assignments of (i) all of Aircastle Ireland No. 2 Limited's equity ownership and beneficial interests in the borrowers and related trusts, (ii) any cash, securities or other property declared or distributed in respect of or in exchange for the equity ownership and beneficial interests in the borrowers and related trusts, including any proceeds therefrom, (iii) Aircastle Ireland Holding Limited's share ownership interest in Aircastle Ireland No. 2 Limited and (iv) the borrowers' interests in leases of aircraft financed or refinanced with proceeds of the credit facility, in lockbox accounts and in the borrowers' general bank accounts.

Certain Covenants.     Credit Facility No. 3 contains a number of covenants that, among other things, restrict, subject to certain exceptions, the ability of the borrowers and all of the guarantors (other than Aircastle Ireland Holding Limited) and their respective subsidiaries, to:

•  sell, lease, transfer or otherwise dispose of its assets;
•  incur additional indebtedness;
•  create liens on assets, including assets financed with proceeds from Credit Facility No. 3;
•  make investments, loans, guarantees or advances;
•  make certain acquisitions;
•  incur secured indebtedness;
•  engage in amalgamations, mergers or consolidations;
•  engage in certain transactions with affiliates;
•  change the business conducted by the borrowers and their respective subsidiaries;
•  make certain capital expenditures, other than those related to the purchase or maintenance of assets financed with proceeds from Credit Facility No. 3; and
•  own, operate or lease assets financed with proceeds from Credit Facility No. 3.

Credit Facility No. 3 also contains customary affirmative covenants and events of default.

Securitization

General.     On June 15, 2006, we completed an aircraft lease portfolio securitization. Under the terms of the transaction, a single class of certificates was issued by the ACS 2006-1 Pass Through Trust, or the trust. The proceeds of the sale of the certificates were used by the trust to acquire senior secured notes issued by ACS Bermuda Finance Limited and ACS Ireland Finance Limited, the Bermuda and Irish special purpose entities we formed in May and March, respectively, 2006 and in which we will continue to hold substantially all of the equity interests. ACS Bermuda Finance Limited and ACS Ireland Finance Limited, together with their respective subsidiaries, are referred to herein as the ACS group.

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The proceeds of the sale of the notes were used by ACS group entities to acquire, directly or indirectly, a total of 40 aircraft from wholly owned subsidiaries of Aircastle and to pay the expenses relating to the securitization. The aggregate principal amount of the notes sold to the trust was $560 million, and the expenses incurred in connection with the sale of the certificates was equal to approximately $13 million.

Payments on the notes will be passed through to the holders of the certificates. The primary source of payments on the notes will be lease payments on the aircraft to be owned by ACS group entities. ACS Bermuda and ACS Ireland have each unconditionally guaranteed the amounts due under the notes issued by the other.

Financial Guaranty Insurance Company issued a financial guaranty insurance policy to support the payment of interest when due on the certificates and the payment of the outstanding principal balance of the certificates on the final distribution date.

The certificates are rated Aaa and AAA by Moody's Investor Service and Standard & Poor's rating services, respectively.

Liquidity.     The ACS group will be required to maintain, as of each monthly payment date, unrestricted cash in an amount sufficient to cover its operating expenses over the one month, or in the case of maintenance expenditures, the three months following such payment date. In addition, Calyon, a subsidiary of the Crédit Agricole Group, will provide a liquidity facility in the amount of $42 million to the ACS group, which may under certain circumstances be drawn upon to pay expenses of the ACS group, interest rate hedge payments and interest on the notes.

Servicing.     Our wholly-owned subsidiary, Aircastle Advisor LLC, provides lease remarketing services to ACS Bermuda, and Aircastle Advisor (Ireland) Limited provides lease remarketing services to ACS Ireland, and sales remarketing services to the ACS group entitles and each receives a fee equal to 2.0% of the aggregate rentals received in relation to the aircraft it is remarketing and, in the case of Aircastle Advisor (Ireland) Limited, 1.0% of the net sales proceeds of any aircraft sold. Aircastle Advisor LLC also provides administrative services to the ACS group entities and is paid an annual fee equal to 0.5% of the aggregate rentals received each month on the ACS group aircraft.

The remarketing servicers and administrative agency agreements may be terminated in certain circumstances by the ACS group or policy provider in the event of a default by or insolvency of any of them, and in addition the remarketing servicers may be terminated if, among other things, (i) at least 15% of the aircraft of the ACS group remain off-lease for four months or more after having been reasonably available for lease, (ii) our tangible net worth falls below $250 million, (iii) our leverage ratio exceeds 8.5, or (iv) Fortress fails to maintain certain minimum shareholding levels at a time when our net worth is also below certain levels. More particularly, a termination right with respect to the remarketing services will arise if Fortress fails to maintain (i) a 23% ownership interest in Aircastle until the date of the first anniversary of the closing date unless our net worth is at least $500 million, (ii) a 21% ownership interest in Aircastle from the first anniversary up to the second anniversary of the closing date of the offering unless our net worth is at least $500 million, (iii) a 19% ownership interest in Aircastle from the date of the second anniversary up to the third anniversary of the closing date unless our net worth of Aircastle is at least $500 million, (iv) a 17% ownership interest in Aircastle from the third anniversary of the closing date up to the fourth anniversary of the closing date unless our net worth is at least $550 million or (v) a 10% ownership interest in Aircastle from the fourth anniversary up to the fifth anniversary of the closing date unless our net worth is at least $600 million: provided , however , that the foregoing will not be a termination event if Fortress has not sold any shares of Aircastle.

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International Lease Finance Corporation acts as the back-up remarketing servicer and will provide remarketing services if the remarketing service agreements terminate prior to repayment of the notes. The back-up remarketing servicer receives a stand-by fee equal to $200,000 per annum, payable monthly in advance. Upon the termination of the remarketing services agreements, the back-up remarketing servicer will receive a monthly rent-based fee paid in arrears equal to the amount of 3.0% of the aggregate rents received on the ACS group aircraft and a sales-based incentive fee with respect to each sale of an aircraft in the amount of 3.0% of the value of the total consideration paid for the aircraft in such sale.

Interest Rate.     The notes will bear interest at one-month LIBOR plus 0.27%. We have entered into a series of interest rate hedging contracts intended to hedge the interest rate exposure associated with issuing floating-rate obligations backed by primarily fixed-rate lease assets. These contracts, together with the guarantee premium, the spread referenced above and other costs of trust administration, result in a fixed rate cost of 6.6% per annum, before the amortization of issuance fees and expenses.

Payment Terms.     The interest and principal payments on the notes are due on a monthly basis. The scheduled payments of principal have been calculated such that the principal balance of the notes will be equal to 54.8% of the Initial Appraised Value of the aircraft, as such Initial Appraised Value is decreased over time by an assumed amount of depreciation. During the first five years of the transaction, subject to compliance with the debt service coverage ratio test in years four and five, all cash flows attributable to the underlying aircraft after payment of expenses, interest and scheduled principal payments, or excess securitization cash flows, will be available for distribution to us. We intend to use the excess securitization cash flow to pay dividends and to make additional investments. We expect to refinance the notes on or prior to June 2011. In the event that the notes are not repaid on or prior to June 2011, the excess securitization cash flow will be used to repay the principal amount of the notes and will not be available to us to pay dividends to our shareholders or otherwise. If during year four or five of the transaction, the debt service coverage ratio test fails on two consecutive payment dates, the excess securitization cash flow will be used to repay the principal amount of the notes and will not be available to us to pay dividends to our shareholders. The debt service coverage ratio test will fail to the extent that the trailing six month debt service coverage ratio is less than 1.7:1.

If the notes are voluntary redeemed, other than in certain limited circumstances, the redemption price will be 103% of the then outstanding principal balance of the notes, if the redemption occurs in the first ten months following the closing of the securitization. The redemption price reduces to 102% during the period between 11 and 20 months following closing, and to 101% in the period between 21 and 30 months following closing, and 100% thereafter. A redemption premium would also be payable to the financial guaranty insurance policy issuer in the event of a voluntary redemption prior to the third anniversary of the closing date, and the financial guaranty insurance policy issuer’s monthly premium will increase if the certificates are not fully repaid within 72 months of the closing date.

Maturity Date.     The final maturity date will be June 15, 2031. We intend to refinance the certificates on or before June 2011.

Collateral.     The property of the trust includes the notes and rights under the financial guaranty insurance policy. The notes are secured by first priority perfected security interests in and pledges or assignments of equity ownership and beneficial interests in certain ACS Bermuda and ACS Ireland entities, as well as by their interests in leases of the aircraft they own, by cash held by or for them and by their rights under agreements with the service providers. Rentals and reserves paid under leases of the ACS Bermuda and ACS Ireland aircraft will be placed in collection accounts and paid out according to a priority of payments.

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Default and Remedies.     ACS Bermuda and ACS Ireland will be in default under the transaction documents in the event, among other things, interest on the notes or principal due at final maturity is not paid, certain other covenants are not complied with and noncompliance materially adversely affects the noteholder, any significant ACS group member becomes the subject of insolvency proceedings or a judgment for the payment of money exceeding five percent of the then assumed portfolio value is entered and remains unstayed for a period of time. Following any such default and acceleration of the notes by the controlling party, the security trustee may exercise such remedies in relation to the collateral as may be available to it under applicable law, including the sale of any of the aircraft at public or private sale and on such terms as it may determine to be commercially reasonable. After the occurrence of certain bankruptcy and insolvency related events of default, or any acceleration of the notes after the occurrence of any event of default, all cash generated by the ACS group will be used to prepay the notes and will not be available to us to make distributions to our shareholders.

Certain Covenants.     The remarketing service providers and administrative agent each have broad authority, within its internal operating guidelines, to manage the ACS group aircraft without requiring any consent or approval from the security trustee, rating agencies or the financial guaranty insurance policy issuer consent; however, certain transactions will require the consent or approval of one or more of the foregoing parties, including (i) sales of aircraft (a) for prices below 107% of the then-applicable note balance for such aircraft or (b) in any calendar year, in amounts in excess of 10% of the assumed portfolio value at the beginning of that year, (ii) re-leasing aircraft to the extent not in compliance with the lessee and geographic concentration limits, and the other operating covenants, in the transaction documents, (iii) modifying an aircraft if the cost thereof would exceed 105% of the cost of a heavy airframe check and an engine overhaul or (iv) enter into any transaction between Aircastle and the ACS group entities not already contemplated by the transaction documents. The lessee and geographic concentration limits will require us to re-lease the aircraft to an obligor- and jurisdictional-diverse set of customers, and may place limits on our ability (absent a third-party consent) to re-lease ACS group aircraft to certain customers at certain times, even if to do so would provide the best risk-adjusted cash flow and would be within any Aircastle group risk policies then in effect.

ACS Bermuda and ACS Ireland (and their subsidiaries) will not be permitted to acquire any aircraft other than the initial 40 aircraft subject to the securitization unless certain conditions are satisfied, including that the acquisition does not result in an event of default under the transaction documents, does not result in a default under the applicable concentration limits and, if the acquisition is of a remaining or substitute aircraft for the initial 40 aircraft or, if not, is made by means of the issuance of additional securities (other than certain equity securities of ACS Ireland), ACS Ireland or ACS Bermuda as applicable obtains prior written consent of each of the policy provider and Calyon and a confirmation from the rating agencies rating the certificates that they will not lower, qualify or withdraw their ratings on the certificates as a result of the acquisition.

Under the transaction documents, there are certain restrictions on the ability of the ACS group to make certain capital expenditures outside of the ordinary course of business. However, subject to certain restrictions, the ACS group will be permitted to convert aircraft from passenger to freighter and/or mixed use configurations and fund such conversions by using cash paid into an aircraft conversion account held by the security trustee. The aircraft conversion account will hold amounts accumulated in lieu of cash used to make what would otherwise constitute minimum principal payments and cash which would otherwise be made available for distribution to the Aircastle equity interest holders. Aircraft conversions funded by aircraft conversion account would be permitted only if certain conditions are met and, if more than three narrow-body

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aircraft are to be converted in the aggregate or for any conversion after the fifth anniversary of the closing or after the trailing six-month debt service coverage ratio failed to be met on two consecutive monthly payment dates, with rating agency confirmation and financial guaranty insurance policy issuer consent. After payment in full of any aircraft conversion or if a planned conversion is not undertaken, the balance of the amounts originally deposited in the aircraft conversion account for such aircraft conversion will be transferred to the collections account for application in accordance with the agreed priority of payments.

The transaction documents contain other operating covenants applicable to the ACS group entities, including covenants that restrict the investment and business activities of the ACS group, limit the amount of debt that can be assumed by the ACS group entities and the payments they may make outside the payment priority provisions of the transaction documents, restrict their ability to grant liens, and limit their ability to merge, amalgamate, consolidate or transfer assets.

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Description of Share Capital

The following description of our share capital summarizes material provisions of our memorandum of association and our bye-laws as they will be in effect prior to the completion of this offering, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part. Prospective investors are urged to read the exhibits for a complete understanding of our memorandum of association and bye-laws .

Share Capital

Prior to the completion of this offering, our authorized share capital will consist of 250,000,000 common shares, par value U.S. $0.01 each and 50,000,000 preference shares, par value U.S. $0.01. Upon completion of this offering, there will be 50,082,900 common shares issued and outstanding (assuming no exercise of the underwriters' over-allotment option), excluding an additional 3,138,000 common shares which remain available for grant under our equity and incentive plan, and no preference shares issued and outstanding. All of our issued and outstanding common shares prior to completion of this offering are fully paid, and all of our shares to be issued in this offering will be issued fully paid. Our bye-laws permit us to issue shares that are not fully paid, subject to the right of our board of directors to make calls for unpaid amounts.

Pursuant to our bye-laws, subject to any resolution of the shareholders to the contrary, our board of directors is authorized to issue any of our authorized but unissued shares. There are no limitations on the right of non-Bermudians or non-residents of Bermuda to hold or vote our shares.

Common Shares

Holders of common shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of common shares are entitled to one vote per share on all matters submitted to a vote of holders of common shares. Unless a different majority is required by law or by our bye-laws, resolutions to be approved by holders of common shares require approval by a simple majority of votes cast at a meeting at which a quorum is present. Our bye-laws provide that persons standing for election as directors at a duly constituted and quorate annual general meeting are elected by our shareholders by a plurality of the votes cast on the resolution. There is no cumulative voting in the election of our directors. In the event of our liquidation, dissolution or winding up, the holders of common shares are entitled to share equally and ratably in our assets, if any, remaining after the payment of all of our debts and liabilities, subject to any liquidation preference on any issued and outstanding preference shares. We have applied to list our common shares on the New York Stock Exchange.

Preference Shares

Pursuant to Bermuda law and our bye-laws, our board of directors by resolution may establish one or more series of preference shares having such number of shares, designations, dividend rates, relative voting rights, conversion or exchange rights, redemption rights, liquidation rights and other relative participation, optional or other powers, preferences and rights, qualifications, limitations or restrictions as may be fixed by the board without any further shareholder approval. The rights with respect to a series of preference shares may be greater than the rights attached to our common shares. It is not possible to state the actual effect of the issuance of any preference shares on the rights of holders of our common shares until our board of directors determines the specific rights attached to that preference share. The effect of issuing preference shares could include one or more of the following:

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•  restricting dividends in respect of our common shares;
•  diluting the voting power of our common shares or providing that holders of preference shares have the right to vote on matters as a class;
•  impairing the liquidation rights of our common shares; or
•  delaying or preventing a change of control of Aircastle.

Dividend Rights

Under Bermuda law, a company's board of directors may declare and pay dividends from time to time unless there are reasonable grounds for believing that the company is, or would after the payment be, unable to pay its liabilities as they become due or that the realizable value of its assets would thereby be less than the aggregate of its liabilities and issued share capital and share premium accounts. Under our bye-laws, each common share is entitled to dividends if, as and when dividends are declared by our board of directors, subject to any preferred dividend right of the holders of any preference shares. There are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of our common shares.

Variation of Rights

If at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms of issue of the relevant class, may be varied either: (i) with the consent in writing of the holders of 50% of the issued shares of that class; or (ii) with the sanction of a resolution passed by a majority of the votes cast at a general meeting of the relevant class of shareholders at which a quorum consisting of at least two persons holding or representing two-thirds of the issued shares of the relevant class is present. Our bye-laws specify that the creation or issue of shares ranking equally with existing shares will not, unless expressly provided by the terms of issue of existing shares, vary the rights attached to existing shares. In addition, the creation or issue of preference shares ranking prior to common shares will not be deemed to vary the rights attached to common shares or, subject to the terms of any other series of preference shares, to vary the rights attached to any other series of preference shares.

Election and Removal of Directors

Our bye-laws provide that our board shall consist of not less than three and not more than eight directors as the board may from time to time determine. Our board of directors will initially consist of seven directors. Our board is divided into three classes that are, as nearly as possible, of equal size. Each class of directors is elected for a three-year term of office, but the terms are staggered so that the term of only one class of directors expires at each annual general meeting. The current terms of the Class I, Class II and Class III directors will expire in 2007, 2008, and 2009, respectively.

Any shareholder wishing to propose for election as a director someone who is not an existing director or is not proposed by our board must give notice of the intention to propose the person for election. Where a person is to be proposed for election as a director at an annual general meeting by a shareholder, that notice must be given not less than 90 days nor more than 120 days before the anniversary of the last annual general meeting prior to the giving of the notice or, in the event the annual general meeting is called for a date that is not 25 days before or after such anniversary, the notice must be given not later than ten days following the earlier of the date on which notice of the annual general meeting was posted to shareholders or the date on

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which public disclosure of the date of the annual general meeting was made. Where a director is to be elected at a special general meeting, that notice must be given not later than 10 days following the earlier of the date on which notice of the special general meeting was mailed to shareholders or the date on which public disclosure of the date of the special general meeting was made.

A director may be removed with or without cause by a resolution of our shareholders, including the affirmative votes of at least 80.0% of all votes attaching to all shares in issue entitling the holder to vote on such resolution, provided that notice of the shareholders meeting convened to remove the director is given to the director. The notice must contain a statement of the intention to remove the director and must be served on the director not less than 14 days before the meeting. The director is entitled to attend the meeting and be heard on the motion for his removal.

Corporate Opportunity

Our bye-laws provide that the Fortress shareholders, and their respective subsidiaries and affiliates (collectively, the ‘‘Significant Shareholders’’) have the right to, and have no duty to abstain from, exercising such right to, engage or invest in the same or similar business as us, do business with any of our clients, customers or vendors or employ or otherwise engage any of our officers, directors or employees. If the Significant Shareholders or any of their officers, directors or employees acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty to offer such corporate opportunity to us, our shareholders or affiliates.

Our bye-laws also provide that, in the event that any of our directors and officers who is also a director, officer or employee of any of our Significant Shareholders acquires knowledge of a corporate opportunity or is offered a corporate opportunity, provided that this knowledge was not acquired solely in such person’s capacity as our director or officer and such person acted in good faith, then such person is not liable to us if any of the Significant Shareholders pursues or acquires such corporate opportunity or if such person did not present the corporate opportunity to us.

Acquisition of Common Shares by Aircastle and Option to Require Sale of Shares

Our bye-laws provide that we have the option, but not the obligation, to require a shareholder that is not a U.S. citizen or a qualified resident of the U.S. or of the other contracting state of the applicable tax treaty with the U.S. (as determined for purposes of the relevant provision of the limitation on benefits article of such treaty) owning more than 5% of our issued and outstanding common shares to sell its common shares for their fair market value to us, to other shareholders or to third parties if we determine, that failure to exercise our option would result in adverse tax consequences to us or any of our subsidiaries. Our right to require a shareholder to sell its shares will be limited to the purchase of a number of shares that our directors in the reasonable exercise of their discretion, determine is necessary to permit avoidance of those adverse tax consequences.

Shareholders Agreement

For a description of the Amended and Restated Shareholders Agreement that we will enter into with the Fortress shareholders upon the completion of this offering, see ‘‘Certain Relationships and Related Party Transactions — Shareholders Agreement.’’

Anti-Takeover Provisions

The following is a summary of certain provisions of our bye-laws that may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a

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shareholder might consider to be in its best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders.

The authorized but unissued common shares and our preference shares will be available for future issuance by the board of directors, subject to any resolutions of the shareholders. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued common shares and preference shares could render more difficult or discourage an attempt to obtain control over us by means of a proxy contest, tender offer, amalgamation or otherwise.

Certain provisions of our bye-laws may make a change in control of Aircastle more difficult to effect. Our bye-laws provide for a staggered board of directors consisting of three classes of directors. Each class of directors are chosen for three-year terms upon the expiration of their current terms and each year one class of our directors is elected for a three-year term of office by our shareholders. The terms of the directors in the first, second and third classes will expire in 2007, 2008 and 2009, respectively. We believe that classification of our board of directors will help to assure the continuity and stability of our business strategies and policies as determined by our board of directors. The classified board could have the effect of making the replacement of incumbent directors more time consuming and difficult. At least two annual meetings of shareholders, instead of one, will generally be required to effect a change in a majority of our board of directors. Thus, the classified board could increase the likelihood that incumbent directors will retain their positions. The staggered terms of directors may delay, defer or prevent a tender offer or an attempt to change control of us, even though a tender offer or change in control might be in the best interest of our shareholders. Our bye-laws provide that persons standing for election as directors at a duly constituted and quorate annual general meeting are elected by our shareholders by a plurality of the votes cast on the resolution. In addition, our bye-laws provide that directors may be removed with or without cause by a resolution of our shareholders, including the affirmative votes of at least 80.0% of all votes attaching to all shares in issue entitling the holder to vote on such resolution. Our bye-laws also give us the option, but not the obligation, to require a shareholder that is not a U.S. citizen or a qualified resident of the U.S. or of the other contracting state of the applicable tax treaty with the U.S. (as determined for purposes of the relevant provision of the limitation on benefits article of such treaty) owning more than 5% of our issued and outstanding common shares to sell the shareholder's common shares to us, to another shareholder or to third parties at fair market value if we determine, that failure to exercise such option would result in adverse tax consequences to us or any of our subsidiaries.

Pursuant to our bye-laws, our preference shares may be issued from time to time, and the board of directors is authorized to determine the rights, preferences, powers, qualifications, limitations and restrictions. See ‘‘— Preference Shares.’’

Certain Provisions of Bermuda Law

We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows us to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to United States residents who are holders of our common shares.

The Bermuda Monetary Authority has given its consent for the issue and free transferability of all of the common shares that are the subject of this offering to and between non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an appointed stock

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exchange, which includes the New York Stock Exchange. Approvals or permissions given by the Bermuda Monetary Authority do not constitute a guarantee by the Bermuda Monetary Authority as to our performance or our creditworthiness. Accordingly, in giving such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or default of our business or for the correctness of any opinions or statements expressed in this prospectus. Certain issues and transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes may require the specific consent of the Bermuda Monetary Authority.

This prospectus will be filed with the Registrar of Companies in Bermuda pursuant to Part III of the Companies Act 1981 of Bermuda. In accepting this prospectus for filing, the Registrar of Companies in Bermuda shall not be liable for the financial soundness, performance or default of our business or for the correctness of any opinions or statements expressed in this prospectus.

In accordance with Bermuda law, share certificates are only issued in the names of companies, partnerships or individuals. In the case of a shareholder acting in a special capacity (for example as a trustee), certificates may, at the request of the shareholder, record the capacity in which the shareholder is acting. Notwithstanding such recording of any special capacity, we are not bound to investigate or see to the execution of any such trust. We will take no notice of any trust applicable to any of our shares, whether or not we have been notified of such trust.

Differences in Corporate Law

You should be aware that the Companies Act 1981 of Bermuda, which applies to us, differs in certain material respects from laws generally applicable to Delaware corporations and their shareholders. In order to highlight these differences, set forth below is a summary of material provisions of the Companies Act (including modifications adopted pursuant to our bye-laws) and Bermuda common law applicable to us which differ in certain respects from provisions of the General Corporation Law of the State of Delaware.

Duties of Directors.     Our bye-laws provide that our business is to be managed and conducted by our board of directors. At common law, members of a board of directors owe a fiduciary duty to the company to act in good faith in their dealings with or on behalf of the company and exercise their powers and fulfill the duties of their office honestly. This duty includes the following essential elements:

•  a duty to act in good faith in the best interests of the company;
•  a duty not to make a personal profit from opportunities that arise from the office of director;
•  a duty to avoid conflicts of interest; and
•  a duty to exercise powers for the purpose for which such powers were intended.

The Companies Act imposes a duty on directors and officers of a Bermuda company:

•  to act honestly and in good faith with a view to the best interests of the company; and
•  to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

In addition, the Companies Act imposes various duties on directors and officers of a company with respect to certain matters of management and administration of the company.

Directors and officers generally owe fiduciary duties to the company, and not to the company's individual shareholders. Our shareholders may not have a direct cause of action against our directors.

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Under Delaware law, the business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their powers, directors are charged with a fiduciary duty of care to protect the interests of the corporation and a fiduciary duty of loyalty to act in the best interests of its shareholders. The duty of care requires that directors act in an informed and deliberative manner and inform themselves, prior to making a business decision, of all material information reasonably available to them. The duty of care also requires that directors exercise care in overseeing and investigating the conduct of corporate employees. The duty of loyalty may be summarized as the duty to act in good faith, not out of self-interest, and in a manner which the director reasonably believes to be in the best interests of the shareholders.

Delaware law provides that a party challenging the propriety of a decision of a board of directors bears the burden of rebutting the applicability of the presumptions afforded to directors by the ‘‘business judgment rule.’’ The business judgment rule is a presumption that in making a business decision, directors acted on an informed basis and that the action taken was in the best interests of the Company and its shareholders, and accordingly, unless the presumption is rebutted, a board's decision will be upheld unless there can be no rational business purpose for the action or the action constitutes corporate waste. If the presumption is not rebutted, the business judgment rule attaches to protect the directors and their decisions, and their business judgments will not be second guessed. Where, however, the presumption is rebutted, the directors bear the burden of demonstrating the entire fairness of the relevant transaction. Notwithstanding the foregoing, Delaware courts may subject directors' conduct to enhanced scrutiny in respect of defensive actions taken in response to a threat to corporate control or the approval of a transaction resulting in a sale of control of the corporation.

Interested Directors.     Bermuda law and our bye-laws provide that if a director has an interest in a material transaction or proposed material transaction with us or any of our subsidiaries or has a material interest in any person that is a party to such a transaction, the director must disclose the nature of that interest at the first opportunity either at a meeting of directors or in writing to the directors. Our bye-laws provide that, after a director has made such a declaration of interest, he is allowed to be counted for purposes of determining whether a quorum is present and to vote on a transaction in which he has an interest, unless disqualified from doing so by the chairman of the relevant board meeting. Under Delaware law, such transaction would not be voidable if (i) the material facts as to such interested director's relationship or interests are disclosed or are known to the board of directors and the board in good faith authorizes the transaction by the affirmative vote of a majority of the disinterested directors, (ii) such material facts are disclosed or are known to the shareholders entitled to vote on such transaction and the transaction is specifically approved in good faith by vote of the majority of shares entitled to vote thereon or (iii) the transaction is fair as to the Company as of the time it is authorized, approved or ratified. Under Delaware law, such interested director could be held liable for a transaction in which such director derived an improper personal benefit.

Voting Rights and Quorum Requirements.     Under Bermuda law, the voting rights of our shareholders are regulated by our bye-laws and, in certain circumstances, the Companies Act. Under our bye-laws, at any general meeting, two or more persons present in person at the start of the meeting and representing in person or by proxy more than 50% of all votes attaching to all shares in issue entitling the holder to vote at the meeting, shall constitute a quorum for the transaction of business. Generally, except as otherwise provided in the bye-laws, or the Companies Act, any action or resolution requiring approval of the shareholders may be passed by a simple majority of votes cast except for the election of directors which requires only a plurality of the votes cast.

Any individual who is a shareholder of the company and who is present at a meeting may vote in person, as may any corporate shareholder that is represented by a duly authorized representative

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at a meeting of shareholders. Our bye-laws also permit attendance at general meetings by proxy, provided the instrument appointing the proxy is in the form specified in the bye-laws or such other form as the board may determine. Under our bye-laws, each holder of common shares is entitled to one vote per common share held.

Under Delaware law, unless otherwise provided in the company's certificate of incorporation, each stockholder is entitled to one vote for each share of stock held by the stockholder. Delaware law provides that unless otherwise provided in a company's certificate of incorporation or bylaws, a majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum at a meeting of stockholders. In matters other than the election of directors, with the exception of special voting requirements related to extraordinary transactions, and unless otherwise provided in a company's certificate of incorporation or bylaws, the affirmative vote of a majority of shares present in person or represented by proxy at the meeting entitled to vote is required for stockholder action, and the affirmative vote of a plurality of shares is required for the election of directors.

Dividends.     Under Bermuda law, a company may not declare or pay dividends if there are reasonable grounds for believing that: (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) that the realizable value of its assets would thereby be less than the aggregate of its liabilities, its issued share capital (par value) and its share premium accounts (share premium being the amount of consideration paid for the subscription of shares in excess of the par value of those shares). As a result, in future years, if the realizable value of a company's assets decreases, its ability to make or maintain dividend payments may depend upon its shareholders' approval of resolutions reducing the share premium account by transferring funds to the contributed surplus account. Under our bye-laws, each common share is entitled to dividends if, as and when dividends are declared by our board of directors, subject to any preferred dividend right of the holders of any preference shares. Issued share capital is the aggregate par value of the company's issued shares, and share premium is the aggregate amount paid for issued shares over and above their par value. Share premium accounts may be reduced in certain limited circumstances.

Under Delaware law, subject to any restrictions contained in the company's certificate of incorporation, a company may pay dividends out of surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and for the preceding fiscal year. Delaware law also provides that dividends may not be paid out of net profits if, after the payment of the dividend, capital is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.

Amalgamations, Mergers and Similar Arrangements.     The amalgamation of a Bermuda company with another company or corporation (other than certain affiliated companies) requires the amalgamation agreement to be approved by the company's board of directors and by its shareholders. Unless the company's bye-laws provide otherwise, the approval of 75% of the shareholders voting at such meeting is required to approve the amalgamation agreement, and the quorum for such meeting must be two persons holding or representing more than one-third of the issued shares of the company. Our bye-laws provide that a merger or an amalgamation (other than with certain affiliated companies) that has been approved by the board must only be approved by a majority of the votes cast at a general meeting of the shareholders at which the quorum shall be two or more persons present in person at the start of the meeting and representing in person or by proxy more than 50% of all votes attaching to all shares in issue entitling the holder to vote at the meeting. Any merger or amalgamation not approved by our board must be approved by a shareholders resolution, including the affirmative vote of at least 66% of all votes attaching to all shares in issue entitling the holder to vote on such matter.

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Under Bermuda law, in the event of an amalgamation of a Bermuda company with another company or corporation, a shareholder of the Bermuda company who did not vote in favor of the amalgamation and is not satisfied that fair value has been offered for such shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the Supreme Court of Bermuda to appraise the fair value of those shares.

Under Delaware law, with certain exceptions, a merger, consolidation or sale of all or substantially all the assets of a corporation must be approved by the board of directors and a majority of the issued and outstanding shares entitled to vote thereon. Under Delaware law, a shareholder of a corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the transaction.

Takeovers.     An acquiring party is generally able to acquire compulsorily the common shares of minority holders in the following ways:

•  By a procedure under the Companies Act known as a ‘‘scheme of arrangement’’. A scheme of arrangement could be effected by obtaining the agreement of the company and of holders of common shares, representing in the aggregate a majority in number and at least 75% in value of the common shareholders present and voting at a court ordered meeting held to consider the scheme of arrangement. The scheme of arrangement must then be sanctioned by the Bermuda Supreme Court. If a scheme of arrangement receives all necessary agreements and sanctions, upon the filing of the court order with the Registrar of Companies in Bermuda, all holders of common shares could be compelled to sell their shares under the terms of the scheme or arrangement.
•  If the acquiring party is a company by acquiring pursuant to a tender offer 90% of the shares or class of shares not already owned by, or by a nominee for, the acquiring party (the offeror), or any of its subsidiaries. If an offeror has, within four months after the making of an offer for all the shares or class of shares not owned by, or by a nominee for, the offeror, or any of its subsidiaries, obtained the approval of the holders of 90% or more of all the shares to which the offer relates, the offeror may, at any time within two months beginning with the date on which the approval was obtained, require by notice any nontendering shareholder to transfer its shares on the same terms as the original offer. In those circumstances, nontendering shareholders will be compelled to sell their shares unless the Supreme Court of Bermuda (on application made within a one-month period from the date of the offeror's notice of its intention to acquire such shares) orders otherwise.
•  Where the acquiring party or parties holds not less than 95% of the shares or a class of shares of a company, such holder(s) may, pursuant to a notice given to the remaining shareholders or class of shareholders, acquire the shares of such remaining shareholders or class of shareholders. When this notice is given, the acquiring party is entitled and bound to acquire the shares of the remaining shareholders on the terms set out in the notice, unless a remaining shareholder, within one month of receiving such notice, applies to the Supreme Court of Bermuda for an appraisal of the value of their shares. This provision only applies where the acquiring party offers the same terms to all holders of shares whose shares are being acquired.

Delaware law provides that a parent corporation, by resolution of its board of directors and without any shareholder vote, may merge with any subsidiary of which it owns at least 90% of each class of its capital stock. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.

Shareholders' Suits.     Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be expected to

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permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

When the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company's affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.

Our bye-laws contain a provision by virtue of which our shareholders waive any claim or right of action that they have, both individually and on our behalf, against any director or officer in relation to any action or failure to take action by such director or officer, except in respect of any fraud or dishonesty of such director or officer. We have been advised by the SEC that in the opinion of the SEC, the operation of this provision as a waiver of the right to sue for violations of federal securities laws would likely be unenforceable in U.S. courts.

Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court generally has discretion to permit the winning party to recover attorneys' fees incurred in connection with such action.

Indemnification of Directors and Officers.     Section 98 of the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default, breach of duty or breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to section 281 of the Companies Act.

We have adopted provisions in our bye-laws that provide that we shall indemnify our officers and directors in respect of their actions and omissions, except in respect of their fraud or dishonesty. Our bye-laws provide that the shareholders waive all claims or rights of action that they might have, individually or in right of the company, against any of the company’s directors or officers for any act or failure to act in the performance of such director’s or officer’s duties, except in respect of any fraud or dishonesty of such director or officer. Section 98A of the Companies Act permits us to purchase and maintain insurance for the benefit of any officer or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of duty or breach of trust, whether or not we may otherwise indemnify such officer or director. We have purchased and maintain a directors’ and officers’ liability policy for such a purpose.

Under Delaware law, a corporation may indemnify a director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if (i) such director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and (ii) with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe his conduct was unlawful.

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Inspection of Corporate Records.     Members of the general public have the right to inspect our public documents available at the office of the Registrar of Companies in Bermuda and our registered office in Bermuda, which will include our memorandum of association (including its objects and powers) and certain alterations to our memorandum of association. Our shareholders have the additional right to inspect our bye-laws, minutes of general meetings and audited financial statements, which must be presented to the annual general meeting of shareholders. The register of members of a company is also open to inspection by shareholders without charge, and by members of the general public on payment of a fee. The register of members is required to be open for inspection for not less than two hours in any business day (subject to the ability of a company to close the register of members for not more than 30 days in a year). A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside of Bermuda. A company is required to keep at its registered office a register of directors and officers that is open for inspection for not less than two hours in any business day by members of the public without charge. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other corporate records. Delaware law permits any shareholder to inspect or obtain copies of a corporation's shareholder list and its other books and records for any purpose reasonably related to such person's interest as a shareholder.

Shareholder Proposals.     Under Bermuda law, shareholder(s) may, as set forth below and at their own expense (unless the company otherwise resolves), require the company to: (i) give notice to all shareholders entitled to receive notice of the annual general meeting of any resolution that the shareholder(s) may properly move at the next annual general meeting; and/or (ii) circulate to all shareholders entitled to receive notice of any general meeting a statement in respect of any matter referred to in any proposed resolution or any business to be conducted at such general meeting. The number of shareholders necessary for such a requisition is either: (i) any number of shareholders representing not less than 5% of the total voting rights of all shareholders entitled to vote at the meeting to which the requisition relates; or (ii) not less than 100 shareholders. Delaware law does not include a provision restricting the manner in which nominations for directors may be made by shareholders or the manner in which business may be brought before a meeting although restrictions may be included in a Delaware company's certificate of incorporation or bylaws.

Calling of Special Shareholders Meetings.     Under Aircastle's bye-laws, a special general meeting may be called by the President, the chairman of the board or the board of directors. The board of directors must call a special general meeting upon the request of Fortress or any ‘‘significant shareholder’’ or ‘‘affiliate’’ of such shareholder (both as defined in the bye-laws) so long as the significant shareholder and its affiliates collectively hold shares carrying at least 10% of the votes attaching to all shares, at the time of such request. Bermuda law also provides that a special general meeting must be called upon the request of shareholders holding not less than 10% of the paid-up capital of the company carrying the right to vote at general meetings. Delaware law permits the board of directors or any person who is authorized under a corporation's certificate of incorporation or bye-laws to call a special meeting of shareholders.

Amendment of Organizational Documents.     Bermuda law provides that the memorandum of association of a company may be amended by a resolution passed at a general meeting of shareholders of which due notice has been given. Certain amendments to the memorandum of association may require approval of the Bermuda Minister of Finance, who may grant or withhold approval at his or her discretion.

Under Bermuda law, the holders of an aggregate of not less than 20% in par value of a company's issued share capital have the right to apply to the Bermuda courts for an annulment of any amendment of the memorandum of association adopted by shareholders at any general

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meeting, other than an amendment which alters or reduces a company's share capital as provided in the Companies Act. Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda court. An application for an annulment of an amendment of the memorandum of association must be made within 21 days after the date on which the resolution altering the company's memorandum of association is passed and may be made on behalf of persons entitled to make the application by one or more of their designees as such holders may appoint in writing for such purpose. No application may be made by the shareholders voting in favor of the amendment.

Under Delaware law, amendment of the certificate of incorporation, which is the equivalent of a memorandum of association, of a company must be made by a resolution of the board of directors setting forth the amendment, declaring its advisability, and either calling a special meeting of the shareholders entitled to vote or directing that the proposed amendment be considered at the next annual meeting of the shareholders. Delaware law requires that, unless a different percentage is provided for in the certificate of incorporation, a majority of the voting power of the corporation is required to approve the amendment of the certificate of incorporation at the shareholders meeting. If the amendment would alter the number of authorized shares or par value or otherwise adversely affect the rights or preference of any class of a company's stock, the holders of the issued and outstanding shares of such affected class, regardless of whether such holders are entitled to vote by the certificate of incorporation, are entitled to vote as a class upon the proposed amendment. However, the number of authorized shares of any class may be increased or decreased, to the extent not falling below the number of shares then issued and outstanding, by the affirmative vote of the holders of a majority of the stock entitled to vote, if so provided in the company's certificate of incorporation that was authorized by the affirmative vote of the holders of a majority of such class or classes of stock.

Amendment of Bye-laws.     Except as provided below, Aircastle's bye-laws provide that the bye-laws may only be rescinded, altered or amended upon approval by a resolution of Aircastle's board of directors and by a resolution of our shareholders.

Those bye-laws regarding the election of directors, classes of directors, the term of office of directors and amalgamations may only be rescinded, altered or amended upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 66.0% of the votes attaching to all shares in issue entitling the holder to vote on such resolution.

Those bye-laws dealing with the removal of directors and corporate opportunity may only be rescinded, altered or amended upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 80.0% of the votes attaching to all shares in issue entitling the holder to vote on such resolution.

Under Delaware law, unless the certificate of incorporation or bylaws provide for a different vote, holders of a majority of the voting power of a corporation and, if so provided in the certificate of incorporation, the directors of the corporation have the power to adopt, amend and repeal the bylaws of a corporation. Those bye-laws dealing with the election of directors, classes of directors and the term of office of directors may only be rescinded, altered or amended upon approval by a resolution of the directors and by a resolution of shareholders carrying not less than 66% of all shares entitled to vote on the resolution.

Registrar and Transfer Agent

A register of holders of the common shares will be maintained by Codan Services Limited in Bermuda, and a branch register will be maintained in the United States by American Stock

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Transfer & Trust Company, who will serve as branch registrar and transfer agent. The telephone number of Codan Services Limited is +1(441) 295-5950 and of American Stock Transfer & Trust Company is 212-936-5100.

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Shares Eligible for Future Sale

Prior to this offering, there has been no public market for our common shares, and we cannot predict the effect, if any, that market sales of shares or availability of any shares for sale will have on the market price of our common shares prevailing from time to time. Sales of substantial amounts of common shares (including shares issued on the exercise of options, warrants or convertible securities, if any) or the perception that such sales could occur, could adversely affect the market price of our common shares and our ability to raise additional capital through a future sale of securities.

Upon completion of this offering, we will have 50,082,900 common shares issued and outstanding (or a maximum of 51,446,535 shares if the underwriters exercise their over-allotment option in full). All 9,090,900 of the common shares sold in this offering (or 10,454,535 shares if the underwriters exercise their over-allotment option in full) will be freely transferable without restriction or further registration under the Securities Act unless such shares are held by ‘‘affiliates’’ as that term is defined in Rule 144 under the Securities Act. Our remaining issued and outstanding common shares will be deemed ‘‘restricted securities’’ as that term is defined under Rule 144. Subject to certain contractual restrictions, holders of restricted shares will be entitled to sell those shares in the public securities markets if they qualify for an exemption from registration under Rule 144 or any other applicable exemption under the Securities Act. Subject to the lock-up agreements described below and the provisions of Rules 144, 144(k) and 701, additional shares will be available for sale as set forth below.

In addition to the issued and outstanding common shares, we intend to file a registration statement on Form S-8 to register an aggregate of 4,000,000 common shares reserved for issuance under our incentive plan (not including annual increases of 100,000 common shares beginning in 2007 through and including 2016).

Lock-Up of our Common Shares

We and our executive officers, directors, approximately 100% of our existing shareholders and participants in our directed share program have agreed with the underwriters, subject to certain exceptions described below, not to (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer, dispose of or hedge, directly or indirectly, our common shares (including, without limitation, common shares which may be deemed to be beneficially owned by such executive officers, directors, shareholders and participants in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a share option or warrant) or any securities convertible into or exercisable or exchangeable for our common shares or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our common shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common shares or such other securities, in cash or otherwise during the period from the date of this prospectus continuing through the date 120 days after the date of this prospectus, except with the prior written consent of the representatives. The underwriters may waive these restrictions in their discretion. Currently, the underwriters have no intention to release the aforementioned holders of our common shares from the lock-up restrictions described above.

The 120-day restricted period described in the preceding paragraph will be automatically extended if (i) during the last 17 days of the 120-day restricted period we issue an earnings release or announce material news or a material event relating to us occurs or (ii) prior to the

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expiration of the 120-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 120-day restricted period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.

Our lock-up agreement will provide exceptions for, among other things:

•  the grant of awards pursuant to employee benefit plans or arrangements including in connection with the settlement of restricted share units;
•  the exercise of an option or upon conversion or exchange of convertible or exchangeable securities outstanding;
•  the issuance of securities to be registered pursuant to any registration statement on Form S-8 pursuant to any benefit plans or arrangements; and
•  the issuance of up to 20% of our outstanding common shares in connection with the acquisition of the assets of, or a majority or controlling portion of the equity of, or a joint venture with, another entity.

The shareholder lock-up agreements will provide exceptions for, among other things:

•  sales under any 10b5-1 plan;
•  any bona fide gift or gifts, provided that the donee or donees thereof agree to be bound in writing by the restrictions set forth in the shareholder lock-up agreement;
•  transfers by will or by intestacy provided that such transferee agrees to be bound in writing by the restrictions set forth in the shareholder lock-up agreement;
•  transfer to any trust for the direct or indirect benefit of the shareholder or the immediate family of the shareholder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth in the shareholder lock-up agreement, and provided further that any such transfer shall not involve a disposition for value;
•  any distribution to partners or members of the shareholder (including upon any liquidation and dissolution of the shareholder pursuant to a plan of liquidation approved by the shareholder's partners or members), provided that the partners or members of the shareholder agree to be bound in writing by the restrictions set forth in the shareholder lock-up agreement;
•  transfers in connection with a sale of 100% of the outstanding shares of our common shares or by way of merger of Aircastle with another person to a third party or group of third parties that are not affiliates of Aircastle;
•  transfer of common shares by the shareholder to us deemed to occur upon the cashless exercise of options granted pursuant to our employee benefit plans;
•  transfer to the shareholder's affiliates or to any investment fund or other entity controlled or managed by the shareholder, provided that such affiliate, investment fund or other entity controlled or managed by the shareholder agrees to be bound in writing by the restrictions set forth in the shareholder lock-up agreement; or
•  transactions relating to common shares or other securities acquired in open market transactions after the completion of this offering.

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Rule 144

In general, Rule 144 of the Securities Act as currently in effect, provides that a person may sell within any three month period a number of common shares that does not exceed the greater of:

•  1% of the total number of common shares then issued and outstanding, which will equal approximately 500,829 shares immediately after this offering; or
•  the average weekly trading volume of the common shares on the New York Stock Exchange during the four calendar weeks preceding the filing of notice on Form 144 with respect to the sale;

subject, in either case, to a requirement that any ‘‘restricted’’ shares have been beneficially owned for at least one year, including the holding period of any prior owner which was not an affiliate.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. An ‘‘affiliate’’ is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with an issuer.

Rule 144(k)

Under Rule 144(k), a person (or persons whose shares are aggregated) who is not deemed to have been our affiliate at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years (including the holding period of any prior owner other than an affiliate), is entitled to sell these shares under Rule 144(k) without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, ‘‘144(k)’’ shares may be sold immediately upon completion of this offering.

Registration Rights

Pursuant to our Amended and Restated Shareholders Agreement, Fortress shareholders and certain of their affiliates and permitted third-party transferees will have the right, in certain circumstances, to require us to register all of their common shares under the Securities Act for sale into the public markets. Upon the effectiveness of such a registration statement, all shares covered by the registration statement will be freely transferable. See ‘‘Certain Relationships and Related Party Transactions — Shareholders Agreement.’’

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Material Tax Considerations

Bermuda Tax Considerations

At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares. We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 28, 2016, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda.

Irish Taxation of the ACS Group

ACS Ireland and any other Irish-tax-resident members of the ACS Group should be subject to Irish corporate tax on their net trading income, including leasing income, at a 12.5% rate and on non-trading income at a rate of 25%. There can be no assurance that these tax rates will not be changed in the future.

A company will not be subject to Irish income tax if it is not Irish tax-resident, has no branch or agency in Ireland and has no Irish-source income. The non-Irish-resident companies in ACS Group should not be subject to Irish income tax on their non-Irish source income. Lease rentals paid by Irish-resident subsidiary companies of ACS Bermuda to ACS Bermuda, although not subject to withholding tax, may constitute Irish-source income of the lessor which may, therefore, have a technical liability to Irish income tax. However, as a matter of practice, the Irish tax authorities do not pursue collection of any such liability for Irish tax on the part of persons who are not resident in Ireland. However, there can be no assurance that these companies will not be subject to Irish tax on some or all of their income.

Material United States Federal Income Tax Considerations

The following is a discussion of the material U.S. federal income tax considerations applicable to the purchase, ownership and disposition of common shares by U.S. Holders (as defined below) and Non-U.S. Holders (as defined below). This discussion deals only with our common shares held as capital assets by holders who purchase common shares in this offering. This discussion does not cover all aspects of U.S. federal income taxation that may be relevant to the purchase, ownership or disposition of our common shares by prospective investors in light of their particular circumstances. In particular, this discussion does not address all of the tax considerations that may be relevant to certain types of investors subject to special treatment under U.S. federal income tax laws, such as the following:

•  brokers or dealers in securities or currencies;
•  financial institutions;
•  pension plans;
•  regulated investment companies;
•  real estate investment trusts;

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•  cooperatives;
•  tax-exempt entities;
•  insurance companies;
•  persons holding common shares as part of a hedging, integrated, conversion or constructive sale transaction or a straddle;
•  traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;
•  persons liable for alternative minimum tax;
•  U.S. expatriates;
•  partnerships or entities or arrangements treated as partnerships or other pass through entities for U.S. federal tax purposes (or investors therein); or
•  U.S. Holders (as defined below) whose ‘‘functional currency’’ is not the U.S. dollar.

Furthermore, this discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof. Such authorities may be repealed, revoked, modified or subject to differing interpretations, possibly on a retroactive basis, so as to result in U.S. federal income tax consequences different from those discussed below. This discussion does not address any state, local or non-U.S. tax considerations.

For purposes of this discussion, you will be considered a ‘‘U.S. Holder’’ if you beneficially own our common shares and you are for U.S. federal income tax purposes one of the following:

•  a citizen or an individual resident of the United States;
•  a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
•  an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
•  a trust if you (i) are subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all of your substantial decisions or (ii) have a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

You will be considered a ‘‘Non-U.S. Holder’’ if you beneficially own our common shares and your are not a U.S. Holder or a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes. If you are a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes, the U.S. federal income tax treatment of your partners generally will depend upon the status of such partners and your activities.

If you are considering the purchase of our common shares, we urge you to consult your own tax advisors concerning the particular U.S. federal income tax consequences to you of the purchase, ownership and disposition of our common shares, as well as any consequences to you arising under state, local and non-U.S. tax laws.

Taxation of Aircastle

AL expects that it will not be treated as engaged in a trade or business in the United States and thus will not be subject to U.S. federal income taxation. No assurances can be given, however, in

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this regard. Certain subsidiaries of AL may be treated as engaged in a trade business in the United States. Unless otherwise exempted by an applicable income tax treaty, a non-U.S. corporation that is engaged in a trade or business in the United States is generally subject to U.S. federal income taxation, at the graduated tax rates applicable to U.S. corporations, on the portion of such non-U.S. corporation’s income that is ‘‘effectively connected’’ with such trade or business. In addition, such non-U.S. corporation may be subject to the U.S. federal branch profits tax on its effectively connected earnings and profits at a rate of 30%, or at such lower rate as may be specified by an applicable income tax treaty.

We expect that each of our Irish subsidiaries will be eligible to claim the benefits of the Irish Treaty. Accordingly, even if such Irish subsidiaries earn income that otherwise would be treated as effectively connected with a trade or business in the United States, such income is expected to be exempt from U.S. tax under the Irish Treaty to the extent that it is (i) rental income attributable to aircraft used in international traffic or (ii) gain from the sale of aircraft used in international traffic. For this purpose, ‘‘international traffic’’ means transportation except where flights are solely between places within the United States. Although any income of the Irish subsidiaries that is attributable to aircraft used for flights solely between places within the United States may be subject to U.S. federal income taxation at a maximum rate of 35%, such income would be subject to a reduced 5% branch profits tax under the Irish Treaty. No assurances can be given, however, that each of the Irish subsidiaries will qualify each year for the benefits of the Irish Treaty.

Although Aircastle Bermuda may be treated as engaged in a trade or business in the United States, we expect that Aircastle Bermuda generally will not earn income that is treated as effectively connected with a U.S. trade or business. Accordingly, we expect that Aircastle Bermuda generally will not be subject to U.S. federal income taxation on a net income basis. No assurances can be given, however, that Aircastle Bermuda will be able to avoid generating income (unless exempt from tax pursuant to Section 883 of the Code as described below) that is effectively connected with a U.S. trade or business. We expect that Aircastle Bermuda’s U.S. source rental income generally will be subject to U.S. federal taxation, on a gross income basis, at a rate of not in excess of 4% as provided in Section 887 of the Code. If, contrary to expectations, we do not comply with certain administrative guidelines of the IRS, such that 90% or more of Aircastle Bermuda’s U.S. source rental income were attributable to the activities of personnel based in the United States, Aircastle Bermuda’s U.S. source rental income could be treated as income effectively connected with the conduct of a trade or business in the United States. In such case, Aircastle Bermuda’s U.S. source rental income would be subject to U.S. federal income taxation at a maximum rate of 35%. In addition, Aircastle Bermuda would be subject to the U.S. federal branch profits tax on its effectively connected earnings and profits at a rate of 30%.

Section 883 of the Code provides an exemption from U.S. federal income taxation for income derived from aircraft used in international traffic by certain foreign corporations. To qualify for this exemption in respect of rental income, the lessor of the aircraft must be organized in a country that grants a comparable exemption to U.S. lessors (Bermuda and Ireland each do), and the direct and indirect shareholders of the lessor must satisfy certain residency requirements. We and our subsidiaries may qualify for this exemption from U.S. tax, in which case income earned by us from aircraft used in international traffic would not be subject to U.S. federal income tax.

Consequences to U.S. Holders

The following discussion applies to you only if you are a U.S. Holder.

Dividends

Subject to the passive foreign investment company rules and the controlled foreign corporation rules discussed below, distributions of cash or property that we pay in respect of our common

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shares will constitute dividends for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) and will be includible in your gross income upon receipt. Distributions to you in excess of our earnings and profits will be treated first as a return of capital (with a corresponding reduction in your tax basis in the common shares) to the extent of your tax basis in the common shares on which the distribution was made, and then as capital gain from the sale or exchange of such common shares. We expect that our distributions will not be eligible for the dividends-received deduction for corporate U.S. Holders or ‘‘qualified dividend income’’ (which is taxable at the rates generally applicable to long-term capital gains) for U.S. Holders taxed as individuals.

Sale, Exchange or Other Taxable Disposition of Common Shares

Subject to the passive foreign investment company rules and the controlled foreign corporation rules discussed below, upon the sale, exchange or other taxable disposition of common shares, you will recognize capital gain or loss equal to the difference between the amount realized on such sale, exchange or taxable disposition and your tax basis in the common shares sold. Such gain or loss generally will be long-term capital gain or loss if your holding period with respect to such common shares is more than one year at the time of its disposition. The deductibility of capital losses is subject to limitations.

Passive Foreign Investment Company Status and Related Tax Consequences

We expect AL and certain of its subsidiaries to be PFICs for U.S. federal income tax purposes. Accordingly, you will be subject to different taxation rules with respect to an investment in our common shares depending on whether you make a QEF election with respect to your investment in common shares and with respect to the subsidiaries of AL that are treated as PFICs. Different rules may apply to you if you are a ‘‘10% U.S. Holder’’ (as described below under Controlled Foreign Corporation Status and Related Tax Consequences).

If you make timely QEF elections with respect to your common shares and the subsidiaries of AL that are treated as PFICs, you must report for U.S. federal income tax purposes your pro rata share of each PFIC’s ordinary earnings and net capital gain, if any, for each taxable year for which it is a PFIC that ends with or within your taxable year, regardless of whether or not you received any distributions on the common shares you own. No portion of any such inclusions of ordinary earnings would be eligible to be treated as ‘‘qualified dividend income.’’ If you are a non-corporate U.S. Holder, any such net capital gain inclusions would be eligible for taxation at the preferential capital gains tax rates. If you are a regulated investment company, such ordinary earnings and net capital gain inclusions will be treated as qualifying income described in Section 851(b)(2)(A) of the Code. Your adjusted tax basis in your common shares would be increased to reflect any taxed but undistributed earnings and profits. Any distribution of earnings and profits that previously had been taxed would not be taxed again when you receive such distribution, but it would result in a corresponding reduction in the adjusted tax basis in your common shares. You would not, however, be entitled to a deduction for your pro rata share of any losses that any such PFIC incurs with respect to any year. You generally would recognize capital gain or loss on the sale, exchange or other disposition of common shares. You may make timely QEF elections with respect to your investment in common shares by filing one copy of IRS Form 8621 with your U.S. federal income tax return for the first year in which you hold our common shares. AL will provide you with all necessary information in order for you to make QEF elections as described above. Another election generally available with respect to publicly traded PFICs, the ‘‘mark-to-market’’ election, will not be available with respect to the subsidiaries of AL, making such an election ineffectual with respect to an investment in AL common shares.

Finally, if you do not make QEF elections with respect to your investment in common shares and to any subsidiary of AL that is a PFIC, you would be subject to special rules with respect to (i) any

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excess distribution (i.e., the portion of any distributions you receive on your common shares in a taxable year in excess of 125% of the average annual distributions you received in the three preceding taxable years, or, if shorter, your holding period for the common shares), and (ii) any gain realized on the sale, exchange or other disposition of common shares. Under these special rules:

•  the excess distribution or gain would be allocated ratably over the aggregate holding period for the common shares;
•  the amount allocated to the current taxable year would be taxed as ordinary income and would not be ‘‘qualified dividend income’’; and
•  the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.

If you do not make QEF elections with respect to AL and its subsidiaries that are treated as PFICs, if the stock of a subsidiary of AL that is treated as a PFIC is sold or otherwise disposed of, you will be required to recognize gain in an amount equal to your pro rata share of the gain realized by the direct owner of the disposed PFIC stock. The amount of such gain will be treated as an excess distribution and will be subject to the rules set forth above with respect to excess distributions.

These special rules should not apply to a beneficial owner of our common shares that is a pension, profit sharing or other retirement trust or other tax-exempt organization that does not borrow money or otherwise utilize leverage in connection with its acquisition of our common shares.

YOU SHOULD CONSULT YOUR TAX ADVISOR ABOUT THE APPLICATION OF THE PFIC RULES TO YOUR PARTICULAR SITUATION.

Controlled Foreign Corporation Status and Related Tax Consequences

We also expect that AL and certain of its subsidiaries currently are CFCs for U.S. federal income tax purposes. AL will be a CFC for any year in which U.S. Holders that each own (directly, indirectly or by attribution) at least 10% of AL’s voting shares (each a ‘‘10% U.S. Holder’’) together own more than 50% of the total combined voting power of all classes of AL’s voting shares or more than 50% of the total value of AL’s shares. The classification of AL as a CFC has many complex results, one of which is that if you are a 10% U.S. Holder on the last day of AL’s taxable year, you will be required to recognize as ordinary income your pro rata share of certain income of AL and its subsidiaries (including both ordinary earnings and capital gains) for the taxable year, whether or not you receive any distributions on your common shares during that taxable year. In addition, special foreign tax credit rules would apply. Your adjusted tax basis in your common shares would be increased to reflect any taxed but undistributed earnings and profits. Any distribution of earnings and profits that previously had been taxed would result in a corresponding reduction in your adjusted tax basis in your common shares and would not be taxed again when you receive such distribution. Subject to a special limitation in the case of individual 10% U.S. Holders that have held their common shares for more than one year, if you are a 10% U.S. Holder, any gain from disposition of your common shares will be treated as dividend income to the extent of accumulated earnings attributable to such common shares during the time you held such common shares.

For any year in which AL is both a PFIC and a CFC, if you are a 10% U.S. Holder, you would be subject to the CFC rules and not the PFIC rules with respect to your investment in common shares.

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YOU SHOULD CONSULT YOUR TAX ADVISOR ABOUT THE APPLICATION OF THE CFC RULES TO YOUR PARTICULAR SITUATION.

Information Reporting and Backup Withholding

In general, information will be reported to the IRS each year regarding the amount of any dividends on our common shares and the proceeds of any sale of our common shares paid to you during such year unless you are an exempt recipient (such as a corporation). A backup withholding tax will apply to such payments if you fail to provide your taxpayer identification number or to make required certifications or you have been notified by the IRS that you are subject to backup withholding. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided that you timely furnish the required information to the IRS.

If you are a U.S. Holder that owns more than 10% of the aggregate value of our common shares (or you are an officer or director of AL and you are a United States citizen or resident) you may be required to file an information return on IRS Form 5471. A U.S. Holder that purchases common shares with cash generally will be required to file Form 926 with the IRS if (i) immediately after the transfers such investor holds, directly or indirectly, at least 10% of our voting shares, or (ii) the amount of cash transferred in exchange for common shares during the 12-month period ending on the date of the transfer exceeds $100,000. In the event a U.S. Holder fails to file any such required form, such holder could be required to pay a substantial penalty. In addition, depending on your particular circumstances, you may be required to file certain other IRS information returns with respect to an investment in common shares.

Consequences to Non-U.S. Holders

The following discussion applies you only if you are a Non-U.S. Holder. Special rules may apply to you if you are a CFC or a PFIC or are otherwise subject to special treatment under the Code. In such case, you should consult your own tax advisor to determine the U.S. federal, state, local and non-U.S. tax consequences that may be relevant to you with respect to an investment in common shares.

Dividends

You generally will not be subject to U.S. federal income tax or withholding tax on dividends received from us with respect to the common shares, unless that income is effectively connected with your conduct of a trade or business in the United States. If you are entitled to the benefits of a U.S. income tax treaty with respect to those dividends, that income is generally taxable only if it is attributable to a permanent establishment maintained by you in the United States.

Sale, Exchange or Other Taxable Disposition of Common Shares

You generally will not be subject to U.S. federal income tax or withholding tax with respect to any gain recognized on a sale, exchange or other taxable disposition of shares of our common shares unless:

•  the gain is effectively connected with your conduct of a trade or business in the United States, or, if certain tax treaties apply, is attributable to a permanent establishment you maintain in the United States; or
•  if you are an individual and you are present in the United States for 183 or more days in the taxable year of the sale, exchange or other taxable disposition, and you meet certain other requirements

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If you are an individual and are described in the first bullet above, you will be subject to tax on any gain derived from the sale, exchange or other taxable disposition of common shares under regular graduated U.S. federal income tax rates. If you are an individual and are described in the second bullet above, you will be subject to a flat 30% tax on any gain derived from the sale, exchange or other taxable disposition of common shares that may be offset by U.S. source capital losses (even though you are not considered a resident of the United States). If you are a corporation and are described in the first bullet above, you will be subject to tax on your gain under regular graduated U.S. federal income tax rates and, in addition, may be subject to the branch profits tax on your effectively connected earnings and profits for the taxable year, which would include such gain, at a rate of 30%, or at such lower rate as may be specified by an applicable income tax treaty.

Information Reporting and Backup Withholding

You may be required to establish your exemption from information reporting and backup withholding by certifying your status on Internal Revenue Service Form W-8BEN, W-8ECI or W-8IMY, as applicable.

If you are a Non-U.S. Holder and you sell your common shares to or through a U.S. office of a broker, the payment of the proceeds is subject to both U.S. backup withholding and information reporting unless you certify that you are a non-U.S. person, under penalties of perjury, or you otherwise establish an exemption. If you sell your common shares through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then information reporting and backup withholding generally will not apply to that payment. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made to you outside the United States, if you sell your common shares through a non-U.S. office of a broker that is a U.S. person or that has some other contacts with the United States. Such information reporting requirements will not apply, however, if the broker has documentary evidence in its records that you are a non-U.S. person and certain other conditions are met, or you otherwise establish an exemption.

The IRS may make information reported to you and the IRS available under the provisions of an applicable income tax treaty to the tax authorities in the country in which you reside. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability, if any, provided the required information is timely furnished by you to the IRS. You should consult your own tax advisors regarding the filing of a U.S. tax return for claiming a refund of any such backup withholding.

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Underwriting

J.P. Morgan Securities Inc., Bear, Stearns & Co. Inc. and Citigroup Global Markets Inc. are acting as joint book-running managers of the offering, and as representatives of the underwriters named below.

We and the underwriters named below have entered into an underwriting agreement covering the common shares to be sold in this offering. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of common shares listed next to its name in the following table:


Name Number of Shares
J.P. Morgan Securities Inc.  
Bear, Stearns & Co. Inc.   
Citigroup Global Markets Inc.  
Calyon Securities (USA) Inc.  
Deutsche Bank Securities Inc.                         
Total 9,090,900

The underwriters are committed to purchase all the common shares offered by us if they purchase any shares. If an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated. The underwriting agreement also provides that the obligations of the underwriters are subject to certain conditions precedent, including the absence of any material adverse change in our business and the receipt of certain certificates, opinions and letters from us, our counsel and our independent auditors.

The underwriters propose to offer the common shares directly to the pubic at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession of up to $           per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $           per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters. The representatives have advised us that the underwriters do not intend to confirm discretionary sales in excess of 5% of the common shares offered in this offering.

The underwriters have an option to buy up to 1,363,635 additional common shares from us to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this over-allotment option. If any shares are purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional common shares are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

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The underwriting fee is equal to the public offering price per common share less the amount paid by the underwriters to us per common share. The underwriting fee is $             per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ over-allotment option.


  Without
over-allotment
exercise
With full
over-allotment
exercise
Per Share $                 
$                 
Total $                 
$                 

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $4.0 million.

A prospectus in electronic format may be made available on the websites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations. The information on any such website is not part of this prospectus.

We have agreed, subject to certain exceptions, that we will not offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer, dispose of or hedge, directly or indirectly, or enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our common shares or relating to our common shares or any securities convertible into or exercisable or exchangeable for our common shares, without the prior written consent of the representatives for a period of 120 days after the date of this prospectus. Notwithstanding the foregoing, if (i) during the last 17 days of the 120-day restricted period, we issue an earnings release or material news or a material event relating to us occurs; or (ii) prior to the expiration of the 120-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 120-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

Additionally, our executive officers, directors, shareholders and participants in our directed share program have entered into lock-up agreements with the underwriters pursuant to which we and each of these persons or entities, subject to certain exceptions, for a period of 120 days after the date of this prospectus, may not, without the prior written consent of the representatives, directly or indirectly (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer, dispose of or hedge, directly or indirectly, our common shares (including, without limitation, common shares which may be deemed to be beneficially owned by such executive officers, directors, shareholders and participants in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a share option or warrant) or any securities convertible into or exercisable or exchangeable for our common shares; or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common shares, whether any such

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transaction described in clause (i) or (ii) above is to be settled by delivery of common shares or such other securities, in cash or otherwise. In addition, each of such executive officers, directors, shareholders and participants has agreed that, without the prior written consent of the representatives, it will not, during the 120-day restricted period, make any demand for or exercise any right with respect to the registration of our common shares or any securities convertible into or exercisable or exchangeable for our common shares. Notwithstanding the foregoing, if (i) during the last 17 days of the 120-day restricted period, we issue an earnings release or material news or a material event relating to us occurs; or (ii) prior to the expiration of the 120-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 120-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

We may issue common shares or securities convertible into or exercisable or exchangeable for common shares for the benefit of our employees, directors and officers under incentive plans described in this prospectus, provided that recipients are subject to the lock-up described above.

At our request, the underwriters have reserved for sale, at the initial public offering price, up to 10% of the shares offered hereby to be sold to certain directors, officers, employees and persons having relationships with us pursuant to a directed share program. The number of common shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares under this program. Any reserved shares which are not confirmed for purchase via our directed share program website or orally by telephone by midnight New York City time on the business day immediately prior to the first day of trading will be sold by the underwriters to the general public on the same terms as the other shares offered hereby.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

We have applied to have our common shares approved for listing on the NYSE under the symbol ‘‘AYR’’. The underwriters intend to sell our common shares to a minimum of 2,000 beneficial owners in lots of 100 or more so as to meet the distribution requirements of the NYSE.

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling common shares in the open market for the purpose of preventing or retarding a decline in the market price of the common shares while this offering is in progress. These stabilizing transactions may include making short sales of the common shares, which involves the sale by the underwriters of a greater number of common shares than they are required to purchase in this offering, and purchasing common shares on the open market to cover positions created by short sales. Short sales may be ‘‘covered’’ shorts, which are short positions in an amount not greater than the underwriters’ over-allotment option referred to above, or may be ‘‘naked’’ shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the

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common shares, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common shares in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common shares or preventing or retarding a decline in the market price of the common shares, and, as a result, the price of the common shares may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the NYSE, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common shares. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors, including:

•  the information set forth in this prospectus and otherwise available to the representatives;
•  our prospects and the history and prospects for the industry in which we compete;
•  an assessment of our management;
•  our historical financial statements;
•  our prospects for future earnings and cash flows;
•  our revenues, earnings and operating information in recent periods;
•  the general condition of the securities markets at the time of this offering;
•  the market valuations of, and demand for, publicly traded common stock of generally comparable companies; and
•  the present state of our development.

Neither we nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions.

In the ordinary course of its business, an affiliate of Calyon Securities (USA) Inc. has sold aircraft to us and our affiliates and may continue to do so from time to time in the future. Each of the representatives acted as an initial purchaser in Securitization No. 1. An affiliate of Calyon Securities (USA) Inc. acted as the liquidity provider in Securitization No. 1.

Affiliates of J.P. Morgan Securities Inc., Bear, Stearns & Co. Inc. and Citigroup Global Markets Inc., JP Morgan Chase Bank, N.A., Bear Stearns Corporate Lending Inc., and Citibank, N.A., respectively, are lenders under Credit Facility No. 2. Citibank, N.A., an affiliate of Citigroup Global Markets Inc., is also the lender and agent under Credit Facility No. 3. Certain of the underwriters or their affiliates may receive more than 10% of the proceeds of this offering. Generally, in an offering in which this is the case, Rule 2710(h) of the NASD Conduct Rules mandates that the

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initial public offering price can be no higher than that recommended by a ‘‘qualified independent underwriter’’ meeting certain standards. Accordingly, has assumed the responsibilities of acting as a qualified independent underwriter and will recommend a price in compliance with the requirements of Rule 2720. Deutsche Bank Securities Inc., in its role as qualified independent underwriter, has performed due diligence investigations and reviewed and participated in the preparation of this prospectus and the registration statement of which this prospectus is a part. Deutsche Bank Securities Inc. will receive $                 for acting in this capacity; however, we have agreed to indemnify Deutsche Bank Securities Inc. for acting as a qualified independent underwriter against specified liabilities under the Securities Act.

Selling Restrictions

United Kingdom

Each of the underwriters has represented and agreed that:

•  it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (as amended) (FSMA) received by it in connection with the issue or sale of the common shares or in circumstances in which section 21 of FSMA does not apply to the Company; and
•  it has complied with, and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’) an offer to the public of the common shares may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any common shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

(a)  to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
(b)  to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
(c)  by the underwriters to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer, or
(d)  in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of the common shares shall result in a requirement for the publication by the Company or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an ‘‘offer of Shares to the public’’ in relation to any common shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Shares to be offered so as

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to enable an investor to decide to purchase or subscribe the common shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Federal Republic of Germany

The underwriters have agreed to comply with the following selling restrictions applicable to the Federal Republic of Germany.

The underwriters have agreed that they shall not offer or sell the common shares in the Federal Republic of Germany other than in compliance with the German Securities Prospectus Act ( Wertpapierprospektgesetz ), the German Securities Sales Prospectus Act ( Wertpapier-Verkaufsprospektgesetz ), the German Investment Act ( Investmentgesetz ), respectively, and any other laws and regulations applicable in the Federal Republic of Germany governing the issue, the offering and the sale of securities.

The common shares may neither be nor intended to be distributed by way of public offering, public advertisement or in a similar manner within the meaning of sections 2 (4), 3 (1) of the German Securities Prospectus Act ( Wertpapierprospektgesetz ), section 8f (1) of the German Securities Sales Prospectus Act ( Wertpapier-Verkaufsprospektgesetz ) and sections 1, 2 (11), 101 (1) and (2) of the German Investment Act ( Investmentgesetz ) nor shall the distribution of this prospectus or any other document relating to the common shares constitute such public offer.

The distribution of the common shares has not been notified and the common shares are not registered or authorized for public distribution in the Federal Republic of Germany under the German Securities Prospectus Act ( Wertpapierprospektgesetz ) or the German Investment Act ( Investmentgesetz ). Accordingly, this prospectus has not been filed or deposited with the German Federal Financial Supervisory Authority ( Bundesanstalt fuer Finanzdienstleistungsaufsicht - BaFin ).

Prospective German investors in the common shares are urged to seek independent tax advice and to consult their professional advisors as to the legal and tax consequences that may arise from the application of the German Investment Tax Act ( Investmentsteuergesetz ) to the common shares and neither we nor the underwriters accept any responsibility in respect of the German tax position of the common shares.

Hong Kong

Our common shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to ‘‘professional investors’’ within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a ‘‘prospectus’’ within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to our common shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to common shares which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

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Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our common shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (or, the ‘‘SFA’’), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where our common shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (ii) where no consideration is given for the transfer; or (iii) by operation of law.

Japan

Our common shares have not been and will not be registered under the Securities and Exchange Law of Japan (or, the ‘‘Securities and Exchange Law’’) and each underwriter has agreed that it will not offer or sell any of our common shares, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Securities and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Switzerland

Our common shares may be offered in Switzerland only on the basis of a non-public offering. This prospectus does not constitute an issuance prospectus according to articles 652a or 1156 of the Swiss Federal Code of Obligations or a listing prospectus according to article 32 of the Listing Rules of the SWX Swiss Exchange. Our common shares may not be offered or distributed on a professional basis in or from Switzerland and neither this prospectus nor any other offering material relating to our common shares may be publicly issued in connection with any such offer or distribution. Our common shares have not been and will not be approved by any Swiss regulatory authority. In particular, our common shares are not and will not be registered with or supervised by the Swiss Federal Banking Commission, and investors may not claim protection under the Swiss Investment Fund Act.

Italy

The offering of our common shares has not been registered with the Commissione Nazionale per le Societ|$$|Aga e la Borsa (‘‘CONSOB’’), in accordance with Italian securities legislation. Accordingly, the

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shares may not be offered, sold or delivered, and copies of this prospectus or any other document relating to the shares may not be distributed in Italy except to Professional Investors, as defined in Art. 31.2 of CONSOB Regulation no. 11522 of July 1, 1998, as amended, pursuant to Art. 30.2 and Art. 100 of Legislative Decree no. 58 of February 24, 1998 (the ‘‘Finance Law’’) or in any other circumstance where an express exemption to comply with the solicitation restrictions provided by the Finance Law or CONSOB Regulation no. 11971 of May 14, 1999, as amended (the ‘‘Issuers Regulation’’) applies, including those provided for under Art. 100 of the Finance Law and Art. 33 of the Issuers Regulation, and provided, however, that any such offer, sale, or delivery of the shares or distribution of copies of this prospectus or any other document relating to the shares in Italy must (i) be made in accordance with all applicable Italian laws and regulations, (ii) be made in compliance with Article 129 of Legislative Decree no. 385 of September 1, 1993, as amended (the ‘‘Banking Law Consolidated Act’’) and the implementing guidelines of the Bank of Italy (Istruzioni di Vigilanza per le banche) pursuant to which the issue, trading or placement of securities in the Republic of Italy is subject to prior notification to the Bank of Italy, unless an exemption applies depending, inter alia, on the amount of the issue and the characteristics of the securities, (iii) be conducted in accordance with any relevant limitations or procedural requirements the Bank of Italy or CONSOB may impose upon the offer or sale of the securities, and (iv) be made only by (a) banks, investment firms or financial companies enrolled in the special register provided for in Article 107 of the Banking Law Consolidated Act, to the extent duly authorized to engage in the placement and/or underwriting of financial instruments in Italy in accordance with the Financial Laws Consolidated Act and the relevant implementing regulations; or by (b) foreign banks or financial institutions (the controlling shareholding of which is owned by one or more banks located in the same EU Member State) authorized to place and distribute securities in the Republic of Italy pursuant to Articles 15, 16 and 18 of the Banking Law Consolidated Act, in each case acting in compliance with every applicable law and regulation.

Ireland

Each underwriter has agreed that it will not underwrite the issue of, or place the common shares, otherwise than in conformity than with the provisions of the Irish Investment Intermediaries Act 1995 (as amended), including, without limitation, Sections 9 and 23 thereof and any codes of conduct rules made under Section 37 thereof and the provisions of the Investor Compensation Act 1998.

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Legal Matters

Certain legal matters will be passed upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, and Conyers Dill & Pearman, Hamilton, Bermuda will pass upon the validity of the common shares. Sidley Austin LLP, New York, New York is representing the underwriters in this offering. Skadden, Arps, Slate, Meagher & Flom LLP also represents Fortress on a variety of past and current matters. Sidley Austin LLP has represented us and Fortress on a variety of past and current matters.

Experts

The consolidated financial statements of Aircastle Limited at December 31, 2004 and 2005, for the period from October 29, 2004 (commencement of operations) through December 31, 2004 and for the year ended December 31, 2005, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

We have obtained certain information used in this prospectus from BACK Aviation Services, an aviation consulting firm and aviation market analysis firm, and we have included such information in reliance upon the authority of BACK Aviation Services as the source of such data.

We have obtained certain information used in this prospectus from Simat Helliesen & Eichner, an aviation consulting firm and aviation market analysis firm, and have included such information in reliance upon the authority of Simat Helliesen & Eichner as the source of such data.

We have obtained certain information used in this prospectus from International Bureau of Aviation, an aviation consulting firm, and we have included such information in reliance upon the authority of International Bureau of Aviation as the source of such data.

We have obtained certain information used in this prospectus from Aviation Specialists Group, a provider of aircraft appraisals, market analysis and aviation industry insight, and we have included such information in reliance upon the authority of Aviation Specialists Group as the source of such data.

We have obtained certain information used in this prospectus from ESG Aviation Services and The Airline Monitor, an aviation market analysis firm, and we have included such information in reliance upon the authority of ESG Aviation Services and The Airline Monitor as the source of such data.

Where You Can Find More Information

We have filed a registration statement, of which this prospectus is a part, on Form S-1 with the Securities and Exchange Commission relating to this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and financial statements included with the registration statement. You may read and copy the registration statement, the related exhibits and other material we file with the Commission at the Commission's public reference room in Washington, D.C. at 100 F Street, Room 1580, N.E., Washington, D.C. 20549. You can also request copies of those documents, upon payment of a duplicating fee, by writing to the Commission. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Commission also maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file with the Commission. The website address is http://www.sec.gov. You may also request a copy

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of these filings, at no cost, by writing or telephoning us as follows: Aircastle Limited, c/o Aircastle Advisor LLC, 300 First Stamford Place, 5 th Floor, Stamford, CT 06902, (203) 504-1020.

Upon the effectiveness of the registration statement, we will be subject to the informational requirements of the Exchange Act, and, in accordance with the Exchange Act, will file reports, proxy and information statements and other information with the Commission. Such annual, quarterly and special reports, proxy and information statements and other information can be inspected and copied at the locations set forth above. We will report our financial statements on a year ended December 31. We intend to furnish our shareholders with annual reports containing consolidated financial statements audited by our independent certified public accountants and with quarterly reports containing unaudited consolidated financial statements for each of the first three quarters of each fiscal year.

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Index to Consolidated Financial Statements


Unaudited Pro Forma Consolidated Financial Statements F-2
Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2005 F-3
Unaudited Pro Forma Consolidated Statement of Operations for the Three Months Ended March 31, 2006 F-4
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2006 F-5
Notes to Unaudited Pro Forma Consolidated Financial Statements F-6
Consolidated Financial Statements – December 31, 2004 and 2005  
Report of Independent Registered Public Accounting Firm F-10
Consolidated Balance Sheets at December 31, 2004 and 2005 F-11
Consolidated Statements of Operations for the period from October 29, 2004 (Commencement of Operations) through December 31, 2004 and for the Year Ended December 31, 2005 F-12
Consolidated Statements of Shareholders' Equity for the period from October 29, 2004 (Commencement of Operations) through December 31, 2004 and for the Year Ended December 31, 2005 F-13
Consolidated Statements of Cash Flows for the period from October 29, 2004 (Commencement of Operations) through December 31, 2004 and for the Year Ended December 31, 2005 F-14
Notes to Consolidated Financial Statements F-15
Unaudited Consolidated Financial Statements – March 31, 2005 and 2006
Consolidated Balance Sheets at December 31, 2005 and March 31, 2006 F-33
Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2006 F-34
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2006 F-35
Notes to Unaudited Consolidated Financial Statements F-36

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Unaudited Pro Forma Consolidated Financial Statements

The following unaudited pro forma consolidated financial statements have been derived from the application of pro forma adjustments to our historical financial statements. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2005 and the three months ended March 31, 2006 assumes that Securitization No. 1 occurred on January 1, 2005 and that the proceeds were used to refinance borrowings under our $525 million senior secured credit facility which we refer to as Credit Facility No. 1. The unaudited pro forma consolidated balance sheet as of March 31, 2006 assumes that the following transactions occurred on March 31, 2006:

•  Securitization No. 1 and the related repayment of borrowings under Credit Facility No. 1.
•  The return of $36.9 million to the Fortress shareholders in exchange for the cancellation of 3,693,200 of our common shares.
•  The purchase of 277,000 common shares by employees and a director nominee.
•  The payment of an ordinary dividend from cash on hand in the amount of $0.35 per common share or an aggregate of $14.4 million, declared by our board of directors on July 20, 2006 and payable on July 31, 2006.
•  The payment of an ordinary dividend from cash on hand in the amount of $0.175 per common share, or an aggregate of $7.2 million, to shareholders of record as of August 1, 2006, which is payable on August 15, 2006, for the period commencing on July 1, 2006 and ending on August 15, 2006.

The unaudited pro forma consolidated statements of operations for the three months ended March 31, 2006 and the unaudited pro forma consolidated balance sheet as of March 31, 2006 are further adjusted to give effect to our initial public offering and the related partial repayment of indebtedness.

The unaudited pro forma consolidated financial statements do not purport to represent what our results of operations or financial position would have been if these transactions had occurred on the date indicated and are not intended to project our results of operations or financial position for any future period or date.

The unaudited pro forma adjustments are based on estimates, available information and certain assumptions that we believe are reasonable and may be revised as additional information becomes available. The pro forma adjustments and primary assumptions are described in the accompanying notes.

You should read our unaudited pro forma consolidated financial statements and the related notes hereto in conjunction with our historical financial statements and the related notes thereto and the other information contained in ‘‘Capitalization,’’ ‘‘Description of Indebtedness,’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ included elsewhere in this prospectus.

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Aircastle Limited and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2005
(Dollars in thousands, except per share data)


  Historical Pro Forma
Adjustments
Pro Forma Adjustments
for Offering
Pro Forma,
As Adjusted
Revenues  
 
 
 
 
Lease rentals $ 32,978
$       —
$ 32,978
$
$ 32,978
Interest income 2,942
2,942
2,942
Other revenue 106
106
106
Total revenues 36,026
36,026
36,026
Expenses  
 
 
 
 
Depreciation 14,460
14,460
14,460
Interest (net of interest income of $1,364) 7,739
1,715
 (A)
9,454
9,454
Selling, general and administrative (including share based payments expense of $409) 12,595
12,595
12,595
Other expenses 1,171
1,171
1,171
Total expenses 35,965
1,715
37,680
37,680
Income (Loss) from continuing operations before  
 
 
 
 
income taxes 61
(1,715
)
(1,654
)
(1,654
)
Income tax provision 940
(95
)(B)
845
845
(Loss) from continuing operations $ (879
)
$ (1,620
)
$ (2,499
)
$
$ (2,499
)
Basic earnings (loss) per share from continuing operations (c) $ (.02
)
 
$ (.06
)
 
$ (.06
)
Diluted earnings (loss) per share from continuing operations (c) $ (.02
)
 
$ (.06
)
 
$ (.06
)

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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Aircastle Limited and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For the Three Months Ended March 31, 2006
(Dollars in thousands, except per share amounts)


  Historical Pro Forma
Adjustments
Pro Forma Adjustments
for Offering
Pro Forma,
As Adjusted
 
Revenues  
 
 
 
 
 
Lease rentals $ 31,371
$       —
$ 31,371
$
$ 31,371
 
Interest income 1,641
1,641
1,641
 
Total revenues 33,012
33,012
33,012
 
Expenses  
 
 
 
 
 
Depreciation 9,915
9,915
9,915
 
Interest (net of interest income of $1,063) 7,717
872
 (A)
8,589
(2
)(L)
8,587
 
Selling, general and administrative (including share-based payments expense of $1,292) 5,954
5,954
5,954
 
Other expenses 641
641
641
 
Total expenses 24,227
872
25,099
(2
)
25,097
 
Income from continuing operations before income
taxes
8,785
(872
)
7,913
2
7,915
 
Income tax provision 1,004
(101
)(B)
903
903
 
Income from continuing operations $ 7,781
$ (771
)
$ 7,010
$ 2
$ 7,012
 
Basic earnings (loss) per share from continuing operations (c) $ .19
 
$ .17
 
.17
 
Diluted earnings (loss) per share from continuing operations (c) $ .19
 
$ .17
 
$ .17
 

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 2006
(Dollars in thousands, except share data)


  As of March 31, 2006
  Historical Pro Forma
Adjustments
Pro Forma Adjustments
for Offering
Pro Forma,
As Adjusted
Assets  
 
 
 
 
Cash and cash equivalents $ 27,554
$ 50,339
 (D)
$ 77,893
173,446
(M)
$ 251,339
Accounts receivable 3,492
      —
3,492
          
3,492
Debt securities, available for sale 120,558
120,558
 
120,558
Restricted cash and cash equivalents 92,666
(34,800
)(E)
57,866
 
57,866
Flight equipment held for sale
 
 
Flight equipment held for lease, net of accumulated depreciation of $24,355 941,692
941,692
 
941,692
Leasehold improvements, furnishings and equipment, net of accumulated depreciation of $278 1,615
1,615
 
1,615
Fair value of derivative assets 13,950
(11,524
)(F)
2,426
 
2,426
Other assets 16,935
10,244
 (G)
27,179
 
27,179
Total assets $ 1,218,462
$ 14,259
$ 1,232,721
$ 173,446
$ 1,406,167
Liabilities and Shareholders' Equity  
 
 
 
 
Liabilities  
 
 
 
 
Borrowings under credit facilities $ 568,859
(486,973
)(H)
81,886
(8,554
)(N)
73,332
Securitization debt
560,000
(H)
560,000
 
560,000
Accounts payable, accrued expenses and other liabilities 19,193
51
 (I)
19,244
    
19,244
Payable to affiliates 233
233
 
233
Lease rentals received in advance 7,161
7,161
 
7,161
Repurchase agreements 84,434
84,434
 
84,434
Security deposits and maintenance payments 62,518
62,518
 
62,518
Fair value of derivative liabilities 264
264
 
264
Total liabilities 742,662
73,078
815,740
(8,554
)
807,186
Commitments and contingencies — Note 11  
 
 
 
 
Shareholders' Equity  
 
 
 
 
Common shares, $.01 par value, 100,000,000 shares authorized, issued and outstanding; 44,408,200 shares actual; 40,992,000 shares pro forma; and 50,082,900 shares pro forma, as adjusted 444
(34
)(J)
410
91
(O)
501
Additional paid-in capital 438,189
(30,804
)(J)
407,385
181,909
(O)
589,294
(Accumulated deficit) retained earnings 9,943
(27,981
)(K)
(18,038
)
 
(18,038
)
Accumulated other comprehensive income 27,224
27,224
 
27,224
Total shareholders' equity 475,800
(58,819
)
416,981
182,000
598,981
Total liabilities and shareholders' equity $ 1,218,462
$ 14,259
$ 1,232,721
$ 173,446
$ 1,406,167

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Pro Forma
Consolidated Financial Statements

    
(Dollars in thousands, except per share amounts)

1.  Adjustments to Pro Forma Consolidated Statements of Operations and Balance Sheet

(A)    Interest Expense

On June 15, 2006 we closed our first aircraft lease portfolio securitization which we refer to as Securitization No. 1. The pro forma adjustment to interest expense reflects the refinancing of borrowings under our Credit Facility No. 1 which had an effective interest rate of 5.87% and 6.25% for 2005 and the three months ended March 31, 2006, respectively, with proceeds from Securitization No. 1 at an estimated 6.6% effective interest rate.


  Year Ended
December 31, 2005
Three Months
Ended
March 31, 2006
Elimination of interest expense due to extinguishments of existing debt (1) $ (7,197
)
$ (6,556
)
Additions to interest expense due to Securitization No. 1 (2) 8,912
7,428
Pro forma interest expense adjustment $ 1,715
$ 872
(1) As of December 31, 2005 and March 31, 2006 there was $380.6 million and $487.0 million of debt outstanding on Credit Facility No. 1. The reductions in interest expense due to extinguishment of existing debt assumes that the securitization proceeds are used to extinguish all outstanding debt on Credit Facility No. 1. The pro forma adjustment therefore eliminates all interest expense associated with Credit Facility No. 1.
(2) Additions to interest expense due to new debt assumes a fixed-rate financing cost of 6.60% per annum on Securitization No. 1 which includes fixed-rate hedging contract rates and recurring administrative costs and amortization of deferred issuance costs. The weighted average balance during 12 months ended December 31, 2005 and three months ended March 31, 2006 was $135.0 million and $450.2 million respectively.

The above calculation does not include the effects of a one-time write-off of $2,056 of deferred financing costs associated with the refinancing of Credit Facility No. 1 which was recognized in June 2006.

(B)    Income Taxes

The pro forma adjustment reflects the income tax effect of pro forma interest expense adjustments and was determined by applying the effective tax rate of each subsidiary to the pro forma increases in interest expense attributable to that subsidiary's pro forma borrowings. The effective tax rates of the subsidiaries range from 0% to 30%.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Pro Forma
Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

(C)    Pro Forma Outstanding Shares


  Historical Pro Forma
Adjustments
Pro Forma Adjustments
for Offering
Pro Forma,
As Adjusted
December 31, 2005  
 
 
 
 
Basic earnings (loss) per share:  
 
 
 
 
Weighted average shares outstanding 40,000,000
40,000,000
40,000,000
Diluted earnings (loss) per share:  
 
 
 
 
Weighted average shares outstanding 40,000,000
40,000,000
40,000,000
March 31, 2006  
 
 
 
 
Basic earnings (loss) per share:  
 
 
 
 
Weighted average shares outstanding 41,322,604
41,322,604
427,273
41,749,877
Diluted earnings (loss) per share:  
 
 
 
 
Weighted average shares outstanding 41,402,952
41,402,952
427,273
41,830,225

The adjustments for the offering include shares assumed to be issued at the beginning of the period for net proceeds of $8,554. We have not included 8,663,627 shares in this computation as the proceeds have not been assumed to be used to pay debt during this period.

(D)    Cash and Cash Equivalents

The pro forma adjustment reflects the net impact on cash and cash equivalents as a result of:


Excess proceeds from Securitization No. 1 $ 60,727
Release of maintenance reserves and the elimination of certain restrictions contained in Credit Facility No. 1 34,800
Cash proceeds from termination of interest rate swap 11,524
Repurchase of shares from Fortress (36,932
)
Payment of ordinary dividends declared by the Board of Directors subsequent to March 31, 2006 (21,550
)
Sale of shares to employees and director nominee 1,770
  $ 50,339

(E)    Restricted Cash and Cash Equivalents

The pro forma adjustment reflects the elimination of the restriction on cash pursuant to Credit Facility No. 1 which is assumed to be refinanced in connection with Securitization No. 1 which does not place such restrictions on our ability to use cash received from lessees.

(F)    Fair Value of Derivative Instruments

The pro forma adjustment reflects the termination of existing interest rate swaps used to hedge future cash flows associated with variable interest borrowings under Securitization No. 1.

(G)    Deferred Financing Fees

The pro forma adjustment reflects the write-off of deferred financing fees associated with Credit Facility No. 1 of $2,056 which was refinanced with proceeds from Securitization No. 1 and capitalization of $12,300 of financing fees related to Securitization No. 1.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Pro Forma
Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

(H)    Securitization No. 1

The pro forma adjustment reflects the repayment of borrowings under Credit Facility No. 1 with proceeds from Securitization No. 1.

(I)    Accounts Payable, Accrued Expenses and Other Liabilities

The pro forma adjustment reflects the liability for taxes incurred in connection with employee purchases of our common shares.

(J)    Capital Transactions

The pro forma adjustment reflects the return of $36,932 to the Fortress shareholders in exchange for the cancellation of 3,693,200 of our common shares and the purchase of 277,000 of our common shares by employees and a director nominee for aggregate proceeds of $1,770.


  Common Stock Additional Paid-in
Capital
•Return of $36.9 million to Fortress shareholders in exchange for cancellation of 3,693,200 shares $(37) $(36,895)
•    Purchase of 277,000 shares by employees and a director nominee 3 6,091
  $(34) $(30,804)

The pro forma adjustments to additional paid in capital related to the return of $36.9 million to the Fortress shareholders and related cancellation of shares equals the total price paid for the shares less the par value of the shares. The pro forma adjustment related to the purchase of 277,000 shares by employees and a director nominee is equal to the aggregate fair value of the stock at $22.00 per share times the number of shares purchased less the par value of the shares.

(K)    (Accumulated Deficit) Retained Earnings

The pro forma adjustment reflects the following items:


Write-off of deferred financing fees associated with Credit Facility No. 1 which was refinanced with the proceeds from Securitization No. 1 (2,056
)
Compensation expense, net of tax, associated with the purchase of shares by employees and a director nominee, at amounts less than the fair value of the shares (4,375
)
Payment of an ordinary dividend from current earnings in the amount of $0.35 per common share or an aggregate of $14.4 million, declared by our board of directors on July 20, 2006 and payable on July 31, 2006 (14,367
)
Payment of an ordinary dividend from cash on hand in the amount of $0.175 per common share, or an aggregate of $7.2 million, expected to be declared and payable on August 15, 2006. (7,183
)
  $ (27,981
)

F-8




Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Pro Forma
Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

(L)    Interest Expense

The adjustment to interest expense resulting from the offering reflects our intent to use a portion of the proceeds to repay in full borrowings under Credit Facility No. 2, which closed on February 28, 2006. The first borrowing under Credit Facility No. 2 occurred on March 31, 2006. The adjustment related to the offering eliminates the actual interest expense of $2 incurred on Credit Facility No. 2 for that one day.

(M)    Cash and Cash Equivalents

The adjustment for the offering reflects the net impact on cash and cash equivalents as a result of:


Gross proceeds from the offering $ 200,000
Underwriters' discount (14,000
)
Expenses related to the offering (4,000
)
Repayment of Credit Facility No. 2 (8,554
)
  $ 173,446

(N)    Borrowings under Credit Facilities

The adjustment for the offering reflects our intent to use a portion of the proceeds of the offering to repay in full borrowings under Credit Facility No. 2, which had $8,554 outstanding at March 31, 2006.

(O)    Capital Transactions

The adjustments related to the offering impact our common shares and additional paid in capital as follows:


  Common Stock Additional Paid-in
Capital
Gross proceeds from offering $91 $ 199,909
Underwriters discount (14,000
)
Estimated underwriting expenses (4,000
)
  $91 $ 181,909

F-9




Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Aircastle Limited

We have audited the accompanying consolidated balance sheets of Aircastle Limited and subsidiaries as of December 31, 2004 and 2005 and the related consolidated statements of operations, shareholders' equity and cash flows for the period October 29, 2004 (commencement of operations) through December 31, 2004 and for the year ended December 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Aircastle Limited and subsidiaries at December 31, 2004 and 2005, and the consolidated results of their operations and their cash flows for the period October 29, 2004 (commencement of operations) through December 31, 2004 and for the year ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
March 31, 2006

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Table of Contents

Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)


  December 31,
  2004 2005
Assets  
 
Cash and cash equivalents $
$ 79,943
Accounts receivable 350
3,115
Receivable from shareholders 7,585
Debt securities, available-for-sale
26,907
Restricted cash and cash equivalents
40,652
Flight equipment held for sale
54,917
Flight equipment held for lease, net of accumulated depreciation of $390 and $14,685 94,430
746,124
Leasehold improvements, furnishings and equipment, net of accumulated depreciation of $0 and $165 30
1,529
Fair value of derivative assets
3,608
Other assets 2,586
10,737
Total assets $ 104,981
$ 967,532
Liabilities and Shareholders’ Equity  
 
Liabilities  
 
Borrowings under credit facilities $
$ 490,588
Accounts payable, accrued expenses and other liabilities 272
12,038
Payable to affiliates 1,098
105
Lease rentals received in advance 902
6,241
Repurchase agreements
8,665
Security deposits and maintenance payments 3,474
37,089
Fair value of derivative liabilities
1,870
Total liabilities 5,746
556,596
Commitment and Contingencies – Note 10  
 
Shareholders’ Equity  
 
Common shares, $.01 par value, 100,000,000 shares authorized, 40,000,000 shares issued and outstanding 400
400
Additional paid-in capital 100,300
400,009
Accumulated deficit (1,465
)
(1,237
)
Accumulated other comprehensive income
11,764
Total shareholders’ equity 99,235
410,936
Total liabilities and shareholders’ equity $ 104,981
$ 967,532

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share data)


  Period from
October 29
(Commencement
of Operations) to
December 31, 2004
Year Ended
December 31, 2005
Revenues  
 
Lease rentals $ 78
$ 32,978
Interest income
2,942
Other revenue
106
Total revenues 78
36,026
Expenses  
 
Depreciation 390
14,460
Interest (net of interest income of $9 and $1,364) (9
)
7,739
Selling, general and administrative (including share based payments expense of $0 and $409) 1,117
12,595
Other expenses 45
1,171
Total expenses 1,543
35,965
Income (Loss) from continuing operations before  
 
income taxes (1,465
)
61
Income tax provision
940
(Loss) from continuing operations (1,465
)
(879
)
Earnings from discontinued operations, net of income taxes
1,107
Net income (loss) $ (1,465
)
$ 228
Basic earnings (loss) per share:  
 
Loss from continuing operations $ (.04
)
$ (.02
)
Earnings from discontinued operations, net of income taxes
.03
Net income (loss) $ (.04
)
$ .01
Diluted earnings (loss) per share:  
 
Loss from continuing operations $ (.04
)
$ (.02
)
Earnings from discontinued operations, net of income taxes
.03
Net income (loss) $ (.04
)
$ .01

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(Dollars in thousands)


  Common Shares Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Income
Total
Shareholders’
Equity
  Shares Amount
Shareholders’ equity, October 29, 2004 (commencement of operations)
$
$
$
$
$
Issuance of common shares 40,000,000
400
400
Capital contributions
100,300
100,300
Net (loss)
(1,465
)
(1,465
)
Balance, December 31, 2004 40,000,000
400
100,300
(1,465
)
99,235
Capital contributions
299,300
299,300
Amortization of share based payments
409
409
Comprehensive income:  
 
 
 
 
 
Net income
228
228
Other comprehensive income:  
 
 
 
 
 
Change in fair value of derivatives
1,864
1,864
Unrealized appreciation on debt securities
9,900
9,900
Total comprehensive income  
 
 
 
 
11,992
Balance, December 31, 2005 40,000,000
$ 400
$ 400,009
$ (1,237
)
$ 11,764
$ 410,936

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)


  Period from
October 29
(Commencement
of Operations) to
December 31, 2004
Year Ended
December 31, 2005
Cash flows from operating activities  
 
Net income (loss) $ (1,465
)
$ 228
Adjustments to reconcile net (loss) income to net cash provided by operating activities (inclusive of amounts related to discontinued operations):  
 
Depreciation 390
14,460
Amortization 30
2,072
Deferred income taxes
333
Accretion of purchase discount on debt securities
(787
)
Share based payments expense
409
Ineffective portion of cash flow hedges
126
(Loss) on sale of debt securities
7
Changes in certain assets and liabilities  
 
Restricted cash and cash equivalents
(40,652
)
Accounts receivables (350
)
(2,765
)
Other assets (61
)
(535
)
Payable to affiliates 1,098
(988
)
Security deposits and maintenance payments 3,474
33,615
Accounts payable, accrued expenses and other liabilities 272
9,700
Lease rentals received in advance 902
5,339
Net cash provided by operating activities 4,290
20,562
Cash flows from investing activities  
 
Acquisition and improvement of flight equipment (97,405
)
(664,643
)
Investment in purchase of flight equipment held for sale
(54,917
)
Purchase of debt securities
(29,376
)
Leasehold improvements, furnishings and equipment
(2,892
)
Deposits on aircraft purchases
(3,465
)
Principal repayments on debt securities
10,461
Proceeds from sale of debt securities
2,688
Net cash used in investing activities (97,405
)
(742,144
)
Cash flows from financing activities  
 
Issuance of common shares 400
Credit facility borrowings
490,588
Deferred financing costs
(4,613
)
Proceeds from repurchase agreements
8,679
Principal repayment of repurchase agreements
(14
)
Capital contributions 92,715
306,885
Net cash provided by financing activities 93,115
801,525
Net increase in cash and cash equivalents
79,943
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period $
$ 79,943
Supplemental disclosures of cash flow information  
 
Cash paid during the period for interest $
$ 6,695

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements

    
(Dollars in thousands, except per share amounts)

1.  Organization

Aircastle Limited, formerly Aircastle Investment Limited, (‘‘Aircastle’’, the ‘‘Company’’, ‘‘we’’, ‘‘our’’) is a Bermuda company that was incorporated on October 29, 2004 by Fortress Investment Group LLC and certain of its affiliates (together, the ‘‘Shareholders,’’ or ‘‘Fortress’’) under the provisions of Section 14 of the Companies Act 1981 of Bermuda. Aircastle’s business is investing in aviation assets, including acquiring, managing and leasing commercial jet aircraft to airlines throughout the world and investing in aircraft related debt investments.

Pursuant to a Shareholders Agreement executed November 24, 2004 (‘‘the Shareholders Agreement’’), the Shareholders committed to contribute $400,000 in initial equity to Aircastle. As of December 31, 2005, the Shareholders had completed making their initial $400,000 cash capital contribution.

The Shareholders Agreement requires that all transfers of shares by shareholders require the prior approval of the Board of Directors.

2.  Summary of Significant Accounting Policies

Basis of Presentation

Aircastle is a holding company that conducts its business through subsidiaries. Aircastle owns directly or indirectly all of the outstanding common shares of its subsidiaries. The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (‘‘GAAP’’).

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of Aircastle and all of its subsidiaries. All significant intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. While Aircastle believes that the estimates and related assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Aircastle considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

Restricted cash and cash equivalents consists primarily of maintenance deposits and security deposits received from lessees pursuant to the terms of various lease agreements, and rent collections held in lockbox accounts pursuant to our credit facilities.

All of our cash and cash equivalents and restricted cash and cash equivalents are held by three major financial institutions.

Debt Securities

Aircastle accounts for debt securities in accordance with Statement of Financial Accounting Standards (‘‘SFAS’’) No. 115, Accounting for Certain Investments in Debt and Equity Securities . As of December 31, 2005 all of our debt securities are classified as available-for-sale and are reported at fair value, based on quoted market prices, with unrealized gains and losses included in shareholders’ equity as a component of accumulated other comprehensive income, net of applicable taxes, if any. The cost of securities sold is based on the specific identification method. Interest on these securities is accrued as earned and included in interest income. Unrealized losses considered to be ‘‘other-than-temporary’’ are recognized in earnings.

Flight Equipment Held for Lease

Flight equipment held for lease is stated at cost and depreciated using the straight-line method over a 25 year life from the date of manufacture to estimated residual values. Estimated residual values are generally determined to be approximately 15% of the manufacturer’s estimated realized price for the flight equipment when new. Management may, at its discretion, make exceptions to this policy on a case-by-case basis when, in its judgment, the residual value calculated pursuant to this policy does not appear to reflect current expectations of residual values. Examples of situations where exceptions may arise include, but are not limited to:

•  Flight equipment where estimates of the manufacturer’s realized sales prices are not relevant (e.g., freighter conversions)
•  Flight equipment where estimates of the manufacturer’s realized sales prices are not readily available (e.g., older flight equipment)
•  Flight equipment which may have a shorter useful life due to obsolescence.

Major improvements and modifications incurred in connection with the acquisition of aircraft that are required to get the aircraft ready for initial service are capitalized and depreciated over the remaining life of the flight equipment.

Lease acquisition costs related to reconfiguration of the aircraft cabin and other lessee specific modifications are capitalized and amortized into expense over the initial life of the lease, assuming no lease renewals and are included in other assets.

Cash incentives paid to lessees are capitalized as prepaid lease incentive costs and are amortized into revenue over the initial life of the lease, assuming no lease renewals and are included in other assets.

Generally, lessees are required to provide for repairs, scheduled maintenance and overhauls during the lease and to be compliant with return conditions of flight equipment at lease

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

termination. Costs paid by us of scheduled maintenance and overhauls in excess of amounts paid by lessees are capitalized and depreciated over a period to the next scheduled maintenance or overhaul event. We have not incurred such expenditures to date. Miscellaneous repairs are expensed when incurred.

Lease premiums relate to leases acquired with the purchase of an aircraft that were determined to be above fair value. This premium is capitalized and amortized using the straight-line method over the initial lease term assuming no renewals, and is included in other assets.

Flight Equipment Held for Sale

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (‘‘SFAS No. 144’’), flight equipment held for sale is stated at the lower of carrying value or fair value less estimated costs to sell.

Flight equipment held for sale is not depreciated and related deferred costs are not amortized. Subsequent changes to the asset’s fair value, either increases or decreases, are recorded as adjustments to the carrying value of the flight equipment; however, any such adjustment would not exceed the original carrying value of the flight equipment held for sale. The rent received from flight equipment held for sale and related interest expense, net of income taxes, are reported in income from discontinued operations.

Impairment of Flight Equipment

In accordance with SFAS No. 144, Aircastle reviews its flight equipment for impairment when indicators of impairment exist. Impairment exists when the carrying value of an aircraft exceeds the sum of the undiscounted cash flows and its fair value. Our review for impairment includes a consideration of the existence of impairment indicators including third party appraisals of our aircraft, adverse changes in market conditions for specific aircraft types and the occurrence of significant adverse changes in general industry and market conditions that could affect the fair value of our aircraft. When indicators of impairment suggest that the carrying value of an aircraft may not be recoverable we determine whether SFAS No. 144’s impairment recognition criteria have been met by evaluating whether the carrying value of the asset exceeds the undiscounted future cash flows expected to result from the use and eventual disposition of the asset. The preparation of the undiscounted cash flows requires the use of assumptions and estimates, including the level of future rents, the residual value expected to be realized upon disposition of the asset, estimated downtime between re-leasing events and the amount of re-leasing costs.

If we determine that the carrying value may not be recoverable, we will assess the fair values of the assets. In determining the fair value of the assets, we consider market trends, published values for similar aircraft, recent transactions of similar aircraft and quotes from third party appraisers.

Security Deposits and Maintenance Payments

Most of Aircastle’s operating leases require the lessee to pay Aircastle a security deposit or provide a letter of credit. At December 31, 2004 and 2005, security deposits represent cash

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

received from the lessee that are held on deposit until lease expiry. Aircastle’s operating leases also obligate the lessees to maintain flight equipment and comply with all governmental requirements applicable to the flight equipment, including, without limitation, operational, maintenance, registration requirements and airworthiness directives. In all of Aircastle’s operating leases, the lessee is obligated to pay maintenance payments or end of lease payments for certain scheduled maintenance, which may be used to reimburse lessees for costs of certain agreed upon maintenance. We do not record any portion of maintenance payments as revenue at the time of receipt.

Income Taxes

Aircastle provides for income taxes under the provisions of SFAS No. 109, Accounting for Income Taxes (‘‘SFAS No. 109’’). SFAS No. 109 requires an asset and liability based approach in accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement and tax basis of existing assets and liabilities using enacted rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount estimated by Aircastle to be realizable.

Hedging Activities

In the normal course of business, we utilize derivative financial instruments to manage our exposure to interest rate risks. We account for derivatives in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (‘‘SFAS No. 133’’). All derivatives are recognized on the balance sheet at their fair value. Through December 31, 2005 all of our derivative activities were cash flow hedges. On the date that we enter into a derivative contract, we formally document all relationships between hedging instruments and hedged items, as well as risk management objectives and strategies for undertaking various hedge transactions.

This includes linking all derivatives that are designated as cash flow hedges to specific assets or liabilities on the balance sheet. We also assess (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. If it were to be determined that a derivative is not (or has ceased to be) highly effective as a hedge, we would discontinue hedge accounting prospectively.

Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are recorded in accumulated other comprehensive income, until earnings are affected by the variability of cash flows of the hedged transaction (e.g., until periodic settlements of the variable rate liability are recorded in earnings). Any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative exceeds the variability in the cash flows of the forecasted transaction) is recorded in current period earnings. Changes in the fair value of derivative financial instruments that did not qualify for hedge treatment under SFAS No. 133 are reported in current period earnings.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

Repurchase Agreements

Debt securities sold under agreements to repurchase (‘‘repurchase agreements’’) normally do not constitute economic sales and are therefore treated as collateralized financing transactions and are carried at the amount of cash received. Repurchase agreements are recorded as liabilities, with the underlying debt securities sold continuing to be classified as debt securities available-for-sale. Liabilities recorded under these agreements are accounted for on an accrual basis with interest reported in interest expense. At December 31, 2005, substantially all of our repurchase agreements are with parties from whom we did not originally acquire the debt securities.

Lease Rentals

We lease flight equipment under net operating leases with lease terms typically ranging from 3 to 7 years. We generally do not offer renewal terms or purchase options to our lessees, although certain of our operating leases allow the lessee the option to extend the lease for an additional term. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the initial lease, assuming no renewals. Operating lease rentals that adjust based on a LIBOR index are recognized on a straight-line basis over the period the rentals are fixed and accruable. Revenue is not recognized when collection is not reasonably assured.

Comprehensive Income

Comprehensive income consists of net income (loss) and other gains and losses, net of income taxes, if any, affecting shareholders’ equity that under GAAP are excluded from net income (loss). At December 31, 2005 such amount consists of the effective portion of fluctuations in the fair value of derivatives designated as cash flow hedges and unrealized gains on the fair value of debt securities classified as available-for-sale.

Share Based Compensation

Aircastle adopted SFAS No. 123(R), Share Based Payment (‘‘SFAS No. 123(R)’’), effective January 1, 2005. Pursuant to SFAS No. 123(R), Aircastle recognizes compensation cost relating to share-based payment transactions in the financial statements based on the fair value of the equity instruments issued. Aircastle uses the straight line method of accounting for compensation cost on share-based payment awards that contain pro-rata vesting provisions.

Deferred Financing Costs

Costs in connection with borrowings are deferred and amortized over the life of the revolving credit facility and are charged to interest expense.

Leasehold Improvements, Furnishings and Equipment

Improvements made in connection with the leasing of office facilities are capitalized as leasehold improvements and are amortized on a straight line basis over the minimum lease period. Furnishings and equipment are capitalized at cost and are amortized over the estimated life of the related assets which range between 3 and 5 years.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

Impact of Recently Issued Accounting Standard

In November 2005, the Financial Accounting Standards Board (‘‘FASB’’) issued Staff Position No. FAS 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (‘‘FSP 115-1’’). FSP 115-1 provides accounting guidance for determining and measuring other-than-temporary impairments of debt and equity securities, and confirms the disclosure requirements for investments in unrealized loss positions as outlined in EITF issue 03-01, The Meaning of Other-Than-Temporary Impairments and its Application to Certain Investments . The accounting requirements of FSP 115-1 are effective for Aircastle on January 1, 2006 and are not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

3.  Fair Value of Financial Instruments

Aircastle’s financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, debt securities, accounts payable, amounts borrowed under credit facilities, repurchase agreements and cash flow hedges. The fair value of cash, cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short term nature. Borrowings under our credit facilities and repurchase agreements bear floating rates of interest which reset monthly or quarterly to a market benchmark rate plus a credit spread. We believe that, for similar financial instruments with comparable credit risks, the effective rate of these agreements approximates market rates. Accordingly, the carrying amounts of these agreements are believed to approximate their fair values. The fair value of our debt securities and cash flow hedges are generally available from broker quotations.

4.  Lease Rental Revenue and Flight Equipment Held for Lease

Minimum future annual rentals contracted to be received under our existing operating leases at December 31, 2005 are as follows:


Year Ending December 31 Amount
2006 $ 113,000
2007 103,900
2008 92,100
2009 73,800
2010 58,100
Thereafter 98,500
  $ 539,400

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

Geographic concentrations of lease rental revenues earned from flight equipment held for lease are as follows:


  Period from
October 29, 2004
(commencement of
operations) through
December 31, 2004
Year ended
December 31, 2005
Region Number of
Aircraft
Revenue
%
Number of
Aircraft
Revenue
%
Europe 1
100
%
16
40
%
Asia 1
9
32
%
North America
4
19
%
Latin America
3
9
%
Off-lease 1
  3
100
%
32
100
%

The classification of regions above and below is determined based on the principal location of the lessee of the aircraft.

For the year ended December 31, 2005 four customers accounted for 55.0% of all lease revenue. The lease rental income, as a percent of total lease income, for these four customers was 19.3%, 13.4%, 11.4% and 10.9%. No other customer was responsible for lease revenue in excess of 10%.

Amortization of lease premiums related to certain acquired operating leases was $30 and $734 for 2004 and 2005, respectively, and is netted against lease rental revenue.

Geographic concentrations of net book values of flight equipment held for lease were as follows:


  December 31, 2004 December 31, 2005
Region Number of
Aircraft
Net Book
Value
%
Number of
Aircraft
Net Book
Value
%
Europe 1
33
%
16
40
%
Asia 1
30
%
9
26
%
North America
4
29
%
Latin America
3
5
%
Off-lease 1
37
%
  3
100
%
32
100
%

At December 31, 2004 and 2005 lease acquisition costs included in other assets was $0 and $775, respectively. At December 31, 2004 and 2005 prepaid lease incentive costs included in other assets was $0 and $453, respectively.

5.  Discontinued Operations and Flight Equipment Held for Sale

As of December 31, 2005, we had one aircraft classified as flight equipment held for sale. The flight equipment has been under lease since the date of the acquisition and revenue and related interest expense has been recorded as part of earnings from discontinued operations, net of

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

income tax provision. Earnings from discontinued operations for the year ended December 31, 2005 were as follows:


Earnings from discontinued operations  
Lease rental revenue $ 1,626
Interest expense (404
)
Earnings before income tax provision 1,222
Income tax provision (115
)
Earnings from discontinued operations $ 1,107

The aircraft is financed in part using $36,666 borrowed under one of our credit facilities. Interest expense allocated to the discontinued operation was directly attributable to the funds borrowed to purchase the aircraft. We are actively marketing this flight equipment and expect to sell it within one year from acquisition. The net cash flows from the aircraft are expected to continue until the aircraft is sold.

6.  Debt Securities

At December 31, 2005 all of our debt securities are corporate debt obligations and are classified as available-for-sale. These debt obligations are interests in pools of loans and are collateralized by interests in commercial aircraft of which $4,066 are investment grade and $22,841 are subordinate to other debt related to such aircraft. The aggregate fair value of our debt securities at December 31, 2005 was $26,907. All of our debt securities had unrealized gains at the end of 2005. The total unrealized gain of $9,900 is included in accumulated other comprehensive income.

One of our debt securities with a fair value of $7,041 at December 31, 2005 has a stated maturity in 2010. Our remaining three debt securities, with an aggregate fair value of $19,866, have remaining terms to stated maturity in excess of ten years after December 31, 2005. All of our debt securities provide for the periodic payment of both principal and interest and are subject to prepayment and/or acceleration depending on certain events, including sale of the underlying collateral aircraft and events of default. Therefore, the expected maturity of our debt securities may be less than the stated maturities.

7.  Borrowings Under Credit Facilities

We used two separate credit facilities to fund a portion of the purchase price of our acquisitions of flight equipment. These borrowings are secured by our interests in the leases on the flight equipment, including our rights to receive rents and other income from the flight equipment, our ownership interests in the special purpose entities that own the flight equipment, funds on deposit in lockbox accounts established to collect rents and any security deposits and/or maintenance payments received from the lessees and certain other interests.

In February 2005, we entered into a $300,000 revolving credit facility with a group of banks to finance the acquisition of flight equipment and related improvements. The interest rate on the facility is the one month LIBOR plus 1.50%. The interest rate, which resets monthly, was 5.87% at

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

December 31, 2005. Additionally, we are required to pay a 0.25% fee on the amount of any unused portion of the total committed facility. The facility required monthly payments of interest only until the end of the revolving period on February 24, 2006. Thereafter, the facility requires monthly payments of interest and amortization of principal through the final scheduled termination of the facility on February 24, 2007. In August 2005, the terms of the credit facility were amended to increase the amount of the facility to $600,000. At December 31, 2005, we had borrowed $380,590 and had $219,410 unused and available on the facility. Scheduled principal installments to be paid on this credit facility in 2006 and 2007 are $19,830 and $360,760, respectively.

In October 2005 Aircastle entered into a credit facility for $109,998 with a bank to finance the acquisition of three aircraft. The interest rate on the facility is one month LIBOR plus 1.50%. The interest rate, which resets monthly, was 5.86% at December 31, 2005. The facility, which matures on October 24, 2006, provides for the monthly payment of interest only. On or prior to maturity, we plan to refinance this credit facility with long-term financing.

8.  Repurchase Agreements

We entered into repurchase agreements to fund a portion of the purchase price of certain of our debt securities. The repurchase agreements are secured by liens on the debt securities that were acquired. At December 31, 2005, debt securities available-for-sale with a fair value of $11,107 were pledged as collateral for the repurchase agreements. The repurchase agreements provide for the payment of interest at LIBOR based rates plus spreads ranging between 0.50% and 0.75% (4.88% to 5.20% at December 31, 2005). At December 31, 2005, the repurchase agreements are scheduled to mature through June 2006. Upon maturity, we plan to refinance the repurchase agreements on similar terms and conditions. The weighted average interest rate paid on these repurchase agreements at December 31, 2005 was 5.09%.

9.  Income Taxes

Income taxes have been provided based upon the tax laws and rates in the countries in which operations are conducted and income is earned. The Company received an assurance from the Bermuda government that it would be exempted from local income, withholding and capital gains taxes until March 2016. Consequently, the provision for income taxes recorded relates to income earned by certain subsidiaries of the Company which are located in or earn income in jurisdictions that impose income taxes, primarily the United States and Ireland.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

The sources of income (loss) from continuing operations before income taxes for the year ended December 31, 2005 are as follows:


  Year Ended
December 31, 2005
Bermuda $ (2,651
)
Non-Bermuda 2,712
  $ 61

The components of income tax provision from continuing operations for the year ended December 31, 2005 consist of the following:


  Year Ended
December 31, 2005
Current $ 607
Deferred 333
Total $ 940

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2005 consist of the following:


  Year Ended
December 31, 2005
Deferred tax assets  
Share based payments $ 152
Net operating loss carryforward 49
Other 6
Total deferred tax assets 207
Deferred tax liabilities  
Accelerated depreciation (333
)
U.S. withholding taxes on unremitted earnings (207
)
Total deferred tax liabilities (540
)
Net deferred tax liability $ (333
)

The Company has approximately $390 of net operating loss carryforwards available to offset future taxable income in Ireland. Deferred tax assets and liabilities are included in other assets and accounts payable and accrued liabilities, respectively, in the accompanying balance sheet.

We do not expect to incur income taxes on future distributions of undistributed earnings of non-U.S. subsidiaries and, accordingly, no deferred income taxes have been provided for the distribution of such earnings. Withholding taxes have been provided on unremitted U.S. earnings.

10.  Commitments and Contingencies

Rent expense, primarily for the corporate office and sales and marketing facilities, was approximately $293 for the year ended December 31, 2005. Amounts for 2005 include $43 of rent expense paid to Fortress for occupancy of shared space.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

As of December 31, 2005 Aircastle is obligated, under non-cancelable operating leases relating principally to office facilities, for future minimum lease payments in each of the years ending December 31, as follows:


2006 $ 500
2007 500
2008 500
2009 500
2010 500
Thereafter 1,000
  $ 3,500

At December 31, 2005, Aircastle had letters of intent to acquire nine aircraft for an estimated purchase price of $191,620. Although the closing of each purchase is contingent on the seller meeting certain conditions precedent, the Company expects that all of the aircraft will be acquired during the first quarter of 2006. The purchase price of the aircraft under these letters of intent is subject to variable price provisions that typically reduce the final purchase price if the actual closing occurs beyond an initially agreed upon date.

All of our credit facilities contain standard provisions present in credit facilities of this type that obligate us to reimburse the banks for any increased costs associated with continuing to hold the loan on their books which arise as a result of broadly defined regulatory changes, including changes in reserve requirements and bank capital requirements. These indemnities would have the practical effect of increasing the interest rate on our debt if they were to be triggered. In all cases, we have the right to repay the credit facility and avoid the increased costs. The term of the indemnities matches the length of the related credit facility.

11.  Related Party Transactions

During 2004 and 2005, Fortress provided certain support services to Aircastle. These direct operating costs in the amount of $1,098 in 2004 and $311 in 2005 primarily included payroll and benefit costs, office supplies and professional fees paid to third parties. These expenses were charged to Aircastle at cost and are included in selling, general and administrative expenses in our consolidated statement of operations.

As of December 31, 2004 and 2005, $1,098 and $105, respectively, were payable to Fortress. As of December 31, 2004, receivable from shareholders represented cash for a capital contribution of $7,585 held by Fortress on Aircastle’s behalf. This amount was received in the first quarter of 2005.

For the year ended December 31, 2005, Aircastle paid $235 for legal fees related to the establishment and financing activities of Bermuda companies and $155 for Bermuda corporate services related to our Bermuda companies to a law firm and a secretarial services provider, respectively, affiliated with a Bermuda resident director serving on certain subsidiary company boards. The Bermuda director serves as an outside director of these subsidiaries.

Aircastle employees participate in various benefit plans sponsored by Fortress including a voluntary savings plan (401(k) plan) and other health and benefit plans. Aircastle reimbursed

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

Fortress $13 and $155 for 2004 and 2005, respectively, for the cost of its employees’ coverage in the various health and benefit plans. Similarly, Aircastle will reimburse Fortress for the matching contribution, up to 3% of eligible earnings, when that contribution is actually funded. At December 31, 2005, Aircastle’s estimated contribution was $52 which was recorded in other liabilities.

12.  Derivatives

We enter into derivative financial instruments designated as cash flow hedges for the purpose of hedging the risks of certain existing and forecasted transactions. In general, the types of risks hedged are those relating to the variability of interest payments on our existing and expected future variable rate debt caused by movements in benchmark interest rates. Aircastle enters into designated cash flow hedge derivatives only for the purpose of hedging such risks, not for speculation. Aircastle generally intends to hedge only the risk related to changes in the benchmark interest rate, typically LIBOR.

We enter into interest rate swap transactions that require the Company to make periodic fixed payments on a notional amount and receive floating rate payments to match the floating rate payments on its existing repurchase agreements, which require payment based on a variable interest rate index. At December 31, 2005, we had interest rate swaps outstanding with a notional amount of $7,900 to hedge against future interest payments on $8,665 of repurchase agreements. For the year ended December 31, 2005 Aircastle recognized ineffectiveness amounting to $51 related to these cash flow hedges. This amount is included in interest income on the consolidated statements of operations.

We also entered into forward starting interest rate swaps to hedge the risk of interest rate fluctuations with respect to anticipated financings. The primary risk involved is that interest rates may increase between the date flight equipment is acquired and the closing of the anticipated financings. At December 31, 2005, future interest payments on the anticipated financings that were expected to be issued in the first quarter of 2006 were designated as the hedged items to interest rate swap agreements with a total notional amount of $600,000. These swaps, which had a start date of December 15, 2005, have a mandatory termination date of April 28, 2006. At that time, it is expected that any gain or loss will be realized, and the resulting deferred gain or loss will be amortized into income over the life of anticipated financing, which is expected to be five years. For the year ended December 31, 2005, Aircastle recognized ineffectiveness of ($177) related to these cash flow hedges. This amount is included in interest expense on the consolidated statements of operations.

As of December 31, 2005, the accumulated other comprehensive gain related to cash flow hedges, was $1,864. It is expected that approximately $214 of these existing gains will be reclassified into earnings in the next twelve months.

13.  Shareholders’ Equity, Share Based Payments and Earnings (Loss) Per Share

Aircastle is required to present both basic and diluted earnings (loss) per share (‘‘EPS’’). Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares of common shares outstanding during each period. The weighted average shares outstanding exclude our

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

unvested shares for purposes of Basic EPS. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common shares outstanding during the period while also giving effect to all potentially dilutive common shares that were outstanding during the period based on the treasury stock method. For the period from October 29 (commencement of operations) through December 31, 2004 the company had no common stock equivalents. For the year ended December 31, 2005, based on the treasury stock method, we had 24,071 anti-dilutive common share equivalents resulting from restricted shares.

The calculations of both basic and diluted earnings (loss) per share are as follows:


  Period from
October 29
(Commencement of
operations) to
December 31, 2004
Year Ended
December 31, 2005
Numerator:  
 
Loss from continuing operations $ (1,465
)
$ (879
)
Earnings from discontinued operations, net of income taxes
1,107
Net income (loss) $ (1,465
)
$ 228
Denominator for basic earnings per share 40,000,000
40,000,000
Effect of dilutive restricted shares
(a )
Denominator for diluted earnings per share 40,000,000
40,000,000
Basic earnings (loss) per share:  
 
Loss from continuing operations $ (.04
)
$ (.02
)
Earnings from discontinued operations, net of income taxes
.03
Net income (loss) $ (.04
)
$ .01
Diluted earnings (loss) per share:  
 
Loss from continuing operations $ (.04
)
$ (.02
)
Earnings from discontinued operations, net of income taxes
.03
Net income (loss) $ (.04
)
$ .01
(a) Anti-dilutive

On January 31, 2006, the Shareholders approved the Second Amended and Restated Shareholders’ Agreement (the ‘‘Amended Shareholders Agreement’’). The Amended Shareholders Agreement provided for an increase in the authorized number of shares from 12,000 shares of $1.00 par value to 100 million, and the subdivision of the Company’s issued and outstanding common shares from 12,000 shares of $1.00 par value to 40,000,000 shares of $0.01 par value. All share and per share data for periods presented in the accompanying consolidated financial statements and notes thereto give retroactive effect to this transaction.

During 2005, the Company entered into employment agreements in connection with recruiting and hiring of certain employees. The employment agreements provide for grants of restricted

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

shares (the ‘‘initial grants’’) that vest over five year periods based on continued service. Based on these employment agreements, the Company granted 347,500 shares in the first half of 2005 and 25,000 shares on July 5, 2005 with a weighted average fair value at grant date of $8.50. None of the shares vested in 2005. Compensation cost in 2005 for the awards was $409.

As of December 31, 2005, there was $2,757 of total unrecognized compensation cost related to nonvested, share-based compensation arrangements. That cost was expected to be recognized over a weighted average period of 4.4 years. The fair value of the shares was determined based on a retrospective valuation performed by an unrelated valuation specialist. The valuation relied on observed equity investments made by the Shareholders, adjusted to reflect the lack of marketability of the shares granted to employees.

14.  Segment Information

We have two reportable segments: Aircraft Leasing and Debt Investments. We present our segment information on a contribution margin basis consistent with the information that our chief executive officer (the Chief Operating Decision Maker or ‘‘CODM’’) reviews in assessing segment performance and allocating resources. Contribution margin includes revenue, depreciation, interest expense and other expenses that are directly connected to our business segments. We believe contribution margin is an appropriate measure of performance because it reflects the marginal profitability of our business segments excluding overhead.

Aircraft Leasing

The Aircraft Leasing segment consists of amounts earned from our commercial aircraft leasing operations. All of our aircraft are subject to net operating leases whereby the lessee is responsible for maintaining the aircraft and paying all operational and insurance costs. In many of our leases we are obligated to bear a portion of maintenance costs or costs associated with modifications required by manufacturers or regulators. We retain the benefit, and bear the risk, of re-leasing and the residual value of the aircraft upon expiry or early termination of the lease.

Debt Investments

In the first quarter of 2005 the Company commenced a segment that is engaged in the investing in debt securities from structured financings in the airline industry. For the year ended December 31, 2005, this segment's activities consisted of amounts earned from our investments in debt securities secured by commercial jet aircraft including enhanced equipment trust certificates, or EETCs, and other forms of collateralized debt.

Information on reportable segments and the reconciliation to income from continuing operations before income taxes for the year ended December 31, 2005 is as follows:

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)


  Year Ended December 31, 2005
  Aircraft
Leasing
Debt
Investments
 
  Total
Revenues  
 
 
Lease rentals $ 32,978
$
$ 32,978
Interest income
2,942
2,942
Other revenues 2
104
106
Total revenues 32,980
3,046
36,026
Expenses  
 
 
Depreciation 14,295
14,295
Interest 8,930
173
9,103
Other expenses 1,078
1,078
Total expenses 24,303
173
24,476
Contribution margin $ 8,677
$ 2,873
$ 11,550
Segment Assets $ 803,253
$ 27,369
$ 830,622

Total contribution margin reported as segment profit for reportable business segments is reconciled to income from continuing operations before income taxes as follows:


Contribution margin $ 11,550
Selling, general and administrative expenses (12,595
)
Depreciation and other expenses (258
)
Interest income on cash balances 1,364
Income from continuing operations before income taxes $ 61

The Company's CODM does not consider selling, general and administrative expenses, depreciation from leasehold improvements and office equipment and other expenses in the evaluation of the operating segment’s results as such costs are semi-fixed and do not bear a direct correlation to operating results. The Company's CODM does not consider interest income on all cash balances in the evaluation of the operating segment's results as such amounts do not bear a direct correlation to operating results. Additionally, during 2005, the Company's first full year of existence a substantial portion of costs excluded from segment results were either one-time organizational charges or were incurred in a ramp up phase.

Total assets reported as segment is reconciled to total assets as follows:


Segment assets $ 830,622
Operating cash accounts 79,943
Flight equipment held for sale 54,917
All other 2,050
  $ 967,532

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

15.  Subsequent Events

Shareholders’ Equity

In January 2006, the Board of Directors and Shareholders adopted the Aircastle Investment Limited 2005 Equity and Incentive Plan (the ‘‘2005 Plan’’). The purpose of the Plan is to provide additional incentive to selected management employees. The 2005 Plan provides that the Company may grant (a) share options, (b) share appreciation rights, (c) awards of restricted shares, deferred shares, performance shares, unrestricted shares or other share-based awards, or (d) any combination of the foregoing. The 2005 Plan includes four million shares that are reserved and available for issuance. The 2005 Plan provides that grantees of restricted shares will have all of the rights of shareholders, including the right to receive dividends, other than the right to sell, transfer, assign or otherwise dispose of the shares until the lapse of the restricted period.

In February and March of 2006, the Board ratified the initial grants of 372,500 shares provided for in certain employment contracts and approved new grants of 412,500 restricted shares pursuant to the terms of the 2005 Plan. Generally, the restricted shares vest over five year periods, based on continued service. The terms of the grants provide for accelerated vesting under certain circumstances, including termination without cause and termination without cause following a change of control. The grant also imposes lock up restrictions on restricted shares from the date of grant through 120 days after the date of any initial public offering, and provides for certain further restrictions and notice periods thereafter.

The total fair value of the shares granted under the 2005 Plan in 2006 is estimated to be $9,075. After giving effect to the 2006 grants, the weighted average period over which the compensation cost is expected to be recognized is 3.6 years. The fair value of the restricted shares granted in 2006 was determined based on a retrospective estimate of the offering range per share from the anticipated initial public offering.

On January 31, 2006, the Shareholders committed to contribute up to $100,000 of equity to Aircastle. On February 8, 2006, the Shareholders purchased an additional 3,693,200 shares at $10 per share.

Financing Activities

On February 24, 2006, the revolving period of our $600,000 credit facility was extended to May 31, 2006, and the maximum amount of the credit facility was reduced to $525,000 and on April 28, 2006 the maturity date was extended to May 31, 2006.

On February 28, 2006, we entered into a $500,000 revolving credit facility with a group of banks, as lenders, to finance the acquisition of aircraft and related improvements. The borrowing base is equal to the net book value of the aircraft. Borrowings under the credit facility incur interest at the one-month LIBOR rate plus 1.25%. Additionally, we are subject to a 0.25% fee on the average daily amount of the unused portion of the total committed facility on an annualized basis. The facility requires the monthly payment of interest and principal, to the extent of 85% of any decrease in the net book value of the assets, through the final maturity of the facility on August 28, 2007. The facility limits our ability to pay dividends prior to an initial public offering

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

(IPO). After any IPO, the facility has no restrictions on the amount of dividends we can pay, provided that we are not in default. Additionally, after any IPO, we are required under the credit facility to maintain a net worth of no less than $500,000.

Debt Securities

On March 10, 2006, we purchased two debt securities for $94,097. The purchase was funded in part by entering into a repurchase agreement for $75,647 with a bank from whom we did not purchase the securities. The repurchase agreement, which matures on March 1, 2007, provides for the monthly payment of interest at one-month LIBOR rate plus 0.50%. We designated an interest rate swap which we had entered into on February 2, 2006 as a hedge of the future variable rate interest payments on the repurchase agreement. The interest rate swap has an initial notional principal amount of $74,000, which decreases periodically based on estimated projected principal payments on the debt securities. The interest rate swap, which matures on July 1, 2010, provides for the semi-annual payment of a fixed rate of 5.02% and the monthly receipt of the one-month LIBOR rate on the notional amount.

Discontinued Operation

On March 29, 2006, we sold the aircraft held for sale for a gain. The related outstanding debt of $36,666 was repaid plus accrued interest.

16.  Other Subsequent Events (Unaudited)

Registration Statement

On May 22, 2006, the Company’s board of directors authorized the filing of a registration statement with the Securities and Exchange Commission for an initial public offering of its common shares.

Aircraft Acquisitions

From January 1, 2006 through July 18, 2006 we acquired an additional 20 aircraft for an aggregate purchase price of approximately $422,598. The acquisitions were partially funded with borrowings under our credit facilities. At July 18, 2006 all of the purchased aircraft are subject to operating leases.

As of July 18, 2006, Aircastle had letters of intent to acquire 11 aircraft for an estimated purchase price of $305.3 million. Although the closing of each purchase is contingent on the seller meeting certain conditions precedent, the Company expects that all of the aircraft will be acquired during the second quarter of 2006. The purchase price of certain of the commitments are subject to variable price provisions that typically reduce the final purchase price if the actual closing occurs beyond an initially agreed upon date.

Financing

On June 15, 2006, we agreed to the terms of our first securitization. ACS 2006-1 Pass Through Trust (‘‘ACS’’), a newly formed trust, will issue $560 million of trust certificates representing

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Consolidated Financial Statements   (continued)

    
(Dollars in thousands, except per share amounts)

undivided interests in floating rate asset-backed notes supported by 40 aircraft. The principal balance of the notes will be equal to 54.8% of the Initial Appraised Value of the 40 aircraft of $1.022 billion. Initial Appraised Value is the lesser of the mean and the median of base value appraisals obtained from three nationally recognized appraisal firms. We retained 100% of the rights to receive future cash flows from Portfolio No. 1 after the payment of claims that are senior to our rights. The notes bear interest at LIBOR plus 0.27%. Financial Guarantee Insurance Company, issued a financial guarantee insurance policy to support the payment of interest when due on the certificates and the payment of the outstanding principal balance of the certificates on the final distribution date. The certificates are rated Aaa and AAA by Moody's Investors Service and Standard & Poor's rating services, respectively. A portion of the proceeds will be used to repay the outstanding debt under our existing credit facilities associated with the 40 aircraft. No assurance can be given that this transaction will be consummated.

On June 15, 2006, the $500,000 revolving credit facility was increased to $750,000 and the mandatory termination date was extended to November 2007.

On July 18, 2006, the amount available under our $109,988 credit facility was $25,116 and the mandatory termination date was extended to March 2007.

Purchases of Restricted Shares

In May 2006, a family trust of an individual who will be appointed to the Company's Board of Directors and certain members of management of the Company purchased an aggregate of 277,000 of the Company's common shares in exchange for cash consideration in the amount of $5 and $10 per share, respectively. The purchase price of the shares was below the fair value of $22.00 of the Company's common shares and accordingly, the Company will record compensation expense of approximately $4,324 in the quarter ending June 30, 2006. The fair value of the common shares was determined based on a retrospective estimate of the offering range per share from the anticipated initial public offering.

On July 20, 2006, the board of directors declared the payment of an ordinary dividend from cash on hand in the amount of $0.35 per common share, or and aggregate of $14.4 million payable on July 31, 2006. In addition, our board of directors is expected to declare a dividend of $0.175 per common share to shareholders of record as of August 1, 2006, which is payable on August 15, 2006, for the period commencing on July 1, 2006 and ending on August 15, 2006. We are paying this dividend so that holders of our common shares prior to the offering will receive a distribution for the period prior to the offering.

On July 21, 2006, the Company returned $36.9 million of cash to Fortress in exchange for the cancellation of 3,693,200 of our common shares at $10 per share.

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Table of Contents

Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)


  December 31,
2005
(Unaudited)
March 31, 2006
(Unaudited)
(Pro Forma,)
March 31, 2006
Assets  
 
 
Cash and cash equivalents $ 79,943
$ 27,554
$             
Accounts receivable 3,115
3,492
 
Debt securities, available for sale 26,907
120,558
 
Restricted cash and cash equivalents 40,652
92,666
 
Flight equipment held for sale 54,917
 
Flight equipment held for lease, net of accumulated depreciation of $14,685 and $24,355 746,124
941,692
 
Leasehold improvements, furnishings and equipment, net of accumulated depreciation of $165 and $278 1,529
1,615
 
Fair value of derivative assets 3,608
13,950
 
Other assets 10,737
16,935
 
Total assets $ 967,532
$ 1,218,462
 
Liabilities and Shareholders' Equity  
 
 
Liabilities  
 
 
Borrowings under credit facilities $ 490,588
$ 568,859
$ 81,886
Securitization debt
560,000
Accounts payable, accrued expenses and other liabilities 12,038
19,193
19,244
Payable to affiliates 105
233
233
Lease rentals received in advance 6,241
7,161
7,161
Repurchase agreements 8,665
84,434
84,434
Security deposits and maintenance payments 37,089
62,518
62,518
Fair value of derivative liabilities 1,870
264
264
Total liabilities 556,596
742,662
815,740
Commitments and contingencies — Note 11  
 
 
Shareholders' Equity  
 
 
Common shares, $.01 par value, 100,000,000 shares authorized, 40,000,000 shares issued and outstanding at December 31, 2005; 44,408,200 shares issued and outstanding at March 31, 2006 400
444
410
Additional paid-in capital 400,009
438,189
407,385
(Accumulated deficit) retained earnings (1,237
)
9,943
(18,038
)
Accumulated other comprehensive income 11,764
27,224
27,224
Total shareholders' equity 410,936
475,800
416,981
Total liabilities and shareholders' equity $ 967,532
$ 1,218,462
$ 1,232,721

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)


  (Unaudited)
Three Months Ended March 31
  2005 2006
Revenues  
 
Lease rentals $ 1,862
$ 31,371
Interest income 325
1,641
Total revenues 2,187
33,012
Expenses  
 
Depreciation 1,462
9,915
Interest (net of interest income of $29 and $1,063) 313
7,717
Selling, general and administrative (including share-based payments expense of $9 and $1,292 respectively) 1,548
5,954
Other expenses 69
641
Total expenses 3,392
24,227
Income (loss) from continuing operations before income
taxes
(1,205
)
8,785
Income tax provision 169
1,004
Income (loss) from continuing operations (1,374
)
7,781
Earnings from discontinued operations, net of income taxes
3,399
Net income (loss) $ (1,374
)
$ 11,180
Basic earnings (loss) per share:  
 
Income (loss) from continuing operations $ (.03
)
$ .19
Earnings from discontinued operations, net of income taxes
.08
Net income (loss) per share $ (.03
)
$ .27
Diluted earnings (loss) per share:  
 
Income (loss) from continuing operations $ (.03
)
$ .19
Earnings from discontinued operations, net of income taxes
.08
Net income (loss) per share $ (.03
)
$ .27

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)


  (Unaudited)
Three Months Ended March 31
  2005 2006
Cash flows from operating activities  
 
Net income (loss) $ (1,374
)
$ 11,180
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities (inclusive of amounts related to discontinued operations):  
 
Depreciation 1,462
9,915
Amortization 157
630
Deferred income taxes 64
155
Accretion of purchase discount on debt securities (73
)
(266
)
Share based payments expense 9
1,292
Ineffective portion of cash flow hedges
(253
)
Gain on the sale of aircraft held for sale
(2,240
)
Changes in certain assets and liabilities:  
 
Accounts receivable 80
(377
)
Restricted cash and cash equivalents (4,020
)
(31,689
)
Other assets 175
(222
)
Accounts payable, accrued expenses and other liabilities 865
(698
)
Payable to affiliates 161
128
Lease rentals received in advance 62
920
Security deposits and maintenance payments 546
25,429
Net cash (used in) provided by operating activities (1,886
)
13,904
Cash flows from investing activities  
 
Acquisition and improvement of flight equipment (27,828
)
(200,456
)
Disposition of flight equipment held for sale
57,157
Restricted cash from disposition of flight equipment held for sale
(20,325
)
Purchase of debt securities (22,981
)
(92,726
)
Leasehold improvements, furnishings and equipment (4
)
(199
)
Deposits on aircraft purchases (500
)
(1,716
)
Principal repayments on debt securities
3,106
Net cash used in investing activities (51,313
)
(255,159
)
Cash flows from financing activities  
 
Issuance of common shares
36,932
Credit facility borrowings 43,146
114,937
Credit facility repayment
(36,666
)
Deferred financing costs (1,254
)
(2,106
)
Proceeds from repurchase agreements 3,313
75,968
Principal repayment on repurchase agreements
(199
)
Capital contributions 51,451
Net cash provided by financing activities 96,656
188,866
Net increase (decrease) in cash and cash equivalents 43,457
(52,389
)
Cash and cash equivalents at beginning of period
79,943
Cash and cash equivalents at end of period $ 43,457
$ 27,554
Supplemental disclosures of cash flow information  
 
Cash paid during the period for interest $ 23
$ 8,231
Cash paid during the period for income taxes $
$ 87

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

1.  Organization and Basis of Presentation

Aircastle Limited, formerly Aircastle Investment Limited, (‘‘Aircastle’’, the ‘‘Company’’, ‘‘we’’, ‘‘our’’) is a Bermuda company that was incorporated on October 29, 2004 by Fortress Investment Group LLC and certain of its affiliates (together, the ‘‘Shareholders,’’ or ‘‘Fortress’’) under the provisions of Section 14 of the Companies Act 1981 of Bermuda.

Aircastle is a holding company that conducts its business through subsidiaries. Aircastle owns directly or indirectly all of the outstanding common shares of its subsidiaries. The consolidated financial statements include the accounts of Aircastle and all of its subsidiaries. All significant intercompany transactions and balances have been eliminated.

The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the ‘‘SEC’’) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2006. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (‘‘GAAP’’) have been omitted in accordance with the rules and regulations of the SEC. For further information refer to the audited consolidated financial statements and accompanying notes thereto included elsewhere in this Prospectus and Registration Statement.

2.  Fair Value of Financial Instruments

Aircastle’s financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, debt securities, accounts payable, amounts borrowed under credit facilities, repurchase agreements and cash flow hedges. The fair value of cash, cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short term nature. Borrowings under our credit facilities and repurchase agreements bear floating rates of interest which reset monthly or quarterly to a market benchmark rate plus a credit spread. We believe that, for similar financial instruments with comparable credit risks, the effective rate of these agreements approximates market rates at the balance sheet dates. Accordingly, the carrying amounts of these agreements are believed to approximate their fair values. The fair value of our debt securities and cash flow hedges are generally available from broker quotations.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

3.  Lease Rental Revenue and Flight Equipment Held for Lease

Minimum future rentals contracted to be received under our existing operating leases at March 31, 2006 are as follows:


Year Ending December 31, Amount
Remainder of 2006 $ 102,800
2007 123,700
2008 110,000
2009 88,200
2010 62,100
2011 53,000
Thereafter 46,700
  $ 586,500

Geographic concentrations of lease rental revenues earned from flight equipment held for lease are as follows:


  Three Months Ended March 31,
  2005 2006
Region Number of
Aircraft
Revenue
%
Number of
Aircraft
Revenue
%
Europe 2
51
%
23
39
%
Asia 1
49
%
11
26
%
North America
5
30
%
Latin America
3
5
%
Off-lease 3
  6
100
%
42
100
%

The classification of regions above and below is determined based on the principle location of the lessee of the aircraft.

In the three months ended March 31, 2005, two customers accounted for all revenues. In the three months ended March 31, 2006, two customers accounted for 41.7% of revenues. The lease rental revenues for these two lessees were 29.6% and 12.1% for the three months ended March 31, 2006 and no other customer accounted for more than 6% of lease revenues.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Geographic concentrations of net book values of flight equipment held for lease were as follows:


  December 31 March 31
  2005 2006
Region Number of
Aircraft
Net Book
Value %
Number of
Aircraft
Net Book
Value %
Europe 16
40
%
23
47
%
Asia 9
26
%
11
25
%
North America 4
29
%
5
24
%
Latin America 3
5
%
3
4
%
  32
100
%
42
100
%

At December 31, 2005 and March 31, 2006 lease acquisition costs included in other assets was $775 and $775, respectively. At December 31, 2005 and March 31, 2006 prepaid lease incentive costs included in other assets was $453 and $443, respectively.

4.  Discontinued Operations and Flight Equipment Held for Sale

As of December 31, 2005, we had one aircraft classified as flight equipment held for sale. During the three months ended March 31, 2006, we completed the sale of this aircraft. In accordance with the credit facility associated with this aircraft, the proceeds from the sale were deposited into a restricted cash account. A portion of the proceeds was withdrawn from the restricted cash account and used to repay $36,666 of debt related to the aircraft plus accrued interest. The remaining balance was transferred from restricted cash in April 2006.

Earnings from discontinued operations for the three months ended March 31, 2006, related solely to the aircraft held for sale, were as follows:


Earnings from discontinued operations  
Lease rentals $ 2,135
Gain on disposition 2,240
Interest expense (528
)
Earnings before income tax provision 3,847
Income tax provision (448
)
Earnings from discontinued operations $ 3,399
5.  Debt Securities

As of December 31, 2005 and March 31, 2006 all of our debt securities are corporate obligations and were classified as available-for-sale. The aggregate fair value of our debt securities at March 31, 2006 was $120,558. These debt obligations are interests in pools of loans and are collateralized by interests in commercial aircraft of which $4,014 are investment grade, $93,943 are senior subordinated instruments within their pools and $22,601 are subordinate to other debt related to such aircraft. All of our debt securities had unrealized gain positions, which aggregated $9,900 and $13,665 at December 31, 2005 and March 31, 2006, respectively.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Three of our debt securities, with a fair value of $101,307 at March 31, 2006 have stated maturities in 2010. Our other three debt securities, with an aggregate fair value of $19,251, have remaining terms to stated maturity in excess of ten years after March 31, 2006. All of our debt securities provide for the periodic payment of both principal and interest and are subject to prepayment and/or acceleration depending on certain events, including sale of the underlying collateral aircraft and events of default. Therefore, the actual maturity of our debt securities may be less than the stated maturities.

6.  Borrowings Under Credit Facilities

We have used borrowings from three separate credit facilities to fund a portion of the purchase price of our acquisitions of flight equipment. These borrowings are secured by our interests in the leases on the flight equipment, including our rights to receive rents and other income from the flight equipment, our ownership interests in the special purpose entities that own the flight equipment, funds on deposit in lockbox accounts established to collect rents and any security deposits and/or maintenance payments received from the lessees and certain other interests.

On February 28, 2006, we entered into a $500,000 revolving credit facility with a group of banks, as lenders, to finance the acquisition of aircraft and related improvements. The borrowing base is equal to 85% of the net book value of the aircraft. Borrowings under the credit facility incur interest at the one-month LIBOR rate plus 1.25%. Additionally, we are subject to a 0.25% fee on any unused portion of the total committed facility. The facility requires the monthly payment of interest and principal, to the extent of 85% of any decrease in the net book value of the assets, through the final maturity of the facility on August 28, 2007. The facility limits our ability to pay dividends prior to an initial public offering (IPO). After any IPO, the facility has no restrictions on the amount of dividends we can pay, provided that we are not in default. Additionally, after any IPO, we are required under the credit facility to maintain a net worth, of no less than $500,000. As of March 31, 2006 $8,554 was outstanding under this facility.

On February 24, 2006 the revolving period of our existing $600,000 credit facility was extended to April 28, 2006 and the maximum amount of the credit facility was reduced to $525,000. The other terms of the facility remain the same. Monthly payments of interest will continue through May 31, 2006. After that date monthly payments of principle and interest will commence. As of March 31, 2006, $486,973 was outstanding under this facility. Scheduled principal installments to be paid on this credit facility in 2006 and 2007 are $17,774 and $469,199, respectively.

In October 2005 the Company entered into a credit facility for $109,998 with a bank to finance the acquisition of three aircraft. On March 30, 2006 $36,666 of this facility was repaid using a portion of the proceeds from the disposition of flight equipment held for sale which had been financed under this facility. The facility, which matures on October 24, 2006, provides for the monthly payment of interest only. On or prior to maturity, we intend to refinance this credit facility with long-term financing. However, there is no assurance the Company will be able to obtain this financing.

7.  Repurchase Agreements

We entered into repurchase agreements to fund a portion of the purchase price of certain of our debt investments. At December 31, 2005 and March 31, 2006, the repurchase agreements are secured by liens on the debt investments with a fair value of $11,107 and $104,770, respectively. The repurchase agreements are substantially all with parties other than those from whom we originally purchased the

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

debt investments. At March 31, 2006 the repurchase agreements are scheduled to mature through March 2007. Upon maturity, we intend to refinance the repurchase agreements on similar terms and conditions. However, there is no assurance the Company will be able to refinance the repurchase agreements. The weighted average interest rate of these repurchase agreements at March 31, 2006 was 5.22%.

8.  Shareholders’ Equity, Share Based Payments and Earnings (Loss) Per Share

In January 2006, the Board of Directors and Shareholders adopted the Aircastle Investment Limited 2005 Equity and Incentive Plan (the ‘‘2005 Plan’’). The purpose of the Plan is to provide additional incentive to selected management employees. The 2005 Plan provides that the Company may grant (a) share options, (b) share appreciation rights, (c) awards of restricted shares, deferred shares, performance shares, unrestricted shares or other share-based awards, or (d) any combination of the foregoing. The 2005 Plan sets aside four million shares that are reserved and available for issuance. The 2005 Plan provides that grantees of restricted shares will have all of the rights of shareholders, including the right to receive dividends, other than the right to sell, transfer, assign or otherwise dispose of the shares until the lapse of the restricted period.

In February and March of 2006, the Board ratified the initial grants of 347,500 shares in the first half of 2005 and 25,000 shares on July 5, 2005 which were provided for in certain employment contracts, and approved new grants of 412,500 restricted shares. Generally, the restricted shares vest over five year periods, based on continued service and are being expensed on a straight line basis over the requisite service period of the awards. The terms of the grants provide for accelerated vesting under certain circumstances, including termination without cause following a change of control. The grant also imposes lock up restrictions on restricted shares from the date of grant through 120 days after the date of any initial public offering, and provides for certain further restrictions and notice periods thereafter.

A summary of the fair value of nonvested shares is as follows:


Nonvested Shares Shares
(in 000's)
Weighted
Average
Grant-Date
Fair Value
Fair Value
of Nonvested
Shares
Nonvested at January 1, 2006 372.5
$ 8.50
$ 3,166
Granted 412.5
22.00
9,075
Vested (43.0
)
16.90
(727
)
Forfeited
Nonvested at March 31, 2006 742.0
$ 15.52
$ 11,514

The fair value of the restricted shares granted in 2006 was determined based on a retrospective estimate of the offering range per share from the anticipated initial public offering. The Company anticipates that the current requisite service periods will be obtained for employees with awards. The total unrecognized compensation cost as of March 31, 2006 in the amount of $10,458 is expected to be recognized over a weighted average period of 4.0 years.

During the three months ended March 31, 2005, 50,000 restricted shares of the initial grants of 347,500 shares were granted at a fair value of $8.50. The fair value of the restricted shares granted in

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

2005 was determined based on a retrospective valuation performed by an unrelated valuation specialist. The valuation relied on observed equity investments made by the Shareholders, adjusted to reflect the lack of marketability of the shares granted to employees.

Aircastle is required to present both basic and diluted earnings (loss) per share (‘‘EPS’’). Basic EPS is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during each period. The weighted average shares outstanding exclude our unvested shares for purposes of basic EPS. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares of common shares outstanding during the period while also giving effect to all potentially dilutive common shares that were outstanding during the period based on the treasury stock method. For the three months ended March 31, 2005, based on the treasury stock method, we had 318 anti-dilutive common share equivalents resulting from restricted shares.

The calculations of both basic and diluted earnings (loss) per share are as follows:


  Three Months Ended March 31
  2005 2006
Numerator:  
 
Income (loss) from continuing operations $ (1,374
)
$ 7,781
Earnings from discontinued operations, net of income taxes
3,399
Net income (loss) per share $ (1,374
)
$ 11,180
Denominator for basic earnings per share 40,000,000
41,322,604
Effect of dilutive restricted shares
(a )
78,348
Denominator for diluted earnings per share 40,000,000
41,400,952
Basic earnings (loss) per share:  
 
Income (loss) from continuing operations $ (.03
)
$ .19
Earnings from discontinued operations, net of income taxes
.08
Net income (loss) per share $ (.03
)
$ .27
Diluted earnings (loss) per share:  
 
Income (loss) from continuing operations $ (.03
)
$ .19
Earnings from discontinued operations, net of income taxes
.08
Net income (loss) per share $ (.03
)
$ .27
(a) Anti-dilutive
9.  Income Taxes

Income taxes have been provided based upon the tax laws and rates in countries in which our operations are conducted and income is earned. The Company received an assurance from the Bermuda government that it would be exempted from local income, withholding and capital gains taxes until March 2016. Consequently, the provision for income taxes recorded relates to income earned by certain subsidiaries of the Company which are located in or earn income in jurisdictions that impose income taxes, primarily the United States and Ireland.

The sources of (loss) income from continuing operations before income taxes for the three months ended March 31, 2005 and 2006 are as follows:

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)


  Three Months Ended March 31,
  2005 2006
Bermuda $ (1,306
)
$ 4,106
Non-Bermuda 101
4,679
  $ (1,205
)
$ 8,785

The components of the income tax provision from continuing operations for the three months ended March 31, 2005 and 2006 consist of the following:


  Three Months Ended March 31,
  2005 2006
Current $ 105
$ 849
Deferred 64
155
Total $ 169
$ 1,004

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2005 and March 31, 2006 consist of the following:


  December 31,
2005
March 31,
2006
Deferred tax assets:  
 
Share based payments $ 152
$ 320
Net operating loss carryforwards 49
49
Other 6
5
Total deferred tax assets 207
374
Deferred tax liabilities:  
 
Accelerated depreciation (333
)
(641
)
U.S. federal withholding tax on unremitted earnings (207
)
(221
)
Total deferred tax liabilities (540
)
(862
)
Net deferred tax liabilities $ (333
)
$ (488
)

The Company has approximately $390 of net operating loss carry forwards available at December 31, 2005 to offset future taxable income in Ireland. Deferred tax assets and liabilities are included in other assets and accounts payable and accrued liabilities, respectively, in the accompanying balance sheet.

We do not expect to incur income taxes on future distributions of undistributed earnings of non-U.S. subsidiaries and, accordingly, no deferred income taxes have been provided for the distribution of such earnings. Withholding taxes have been provided on unremitted earnings of our U.S. subsidiary.

10.  Comprehensive Income

Comprehensive income includes net income (loss) and the changes in the fair value of derivatives, reclassification into earnings of amounts previously deferred relating to our derivative financial instruments and the change in unrealized appreciation on debt securities.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Comprehensive income is as follows:


  Three Months Ended March 31
  2005 2006
Net income (loss) $ (1,374
)
$ 11,180
Change in fair value of derivatives 2,834
11,695
Change in unrealized appreciation of debt securities 77
3,765
Comprehensive income $ 1,537
$ 26,640
11.  Commitments and Contingencies

At March 31, 2006, Aircastle had letters of intent to acquire 10 aircraft for an estimated purchase price of approximately $198,700. Although the closing of each purchase is contingent on the seller meeting certain conditions precedent, the Company expects that these aircraft will be acquired during the second quarter of 2006. The purchase price of the aircraft under these letters of intent is subject to variable price provisions that typically reduce the final purchase price if the actual closing occurs beyond an initially agreed upon date.

12.  Related Party Transactions

Aircastle employees participate in various benefit plans sponsored by Fortress including a voluntary savings plan (401(k) plan) and other health and benefit plans. For the three months ended March 31, 2005 and 2006 Aircastle incurred $33 and $93, respectively, for its costs under the health and benefit plans. In addition, in the quarter ended March 31, 2006, Aircastle remitted $179 in annual contributions for the 2005 plan year for our employee’s participation in a voluntary 401(k) savings plan sponsored by Fortress.

In addition, Fortress requires Aircastle to reimburse it for costs of services which it has incurred on behalf of Aircastle. These expenses are charged to Aircastle at cost and are included in selling, general and administrative expenses in the consolidated statement of operations. In the quarter ended March 31, 2006 no such costs were incurred. For the three months ended March 31, 2005 such costs were $174 and were primarily for professional fees.

For the three months ended March 31, 2006, Aircastle paid $163 for legal fees related to the establishment and financing activities of Bermuda companies and $85 for Bermuda corporate services related to our Bermuda companies to a law firm and a secretarial services provider, respectively, affiliated with a Bermuda resident director serving on certain subsidiary company boards. The Bermuda director serves as an outside director of these subsidiaries.

13.  Derivatives

On March 10, 2006, we designated an interest rate swap which we had entered into on February 2, 2006 as a hedge of the future variable rate interest payments on the repurchase agreements for debt securities we purchased during the quarter. The interest rate swap has an initial notional principal amount of $74,000, which decreases periodically based on estimated projected principal payments on the debt securities. The interest rate swap, which matures on July 1, 2010, provides for the semi-annual payment of a fixed rate of 5.02% and the monthly receipt of the one-month LIBOR rate on the notional amount.

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Table of Contents

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

14.  Segment Information

We have two reportable segments: Aircraft Leasing and Debt Investments. We present our segment information on a contribution margin basis consistent with the information that our chief executive officer (the Chief Operating Decision Maker or ‘‘CODM’’) reviews in assessing segment performance and allocating resources. Contribution margin includes revenue, depreciation, interest expense and other expenses that are directly connected to our business segments. We believe contribution margin is an appropriate measure of performance because it reflects the marginal profitability of our business segments excluding overhead.

Aircraft Leasing

The Aircraft Leasing segment consists of amounts earned from our commercial aircraft leasing operations. All of our aircraft are subject to net operating leases whereby the lessee is responsible for maintaining the aircraft and paying all operational and insurance costs. In many of our leases we are obligated to bear a portion of maintenance costs or costs associated with modifications required by manufacturers or regulators. We retain the benefit, and bear the risk, of re-leasing and the residual value of the aircraft upon expiry or early termination of the lease.

Debt Investments

The Debt Investments segment consists of amounts earned from our investments in debt securities secured by commercial jet aircraft including enhanced equipment trust certificates, or EETCs, and other forms of collateralized debt.

Information on reportable segments for 2005 is as follows:


  Three Months Ended March 31, 2005
  Aircraft
Leasing
Debt
Investments
Total
Revenues  
 
 
Lease rentals $ 1,862
$
$ 1,862
Interest income  
325
325
Total revenues 1,862
325
2,187
Expenses  
 
 
Depreciation 1,462
1,462
Interest 342
342
Other expenses 69
69
Total expenses 1,873
1,873
Contribution margin $ (11
)
$ 325
$ 314
Segment Assets $ 134,664
$ 23,393
$ 158,057

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Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Information on reportable segments for 2006 is as follows:


  Three Months Ended March 31, 2006
  Aircraft
Leasing
Debt
Investments
Total
Revenues  
 
 
Lease rentals $ 31,371
$
$ 31,371
Interest income
1,641
1,641
Total revenues 31,371
1,641
33,012
Expenses  
 
 
Depreciation 9,802
9,802
Interest 7,912
868
8,780
Other expenses 641
641
Total expenses 18,355
868
19,223
Contribution margin $ 13,016
$ 773
$ 13,789
Segment Assets $ 1,064,772
$ 122,853
$ 1,187,625

Total contribution margin reported as segment profit for reportable business segments is reconciled to income (loss) from continuing operations before income taxes as follows:


  Three Months Ended March 31,
  2005 2006
Contribution margin $ 314
$ 13,789
Selling, general and administrative expenses (1,548
)
(5,954
)
Depreciation and other expenses
(113
)
Interest income on cash balances 29
1,063
Income (loss) from continuing operations before income taxes $ (1,205
)
$ 8,785

The Company's CODM does not consider selling, general and administrative expenses, depreciation from leasehold improvements and office equipment and other expenses, in the evaluation of the operating segment’s results as such costs are semi-fixed and do not bear a direct correlation to operating results. The Company's CODM does not consider interest income on all cash balances in the evaluation of the operating segment's results as such amounts do not bear a direct correlation to operating results.


  March 31,
  2005 2006
Segment assets $ 158,057
$ 1,187,625
Operating cash accounts 43,457
27,801
All other 77
3,036
  $ 201,591
$ 1,218,462

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Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

15.  Pro Forma Capitalization

The following table sets forth our capitalization at March 31, 2006 and our capitalization as of such date as adjusted to give effect to proceeds received in connection with Securitization No. 1 and the repayment of $487.0 million of indebtedness under Credit Facility No. 1 and the return of $36.9 million to Fortress as a partial use of proceeds from Securitization No. 1, the payment of an ordinary dividend from cash on hand in the amount of $0.35 per common share, or an aggregate of $14.4 million, declared by our board of directors on July 20, 2006 and payable on July 31, 2006, the purchase of 277,000 shares by employees and a director nominee in May 2006, and the payment of an ordinary dividend from cash on hand in the amount of $0.175 per common share, or an aggregate of $7.2 million, expected to be declared and payable on August 15, 2006..


  Actual Pro Forma
Borrowings under credit facilities $ 568,859
$ 81,886
Securitization debt
560,000
Repurchase agreements 84,434
84,434
Common shares 444
410
Additional paid-in capital 438,189
407,385
Retained earnings 9,943
(18,038
)
Accumulated other comprehensive income 27,224
27,224
Total shareholders' equity 475,800
416,981
Total capitalization $ 1,129,093
$ 1,143,301

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9,090,900 Shares

Common shares

Prospectus

JPMorgan Bear, Stearns & Co. Inc. Citigroup

Calyon Securities (USA) Inc. Deutsche Bank Securities

                , 2006

Through and including            , 2006 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.




Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.  Other Expenses of Issuance and Distribution

The following table sets forth the estimated fees and expenses (except for the Securities and Exchange Commission registration fee, the National Association of Securities Dealers, Inc. filing fee and the NYSE, Inc. listing fee) payable by the registrant in connection with the distribution of the common shares:


Securities and Exchange Commission registration fee $ 24,610
National Association of Securities Dealers, Inc. filing fee $ 23,500
NYSE listing fee 277,900
Printing and engraving costs $ 300,000
Legal fees and expenses $ 2,000,000
Accountants' fees and expenses $ 1,000,000
Transfer agent fees 3,500
Miscellaneous $ 370,490
Total $ 4,000,000
* To be furnished by amendment.
Item 14.  Indemnification of Directors and Officers

Our bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. The waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty. Our bye-laws also indemnify our directors and officers in respect of their actions and omissions, except in respect of their fraud or dishonesty. The indemnification provided in the bye-laws is not exclusive of other indemnification rights to which a director or officer may be entitled, provided these rights do not extend to his or her fraud or dishonesty.

Section 98 of the Companies Act 1981 of Bermuda, or the Companies Act, provides generally that a Bermuda company may indemnify its directors, officers and auditors against any liability which by virtue of any rule of law otherwise would be imposed on them in respect of any negligence, default, breach of duty or breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer or auditor may be guilty in relation to the company. Section 98 further provides that a Bermuda company may indemnify its directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in which judgment is awarded in their favor or in which they are acquitted or granted relief by the Supreme Court of Bermuda pursuant to Section 281 of the Companies Act. The registrant maintains standard policies of insurance under which coverage is provided (a) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act, and (b) to the registrant with respect to payments which may be made by the registrant to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law. Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1 hereto for provisions providing that the Underwriters are obligated, under certain circumstances, to indemnify the directors, certain officers and the controlling persons of the Registrant against certain liabilities under the Securities Act of 1933, as amended.

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Item 15.  Recent Sales of Unregistered Securities

Since our formation in October 2004, we have issued unregistered securities to a limited number of persons, as described below. None of these transactions involved any underwriters or any public offerings and we believe that each of these transactions was exempt from registration requirements pursuant to Section 4(2) of the Securities Act, Regulation D promulgated thereunder, Rule 144A of the Securities Act, or Rule 701 of the Securities Act pursuant to compensatory benefit plans and contracts related to compensation as provided under Rule 701. The recipients of the securities in these transactions represented their intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and instruments issued in these transactions.

Initial Capitalization

In connection with our initial capitalization, on November 19, 2004, we issued common shares in the following amounts to the following persons. The issuance of these securities was exempt from registration under Section 4(2) of the Securities Act as transactions by the issuer not involving a public offering. We determined that the purchasers of the securities in these transactions were either accredited or sophisticated investors and were provided access to all relevant information necessary to evaluate the investment.

•  We issued 3,252 common shares to Fortress Investment Fund III LP, for an aggregate purchase price of $3,252.00.
•  We issued 2,716 common shares to Fortress Investment Fund III (Fund B) LP, for an aggregate purchase price of $2,716.00.
•  We issued 583.50 common shares to Fortress Investment Fund III (Fund C) LP, for an aggregate purchase price of $583.50.
•  We issued 948 common shares to Fortress Investment Fund III (Fund D) LP, for an aggregate purchase price of $948.00.
•  We issued 255 common shares to Fortress Investment Fund III (Coinvestment Fund A) LP, for an aggregate purchase price of $255.00.
•  We issued 501 common shares to Fortress Investment Fund III (Coinvestment Fund B) LP, for an aggregate purchase price of $501.00.
•  We issued 129 common shares to Fortress Investment Fund III (Coinvestment Fund C) LP, for an aggregate purchase price of $129.00.
•  We issued 615 common shares to Fortress Investment Fund III (Coinvestment Fund D) LP, for an aggregate purchase price of $615.00.
•  We issued 1,500 common shares to Drawbridge Global Macro Master Fund Ltd., for an aggregate purchase price of $1,500.00.
•  We issued 1,125 common shares to Drawbridge Special Opportunities Fund LP, for an aggregate purchase price of $1,125.00.
•  We issued 375 common shares to Drawbridge Special Opportunities Fund Ltd., for an aggregate purchase price of $375.00.

Stock Option Grants and Grants of Restricted Shares

From time to time, we have issued restricted shares to our employees under our 2005 Equity and Incentive Compensation Plan. A portion of the grants of restricted shares set forth below was exempt from registration under Section 701 of the Securities Act because they were made under written compensatory plans or agreements and the remainder were exempt under Section 4(2) of the Securities Act.

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•  In February 2006, we issued to certain of our employees an aggregate of 780,000 restricted shares and restricted share units, scheduled to vest over a four to five year period from the grant date.
•  In March 2006, we issued to an employee 5,000 restricted shares, scheduled to vest over a five year period from the grant date.
•  In April 2006, we issued to certain of our employees an aggregate of 77,000 restricted shares, which immediately vested, for an aggregate purchase price of $770,000.

Sale of Common Shares

On April 28, 2006, we issued 200,000 of our common shares to Peter V. Ueberroth and Virginia Ueberroth, as trustees of the Ueberroth Family Trust, for an aggregate offering price of $1,000,000. No underwriters were involved in this sale of securities. The securities described in this paragraph were issued to a U.S. investor in reliance upon the exemption from the registration requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act and Rule 506 of Regulation D promulgated thereunder relating to sales by an issuer not involving any public offering, to the extent an exemption from such registration was required. The purchaser of our common shares described above represented to us in connection with their purchase that they were an accredited investor and were acquiring the shares for investment and not distribution, that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The purchaser received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an available exemption from such registration. The sales of these securities were made without general solicitation or advertising.

Item 16.  Exhibits and Financial Statement Schedules

A.    Exhibits


Exhibit No. Description
1 .1
Form of Underwriting Agreement
3 .1
Memorandum of Association
3 .2
Form of Amended Bye-laws
4 .1
Specimen Share Certificate
4 .2
Form of Amended and Restated Shareholders Agreement among Aircastle Limited and Fortress Investment Fund III LP, Fortress Investment Fund III (Fund B) LP, Fortress Investment Fund III (Fund C) LP, Fortress Investment Fund III (Fund D) L.P., Fortress Investment Fund III (Fund E) LP, Fortress Investment Fund III (Coinvestment Fund A) LP, Fortress Investment Fund III (Coinvestment Fund B) LP, Fortress Investment Fund III (Coinvestment Fund C) LP, Fortress Investment Fund III (Coinvestment Fund D) L.P., Drawbridge Special Opportunities Fund LP, Drawbridge Special Opportunities Fund Ltd. and Drawbridge Global Macro Master Fund Ltd.
5 .1
Opinion of Conyers Dill & Pearman
10 .1
Aircastle Limited 2005 Equity and Incentive Plan†
10 .2
Form of Restricted Share Purchase Agreement†
10 .3
Form of Restricted Share Grant Letter†
10 .4
Form of International Restricted Share Grant Letter†
10 .5
Letter Agreement, dated May 2, 2005, between Aircastle Limited and Ron Wainshal†
10 .6
Letter Agreement, dated February 3, 2005, between Aircastle Limited and Mark Zeidman†

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Exhibit No. Description
10 .7
Letter Agreement, dated March 8, 2006, between Aircastle Advisor LLC and Mark Zeidman†
10 .8
Letter Agreement, dated February 3, 2005, between Aircastle Limited and David Walton†
10 .9
Letter Agreement, dated March 8, 2006, between Aircastle Advisor LLC and David Walton†
10 .10
Letter Agreement, dated July 15, 2004, between Fortress Investment Group LLC and Joseph Schreiner†
10 .11
Letter Agreement, dated February 24, 2006, between Aircastle Advisor LLC and Joseph Schreiner†
10 .12
Letter Agreement, dated April 29, 2005, between Aircastle Advisor LLC and Jonathan Lang†
10 .13
Intentionally deleted
10 .14
Letter Agreement, dated March 8, 2006 between Aircastle Advisor LLC and Jonathan M. Lang†
10 .15
Credit Agreement, dated as of February 28, 2006, by and among Aircastle Investment Holdings 2 Limited, Aircastle Ireland No. 3 Limited, certain Holding Subsidiary Trusts and Holdings SPCs designated as Borrowing Affiliates, JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending Inc. and Citibank, N.A.†
10 .16
Parent Guarantor Guaranty Agreement, dated as of February 28, 2006, by Aircastle Limited to JPMorgan Chase Bank, N.A.†
10 .17
364-Day Senior Secured Credit Agreement, dated as of October 25, 2005, by and among Aircastle Ireland No. 2 Limited, the borrowers party thereto, Citibank, N.A. and the other lenders party thereto from time to time†
10 .18
Subscription Agreement, dated as of April 28, 2006, between Aircastle Limited and Ueberroth Family Trust†
10 .19
Remarketing, Administrative and Technical Services Letter, dated as of January 1, 2006 between Aircastle Advisor LLC and FIT Aero Investments Limited†
10 .20
Remarketing, Administrative and Technical Services Letter, dated as of January 1, 2006 between Aircastle Advisor (Ireland) Limited and FIT Aero Investments Limited†
10 .21
Third Amended and Restated Credit Agreement, dated as of October 24, 2005, by and among Aircastle Investment Holdings Limited, Aircastle Ireland No. 1 Limited, certain Holding Subsidiary Trusts and Holdings SPCs designated as borrowing affiliates, ABH 12 Limited, JPMorgan Chase Bank, N.A. and Bear Stearns Corporate Lending Inc.†
10 .22
First Amendment, dated as of November 7, 2005, to the Third Amended and Restated Credit Agreement†
10 .23
Second Amendment, dated as of February 24, 2006, to the Third Amended and Restated Credit Agreement†
10 .24
Third Amendment, dated as of April 28, 2006, to the Third Amended and Restated Credit Agreement†
10 .25
Letter of Intent, dated March 17, 2006 by and between Aircastle Advisor LLC and First Greenwich Kahala Limited†

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Table of Contents
Exhibit No. Description
10 .26
Trust Indenture, dated as of June 15, 2006, among ACS Aircraft Finance Bermuda Limited, as Issuer, ACS Aircraft Finance Ireland PLC, as Guarantor, Deutsche Bank Trust Company Americas, in its capacity as the Cash Manager, Deutsche Bank Trust Company Americas, in its capacity as the person accepting appointment as the Trustee under the Indenture, CALYON, Financial Guaranty Insurance Company and Deutsche Bank Trust Company Americas, in its capacity as the Drawing Agent
10 .27
Trust Indenture, dated as of June 15, 2006, among ACS Aircraft Finance Ireland PLC, as Issuer, ACS Aircraft Finance Bermuda Limited, as Guarantor, Deutsche Bank Trust Company Americas, in its capacity as the Cash Manager, Deutsche Bank Trust Company Americas, in its capacity as the person accepting appointment as the Trustee under the Indenture, CALYON, Financial Guaranty Insurance Company and Deutsche Bank Trust Company Americas, in its capacity as the Drawing Agent
10 .28
Amended and Restated Aircastle Limited 2005 Equity and Incentive Plan
10 .29
First Amendment, dated as of June 15, 2006, to the Credit Agreement, dated as of February 28, 2006, by and among Aircastle Investment Holdings 2 Limited, Aircastle Ireland No. 3 Limited, certain Holding Subsidiary Trusts and Holdings SPCs designated as Borrowing Affiliates, JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending Inc. and Citibank, N.A.
10 .30
Amendment No. 1, dated as of July 18, 2006, to the 364-Day Senior Secured Credit Agreement, dated as of October 25, 2005, by and among Aircastle Ireland No. 2 Limited, the borrowers party thereto, Citibank, N.A. and the other lenders party thereto from time to time
21 .1
Subsidiaries of the Registrant†
23 .1
Consent of Ernst & Young LLP
23 .2
Consent of Conyers Dill & Pearman (included in Exhibit 5.1)
23 .3
Consent of BACK Aviation Services†
23 .4
Consent of Simat Helliesen & Eichner, Inc.†
23 .5
Consent of International Bureau of Aviation†
23 .6
Consent of Aviation Specialists Group
23 .7
Consent of ESG Aviation Services and Airline Monitor†
23 .8
Consent of Economist Intelligence Unit†
24 .1
Power of Attorney (included as part of the signature pages)†
99 .1
Consent of Peter Ueberroth
99 .2
Consent of Ronald L. Merriman
99 .3
Consent of Douglas A. Hacker
99 .4
Consent of Ronald W. Allen
99 .5
Consent of John Z. Kukral
* To be filed by amendment.
Previously filed

B.    Financial Statement Schedules

Item 17.  Undertakings

(1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing

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provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted against the registrant by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(2) The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) The undersigned hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on July 25, 2006.


AIRCASTLE LIMITED
By: /s/ Ron Wainshal                                
  Name:      Ron Wainshal
Title:        Chief Executive Officer
Signature Title Date
* Chairman of the Board of Directors July 25, 2006
Wesley R. Edens
/s/ Ron Wainshal Chief Executive Officer July 25, 2006
Ron Wainshal
* Chief Financial Officer July 25, 2006
Mark Zeidman
/s/ Aaron Dahlke Chief Accounting Officer July 25, 2006
Aaron Dahlke
* Deputy Chairman of the Board of
Directors
July 25, 2006
Joseph P. Adams Jr.

*By        /s/ Ron Wainshal                        

         Ron Wainshal

        Attorney-in-fact

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INDEX TO EXHIBITS


Exhibit No. Description
1 .1
Form of Underwriting Agreement
3 .1
Memorandum of Association
3 .2
Form of Amended Bye-laws
4 .1
Specimen Share Certificate
4 .2
Form of Amended and Restated Shareholders Agreement among Aircastle Limited and Fortress Investment Fund III LP, Fortress Investment Fund III (Fund B) LP, Fortress Investment Fund III (Fund C) LP, Fortress Investment Fund III (Fund D) L.P., Fortress Investment Fund III (Fund E) LP, Fortress Investment Fund III (Coinvestment Fund A) LP, Fortress Investment Fund III (Coinvestment Fund B) LP, Fortress Investment Fund III (Coinvestment Fund C) LP, Fortress Investment Fund III (Coinvestment Fund D) L.P., Drawbridge Special Opportunities Fund LP, Drawbridge Special Opportunities Fund Ltd. and Drawbridge Global Macro Master Fund Ltd.
5 .1
Opinion of Conyers Dill & Pearman
10 .1
Aircastle Limited 2005 Equity and Incentive Plan†
10 .2
Form of Restricted Share Purchase Agreement†
10 .3
Form of Restricted Share Grant Letter†
10 .4
Form of International Restricted Share Grant Letter†
10 .5
Letter Agreement, dated May 2, 2005, between Aircastle Limited and Ron Wainshal†
10 .6
Letter Agreement, dated February 3, 2005, between Aircastle Limited and Mark Zeidman†
10 .7
Letter Agreement, dated March 8, 2006, between Aircastle Advisor LLC and Mark Zeidman†
10 .8
Letter Agreement, dated February 3, 2005, between Aircastle Limited and David Walton†
10 .9
Letter Agreement, dated March 8, 2006, between Aircastle Advisor LLC and David Walton†
10 .10
Letter Agreement, dated July 15, 2004, between Fortress Investment Group LLC and Joseph Schreiner†
10 .11
Letter Agreement, dated February 24, 2006, between Aircastle Advisor LLC and Joseph Schreiner†
10 .12
Letter Agreement, dated April 29, 2005, between Aircastle Advisor LLC and Jonathan Lang†
10 .13
Intentionally deleted
10 .14
Letter Agreement, dated March 8, 2006 between Aircastle Advisor LLC and Jonathan M. Lang†
10 .15
Credit Agreement, dated as of February 28, 2006, by and among Aircastle Investment Holdings 2 Limited, Aircastle Ireland No. 3 Limited, certain Holding Subsidiary Trusts and Holdings SPCs designated as Borrowing Affiliates, JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending Inc. and Citibank, N.A.†

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Exhibit No. Description
10 .16
Parent Guarantor Guaranty Agreement, dated as of February 28, 2006, by Aircastle Limited to JPMorgan Chase Bank, N.A.†
10 .17
364-Day Senior Secured Credit Agreement, dated as of October 25, 2005, by and among Aircastle Ireland No. 2 Limited, the borrowers party thereto, Citibank, N.A. and the other lenders party thereto from time to time†
10 .18
Subscription Agreement, dated as of April 28, 2006, between Aircastle Limited and Ueberroth Family Trust†
10 .19
Remarketing, Administrative and Technical Services Letter, dated as of January 1, 2006 between Aircastle Advisor LLC and FIT Aero Investments Limited†
10 .20
Remarketing, Administrative and Technical Services Letter, dated as of January 1, 2006 between Aircastle Advisor (Ireland) Limited and FIT Aero Investments Limited†
10 .21
Third Amended and Restated Credit Agreement, dated as of October 24, 2005, by and among Aircastle Investment Holdings Limited, Aircastle Ireland No. 1 Limited, certain Holding Subsidiary Trusts and Holdings SPCs designated as borrowing affiliates, ABH 12 Limited, JPMorgan Chase Bank, N.A. and Bear Stearns Corporate Lending Inc.†
10 .22
First Amendment, dated as of November 7, 2005, to the Third Amended and Restated Credit Agreement†
10 .23
Second Amendment, dated as of February 24, 2006, to the Third Amended and Restated Credit Agreement†
10 .24
Third Amendment, dated as of April 28, 2006, to the Third Amended and Restated Credit Agreement†
10 .25
Letter of Intent, dated March 17, 2006, by and between Aircastle Advisor LLC and First Greenwich Kahala Limited.†
10 .26
Trust Indenture, dated as of June 15, 2006, among ACS Aircraft Finance Bermuda Limited, as Issuer, ACS Aircraft Finance Ireland PLC, as Guarantor, Deutsche Bank Trust Company Americas, in its capacity as the Cash Manager, Deutsche Bank Trust Company Americas, in its capacity as the person accepting appointment as the Trustee under the Indenture, CALYON, Financial Guaranty Insurance Company and Deutsche Bank Trust Company Americas, in its capacity as the Drawing Agent
10 .27
Trust Indenture, dated as of June 15, 2006, among ACS Aircraft Finance Ireland PLC, as Issuer, ACS Aircraft Finance Bermuda Limited, as Guarantor, Deutsche Bank Trust Company Americas, in its capacity as the Cash Manager, Deutsche Bank Trust Company Americas, in its capacity as the person accepting appointment as the Trustee under the Indenture, CALYON, Financial Guaranty Insurance Company and Deutsche Bank Trust Company Americas, in its capacity as the Drawing Agent
10 .28
Amended and Restated Aircastle Limited 2005 Equity and Incentive Plan
10 .29
First Amendment, dated as of June 15, 2006, to the Credit Agreement, dated as of February 28, 2006, by and among Aircastle Investment Holdings 2 Limited, Aircastle Ireland No. 3 Limited, certain Holding Subsidiary Trusts and Holdings SPCs designated as Borrowing Affiliates, JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending Inc. and Citibank, N.A.

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Exhibit No. Description
10 .30
Amendment No. 1, dated as of July 18, 2006, to the 364-Day Senior Secured Credit Agreement, dated as of October 25, 2005, by and among Aircastle Ireland No. 2 Limited, the borrowers party thereto, Citibank, N.A. and the other lenders party thereto from time to time
21 .1
Subsidiaries of the Registrant†
23 .1
Consent of Ernst & Young LLP
23 .2
Consent of Conyers Dill & Pearman (included in Exhibit 5.1)
23 .3
Consent of BACK Aviation Services†
23 .4
Consent of Simat Helliesen & Eichner, Inc.†
23 .5
Consent of International Bureau of Aviation†
23 .6
Consent of Aviation Specialists Group
23 .7
Consent of ESG Aviation Services and The Airline Monitor†
23 .8
Consent of Economist Intelligence Unit†
24 .1
Power of Attorney (included as part of the signature pages)†
99 .1
Consent of Peter Ueberroth
99 .2
Consent of Ronald L. Merriman
99 .3
Consent of Douglas A. Hacker
99 .4
Consent of Ronald W. Allen
99 .5
Consent of John Z. Kukral
* To be filed by amendment.
Previously filed

II-10






                             UNDERWRITING AGREEMENT


                                AIRCASTLE LIMITED

                                  Common Shares

                             Underwriting Agreement

                                                             _____________, 2006

J.P. Morgan Securities Inc.
Bear, Stearns & Co. Inc.
Citigroup Global Markets Inc.
   As Representatives of the
   several Underwriters listed
   in Schedule 1 hereto
c/o J.P. Morgan Securities Inc.
277 Park Avenue
New York, New York 10172


Ladies and Gentlemen:

      Aircastle Limited, a Bermuda exempted company (the "Company"), proposes to
issue and sell to the several Underwriters listed in Schedule 1 hereto (the
"Underwriters"), for whom you are acting as representatives (the
"Representatives"), an aggregate of _______ common shares, par value U.S. $0.01
per share, of the Company (the "Underwritten Shares") and, at the option of the
Underwriters, up to an additional ________ common shares of the Company (the
"Option Shares"). The Underwritten Shares and the Option Shares are herein
referred to as the "Shares". The common shares of the Company to be issued and
outstanding after giving effect to the sale of the Shares are herein referred to
as the "Stock".

      As part of the offering contemplated by this Agreement, the Underwriters
have agreed to reserve on a pro rata basis out of the Shares set forth opposite
their names on Schedule 1 to this Agreement, up to ___ common shares, for sale
to the Company's employees, officers, and directors and other parties associated
with the Company (collectively, "Participants") (the "Directed Share Program").
The Shares to be sold by or on behalf of the Underwriters pursuant to the
Directed Share Program (the "Directed Shares") will be sold pursuant to this
Agreement at the public offering price. Any Directed Shares not confirmed for
purchase by any Participants via the Company's Directed Share Program web site
or orally by telephone by midnight, New York City time, on the date on which
this Agreement is executed will be offered to the public with the remaining
Shares.




      The Company hereby confirms its agreement with the several Underwriters
concerning the purchase and sale of the Shares, as follows:

      1.    Registration Statement. The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Securities Act"), a registration statement on Form S-1 (File
No. 333-134669), including a prospectus, relating to the Shares. Such
registration statement, as amended at the time it becomes effective, including
the information, if any, deemed pursuant to Rule 430A under the Securities Act
to be part of the registration statement at the time of its effectiveness ("Rule
430A Information"), is referred to herein as the "Registration Statement"; and
as used herein, the term "Preliminary Prospectus" means each prospectus included
in such registration statement (and any amendments thereto) before it becomes
effective (including any prospectus wrapper or Directed Share Program material
prepared by or with the consent of the Company for distribution in connection
with the Directed Share Program attached to or included with any preliminary
prospectus), any prospectus filed with the Commission pursuant to Rule 424(a)
under the Securities Act and the prospectus included in the Registration
Statement at the time of its effectiveness that omits Rule 430A Information, and
the term "Prospectus" means the final prospectus in the form first used (or made
available to the Underwriters for delivery, upon request of purchasers pursuant
to Rule 173 under the Securities Act) in connection with sales of the Shares
(including any prospectus wrapper or Directed Share Program material prepared by
or with the consent of the Company for distribution in connection with the
Directed Share Program attached to or included with final prospectus). If the
Company has filed an abbreviated registration statement pursuant to Rule 462(b)
under the Securities Act (the "Rule 462 Registration Statement"), then any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462 Registration Statement. Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Registration Statement
and the Prospectus.

At or prior to the time when sales of the Shares were first made (the "Time of
Sale"), the Company had prepared the following information (collectively with
the pricing information set forth on Annex A, the "Time of Sale Information"): a
Preliminary Prospectus dated August ___, 2006, and each "free-writing
prospectus" (as defined pursuant to Rule 405 under the Securities Act) listed on
Annex B hereto.

      2.    Purchase of the Shares by the Underwriters. (a) The Company agrees
to issue and sell the Shares to the several Underwriters as provided in this
Agreement, and each Underwriter, on the basis of the representations, warranties
and agreements set forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the respective
number of Underwritten Shares set forth opposite such Underwriter's name in
Schedule 1 hereto at a price per share (the "Purchase Price") of U.S.$         .
The public offering price of the Shares is not in excess of the price
recommended by         , acting as a "qualified independent underwriter" within
the meaning of Rule 2720 of the Rules of Conduct of the National Association
of Securities Dealers, Inc.


                                        2



      In addition, the Company agrees to issue and sell the Option Shares to the
several Underwriters as provided in this Agreement, and the Underwriters, on the
basis of the representations, warranties and agreements set forth herein and
subject to the conditions set forth herein, shall have the option to purchase,
severally and not jointly, from the Company the Option Shares at the Purchase
Price.

      If any Option Shares are to be purchased, the number of Option Shares to
be purchased by each Underwriter shall be the number of Option Shares which
bears the same ratio to the aggregate number of Option Shares being purchased as
the number of Underwritten Shares set forth opposite the name of such
Underwriter in Schedule 1 hereto (or such number increased as set forth in
Section 10 hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject, however, to
such adjustments to eliminate any fractional Shares as the Representatives in
their sole discretion shall make.

      The Underwriters may exercise the option to purchase the Option Shares at
any time in whole, or from time to time in part, on or before the thirtieth day
following the date of this Agreement, by written notice from the Representatives
to the Company. Such notice shall set forth the aggregate number of Option
Shares as to which the option is being exercised and the date and time when the
Option Shares are to be delivered and paid for which may be the same date and
time as the Closing Date (as hereinafter defined) but shall not be earlier than
the Closing Date nor later than the tenth full business day (as hereinafter
defined) after the date of such notice (unless such time and date are postponed
in accordance with the provisions of Section 10 hereof). Any such notice shall
be given at least two business days prior to the date and time of delivery
specified therein.

      (b)   The Company understands that the Underwriters intend to make a
public offering of the Shares as soon after the effectiveness of this Agreement
as in the judgment of the Representatives is advisable, and initially to offer
the Shares on the terms set forth in the Prospectus. The Company acknowledges
and agrees that the Underwriters may offer and sell Shares to or through any
affiliate of an Underwriter and that any such affiliate may offer and sell
Shares purchased by it to or through any Underwriter.

      (c)   Payment for the Shares shall be made by wire transfer in immediately
available funds to the account specified by the Company to the Representatives
in the case of the Underwritten Shares, at the offices of __________________ at
10:00 A.M., New York City time, on _____, 2006, or at such other time or place
on the same or such other date, not later than the fifth business day
thereafter, as the Representatives and the Company may agree upon in writing or,
in the case of the Option Shares, on the date and at the time and place
specified by the Representatives in the written notice of the Underwriters'
election to purchase such Option Shares. The time and date of such payment for
the Underwritten Shares is referred to herein as the "Closing Date" and the time
and date for such payment for the Option Shares, if other than the Closing Date,
is herein referred to as the "Additional Closing Date".

      Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date in definitive


                                        3



form registered in such names and in such denominations as the Representatives
shall request in writing not later than two full business days prior to the
Closing Date or the Additional Closing Date, as the case may be, with any
transfer taxes payable in connection with the sale of the Shares duly paid by
the Company. The certificates for the Shares will be made available for
inspection and packaging by the Representatives at the office of J.P. Morgan
Securities Inc. set forth above not later than 1:00 P.M., New York City time, on
the business day prior to the Closing Date or the Additional Closing Date, as
the case may be.

      (d)   The Company acknowledges and agrees that the Underwriters are acting
solely in the capacity of an arm's length contractual counterparty to the
Company with respect to the offering of Shares contemplated hereby (including in
connection with determining the terms of the offering) and not as a financial
advisor or a fiduciary to, or an agent of, the Company or any other person.
Additionally, none of the Representatives or other Underwriters are advising the
Company or any other person as to any legal, tax, investment, accounting or
regulatory matters in any jurisdiction. The Company shall consult with its own
advisors concerning such matters and shall be responsible for making its own
independent investigation and appraisal of the transactions contemplated hereby,
and the Underwriters shall have no responsibility or liability to the Company
with respect thereto. Any review by the Underwriters of the Company, the
transactions contemplated hereby or other matters relating to such transactions
will be performed solely for the benefit of the Underwriters and shall not be on
behalf of the Company.

      3.    Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:

      (a)   Preliminary Prospectus. No order preventing or suspending the use of
any Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, complied in all material
respects with the Securities Act and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through
the Representatives expressly for use in any Preliminary Prospectus.

      (b)   Time of Sale Information. The Time of Sale Information, at the Time
of Sale did not, and at the Closing Date and as of the Additional Closing Date,
as the case may be, will not, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided that the Company makes no representation and warranty with respect to
any statements or omissions made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use in such Time of
Sale Information. No statement of material fact included in the Prospectus has
been omitted from the Time of Sale Information and no statement of material fact
included in the Time of Sale Information that is required to be included in the
Prospectus has been omitted therefrom.


                                        4



      (c)   Issuer Free Writing Prospectus. Other than the Preliminary
Prospectus and the Prospectus, the Company (including its agents and
representatives, other than the Underwriters in their capacity as such) has not
made, used, prepared, authorized, approved or referred to and will not prepare,
make, use, authorize, approve or refer to any "written communication" (as
defined in Rule 405 under the Securities Act) that constitutes an offer to sell
or solicitation of an offer to buy the Shares (each such communication by the
Company or its agents and representatives (other than a communication referred
to in clause (i) below) an "Issuer Free Writing Prospectus") other than (i) any
document not constituting a prospectus pursuant to Section 2(a)(10)(a) of the
Securities Act or Rule 134 under the Securities Act or (ii) the documents listed
on Annex B hereto and other written communications approved in writing in
advance by the Representatives. Each such Issuer Free Writing Prospectus
complied in all material respects with the Securities Act, has been filed in
accordance with the Securities Act (to the extent required thereby) and, when
taken together with the Preliminary Prospectus accompanying, or delivered prior
to delivery of, such Issuer Free Writing Prospectus, did not, and at the Closing
Date and as of the Additional Closing Date, as the case may be, will not,
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation and warranty with respect to any statements or
omissions made in each such Issuer Free Writing Prospectus in reliance upon and
in conformity with information relating to any Underwriter furnished to the
Company in writing by such Underwriter through the Representatives expressly for
use in any Issuer Free Writing Prospectus.

      (d)   Registration Statement and Prospectus. The Registration Statement
has been declared effective by the Commission. No order suspending the
effectiveness of the Registration Statement has been issued by the Commission
and, to the Company's knowledge, no proceeding for that purpose or pursuant to
Section 8A of the Securities Act against the Company or related to the offering
has been initiated or, to the Company's knowledge, is contemplated or threatened
by the Commission; as of the applicable effective date of the Registration
Statement and any amendment thereto, the Registration Statement complied and
will comply in all material respects with the Securities Act, and neither the
Registration Statement nor any amendment thereto contained or will contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading; and as of the date of the Prospectus and any amendment or supplement
thereto and as of the Closing Date and as of the Additional Closing Date, as the
case may be, neither the Prospectus nor any amendment or supplement thereto will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that the Company makes no representation and warranty with
respect to any statements or omissions made in reliance upon and in conformity
with information relating to any Underwriter furnished to the Company in writing
by such Underwriter through the Representatives expressly for use in the
Registration Statement and the Prospectus and any amendment or supplement
thereto.

      (e)   Financial Statements. The financial statements together with the
related notes thereto of the Company and its consolidated subsidiaries included
in the Registration Statement, the Time of Sale Information and the Prospectus
comply in all material respects with the


                                        5



applicable requirements of the Securities Act and present fairly in all material
respects the financial position of the Company and its subsidiaries as of the
dates indicated and the results of their operations and the changes in their
cash flows for the periods specified; such financial statements have been
prepared in conformity with U.S. generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby, and the
supporting schedules, if any, included in the Registration Statement present
fairly in all material respects the information required to be stated therein;
and the other financial information included in the Registration Statement, the
Time of Sale Information and the Prospectus has been derived from the accounting
records of the Company and its subsidiaries and presents fairly in all material
respects the information shown thereby; and the pro forma financial information
and the related notes thereto included in the Registration Statement, the Time
of Sale Information and the Prospectus have been prepared in accordance with the
applicable requirements of the Securities Act and the assumptions underlying
such pro forma financial information are reasonable and are set forth in the
Registration Statement, the Time of Sale Information and the Prospectus.

      (f)   No Material Adverse Change. Since the date of the most recent
financial statements of the Company included in the Registration Statement, the
Time of Sale Information and the Prospectus, except in each case as otherwise
disclosed in the Registration Statement, the Time of Sale Information and the
Prospectus, (i) there has not been any change in the share capital or long-term
debt of the Company or any of its subsidiaries, or any dividend or distribution
of any kind declared, set aside for payment, paid or made by the Company on any
class of shares, or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the business, properties,
management, financial position, shareholders' equity, results of operations or
prospects of the Company and its subsidiaries taken as a whole (other than
changes (a) in the ordinary course of business in amounts outstanding under the
Company's credit facilities or repurchase agreements described in the
Registration Statement, the Time of Sale Information and the Prospectus, or (b)
due to issuances of the Company's common shares or securities convertible or
exercisable into the Company's common shares under the Company's employee
benefit and option plans described in the Registration Statement, the Time of
Sale Information and the Prospectus, including the settlement of a restricted
share award), (ii) neither the Company nor any of its subsidiaries has entered
into any transaction or agreement that is material to the Company and its
subsidiaries taken as a whole or incurred any liability or obligation, direct or
contingent, that is material to the Company and its subsidiaries taken as a
whole and (iii) neither the Company nor any of its subsidiaries has sustained
any loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor disturbance or
dispute or any action, order or decree of any court or arbitrator or
governmental or regulatory authority which is material to the Company and its
subsidiaries taken as a whole.

      (g)   Organization and Good Standing. The Company and each "significant
subsidiary" (as defined in Rule 1-02 of Regulation S-X) of the Company, which
are listed on Schedule 2 of this Agreement (the "Significant Subsidiaries"),
have been duly organized and are validly existing and in good standing under the
laws of their respective jurisdiction of incorporation or formation, as
applicable, are duly qualified to do business and are in good standing in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification, and have all
power and


                                        6



authority necessary to own or hold their respective properties and to conduct
the businesses in which they are engaged, except where the failure to be so
qualified or have such power or authority would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, properties, management, financial position, shareholders' equity,
results of operations or prospects of the Company and its subsidiaries taken as
a whole (a "Material Adverse Effect"). The Company does not own or control,
directly or indirectly, any company, corporation, association or other entity
other than (i) the subsidiaries listed in Exhibit 21.1 to the Registration
Statement and (ii) subsidiaries, if considered in the aggregate as a single
subsidiary, would not constitute a "significant subsidiary" (as defined in Rule
1-02 of Regulation S-X).

      (h)   Capitalization. The Company has an authorized capitalization as set
forth in the Registration Statement, the Time of Sale Information and the
Prospectus under the heading "Capitalization"; all the issued shares of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable (except for directors' qualifying shares, if any, and except as
set forth in the Registration Statement, the Time of Sale Information and the
Prospectus) and except as described in or expressly contemplated by the
Registration Statement, the Time of Sale Information and the Prospectus, are not
subject to any preemptive or similar rights; there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares or
other equity interest in the Company or any of its subsidiaries, or any
contract, commitment, agreement, understanding or arrangement of any kind
relating to the issuance of shares in the capital of the Company or any such
subsidiary, any such convertible or exchangeable securities or any such rights,
warrants or options; the share capital of the Company conforms in all material
respects to the description thereof contained in the Registration Statement, the
Time of Sale Information and the Prospectus; and all the outstanding shares or
other equity interests of each Significant Subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and non-assessable
(except for directors' qualifying shares and except as set forth in the
Registration Statement, the Time of Sale Information and the Prospectus) and,
except as otherwise described in the Registration Statement, the Time of Sale
Information and the Prospectus, are owned directly or indirectly by the Company,
free and clear of any lien, charge, encumbrance, security interest, restriction
on voting or transfer or any other claim of any third party.

      (i)   Due Authorization. The Company has full right, power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.

      (j)   Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by the Company.

      (k)   The Shares. The Shares have been duly authorized for issuance and
sale by the Company and, when issued and delivered and paid for as provided
herein, will be duly and validly issued and will be fully paid and
non-assessable and will conform to the descriptions thereof in the Registration
Statement, the Time of Sale Information and the Prospectus; and the issuance of
the Shares is not subject to any preemptive or similar rights.


                                        7



      (l)   No Violation or Default. Neither the Company nor any of its
subsidiaries is (i) in violation of its charter, memorandum of association,
bye-laws or similar organizational documents, as applicable, (ii) in default,
and no event has occurred that, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any term,
covenant or condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject or (iii) in violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or governmental
or regulatory authority, except, in the case of clause (i) above, with respect
to subsidiaries of the Company other than the Significant Subsidiaries and in
the case of clauses (ii) and (iii) above, for any such default or violation that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

      (m)   No Conflicts. The execution, delivery and performance by the Company
of this Agreement, the issuance and sale of the Shares and the consummation of
the transactions contemplated by this Agreement will not (i) conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its subsidiaries is
subject, (ii) result in any violation of the provisions of the charter,
memorandum of association, bye-laws or similar organizational documents of the
Company or any of its subsidiaries or (iii) result in the violation of any law
or statute or any judgment, order, rule or regulation of any court or arbitrator
or governmental or regulatory authority, except in the case of clauses (i) and
(iii) above, for any such conflict, breach or violation that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

      (n)   No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority, in Bermuda, the United States or otherwise, is required
for the execution, delivery and performance by the Company of this Agreement,
the issuance and sale of the Shares and the consummation of the transactions
contemplated by this Agreement, except for (i) the registration of the Shares
under the Securities Act, (ii) such as have already been obtained or as may be
required by the rules of the New York Stock Exchange (the "NYSE") or the
National Association of Securities Dealers, Inc., (iii) such consents,
approvals, authorizations, orders and registrations or qualifications as may be
required under applicable state securities laws in connection with the purchase
and distribution of the Shares by the Underwriters, (iv) the filing of the
Prospectus under the Companies Act of 1981 of Bermuda in connection with the
offer and sale of the Shares and (v) such as may be required and have been
obtained from the Bermuda Monetary Authority.

      (o)   Legal Proceedings. Except as described in the Registration
Statement, the Time of Sale Information and the Prospectus, there are no legal,
governmental or regulatory investigations, actions, suits, proceedings,
inquiries or investigations pending to which the


                                        8



Company or any of its subsidiaries is or may be a party or to which any property
of the Company or any of its subsidiaries is or may be the subject that,
individually or in the aggregate, if determined adversely to the Company or any
of its subsidiaries, could reasonably be expected to have a Material Adverse
Effect or materially and adversely affect the ability of the Company to perform
its obligations under this Agreement; no such investigations, actions, suits,
proceedings, inquiries or investigations are, to the knowledge of the Company,
threatened or contemplated by any governmental or regulatory authority or
threatened by others; and (i) there are no current or pending legal,
governmental or regulatory actions, suits, proceedings, inquiries or
investigations that are required under the Securities Act to be described in the
Registration Statement or the Prospectus that are not so described in the
Registration Statement, the Time of Sale Information and the Prospectus and (ii)
there are no contracts or other documents that are required under the Securities
Act to be filed as exhibits to the Registration Statement or described in the
Registration Statement or the Prospectus that are not so filed as exhibits to
the Registration Statement or described in the Registration Statement, the Time
of Sale Information and the Prospectus.

      (p)   Independent Accountants. Ernst & Young LLP, who has certified
certain financial statements of the Company and its subsidiaries, is an
independent registered public accounting firm with respect to the Company and
its subsidiaries within the applicable rules and regulations adopted by the
Commission and the Public Accounting Oversight Board (United States) and as
required by the Securities Act.

      (q)   Title to Real and Personal Property. Except as described in the
Registration Statement, the Time of Sale Information and the Prospectus, the
Company and its subsidiaries have good and marketable title in fee simple to, or
have valid rights to lease or otherwise use, all items of real and personal
property that are material to the respective businesses of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances, claims and
defects and imperfections of title except those that (i) do not materially
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries or (ii) could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.

      (r)   Title to Intellectual Property. The Company and its subsidiaries own
or possess adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses and know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their respective businesses;
and the conduct of their respective businesses will not conflict in any material
respect with any such rights of others, and the Company and its subsidiaries
have not received any notice of any claim of infringement or conflict with any
such rights of others.

      (s)   No Undisclosed Relationships. No relationship, direct or, to the
Company's knowledge, indirect, exists between or among the Company or any of its
subsidiaries, on the one hand, and Fortress Investment Holdings LLC ("Fortress")
and the directors, officers, shareholders, members, customers or suppliers of
the Company or Fortress or any of their respective subsidiaries or other
affiliates, on the other, that is required by the Securities Act to be


                                        9



described in the Registration Statement and the Prospectus and that is not so
described in such documents and in the Time of Sale Information.

      (t)   Investment Company Act. The Company is not and, after giving effect
to the offering and sale of the Shares and the application of the proceeds
thereof as described in the Registration Statement, the Time of Sale Information
and the Prospectus, will not be required to register as an "investment company"
or an entity "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations of the
Commission thereunder (collectively, "Investment Company Act").

      (u)   Taxes. The Company and its subsidiaries have paid all Bermuda,
Ireland, U.S. federal, state and local and foreign taxes and filed all tax
returns required to be paid or filed through the date hereof except with respect
to taxes and tax returns contested in good faith and except where the failure to
so pay or file would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and except as otherwise disclosed in
the Registration Statement, the Time of Sale Information and the Prospectus, no
tax deficiency has been determined adversely to the Company or any of its
subsidiaries or any of their respective properties or assets which would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and the Company does not have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its
subsidiaries, would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

      (v)   Licenses and Permits. The Company and its subsidiaries possess all
licenses, certificates, permits and other authorizations issued by, and have
made all declarations and filings with, the appropriate Bermuda, Ireland, U.S.
federal, state and local or foreign governmental or regulatory authorities that
are necessary for the ownership or lease of their respective properties or the
conduct of their respective businesses as described in the Registration
Statement, the Time of Sale Information and the Prospectus, except where the
failure to possess or make the same would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and except as
described in the Registration Statement, the Time of Sale Information and the
Prospectus, neither the Company nor any of its subsidiaries has received notice
of any revocation or materially adverse modification of any such license,
certificate, permit or authorization or has any reason to believe that any such
license, certificate, permit or authorization will not be renewed in the
ordinary course.

      (w)   No Labor Disputes. No labor disturbance by or dispute with employees
of the Company or any of its subsidiaries exists or, to the knowledge of the
Company, is contemplated or threatened and the Company is not aware of any
existing or imminent labor disturbance by, or dispute with, the employees of any
of its or its subsidiaries' principal suppliers, contractors or customers,
except, in each case, as would not have a Material Adverse Effect.

      (x)   Compliance With Environmental Laws. (i) The Company and its
subsidiaries (x) are in compliance with any and all applicable Bermuda, Ireland,
U.S. federal, state and local and foreign laws, rules, regulations,
requirements, decisions and orders relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (collectively, "Environmental Laws"), (y) have
received and are in


                                       10



compliance with all permits, licenses, certificates or other authorizations or
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (z) have not received notice of any actual or
potential liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or contaminants,
and (ii) there are no costs or liabilities associated with Environmental Laws of
or relating to the Company or its subsidiaries, except in the case of each of
clauses (i) and (ii) above, for any such failure to comply, or failure to
receive required permits, licenses or approvals, or cost or liability, as would
not, individually or in the aggregate, have a Material Adverse Effect.

      (y)   Compliance With ERISA. Each employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is maintained, administered or contributed to by the
Company or any of its affiliates for employees or former employees of the
Company and its affiliates has been maintained in compliance in all material
respects with its terms and the requirements of any applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the Internal
Revenue Code of 1986, as amended (the "Code"); no prohibited transaction, within
the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred
with respect to any such plan excluding transactions effected pursuant to a
statutory or administrative exemption; and for each such plan that is subject to
the funding rules of Section 412 of the Code or Section 302 of ERISA, no
"accumulated funding deficiency" as defined in Section 412 of the Code has been
incurred, whether or not waived, and the fair market value of the assets of each
such plan (excluding for these purposes accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions.

      (z)   Accounting Controls. The Company (individually and on a consolidated
basis) and its subsidiaries maintain systems of "internal control over financial
reporting" (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Exchange Act")) sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with U.S. generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

      (aa)  Insurance. The Company and its subsidiaries have insurance covering
their respective properties, operations, personnel and businesses, including
business interruption insurance, which insurance is in amounts and insures
against such losses and risks as are customary for entities engaged in similar
businesses in similar industries and as are adequate in accordance with the
Company's reasonable business judgment to protect the Company and its
subsidiaries and their respective businesses; and neither the Company nor any of
its subsidiaries has (i) received notice from any insurer or agent of such
insurer that material capital improvements or other material expenditures are
required or necessary to be made in order to


                                       11



continue such insurance or (ii) any reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage at reasonable cost from similar insurers as may be
necessary to continue its business.

      (bb)  No Unlawful Payments. None of the Company, any of the Company's
subsidiaries or, to the knowledge of the Company, any director, officer, agent,
employee or other person associated with or acting on behalf of the Company or
any of its subsidiaries has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds, (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977 or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.

      (cc)  Compliance with Money Laundering Laws. The operations of the Company
and its subsidiaries are and have been conducted at all times in compliance in
all material respects with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the money laundering statutes of all jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the "Money Laundering Laws") and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries with respect to the Money
Laundering Laws is pending or, to the knowledge of the Company, threatened.

      (dd)  Compliance with OFAC. None of the Company, any of the Company's
subsidiaries or, to the knowledge of the Company, any director, officer, agent,
employee or Affiliate of the Company or any of its subsidiaries is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Department of the Treasury ("OFAC"); and the Company will
not directly or indirectly use the proceeds of the offering of the Shares
hereunder, or lend, contribute or otherwise make available such proceeds to any
subsidiary, joint venture partner or other person or entity, for the purpose of
financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.

      (ee)  No Restrictions on Subsidiaries. Except as set forth in the
Registration Statement, the Time of Sale Information and the Prospectus, no
subsidiary of the Company is currently prohibited, directly or indirectly, under
any agreement or other instrument to which it is a party or is subject, from
paying any dividends to the Company, from making any other distribution on such
subsidiary's capital stock, from repaying to the Company any loans or advances
to such subsidiary from the Company or from transferring any of such
subsidiary's properties or assets to the Company or any other subsidiary of the
Company.

      (ff)  No Broker's Fees. Neither the Company nor any of its subsidiaries is
a party to any contract, agreement or understanding with any person (other than
this Agreement) that would give rise to a valid claim against the Company or any
of its subsidiaries or any Underwriter for a brokerage commission, finder's fee
or like payment in connection with the offering and sale of the Shares.


                                       12



      (gg)  No Registration Rights. Except as set forth in the Registration
Statement, the Time of Sale Information and the Prospectus, no person has the
right to require the Company or any of its subsidiaries to register any
securities for sale under the Securities Act by reason of the filing of the
Registration Statement with the Commission or the issuance and sale of the
Shares.

      (hh)  No Stabilization. The Company has not taken, directly or indirectly
(without giving any effect to activities by the Underwriters), any action
designed to or that could reasonably be expected to cause or result in any
stabilization or manipulation of the price of the Shares.

      (ii)  Forward-Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Registration Statement, the Time of Sale Information or
the Prospectus has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith.

      (jj)  Statistical and Market Data. Nothing has come to the attention of
the Company that has caused the Company to believe that the statistical and
market-related data included in the Registration Statement, the Time of Sale
Information or the Prospectus is not based on or derived from sources that are
reliable and accurate in all material respects.

      (kk)  Status under the Securities Act. The Company is not an ineligible
issuer, as defined under the Securities Act, at the times specified in the
Securities Act in connection with the offering of the Shares.

      (ll)  Identification of Participants. The Company solely determined,
without any direct or indirect participation by the Underwriters, the
Participants who will purchase Directed Shares (including the amounts to be
purchased by such persons) sold in the offering by the Underwriters pursuant to
the Directed Share Program.

      (mm)  Directed Share Program. The Registration Statement, the Prospectus
and the Time of Sale Information comply, and any further amendments or
supplements thereto will comply, in all material respects, with any applicable
laws or regulations of each jurisdiction in which the Time of Sale Information
or the Prospectus, as amended or supplemented, if applicable, is distributed in
connection with the Directed Share Program, and no authorization, approval,
consent, license, order, registration or qualification of or with any court or
governmental or regulatory authority, other than such as have been obtained or
will be obtained or completed by the Closing Date, is necessary under the
securities laws and regulations of any such jurisdiction. The Company has not
offered, or caused the Underwriters to offer, Shares to any person pursuant to
the Directed Share Program with the specific intent to unlawfully influence (i)
a customer or supplier of the Company to alter the customer's or supplier's
level or type of business with the Company or (ii) a trade journalist or
publication to write or publish favorable information about the Company or its
products.

      (nn)  Dividends. All dividends and other distributions declared and
payable on the capital shares of the Company may under current laws and
regulations of Bermuda be paid in any currency other than Bermuda dollars that
may be freely transferred out of Bermuda, and all such dividends and other
distributions will not be subject under such current laws and regulations to


                                       13



withholding or other taxes under the laws and regulations of Bermuda and are
otherwise free and clear of any other tax, approval, authorization, registration
or qualification of or with any governmental agency or body or any court in
Bermuda (other than as may apply to residents of Bermuda for Bermuda exchange
control purposes); and other than as disclosed in the Registration Statement,
the Time of Sale Information and the Prospectus, no regulatory agency or body or
other governmental authority has issued any order or decree impairing,
restricting or prohibiting the payment of dividends by the Company or its
subsidiaries.

      (oo)  Absence of Stamp or Transfer Taxes. No stamp or other issuance or
transfer taxes of duties and no capital gains, income, withholding or other
taxes are payable by or on behalf of the Underwriters to Bermuda or any
political subdivision or taxing authority thereof or therein in connection with
the sale and delivery outside Bermuda by the Underwriters of the Shares to the
initial purchasers thereof; and no registration, documentary, recording,
transfer or other similar tax, fee or charge by any Bermuda governmental
authority is payable in connection with the execution, delivery, filing,
registration or performance of this Agreement.

      (pp)  Bermuda Status. The Bermuda Monetary Authority has designated the
Company as non-resident for exchange control purposes and has granted permission
for the issue and subsequent transfer of the Shares, subject to the condition
that the Shares shall be listed on the NYSE or any other appointed stock
exchange; such permission has not been revoked and is in full force and effect,
and the Company has no knowledge of any proceedings planned or threatened for
the revocation of such permission; the Company is an "exempted company" under
Bermuda law and has not conducted its business in a manner that is prohibited
for "exempted companies" under Bermuda law; and the Company has not received
notification from the Bermuda Monetary Authority or any other Bermuda
governmental authority of proceedings relating to the modification or revocation
of its designation as non-resident for exchange control purposes, its permission
for the issue and subsequent transfer of the Shares, or its status as an
"exempted company."

      4.    Further Agreements of the Company. The Company covenants and agrees
with each Underwriter that:

      (a)   Required Filings. The Company will file the Prospectus with the
Commission within the time periods specified by Rule 424(b) and Rule 430A under
the Securities Act and will file any Issuer Free Writing Prospectus to the
extent required by Rule 433 under the Securities Act; and the Company will
furnish copies of the Prospectus and each Issuer Free Writing Prospectus (to the
extent not previously delivered) to the Underwriters in New York City prior to
10:00 A.M., New York City time, on the business day next succeeding the date of
this Agreement in such quantities as the Representatives may reasonably request.

      Each Issuer Free Writing Prospectus, as of its issue date and at all
subsequent times through the completion of the offering contemplated by this
Agreement, or until any earlier date that the Company notified or notifies the
Underwriters as described in Section 4(e), did not, does not and will not
include any information that conflicted, conflicts or will conflict with the
information contained in the Registration Statement or the Prospectus, and any
preliminary or other prospectus deemed to be a part thereof that has not been
superseded or modified; provided,


                                       14



however, that this paragraph shall not apply to statements in or information
from any Issuer Free Writing Prospectus made in reliance upon and in conformity
with information furnished in writing to the Company by any Underwriter
expressly for inclusion in such Issuer Free Writing Prospectus, it being
understood and agreed upon that the only such information furnished by any
Underwriter consists of the information identified in Section 7(b) hereof.

      (b)   Delivery of Copies. The Company will deliver, without charge, (i) to
the Representatives, four signed copies of the Registration Statement as
originally filed and each amendment thereto, in each case including all exhibits
and consents filed therewith; and (ii) to each Underwriter (A) a conformed copy
of the Registration Statement as originally filed and each amendment thereto
(without exhibits) and (B) during the Prospectus Delivery Period (as defined
below), as many copies of the Prospectus (including all amendments and
supplements thereto) and each Issuer Free Writing Prospectus as the
Representatives may reasonably request. As used herein, the term "Prospectus
Delivery Period" means such period of time after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters a
prospectus relating to the Shares is required by law to be delivered (or
required to be delivered but for Rule 172 under the Securities Act) in
connection with sales of the Shares by any Underwriter or dealer.

      (c)   Amendments or Supplements, Issuer Free Writing Prospectuses. Before
preparing, using, authorizing, approving, referring to or filing any Issuer Free
Writing Prospectus, and before filing any amendment or supplement to the
Registration Statement or the Prospectus, the Company will furnish to the
Representatives and counsel for the Underwriters a copy of the proposed Issuer
Free Writing Prospectus, amendment or supplement for review and will not
prepare, use, authorize, approve, refer to or file any such Issuer Free Writing
Prospectus or file any such proposed amendment or supplement to which the
Representatives reasonably object.

      (d)   Notice to the Representatives. The Company will advise the
Representatives promptly, and confirm such advice in writing, (i) when the
Registration Statement has become effective, (ii) when any amendment to the
Registration Statement has been filed or becomes effective, (iii) when any
supplement to the Prospectus or any Issuer Free Writing Prospectus or any
amendment to the Prospectus has been filed, (iv) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or the receipt of any comments from the Commission
relating to the Registration Statement or any other request by the Commission
for any additional information, (v) of the issuance by the Commission of any
order suspending the effectiveness of the Registration Statement or preventing
or suspending the use of any Preliminary Prospectus or the Prospectus or the
initiation or threatening of any proceeding for that purpose or pursuant to
Section 8A of the Securities Act, (vi) of the occurrence of any event within the
Prospectus Delivery Period as a result of which the Prospectus, the Time of Sale
Information or any Issuer Free Writing Prospectus as then amended or
supplemented would include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances existing when the
Prospectus, the Time of Sale Information or any such Issuer Free Writing
Prospectus is delivered to a purchaser, not misleading and (vii) of the receipt
by the Company of any notice with respect to any suspension of the qualification
of the Shares


                                       15



for offer and sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and the Company will use its best efforts to
prevent the issuance of any such order suspending the effectiveness of the
Registration Statement, preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification of the Shares
and, if any such order is issued, will use its best efforts to obtain as soon as
possible the withdrawal thereof.

      (e)   Ongoing Compliance. (1) If during the Prospectus Delivery
Period (i) any event shall occur or condition shall exist as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances existing when the Prospectus is delivered to a
purchaser, not misleading or (ii) it is necessary to amend or supplement the
Prospectus to comply with law, the Company will immediately notify the
Underwriters thereof and forthwith prepare and, subject to paragraph (c) above,
file with the Commission and furnish to the Underwriters and to such dealers as
the Representatives may designate, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances existing
when the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law and (2) if at any time prior to the Closing Date
(i) any event shall occur or condition shall exist as a result of which the Time
of Sale Information as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances, not
misleading or (ii) it is necessary to amend or supplement the Time of Sale
Information to comply with law, the Company will immediately notify the
Underwriters thereof and forthwith prepare and, subject to paragraph (c) above,
file with the Commission (to the extent required) and furnish to the
Underwriters and to such dealers as the Representatives may designate, such
amendments or supplements to the Time of Sale Information as may be necessary so
that the statements in the Time of Sale Information as so amended or
supplemented will not, in the light of the circumstances, be misleading or so
that the Time of Sale Information will comply with law.

      (f)   Blue Sky Compliance. The Company will qualify the Shares for offer
and sale under the securities or Blue Sky laws of such jurisdictions as the
Representatives shall reasonably request and will continue such qualifications
in effect so long as required for distribution of the Shares; provided that the
Company shall not be required to (i) qualify as a foreign corporation or other
entity or as a dealer in securities in any such jurisdiction where it would not
otherwise be required to so qualify, (ii) file any general consent to service of
process in any such jurisdiction or (iii) subject itself to taxation in any such
jurisdiction if it is not otherwise so subject. Furthermore, the Company
covenants with the Representatives that the Company will comply in all material
respects with all applicable U.S. securities and other applicable laws, rules
and regulations in each jurisdiction in which the Directed Shares are offered in
connection with the Directed Share Program.

      (g)   Earning Statement. The Company will make generally available to its
security holders and the Representatives as soon as practicable an earning
statement that satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Commission promulgated


                                       16



thereunder covering a period of at least twelve months beginning with the first
fiscal quarter of the Company occurring after the "effective date" (as defined
in Rule 158) of the Registration Statement, provided that (i) such delivery
requirements to the Company's shareholders shall be deemed met by the Company's
compliance with its reporting requirements pursuant to the Exchange Act if such
compliance satisfies the conditions of Rule 158 and (ii) such delivery
requirements to the Representatives shall be deemed met by the Company if the
related reports are available on the Commission's Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR").

      (h)   Clear Market. For a period of 120 days after the date of the
Prospectus, the Company will not (i) offer, pledge, announce the intention to
sell, sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase
or otherwise transfer, dispose of or hedge, directly or indirectly, any shares
of Stock or any securities convertible into or exercisable or exchangeable for
Stock or (ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences of ownership of the Stock, whether any
such transaction described in clause (i) or (ii) above is to be settled by
delivery of Stock or such other securities, in cash or otherwise, without the
prior written consent of the Representatives, other than (A) the Shares to be
sold hereunder, (B) the grant of awards pursuant to employee benefit plans or
arrangements described in the Registration Statement, the Time of Sale
Information and the Prospectus or approved by the Company's shareholders after
the date hereof, including in connection with the settlement of restricted share
units, (C) upon the exercise of an option or upon conversion or exchange of
convertible or exchangeable securities disclosed in the Registration Statement,
the Time of Sale Information and the Prospectus, (D) the issuance of securities
to be registered pursuant to any registration statement on Form S-8 pursuant to
any benefit plans or arrangements disclosed in the Registration Statement, the
Time of Sale Information and the Prospectus or approved by the Company's
shareholders after the date hereof and (E) the issuance of up to 20% of the
Company's issued and outstanding common shares in connection with the
acquisition of the assets of, or a majority or controlling portion of the equity
of, or a joint venture with, another entity. Notwithstanding the foregoing, if
(1) during the last 17 days of the 120-day restricted period, the Company issues
an earnings release or material news or a material event relating to the Company
occurs; or (2) prior to the expiration of the 120-day restricted period, the
Company announces that it will release earnings results during the 16-day period
beginning on the last day of the 120-day period, the restrictions imposed by
this Agreement shall continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of the
material news or material event.

      (i)   Use of Proceeds. The Company will apply the net proceeds
from the sale of the Shares in a manner consistent in all material respects with
the description in the Registration Statement, the Time of Sale Information and
the Prospectus under the heading "Use of Proceeds".

      (j)   No Stabilization. The Company will not take, directly or
indirectly (it being understood that the Company makes no covenant or agreement
as to the activities of any Underwriter), any action designed to or that could
reasonably be expected to cause or result in any stabilization or manipulation
of the price of the Shares.


                                       17



      (k)   Exchange Listing. The Company will use its best efforts to list,
subject to notice of issuance, the Shares on the NYSE.

      (l)   Reports. During a period of two years following the effective date
of the Registration Statement, the Company will furnish to the Representatives,
as soon as they are available, copies of all reports or other communications
(financial or other) furnished to holders of the Shares, and copies of any
reports and financial statements furnished to or filed with the Commission or
any national securities exchange or automatic quotation system; provided that
the Company's filing or furnishing of any of the foregoing materials with the
Commission that are publicly available on EDGAR or pursuant to any similar
replacement electronic system approved by the Commission, shall be deemed to
have been furnished to the Representatives at the time of such filing.

      (m)   Record Retention. The Company will, pursuant to reasonable
procedures developed in good faith, retain copies of each Issuer Free Writing
Prospectus that is not filed with the Commission in accordance with Rule 433
under the Securities Act.

      (n)   Filings. The Company will file with the Commission such reports as
may be required by Rule 463 under the Securities Act.

      (o)   Bermuda Filings. In connection with the offer and sale of the
Shares, the Company will make all filings required (i) under the Companies Act
of 1981 of Bermuda and (ii) by the Bermuda Monetary Authority.

      (p)   Delivery of Qualified Electing Fund Information. The Company will
make available to shareholders that have elected to treat the Company as a
qualified electing fund ("QEF") under section 1295 of the Code such information
as may be required in connection with such election, at the time and in the
manner prescribed by the Code and Treasury regulations promulgated thereunder.

      (q)   Disclosure Controls. The Company and its subsidiaries will
use their respective best efforts to implement and maintain an effective system
of "disclosure controls and procedures" (as defined in Rule 13a-15(e) of the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in reports that it will file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms, including controls and
procedures designed to ensure that such information is accumulated and
communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure. Subsequent to implementation, the
Company and its subsidiaries will carry out evaluations of the effectiveness of
such disclosure controls and procedures as required by Rule 13a-15 of the
Exchange Act.

      5.    Certain Agreements of the Underwriters. Each Underwriter hereby
represents and agrees that:

      (a)   It has not and will not use, authorize use of, refer to, or
participate in the planning for use of, any "free writing prospectus", as
defined in Rule 405 under the Securities Act (which


                                       18



term includes use of any written information furnished to the Commission by the
Company and not incorporated by reference into the Registration Statement and
any press release issued by the Company) other than (i) a free writing
prospectus that contains no "issuer information" (as defined in Rule 433(h)(2)
under the Securities Act) that was not included (including through incorporation
by reference) in the Preliminary Prospectus or a previously filed Issuer Free
Writing Prospectus, (ii) any Issuer Free Writing Prospectus listed on Annex B or
prepared pursuant to Section 3(c) or Section 4(c) above, or (iii) any free
writing prospectus prepared by such underwriter and approved by the Company in
advance in writing (each such free writing prospectus referred to in clauses (i)
or (iii), an "Underwriter Free Writing Prospectus").

      (b)   It has not and will not distribute any Underwriter Free
Writing Prospectus referred to in clause (a)(i) in a manner reasonably designed
to lead to its broad unrestricted dissemination.

      (c)   It has not and will not, without the prior written consent of the
Company, use any free writing prospectus that contains the final terms of the
Shares unless such terms have previously been included in a free writing
prospectus filed with the Commission.

      (d)   It will, pursuant to reasonable procedures developed in good faith,
retain copies of each free writing prospectus used or referred to by it, in
accordance with Rule 433 under the Securities Act.

      (e)   It is not subject to any pending proceeding under Section 8A of the
Securities Act with respect to the offering (and will promptly notify the
Company if any such proceeding against it is initiated during the Prospectus
Delivery Period).

      6.    Conditions of Underwriters' Obligations. The obligation of each
Underwriter to purchase the Underwritten Shares on the Closing Date or the
Option Shares on the Additional Closing Date, as the case may be, as provided
herein is subject to the performance by the Company of its covenants and other
obligations hereunder and to the following additional conditions:

      (a)   Registration Compliance; No Stop Order. No order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceeding for such purpose pursuant to Section 8A under the Securities Act
shall be pending before or threatened by the Commission; the Prospectus and each
Issuer Free Writing Prospectus shall have been timely filed with the Commission
under the Securities Act (in the case of an Issuer Free Writing Prospectus, to
the extent required by Rule 433 under the Securities Act) and in accordance with
Section 4(a) hereof; and all requests by the Commission for additional
information shall have been complied with to the reasonable satisfaction of the
Representatives.

      (b)   Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct on the date
hereof and on and as of the Closing Date or the Additional Closing Date, as the
case may be, and the statements of the Company and its officers made in any
certificates delivered pursuant to this Agreement shall be true and correct on
and as of the Closing Date or the Additional Closing Date, as the case may be.


                                       19



      (c)   No Downgrade. Subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded any
debt securities of or guaranteed by the Company or any of its subsidiaries by
any "nationally recognized statistical rating organization", as such term is
defined by the Commission for purposes of Rule 436(g)(2) under the Securities
Act and (ii) no such organization shall have publicly announced that it has
under surveillance or review, or has changed its outlook with respect to, its
rating of any debt securities of or guaranteed by the Company or any of its
subsidiaries (other than an announcement with positive implications of a
possible upgrading).

      (d)   No Material Adverse Change. No event or condition of a type
described in Section 3(f) hereof shall have occurred or shall exist, which event
or condition is not described in the Time of Sale Information (excluding any
amendment or supplement thereto) and the Prospectus (excluding any amendment or
supplement thereto) and the effect of which in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the
offering, sale or delivery of the Shares on the Closing Date or the Additional
Closing Date, as the case may be, on the terms and in the manner contemplated by
this Agreement, the Time of Sale Information and the Prospectus.

      (e)   Officer's Certificate. The Representatives shall have received on
and as of the Closing Date or the Additional Closing Date, as the case may be, a
certificate of the chief financial officer or chief accounting officer of the
Company and one additional senior executive officer of the Company who is
satisfactory to the Representatives (i) confirming that such officers have
carefully reviewed the Registration Statement, the Time of Sale Information and
the Prospectus and, to the knowledge of such officers, the representations set
forth in Sections 3(b) and 3(d) hereof are true and correct, (ii) confirming
that the other representations and warranties of the Company in this Agreement
are true and correct and that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to such Closing Date and (iii) to the effect set forth in paragraphs
(a), (c) and (d) above.

      (f)   Comfort Letters. On the date of this Agreement and on the Closing
Date or the Additional Closing Date, as the case may be, Ernst & Young LLP shall
have furnished to the Representatives, at the request of the Company, letters,
dated the respective dates of delivery thereof and addressed to the
Underwriters, in form and substance reasonably satisfactory to the
Representatives, containing statements and information of the type customarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement, the Time of Sale Information and the Prospectus;
provided, that the letter delivered on the Closing Date or the Additional
Closing Date, as the case may be, shall use a "cut-off" date no more than three
business days prior to such Closing Date or such Additional Closing Date, as the
case may be.

      (g)   Opinions of Counsel for the Company. Skadden, Arps, Slate, Meagher &
Flom LLP, U.S. counsel for the Company, Conyers Dill & Pearman, special Bermuda
counsel for the Company, and David Walton, General Counsel of the Company, shall
have furnished to the Representatives, at the request of the Company, their
written opinions, dated the Closing Date or the Additional Closing Date, as the
case may be, and addressed to the Underwriters, in form and


                                       20



substance reasonably satisfactory to the Representatives, to the effect set
forth in Annex C-1, Annex C-2 and Annex C-3 respectively, hereto.

      (h)   Opinion of Counsel for the Underwriters. The Representatives shall
have received on and as of the Closing Date or the Additional Closing Date, as
the case may be, an opinion of Sidley Austin LLP, counsel for the Underwriters,
with respect to such matters as the Representatives may reasonably request, and
such counsel shall have received such documents and information as they may
reasonably request to enable them to pass upon such matters.

      (i)   No Legal Impediment to Issuance. No action shall have been taken and
no statute, rule, regulation or order shall have been enacted, adopted or issued
by any Bermuda or U.S. federal or state or foreign governmental or regulatory
authority that would, as of the Closing Date or the Additional Closing Date, as
the case may be, prevent the issuance or sale of the Shares; and no injunction
or order of any Bermuda or U.S. federal or state or foreign court shall have
been issued that would, as of the Closing Date or the Additional Closing Date,
as the case may be, prevent the issuance or sale of the Shares.

      (j)   Good Standing. The Representatives shall have received on and as of
the Closing Date or the Additional Closing Date, as the case may be,
satisfactory evidence of the good standing of the Company and its Significant
Subsidiaries in their respective jurisdictions of organization and their good
standing as foreign entities in such other jurisdictions as the Representatives
may reasonably request, in each case in writing or any standard form of
telecommunication from the appropriate governmental authorities of such
jurisdictions.

      (k)   Exchange Listing. The Shares to be delivered on the Closing Date or
Additional Closing Date, as the case may be, shall have been approved for
listing on the NYSE, subject to official notice of issuance.

      (l)   Lock-up Agreements. The "lock-up" agreements, each substantially in
the form of Annex D hereto, between you and the Company's shareholders,
executive officers, directors and Participants relating to sales and certain
other dispositions of shares of Stock or certain other securities, delivered to
you on or before the date hereof, shall be in full force and effect on the
Closing Date.

      (m)   Additional Documents. On or prior to the Closing Date or the
Additional Closing Date, as the case may be, the Company shall have furnished to
the Representatives such further certificates and documents as the
Representatives may reasonably request.

      All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.

      7.    Indemnification and Contribution.

      (a)   Indemnification of the Underwriters. The Company agrees to indemnify
and hold harmless each Underwriter, its affiliates, directors and officers and
each person, if any, who controls such Underwriter within the meaning of Section
15 of the Securities Act or Section 20


                                       21



of the Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, legal fees and other expenses
incurred in connection with any suit, action or proceeding or any claim
asserted, as such fees and expenses are incurred), joint or several, that arise
out of, or are based upon, (i) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, not
misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or supplement
thereto), any Issuer Free Writing Prospectus or any Time of Sale Information
(including any Time of Sale Information that has subsequently been amended) or
caused by any omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, in each case except insofar as such
losses, claims, damages or liabilities arise out of, or are based upon, any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with any information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the
Representatives expressly for use therein, it being understood and agreed that
the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below.

      The Company agrees to indemnify and hold harmless the Underwriters and any
selling group member participating in the Directed Share Program, their
affiliates, directors and officers and each person who controls each Underwriter
or any selling group member participating in the Directed Share Program within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages and liabilities
(including, without limitation, legal fees and other expenses incurred in
connection with any suit, action or proceeding or any claim asserted, as such
fees and expenses are incurred), joint or several, that (i) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the prospectus wrapper or Directed Share Program material prepared
by or with the consent of the Company for distribution in connection with the
Directed Share Program attached to or included with the Prospectus or any
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement therein, when considered in conjunction with
the Prospectus or any applicable preliminary prospectus, not misleading, (ii)
are caused by the failure of any Participant to pay for and accept delivery of
the Shares which were subject to a properly confirmed agreement to purchase or
(iii) are related to, arise out of, or are in connection with the Directed Share
Program, except that this clause (iii) shall not apply to the extent that such
loss, claim, damage or liability is finally judicially determined to have
resulted from the bad faith, gross negligence or willful misconduct of the
Underwriters or any selling group member participating in the Directed Share
Program.

      The Company also agrees to indemnify and hold harmless Deutsche Bank
Securities Inc. (the "QIU"), its affiliates, directors and officers and each
person, if any, who controls the QIU within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities incurred as a result of QIU's
participation as a "qualified independent underwriter" within the meaning of the
Rules of


                                       22



Conduct of the National Association of Securities Dealers, Inc. in connection
with the offering of the Shares.

      (b)   Indemnification of the Company. Each Underwriter agrees, severally
and not jointly, to indemnify and hold harmless the Company, its directors, its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the indemnity set forth in
paragraph (a) above, but only with respect to any losses, claims, damages or
liabilities that arise out of, or are based upon, any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with any information relating to such Underwriter furnished to the
Company in writing by such Underwriter through the Representatives expressly for
use in the Registration Statement, the Prospectus (or any amendment or
supplement thereto), any Issuer Free Writing Prospectus or any Time of Sale
Information, it being understood and agreed upon that the only such information
furnished by any Underwriter consists of the following information in the
Prospectus furnished on behalf of each Underwriter: (i) the concession and
reallowance figures appearing in the first and second sentences of the fourth
paragraph under the caption "Underwriting," (ii) the third, fourth and fifth
sentences of the fourth paragraph under the caption "Underwriting," (iii) the
eighth, fifteenth and sixteenth paragraphs under the caption "Underwriting" and
(iv) the second and third sentences of the seventeenth paragraph under the
caption "Underwriting"[; and the following information in the Issuer Free
Writing Prospectus dated _______, 20__: [insert description of information
provided by Underwriters].

      (c)   Notice and Procedures. If any suit, action, proceeding (including
any governmental or regulatory investigation), claim or demand shall be brought
or asserted against any person in respect of which indemnification may be sought
pursuant to either paragraph (a) or (b) above, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnification may
be sought (the "Indemnifying Person") in writing; provided that the failure to
notify the Indemnifying Person shall not relieve it from any liability that it
may have under this Section 7 except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by such
failure; and provided, further, that the failure to notify the Indemnifying
Person shall not relieve it from any liability that it may have to an
Indemnified Person otherwise than under this Section 7. If any such proceeding
shall be brought or asserted against an Indemnified Person and it shall have
notified the Indemnifying Person thereof, the Indemnifying Person shall retain
counsel reasonably satisfactory to the Indemnified Person (who shall not,
without the consent of the Indemnified Person, be counsel to the Indemnifying
Person) to represent the Indemnified Person in such proceeding and shall pay the
fees and expenses of such counsel related to such proceeding, as incurred. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person, (iii) the Indemnifying Person
does not diligently defend the action after assumption of the defense or (iv)
such Indemnified Person or Persons shall have reasonably concluded that there
may be defenses available to it or them which are different from or additional
to those available to one or all of the Indemnifying Persons (in which case the


                                       23



Indemnifying Persons shall not have the right to direct the defense of such
action on behalf of the Indemnified Person or Persons). It is understood and
agreed that the Indemnifying Person shall not, in connection with any proceeding
or related proceeding in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Indemnified Persons, and that all such fees and expenses shall be paid or
reimbursed as they are incurred; provided, however that if indemnity may be
sought pursuant to the third paragraph of Section 7(a) above in respect of such
proceeding, then in addition to such separate firm of the Underwriters, their
affiliates and such control persons of the Underwriters the indemnifying party
shall be liable for the fees and expenses of not more than one separate firm (in
addition to any local counsel) for the QIU, in its capacity specified in such
paragraph, its respective affiliates and all persons, if any, who control the
QIU, within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act. Any such separate firm for any Underwriter, its affiliates,
directors and officers and any control persons of such Underwriter shall be
designated in writing by J.P. Morgan Securities Inc. or, in the case of the
third paragraph of Section 7(a) above, the QIU, and any such separate firm for
the Company, its directors, its officers who signed the Registration Statement
and any control persons of the Company shall be designated in writing by the
Company. The Indemnifying Person shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify each Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested
that an Indemnifying Person reimburse the Indemnified Person for fees and
expenses of counsel as contemplated by this paragraph, the Indemnifying Person
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 60 days after
receipt by the Indemnifying Person of such request and, (ii) the Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. No Indemnifying Person shall,
without the written consent of the Indemnified Person, effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified Person
is or could have been a party and indemnification could have been sought
hereunder by such Indemnified Person, unless such settlement (x) includes an
unconditional release of such Indemnified Person, in form and substance
reasonably satisfactory to such Indemnified Person, from all liability on claims
that are the subject matter of such proceeding and (y) does not include any
statement as to or any admission of fault, culpability or a failure to act by or
on behalf of any Indemnified Person.

      (d)   Contribution. If the indemnification provided for in paragraphs (a)
and (b) above is unavailable to an Indemnified Person or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, on the one hand, and the Underwriters, (both
in their capacity as underwriters and in connection with the Directed Share
Program) or the QIU in its capacity as a "qualified independent underwriter", as
the case may be, on the other, from the offering of the Shares or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not


                                       24



only the relative benefits referred to in clause (i) but also the relative fault
of the Company, on the one hand, and the Underwriters (both in their capacity as
underwriters and in connection with the Directed Share Program) or the QIU in
its capacity as a "qualified independent underwriter", as the case may be, on
the other, in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Underwriters (both in their capacity as underwriters and in connection
with the Directed Share Program) or the QIU in its capacity as a "qualified
independent underwriter", as the case may be, on the other, shall be deemed to
be in the same respective proportions as the net proceeds (before deducting
expenses) received by the Company from the sale of the Shares and the total
underwriting discounts and commissions received by the Underwriters in
connection therewith, in each case as set forth in the table on the cover of the
Prospectus, or the fee to be received by the QIU in its capacity as a "qualified
independent underwriter", as the case may be, bear to the aggregate offering
price of the Shares. The relative fault of the Company, on the one hand, and the
Underwriters (both in their capacity as underwriters and in connection with the
Directed Share Program) or the QIU in its capacity as a "qualified independent
underwriter", as the case may be, on the other, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters (both in
their capacity as underwriters and in connection with the Directed Share
Program) or the QIU in its capacity as a "qualified independent underwriter", as
the case may be, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

      (e)   Limitation on Liability. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Person in connection with any such
action or claim. Notwithstanding the provisions of this Section 7, in no event
shall an Underwriter be required to contribute any amount in excess of the
amount by which the total underwriting discounts and commissions received by
such Underwriter with respect to the offering of the Shares exceeds the amount
of any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are several
in proportion to their respective purchase obligations hereunder and not joint.

      (f)   Non-Exclusive Remedies. The remedies provided for in this Section 7
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any Indemnified Person at law or in equity.


                                       25



      8.    Effectiveness of Agreement. This Agreement shall become effective
upon the execution and delivery hereof by the parties hereto.

      9.    Termination. This Agreement may be terminated in the absolute
discretion of the Representatives, by notice to the Company, if after the
execution and delivery of this Agreement and prior to the Closing Date or, in
the case of the Option Shares, prior to the Additional Closing Date, (i) trading
generally shall have been suspended or materially limited on or by any of the
NYSE, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities issued or
guaranteed by the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities shall have been declared by U.S. federal or New York State or Bermuda
authorities or (iv) there shall have occurred any outbreak or escalation of
hostilities or any change in financial markets or any calamity or crisis, either
within or outside the United States, that, in the judgment of the
Representatives, is material and adverse and makes it impracticable or
inadvisable to proceed with the offering, sale or delivery of the Shares on the
Closing Date or the Additional Closing Date, as the case may be, on the terms
and in the manner contemplated by this Agreement, the Time of Sale Information
and the Prospectus.

      10.   Defaulting Underwriter. (a) If, on the Closing Date or the
Additional Closing Date, as the case may be, any Underwriter defaults on its
obligation to purchase the Shares that it has agreed to purchase hereunder on
such date, the non-defaulting Underwriters may in their discretion arrange for
the purchase of such Shares by other persons satisfactory to the Company on the
terms contained in this Agreement. If, within 36 hours after any such default by
any Underwriter, the non-defaulting Underwriters do not arrange for the purchase
of such Shares, then the Company shall be entitled to a further period of 36
hours within which to procure other persons satisfactory to the non-defaulting
Underwriters to purchase such Shares on such terms. If other persons become
obligated or agree to purchase the Shares of a defaulting Underwriter, either
the non-defaulting Underwriters or the Company may postpone the Closing Date or
the Additional Closing Date, as the case may be, for up to five full business
days in order to effect any changes that in the opinion of counsel for the
Company or counsel for the Underwriters may be necessary in the Registration
Statement and the Prospectus or in any other document or arrangement, and the
Company agrees to promptly prepare any amendment or supplement to the
Registration Statement and the Prospectus that effects any such changes. As used
in this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context otherwise requires, any person not listed in
Schedule 1 hereto that, pursuant to this Section 10, purchases Shares that a
defaulting Underwriter agreed but failed to purchase.

      (b)   If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or the Additional
Closing Date, as the case may be, does not exceed one-eleventh of the aggregate
number of Shares to be purchased on such date, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of
Shares that such Underwriter agreed to purchase hereunder on such date plus such
Underwriter's pro rata share (based on the number of Shares that such
Underwriter agreed to purchase on such date) of the


                                       26



Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made.

      (c)   If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or the Additional
Closing Date, as the case may be, exceeds one-eleventh of the aggregate amount
of Shares to be purchased on such date, or if the Company shall not exercise the
right described in paragraph (b) above, then this Agreement or, with respect to
any Additional Closing Date, the obligation of the Underwriters to purchase
Shares on the Additional Closing Date, as the case may be, shall terminate
without liability on the part of the non-defaulting Underwriters. Any
termination of this Agreement pursuant to this Section 10 shall be without
liability on the part of the Company, except that the Company will continue to
be liable for the payment of expenses as set forth in Section 11 hereof and
except that the provisions of Section 7 hereof shall not terminate and shall
remain in effect.

      (d)   Nothing contained herein shall relieve a defaulting Underwriter of
any liability it may have to the Company or any non-defaulting Underwriter for
damages caused by its default.

      11.   Payment of Expenses. (a) Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company will pay or cause to be paid all costs and expenses incident to the
performance of its obligations hereunder, including without limitation, (i) the
costs incident to the authorization, issuance, sale, preparation and delivery of
the Shares and any taxes payable in connection therewith, (ii) the costs
incident to the preparation, printing and filing under the Securities Act of the
Registration Statement, the Preliminary Prospectus, any Issuer Free Writing
Prospectus, any Time of Sale Information and the Prospectus (including all
exhibits, amendments and supplements thereto) and the distribution thereof,
(iii) the costs of reproducing and distributing this Agreement, (iv) the fees
and expenses of the Company's counsel and independent accountants, (v) the fees
and expenses incurred in connection with the registration or qualification and
determination of eligibility for investment of the Shares under the laws of such
jurisdictions as the Representatives may designate and the preparation, printing
and distribution of a Blue Sky Memorandum (including the related fees and
expenses of counsel for the Underwriters), (vi) the cost of preparing share
certificates, (vii) the costs and charges of any transfer agent and any
registrar, (viii) all expenses and application fees incurred in connection with
any filing with, and clearance of the offering by, the National Association of
Securities Dealers, Inc. (including the fees and expenses of QIU acting as
"qualified independent underwriter" within the meaning of the aforementioned
Rule 2720 of The Rules of Conduct), (ix) all expenses incurred by the Company in
connection with any "road show" presentation to potential investors, (x) all
expenses and application fees related to the listing of the Shares on the
Exchange and (xi) all fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program, including the
printing (or reproduction) and delivery (including postage, air freight charges
and charges for counting and packaging) of such copies of any prospectus wrapper
or the Directed Share Program material and stamp duties, similar taxes or duties
or other taxes, if any, incurred by the Underwriters in connection with the
Directed Share Program.


                                       27



      (b)   If (i) this Agreement is terminated pursuant to clause (ii) of
Section 9 hereof, (ii) the Company for any reason fails to tender the Shares for
delivery to the Underwriters or (iii) the Underwriters decline to purchase the
Shares for any reason permitted under this Agreement (other than following
termination of this Agreement pursuant to clauses (i), (iii) or (iv) of Section
9 hereof), the Company agrees to reimburse the Underwriters for all
out-of-pocket costs and expenses (including the fees and expenses of their
counsel) reasonably incurred by the Underwriters in connection with this
Agreement and the offering contemplated hereby.

      12.   Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and the officers and directors and any controlling persons referred
to in Section 7 hereof. Nothing in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein. No
purchaser of Shares from any Underwriter shall be deemed to be a successor
merely by reason of such purchase.

      13.   Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Underwriters
contained in this Agreement or made by or on behalf of the Company or the
Underwriters pursuant to this Agreement or any certificate delivered pursuant
hereto shall survive the delivery of and payment for the Shares and shall remain
in full force and effect, regardless of any termination of this Agreement or any
investigation made by or on behalf of the Company or the Underwriters.

      14.   Certain Defined Terms. For purposes of this Agreement, (a) except
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act; (b) the term "business day" means
any day other than a day on which banks are permitted or required to be closed
in New York City; and (c) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act.

      15.   Submission to Jurisdiction; Process Agent; Waiver of Trial by Jury.
The Company irrevocably (i) agrees that any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby may be instituted in any state or federal court located in the Borough of
Manhattan, The City of New York, New York (each, a "New York Court"), (ii)
waives, to the fullest extent it may effectively do so, any objection which it
may now or hereafter have to the laying of venue of any such suit, action or
proceeding and (iii) submits to the non-exclusive jurisdiction of such courts in
any such suit, action or proceeding. The Company irrevocably waives any immunity
to jurisdiction to which it may otherwise be entitled or become entitled
(including sovereign immunity, immunity to pre-judgment attachment, post
judgment attachment and execution) in any legal suit, action or proceeding
against it arising out of or based on this Agreement or the transactions
contemplated hereby which is instituted in any New York Court or in any
competent court in Bermuda. The Company has appointed _________________________,
as its authorized agent (the "Authorized Agent") upon whom process may be served
in any such suit, action or proceeding arising out of or based on this Agreement
or the transactions contemplated hereby which may be instituted in any New York
Court by the Underwriters or by any person who controls an Underwriter,
expressly consents to the jurisdiction of any such court in respect of any such
court


                                       28



in respect of any such suit, action or proceeding, and waives any other
requirements of or objections to personal jurisdiction with respect thereto.
Such appointments shall be irrevocable. The Company represents and warrants that
the Authorized Agent has agreed to act as such agent for service of process and
agrees to take any and all action, including the filing of any and all documents
and instruments that may be necessary to continue such appointment in full force
and effect as aforesaid. Service of process upon the Authorized Agent and
written notice of such service to the Company shall be deemed, in every respect,
effective service of process upon the Company. The Company and the Underwriters
hereby irrevocably waive, to the fullest extent permitted by applicable law, any
and all right to trial by jury in any legal suit, action or proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby.

      16.   Judgment Currency. In respect to any judgment or order given or made
for any amount due hereunder that is expressed and paid in a currency (the
"judgment currency") other than United States dollars, the Company will
indemnify the Underwriters against any loss incurred by the Underwriters as a
result of any variation as between (a) the rate of exchange at which the United
States dollar amount is converted into the judgment currency for the purpose of
such judgment or order and (b) the rate of exchange at which the Underwriters
are able to purchase United States dollars with the amount of judgment currency
on the date the judgment currency is actually received by the Underwriters. The
foregoing indemnity shall constitute a separate and independent obligation of
the Company and shall continue in full force and effect notwithstanding any such
judgment or order as aforesaid. The term "rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase of or
conversion into United States dollars.

      17.   Miscellaneous. (a) Authority of the Representatives. Any action by
the Underwriters hereunder may be taken by any Representative on behalf of the
Underwriters, and any such action taken by any Representative shall be binding
upon the Underwriters.

      (b)   Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted and
confirmed by any standard form of telecommunication. Notices to the Underwriters
shall be given to the Representatives c/o J.P. Morgan Securities Inc., 277 Park
Avenue, New York, New York 10172 (fax: (212) 622-8358); Attention: Equity
Syndicate Desk. Notices to the Company shall be given to it c/o Aircastle
Advisor LLC, 300 First Stamford Place, 5th Floor, Stamford, Connecticut 06902,
(fax: (203) 504-1021); Attention: General Counsel.

      (c)   Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

      (d)   Counterparts. This Agreement may be signed in counterparts (which
may include counterparts delivered by any standard form of telecommunication),
each of which shall be an original and all of which together shall constitute
one and the same instrument.

      (e)   Amendments or Waivers. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.


                                       29



      (f)   Headings. The headings herein are included for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.


                                       30



      If the foregoing is in accordance with your understanding, please indicate
your acceptance of this Agreement by signing in the space provided below.


                                            Very truly yours,

                                            AIRCASTLE LIMITED


                                            By_______________________
                                               Name:
                                               Title:

Accepted: __________, 2006

J.P. MORGAN SECURITIES INC.
BEAR, STEARNS & CO. INC.
CITIGROUP GLOBAL MARKETS INC.
  For itself and on behalf of the
  several Underwriters listed
  in Schedule 1 hereto.



By_________________________________
       Authorized Signatory


                                       31



                                                                      Schedule 1

Underwriter                                 Number of Shares

J.P. Morgan Securities Inc.
Bear, Stearns & Co. Inc.
Citigroup Global Markets Inc.
Calyon Securities (USA) Inc.
Deutsche Bank Securities Inc.

                                            _________________________

                                      Total


                                       32



                                                                      Schedule 2

                     Significant Subsidiaries of the Company

                                    [TO COME]


                                       33



                                                                         Annex A


                                 Pricing Script

                                    [TO COME]


                                       34



                                                                         Annex B


                  Schedule of Issuer Free Writing Prospectuses

                                    [TO COME]


                                       35



                                                                       Annex C-1


           Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP

                                    [TO COME]


                                       36



                                                                       Annex C-2


                    Form of Opinion of Conyers Dill & Pearman

                                    [TO COME]


                                       37



                                                                       Annex C-3


                       Form of Opinion of General Counsel

                                    [TO COME]


                                       38



                                                                         Annex D


                     Form of Shareholders' Lock-up Agreement

                                    [TO COME]


                                       39


FORM NO. 2

                                     [LOGO]

                                     BERMUDA

                             THE COMPANIES ACT 1981

             MEMORANDUM OF ASSOCIATION OF COMPANY LIMITED BY SHARES
                              SECTION 7(1) AND (2)

                            MEMORANDUM OF ASSOCIATION

                                       OF

                          AIRCASTLE INVESTMENT LIMITED
--------------------------------------------------------------------------------
                   (hereinafter referred to as "the Company")

1.  The liability of the members of the Company is limited to the amount (if
    any) for the time being unpaid on the shares respectively held by them.

2.  We, the undersigned, namely,



                                                                      Number of
                                Bermudian Status                        Shares
Name and Address                  (Yes or No)        Nationality      Subscribed

Alison Dyer-Fagundo
Canon's Court,
22 Victoria Street
Hamilton HM 12, Bermuda               Yes              British            1

Bernett Cox
Canon's Court,
22 Victoria Street
Hamilton HM 12, Bermuda               Yes              British            1

Antoinette Simmons
Canon's Court,
22 Victoria Street
Hamilton HM 12, Bermuda               Yes              British            1

Marcia Gilbert
Canon's Court,
22 Victoria Street
Hamilton HM 12, Bermuda                No            Trinidadian          1


do hereby respectively agree to take such number of shares of the Company as may
be allotted to us respectively by the provisional directors of the Company, not
exceeding the number of shares for which we have respectively subscribed, and to
satisfy such calls as may be made by the directors, provisional directors or
promoters of the Company in respect of the shares allotted to us respectively.




3.  The Company is to be an Exempted Company as defined by the Companies Act
    1981.

4.  The Company, with the consent of the Minister of Finance, has power to hold
    land situate in Bermuda not exceeding ___ in all, including the following
    parcels:-

    NOT APPLICABLE.

5.  The authorised share capital of the Company is US$12,000.00 divided into
    12,000 shares of par value US$1.00 each. The minimum subscribed share
    capital of the Company is $12,000.00 in United States currency.

6.  The objects for which the Company is formed and incorporated are:-

    As set forth in paragraphs (b) to (u) inclusive of the Second Schedule to
    the Companies Act 1981.

7.  The Company has the powers set out in The Schedule annexed hereto.




Signed by each subscriber in the presence of at least one witness attesting
the signature thereof:-

/s/ Alison Dyer-Fagundo                         /s/ Tanya Boyles
----------------------------                    ----------------------------

/s/ Bernett Cox                                 /s/ Tanya Boyles
----------------------------                    ----------------------------

/s/ Antoinette Simmons                          /s/ Tanya Boyles
----------------------------                    ----------------------------

/s/ Marcia Gilbert                              /s/ Tanya Boyles
----------------------------                    ----------------------------

      (Subscribers)                                     (Witnesses)


Subscribed this 22nd day of October 2004





STAMP DUTY (To be affixed)




                                  THE SCHEDULE

           (referred to in Clause 7 of the Memorandum of Association)

(a)   to borrow and raise money in any currency or currencies and to secure or
      discharge any debt or obligation in any manner and in particular (without
      prejudice to the generality of the foregoing) by mortgages of or charges
      upon all or any part of the undertaking, property and assets (present and
      future) and uncalled capital of the company or by the creation and issue
      of securities;

(b)   to enter into any guarantee, contract of indemnity or suretyship and in
      particular (without prejudice to the generality of the foregoing) to
      guarantee, support or secure, with or without consideration, whether by
      personal obligation or by mortgaging or charging all or any part of the
      undertaking, property and assets (present and future) and uncalled capital
      of the company or by both such methods or in any other manner, the
      performance of any obligations or commitments of, and the repayment or
      payment of the principal amounts of and any premiums, interest, dividends
      and other moneys payable on or in respect of any securities or liabilities
      of, any person, including (without prejudice to the generality of the
      foregoing) any company which is for the time being a subsidiary or a
      holding company of the company or another subsidiary of a holding company
      of the company or otherwise associated with the company;

(c)   to accept, draw, make, create, issue, execute, discount, endorse,
      negotiate and deal in bills of exchange, promissory notes, and other
      instruments and securities, whether negotiable or otherwise;

(d)   to sell, exchange, mortgage, charge, let on rent, share of profit, royalty
      or otherwise, grant licences, easements, options, servitudes and other
      rights over, and in any other manner deal with or dispose of, all or any
      part of the undertaking, property and assets (present and future) of the
      company for any consideration and in particular (without prejudice to the
      generality of the foregoing) for any securities;

(e)   to issue and allot securities of the company for cash or in payment or
      part payment for any real or personal property purchased or otherwise
      acquired by the company or any services rendered to the company or as
      security for any obligation or amount (even if less than the nominal
      amount of such securities) or for any other purpose;

(f)   to grant pensions, annuities, or other allowances, including allowances on
      death, to any directors, officers or employees or former directors,
      officers or employees of the company or any company which at any time is
      or was a subsidiary or a holding company or another subsidiary of a
      holding company of the company or otherwise associated with the company or
      of any predecessor in business of any of them, and to the relations,
      connections or dependants of any such persons, and to other persons whose
      service or services have directly or indirectly been of




      benefit to the company or whom the company considers have any moral claim
      on the company or to their relations connections or dependants, and to
      establish or support any associations, institutions, clubs, schools,
      building and housing schemes, funds and trusts, and to make payment
      towards insurance or other arrangements likely to benefit any such persons
      or otherwise advance the interests of the company or of its members or for
      any national, charitable, benevolent, educational, social, public, general
      or useful object;

(g)   subject to the provisions of Section 42 of the Companies Act 1981, to
      issue preference shares which at the option of the holders thereof are to
      be liable to be redeemed;

(h)   to purchase its own shares in accordance with the provisions of Section
      42A of the Companies Act 1981.




                             THE COMPANIES ACT 1981

                                 FIRST SCHEDULE                  (SECTION 11(1))

A company limited by shares, or other company having a share capital, may
exercise all or any of the following powers subject to any provision of law or
its memorandum -

(1)   [repealed by 1992:51]

(2)   to acquire or undertake the whole or any part of the business, property
      and liabilities of any person carrying on any business that the company is
      authorised to carry on;

(3)   to apply for, register, purchase, lease, acquire, hold, use, control,
      licence, sell, assign or dispose of patents, patent rights, copyrights,
      trade marks, formulae, licences, inventions, processes, distinctive marks
      and similar rights;

(4)   to enter into partnership or into any arrangement for sharing of profits,
      union of interests, co-operation joint venture, reciprocal concession or
      otherwise with any person carrying on or engaged in or about to carry on
      or engage in any business or transaction that the company is authorised to
      carry on or engage in or any business or transaction capable of being
      conducted so as to benefit the company;

(5)   to take or otherwise acquire and hold securities in any other body
      corporate having objects altogether or in part similar to those of the
      company or carrying on any business capable of being conducted so as to
      benefit the company;

(6)   subject to section 96 to lend money to any employee or to any person
      having dealings with the company or with whom the company proposes to have
      dealings or to any other body corporate any of whose shares are held by
      the company;

(7)   to apply for, secure or acquire by grant, legislative enactment,
      assignment, transfer, purchase or otherwise and to exercise, carry out and
      enjoy any charter, licence, power, authority, franchise, concession, right
      or privilege, that any government or authority or any body corporate or
      other public body may be empowered to grant, and to pay for, aid in and
      contribute toward




      carrying it into effect and to assume any liabilities or obligations
      incidental thereto;

(8)   to establish and support or aid in the establishment and support of
      associations, institutions, funds or trusts for the benefit of employees
      or former employees of the company or its predecessors, or the dependants
      or connections of such employees or former employees, and grant pensions
      and allowances, and make payments towards insurance or for any object
      similar to those set forth in this paragraph, and to subscribe or
      guarantee money for charitable, benevolent, educational or religious
      objects or for any exhibition or for any public, general or useful
      objects;

(9)   to promote any company for the purpose of acquiring or taking over any of
      the property and liabilities of the company or for any other purpose that
      may benefit the company;

(10)  to purchase, lease, take in exchange, hire or otherwise acquire any
      personal property and any rights or privileges that the company considers
      necessary or convenient for the purposes of its business;

(11)  to construct, maintain, alter, renovate and demolish any buildings or
      works necessary or convenient for its objects;

(12)  to take land in Bermuda by way of lease or letting agreement for a term
      not exceeding fifty years, being land bona fide required for the purposes
      of the business of the company and with the consent of the Minister
      granted in his discretion to take land in Bermuda by way of lease or
      Letting agreement for a term not exceeding twenty-one years in order to
      provide accommodation or recreational facilities for its officers and
      employees and when no longer necessary for any of the above purposes to
      terminate or transfer the lease or letting agreement;

(13)  except to the extent, if any, as may be otherwise expressly provided in
      its incorporating Act or memorandum and subject to this Act every company
      shall have power to invest the moneys of the Company by way of mortgage of
      real or personal property of every description in Bermuda or elsewhere and
      to sell, exchange, vary, or dispose of such mortgage as the company shall
      from time to time determine;

(14)  to construct, improve, maintain, work, manage, carry out or control any
      roads, ways, tramways, branches or sidings, bridges, reservoirs,
      watercourses, wharves, factories, warehouses, electric works, shops,
      stores and other works and conveniences that may advance the interests of
      the




      company and contribute to, subsidise or otherwise assist or take part in
      the construction, improvement, maintenance, working, management, carrying
      out or control thereof;

(15)  to raise and assist in raising money for, and aid by way of bonus, loan,
      promise, endorsement, guarantee or otherwise, any person and guarantee the
      performance or fulfilment of any contracts or obligations of any person,
      and in particular guarantee the payment of the principal of and interest
      on the debt obligations of any such person;

(16)  to borrow or raise or secure the payment of money in such manner as the
      company may think fit;

(17)  to draw, make, accept, endorse, discount, execute and issue bills of
      exchange, promissory notes, bills of lading, warrants and other negotiable
      or transferable instruments;

(18)  when properly authorised to do so, to sell, lease, exchange or otherwise
      dispose of the undertaking of the company or any part thereof as an
      entirety or substantially as an entirety for such consideration as the
      company thinks fit;

(19)  to sell, improve, manage, develop, exchange, lease, dispose of, turn to
      account or otherwise deal with the property of the company in the ordinary
      course of its business;

(20)  to adopt such means of making known the products of the company as may
      seem expedient, and in particular by advertising, by purchase and
      exhibition of works of art or interest, by publication of books and
      periodicals and by granting prizes and rewards and making donations;

(21)  to cause the company to be registered and recognised in any foreign
      jurisdiction, and designate persons therein according to the laws of that
      foreign jurisdiction or to represent the company and to accept service for
      and on behalf of the company of any process or suit;

(22)  to allot and issue fully-paid shares of the company in payment or part
      payment of any property purchased or otherwise acquired by the company or
      for any past services performed for the company;

(23)  to distribute among the members of the company in cash, kind, specie or
      otherwise as may be resolved, by way of dividend, bonus or in any other
      manner considered advisable, any property of the company, but not so as to
      decrease the capital of the company unless the distribution is made for
      the




      purpose of enabling the company to be dissolved or the distribution, apart
      from this paragraph, would be otherwise lawful;

(24)  to establish agencies and branches;

(25)  to take or hold mortgages, hypothecs, liens and charges to secure payment
      of the purchase price, or of any unpaid balance of the purchase price, of
      any part of the property of the company of whatsoever kind sold by the
      company, or for any money due to the company from purchasers and others
      and to sell or otherwise dispose of any such mortgage, hypothec, lien or
      charge;

(26)  to pay all costs and expenses of or incidental to the incorporation and
      organization of the company;

(27)  to invest and deal with the moneys of the company not immediately required
      for the objects of the company in such manner as may be determined;

(28)  to do any of the things authorised by this Schedule and all things
      authorised by its memorandum as principals, agents, contractors, trustees
      or otherwise, and either alone or in conjunction with others;

(29)  to do all such other things as are incidental or conducive to the
      attainment of the objects and the exercise of the powers of the company.

Every company may exercise its powers beyond the boundaries of Bermuda to the
extent to which the laws in force where the powers are sought to be exercised
permit.




                             THE COMPANIES ACT 1981

                                 SECOND SCHEDULE                 (SECTION 11(2))

      Subject to Section 4A, a company may by reference include in its
memorandum any of the following objects, that is to say the business of -

(a)   insurance and re-insurance of all kinds;

(b)   packaging of goods of all kinds;

(c)   buying, selling and dealing in goods of all kinds;

(d)   designing and manufacturing of goods of all kinds;

(e)   mining and quarrying and exploration for metals, minerals, fossil fuels
      and precious stones of all kinds and their preparation for sale or use;

(f)   exploring for, the drilling for, the moving, transporting and refining
      petroleum and hydro carbon products including oil and oil products;

(g)   scientific research including the improvement, discovery and development
      of processes, inventions, patents and designs and the construction,
      maintenance and operation of laboratories and research centres;

(h)   land, sea and air undertakings including the land, ship and air carriage
      of passengers, mails and goods of all kinds;

(i)   ships and aircraft owners, managers, operators, agents, builders and
      repairers;

(j)   acquiring, owning, selling, chartering, repairing or dealing in ships and
      aircraft;

(k)   travel agents, freight contractors and forwarding agents;

(l)   dock owners, wharfingers, warehousemen;

(m)   ship chandlers and dealing in rope, canvas oil and ship stores of all
      kinds;

(n)   all forms of engineering;

(o)   developing, operating, advising or acting as technical consultants to any
      other enterprise or business;

(p)   farmers, livestock breeders and keepers, graziers, butchers, tanners and
      processors of and dealers in all kinds of live and dead stock, wool,
      hides, tallow, grain, vegetables and other produce;




(q)   acquiring by purchase or otherwise and holding as an investment
      inventions, patents, trade marks, trade names, trade secrets, designs and
      the like;

(r)   buying, selling, hiring, letting and dealing in conveyances of any sort;
      and

(s)   employing providing, hiring out and acting as agent for artists, actors,
      entertainers of all sorts, authors, composers, producers, directors,
      engineers and experts or specialists of any kind;

(t)   to acquire by purchase or otherwise and hold, sell, dispose of and deal in
      real property situated outside Bermuda and in personal property of all
      kinds wheresoever situated;

(u)   to enter into any guarantee, contract of indemnity or suretyship and to
      assure, support or secure with or without consideration or benefit the
      performance of any obligations of any person or persons and to guarantee
      the fidelity of individuals filling or about to fill situations of trust
      or confidence;

(v)   to be and carry on business of a mutual fund within the meaning of section
      156A.



FORM NO. 7A                                               REGISTRATION NO. 36007

                                     [LOGO]

                                     BERMUDA

                            CERTIFICATE OF DEPOSIT OF
                     MEMORANDUM OF INCREASE OF SHARE CAPITAL

      THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital of

                          AIRCASTLE INVESTMENT LIMITED

was delivered to the Registrar of Companies on the 1ST day of FEBRUARY, 2006 in
accordance with section 45(3) of THE COMPANIES ACT 1981 ("the Act").


                                        Given under my hand and Seal of the
                                        REGISTRAR OF COMPANIES this
                                        13TH day of FEBRUARY, 2006

             [SEAL]
                                        /s/ Patrick M. Adams
                                        for REGISTRAR OF COMPANIES




Capital prior to increase:    US$    12,000.00
                              ----------------

Amount of increase:           US$   988,000.00
                              ----------------

Present Capital:              US$ 1,000,000.00
                              ----------------




FORM NO.6                                                 REGISTRATION NO. 36007

                                     [LOGO]

                                     BERMUDA



                          CERTIFICATE OF INCORPORATION

I hereby in accordance with section 14 of THE COMPANIES ACT 1981 issue this
Certificate of Incorporation and do certify that on the 29TH day of OCTOBER,
2004

                          AIRCASTLE INVESTMENT LIMITED

was registered by me in the Register maintained by me under the provisions of
the said section and that the status of the said company is that of an EXEMPTED
company.


                                        Given under my hand and the Seal of
                                        the REGISTRAR OF COMPANIES
                                        this 2ND day of NOVEMBER, 2004
             [SEAL]

                                        /s/ Patrick M. Adams
                                        for REGISTRAR OF COMPANIES




                                                          REGISTRATION NO. 36007

                                     [LOGO]

                                     BERMUDA

                 CERTIFICATE OF INCORPORATION ON CHANGE OF NAME

I HEREBY CERTIFY that in accordance with section 10 of the Companies Act 1981
AIRCASTLE INVESTMENT LIMITED by resolution and with the approval of the
Registrar of Companies has changed its name and was registered as AIRCASTLE
LIMITED on the 17TH day of MAY, 2006.


                                        Given under my hand and the Seal of
                                        the REGISTRAR OF COMPANIES
                                        this 22ND day of MAY, 2006

             [SEAL]
                                        /s/ Patrick M. Adams
                                        for REGISTRAR OF COMPANIES




                                                                     Exhibit 3.2


                                   BYE-LAWS OF
                                AIRCASTLE LIMITED



                                TABLE OF CONTENTS

                                 INTERPRETATION

1.    Definitions

                                     SHARES

2.    Power to Issue Shares
3.    Power of the Company to Purchase its Shares
4.    Rights Attaching to Shares
5.    Calls on Shares
6.    Prohibition on Financial Assistance
7.    Forfeiture of Shares
8.    Share Certificates
9.    Fractional Shares

                             REGISTRATION OF SHARES

10.   Register of Members
11.   Registered Owner Absolute Owner
12.   Transfer of Registered Shares
13.   Transmission of Registered Shares

                           ALTERATION OF SHARE CAPITAL

14.   Power to Alter Capital
15.   Variation of Rights Attaching to Shares

                          DIVIDENDS AND CAPITALISATION

16.   Dividends
17.   Power to Set Aside Profits
18.   Method of Payment
19.   Capitalisation

                               MEETINGS OF MEMBERS

20.   Annual General Meetings
21.   Special General Meetings
22.   Requisitioned General Meetings/Other Business
23.   Notice
24.   Giving Notice
25.   Postponement or Cancellation of General Meeting
26.   Attendance and Security at General Meetings
27.   Quorum at General Meetings
28.   Chairman to Preside
29.   Voting on Resolutions
30.   Voting on a Poll
31.   Voting by Joint Holders of Shares
32.   Instrument of Proxy
33.   Representation of Corporate Member
34.   Adjournment of General Meeting
35.   Directors' Attendance at General Meetings

                             DIRECTORS AND OFFICERS

36.   Election of Directors
37.   Classes of Directors
38.   Term of Office of Directors
39.   Alternate Directors
40.   Removal of Directors
41.   Vacancy in the Office of Director
42.   Remuneration of Directors
43.   Defect in Appointment of Director
44.   Directors to Manage Business
45.   Powers of the Board of Directors
46.   Register of Directors and Officers
47.   Officers
48.   Appointment of Officers
49.   Duties of Officers
50.   Remuneration of Officers
51.   Conflicts of Interest
52.   Indemnification and Exculpation of Directors and Officers

                       MEETINGS OF THE BOARD OF DIRECTORS

53.   Board Meetings
54.   Notice of Board Meetings
55.   Participation in Meetings by Telephone
56.   Quorum at Board Meetings
57.   Board to Continue in Event of Vacancy
58.   Chairman to Preside
59.   Written Resolutions
60.   Validity of Prior Acts of the Board

                                CORPORATE RECORDS

61.   Minutes
62.   Place Where Corporate Records Kept
63.   Form and Use of Seal

                                    ACCOUNTS

64.   Books of Account
65.   Financial Year End

                                     AUDITS

66.   Annual Audit
67.   Appointment of Auditors
68.   Remuneration of Auditors
69.   Duties of Auditors
70.   Access to Records
71.   Financial Statements
72.   Distribution of Auditor's Report
73.   Vacancy in the Office of Auditor

                              BUSINESS COMBINATIONS

74.   Business Combinations

                      VOLUNTARY WINDING-UP AND DISSOLUTION

75.   Winding-Up

                             CHANGES TO CONSTITUTION

76.   Changes to Bye-laws
77.   Discontinuance



                                   APPENDIX A



AIRCASTLE LIMITED                                                         Page 1
--------------------------------------------------------------------------------


                                 INTERPRETATION

1.   DEFINITIONS

     1.1  In these Bye-laws, the following words and expressions shall, where
          not inconsistent with the context, have the following meanings,
          respectively:

          Act                        the Companies Act 1981 as amended from
                                     time to time;

          Affiliate                  has the meaning set forth in Appendix A;

          Alternate Director         an alternate director appointed in
                                     accordance with these Bye-laws;

          Auditor                    includes an individual or partnership;

          Board                      the board of directors appointed or elected
                                     pursuant to these Bye-laws and acting by
                                     resolution in accordance with the Act and
                                     these Bye-laws or the directors present at
                                     a meeting of directors at which there is a
                                     quorum;

          Company                    the company for which these Bye-laws are
                                     approved and confirmed;

          Director                   a director of the Company and shall include
                                     an Alternate Director;

          Fair Market Value          with respect to a purchase of any shares of
                                     the Company in accordance with Bye-laws 3.2
                                     and 3.3 (i) if such shares are listed on a
                                     securities exchange (or quoted in a
                                     securities quotation system), the average
                                     closing sale price of such shares on such
                                     exchange (or in such quotation system), or,
                                     if such shares are listed on (or quoted in)
                                     more than one exchange (or quotation
                                     system), the average closing sale price of
                                     the shares on the principal securities
                                     exchange (or



AIRCASTLE LIMITED                                                         Page 2
--------------------------------------------------------------------------------


                                     quotation system) on which such shares are
                                     then traded, or, if such shares are not
                                     then listed on a securities exchange (or
                                     quotation system) but are traded in the
                                     over-the-counter market, the average of the
                                     latest bid and asked quotations for such
                                     shares in such market, in each case for the
                                     last five trading days immediately
                                     preceding the day on which notice of the
                                     purchase of such shares is sent pursuant to
                                     these Bye-laws or (ii) if no such closing
                                     sales prices or quotations are available
                                     because such shares are not publicly traded
                                     or otherwise, the fair value of such shares
                                     as determined by one independent nationally
                                     recognized investment banking firm chosen
                                     by the Company, provided that the
                                     calculation of the Fair Market Value of the
                                     shares made by such appointed investment
                                     banking firm (i) shall not include any
                                     discount relating to the absence of a
                                     public trading market for, or any transfer
                                     restrictions on, such shares, and (ii) such
                                     calculation shall be final and the fees and
                                     expenses stemming from such calculation
                                     shall be borne by the Company or its
                                     assignee, as the case may be;

          Member                     the person registered in the Register of
                                     Members as the holder of shares in the
                                     Company and, when two or more persons are
                                     so registered as joint holders of shares,
                                     means the person whose name stands first in
                                     the Register of Members as one of such
                                     joint holders or all of such persons, as
                                     the context so requires;

          notice                     written notice as further provided in these
                                     Bye-laws unless otherwise specifically
                                     stated;

          Officer                    any person appointed by the Board to hold
                                     an office in the Company;



AIRCASTLE LIMITED                                                         Page 3
--------------------------------------------------------------------------------


          Register of Directors      the register of directors and officers
          and Officers               referred to in these Bye-laws;

          Register of Members        the register of members referred to in
                                     these Bye-laws;

          Resident Representative    any person appointed to act as resident
                                     representative and includes any deputy or
                                     assistant resident representative;

          Secretary                  the person appointed to perform any or all
                                     of the duties of secretary of the Company
                                     and includes any deputy or assistant
                                     secretary and any person appointed by the
                                     Board to perform any of the duties of the
                                     Secretary; and

          Significant Shareholders   has the meaning set forth in Appendix A.


     1.2  In these Bye-laws, where not inconsistent with the context:

          (a)  words denoting the plural number include the singular number and
               vice versa;

          (b)  words denoting the masculine gender include the feminine and
               neuter genders;

          (c)  words importing persons include companies, associations or bodies
               of persons whether corporate or not;

          (d)  the words:

               (i)  "may" shall be construed as permissive; and

               (ii) "shall" shall be construed as imperative; and

          (e)  unless otherwise provided herein, words or expressions defined in
               the Act shall bear the same meaning in these Bye-laws.

     1.3  In these Bye-laws expressions referring to writing or its cognates
          shall, unless the contrary intention appears, include facsimile,
          printing, lithography, photography, electronic mail and other modes of
          representing words in visible form.



AIRCASTLE LIMITED                                                         Page 4
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     1.4  Headings used in these Bye-laws are for convenience only and are not
          to be used or relied upon in the construction hereof.

                                     SHARES

2.   POWER TO ISSUE SHARES

     2.1  Subject to these Bye-laws and to any resolution of the Members to the
          contrary, and without prejudice to any special rights previously
          conferred on the holders of any existing shares or class of shares,
          the Board shall have the power to issue any unissued shares of the
          Company on such terms and conditions as it may determine.

     2.2  Without limitation to the provisions of Bye-law 4, subject to the
          provisions of the Act, any preference shares may be issued or
          converted into shares that (at a determinable date or at the option of
          the Company or the holder) are liable to be redeemed on such terms and
          in such manner as may be determined by the Board (before the issue or
          conversion).

3.   POWER OF THE COMPANY TO PURCHASE ITS SHARES

     3.1  The Company may purchase its own shares in accordance with the
          provisions of the Act on such terms as the Board shall think fit. The
          Board may exercise all the powers of the Company to purchase all or
          any part of its own shares in accordance with the Act.

     3.2  Without prejudice to the generality of Bye-law 3.1, subject to the
          Act, if the Board in its absolute and unfettered discretion, on behalf
          of the Company, determines that share ownership by any Member owning
          more than 5% of the Company's issued and outstanding Common Shares (as
          defined in Bye-law 4.1) that is not either a U.S. citizen or a
          qualified resident of the U.S. or of the contracting state of any
          applicable tax treaty with the U.S. (as determined for purposes of the
          relevant provision of the limitation on benefits article of such
          treaty) may result in adverse tax, regulatory or legal consequences to
          the Company or to any of its subsidiaries (wherever incorporated), the
          Company will have the option, but not the obligation, to purchase all
          or part of the shares held by such Member (to the extent the Board, in
          the reasonable exercise of its discretion, determines it is necessary
          to avoid or cure such adverse consequences) for immediately available
          funds in an amount equal to the Fair Market Value of such shares on
          the



AIRCASTLE LIMITED                                                         Page 5
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          date the Company sends the Repurchase Notice referred to below (the
          "Repurchase Price"); provided that the Board will use its reasonable
          efforts to exercise this option equitably among similarly situated
          Members (to the extent feasible under the circumstances). In that
          event, the Company will also be entitled to assign its purchase right
          to a third party or parties including the other Members, with the
          consent of such assignee. Each Member shall be bound by the
          determination by the Company to purchase or assign its right to
          purchase such Member's shares and, if so required by the Company,
          shall sell the number of shares that the Company requires it to sell.

     3.3  In the event that the Company or its assignee(s) determines to
          purchase any shares in accordance with Bye-law 3.2, the Company shall
          provide each Member concerned with written notice of such
          determination (a "Repurchase Notice") at least 7 calendar days prior
          to such purchase or such shorter period as each such Member may
          authorize, specifying the date on which any such shares are to be
          purchased and the Repurchase Price. The Company may revoke the
          Repurchase Notice at any time before it (or its assignee(s)) pays for
          the shares. Neither the Company nor its assignee(s) shall be obliged
          to give general notice to the Members of any intention to purchase or
          the conclusion of any purchase of shares. Payment of the Repurchase
          Price by the Company or its assignee(s) shall be by wire transfer and
          made at a closing to be held no less than 7 calendar days after
          receipt of the Repurchase Notice by the Member.

4.   RIGHTS ATTACHING TO SHARES

     4.1  At the date these Bye-laws are adopted, the share capital of the
          Company shall be divided into two classes: (i) 250,000,000 common
          shares of par value US$0.01 each (the "Common Shares") and (ii)
          50,000,000 preference shares of par value US$0.01 each (the
          "Preference Shares").

     4.2  The holders of Common Shares shall, subject to the provisions of these
          Bye-laws (including, without limitation, the rights attaching to
          Preference Shares):

          (a)  be entitled to one vote per share;

          (b)  be entitled to such dividends as the Board may from time to time
               declare;



AIRCASTLE LIMITED                                                         Page 6
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          (c)  in the event of a winding-up or dissolution of the Company,
               whether voluntary or involuntary or for the purpose of a
               reorganisation or otherwise or upon any distribution of capital,
               be entitled to the surplus assets of the Company; and

          (d)  generally be entitled to enjoy all of the rights attaching to
               shares.

     4.3  The Board is authorised to provide for the issuance of the Preference
          Shares in one or more series, and to establish from time to time the
          number of shares to be included in each such series, and to fix the
          designation, powers, preferences and rights of the shares of each such
          series and the qualifications, limitations, or restrictions thereof
          (and, for the avoidance of doubt, such matters and the issuance of
          such Preference Shares shall not be deemed to vary the rights attached
          to the Common Shares or, subject to the terms of any other series of
          Preference Shares, to vary the rights attached to any other series of
          Preference Shares). The authority of the Board with respect to each
          series shall include, but not be limited to, determination of the
          following:

          (a)  the number of shares constituting that series and the distinctive
               designation of that series;

          (b)  the dividend rate on the shares of that series, whether dividends
               shall be cumulative and, if so, from which date or dates, and the
               relative rights of priority, if any, of the payment of dividends
               on shares of that series;

          (c)  whether that series shall have voting rights, in addition to the
               voting rights provided by law, and if so, the terms of such
               voting rights;

          (d)  whether that series shall have conversion or exchange privileges
               (including, without limitation, conversion into Common Shares),
               and, if so, the terms and conditions of such conversion or
               exchange, including provision for adjustment of the conversion or
               exchange rate in such events as the Board shall determine;

          (e)  whether or not the shares of that series shall be redeemable or
               repurchaseable, and, if so, the terms and conditions of such
               redemption or repurchase, including the manner of selecting
               shares for redemption or repurchase if less than all shares are
               to be redeemed or repurchased, the date or dates upon or after
               which they shall be redeemable or repurchaseable, and the amount
               per share payable in case of redemption or repurchase,



AIRCASTLE LIMITED                                                         Page 7
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               which amount may vary under different conditions and at different
               redemption or repurchase dates;

          (f)  whether that series shall have a sinking fund for the redemption
               or repurchase of shares of that series, and, if so, the terms and
               amount of such sinking fund;

          (g)  the right of the shares of that series to the benefit of
               conditions and restrictions upon the creation of indebtedness of
               the Company or any subsidiary, upon the issue of any additional
               shares (including additional shares of such series or any other
               series) and upon the payment of dividends or the making of other
               distributions on, and the purchase, redemption or other
               acquisition by the Company or any subsidiary of any issued shares
               of the Company;

          (h)  the rights of the shares of that series in the event of voluntary
               or involuntary liquidation, dissolution or winding up of the
               Company, and the relative rights of priority, if any, of payment
               of shares of that series; and

          (i)  any other relative participating, optional or other special
               rights, qualifications, limitations or restrictions of that
               series.

     4.4  Any Preference Shares of any series which have been redeemed (whether
          through the operation of a sinking fund or otherwise) or which, if
          convertible or exchangeable, have been converted into or exchanged for
          shares of any other class or classes shall have the status of
          authorised and unissued Preference Shares of the same series and may
          be reissued as a part of the series of which they were originally a
          part or may be reclassified and reissued as part of a new series of
          Preference Shares to be created by resolution or resolutions of the
          Board or as part of any other series of Preference Shares, all subject
          to the conditions and the restrictions on issuance set forth in the
          resolution or resolutions adopted by the Board providing for the issue
          of any series of Preference Shares.

     4.5  At the discretion of the Board, whether or not in connection with the
          issuance and sale of any shares or other securities of the Company,
          the Company may issue securities, contracts, warrants or other
          instruments evidencing any shares, option rights, securities having
          conversion or option rights, or obligations on such terms, conditions
          and other provisions as are fixed by the Board,



AIRCASTLE LIMITED                                                         Page 8
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          including, without limiting the generality of this authority,
          conditions that preclude or limit any person or persons owning or
          offering to acquire a specified number or percentage of the issued
          Common Shares, other shares, option rights, securities having
          conversion or option rights, or obligations of the Company or
          transferee of the person or persons from exercising, converting,
          transferring or receiving the shares, option rights, securities having
          conversion or option rights, or obligations.

5.   CALLS ON SHARES

     5.1  The Board may make such calls as it thinks fit upon the Members in
          respect of any monies (whether in respect of nominal value or premium)
          unpaid on the shares allotted to or held by such Members (and not made
          payable at fixed times by the terms and conditions of issue) and, if a
          call is not paid on or before the day appointed for payment thereof,
          the Member may at the discretion of the Board be liable to pay the
          Company interest on the amount of such call at such rate as the Board
          may determine, from the date when such call was payable up to the
          actual date of payment. The Board may differentiate between the
          holders as to the amount of calls to be paid and the times of payment
          of such calls.

     5.2  Any sum which by the terms of allotment of a share becomes payable
          upon issue or at any fixed date, whether on account of the nominal
          value of the share or by way of premium, shall for all the purposes of
          these Bye-laws be deemed to be a call duly made and payable, on the
          date on which, by the terms of issue, the same becomes payable, and in
          case of non-payment all the relevant provisions of these Bye-laws as
          to payment of interest, costs, charges and expenses, forfeiture or
          otherwise shall apply as if such sum had become payable by virtue of a
          call duly made and notified.

     5.3  The joint holders of a share shall be jointly and severally liable to
          pay all calls in respect thereof.

     5.4  The Company may accept from any Member the whole or a part of the
          amount remaining unpaid on any shares held by him, although no part of
          that amount has been called up.



AIRCASTLE LIMITED                                                         Page 9
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6.   PROHIBITION ON FINANCIAL ASSISTANCE

     The Company shall not give, whether directly or indirectly, whether by
     means of loan, guarantee, provision of security or otherwise, any financial
     assistance for the purpose of the acquisition or proposed acquisition by
     any person of any shares in the Company, but nothing in this Bye-law shall
     prohibit transactions permitted under the Act.

7.   FORFEITURE OF SHARES

     7.1  If any Member fails to pay, on the day appointed for payment thereof,
          any call in respect of any share allotted to or held by such Member,
          the Board may, at any time thereafter during such time as the call
          remains unpaid, direct the Secretary to forward such Member a notice
          in writing in the form, or as near thereto as circumstances admit, of
          the following:

            Notice of Liability to Forfeiture for Non-Payment of Call
                       Aircastle Limited (the " Company")

          You have failed to pay the call of [amount of call] made on the [ ]
          day of [ ], 200[ ], in respect of the [number] share(s) [number in
          figures] standing in your name in the Register of Members of the
          Company, on the [ ] day of [ ], 200[ ], the day appointed for payment
          of such call. You are hereby notified that unless you pay such call
          together with interest thereon at the rate of [ ] per annum computed
          from the said [ ] day of [ ], 200[ ] at the registered office of the
          Company the share(s) will be liable to be forfeited.

          Dated this [ ] day of [ ], 200[ ]


          ----------------------------------------------
          [Signature of Secretary] By Order of the Board

     7.2  If the requirements of such notice are not complied with, any such
          share may at any time thereafter before the payment of such call and
          the interest due in respect thereof be forfeited by a resolution of
          the Board to that effect, and such share shall thereupon become the
          property of the Company and may be disposed of as the Board shall
          determine.



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     7.3  A Member whose share or shares have been forfeited as aforesaid shall,
          notwithstanding such forfeiture, be liable to pay to the Company all
          calls owing on such share or shares at the time of the forfeiture and
          all interest due thereon.

     7.4  The Board may accept the surrender of any shares which it is in a
          position to forfeit on such terms and conditions as may be agreed.
          Subject to those terms and conditions, a surrendered share shall be
          treated as if it had been forfeited.

8.   SHARE CERTIFICATES

     8.1  Every Member shall be entitled to a certificate under the seal of the
          Company (or a facsimile thereof) specifying the number and, where
          appropriate, the class of shares held by such Member and whether the
          same are fully paid up and, if not, specifying the amount paid on such
          shares. The Board may by resolution determine, either generally or in
          a particular case, that any or all signatures on certificates may be
          printed thereon or affixed by mechanical means.

     8.2  The Company shall be under no obligation to complete and deliver a
          share certificate unless specifically called upon to do so by the
          person to whom the shares have been allotted.

     8.3  If any share certificate shall be proved to the satisfaction of the
          Board to have been worn out, lost, mislaid, or destroyed the Board may
          cause a new certificate to be issued and request an indemnity for the
          lost certificate if it sees fit.

9.   FRACTIONAL SHARES

     The Company may issue its shares in fractional denominations and deal with
     such fractions to the same extent as its whole shares and shares in
     fractional denominations shall have in proportion to the respective
     fractions represented thereby all of the rights of whole shares including
     (but without limiting the generality of the foregoing) the right to vote,
     to receive dividends and distributions and to participate in a winding-up.

                             REGISTRATION OF SHARES

10.  REGISTER OF MEMBERS



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     10.1 The Board shall cause to be kept in one or more books a Register of
          Members and shall enter therein the particulars required by the Act.

     10.2 The Register of Members shall be open to inspection at the registered
          office of the Company on every business day, subject to such
          reasonable restrictions as the Board may impose, so that not less than
          two hours in each business day be allowed for inspection. The Register
          of Members may, after notice has been given in accordance with the
          Act, be closed for any time or times not exceeding in the whole thirty
          days in each year.

11.  REGISTERED HOLDER ABSOLUTE OWNER

     The Company shall be entitled to treat the registered holder of any share
     as the absolute owner thereof and accordingly shall not be bound to
     recognise any equitable claim or other claim to, or interest in, such share
     on the part of any other person.

12.  TRANSFER OF REGISTERED SHARES

     12.1 An instrument of transfer shall be in writing in the form of the
          following, or as near thereto as circumstances admit, or in such other
          form as the Board may accept:



                          Transfer of a Share or Shares

                        Aircastle Limited (the "Company")

          FOR VALUE RECEIVED _______________ [amount], I, [name of transferor]
          hereby sell, assign and transfer unto [transferee] of [address],
          [number] of shares of the Company.

          DATED this [ ] day of [ ], 200[ ]

          Signed by:                           In the presence of:


          ----------------------------------   ---------------------------------
          Transferor                           Witness


          ----------------------------------   ---------------------------------
          Transferee                           Witness


     12.2 Such instrument of transfer shall be signed by or on behalf of the
          transferor and transferee, provided that, in the case of a fully paid
          share, the Board may accept the instrument signed by or



AIRCASTLE LIMITED                                                        Page 12
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          on behalf of the transferor alone. The transferor shall be deemed to
          remain the holder of such share until the same has been transferred to
          the transferee in the Register of Members.

     12.3 The Board may refuse to recognise any instrument of transfer unless it
          is accompanied by the certificate in respect of the shares to which it
          relates and by such other evidence as the Board may reasonably require
          to show the right of the transferor to make the transfer.

     12.4 The joint holders of any share may transfer such share to one or more
          of such joint holders, and the surviving holder or holders of any
          share previously held by them jointly with a deceased Member may
          transfer any such share to the executors or administrators of such
          deceased Member.

     12.5 The Board may in its absolute discretion and without assigning any
          reason therefor refuse to register the transfer of a share which is
          not fully paid. The Board shall refuse to register a transfer unless
          all applicable consents, authorisations and permissions of any
          governmental body or agency in Bermuda have been obtained. If the
          Board refuses to register a transfer of any share the Secretary shall,
          within three months after the date on which the transfer was lodged
          with the Company, send to the transferor and transferee notice of the
          refusal.

     12.6 Shares may be transferred without a written instrument if transferred
          by an appointed agent or otherwise in accordance with the Act.

13.  TRANSMISSION OF REGISTERED SHARES

     13.1 In the case of the death of a Member, the survivor or survivors where
          the deceased Member was a joint holder, and the legal personal
          representatives of the deceased Member where the deceased Member was a
          sole holder, shall be the only persons recognised by the Company as
          having any title to the deceased Member's interest in the shares.
          Nothing herein contained shall release the estate of a deceased joint
          holder from any liability in respect of any share which had been
          jointly held by such deceased Member with other persons. Subject to
          the provisions of the Act, for the purpose of this Bye-law, legal
          personal representative means the executor or administrator of a
          deceased Member or such other person as the Board may, in its absolute
          discretion, decide as being properly authorised to deal with the
          shares of a deceased Member.



AIRCASTLE LIMITED                                                        Page 13
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     13.2 Any person becoming entitled to a share in consequence of the death or
          bankruptcy of any Member may be registered as a Member upon such
          evidence as the Board may deem sufficient or may elect to nominate
          some person to be registered as a transferee of such share, and in
          such case the person becoming entitled shall execute in favour of such
          nominee an instrument of transfer in writing in the form, or as near
          thereto as circumstances admit, of the following:

     Transfer by a Person Becoming Entitled on Death/Bankruptcy of a Member

                       Aircastle Limited (the " Company")

          I/We, having become entitled in consequence of the [death/bankruptcy]
          of [name and address of deceased/bankrupt Member] to [number] share(s)
          standing in the Register of Members of the Company in the name of the
          said [name of deceased/bankrupt Member] instead of being registered
          myself/ourselves, elect to have [name of transferee] (the
          "Transferee") registered as a transferee of such share(s) and I/we do
          hereby accordingly transfer the said share(s) to the Transferee to
          hold the same unto the Transferee, his or her executors,
          administrators and assigns, subject to the conditions on which the
          same were held at the time of the execution hereof; and the Transferee
          does hereby agree to take the said share(s) subject to the same
          conditions.



          DATED this [ ] day of [ ], 200[ ]

          Signed by:                           In the presence of:


          ----------------------------------   ---------------------------------
          Transferor                           Witness


          ----------------------------------   ---------------------------------
          Transferee                           Witness


     13.3 On the presentation of the foregoing materials to the Board,
          accompanied by such evidence as the Board may require to prove the
          title of the transferor, the transferee shall be registered as a
          Member. Notwithstanding the foregoing, the Board shall, in any case,
          have the same right to decline or suspend registration as it would
          have had in the case of a transfer of the share by that Member before
          such Member's death or bankruptcy, as the case may be.



AIRCASTLE LIMITED                                                        Page 14
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     13.4 Where two or more persons are registered as joint holders of a share
          or shares, then in the event of the death of any joint holder or
          holders the remaining joint holder or holders shall be absolutely
          entitled to the said share or shares and the Company shall recognise
          no claim in respect of the estate of any joint holder except in the
          case of the last survivor of such joint holders.

                           ALTERATION OF SHARE CAPITAL

14.  POWER TO ALTER CAPITAL

     14.1 The Company may if authorised by resolution of the Members increase,
          divide, consolidate, subdivide, change the currency denomination of,
          diminish or otherwise alter or reduce its share capital in any manner
          permitted by the Act.

     14.2 Where, on any alteration or reduction of share capital, fractions of
          shares or some other difficulty would arise, the Board may deal with
          or resolve the same in such manner as it thinks fit.

15.  VARIATION OF RIGHTS ATTACHING TO SHARES

     If, at any time, the share capital is divided into different classes of
     shares, the rights attached to any class (unless otherwise provided by the
     terms of issue of the shares of that class) may, whether or not the Company
     is being wound-up, be varied with the consent in writing of the holders of
     50% of the issued shares of that class or with the sanction of a resolution
     passed by a majority of the votes cast at a separate general meeting of the
     holders of the shares of the class at which meeting the necessary quorum
     shall be two persons at least holding or representing by proxy two-thirds
     of the issued shares of the class. The rights conferred upon the holders of
     the shares of any class issued with preferred or other rights shall not,
     unless otherwise expressly provided by the terms of issue of the shares of
     that class, be deemed to be varied by the creation or issue of further
     shares ranking pari passu therewith.

                          DIVIDENDS AND CAPITALISATION

16.  DIVIDENDS

     16.1 The Board may, subject to these Bye-laws and in accordance with the
          Act, declare a dividend to be paid to the Members, in proportion to
          the number of shares held by them, and such dividend



AIRCASTLE LIMITED                                                        Page 15
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          may be paid in cash or wholly or partly in specie in which case the
          Board may fix the value for distribution in specie of any assets. No
          unpaid dividend shall bear interest as against the Company.

     16.2 The Board may fix any date as the record date for determining the
          Members entitled to receive any dividend.

     16.3 The Company may pay dividends in proportion to the amount paid up on
          each share where a larger amount is paid up on some shares than on
          others.

     16.4 The Board may declare and make such other distributions (in cash or in
          specie) to the Members as may be lawfully made out of the assets of
          the Company. No unpaid distribution shall bear interest as against the
          Company.

17.  POWER TO SET ASIDE PROFITS

     The Board may, before declaring a dividend, set aside out of the surplus or
     profits of the Company, such sum as it thinks proper as a reserve to be
     used to meet contingencies or for equalising dividends or for any other
     purpose.

18.  METHOD OF PAYMENT

     18.1 Any dividend or other monies payable in respect of a share may be paid
          by cheque or warrant sent through the post directed to the address of
          the Member in the Register of Members (in the case of joint Members,
          the senior joint holder, seniority being determined by the order in
          which the names stand in the Register of Members), or by direct
          transfer to such bank account as such Member may direct. Every such
          cheque shall be made payable to the order of the person to whom it is
          sent or to such persons as the Member may direct, and payment of the
          cheque or warrant shall be a good discharge to the Company. Every such
          cheque or warrant shall be sent at the risk of the person entitled to
          the money represented thereby. If two or more persons are registered
          as joint holders of any shares any one can give an effectual receipt
          for any dividend paid in respect of such shares.

     18.2 The Board may deduct from the dividends or distributions payable to
          any Member all monies due from such Member to the Company on account
          of calls or otherwise.



AIRCASTLE LIMITED                                                        Page 16
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     18.3 Any dividend and or other monies payable in respect of a share which
          has remained unclaimed for 6 years from the date when it became due
          for payment shall, if the Board so resolves, be forfeited and cease to
          remain owing by the Company. The payment of any unclaimed dividend or
          other moneys payable in respect of a share may (but need not) be paid
          by the Company into an account separate from the Company's own
          account. Such payment shall not constitute the Company a trustee in
          respect thereof.

     18.4 The Company shall be entitled to cease sending dividend cheques and
          warrants by post or otherwise to a Member if those instruments have
          been returned undelivered to, or left uncashed by, that Member on at
          least two consecutive occasions, or, following one such occasion,
          reasonable enquiries have failed to establish the Member's new
          address. The entitlement conferred on the Company by this Bye-law 18.4
          in respect of any Member shall cease if the Member claims a dividend
          or cashes a dividend cheque or warrant.

19.  CAPITALISATION

     19.1 The Board may resolve to capitalise any sum for the time being
          standing to the credit of any of the Company's share premium or other
          reserve accounts or to the credit of the profit and loss account or
          otherwise available for distribution by applying such sum in paying up
          unissued shares to be allotted as fully paid bonus shares pro-rata
          (except in connection with the conversion of shares of one class to
          shares of another class) to the Members.

     19.2 The Board may resolve to capitalise any sum for the time being
          standing to the credit of a reserve account or sums otherwise
          available for dividend or distribution by applying such amounts in
          paying up in full partly paid or nil paid shares of those Members who
          would have been entitled to such sums if they were distributed by way
          of dividend or distribution.

                               MEETINGS OF MEMBERS

20.  ANNUAL GENERAL MEETINGS

     The annual general meeting of the Company shall be held in each year (other
     than the year of incorporation) at such time and place as the President or
     the Chairman or the Board shall appoint.



AIRCASTLE LIMITED                                                        Page 17
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21.  SPECIAL GENERAL MEETINGS

     The President or the Chairman or the Board may convene a special general
     meeting of the Company whenever in their judgment such a meeting is
     necessary, and, in addition to any rights of Members under the Act, shall
     convene such a special general meeting upon the written request of any
     Significant Shareholder or any Affiliate of a Significant Shareholder,
     provided that the Significant Shareholder and its Affiliates collectively
     hold shares carrying at least 10% of the votes attaching to all shares in
     issue at the time of such request.

22.  REQUISITIONED GENERAL MEETINGS/OTHER BUSINESS

     22.1 The Board shall, on the requisition of Members holding at the date of
          the deposit of the requisition not less than one-tenth of such of the
          paid-up share capital of the Company as at the date of the deposit
          carries the right to vote at general meetings of the Company,
          forthwith proceed to convene a special general meeting of the Company
          and the provisions of the Act shall apply.

     22.2 In addition to any rights of Members under the Act or these Bye-laws,
          business may be brought before any annual general meeting of the
          Company, or any special general meeting of the Company, by any person
          who: (i) is a Member of record on the date of the giving of the notice
          provided for in this Bye-law and on the record date for the
          determination of Members entitled to receive notice of and vote at
          such meeting; and (ii) complies with the notice procedures set forth
          in this Bye-law.

     22.3 In addition to any other applicable requirements, for other business
          to be proposed by a Member pursuant to Bye-law 22.2, such Member must
          have given timely notice thereof in proper written form to the
          Secretary.

     22.4 To be timely, a notice given to the Secretary pursuant to Bye-law 22.3
          must be delivered to or mailed and received at the registered office
          and by the Secretary at the principal executive offices of the Company
          as set forth in the Company's filings with the U.S. Securities and
          Exchange Commission: (i) in the case of an annual general meeting, not
          less than 90 days nor more than 120 days before the anniversary of the
          last annual general meeting prior to the giving of the notice or, in
          the event the annual general meeting is called for a date that is not
          25 days



AIRCASTLE LIMITED                                                        Page 18
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          before or after such anniversary the notice must be so delivered or
          mailed and received not later than 10 days following the date on which
          notice of the annual general meeting was mailed or the date on which
          public disclosure of the date of the annual general meeting was made,
          whichever first occurs, and (ii) in the case of a special general
          meeting, not later than 10 days following the date on which notice of
          the special general meeting was mailed or the date on which public
          disclosure of the date of the special general meeting was made,
          whichever first occurs.

     22.5 To be in proper written form, a notice given to the Secretary pursuant
          to Bye-law 22.3 must set forth as to each matter such Member proposes
          to bring before the general meeting: (i) a brief description of the
          business desired to be brought before the general meeting and the
          reasons for conducting such business at the general meeting, (ii) the
          name and record address of such Member, (iii) the class or series and
          number of shares of the Company which are registered in the name of
          such Member, (iv) a description of all arrangements or understandings
          between such Member and any other person or persons (including their
          names) in connection with the proposal of such business by such Member
          and any material interest of such Member in such business, and (v) a
          representation that such Member intends to appear in person or by
          proxy at the general meeting to bring such business before the general
          meeting.

     22.6 Once business has been properly brought before the general meeting in
          accordance with the procedures set forth in this Bye-law, nothing in
          this Bye-law shall be deemed to preclude discussion by any Member of
          any such business. If the chairman of a general meeting determines
          that business was not properly brought before the meeting in
          accordance with this Bye-law, the chairman shall declare to the
          meeting that the business was not properly brought before the meeting
          and such business shall not be transacted.

     22.7 No business may be transacted at a general meeting, other than
          business that is either (i) properly brought before the general
          meeting by or at the direction of the Board (or any duly authorized
          committee thereof); or (ii) properly brought before the general
          meeting by any Member or Members in accordance with the Act or these
          Bye-laws.

23.  NOTICE

     23.1 Not less than 10 nor more than 60 days' notice of an annual general
          meeting shall be given to each Member entitled to attend and vote
          thereat, stating the date, place and time at which the



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          meeting is to be held, that the election of Directors will take place
          thereat, and as far as practicable, the other business to be conducted
          at the meeting.

     23.2 Not less than 10 nor more than 60 days' notice of a special general
          meeting shall be given to each Member entitled to attend and vote
          thereat, stating the date, time, place and the general nature of the
          business to be considered at the meeting, provided, however, that if a
          special general meeting is called upon the request of a Significant
          Shareholder or an Affiliate of a Significant Shareholder in accordance
          with Bye-law 21, then not less than 5 days' notice of such special
          general meeting shall be given.

     23.3 The Board may fix any date as the record date for determining the
          Members entitled to receive notice of and to vote at any general
          meeting of the Company.

     23.4 A general meeting of the Company shall, notwithstanding that it is
          called on shorter notice than that specified in these Bye-laws, be
          deemed to have been properly called if it is so agreed by (i) all the
          Members entitled to attend and vote thereat in the case of an annual
          general meeting; and (ii) by a majority in number of the Members
          having the right to attend and vote at the meeting, being a majority
          together holding not less than 95% in nominal value of the shares
          giving a right to attend and vote thereat in the case of a special
          general meeting.

     23.5 The accidental omission to give notice of a general meeting to, or the
          non-receipt of a notice of a general meeting by, any person entitled
          to receive notice shall not invalidate the proceedings at that
          meeting.

24.  GIVING NOTICE

     24.1 A notice may be given by the Company to any Member either by
          delivering it to such Member in person or by sending it to such
          Member's address in the Register of Members or to such other address
          given for the purpose. For the purposes of this Bye-law, a notice may
          be sent by letter mail, courier service, cable, telex, telecopier,
          facsimile, electronic mail or other mode of representing words in a
          legible form.



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     24.2 Any notice required to be given to a Member shall, with respect to any
          shares held jointly by two or more persons, be given to whichever of
          such persons is named first in the Register of Members and notice so
          given shall be sufficient notice to all the holders of such shares.

     24.3 Save as provided by Bye-law 24.4, any notice shall be deemed to have
          been served at the time when the same would be delivered in the
          ordinary course of transmission and, in proving such service, it shall
          be sufficient to prove that the notice was properly addressed and
          prepaid, if posted, at the time when it was posted, delivered to the
          courier or to the cable company or transmitted by telex, facsimile,
          electronic mail, or such other method as the case may be.

     24.4 Mail notice shall be deemed to have been served seven days after the
          date on which it is deposited, with postage prepaid, in the mail of
          any member state of the European Union, the United States, or Bermuda.

     24.5 The Company shall be under no obligation to send a notice or other
          document to the address shown for any particular Member in the
          Register of Members if the Board considers that the legal or practical
          problems under the laws of, or the requirements of any regulatory body
          or stock exchange in, the territory in which that address is situated
          are such that it is necessary or expedient not to send the notice or
          document concerned to such Member at such address and may require a
          Member with such an address to provide the Company with an alternative
          acceptable address for delivery of notices by the Company.

25.  POSTPONEMENT OR CANCELLATION OF GENERAL MEETING

     The Chairman or the President may, and the Secretary on instruction from
     the Chairman or the President shall, postpone or cancel any general meeting
     called in accordance with the provisions of these Bye-laws (other than a
     meeting requisitioned under these Bye-laws) provided that notice of
     postponement or cancellation is given to each Member before the time for
     such meeting. Fresh notice of the date, time and place for the postponed or
     cancelled meeting shall be given to the Members in accordance with the
     provisions of these Bye-laws.



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26.  ATTENDANCE AND SECURITY AT GENERAL MEETINGS

     26.1 Members may participate in any general meeting by means of such
          telephone, electronic or other communication facilities as permit all
          persons participating in the meeting to communicate with each other
          simultaneously and instantaneously, and participation in such a
          meeting shall constitute presence in person at such meeting.

     26.2 The Board may, and at any general meeting, the chairman of such
          meeting may make any arrangement and impose any requirement or
          restriction it or he considers appropriate to ensure the security of a
          general meeting including, without limitation, requirements for
          evidence of identity to be produced by those attending the meeting,
          the searching of their personal property and the restriction of items
          that may be taken into the meeting place. The Board and, at any
          general meeting, the chairman of such meeting are entitled to refuse
          entry to a person who refuses to comply with any such arrangements,
          requirements or restrictions.

27.  QUORUM AT GENERAL MEETINGS

     27.1 At any general meeting of the Company two or more persons present in
          person at the start of the meeting and representing in person or by
          proxy in excess of 50% of all votes attaching to all shares of the
          Company in issue entitling the holder to vote at the meeting shall
          form a quorum for the transaction of business.

     27.2 If within half an hour from the time appointed for the meeting a
          quorum is not present, then, in the case of a meeting convened on a
          requisition, the meeting shall be deemed cancelled and, in any other
          case, the meeting shall stand adjourned to the same day one week
          later, at the same time and place or to such other day, time or place
          as the Secretary may determine. If the meeting shall be adjourned to
          the same day one week later or the Secretary shall determine that the
          meeting is adjourned to a specific date, time and place, it is not
          necessary to give notice of the adjourned meeting other than by
          announcement at the meeting being adjourned. If the Secretary shall
          determine that the meeting be adjourned to an unspecified date, time
          or place, fresh notice of the resumption of the meeting shall be given
          to each Member entitled to attend and vote thereat in accordance with
          the provisions of these Bye-laws.



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28.  CHAIRMAN TO PRESIDE

     Unless otherwise agreed by a majority of those attending and entitled to
     vote thereat, the Chairman, if there be one, and if not the President,
     shall act as chairman at all meetings of the Members at which such person
     is present. In their absence, the Deputy Chairman or Vice President, if
     present, shall act as chairman and in the absence of all of them a chairman
     shall be appointed or elected by those present at the meeting and entitled
     to vote.

29.  VOTING ON RESOLUTIONS

     29.1 Subject to the provisions of the Act and these Bye-laws (including,
          without limitation, Bye-law 36.3), any question proposed for the
          consideration of the Members at any general meeting shall be decided
          by the affirmative votes of a majority of the votes cast in accordance
          with the provisions of these Bye-laws and in the case of an equality
          of votes the resolution shall fail.

     29.2 No Member shall be entitled to vote at a general meeting unless such
          Member has paid all the calls on all shares held by such Member.

     29.3 At any general meeting a resolution put to the vote of the meeting
          shall be decided on a poll.

     29.4 At any general meeting if an amendment shall be proposed to any
          resolution under consideration and the chairman of the meeting shall
          rule on whether the proposed amendment is out of order, the
          proceedings on the substantive resolution shall not be invalidated by
          any error in such ruling.

     29.5 At any general meeting a declaration by the chairman of the meeting
          that a question proposed for consideration has been carried, or
          carried unanimously, or by a particular majority, or lost, and an
          entry to that effect in a book containing the minutes of the
          proceedings of the Company shall, subject to the provisions of these
          Bye-laws, be conclusive evidence of that fact.

30.  VOTING ON A POLL

     30.1 Where a poll is taken, subject to any rights or restrictions for the
          time being lawfully attached to any class of shares, every person
          present at such meeting shall have one vote for each share of which
          such person is the holder or for which such person holds a proxy and
          such vote shall be counted by ballot as described herein, or in the
          case of a general meeting at which one or more



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          Members are present by telephone, in such manner as the chairman of
          the meeting may direct and the result of such poll shall be deemed to
          be the resolution of the meeting at which the poll was taken. A person
          entitled to more than one vote need not use all his votes or cast all
          the votes he uses in the same way.

     30.2 A poll taken for the purpose of electing a chairman of the meeting or
          on a question of adjournment shall be taken forthwith and a poll taken
          on any other question shall be taken in such manner and at such time
          and place at such meeting as the chairman (or acting chairman) of the
          meeting may direct and any business other than that upon which a poll
          is to be taken may be proceeded with pending the taking of the poll.

     30.3 Where a vote is taken by poll, each person present and entitled to
          vote shall be furnished with a ballot paper on which such person shall
          record his vote in such manner as shall be determined at the meeting
          having regard to the nature of the question on which the vote is
          taken, and each ballot paper shall be signed or initialed or otherwise
          marked so as to identify the voter and the registered holder in the
          case of a proxy. At the conclusion of the poll, the ballot papers
          shall be examined and counted by one or more inspectors of votes
          appointed by the chairman or the Board for the purpose and the result
          of the poll shall be declared by the chairman.

31.  VOTING BY JOINT HOLDERS OF SHARES

     In the case of joint holders, the vote of the senior who tenders a vote
     (whether in person or by proxy) shall be accepted to the exclusion of the
     votes of the other joint holders, and for this purpose seniority shall be
     determined by the order in which the names stand in the Register of
     Members.

32.  INSTRUMENT OF PROXY

     32.1 A Member may appoint a proxy by (a) an instrument appointing a proxy
          in writing in substantially the following form or such other form as
          the Board may determine from time to time:

                                      Proxy
                       Aircastle Limited (the " Company")



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     I/We, [insert names here], being a Member of the Company with [number]
     shares, HEREBY APPOINT [name] of [address] or failing him, [name] of
     [address] to be my/our proxy to vote for me/us at the meeting of the
     Members to be held on the [ ] day of [ ], 200[ ] and at any adjournment
     thereof. (Any restrictions on voting to be inserted here.)

          Signed this [ ] day of [ ], 200[ ]


          ---------------------------
          Member(s)

          or (b) such telephonic, electronic or other means as may be approved
          by the Board from time to time.

     32.2 The appointment of a proxy must be received by the Company at the
          registered office or at such other place or in such manner as is
          specified in the notice convening the meeting or in any instrument of
          proxy sent out by the Company in relation to the meeting at which the
          person named in the appointment proposes to vote, and an appointment
          of proxy which is not received in the manner so permitted shall be
          invalid.

     32.3 A Member who is the holder of two or more shares may appoint more than
          one proxy to represent him and vote on his behalf.

     32.4 The decision of the chairman of any general meeting as to the validity
          of any appointment of a proxy shall be final.

33.  REPRESENTATION OF CORPORATE MEMBER

     33.1 A corporation which is a Member may, by written instrument, authorise
          such person or persons as it thinks fit to act as its representative
          at any meeting of the Members and any person so authorised shall be
          entitled to exercise the same powers on behalf of the corporation
          which such person represents as that corporation could exercise if it
          were an individual Member, and that Member shall be deemed to be
          present in person at any such meeting attended by its authorised
          representative or representatives.



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     33.2 Notwithstanding the foregoing, the chairman of the meeting may accept
          such assurances as he thinks fit as to the right of any person to
          attend and vote at general meetings on behalf of a corporation which
          is a Member.

34.  ADJOURNMENT OF GENERAL MEETING

     34.1 The chairman of any general meeting at which a quorum is present may
          with the consent of Members holding a majority of the voting rights of
          those Members present in person or by proxy (and shall if so directed
          by Members holding a majority of the voting rights of those Members
          present in person or by proxy), adjourn the meeting.

     34.2 In addition, the chairman may adjourn the meeting to another time and
          place without such consent or direction if it appears to him that:

          (a)  it is likely to be impracticable to hold or continue that meeting
               because of the number of Members wishing to attend who are not
               present; or

          (b)  the unruly conduct of persons attending the meeting prevents, or
               is likely to prevent, the orderly continuation of the business of
               the meeting; or

          (c)  an adjournment is otherwise necessary so that the business of the
               meeting may be properly conducted.

     34.3 Unless the meeting is adjourned to a specific date, place and time
          announced at the meeting being adjourned, fresh notice of the date,
          place and time for the resumption of the adjourned meeting shall be
          given to each Member entitled to attend and vote thereat in accordance
          with the provisions of these Bye-laws.

35.  DIRECTORS ATTENDANCE AT GENERAL MEETINGS

     The Directors of the Company shall be entitled to receive notice of, attend
     and be heard at any general meeting.



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                             DIRECTORS AND OFFICERS

36.  ELECTION OF DIRECTORS

     36.1 The Board shall consist of such number of Directors being not less
          than 3 Directors and not more than such maximum number of Directors,
          not exceeding 8 Directors, as the Board may from time to time
          determine.

     36.2 Only persons who are proposed or nominated in accordance with this
          Bye-law shall be eligible for election as Directors. Any Member or the
          Board may propose any person for election as a Director. Where any
          person, other than a Director retiring at the meeting or a person
          proposed for re-election or election as a Director by the Board, is to
          be proposed for election as a Director, notice must be given to the
          Company of the intention to propose him and of his willingness to
          serve as a Director. Where a Director is to be elected at an annual
          general meeting, that notice must be given not less than 90 days nor
          more than 120 days before the anniversary of the last annual general
          meeting prior to the giving of the notice or, in the event the annual
          general meeting is called for a date that is not 25 days before or
          after such anniversary the notice must be given not later than 10 days
          following the date on which notice of the annual general meeting was
          mailed or the date on which public disclosure of the date of the
          annual general meeting was made, whichever first occurs. Where a
          Director is to be elected at a special general meeting, that notice
          must be given not later than 10 days following the date on which
          notice of the special general meeting was mailed or the date on which
          public disclosure of the date of the special general meeting was made,
          whichever first occurs.

     36.3 Where persons are validly proposed for re-election or election as
          Directors, the persons receiving the most votes (up to the number of
          Directors to be elected) shall be elected as Directors, and an
          absolute majority of the votes cast shall not be a prerequisite to the
          election of such Directors.

     36.4 At any general meeting the Members may authorise the Board to fill any
          vacancy in their number left unfilled at a general meeting.



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37.  CLASSES OF DIRECTORS

     The Directors shall be divided into three classes designated Class I, Class
     II and Class III. Each class of Directors shall consist, as nearly as
     possible, of one third of the total number of Directors constituting the
     entire Board.

38.  TERM OF OFFICE OF DIRECTORS

     At the first meeting of the Board following the date of adoption of these
     Bye-laws, the Class I Directors shall be appointed to serve for a one year
     term of office, the Class II Directors shall be appointed to serve for a
     two year term of office and the Class III Directors shall be appointed to
     serve for a three year term of office, as determined by the Board. At each
     succeeding annual general meeting, successors to the class of Directors
     whose term expires at that annual general meeting shall be elected for a
     three year term. If the number of Directors is changed, any increase or
     decrease shall be apportioned among the classes so as to maintain the
     number of Directors in each class as nearly equal as possible, and any
     Director of any class elected to fill a vacancy shall hold office for a
     term that shall coincide with the remaining term of the other Directors of
     that class, but in no case shall a decrease in the number of Directors
     shorten the term of any Director then in office. A Director shall hold
     office until the annual general meeting for the year in which his term
     expires, subject to his office being vacated pursuant to Bye-law 41.

39.  ALTERNATE DIRECTORS

     39.1 Any Director may appoint a person or persons to act as a Director in
          the alternative to himself by notice in writing deposited with the
          Secretary. Any person so elected or appointed shall have all the
          rights and powers of the Director or Directors for whom such person is
          appointed in the alternative provided that such person shall not be
          counted more than once in determining whether or not a quorum is
          present.

     39.2 An Alternate Director shall be entitled to receive notice of all
          meetings of the Board and to attend and vote at any such meeting at
          which a Director for whom such Alternate Director was appointed in the
          alternative is not personally present and generally to perform at such
          meeting all the functions of such Director for whom such Alternate
          Director was appointed.



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     39.3 An Alternate Director shall cease to be such if the Director for whom
          such Alternate Director was appointed ceases for any reason to be a
          Director but may be re-appointed by the Board as an alternate to the
          person appointed to fill the vacancy in accordance with these
          Bye-laws.

40.  REMOVAL OF DIRECTORS

     40.1 Subject to any provision to the contrary in these Bye-laws, the
          Members entitled to vote for the election of Directors may, by a
          resolution including the affirmative votes of at least 80% of all
          votes attaching to all shares in issue entitling the holder to attend
          and vote on such resolution, at any special general meeting convened
          and held in accordance with these Bye-laws, remove a Director, with or
          without cause, provided that the notice of any such meeting convened
          for the purpose of removing a Director shall contain a statement of
          the intention so to do and be served on such Director not less than 14
          days before the meeting and at such meeting the Director shall be
          entitled to be heard on the motion for such Director's removal.

     40.2 If a Director is removed from the Board under the provisions of this
          Bye-law the Members may fill the vacancy at the meeting at which such
          Director is removed. In the absence of such election or appointment,
          the Board may fill the vacancy.

41.  VACANCY IN THE OFFICE OF DIRECTOR

     41.1 The office of Director shall be vacated if the Director:

          (a)  is removed from office pursuant to these Bye-laws or is
               prohibited from being a Director by law;

          (b)  is or becomes bankrupt, or makes any arrangement or composition
               with his creditors generally;

          (c)  is or becomes of unsound mind or dies; or

          (d)  resigns his office by notice in writing to the Company.

     41.2 The Members in general meeting or the Board shall have the power to
          appoint any person as a Director to fill a vacancy on the Board
          occurring as a result of the death, disability,



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          disqualification or resignation of any Director or as a result of an
          increase in the size of the Board and to appoint an Alternate Director
          to any Director so appointed.

42.  REMUNERATION OF DIRECTORS

     The remuneration (if any) of the Directors shall be determined by the Board
     and shall be deemed to accrue from day to day. The Directors may also be
     paid all travel, hotel and other expenses properly incurred by them in
     attending and returning from the meetings of the Board, any committee
     appointed by the Board, general meetings of the Company, or in connection
     with the business of the Company or their duties as Directors generally.

43.  DEFECT IN APPOINTMENT OF DIRECTOR

     All acts done in good faith by the Board or by a committee of the Board or
     by any person acting as a Director shall, notwithstanding that it be
     afterwards discovered that there was some defect in the appointment of any
     Director or person acting as aforesaid, or that they or any of them were
     disqualified, be as valid as if every such person had been duly appointed
     and was qualified to be a Director.

44.  DIRECTORS TO MANAGE BUSINESS

     44.1 The business of the Company shall be managed and conducted by the
          Board. In managing the business of the Company, the Board may exercise
          all such powers of the Company as are not, by statute or by these
          Bye-laws, required to be exercised by the Company in general meeting
          subject, nevertheless, to these Bye-laws and the provisions of any
          statute.

     44.2 Subject to these Bye-laws, the Board may delegate to any company,
          firm, person, or body of persons any power of the Board (including the
          power to sub-delegate).

45.  POWERS OF THE BOARD OF DIRECTORS

     The Board may:

          (a)  appoint, suspend, or remove any manager, secretary, clerk, agent
               or employee of the Company and may fix their remuneration and
               determine their duties;



AIRCASTLE LIMITED                                                        Page 30
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          (b)  exercise all the powers of the Company to borrow money and to
               mortgage or charge its undertaking, property and uncalled
               capital, or any part thereof, and may issue debentures, debenture
               stock and other securities whether outright or as security for
               any debt, liability or obligation of the Company or any third
               party;

          (c)  appoint one or more Directors to the office of managing director
               or chief executive officer of the Company, who shall, subject to
               the control of the Board, supervise and administer all of the
               general business and affairs of the Company;

          (d)  appoint a person to act as manager of the Company's day-to-day
               business and may entrust to and confer upon such manager such
               powers and duties as it deems appropriate for the transaction or
               conduct of such business;

          (e)  by power of attorney, appoint any company, firm, person or body
               of persons, whether nominated directly or indirectly by the
               Board, to be an attorney of the Company for such purposes and
               with such powers, authorities and discretions (not exceeding
               those vested in or exercisable by the Board) and for such period
               and subject to such conditions as it may think fit and any such
               power of attorney may contain such provisions for the protection
               and convenience of persons dealing with any such attorney as the
               Board may think fit and may also authorise any such attorney to
               sub-delegate all or any of the powers, authorities and
               discretions so vested in the attorney. Such attorney may, if so
               authorised under the seal of the Company, execute any deed or
               instrument under such attorney's personal seal with the same
               effect as the affixation of the seal of the Company;

          (f)  procure that the Company pays all expenses incurred in promoting
               and incorporating the Company;

          (g)  delegate any of its powers (including the power to sub-delegate)
               to a committee appointed by the Board which may consist partly or
               entirely of non-Directors, provided that every such committee
               shall conform to such directions as the Board shall impose on
               them and provided further that the meetings and proceedings of
               any such committee shall be governed by the provisions of these
               Bye-laws regulating the meetings and proceedings of the Board, so
               far as the same are applicable and are not superseded by
               directions imposed by the Board;



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          (h)  delegate any of its powers (including the power to sub-delegate)
               to any person on such terms and in such manner as the Board may
               see fit;

          (i)  present any petition and make any application in connection with
               the liquidation or reorganisation of the Company;

          (j)  in connection with the issue of any share, pay such commission
               and brokerage as may be permitted by law; and

          (k)  authorise any company, firm, person or body of persons to act on
               behalf of the Company for any specific purpose and in connection
               therewith to execute any agreement, document or instrument on
               behalf of the Company.

46.  REGISTER OF DIRECTORS AND OFFICERS

     The Board shall cause to be kept in one or more books at the registered
     office of the Company a Register of Directors and Officers and shall enter
     therein the particulars required by the Act.

47.  OFFICERS

     The Officers shall consist of a President and a Vice President or a
     Chairman and a Deputy Chairman, a Secretary and such additional Officers as
     the Board may determine all of whom shall be deemed to be Officers for the
     purposes of these Bye-laws.

48.  APPOINTMENT OF OFFICERS

     The Board shall appoint a President and Vice President or a Chairman and
     Deputy Chairman who shall be Directors. The Secretary (and additional
     Officers, if any) shall be appointed by the Board from time to time.

49.  DUTIES OF OFFICERS

     The Officers shall have such powers and perform such duties in the
     management, business and affairs of the Company as may be delegated to them
     by the Board from time to time.



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50.  REMUNERATION OF OFFICERS

     The Officers shall receive such remuneration as the Board may determine.

51.  CONFLICTS OF INTEREST

     51.1 Any Director, or any Director's firm, partner or any company with whom
          any Director is associated, may act in any capacity for, be employed
          by or render services to the Company and such Director or such
          Director's firm, partner or company shall be entitled to remuneration
          as if such Director were not a Director. Nothing herein contained
          shall authorise a Director or Director's firm, partner or company to
          act as Auditor to the Company.

     51.2 A Director who is directly or indirectly interested in a contract or
          proposed contract or arrangement with the Company shall declare the
          nature of such interest as required by the Act.

     51.3 Following a declaration being made pursuant to this Bye-law, and
          unless disqualified by the chairman of the relevant Board meeting, a
          Director may vote in respect of any contract or proposed contract or
          arrangement in which such Director is interested and may be counted in
          the quorum for such meeting.

     51.4 Appendix A, which is incorporated into and forms part of these
          Bye-laws, shall apply in respect of certain corporate opportunities,
          and certain other matters, as set forth therein.

52.  INDEMNIFICATION AND EXCULPATION OF DIRECTORS AND OFFICERS

     52.1 The Directors, Secretary and other Officers (such term to include any
          person appointed to any committee by the Board) for the time being
          acting in relation to any of the affairs of the Company, any
          subsidiary thereof and the liquidator or trustees (if any) for the
          time being acting in relation to any of the affairs of the Company or
          any subsidiary thereof and every one of them, and their heirs,
          executors and administrators, shall be indemnified and secured
          harmless out of the assets of the Company from and against all
          actions, costs, charges, losses, damages and expenses which they or
          any of them, their heirs, executors or administrators, shall or may
          incur or sustain by or by reason of any act done, concurred in or
          omitted in or about the execution of their duty, or supposed duty, or
          in their respective offices or trusts, and none of them shall be
          answerable for the acts, receipts, neglects or defaults of the others
          of them or for joining in any



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          receipts for the sake of conformity, or for any bankers or other
          persons with whom any moneys or effects belonging to the Company shall
          or may be lodged or deposited for safe custody, or for insufficiency
          or deficiency of any security upon which any moneys of or belonging to
          the Company shall be placed out on or invested, or for any other loss,
          misfortune or damage which may happen in the execution of their
          respective offices or trusts, or in relation thereto, PROVIDED THAT
          this indemnity shall not extend to any matter in respect of any fraud
          or dishonesty which may attach to any of the said persons. Each Member
          agrees to waive any claim or right of action such Member might have,
          whether individually or by or in the right of the Company, against any
          Director or Officer on account of any action taken by such Director or
          Officer, or the failure of such Director or Officer to take any action
          in the performance of his duties with or for the Company or any
          subsidiary thereof, PROVIDED THAT such waiver shall not extend to any
          matter in respect of any fraud or dishonesty which may attach to such
          Director or Officer.

     52.2 The Company shall pay to or on behalf of any such Director, Secretary
          or other Officer referred to in Bye-law 52.1 expenses (including
          attorneys' fees) incurred by such person in defending any civil,
          criminal, administrative or investigative action, suit or proceeding
          in advance of the final disposition of such action, suit or proceeding
          upon receipt of an undertaking by or on behalf of such person to repay
          such amount if it shall ultimately be determined that such person is
          not entitled to be indemnified by the Company, and such expenses
          (including attorneys' fees) incurred by other employees and agents may
          be so paid upon such terms and conditions, if any, as the Company
          deems appropriate, provided that in the event of a finding of fraud or
          dishonesty (such fraud or dishonesty having been established in a
          final judgment or decree not subject to appeal), such Director,
          Secretary or other Officer or, if applicable, such other employee or
          agent, shall reimburse to the Company all funds paid by the Company in
          respect of expenses of defending such action, suit or proceeding.

     52.3 The indemnification and advancement of expenses provided by, or
          granted pursuant to, this Bye-law shall not be deemed exclusive of any
          other rights to which those seeking indemnification or advancement of
          expenses may be entitled under these Bye-laws, any agreement,
          resolution of Members or disinterested directors or otherwise, both as
          to action in such person's official capacity and as to action in
          another capacity while holding such office, it being the policy of the



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          Company that indemnification of the persons specified in Bye-law 52.1
          shall be made to the fullest extent permitted by law. The provisions
          of this Bye-law shall not be deemed to preclude the indemnification of
          any person who is not specified in Bye-law 52.1 but whom the Company
          has the power or obligation to indemnify under the provisions of the
          Act, or otherwise.

     52.4 The indemnification and advancement of expenses provided by, or
          granted pursuant to, this Bye-law shall, unless otherwise provided
          when authorized or ratified, continue as to a person who has ceased to
          be a Director or Officer and shall inure to the benefit of the heirs,
          executors and administrators of such a person.

     52.5 The Company may, to the extent authorized from time to time by the
          Board, provide rights to indemnification and to the advancement of
          expenses to employees and agents of the Company similar to those
          conferred in this Bye-law to Directors, the Secretary and other
          Officers of the Company, PROVIDED THAT any such indemnity shall not
          extend to any matter in respect of any fraud or dishonesty which may
          attach to any such persons, and any funds paid by the Company in
          respect of any such expense shall be reimbursed to the Company in the
          event of a finding of fraud or dishonesty as set forth in Bye-Law
          52.2.

     52.6 If this Bye-law or any portion of this Bye-law shall be invalidated on
          any ground by a court of competent jurisdiction the Company shall
          nevertheless indemnify each Director or Officer of the Company, former
          Director or Officer of the Company or person serving at the request of
          the Company as a director or officer, employee or agent of another
          company or corporation, partnership, joint venture, trust, employee
          benefit plan or other enterprise, as to expenses (including attorneys'
          fees), judgments, fines and amounts paid in settlement with respect to
          any action, suit, proceeding or investigation, whether civil, criminal
          or administrative, including a grand jury proceeding or action or suit
          brought by or in the right of the Company, to the fullest extent
          permitted by any applicable portion of this Bye-law that shall not
          have been invalidated, PROVIDED THAT any such indemnity shall not
          extend to any matter in respect of any fraud or dishonesty which may
          attach to any such persons.

     52.7 The Company may purchase and maintain insurance for the benefit of any
          Director or Officer of the Company against any liability incurred by
          him under the Act in his capacity as a Director or Officer of the
          Company or indemnifying such Director or Officer in respect of any
          loss arising or



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          liability attaching to him by virtue of any rule of law in respect of
          any negligence, default, breach of duty or breach of trust of which
          the Director or Officer may be guilty in relation to the Company or
          any subsidiary thereof.

                       MEETINGS OF THE BOARD OF DIRECTORS

53.  BOARD MEETINGS

     The Board may meet for the transaction of business, adjourn and otherwise
     regulate its meetings as it sees fit. Subject to the provisions of these
     Bye-laws, a resolution put to the vote at a meeting of the Board shall be
     carried by the affirmative votes of a majority of the votes cast and in the
     case of an equality of votes the resolution shall fail.

54.  NOTICE OF BOARD MEETINGS

     A Director may, and the Secretary on the requisition of a Director shall,
     at any time summon a meeting of the Board. Notice of a meeting of the Board
     shall be deemed to be duly given to a Director if it is given to such
     Director verbally (in person or by telephone) or otherwise communicated or
     sent to such Director by post, cable, telex, telecopier, facsimile,
     electronic mail or other mode of representing words in a legible form at
     such Director's last known address or any other address given by such
     Director to the Company for this purpose.

55.  PARTICIPATION IN MEETINGS BY TELEPHONE

     Directors may participate in any meeting of the Board by means of such
     telephone, electronic or other communication facilities as permit all
     persons participating in the meeting to communicate with each other
     simultaneously and instantaneously, and participation in such a meeting
     shall constitute presence in person at such meeting.

56.  QUORUM AT BOARD MEETINGS

     The quorum necessary for the transaction of business at a meeting of the
     Board shall be a majority of the Directors (excluding Alternate Directors)
     in office at that time.



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57.  BOARD TO CONTINUE IN THE EVENT OF VACANCY

     The Board may act notwithstanding any vacancy in its number but, if and so
     long as its number is reduced below the number fixed by these Bye-laws as
     the quorum necessary for the transaction of business at meetings of the
     Board, the continuing Directors or Director may act for the purpose of (i)
     summoning a general meeting of the Company; or (ii) preserving the assets
     of the Company.

58.  CHAIRMAN TO PRESIDE

     Unless otherwise agreed by a majority of the Directors attending, the
     Chairman, if there be one, and if not, the President shall act as chairman
     at all meetings of the Board at which such person is present. In their
     absence the Deputy Chairman or Vice President, if present, shall act as
     chairman and in the absence of all of them a chairman shall be appointed or
     elected by the Directors present at the meeting.

59.  WRITTEN RESOLUTIONS

     A resolution signed by all the Directors, which may be in counterparts,
     shall be as valid as if it had been passed at a meeting of the Board duly
     called and constituted, such resolution to be effective on the date on
     which the last Director signs the resolution. For the purposes of this
     Bye-law only, "Director" shall not include an Alternate Director.

60.  VALIDITY OF PRIOR ACTS OF THE BOARD

     No regulation or alteration to these Bye-laws made by the Company in
     general meeting shall invalidate any prior act of the Board which would
     have been valid if that regulation or alteration had not been made.

                                CORPORATE RECORDS

61.  MINUTES

     The Board shall cause minutes to be duly entered in books provided for the
purpose:

          (a)  of all elections and appointments of Officers;

          (b)  of the names of the Directors present at each meeting of the
               Board and of any committee appointed by the Board; and



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          (c)  of all resolutions and proceedings of general meetings of the
               Members, meetings of the Board, and meetings of committees
               appointed by the Board.

62.  PLACE WHERE CORPORATE RECORDS KEPT

     Minutes prepared in accordance with the Act and these Bye-laws shall be
     kept by the Secretary at the registered office of the Company.

63.  FORM AND USE OF SEAL

     63.1 The seal of the Company shall be in such form as the Board may
          determine. The Board may adopt one or more duplicate seals for use in
          or outside Bermuda.

     63.2 The seal of the Company shall not be affixed to any instrument except
          attested by the signature of a Director and the Secretary or any two
          Directors, or any person appointed by the Board for that purpose,
          provided that any Director, Officer or Resident Representative, may
          affix the seal of the Company attested by such Director, Officer or
          Resident Representative's signature to any authenticated copies of
          these Bye-laws, the incorporating documents of the Company, the
          minutes of any meetings or any other documents required to be
          authenticated by such Director, Officer or Resident Representative.

                                    ACCOUNTS

64.  BOOKS OF ACCOUNT

     64.1 The Board shall cause to be kept proper records of account with
          respect to all transactions of the Company and in particular with
          respect to:

          (a)  all sums of money received and expended by the Company and the
               matters in respect of which the receipt and expenditure relates;

          (b)  all sales and purchases of goods by the Company; and

          (c)  all assets and liabilities of the Company.



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     64.2 Such records of account shall be kept at the registered office of the
          Company, or subject to the provisions of the Act, at such other place
          as the Board thinks fit and shall be available for inspection by the
          Directors during normal business hours.

65.  FINANCIAL YEAR END

     The financial year end of the Company may be determined by resolution of
     the Board and failing such resolution shall be 31st December in each year.

                                     AUDITS

66.  ANNUAL AUDIT

     Subject to any rights to waive laying of accounts or appointment of an
     Auditor pursuant to the Act, the accounts of the Company shall be audited
     at least once in every year.

67.  APPOINTMENT OF AUDITORS

     67.1 Subject to the provisions of the Act, at the annual general meeting or
          at a subsequent special general meeting in each year, an independent
          representative of the Members shall be appointed by them as Auditor of
          the accounts of the Company.

     67.2 The Auditor may be a Member but no Director, Officer or employee of
          the Company shall, during his continuance in office, be eligible to
          act as an Auditor of the Company.

68.  REMUNERATION OF AUDITORS

     The remuneration of the Auditor shall be fixed by the Company in general
     meeting or in such manner as the Members may determine.

69.  DUTIES OF AUDITORS

     69.1 The financial statements provided for by these Bye-laws shall be
          audited by the Auditor in accordance with generally accepted auditing
          standards. The Auditor shall make a written report thereon in
          accordance with generally accepted auditing standards.



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     69.2 The generally accepted auditing standards referred to in this Bye-law
          may be those of a country or jurisdiction other than Bermuda or such
          other generally accepted auditing standards as may be provided for in
          the Act. If so, the financial statements and the report of the Auditor
          shall identify the generally accepted auditing standards used.

70.  ACCESS TO RECORDS

     The Auditor shall at all reasonable times have access to all books kept by
     the Company and to all accounts and vouchers relating thereto, and the
     Auditor may call on the Directors or Officers of the Company for any
     information in their possession relating to the books or affairs of the
     Company.

71.  FINANCIAL STATEMENTS

     Subject to any rights to waive laying of accounts pursuant to the
     provisions of the Act, financial statements as required by the Act shall be
     laid before the Members in general meeting.

72.  DISTRIBUTION OF AUDITORS REPORT

     The report of the Auditor shall be submitted to the Members in general
     meeting.

73.  VACANCY IN THE OFFICE OF AUDITOR

     If the office of Auditor becomes vacant by the resignation or death or the
     Auditor, or by the Auditor becoming incapable of acting by reason of
     illness or other disability at a time when the Auditor's services are
     required, the vacancy thereby created shall be filled in accordance with
     the Act.

                              BUSINESS COMBINATIONS

74.  AMALGAMATIONS

     74.1 Subject to Bye-law 74.2, the Company shall not engage in any
          amalgamation unless such amalgamation has been approved by a
          resolution of the Members including the affirmative votes of at least
          66 % of all votes attaching to all shares in issue entitling the
          holder to attend and vote on such resolution.

     74.2 Bye-law 74.1 shall not apply in respect of any amalgamation approved
          by the Board, and in respect of any amalgamation approved by the Board
          which the Act requires to be approved by



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          the Members, the necessary general meeting quorum and Members'
          approval shall be as set out in Bye-laws 27 and 29 respectively.

                      VOLUNTARY WINDING-UP AND DISSOLUTION

75.  WINDING-UP

     If the Company shall be wound up the liquidator may, with the sanction of a
     resolution of the Members, divide amongst the Members in specie or in kind
     the whole or any part of the assets of the Company (whether they shall
     consist of property of the same kind or not) and may, for such purpose, set
     such value as he deems fair upon any property to be divided as aforesaid
     and may determine how such division shall be carried out as between the
     Members or different classes of Members. The liquidator may, with the like
     sanction, vest the whole or any part of such assets in the trustees upon
     such trusts for the benefit of the Members as the liquidator shall think
     fit, but so that no Member shall be compelled to accept any shares or other
     securities or assets whereon there is any liability.

                             CHANGES TO CONSTITUTION

76.  CHANGES TO BYE-LAWS

     76.1 Subject to Bye-laws 76.2 and 76.3, no Bye-law shall be rescinded,
          altered or amended and no new Bye-law shall be made until the same has
          been approved by a resolution of the Board and by a resolution of the
          Members.

     76.2 Bye-laws 36, 37, 38, 74 and 76.2 shall not be rescinded, altered or
          amended and no new Bye-law shall be made which would have the effect
          of rescinding, altering or amending the provisions of such Bye-laws,
          until the same has been approved by a resolution of the Board and by a
          resolution of the Members including the affirmative votes of at least
          66% of all votes attaching to all shares in issue entitling the holder
          to attend and vote on such resolution.

     76.3 Bye-laws 40, 51.4, 76.3 and Appendix A (subject to Part H thereof)
          shall not be rescinded, altered or amended and no new Bye-law shall be
          made which would have the effect of rescinding, altering or amending
          the provisions of such Bye-laws and/or Appendix A, until the same has
          been approved by a resolution of the Board and by a resolution of the
          Members



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          including the affirmative votes of at least 80% of all votes attaching
          to all shares in issue entitling the holder to attend and vote on such
          resolution.

77.  DISCONTINUANCE

     The Board may exercise all the powers of the Company to discontinue the
     Company to a jurisdiction outside Bermuda pursuant to the Act.



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                                   APPENDIX A

                               PART A. DEFINITIONS

     For purposes of this Appendix A, the following definitions shall apply:

     "Affiliate" means, with respect to a given person, any other person that,
directly or indirectly, controls, is controlled by or is under common control
with, such person; provided, however, that for purposes of this definition and
this Appendix A, none of (i) the Aircastle Entities and their Affiliates, on the
one hand, or (ii) the Significant Shareholders and their respective Affiliates,
on the other hand, shall be deemed to be "Affiliates" of one another. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with") as applied to any
person, means the possession, directly or indirectly, of beneficial ownership
of, or the power to vote, forty percent (40%) or more of the securities having
voting power for the election of directors (or other persons acting in similar
capacities) of such person or the power otherwise to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities, by contract or otherwise.

     "Aircastle Entities" means the Company and its Subsidiaries, and "Aircastle
Entity" shall mean any of the Aircastle Entities.

     "corporate opportunity" shall include, but not be limited to, business
opportunities which the Company (or, at the Company's discretion, any other
Aircastle Entity or their Affiliates) is financially able to undertake, which
are, from their nature, in the line of the Company's business (or, if
applicable, the business of any other Aircastle Entity or their Affiliates), are
of practical advantage to it and are ones in which the Company has an interest
or a reasonable expectancy, and in which, by embracing the opportunities, the
self-interest of any of the Significant Shareholders or their respective
Affiliates or their officers or directors will be brought into conflict with
that of any of the Aircastle Entities or their Affiliates.

     "Governmental Entity" shall mean any national, state, provincial,
municipal, local or foreign government, any court, arbitral tribunal,
administrative agency or commission or other governmental or regulatory
authority, commission or agency or any non-governmental, self-regulatory
authority, commission or agency.

     "Judgment" shall mean any order, writ, injunction, award, judgment, ruling
or decree of any Governmental Entity.

     "Law" shall mean any law, statute, code, ordinance, rule or regulation of
any jurisdiction or Governmental Entity.

     "Lien" shall mean any pledge, claim, equity, option, lien, charge,
mortgage, easement, right-of-way, call right, right of first refusal, "tag"- or
"drag"- along right, encumbrance, security interest or other similar restriction
of any kind or nature whatsoever.

     "Restriction" with respect to any share, partnership interest, membership
interest in a limited liability company or other equity interest or security,
shall mean any voting or other trust or agreement, option, warrant, preemptive
right, right of first offer, right of first refusal, escrow arrangement, proxy,
buy-sell agreement, power of attorney or other contract, any Law, license,
permit or Judgment that, conditionally or unconditionally,



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(i) grants to any person the right to purchase or otherwise acquire, or
obligates any person to sell or otherwise dispose of or issue, or otherwise
results or, whether upon the occurrence of any event or with notice or lapse of
time or both or otherwise, may result in any person acquiring, (A) any of such
shares, partnership interest, membership interest in a limited liability company
or other equity interest or security, (B) any of the proceeds of, or any
distributions paid or that are or may become payable with respect to, any of
such shares, partnership interest, membership interest in a limited liability
company or other equity interest or security or (C) any interest in such shares,
partnership interest, membership interest in a limited liability company or
other equity interest or security or any such proceeds or distributions, (ii)
restricts or, whether upon the occurrence of any event or with notice or lapse
of time or both or otherwise, is reasonably likely to restrict the transfer or
voting of, or the exercise of any rights or the enjoyment of any benefits
arising by reason of ownership of, any such shares, partnership interest,
membership interest in a limited liability company or other equity interest or
security or any such proceeds or distributions or (iii) creates or, whether upon
the occurrence of any event or with notice or lapse of time or both or
otherwise, is reasonably likely to create a Lien or purported Lien affecting
such shares, partnership interest, membership interest in a limited liability
company or other equity interest or security, proceeds or distributions.

     "Significant Shareholders" means Fortress Investment Fund III LP, Fortress
Investment Fund III (Fund B) LP, Fortress Investment Fund III (Fund C) LP,
Fortress Investment Fund III (Fund D) LP, Fortress Investment Fund III (Fund E)
LP, Fortress Investment Fund III (Coinvestment Fund A) LP, Fortress Investment
Fund III (Coinvestment Fund B) LP, Fortress Investment Fund III (Coinvestment
Fund C) LP, Fortress Investment Fund III (Coinvestment Fund D) LP, Drawbridge
Special Opportunities Fund LP, Drawbridge Special Opportunities Fund Ltd. and
Drawbridge Global Macro Master Fund Ltd. and, in each case, their respective
Subsidiaries (other than Subsidiaries that constitute Aircastle Entities), and
"Significant Shareholder" shall mean any of the Significant Shareholders.

     "Subsidiary" with respect to any person means: (i) a company or
corporation, wherever incorporated, a majority in voting power of whose shares
with voting power, under ordinary circumstances, to elect directors is at the
time, directly or indirectly owned by such person, by a Subsidiary of such
person, or by such person and one or more Subsidiaries of such person, without
regard to whether the voting of such shares is subject to a voting agreement or
similar Restriction, (ii) a partnership or limited liability company in which
such person or a Subsidiary of such person is, at the date of determination, (A)
in the case of a partnership, a general partner of such partnership with the
power affirmatively to direct the policies and management of such partnership or
(B) in the case of a limited liability company, the managing member or, in the
absence of a managing member, a member with the power affirmatively to direct
the policies and management of such limited liability company or (iii) any other
person (other than a company or corporation) in which such person, a Subsidiary
of such person or such person and one or more Subsidiaries of such person,
directly or indirectly, at the date of determination thereof, has (A) the power
to elect or direct the election of a majority of the members of the governing
body of such person (whether or not such power is subject to a voting agreement
or similar restriction) or (B) in the absence of such a governing body, a
majority ownership interest.

                     PART B. SIGNIFICANT SHAREHOLDERS, ETC.

     In anticipation and in recognition that:

          a. the Significant Shareholders or their respective Affiliates will be
     significant shareholders of the Company;

          b. directors, officers and/or employees of the Significant
     Shareholders and their



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     respective Affiliates may serve as directors, officers and/or employees of
     the Aircastle Entities and their Affiliates;

          c. the Aircastle Entities and their Affiliates, on the one hand, and
     the Significant Shareholders and their respective Affiliates, on the other
     hand, may engage in the same, similar or related lines of business and may
     have an interest in the same, similar or related areas of corporate
     opportunities;

          d. the Aircastle Entities and their Affiliates, on the one hand, and
     the Significant Shareholders and their respective Affiliates, on the other
     hand, may enter into, engage in, perform and consummate contracts,
     agreements, arrangements, transactions and other business relations; and

          e. the Aircastle Entities and their Affiliates will derive benefits
     therefrom and through their continued contractual, corporate and business
     relations with the Significant Shareholders and their respective
     Affiliates,

the provisions of this Appendix A are set forth to regulate, define and guide,
to the fullest extent permitted by Law, the conduct of the Company and its
officers, directors and employees in connection with certain affairs of the
Aircastle Entities and their Affiliates as they may involve the Significant
Shareholders and their respective Affiliates and their officers and directors,
and certain powers, rights, duties and liabilities of the Company and/or its
officers, directors and employees in connection therewith.

                    PART C. RELATED BUSINESS ACTIVITIES, ETC.

     Except as the Significant Shareholders or their respective Affiliates, on
the one hand, and the Aircastle Entities or their Affiliates, on the other hand,
may otherwise agree in writing, to the fullest extent permitted by Law, the
Significant Shareholders and their respective Affiliates shall have the right
to, and shall have no duty to abstain from exercising such right to, (i) engage
or invest, directly or indirectly, in the same, similar or related business
activities or lines of business as the Aircastle Entities or their Affiliates,
(ii) do business with any client, customer, vendor or lessor of any of the
Aircastle Entities or their Affiliates or (iii) employ or otherwise engage any
officer, director or employee of the Aircastle Entities or their Affiliates,
and, to the fullest extent permitted by Law, the Significant Shareholders and
their respective Affiliates and officers, directors and employees thereof
(subject to Parts E and I of this Appendix A) shall not be liable to the Company
or its shareholders for any breach or alleged breach of duty or for any
derivation of any personal economic gain by reason of any such activities of any
of the Significant Shareholders or their respective Affiliates or of any of
their officer's, director's or employee's participation therein.

                       PART D. CORPORATE OPPORTUNITY, ETC.

     Except as the Significant Shareholders or their respective Affiliates, on
the one hand, and the Aircastle Entities or their Affiliates, on the other hand,
may otherwise agree in writing, to the fullest extent permitted by Law, if any
of the Significant Shareholders or their respective Affiliates, or any officer,
director or employee thereof (subject to Parts E and I of this Appendix A),
acquires knowledge of a potential transaction or matter that may be a corporate
opportunity for any of the Significant Shareholders or any of their Affiliates,
the Company shall not have an interest in, or expectation that, such corporate
opportunity be offered to it or that it be offered an opportunity to participate
therein. Accordingly, subject to Parts E and I of this Appendix A and except as
the Significant Shareholders or their respective Affiliates may otherwise agree
in writing, to the fullest



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extent permitted by Law, (i) none of the Significant Shareholders or their
respective Affiliates or any officer, director or employee thereof will be under
any obligation to present, communicate or offer any such corporate opportunity
to the Company; (ii) any of the Significant Shareholders and their respective
Affiliates shall have the right to hold or pursue any such corporate opportunity
for its own account, or to direct, recommend, sell, assign or otherwise transfer
such corporate opportunity to any person or persons other than the Aircastle
Entities and their Affiliates; and (iii) the Significant Shareholders and their
respective Affiliates and officers, directors and employees thereof (subject to
Parts E and I of this Appendix A) shall not be liable to the Company for any
breach or alleged breach of duty or for any derivation of personal economic gain
by reason of the fact that any of the Significant Shareholders or their
respective Affiliates or any of their officers, directors or employees pursues
or acquires the corporate opportunity for itself, or directs, recommends, sells,
assigns or otherwise transfers the corporate opportunity to another person, or
any of the Significant Shareholders or their respective Affiliates or any of
their officers, directors or employees does not present, offer or communicate
information regarding the corporate opportunity to the Aircastle Entities or
their Affiliates.

                    PART E. DIRECTORS, OFFICERS AND EMPLOYEES

     Subject to Part I of this Appendix A and except as the Significant
Shareholders or their respective Affiliates, on the one hand, and the Aircastle
Entities or their Affiliates, on the other hand, may otherwise agree in writing,
in the event that a director or officer of any of the Aircastle Entities or
their Affiliates who is also a director, officer or employee of any of the
Significant Shareholders or their respective Affiliates acquires knowledge of a
potential transaction or matter that may be a corporate opportunity or is
offered a corporate opportunity, if (i) such person acts in good faith and (ii)
such knowledge of such potential transaction or matter was not obtained solely
in connection with, or such corporate opportunity was not offered to such person
solely in, such person's capacity as director or officer of any of the Aircastle
Entities or their Affiliates, then to the fullest extent permitted by Law, (A)
such director, officer or employee shall not be liable to the Company for any
breach or alleged breach of duty by reason of the fact that any of the
Significant Shareholders or their respective Affiliates pursues or acquires the
corporate opportunity for itself, or directs, recommends, sells, assigns or
otherwise transfers the corporate opportunity to another person, or any of the
Significant Shareholders or their respective Affiliates or such director,
officer or employee does not present, offer or communicate information regarding
the corporate opportunity to the Aircastle Entities or their Affiliates, and
shall not be obliged to account for any personal benefit derived therefrom and
shall not be liable to the Company as a result thereof; and (B) such potential
transaction or matter that may be a corporate opportunity, or the corporate
opportunity, may be pursued or otherwise dealt with by the applicable
Significant Shareholder or respective Affiliates thereof (and not by any of the
Aircastle Entities or Affiliates thereof).

                PART F. AGREEMENTS WITH SIGNIFICANT SHAREHOLDERS

     To the fullest extent permitted by Law, the Aircastle Entities and their
Affiliates may from time to time enter into and perform one or more agreements
(or modifications or supplements to pre-existing agreements) with the
Significant Shareholders and their respective Affiliates pursuant to which the
Aircastle Entities and their Affiliates, on the one hand, and the Significant
Shareholders and their respective Affiliates, on the other hand, agree to engage
in transactions of any kind or nature with each other and/or agree to compete,
or to refrain from competing or to limit or restrict their competition, with
each other, including to allocate and to cause their respective directors,
officers and employees (including any who are directors, officers or employees
of both) to allocate corporate opportunities between or to refer corporate
opportunities to each other. Subject to Parts E and I of this Appendix A, and
except as the Significant Shareholders or their respective Affiliates, on the
one hand, and the Aircastle Entities or their Affiliates, on the other hand, may
otherwise agree in writing, to the fullest extent permitted by Law, no such
agreement, or the performance thereof by the Aircastle Entities and



AIRCASTLE LIMITED                                                        Page 46
--------------------------------------------------------------------------------


their Affiliates, or the Significant Shareholders or their respective
Affiliates, shall be considered contrary to or inconsistent with any duty to the
Company of any director or officer of the Company who is also a director,
officer or employee of any of the Significant Shareholders or their respective
Affiliates. Subject to Parts E and I of this Appendix A, and except as the
Significant Shareholders or their respective Affiliates, on the one hand, and
the Aircastle Entities or their Affiliates, on the other hand, may otherwise
agree in writing, to the fullest extent permitted by Law; (i) none of the
Significant Shareholders or their respective Affiliates shall have or be under
any duty to refrain from entering into any agreement or participating in any
transaction referred to in this Part F of Appendix A; and (ii) no director,
officer or employee of the Company who is also a director, officer or employee
of any of the Significant Shareholders or their respective Affiliates shall be
obliged to refrain from acting on behalf of any of the Significant Shareholders
or their respective Affiliates in respect of any such agreement or transaction
or performing any such agreement in accordance with its terms.

                                PART G. AMBIGUITY

     For the avoidance of doubt and in furtherance of the foregoing, nothing
contained in this Appendix A amends or modifies, or will amend or modify, in any
respect, any written contractual arrangement between the Significant
Shareholders or any of their Affiliates, on the one hand and the Aircastle
Entities or any of their Affiliates, on the other hand.

                               PART H. TERMINATION

     Except for definitions set forth in Part A that are incorporated into
Bye-law 1.1, the provisions of this Appendix A shall have no further force and
effect on the date that both (i) the Significant Shareholders and their
respective Affiliates cease to, collectively, beneficially own (as defined in
Rule 13d-3 under the United States Securities Exchange Act of 1934, as amended)
shares in the Company representing in the aggregate twenty percent (20%) of the
voting power of the then issued and outstanding voting shares and (ii) no person
who is a director or officer of the Company or any of its Affiliates is also a
director or officer of any of the Significant Shareholders or their respective
Affiliates. In addition to any vote of the shareholders required by the Bye-laws
or the Act, until the expiration of the provisions of this Appendix A referred
to in the immediately preceding sentence, the affirmative vote of at least 80%
of all votes attaching to all shares in issue entitling the holder to attend and
vote on the resolution, including the shares held by the Significant
Shareholders and their respective Affiliates, shall be required to alter, amend
or repeal Bye-law 51.4 or this Appendix A.

                        PART I. LIMITATION OF PROVISIONS

This Appendix A shall apply as set forth above, subject to and except as
otherwise provided by Law. Notwithstanding any other provision of Bye-law 51.4
and this Appendix A, nothing herein shall indemnify any director or officer or
employee of the Company against, or exempt any such person from, any liability
in respect of such person's fraud or dishonesty.





Exhibit 4.1

Number

AYR

SHARES

AIRCASTLE CUSIP G0129K 10 4

SEE REVERSE FOR CERTAIN DEFINITIONS

THE SHARES REPRESENTED BY THIS AIRCASTLE LIMITED

CERTIFICATE ARE TRANSFERABLE IN

HAMILTON, BERMUDA AND INCORPORATED UNDER THE LAWS OF BERMUDA

NEW YORK, NEW YORK

THIS CERTIFIES THAT

is the registered holder of

FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF THE PAR VALUE OF $0.01 EACH OF THE SHARE CAPITAL OF AIRCASTLE LIMITED

COMMON SHARES

(hereinafter called the “Company”), subject to the memorandum of association and the bye-laws of the Company and transferable in accordance therewith. This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar, Witness, the facsimile seal of the Company and the facsimile signatures of its duly authorized officers.

Dated

COUNTERSIGNED AND REGISTERED: AIRCASTLE LIMITED

AMERICAN STOCK TRANSFER & TRUST COMPANY BERMUDA 2004

(New York, NY)

CHIEF EXECUTIVE OFFICER

TRANSFER AGENT<br/> AND REGISTRAR

BY:


AIRCASTLE LIMITED

AIRCASTLE LIMITED

THE COMPANY WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF SHARES OF EACH CLASS AUTHORIZED TO BE ISSUED AND, WITH RESPECT TO THE CLASSES OF SHARES WHICH MAY BE ISSUED IN SERIES, THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES, TO THE EXTENT THEY HAVE BEEN SET. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE COMPANY AT ITS REGISTERED OFFICE OR TO THE TRANSFER AGENT.

KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE COMPANY WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM – as tenants in common UNIF GIFT MIN ACT ? Custodian

TEN ENT – as tenants by the entireties (Cust) (Minor)

JT TEN – as joint tenants with right of under Uniform Gifts to Minors

survivorship and not as tenants Act

in common (State)

Additional abbreviations may also be used though not in the above list.

For value received, ________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

______________________________________ shares<br/> represented by the within Certificate, and do hereby irrevocably constitute and appoint

_______________________________________________Attorney<br/> to transfer the said shares on the books of the within named Company<br/> with full power of substitution in the premises.

Dated

NOTICE: NOTICE:THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF<br/> THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed:

THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,

STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN





                                 --------------


                              AMENDED AND RESTATED
                             SHAREHOLDERS AGREEMENT

                                  BY AND AMONG

                                AIRCASTLE LIMITED

                        AND THE SHAREHOLDERS NAMED HEREIN


                                 --------------


                          Dated as of August [ ], 2006






ARTICLE I DEFINITIONS..........................................................2

Section 1.1 Defined Terms......................................................2

ARTICLE II TRANSFER............................................................6

Section 2.1 Binding Effect on Transferees......................................6

Section 2.2 Additional Purchases...............................................6

Section 2.3 Charter Provisions.................................................6

ARTICLE III BOARD OF DIRECTORS.................................................6

Section 3.1 Board..............................................................6

ARTICLE IV REPRESENTATIONS OF EACH SHAREHOLDER.................................8

Section 4.1 Due Organization, Authorization....................................8

Section 4.2 Enforceability, Etc................................................8

Section 4.3 No Conflicts.......................................................8

Section 4.4 Governmental Approvals.............................................8

Section 4.5 Litigation.........................................................8

Section 4.6 Title to the Shares................................................9

ARTICLE V REGISTRATION RIGHTS..................................................9

Section 5.1 Demand Registration................................................9

Section 5.2 Piggyback Registrations...........................................11

Section 5.3 Shelf Registration................................................13

Section 5.4 Withdrawal Rights.................................................14

Section 5.5 Holdback Agreements...............................................15

Section 5.6 Registration Procedures...........................................15

Section 5.7 Registration Expenses.............................................19

Section 5.8 Indemnification...................................................20

ARTICLE VI MISCELLANEOUS......................................................23

Section 6.1 Headings..........................................................23

Section 6.2 Entire Agreement..................................................23

Section 6.3 Further Actions; Cooperation......................................23

Section 6.4 Notices...........................................................23

Section 6.5 Applicable Law....................................................24

Section 6.6 Severability......................................................24

Section 6.7 Successors and Assigns............................................24



                                        2





Section 6.8 Amendments........................................................25

Section 6.9 Waiver............................................................25

Section 6.10 Counterparts.....................................................25

Section 6.11 Injunctive Relief................................................25

Section 6.12 SUBMISSION TO JURISDICTION.......................................25

Section 6.13 Recapitalizations, Exchanges, Etc. Affecting the Common Shares;
               New Issuances..................................................26

Section 6.14 Termination......................................................26

Section 6.15 Rule 144.........................................................27

Section 6.16 Bye-Laws.........................................................27



                                        3



                             SHAREHOLDERS AGREEMENT

                                       OF

                                AIRCASTLE LIMITED

                                 --------------

            THIS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (this "Agreement")
is made as of August [ ], 2006, by and among Aircastle Limited, a Bermuda
exempted company limited by shares (the "Company"), Fortress Investment Fund III
LP ("Fund A"), Fortress Investment Fund III (Fund B) LP ("Fund B"), Fortress
Investment Fund III (Fund C) LP ("Fund C"), Fortress Investment Fund III (Fund
D) L.P. ("Fund D"), Fortress Investment Fund III (Fund E) LP ("Fund E"),
Fortress Investment Fund III (Coinvestment Fund A) LP ("Coinvestment Fund A"),
Fortress Investment Fund III (Coinvestment Fund B) LP ("Coinvestment Fund B"),
Fortress Investment Fund III (Coinvestment Fund C) LP ("Coinvestment Fund C"),
Fortress Investment Fund III (Coinvestment Fund D) L.P.("Coinvestment Fund D"),
Drawbridge Special Opportunities Fund LP ("Drawbridge 1"), Drawbridge Special
Opportunities Fund Ltd. ("Drawbridge 2") and Drawbridge Global Macro Master Fund
Ltd. ("Drawbridge 3") (collectively, the "Initial Shareholders"). Certain
capitalized terms used in this Agreement are defined in Article I. Unless
otherwise indicated, references to articles and sections shall be to articles
and sections of this Agreement.

            WHEREAS, each Initial Shareholder is the holder of Common Shares (as
hereinafter defined);

            WHEREAS, the Initial Shareholders desire to regulate the sale,
assignment, transfer, encumbrance or other disposition of Company Securities (as
hereinafter defined) and to provide for certain rights and obligations in
respect thereto as hereinafter provided;

            WHEREAS, the Company has agreed to provide the registration rights
set forth herein; and

            WHEREAS, the Shareholders (as hereinafter defined) deem it in their
best interests and in the best interests of the Company to set forth certain of
their respective rights and obligations in connection with their investment in
the Company.

            NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:




                                    ARTICLE I

                                   DEFINITIONS

            Section 1.1 Defined Terms. For purposes of this Agreement, the terms
defined other than in this Article I shall have the meanings indicated and the
following terms shall have the following meanings:

                  (a)   "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under the Exchange Act; provided that no Shareholder shall be
deemed an Affiliate of any other Shareholder solely by reason of any investment
in the Company.

                  (b)   "Agreement" shall have the meaning assigned to it in the
introductory paragraph.

                  (c)   A Person shall be deemed to "Beneficially Own"
securities if such Person is deemed to be a "beneficial owner" within the
meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the date
of this Agreement.

                  (d)   "Board" shall have the meaning assigned to it in Section
3.1(a).

                  (e)   "Commission" shall mean the United States Securities and
Exchange Commission or any successor agency.

                  (f)   "Common Shares" shall mean the Company's Common Shares,
par value $0.01 per share and any and all securities of any kind whatsoever of
the Company which may be issued and outstanding on or after the date hereof in
respect of, in exchange for, or upon conversion of the Common Shares pursuant to
a merger, amalgamation, consolidation, share split, subdivision, share dividend,
bonus issue, recapitalization of the Company or otherwise.

                  (g)   "Company" shall have the meaning assigned to it in the
introductory paragraph.

                  (h)   "Company Securities" shall mean (i) any Common Shares
and (ii) any other securities of the Company entitled to vote generally in the
election of directors of the Company.

                  (i)   "Demand" shall have the meaning assigned to it in
Section 5.1(a).

                  (j)   "Demand Registration" shall have the meaning assigned to
it in Section 5.1(a).

                  (k)   "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.


                                        2



                  (l)   ""FIG Advisors" shall mean FIG Advisors LLC, a Delaware
limited liability company, or any other Person designated as "FIG Advisors" by
Fortress Investment Group LLC in a written notice to Company.

                  (m)   Form S-3" shall have the meaning assigned to it in
Section 5.3(a).

                  (n)   "Initial Public Offering" shall mean the initial public
offering of Common Shares pursuant to an effective registration statement under
the Securities Act.

                  (o)   The terms "Initial Shareholder" and "Initial
Shareholders" shall each have the meaning assigned to such term in the
introductory paragraph.

                  (p)   "Inspectors" shall have the meaning assigned to it in
Section 5.6(a)(viii).

                  (q)   "Liens" shall have the meaning assigned to it in Section
4.3.

                  (r)   "Losses" shall have the meaning assigned to it in
Section 5.8(a).

                  (s)   "NYSE" means the New York Stock Exchange.

                  (t)   "Other Demanding Sellers" shall have the meaning
assigned to it in Section 5.2(b).

                  (u)   "Other Proposed Sellers" shall have the meaning assigned
to it in Section 5.2(b).

                  (v)   "Permitted Transferee" shall mean, with respect to each
Shareholder, (i) any other Shareholder, (ii) such Shareholder's Affiliates and
(iii) in the case of any Shareholder, (A) any general or limited partner or
member of such Shareholder, (B) any company, corporation, partnership, limited
liability company or other entity that is an Affiliate of such Shareholder or
any general or limited partner of such Shareholder (collectively, "Shareholder
Affiliates"), (C) any investment funds managed directly or indirectly by such
Shareholder or any Shareholder Affiliates (a "Shareholder Fund"), (D) any
general or limited partner of any Shareholder Fund, (E) any managing director,
general partner, director, limited partner, officer or employee of any
Shareholder Affiliate, or any spouse, lineal descendant, sibling, parent, heir,
executor, administrator, testamentary trustee, legatee or beneficiary of any of
the foregoing persons described in this clause (E) (collectively, "Shareholder
Associates") or (F) any trust, the beneficiaries of which, or any company,
corporation, limited liability company or partnership, the shareholders, members
or general or limited partners of which consist solely of any one or more of
such Shareholder, any general or limited partner of such Shareholder, any
Shareholder Affiliates, any Shareholder Fund, any Shareholder Associates, their
spouses or their lineal descendants.


                                        3



                  (w)   "Person" shall mean any individual, firm, company,
corporation, partnership, limited liability company or other entity, and shall
include any successor (by merger, amalgamation or otherwise) of such entity.

                  (x)   "Piggyback Notice" shall have the meaning assigned to it
in Section 5.2(a).

                  (y)   "Piggyback Registrable Amount" shall mean an amount of
Common Shares equal to 1% of the Common Shares issued and outstanding
immediately after the consummation of the Initial Public Offering.

                  (z)   "Piggyback Registration" shall have the meaning assigned
to it in Section 5.2(a).

                  (aa)  "Piggyback Seller" shall have the meaning assigned to it
in Section 5.2(a).

                  (bb)  "Piggyback Shareholder" shall mean (i) the Initial
Shareholders and (ii) each Permitted Transferee who becomes a party to or bound
by the provisions of this Agreement in accordance with the terms hereof or
Permitted Transferee thereof who is entitled to enforce the provisions of this
Agreement in accordance with the terms hereof, in the case of clauses (i) and
(ii), to the extent that such Initial Shareholder (irrespective of whether or
not such Initial Shareholder owns any Registrable Securities) or such Permitted
Transferee, together with its respective Permitted Transferees (other than any
other Initial Shareholders), holds at least a Piggyback Registrable Amount.

                  (cc)  "Public Offering" shall mean an offering of equity
securities of the Company pursuant to an effective registration statement under
the Securities Act, including an offering in which Shareholders are entitled to
sell Common Shares pursuant to the terms of this Agreement.

                  (dd)  "Records" shall have the meaning assigned to it in
Section 5.6(a)(viii).

                  (ee)  "Registrable Amount" shall mean an amount of Common
Shares equal to 5% of the Common Shares issued and outstanding immediately after
the consummation of the Initial Public Offering.

                  (ff)  "Registrable Securities" shall mean any Common Shares
currently owned or hereafter acquired by any Shareholder. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (x) a registration statement registering such securities under the
Securities Act has been declared effective and such securities have been sold or
otherwise transferred by the holder thereof pursuant to such effective
registration statement or (y) such securities are sold in accordance with Rule
144 (or any successor provision) promulgated under the Securities Act.


                                        4



                  (gg)  "Requested Information" shall have the meaning assigned
to it in Section 5.8(g).

                  (hh)  "Requesting Shareholder" shall have the meaning assigned
to it in Section 5.1(a).

                  (ii)  "Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.

                  (jj)  "Selling Holders" shall have the meaning assigned to it
in Section 5.6(a)(i).

                  (kk)  "Shareholders" shall mean (i) the Initial Shareholders
and (ii) each Permitted Transferee who becomes a party to or bound by the
provisions of this Agreement in accordance with the terms hereof or Permitted
Transferee thereof who is entitled to enforce the provisions of this Agreement
in accordance with the terms hereof, in the case of clauses (i) and (ii), to the
extent that such Initial Shareholder (irrespective of whether or not such
Initial Shareholder owns any Registrable Securities) or such Permitted
Transferee, together with its respective Permitted Transferees (other than any
other Initial Shareholders), hold at least a Registrable Amount.

                  (ll)  "Shelf Notice" shall have the meaning assigned to it in
Section 5.3(a).

                  (mm)  "Shelf Registration Statement" shall have the meaning
assigned to it in Section 5.3(a).

                  (nn)  "Suspension Period" shall have the meaning assigned to
it in Section 5.3(d).

                  (oo)  "Transfer" shall mean, with respect to any Company
Securities, (i) when used as a verb, to sell, assign, dispose of, exchange,
pledge, encumber, hypothecate or otherwise transfer such Company Securities or
any participation or interest therein, whether directly or indirectly, or agree
or commit to do any of the foregoing and (ii) when used as a noun, a direct or
indirect sale, assignment, disposition, exchange, pledge, encumbrance,
hypothecation, or other transfer of such Company Securities or any participation
or interest therein or any agreement or commitment to do any of the foregoing.

                  (pp)  "Underwritten Offering" shall mean a sale of securities
of the Company to an underwriter or underwriters for reoffering to the public.

                  (qq)  "Voting Power of the Company" shall mean the total
number of votes that may be cast in the election of directors of the Company if
all Company Securities were present and voted at a meeting held for such
purpose.


                                        5



                                   ARTICLE II

                                    TRANSFER

            Section 2.1 Binding Effect on Transferees. Prior to any Transfer by
a Shareholder of Company Securities to a Permitted Transferee, the transferring
Shareholder shall cause the transferee to execute an agreement on the same terms
and conditions set forth herein, providing that such transferee shall be bound
by and shall fully comply with the terms of this Agreement (including the
provisions of Article IV with respect to the Company Securities being
transferred to such transferee) and shall become a Shareholder hereunder.

            Section 2.2 Additional Purchases. Any Company Securities owned by a
Shareholder on or after the date of this Agreement shall be subject to the terms
and conditions of this Agreement.

            Section 2.3 Charter Provisions. For so long as this Agreement is in
effect, each of the Shareholders shall vote or cause to be voted all of the
Company Securities held of record or beneficially owned by such Shareholder and
take all other reasonably necessary action such that no amendment shall be made
to the Company's Memorandum of Association or Bye-Laws, as in effect as of the
date of this Agreement in a manner that would (a) add restrictions to the
transferability of the Company Securities by any Shareholder who was an original
party to this Agreement and who (or whose Permitted Transferee) remains a
"Shareholder" at the time of such an amendment, which restrictions are beyond
those provided for in the Company's Memorandum of Association, Bye-Laws, this
Agreement or applicable securities laws or (b) nullify any of the rights of any
Shareholder who was an original party to this Agreement and who (or whose
Permitted Transferee) remains a "Shareholder" at the time of such amendment,
which rights are explicitly provided for in this Agreement, unless, in each such
case, such amendment shall have been approved by such Shareholder.

                                   ARTICLE III

                               BOARD OF DIRECTORS

            Section 3.1 Board.

                  (a)   For so long as this Agreement is in effect, each of the
Shareholders shall vote or cause to be voted all of the Company Securities held
of record or beneficially owned by such Shareholder and take all other
reasonably necessary action so as to elect to the board of directors of the
Company (the "Board"), and to continue in office not more than eight (8)
directors. The Shareholders shall cause the Company to take all necessary or
desirable action within its control to give effect to the provisions of this
Section 3.1. The Company shall use its reasonable efforts so that a sufficient
number of "independent directors" (as such term is defined in the applicable
NYSE listing standards from time to time) are members of the Board in order for
the Company to


                                        6



comply with the applicable listing standards of the NYSE without reliance on the
"controlled company" exception contemplated thereby.

                  (b)   So long as the Initial Shareholders and their Permitted
Transferees have Beneficial Ownership of:

                        (i)   more than 50% of the Voting Power of the Company,
FIG Advisors shall be entitled to designate four directors to the Board or, if
the Board shall be comprised of eight members, then FIG Advisors shall be
entitled to designate five directors to the Board,

                        (ii)  less than 50% but more than 25% of the Voting
Power of the Company, FIG Advisors shall be entitled to designate three
directors to the Board,

                        (iii) less than 25% but more than 10% of the Voting
Power of the Company, FIG Advisors shall be entitled to designate two directors
to the Board, and

                        (iv)  less than 10% but more than 5% of the voting Power
of the Company, FIG Advisors shall be entitled to designate one director to the
Board.

Each of the Shareholders shall vote or cause to be voted all of the Company
Securities held of record or beneficially owned by such Shareholder and take all
other reasonably necessary action so as to effect the purpose of this Section
3.1(b).

                  (c)   If FIG Advisors notifies the Shareholders of its desire
to remove, with or without cause, any director previously designated by it, each
Shareholder shall vote or cause to be voted all of the Company Securities held
of record or beneficially owned by such Shareholder and take all other necessary
actions to cause the removal of any director designated pursuant to this Section
3.1.(d), subject to the bye-laws of the Company.

                  (d)   In the event that any designees of FIG Advisors shall
for any reason cease to serve as a member of the Board during his term of
office, the resulting vacancy on the Board will be filled by an individual
designated by FIG Advisors and each of the Shareholders shall vote or cause to
be voted all of the Company Securities held of record or beneficially by such
Shareholder and take all other reasonably necessary action so as to effect the
purpose of this Section 3.1.(d).

                  (e)   If at any time the number of directors entitled to be
designated by FIG Advisors pursuant to this Section 3.1 would decrease, within
10 days thereafter, FIG Advisors shall cause a sufficient number of directors
designated by it to resign from the Board so that the number of directors
designated by it on the Board after such resignation(s) equals the number of
directors FIG Advisors would have been entitled to designate had an election of
directors taken place at such time. Any vacancies created by a resignation
required by this Section 3.1(e) shall be filled by a majority vote of the Board.


                                        7



                                   ARTICLE IV

                       REPRESENTATIONS OF EACH SHAREHOLDER

Each Shareholder hereby represents and warrants to each other Shareholder as
follows:

            Section 4.1 Due Organization, Authorization. Such Shareholder is
either (a) duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization or (b) a natural person that is competent
and has legal capacity to execute, deliver and perform its obligations under
this Agreement. The execution, delivery and performance by such Shareholder of
this Agreement, if not a natural person, and the consummation by such
Shareholder of the transactions contemplated hereby, have been duly authorized
by all necessary corporate and other action on its part.

            Section 4.2 Enforceability, Etc. This Agreement has been duly
executed and delivered by such Shareholder. This Agreement constitutes a legal,
valid and binding obligation of such Shareholder, enforceable against such
Shareholder in accordance with its terms, subject to any limitations imposed by
bankruptcy, insolvency, or other laws of general application relating to
enforcement of creditors' rights or general equity principles.

            Section 4.3 No Conflicts. The execution, delivery and performance
of this Agreement by such Shareholder and the consummation by such Shareholder
of the transactions contemplated hereby will not (a) result in a violation of,
be in conflict with or constitute a default (with or without notice or lapse of
time or both) under (i) any law applicable to such Shareholder or any of its
assets, (ii) any provision of its organizational documents, if such Shareholder
is not a natural person, (iii) any order or judgment of any court or other
agency of government applicable to such Shareholder or any of its assets or (iv)
any contractual restriction binding on or affecting such Shareholder or any of
its assets or (b) result in the creation or imposition of any lien, mortgage,
pledge, claim, right, charge, security interest or other restriction or
encumbrance (collectively, "Liens") upon any of such Shareholder's assets,
including the Common Shares.

            Section 4.4 Governmental Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, including under federal or state law or otherwise, is required
to be obtained or made by or with respect to such Shareholder in connection with
its execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby by such Shareholder (other than those which are
not material).

            Section 4.5 Litigation. There is no lawsuit, claim, proceeding or
investigation pending or threatened by or against such Shareholder or any of its
properties, assets, operations, businesses or prospects, which relates to the
transactions contemplated by this Agreement.


                                        8



            Section 4.6 Title to the Shares. Such Shareholder owns the Company
Securities owned by it free and clear of any Liens.

                                    ARTICLE V

                               REGISTRATION RIGHTS

            Section 5.1 Demand Registration.

                  (a)   At any time after the six month anniversary of the date
hereof, any Persons that on the date a Demand (as hereafter defined) is made
constitute a Shareholder (a "Requesting Shareholder") shall be entitled to make
a written request of the Company (a "Demand") for registration under the
Securities Act of an amount of Registrable Securities that, when taken together
with the amounts of Registrable Securities requested to be registered under the
Securities Act by such Requesting Shareholder's Affiliates, equals or is greater
than the Registrable Amount (based on the number of Registrable Securities
outstanding on the date such Demand is made) (a "Demand Registration") and
thereupon the Company will, subject to the terms of this Agreement, use its
commercially reasonable efforts to effect the registration under the Securities
Act of:

                        (i)   the Registrable Securities which the Company has
been so requested to register by the Requesting Shareholders for disposition in
accordance with the intended method of disposition stated in such Demand;

                        (ii)  all other Registrable Securities which the Company
has been requested to register pursuant to Section 5.1(b); and

                        (iii) all Common Shares which the Company may elect to
register in connection with any offering of Registrable Securities pursuant to
this Section 5.1, but subject to Section 5.1(g);

all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Securities and the additional
Common Shares, if any, to be so registered. So long as a Requesting Shareholder
shall be entitled to make a Demand pursuant to this Section 5.1, such Requesting
Shareholder may elect to make such Demand pursuant to Section 5.3

                  (b)   A Demand shall specify: (i) the aggregate number of
Registrable Securities requested to be registered in such Demand Registration,
(ii) the intended method of disposition in connection with such Demand
Registration, to the extent then known, (iii) the identity of the Requesting
Shareholder (or Requesting Shareholders) and (iv) whether the Demand shall be
effected pursuant to this Section 5.1 or Section 5.3. Within five days after
receipt of a Demand, the Company shall give written notice of such Demand to any
other Persons that on the date a Demand is delivered to the Company constitute a
Shareholder. Subject to Section 5.1(g), the Company shall include in the Demand
Registration covered by such Demand all Registrable Securities with respect to
which the Company has received a written request


                                        9



for inclusion therein within ten days after the Company's notice required by
this paragraph has been given. Such written request shall comply with the
requirements of a Demand as set forth in this Section 5.1(b).

                  (c)   Each Shareholder shall be entitled to an aggregate of
two Demand Registrations.

                  (d)   A Demand Registration shall not be deemed to have been
effected and shall not count as a Demand (i) unless a registration statement
with respect thereto has become effective and has remained effective for a
period of at least 60 days (or such shorter period in which all Registrable
Securities included in such Demand Registration have actually been sold
thereunder), (ii) if, after it has become effective, such Demand Registration
becomes subject to any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason or (iii) if
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such Demand Registration are not
satisfied, other than by reason of some act or omission by such Requesting
Shareholders.

                  (e)   Demand Registrations shall be on such appropriate
registration form of the Commission as shall be selected by the Requesting
Shareholders and shall be reasonably acceptable to the Company.

                  (f)   The Company shall not be obligated to effect any Demand
Registration (A) within six months of a "firm commitment" Underwritten Offering
in which all Piggyback Shareholders were given "piggyback" rights pursuant to
Section 5.2 (subject to Section 5.1(g)) and at least 50% of the number of
Registrable Securities requested by such Shareholders to be included in such
Demand Registration were included, (B) within four months of any other Demand
Registration or (C) if, in the Company's reasonable judgment, it is not feasible
for the Company to proceed with the Demand Registration because of the
unavailability of audited financial statements. In addition, the Company shall
be entitled to postpone (upon written notice to all Shareholders) for up to 120
days the filing or the effectiveness of a registration statement for any Demand
Registration (but no more than twice in any period of 12 consecutive months) if
the Board determines in good faith and in its reasonable judgment that the
filing or effectiveness of the registration statement relating to such Demand
Registration would cause the disclosure of material, non-public information that
the Company has a bona fide business purpose for preserving as confidential. In
the event of a postponement by the Company of the filing or effectiveness of a
registration statement for a Demand Registration, the holders of a majority of
Registrable Securities held by the Requesting Shareholder(s) shall have the
right to withdraw such Demand in accordance with Section 5.4.

                  (g)   The Company shall not include any securities other than
Registrable Securities in a Demand Registration, except with the written consent
of Shareholders participating in such Demand Registration that hold a majority
of the Registrable Securities included in such Demand Registration. If, in
connection with a Demand Registration, any managing underwriter (or, if such
Demand Registration is not


                                       10



an Underwritten Offering, a nationally recognized independent investment bank
selected by FIG Advisors or any Shareholder or Permitted Transferee (to the
extent a Shareholder hereunder) reasonably acceptable to the Company, and whose
fees and expenses shall be borne solely by the Company) advises the Company, in
writing, that, in its opinion, the inclusion of all of the securities, including
securities of the Company that are not Registrable Securities, sought to be
registered in connection with such Demand Registration would adversely affect
the marketability of the Registrable Securities sought to be sold pursuant
thereto, then the Company shall include in such registration statement only such
securities as the Company is advised by such underwriter can be sold without
such adverse effect as follows and in the following order of priority: (i)
first, up to the number of Registrable Securities requested to be included in
such Demand Registration by the Shareholders, which, in the opinion of the
underwriter can be sold without adversely affecting the marketability of the
offering, pro rata among such Shareholders requesting such Demand Registration
on the basis of the number of such securities requested to be included by such
Shareholders and such Shareholders that are Piggyback Sellers; (ii) second,
securities the Company proposes to sell; and (iii) third, all other securities
of the Company duly requested to be included in such registration statement, pro
rata on the basis of the amount of such other securities requested to be
included or such other method determined by the Company.

                  (h)   Any time that a Demand Registration involves an
Underwritten Offering, the Company shall select the investment banker or
investment bankers and managers that will serve as lead and co-managing
underwriters with respect to the offering of such Registrable Securities.

            Section 5.2 Piggyback Registrations.

                  (a)   Subject to the terms and conditions hereof, whenever the
Company proposes to register any of its equity securities under the Securities
Act (other than a registration by the Company on a registration statement on
Form S-4 or a registration statement on Form S-8 or any successor forms thereto)
(a "Piggyback Registration"), whether for its own account or for the account of
others, the Company shall give the Piggyback Shareholders prompt written notice
thereof (but not less than ten business days prior to the filing by the Company
with the Commission of any registration statement with respect thereto). Such
notice (a "Piggyback Notice") shall specify, at a minimum, the number of equity
securities proposed to be registered, the proposed date of filing of such
registration statement with the Commission, the proposed means of distribution,
the proposed managing underwriter or underwriters (if any and if known) and a
good faith estimate by the Company of the proposed minimum offering price of
such equity securities. Upon the written request of any Persons that on the date
of the Piggyback Notice constitute a Piggyback Shareholder (a "Piggyback
Seller") (which written request shall specify the number of Registrable
Securities then presently intended to be disposed of by such Piggyback Seller)
given within ten days after such Piggyback Notice is received by such Piggyback
Seller, the Company, subject to the terms and conditions of this Agreement,
shall use its reasonable best efforts to cause all such Registrable Securities
held by Piggyback Sellers with respect to which the Company has received such
written requests for inclusion to be included in such Piggyback


                                       11



Registration on the same terms and conditions as the Company's equity securities
being sold in such Piggyback Registration.

                  (b)   If, in connection with a Piggyback Registration,
any managing underwriter (or, if such Piggyback Registration is not an
Underwritten Offering, a nationally recognized independent investment bank
selected by FIG Advisors, any Shareholder or any Permitted Transferee thereof
(to the extent a Shareholder hereunder); reasonably acceptable to the Company,
and whose fees and expenses shall be borne solely by the Company) advises the
Company in writing that, in its opinion, the inclusion of all the equity
securities sought to be included in such Piggyback Registration by (i) the
Company, (ii) others who have sought to have equity securities of the Company
registered in such Piggyback Registration pursuant to rights to demand (other
than pursuant to so-called "piggyback" or other incidental or participation
registration rights) such registration (such Persons being "Other Demanding
Sellers"), (iii) the Piggyback Sellers and (iv) any other proposed sellers of
equity securities of the Company (such Persons being "Other Proposed Sellers"),
as the case may be, would adversely affect the marketability of the equity
securities sought to be sold pursuant thereto, then the Company shall include in
the registration statement applicable to such Piggyback Registration only such
equity securities as the Company is so advised by such underwriter can be sold
without such an effect, as follows and in the following order of priority:

                        (i)     if the Piggyback Registration relates to an
offering for the Company's own account, then (A) first, such number of equity
securities to be sold by the Company as the Company, in its reasonable judgment
and acting in good faith and in accordance with sound financial practice, shall
have determined, (B) second, Registrable Securities of Piggyback Sellers,
securities sought to be registered by Other Demanding Sellers (if any), pro rata
on the basis of the number of Common Shares held by such Piggyback Sellers and
(C) third, other equity securities held by any Other Proposed Sellers; or

                        (ii)    if the Piggyback Registration relates to an
offering other than for the Company's own account, then (A) first, such number
of equity securities sought to be registered by each Other Demanding Seller, the
Piggyback Sellers (if any), pro rata in proportion to the number of securities
sought to be registered by all such Other Demanding Sellers, Piggyback Sellers
and (B) second, other equity securities held by any Other Proposed Sellers or to
be sold by the Company as determined by the Company.

                  (c)   In connection with any Underwritten Offering under this
Section 5.2 for the Company's account, the Company shall not be required to
include a holder's Registrable Securities in the Underwritten Offering unless
such holder accepts the terms of the underwriting as agreed upon between the
Company and the underwriters selected by the Company; provided, that any such
underwriting agreement includes only customary terms and conditions.


                                       12



                  (d)   If, at any time after giving written notice of its
intention to register any of its equity securities as set forth in this Section
5.2 and prior to the time the registration statement filed in connection with
such Piggyback Registration is declared effective, the Company shall determine
for any reason not to register such equity securities, the Company may, at its
election, give written notice of such determination to each Piggyback
Shareholder and thereupon shall be relieved of its obligation to register any
Registrable Securities in connection with such particular withdrawn or abandoned
Piggyback Registration (but not from its obligation to pay the Registration
Expenses in connection therewith as provided herein); provided, that
Shareholders may continue the registration as a Demand Registration pursuant to
the terms of Section 5.1.

            Section 5.3 Shelf Registration.

                  (a)   Subject to Section 5.3(d), and further subject to the
availability of a Registration Statement on Form S-3 ("Form S-3") to the
Company, the Shareholders or any of their respective Permitted Transferees (in
each case to the extent a Shareholder hereunder) may by written notice delivered
to the Company (the "Shelf Notice") require the Company to file as soon as
practicable (but no later than 60 days after the date the Shelf Notice is
delivered), and to use commercially reasonable efforts to cause to be declared
effective by the Commission (within 90 days after such filing date), a Form S-3
providing for an offering to be made on a continuous basis pursuant to Rule 415
under the Securities Act relating to the offer and sale, from time to time, of
the Registrable Securities owned by any Shareholder (or any Permitted Transferee
thereof), as the case may be, and any other Persons that at the time of the
Shelf Notice meet the definition of a Shareholder who elect to participate
therein as provided in Section 5.3(b) in accordance with the plan and method of
distribution set forth in the prospectus included in such Form S-3 (the "Shelf
Registration Statement").

                  (b)   Within five business days after receipt of a Shelf
Notice pursuant to Section 5.3(a), the Company will deliver written notice
thereof to each Shareholder. Each Shareholder may elect to participate in the
Shelf Registration Statement by delivering to the Company a written request to
so participate within ten days after the Shelf Notice is received by any such
Shareholder.

                  (c)   Subject to Section 5.3(d), the Company will use
commercially reasonable efforts to keep the Shelf Registration Statement
continuously effective until the date on which all Registrable Securities
covered by the Shelf Registration Statement have been sold thereunder in
accordance with the plan and method of distribution disclosed in the prospectus
included in the Shelf Registration Statement, or otherwise.

                  (d)   Notwithstanding anything to the contrary contained in
this Agreement, the Company shall be entitled, from time to time, by providing
written notice to the Shareholders who elected to participate in the Shelf
Registration Statement, to require such Shareholders to suspend the use of the
prospectus for sales of Registrable Securities under the Shelf Registration
Statement for a reasonable period of time not to exceed 60 days in succession or
90 days in the aggregate in any 12 month period (a


                                       13



"Suspension Period") if the Company shall determine that it is required to
disclose in the Shelf Registration Statement a financing, acquisition, corporate
reorganization or other similar corporate transaction or other material event or
circumstance affecting the Company or its securities, and that the disclosure of
such information at such time would be detrimental to the Company or its
shareholders. Immediately upon receipt of such notice, the Shareholders covered
by the Shelf Registration Statement shall suspend the use of the prospectus
until the requisite changes to the prospectus have been made as required below.
Any Suspension Period shall terminate at such time as the public disclosure of
such information is made. After the expiration of any Suspension Period and
without any further request from a Shareholder, the Company shall as promptly as
reasonably practicable prepare a post-effective amendment or supplement to the
Shelf Registration Statement or the prospectus, or any document incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to purchasers of the Registrable Securities included therein, the
prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

            Section 5.4 Withdrawal Rights. Any Shareholder having notified or
directed the Company to include any or all of its Registrable Securities in a
registration statement under the Securities Act shall have the right to withdraw
any such notice or direction with respect to any or all of the Registrable
Securities designated by it for registration by giving written notice to such
effect to the Company prior to the effective date of such registration
statement. In the event of any such withdrawal, the Company shall not include
such Registrable Securities in the applicable registration and such Registrable
Securities shall continue to be Registrable Securities for all purposes of this
Agreement. No such withdrawal shall affect the obligations of the Company with
respect to the Registrable Securities not so withdrawn; provided, however, that
in the case of a Demand Registration, if such withdrawal shall reduce the number
of Registrable Securities sought to be included in such registration below the
Registrable Amount, then the Company shall as promptly as practicable give each
holder of Registrable Securities sought to be registered notice to such effect
and, within ten days following the mailing of such notice, such holder of
Registrable Securities still seeking registration shall, by written notice to
the Company, elect to register additional Registrable Securities, when taken
together with elections to register Registrable Securities by its Affiliates, to
satisfy the Registrable Amount or elect that such registration statement not be
filed or, if theretofore filed, be withdrawn. During such ten day period, the
Company shall not file such registration statement if not theretofore filed or,
if such registration statement has been theretofore filed, the Company shall not
seek, and shall use commercially reasonable efforts to prevent, the
effectiveness thereof. Any registration statement withdrawn or not filed (a) in
accordance with an election by the Company, (b) in accordance with an election
by the Requesting Shareholders in the case of a Demand Registration or by the
Shareholder or Permitted Transferee thereof (to the extent a Shareholder
hereunder) with respect to a Shelf Registration Statement or (c) in accordance
with an election by the Company subsequent to the effectiveness of the
applicable Demand Registration statement because any post-effective amendment or
supplement to the applicable Demand Registration statement contains information


                                       14



regarding the Company which the Company deems adverse to the Company, shall not
be counted as a Demand.

            Section 5.5 Holdback Agreements. Each Shareholder agrees not to
effect any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such equity securities, during any time period
reasonably requested by the Company (which shall not exceed 90 days) with
respect to any Public Offering, Demand Registration or Piggyback Registration
(in each case, except as part of such registration), or, in each case, a later
date required by any underwriting agreement with respect thereto.

            Section 5.6 Registration Procedures.

                  (a)   If and whenever the Company is required to use
commercially reasonable efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 5.1, 5.2 and 5.3 the
Company shall as expeditiously as reasonably possible:

                        (i)     prepare and file with the Commission a
registration statement to effect such registration and thereafter use
commercially reasonable efforts to cause such registration statement to become
and remain effective pursuant to the terms of this Agreement; provided, however,
that the Company may discontinue any registration of its securities which are
not Registrable Securities at any time prior to the effective date of the
registration statement relating thereto; provided, further that before filing
such registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the holders of Registrable Securities which are to be
included in such registration ("Selling Holders") copies of all such documents
proposed to be filed, which documents will be subject to the review of such
counsel, and such review to be conducted with reasonable promptness;

                        (ii)    prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement until the earlier of such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement or (i) in the case
of a Demand Registration pursuant to Section 5.1, the expiration of 60 days
after such registration statement becomes effective or (ii) in the case of a
Piggyback Registration pursuant to Section 5.2, the expiration of 60 days after
such registration statement becomes effective or (iii) in the case of a Shelf
Registration pursuant to Section 5.3, the expiration of one year after such
registration statement becomes effective;

                        (iii)   furnish to each Selling Holder and each
underwriter, if any, of the securities being sold by such Selling Holder such
number of conformed copies of such registration statement and of each amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus contained in such


                                       15



registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such other
documents as such Selling Holder and underwriter, if any, may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;

                        (iv)    use commercially reasonable efforts to register
or qualify such Registrable Securities covered by such registration statement
under such other securities laws or blue sky laws of such jurisdictions as any
Selling Holder and any underwriter of the securities being sold by such Selling
Holder shall reasonably request, and take any other action which may be
reasonably necessary or advisable to enable such Selling Holder and underwriter
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such Selling Holder, except that the Company shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements of
this clause (iv) be obligated to be so qualified, to subject itself to taxation
in any such jurisdiction or to file a general consent to service of process in
any such jurisdiction;

                        (v)     use commercially reasonable efforts to cause
such Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed and, if no such
securities are so listed, use commercially reasonable efforts to cause such
Registrable Securities to be listed on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq Stock Market;

                        (vi)    use commercially reasonable efforts to cause
such Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the Selling Holder(s) thereof to consummate the
disposition of such Registrable Securities;

                        (vii)   in connection with an Underwritten Offering,
obtain for each Selling Holder and underwriter:

                                    (1) an opinion of counsel for the Company,
      covering the matters customarily covered in opinions requested in
      underwritten offerings and such other matters as may be reasonably
      requested by such Selling Holder and underwriters, and

                                    (2) a "comfort" letter (or, in the case of
      any such Person which does not satisfy the conditions for receipt of a
      "comfort" letter specified in Statement on Auditing Standards No. 72, an
      "agreed upon procedures" letter) signed by the independent public
      accountants who have certified the Company's financial statements included
      in such registration statement;

                        (viii)  promptly make available for inspection by any
seller, any underwriter participating in any disposition pursuant to any
registration statement,


                                       16



and any attorney, accountant or other agent or representative retained by any
such seller or underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information requested by any
such Inspector in connection with such registration statement; provided,
however, that, unless the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in the registration statement or the release
of such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, the Company shall not be required to provide any
information under this subparagraph (viii) if (i) the Company believes, after
consultation with counsel for the Company, that to do so would cause the Company
to forfeit an attorney-client privilege that was applicable to such information
or (ii) if either (A) the Company has requested and been granted from the SEC
confidential treatment of such information contained in any filing with the SEC
or documents provided supplementally or otherwise or (B) the Company reasonably
determines in good faith that such Records are confidential and so notifies the
Inspectors in writing unless prior to furnishing any such information with
respect to (i) or (ii) such Holder of Registrable Securities requesting such
information agrees, and causes each of its Inspectors, to enter into a
confidentiality agreement on terms reasonably acceptable to the Company; and
provided, further, that each Holder of Registrable Securities agrees that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company, at its
expense, to undertake appropriate action and to prevent disclosure of the
Records deemed confidential;

                        (ix)    promptly notify in writing each Selling Holder
and the underwriters, if any, of the following events:

                                    (1) the filing of the registration
      statement, the prospectus or any prospectus supplement related thereto or
      post-effective amendment to the registration statement, and, with respect
      to the registration statement or any post-effective amendment thereto,
      when the same has become effective;

                                    (2) any request by the Commission for
      amendments or supplements to the registration statement or the prospectus
      or for additional information;

                                    (3) the issuance by the Commission of any
      stop order suspending the effectiveness of the registration statement or
      the initiation of any proceedings by any Person for that purpose; and

                                    (4) the receipt by the Company of any
      notification with respect to the suspension of the qualification of any
      Registrable Securities for sale under the securities or blue sky laws of
      any jurisdiction or the initiation or threat of any proceeding for such
      purpose;


                                       17



                        (x)     notify each Selling Holder, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, at the request of any Selling Holder, promptly
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading;

                        (xi)    make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of such registration
statement;

                        (xii)   otherwise use commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission, and make
available to Selling Holders, as soon as reasonably practicable, an earnings
statement covering the period of at least 12 months, but not more than 18
months, beginning with the first day of the Company's first full quarter after
the effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;

                        (xiii)  use its reasonable best efforts to assist
Shareholders who made a request to the Company to provide for a third party
"market maker" for the Common Shares; provided, however, that the Company shall
not be required to serve as such "market maker";

                        (xiv)   cooperate with the sellers and the managing
underwriter to facilitate the timely preparation and delivery of certificates
(which shall not bear any restrictive legends unless required under applicable
law) representing securities sold under any registration statement, and enable
such securities to be in such denominations and registered in such names as the
managing underwriter or such sellers may request and keep available and make
available to the Company's transfer agent prior to the effectiveness of such
registration statement a supply of such certificates; and

                        (xv)    have appropriate officers of the Company prepare
and make presentations at any "road shows" and before analysts and rating
agencies, as the case may be, take other actions to obtain ratings for any
Registrable Securities (if they are eligible to be rated) and otherwise use its
reasonable best efforts to cooperate as reasonably requested by the Selling
Holders and the underwriters in the offering, marketing or selling of the
Registrable Securities.

      The Company may require each Selling Holder and each underwriter, if any,
to furnish the Company in writing such information regarding each Selling Holder
or underwriter and the distribution of such Registrable Securities as the
Company may from


                                       18



time to time reasonably request to complete or amend the information required by
such registration statement.

                  (b)   Without limiting any of the foregoing, in the event that
the offering of Registrable Securities is to be made by or through an
underwriter, the Company shall enter into an underwriting agreement with a
managing underwriter or underwriters containing representations, warranties,
indemnities and agreements customarily included (but not inconsistent with the
covenants and agreements of the Company contained herein) by an issuer of common
shares in underwriting agreements with respect to offerings of common shares for
the account of, or on behalf of, such issuers. In connection with any offering
of Registrable Securities registered pursuant to this Agreement, the Company
shall (i) furnish to the underwriter, if any (or, if no underwriter, the sellers
of such Registrable Securities), unlegended certificates representing ownership
of the Registrable Securities being sold, in such denominations as requested and
(ii) instruct any transfer agent and registrar of the Registrable Securities to
release any stop transfer order with respect thereto.

                  (c)   Each Selling Holder agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 5.6(a)(ix), such Selling Holder shall forthwith discontinue such Selling
Holder's disposition of Registrable Securities pursuant to the applicable
registration statement and prospectus relating thereto until such Selling
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5.6(a)(ix) and, if so directed by the Company, deliver
to the Company, at the Company's expense, all copies, other than permanent file
copies, then in such Selling Holder's possession of the prospectus current at
the time of receipt of such notice relating to such Registrable Securities. In
the event the Company shall give such notice, any applicable 60 day or one year
period during which such registration statement must remain effective pursuant
to this Agreement shall be extended by the number of days during the period from
the date of giving of a notice regarding the happening of an event of the kind
described in Section 5.6(a)(ix) to the date when all such Selling Holders shall
receive such a supplemented or amended prospectus and such prospectus shall have
been filed with the Commission.

            Section 5.7 Registration Expenses. All expenses incident to the
Company's performance of, or compliance with, its obligations under this
Agreement including, without limitation, all registration and filing fees, all
fees and expenses of compliance with securities and "blue sky" laws, all fees
and expenses associated with filings required to be made with the NASD
(including, if applicable, the fees and expenses of any "qualified independent
underwriter" as such term is defined in Schedule E of the By-Laws of the NASD),
all fees and expenses of compliance with securities and "blue sky" laws, all
printing (including, without limitation, expenses of printing certificates for
the Registrable Securities in a form eligible for deposit with the Depository
Trust Company and of printing prospectuses if the printing of prospectuses is
requested by a holder of Registrable Securities) and copying expenses, all
messenger and delivery expenses, all fees and expenses of the Company's
independent certified public accountants and counsel (including, without
limitation, with respect to "comfort" letters and opinions) and fees and
expenses of one firm of counsel to the Shareholders selling in


                                       19



such registration (which firm shall be selected by the Shareholders selling in
such registration that hold a majority of the Registrable Securities included in
such registration) (collectively, the "Registration Expenses") shall be borne by
the Company, regardless of whether a registration is effected. The Company will
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties,
the expense of any annual audit and the expense of any liability insurance) and
the expenses and fees for listing the securities to be registered on each
securities exchange and included in each established over-the-counter market on
which similar securities issued by the Company are then listed or traded. Each
Selling Holder shall pay its portion of all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale of such Selling
Holder's Registrable Securities pursuant to any registration.

            Section 5.8 Indemnification.

                  (a)   The Company agrees to indemnify and hold harmless, to
the fullest extent permitted by law, each Selling Holder, its officers,
directors, employees, managers, partners and agents and each Person who controls
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act) such Selling Holder or such other indemnified Person from and
against all losses, claims, damages, liabilities and expenses (including
reasonable expenses of investigation and reasonable attorneys' fees and
expenses) (collectively, the "Losses") caused by, resulting from or relating to
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission (or alleged omission) of
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as the same are caused by any information
furnished in writing to the Company by such Selling Holder expressly for use
therein or by such Selling Holder's failure to deliver a copy of a current
prospectus or any amendments or supplements thereto (which does not contain any
such material misstatements or omissions) after the Company has furnished such
holder with a sufficient number of copies of the same. In connection with an
Underwritten Offering and without limiting any of the Company's other
obligations under this Agreement, the Company shall also indemnify such
underwriters, their officers, directors, employees and agents and each Person
who controls (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act) such underwriters or such other indemnified Person to
the same extent as provided above with respect to the indemnification (and
exceptions thereto) of the holders of Registrable Securities being sold.
Reimbursements payable pursuant to the indemnification contemplated by this
Section 5.8(a) will be made by periodic payments during the course of any
investigation or defense, as and when bills are received or expenses incurred.

                  (b)   In connection with any registration statement in which a
holder of Registrable Securities is participating, each such Selling Holder will
furnish to the Company in writing information regarding such Selling Holder's
ownership of Registrable Securities and its intended method of distribution
thereof and, to the extent permitted by law, shall, severally and not jointly,
indemnify the Company, its directors,


                                       20



officers, employees and agents and each Person who controls (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act) the
Company or such other indemnified Person against all Losses caused by any untrue
statement of material fact contained in the registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, but only to the extent that such untrue statement or
omission is caused by and contained in such information so furnished in writing
by such Selling Holder expressly for use therein; provided, however, that each
Selling Holder's obligation to indemnify the Company hereunder shall, to the
extent more than one Selling Holder is subject to the same indemnification
obligation, be apportioned between each Selling Holder based upon the net amount
received by each Selling Holder from the sale of Registrable Securities, as
compared to the total net amount received by all of the Selling Holders of
Registrable Securities sold pursuant to such registration statement.
Notwithstanding the foregoing, no Selling Holder shall be liable to the Company
for amounts in excess of the lesser of (i) such apportionment and (ii) the
amount received by such holder in the offering giving rise to such liability.

                  (c)   Any Person entitled to indemnification hereunder shall
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification; provided, however, the failure to give such
notice shall not release the indemnifying party from its obligation, except to
the extent that the indemnifying party has been materially prejudiced by such
failure to provide such notice on a timely basis.

                  (d)   In any case in which any such action is brought against
any indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not (so long as it shall continue to have the right to
defend, contest, litigate and settle the matter in question in accordance with
this paragraph) be liable to such indemnified party hereunder for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, supervision
and monitoring (unless (i) such indemnified party reasonably objects to such
assumption on the grounds that there may be defenses available to it which are
different from or in addition to the defenses available to such indemnifying
party or (ii) the indemnifying party shall have failed within a reasonable
period of time to assume such defense and the indemnified party is or is
reasonably likely to be prejudiced by such delay, in either event the
indemnified party shall be promptly reimbursed by the indemnifying party for the
expenses incurred in connection with retaining separate legal counsel). An
indemnifying party shall not be liable for any settlement of an action or claim
effected without its consent. The indemnifying party shall lose its right to
defend, contest, litigate and settle a matter if it shall fail to diligently
contest such matter (except to the extent settled in accordance with the next
following sentence). No matter shall be settled by an indemnifying party


                                       21



without the consent of the indemnified party (which consent shall not be
unreasonably withheld, it being understood that the indemnified party shall not
be deemed to be unreasonable in withholding its consent if the proposed
settlement imposes any obligation on the indemnified party other than the
payment of money).

                  (e)   The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified Person and will survive the transfer of the
Registrable Securities and the termination of this Agreement.

                  (f)   If recovery is not available under the foregoing
indemnification provisions for any reason or reasons other than as specified
therein, any Person who would otherwise be entitled to indemnification by the
terms thereof shall nevertheless be entitled to contribution with respect to any
Losses with respect to which such Person would be entitled to such
indemnification but for such reason or reasons. In determining the amount of
contribution to which the respective Persons are entitled, there shall be
considered the Persons' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and other equitable
considerations appropriate under the circumstances. It is hereby agreed that it
would not necessarily be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not found guilty of
such fraudulent misrepresentation. Notwithstanding the foregoing, no Selling
Holder or transferee thereof shall be required to make a contribution in excess
of the net amount received by such holder from its sale of Registrable
Securities in connection with the offering that gave rise to the contribution
obligation.

                  (g)   Not less than five business days before the expected
filing date of each registration statement pursuant to this Agreement, the
Company shall notify each Shareholder who has timely provided the requisite
notice hereunder entitling the Shareholder to register Registrable Securities in
such registration statement of the information, documents and instruments from
such Shareholder that the Company or any underwriter reasonably requests in
connection with such registration statement, including, but not limited to a
questionnaire, custody agreement, power of attorney, lock-up letter and
underwriting agreement (the "Requested Information"). If the Company has not
received, on or before the second day before the expected filing date, the
Requested Information from such Shareholder, the Company may file the
Registration Statement without including Registrable Securities of such
Shareholder. The failure to so include in any registration statement the
Registrable Securities of a Shareholder (with regard to that registration
statement) shall not in and of itself result in any liability on the part of the
Company to such Shareholder.


                                       22



                                   ARTICLE VI

                                  MISCELLANEOUS

            Section 6.1  Headings. The headings in this Agreement are for
convenience of reference only and shall not control or effect the meaning or
construction of any provisions hereof.

            Section 6.2  Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein, and there are no restrictions, promises,
representations, warranties, covenants, conditions or undertakings with respect
to the subject matter hereof, other than those expressly set forth or referred
to herein. This Agreement supersedes all prior agreements and understandings
between the parties hereto with respect to the subject matter hereof.

            Section 6.3  Further Actions; Cooperation. Each of the Shareholders
agrees to use its reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to give effect to
the transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, each of the Shareholders (i) acknowledges that the
Shareholders will prepare and file with the Commission filings under the
Exchange Act, including under Section 13(d) of the Exchange Act, relating to
their beneficial ownership of the Common Shares and (ii) agrees to use its
reasonable efforts to assist and cooperate with the other parties in promptly
preparing, reviewing and executing any such filings under the Exchange Act,
including any amendments thereto.

            Section 6.4  Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated on
the signature pages of this Agreement or in writing by such party to the other
parties:

                  If to any of the Shareholders, to:

                         c/o Fortress Investment Group, LLC
                         1251 Avenue of the Americas, 16th Floor
                         New York, NY  10020
                         Fax:   (212) 798-6122
                         Attn:  Randal A. Nardone

                  with a copy (which shall not constitute notice) to:

                         Skadden, Arps, Slate, Meagher & Flom LLP
                         4 Times Square
                         New York, NY 10036-6522


                                       23



                         Fax:   (212) 735-2000
                         Attn:  Joseph A. Coco, Esq.

                  if to the Company, to:

                         Aircastle Limited
                         Clarendon House
                         2 Church Street
                         Hamilton HM 11
                         Bermuda
                         Fax:   (441) 292-4720
                         Attn:  Secretary

                  and

                         Aircastle Advisor LLC
                         300 First Stamford Place, 5th Floor
                         Stamford, CT  06902
                         Fax:   (917) 591-9106
                         Attn:  General Counsel

All such notices, requests, consents and other communications shall be deemed to
have been given or made if and when received (including by overnight courier) by
the parties at the above addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified above (or at such other
address or telecopy number for a party as shall be specified by like notice).
Any notice delivered by any party hereto to any other party hereto shall also be
delivered to each other party hereto simultaneously with delivery to the first
party receiving such notice.

            Section 6.5  Applicable Law. The laws of the State of Delaware shall
govern the interpretation, validity and performance of the terms of this
Agreement, without regard to conflicts of law doctrines.

            Section 6.6  Severability. The invalidity, illegality or
unenforceability of one or more of the provisions of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of the
remainder of this Agreement, including any such provisions, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.

            Section 6.7  Successors and Assigns. Except as otherwise provided
herein, all the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the respective
successors and permitted assigns of the parties hereto. No Shareholder may
assign any of its rights hereunder to any Person other than a Permitted
Transferee that has complied in all respects with the requirements of this
Agreement (including, without limitation, Section 2.1). Except as otherwise
provided in Section 2.1, each Permitted Transferee of any Shareholder, shall be
subject to all of the terms of this Agreement, and by taking and holding such
shares such


                                       24



Person shall be entitled to receive the benefits of and be conclusively deemed
to have agreed to be bound by and to comply with all of the terms and provisions
of this Agreement; provided, however, no transfer of rights permitted hereunder
shall be binding upon or obligate the Company unless and until (i) the Company
shall have received written notice of such transfer, (ii) such transferee can
establish beneficial ownership or ownership of record of Company Securities
(whether individually or together with its Affiliates that are Shareholders or
transferees of Shareholders and, if applicable, its other Permitted Transferees
that are Shareholders or transferees of Shareholders) and (iii) with respect to
the rights set forth in Article V hereof, such transferee can establish
beneficial ownership or ownership of record of a Registrable Amount (whether
individually or together with its Affiliates that are Shareholders or
transferees of Shareholders and, if applicable, its other Permitted Transferees
that are Shareholders or transferees of Shareholders). The Company may not
assign any of its rights or obligations hereunder without the prior written
consent of each of the Shareholders. Notwithstanding the foregoing, no successor
or assignee of the Company shall have any rights granted under this Agreement
until such Person shall acknowledge its rights and obligations hereunder by a
signed written statement of such Person's acceptance of such rights and
obligations.

            Section 6.8  Amendments. This Agreement may not be amended, modified
or supplemented unless such amendment, modification or supplement is in writing
and signed by each of the Shareholders and the Company.

            Section 6.9  Waiver. The failure of a party hereto at any time or
times to require performance of any provision hereof shall in no manner affect
its right at a later time to enforce the same. No waiver by a party of any
condition or of any breach of any term, covenant, representation or warranty
contained in this Agreement shall be effective unless in a writing signed by the
party against whom the waiver is to be effective, and no waiver in any one or
more instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.

            Section 6.10 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same Agreement.

            Section 6.11 Injunctive Relief. Each party hereto acknowledges and
agrees that a violation of any of the terms of this Agreement will cause the
other parties irreparable injury for which an adequate remedy at law is not
available. Therefore, each party shall be entitled to, an injunction,
restraining order, specific performance or other equitable relief from any court
of competent jurisdiction, restraining any party from committing any violations
of the provisions of this Agreement.

            Section 6.12 SUBMISSION TO JURISDICTION.

            ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND
ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT IN
THE COURTS OF


                                       25



THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
PARTY HERETO HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
THE APPELLATE COURTS THEREOF. EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO SUCH PARTY AT THE ADDRESS FOR NOTICES SET FORTH HEREIN. EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE
COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

            Section 6.13 Recapitalizations, Exchanges, Etc. Affecting the Common
Shares; New Issuances. The provisions of this Agreement shall apply, to the
full extent set forth herein with respect to Common Shares and to any and all
equity or debt securities of the entity issuing such Common Shares or any
successor or assign of such entity (whether by merger, amalgamation,
consolidation, sale of assets, or otherwise) which may be issued in respect of,
in exchange for, or in substitution of, such Common Shares and shall be
appropriately adjusted for any share dividends, bonus issues, subdivisions,
consolidations, combinations, reclassifications, recapitalizations,
reorganizations and the like occurring after the date hereof.

            Section 6.14 Termination. Upon the mutual consent of all of the
parties hereto or, with respect to each Shareholder, at such earlier time as
such Shareholder and its Affiliates and Permitted Transferees ceases to
beneficially own a Registrable Amount, the terms of this Agreement shall
terminate, and be of no further force and effect; provided, however, that the
following shall survive the termination of this Agreement: (i) the provisions of
Sections 5.2 (which shall terminate, and be of no further force and effect, with
respect to each Piggyback Shareholder, at such time as such Piggyback
Shareholder and its Affiliates and Permitted Transferees ceases to beneficially
own a Piggyback Registrable Amount), 5.7, 5.8, 6.5, 6.11, this Section 6.14 and
Section 6.15; (ii) the rights with respect to the breach of any provision hereof
by the Company and (iii) any registration rights vested or obligations accrued
as of the date of termination of this Agreement to the extent, in the case of
registration rights so vested, if such Shareholder ceases to meet the definition
of a Shareholder under this Agreement subsequent to the vesting of such
registration rights as a result of action taken by the Company. No termination
pursuant to this Section 6.14 shall release any Shareholder from its
indemnification and contribution rights and obligations, if any, pursuant to
Section 5.8 herein.


                                       26



            Section 6.15 Rule 144. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder (or, if it is
not required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales in compliance with Rule 144 under the Securities Act),
and it will take such further reasonable action, to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 under the Securities Act, as such Rule 144 may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission. Upon the reasonable request of any holder of Registrable Securities,
the Company will deliver to such holder a written statement as to whether it has
complied with such information and filing requirements.

            Section 6.16 Bye-Laws. In the case of any inconsistency between
this Agreement and the Bye-Laws of the Company, the Company and the Shareholders
shall, to the extent possible, cause the Bye-Laws to be amended to reflect the
terms of this Agreement.

                  [Remainder of page left blank intentionally]


                                       27



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

                                        AIRCASTLE LIMITED


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                        FORTRESS INVESTMENT FUND III LP
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                        FORTRESS INVESTMENT FUND III
                                        (FUND B) LP
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                        FORTRESS INVESTMENT FUND III
                                        (FUND C) LP
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer




                                        FORTRESS INVESTMENT FUND III
                                        (FUND D) L.P.
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                        FORTRESS INVESTMENT FUND III (FUND E) LP
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                        Name:
                                        Title:
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                        FORTRESS INVESTMENT FUND III
                                        (COINVESTMENT FUND A) LP
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                        FORTRESS INVESTMENT FUND III
                                        (COINVESTMENT FUND B) LP
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                       2



                                        FORTRESS INVESTMENT FUND III
                                        (COINVESTMENT FUND C) LP
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                        FORTRESS INVESTMENT FUND III
                                        (COINVESTMENT FUND D) L.P.
                                                By:  Fortress Fund III GP LLC,
                                                     its general partner


                                        By:__________________
                                                Name:  Randal A. Nardone
                                                Title: Chief Operating Officer


                                        DRAWBRIDGE SPECIAL
                                        OPPORTUNITIES FUND LP


                                        By:__________________
                                                Name:  Marc K. Furstein
                                                Title: Chief Operating Officer


                                        DRAWBRIDGE SPECIAL
                                        OPPORTUNITIES FUND LTD.


                                        By:__________________
                                                Name:
                                                Title:


                                        DRAWBRIDGE GLOBAL MACRO
                                        MASTER FUND LTD.


                                        By:__________________
                                                Name:  Kevin J. Treacy
                                                Title: Director


                                        3







Table of Contents

25 July 2006

Aircastle Limited
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda

Dear Sirs

Aircastle Limited (the ‘‘Company’’)

We have acted as special legal counsel in Bermuda to the Company in connection with a registration statement on form S-1, as amended, (Registration No.333-134669) initially filed with the U.S. Securities and Exchange Commission (the ‘‘Commission’’) on 2 June, 2006 (the ‘‘Registration Statement’’, which term does not include any other document or agreement whether or not specifically referred to therein or attached as an exhibit or schedule thereto) relating to the registration under the U.S. Securities Act of 1933, as amended, (the ‘‘Securities Act’’) of an aggregate of 9,090,900 common shares, par value US$0.01 each, of the Company, together with an additional 1,363,635 common shares, par value US$0.01 each, of the Company, subject to an over-allotment option granted to the underwriters by the Company (collectively, the ‘‘Common Shares’’).

For the purposes of giving this opinion, we have examined a copy of the Registration Statement. We have also reviewed the memorandum of association and the bye-laws of the Company, each certified by the Secretary of the Company on 25 July, 2006, a draft set of regulations to be adopted as the new bye-laws of the Company (the ‘‘Amended Bye-laws’’), a draft of unanimous written resolutions of the members of the Company approving, amongst other matters, the adoption of the Amended Bye-laws and an increase in the authorized capital of the Company (the ‘‘Draft Minutes’’), minutes of meetings of the board of directors of the Company held on May 23 2006 and July 20 2006 (the ‘‘Minutes’’) and such other documents and made such enquiries as to questions of law as we have deemed necessary in order to render the opinion set forth below.

We have assumed (a) the genuineness and authenticity of all signatures and the conformity to the originals of all copies (whether or not certified) examined by us and the authenticity and completeness of the originals from which such copies were taken, (b) that where a document has been examined by us in draft form, it will be or has been executed and/or filed in the form of that draft, and where a number of drafts of a document have been examined by us all changes thereto have been marked or otherwise drawn to our attention, (c) the accuracy and completeness of all factual representations made in the Registration Statement and other documents reviewed by us, (d) that the resolutions contained in the Minutes were passed, and those in the Draft Minutes will have been passed before the issue of any Common Shares, at one or more duly convened, constituted and quorate meetings, or by unanimous written resolutions and remain in full force and effect, and have not been and will not be rescinded or amended, (e) that there is no provision of the law of any jurisdiction, other than Bermuda, which would have any implication in relation to the opinions expressed herein, (f) that the pricing committee of the Company's board of directors will have approved the terms of the offering of the Common Shares pursuant to the Registration Statement as contemplated by the Minutes, (g) that upon issue of any Common Shares the Company will receive consideration for the full issue price thereof which shall be equal to at least the par value thereof.

We have made no investigation of and express no opinion in relation to the laws of any jurisdiction other than Bermuda. This opinion is to be governed by and construed in accordance with the laws of Bermuda and is limited to and is given on the basis of the current law and practice in Bermuda. This opinion is issued solely for the purposes of the filing of the Registration Statement and the offering of the Common Shares by the Company and is not to be relied upon in respect of any other matter.




Table of Contents

On the basis of and subject to the foregoing, we are of the opinion that:

1.  The Company is duly incorporated and existing under the laws of Bermuda in good standing (meaning solely that it has not failed to make any filing with any Bermuda government authority or to pay any Bermuda government fees or tax which would make it liable to be struck off the Register of Companies and thereby cease to exist under the laws of Bermuda).
2.  When issued and paid for as contemplated by the Registration Statement, the Common Shares will be validly issued, fully paid and non-assessable (which term means when used herein that no further sums are required to be paid by the holders thereof in connection with the issue of such shares).

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption ‘‘Legal Matters’’ in the prospectus forming a part of the Registration Statement. In giving this consent, we do not hereby admit that we are experts within the meaning of Section 11 of the Securities Act or that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the Rules and Regulations of the Commission promulgated thereunder.

Yours faithfully

/s/ CONYERS DILL & PEARMAN

2






                                                                   Exhibit 10.26

                                                               EXECUTION VERSION

                                 TRUST INDENTURE
                            dated as of June 15, 2006

                                      among

                      ACS AIRCRAFT FINANCE BERMUDA LIMITED,

                                  as the Issuer

                        ACS AIRCRAFT FINANCE IRELAND PLC,

                                as the Guarantor

                      DEUTSCHE BANK TRUST COMPANY AMERICAS,

                               as the Cash Manager

                      DEUTSCHE BANK TRUST COMPANY AMERICAS,

                      as the Trustee and the Drawing Agent

                                     CALYON,

                     as the Initial Credit Facility Provider

                                       and

                      FINANCIAL GUARANTY INSURANCE COMPANY,

                             as the Policy Provider



                                TABLE OF CONTENTS



                                                                                             Page
                                                                                             ----

ARTICLE I DEFINITIONS.....................................................................      1

   Section 1.01    Definitions............................................................      1
   Section 1.02    Rules of Construction..................................................     46
   Section 1.03    Compliance Certificates and Opinions...................................     48
   Section 1.04    Acts of Holders........................................................     48

ARTICLE II THE SECURITIES.................................................................     50

   Section 2.01    Authorized Amount; Terms; Form; Execution and Delivery.................     50
   Section 2.02    Restrictive Legends....................................................     52
   Section 2.03    Registrar and Paying Agent.............................................     53
   Section 2.04    Paying Agent to Hold Money in Trust....................................     54
   Section 2.05    Method of Payment......................................................     54
   Section 2.06    Minimum Denomination...................................................     55
   Section 2.07    Transfer and Exchange; Cancellation....................................     55
   Section 2.08    Mutilated, Destroyed, Lost or Stolen Securities........................     56
   Section 2.09    Payments of Transfer Taxes.............................................     56
   Section 2.10    Refinancing of Securities..............................................     56
   Section 2.11    Delivery of Remaining Aircraft.........................................     59
   Section 2.12    Additional Securities..................................................     60
   Section 2.13    Special Transfer Provisions............................................     62
   Section 2.14    Temporary Securities...................................................     62
   Section 2.15    Statements to Holders..................................................     63
   Section 2.16    CUSIP, CINS and ISIN Numbers...........................................     64
   Section 2.17    Holder Representations and Covenants...................................     64

ARTICLE III ACCOUNTS; PRIORITY OF PAYMENTS................................................     65

   Section 3.01    Accounts...............................................................     65
   Section 3.02    Investments of Cash....................................................     71
   Section 3.03    Closing Date Deposits, Withdrawals and Transfers.......................     73
   Section 3.04    Interim Deposits, Transfers and Withdrawals............................     74
   Section 3.05    Withdrawals and Transfers Relating to the Acquisition of Aircraft
                   and Interim Deposits and Withdrawals for Aircraft Sales................     75
   Section 3.06    Calculation Date Calculations..........................................     76
   Section 3.07    Payment Date First Step Withdrawals and Transfers......................     82
   Section 3.08    Payment Date Second Step Withdrawals...................................     83
   Section 3.09    Allocations of Principal Payments Among Subclasses of the Securities...     90
   Section 3.10    Certain Redemptions; Certain Premiums..................................     91
   Section 3.11    Adjustment of Certain Percentages, Factors and Balances................     93
   Section 3.12    Initial Credit Facility................................................     94



                                      -i-





                                                                                             Page
                                                                                             ----

   Section 3.13    Eligible Credit Facilities.............................................     98
   Section 3.14    The Policy.............................................................     98
   Section 3.15    Contributions..........................................................    102
   Section 3.16    DSCR Failure...........................................................    103

ARTICLE IV DEFAULT AND REMEDIES...........................................................    103

   Section 4.01    Events of Default......................................................    103
   Section 4.02    Acceleration, Rescission and Annulment.................................    104
   Section 4.03    Other Remedies.........................................................    105
   Section 4.04    Limitation on Suits....................................................    106
   Section 4.05    Waiver of Existing Defaults............................................    106
   Section 4.06    Restoration of Rights and Remedies.....................................    107
   Section 4.07    Remedies Cumulative....................................................    107
   Section 4.08    Authority of Courts Not Required.......................................    107
   Section 4.09    Rights of Holders to Receive Payment...................................    107
   Section 4.10    Trustee May File Proofs of Claim.......................................    107
   Section 4.11    Undertaking for Costs..................................................    107
   Section 4.12    Control by Holders.....................................................    108

ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS.......................................    108

   Section 5.01    Representations and Warranties.........................................    108
   Section 5.02    General Covenants......................................................    111
   Section 5.03    Operating Covenants....................................................    125
   Section 5.04    Compliance Through Agents..............................................    130

ARTICLE VI THE TRUSTEE....................................................................    130

   Section 6.01    Acceptance of Trusts and Duties........................................    130
   Section 6.02    Absence of Duties......................................................    130
   Section 6.03    Representations or Warranties..........................................    130
   Section 6.04    Reliance; Agents; Advice of Counsel....................................    130
   Section 6.05    Not Responsible in Individual Capacity.................................    132
   Section 6.06    No Compensation from Holders...........................................    132
   Section 6.07    Notice of Defaults.....................................................    133
   Section 6.08    May Hold Securities....................................................    133
   Section 6.09    Corporate Trustee Required; Eligibility................................    133
   Section 6.10    Disqualification of Trustee............................................    133
   Section 6.11    Preferential Collection of Claims Against Issuer.......................    133
   Section 6.12    Reports by the Issuer..................................................    133
   Section 6.13    Holder Lists...........................................................    134
   Section 6.14    Preservation of Information; Communications to Holders.................    134

ARTICLE VII SUCCESSOR TRUSTEES............................................................    135

   Section 7.01    Resignation and Removal of Trustee.....................................    135
   Section 7.02    Appointment of Successor...............................................    135



                                      -ii-





                                                                                             Page
                                                                                             ----

ARTICLE VIII INDEMNITY....................................................................    137

   Section 8.01    Indemnity..............................................................    137
   Section 8.02    Holders' Indemnity.....................................................    137

ARTICLE IX MODIFICATION...................................................................    137

   Section 9.01    Modification with Consent of Holders and the Policy Provider...........    137
   Section 9.02    Modification Without Consent of Holders or the Providers of
                   Eligible Credit Facilities or the Policy Provider......................    138
   Section 9.03    Subordination and Priority of Payments.................................    139
   Section 9.04    Execution of Amendments by Trustee.....................................    139
   Section 9.05    Conformity with Trust Indenture Act....................................    139

ARTICLE X SUBORDINATION...................................................................    139

   Section 10.01   Subordination of the Securities and Other Subordinated Obligations.....    139
   Section 10.02   Rights of Subrogation..................................................    140
   Section 10.03   Further Assurances of Subordinated Representatives.....................    140
   Section 10.04   Enforcement............................................................    141
   Section 10.05   Continued Effectiveness................................................    141
   Section 10.06   Senior Claims and Subordinated Claims Unimpaired.......................    141
   Section 10.07   Ranking of the Guarantee...............................................    141

ARTICLE XI GUARANTEE......................................................................    141

   Section 11.01   Guarantee..............................................................    141
   Section 11.02   Reinstatement..........................................................    143
   Section 11.03   Unconditional Nature of Guarantee......................................    143

ARTICLE XII DISCHARGE OF INDENTURE; DEFEASANCE............................................    144

   Section 12.01   Discharge of Liability on the Securities; Defeasance...................    144
   Section 12.02   Conditions to Defeasance...............................................    145
   Section 12.03   Application of Trust Money.............................................    146
   Section 12.04   Repayment to Issuer....................................................    146
   Section 12.05   Indemnity for Government Obligations and Corporate Obligations.........    146
   Section 12.06   Reinstatement..........................................................    146

ARTICLE XIII MISCELLANEOUS................................................................    147

   Section 13.01   Right of Trustee to Perform............................................    147
   Section 13.02   Waiver.................................................................    147
   Section 13.03   Severability...........................................................    147
   Section 13.04   Restrictions on Exercise of Certain Rights.............................    147
   Section 13.05   Notices................................................................    148
   Section 13.06   Assignments; Third Party Beneficiary...................................    151
   Section 13.07   Currency Conversion....................................................    151
   Section 13.08   Application to Court...................................................    152



                                      -iii-





                                                                                             Page
                                                                                             ----

   Section 13.09   Governing Law..........................................................    152
   Section 13.10   Jurisdiction...........................................................    152
   Section 13.11   Counterparts...........................................................    153
   Section 13.12   Table of Contents, Headings, Etc.......................................    153
   Section 13.13   Compliance with Applicable Anti-Terrorism and Anti-Money
                   Laundering Regulations.................................................    153



                                      -iv-



                                    Schedules
                                    ---------

Schedule 1  -   Initial Aircraft
Schedule 2  -   ACS Bermuda Subsidiaries
Schedule 3  -   Minimum Target Principal Balance
Schedule 4  -   Note Pool Factors
Schedule 5  -   Extended Note Pool Factors
Schedule 6  -   Initial Leases - Current War Risk Coverage Amounts

                                    Exhibits
                                    --------

Exhibit A-1 -   Form of Class A Floating Rate Note
Exhibit A-2 -   Form of Class A Fixed Rate Note
Exhibit B   -   Intentionally Omitted
Exhibit C   -   Concentration Limits
Exhibit D   -   Insurance Provisions
Exhibit E   -   Form of Monthly Report to Each Holder
Exhibit F   -   Core Lease Provisions
Exhibit G   -   Compliance Certificate


                                      -v-



          This TRUST INDENTURE, dated as of June 15, 2006 (this "Indenture"), is
made among ACS AIRCRAFT FINANCE BERMUDA LIMITED, a Bermuda exempted company (the
"Issuer"), ACS AIRCRAFT FINANCE IRELAND PLC, an Irish public limited liability
company (the "Guarantor"), DEUTSCHE BANK TRUST COMPANY AMERICAS, in its capacity
as the Cash Manager, DEUTSCHE BANK TRUST COMPANY AMERICAS, in its capacity as
the person accepting appointment as the Trustee under this Indenture, CALYON, a
societe anonyme organized under the laws of France (the "Initial Credit Facility
Provider") and FINANCIAL GUARANTY INSURANCE COMPANY, a New York stock insurance
company (the "Policy Provider") and DEUTSCHE BANK TRUST COMPANY AMERICAS, in its
capacity as the Drawing Agent (the "Drawing Agent").

          The parties to this Indenture hereby agree as follows.

                                    ARTICLE I
                                   DEFINITIONS

     Section 1.01 Definitions. For purposes of this Indenture, the following
terms shall have the meanings indicated below:

          "Acceleration" means, with respect to the principal, interest and
other amounts payable in respect of the Securities, such amounts becoming
immediately due and payable by declaration or otherwise. "Accelerate,"
"Accelerated" and "Accelerating" have meanings correlative to the foregoing.

          "Acceleration Default" means any Event of Default of the type
described in Section 4.01(e) or 4.01(f) hereof.

          "Account" means any or, in its plural form, all of the accounts
established pursuant to Section 3.01(a) hereof and any ledger accounts and
ledger subaccounts maintained therein in accordance with this Indenture.

          "Accrual Period" means, as to each subclass of ACS Group Securities,
each of the following periods: the period commencing on (and including) the
relevant Closing Date and ending on (but excluding) the first Payment Date
thereafter and each successive period beginning on (and including) a Payment
Date and ending on (but excluding) the next succeeding Payment Date; provided
that the final Accrual Period with respect to any subclass of ACS Group
Securities shall end on but exclude the date such subclass of ACS Group
Securities is repaid in full. Account balances with respect to each Accrual
Period ending on a Payment Date shall be determined by reference to the balances
of funds on deposit in the Accounts as of the close of business on the
Calculation Date immediately preceding such Payment Date.

          "Accrued Senior Interest" means, with respect to the Certificates, as
of any date of determination, all amounts of accrued and unpaid interest on the
Certificates at the Stated Rate of Interest for the Certificates.



                                                                               2


          "Acquisition Agreements" means the Purchase Agreement and any
agreements pursuant to which Additional Aircraft (or related Aircraft Interest)
are acquired.

          "Acquisition Date" means, with respect to any Aircraft Interest (and
the ACS Group Aircraft subject to that Aircraft Interest), the Delivery Date
with respect to such ACS Group Aircraft.

          "ACS Bermuda Group" means, collectively, the Issuer and each ACS
Bermuda Subsidiary.

          "ACS Bermuda Group Member" means the Issuer or an ACS Bermuda
Subsidiary, as applicable.

          "ACS Bermuda Subsidiary" means each subsidiary of the Issuer
(including each trust of which the Issuer or another ACS Bermuda Subsidiary is
the holder of the beneficial interest) listed on Schedule 2 hereto and any other
subsidiary (including any such trust) of the Issuer.

          "ACS Group" means, collectively, the ACS Ireland Group and the ACS
Bermuda Group.

          "ACS Group Acquisition Agreements" means, collectively, the
Acquisition Agreements and the Guarantor Acquisition Agreements.

          "ACS Group Additional Aircraft" means, collectively, the Additional
Aircraft and the Guarantor Additional Aircraft.

          "ACS Group Additional Securities" means, collectively, the Additional
Securities and the Guarantor Additional Securities.

          "ACS Group Aircraft" means, collectively, the Aircraft and the
Guarantor Aircraft.

          "ACS Group Aircraft Agreement" means an Aircraft Agreement or a
Guarantor Aircraft Agreement, as applicable.

          "ACS Group Aircraft Conversion" means an Aircraft Conversion or a
Guarantor Aircraft Conversion, as applicable.

          "ACS Group Class A Securities" means, collectively, the Class A
Securities and the Guarantor Class A Securities.

          "ACS Group Class A Security Portion" means, as of any date of
determination, a fraction the numerator of which is the Initial Outstanding
Balance of the ACS Group Initial Class A Securities and the denominator of which
is the aggregate Initial Appraised Values of all of the ACS Group Initial
Aircraft.



                                                                               3


          "ACS Group Conversion Payments" means, collectively, Conversion
Payments and Guarantor Conversion Payments.

          "ACS Group Fixed Rate Securities" means, collectively, the Fixed Rate
Securities and the Guarantor Fixed Rate Securities.

          "ACS Group Floating Rate Securities" means, collectively, the Floating
Rate Securities and the Guarantor Floating Rate Securities.

          "ACS Group Initial Aircraft" means, collectively, the Initial Aircraft
and the Guarantor Initial Aircraft.

          "ACS Group Initial Class A Securities" means, collectively, the
Initial Class A Securities and the Guarantor Class A Securities.

          "ACS Group Initial Leases" means, collectively, the Initial Leases and
the Guarantor Initial Leases

          "ACS Group Initial Securities" means, collectively, the Initial
Securities and the Guarantor Initial Securities.

          "ACS Group Leases" means, collectively, the Leases and the Guarantor
Leases.

          "ACS Group Members" means, collectively, the ACS Bermuda Group Members
and the ACS Ireland Group Members.

          "ACS Group Modification Payments" means, collectively, Modification
Payments and Guarantor Modification Payments.

          "ACS Group Portfolio" means, as of any date of determination, all ACS
Group Aircraft owned by the ACS Group as of such date.

          "ACS Group Purchase Agreements" means, collectively, the Purchase
Agreement and the Guarantor Purchase Agreement.

          "ACS Group Redemption Date" means a Redemption Date or a Guarantor
Redemption Date, as applicable.

          "ACS Group Refinancing" means a Refinancing or a Guarantor
Refinancing, as applicable.

          "ACS Group Refinancing Expenses" means, collectively, Refinancing
Expenses and Guarantor Refinancing Expenses.

          "ACS Group Refinancing Securities" means, collectively, the
Refinancing Securities and the Guarantor Refinancing Securities.

          "ACS Group Securities" means, collectively, the Securities and the
Guarantor Securities.



                                                                               4


          "ACS Group Subclass A-1 Securities" means, collectively, the Subclass
A-1 Securities and the Guarantor Subclass A-1 Securities.

          "ACS Group Subsidiaries" means, collectively, the ACS Bermuda
Subsidiaries and the ACS Ireland Subsidiaries.

          "ACS Ireland Group" means, collectively, the Guarantor and each ACS
Ireland Subsidiary.

          "ACS Ireland Group Member" means the Guarantor or an ACS Ireland
Subsidiary, as applicable.

          "ACS Ireland Subsidiary" means each subsidiary of the Guarantor
(including each trust of which the Guarantor or another ACS Ireland Subsidiary
is the holder of the beneficial interest) listed on Schedule 2 to the Guarantor
Indenture and any other subsidiary (including any such trust) of the Guarantor.

          "ACS Pass Through Trust" means the ACS 2006-1 Pass Through Trust
formed pursuant to the Pass Through Trust Agreement.

          "Act" has, with respect to any Holder, the meaning given to such term
in Section 1.04(a) hereof.

          "Additional Aircraft" means any aircraft and any related Engine
acquired by any ACS Bermuda Group Member from a Seller or an Affiliate of a
Seller, from another ACS Group Member or (upon receipt of a Rating Agency
Confirmation with respect thereto) or from any other Person after the Initial
Closing Date (other than any Initial Aircraft, Remaining Aircraft or Substitute
Aircraft) (in any such case in accordance with the provisions hereof including
obtaining the prior written consent of the Policy Provider and the Initial
Credit Facility Provider) including any Aircraft acquired by way of a
contribution but excluding any such Aircraft after it has been sold or disposed
of by way of a completed Aircraft Sale.

          "Additional Issuance" has the meaning given to such term in Section
2.12 hereof.

          "Additional Lease" means, with respect to each Additional Aircraft,
each aircraft lease agreement, conditional sale agreement, hire purchase
agreement or other similar arrangement with respect to such Additional Aircraft
on the relevant Closing Date.

          "Additional Premium" has the meaning given to such term in the Policy
Fee Letter.

          "Additional Securities" means any Securities of any subclass of the
Class A Securities (other than the Initial Class A Securities) issued pursuant
to this Indenture.

          "Administrative Agency Agreement" means the Administrative Agency
Agreement dated as of the Initial Closing Date among the Administrative Agent,
the Trustees, the Security Trustee, the Issuers and the Policy Provider.



                                                                               5


          "Administrative Agent" means the Person acting, at the time of
determination, in the capacity of the administrative agent of the Issuers and
the ACS Group Subsidiaries under the Administrative Agency Agreement or any
replacement agreement therefor. The initial Administrative Agent is Aircastle
Advisor LLC.

          "Affiliate" has the meaning given to such term in Section 5.02(b)
hereof.

          "Aggregate Minimum Principal Payment Amount" means, for any Payment
Date, the sum of (x) the aggregate unpaid Minimum Principal Payment Amount, if
any, with respect to the previous Payment Dates (less any Allocable Principal
Conversion Amounts transferred to the Aircraft Conversion Account in connection
with one or more Conversion Elections) plus (y) the Minimum Principal Payment
Amount for such Payment Date.

          "Agreed Currency" has the meaning given to such term in Section
13.07(a) hereof.

          "Agreed Value Payment" means a payment to be made by or on behalf of a
Lessee under an ACS Group Lease upon or following a Total Loss of an ACS Group
Aircraft with respect to such Total Loss.

          "Aircastle Entity" means, collectively, the Remarketing Servicers, the
Administrative Agent, the Bermudian Sellers and any other Aircastle Related
Entity (other than any ACS Group Member).

          "Aircastle Related Entity" means Aircastle Limited, any Shareholder or
any Affiliate of any such Person.

          "Aircraft" means, collectively, the Initial Aircraft (or related
Aircraft Interest) and the Additional Aircraft (or related Aircraft Interest).

          "Aircraft Agreement" means any lease, sublease, conditional sale
agreement, finance leases, hire purchase agreement or other agreement (other
than an agreement relating to maintenance, modification or repairs) or any
purchase option granted to a Person (other than a Purchase Option granted to an
ACS Bermuda Group Member) to purchase an Aircraft, in each case pursuant to
which any Person acquires or is entitled to acquire legal title, or the economic
benefits of ownership of, such Aircraft.

          "Aircraft Allocation Amount", with respect to each ACS Group Aircraft,
has the meaning given to such term in the applicable ACS Group Purchase
Agreement for such ACS Group Aircraft or, with respect to any ACS Group
Additional Aircraft, the meaning given to that or any comparable term in the
relevant ACS Group Acquisition Agreement for such ACS Group Additional Aircraft.

          "Aircraft Assets Related Documents" means all ACS Group Leases and
related documents and other contracts and agreements including any side letters,
assignments of warranties or option agreements of ACS Group Members the terms of
which relate to or affect any of the ACS Group Aircraft.



                                                                               6


          "Aircraft Conversion" has the meaning given to such term in Section
5.02(i) hereof.

          "Aircraft Conversion Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Aircraft Interest" means (a) the Ownership Interest or Guarantor
Ownership Interest in any Person, including without limitation a trust, that
owns an ACS Group Aircraft or (b) the Ownership Interest or Guarantor Ownership
Interest in any Person that holds, directly or indirectly, the interest referred
to in clause (a) above. The acquisition or disposition of all of the Aircraft
Interest with respect to an ACS Group Aircraft constitutes, respectively, the
acquisition or disposition of that ACS Group Aircraft.

          "Aircraft Purchase Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Aircraft Purchase Price", with respect to any ACS Group Initial
Aircraft, means the "Purchase Price" (as defined in the applicable Purchase
Agreement or the Guarantor Purchase Agreement, as applicable) for the entity
owning such ACS Group Initial Aircraft or, with respect to any ACS Group
Additional Aircraft, the meaning given to that or any comparable term in the ACS
Group Acquisition Agreement pursuant to which such ACS Group Aircraft is
acquired by an ACS Group Member.

          "Aircraft Sale" means any sale or other disposition of any ACS Group
Aircraft, including by reason of such ACS Group Aircraft suffering a Total Loss.

          "Allocable Equity Conversion Amount" means, for any Payment Date, with
respect to any ACS Group Aircraft Conversion, the difference, if positive,
between (A) the applicable ACS Group Conversion Payment and (B) the Allocable
Principal Conversion Amount for such ACS Group Conversion Payment.

          "Allocable Principal Conversion Amount" means, for any Payment Date,
with respect to any ACS Group Aircraft Conversion, the product of the ACS Group
Class A Security Portion and the applicable ACS Group Conversion Payment.

          "Allowed Restructuring" has the meaning given to such term in Section
5.02(e) hereof.

          "Annual Report" has the meaning given to such term in Section 2.15(a)
hereof.

          "Applicable Allocation Percentage" means, in the case of (i) the
Holders of the Class E Securities, a fraction, the numerator of which is the
aggregate Assumed Base Values of the ACS Group Aircraft owned by the ACS Ireland
Group and the denominator of which is the aggregate Assumed Base Values of the
ACS Group Aircraft in the ACS Group Portfolio and (ii) the Shareholders, a
fraction, the numerator of which is the aggregate Assumed Base Values of the ACS
Group Aircraft owned by the ACS Bermuda Group and the denominator of which is
the aggregate Assumed Base Values of the ACS Group Aircraft in the ACS Group
Portfolio.



                                                                               7


          "Applicable Aviation Authority" means, in relation to any Aircraft,
each governmental or regulatory authority that has responsibility for the
supervision of civil aviation and/or the registration and operations of civil
aircraft in the State of Registration of such Aircraft.

          "Applicable Governmental Program" has the meaning given to such term
in Exhibit D hereto.

          "Applicable Law" means, with respect to any Person, all laws, rules,
regulations and orders of governmental regulatory authorities applicable to such
Person, including, without limitation, the regulations of each Applicable
Aviation Authority applicable to such Person or the Aircraft owned or operated
by it or as to which it has a contractual responsibility.

          "Applicable Regulations" has the meaning given to such term in Section
13.13 hereof.

          "applicants" has the meaning given to such term in Section 6.14(b)
hereof.

          "Appraiser" means any independent appraiser that is a member of the
International Society of Transport Aircraft Trading or any similar organization.

          "Assumed Base Value" means, with respect to any Payment Date, for any
ACS Group Aircraft, the product of (a) the Initial Appraised Value of such ACS
Group Aircraft (or, in the case of any ACS Group Aircraft with respect to which
an ACS Group Aircraft Conversion has been completed, the sum of the Assumed Base
Value for such ACS Group Aircraft as of the Payment Date immediately succeeding
the completion of such ACS Group Aircraft Conversion (assuming such ACS Group
Aircraft Conversion shall not have occurred) plus the aggregate amount of the
Conversion Payments made in respect of such ACS Group Aircraft) and (b) the
quotient obtained by dividing the Depreciation Factor applicable to such ACS
Group Aircraft on the Calculation Date related to such Payment Date by the
Depreciation Factor applicable to such ACS Group Aircraft on the relevant
Closing Date (or, in the case of any ACS Group Aircraft with respect to which an
ACS Group Aircraft Conversion has been completed, on the Payment Date
immediately succeeding the completion of such ACS Group Aircraft Conversion).

          "Assumed Monthly Depreciation" means, with respect to any Payment Date
(a "Current Payment Date"), the sum of the amount, with respect to each ACS
Group Aircraft in the ACS Group Portfolio as of the Calculation Date preceding
the preceding Payment Date (a "Preceding Payment Date") (not including any ACS
Group Aircraft acquired by way of a contribution), obtained by subtracting (x)
the Assumed Base Value of such ACS Group Aircraft with respect to such Current
Payment Date from (y) the Assumed Base Value of such ACS Group Aircraft with
respect to such Preceding Payment Date (or if such Current Payment Date is the
initial Payment Date, the Initial Closing Date), provided that if an Aircraft
Sale or a Non-Delivery Event has occurred with respect to any such ACS Group
Aircraft after the Calculation Date preceding such Preceding Payment Date (or
the Initial Closing Date, as applicable), the Assumed Base Value for the purpose
of such calculation of such ACS Group Aircraft with respect to such Current
Payment Date shall be deemed to be zero.



                                                                               8


          "Assumed Portfolio Value" means, with respect to any Payment Date and
for all ACS Group Aircraft in the ACS Group Portfolio (not including any ACS
Group Aircraft acquired by way of a contribution), the sum of the product of,
with respect to each ACS Group Aircraft in the ACS Group Portfolio on the
Calculation Date preceding such Payment Date, (a) the Initial Appraised Value of
such ACS Group Aircraft and (b) the quotient obtained by dividing the
Depreciation Factor applicable to such ACS Group Aircraft on such Calculation
Date by the Depreciation Factor applicable to such ACS Group Aircraft on the
relevant Closing Date.

          "Authorized Agent" means, with respect to the Securities of any
subclass, any authorized Paying Agent or Registrar for the Securities of such
subclass.

          "Available Amount" means, as of any date of determination, an amount
equal to the Initial Credit Facility Amount less the aggregate amount of the
Credit Facility Drawings theretofore made by the Initial Credit Facility
Provider under the Initial Credit Facility, prior to such date, which has not
been reimbursed as of such date; provided that, following a Downgrade Drawing, a
Non-Extension Drawing or a Final Drawing, the Available Amount shall be zero.

          "Available Collections" means, as of any Calculation Date, amounts on
deposit in the Collections Account. The Available Collections with respect to
any payment to be made therefrom shall be determined after giving effect to all
payments, if any, having priority to such payment under Section 3.08 hereof.

          "Available Holder Amount" has the meaning given to such term in
Section 3.06(h) hereof.

          "Available Minimum Principal Amount" has the meaning given to such
term in Section 3.06(g) hereof.

          "Avoidance Drawing" has the meaning given to such term in Section
3.14(e) hereof.

          "Avoided Payment" means any amount paid or required to be paid in
respect of any Certificates to a holder of such Certificates which is avoided
under any applicable bankruptcy, insolvency, receivership or similar law in an
insolvency proceeding by or against the Issuer, the Guarantor, any ACS Group
Subsidiary, the Initial Credit Facility Provider or any other provider of an
Eligible Credit Facility and, as a result of such an avoidance event, the
Drawing Agent, the Pass Through Trustee or any holder of such Certificates is
required to return all or any portion of such avoided payment made or to be made
in respect of such Certificates (including any disgorgement from the holders of
the Certificates resulting from any insolvency proceeding, whether such
disgorgement is determined on a theory of preferential conveyance or otherwise).

          "Back-Up Remarketing Servicer" means the Person acting, at the time of
determination, in the capacity of the back-up remarketing servicer of the ACS
Group under the Back-Up Remarketing Services Agreement or any replacement
agreement therefor. The initial Back-Up Remarketing Servicer is International
Lease Finance Corporation.



                                                                               9


          "Back-Up Remarketing Services Agreement" means the Back-Up Remarketing
Services Agreement dated as of the Initial Closing Date among the Issuers, the
Back-Up Remarketing Servicer, the Administrative Agent and the Policy Provider.

          "Base Value" means the value of an ACS Group Aircraft in an open,
unrestricted, stable market environment with a reasonable balance of supply and
demand, and with full consideration of the ACS Group Aircraft's "highest and
best use", presuming an arm's-length, cash transaction between willing, able and
knowledgeable parties, acting prudently, with an absence of duress and with a
reasonable period of time available for marketing, adjusted to account for the
maintenance status of such ACS Group Aircraft (with such assumptions as to use
since the last reported status as may be reasonably stated in the appraisal
setting forth such Base Value).

          "Basic Terms Modification" has the meaning given to such term in
Section 9.01 hereof.

          "Bermudian Remarketing Servicer" means the Person acting, at the time
of determination, in the capacity of the remarketing servicer under the
Bermudian Remarketing Services Agreement. When the Bermudian Remarketing
Services Agreement or the Back-Up Remarketing Services Agreement provides that
the Back-Up Remarking Agent is to perform all or any part of the services called
for by the Bermudian Remarketing Services Agreement in place of the Bermudian
Remarketing Servicer, the terms "Bermudian Remarketing Servicer" and "Bermudian
Remarketing Services Agreement" mean, as to such services, the Back-Up
Remarketing Servicer and the Back-Up Remarketing Services Agreement. The initial
Bermudian Remarketing Servicer is Aircastle Advisor LLC.

          "Bermudian Remarketing Servicer's Pro Forma Lease" has the meaning
given to such term in Section 5.03(e) hereof.

          "Bermudian Remarketing Services Agreement" means the Remarketing
Services Agreement dated as of the Initial Closing Date among the Bermudian
Remarketing Servicer, the Issuer, the Guarantor, the Policy Provider and the
Administrative Agent.

          "Bermudian Secretarial Services Provider" means the Person acting, at
the time of determination, in the capacity of the local administrator of the
Issuer under the local administration agreement with the Issuer dated as of May
18, 2006 (or any successor agreement). The initial Bermudian Secretarial
Services Provider is Codan Services Limited.

          "Bermudian Sellers" means, collectively, Aircastle Investment Holdings
Limited, Aircastle Investment Holdings 2 Limited, Aircastle Bermuda Holding II
Limited, Aircastle Bermuda Holding III Limited, Aircastle Bermuda Holding IV
Limited, Aircastle Bermuda Holding V Limited, Aircastle Bermuda Holding VI
Limited, Aircastle Bermuda Holding IX Limited, ABH 10 Limited and ABH 11 Limited
and "Bermudian Seller" means any one of the foregoing.

          "Board" means the board of directors of the Issuer.



                                                                              10


          "Board Resolution" means a copy of a resolution certified as having
been duly adopted by the Board and being in full force and effect on the date of
such certification.

          "Business Day" means (i) a day on which commercial banks and foreign
exchange markets are open in New York, New York, and, with respect to the
determination or payment of interest on any Floating Rate Security, a day on
which U.S. dollar deposits may be dealt in on the London inter-bank market and,
with respect to payments to or withdrawals from the Non-Trustee Accounts, a day
on which the financial institution at which such account is located is open for
business or (ii) solely with respect to drawings under the Policy, any date
other than a Saturday, a Sunday or a day on which (a) the fiscal agent under
such Policy, at its office specified in the Policy, (b) the Policy Provider, at
its office specified in such Policy, (c) commercial banking institutions in the
cities in which the corporate trust office of the Trustee or (d) insurance
companies in New York, New York are, in any such case, required or authorized by
law or executive order to close.

          "Calculation Date" means the sixth Business Day immediately preceding
a Payment Date.

          "Cash Collateral Account" means the Senior Cash Collateral Account and
each other Eligible Credit Facility account established as an Account pursuant
to Section 3.01(a) hereof. Neither the Issuer nor the Guarantor shall be deemed
a provider of an Eligible Credit Facility with respect to any Cash Collateral
Account.

          "Cash Management Agreement" means the Cash Management Agreement dated
as of the Initial Closing Date among the Cash Manager, the Trustees, the
Security Trustee and the Issuers.

          "Cash Management Services" means the services described in Section
2.01(a) of the Cash Management Agreement.

          "Cash Manager" means the Person acting, at the time of determination,
in the capacity of the cash manager under the Cash Management Agreement. The
initial Cash Manager is Deutsche Bank Trust Company Americas.

          "Certificate Account" means the account in the name of the Pass
Through Trustee at the Operating Bank with respect to the Certificates.

          "Certificates Purchase Agreement" means the Certificates Purchase
Agreement dated as of June 1, 2006 among the Issuers, Aircastle Limited and
Citigroup Global Markets Inc., on behalf of the Initial Purchasers.

          "Certificates" means the Class G-1 Floating Rate Asset Backed
Certificates Series 2006-1 issued by the ACS Pass Through Trust in the aggregate
initial face amount of $560,000,000, including any certificates issued in
replacement or substitution therefor and any refinancing certificate issued to
refinance any such Certificate, in each case pari passu in order of payment
priority with the Certificates.



                                                                              11


          "Charitable Trust" means the charitable trust established under the
laws of Ireland which owns 100% of the issued shares of the Irish Parent.

          "Charitable Trust Dividend" means, if the Administrative Agent has
notified the Cash Manager that an annual dividend has been declared by the
Guarantor Board, $1,500 per annum.

          "Charitable Trustee" means the trustee of the Charitable Trust.

          "Class A Note Target Price" means, as of any date of determination
thereof and with respect to any Aircraft (not including any Aircraft acquired by
way of a contribution), an amount equal to the product of the Designated
Percentage with respect to such Aircraft and the then (determined after the
intended application of Available Collections (but without taking into account
any Net Sale Proceeds from the Aircaft Sale of such Aircraft) as of the next
succeeding Payment Date) Pool Balance of the Certificates.

          "Class A Securities" means, collectively, all Securities designated as
a subclass of Class A, including the Initial Securities so designated
(consisting of the Subclass A-1 Securities issued as of the Initial Closing
Date), all Additional Securities, if any, so designated and all Refinancing
Securities, if any, so designated, in each case, pursuant to this Indenture.

          "Class E Securities" means, collectively, all Guarantor Securities
designated as a subclass of Class E, including the Guarantor Initial Securities
so designated (consisting of the Subclass E-1 Securities issued as of the
Initial Closing Date), all Guarantor Additional Securities, if any, so
designated and all Guarantor Refinancing Securities, if any, so designated.

          "Clearstream" means Clearstream Banking, societe anonyme, Luxembourg.

          "Closing Date" means in the case of (a) the ACS Group Initial
Securities and the ACS Group Initial Aircraft, the Initial Closing Date or, in
the case of Class E Securities issued in connection with a delivery of the
Remaining Aircraft and the Remaining Aircraft, the applicable Acquisition Date,
(b) any ACS Group Refinancing Securities or ACS Group Additional Securities, the
relevant date of issuance of such ACS Group Securities and (c) any ACS Group
Additional Aircraft, the date of issuance of the ACS Group Additional Securities
issued to finance the acquisition of such ACS Group Additional Aircraft.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Collateral" has the meaning given to such term in the Security Trust
Agreement.

          "Collections" means without duplication (a) Rental Payments and all
other amounts received by any ACS Group Member pursuant to any ACS Group Lease
or Related Collateral Document, (b) amounts transferred from any Cash Collateral
Account to the Collections Account pursuant to Section 3.01(p) hereof, (c)
amounts received in respect of claims for damages or claims in respect of any
breach of contract, (d) amounts received by an ACS Group Member in connection
with any Aircraft Sale or otherwise received under any ACS Group Aircraft
Agreement, including sale proceeds, Total Loss Proceeds, Agreed Value Payments,
proceeds of Repossession Insurance, Requisition Compensation and all Partial
Loss



                                                                              12


Proceeds, less, in each case, any expenses payable by such ACS Group Member to
any Person that is not an ACS Group Member in connection therewith, (e) amounts
received by any ACS Group Member from insurance with respect to any ACS Group
Aircraft, (f) any amounts transferred from a Lessee Funded Account or from the
Security Deposit Account into the Collections Account in accordance with Section
3.07 hereof, (g) any Hedge Payments, (h) the proceeds of any Investments of the
funds in the Accounts (except (i) to the extent that any such proceeds are
required to be paid over to any Lessee under an ACS Group Lease or (ii) the
proceeds of any Investments of the funds in the Aircraft Purchase Accounts, the
Initial Liquidity Payment Account, or the Credit Facility Reserve Account), (i)
any amounts transferred from the Aircraft Purchase Account into the Collections
Account in accordance with Section 3.04(g) hereof, (j) any amounts received by
an ACS Group Member under an ACS Group Acquisition Agreement, including any loss
proceeds and other amounts under the ACS Group Purchase Agreements, and (k) any
other amounts received by any ACS Group Member (including any amounts received
from any other ACS Group Member, whether by way of distribution, dividend,
repayment of a loan or otherwise, and any proceeds received in connection with
any Allowed Restructuring under this Indenture and the Guarantor Indenture (as
defined herein and therein)); provided that Collections shall not include (i)
payments under the Policy, (ii) Segregated Funds transferred to a Lessee Funded
Account, (iii) security deposits under any ACS Group Lease that are not
Segregated Funds transferred to the Security Deposit Account, (iv) amounts
deposited in the Defeasance/Redemption Account or the Refinancing Account in
connection with a Redemption hereunder or a Guarantor Redemption (which shall
not include, for the avoidance of doubt, any amounts that are amounts described
under clauses (a) through (k) above), (v) amounts received in connection with a
Refinancing hereunder or a Guarantor Refinancing under the Guarantor Indenture,
(vi) except as provided above with respect to any amounts transferred therefrom
to the Collections Account, amounts in any Cash Collateral Account and any
Aircraft Purchase Account, (vii) amounts to be paid to any Person not an ACS
Group Member or expenses incurred in connection with the receipt of any
Collections or amounts otherwise not to be included as Collections pursuant to
any Related Document, in each case subject to the restrictions set forth in this
Indenture and the Guarantor Indenture, and (viii) payments under the Initial
Credit Facility.

          "Collections Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Commission" means the U.S. Securities and Exchange Commission.

          "Company" has the meaning given to such term in the Purchase
Agreement.

          "Concentration Default" means an Event of Default under Section
5.03(a) hereof which would arise if effect were given to any sale, transfer or
other disposition or any purchase or other acquisition pursuant to an Aircraft
Agreement as of the date of such Aircraft Agreement regardless of whether such
sale, transfer or other disposition or purchase or other acquisition is
scheduled or expected to occur after the date of such Aircraft Agreement.

          "Concentration Limits" has the meaning given to such term in Section
5.03(a) hereof.



                                                                              13


          "Contribution Amounts" has the meaning give to such term in Section
3.15 hereof.

          "Control" has the meaning given to such term in Section 5.02(b)
hereof. "Controlled" and "Controlling" have meanings correlative to the
foregoing.

          "Controlling Party" means, at any time of determination, the Policy
Provider until such time as the Covered Class A Securities and the Policy
Provider Obligations have been paid or repaid in full except that if a Policy
Provider Default has occurred and is continuing, the Controlling Party shall be
the Senior Trustee; provided, however, that, for the Initial Credit Facility
and, for any other Eligible Credit Facility, if and only if so provided in the
Board Resolution and Guarantor Board Resolution providing for such Eligible
Credit Facility, at any time from and including the date that is no earlier than
30 months from the earlier to occur of (a) the date on which the entire amount
available under such Eligible Credit Facility shall have been drawn (except as a
result of (i) a Downgrade Drawing or (ii) a Non-Extension Drawing, in each case
not applied to pay expenses, hedge payments or interest in accordance with the
terms hereof) and remain unreimbursed and (b) the date on which the Securities
shall have been Accelerated, the provider of such Eligible Credit Facility shall
have the right to elect, by Written Notice to the Trustee and the Policy
Provider, to become the Controlling Party (in place of the Policy Provider or
the Senior Trustee, as applicable) thereafter (subject to the next succeeding
proviso) but only for so long as any Credit Facility Obligations due to such
provider remain unpaid; provided further that if, notwithstanding the foregoing,
within 15 Business Days after its receipt of any such Written Notice from such
provider of such Eligible Credit Facility (which notice may be given on or after
the 15th Business Day prior to the end of such 30-month period) the Policy
Provider pays to such provider of such Eligible Credit Facility all outstanding
Credit Facility Obligations owing to such provider of such Eligible Credit
Facility in respect of its Eligible Credit Facility, and interest accrued
thereon to such date, the Policy Provider (if it otherwise would have been the
Controlling Party) shall remain the Controlling Party so long as no Policy
Provider Default has occurred and is continuing. At any time after such 30-month
period, if a Policy Provider Default has occurred and is continuing and the
provider of such Eligible Credit Facility does not elect to be the Controlling
Party or if no Credit Facility Obligations remain outstanding, then the Senior
Trustee shall continue to be the Controlling Party.

          "Conversion Agreement" means any agreement entered into from time to
time between the Issuer or Guarantor (or their respective agents) and any
maintenance facility with respect to the conversion of an ACS Group Aircraft to
a freighter or mixed-use aircraft.

          "Conversion Election" has the meaning given to such term in Section
3.06(h) hereof.

          "Conversion Payment" has the meaning given to such term in Section
5.02(i) hereof.

          "Core Lease Provisions" has the meaning given to such term in Section
5.03(e) hereof.



                                                                              14


          "Corporate Obligations" has the meaning given to such term in Section
12.02(a) hereof.

          "Corporate Trust Office" means, with respect to the Trustee for each
subclass of Securities, the office of such Trustee at which at any particular
time its corporate trust business shall be principally administered. The initial
Corporate Trust Office is 60 Wall St., New York, NY 10006, Attention: Structured
Finance Services/Trust & Securities Services, Facsimile No.: (212) 553-2459.

          "Costs" means liabilities, obligations, damages, judgments,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel and costs of investigation).

          "Covenant Defeasance" has the meaning given to such term in Section
12.01(b) hereof.

          "Covered Class A Securities" means the ACS Group Subclass A-1
Securities issued on the Initial Closing Date and any other subclass of ACS
Group Class A Securities for which the corresponding class of Certificates is
supported by a financial guaranty insurance policy issued by the Policy
Provider.

          "Credit Facility Advance Obligations" means all Credit Facility
Obligations other than Credit Facility Expenses.

          "Credit Facility Drawing" has the meaning given to such term in
Section 3.12(a) hereof.

          "Credit Facility Event of Default" has the meaning given to such term
in the Initial Credit Facility.

          "Credit Facility Expenses" means all Credit Facility Obligations other
than (i) the principal amounts under, or the principal amount of any drawings
under, any Eligible Credit Facility, (ii) interest accrued on Credit Facility
Obligations and (iii) Special Indemnity Payments to the Initial Credit Facility
Provider.

          "Credit Facility Interest Class A Shortfall" has the meaning given to
such term in Section 3.06(f) hereof.

          "Credit Facility Obligations" means all principal, interest, fees and
other amounts (including expenses, indemnity payments or costs incurred by the
providers of Eligible Credit Facilities) owing to the providers of Eligible
Credit Facilities.

          "Credit Facility Reserve Account" has the meaning given to such term
in Section 3.01(a) hereof.

          "Current War Risk Coverage Amount" has the meaning given to such term
in Exhibit D hereto.



                                                                              15


          "Default" means a condition, event or act that, with the giving of
notice or the lapse of time or both, would constitute an Event of Default.

          "Default Notice" means a notice given pursuant to Section 4.02 hereof,
declaring all outstanding principal of, and accrued and unpaid interest on the
Securities to be immediately due and payable.

          "Defeasance/Redemption Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Deficiency Drawing" has the meaning given to such term in Section
3.14(b) hereof.

          "Deficiency Shortfall" means has the meaning given to such term in
Section 3.06(i)(ii) hereof.

          "Delivery" means, with respect to any ACS Group Initial Aircraft, the
transfer of the beneficial interest or shares of the ACS Group Member that has
title to such ACS Group Aircraft in accordance with the Purchase Agreement or
the Guarantor Purchase Agreement, as applicable, and, with respect to any ACS
Group Additional Aircraft, the meaning given to such term or any comparable term
in any other ACS Group Acquisition Agreement. The term "Deliver" or "Delivered"
used as verbs have a correlative meaning.

          "Delivery Date" means, with respect to any ACS Group Aircraft, the
date on which Delivery therefor occurs in accordance with the Purchase Agreement
or the Guarantor Purchase Agreement, as applicable, or that or any comparable
term in any other ACS Group Acquisition Agreement.

          "Delivery Expiry Date" means, as to the ACS Group Initial Aircraft,
the meaning given to such term in the Purchase Agreement or the Guarantor
Purchase Agreement, as applicable, or, as to any ACS Group Additional Aircraft,
the meaning given to that or any comparable term in any other ACS Group
Acquisition Agreement.

          "Depreciation Factor" means (a) with respect to each ACS Group Initial
Aircraft on any date of determination, if positive, [1-(1-R)/L)xA]x(1+I)(A/12),
where "R" equals the assumed residual percentage of 0.10 for widebody and
classics airframes and 0.12 for all other airframe types, "L" equals the
Expected Useful Life of such ACS Group Aircraft expressed in months (25 years,
or, in the case of (i) any ACS Group Aircraft that undergoes an ACS Group
Aircraft Conversion, 30 years or (ii) the four B737-330QCs and the A310-300F
Aircraft, 30 years), "A" equals the current age of such ACS Group Aircraft
expressed in months and "I" equals 0.02; provided that, with respect to each ACS
Group Additional Aircraft (not including any ACS Group Additional Aircraft
acquired by way of a contribution), the Depreciation Factor will be determined
by the Directors of the Issuer or the Guarantor, as applicable, in connection
with the issuance of the relevant ACS Group Additional Securities funding the
acquisition of such ACS Group Additional Aircraft (subject to the consent of the
Policy Provider, the Initial Credit Facility Provider and receipt of a Rating
Agency Confirmation).




                                                                              16


          "Designated Percentage" means, as of any date of determination
thereof, and with respect to any ACS Group Aircraft, the percentage obtained by
dividing the then most recent Assumed Base Value of such ACS Group Aircraft by
the then most recent Assumed Portfolio Value.

          "Developed Markets" has the meaning determined, from time to time, in
accordance with Note (3) to Exhibit C hereof.

          "Direction" has the meaning given to such term in Section 1.04(c)
hereof.

          "Director" means a member of the board of directors of the Issuer.

          "Distribution Date" has the meaning given to such term in the Pass
Through Trust Agreement.

          "Downgrade Drawing" has the meaning given to such term in Section
3.12(c) hereof.

          "Downgrade Event" has the meaning given to such term in the Initial
Credit Facility.

          "Drawing Agent" has the meaning given to such term in the preamble
hereof, or any successor thereto, as drawing agent appointed under the Pass
Through Trust Agreement.

          "DSCR" means, as of any Calculation Date, the amount obtained by
dividing (a) the amount of DSCR Available Cash as of such Calculation Date by
(b) the sum of (i) the DSCR Aggregate Interest Amount for the related Payment
Date and (ii) the DSCR Aggregate Minimum Principal Amount for such Payment Date.

          "DSCR Aggregate Interest Amount" means, with respect to any Payment
Date, the sum of (a) the Interest Amount on the ACS Group Class A Securities for
such Payment Date plus the net amounts payable (or minus the net amounts
receivable) under any Hedge Agreement on such Payment Date (whether or not
actually paid or received on such Payment Date) and (b) (without duplication)
the aggregate Interest Amount on the ACS Group Class A Securities for the
previous five Payment Dates plus the net amounts payable (or minus the net
amounts receivable) under any Hedge Agreement on the related Payment Date
(whether or not actually paid or received on such Payment Date).

          "DSCR Aggregate Minimum Principal Amount" means, with respect to any
Payment Date, the sum of (a) the Minimum Principal Payment Amount for such
Payment Date and (b) (without duplication) the aggregate Minimum Principal
Payment Amount for the previous five Payment Dates.

          "DSCR Available Cash" means, as of any Calculation Date, an amount
equal to the difference between (a) the sum of the aggregate Rental Payments
(not including any maintenance reserves which may be Rental Payments) actually
received by the ACS Group during the six-month period ending on such Calculation
Date and (b) the sum of the aggregate



                                                                              17


Re-leasing Expenses incurred by the ACS Group during the six-month period ending
on such Calculation Date.

          "DSCR Failure" means the occurrence on two consecutive Payment Dates,
each occurring after the 34th month after the Initial Closing Date, of the
amount of DSCR for each such Payment Date equaling less than 1.70.

          "Eligibility Requirements" has the meaning given to such term in
Section 2.03(b) hereof.

          "Eligible Account" means (a) a segregated trust account or demand
deposit account maintained on the books and records of an Eligible Institution
in the name of the Security Trustee as a Securities Account under, and as
defined in, the Security Trust Agreement (except with respect to any demand
deposit account, which shall not be a Securities Account), (b) a deposit or
other account maintained on the books and records of an Eligible Institution in
the name of an ACS Bermuda Group Member as a Non-Trustee Account, in compliance
with the terms of the Security Trust Agreement and (c) the Irish VAT Refund
Account and the Irish Rental Account.

          "Eligible Credit Facility" means (a) the Initial Credit Facility, (b)
any credit agreement, letter of credit, guarantee, credit or liquidity
enhancement facility or other credit facility provided by, or guaranteed by a
further such credit facility provided by, an Eligible Provider in favor of any
ACS Group Member and that is, in any such case, subject to the lien of the
Security Trust Agreement and designated by a Board Resolution and Guarantor
Board Resolution as an Eligible Credit Facility or (c) any Account established
for the purpose of providing like credit or liquidity support and designated by
a Board Resolution and Guarantor Board Resolution as an Eligible Credit
Facility.

          "Eligible Institution" means (a) Deutsche Bank Trust Company Americas
in its capacity as the Operating Bank in respect of any Eligible Account, so
long as it (i) has either (A) a long-term unsecured debt rating of A or better
by Standard & Poor's or A2 or better by Moody's or (B) a short-term unsecured
debt rating of A-1 by Standard & Poor's and P-1 by Moody's and (ii) can act as a
securities intermediary under the New York Uniform Commercial Code; (b) any
Irish Bank in respect of the Irish VAT Refund Account or other bank not
organized under the laws of the United States of America or any state thereof or
the District of Columbia (or any branch of a foreign bank licensed under any
such laws) so long as it has either (i) a long-term unsecured debt rating of A
or better by Standard & Poor's or A2 or better by Moody's or (ii) a short-term
unsecured debt rating of A-1+ by Standard & Poor's and P-1 by Moody's; and (c)
any bank organized under the laws of the United States of America or any state
thereof, or the District of Columbia (or any branch of a foreign bank licensed
under any such laws) appointed as the Operating Bank in respect of any Eligible
Account, so long as it (i) has either (A) a long-term unsecured debt rating of
AA or better by Standard & Poor's or Aa2 or better by Moody's by each Rating
Agency or (B) a short-term unsecured debt rating of A-l+ by Standard & Poor's
and P-1 by Moody's and (ii) can act as a securities intermediary under the New
York Uniform Commercial Code, including a Person providing an Eligible Credit
Facility so long as such Person shall otherwise so qualify and shall have waived
all rights of set-off and counterclaim with respect to the account to be
maintained as an Eligible Account.



                                                                              18


          "Eligible Provider" means a Person whose short-term unsecured debt is
rated A-1+ by Standard & Poor's and P-1 by Moody's or is otherwise designated as
an Eligible Provider by the Board and Guarantor Board subject to the prior
written consent of the Policy Provider and receipt of a Rating Agency
Confirmation.

          "Encumbrance" has the meaning given to such term in Section 5.02(b)
hereof.

          "Engine" means each engine installed (or constituting a spare for an
engine installed) on any ACS Group Aircraft, including any engine replacing a
previously installed engine under the relevant ACS Group Lease, and any and all
Parts incorporated in, installed on or attached to any such engine.

          "Euroclear" means Euroclear Bank, S.A./N.V., as operator of the
Euroclear System.

          "Event of Default" has the meaning, with respect to a class of
Securities, given to such term in Section 4.01 hereof.

          "Excess Policy Rate" has the meaning given to such term in the Policy
Provider Agreement.

          "Exchange Act" means the U.S. Securities Exchange Act of 1934.

          "Expected Final Payment Date" means with respect to (a) the ACS Group
Subclass A-1 Securities, June 15, 2011; (b) the Subclass E-1 Securities, June
15, 2011; and (c) any ACS Group Refinancing Securities or ACS Group Additional
Securities, the Expected Final Payment Date, if any, established by or pursuant
to a Board Resolution, or Guarantor Board Resolution, as applicable, or in any
indenture supplemental hereto or to the Guarantor Indenture, as applicable,
providing for the issuance of such ACS Group Securities or specified in the form
of such ACS Group Securities.

          "Expected Useful Life" means, with respect to each ACS Group Initial
Aircraft, 25 years or, in the case of (i) any ACS Group Aircraft that undergoes
an ACS Group Aircraft Conversion, 30 years or (ii) the four B737-330QCs and the
A310-300F Aircraft, 30 years, and, with respect to any ACS Group Additional
Aircraft (not including any ACS Group Additional Aircraft acquired by way of a
contribution), the "Expected Useful Life" established by or pursuant to a Board
Resolution or Guarantor Board Resolution, as applicable, or in any indenture
supplemental hereto or to the Guarantor Indenture providing for the issuance of
ACS Group Additional Securities to fund the acquisition of such ACS Group
Additional Aircraft or ACS Group Aircraft Conversion (subject to the consent of
the Policy Provider, the Initial Credit Facility Provider and receipt of a
Rating Agency Confirmation, in the case of the issuance of the ACS Group
Additional Securities).

          "Expense Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Expenses" means, collectively, any Taxes, fees, costs or expenses
Incurred by an ACS Group Member in the course of the business activities
permitted under Section 5.02(e)



                                                                              19


hereof, including, without limitation, any fees, expenses and indemnification
amounts of, or owing to, any Service Provider, any Director, any Guarantor
Director, any Authorized Agent, the Charitable Trustee, the Pass Through
Trustee, any Lessee (including any amounts required to be transferred or
reimbursed to such Lessee in accordance with the applicable ACS Group Lease or
Related Collateral Documents), any Credit Facility Expenses (other than any
Special Indemnity Payments), any Policy Expenses, and (subject to a limit of 2%
of the average monthly Rental Payments with respect to the relevant ACS Group
Aircraft (or other amount approved by a Board Resolution or Guarantor Board
Resolution, as applicable, with receipt of a Rating Agency Confirmation and the
prior written consent of the Policy Provider with respect thereto) with respect
to each ACS Group Subsidiary entitled thereto) the shortfall between Rental
Payments received by or on behalf of such ACS Group Subsidiary in respect of an
ACS Group Lease of an ACS Group Aircraft and the amount payable by such ACS
Group Subsidiary, as head lease rent with respect of such ACS Group Aircraft, to
another ACS Group Member; provided, however, that, except as expressly provided
herein, Expenses shall not include any amount payable on the ACS Group
Securities, under any Hedge Agreement, any Policy Premium or any interest
accrued on any Policy Premium, any Special Indemnity Payment or Credit Facility
Advance Obligations.

          "Extended Note Pool Factor" means, with respect to each subclass of
Class A Securities, the "Extended Note Pool Factor" set forth in Schedule 5
hereto with respect to such subclass of Securities, as the same may be adjusted
or, with respect to any new subclass of Securities, as may be determined in
accordance with Section 3.11 hereof.

          "Extension Amount" has the meaning given to such term in Section 3.09
hereof.

          "Final Amount" has the meaning given to such term in Section
3.06(i)(iv) hereof.

          "Final Drawing" has the meaning given to such term in Section 3.12(i)
hereof.

          "Final Maturity Date" means (a) with respect to the ACS Group Initial
Securities, the fourth Business Day prior to the Legal Final Distribution Date
and (b) with respect to any ACS Group Refinancing Securities or ACS Group
Additional Securities, the date, if any, specified in the form of such ACS Group
Securities.

          "Final Order" means in respect of an Avoided Payment, a final,
nonappealable order of a court exercising jurisdiction in an insolvency
proceeding by or against the Issuer, the Guarantor, any ACS Group Member, the
Initial Credit Facility Provider or any other provider of an Eligible Credit
Facility.

          "Final Policy Election" has the meaning given to such term in Section
3.14(c) hereof.

          "Fixed Rate Securities" means any Refinancing Securities or Additional
Securities issued with a fixed rate of interest.

          "Floating Rate Securities" means any Securities constituting Initial
Securities and any Refinancing Securities or Additional Securities issued with a
floating or variable rate of interest.



                                                                              20


          "Future Lease" means, with respect to each Aircraft, any aircraft
lease agreement as may be in effect at any time after the relevant Closing Date
between an ACS Bermuda Group Member and a Person not an ACS Bermuda Group Member
(as lessee or purchaser), in each case other than any Initial Lease or
Additional Lease; provided that if, under any sub-leasing arrangement with
respect to an Aircraft, the lessor thereof agrees to receive payments or
collateral directly from, or is to make payments directly to, the sub-lessee in
any such case to the exclusion of the related Lessee, then the relevant
sub-lease shall constitute the "Lease", and the sub-lessee shall constitute the
related "Lessee" with respect to such Aircraft, but only to the extent of the
provisions of such sub-lease agreement relevant to such payments and collateral
and to the extent agreed by the relevant lessor.

          "Governmental Authority" means any Federal, state, municipal, national
or other government (whether foreign or domestic and including the European
Union) or governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state or local government of the U.S., the U.S., or a foreign
entity or foreign government.

          "guarantee" has the meaning given to such term in Section 5.02(f)
hereof.

          "Guarantee" has the meaning given to such term in Section 11.01
hereof.

          "Guaranteed Obligations" has the meaning given to such term in Section
11.01 hereof.

          "Guaranteed Parties" has the meaning given to such term in Section
11.01 hereof.

          "Guarantor" has the meaning given to such term in the preamble hereof.

          "Guarantor Acquisition Agreements" means the Guarantor Purchase
Agreement and any agreements pursuant to which Guarantor Additional Aircraft are
acquired.

          "Guarantor Additional Aircraft" means any aircraft and any related
Engine acquired by any ACS Ireland Group Member from a Seller or an affiliate of
a Seller or (upon a receipt of a Rating Agency Confirmation with respect
thereto), from any other Person after the Initial Closing Date (other than any
Guarantor Initial Aircraft, Remaining Aircraft or Substitute Aircraft), in each
case in accordance with the provisions hereof including obtaining the prior
written consent of the Policy Provider other than in the case of any Guarantor
Aircraft acquired by way of a contribution, excluding any such Guarantor
Aircraft after it has been sold or disposed of by way of a completed Aircraft
Sale.

          "Guarantor Additional Lease" means, with respect to each Guarantor
Additional Aircraft, each aircraft lease agreement, conditional sale agreement,
hire purchase agreement or other similar arrangement with respect to such
Guarantor Additional Aircraft on the relevant Closing Date.



                                                                              21


          "Guarantor Additional Securities" means any Guarantor Securities of
any subclass of the Guarantor Class A Securities (other than the Guarantor
Subclass A-1 Securities issued as of the Initial Closing Date) and the Class E
Securities (other than the Subclass E-1 Securities issued as of the Initial
Closing Date) issued pursuant to the Guarantor Indenture.

          "Guarantor Aircraft" means the Guarantor Initial Aircraft and the
Guarantor Additional Aircraft.

          "Guarantor Aircraft Agreement" means any lease, sublease, conditional
sale agreement, finances lease, hire purchase agreement or other agreement
(other than an agreement relating to maintenance, modification or repairs) or
any purchase option (other than a Purchase Option granted to an ACS Ireland
Group Member) to purchase a Guarantor Aircraft, in each case pursuant to which
any Person acquires or is entitled to acquire legal title to, or the economic
benefits of ownership of, such Guarantor Aircraft.

          "Guarantor Aircraft Conversion" has the meaning given to "Aircraft
Conversion" in Section 5.02(i) of the Guarantor Indenture.

          "Guarantor Board" means the board of directors of the Guarantor.

          "Guarantor Board Resolution" means a copy of a resolution certified as
having been duly adopted by the Guarantor Board and being in full force and
effect on the date of such certification.

          "Guarantor Class A Securities" means, collectively, all Guarantor
Securities designated as a subclass of Class A, including the Guarantor Initial
Securities so designated (consisting of the Guarantor Subclass A-1 Securities
issued as of the Initial Closing Date), all Guarantor Additional Securities, if
any, so designated and, all Guarantor Refinancing Securities, if any, so
designated, in each case, pursuant to this Indenture.

          "Guarantor Conversion Payments" has the meaning given to "Conversion
Payments" in Section 5.02(i) of the Guarantor Indenture.

          "Guarantor Director" means a member of the board of directors of the
Guarantor.

          "Guarantor Fixed Rate Securities" means any Guarantor Refinancing
Securities or Guarantor Additional Securities issued with a fixed rate of
interest.

          "Guarantor Floating Rate Securities" means any Securities constituting
Initial Securities and any Guarantor Refinancing Securities or Guarantor
Additional Securities issued with a floating or variable rate of interest.

          "Guarantor Future Lease" means, with respect to each Guarantor
Aircraft, any aircraft lease agreement as may be in effect at any time after the
relevant Closing Date between an ACS Ireland Group Member and a Person not an
ACS Ireland Group Member (as lessee or purchaser), in each case other than any
Guarantor Initial Lease or Guarantor Additional Lease; provided that if, under
any sub-leasing arrangement with respect to a Guarantor Aircraft, the lessor
thereof agrees to receive payments or collateral directly from, or is to make
payments



                                                                              22


directly to, the sub-lessee in any such case to the exclusion of the related
Lessee, then the relevant sub-lease shall constitute the "Guarantor Lease", and
the sub-lessee shall constitute the related "Lessee" with respect to such
Guarantor Aircraft, but only to the extent of the provisions of such sub-lease
agreement relevant to such payments and collateral and to the extent agreed by
the relevant lessor.

          "Guarantor Indenture" means the trust indenture dated as of the
Initial Closing Date among the Guarantor as issuer of the Guarantor Securities
issued thereunder, the Issuer, as guarantor of the Guarantor Securities issued
thereunder, Deutsche Bank Trust Company Americas as the Cash Manager, Deutsche
Bank Trust Company Americas as the trustee thereunder and Drawing Agent, Calyon
as Initial Credit Facility Provider and Financial Guaranty Insurance Company as
Policy Provider.

          "Guarantor Initial Aircraft" means each of the aircraft identified in
Schedule 1 to the Guarantor Indenture (including any related Engines and Parts
and any Remaining Aircraft) and any Substitute Aircraft, excluding any such
aircraft (or related Aircraft Interest) sold or disposed of by way of a
completed Aircraft Sale and any Remaining Aircraft for which a Substitute
Aircraft is Delivered.

          "Guarantor Initial Class A Securities" means the Guarantor Subclass
A-1 Securities issued on the Initial Closing Date pursuant to the Guarantor
Indenture.

          "Guarantor Initial Lease" means, with respect to each Guarantor
Initial Aircraft, each aircraft lease agreement, conditional sale agreement,
hire purchase agreement or other similar arrangement subject to a written
agreement with respect to such Guarantor Initial Aircraft in existence as of the
date of this Indenture that is listed in Schedule 7 to the Guarantor Purchase
Agreement or with respect to any Substitute Aircraft, each aircraft lease
agreement, conditional sale agreement, hire purchase agreement or other similar
arrangement subject to a written agreement with respect to such Substitute
Aircraft in existence as of the relevant Acquisition Date with respect to such
Substitute Aircraft, as such agreement or arrangement may be amended, modified,
extended, supplemented, assigned or novated from time to time.

          "Guarantor Initial Securities" means the Guarantor Initial Class A
Securities and the Subclass E-1 Securities.

          "Guarantor Leases" means the Guarantor Initial Leases, the Guarantor
Future Leases and the Guarantor Additional Leases.

          "Guarantor Modification Payments" has the meaning given to
"Modification Payments" in Section 5.02(i) of the Guarantor Indenture.

          "Guarantor Securities" means the Guarantor Initial Securities, all
Guarantor Additional Securities, if any, all Guarantor Refinancing Securities,
if any, and all Guarantor Securities, if any, issued in replacement or
substitution of a Guarantor Security pursuant to the Guarantor Indenture.

          "Guarantor Ownership Interest" has the meaning given to "Ownership
Interest" in Section 5.02(b) of the Guarantor Indenture.



                                                                              23


          "Guarantor Purchase Agreement" means the Purchase Agreement dated as
of June 15, 2006 between the Irish Seller and the Guarantor.

          "Guarantor Redemption" has the meaning given to "Redemption" in
Section 3.10(c) of the Guarantor Indenture.

          "Guarantor Redemption Date" means the date, which shall in each case
be a Payment Date, on which Guarantor Securities are redeemed pursuant to
Section 3.10 of the Guarantor Indenture.

          "Guarantor Redemption Price" has the meaning given to "Redemption
Price" in the Guarantor Indenture.

          "Guarantor Refinancing" has the meaning given to "Refinancing" in
Section 2.10 of the Guarantor Indenture.

          "Guarantor Refinancing Expenses" means all out-of-pocket costs and
expenses Incurred in connection with an offering and issuance of Guarantor
Refinancing Securities.

          "Guarantor Refinancing Securities" means any subclass of Guarantor
Securities issued by the Guarantor under the Guarantor Indenture at any time and
from time to time after the date thereof, in a Guarantor Refinancing under
Section 2.10 of the Guarantor Indenture.

          "Guarantor Securities" means the Guarantor Initial Securities, all
Guarantor Additional Securities, if any, all Guarantor Refinancing Securities,
if any, and all Guarantor Securities, if any, issued in replacement or
substitution of a Guarantor Security, in each case, pursuant to the Guarantor
Indenture.

          "Guarantor Subclass A-1 Securities" means the Guarantor Initial
Securities that are designated "Subclass A-1 Securities" under the Guarantor
Indenture, all Guarantor Additional Securities, if any, so designated, all
Guarantor Refinancing Securities, if any, so designated and all Guarantor
Securities, if any, issued in replacement or substitution therefor.

          "Guarantor Trustee" means, with respect to each subclass of Guarantor
Securities the Person appointed, at the time of determination, as the trustee of
such subclass of Guarantor Securities in accordance with the Guarantor
Indenture. The initial Guarantor Trustee is Deutsche Bank Trust Company
Americas.

          "Hedge Agreement" means any interest rate or currency hedge, swap,
cap, floor, Swaption, or other interest rate or currency hedging agreement
between the applicable ACS Group Member and any Hedge Provider existing on the
Initial Closing Date (including the Initial Hedge Agreements) or entered into in
accordance with Section 5.02(e)(iv) hereof.

          "Hedge Breakage Costs" means any amounts payable by any ACS Group
Member to a Hedge Provider as a result of any early termination (however
described or defined therein) of any Hedge Agreement.

          "Hedge Guarantee" has the meaning given to such term in any Hedge
Agreement.



                                                                              24


          "Hedge Overview Services Agreement" means the Hedge Overview Services
Agreement dated as of the Initial Closing Date among the Hedge Services Provider
and the Issuers.

          "Hedge Provider" means any counterparty to any ACS Group Member under
any Hedge Agreement.

          "Hedge Payment" means a net payment to be made by a Hedge Provider
into the Collections Account under a Hedge Agreement and includes any such
payment made by a guarantor under any related Hedge Guarantee or any termination
payment received from any counterparty to a Hedge Agreement.

          "Hedge Services Provider" means the Person acting, at the time of
determination, in the capacity of the hedge services provider under the Hedge
Overview Services Agreement. The initial Hedge Services Provider will be
Citibank Canada.

          "Holder" means any Person in whose name (a) a Class A Security is
registered from time to time in the Register for such Securities or (b) a
Guarantor Class A Security or Class E Security is registered from time to time
in the Register (as defined in the Guarantor Indenture) for such Guarantor
Securities.

          "Holder Conversion Election" has the meaning given to such term in
Section 3.06(h) hereof.

          "Incur" has the meaning given to such term in Section 5.02(f) hereof.

          "Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (a) all indebtedness of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (d) all the obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of purchasing
such property or service or taking delivery and title thereto or the completion
of such services, and payment deferrals arranged primarily as a method of
raising finance or financing the acquisition of such property or service, (e)
all obligations of such Person under a lease of (or other agreement conveying
the right to use) any property (whether real, personal or mixed) that is
required to be classified and accounted for as a capital lease obligation under
U.S. GAAP, (f) all Indebtedness of other Persons secured by a lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person, and
(g) all Indebtedness of other Persons guaranteed by such Person.

          "Indenture" has the meaning given to such term in the preamble hereof.

          "Independent Director" means a Person that is not at the time of its
appointment or at any time when such Person is serving as an Independent
Director and has not been for the five years prior to its appointment as an
Independent Director (i) an employee, officer, director, consultant, customer or
supplier, or the beneficial holder (directly or indirectly) of more than 5% of
any Ownership Interest, of any Aircastle Related Entity; provided, however, that
any such



                                                                              25


Person may serve as a trustee, manager or director of another special purpose
vehicle that is an Affiliate of the Issuer or Aircastle Limited, or (ii) a
spouse of, or Person related to (but not more remote than first cousins), a
Person referred to at (i) above.

          "Initial Aircraft" means each of the aircraft identified in Schedule 1
hereto (including any related Engines and Parts and any Remaining Aircraft) and
any Substitute Aircraft, excluding any such aircraft (or related Aircraft
Interest) sold or disposed of by way of a completed Aircraft Sale and any
Remaining Aircraft for which a Substitute Aircraft is Delivered or for which the
Aircraft Interest for such Remaining Aircraft is not Delivered by the Delivery
Expiry Date to the Issuer.

          "Initial Appraisal Dates" means the dates as of which the Initial
Appraisers calculated the Base Value of each ACS Group Initial Aircraft, which
date in the case of BK Associates, Inc. is as of October 2005, in the case of
Airclaims Limited is as of November 2005 (except with respect to four ACS Group
Aircraft, which appraisals are as of December 2005) and in the case of Aircraft
Information Services, Inc. is as of November 2005.

          "Initial Appraised Value" means (a) in the case of each ACS Group
Initial Aircraft (other than a Substitute Aircraft), the lessor of the mean and
the median of the appraisals by each of the Initial Appraisers of the Base Value
of such ACS Group Initial Aircraft as of the Initial Appraisal Dates, (b) in the
case of any Substitute Aircraft, the average of the appraisals by each of the
Initial Appraisers of the Base Value of such ACS Group Initial Aircraft as of a
date not more than six months prior to the date of the delivery of such ACS
Group Initial Aircraft and (c) in the case of any ACS Group Additional Aircraft,
the average of the appraisals by each of the Appraisers of the Base Value of
such ACS Group Additional Aircraft as of a date not more than six months prior
to the Closing Date for the issuance of the relevant ACS Group Additional
Securities.

          "Initial Appraisers" means Aircraft Information Services, Inc., BK
Associates, Inc. and Airclaims Limited.

          "Initial Class A Securities" means the Subclass A-1 Securities issued
on the Initial Closing Date.

          "Initial Closing Date" means June 15, 2006.

          "Initial Credit Facility" means the revolving credit agreement dated
as of the Initial Closing Date among the Initial Credit Facility Provider, the
Issuer, the Guarantor and the Cash Manager, as amended, supplemented or
otherwise modified from time to time in accordance with its terms and as so
replaced and so designated pursuant to Section 3.12(e)(iii) hereof.

          "Initial Credit Facility Amount" means $42,000,000.

          "Initial Credit Facility Non-Consent Event" means the occurrence of
the following: (i) the termination of the Initial Credit Facility and (ii) the
payment of all Credit Facility Obligations owed to the Initial Credit Facility
Provider in full.



                                                                              26


          "Initial Credit Facility Provider" means Calyon or any provider of an
Eligible Credit Facility so designated by a Board Resolution and a Guarantor
Board Resolution.

          "Initial Expenses" means Expenses related to the issuance of the ACS
Group Initial Securities and the acquisition of the ACS Group Initial Aircraft
(other than Expenses related to the acquisition of the Remaining Aircraft
incurred after the Initial Closing Date).

          "Initial Hedge Agreements" means the series of monthly forward
contracts under the ISDA Master Agreement dated as of June 1, 2006 between the
Issuer and Citibank Canada.

          "Initial Lease" means, with respect to each Initial Aircraft, each
aircraft lease agreement, conditional sale agreement, hire purchase agreement or
other similar arrangement subject to a written agreement with respect to such
Initial Aircraft that is in existence as of the date of this Indenture listed in
Schedule 7 to the Purchase Agreement or with respect to any Substitute Aircraft,
each aircraft lease agreement, conditional sale agreement, hire purchase
agreement or other similar arrangement subject to a written agreement with
respect to such Substitute Aircraft in existence as of the relevant Acquisition
Date with respect to such Substitute Aircraft, as such agreement or arrangement
may be amended, modified, extended, supplemented, assigned or novated from time
to time.

          "Initial Liquidity Payment Account" has the meaning given to such term
in Section 3.01(a) hereof.

          "Initial Outstanding Balance" means, with respect to any subclass of
ACS Group Securities the initial Outstanding Principal Balance thereof on the
date of issuance of such ACS Group Securities.

          "Initial Purchasers" means Citigroup Global Markets Inc., Bear,
Stearns & Co. Inc. and J.P. Morgan Securities Inc.

          "Initial Reserved Cash" means, with respect to the Senior Cash
Collateral Account, $0.

          "Initial Securities" means the Initial Class A Securities.

          "Insolvency Proceeding" means any proceeding of the type referred to
in Section 4.01(e) or (f) hereof in respect of the Issuer.

          "Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.

          "Insured Minimum Principal Payment Amount" means, with respect to the
Regular Distribution Date following each Calculation Date occuring on or after
the date that is 24 months after the date of an Event of Default under Section
4.01(a) or Section 4.01(b) hereof or an Acceleration of the Securities, the
excess, if any, of (a) the Pool Balance of the Certificates as of such Regular
Distribution Date over (b) the Minimum Target Principal Balance of the ACS



                                                                              27


Group Subclass A-1 Securities on the Payment Date that preceded such Regular
Distribution Date by 24 months.

          "Intercompany Loan" has the meaning given to such term in Section
5.02(f)(vi) hereof.

          "Interest Amount" means, with respect to each subclass of ACS Group
Securities (other than any subclass of Class E Securities), on any Payment Date,
(a) the amount of interest accrued and unpaid to such Payment Date at the Stated
Rate of Interest with respect to such subclass of ACS Group Securities for the
Accrual Period ending on such Payment Date (and for any accrued and unpaid
interest for any other Accrual Period, at the Stated Rate of Interest for such
period), determined in accordance with the terms of such subclass of ACS Group
Securities, plus (b) interest at the rate specified in clause (a) above on any
Interest Amount due but not paid on any prior Payment Date.

          "Interest Drawing" has the meaning given to such term in Section
3.14(a) hereof.

          "Interest Shortfall" means has the meaning given to such term in
Section 3.06(i)(i) hereof.

          "Investment" has the meaning given to such term in Section 5.02(c)
hereof.

          "Investment Earnings" means investment earnings on funds on deposit in
any Account net of losses and investment expenses of the Cash Manager in making
such investments.

          "Irish Account Charge" has the meaning given to such term in Section
3.01(a) hereof.

          "Irish Bank" means any bank duly authorized under the laws of Ireland.

          "Irish Parent" means Tormina Holding Limited, a holding company
incorporated under the laws of Ireland which beneficially owns 95% of the issued
shares of the Guarantor.

          "Irish Remarketing Servicer" means the Person acting, at the time of
determination, in the capacity of the remarketing servicer under the Irish
Remarketing Services Agreement. When the Irish Remarketing Services Agreement or
the Back-Up Remarketing Services Agreement provides that the Back-Up Remarking
Agent is to perform all or any part of the services called for by the Irish
Remarketing Services Agreement in place of the Irish Remarketing Servicer, the
terms "Irish Remarketing Servicer" and "Irish Remarketing Services Agreement"
mean, as to such services, the Back-Up Remarketing Servicer and the Back-Up
Remarketing Services Agreement. The initial Irish Remarketing Servicer is
Aircastle Advisor (Ireland) Limited.

          "Irish Remarketing Services Agreement" means the Remarketing Services
Agreement dated as of the Initial Closing Date among the Irish Remarketing
Servicer, the Issuer, the Guarantor, the Policy Provider and the Administrative
Agent.



                                                                              28


          "Irish Rental Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Irish Secretarial Services Provider" means the Person providing, at
the time of determination, secretarial services to the Guarantor under the
secretarial services letter with the Guarantor dated as of the Initial Closing
Date (or any successor agreement). The initial Irish Secretarial Services
Provider is Goodbody Secretarial Limited.

          "Irish Seller" means Aircastle Ireland No. 1 Limited.

          "Irish VAT Refund Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Issuer" has the meaning given to such term in the preamble hereof.

          "Issuers" means, collectively, the Issuer and the Guarantor (in its
capacity as issuer under the Guarantor Indenture).

          "Leases" means the Initial Leases, the Future Leases and the
Additional Leases.

          "Legal Defeasance" has the meaning given to such term in Section
12.01(b) hereof.

          "Legal Final Distribution Date" has the meaning given to such term in
the Pass Through Trust Agreement.

          "Lessee" means each Person who is the lessee of an ACS Group Aircraft
from time to time leased from an ACS Group Member pursuant to an ACS Group
Lease.

          "Lessee Funded Account" has the meaning given to such term in Section
3.01(a) hereof.

          "LIBOR" means the London interbank offered rate for one month U.S.
dollar deposits, determined pursuant to the Reference Agency Agreement, or such
other interest rate so denominated, with respect to any ACS Group Additional
Securities or ACS Group Refinancing Securities, in an indenture supplemental
hereto and to the Guarantor Indenture for any such ACS Group Securities or in
the form thereof.

          "Material Hedge Agreement Terms" means events of default, termination
events, additional termination events, subordinated hedge payment provisions,
Policy Provider step-in rights, Policy Provider consent rights to amendments,
assignments and transfers, provisions relating to the obligation of the Hedge
Provider to any ACS Group Member to post collateral, find a replacement
counterparty or take other remedial action upon a downgrade in its credit rating
(together with the associated ratings thresholds) and a provision stating that
the Policy Provider is an intended third-party beneficiary.

          "Maximum Commitment" has the meaning given to such term in the Initial
Credit Facility.



                                                                              29


          "Minimum Principal Payment Amount" means, with respect to any subclass
of ACS Group Class A Securities, as of any Payment Date, the product of (i) the
ACS Group Class A Security Portion for such Payment Date and (ii) the Assumed
Monthly Depreciation for such Payment Date.

          "Minimum Principal Shortfall" has the meaning given to such term in
Section 3.06(i)(iii) hereof.

          "Minimum Target Principal Balance" means, with respect to the ACS
Group Class A Securities on any Payment Date, the amount set forth in Schedule 3
to this Indenture and set forth in Schedule 3 to the Guarantor Indenture for
such Payment Date, subject to the following adjustment.

If any ACS Group Initial Aircraft ceases to be owned by the ACS Group before the
end of the useful life of such ACS Group Initial Aircraft, the Minimum Target
Principal Balance for each Payment Date occurring after the Calculation Date
next succeeding the date of such cessation will be adjusted to be equal to: (x)
if such Payment Date occurs on or before the fifth anniversary of the Initial
Closing Date, the Assumed Portfolio Value for such Payment Date multiplied by
the ACS Group Class A Security Portion or (y) if such Payment Date occurs after
the fifth anniversary of the Initial Closing Date, the sum for all ACS Group
Initial Aircraft then owned by the ACS Group of the product of (1) the Assumed
Base Value of each such ACS Group Initial Aircraft for such Payment Date, (2)
the ACS Group Class A Security Portion and (3) a fraction (a) the numerator of
which shall be equal to the remaining Expected Useful Life in months of such ACS
Group Aircraft as of such Payment Date and (b) the denominator of which shall be
equal to the remaining Expected Useful Life of such ACS Group Aircraft in months
as of the fifth anniversary of the Initial Closing Date, provided that in no
event the Minimum Target Principal Balance for any Payment Date shall be less
than zero.

If any ACS Group Initial Aircraft has undergone a conversion, the Minimum Target
Principal Balance for each Payment Date occurring after the Calculation Date
next succeeding the later of the fifth anniversary of the Initial Closing Date
or the date of the completion of such conversion will be adjusted to be equal to
the sum for all ACS Group Initial Aircraft then owned by the ACS Group of the
product of (1) the Assumed Base Value of each such ACS Group Initial Aircraft
for such Payment Date, (2) the ACS Group Class A Security Portion and (3) a
fraction (a) the numerator of which shall be equal to the remaining Expected
Useful Life in months of such ACS Group Aircraft as of such Payment Date and (b)
the denominator of which shall be equal to the remaining Expected Useful Life of
such ACS Group Aircraft in months as of the fifth anniversary of the Initial
Closing Date (for the purpose of this clause (b), the Expected Useful Life of
such ACS Group Aircraft will be deemed to have been extended by 60 months as of
such fifth anniversary), provided that in no event the Minimum Target Principal
Balance for any Payment Date shall be less than zero.

          "Modification Payment" has the meaning given to such term in Section
5.02(i) hereof.

          "Monthly Report" has the meaning given to such term in Section 2.15(a)
hereof.



                                                                              30


          "Moody's" means Moody's Investors Service, Inc.

          "Net Sale Proceeds" means, with respect to any sale or other
disposition of any assets, the aggregate amount of cash received or to be
received from time to time (whether as initial or deferred consideration) by or
on behalf of the seller in connection with such transaction after deducting
therefrom (without duplication) (a) reasonable and customary brokerage
commissions and other similar fees and commissions (including fees received by
the Bermudian Remarketing Servicer under the Bermudian Remarketing Services
Agreement) and (b) the amount of Taxes payable in connection with or as a result
of such transaction, in each case to the extent, but only to the extent, that
the amounts so deducted are, at the time of receipt of such cash, actually paid
to a Person that is not an Affiliate of the seller and are properly attributable
to such transaction or to the asset that is the subject thereof.

          "No Proceeds Drawing" has the meaning given to such term in Section
3.14(c) hereof.

          "Non-Delivery Event" has the meaning given to such term in Section
3.05(c) hereof.

          "Non-Extension Drawing" has the meaning given to such term in Section
3.12(d) hereof.

          "Non-Extended Facility" has the meaning given to such term in Section
3.12(d) hereof.

          "Non-Performance Period" has the meaning given to such term in Section
3.14(c) hereof.

          "Non-Significant Subsidiary" means a direct or indirect subsidiary of
the Issuer or Guarantor with respect to which an order or decree described in
Section 4.01(e) has been entered or an event described in Section 4.01(f) has
occurred if, as of the date of the entry of such order or decree or of such
event, as the case may be, such subsidiary, together with all of the
subsidiaries of the Issuer or the Guarantor, as applicable, that have been and
continue to be subject to such order or decree or event, as the case may be,
since the Initial Closing Date, own or lease ACS Group Aircraft having an
aggregate Assumed Base Value of less than 10% of the Assumed Portfolio Value as
of such applicable date of such order or decree or event.

          "Non-Trustee Account" has the meaning given to such term in Section
3.01(g) hereof.

          "Note Pool Factor" means, with respect to each subclass of Class A
Securities on any Payment Date, the "Note Pool Factor" for such Payment Date set
forth in Schedule 4 hereto as the same may be adjusted or, with respect to any
new subclass of Securities, as may be determined in accordance with Section 3.11
hereof.

          "Note Target Price" means, in respect of any Aircraft (not including
any Aircraft acquired by way of a contribution), an amount equal to the product
of (i) the Designated Percentage with respect to such Aircraft and (ii) the sum
of (A) the then Outstanding Principal



                                                                              31


Balance of the ACS Group Class A Securities, (B) any accrued but unpaid interest
on the ACS Group Class A Securities, (C) any related Hedge Breakage Costs, (D)
any Policy Premium and Policy Expenses then due and payable to the Policy
Provider and (E) any Credit Facility Expenses then due and payable to the
Initial Credit Facility Provider.

          "Notice of Avoided Payment" has the meaning given to such term in the
Policy.

          "Notice of Nonpayment" has the meaning given to such term in the
Policy.

          "Notices" has the meaning given to such term in Section 13.05 hereof.

          "Novations" has the meaning given to such term in the Policy Provider
Agreement.

          "Obligations" means the Secured Obligations and the payments to be
made to either Issuer or any Holder of a Class E Security or Shareholder under
Section 3.08 hereof.

          "Officer's Certificate" means a certificate signed by, with respect to
the Issuer, any Director and, with respect to any other Person, any authorized
officer, director, trustee or equivalent representative.

          "Operating Bank" means the Person acting, at the time of
determination, as the Operating Bank under the Security Trust Agreement. The
initial Operating Bank is Deutsche Bank Trust Company Americas.

          "Opinion of Counsel" means a written opinion signed by legal counsel,
who may be an employee of or counsel to the Issuer, that meets the requirements
of Section 1.03 hereof.

          "Optional Redemption" means a Redemption of Securities pursuant to
Section 3.10(a) hereof.

          "Outstanding" means (a) with respect to the ACS Group Securities, of
any class or subclass at any time, all ACS Group Securities of such class or
subclass theretofore authenticated and delivered by the Trustee or the Guarantor
Trustee, as applicable, except (i) any such ACS Group Securities cancelled by,
or delivered for cancellation to, the Trustee or the Guarantor Trustee, as
applicable, (ii) any such ACS Group Securities, or portions thereof, for the
payment of principal of and accrued and unpaid interest on which moneys have
been deposited in the applicable Securities Account or distributed to Holders by
the Trustee and the Guarantor Trustee and any such ACS Group Securities, or
portions thereof, for the payment or redemption of which moneys in the necessary
amount have been deposited in the Defeasance/Redemption Account; provided that
if such ACS Group Securities are to be redeemed prior to the maturity thereof in
accordance with the requirements of Section 3.10(a) or 3.10(b) hereof or of the
Guarantor Indenture, as applicable, notice of such redemption shall have been
given as provided in Section 3.10(c) hereof or of the Guarantor Indenture, or
provision satisfactory to the Trustee or Guarantor Trustee, as applicable, shall
have been made for giving such notice, and (iii) any such ACS Group Securities
in exchange or substitution for which other ACS Group Securities, as the case
may be, have been authenticated and delivered, or which have been paid pursuant
to the terms of this Indenture or the Guarantor Indenture, as applicable,
(unless proof satisfactory to the



                                                                              32


Trustee or the Guarantor Trustee, if applicable, is presented that any of such
ACS Group Securities is held by a Person in whose hands such ACS Group Security
is a legal, valid and binding obligation of the Issuer or the Guarantor, as
applicable); and (b) when used with respect to any evidence of indebtedness
other than any ACS Group Securities means, at any time, any principal amount
thereof then unpaid and outstanding (whether or not due or payable).

          "Outstanding Balance" has the meaning given to such term in Section
3.14(c) hereof.

          "Outstanding Principal Balance" means, with respect to any ACS Group
Securities, the total principal amount evidenced by such ACS Group Securities
unpaid and outstanding at any time as determined in accordance with Section 3.06
hereof and Section 3.06 of the Guarantor Indenture.

          "Ownership Interest" has the meaning given to such term in Section
5.02(b) hereof.

          "Part" means any part, component, appliance, accessory, instrument or
other item of equipment (other than any Engine) installed in or attached to (or
constituting a spare for any such item installed in or attached to) any ACS
Group Aircraft (other than any Engine).

          "Partial Loss" means, with respect to any ACS Group Aircraft, any
event or occurrence of loss, damage, destruction or the like which is not a
Total Loss.

          "Partial Loss Proceeds" means, with respect to any ACS Group Aircraft,
the total proceeds of the insurance or reinsurance (other than in respect of
liability insurance) paid in respect of any Partial Loss to any ACS Group
Member.

          "Pass Through Trust Agreement" means the pass through trust agreement
dated as of June 15, 2006 among the Pass Through Trustee and the Issuers, and a
supplement thereto dated as of June 15, 2006 with respect to the ACS Pass
Through Trust and any further supplements thereto (with respect to additional
pass through trusts that may be formed in the future).

          "Pass Through Trustee" means Wilmington Trust Company.

          "Paying Agent" has the meaning given to such term in Section 2.03
hereof.

          "Payment Date" means the 15th day of each month, commencing on July
15, 2006; provided that (a) if any Payment Date would otherwise fall on a day
that is not a Business Day, such Payment Date shall be the first following day
that is a Business Day and (b) the Payment Date in June 2031 shall be the fourth
Business Day prior to the Legal Final Distribution Date.



                                                                              33


          "Permitted Account Investments" means, in each case (except with
regard to clause (f) hereof), book-entry securities, negotiable instruments or
securities in bearer or registered form that evidence:

          (a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America (having original maturities of
no more than 365 days, or such lesser time as is required for the distribution
of funds);

          (b) demand deposits, time deposits or certificates of deposit of the
Operating Bank or of depository institutions or trust companies organized under
the laws of the United States of America or any state thereof, or the District
of Columbia (or any domestic branch of a foreign bank) (i) having original
maturities of no more than 365 days, or such lesser time as is required for the
distribution of funds; provided that at the time of Investment or contractual
commitment to invest therein, the short-term debt rating of such depository
institution or trust company shall be at least A-1 by Standard & Poor's, P-1 by
Moody's or (ii) having maturities of more than 365 days and, at the time of the
Investment or contractual commitment to invest therein, a rating of AA by
Standard & Poor's and Aa2 by Moody's; provided that, during any applicable
period, not more than 20% of the Issuers' aggregate Permitted Account
Investments may be made in investments described under this clause (b);

          (c) corporate or municipal debt obligations (including, without
limitation, commercial paper) (i) having remaining maturities of no more than
365 days, or such lesser time as is required for the distribution of funds,
having, at the time of the Investment or contractual commitment to invest
therein, a rating of at least A-1+ or AA by Standard & Poor's and P-1 or Aa2 by
Moody's or (ii) having maturities of more than 365 days and, at the time of the
Investment or contractual commitment to invest therein, a rating of AA by
Standard & Poor's and Aa2 by Moody's;

          (d) Investments in money market funds (including funds in respect of
which the Trustee or any of its Affiliates is investment manager or advisor)
having a rating of at least AA by Standard & Poor's and Aa2 by Moody's; or

          (e) notes or bankers' acceptances (having original maturities of no
more than 365 days, or such lesser time as is required for the distribution of
funds) issued by any depository institution or trust company referred to in (b)
above;

          provided, however, that no Investment shall be made in any obligations
of any depository institution or trust company which has a contractual right to
set off and apply any deposits held, and other indebtedness owing, by any ACS
Group Member to or for the credit or the account of such depository institution
or trust company; provided further that if, at any time, the rating of any of
the foregoing investments falls below "BBB" by Standard & Poor's or "Baa2" by
Moody's, such downgraded investment shall no longer constitute a "Permitted
Account Investment".

          "Permitted Accruals" has the meaning given to such term in Section
3.08(a) hereof and in Section 3.08(a) of the Guarantor Indenture.



                                                                              34


          "Permitted Additional Aircraft Acquisition" has the meaning given to
such term in Section 5.02(h) hereof.

          "Permitted Encumbrance" has the meaning given to such term in Section
5.02(b) hereof.

          "Person" means any natural person, firm, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any political subdivision
thereof or any other legal entity, including public bodies.

          "Pledged Beneficial Interest" has the meaning given to such term in
the Security Trust Agreement.

          "Pledged Debt" has the meaning given to such term in the Security
Trust Agreement.

          "Pledged Share" has the meaning given to such term in the Security
Trust Agreement.

          "Policy" means the Financial Guarantee Insurance Policy No. 06030066,
issued as of the Initial Closing Date by the Policy Provider, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.

          "Policy Drawing" means any payment of a claim under the Policy.

          "Policy Expenses" means all amounts (including, but not limited to,
all amounts in respect of fees, indemnities or costs and expenses incurred by
the Policy Provider, including, without limitation, in connection with the
enforcement, defense or preservation of any rights in respect of any of the
Related Documents) due to the Policy Provider under the Policy Provider
Agreement or any other Policy Provider Document other than (i) reimbursement of
any Policy Drawing, (ii) any Policy Premium and Policy Redemption Premium, if
any, (iii) any interest accrued on any Policy Drawings or any Policy Premium,
and (iv) reimbursement of and interest on any Credit Facility Advance
Obligations in respect of any Eligible Credit Facility paid by the Policy
Provider to any provider of an Eligible Credit Facility.

          "Policy Fee Letter" means the fee letter, dated as of June 15, 2006
from the Policy Provider to the Issuer, Guarantor, the Trustees and the Drawing
Agent setting forth the Policy Premium and certain other amounts payable in
respect of the Policy.

          "Policy Non-Consent Event" means the occurrence of (i) the payment of
the Certificates in full, (ii) the termination and surrender of the Policy to
the Policy Provider for cancellation and (iii) the payment of all Policy
Provider Obligations in full.

          "Policy Premium" has the meaning given to such term in the Policy Fee
Letter.

          "Policy Provider" means Financial Guaranty Insurance Company, a New
York stock insurance company.



                                                                              35


          "Policy Provider Agreement" means the Insurance and Indemnity
Agreement, dated as of the date of issuance of the Certificates, among the
Drawing Agent, the Issuer, the Guarantor, the Trustee, the Guarantor Trustee,
the Pass Through Trustee and the Policy Provider.

          "Policy Provider Default" means the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure by the
Trustee, the Guarantor Trustee, Cash Manager, Operating Bank or the
Administrative Agent to the Policy Provider, or (b) the Policy Provider (i)
files any petition or commences any case or proceeding under any provisions of
any federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) makes a general assignment for the benefit
of its creditors or (iii) has an order for relief entered against it under any
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization that is final and nonappealable, or (c) a court of
competent jurisdiction, the New York Insurance Department or another competent
judicial or regulatory authority enters a final and nonappealable order,
judgment or decree (i) appointing a custodian, trustee, agent or receiver for
the Policy Provider or for all or any material portion of its property or (ii)
authorizing the taking of possession by a custodian, trustee, agent or receiver
of the Policy Provider (or taking of possession of all or any material portion
of the Policy Provider's property).

          "Policy Provider Documents" means the Policy, the Policy Fee Letter,
the Policy Provider Agreement and the Policy Provider Indemnification Agreement.

          "Policy Provider Indemnification Agreement" means the Indemnification
Agreement dated as of June 1, 2006 entered into among the Policy Provider, the
Issuer, the Guarantor and the Initial Purchasers.

          "Policy Provider Obligations" means all reimbursements and other
amounts, including without limitation, fees, expenses, interest and indemnities,
due to the Policy Provider hereunder, or under the Policy Provider Documents,
all such amounts to be paid only as expressly provided hereunder and without
duplication whether by reason of any rights of subrogation or otherwise.

          "Policy Redemption Premium" has the meaning given to such term in the
Policy Fee Letter.

          "Pool Balance" has the meaning given to such term in the Pass Through
Trust Agreement.

          "Precedent Lease" has the meaning given to such term in Section
5.03(e) hereof.

          "Primary Expenses" means all Expenses other than ACS Group
Modification Payments and ACS Group Refinancing Expenses.

          "Principal Conversion Election" has the meaning given to such term in
Section 3.06(g) hereof.



                                                                              36


          "Prior Ranking Amounts" has the meaning given to such term in Section
3.08(a) hereof.

          "Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Section 2.02(a) hereof.

          "Prohibited Countries" has the meaning determined, from time to time,
in accordance with Section 5.03(a) hereof.

          "Purchase Agreement" means the Purchase Agreement dated as of June 15,
2006 between the Bermudian Sellers and the Issuer.

          "Purchase Option" means a contractual option granted by the lessor or
owner under an ACS Group Aircraft Agreement (including pursuant to a conditional
sale agreement) as to the purchase of the applicable ACS Group Aircraft.

          "Quarterly Report" has the meaning given to such term in Section
2.15(a) hereof.

          "Rating Agency" means each of Moody's and Standard & Poor's and any
other nationally recognized rating agency designated by the Issuers; provided
that such organizations shall only be deemed to be a Rating Agency for purposes
of this Indenture with respect to the Certificates they are then rating.

          "Rating Agency Confirmation" means a prior written confirmation from
each (unless specified otherwise) Rating Agency received by the Issuers and the
Trustees that a specified action or event shall not result in the downgrade,
qualification or withdrawal of such Rating Agency's then current credit rating,
if any, of any Certificates (such rating, in the case of the Certificates, as
determined without regard to the Policy).

          "Received Currency" has the meaning given to such term in Section
13.07(a) hereof.

          "Receiver" means any Person or Persons appointed as (and any
additional Person or Persons appointed or substituted as) administrative
receiver, receiver, manager or receiver and manager.

          "Record Date" means, with respect to each Payment Date, the close of
business on the day that is 15 days prior to such Payment Date or, if 15 days
has not passed since the Initial Closing Date, the Initial Closing Date, in any
event whether or not such day is a Business Day.

          "Redemption" has the meaning given to such term in Section 3.10(c)
hereof.

          "Redemption Date" means the date, which shall in each case be a
Payment Date, on which Securities of any subclass are redeemed pursuant to
Section 3.10 hereof.



                                                                              37


          "Redemption Premium" means in respect of any Initial Class A Security
being redeemed in an Optional Redemption on any date, the Redemption Premium
indicated for such Initial Security with respect to such date in the table
below:





                           REDEMPTION DATE                              SUBCLASS A-1
---------------------------------------------------------------------   ------------

On or after the Initial Closing Date                                        103%
On or after the date that is 11 months after the Initial Closing Date       102%
On or after the date that is 21 months after the Initial Closing Date       101%
On or after the date that is 31 months after the Initial Closing Date       100%



          "Redemption Price" means an amount (determined as of the Calculation
Date for the Redemption Date for any Redemption pursuant to Section 3.10(a)
hereof) equal to:

          (a) with respect to any Initial Class A Securities being redeemed and
except as otherwise provided in clause (d) below, the product of the applicable
Redemption Premium and the portion of the Outstanding Principal Balance being
redeemed;

          (b) with respect to any Securities being redeemed under Section
3.10(a) hereof after the giving of a Default Notice or the Acceleration of any
of the Securities or under Section 3.10(b) hereof, the then Outstanding
Principal Balance thereof; and

          (c) with respect to any Securities other than the Initial Securities,
as provided in the Board Resolution providing for the issuance of such
Securities.

          "Reference Agency Agreement" means the Reference Agency Agreement
dated as of the Initial Closing Date, among the Issuers, the Reference Agent and
the Cash Manager pursuant to which LIBOR is determined from time to time.

          "Reference Agent" means the Person acting, at the time of
determination, in the capacity of the Reference Agent under the Reference Agency
Agreement. The initial Reference Agent is Deutsche Bank Trust Company Americas.

          "Reference Date" means, with respect to each Accrual Period, the day
that is two Business Days prior to the commencement of such Accrual Period.

          "Refinancing" has the meaning given to such term in Section 2.10(a)
hereof.

          "Refinancing Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Refinancing Expenses" means all out-of-pocket costs and expenses
Incurred in connection with an offering and issuance of Refinancing Securities
and any corresponding refinancing of the Certificates.



                                                                              38


          "Refinancing Securities" means any subclass of Securities issued by
the Issuer under this Indenture at any time and from time to time after the date
hereof, in a Refinancing under Section 2.10 hereof.

          "Register" has the meaning given to such term in Section 2.07(a)
hereof.

          "Regular Distribution Date" has the meaning given to such term in the
Pass Through Trust Agreement.

          "Regulation" has the meaning given to such term in Section 2.18
hereof.

          "Related Collateral Document" means any letter of credit, third-party
or bank guarantee or cash collateral provided by or on behalf of a Lessee to
secure such Lessee's obligations under an ACS Group Lease.

          "Related Documents" means the Administrative Agency Agreement, the
Cash Management Agreement, each Eligible Credit Facility, this Indenture, the
Guarantor Indenture, the ACS Group Securities, the Reference Agency Agreement,
the Security Documents, the Policy Provider Documents, the Remarketing Services
Agreements, the Back-Up Remarketing Services Agreement, the Hedge Overview
Services Agreement, the ACS Group Purchase Agreements and any other ACS Group
Acquisition Agreement, any Hedge Agreements and any Hedge Guarantees.

          "Re-leasing Expenses" means, with respect to any period, all
out-of-pocket costs and expenses incurred by the ACS Group in connection with
the re-leasing of ACS Group Aircraft during such period, including but not
limited to the following:

          (a) storage, maintenance, test flight, navigation, landing, ferry
flights, shipping, fuel, reconfiguration, modification, refurbishment and repair
expenses incurred in connection with the re-leasing of such ACS Group Aircraft
during such period;

          (b) insurance premiums, fees and expenses incurred by or on behalf of
the ACS Group for possessed hull and liability insurance while such ACS Group
Aircraft is off-lease during such period;

          (c) expenses incurred in connection with the acceptance of delivery,
and in connection with the transition of such ACS Group Aircraft, to such
re-lease during such period; and

          (d) outside legal counsel fees and expenses and other professional
fees and expenses, and all court costs, filing fees, bonding costs and other
expenses, and other governmental fees and costs related to any re-lease of such
ACS Group Aircraft during such period;

provided that Re-leasing Expenses shall not include those expenses against
which, under leases that require maintenance reserves to be paid, lessees
customarily pay maintenance reserves.



                                                                              39


          "Relevant Information" means any information provided to the Cash
Manager by any Service Provider or any other service provider retained from time
to time by an ACS Group Member pursuant to the Related Documents.

          "Remaining Aircraft" has the meaning given to such term in the
Purchase Agreement or the Guarantor Purchase Agreement, as applicable.

          "Remaining Aircraft Allocation Amount" has the meaning given to such
term in Section 2.11 hereof.

          "Remarketing Servicers" means, collectively, the Irish Remarketing
Servicer and the Bermudian Remarketing Servicer.

          "Remarketing Services Agreements" means, collectively, the Irish
Remarketing Services Agreement and the Bermudian Remarketing Services Agreement.

          "Renewal Lease" has the meaning given to such term in Section 5.03(e)
hereof.

          "Rental Account" has the meaning given to such term in Section 3.01(a)
hereof.

          "Rent Payment Reimbursement Amount" means, for any Aircraft to be
Delivered, the Investment Earnings on the funds deposited in the related
Aircraft Purchase Account received during the relevant Rent Transfer Period.

          "Rental Payments" means all rental payments and other amounts
equivalent to a rental payment payable by or on behalf of a Lessee under an ACS
Group Lease, including payments under any Purchase Option.

          "Rent Transfer Period" means, for each Aircraft to be Delivered, the
period from the Initial Closing Date and ending on (but excluding) the first
Calculation Date thereafter and each successive period beginning on (and
including) a Calculation Date and ending on (but excluding) the next succeeding
Calculation Date.

          "Replacement Credit Facility" means, for the Initial Credit Facility,
an irrevocable revolving credit agreement (or agreements) in substantially the
form of the Initial Credit Facility, including reinstatement provisions, or in
such other form or forms (which may include a letter of credit, surety bond,
swap, financial insurance policy or guaranty) as shall permit the Rating
Agencies to confirm in writing their respective ratings then in effect for the
Certificates (before downgrading of such ratings, if any, as a result of the
downgrading of the ratings of the replaced Initial Credit Facility Provider;
such rating as determined without regard to the Policy) and, if not in form and
substance substantially the same as the Initial Credit Facility as reasonably
determined by the Policy Provider, that has been approved in writing by the
Policy Provider, in a face amount (or in an aggregate face amount) equal to the
then Maximum Commitment for the replaced Initial Credit Facility and issued by
an Eligible Provider or Eligible Providers having an unsecured short-term or
long-term (as the case may be) debt rating and a short-term or long-term (as the
case may be) issuer credit rating, as the case may be, issued by Moody's and
Standard & Poor's which are equal to or higher than the Threshold Rating (and
consented to in writing by the Policy Provider if any such rating which is equal
to the Threshold Rating shall not have a stable



                                                                              40


or positive outlook according to the Rating Agencies) or, with the written
consent of the Policy Provider, such other ratings and qualifications as shall
permit the Rating Agencies to confirm in writing their respective ratings then
in effect for the Certificates (before the downgrading of such ratings, if any,
as a result of the downgrading of the ratings of the replaced Initial Credit
Facility Provider; such rating as determined without regard to the Policy).
Without limitation of the form that a Replacement Credit Facility otherwise may
have pursuant to the preceding sentence, a Replacement Credit Facility may have
a stated expiration date earlier than 15 days after the Final Maturity Date of
the ACS Group Subclass A-1 Securities so long as such Replacement Credit
Facility provides for a Non-Extension Drawing as contemplated by Section
3.12(d).

          "Replacement Credit Facility Provider" means a Person (or Persons) who
issues a Replacement Credit Facility.

          "Repossession Insurance" has the meaning given to such term in Section
5.03(g) hereof and Section 5.03(g) of the Guarantor Indenture.

          "Required Amount" means, (a) initially (i) with respect to the Initial
Credit Facility, zero; provided that, if a Downgrade Drawing, a Non-Extension
Drawing or (for the purposes of Section 3.12(f)(ii) hereof and Article II of the
Initial Credit Facility only) a Final Drawing shall have occurred, the "Required
Amount" shall be the Maximum Commitment, and (ii) with respect to the Senior
Cash Collateral Account, an amount equal to the Initial Reserved Cash therefor,
and (b) thereafter, on any Payment Date, with respect to the Senior Cash
Collateral Account, and any other Eligible Credit Facility, such amounts as
designated in a Board Resolution and Guarantor Board Resolution (and for which a
Rating Agency Confirmation has been received and prior written consent of the
Policy Provider and the Initial Credit Facility Provider has been received),
plus the increase, if any, in the Required Amount for any such Cash Collateral
Account or Eligible Credit Facility provided for by the terms of any ACS Group
Additional Securities or ACS Group Refinancing Securities.

          "Required Expense Amount" means, with respect to each Payment Date,
the amount of Expenses of the ACS Group due and payable on the Calculation Date
relating to such Payment Date or reasonably anticipated to become due and
payable before the next succeeding Payment Date, the accrual of which would be
prudent in light of the size and timing of such Expenses, and with respect to
any maintenance expenditures, before the third succeeding Payment Date, to the
extent such Expenses consist of (a) Primary Expenses and (b) any ACS Group
Modification Payments or ACS Group Refinancing Expenses in respect of which a
Permitted Accrual was previously effected by a deposit in the Expense Account
(whether or not any such deposit has been previously used to pay any other
Primary Expense but excluding any portion of such deposit previously used to pay
any ACS Group Modification Payments or ACS Group Refinancing Expenses) in each
case after giving effect to any withdrawal from any Lessee Funded Account or any
drawing upon a Related Collateral Document that is then available for the
payment of any such Expense; provided, however, that the Required Expense Amount
shall not include any Initial Expenses.

          "Required Expenses Shortfall" has the meaning given to such term in
Section 3.06(f) hereof.



                                                                              41


          "Requisition Compensation" means all monies or other compensation
receivable by any ACS Group Member from any government, whether civil, military
or de facto, or public or local authority in relation to an ACS Group Aircraft
in the event of its requisition for title, confiscation, restraint, detention,
forfeiture or compulsory acquisition or seizure or requisition for hire by or
under the order of any government or public or local authority.

          "Responsible Officer" means (a) with respect to the Trustee, any
officer within the Corporate Trust Office, including any Vice President,
Managing Director, Assistant Vice President, Director or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the above designated officers and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge and familiarity with the particular subject, (b) with respect to the
Issuer, any Director and (c) with respect to any Person providing an Eligible
Credit Facility and the Cash Manager or any other Service Provider, any
authorized officer of such Person.

          "Restricted Security" means any Security bearing the Private Placement
Legend.

          "Secured Obligations" has the meaning given to such term in the
Security Trust Agreement.

          "Secured Parties" has the meaning given to such term in the Security
Trust Agreement.

          "Securities" means the Initial Securities, all Additional Securities,
if any, all Refinancing Securities, if any, and all Securities, if any, issued
in replacement or substitution of a Security, in each case, pursuant to this
Indenture.

          "Securities Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Securities Act" means the Securities Act of 1933.

          "Security Deposit Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Security Documents" means the Security Trust Agreement and any
document executed pursuant thereto, or otherwise, for the purpose of granting a
security interest in any Collateral to the Security Trustee for the benefit of
the Secured Parties or for the purpose of perfecting such security interest.

          "Security Interests" means the security interests granted or expressed
to be granted in the Collateral pursuant to the Security Trust Agreement.

          "Security Trust Agreement" means the Security Trust Agreement dated as
of the Initial Closing Date, among the Issuers, the Security Trustee, the Cash
Manager, the Operating Bank and each other party thereto.



                                                                              42


          "Security Trustee" means the Person appointed, at the time of
determination, as the trustee for the benefit of the Secured Parties pursuant to
Section 5.01 of the Security Trust Agreement. The initial Security Trustee is
Deutsche Bank Trust Company Americas.

          "Segregated Funds" means, with respect to each ACS Group Lease, (a)
all security deposits provided for under such ACS Group Lease that have been
received from the relevant Lessee or pursuant to the relevant ACS Group
Acquisition Agreement with respect to such ACS Group Lease, (b) any security
deposit pledged to the relevant Lessee by an ACS Group Member and (c) all other
funds, including any maintenance reserves, received from the relevant Lessee or
pursuant to the relevant ACS Group Acquisition Agreement with respect to such
ACS Group Lease and in each case of clause (a), (b) and (c) not permitted,
pursuant to the terms of such ACS Group Lease, to be commingled with the funds
of the ACS Group.

          "Sellers" means the Irish Seller and the Bermudian Sellers and any
Affiliates thereof that are sellers of (i) a Company or U.S. Trust or (ii)
entities that own an Additional Aircraft or a related Aircraft Interest, in each
case to an ACS Group Member.

          "Senior Cash Collateral Account" has the meaning given to such term in
Section 3.01(a) hereof. The Senior Cash Collateral Account is an Eligible Credit
Facility.

          "Senior Cash Collateral Event" has the meaning given to such term in
Section 3.01(p) hereof.

          "Senior Claim" means, with respect to any Obligations (other than
Expenses), all other Obligations the payment of which constitutes a Prior
Ranking Amount with respect thereto.

          "Senior Claimant" means the holder of a Senior Claim.

          "Senior Class" means (a) with respect to the Securities, so long as
any Class A Securities are Outstanding, the Class A Securities and (b) with
respect to the Guarantor Securities, (i) so long as any Guarantor Class A
Securities are Outstanding, the Guarantor Class A Securities, (ii) after the
Guarantor Class A Securities have been paid in full but so long as any Class A
Securities are Outstanding, the Class A Securities and (iii) after the Guarantor
Class A Securities have been paid in full, the Class E Securities.

          "Senior Hedge Payment" means, on any Payment Date, a net payment to a
Hedge Provider by any ACS Group Member (including, but not limited to, any Hedge
Breakage Costs payable by any ACS Group Member to a Hedge Provider if such Hedge
Breakage Costs result from an early termination of the related Hedge Agreement,
unless the applicable Hedge Provider is the "Defaulting Party" or an "Affected
Party" (as such terms are defined in the related Hedge Agreement); provided
that, where the applicable Hedge Provider is an "Affected Party", such Hedge
Breakage Costs are Senior Hedge Payments unless subordinated pursuant to the
applicable Hedge Agreement), other than any Subordinated Hedge Payment.

          "Senior Hedge Payments Shortfall" has the meaning given to such term
in Section 3.06(f) hereof.



                                                                              43


          "Senior Trustee" means the Trustee of the Senior Class; provided that
if the same Person shall not be the Trustee of each of the subclasses of the
Senior Class, then the Senior Trustee shall be the Trustee of the subclass of
such Securities with the lowest numerical designation then Outstanding. If as a
result of the foregoing, the Senior Trustee and the Operating Bank are not the
same Person, the Senior Trustee shall assume the obligations of the Operating
Bank under, and become a party to, the Security Trust Agreement.

          "Service Provider" means each of the Operating Bank, the Remarketing
Servicers, the Back-Up Remarketing Servicer, the Trustee, the Guarantor Trustee,
the Security Trustee, any Authorized Agent, the Administrative Agent, the Cash
Manager, the Hedge Services Provider, the Bermudian Secretarial Services
Provider, the Irish Secretarial Services Provider, the Drawing Agent and the
Reference Agent.

          "Shareholders" means the holder(s) of the shares of the Issuer as
shall be notified from time to time by the Guarantor to the Trustee and the
Guarantor Trustee.

          "Shareholders Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Special Distribution Date" has the meaning given to such term in the
Pass Through Trust Agreement.

          "Special Indemnity Payments" means (a) any indemnity amounts owing at
any time and from time to time by either Issuer to the Initial Purchasers under
the Certificates Purchase Agreement, to the Remarketing Servicer under Section
12.01 of the applicable Remarketing Services Agreement (exclusive of such
indemnities owing to the Back-Up Remarketing Servicer), to the Policy Provider
under the Policy Provider Indemnification Agreement or to the Initial Credit
Facility Provider under Sections 3.01 and 3.09 of the Initial Credit Facility
and (b) any other indemnity amounts owing at any time and from time to time to
any other Person (other than the Back-Up Remarketing Servicer) party to a
Related Document which arise from violations of the Securities Act, the U.S.
Securities Exchange Act of 1934, as amended or any other securities law.

          "Specified Aircraft" means the ACS Group Initial Aircraft with respect
to which the Lessee under the related ACS Group Lease shall have entered into a
Novation with respect to such ACS Group Lease.

          "Specified Number" means 33 minus the number of ACS Group Initial
Aircraft purchased by the Issuers within five Business Days of the Initial
Closing Date (or such longer period as the Policy Provider may agree in
writing).

          "Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.

          "State of Registration" means, in relation to an Aircraft at any time,
the country or state on whose national register such Aircraft is registered at
that time under the laws of such



                                                                              44


country or state in accordance with the applicable provisions of any Lease
relating to such Aircraft or, in the absence of any such provisions, Applicable
Law.

          "Stated Expiration Date" has the meaning given to such term in Section
3.12(d) hereof.

          "Stated Rate of Interest" means (i) with respect to each subclass of
ACS Group Securities (other than Class E Securities), the interest rate set
forth in such ACS Group Securities and (ii) with respect to the Certificates,
has the meaning given to such term in the Pass Through Trust Agreement.

          "Subclass A-1 Securities" means the Initial Securities that are
designated "Subclass A-1 Securities" under this Indenture, all Additional
Securities, if any, so designated, all Refinancing Securities, if any, so
designated and all Securities, if any, issued in replacement or substitution
therefor, in each case, pursuant to this Indenture.

          "Subclass E-1 Securities" means the Guarantor Initial Securities that
are designated Subclass E-1 Securities, all Guarantor Additional Securities, if
any, so designated, all Guarantor Refinancing Securities, if any, so designated
and all Guarantor Securities, if any, issued in replacement or substitution
therefor, in each case, pursuant to the Guarantor Indenture.

          "Subordinated Claim" means a claim that is subordinate in right of
payment to each Senior Claim as provided in Section 3.08 hereof.

          "Subordinated Claimant" means the holder of a Subordinated Claim.

          "Subordinated Hedge Payments" means any amounts payable by any ACS
Group Member to a Hedge Provider that are subordinated in accordance with the
relevant Hedge Agreement (including, but not limited to, any Hedge Breakage
Costs payable by any ACS Group Member to a Hedge Provider if such Hedge Breakage
Costs result from an early termination of the related Hedge Agreement with
respect to which such Hedge Provider is the "Defaulting Party" or, to the extent
subordinated in any Hedge Agreement, an "Affected Party" (as such terms are
defined in the related Hedge Agreement)).

          "Subordinated Representative" means, as applicable, the Trustee with
respect to any Subordinated Claim consisting of any subclass of Securities of
which it is the Trustee and any other Person acting as the representative of one
or more Subordinated Claimants.

          "Substitute Aircraft" has the meaning given to such term in the
Purchase Agreement or the Guarantor Purchase Agreement, as applicable, and that
has been approved by the Policy Provider.

          "Swaption" means any option agreement with respect to a Hedge
Agreement.

          "Taxes" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs Incurred or imposed with respect thereto) imposed or otherwise
assessed by any Governmental Authority, including, without limitation:



                                                                              45


taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth and similar charges; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods
and services, gains taxes, license, registration and documentation fees, customs
duties, tariffs, and similar charges.

          "Termination Notice" has the meaning given to such term in the Initial
Credit Facility.

          "Third Party Event" has the meaning given to such term in Section
5.03(b) hereof.

          "Threshold Rating" means the short-term issuer credit rating of A-1+
by Standard & Poor's (or, in the absence of a short-term issuer credit rating by
Standard & Poor's, a long-term issuer credit rating of AA- by Standard & Poor's)
and a short-term unsecured debt rating of P-1 by Moody's (or, in the absence of
a short-term unsecured debt rating by Moody's, a long-term unsecured debt rating
of A1 by Moody's).

          "Total Loss" means, with respect to any ACS Group Aircraft (a) if the
same is subject to an ACS Group Lease, a Casualty Occurrence, Total Loss or
Event of Loss (each as defined in such ACS Group Lease) or the like (however so
defined); or (b) if the same is not subject to an ACS Group Lease, (i) its
actual, constructive, compromised, arranged or agreed total loss, (ii) its
destruction, damage beyond repair or being rendered permanently unfit for normal
use for any reason whatsoever, (iii) its requisition for title, confiscation,
restraint, detention, forfeiture or any compulsory acquisition or seizure or
requisition for hire (other than a requisition for hire for a temporary period
not exceeding 180 days) by or under the order of any government (whether civil,
military or de facto) or public or local authority or (iv) its hijacking, theft
or disappearance, resulting in loss of possession by the owner or operator
thereof for a period of 30 consecutive days or longer. A Total Loss with respect
to any ACS Group Aircraft shall be deemed to occur on the date on which such
Total Loss is deemed pursuant to the relevant ACS Group Lease to have occurred
or, if such Lease does not so deem or the relevant ACS Group Aircraft is not
subject to an ACS Group Lease, (A) in the case of an actual total loss or
destruction, damage beyond repair or being rendered permanently unfit, the date
on which such loss, destruction, damage or rendering occurs (or, if the date of
loss or destruction is not known, the date on which the relevant ACS Group
Aircraft was last heard of); (B) in the case of a constructive, compromised,
arranged or agreed total loss, the earlier of (1) the date 30 days after the
date on which notice claiming such total loss is issued to the insurers or
brokers and (2) the date on which such loss is agreed or compromised by the
insurers; (C) in the case of requisition for title, confiscation, restraint,
detention, forfeiture, compulsory acquisition or seizure, the date on which the
same takes effect; (D) in the case of a requisition for hire, the expiration of
a period of 180 days from the date on which such requisition commenced (or, if
earlier, the date upon which insurers make payment on the basis of a Total
Loss); or (E) in the case of clause (iv) above, the final day of the period of
30 consecutive days referred to therein.

          "Total Loss Proceeds" means, in relation to an ACS Group Aircraft, the
total net proceeds of the insurance and reinsurance paid in respect of a Total
Loss thereof and includes, in the case of a Total Loss of an airframe which does
not involve the Total Loss of all Engines or



                                                                              46


Parts installed thereon at the time when such Total Loss occurred, the net sale
proceeds of any such surviving Engines or Parts.

          "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
(15 U.S. Code Section 77aaa-77bbbb), as in effect on the date this Indenture was
executed, except as provided in Section 9.05 hereof.

          "Trustee" means, with respect to each subclass of Securities the
Person appointed, at the time of determination, as the trustee of such subclass
of Securities in accordance with this Indenture. The initial Trustee for each
subclass of Securities is Deutsche Bank Trust Company Americas.

          "Trustees" means, collectively, the Trustee and the Guarantor Trustee.

          "Unrestricted Security" means any Security not bearing the Private
Placement Legend.

          "U.S." means the United States of America.

          "U.S. GAAP" means generally accepted accounting principles in the
United States.

          "U.S. Government Obligations" has the meaning given to such term in
Section 12.02(a) hereof.

          "U.S. Trust" has the meaning given to such term in the Purchase
Agreement.

          "War Risk Coverage" has the meaning given to such term in Exhibit D
hereto.

          "Written Notice" means, with reference to the Issuer, the Trustee, the
Cash Manager, the Operating Bank, the Administrative Agent or the provider of
any Eligible Credit Facility, a written instrument executed by a Responsible
Officer of such Person.

     Section 1.02 Rules of Construction. Unless the context otherwise requires:

          (a) A term has the meaning assigned to it and an accounting term not
otherwise defined has the meaning assigned to it in accordance with U.S. GAAP.

          (b) The terms "herein", "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.

          (c) Unless otherwise indicated in context, all references to Articles,
Sections, Schedules or Exhibits refer to an Article or Section of, or a Schedule
or Exhibit to, this Indenture.

          (d) Words of the masculine, feminine or neuter gender shall mean and
include the correlative words of other genders, and words in the singular shall
include the plural, and vice versa.



                                                                              47


          (e) The terms "include", "including" and similar terms shall be
construed as if followed by the phrase "without limitation".

          (f) Unless otherwise indicated, references to a subclass of
Securities, Guarantor Securities or ACS Group Securities shall be to the
Subclass A-1 Securities, the Guarantor Subclass A-1 Securities or the ACS Group
Subclass A-1 Securities, respectively, the Subclass E-1 Securities or to a
subclass of Refinancing Securities, Guarantor Refinancing Securities or ACS
Group Refinancing Securities or Additional Securities, Guarantor Additional
Securities or ACS Group Additional Securities; and references to a class of
Securities, Guarantor Securities or ACS Group Securities shall be to the Class A
Securities, the Guarantor Class A Securities or the ACS Group Class A Securities
or the Class E Securities or to a class of Refinancing Securities, Guarantor
Refinancing Securities or ACS Group Refinancing Securities or Additional
Securities, Guarantor Additional Securities or ACS Group Additional Securities.

          (g) References in this Indenture to an agreement or other document
(including this Indenture) include references to such agreement or document as
amended, replaced or otherwise modified (without, however, limiting the effect
of the provisions of this Indenture with regard to any such amendment,
replacement or modification), and the provisions of this Indenture apply to
successive events and transactions. References to any Person shall include such
Person's successors in interest and permitted assigns.

          (h) References in this Indenture to Section 3.01 through Section 3.08
and Section 3.12 through Section 3.15 shall include reference to the equivalent
Section 3.01 through Section 3.08 and Section 3.12 through Section 3.15 of the
Guarantor Indenture.

          (i) References in this Indenture to any statute or other legislative
provision shall include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor, and references to any
governmental Person shall include reference to any governmental Person
succeeding to the relevant functions of such Person.

          (j) References in this Indenture to the Securities of any class or
subclass include the conditions applicable to the Securities of such class or
subclass; and any reference to any amount of money due or payable by reference
to the Securities of any class or subclass shall include any sum covenanted to
be paid by the Issuer under this Indenture.

          (k) References in this Indenture to any action, remedy or method of
judicial proceeding for the enforcement of the rights of creditors or of
security shall be deemed to include, in respect of any jurisdiction other than
the State of New York, references to such action, remedy or method of judicial
proceeding for the enforcement of the rights of creditors or of security
available or appropriate in such jurisdiction as shall most nearly approximate
such action, remedy or method of judicial proceeding described or referred to in
this Indenture.

          (l) Where any payment is to be made, funds applied or any calculation
is to be made hereunder on a day which is not a Business Day, unless any Related
Document otherwise provides, such payment shall be made, funds applied and
calculation made on the next succeeding Business Day, and payments shall be
adjusted accordingly.



                                                                              48


          (m) Where the Bermudian Remarketing Servicer or any replacement
remarketing servicer (including the Back-Up Remarketing Servicer) or the
Administrative Agent or any replacement administrative agent are performing or
may perform lease management and/or remarketing services pursuant to a Related
Document in relation to one or more different Aircraft at the same time, a
reference in this Indenture to the "Remarketing Servicer" or the "Administrative
Agent", as applicable, shall be construed as a reference to each of the
Bermudian Remarketing Servicer or replacement remarketing servicer, as the case
may be, or Administrative Agent or replacement administrative agent, as
applicable, and the rights and obligations of the parties hereto shall be
construed accordingly.

     Section 1.03 Compliance Certificates and Opinions. Upon any application or
request by the Issuer to the Trustee to take any action under any provision of
this Indenture, the Issuer shall furnish to the Trustee an Officer's Certificate
stating that, in the opinion of the signers thereof, all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with, and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.

          Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture or any indenture
supplemental hereto shall include:

          (a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Indenture relating thereto;

          (b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

          (c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and

          (d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.

     Section 1.04 Acts of Holders. (a) Any direction, consent, waiver or other
action provided by this Indenture in respect of the Securities of any subclass
to be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent or proxy duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee, to each Rating Agency where it is
hereby expressly required pursuant to this Indenture and to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose under



                                                                              49


this Indenture and conclusive in favor of the Trustee or the Issuer, if made in
the manner provided in this Section.

          (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds
or administer oaths that the Person executing such instrument acknowledged to
him the execution thereof, or by an affidavit of a witness to such execution
sworn to before any such notary or such other officer and where such execution
is by an officer of a corporation or association, trustee of a trust or member
of a partnership, on behalf of such corporation, association, trust or
partnership, such certificate or affidavit shall also constitute sufficient
proof of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other reasonable manner which the Trustee deems
sufficient.

          (c) In determining whether the Holders have given any direction,
consent, request, demand, authorization, notice, waiver or other Act (a
"Direction"), under this Indenture, Securities owned by the Issuer or any
Affiliate of the Issuer shall be disregarded and deemed not to be Outstanding
for purposes of any such determination. In determining whether the Trustee shall
be protected in relying upon any such Direction, only Securities which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of
the Securities of any subclass Outstanding, such Securities shall not be so
disregarded as aforesaid, and (ii) if any amount of Securities of such subclass
so owned by any such Person have been pledged in good faith, such Securities
shall not be disregarded as aforesaid if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Issuer or any Affiliate of the
Issuer.

          (d) The Issuer may at its option, by delivery of Officers'
Certificates to the Trustee, set a record date other than the Record Date to
determine the Holders in respect of the Securities of any subclass entitled to
give any Direction in respect of such Securities. Such record date shall be the
record date specified in such Officer's Certificate which shall be a date not
more than 30 days prior to the first solicitation of Holders in connection
therewith. If such a record date is fixed, such Direction may be given before or
after such record date, but only the Holders of record of the applicable
subclass at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities of such subclass have authorized or agreed
or consented to such Direction, and for that purpose the Outstanding Securities
of such subclass shall be computed as of such record date; provided that no such
Direction by the Holders on such record date shall be deemed effective unless it
shall become effective pursuant to the provisions of this Indenture not later
than one year after the record date.

          (e) Any Direction or other action by the Holder of any Security shall
bind the Holder of every Security issued upon the transfer thereof or in
exchange therefor or in lieu thereof, whether or not notation of such action is
made upon such Security.



                                                                              50


                                   ARTICLE II

                                 THE SECURITIES

     Section 2.01 Authorized Amount; Terms; Form; Execution and Delivery. (a)
The Outstanding Principal Balance of any subclass of Securities which may be
authenticated and delivered from time to time under this Indenture shall not
exceed the initial Outstanding Principal Balance set forth for such subclass of
Securities in the definition thereof or, with respect to any subclass of
Refinancing Securities or Additional Securities, authorized in one or more Board
Resolutions; provided that at no time may the Outstanding Principal Balance of
any subclass of Refinancing Securities exceed the Redemption Price of the
subclass of Securities being refinanced thereby plus Refinancing Expenses
relating thereto, any Policy Premium and any Policy Redemption Premium, if any,
due and payable to the Policy Provider and any amount to be deposited in a Cash
Collateral Account for such Refinancing Securities; and provided further that
any Additional Securities shall be issued in accordance with Section 2.12
hereof. All Securities of any class or subclass need not be issued at the same
time and any class or subclass of Securities may be reopened, without the
consent of any Holder, for issuances of Additional Securities or Refinancing
Securities of such class or subclass, subject in all cases to Sections 2.10,
2.12, 3.09, 3.11 and 5.02 hereof and any other applicable provision of this
Indenture.

          The Initial Securities issuable hereunder on the Initial Closing Date
shall be issued in two subclasses. The Initial Securities shall be designated
the Subclass A-1 Securities.

          Interest shall accrue on any subclass of the Floating Rate Securities
from the relevant Closing Date and shall be computed for each Accrual Period on
the basis of a 360-day year and the actual number of days elapsed in such
Accrual Period on the Outstanding Principal Balance of such Security. Interest
shall accrue on any subclass of the Fixed Rate Securities from the relevant
Closing Date and shall be computed for each Accrual Period on the basis of a
360-day year and one-twelfth of an annual interest payment on the Outstanding
Principal Balance and, in the case of the first Accrual Period and any
incomplete Accrual Period, on the basis of a 360-day year consisting of twelve
30-day months and the actual number of days elapsed in such Accrual Period.

          Any amount of premium or interest on any subclass of Securities not
paid when due shall, to the fullest extent permitted by applicable law, bear
interest at an interest rate per annum equal to the Stated Rate of Interest for
such Securities from the date when due until such amount is paid or duly
provided for, due and payable on the next succeeding Payment Date, subject to
the availability of the Available Collections therefor after making payments
entitled to priority under Section 3.08 hereof.

          (b) There shall be issued and delivered and authenticated on the
relevant Closing Date, to each of the Holders, Securities in the principal
amounts and maturities and bearing the interest rates, in each case in
definitive, certificated, registered form as described herein or in any
indenture supplemental hereto, and substantially in the form set forth in the
applicable exhibit to this Indenture or in any indenture supplemental hereto,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or



                                                                              51


endorsements printed, lithographed or engraved thereon, as may be required to
comply with the rules of any securities exchange on which such Securities may be
listed or to conform to any usage in respect thereof, or as may, consistently
herewith, be prescribed by the Director executing such Securities, such
determination by the Director to be evidenced by his or her execution of the
Securities.

          Securities of each subclass shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the Director executing such Securities, as
evidenced by his or her execution of such Securities.

          Each subclass of Securities shall be offered and sold in reliance on
Section 4(2) of the Securities Act and shall be duly executed by the Issuer,
authenticated by the Trustee and held by the Pass Through Trustee as hereafter
provided.

          (c) On the date of any Refinancing, the Issuer shall issue and deliver
as provided in Section 2.10 hereof an aggregate principal amount of Refinancing
Securities having the maturities and bearing the interest rates and such other
terms authorized by one or more Board Resolutions or in any indenture
supplemental hereto providing for the issuance of such Securities or specified
in the form of such Securities, in each case in accordance with such Section
2.10.

          (d) On the date of the issuance, if any, of any Additional Securities,
the Issuer shall issue and deliver, as provided in Sections 2.12 and 5.02(f)
hereof, an aggregate principal amount of Additional Securities having the
maturities and bearing the interest rates and such other terms authorized by one
or more Board Resolutions or in any indenture supplemental hereto providing for
the issuance of such Securities or specified in the form of such Securities, in
each case in accordance with such Section 2.12.

          (e) The Securities shall be executed on behalf of the Issuer by the
manual or facsimile signature of a Director or other authorized officer of the
Issuer.

          (f) Each Security bearing the manual or facsimile signatures of any
individual who was at the time such Security was executed a Director or other
authorized officer of the Issuer shall bind the Issuer, notwithstanding that any
such individual has ceased to hold such office prior to the authentication and
delivery of such Securities or any payment thereon.

          (g) At any time and from time to time after the execution of any
Securities, the Issuer may deliver such Securities to the Trustee for
authentication and, upon receipt of a written instruction by the Issuer, subject
to the provisions of clause (h) below, the Trustee shall authenticate such
Securities by manual or facsimile signature upon receipt by it of written orders
of the Issuer. The Securities shall be authenticated on behalf of the Trustee by
any Responsible Officer of the Trustee.

          (h) No Security shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless it shall have been executed on
behalf of the Issuer as provided in clause (e) above and authenticated by or on
behalf of the Trustee as provided in clause (g) above. Such signatures shall be
conclusive evidence that such Security has been duly executed



                                                                              52


and authenticated under this Indenture. Each Security shall be dated the date of
its authentication.

          (i) The Issuer shall execute and the Trustee shall, in accordance with
this Section 2.01, authenticate the Securities and, in the case of the Class A
Securities, the Registrar shall register the Securities in the name of the Pass
Through Trustee and the Trustee shall deliver the Securities to the Pass Through
Trustee.

     Section 2.02 Restrictive Legends. (a) Except as specified in Section
2.13(a) hereof, each Security (and all Securities issued in exchange therefor or
upon registration of transfer or substitution thereof) shall bear the following
legend on the face thereof:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 AS
AMENDED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY IN
ANY JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE IN THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION.

          (b) Each Security (except as provided in Section 2.13(a)) shall also
bear the following legend on the face thereof:

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR SUCH
CERTIFICATES AND OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS AND THE OTHER RESTRICTIONS
CONTAINED IN THE INDENTURE.

          (c) Each Security shall also bear the following legend on the face
thereof:

EACH PURCHASER OR TRANSFEREE OF THIS SECURITY OR ANY INTEREST HEREIN WILL BE
REQUIRED TO REPRESENT, WARRANT AND AGREE THAT EITHER: (A) NO ASSETS OF (I) AN
EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), (II) A PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (III)
A PLAN, ACCOUNT OR ARRANGEMENT (SUCH AS A GOVERNMENTAL, CHURCH OR NON-U.S. PLAN)
THAT IS SUBJECT TO ANY U.S. FEDERAL, STATE, LOCAL OR FOREIGN LAW THAT IS
SUBSTANTIALLY SIMILAR TO SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE
("SIMILAR LAW") OR (IV) AN ENTITY WHOSE UNDERLYING ASSETS ARE DEEMED TO INCLUDE
ASSETS OF ANY SUCH EMPLOYEE BENEFIT PLAN, PLAN, ACCOUNT OR ARRANGEMENT, HAVE
BEEN USED TO ACQUIRE THIS SECURITY OR ANY INTEREST HEREIN; OR (B) THE
ACQUISITION, HOLDING AND DISPOSITION OF THIS SECURITY OR ANY INTEREST HEREIN BY
THE HOLDER WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION
UNDER



                                                                              53


SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR A VIOLATION OF ANY
SIMILAR LAW, AS APPLICABLE.

     Section 2.03 Registrar and Paying Agent. (a) With respect to each subclass
of Securities, there shall at all times be maintained by the Registrar (i) an
office or agency in the location set forth in Section 13.05 hereof where
Securities of such subclass may be presented or surrendered for registration of
transfer or for exchange, (ii) an office or agency in the location set forth in
Section 13.05 (other than Ireland) for payment of Securities of any subclass
(each, a "Paying Agent") and (iii) an office or agency where notices and demands
in respect of the payment of such Securities may be served. Written notice of
the location of such other office or agency and of any change of location
thereof shall be given by the Trustee to the Issuer and the Holders of such
subclass. In the event that no such office or agency shall be maintained or no
such notice of location or of change of location shall be given, presentations
and demands may be made and notices may be served at the Corporate Trust Office
of the Trustee.

          (b) Each Authorized Agent shall be a bank or trust company, shall be a
corporation organized and doing business under the laws of the United States or
any state or territory thereof or of the District of Columbia, with a combined
capital and surplus of at least $75,000,000 (or having a combined capital and
surplus in excess of $5,000,000 and the obligations of which, whether now in
existence or hereafter Incurred, are fully and unconditionally guaranteed by a
corporation organized and doing business under the laws of the United States,
any state or territory thereof or of the District of Columbia and having a
combined capital and surplus of at least $75,000,000) and shall be authorized
under the laws of the United States or any state or territory thereof to
exercise corporate trust powers, subject to supervision by Federal or state
authorities (such requirements, the "Eligibility Requirements"). The Trustee
shall initially be a Paying Agent and Registrar hereunder with respect to the
Securities of each subclass.

          (c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.

          (d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee and the Issuer. The Issuer may, and at the
request of the Trustee shall, at any time terminate the agency of any Authorized
Agent by giving written notice of termination to such Authorized Agent and to
the Trustee. Upon the resignation or termination of an Authorized Agent or if at
any time any such Authorized Agent shall cease to be eligible under this Section
(when, in either case, no other Authorized Agent performing the functions of
such Authorized Agent shall have been appointed by the Trustee), the Issuer
shall promptly appoint one or more qualified successor Authorized Agents,
reasonably satisfactory to the Trustee, to perform the functions of the
Authorized Agent which has resigned or whose agency has been terminated or who
shall have ceased to be eligible under this Section. The Issuer shall give
written notice of any such appointment made by it to the Trustee; and in each
case the Trustee



                                                                              54


shall mail notice of such appointment to all Holders of the related subclass as
their names and addresses appear on the Register for such subclass.

          (e) The Issuer agrees to pay, or cause to be paid, from time to time
to each Authorized Agent reasonable compensation for its services and to
reimburse it for its reasonable expenses to be agreed to pursuant to separate
agreements with each such Authorized Agent.

     Section 2.04 Paying Agent to Hold Money in Trust. The Trustee shall require
each Paying Agent other than the Trustee to agree in writing that all moneys
deposited with any Paying Agent for the purpose of any payment on the Securities
or to the Policy Provider shall be deposited and held in trust for the benefit
of the Holders (with regard to payments on the Securities) entitled to such
payment, or the Policy Provider, as the case may be, subject to the provisions
of this Section. Moneys so deposited and held in trust shall constitute a
separate trust fund for the benefit of the Holders with respect to which such
money was deposited.

          The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

     Section 2.05 Method of Payment. (a) On each Payment Date, the Trustee
shall, or shall instruct the Paying Agent to, pay, to the extent of the
Available Collections therefor transferred to a Securities Account, to the
Holders as of the Record Date for such Payment Date all principal or Redemption
Price of, and interest on the Securities of each subclass (other than payments
received following an Event of Default in respect of any subclass of
Securities); provided that in the event and to the extent receipt of any payment
is not confirmed by the Trustee or Paying Agent by 1:00 p.m. (New York time) on
such Payment Date or any Business Day thereafter, distribution thereof shall be
made on the Business Day following the Business Day such payment is received.

          (b) Any payments on a Payment Date with respect to the Class A
Securities shall be made by wire transfer to or as instructed by the Pass
Through Trustee at least five Business Days before the applicable Payment Date
so long as it is the Holder thereof. Alternatively, upon application in writing
to the Trustee, not later than the applicable Record Date, by a Holder other
than the Pass Through Trustee of one or more Class A Securities of such subclass
having an aggregate principal amount of not less than $1,000,000, any such
payments shall be made by wire transfer to an account designated by such Holder
at a financial institution in New York, New York.

          (c) The final payment for each subclass of Securities shall be made
only upon presentation and surrender of the Securities of such subclass by the
Holder or its agent at the Corporate Trust Office or agency of the Trustee or
Paying Agent specified in the notice of such final payment given by the Trustee
or Paying Agent. The Trustee or Paying Agent shall mail such notice of the final
payment of such subclass to each of the Holders of such subclass, specifying the
date and amount of such final payment no later than five Business Days prior to
such final payment.



                                                                              55


     Section 2.06 Minimum Denomination. Each subclass of Class A Securities
shall be issued in minimum denominations of $100,000 and integral multiples of
$1,000 in excess thereof.

     Section 2.07 Transfer and Exchange; Cancellation. (a) The Trustee agrees
with the Issuer that the Trustee shall keep a register (herein referred to as
the "Register") in which provisions shall be made for the registration of
Securities and the registration of transfers of Securities and a record of the
dates and payments made with respect to the Securities. The Register shall be
kept at the Corporate Trust Office, and the Trustee is hereby appointed
"Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided. A Holder may transfer a Security only by written
application to the Registrar stating the name of the proposed transferee and
otherwise complying with the terms of this Indenture, including, without
limitation, the provisions of this Section 2.07. No such transfer shall be
effective until, and such transferee shall succeed to the rights of a Holder
only upon, final acceptance and registration of the transfer by the Registrar in
the Register.

          (b) Upon surrender for registration or transfer of any Security at the
Corporate Trust Office, the Issuer shall execute, upon the written request of
such Holder, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
class and of a like aggregate principal amount. At the option of a Holder, its
Securities may be exchanged for other Securities of the same class of any
authorized denomination, of a like aggregate principal amount, upon surrender of
the Securities to be exchanged at the Corporate Trust Office. Each new Class A
Security issued upon transfer or exchange shall be in a principal amount of at
least $100,000 (and, if less, the then unpaid principal amount thereof) and
dated the date or dates to which interest on the Security surrendered shall have
been paid or, if no such interest shall have been paid, the applicable date of
issuance. Whenever any Securities are so surrendered for exchange, the Issuer
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive. All Securities
issued upon any registration of transfer or exchange of Securities shall be the
valid obligations of the Issuer evidencing the same respective obligations, and
entitled to the same security and benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange. When
Securities are presented to the Registrar with a request to register their
transfer or to exchange them for an equal principal amount of Securities of
other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested if the requirements for such transactions are met
(including, in the case of a transfer, that such Securities are duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and Registrar duly executed by the Holder thereof or by an attorney who
is authorized in writing to act on behalf of the Holder). In addition, the
Trustee may require evidence satisfactory to it as to the compliance of any such
transfer with the Securities Act of 1933, as amended. The Trustee shall make a
notation on each new Security or Securities of the amount of all payments of
principal previously made on the old Security or Securities with respect to
which such new Security is issued and the date to which interest accrued on such
old Security or Securities has been paid.

          (c) Prior to the due presentment for registration of transfer of a
Security, the Issuer and the Trustee may deem and treat the applicable
registered Holder as the absolute owner and Holder of such Security for the
purpose of receiving payment of all amounts payable with



                                                                              56


respect to such Security and for all other purposes and shall not be affected by
any notice to the contrary.

          (d) The Issuer shall not be required to exchange any surrendered
Securities as above provided during the 15 calendar day period preceding the due
date of any payment on such Securities. The Issuer shall not be required to
exchange or register the transfer of any Securities as above provided during the
15 calendar days preceding the Final Maturity Date of any such Securities or
during the 15 calendar days preceding the first mailing of any notice of
Redemption or Refinancing of Securities to be redeemed or refinanced. The Issuer
shall not be required to exchange or register the transfer of any Securities
that have been selected, called or are being called for Redemption or
Refinancing except, in the case of any Securities where notice has been given
that such Securities are to be redeemed in part, the portion thereof not so to
be redeemed.

          (e) A Security may not be exchanged for another Security other than as
provided in this Section 2.07 and Section 2.08 hereof.

          (f) The Issuer at any time may deliver Securities to the Trustee for
cancellation. The Trustee and no one else shall cancel and destroy in accordance
with its customary practices in effect from time to time (subject to the record
retention requirements of the Exchange Act) any such Securities, together with
any other Securities surrendered to it for registration of transfer, exchange or
payment.

     Section 2.08 Mutilated, Destroyed, Lost or Stolen Securities. If any
Security shall become mutilated, destroyed, lost or stolen, the Issuer shall,
upon the written request of the Holder thereof and presentation of the Security
or satisfactory evidence of destruction, loss or theft thereof to the Trustee or
Registrar, issue, and the Trustee shall authenticate and deliver in exchange
therefor or in replacement thereof, a new Security of the same subclass, payable
to such Holder in the same principal amount, of the same maturity, with the same
payment schedule, bearing the same interest rate and dated the date of its
authentication. If the Security being replaced has become mutilated, such
Security shall be surrendered to the Trustee or a Registrar and forwarded to the
Issuer by the Trustee or such Registrar. If the Security being replaced has been
destroyed, lost or stolen, the Holder thereof shall furnish to the Issuer, the
Trustee or a Registrar (i) such security or indemnity as may be required by them
to save the Issuer, the Trustee and such Registrar harmless and (ii) evidence
satisfactory to the Issuer, the Trustee and such Registrar of the destruction,
loss or theft of such Security and of the ownership thereof. The Holders will be
required to pay any tax or other governmental charge imposed in connection with
such exchange or replacement and any other expenses (including the fees and
expenses of the Trustee and any Registrar) connected therewith.

     Section 2.09 Payments of Transfer Taxes. Upon the transfer of any Security
or Securities pursuant to Section 2.07 hereof, the Issuer or the Trustee may
require from the party requesting such new Security or Securities payment of a
sum to reimburse the Issuer or the Trustee for, or to provide funds for the
payment of, any transfer Tax or similar governmental charge payable in
connection therewith.

     Section 2.10 Refinancing of Securities. (a) Subject to Section 2.01(a)
hereof, paragraphs (b) and (c) below and Section 5.02(f)(ii) hereof, the Issuer
may issue Refinancing



                                                                              57


Securities pursuant to this Indenture for the purpose of refinancing the
Outstanding Principal Balance of any subclass of Securities (including
refinancings of Refinancing Securities). Each refinancing of any subclass of
Securities with the proceeds of an offering of Refinancing Securities (a
"Refinancing") shall be authorized pursuant to one or more Board Resolutions and
shall be effected only following receipt of a Rating Agency Confirmation and
upon obtaining the prior written consent of the Policy Provider (unless a Policy
Non-Consent Event has occurred or will occur in connection with such
Refinancing) and the Initial Credit Facility Provider (unless an Initial Credit
Facility Non-Consent Event has occurred or will occur in connection with such
Refinancing). Each Refinancing Security shall constitute a "Security" for all
purposes under this Indenture, and shall have the class or subclass designation
and such further designations added or incorporated in such title as specified
in the related Board Resolutions, in any indenture supplemental hereto providing
for the issuance of such Securities or specified in the form of such Securities,
as the case may be.

          (b) A Refinancing of any subclass of Securities in whole or in part
may occur on any Payment Date after the Initial Closing Date and shall be
effected as an Optional Redemption pursuant to Section 3.10 hereof. On the date
of any Refinancing, the Issuer shall issue and sell an aggregate principal
amount of Refinancing Securities not to exceed the Redemption Price of the
Securities being refinanced thereby and any accrued and unpaid interest plus the
Refinancing Expenses relating thereto, any Policy Premium and Policy Redemption
Premium due and payable to the Policy Provider and any amount to be deposited in
any Cash Collateral Account for such Refinancing Securities. The proceeds of
each sale of Refinancing Securities shall be used to make the deposit required
by Section 3.10(d) hereof, to pay such Refinancing Expenses, such Policy Premium
and Policy Redemption Premium and to fund such Cash Collateral Account.

          (c) Each Refinancing Security shall contain such terms as may be
established in or pursuant to the related Board Resolution (subject to Section
2.01 hereof), in any indenture supplemental hereto providing for the issuance of
such Securities or specified in the form of such Securities to the extent
permitted below, and shall have the same ranking pursuant to Section 3.08 hereof
with respect to all other Obligations as the Securities of the class to which
such Refinancing Securities belong (and, with respect to other subclasses of
such class, as provided in Section 3.09 hereof). No less than seven Business
Days, prior to any Refinancing, any or all of the following, as applicable, with
respect to the related issue of each subclass of Refinancing Securities shall
have been determined by the Issuer and set forth in such Board Resolutions, in
any indenture supplemental hereto or specified in the form of such Securities,
as the case may be:

          (i) the Securities to be refinanced by such Refinancing Securities;

          (ii) the aggregate principal amount of such Refinancing Securities
that may be issued;

          (iii) the proposed date of such Refinancing;

          (iv) the Expected Final Payment Date and the Final Maturity Date of
such Refinancing Securities;



                                                                              58


          (v) whether such Refinancing Securities are to have the benefit of any
Eligible Credit Facility and, if so, the amount and other terms thereof and/or
any increase in the Required Amount for any Cash Collateral Account;

          (vi) the rate at which such Refinancing Securities shall bear interest
or the method by which such rate shall be determined;

          (vii) if other than denominations of $100,000 or higher integral
multiples of $1,000 (with respect to Class A Securities), the denomination or
denominations in which such Refinancing Securities shall be issuable;

          (viii) whether such Refinancing Securities are to be issuable
initially in registered or global form and, if global, whether holders of any
such global Refinancing Security may exchange such Securities for Refinancing
Securities of the same class or subclass and of like tenor of any authorized
form and denomination and the circumstances under which any such exchanges may
occur, if other than in the manner provided in Section 2.07 hereof, and the
circumstances under which and the place or places where any such exchanges may
be made;

          (ix) any adjustments to be made, consistent with Sections 3.09 and
3.11 hereof, to the applicable Note Pool Factors or Extended Note Pool Factors
as a result of the issuance of such Refinancing Securities;

          (x) the class and subclass of Securities to which such Refinancing
Securities belong;

          (xi) whether such Refinancing Securities are to be Covered Class A
Securities; and

          (xii) any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) relating to such Refinancing
Securities (which terms shall comply with Applicable Law and not be inconsistent
with the requirements or restrictions of this Indenture, including Section
5.02(f)(ii) hereof).

          If any of the terms of any issue of Refinancing Securities are
established by action taken pursuant to one or more Board Resolutions, such
Board Resolutions shall be delivered to the Trustee setting forth the terms of
such Refinancing Securities.

          (d) In connection with any Refinancing of the Subclass A-1 Securities
or any other subclass of Covered Class A Securities that has occurred with the
prior written consent of the Policy Provider, each of the Policy and the Policy
Provider Agreement shall be amended to cover the corresponding class of
Certificates relating to such subclass of Covered Class A Securities and the
Policy Provider shall deliver a new Policy or amended Policy, as applicable, to
the Drawing Agent; provided that if the Refinancing Securities of such
Refinancing will not be Covered Class A Securities, no amendment of the Policy
and the Policy Provider Agreement shall be required and no delivery of an
amended Policy or new Policy shall be required; provided further that,
notwithstanding anything to the contrary herein, Class A Securities that are not
Covered Class A Securities may not be issued while the Policy remains
outstanding. In connection with the amendment of the Policy to cover the
Certificates relating to the Refinancing



                                                                              59


Securities, the Policy Provider agrees to deliver to the Issuer, the Guarantor
and Drawing Agent, on or prior to the date of Refinancing, legal opinions and
corporate documents in respect of the amended Policy, substantially similar in
form, scope and substance to the legal opinions and corporate documents
delivered by the Policy Provider on the Initial Closing Date. The Policy
Provider agrees that its rights of reimbursement in respect of the Policy
Drawings under the amended Policy will be the same as its rights of
reimbursement set forth in Section 3.08 and premium payable in respect of the
amended Policy shall be on the same basis and terms as the Policy Premium and
the Policy Redemption Premium paid in respect of the Policy issued on the
Initial Closing Date (unless otherwise agreed to by the Issuer, the Guarantor
and the Drawing Agent and the Policy Provider).

          (e) In connection with any Refinancing of a subclass of Class A
Securities that has occurred with the prior written consent of the Initial
Credit Facility Provider, the Initial Credit Facility if so required by the
terms of such Refinancing shall be amended to cover such subclass of Class A
Securities and the Initial Credit Facility Provider shall deliver a new Eligible
Credit Facility or amended Initial Credit Facility, as applicable, to the
Trustee. In connection with the amendment of the Initial Credit Facility to
cover the Refinancing Securities, the Initial Credit Facility Provider agrees to
deliver to the Issuer and the Guarantor, on or prior to the date of Refinancing,
legal opinions and corporate documents in respect of the amended Initial Credit
Facility, substantially similar in form, scope and substance to the legal
opinions and corporate documents delivered by the Initial Credit Facility
Provider on the Initial Closing Date. The Initial Credit Facility Provider
agrees that its rights of reimbursement in respect of the drawings under the
amended Initial Credit Facility will be the same as its rights of reimbursement
set forth in Section 3.08, and fees payable in respect of the amended Initial
Credit Facility shall be on the same basis and terms as the fees paid in respect
of the Initial Credit Facility entered into on the Initial Closing Date.

          (f) In connection with any Refinancing, the Issuer shall pay to all
parties to the Related Documents all reasonable costs and expenses related
thereto.

          (g) Notwithstanding anything to the contrary herein, if the Class A
Securities are refinanced with Class A Securities that are not covered by the
Policy, the issuance of such new uninsured Class A Securities shall be subject
to the following conditions precedent:

          (i) the payment in full of all outstanding Policy Provider Obligations
to the Policy Provider; and

          (ii) the return of the Policy to the Policy Provider for cancellation
and termination.

     Section 2.11 Delivery of Remaining Aircraft. Upon receipt by the Trustee of
a certificate executed by a Director stating (i) that a Remaining Aircraft has
been delivered under and in accordance with the Purchase Agreement, (ii) that no
waiver of the conditions specified in Clauses 4.1.1, 4.1.2, 4.1.3, 4.2, 14.2 and
14.3 of the Purchase Agreement has occurred with respect to such Remaining
Aircraft (or the relevant Company) without the receipt of a Rating Agency
Confirmation and the prior written consent of the Policy Provider and the
Initial Credit Facility Provider, and (iii) the amount of cash payable from the
Aircraft Purchase Account allocable to such Remaining Aircraft, as set forth in
column V of Exhibit A to the Purchase



                                                                              60


Agreement, net of the amounts provided for in the Purchase Agreement (any such
amount, a "Remaining Aircraft Allocation Amount"), and wire instructions for the
payment of such funds, the Trustee shall transfer funds in the amount of the
Remaining Aircraft Allocation Amount for such Remaining Aircraft from the
relevant Aircraft Purchase Account in the amount so certified and in accordance
with the written instructions provided by the Cash Manager in accordance with
Section 3.05(a).

     Section 2.12 Additional Securities. (a) Subject to paragraph (b) below and
Section 5.02(f)(iv) hereof without limiting the provisions of Section
5.02(l)(ii) hereof, as applicable, the Issuer may issue Additional Securities
pursuant to this Indenture the proceeds of which shall be used to acquire
Additional Aircraft or make Conversion Payments, as the case may be, make
payments into a Cash Collateral Account or pay expenses related thereto (each,
an "Additional Issuance)". Each Additional Issuance shall be authorized pursuant
to one or more Board Resolutions and shall be effected only following receipt of
a Rating Agency Confirmation and upon obtaining the prior written consent of the
Policy Provider (unless a Policy Non-Consent Event has occurred) and the Initial
Credit Facility Provider (unless an Initial Credit Facility Non-Consent Event
has occurred). Each Additional Security shall have such subclass and such
further designations added or incorporated in such title as specified in the
related Board Resolutions, in any indenture supplemental hereto providing for
the issuance of such Securities or specified in the form of such Securities, as
the case may be.

          (b) Each Additional Security shall contain such terms as may be
established in or pursuant to the related Board Resolutions (subject to Section
2.01 hereof), in any indenture supplemental hereto providing for the issuance of
such Securities or specified in the form of such Securities to the extent
permitted below, and shall have the same ranking pursuant to Section 3.08 hereof
with respect to all other Obligations as the Securities of the class to which
such Additional Securities belong (and, with respect to other subclasses of such
class, as provided in Section 3.09 hereof). No less than seven Business Days
prior to any issuance, any or all of the following, as applicable, with respect
to the related Additional Issuance shall have been determined by the Issuer and
set forth in such Board Resolutions, in any indenture supplemental hereto or
specified in the form of such Securities, as the case may be:

          (i) the subclass of Additional Securities to be issued;

          (ii) with respect to each such subclass of Additional Securities:

               (A) the aggregate principal amount of any such Additional
Securities which may be issued;

               (B) the proposed date of such Additional Issuance;

               (C) the Expected Final Payment Date and the Final Maturity Date
of any such Additional Securities;

               (D) whether any such Additional Securities are to have the
benefit of any Eligible Credit Facility and/or any increase in the Required
Amount for any Cash Collateral Account for the related class or classes of
Securities and, if so, the amount and terms thereof;



                                                                              61


               (E) the rate at which any such Additional Securities shall bear
interest or the method by which such rate shall be determined;

               (F) if other than denominations of $100,000 or higher integral
multiples of $1,000 (with respect to Class A Securities), the denomination or
denominations in which any such Additional Securities shall be issuable;

               (G) any adjustments to be made, consistent with Sections 3.09 and
3.11 hereof, to the applicable Note Pool Factors or Extended Note Pool Factors
as result of the issuance of any such Additional Securities; and

               (H) any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) relating to any such Additional
Securities (which terms shall comply with Applicable Law and not be inconsistent
with the requirements or restrictions of this Indenture, including Section
5.02(f) hereof); and

          (iii) to what extent the proceeds of such Additional Securities are to
be used to acquire Additional Aircraft or to make Conversion Payments, or both,
and:

               (A) in the case of Additional Aircraft, a description of such
Additional Aircraft and the Expected Useful Life of such Additional Aircraft;
and

               (B) in the case of Conversion Payments, a description of the
Aircraft to be converted.

          If any of the terms of any issue of any such Additional Securities are
established by action taken pursuant to one or more Board Resolutions, such
Board Resolutions shall be delivered to the Trustee setting forth the terms of
such Additional Securities.

          (c) In the event Additional Securities are issued as Class A
Securities with the prior consent of the Policy Provider, each of the Policy and
the Policy Provider Agreement shall be amended to cover the corresponding class
of Certificates of such Additional Securities and the Policy Provider shall
deliver a new Policy or amended Policy, as applicable, to the Drawing Agent;
provided that if the Additional Securities of such Additional Issuance will not
be Covered Class A Securities, no amendment of the Policy and the Policy
Provider Agreement shall be required and no delivery of an amended Policy or new
Policy shall be required; provided further, that, notwithstanding anything to
the contrary herein, no Class A Securities may be issued without the prior
written consent of the Policy Provider (unless a Policy Non-Consent Event has
occurred or will occur in connection with such Additional Issuance) and the
prior written consent of the Initial Credit Facility Provider (unless an Initial
Credit Facility Non-Consent Event has occurred or will occur in connection with
such Additional Issuance); provided further, that, notwithstanding anything to
the contrary herein, Class A Securities that are not Covered Class A Securities
may not be issued while the Policy remains outstanding. In connection with any
issuance of Additional Securities as a subclass of Class A Securities and
amendment of the Policy, the Policy Provider agrees to deliver to the Issuer,
the Guarantor and the Drawing Agent, on or prior to the date of issuance, legal
opinions and corporate documents in respect of the amended Policy, substantially
similar in form, scope and substance to the legal opinions and corporate
documents delivered by the Policy Provider on the Initial Closing Date. The
Policy



                                                                              62


Provider agrees that its rights of reimbursement in respect of any Policy
Drawings under the amended Policy will be the same as its rights of
reimbursement set forth in Section 3.08, and premium payable in respect of the
amended Policy shall be on the same basis and terms as the Policy Premium and
Policy Redemption Premium (if any) paid in respect of the Policy issued on the
Initial Closing Date (unless otherwise agreed to by the Issuer, Guarantor and
Drawing Agent and the Policy Provider).

          (d) In connection with any issuance of Additional Securities, the
Issuer shall pay to all parties to the Related Documents all reasonable costs
and expenses related thereto.

     Section 2.13 Special Transfer Provisions.

          (a) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the Trustee
shall deliver Securities that do not bear the Private Placement Legend, as
applicable. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Trustee shall deliver only Securities that bear
the Private Placement Legend, as applicable, unless there is delivered to the
Trustee an Opinion of Counsel reasonably satisfactory to the Issuer and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.

          (b) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such Security acknowledges the restrictions on
transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture. The Registrar shall not register a transfer of any Security
unless such transfer complies with the restrictions on transfer of such Security
set forth in this Indenture. In connection with any transfer of Securities, each
Holder agrees by its acceptance of such Securities to furnish the Trustee the
certifications and legal opinions described herein to confirm that such transfer
is being made pursuant to an exemption from, or a transaction not subject to,
the registration requirements of the Securities Act; provided that the Trustee
shall not be required to determine (but may rely on a determination made by the
Issuer with respect to) the sufficiency of any such legal opinions.

          The Initial Securities shall be issued pursuant to an exemption from
registration under the Securities Act.

          The Trustee shall retain copies of all letters, notices and other
written communications received pursuant to this Section 2.13 in accordance with
applicable law. The Issuer shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable Written Notice to the Trustee during the term of
this Agreement and for a period of three months thereafter.

     Section 2.14 Temporary Securities. Pending the preparation of Securities of
any subclass, the Issuer may execute and the Trustee may authenticate and
deliver temporary Securities of such subclass which are printed, lithographed,
typewritten or otherwise produced, in any denomination, containing substantially
the same terms and provisions as are set forth in the applicable exhibit hereto
or in any indenture supplemental hereto, except for such appropriate



                                                                              63


insertions, omissions, substitutions and other variations relating to their
temporary nature as the Director executing such temporary Securities may
determine, as evidenced by his or her execution of such temporary Securities.

          If temporary Securities of any subclass are issued, the Issuer will
cause Securities of such subclass to be prepared without unreasonable delay.
After the preparation of Securities of such subclass, the temporary Securities
shall be exchangeable for Securities upon surrender of such temporary Securities
at the Corporate Trust Office of the Trustee, without charge to the Holder
thereof. Upon surrender for cancellation of any one or more temporary
Securities, the Issuer shall execute and the Trustee shall authenticate and
deliver in exchange therefor Securities of like subclass, in authorized
denominations and in the same aggregate principal amounts. Until so exchanged,
such temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as Securities.

     Section 2.15 Statements to Holders. (a) On the second Business Day before
each Payment Date, the Issuers shall cause the Administrative Agent to deliver
to the Pass Through Trustee, the Trustees, the Cash Manager, the Directors and
the Policy Provider, and the Trustee shall (or shall instruct any Paying Agent
to) promptly thereafter distribute or make available to each Holder of record
with respect to such Payment Date, the Policy Provider, the Initial Credit
Facility Provider and each Rating Agency, a report, substantially in the form
attached as Exhibit E hereto prepared by the Administrative Agent and setting
forth the information described therein after giving effect to such payment
(each, a "Monthly Report") in respect of the Calculation Date immediately
preceding such Payment Date and the month then ended. Each Monthly Report
provided to the Pass Through Trustee, the Trustees, Directors, the Policy
Provider, the Initial Credit Facility Provider and each Rating Agency for each
May, August and November shall be accompanied by (i) a statement setting forth
an analysis of the Collections Account activity for the preceding quarter ended
on the Calculation Date occurring in the immediately preceding March, June and
September, respectively, (ii) a discussion and analysis of such activity and of
any significant developments affecting the ACS Group in such quarter and (iii)
an updated description of the ACS Group Aircraft in the ACS Group Portfolio and
the related Lessees as of the end of such quarter (each, a "Quarterly Report").
Each Monthly Report provided to the Pass Through Trustee, the Trustees,
Directors, the Policy Provider, the Initial Credit Facility Provider and each
Rating Agency for each April shall be accompanied by (x) a statement setting
forth an analysis of the Collections Account activity for the year ended on the
Calculation Date occurring in the immediately preceding January, (y) a
discussion and analysis of such activity and of any significant developments
affecting the ACS Group in such year and (z) updated information with respect to
the ACS Group Aircraft in the ACS Group Portfolio as of the end of such year
(each, an "Annual Report"). Each Quarterly Report and Annual Report, as the case
may be, shall contain a listing of the ACS Group Aircraft that are not subject
to any ACS Group Lease. The Trustees shall deliver a copy of, or make available
via a website, each Quarterly Report and Annual Report to any Holder or other
Secured Party who requests a copy thereof.

          (b) After the end of each calendar year but not later than the latest
date permitted by law, the Issuer shall cause the Administrative Agent to
deliver to the Trustee, the Cash Manager, the Policy Provider, the Initial
Credit Facility Provider and the Directors, and the Trustee shall (or shall
instruct any Paying Agent to) furnish to each Person who at any time



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during such calendar year was a Holder of record of any subclass of Securities a
statement prepared by the Administrative Agent containing the sum of the amounts
determined pursuant to Exhibit E hereto with respect to the subclass of
Securities for such calendar year or, in the event such Person was a Holder of
record of any subclass during only a portion of such calendar year, for the
applicable portion of such calendar year, and such other items as are readily
available to the Administrative Agent and which a Holder shall reasonably
request as necessary for the purpose of such Holder's preparation of its U.S.
federal income or other tax returns. In the event that any such information has
been provided by any Paying Agent directly to such Person through other
tax-related reports or otherwise, the Trustee in its capacity as Paying Agent
shall not be obligated to comply with such request for information.

          (c) The Trustee shall forward the information furnished pursuant to
Section 2.15 to each Holder of record of each Security of such subclass for the
relevant period of ownership of such Security as appears on the records of the
Registrar.

          (d) The Trustee shall be at liberty to sanction some other method of
giving notice to the Holders of any subclass if, in its opinion, such other
method is reasonable, having regard to the number and identity of the Holders of
such subclass and/or to market practice then prevailing, is in the best
interests of the Holders of such subclass and will comply with the rules of any
other stock exchange (if any) on which the Securities of such subclass are then
listed, and any such notice shall be deemed to have been given on such date as
the Trustee may approve; provided that notice of such method is given to the
Holders of such subclass in such manner as the Trustee shall require with no
further publication requirement.

     Section 2.16 CUSIP, CINS and ISIN Numbers. The Issuer in issuing the
Securities may use "CUSIP", "CINS", "ISIN" or other identification numbers (if
then generally in use), and if so, the Trustee shall use CUSIP numbers, CINS
numbers, ISIN numbers or other identification numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; provided that any
such notice shall state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Securities; provided further that failure
to use "CUSIP", "CINS", "ISIN" or other identification numbers in any notice of
redemption or exchange shall not affect the validity or sufficiency of such
notice.

     Section 2.17 Holder Representations and Covenants. Each Holder and
beneficial owner of a Security, by the purchase of such Security or beneficial
interest therein, covenants and agrees that it will treat such Security as
indebtedness for all purposes and will not take any action contrary to such
characterization, including, without limitation, filing any tax returns or
financial statements inconsistent therewith.



                                                                              65


                                  ARTICLE III
                         ACCOUNTS; PRIORITY OF PAYMENTS

     Section 3.01 Accounts. (a) Establishment of Accounts. The Cash Manager,
acting on behalf of the Security Trustee, shall direct the Operating Bank in
writing to establish and maintain on its books and records in the name of the
Security Trustee the following non-interest bearing accounts: (i) a collections
account (the "Collections Account"), an aircraft purchase account (each, an
"Aircraft Purchase Account") with respect to each Initial ACS Group Aircraft not
acquired on the Initial Closing Date, one or more rental accounts (each, a
"Rental Account"), one or more lessee funded accounts as provided in the Cash
Management Agreement (each, a "Lessee Funded Account"), an aircraft conversion
account (the "Aircraft Conversion Account"), a security deposit account (the
"Security Deposit Account"), an expense account (the "Expense Account"), one
note account for each subclass of the initial ACS Group Securities (each, a
"Securities Account"), an account for the Shareholders (the "Shareholders
Account"), a senior cash collateral account (the "Senior Cash Collateral
Account"), a liquidity reserve account (the "Credit Facility Reserve Account")
and a payment account for the Initial Credit Facility (the "Initial Liquidity
Payment Account") in each case on or before the Initial Closing Date and (ii)
one or more Rental Accounts and any additional Lessee Funded Accounts, in each
case provided for in the Cash Management Agreement, any additional Securities
Accounts, a defeasance/redemption account (the "Defeasance/Redemption Account"),
a refinancing account (the "Refinancing Account"), and any other Account
(including any additional Cash Collateral Account) the establishment of which is
set forth in a Board Resolution or Guarantor Board Resolution, as applicable,
delivered to the Trustee and the Guarantor Trustee, the Security Trustee and the
Cash Manager, in each case at such time as is set forth in this Section 3.01 or
in such Board Resolution or such Guarantor Board Resolution. The Guarantor shall
establish a rental account (the "Irish Rental Account") and an Irish collections
account (the "Irish VAT Refund Account") in its name at an Eligible Institution.
Each Account shall be established and maintained as an Eligible Account in
accordance with the terms of the Security Trust Agreement (or, in the case of
the Irish VAT Refund Account and the Irish Rental Account, a charge over bank
account governed by Irish law with respect thereto (the "Irish Account Charge"))
so as to create, perfect and establish the priority of the security interest of
the Security Trustee in such Account and all cash, Investments and other
property therein under the Security Trust Agreement (or, in the case of the
Irish Rental Account and the Irish VAT Refund Account, the Irish Account Charge)
and otherwise to effectuate the Security Trust Agreement (or, in the case of the
Irish Rental Account and Irish VAT Refund Account, the Irish Account Charge).
Each new Account established pursuant to Section 2.03(a) of the Cash Management
Agreement shall, when so established, be the Account of such name and purposes
for all purposes of this Indenture. A Certificate Account for the benefit of the
holders of the Certificates shall be established and maintained in accordance
with the terms of the Pass Through Trust Agreement.

          (b) Withdrawals and Transfers Generally. Any provision of this
Indenture relating to any deposit to, withdrawal from, or any transfer to or
from, any Account by the Cash Manager shall mean any such deposit, withdrawal or
transfer effected by the Operating Bank at the Written Notice of the Cash
Manager (such direction to be provided to the Operating Bank by 1:00 p.m. (New
York City time) on the date of such deposit, transfer or withdrawal) given in
accordance with the terms of this Indenture, the Cash Management Agreement and
the Security Trust Agreement. Each such Written Notice to the Operating Bank
shall be also communicated



                                                                              66


in computer file format or in such other form as the Cash Manager, the Operating
Bank, the Trustees and the Security Trustee agree, provided that, in the case of
communication in computer file format or any other form other than a written
tangible form, a written tangible form thereof shall promptly thereafter be sent
to the Operating Bank. No deposit to, withdrawal from or transfer from or to any
Account shall be made except in accordance with the terms of this Indenture, the
Security Trust Agreement and the Cash Management Agreement or by any Person
other than the Cash Manager (or, upon the written direction of the Cash Manager,
the Operating Bank) or, in the case of the Securities Accounts, the Trustee or
Guarantor Trustee (in which respect such Trustee or Guarantor Trustee agrees it
is acting as the agent of the Security Trustee). Each of the parties to this
Indenture acknowledges that the terms of this Indenture contemplate that the
Cash Manager will receive certain information from other parties to this
Indenture and the Related Documents in order for the Cash Manager to be able to
perform all or any part of its obligations hereunder, that the Cash Manager will
be able to perform its obligations hereunder only to the extent such information
is provided to the Cash Manager by the relevant parties and that the Cash
Manager may conclusively rely, absent manifest error, on such information as it
receives without undertaking any independent verification of that information.
The Cash Manager agrees that if it does not receive any such information
expected to be received by it, it will promptly notify the Administrative Agent
that it has not received such information and which party who was to provide
such information of such failure.

          (c) Collections Account. All Collections (including amounts
transferred from the Rental Accounts) shall be, when received, deposited in the
Collections Account, and all cash, Investment and other property in the
Collections Account shall be transferred from the Collections Account in
accordance with the terms of this Indenture.

          (d) Lessee Funded Account. Any Segregated Funds received from time to
time from any Lessee or pursuant to any ACS Group Acquisition Agreement shall be
transferred by the Operating Bank at the written direction of the Cash Manager
(which direction shall be given pursuant to a Written Notice from the
Administrative Agent) from the Collections Account into the related Lessee
Funded Account. The Cash Manager shall not make any withdrawal from, or transfer
from or to, any Lessee Funded Account in respect of (i) any portion of the
Segregated Funds therein consisting of a security deposit except, upon the
termination of the related ACS Group Lease, as provided in such ACS Group Lease
or (ii) any Segregated Funds that is contrary to the requirements of the
respective ACS Group Leases as to Segregated Funds and the requirements of the
Security Trust Agreement (including the agreement of the Security Trustee that
it designate on its account records that it holds its interest in each Lessee
Funded Account for the benefit of the respective Lessee in respect of whom such
Segregated Funds are held). Without limiting the foregoing, no cash, Investment
and other property in a Lessee Funded Account may be used to make payments,
other than as permitted under Section 3.07 hereof, in respect of the ACS Group
Securities at any time, including after the delivery of a Default Notice. Any
Segregated Funds relating to an expired ACS Group Lease that remain in a Lessee
Funded Account after expiration or termination of such ACS Group Lease and that
are not due and owing to the relevant Lessee under such expired or terminated
ACS Group Lease shall, if so required under the terms of a subsequent ACS Group
Lease, if any, relating to such ACS Group Aircraft, be credited in a Lessee
Funded Account or the Security Deposit Account for the benefit of the next
Lessee of the relevant ACS Group Aircraft to the extent required under the terms
of such subsequent ACS Group Lease and, to the extent not so required,
transferred to the



                                                                              67


Collections Account. When and as provided in the Cash Management Agreement the
Cash Manager shall cause to be established such additional Lessee Funded
Accounts as requested by the Administrative Agent and as are provided for in
accordance with Section 3.01(a) hereof.

          (e) Security Deposit Account. Any cash security deposits received from
time to time from any Lessee or pursuant to any ACS Group Acquisition Agreement
(other than any cash security deposit required to be Segregated Funds, which
shall be deposited in the related Lessee Funded Account) shall be transferred by
the Operating Bank at the written direction of the Cash Manager (which direction
shall be given pursuant to a Written Notice from the Administrative Agent) from
the Collections Account into the Security Deposit Account. No cash, Investment
and other property in the Security Deposit Account may be used to make payments,
other than as permitted under Section 3.07 hereof, in respect of the ACS Group
Securities at any time, including after the delivery of a Default Notice. Any
security deposits relating to an expired ACS Group Lease that remain in the
Security Deposit Account after expiration or termination of such ACS Group Lease
and that are not due and owing to the relevant Lessee under such expired or
terminated ACS Group Lease shall, if so required under the terms of a subsequent
ACS Group Lease, if any, relating to such ACS Group Aircraft, be credited in the
Security Deposit Account or a Lessee Funded Account for the benefit of the next
Lessee of the relevant ACS Group Aircraft and, to the extent not so required,
transferred to the Collections Account.

          (f) Expense Account. On each Payment Date, such amounts as are
provided in Section 3.08 hereof in respect of the Required Expense Amount and
Permitted Accruals shall be deposited into the Expense Account from the
Collections Account. Expenses shall be paid from the Expenses Account as
provided in Section 3.04 hereof.

          (g) Rental Accounts. All Rental Payments and other amounts received
pursuant to any Related Collateral Document shall be deposited into such Rental
Account (including any Non-Trustee Account) as the Cash Manager may determine or
as provided for in the Cash Management Agreement or, with respect to any ACS
Group Aircraft held by the ACS Ireland Group, all Rental Payments and other
amounts received pursuant to any Related Collateral Document related to such ACS
Group Aircraft shall be deposited into the Irish Rental Account. Except with
respect to amounts, if any, that for local tax or other regulatory or legal
reasons must be retained on deposit or as to the transfer of which the Cash
Manager determines (based on information provided to the Cash Manager in a
Written Notice from the Administrative Agent) there is any substantial
uncertainty, all amounts so deposited shall, within one Business Day of their
receipt (or, with respect to any Non-Trustee Account or the Irish Rental
Account, within three Business Days of their receipt), be transferred by the
Cash Manager to the Collections Account. If the Cash Manager determines (based
on information provided to the Cash Manager in a Written Notice from the
Administrative Agent) that, for any tax or other regulatory or legal reason, any
such Collections may not be deposited into an account in the name of the
Security Trustee, then, notwithstanding the requirements of Section 3.01(a)
hereof, the relevant ACS Group Member may establish one or more Rental Accounts
(each, a "Non-Trustee Account"), for such Collections in its own name or in the
name of a nominee or trustee acting on its behalf (but subject to the direction
and control of the Cash Manager on behalf of the Security Trustee) at any
Eligible Institution provided that the ACS Group Member that is the lessor under
the relevant Lease is or becomes a party to a Security Document with respect to
such Account.



                                                                              68


          (h) Refinancing Account. Upon notice to it of an ACS Group
Refinancing, the Cash Manager shall cause the Operating Bank to establish and
maintain a Refinancing Account pursuant to Section 3.01(a) hereof in the name of
the Security Trustee for the benefit of the Holders of the subclass of ACS Group
Securities, if any, to be refinanced. All net cash proceeds of such ACS Group
Refinancing shall be deposited in the Refinancing Account and shall be held in
such Account until such proceeds are applied to pay the Redemption Price or
Guarantor Redemption Price, as applicable, of and all accrued and unpaid
interest on such ACS Group Securities until such ACS Group Securities are
cancelled by the Trustees and Refinancing Expenses (and any Policy Premium due
and payable to the Policy Provider) with respect thereto (except to the extent
the Directors and the Guarantor Directors have determined, as evidenced by a
Board Resolution and a Guarantor Board Resolution, respectively, to pay the same
from funds available therefor as Permitted Accruals in the Expense Account) and
as otherwise provided in Section 5.02(f)(ii)(D) hereof.

          (i) Defeasance/Redemption Account. Upon notice to it that any subclass
of ACS Group Securities is to be redeemed pursuant to Section 3.10 hereof or the
Guarantor Indenture (other than in an ACS Group Refinancing) or defeased under
Article XII hereof or the Guarantor Indenture, the Cash Manager shall cause the
Operating Bank to establish and maintain a Defeasance/Redemption Account
pursuant to Section 3.01(a) hereof or of the Guarantor Indenture in the name of
the Security Trustee for the benefit of the Holders of such subclass. All
amounts received for the purpose of any such redemption or defeasance shall be
deposited in the Defeasance/Redemption Account.

          (j) Aircraft Purchase Accounts. As and to the extent provided in
Section 3.04 hereof (or, in the case of any ACS Group Additional Aircraft, in
the terms of any indenture supplemental hereto or to the Guarantor Indenture, as
applicable, or a Board Resolution or Guarantor Board Resolution, as applicable,
with respect to the related ACS Group Additional Securities), an amount equal to
the Aircraft Allocation Amount for each Remaining Aircraft acquired on the
relevant Acquisition Date or, in the case of an Additional ACS Group Aircraft,
on the Closing Date for the related ACS Group Additional Securities will be
transferred from the Collections Account out of the proceeds of the ACS Group
Initial Securities or ACS Group Additional Securities (as the case may be) to
the Aircraft Purchase Account for such ACS Group Aircraft. The amount so
deposited will be held in such Account and invested in Permitted Account
Investments until applied as provided in Section 3.04 or 3.05 hereof. The Issuer
or the Guarantor, as applicable, shall notify the Security Trustee and the
Administrative Agent of the satisfaction or waiver (specifying which) of all
conditions for the payment of the Aircraft Purchase Price of any ACS Group
Aircraft not acquired on a Closing Date.

          (k) Aircraft Conversion Account. As and to the extent provided in
Section 3.04(g) and Section 5.02(i) hereof (or in the terms of any indenture
supplement hereto or indenture supplement to the Guarantor Indenture or a Board
Resolution or Guarantor Board Resolution with respect to the related ACS Group
Additional Securities), an amount equal to any expected ACS Group Conversion
Payment (or in the case of a Conversion Election, a portion thereof) will be
transferred from the Collections Account (i) in the event of a Conversion
Election for any Payment Date, in an amount equal to the sum of (A) the
Available Minimum Principal Amount (or a portion thereof) to fund the Allocable
Principal Conversion Amount and (B) the Available Holder Amount (or a portion
thereof) to fund the Allocable Equity Conversion



                                                                              69


Amount for such Payment Date, or (ii) out of the proceeds of the ACS Group
Additional Securities, in each case to the Aircraft Conversion Account. The
amount so deposited will be held in the Aircraft Conversion Account and invested
in Permitted Account Investments until applied as provided in Section 3.04 or
3.08 hereof and upon payment of all ACS Group Conversion Payments required for
such Aircraft Conversion, any remaining amounts in the Aircraft Conversion
Account shall be promptly transferred to the Collections Account. The
Administrative Agent shall notify the Security Trustee and the Cash Manager of
the satisfaction or waiver (specifying which) of all conditions for the payment
of any ACS Group Conversion Payment, and no amounts may be withdrawn or
transferred from the Aircraft Conversion Account until receipt of such notice as
to such ACS Group Conversion Payment.

          (l) Securities Account. Upon the issuance of ACS Group Securities of
any subclass for which a Securities Account was not previously established, the
Cash Manager shall cause the Operating Bank to establish and maintain a
Securities Account for such subclass in accordance with Section 3.01(a) hereof
in the name of the Security Trustee for the benefit of the Holders of the ACS
Group Securities of such subclass. Upon the transfer of any amounts to the
Securities Account for any subclass of ACS Group Securities in accordance with
Section 3.08 hereof, the Trustee or the Guarantor Trustee, as applicable, on the
same day shall pay all such amounts to the Holders of such subclass of
Securities as of the related Record Date in accordance with the terms of this
Indenture or the Guarantor Indenture, as applicable; provided that with respect
to the Securities Account for any subclass of ACS Group Class A Securities, so
long as the Pass Through Trustee is the Holder of any subclass of ACS Group
Class A Securities, all amounts in the Securities Account for such subclass of
ACS Group Class A Securities shall be promptly transferred to the Certificate
Account.

          (m) Shareholders Account. Upon the transfer of any amounts to the
Shareholders Account for the Shareholders in accordance with Section 3.08
hereof, the Guarantor Trustee on the same day shall pay all such amounts to the
Shareholders.

          (n) Irish VAT Refund Account. All payments of refunds with respect to
Irish value-added Tax and any similar amounts related to Irish Tax payments
payable to the Issuers or any ACS Group Subsidiary shall be, when received,
deposited in the Irish VAT Refund Account. Funds held in the Irish VAT Refund
Account shall be converted into U.S. dollars with a recognized foreign exchange
dealer or foreign commercial bank (which may be the bank where the Irish VAT
Refund Account is located or the Cash Manager or an affiliate). The conversion
of currency into U.S. dollars shall be pursuant to the conversion procedures set
forth in Section 13.07. Upon conversion and receipt of U.S. dollars, the Cash
Manager shall cause such amounts to be deposited from the Irish VAT Refund
Account to the Collections Account as soon as administratively practicable. The
cost and expense of any such conversion shall be added to and reflected in the
rate obtained for conversion and in no event shall the Cash Manager or any of
its affiliates be liable in respect of the exchange rate obtained for any such
conversion or any related cost or expense.

          All amounts held in the Irish VAT Refund Account from time to time
shall remain uninvested pending conversion to U.S. dollars and transfer to the
Collections Account.



                                                                              70


          The Administrative Agent shall promptly notify the Cash Manager in
writing of the expected payment of any such refund and the anticipated amount as
set forth in the Administrative Agency Agreement.

          (o) Credit Facility Reserve Account. Following the funding of the
Credit Facility Reserve Account with a Downgrade Drawing, a Final Drawing or a
Non-Extension Drawing, if the Cash Manager determines on any Calculation Date,
after all withdrawals and transfers are made with respect to the Payment Date
related to such Calculation Date, there will be insufficient funds in the
Collections Account (x) to transfer to the Expense Account an amount such that
the amount on deposit therein is equal to the Required Expense Amount for such
Payment Date, (y) to pay Senior Hedge Payments to each applicable Hedge Provider
and (z) to pay the Interest Amount for the ACS Group Subclass A-1 Securities, in
each case as provided in Section 3.08 hereof, the Operating Bank shall withdraw
from the Credit Facility Reserve Account on such Payment Date the lesser of the
amount equal to the shortfall in making the payments set forth in clauses (x),
(y) and (z) above and the amount on deposit therein. The amount so withdrawn
shall be applied in the following manner: FIRST, to the Expense Account an
amount such that the amount on deposit therein is at least equal to the Required
Expense Amount for such Payment Date and SECOND, in no order of priority inter
se, but pro rata, (A) to the Securities Accounts for the ACS Group Subclass A-1
Securities, the Interest Amount on each such subclass of ACS Group Class A
Securities in no order of priority inter se, but pro rata according to the
amount of accrued and unpaid interest on the ACS Group Subclass A-1 Securities
and (B) pro rata, to any Hedge Provider, an amount equal to any Senior Hedge
Payment due from any ACS Group Member pursuant to any Hedge Agreement.

          (p) Senior Cash Collateral Account. (A) If the Cash Manager determines
on any Calculation Date that, on any Payment Date after making all payments and
transfers to be made with respect to such Payment Date (for the avoidance of
doubt, prior to any drawings under the Initial Credit Facility or the Policy
and/or withdrawals, if any, from the Credit Facility Reserve Account), there are
insufficient funds in the Collections Account (x) to transfer to the Expense
Account an amount such that the amount on deposit therein is equal to the
Required Expense Amount, (y) to pay Senior Hedge Payments to each applicable
Hedge Provider and (z) to pay the Interest Amount for each subclass of ACS Group
Class A Securities, in each case as provided in Section 3.08, the Cash Manager
shall so notify the Trustee and the Guarantor Trustee and direct the Operating
Bank in writing on such Payment Date to withdraw from the Senior Cash Collateral
Account the lesser of an amount equal to the shortfall in making the payments
set forth in clauses (x), (y) and (z) above and the amount on deposit therein.
The amount so withdrawn shall be applied, FIRST, to the Expense Account an
amount such that the amount on deposit therein is at least equal to the Required
Expense Amount and SECOND, in no order of priority inter se, but pro rata, (A)
to the Securities Accounts for each subclass of ACS Group Class A Securities,
the Interest Amount on such subclass of ACS Group Class A Securities in no order
of priority inter se, but pro rata according to the amount of accrued and unpaid
interest on such subclass of ACS Group Class A Securities; and (B) pro rata, to
any Hedge Provider, an amount equal to any Senior Hedge Payment due from any ACS
Group Member pursuant to any Hedge Agreement. If the Cash Manager determines
that, on any Payment Date, the amount on deposit in the Senior Cash Collateral
Account, after making any withdrawals therefrom to be made on such Payment Date,
exceeds the aggregate Outstanding Principal Balance of the ACS Group Class A
Securities, the Cash Manager shall so notify the Trustee and Guarantor Trustee
in writing and,



                                                                              71


upon receipt of written consent of the Issuer and the Guarantor, direct the
Operating Bank in writing to withdraw the collected credit balance of the Senior
Cash Collateral Account and apply such balance, FIRST, to the Securities
Accounts for each subclass of ACS Group Class A Securities, in the order of
priority by subclass set forth in Section 3.09 hereof, an amount equal to the
Outstanding Principal Balance of each such subclass and SECOND, to the
Collections Account, for application on the next succeeding Payment Date in
accordance with Section 3.08 hereof (any such application, a "Senior Cash
Collateral Event"). Unless applied in connection with a Senior Cash Collateral
Event, no amount in the Senior Cash Collateral Account shall be available for
any shortfall in the payment of principal of the ACS Group Class A Securities.
Amounts deposited in the Senior Cash Collateral Account are not subject to the
payment priorities set forth in Section 3.08 hereof.

          (q) Certificate Account. The proceeds of any Policy Drawing shall be,
when received, deposited in the Certificate Account. Any amounts so paid shall
be distributed by the Pass Through Trustee to the holders of the Certificates in
accordance with the terms of the Pass Through Trust Agreement.

          (r) Additional Cash Collateral Accounts. Upon receipt by the Cash
Manager and the Trustee and Guarantor Trustee of a Board Resolution and
Guarantor Board Resolution providing for the establishment of any additional
Cash Collateral Account as an Eligible Credit Facility for one or more
subclasses of Securities or in respect of any other Obligation, the Cash Manager
shall, by Written Notice, cause the Operating Bank to establish (within three
Business Days of the giving of such Written Notice) and maintain such Cash
Collateral Account pursuant to Section 3.01(a) hereof in the name of the
Security Trustee for the benefit of the Holders of the ACS Group Securities of
each such subclass and/or the Secured Parties holding such other Obligation
(and, with respect to any additional Cash Collateral Account to be an Eligible
Credit Facility (other than any Cash Collateral Account in respect of which (a)
amounts will be deposited therein and (b) there is no obligation to reimburse
any Person in respect of such amounts), upon receipt of the prior written
consent of the Initial Credit Facility Provider and the Policy Provider to such
additional Cash Collateral Account). All amounts provided in connection with any
such Board Resolution and Guarantor Board Resolution for deposit in such Account
and all amounts to be deposited in such Account under Section 3.08 hereof as an
Eligible Credit Facility shall be held in such Cash Collateral Account for
application, and all replenishment shall be made, in accordance with the terms
of the Board Resolution and Guarantor Board Resolution relating to such Eligible
Credit Facility, which Board Resolution and Guarantor Board Resolution shall
include the basis of any replenishment of the Cash Collateral Account.

          (s) Guarantor Indenture. For the avoidance of doubt, references to
this Section 3.01 shall include reference to the equivalent Section 3.01 in the
Guarantor Indenture.

     Section 3.02 Investments of Cash. (a) For so long as any ACS Group
Securities remain Outstanding, the Cash Manager, on behalf of the Security
Trustee, shall, or shall direct the Operating Bank in writing to, invest and
reinvest, at the written direction of the Issuers, the funds on deposit in the
Accounts in Permitted Account Investments; provided, however, that the Initial
Credit Facility Provider shall be entitled to direct the Cash Manager to invest
the amounts standing (if any) in the Credit Facility Reserve Account in
Permitted Account Investments;



                                                                              72


provided further that following the giving of a Default Notice or during the
continuance of an Acceleration Default, the Cash Manager shall invest such
amount at the written direction of the Security Trustee in Permitted Account
Investments described in clause (d) of the definition thereof (but in the case
of a Lessee Funded Account only to the extent any such investment credited to
such Lessee Funded Account is permitted by the ACS Group Leases pursuant to
which such funds were received) from the time of receipt thereof until such time
as such amounts are required to be distributed pursuant to the terms of this
Indenture and the Guarantor Indenture. The Cash Manager shall make such
investments and reinvestments, and the Issuer, the Initial Credit Facility
Provider and/or the Security Trustee as specified in the immediately preceding
sentence shall provide such direction, in accordance with the terms of the
following provisions:

          (i) the Permitted Account Investments shall have maturities and other
terms such that sufficient funds shall be available to make required payments
pursuant to this Indenture and the Guarantor Indenture (A) before the next
Payment Date after which such investment is made, in the case of investments of
funds on deposit in the Collections Account and the Expense Account, or (B) in
accordance with a Written Notice provided by the Administrative Agent, the
requirements of the relevant ACS Group Leases or ACS Group Aircraft Agreements,
in the case of investments of funds on deposit in the Lessee Funded Accounts or
the Security Deposit Account; provided that an investment maturing within one
year of the date of investment shall nevertheless be a Permitted Account
Investment if it has been acquired with funds which are not reasonably
anticipated, at the discretion of the Cash Manager (at the direction of the
Administrative Agent), to be required to be paid to any other Person or
otherwise transferred from the applicable Account prior to such maturity;

          (ii) if any funds to be invested are not received in the Accounts by
1:00 p.m. (New York City time) on any Business Day, such funds shall, if
possible, be invested in overnight Permitted Account Investments described in
clause (d) of the definition thereof; provided that none of the Trustee, the
Guarantor Trustee or the Security Trustee shall be liable for any losses
Incurred in respect of the failure to invest funds not thereby received; and

          (iii) if required by the terms of a ACS Group Lease as set forth in a
Written Notice from the Administrative Agent to the Cash Manager, any
investments of funds on deposit in a Lessee Funded Account or the Security
Deposit Account shall be made on behalf of the relevant Lessee in such
investments as may be required thereunder.

          (b) It is understood and agreed that the Cash Manager or its
affiliates are permitted to receive additional compensation that could be deemed
to be in the Cash Manager's economic self-interest for (1) serving as investment
adviser, administrator, shareholder servicing agent, custodian or sub-custodian
with respect to certain of the Permitted Account Investments, (2) using
affiliates to effect transactions in certain Permitted Account Investments and
(3) effecting transactions in Permitted Account Investments.

          (c) Except as provided expressly hereunder, the Cash Manager shall
have no obligation to invest and reinvest any cash held in the Accounts in the
absence of timely and specific written investment direction from the Issuers (or
the Administrative Agent), the Initial Credit Facility Provider or the Security
Trustee, as the case may be. In no event shall the Cash Manager be liable for
the selection of investments or for investment losses incurred thereon. The



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Cash Manager shall have no liability in respect of losses incurred as a result
of the liquidation of any investment prior to its stated maturity or the failure
of Issuers to provide timely written investment direction.

     Section 3.03 Closing Date Deposits, Withdrawals and Transfers. The Cash
Manager shall, on each Closing Date, at the written direction of the Issuer,
upon the Operating Bank's receipt thereof, make, or direct the Operating Bank in
writing to make, the following deposits and transfers to the Accounts:

          (a) on the Initial Closing Date,

          (i) (A) deposit in the Collections Account the proceeds of the
issuance of the ACS Group Initial Securities, (B) deposit in the relevant Lessee
Funded Accounts the amount of the initial Segregated Funds, if any, received or
deemed to have been received pursuant to the terms of the relevant ACS Group
Acquisition Agreements and (C) deposit in the Security Deposit Account the
amount of the initial security deposits that are not Segregated Funds received
or deemed to have been received pursuant to the terms of the relevant ACS Group
Acquisition Agreements,

          (ii) after making the deposits required by clause (i) above and in the
following order (A) transfer from the Collections Account to the Expense
Account, an amount equal to the Required Expense Amount for the initial Accrual
Period, (B) pay from the Collections Account to each relevant Seller an amount
equal to the respective Aircraft Allocation Amount for each ACS Group Aircraft,
if any, being acquired from such Seller on the Initial Closing Date pursuant to
the Purchase Agreement or the Guarantor Purchase Agreement, as applicable, minus
the amount of any security deposits that are not Segregated Funds held by an ACS
Group Member, minus the amount equal to any basic rent received by an ACS Group
Member attributable to the period after the Initial Closing Date, (C) transfer
from the Collections Account to the Senior Cash Collateral Account an amount
equal to the Required Amount for such Account and (D) retain in the Collections
Account the balance, if any, remaining after making the foregoing transfers,

          (iii) transfer to each applicable Aircraft Purchase Account from the
Collections Account any Aircraft Allocation Amount as to each ACS Group Initial
Aircraft not acquired on the Initial Closing Date, and

          (iv) withdraw from the Expense Account such amount as is needed to
discharge any Expenses due and payable on the Initial Closing Date and pay such
amount to the appropriate payees thereof as specified in a Written Notice of the
Cash Manager;

          (b) in the case of a Closing Date for any ACS Group Additional
Securities issued to acquire any ACS Group Additional Aircraft pay from the
Collections Account to each respective Seller the Aircraft Allocation Amount for
each such ACS Group Additional Aircraft;

          (c) in the case of a Closing Date for any ACS Group Additional
Securities issued to finance any ACS Group Aircraft Conversion, transfer from
the Collections Account to the Aircraft Conversion Account such amount as the
relevant Conversion Agreement requires to be paid on or before that Closing
Date; and



                                                                              74


          (d) in the case of a Closing Date with respect to any Refinancing
Securities, deposit the proceeds of such Refinancing Securities for application
in accordance with the terms hereof.

     Section 3.04 Interim Deposits, Transfers and Withdrawals. On any Business
Day the Cash Manager, upon the Operating Bank's receipt thereof, may make, or
direct the Operating Bank in writing to make, without duplication, the following
deposits, transfers and withdrawals for the following purposes, in each case
after Written Notice from the Cash Manager to the Trustee and the Guarantor
Trustee (which Written Notice of the Cash Manager shall, as a condition to any
such deposit, withdrawal and transfer, be accompanied by a Written Notice of the
Administrative Agent setting forth the amounts of such deposits, withdrawals and
transfers), identifying the basis for such deposit, transfer or withdrawal in
reasonable detail:

          (a) withdraw from a Lessee Funded Account or the Security Deposit
Account to the extent that funds on deposit therein or available thereunder may
be withdrawn or drawn pursuant to the terms of the related ACS Group Lease for
payment thereof, to discharge any Expense then due and payable and pay such
amount to the appropriate payees thereof;

          (b) withdraw from the Expense Account (to the extent of funds on
deposit therein) such amount as is needed to discharge (i) any Primary Expenses
and (ii) any ACS Group Modification Payments or ACS Group Refinancing Expenses
in respect of which a Permitted Accrual was previously effected by a deposit in
the Expense Account (whether or not any such deposit has been previously used to
pay any other Primary Expense but excluding any portion of such deposit
previously used to pay any ACS Group Modification Payments or ACS Group
Refinancing Expenses) then due and payable and pay such amount to the
appropriate payees thereof;

          (c) transfer from the Collections Account from time to time (but in no
event upon less than one Business Day's prior Written Notice to the Trustee and
the Guarantor Trustee (unless such one Business Day's notice requirement is
waived by the Trustee and the Guarantor Trustee)), other amounts from the
Collections Account to the Expense Account, in each case only to the extent that
such funds are to be applied to Primary Expenses that become due and payable
during such Accrual Period and for the payment of which there are insufficient
funds in the Expense Account; provided that no such transfer from the
Collections Account in respect of Primary Expenses shall be made prior to the
next succeeding Payment Date if, in the reasonable judgment of the Cash Manager,
such transfer would have a material adverse effect on the ability of the Issuers
to make payments of accrued and unpaid interest on the Senior Class then
Outstanding on the next Payment Date therefor in accordance with Section 3.08
hereof;

          (d) withdraw Segregated Funds from a Lessee Funded Account or security
deposits from the Security Deposit Account or draw under or cause to be drawn
under any applicable Related Collateral Document, in any case to the extent
required by or necessary in connection with an ACS Group Lease or any documents
related thereto and the Related Collateral Documents, for deposit in the
Collections Account to satisfy any default in Rental Payments under any related
ACS Group Lease;



                                                                              75


          (e) transfer any Segregated Funds from the Collections Account to a
Lessee Funded Account in accordance with the terms of any ACS Group Lease;

          (f) transfer any security deposits that are not Segregated Funds from
the Collections Account to the Security Deposit Account;

          (g) subject to Section 5.02(i) hereof, withdraw from the Aircraft
Conversion Account an amount equal to all or a portion of the ACS Group
Conversion Payment for any ACS Group Aircraft Conversion, to the extent the
relevant ACS Group Conversion Agreement requires payment on that or the next
Business Day; and

          (h) transfer to the Collections Account, or any other applicable
Account, any Contribution Amounts.

     Section 3.05 Withdrawals and Transfers Relating to the Acquisition of
Aircraft and Interim Deposits and Withdrawals for Aircraft Sales. (a)
Acquisition. On the Acquisition Date (other than a Closing Date) with respect to
an ACS Group Aircraft, the Cash Manager may make, or direct the Operating Bank
to make, the following deposits, withdrawals and transfers to the Accounts, in
each case as specified in a Written Notice of the Cash Manager to the Trustee,
the Guarantor Trustee, the Security Trustee and the Operating Bank (which
Written Notice of the Cash Manager shall, as a condition to any such deposit,
withdrawal and transfer be accompanied by a Written Notice of the Administrative
Agent (i) stating that the conditions to payment for an ACS Group Aircraft (or
related Aircraft Interest) specified in the applicable ACS Group Acquisition
Agreement have been fulfilled and (ii) setting forth the amounts of such
deposits, withdrawals and transfers):

          (i) deposit into the relevant Lessee Funded Account, the amount of any
Segregated Funds received in respect of such ACS Group Aircraft under the
applicable ACS Group Acquisition Agreement;

          (ii) pay out of the Aircraft Purchase Account for such ACS Group
Aircraft to the applicable Seller the Aircraft Allocation Amount for such ACS
Group Aircraft plus Investment Earnings, if any, remaining in such Aircraft
Purchase Account minus the amount of any security deposits that are not
Segregated Funds held by an ACS Group Subsidiary as lessor under the Lease with
respect to such ACS Group Aircraft; and

          (iii) transfer from the Aircraft Purchase Account for such ACS Group
Aircraft to the Security Deposit Account the amount of any security deposits
that are not Segregated Funds held by an ACS Group Subsidiary as lessor under
the ACS Group Lease with respect to such ACS Group Aircraft.

          (b) Aircraft Payments. The payments of the Aircraft Allocation Amount
for any ACS Group Aircraft to be made pursuant to Section 3.05(a)(ii) to any
Seller shall, subject to the delivery as to such ACS Group Aircraft of the
Written Notice referred to in Section 3.05(a), be made as so provided
notwithstanding the giving of any Default Notice or any other exercise of
remedies hereunder.



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          (c) Delivery Expiry Date. Upon Written Notice of the Administrative
Agent to the Cash Manager, the Trustee, the Guarantor Trustee, the Security
Trustee and the Operating Bank that the Issuer or Guarantor, as applicable, is
no longer required, pursuant to the terms of the applicable ACS Group
Acquisition Agreement, to purchase any ACS Group Initial Aircraft or ACS Group
Additional Aircraft (whether by reason of the passing of the Delivery Expiry
Date (including, without limitation, if at least 33 of the ACS Group Initial
Aircraft are not purchased within five Business Days after the Initial Closing
Date and the Policy Provider has not extended the period for purchase of the
Specified Number of the ACS Group Initial Aircraft in writing, then the Delivery
Expiry Date shall be deemed to have occurred with respect to the Specified
Number of ACS Group Aircraft selected by the Policy Provider from among the
Specified Aircraft not purchased during such period), the exercise by the Issuer
of any termination right under that ACS Group Acquisition Agreement or otherwise
(any such event, a "Non-Delivery Event")), the Cash Manager shall direct the
Operating Bank to (i) transfer from the Aircraft Purchase Account for each ACS
Group Aircraft so affected to the Collections Account (for application in
accordance with Section 3.08 hereof) the Aircraft Allocation Amount for such ACS
Group Aircraft, and (ii) transfer to the applicable Seller, an amount equal to
the Investment Earnings remaining in such Aircraft Purchase Account.

          (d) Rent Payment Reimbursement Amount. On each Payment Date prior to
an Acquisition Date with respect to a Remaining Aircraft, the Cash Manager shall
pay or shall direct the Operating Bank to pay to the relevant Seller an amount
equal to the Rent Payment Reimbursement Amount for such Remaining Aircraft for
the Rent Transfer Period ending immediately preceding such Payment Date, such
payment to be made from the Investment Earnings in the Aircraft Purchase Account
for such Remaining Aircraft accrued during such Rent Transfer Period.

          (e) Aircraft Sales. The Cash Manager shall cause the Operating Bank to
deposit any and all proceeds received in respect of any Aircraft Sale by any ACS
Group Member (including any loss proceeds and any other amounts under the
relevant ACS Group Purchase Agreement), in each case in the Collections Account
(other than in connection with any sale of all or substantially all of the
assets of the ACS Bermuda Group or ACS Ireland Group, as applicable, in which
case the Cash Manager shall deposit any and all proceeds of any thereof into the
Defeasance/Redemption Account in connection with the redemption of each subclass
of the Securities or Guarantor Securities, as applicable), in each case as
specified in a Written Notice of the Cash Manager to the Trustee, the Security
Trustee and the Operating Bank (which Written Notice of the Cash Manager shall,
as a condition to any such deposit, be accompanied by a Written Notice of the
Administrative Agent setting forth the amount of such deposit). Any funds then
on deposit in a Lessee Funded Account or the Security Deposit Account related to
the ACS Group Aircraft subject to such sale or other disposition shall be
applied on a basis consistent with the terms of the Lease related to such ACS
Group Aircraft, if any, or as otherwise provided by the relevant agreements
related to such sale or other disposition.

          Section 3.06 Calculation Date Calculations. (a) Calculation of
Required Amounts. The Cash Manager shall determine, as soon as practicable after
each Calculation Date, but in no event later than two Business Days preceding
the immediately succeeding Payment Date, based on information known to the Cash
Manager or Relevant Information (and, without limitation, in the case of clauses
(ii), (iii), (iv), (v), (vi), (vii) and (viii) below, a Written Notice from the



                                                                              77


Administrative Agent received by the Cash Manager no later than 10:00 a.m. (New
York City time) on the day after such Calculation Date setting forth the amounts
required for the calculations in such clauses) provided to the Cash Manager, the
Collections received during the period commencing on the close of business on
the preceding Calculation Date and ending on the close of business on such
Calculation Date and calculate the following amounts:

          (i) the balance of funds on deposit in the Accounts on the Calculation
Date, the Required Amount with respect to each Cash Collateral Account
(including the Senior Cash Collateral Account) on such Calculation Date and the
amount available under all Eligible Credit Facilities on such Calculation Date;

          (ii) the Required Expense Amount and any amount to be deposited in
respect of Permitted Accruals as of such Calculation Date as set forth in the
Monthly Report prepared by the Administrative Agent and provided to the
Operating Bank;

          (iii) the Available Collections on such Calculation Date (separately
listing any Senior Hedge Payments, Subordinated Hedge Payments and Hedge
Breakage Costs) (provided that, in making such determination, the Cash Manager
may assume that any amount from a Hedge Provider to be paid on such Payment Date
pursuant to any Hedge Agreement will be paid on such Payment Date);

          (iv) the net Segregated Funds and any amounts on deposit in the
Security Deposit Account available to be transferred into the Collections
Account on such Calculation Date;

          (v) any amounts to be withdrawn from any Cash Collateral Account for
the payment of the Interest Amount on the Outstanding Principal Balance of any
class of ACS Group Securities, any Expenses or Senior Hedge Payments;

          (vi) any amounts to be transferred in respect of Eligible Credit
Facilities under clause (iv) of Section 3.08(a) hereof, clause (iii) of Section
3.08(b) hereof or clause (ii) of Section 3.08(c) hereof;

          (vii) any amount to be transferred from any Aircraft Purchase Account
to the Collections Account as provided in Section 3.05(c) hereof; and

          (viii) the Contribution Amounts, if any, made prior to such
Calculcation Date.

          (b) Calculation of Interest Amounts, Policy Premiums and fees of
Initial Credit Facility Provider. The Cash Manager shall, not later than four
Business Days prior to each Payment Date, make the following calculations or
determinations with respect to Interest Amounts, Policy Premiums and fees of the
Initial Credit Facility Provider due on such Payment Date:

          (i) based on Relevant Information provided to it by the Reference
Agent, the applicable interest rate on each subclass of ACS Group Floating Rate
Securities based on LIBOR determined on the Reference Date for the relevant
Accrual Period;



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          (ii) the Interest Amount in respect of each class or subclass of ACS
Group Floating Rate Securities (other than Class E Securities) on such Payment
Date;

          (iii) the Interest Amount in respect of each class or subclass of ACS
Group Fixed Rate Securities on such Payment Date;

          (iv) the DSCR Aggregate Interest Amount for such Payment Date;

          (v) the Policy Premium due and owing to the Policy Provider on such
Payment Date; and

          (vi) any fees due and owing to the Initial Credit Facility Provider on
such Payment Date.

          (c) Calculation of Principal Payment and Other Amounts. The Cash
Manager shall, not later than five Business Days prior to each Payment Date,
calculate or determine the following with respect to principal payments due on
such Payment Date and certain other amounts in respect of such Payment Date:

          (i) the Outstanding Principal Balance of each class and subclass of
the ACS Group Securities on such Payment Date immediately prior to any principal
payment on such date;

          (ii) the Assumed Base Value and Assumed Monthly Depreciation for each
ACS Group Aircraft and the Assumed Portfolio Value on such Payment Date;

          (iii) the DSCR Available Cash on such Payment Date (with the amount of
Re-leasing Expenses with respect to such DSCR Available Cash to be certified to
the Cash Manager by the Administrative Agent on or prior to five Business Days
prior to each Payment Date);

          (iv) the Minimum Principal Payment Amount on such Payment Date with
respect to each subclass of ACS Group Class A Securities;

          (v) the Aggregate Minimum Principal Payment Amount on such Payment
Date with respect to each subclass of ACS Group Class A Securities;

          (vi) the DSCR Aggregate Minimum Principal Amount with respect to such
Payment Date;

          (vii) the DSCR on such Payment Date;

          (viii) the Applicable Allocation Percentage; and

          (ix) the Allocable Principal Conversion Amount and the Allocable
Equity Conversion Amount.

          (d) Calculation of Refinancing Amounts. The Cash Manager shall, not
later than five Business Days prior to each Payment Date on which an ACS Group
Refinancing or



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Redemption or Guarantor Redemption, as applicable, of any class or subclass of
ACS Group Securities is scheduled to occur, perform the calculations necessary
to determine the Redemption Price or Guarantor Redemption Price, as applicable,
of and the accrued and unpaid interest on such Securities.

          (e) Application of the Available Collections. The Cash Manager shall,
not later than 1:00 p.m. (New York City time) on the Business Day prior to each
Payment Date, determine the amounts to be applied on such Payment Date to make
each of the payments contemplated by Section 3.08(a), 3.08(b) or 3.08(c) (as
applicable) hereof setting forth separately, the amount to be applied on such
Payment Date pursuant to each clause of Section 3.08(a), 3.08(b) or 3.08(c) (as
applicable) hereof including, where applicable, the allocation of principal of
the ACS Group Securities in accordance with Section 3.09 hereof.

          (f) Calculations in respect of Initial Credit Facility Drawings. As
soon as practicable after each Calculation Date, but in no event later than
12:00 p.m. (New York City time) on the date which is the fourth Business Day
prior to the related Payment Date, the Cash Manager shall determine (after
giving effect to the application of Available Collections in accordance with the
applicable payment priorities set forth in Section 3.08 hereof), whether a
shortfall exists as of such Calculation Date in Available Collections (x) to pay
on the next succeeding Payment Date the Required Expense Amount due on such
Payment Date (any such shortfall in respect of the Required Expense Amount, a
"Required Expenses Shortfall"), (y) to pay in full the Senior Hedge Payments to
each applicable Hedge Provider due on such Payment Date (any such shortfall of
Senior Hedge Payments, the "Senior Hedge Payments Shortfall"), and (z) to pay
the Interest Amount due on each subclass of the ACS Group Class A Securities on
such Payment Date (any such shortfall in respect of the Interest Amount due with
respect to the ACS Group Subclass A-1 Securities, a "Credit Facility Interest
Class A Shortfall").

          (g) Notification of Calculations in respect of Available Minimum
Principal Amounts. So long as a Default Notice has not been issued, an
Acceleration Default has not occurred or a DSCR Failure has not occurred or will
not occur on the next succeeding Payment Date, as soon as practicable after each
Calculation Date, but in no event later than 12:00 p.m. (New York City time) on
the date which is the third Business Day prior to the related Payment Date, the
Cash Manager shall provide notice to the Issuer and the Guarantor of its
calculations of (i) the amount (the "Available Minimum Principal Amount")
available (after giving effect to all Prior Ranking Amounts) to pay the Minimum
Principal Payment Amount for the ACS Group Class A Securities (for application
in accordance with Section 3.08(a)) for such Payment Date and (ii) the Allocable
Principal Conversion Amount with respect to any proposed ACS Group Aircraft
Conversion and whether the Available Minimum Principal Amount (after giving
effect to any prior transfer to the Aircraft Conversion Account of any Available
Minimum Principal Amounts in respect of a particular Aircraft Conversion) is
sufficient to fund such Allocable Principal Conversion Amount in full. As soon
as practicable after receipt of such calculations, but in no event later than
12:00 p.m. (New York City time) on the date which is the second Business Day
prior to the related Payment Date, each of the Issuer and the Guarantor (or the
Administrative Agent on their behalf) shall advise the Cash Manager as to
whether the Available Minimum Principal Amount should be applied in accordance
with Section 3.08(a) towards the Minimum Principal Payment Amount payable for
such Payment Date or should be transferred to the Aircraft Conversion Account
(such election to transfer the Available Minimum Principal



                                                                              80


Amount (or such lesser amount as may be necessary to fund the Allocable
Principal Conversion Amount for such ACS Group Aircraft Conversion) to the
Aircraft Conversion Account, a "Principal Conversion Election"). For the
avoidance of doubt, the sum of the Available Minimum Principal Amount
transferred to the Aircraft Conversion Account in respect of any proposed ACS
Group Aircraft Conversion may not exceed the Allocable Principal Conversion
Amount for such ACS Group Aircraft Conversion. In the absence of a Principal
Conversion Election, the Available Minimum Principal Amount shall be applied in
accordance with the payment priorities set forth in Section 3.08(a) hereof. A
Principal Conversion Election with respect to any ACS Group Aircraft Conversion
in relation to any Payment Date will be only permitted (i) if a Holder
Conversion Election with respect to such ACS Group Aircraft conversion in
relation to such Payment Date is also made and (ii) in the same proportion as
(x) the amount of Available Holder Amount to be transferred to the Aircraft
Conversion Account to fund the Allocable Equity Conversion Amount in respect of
such Holder Conversion Election on such Payment Date bears to (y) such Allocable
Equity Conversion Amount.

          (h) Notification of Calculations in respect of Available Holder
Amounts. So long as a Default Notice has not been issued, an Acceleration
Default has not occurred or a DSCR Failure has not occurred or will not occur on
the next succeeding Payment Date, as soon as practicable after each Calculation
Date, but in no event later than 12:00 p.m. (New York City time) on the date
which is the third Business Day prior to the related Payment Date, the Cash
Manager shall provide notice to the Issuer and the Guarantor of its calculations
of (i) the amount (the "Available Holder Amount") available (after giving effect
to all Prior Ranking Amounts) to pay the Holder of the Class E Securities and
the Shareholders in accordance with Section 3.08(a) for such Payment Date and
(ii) the Allocable Equity Conversion Amount with respect to any proposed ACS
Group Aircraft Conversion and whether such Available Holder Amount (after giving
effect to any prior transfers to the Aircraft Conversion Account of Available
Holder Amounts in respect of a particular ACS Group Aircraft Conversion) is
sufficient to fund such Allocable Equity Conversion Amount in full. As soon as
practicable after receipt of such calculations, but in no event later than 12:00
p.m. (New York City time) on the date which is the second Business Day prior to
the related Payment Date, each of the Issuer and the Guarantor (or the
Administrative Agent on their behalf) shall advise the Cash Manager as to
whether the Available Holder Amount should be paid to the Holders of the Class E
Securities and the Shareholders pro rata according to the Applicable Allocation
Percentage for such Payment Date or should, in lieu of such payment, be
transferred in whole or in part to the Aircraft Conversion Account to fund the
Allocable Equity Conversion Amount (such election to transfer the Available
Holder Amount (or such lesser amount as may be necessary to fund the Allocable
Equity Conversion Amount for such ACS Group Aircraft Conversion) to the Aircraft
Conversion Account, a "Holder Conversion Election" and, together with a
Principal Conversion Election, a "Conversion Election"). For the avoidance of
doubt, the sum of the Available Holder Amount transferred to the Aircraft
Conversion Account in respect of any proposed ACS Group Aircraft Conversion may
not exceed the Allocable Equity Conversion Amount for such ACS Group Aircraft
Conversion. In the absence of a Holder Conversion Election, the Available Holder
Amount shall be applied in accordance with the payment priorities set forth in
Section 3.08(a) hereof.



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          (i) Calculations in respect of Policy Drawings. The Cash Manager shall
make the following calculations or determinations in respect of the Policy:

          (i) as soon as practicable after each Calculation Date, but in no
event later than 12:00 p.m. (New York City time) on the date which is the third
Business Day prior to each Regular Distribution Date, determine (after giving
effect to all payments and transfers to be made with respect to such Regular
Distribution Date and the application of Available Collections in accordance
with the applicable payment priorities set forth in Section 3.08 hereof, the
application of Credit Facility Drawings to be made pursuant to the Initial
Credit Facility, any withdrawals from the Credit Facility Reserve Account and
any withdrawals from the Senior Cash Collateral Account pursuant to Section
3.01(p)), whether a shortfall will exist as of such Regular Distribution Date in
the Available Collections and such other amounts to make payment on such Regular
Distribution Date of Accrued Senior Interest due on the Certificates on such
Regular Distribution Date (any such shortfall in respect of accrued and unpaid
interest on the Certificates on any Regular Distribution Date, an "Interest
Shortfall" therefor);

          (ii) as soon as practicable after the Calculation Date next succeeding
the date of a sale or other disposition of an ACS Group Aircraft (not including
any ACS Group Aircraft acquired by way of contribution) or of an ACS Group
Subsidiary which owns an ACS Group Aircraft (not including any ACS Group
Aircraft acquired by way of contribution), in each case by or on behalf of, or
at the direction of the Controlling Party after an Acceleration of the
Securities, but in no event later than 12:00 p.m. (New York City time) on the
date which is the third Business Day prior to the next succeeding Regular
Distribution Date, determine the shortfall, if any, between the Class A Note
Target Price (determined as of the date of disposition) of the disposed Aircraft
(or of the Aircraft owned by the disposed ACS Group Subsidiary) and the Net Sale
Proceeds from the sale or other disposition of such Aircraft (or of such
disposed ACS Group Subsidiary owning such Aircraft) (the "Deficiency Shortfall"
with respect to the next succeeding Regular Distribution Date);

          (iii) as soon as practicable after each Calculation Date on or
following the date that is 24 months after the date (as determined by the Pass
Through Trustee or the Trustee and notified to the Policy Provider in writing)
of the occurrence of an Event of Default under Section 4.01(a) or Section
4.01(b) hereof or an Acceleration of the Securities, but in no event later than
12:00 p.m. (New York City time) on the date which is the third Business Day
prior to the immediately succeeding Regular Distribution Date, determine (after
giving effect to the application of Available Collections in accordance with the
applicable payment priorities set forth in Section 3.08 hereof and the
application of any Credit Facility Drawings (or drawings under any Replacement
Credit Facility) and the application of any withdrawals from the Credit Facility
Reserve Account and/or the Senior Cash Collateral Account, in each case, in
accordance with the terms hereof) the shortfall (determined as of such
Calculation Date), if any, of Available Collections and such other amounts for
the payment on the next succeeding Regular Distribution Date of an amount
necessary to reduce the then Pool Balance of the Certificates by the Insured
Minimum Principal Payment Amount, if any, of the ACS Group Subclass A-1
Securities for such Regular Distribution Date (with respect to any such Regular
Distribution Date, a "Minimum Principal Shortfall");



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          (iv) as soon as practicable after the Final Maturity Date, but in no
event later than 12:00 p.m. (New York City time) on the date which is the third
Business Day prior to the applicable Legal Final Distribution Date, determine
(after giving effect to all payments and transfers to be made hereunder and the
application of Available Collections in accordance with the applicable payment
priorities set forth in Section 3.08 hereof on or prior to the Final Maturity
Date and the application of any Credit Facility Drawings (or drawings under any
Replacement Credit Facility), any withdrawals from the Credit Facility Reserve
Account and any withdrawals from the Senior Cash Collateral Account as set forth
in Section 3.01(p), in each case, on such Final Maturity Date) (determined as of
the Final Maturity Date) whether any shortfall will exist in the amount
necessary for the payment in full of the Pool Balance of the Certificates on the
Legal Final Distribution Date therefor together with accrued and unpaid interest
thereon (at the Stated Rate of Interest for the Certificates) (any such
shortfall on the Legal Final Distribution Date, the "Final Amount" therefor);
and

          (v) as promptly as practicable after the date of any Avoided Payment,
calculate the amount of such Avoided Payment.

     Section 3.07 Payment Date First Step Withdrawals and Transfers. Two
Business Days prior to each Payment Date, the Cash Manager shall make or direct
the Operating Bank in writing to make (such direction to be communicated in
computer file format or in such other form as the Cash Manager, the Operating
Bank, the Trustees and the Security Trustee agree, provided that, in the case of
communication in computer file format or any other form other than a written
tangible form, a written tangible form thereof shall promptly thereafter be sent
to the Operating Bank), on such Payment Date, the following withdrawals from and
transfers to the Accounts in each case as specified in a Written Notice of the
Cash Manager to the Trustee, the Security Trustee and the Operating Bank (and,
in the case of clauses (c) and (d) below, such direction shall be based on
information provided by the Administrative Agent in a Written Notice to the Cash
Manager specifying the amounts for such clauses);

          (a) transfer the net proceeds of any ACS Group Refinancing of any ACS
Group Securities from the Refinancing Account to any Cash Collateral Account
established for the related ACS Group Refinancing Securities (up to the Required
Amount therefor in accordance with Section 3.03 hereof) and the balance to the
applicable Securities Accounts, in each case in accordance with Sections 2.10(b)
and 5.02(f) hereof and Sections 2.10(b) and 5.02(f) of the Guarantor Indenture;

          (b) transfer any amounts on deposit in the Defeasance/Redemption
Account in respect of any Redemption or Guarantor Redemption that is not a
Refinancing or Guarantor Refinancing to the applicable Securities Accounts;

          (c) transfer from each Lessee Funded Account to the Security Deposit
Account or the Collections Account, as applicable, any available Segregated
Funds that are no longer required to be maintained in a segregated account under
the applicable ACS Group Leases;

          (d) transfer from the Security Deposit Account to the Collections
Account any security deposits relating to an expired ACS Group Lease that are
not required under the terms of a subsequent ACS Group Lease to be retained in
the Security Deposit Account;



                                                                              83


          (e) transfer from the Collections Account to the relevant Lessee
Funded Accounts the amount of any Segregated Funds then on deposit in the
Collections Account;

          (f) transfer from the Collections Account to the Security Deposit
Account the amount of any security deposits that are not Segregated Funds then
on deposit in the Collections Accounts;

          (g) transfer from any Account (other than the Collections Account, the
Credit Facility Reserve Account, the Initial Liquidity Payment Account, the
Aircraft Conversion Account, and the Aircraft Purchase Accounts) to the
Collections Account the amount of Investment Earnings, if any, on investments of
funds on deposit therein during the preceding Accrual Period, except that (a)
earnings on any portion of the funds on deposit in any Account required under
the terms of the related Lease to be repaid to the related Lessee shall be
retained therein and (b) in the case of any Aircraft Purchase Account, any
earnings on the portion of the purchase price funds in respect of an ACS Group
Aircraft on deposit in such Aircraft Purchase Account shall be retained therein
for application in accordance with Section 3.05 hereof;

          (h) after the giving of a Default Notice, during the continuation of
an Acceleration Default or following the Accrual Period in which an Aircraft
Sale occurs with respect to the last remaining ACS Group Aircraft, transfer any
amounts remaining in the relevant Lessee Funded Account (other than amounts
required to be maintained in such account pursuant to the terms of the related
ACS Group Lease or ACS Group Aircraft Agreement) and the Security Deposit
Account into the Collections Account;

          (i) transfer from the Collections Account to the Aircraft Conversion
Account an amount equal to the Available Minimum Principal Amount (or a portion
thereof) to fund the Allocable Principal Conversion Amount and the Available
Holder Amount (or a portion thereof) to fund the Allocable Equity Conversion
Amount in connection with a Conversion Election; and

          (j) after payment in full of all ACS Group Conversion Payments to be
made for any ACS Group Aircraft Conversion, transfer any balance of the amount
originally deposited in the Aircraft Conversion Account in respect of such ACS
Group Aircraft Conversion from the Aircraft Conversion Account to the
Collections Account for application in accordance with Section 3.08 hereof.

     Section 3.08 Payment Date Second Step Withdrawals. (a) On each Payment
Date, after the withdrawals and transfers provided for in Section 3.07 hereof
have been made, the Cash Manager shall distribute from the Collections Account
(or retain in the Collections Account, if so indicated in the relevant clause
below), or direct the Operating Bank in writing to do the same (such direction
to be communicated in computer file format or in such other form as the Cash
Manager, the Operating Bank, the Trustees and the Security Trustee agree;
provided that, in the case of communication in computer file format or any other
form other than a written tangible form, a written tangible form thereof shall
promptly thereafter be sent to the Operating Bank), at least two Business Days
prior to such Payment Date the amounts set forth below in the order of priority
set forth below but, in each case, only to the extent that all amounts then
required to be paid (or retained in the Collections Account, as applicable)
ranking prior thereto ("Prior Ranking Amounts") have been paid in full (provided
that the amount to be paid shall be reduced in



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inverse order of priority by the amount of any payment by a Hedge Provider under
a Hedge Agreement that was assumed pursuant to Section 3.06(a)(iii) to be, but
has not in fact been, paid on such Payment Date). All payments of Available
Collections to be made to or for the account of Holders of any subclass of ACS
Group Securities, pursuant to this Section 3.08 shall be made through a direct
transfer of funds to the applicable Securities Account with respect to such
subclass of ACS Group Securities. Payments shall be made in the following order
of priority:

          (i) to the Expense Account, an amount such that the amount on deposit
therein is at least equal to the Required Expense Amount (including Credit
Facility Expenses due and payable to the Initial Credit Facility Provider and
Policy Expenses due and payable to the Policy Provider);

          (ii) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A), (B) and (C) as follows, (A) FIRST, to the Securities
Accounts for each subclass of ACS Group Class A Securities, the Interest Amount
on such subclass of ACS Group Class A Securities (other than any portion thereof
constituting any interest described in clause (b) of the definition of Interest
Amount to the extent the Policy Provider has made timely payment in respect of
any unpaid Interest Shortfall due on the related Regular Distribution Date on
the Certificates) in no order of priority inter se, but pro rata according to
the Interest Amount on such subclass of ACS Group Class A Securities less the
sum of (1) the amount of any Interest Drawing paid on or before the related
Distribution Date by the Policy Provider under the Policy on or prior to such
Distribution Date to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date and (2) the amount of any Credit Facility
Drawing in respect of the Interest Amount due on such subclass of ACS Group
Class A Securities paid on or before such Payment Date to the extent not
theretofore reimbursed to the Initial Credit Facility Provider as of such
Payment Date; and SECOND, to the Policy Provider, the amounts so paid by the
Policy Provider in respect of such Interest Drawings to the extent not
theretofore reimbursed to the Policy Provider as of such Distribution Date; (B)
pro rata, to any Hedge Provider, an amount equal to any Senior Hedge Payment due
from any ACS Group Member pursuant to any Hedge Agreement; and (C) to the Policy
Provider, an amount equal to accrued interest (at the Stated Rate of Interest
with respect to the Certificates) on the amount of any Policy Drawing paid by
the Policy Provider under the Policy prior to the related Distribution Date and
to the extent not theretofore reimbursed to the Policy Provider as of such
Distribution Date;

          (iii) to the Policy Provider, an amount equal to any Senior Hedge
Payment made by the Policy Provider on behalf of an ACS Group Member to the
extent not theretofore reimbursed to the Policy Provider as of such Payment
Date;

          (iv) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A), (B) and (C) as follows: (A) FIRST, to the Credit
Facility Reserve Account (if applicable), such amount so that the amount on
deposit in such Account is equal to the Required Amount therefor and SECOND, to
any Persons providing any Eligible Credit Facilities, any Credit Facility
Advance Obligations payable to such Persons under the terms of their respective
Eligible Credit Facilities (after giving effect to any payments made by the
Policy Provider to the Persons providing such Eligible Credit Facilities as
provided in the definition of "Controlling Party"); (B) if the Policy Provider
has paid any such Credit Facility Advance Obligations, as so provided, to the
Policy Provider, the amount of such payments to the extent not theretofore
reimbursed to



                                                                              85


the Policy Provider (plus interest accrued thereon at the applicable rate under
such Eligible Credit Facility that would have otherwise been payable to the
Persons providing such Eligible Credit Facility from the date of such payment);
and (C) to the Senior Cash Collateral Account, such amount so that the amount on
deposit in such Account is equal to the Required Amount therefor;

          (v) to the Policy Provider, any Policy Premium due and owing to the
Policy Provider;

          (vi) FIRST, except in connection with a Conversion Election, to the
Securities Accounts for each subclass of ACS Group Class A Securities, in the
order of priority by subclass set forth in Section 3.09 hereof, an amount equal
to the Aggregate Minimum Principal Payment Amount of the ACS Group Class A
Securities for such Payment Date less the amounts of Policy Drawings (such
amount in the aggregate not to exceed such Aggregate Minimum Principal Payment
Amount for such date) in respect of the principal of the ACS Group Class A
Securities (or, without duplication, otherwise applied to reduce the
corresponding portion of the Pool Balance of the Certificates) paid by the
Policy Provider under the Policy for periods prior to the related Distribution
Date to the extent not theretofore reimbursed to the Policy Provider; and
SECOND, to the Policy Provider, an amount, not to exceed the Aggregate Minimum
Principal Payment Amount of the ACS Group Class A Securities for such Payment
Date, equal to the amount of such Policy Drawings in respect of such principal
(or, without duplication, otherwise applied to reduce the corresponding portion
of the Pool Balance of the Certificates) so paid by the Policy Provider under
the Policy prior to such Distribution Date to the extent not theretofore
reimbursed to the Policy Provider as of such Distribution Date;

          (vii) to the Expense Account, such amount as an accrual (the
"Permitted Accruals") in respect of any ACS Group Modification Payments or ACS
Group Refinancing Expenses as the Cash Manager shall determine based on
information provided in a Written Notice to the Cash Manager by the
Administrative Agent;

          (viii) payments to the applicable party, pro rata inter se, of Special
Indemnity Payments;

          (ix) to the Policy Provider, an amount equal to accrued interest (at
the Excess Policy Rate) on any amounts paid by the Policy Provider under the
Policy prior to the related Distribution Date and to the extent not theretofore
reimbursed to the Policy Provider as of such Distribution Date;

          (x) payments to Hedge Providers, pro rata inter se, that are
Subordinated Hedge Payments;

          (xi) to the Policy Provider, any Additional Premium due and owing to
the Policy Provider;

          (xii) to the Irish Parent, the Charitable Trust Dividend, if any;

          (xiii) in no order of priority inter se but pro rata, not on account
of any obligation or debt (A) to the Securities Account for the Holders of the
Class E Securities, an



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amount equal to the reimbursement to the Holders of the Class E Securities of
the Contribution Amounts (if any) made by such Holders, and (B) to the
Shareholders Account as a dividend or distribution, an amount equal to the
reimbursement to the Shareholders of the Contribution Amounts (if any) made by
the Shareholders with respect to the Shares; and

          (xiv) the balance in no order of priority inter se but pro rata in
accordance with the Applicable Allocation Percentages, to the Securities Account
for the Holders of the Class E Securities and to the Shareholders Account for
the Shareholders.

          (b) Anything to the contrary contained in Section 3.08(a) hereof
notwithstanding, following the earlier of (x) the Expected Final Payment Date of
the ACS Group Subclass A-1 Securities or (y) the occurrence of a DSCR Failure,
the allocation of payments described in Section 3.08(a) hereof shall not apply
and the Cash Manager shall direct the Operating Bank in writing (such direction
to be communicated in computer file format or in such other form as the Cash
Manager, the Operating Bank, the Trustees, and the Security Trustee agree,
provided that, in the case of communication in computer file format or any other
form other than a written tangible form, a written tangible form thereof shall
promptly thereafter be sent to the Operating Bank) to cause all amounts on
deposit in the Collections Account and the Expense Account to be applied on each
Payment Date in the following order of priority:

          (i) to the Expense Account, an amount such that the amount on deposit
therein is equal to the Required Expense Amount (including Credit Facility
Expenses due and payable to the Initial Credit Facility Provider and Policy
Expenses due and payable to the Policy Provider);

          (ii) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A), (B), (C) and (D) as follows: (A) FIRST, to the
Securities Accounts for each subclass of ACS Group Class A Securities, the
Interest Amount on such subclass of ACS Group Class A Securities (other than any
portion thereof constituting any interest described in clause (b) of the
definition of Interest Amount to the extent the Policy Provider has made timely
payment in respect of any unpaid Interest Shortfall due on the related
Distribution Date on the Certificates) in no order of priority inter se, but pro
rata according to the Interest Amount of such subclass of ACS Group Securities
less the sum of (1) the amount of any Interest Drawing paid on or before the
related Distribution Date by the Policy Provider under the Policy on or prior to
such Distribution Date to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date and (2) the amount of any Credit Facility
Drawing in respect of the Interest Amount due on such subclass of ACS Group
Class A Securities paid on or before such Payment Date to the extent not
theretofore reimbursed to the Initial Credit Facility Provider as of such
Payment Date; and SECOND, to the Policy Provider, the amounts so paid by the
Policy Provider in respect of such Interest Drawing to the extent not
theretofore reimbursed to the Policy Provider as of such Distribution Date, (B)
pro rata to any Hedge Provider, such amounts as are required to make any Senior
Hedge Payments due to such Hedge Provider pursuant to any Hedge Agreement; (C)
to the Policy Provider, an amount equal to accrued interest (at the Stated Rate
of Interest with respect to the Certificates) on the amount of any Policy
Drawing paid by the Policy Provider under the Policy prior to the related
Distribution Date and to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date and (D) to the Policy Provider, an amount
equal to any Senior Hedge Payment made by the Policy Provider made by the Policy
Provider on behalf of an



                                                                              87


ACS Group Member to the extent not theretofore reimbursed to the Policy Provider
as of such Payment Date;

          (iii) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A) and (B), (A) to any Persons providing any Eligible
Credit Facilities, pro rata inter se, any Credit Facility Advance Obligations
payable to such Persons under the terms of their respective Eligible Credit
Facilities other than a Cash Collateral Account (after giving effect to any
payments made by the Policy Provider to Persons providing such Eligible Credit
Facilities as provided in the definition of "Controlling Party"); and (B) if the
Policy Provider has paid any such Credit Facility Advance Obligations, as so
provided, to the Policy Provider, the amount of such payments to the extent not
theretofore reimbursed to the Policy Provider (plus interest accrued thereon at
the applicable rate under such Eligible Credit Facility that would have
otherwise been payable to the Person providing such Eligible Credit Facility
from the date of such payment);

          (iv) to the Policy Provider, any Policy Premium due and owing to the
Policy Provider;

          (v) FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, an amount equal to the Aggregate Minimum Principal Payment
Amount of the ACS Group Class A Securities for such Payment Date less the
amounts of Policy Drawings (such amount in the aggregate not to exceed such
Aggregate Minimum Principal Payment Amount for such date) in respect of the
principal of the ACS Group Class A Securities (or, without duplication,
otherwise applied to reduce the corresponding portion of the Pool Balance of the
Certificates) paid by the Policy Provider under the Policy for periods prior to
the related Distribution Date to the extent not theretofore reimbursed to the
Policy Provider; and SECOND, to the Policy Provider, an amount, not to exceed in
the Aggregate Minimum Principal Payment Amount of the ACS Group Class A
Securities for such Payment Date, equal to the amount of such Policy Drawings in
respect of such principal (or, without duplication, otherwise applied to reduce
the corresponding portion of the Pool Balance of the Certificates) so paid by
the Policy Provider under the Policy prior to such Distribution Date to the
extent not theretofore reimbursed to the Policy Provider as of such Distribution
Date;

          (vi) FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, the Outstanding Principal Balance of such subclass of ACS
Group Class A Securities in no order of priority inter se, but pro rata
according to the amount of the principal of such subclass of ACS Group Class A
Securities less the amounts of Policy Drawings in respect of the principal of
such subclass of the ACS Group Class A Securities (or, without duplication,
otherwise applied to reduce the corresponding portion of the Pool Balance of the
Certificates) paid by the Policy Provider under the Policy for periods prior to
the related Distribution Date to the extent not theretofore reimbursed to the
Policy Provider and SECOND, to the Policy Provider, an amount equal to the
Policy Drawings in respect of such principal (or, without duplication, otherwise
applied to reduce the corresponding portion of the Pool Balance of the
Certificates) so paid by the Policy Provider under the Policy prior to such
Distribution Date to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date;

          (vii) payments to the applicable party, pro rata inter se, of Special
Indemnity Payments;



                                                                              88


          (viii) to the Policy Provider, an amount equal to accrued interest (at
the Excess Policy Rate) on any amounts paid by the Policy Provider under the
Policy prior to the related Distribution Date and to the extent not theretofore
reimbursed to the Policy Provider as of such Distribution Date;

          (ix) payments to any Hedge Provider, pro rata inter se, that are
Subordinated Hedge Payments;

          (x) to the Policy Provider, any Additional Premium then due and owing
to the Policy Provider;

          (xi) to the Irish Parent, the Charitable Trust Dividend, if any; and

          (xii) in no order of priority inter se but pro rata, not on account of
any obligation or debt (A) to the Securities Account for the Holders of the
Class E Securities, an amount equal to the reimbursement to the Holders of the
Class E Securities of the Contribution Amounts (if any) made by such Holders,
and (B) to the Shareholders Account, an amount equal to the reimbursement to the
Shareholders of the Contribution Amounts, if any, made by the Shareholders; and

          (xiii) the balance in no order of priority inter se but pro rata in
accordance with the Applicable Allocation Percentages, to the Securities Account
for the Holders of the Class E Securities and to the Shareholders Account for
the Shareholders.

          (c) Anything to the contrary contained in Section 3.08(a) or (b)
hereof notwithstanding, following the delivery to the Issuer, the Guarantor or
the Cash Manager of a Default Notice or during the continuance of an
Acceleration Default, the allocation of payments described in Section 3.08(a)
and (b) hereof shall not apply and the Cash Manager shall direct the Operating
Bank in writing (such direction to be communicated in computer file format or in
such other form as the Cash Manager, the Operating Bank, the Trustees, and the
Security Trustee agree, provided that, in the case of communication in computer
file format or any other form other than a written tangible form, a written
tangible form thereof shall promptly thereafter be sent to the Operating Bank)
to cause all amounts on deposit in the Collections Account and the Expense
Account to be applied on each Payment Date in the following order of priority:

          (i) to the Expense Account, an amount such that the amount on deposit
therein is equal to the Required Expense Amount (including Credit Facility
Expenses due and payable to the Initial Credit Facility Provider and Policy
Expenses due and payable to the Policy Provider);

          (ii) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A) and (B), (A) to any Persons providing any Eligible
Credit Facilities, pro rata inter se, any Credit Facility Advance Obligations
payable to such Persons under the terms of their respective Eligible Credit
Facilities other than a Cash Collateral Account (after giving effect to any
payments made by the Policy Provider to Persons providing such Eligible Credit
Facilities as provided in the definition of "Controlling Party"); and (B) if the
Policy Provider has paid any such Credit Facility Advance Obligations, as so
provided, to the Policy Provider, the amount of such payments to the extent not
theretofore reimbursed to the Policy Provider (plus interest accrued



                                                                              89


thereon at the applicable rate under such Eligible Credit Facility that would
have otherwise been payable to the Person providing such Eligible Credit
Facility from the date of such payment);

          (iii) to the Policy Provider, any Policy Premium due and owing to the
Policy Provider;

          (iv) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A), (B), (C) and (D) as follows: (A) FIRST, to the
Securities Accounts for each subclass of ACS Group Class A Securities, the
Interest Amount on such subclass of ACS Group Class A Securities (other than any
portion thereof constituting any interest described in clause (b) of the
definition of Interest Amount to the extent the Policy Provider has made timely
payment in respect of any unpaid Interest Shortfall due on the related
Distribution Date on the Certificates) in no order of priority inter se, but pro
rata according to the Interest Amount of such subclass of ACS Group Securities
less the sum of (1) the amount of any Interest Drawing paid on or before the
related Distribution Date by the Policy Provider under the Policy on or prior to
such Distribution Date to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date and (2) the amount of any Credit Facility
Drawing in respect of the Interest Amount due on such subclass of ACS Group
Class A Securities paid on or before such Payment Date to the extent not
theretofore reimbursed to the Initial Credit Facility Provider as of such
Payment Date; and SECOND, to the Policy Provider, the amounts so paid by the
Policy Provider in respect of such Interest Drawing to the extent not
theretofore reimbursed to the Policy Provider as of such Distribution Date, (B)
pro rata to any Hedge Provider, such amounts as are required to make any Senior
Hedge Payments due to such Hedge Provider pursuant to any Hedge Agreement; (C)
to the Policy Provider, an amount equal to accrued interest (at the Stated Rate
of Interest with respect to the Certificates) on the amount of any Policy
Drawing paid by the Policy Provider under the Policy prior to the related
Distribution Date and to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date and (D) to the Policy Provider, an amount
equal to any Senior Hedge Payment made by the Policy Provider made by the Policy
Provider on behalf of an ACS Group Member to the extent not theretofore
reimbursed to the Policy Provider as of such Payment Date;

          (v) FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, an amount equal to the Aggregate Minimum Principal Payment
Amount of the ACS Group Class A Securities for such Payment Date less the
amounts of Policy Drawings (such amount in the aggregate not to exceed such
Aggregate Minimum Principal Payment Amount for such date) in respect of the
principal of the ACS Group Class A Securities (or, without duplication,
otherwise applied to reduce the corresponding portion of the Pool Balance of the
Certificates) paid by the Policy Provider under the Policy for periods prior to
the related Distribution Date to the extent not theretofore reimbursed to the
Policy Provider; and SECOND, to the Policy Provider, an amount, not to exceed in
the Aggregate Minimum Principal Payment Amount of the ACS Group Class A
Securities for such Payment Date, equal to the amount of such Policy Drawings in
respect of such principal (or, without duplication, otherwise applied to reduce
the corresponding portion of the Pool Balance of the Certificates) so paid by
the Policy Provider under the Policy prior to such Distribution Date to the
extent not theretofore reimbursed to the Policy Provider as of such Distribution
Date;



                                                                              90


          (vi) FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, the Outstanding Principal Balance of such subclass of ACS
Group Class A Securities in no order of priority inter se, but pro rata
according to the amount of the principal of such subclass of ACS Group Class A
Securities less the amounts of Policy Drawings in respect of the principal of
such subclass of the ACS Group Class A Securities (or, without duplication,
otherwise applied to reduce the corresponding portion of the Pool Balance of the
Certificates) paid by the Policy Provider under the Policy for periods prior to
the related Distribution Date to the extent not theretofore reimbursed to the
Policy Provider and SECOND, to the Policy Provider, an amount equal to the
Policy Drawings in respect of such principal (or, without duplication, otherwise
applied to reduce the corresponding portion of the Pool Balance of the
Certificates) so paid by the Policy Provider under the Policy prior to such
Distribution Date to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date;

          (vii) payments to the applicable party, pro rata inter se, of Special
Indemnity Payments;

          (viii) to the Policy Provider, an amount equal to accrued interest (at
the Excess Policy Rate) on any amounts paid by the Policy Provider under the
Policy prior to the related Distribution Date and to the extent not theretofore
reimbursed to the Policy Provider as of such Distribution Date;

          (ix) payments to Hedge Providers, pro rata inter se, that are
Subordinated Hedge Payments;

          (x) to the Policy Provider, any Additional Premium then due and owing
to the Policy Provider;

          (xi) to the Irish Parent, the Charitable Trust Dividend, if any;

          (xii) in no order of priority inter se but pro rata, not on account of
any obligation or debt (A) to the Securities Account for the Holders of the
Class E Securities, an amount equal to the reimbursement to the Holders of the
Class E Securities of the Contribution Amounts (if any) made by such Holders,
and (B) to the Shareholders Account, an amount equal to the reimbursement to the
Shareholders of the Contribution Amounts, if any, made by the Shareholders; and

          (xiii) the balance in no order of priority inter se but pro rata in
accordance with the Applicable Allocation Percentages, to the Securities Account
for the Holders of the Class E Securities and to the Shareholders Account for
the Shareholders.

     Section 3.09 Allocations of Principal Payments Among Subclasses of the
Securities. To the extent that any payment of principal pursuant to Section
3.08(a) and (b) hereof is allocable to any class of Securities on any Payment
Date, such payment will be applied to repay all Securities in such class in the
following order of priority: (i) FIRST, to each subclass, in order of the
earliest issued subclass, the excess, if any, of the Outstanding Principal
Balance of each such subclass over the product of the applicable Extended Note
Pool Factor on such Payment Date and the initial principal balance of each such
subclass (any such difference, the "Extension Amount"); provided that, in the
case of two or more subclasses issued on the same date, the



                                                                              91


Available Collections will be applied to each such subclass pro rata according
to the amount of, but not to exceed, the Extension Amount of such subclass; (ii)
SECOND, to each subclass, in no order of priority inter se, but pro rata
according to the amount of, but not to exceed, the excess, if any, of the
Outstanding Principal Balance of each such subclass (after giving effect to any
payment under clause (i) above) over the product of the applicable Note Pool
Factor on such Payment Date and the initial principal balance of each such
subclass; (iii) THIRD, to each subclass with an Expected Final Payment Date on
or before such Payment Date, in order of the earliest issued subclass; provided
that, in the case of two or more subclasses issued on the same date, the
Available Collections will be applied to such subclasses in order of the
subclass with the earliest Expected Final Payment Date and, with respect to two
or more subclasses having the same Expected Final Payment Date, the Available
Collections will be applied to such subclasses pro rata according to the
Outstanding Principal Balance of each such subclass (after giving effect to any
payment under clauses (i) and (ii) above) on such Payment Date; and (iv) FOURTH,
to each subclass in order of the earliest Expected Final Payment Date, provided,
in the case of two or more subclasses having the same Expected Final Payment
Date, in no order of priority inter se, but pro rata, according to the
Outstanding Principal Balance of each such subclass (after giving effect to any
payment under clauses (i), (ii) and (iii) above) on such Payment Date.

     Section 3.10 Certain Redemptions; Certain Premiums. (a) Optional
Redemption. Subject to the provisions of Section 3.10(c) hereof, on any Payment
Date the Issuer may elect to redeem (including in connection with any
Refinancing) any subclass of the Securities in whole or in part, out of amounts
available in the Defeasance/Redemption Account or, in the case of a Refinancing,
the Refinancing Account, for such purpose, if any, other than, in either such
case, any funds constituting part of the Available Collections, at the
Redemption Price plus any accrued and unpaid interest (after giving effect to
any payment thereof on such Redemption Date under Section 3.08 hereof) on the
Securities to be redeemed to the Redemption Date; provided that such a
redemption may only occur upon the prior written consent of the Policy Provider
(except that a redemption in full of the ACS Group Subclass A-1 Securities shall
not require any such consent if a Policy Non-Consent Event occurs in connection
with such redemption) and after the giving of a Default Notice or the
Acceleration of any Securities, the Securities may be redeemed only in whole but
not in part pursuant to this Section 3.10(a); provided further that Written
Notice of any such Redemption shall be given by the Issuer (or the
Administrative Agent on its behalf) to the Trustee not less than 30 days and not
more than 45 days prior to such Redemption Date.

          (b) Redemption for Taxation Reasons. Subject to the provisions of
Section 3.10(c) hereof, if, at any time,

          (i) the Issuer is, or on the next succeeding Payment Date will be,
     required to make any withholding or deduction under the laws or regulations
     of any applicable tax authority with respect to any payment on any subclass
     of Securities; or

          (ii) the Issuer is or will be subject to any circumstance (whether by
     reason of any law, regulation, regulatory requirement or double-taxation
     convention, or the interpretation or application thereof, or otherwise)
     that has resulted or will result in the imposition of a Tax (whether by
     direct assessment or by withholding at source) or other similar imposition
     by any jurisdiction that would (A) materially increase the cost to the



                                                                              92


     Issuer of making payments in respect of any subclass of Securities or of
     complying with its obligations under or in connection with the Securities;
     (B) materially increase the operating or administrative expenses of the
     Issuer; or (C) otherwise obligate the Issuer or any of its subsidiaries to
     make any material payment on, or calculated by reference to, the amount of
     any sum received or receivable by the Issuer, or by the Cash Manager on
     behalf of the ACS Bermuda Group as contemplated by the Cash Management
     Agreement,

then the Issuer shall inform the Trustee in writing at such time of any such
requirement or imposition and shall use commercially reasonable efforts to avoid
the effect of the same; provided that no actions shall be taken by the Issuer to
avoid such effects without receipt of a Rating Agency Confirmation and the prior
written consent of the Policy Provider. If, after using its commercially
reasonable efforts to avoid the adverse effects described above, any ACS Bermuda
Group Member has not avoided such effects, the Issuer may, at its election,
redeem the Securities on any Payment Date, in whole, at the Outstanding
Principal Balance thereof plus accrued and unpaid interest (after giving effect
to any payment thereof on such Redemption Date under Section 3.08 hereof)
thereon, the Required Expense Amount and all unpaid Policy Provider Obligations,
Credit Facility Obligations and any amounts payable to any Hedge Provider as of
the Redemption Date to such Payment Date but without premium; provided, however,
that any such Redemptions may not occur more than 30 days prior to such time as
the requirement or imposition described in (i) or (ii) above is to become
effective and each of the Trustee and the Policy Provider shall have received a
certification from the Issuer certifying that the applicable ACS Bermuda Group
Member has been unable, after using such commercially reasonable efforts, to
avoid the adverse effects described above; and provided further that Written
Notice of any such Redemption shall be given by the Issuer (or the
Administrative Agent on its behalf) to the Trustee and the Policy Provider not
less than 30 days and not more than 45 days prior to the Redemption Date for
such Redemption.

          (c) Method of Redemption. Upon receipt of notice from the Issuer or
the Administrative Agent under Section 3.10(a) or 3.10(b) hereof, the Trustee
shall give Written Notice in respect of any such redemption of any subclass of
Securities under Section 3.10(a) or 3.10(b) hereof (a "Redemption") to each
Holder of Securities and the Policy Provider, at least 20 days before the
Redemption Date for such Redemption. Except in the case of a Refinancing, the
Trustee shall not deliver any notice under this Section 3.10(c) unless and until
the Trustee shall have received certification that all conditions precedent to
such Redemption have been satisfied and evidence satisfactory to it that the
amounts required to be deposited pursuant to Section 3.10(d) hereof are, or will
on or before the Redemption Date be, deposited in the Defeasance/Redemption
Account. Each notice in respect of a Redemption given pursuant to this Section
3.10(c) shall state (i) the applicable Redemption Date, (ii) the Trustee's
arrangements for making payments in respect of such Redemption, (iii) the
Redemption Price or the Outstanding Principal Balance of each subclass of
Securities to be redeemed and accrued and unpaid interest, (iv) in the case of a
Redemption of the Securities of any subclass in whole, that Securities of each
subclass to be redeemed must be surrendered to the Trustee to collect the
Redemption Price plus accrued and unpaid interest on such Securities and (v) in
the case of a Redemption of the Securities of any subclass in whole, that,
unless the Issuer defaults in the payment of the Redemption Price and any
accrued and unpaid interest on the Securities to be redeemed, interest



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on the subclass of Securities called for Redemption shall cease to accrue on and
after the Redemption Date.

          (d) Deposit of Redemption Amount. On or before 10:00 a.m. (New York
City time) on the fifth day preceding any Redemption Date in respect of a
Redemption under Section 3.10(a) hereof, the Issuer shall, to the extent an
amount equal to the Redemption Price of Securities to be redeemed and all
accrued and unpaid interest thereon (after giving effect to any payment thereof
on such Redemption Date under Section 3.08 hereof) and all unpaid Policy
Provider Obligations as of the Redemption Date is not then held on deposit
therein, deposit or cause to be deposited in the Defeasance/Redemption Account
or, in the case of a Refinancing, the Refinancing Account, other than, in either
case, any funds constituting part of the Available Collections, an amount in
immediately available funds equal to such amount. On or before 10:00 a.m. (New
York City time) on the fifth day preceding any Redemption Date in respect of a
Redemption under Section 3.10(b) hereof, the Issuer shall, to the extent an
amount equal to the Outstanding Principal Balance of Securities to be redeemed
and all accrued and unpaid interest (after giving effect to any payment thereof
on such Redemption Date under Section 3.08 hereof) and all unpaid Policy
Provider Obligations (including any Policy Premium and any Policy Redemption
Premium, if any) as of the Redemption Date is not then held on deposit therein,
deposit or cause to be deposited in the Defeasance/Redemption Account or, in
case of a Refinancing, the Refinancing Account, other than, in either case, any
funds constituting part of Available Collections, an amount in immediately
available funds equal to such amount. In the event the ACS Group Subclass A-1
Securities or any other Covered Class A Securities are redeemed in full, the
Policy shall be surrendered to the Policy Provider for cancellation.

          (e) Securities Payable on Redemption Date. After notice has been given
under Section 3.10(c) hereof, the Outstanding Principal Balance of the
Securities to be redeemed on such Redemption Date shall become due and payable
at the Corporate Trust Office of the Trustee, and from and after such Redemption
Date (unless there shall be a default in the payment of the applicable amount to
be redeemed) such principal amount shall cease to bear interest. Upon surrender
of any Security for redemption in accordance with such notice, the Redemption
Price or the Outstanding Principal Balance (as applicable) of such Security,
together with accrued and unpaid interest on such Security shall be paid as
provided for in this Section 3.10. If any Security to be redeemed shall not be
so paid upon surrender thereof for redemption, the amount in respect thereof
shall continue to bear interest until paid from the Redemption Date at the
interest rate or Periodic Return applicable to such Security.

     Section 3.11 Adjustment of Certain Percentages, Factors and Balances. Upon
each acquisition of any Additional Aircraft (other than any Additional Aircraft
acquired by way of a contribution) or the issuance of any Additional Securities
or Refinancing Securities, subject to Sections 5.02(f) and 5.02(h) hereof (as
applicable), the Note Pool Factors and Extended Note Pool Factors for any
subclass of Securities may be adjusted or, in the case of any new subclass of
Securities, determined to take into account such Permitted Additional Aircraft
Acquisition or the issuance of such Refinancing Securities in the manner
specified in the Board Resolution providing for such action subject to the prior
written consent of the Policy Provider and the Initial Credit Facility Provider;
provided that no Note Pool Factor or Extended Note Pool Factor for any subclass
of Securities may be adjusted so as to change the original Average Life of the
affected subclass of Securities or alter the rate at which such subclass of
Securities was originally



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scheduled to amortize. The Administrative Agent shall include such adjusted Note
Pool Factors, Extended Note Pool Factors and Minimum Target Principal Balances
in each Quarterly Report and Annual Report.

     Section 3.12 Initial Credit Facility.

          (a) Credit Facility Drawings. If the Cash Manager determines in
accordance with Section 3.06(f) hereof that after making all withdrawals (prior
to any drawings under the Policy but after any withdrawals from the Senior Cash
Collateral Account and the Credit Facility Reserve Account) and transfers to be
made with respect to the applicable Payment Date, there is (x) a Required
Expenses Shortfall, (y) a Senior Hedge Payments Shortfall and/or (z) a Credit
Facility Interest Class A Shortfall, in each case as calculated in Section
3.06(f) hereof, the Cash Manager shall so notify the Trustees in writing and
shall, no later than 1:00 p.m. (New York City time) three Business Days prior to
such Payment Date, request a drawing (each such drawing, a "Credit Facility
Drawing") under the Initial Credit Facility, to be paid on or prior to such
Payment Date, in an amount equal to the lesser of (a) the aggregate amount of
the shortfall from clauses (x), (y) and (z) above and (b) the Available Amount
under the Initial Credit Facility.

          (b) Application of Credit Facility Drawings. The proceeds of any
Credit Facility Drawing shall be deposited into the Initial Liquidity Payment
Account and withdrawn by the Operating Bank, upon Written Notice from the Cash
Manager, for application on the applicable Payment Date in the following manner:
FIRST, to the Expense Account an amount such that the amount on deposit therein
is at least equal to the Required Expense Amount for such Payment Date and
SECOND, in no order of priority inter se, but pro rata, (1) to the Securities
Accounts for the ACS Group Subclass A-1 Securities, the amount of accrued and
unpaid interest on the ACS Group Subclass A-1 Securities with respect to the
applicable Payment Date in no order of priority inter se, but pro rata; and (2)
pro rata, to any Hedge Provider, an amount equal to any Senior Hedge Payment due
from any ACS Group Member pursuant to any Hedge Agreement.

          (c) Downgrade Drawings. The Initial Credit Facility Provider shall
notify the Issuers, the Cash Manager and the Policy Provider promptly upon the
occurrence of a Downgrade Event. If at any time a Downgrade Event has occurred
and within 10 days after notice of such event (but not later than the expiration
date of the Initial Credit Facility) (i) the Initial Credit Facility Provider or
the Issuer or the Guarantor does not arrange to replace the Initial Credit
Facility with a Replacement Credit Facility, (ii) the Initial Credit Facility
Provider shall not have received a Rating Agency Confirmation with respect to
the Downgrade Event and the written consent of the Policy Provider to the
retention of such Initial Credit Facility Provider shall not have been obtained
or (iii) the Policy Provider shall not have confirmed in writing that such
downgrading will not constitute a Downgrade Event, on such 10th day (or if such
10th day is not a Business Day, on the next succeeding Business Day) (or, if
earlier, the expiration date of the Initial Credit Facility), then the Cash
Manager shall, upon the occurrence of a Downgrade Event with respect to the
Initial Credit Facility, request a drawing in accordance with and to the extent
permitted by the Initial Credit Facility (such drawing, a "Downgrade Drawing")
of the Available Amount thereunder. Amounts drawn pursuant to a Downgrade
Drawing shall be deposited into the Credit Facility Reserve Account.



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          (d) Non-Extension Drawings. If the Initial Credit Facility is
scheduled to expire on a date (the "Stated Expiration Date") prior to the date
that is 15 days after the Final Maturity Date with respect to the ACS Group
Subclass A-1 Securities, then, no earlier than the 60th day and no later than
the 30th day prior to the applicable Stated Expiration Date then in effect, the
Cash Manager shall request that the Initial Credit Facility Provider extend the
Stated Expiration Date until the earlier of (i) the date which is 15 days after
such Final Maturity Date with respect to the ACS Group Subclass A-1 Securities
and (ii) the date that is immediately preceding the 364th day occurring after
the Stated Expiration Date then in effect (unless the obligations of the Initial
Credit Facility Provider under the Initial Credit Facility are earlier
terminated in accordance with the Initial Credit Facility). If on or before the
date which is 10 days prior to the Stated Expiration Date, (A) the Initial
Credit Facility shall not have been replaced in accordance with Section 3.12(e)
hereof or (B) the Initial Credit Facility Provider fails irrevocably and
unconditionally to advise the Cash Manager that such Stated Expiration Date then
in effect shall be so extended (whether or not the Cash Manager has in fact
requested an extension), the Cash Manager shall immediately, in accordance with
the terms of the Initial Credit Facility (a "Non-Extended Facility"), request a
drawing under such Initial Credit Facility (such drawing, a "Non-Extension
Drawing") for the Available Amount thereunder. Amounts drawn pursuant to a
Non-Extension Drawing shall be deposited into the Credit Facility Reserve
Account.

          (e) Issuance of Replacement Credit Facility.

          (i) If the Initial Credit Facility Provider shall determine not to
extend the Initial Credit Facility in accordance with Section 3.12(d) hereof,
then either the Initial Credit Facility Provider or either the Issuer or the
Guarantor may, at their respective options, arrange for a Replacement Credit
Facility to replace the Initial Credit Facility during the period no earlier
than 35 days and no later than 10 days prior to the then effective Stated
Expiration Date.

          (ii) If a Downgrade Event shall have occurred with respect to the
Initial Credit Facility in accordance with Section 3.12(c) hereof, then either
the Initial Credit Facility Provider or the Issuer or the Guarantor may, at
their respective options, arrange for a Replacement Credit Facility to replace
the Initial Credit Facility within 10 days after receiving notice of such
Downgrade Event (but not later than the expiration date of the Initial Credit
Facility); provided, however, that the Initial Credit Facility Provider may, at
its option, arrange for a Replacement Credit Facility at any time following a
Downgrade Drawing so long as neither the Issuer nor the Guarantor has already
arranged for a Replacement Credit Facility.

          (iii) (A) At any time after the then Stated Expiration Date of the
Initial Credit Facility which has been extended for a period in excess of a
364-day period, the Initial Credit Facility Provider may, at its option, arrange
for a Replacement Credit Facility to replace the Initial Credit Facility.

          (B) No Replacement Credit Facility arranged by the Initial Credit
Facility Provider or the Issuer or the Guarantor in accordance with clauses
(e)(i), (e)(ii) and (e)(iii)(A) above shall become effective and no such
Replacement Credit Facility shall be deemed an Eligible Credit Facility under
this Indenture, unless and until (y) each of the conditions referred to in
subclause (C) below shall have been satisfied, and (z) in the case of a
Replacement Credit



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Facility arranged by the Initial Credit Facility Provider, such Replacement
Credit Facility is acceptable to the Issuer and the Guarantor.

          (C) In connection with the issuance of each Replacement Credit
Facility, (x) the Cash Manager shall, prior to the issuance of such Replacement
Credit Facility, have received a Rating Agency Confirmation with respect to the
Certificates (without regard to any downgrading of any rating of the Initial
Credit Facility Provider being replaced pursuant to Section 3.12(c) hereof and
without regard to the Policy), (y) upon receipt of a Written Notice from the
Administrative Agent to the Cash Manager setting forth the amount of Credit
Facility Obligations then owing to the replaced Initial Credit Facility
Provider, the Cash Manager shall direct the Operating Bank pursuant to a Written
Notice of the Cash Manager setting forth the amount of Credit Facility
Obligations then owing to the replaced Initial Credit Facility Provider to pay
to the replaced Initial Credit Facility Provider all Credit Facility Obligations
then owing to the replaced Initial Credit Facility Provider and upon receipt of
such Written Notice, the Operating Bank shall pay such amount to the Initial
Credit Facility Provider (which payment shall be made first from available funds
in the Credit Facility Reserve Account, and thereafter from any other available
source, including, without limitation, a drawing under the Replacement Credit
Facility) and (z) the issuer of the Replacement Credit Facility shall deliver
the Replacement Credit Facility to the Cash Manager, together with a legal
opinion opining that such Replacement Credit Facility has been duly authorized,
executed and delivered by, and is an enforceable obligation of, such Replacement
Credit Facility Provider, such legal opinion to be reasonably satisfactory to
the Policy Provider unless the legal opinion of counsel to the Replacement
Credit Facility Provider is in form and substance substantially the same as the
legal opinion of counsel to the Initial Credit Facility Provider delivered on
the Initial Closing Date.

          (D) Upon satisfaction of the conditions set forth in clauses (B) and
(C) of this Section 3.12(e)(iii) with respect to a Replacement Credit Facility,
(w) the replaced Initial Credit Facility shall terminate, (x) the Cash Manager
shall, if and to the extent so requested by the Issuer or the Guarantor or the
Initial Credit Facility Provider being replaced, execute and deliver any
certificate or other instrument furnished to it required in order to terminate
the replaced Initial Credit Facility, shall surrender the replaced Initial
Credit Facility to the Initial Credit Facility Provider being replaced and shall
execute and deliver the Replacement Credit Facility, (y) each of the parties
hereto shall enter into any amendments to this Indenture, the Guarantor
Indenture and any other Related Documents necessary to give effect to (1) the
replacement of the applicable Initial Credit Facility Provider with the
applicable Replacement Credit Facility Provider and (2) the replacement of the
applicable Initial Credit Facility with the applicable Replacement Credit
Facility and (z) such Replacement Credit Facility Provider shall be deemed to be
an Eligible Provider with the rights and obligations of the Initial Credit
Facility Provider hereunder and under the other Related Documents and such
Replacement Credit Facility shall be deemed to be an Eligible Credit Facility
(and, if so designated by a Board Resolution and Guarantor Board Resolution,
deemed to be the Initial Credit Facility) hereunder and under the other Related
Documents.

          (f) Credit Facility Reserve Account; Withdrawals; Investments. All
amounts drawn under the Initial Credit Facility by the Cash Manager pursuant to
Section 3.12(c), 3.12(d) or 3.12(i) hereof shall be deposited by the Cash
Manager into the Credit Facility Reserve Account. All amounts on deposit in the
Credit Facility Reserve Account, including any amount



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deposited in accordance with clause (iv) of Section 3.08(a) hereof, shall be
invested and reinvested in accordance with Section 3.02 hereof. Upon a request
by the Initial Credit Facility Provider, the Cash Manager shall provide the
Initial Credit Facility Provider with the amount of Investment Earnings held in
the Credit Facility Reserve Account as of the applicable date of determination.
On each Payment Date, the Cash Manager shall direct the Operating Bank to pay to
the Initial Credit Facility Provider all Investment Earnings on amounts on
deposit in the Credit Facility Reserve Account. Amounts on deposit in the Credit
Facility Reserve Account shall be withdrawn by or at the direction of the Cash
Manager under the following circumstances:

          (i) in accordance with Section 3.01(o) hereof;

          (ii) on any Payment Date, if the amount in the Credit Facility Reserve
Account exceeds the Required Amount therefor, then the Cash Manager shall direct
the Operating Bank to withdraw, upon Written Notice from the Cash Manager, from
the Credit Facility Reserve Account such excess and pay such amount to the
Initial Credit Facility Provider;

          (iii) if a Replacement Credit Facility is established following the
date on which funds have been deposited into the Credit Facility Reserve
Account, the Cash Manager shall direct the Operating Bank to withdraw, upon
Written Notice from the Cash Manager, all amounts on deposit in the Credit
Facility Reserve Account and shall pay such amounts to the replaced Initial
Credit Facility Provider until all Credit Facility Obligations owed to such
Person shall have been paid in full, and shall deposit any remaining amount in
the Collections Account;

          (iv) upon the payment in full of the Outstanding Principal Balance of,
and accrued and unpaid interest on, the ACS Group Subclass A-1 Securities, the
Cash Manager shall direct the Operating Bank to withdraw, upon Written Notice
from the Cash Manager, all amounts from the Credit Facility Reserve Account and
pay such amounts to the Initial Credit Facility Provider until all Credit
Facility Obligations owed to such Initial Credit Facility Provider have been
paid in full, and shall deposit any remaining amount in the Collections Account;
and

          (v) 15 days after the Final Maturity Date with respect to the ACS
Group Subclass A-1 Securities, the Operating Bank shall withdraw, upon Written
Notice from the Cash Manager, all amounts on deposit in the Credit Facility
Reserve Account and pay such amounts to the Initial Credit Facility Provider
until all Credit Facility Obligations owed to such Person shall have been paid
in full, and shall deposit any remaining amount in the Collections Account.

          (g) Reinstatement. With respect to any Credit Facility Drawing under
the Initial Credit Facility, upon the reimbursement to the Initial Credit
Facility Provider in full or in part of the amount of such Credit Facility
Drawing, together with any accrued interest thereon, the Available Amount of the
Initial Credit Facility shall be reinstated by an amount equal to the amount of
such Credit Facility Drawing so reimbursed to the Initial Credit Facility
Provider but not to exceed the Maximum Commitment; provided, however, that the
Initial Credit Facility shall not be so reinstated in part or in full at any
time if (x) a Credit Facility Event of Default shall have occurred and be
continuing or (y) a Downgrade Drawing, Non-Extension Drawing or Final Drawing
shall have occurred.



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          (h) Reimbursement. The amount of each Credit Facility Drawing under
the Initial Credit Facility and any amounts withdrawn from the Credit Facility
Reserve Account following a Downgrade Drawing, Non-Extension Drawing or a Final
Drawing shall be due and payable, together with interest thereon, on the dates
and at the rates, respectively, provided in the Initial Credit Facility but only
to the extent that Available Collections are sufficient to pay such amounts in
the order of priority set forth in Section 3.08 hereof.

          (i) Final Drawing. Upon receipt from the Initial Credit Facility
Provider of a Termination Notice with respect to the Initial Credit Facility,
the Cash Manager shall, not later than the date specified in such Termination
Notice, in accordance with the terms of the Initial Credit Facility, request a
drawing under the Initial Credit Facility of the Available Amount thereunder (a
"Final Drawing"). Proceeds of a Final Drawing shall be deposited into the Credit
Facility Reserve Account for application in accordance with Section 3.12(f)
hereof.

          (j) Initial Credit Facility Provider Consent. To the extent that the
Initial Credit Facility Provider's consent or approval (including with respect
to any amendment) is required under this Indenture, the Guarantor Indenture or
any other Related Document, such consent is not required in the event that (x)
no ACS Group Subclass A-1 Securities are Outstanding and (y) no Credit Facility
Advance Obligations are due and owing to the Initial Credit Facility Provider
(and, in the case of the issuance of ACS Group Additional Securities, if any, an
Initial Credit Facility Non-Consent Event has occurred).

     Section 3.13 Eligible Credit Facilities. Notwithstanding Section 3.08
hereof, Article X hereof, or anything else to the contrary contained in the
Indenture, Guarantor Indenture or the Security Trust Agreement, all amounts
available in any Cash Collateral Account or drawn against any other Eligible
Credit Facility (other than the Initial Credit Facility) shall be paid to
Holders of the subclass of ACS Group Securities (and holders of other
obligations) for whose benefit such Eligible Credit Facility is stated to be
established except to the extent otherwise provided in the Board Resolutions and
Guarantor Board Resolutions providing for such Eligible Credit Facility.

     Section 3.14 The Policy. The Policy Provider shall issue a Policy in favor
of the Drawing Agent for the benefit of the holders of the Certificates, and the
following shall apply to the Policy and the Certificates subject thereto:

          (a) Interest Drawings. If the Cash Manager determines that there is an
Interest Shortfall with respect to any Regular Distribution Date (other than the
Legal Final Distribution Date and the date of the Final Policy Election) in
respect of the Certificates (calculated as provided in Section 3.06(i) hereof),
the Cash Manager shall, prior to 12:00 p.m. (New York City time) on the third
Business Day prior to such Regular Distribution Date, instruct the Drawing Agent
to request and the Drawing Agent shall, no later than 12:00 p.m. (New York City
time) on the second Business Day prior to such Regular Distribution Date,
request a Policy Drawing under the Policy (for payment into the Certificate
Account) in an amount equal to such Interest Shortfall (each, an "Interest
Drawing"). Any request received after 12:00 p.m. (New York City time) on any
Business Day shall be deemed to have been received by the Policy Provider on the
next Business Day. Upon receipt of any such request for a Policy Drawing, the
Policy Provider or its fiscal agent shall pay, no later than 12:00 p.m. (New
York City time) on the later of (i) the applicable Regular Distribution Date and
(ii) the second Business Day following the Business



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Day on which the Policy Provider received the Drawing Agent's request referred
to above, into the Certificate Account, the amount of the Interest Shortfall
with respect to such Regular Distribution Date. Upon receipt, the Pass Through
Trustee shall direct the payment of the amount in the Certificate Account to the
holders of the Certificates in payment of the Interest Shortfall therefor.

          (b) Proceeds Deficiency Drawing. If at any time after the Acceleration
of the Securities, there is a sale or other disposition of an ACS Group Aircraft
(not including any ACS Group Aircraft acquired by way of contribution) or of an
ACS Group Subsidiary that owns an ACS Group Aircraft (not including any ACS
Group Aircraft acquired by way of contribution) by, on behalf of or at the
direction of the Controlling Party, and there is a Deficiency Shortfall
resulting therefrom (calculated as provided in Section 3.06(i)(ii)), the Cash
Manager shall, prior to 12:00 p.m. (New York City time) on the third Business
Day prior to the next succeeding Regular Distribution Date, instruct the Drawing
Agent to request and the Drawing Agent, no later than 12:00 p.m. (New York City
time) on the second Business Day prior to such Regular Distribution Date, shall
request a Policy Drawing (each a "Deficiency Drawing") under the Policy in an
amount equal to the Deficiency Shortfall (for payment into the Certificate
Account) with respect to such Regular Distribution Date. Any request received
after 12:00 p.m. (New York City time) on any Business Day shall be deemed to
have been received by the Policy Provider on the next Business Day. Upon receipt
of any such request, the Policy Provider or its fiscal agent shall, no later
than 12:00 p.m. (New York City time) on the later of (i) the applicable Regular
Distribution Date and (ii) the second Business Day following the Business Day on
which the Policy Provider received the Drawing Agent's request referred to
above, pay under the Policy, in respect of the Certificates, an amount equal to
the Deficiency Shortfall for the Certificates with respect to such Regular
Distribution Date. Upon receipt, the Pass Through Trustee shall direct the
payment of the amount in the Certificate Account to the holders of the
Certificates in payment of the Deficiency Shortfall therefor.

          (c) No Proceeds Drawing. If, on any Calculation Date (other than the
Calculation Date occurring immediately prior to the Legal Final Distribution
Date of the Certificates) falling on or after the date that is 24 months after
the date of the occurrence of an Event of Default under Section 4.01(a) or
Section 4.01(b) hereof or an Acceleration of the Securities (the
"Non-Performance Period"), there is a Minimum Principal Shortfall in respect of
the Certificates for the then next succeeding Regular Distribution Date
(calculated as provided in Section 3.06(i)(iii) hereof), the Cash Manager shall,
no later than 12:00 p.m. (New York City time) on the third Business Day prior to
such Regular Distribution Date, instruct the Drawing Agent to request and the
Drawing Agent shall, no later than 12:00 p.m. (New York City time) on the second
Business Day prior to such Regular Distribution Date, request, a Policy Drawing
(each, a "No Proceeds Drawing") under the Policy (for payment into the
Certificate Account) in an amount equal to the Minimum Principal Shortfall with
respect to such Regular Distribution Date. Any request received after 12:00 p.m.
(New York City time) on any Business Day shall be deemed to have been received
by the Policy Provider on the next Business Day. Upon receipt of such request,
the Policy Provider or its fiscal agent shall, no later than 12:00 p.m. (New
York City time) on the later of (i) the applicable Regular Distribution Date and
(ii) the second Business Day following the Business Day on which the Policy
Provider receives the Drawing Agent's request referred to above, pay under the
Policy an amount equal to the Minimum Principal Shortfall with respect to such
Regular Distribution Date. Upon receipt, the Pass



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Through Trustee shall direct the payment of the amount in the Certificate
Account to the holders of the Certificates in payment of the Minimum Principal
Shortfall therefor.

          Notwithstanding the preceding paragraph, with respect to any Regular
Distribution Date occurring on or after the date of the occurrence of an Event
of Default with respect to the ACS Group Subclass A-1 Securities continuing on
the date of a Final Policy Election, and the occurrence of the earlier of (x)
the date of a Policy Drawing and (y) the fifth anniversary of the Initial
Closing Date, the Policy Provider may, so long as a Policy Provider Default
shall not have occurred and be continuing, elect (a "Final Policy Election"),
upon at least four Business Days' prior written notice to the Drawing Agent
(with a copy to the Cash Manager and the Trustee), to pay on such Regular
Distribution Date, an amount sufficient (after giving effect to the application
of Available Collections in accordance with the applicable payment priorities
set forth in Section 3.08 hereof, the application of any Credit Facility
Drawings (or drawings under any Replacement Credit Facility) and the application
of any withdrawals from the Credit Facility Reserve Account and/or withdrawals
from the Senior Cash Collateral Account in accordance with the terms hereof) to
pay the then Pool Balance of the Certificates, plus accrued and unpaid interest
(at the Stated Rate of Interest for Certificates) thereon, for the period from
the immediately preceding Regular Distribution Date to such Regular Distribution
Date (any such amount to be paid by such Policy Provider, the "Outstanding
Balance"). Upon receipt of any such notice, the Cash Manager shall (a) calculate
the then Outstanding Balance for the Policy Provider and (b) prior to 12:00 p.m.
(New York City time) on the third Business Day prior to such Regular
Distribution Date, instruct the Drawing Agent to request, and the Drawing Agent
shall request no later than 12:00 p.m. (New York City time) on the second
Business Day prior to such Regular Distribution Date, a Policy Drawing from the
Policy Provider in the amount of the then Outstanding Balance (for payment into
the Certificate Account) for the Certificates. Upon receipt of any such request,
the Policy Provider or its fiscal agent shall, no later than 12:00 p.m. (New
York City time) on the later of (i) the applicable Regular Distribution Date and
(ii) the second Business Day following the Business Day on which such Policy
Provider receives the Drawing Agent's request referred to above, pay under the
Policy an amount equal to the Outstanding Balance. Upon receipt, the Pass
Through Trustee shall direct the payment of the amount in the Certificate
Account to the holders of the Certificates in payment of the Outstanding Balance
therefor.

          (d) Final Policy Drawing. If the Cash Manager determines (calculated
as provided in Section 3.06(i)(iv)) that on the Legal Final Distribution Date of
the Certificates there will be insufficient funds available for the payment in
full of the Final Amount with respect to the Certificates as of such date, the
Cash Manager shall, prior to 12:00 p.m. (New York City time) on the third
Business Day prior to such Legal Final Distribution Date, instruct the Drawing
Agent to request, and the Drawing Agent shall, no later than 12:00 p.m. (New
York City time) on the second Business Day prior to such Legal Final
Distribution Date, request a Policy Drawing under the Policy (for payment into
the Certificate Account) in an amount sufficient to pay the Final Amount with
respect to the Certificates. Upon receipt of such request for a Policy Drawing,
the Policy Provider or its fiscal agent shall, no later than 12:00 p.m. (New
York City time) on the later of (i) such Legal Final Distribution Date and (ii)
the second Business Day following the Business Day on which the Policy Provider
receives the Drawing Agent's request referred to above, pay under and in
accordance with the terms of the Policy, an amount sufficient to pay the Final
Amount in respect of the Certificates. Any request received by the Policy



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Provider after 12:00 p.m. (New York City time) on any Business Day shall be
deemed to have been received by the Policy Provider on the next Business Day.
Upon receipt, the Pass Through Trustee shall direct the payment of the amount in
the Certificate Account to the holders of the Certificates in payment of the
Final Amount therefor.

          (e) Avoidance Drawings. If at any time the Drawing Agent shall have
actual knowledge of the issuance of any Final Order, the Drawing Agent shall
promptly give notice thereof to the Trustee, the Guarantor Trustee, the Cash
Manager and the Policy Provider. The Cash Manager shall thereupon determine the
Avoided Payment with respect to the Certificates resulting therefrom and shall
promptly: (i) send to the Drawing Agent a Written Notice of such amount and (ii)
prior to the expiration of the Policy, instruct the Drawing Agent to, and the
Drawing Agent shall, deliver to the Policy Provider or its fiscal agent a Notice
of Avoided Payment under the Policy, together with a copy of the documentation
required by the Policy with respect thereto, requesting a Policy Drawing (each,
an "Avoidance Drawing") thereunder (for payment to the receiver, conservator,
debtor-in-possession, trustee in bankruptcy or the Drawing Agent (for deposit
into the Certificate Account), as applicable), in an amount equal to the amount
of the relevant Avoided Payment. To the extent that any portion of such
Avoidance Drawing is to be paid to the Drawing Agent such Written Notice shall
also set the date for the distribution of such portion of the proceeds of such
Policy Drawing which date shall constitute a Special Distribution Date and shall
be the third Business Day following the date of such Written Notice referred to
in clause (b) above. Upon receipt, the Drawing Agent shall pay the proceeds of
the specified Policy Drawing under the Policy to the Certificate Account and the
Pass Through Trustee shall direct the payment of such amount in the Certificate
Account to the holders of the Certificates.

          (f) Application of Policy Drawings. Notwithstanding anything to the
contrary contained in this Indenture, all payments received by the Drawing Agent
or the Pass Through Trustee in respect of a Policy Drawing (including, without
limitation, that portion, if any, of the proceeds of a Policy Drawing for any
Avoided Payment that is to be paid to the Drawing Agent and not to any receiver,
conservator, debtor-in-possession or trustee in bankruptcy as provided in the
Policy) shall be promptly paid to the holders of the Certificates.

          (g) Resubmission of a Notice of Payment. If the Policy Provider at any
time informs the Drawing Agent in accordance with the Policy that a Notice of
Nonpayment or Notice of Avoided Payment submitted by the Drawing Agent does not
satisfy the requirements of the Policy, the Drawing Agent shall, as promptly as
possible after being so informed, submit to the Policy Provider an amended and
revised Notice of Nonpayment or Notice of Avoided Payment, as the case may be,
and shall transfer to the Certificate Account the amount received pursuant to
such amended or revised Notice of Nonpayment or Notice of Avoided Payment when
received.

          (h) No Discharge of the Issuer's Obligations. Except to the extent
reimbursed to the Policy Provider, the payment on the Certificates with funds
drawn under the Policy shall not reduce the Outstanding Principal Balance of, or
interest due, on the ACS Group Class A Securities, or be deemed to discharge the
Issuer's obligation to repay such funds drawn under the Policy to the Policy
Provider, which obligation shall continue in full force and effect.



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          (i) Interest Coverage. The interest payable by the Policy Provider
under the Policy shall include interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding.

          (j) Policy Provider Consent. The Policy Provider agrees that to the
extent its consent or approval (including with respect to any amendment) is
required under this Indenture or any other Related Document, such consent is not
required in the event that (x) a Policy Non-Consent Event has occurred or (y) in
the case of any consent required under Section 5.03, a Policy Provider Default
has occurred and is continuing. If the Policy Provider fails to provide any
party hereto with a written response with respect to any request for approval
(x) to perform maintenance or modifications to any Aircraft if such maintenance
or modification is required in connection with the remarketing of such Aircraft,
(y) to acquire a replacement Part or Engine by any ACS Group Member for purposes
of remarketing an Aircraft or (z) in connection with any action that would cause
the ACS Group Portfolio to exceed any of the Concentration Limits so long as a
Rating Agency Confirmation from Moody's has been obtained in connection
therewith, within the time indicated by the Issuer or such Remarketing Servicer
in its proposal or, in any event, not less than fifteen Business Days after
receipt of such proposal (which proposal shall be in writing and contains a
legend stating that the Policy Provider's consent shall be deemed to have been
provided unless a response is received from the Policy Provider within fifteen
Business Days of receipt thereof) by the Policy Provider, the Policy Provider
shall be deemed to have approved such proposal, provided that, in connection
with any such proposal, the Issuer or a Remarketing Servicer on its behalf has
promptly provided all information with respect to such proposal reasonably
requested by the Policy Provider. If the Issuer or the Remarketing Servicer has
not provided the Policy Provider with such requested information promptly then
the Policy Provider shall not be deemed to have consented to such proposal.

          (k) Release of Policy Provider. Notwithstanding anything to the
contrary herein, and for the avoidance of doubt, if the Policy is terminated and
surrendered to the Policy Provider for cancellation, all obligations of the
Policy Provider under this Indenture (including, but not limited to, all
obligations set forth in this Section 3.14) shall be terminated and released.

     Section 3.15 Contributions. In the event that the amounts available for
distribution under Section 3.08 hereof and from any Eligible Credit Facility are
insufficient to pay in full any of the Secured Obligations or any other
Obligations, the Issuer or Guarantor may, out of funds provided to it by a
Holder of a Class E Security or a Shareholder (and not out of any amounts in the
Collections Account or any other Account or any other Collateral), pay such
shortfall with respect to such Obligations on the applicable Payment Date by
giving Written Notice of its intention to do so (specifying the amount thereof)
to the Cash Manager and the Trustee at least two Business Days prior to such
Payment Date by transferring funds in such amount (the "Contribution Amounts")
to the Trustee one Business Day prior to such Payment Date for deposit into the
applicable Account related to such Holder of a Class E Security or Shareholder,
as the case may be. All Contribution Amounts so deposited shall (a) be paid out
of such Account to the applicable Person or transferred to the applicable
Account notwithstanding Section 3.08 hereof, Article X hereof or anything else
to the contrary contained in this Indenture or the Security Trust Agreement and
(b) not constitute an obligation or debt of the Issuer.



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     Section 3.16 DSCR Failure. In the event that the Cash Manager determines,
in accordance with Section 3.06(c) hereof, that a DSCR Failure for the related
Payment Date will occur, it shall provide Written Notice thereof (not later than
two Business Days prior to such Payment Date) to the Issuer, the Guarantor, the
Administrative Agent, the Trustees, the Pass Through Trustee, the Policy
Provider and the Rating Agencies. Following the occurrence of a DSCR Failure,
all proceeds on deposit in the Collections Account shall be applied in
accordance with Section 3.08(b) hereof.

                                   ARTICLE IV

                              DEFAULT AND REMEDIES

     Section 4.01 Events of Default. Each of the following events shall
constitute an "Event of Default" hereunder with respect to any subclass of
Securities, and each such Event of Default shall be deemed to exist and continue
so long as, but only so long as, it shall not have been remedied:

          (a) failure to pay when due interest on any Class A Security of such
subclass, and the continuance of such default unremedied for a period of five
Business Days after the same shall have become due and payable;

          (b) failure to pay when due principal of any Security of such subclass
on the applicable Final Maturity Date;

          (c) failure to pay any amount (other than interest) when due and
payable in connection with any Security of such subclass to the extent that
there are, on any Payment Date, amounts available for such payment in the
Collections Account or the Senior Cash Collateral Account with respect to the
Securities of such subclass, and the continuance of such default for a period of
five or more Business Days after such Payment Date;

          (d) failure of any of the representations or warranties of the Issuer
under this Indenture to be true and correct or failure by the Issuer to comply
with any of the covenants, obligations, conditions or provisions binding on it
under this Indenture or any of the Securities (other than a payment default for
which provision is made in Section 4.01(a), (b) or (c) above), if such failure
or such breach materially adversely affects the Holders of such subclass of
Securities and continues for a period of 30 days (or, if such failure or breach
is capable of remedy within 90 days (or in the case of a breach or failure with
respect to a covenant contained in Section 5.03, 180 days) of the date of the
written notice referred to below and the Administrative Agent has promptly
provided the Trustee with a certificate stating that the Issuer has commenced,
or will promptly commence, and diligently pursue all reasonable efforts to
remedy such failure or breach, 90 days (or 180 days, as applicable), so long as
the Issuer or any ACS Bermuda Subsidiary is diligently pursuing such remedy but
in any event no longer than 90 days (or 180 days, as applicable)) after written
notice thereof has been given to the Issuer by the Controlling Party or by the
Holders of at least a majority of the aggregate Outstanding Principal Balance of
the Securities of the Senior Class;



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          (e) a court having jurisdiction in the premises enters a decree or
order for (i) relief in respect of the Issuer or the Guarantor or any direct or
indirect subsidiary thereof (other than a Non-Significant Subsidiary) under any
Applicable Law relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization, examinership, relief of debtors or other similar
law now or hereafter in effect; (ii) appointment of a receiver, liquidator,
Irish law examiner, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or the Guarantor or any direct or indirect subsidiary
thereof (other than a Non-Significant Subsidiary); or (iii) the winding up or
liquidation of the affairs of the Issuer or the Guarantor or any direct or
indirect subsidiary thereof (other than a Non-Significant Subsidiary) and, in
each case, such decree or order shall remain unstayed or such writ or other
process shall not have been stayed or dismissed within 90 days from entry
thereof;

          (f) the Issuer or the Guarantor or any direct or indirect subsidiary
thereof (other than a Non-Significant Subsidiary) (i) commences a voluntary case
under any Applicable Law relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization, examinership, relief of debtors or
other similar law now or hereafter in effect, or consents to the entry of an
order for relief in any involuntary case under any such law; (ii) consents to
the appointment of or taking possession by a receiver, liquidator, Irish law
examiner, assignee, custodian, trustee, sequestrator or similar official of the
Issuer or the Guarantor or any direct or indirect subsidiary thereof (other than
a Non-Significant Subsidiary) or for all or substantially all of the property
and assets of the Issuer or the Guarantor or any direct or indirect subsidiary
thereof (other than a Non-Significant Subsidiary); or (iii) effects any general
assignment for the benefit of creditors;

          (g) one or more judgments or orders for the payment of money that are
in the aggregate in excess of 5% of the aggregate Assumed Portfolio Value shall
be rendered against any ACS Group Member and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; provided, however, that any such judgment or
order shall not be an Event of Default under this Section 4.01(g) if and for so
long as (i) the amount of such judgment or order is covered by a valid and
binding policy of insurance between the defendant and the insurer covering
payment thereof and (ii) such insurer, which shall be rated at least "A" by A.M.
Best Company or any similar successor entity, has been notified of, and has not
disputed the claim made for payment of, the amount of such judgment or order;

          (h) the constitutional documents creating the Issuer or the Guarantor
cease to be in full force and effect without replacement documents having the
same terms being in full force and effect; or

          (i) an Event of Default (as defined in the Guarantor Indenture) has
occurred and is continuing under the Guarantor Indenture.

     Section 4.02 Acceleration, Rescission and Annulment. (a) If an Event of
Default with respect to the Senior Class (including the Class A-1 Securities so
long as any Class A-1 Securities are outstanding and the Policy Non-Consent
Event has not occurred) or any subclass thereof (other than an Event of Default
under Section 4.01(e) or (f) hereof) occurs and is



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continuing, the Controlling Party may, and (if the Controlling Party is the
Senior Trustee) upon the written direction of Holders representing not less than
a majority of the aggregate Outstanding Principal Balance of the Senior Class
shall give a Default Notice to the Issuer, the Cash Manager, the Administrative
Agent, the Security Trustee, the Guarantor, the Trustee, the Guarantor Trustee,
and the Pass Through Trustee declaring the Outstanding Principal Balance of the
Securities and all accrued and unpaid interest thereon to be due and payable. If
the Controlling Party is the Policy Provider or the Initial Credit Facility
Provider, only it may give a Default Notice. Upon delivery of a Default Notice,
such Outstanding Principal Balance and all accrued and unpaid interest thereon
shall be due and payable. At any time after the Controlling Party has declared
the Outstanding Principal Balance of the Securities to be due and payable and
prior to the exercise of any other remedies pursuant to this Article IV, the
Controlling Party may (and if the Controlling Party is the Senior Trustee, upon
the written direction of Holders of a majority of the aggregate Outstanding
Principal Balance of the Senior Class shall) by Written Notice to the Issuer,
the Senior Trustee (if not the Controlling Party), the provider of any Eligible
Credit Facility (if not the Controlling Party), the Cash Manager, the
Administrative Agent, the Security Trustee and the Trustee, subject to Section
4.05(a) hereof, rescind and annul such declaration and thereby annul its
consequences if: (i) there has been paid to or deposited with the Senior Trustee
an amount sufficient to pay all overdue installments of interest on the
Securities, and the principal or Redemption Price of the Securities that would
have become due otherwise than by such declaration of acceleration, (ii) the
rescission or annulment would not conflict with any judgment or decree and (iii)
all other Defaults and Events of Default, other than nonpayment of interest and
principal on the Securities that have become due solely because of such
acceleration, have been cured or waived. If the Controlling Party is the Policy
Provider or the Initial Credit Facility Provider, only it may give a notice of
annulment. If an Event of Default under Section 4.01(e) or (f) hereof occurs,
the Outstanding Principal Balance of the Securities and all accrued and unpaid
interest thereon shall automatically become due and payable without any further
action by any party.

          (b) Notwithstanding this Section 4.02 and Section 4.03 hereof, after
the occurrence and during the continuation of an Event of Default, no Holders of
any class of Securities other than the Senior Class may give or direct the
giving of a Default Notice or exercise or direct the exercise of any remedy in
respect of such Event of Default, and no Person other than the Controlling Party
may give a Default Notice or exercise any such remedy.

          (c) The Trustee shall provide each Rating Agency with a copy of any
Default Notice it receives pursuant to this Indenture.

     Section 4.03 Other Remedies. If an Event of Default occurs and is
continuing, the Senior Trustee (at the direction of the Controlling Party if the
Senior Trustee is not the Controlling Party) may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal or Redemption
Price of, or interest on, the Securities or to enforce the performance of any
provision of the Securities or this Indenture.

     The Senior Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding.



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     Section 4.04 Limitation on Suits. Without limiting the provisions of
Section 4.09 hereof and the final sentence of Section 13.04(a) hereof, no Holder
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, the Security Trust Agreement or the Securities, or
for the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:

          (a) the Senior Trustee is the Controlling Party;

          (b) such Holder holds Securities of the Senior Class and has
previously given written notice to the Senior Trustee of a continuing Event of
Default;

          (c) the Holders of a majority of the aggregate Outstanding Principal
Balance of the Senior Class make a written request to the Senior Trustee to
pursue a remedy hereunder;

          (d) such Holder or Holders offer to the Senior Trustee an indemnity
reasonably satisfactory to the Senior Trustee against any costs, expenses and
liabilities to be Incurred in complying with such request;

          (e) the Senior Trustee does not comply with such request within 60
days after receipt of the request and the offer of indemnity; and

          (f) during such 60-day period, Holders of a majority of the
Outstanding Principal Balance of the Senior Class do not give the Senior Trustee
a revocation or direction inconsistent with such request.

          No one or more Holders may use this Indenture to affect, disturb or
prejudice the rights of another Holder or to obtain or seek to obtain any
preference or priority not otherwise created by this Indenture and the terms of
the Securities over any other Holder or to enforce any right under this
Indenture, except in the manner herein provided.

     Section 4.05 Waiver of Existing Defaults. (a) The Controlling Party or (if
the Controlling Party is the Senior Trustee) the Holders of a majority of the
Outstanding Principal Balance of the Senior Class by notice to the Senior
Trustee and the Issuer may waive any existing Default hereunder and its
consequences, except a Default: (i) in the deposit or distribution of any
payment required to be made on any Securities, (ii) in the payment of the
interest on, principal of or premium, if any, with respect to any Security or
(iii) in respect of a covenant or provision hereof which under Article IX hereof
cannot be modified or amended without the consent of the Holder of each Security
affected thereby, which (in the case of such Defaults described in clauses (i),
(ii) and (iii)) may not be waived. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture, but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon. Each such notice of waiver shall also be given to each Rating Agency.

          (b) Any written waiver of a Default or an Event of Default given by
the Controlling Party or the Holders to the Trustee and the Issuer in accordance
with the terms of this Indenture shall be binding upon the Trustee and the other
parties hereto. Unless such writing expressly provides to the contrary, any
waiver so granted shall extend only to the specific event



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or occurrence which gave rise to the Default or Event of Default so waived and
not to any other similar event or occurrence which occurs subsequent to the date
of such waiver.

     Section 4.06 Restoration of Rights and Remedies. If the Trustee or any
Holder of Securities of the Senior Class has instituted any proceeding to
enforce any right or remedy under this Indenture, and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or such Holder, then in every such case the Issuer, the Trustee and
the Holders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding has been instituted.

     Section 4.07 Remedies Cumulative. Each and every right, power and remedy
herein given to the Trustee (or the Controlling Party) specifically or otherwise
in this Indenture shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given or now or hereafter existing
at law, in equity or by statute, and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised from
time to time and as often and in such order as may be deemed expedient by the
Trustee (or the Controlling Party), and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Trustee (or the Controlling Party) in the
exercise of any right, remedy or power or in the pursuance of any remedy shall
impair any such right, power or remedy or be construed to be a waiver of any
Default on the part of the Issuer or to be an acquiescence therein.

     Section 4.08 Authority of Courts Not Required. The parties hereto agree
that, to the greatest extent permitted by law, the Trustee shall not be obliged
or required to seek or obtain the authority of, or any judgment or order of, the
courts of any jurisdiction in order to exercise any of its rights, powers and
remedies under this Indenture, and the parties hereby waive any such requirement
to the greatest extent permitted by law.

     Section 4.09 Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal or Redemption Price of, or interest on its Security on or after the
respective due dates therefor expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.

     Section 4.10 Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of any Holder allowed in any
judicial proceedings relating to any Issuer on the Securities, its creditors or
its property.

     Section 4.11 Undertaking for Costs. All parties to this Indenture agree,
and each Holder by its acceptance thereof shall be deemed to have agreed, that
in any suit for the enforcement of any right or remedy under this Indenture or
in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and the court in
its



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discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defense made by the party litigant. This Section
4.11 does not apply to a suit instituted by the Trustee, a suit instituted by
any Holder for the enforcement of the payment of principal or Redemption Price
of, or interest on its Security on or after the respective due dates expressed
in such Security, or a suit by a Holder or Holders of not less than a majority
of the Outstanding Principal Balance of any class or subclass of the Securities.

     Section 4.12 Control by Holders. Subject always to the provisions of this
Article IV, the Controlling Party shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee for such
class under this Indenture and other Related Documents; provided that, for such
class (a) such direction shall not be in conflict with any rule of law or with
this Indenture and would not involve the Trustee in personal liability or
expense; and (b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.

                                    ARTICLE V

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 5.01 Representations and Warranties. The Issuer represents and
warrants to the Trustee as follows:

          (a) Due Organization. The Issuer is a Bermuda exempted company, and
each ACS Bermuda Subsidiary is a special purpose entity duly formed in its
respective jurisdiction of formation, in each case with full power and authority
to conduct its business; and none of the Issuer or any ACS Bermuda Subsidiary is
in liquidation, examinership, bankruptcy or suspension of payments.

          (b) Special Purpose Status. The Issuer has not engaged in any
activities since its organization (other than those incidental to its
incorporation and other appropriate steps and arrangements for the payment of
fees to, and director's and officer's insurance for, the Directors, the
authorization and issuance of the Initial Securities, the execution of the
Related Documents to which it is a party and the activities referred to in or
contemplated by such agreements), and the Issuer has not paid any dividends or
other distributions since its organization.

          (c) Non-Contravention. The purchase of the Initial Aircraft and
interests in the Initial Leases pursuant to the Purchase Agreement, the creation
of the Initial Securities, the issuance, execution and delivery by the Issuer
of, and the compliance by the Issuer with the terms of the Initial Securities,
and the execution and delivery by each ACS Bermuda Group Member of, and
compliance by it with the terms of each of the Related Documents to which it is
a party:

          (i) do not and will not at the Initial Closing Date or any Payment
Date conflict with, or result in a breach of any of the terms or provisions of,
or constitute a default under, the constitutional documents of the Issuer or the
constituent documents of any ACS Bermuda Subsidiary or with any existing law,
rule or regulation applying to or affecting the Issuer or any



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ACS Bermuda Subsidiary or any judgment, order or decree of any government,
governmental body or court having jurisdiction over the Issuer or any ACS
Bermuda Subsidiary; and

          (ii) do not and will not at the Initial Closing Date or any Payment
Date constitute a default under, any deed, indenture, agreement or other
instrument or obligation to which the Issuer or any ACS Bermuda Subsidiary is a
party or by which any of them or any part of their undertaking, assets, property
or revenues are bound.

          (d) Due Authorization. The purchase of the Initial Aircraft and
interests in the Initial Leases, the creation, execution and issuance of the
Initial Securities, the execution and issue or delivery by the Issuer and each
ACS Bermuda Subsidiary of the Related Documents executed by it and the
performance by each of them of their obligations hereunder and thereunder and
the arrangements contemplated hereby and thereby to be performed by each of them
have been duly authorized by each of them.

          (e) Validity and Enforceability. This Indenture constitutes, and the
Related Documents to which it is a party, when executed and delivered and, in
the case of the Initial Securities, when issued and authenticated, will
constitute valid, legally binding and (subject to general equitable principles,
insolvency, liquidation, examination, reorganization and other laws of general
application relating to creditors' rights or claims or the concepts of
materiality, reasonableness, good faith and fair dealing) enforceable
obligations of the Issuer and each ACS Bermuda Subsidiary executing the same.

          (f) No Defaults. There exists no Default, Event of Default nor any
event which, had the Initial Securities already been issued, would constitute a
Default or an Event of Default.

          (g) No Encumbrances. Subject to the Security Interests created in
favor of the Security Trustee and except for Permitted Encumbrances, there
exists no Encumbrance over the assets or undertaking of the Issuer or any ACS
Bermuda Subsidiary which ranks prior to or pari passu with the obligation to
make payments on the Initial Securities.

          (h) No Consents. All consents, approvals, authorizations or other
orders of all regulatory authorities required (excluding any required by the
other parties to the Related Documents) for or in connection with the execution
and performance of the Related Documents by the Issuer and each ACS Bermuda
Subsidiary and the issue and performance of the Initial Securities and the
offering of the Initial Securities by the Issuer has been obtained and are in
full force and effect and not contingent upon fulfillment of any condition.

          (i) No Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Issuer, threatened
against or affecting, the Issuer or any ACS Bermuda Subsidiary before any court
or arbitrator or any governmental body, agency or official which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Indenture (including the Exhibits and
Schedules attached hereto) and the Related Documents or which could reasonably
be expected to have a material adverse effect on the ability of the Issuer or
any other ACS Bermuda Group Member to perform its obligations under the Related
Documents.



                                                                             110


          (j) Employees, Subsidiaries. The Issuer and each ACS Bermuda
Subsidiary have no employees. Set forth in Schedule 2 hereto is a true and
complete list, as of the date hereof, of all ACS Bermuda Subsidiaries, together
with their jurisdictions of organization.

          (k) Ownership. The Issuer or an ACS Bermuda Subsidiary is the legal
and beneficial owner of the Pledged Shares, the Pledged Debt, the Pledged
Beneficial Interest and the Non-Trustee Accounts pledged by the Issuer or any
such ACS Bermuda Subsidiary pursuant to the Security Documents, free from all
Encumbrances and claims whatsoever other than Permitted Encumbrances.

          (l) No Filings. Under the laws of Bermuda, the State of New York and
the Federal laws of the United States of America in force at the date hereof, it
is not necessary or desirable that this Indenture or any Related Document to
which an ACS Bermuda Subsidiary is a party (other than any filings with respect
to the Security Interests) be filed, recorded or enrolled with any court or
other authority in any such jurisdictions or that any stamp, registration or
similar tax be paid on or in relation to this Indenture or any of the other
Related Documents, other than the payment of Irish stamp duty in respect of the
Security Trust Agreement.

          (m) Aircraft Assets. Schedule 1 contains a true and complete list of
all Aircraft constituting the Initial Aircraft as of the Initial Closing Date
and each Person within the ACS Group that will own such Initial Aircraft as of
the applicable Delivery Date. Except as otherwise set forth therein, once each
Initial Aircraft listed in Schedule 1 has been delivered under the ACS Group
Purchase Agreement, each Person within the ACS Group listed as an owner of an
Aircraft on such Schedule will have such title to such Aircraft as was conveyed
to such Person, free and clear of all Liens created by or through such Person.

          (n) Aircraft Assets Related Documents. Each Aircraft Assets Related
Document is a legal, valid and binding agreement of the Person within the ACS
Group that is a party thereto (including by way of assignment or novation) and
is enforceable against such Person within the ACS Group that is a party thereto
in accordance with its terms except where enforceability may be limited by
general equitable principles, insolvency, liquidation, reorganization and other
laws of general application relating to creditors' rights or claims or the
concepts of materiality, reasonableness, good faith and fair dealing. No Person
within the ACS Group has modified, amended or waived any provision of or
terminated any Aircraft Assets Related Documents referred to in Schedule 5.01(b)
of the Remarketing Services Agreements except as disclosed therein.

          (o) Other Representations. The representations and warranties made by
the Issuer, the Guarantor, and each ACS Bermuda Subsidiary in any of the other
Related Documents are true and accurate.

          (p) Insurance. Each Lessee under an Initial Lease carries War Risk
Coverage in an amount at least equal to the Current War Risk Coverage Amount set
forth in Schedule 6 hereto with respect to such Lessee.



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     Section 5.02 General Covenants. The Issuer covenants with the Trustee as
follows:

          (a) No Release of Obligations. The Issuer shall not take, or knowingly
permit any ACS Bermuda Subsidiary to take, any action which would amend,
terminate (other than any termination in connection with the replacement of such
agreement with an agreement on terms substantially no less favorable to the ACS
Bermuda Group than the agreement being terminated) or discharge or prejudice the
validity or effectiveness of this Indenture (other than as permitted herein),
the Security Trust Agreement, the Purchase Agreement, the Cash Management
Agreement, any organizational document of the Issuer or any ACS Bermuda
Subsidiary (unless such ACS Bermuda Subsidiary no longer holds any direct or
indirect interest in an Aircraft or a Lease), the Policy (other than as
expressly permitted hereunder), the Initial Credit Facility (other than as
expressly permitted hereunder), the Bermudian Remarketing Services Agreement,
the Back-Up Remarketing Services Agreement, the Administrative Agency Agreement
or the Hedge Overview Services Agreement or any other Related Document to which
the Issuer or any ACS Bermuda Subsidiary (unless such ACS Bermuda Subsidiary no
longer holds any interest in an Aircraft or a Lease) is a party or permit any
other party (other than an ACS Group Member) to any such document to be released
from such obligations, except, in each case, as permitted or contemplated by the
terms of such document and except that in no event shall the Policy be so
terminated (other than as expressly permitted hereunder), and provided that such
actions may be taken or permitted and such releases may be permitted (other than
with respect to the termination of the Policy) if the Issuer shall have first
obtained a Board Resolution determining that such action, permitted action or
release does not materially adversely affect the interests of the Holders of the
Securities, the Policy Provider or the Initial Credit Facility Provider and
having given notice thereof to the Rating Agencies and the prior written consent
of the Policy Provider and the Initial Credit Facility Provider has been
obtained; and provided further that, in any case (i) the Issuer shall not take
any action which would result in any amendment or modification to the conflicts
standard or duty of care in such agreements, (ii) except in the circumstances
expressly contemplated in this Indenture, the Issuer may not amend the Policy
without the unanimous consent of the Holders of the Covered Class A Securities
and without obtaining a Rating Agency Confirmation and (iii) there must be at
all times an administrative agent with respect to the ACS Group Services (as
defined in the Administrative Agency Agreement) and a remarketing servicer with
respect to all ACS Group Aircraft.

          (b) Limitation on Encumbrances. The Issuer shall not, and shall not
permit any ACS Bermuda Subsidiary to, create, Incur, assume or suffer to exist
any mortgage, pledge, lien, encumbrance, charge or security interest (in each
case, an "Encumbrance"), including, without limitation, any conditional sale,
any sale with recourse against any ACS Bermuda Subsidiary or any Affiliate of
any ACS Bermuda Subsidiary, or any agreement to give any security interest over
or with respect to any of the Issuer's or any ACS Bermuda Subsidiary's assets
(other than the segregation of the Segregated Funds) including, without
limitation, all shares of capital stock, all beneficial interests in trusts, all
ordinary shares and preferred shares and any options, warrants and other rights
to acquire such shares or beneficial interests ("Ownership Interest") and any
Indebtedness of any ACS Bermuda Subsidiary held by the Issuer or any ACS Bermuda
Subsidiary.



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          Notwithstanding the foregoing, the Issuer may create, Incur, assume or
suffer to exist (i) any Permitted Encumbrance, (ii) any security interest
created or required to be created under the Security Documents, (iii)
Encumbrances over rights in or derived from Leases, upon prior written consent
of the Policy Provider and receipt of a Rating Agency Confirmation (provided
that any transaction or series of transactions resulting in such Encumbrance,
taken as a whole, does not materially adversely affect the amount of Collections
that would have been received by the Issuer and any other ACS Bermuda Group
Member from such Lease had such Encumbrance not been created), (iv) any other
Encumbrance the validity or applicability of which is being contested in good
faith in appropriate proceedings by the Issuer or any ACS Bermuda Subsidiary,
(v) any Encumbrance in connection with any transfer of title to or Lease of
Aircraft (A) to or in favor of a trust or an entity (which, in either case, is
not an ACS Group Member) for the purpose of registering the Aircraft under the
laws of an applicable jurisdiction so long as, however, the Issuer or any ACS
Bermuda Subsidiary retains the beneficial or economic ownership of the Aircraft
or (B) from such trust or entity to the Issuer or an ACS Bermuda Subsidiary
(subject in the case of this subclause (v) to the limitations set forth in
subclause (vi) of Section 5.02(g) below), and (vi) any lien created in favor of
the issuer of a surety bond, letter of credit or similar instrument to be
obtained by the Issuer or any ACS Bermuda Subsidiary in connection with the
repossession of an Aircraft or other enforcement action under a Lease.

          For purposes of this Indenture, "Affiliate" means, with respect to any
Person, any other Person that, directly or indirectly, Controls, is Controlled
by or is under common control with, such Person or is a director or officer of
such Person; "Control" of a Person means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting Ownership Interest, by
contract or otherwise. For the avoidance of doubt, each ACS Group Member shall
be an "Affiliate" of each other ACS Group Member. For the purposes of this
Indenture, "Permitted Encumbrance" means (i) any lien for Taxes not yet due and
payable or which are being contested in good faith by appropriate proceedings;
(ii) in respect of any Aircraft, any lien of a repairer, carrier or hangar
keeper arising in the ordinary course of business by operation of law or any
engine or parts-pooling arrangements or other similar lien; (iii) any permitted
lien or encumbrances on any Aircraft, Engines or Parts as defined under any
Lease thereof (other than liens or encumbrances created by the relevant lessor);
(iv) any lien created by or through or arising from debt or liabilities or any
act or omission of any Lessee in each case either in contravention of the
relevant Lease (whether or not such Lease has been terminated) or without the
consent of the relevant lessor (provided that if such lessor becomes aware of
any such lien, it shall use commercially reasonable efforts to have any such
lien lifted); (v) any head lease, lease, conditional sale agreement or Purchase
Option under the Initial Lease of any Initial Aircraft existing on the date of
acquisition of such Aircraft or otherwise existing on the relevant Closing Date
or Aircraft Agreement meeting the requirements of clause (iii) or (v) of the
second paragraph of Section 5.02(g) hereof; (vi) any lien for air navigation
authority, airport tending, gate or handling (or similar) charges or levies;
(vii) any lien created in favor of the Issuer, any ACS Bermuda Subsidiary or the
Security Trustee; (viii) any Encumbrance arising under an Eligible Credit
Facility or a Conversion Agreement; and (ix) any other lien not referred to in
clauses (i) through (viii) of this paragraph which would not adversely affect
the owner's rights provided that the amount secured by liens under this clause
(ix) does not exceed, individually,



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$250,000 per Aircraft or, in the aggregate, 0.25% of the Initial Appraised Value
of the ACS Group Portfolio.

          (c) Limitation on Restricted Payments. The Issuer shall not, and shall
not permit any ACS Bermuda Subsidiary to (i) purchase, redeem, retire or
otherwise acquire for value any shares of Ownership Interest in the Issuer, the
Guarantor, any ACS Bermuda Subsidiary or ACS Bermuda Subsidiary held by or on
behalf of Persons other than the Issuer or any ACS Bermuda Subsidiary or other
ACS Group Member other than as provided in Sections 2.12 and 5.02(l)(ii)(B)
hereof; (ii) make any payment of principal, interest or premium, if any, on the
Securities or make any voluntary or optional repurchase, defeasance or other
acquisition or retirement for value of Indebtedness of the Issuer or such ACS
Bermuda Subsidiary that is not owed to the Issuer, the Guarantor, such ACS
Bermuda Subsidiary or such ACS Bermuda Subsidiary or other ACS Group Member
other than in accordance with Articles II, III and XII hereof, the Policy
Provider Documents and otherwise provided for in the Related Documents; provided
that the Issuer or any of its Affiliates may repurchase, defease or otherwise
acquire or retire any of the Securities other than from the Available
Collections so long as any new notes of the Issuer issued in connection with
such transaction rank pari passu with the Securities being repurchased,
defeased, acquired or retired and the Board shall determine that such action
does not materially adversely affect the Holders and shall have obtained prior
written consent of the Policy Provider and a Rating Agency Confirmation with
respect thereto or (iii) make any Investments (other than Permitted Account
Investments, Allowed Restructurings, Investments permitted under Section 5.02(e)
hereof and Investments in any ACS Bermuda Group Member and any other ACS Group
Member pursuant to the Purchase Agreement or a Permitted Additional Aircraft
Acquisition; provided that written notification of the organization or
acquisition of each such ACS Bermuda Group Member shall have been given to the
Policy Provider and the Initial Credit Facility Provider).

          The term "Investment" for purposes of the above restriction means any
loan or advance to a Person, any purchase or other acquisition of any beneficial
interest, capital stock, warrants, rights, options, obligations or other
securities of such Person, any contribution to such Person or any other
Investment in such Person. For the avoidance of doubt, "Investment" shall not
include any obligation of a purchaser of an Aircraft to make deferred or
installment payments pursuant to any Aircraft Agreement specified in (iii) or
(v) of the second paragraph of Section 5.02(g) hereof so long as the ACS Bermuda
Group retains a security interest in the relevant Aircraft until all such
obligations are discharged and shall not include any payment owing to a Lessee.

          (d) Limitation on Restrictions on Dividends and Other Payments. The
Issuer shall not, and shall not permit any ACS Bermuda Subsidiary to, create or
otherwise suffer to exist any consensual encumbrance or restriction of any kind
on the ability of any ACS Bermuda Subsidiary to (i) declare or pay dividends or
make any other distributions permitted by Applicable Law, or purchase, redeem or
otherwise acquire for value, the Ownership Interest of the Issuer or such ACS
Bermuda Subsidiary, as the case may be; (ii) pay any Indebtedness owed to the
Issuer or such ACS Bermuda Subsidiary; (iii) make loans or advances to the
Issuer or such ACS Bermuda Subsidiary; or (iv) transfer any of its property or
assets to the Issuer or any other ACS Bermuda Subsidiary.



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          The foregoing provisions shall not restrict any consensual
encumbrances or other restrictions: (i) existing on the Initial Closing Date or,
in the case of any Aircraft, the Acquisition Date of such Aircraft, under any
Related Document, and any amendments, extensions, refinancings, renewals or
replacements of such documents; provided that such consensual encumbrances and
restrictions in any such amendments, extensions, refinancings, renewals or
replacements are no less favorable in any material respect to the Holders than
those previously in effect and being amended, extended, refinanced, renewed or
replaced; or (ii) in the case of clause (iv) of the preceding paragraph, that
restrict in a customary manner the subletting, assignment or transfer of any
property or asset that is a lease, license, conveyance or contract or similar
property or asset.

          (e) Limitation on Engaging in Business Activities. The Issuer shall
not, and shall not permit any ACS Bermuda Subsidiary to, engage in any business
or activity other than:

          (i) purchasing or otherwise acquiring (subject to Section 5.02(h)
     hereof), owning, holding, converting, maintaining, modifying (subject to
     Section 5.02(i) hereof), managing, operating, leasing, re-leasing and,
     subject to the limitations set forth in Section 5.02(g) hereof, selling or
     otherwise disposing of the Aircraft and entering into all contracts and
     engaging in all related activities incidental thereto, including from time
     to time accepting, exchanging, holding or permitting any ACS Bermuda
     Subsidiary to accept, exchange, sell or hold promissory notes, contingent
     payment obligations or equity interests, of Lessees or their Affiliates
     issued in connection with the bankruptcy, reorganization or other similar
     process, or in settlement of delinquent obligations or obligations
     anticipated to be delinquent, of such Lessees or their respective
     Affiliates in the ordinary course of business (an "Allowed Restructuring");

          (ii) providing loans to, guaranteeing or otherwise supporting the
     obligations and liabilities of any ACS Bermuda Group Member or any ACS
     Bermuda Group Member, in each case whether or not the Issuer or any ACS
     Bermuda Subsidiary derives a benefit therefrom so long as such loans,
     guarantees or other supports are provided in connection with the purposes
     set forth in clause (i) of this Section 5.02(e); provided that written
     notification shall have been given to each Rating Agency, the Policy
     Provider and the Initial Credit Facility Provider of such loan, guarantee
     or other support; provided that, no such notice shall be required for any
     guarantee provided by an ACS Bermuda Group Member with respect to any
     obligations of another ACS Bermuda Group Member or an ACS Ireland Group
     Member;

          (iii) financing or refinancing the business activities described in
     clause (i) of this Section 5.02(e) through the offer, sale and issuance of
     any securities of the Issuer upon such terms and conditions as the Board
     sees fit, for cash or in payment or in partial payment for any property
     purchased or otherwise acquired by any ACS Bermuda Group Member;

          (iv) engaging in currency and interest rate exchange transactions for
     the purposes of avoiding, reducing, minimizing, hedging against or
     otherwise managing the risk of any loss, cost, expense or liability
     arising, or which may arise, directly or indirectly, from any change or
     changes in any interest rate or currency exchange rate or in



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     the price or value of any of the Issuer's or any ACS Bermuda Subsidiary's
     property or assets, within limits and with providers specified by the Board
     Resolution providing therefor from time to time and submitted to the Rating
     Agencies, the Policy Provider and the Initial Credit Facility Provider,
     including dealings, whether involving purchases, sales or otherwise, in
     foreign currency, spot and forward interest rate exchange contracts,
     forward interest rate agreements, caps, floors and collars, futures,
     options, hedges and any other currency, interest rate and other similar
     hedging arrangements and such other instruments as are similar to, or
     derivatives of, any of the foregoing; provided, however, that the Issuer
     shall not, and shall not permit any ACS Bermuda Subsidiary to, enter into
     any such hedging arrangements or other instruments that (x) are not entered
     into solely for hedging interest rate or currency risks associated with the
     Securities and/or the Leases or (y) are not U.S. dollar-denominated
     interest rate hedges, hedges, currency hedges, Swaptions, caps or floors
     (except in instances where the hedging instrument is entered into
     substantially to hedge risks associated with non-U.S. dollar-denominated
     Aircraft Lease) without the prior written consent of the Policy Provider;
     provided further that the Issuer shall not, and shall not permit any ACS
     Bermuda Subsidiary to (unless with respect to any action permitted under
     Section 5.02(g) and Section 5.02(j) with respect to disposition or transfer
     to another ACS Group Member), (A) terminate or transfer such hedging
     arrangements without the prior written consent of the Policy Provider and
     (B) enter into any Hedge Agreement after the Initial Closing Date without
     the prior written consent of the Policy Provider unless such Hedge
     Agreement contains the Material Hedge Agreement Terms that are no less
     favorable to the Issuer, any applicable ACS Bermuda Subsidiary and the
     Policy Provider than those contained in the Initial Hedge Agreements;

          (v) (A) establishing, promoting and aiding in promoting, constituting,
     forming or organizing companies, trusts, syndicates, partnerships or other
     entities of all kinds in any part of the world for the purposes set forth
     in clause (i) above; provided that written notification shall have been
     given to the Policy Provider and the Initial Credit Facility Provider that
     such company, trust, syndicate, partnership or other entity is set up in
     compliance with this Indenture; (B) acquiring, holding and disposing of
     shares, securities and other interests in any such trust, company,
     syndicate, partnership or other entity and (C) disposing of shares,
     securities and other interests in, or causing the dissolution of, any
     existing subsidiary; provided that any such disposition which results in
     the disposition of an Aircraft meets the requirements set forth in Section
     5.02(g) hereof;

          (vi) taking out, acquiring, surrendering and assigning policies of
     insurance and assurances with any insurance company or companies which the
     Issuer or any ACS Bermuda Subsidiary may think fit and to pay the premiums
     thereon; and

          (vii) engaging in the transactions contemplated by the Policy Provider
     Documents and the Initial Credit Facility.

          (f) Limitation on Indebtedness. The Issuer shall not, and shall not
permit any ACS Bermuda Subsidiary to, incur, create, issue, assume, guarantee or
otherwise become liable for or with respect to, or become responsible for, the
payment of, contingently or otherwise, whether present or future (in any such
case, to "Incur"), Indebtedness.



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          Notwithstanding the foregoing, the Issuer and any ACS Bermuda
Subsidiary may Incur each and all of the following:

          (i) Indebtedness in respect of any Initial Securities issued on the
Initial Closing Date or the guarantee of the Issuer in respect of the Guarantor
Initial Securities issued on the Initial Closing Date;

          (ii) Indebtedness in respect of any Refinancing Securities or other
Indebtedness described in the proviso to Section 5.02(c)(ii) hereof; provided
that (A) the Certificates related to such Refinancing Securities or other
Indebtedness receive ratings from the Rating Agencies at the close of such
Refinancing or repurchase equal to or higher than those of the Certificates
related to the subclass being refinanced or repurchased (determined at the date
of Incurrence), (B) taking into account such Refinancing or repurchase, a Rating
Agency Confirmation is obtained prior to such Refinancing or repurchase with
respect to the Certificates related to each subclass of Securities Outstanding
at such time, (C) the Issuer receives the prior written consent of each of the
Policy Provider and the Initial Credit Facility Provider and (D) the net
proceeds of any such Refinancing or other Indebtedness shall be applied only (x)
to repay the Redemption Price of the subclass of Securities being so refinanced
or repurchased plus the Refinancing Expenses relating thereto and pay any Policy
Premium and Policy Redemption Premium (if any) due and unpaid to the Policy
Provider, (y) to fund any Cash Collateral Account established for the related
Refinancing Securities (up to the Required Amount therefor) and (z) for deposit
into any Cash Collateral Account (including in connection with an increase in
any Required Amount effected under this Indenture in connection with the
issuance of such Refinancing Securities);

          (iii) Indebtedness in respect of guarantees by any ACS Bermuda Group
Member that are in the ordinary course of the aircraft operating leasing
business and within the reasonable commercial practice of a leading aircraft
operating lessor;

          (iv) Indebtedness in respect of any Additional Securities the net
proceeds of which are applied (A) in the case of any Additional Securities
related to any Contribution Amounts only, for deposit into the Collections
Account, (B) to finance a Permitted Additional Aircraft Acquisition, (C) to fund
any Cash Collateral Account established for such Additional Securities (up to
the Required Amount therefor), (D) for deposit into any Cash Collateral Account
(including in connection with an increase in any Required Amount effected under
this Indenture in connection with the issuance of such Additional Securities)
and (E) to fund expenses related thereto; provided that (w) a Rating Agency
Confirmation is obtained prior to the Incurrence of such Indebtedness of
Certificates related to Securities Outstanding at such time, (x) the Issuer
receives the prior written consent of each of the Policy Provider (unless a
Policy Non-Consent Event has occurred) and the Initial Credit Facility Provider
(unless a Initial Credit Facility Non-Consent Event has occurred), (y) the net
proceeds of such Indebtedness shall be applied only for the purposes specified
above in this clause (iv) and (z) such Additional Securities will be
cross-collateralized with all Secured Obligations by the Collateral under the
Security Trust Agreement;

          (v) obligations to each Seller under each Acquisition Agreement and
any related lease assignment and assumption agreements and obligations to
Lessees and others under the documents related thereto, including any
Indebtedness owed to any Lessee under any such agreement or the Lease with
respect to maintenance contributions, redelivery condition



                                                                             117


adjustment payments or any other obligation to a Lessee incurred in the ordinary
course of the aircraft operating leasing business and within the reasonable
commercial practice of a leading aircraft operating lessor of the Issuer or any
ACS Bermuda Subsidiary;

          (vi) Indebtedness under any agreements between the Issuer or any ACS
Bermuda Subsidiary and any other ACS Bermuda Group Member or other ACS Group
Member (each, an "Intercompany Loan"); provided that such Indebtedness shall be
evidenced in writing, which may be in electronic form, and, written notification
shall have been given to each Rating Agency, the Policy Provider and the Initial
Credit Facility Provider of the Incurrence of such Indebtedness on behalf of the
Issuer;

          (vii) Indebtedness of the Issuer under any Eligible Credit Facility,
provided that a Rating Agency Confirmation and the prior written consent of the
Policy Provider and the Initial Credit Facility Provider is obtained prior to
entering into an Eligible Credit Facility not in existence on the Initial
Closing Date;

          (viii) Indebtedness required in connection with repossession of an
Aircraft or any Engine;

          (ix) Indebtedness in favor of the issuer of a surety, letter of credit
or similar instrument to be obtained by Issuer or any ACS Bermuda Subsidiary in
connection with the repossession or detention of an Aircraft or other
enforcement action under a Lease; and

          (x) Indebtedness of the Issuer under the Policy Provider Documents.

          For the purposes of this Indenture, "guarantee" means any obligation,
contingent or otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term "guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "guarantee" when used as
a verb has a corresponding meaning.

          (g) Limitation on Aircraft Dispositions. The Issuer shall not, and
shall not permit any ACS Bermuda Subsidiary to, sell, transfer or otherwise
dispose of any Aircraft or any interest therein other than as provided in the
Bermudian Remarketing Services Agreement.

          In addition, and notwithstanding any provision of the Bermudian
Remarketing Services Agreement, the Issuer and any ACS Bermuda Subsidiary shall
only be permitted to sell, transfer or otherwise dispose of, directly or
indirectly, (a) any Engine or Part purchased on the date such Aircraft is
acquired, (b) any Engine or Part in connection with the replacement of such
Engine or Part in accordance with a Lease or (c) one or more Aircraft or an
interest therein (i) pursuant to a Purchase Option or other agreements of a
similar character existing with respect to the Initial Aircraft on the Initial
Closing Date or, with respect to any Substitute Aircraft or Additional Aircraft,
on the Closing Date therefor, (ii) within or among the Issuer and the ACS



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Bermuda Subsidiaries and other ACS Group Members without limitation, and among
the Issuer and/or any other ACS Bermuda Group Member and any other ACS Group
Member provided that no such sale, transferor or other disposition shall be made
if such sale, transfer or disposition would materially adversely affect the
Holders or the Policy Provider as confirmed by a certification of the Issuer;
provided further that written notification shall have been given to each Rating
Agency and the Policy Provider of such sale, transfer or disposition, (iii)
pursuant to any Aircraft Agreement (including a Purchase Option); provided that
such sale does not result in a Concentration Default and the net present value
of the cash Net Sale Proceeds is not less than 107% of the Note Target Price;
provided further that the number of Aircraft sold pursuant to this clause (iii)
shall not exceed four for all of the ACS Group Members without the prior written
consent of the Policy Provider, (iv) pursuant to receipt of insurance proceeds
in connection with an event of loss, (v) pursuant to an Aircraft Agreement the
net present value of the cash Net Sale Proceeds is less than 107% of the Note
Target Price, provided that (with respect to this clause (v)), (x) in any one
calendar year such sales do not exceed 10% of the Assumed Portfolio Value as of
the first day of such calendar year of the ACS Group Portfolio as a whole for
such calendar year, (y) the prior written consent of the Policy Provider is
obtained and (z) such sale, transfer or disposition would not materially
adversely affect the Holders or Policy Provider as confirmed by a certificate of
the Issuer, or (vi) in connection with a transfer of title or another interest
in an Aircraft (A) to or in favor of a trust or another entity which, in either
case, is not an ACS Group Member for the purposes of registering the Aircraft
under the laws of an applicable jurisdiction where the Issuer or an ACS Bermuda
Subsidiary retains the beneficial or economic ownership of the Aircraft or (B)
from such trust or entity to the Issuer or an ACS Bermuda Subsidiary, except
that without the consent of the Policy Provider at any time not more than two
Aircraft may be subject to the arrangements described in this subclause (vi) and
subclause (v) of the second paragraph of Section 5.02(b) hereof.

          For the purpose of this Section 5.02(g), the net present value of the
cash Net Sale Proceeds of any sale, transfer or other disposition of any
Aircraft means the present value of all payments received or to be received by
the Issuer or any ACS Bermuda Subsidiary from the date of execution or option
granting date, as the case may be, of the relevant Aircraft Agreement through
and including the date of transfer of title to such Aircraft, discounted back to
the date of execution or option granting date, as the case may be, of such
Aircraft Agreement at the weighted average cost of funds of the Issuer (based on
the cost of funds represented by the Securities and taking into account any
Hedge Agreements).

          (h) Limitation on Aircraft Acquisitions. The Issuer shall not, and
shall not permit any ACS Bermuda Subsidiary to, purchase or otherwise acquire
any Aircraft other than the Initial Aircraft or any interest therein.

          Notwithstanding the foregoing, the Issuer may, and may permit any ACS
Bermuda Subsidiary to, (A) purchase or otherwise acquire, directly or
indirectly, Additional Aircraft from time to time (a "Permitted Additional
Aircraft Acquisition"); provided that (i) no Event of Default shall have
occurred and be continuing, (ii) the acquisition does not result in a
Concentration Default, (iii) with respect to Additional Aircraft acquired by
means of issuance of Additional Securities, Rating Agency Confirmation has been
received and the prior written consent of each of the Policy Provider and the
Initial Credit Facility Provider has been obtained, (B) purchase or otherwise
acquire, directly or indirectly, (x) Remaining Aircraft pursuant to the



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Purchase Agreement or (y) Substitute Aircraft, provided that, with respect to
Substitute Aircraft, each of a Rating Agency Confirmation and the prior written
consent of the Policy Provider has been received and (C) so long as such
acquisition does not result in a Default or a Concentration Default, acquire, as
a contribution from a Holder of a Class E Security or a Shareholder an
Additional Aircraft, provided that, the representations and warranties with
respect to Aircraft set forth in Section 5.01 hereto shall be made on the date
of such acquisition; and provided further that any such Additional Aircraft
holds or is capable of holding a noise reduction certificate issued under
Chapter 3 of Volume I, Part II of annex 16 of the Chicago Convention or comply
with the Stage 3 noise levels set out in Section 36.3 of Appendix C of Part 36
of the United States Federal Aviation Regulations (in each case without the use
of noise reduction kits).

          (i) Limitation on Modification Payments and Capital Expenditures.
Except for provisions for capital expenditures existing in Initial Leases on the
related Closing Date under the terms hereof, the Issuer shall not, and shall not
permit any ACS Bermuda Subsidiary to, make any capital expenditures for the
purpose of effecting any optional improvement or modification of any Aircraft,
including without limitation the optional conversion (an "Aircraft Conversion")
of any Aircraft from a passenger aircraft to a freighter or mixed-use aircraft,
or for the purpose of purchasing or otherwise acquiring any Engines or Parts
outside of the ordinary course of business, excluding any capital expenditure
made in the ordinary course of business in connection with a new lease of such
Aircraft (each such non-excluded expenditure, a "Modification Payment", and each
Modification Payment in respect of an Aircraft Conversion, a "Conversion
Payment").

          Notwithstanding the foregoing, the Issuer may, and may permit any ACS
Bermuda Subsidiary to: (x) make Conversion Payments from any amounts on deposit
in the Aircraft Conversion Account as a result of one or more Conversion
Elections; provided that (i) the full amount of the cost of such Aircraft
Conversion is on deposit in the Aircraft Conversion Account prior to any
Conversion Payments for such Aircraft Conversion being made (other than any
deposit or similar amount); (ii)(a) the Issuer has provided an information
memorandum containing information and analysis with respect to the related
Aircraft Conversion to the Policy Provider and the Rating Agencies, together
with a certification by the Issuer that such Aircraft Conversion will not
materially adversely affect the Holders or the Policy Provider, (b) the Issuer
has provided written notification to the Initial Credit Facility Provider at
least five Business Days prior to making a Conversion Election, and (c) with
respect to any widebody aircraft, the prior written consent of the Policy
Provider and a Rating Agency Confirmation has been obtained; provided that, if
the estimated total cost of the conversion (as determined by a quote from the
maintenance facility where such Aircraft Conversion is to take place) exceeds
$4,000,000, the prior written consent of the Policy Provider to such Aircraft
Conversion has been received; (iii) the Aircraft Conversion will not result in a
Concentration Default; (iv) not more than three Aircraft Conversions with
respect to any narrowbody aircraft for all of the ACS Group Members may be made
without obtaining a Rating Agency Confirmation and the prior written consent of
the Policy Provider; (v) after the fifth anniversary of the Initial Closing
Date, or in the event a DSCR Failure has occurred, no Aircraft Conversions may
be made (which begin after the fifth anniversary of the Initial Closing Date or
the occurrence of a DSCR Failure) without obtaining a Rating Agency Confirmation
and the prior written consent of the Policy Provider;(vi) a scheduled conversion
slot has been obtained by the relevant ACS Bermuda Group Member and (vii) an
executed letter of intent has been entered into with a lessee with respect to
such Aircraft;



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(y) make Modification Payments if the prior written consent of the Policy
Provider and (after May 31, 2016 only) the Initial Credit Facility Provider has
been obtained (other than with respect to any Conversion Payments); provided
that (i) each Modification Payment (other than Conversion Payments), together
with all other Modification Payments (other than Conversion Payments) made after
the Initial Closing Date pursuant to this Section 5.02(i) with respect to any
single Aircraft, do not exceed the aggregate amount of funds that would be
necessary to perform one incidence of heavy maintenance (as described in the
Bermudian Remarketing Services Agreement) on such Aircraft, including the
airframe and the related Engines thereof; and (ii) (A) such Modification Payment
is included in the annual operating budget of the ACS Bermuda Group, (B) the
amount of funds necessary to make such Modification Payment shall have been
accrued in advance as a Permitted Accrual in the Expense Account through
transfers into the Expense Account pursuant to Section 3.08(a) hereof or
otherwise allowed to be paid under Section 5.02(f) hereof or (C) the amount of
funds to make such Modification Payment is in the Aircraft Conversion Account;
and (z) make any Conversion Payment from the proceeds of Additional Securities
issued in accordance with Section 2.12 hereof in which case the limitations in
clause (x) do not apply.

          (j) Limitation on Amalgamation, Consolidation, Merger and Transfer of
Assets. The Issuer shall not, and shall not permit any ACS Bermuda Subsidiary
to, amalgamate, consolidate or merge with or into, or sell, convey, transfer,
lease or otherwise dispose of its property and assets (as an entirety or
substantially an entirety in one transaction or in a series of related
transactions) to, any other Person, or permit any other Person to amalgamate,
consolidate or merge with or into the Issuer or any ACS Bermuda Subsidiary,
unless (i) the resulting entity is a special purpose entity, the constitutional
documents of which is substantially similar to those of the Issuer or the
equivalent constitutional documents of such ACS Bermuda Subsidiary, as the case
may be, and, after such amalgamation, consolidation, merger, sale, conveyance,
transfer, lease or other disposition, payments from such resulting entity to the
Holders do not give rise to any withholding tax payments less favorable to the
Holders than the amount of any withholding tax payments which would have been
required had such event not occurred, (ii) in the case of any amalgamation,
consolidation, merger or transfer by the Issuer, the shares of the Issuer shall
remain outstanding or new Ownership Interests shall be issued in exchange
therefor having substantially the same terms and conditions as the exchanged
shares of the Issuer and the surviving successor or transferee entity shall
expressly assume all of the obligations of the Issuer under this Indenture, the
Securities and each other Related Document to which the Issuer is then a party,
and in the case of any amalgamation, consolidation, merger or transfer by any
ACS Bermuda Subsidiary, the surviving successor or transferee entity shall
expressly assume all of the obligations of such ACS Bermuda Subsidiary under
each Related Document to which it is then a party, (iii) a Rating Agency
Confirmation is obtained with respect to such amalgamation, consolidation,
merger, sale, conveyance, transfer, lease or disposition, (iv) the Issuer
receives the prior written consent of the Initial Credit Facility Provider
(unless a Initial Credit Facility Non-Consent Event has occurred) (such consent
not to be unreasonably withheld), (v) the Issuer receives the prior written
consent of the Policy Provider (unless a Policy Non-Consent Event has occurred)
(such consent not to be unreasonably withheld), (vi) such transaction does not
result in a recognition of gain or loss by the Holders for U.S. federal income
tax purposes, (vii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing, and (viii) the Issuer
delivers to the Trustee an Officer's Certificate and an Opinion of Counsel, in
each case stating that such amalgamation, consolidation, merger or transfer and



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such supplemental indenture comply with the above criteria and, if applicable,
Section 5.02(g) hereof and that all conditions precedent provided for herein
relating to such transaction have been complied with; provided that this
covenant shall not apply to any such amalgamation, consolidation, merger, sale,
conveyance, transfer, lease or disposition (a) within and among the ACS Bermuda
Group or ACS Group if such amalgamation, consolidation, merger, sale,
conveyance, transfer, lease or disposition, as the case may be, would not
materially adversely affect the Holders and written notification is given to
each Rating Agency, to the Policy Provider and to the Initial Credit Facility
Provider by the Issuer or its agent and is otherwise consistent with Sections
5.02(p) and (q) hereof, (b) complying with the terms of Section 5.02(g) hereof
or (c) effected as part of a single transaction providing for the redemption or
defeasance of Securities in accordance with Section 3.10 or Article XII hereof,
respectively.

          (k) Limitation on Transactions with Affiliates. The Issuer shall not,
and shall not permit any ACS Bermuda Subsidiary, directly or indirectly, to
enter into, renew or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service) with any Affiliate of the Issuer or any ACS Bermuda Subsidiary, except
upon fair and reasonable terms no less favorable to the Issuer or such ACS
Bermuda Subsidiary than could be obtained, at the time of such transaction or at
the time of the execution of the agreement providing therefor, in a comparable
arm's-length transaction with a Person that is not such an Affiliate and
pursuant to enforceable agreements.

          The foregoing limitation does not limit, and shall not apply to: (i)
any transaction in connection with the establishment of the ACS Bermuda Group or
ACS Ireland Group pursuant to the Related Documents and the acquisition of the
Initial Securities from the Issuer and the guarantee by the Issuer of the
Guarantor Initial Securities; (ii) any Contribution Amount or any contribution
in the form of an Additional Aircraft pursuant to the terms of this Indenture
made by any Holder of a Class E Security or any Shareholder; (iii) the payment
by the Issuer of reasonable and customary fees to, and the provision of
reasonable and customary liability insurance in respect of, the Directors; (iv)
any Permitted Additional Aircraft Acquisition or any transaction complying with
Section 5.02(g) hereof; or (v) sale of the Issuer or any ACS Bermuda
Subsidiaries as part of a single transaction providing for the redemption or
defeasance of all of the Securities in accordance with Section 3.10 or Article
XII hereof, respectively.

          (l) Limitation on the Issuance, Delivery and Sale of Equity Interests.
The Issuer shall not (i) issue, deliver or sell any shares, interests,
participations or other equivalents (however designated, whether voting or
non-voting, other than beneficial interests, shares, participations or other
equivalents existing on the Initial Closing Date) in equity of the Issuer, or
(ii) sell, or permit any ACS Bermuda Subsidiary, directly or indirectly, to
issue, deliver or sell, any shares, interests, participations or other
equivalents in equity (however designated, whether voting or non-voting, other
than beneficial interests, shares, participations or other equivalents existing
on the Initial Closing Date), except (A) the issuance, sale, delivery, transfer
or pledge of Ownership Interest in any ACS Bermuda Group Member to or for the
benefit of any other ACS Bermuda Group Member or other ACS Group Member, (B)
issuances or sales of shares of Ownership Interest of foreign ACS Bermuda
Subsidiaries to nationals in the jurisdiction of incorporation or organization
of such ACS Bermuda Subsidiary, as the case may be, to the extent required by
applicable law or necessary in the determination of the Board to avoid adverse
tax consequences or to facilitate the registration or leasing of Aircraft,
provided that the prior written



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consent of the Policy Provider has been obtained in connection therewith, (C)
the pledge of the Pledged Shares and Pledged Beneficial Interests pursuant to
the Security Documents, and (D) the sale of any Ownership Interest in an ACS
Group Subsidiary in order to effect the sale of all Aircraft owned by such ACS
Group Subsidiary in compliance with Section 5.02(g) hereof.

          (m) Bankruptcy and Insolvency; Corporate Governance. The Issuer (i)
shall promptly provide the Trustee, the Policy Provider, the Initial Credit
Facility Provider and the Rating Agencies with written notice of the institution
of any proceeding by or against the Issuer or any ACS Bermuda Subsidiary, as the
case may be, seeking to adjudicate any of them bankrupt or insolvent, or seeking
liquidation, examinership, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of their debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, Irish law
examiner, trustee or other similar official for it or for any substantial part
of its property; (ii) shall not take any action to waive, repeal, amend, vary,
supplement or otherwise modify its constitutional documents that would adversely
affect the rights, privileges or preferences of any Holder of the Securities,
the Policy Provider or the Initial Credit Facility Provider, as determined by
the Board; and (iii) shall not, without an affirmative unanimous Board
Resolution, take any action to waive, repeal, amend, vary, supplement or
otherwise modify (A) the provisions of its constitutional documents which
require a unanimous resolution of the shareholders of the Issuer, or limits the
actions of beneficial interest holders, with respect to voluntary insolvency
proceedings or consents to involuntary insolvency proceedings or (B) any similar
provisions of the constitutional documents of the ACS Bermuda Subsidiaries. The
Issuer shall have at least two Independent Directors and any Independent
Director appointed to replace an Independent Director with respect to the Issuer
shall be subject to the prior written consent of the Policy Provider (except
that if such consent is not obtained in a timely manner, the Issuer shall
nevertheless appoint such Independent Director if so required by, and in
accordance with, the terms of the Issuer's constitutional documents).

          (n) Payment of Principal, Premium, if any, and Interest. The Issuer
shall duly and punctually pay the principal, premium, if any, and interest on
the Securities in accordance with the terms of this Indenture and the
Securities.

          (o) Limitation on Employees. The Issuer shall not, and shall not
permit any ACS Bermuda Subsidiary to, employ or maintain any employees other
than as required by any provisions of local law; provided that indenture
trustees and directors shall not be deemed to be employees for purposes of this
Section 5.02(o).

          (p) Compliance and Agreement. The Issuer shall comply, and shall cause
each ACS Bermuda Subsidiary to comply, with the provisions of the Related
Documents. The Issuer shall ensure that title to each Aircraft shall be held in
a separate special purpose bankruptcy remote entity whose constitutional
documents contain restrictions similar to the restrictions (including, but not
limited to, the provisions regarding limited purpose, maintaining separateness
from other entities and bankruptcy remoteness) contained in the constitutional
documents of the ACS Group Subsidiaries existing on the Initial Closing Date.
The constitutional documents of the ACS Group Subsidiaries shall contain
provisions requiring the ACS Group Subsidiaries to comply with the provisions of
the Related Documents and any amendment to such provision shall be subject to
the prior written consent of the Policy Provider.



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          (q) Maintenance of Separate Existence. Except to the extent provided
in this Indenture or the other Related Documents or as otherwise contemplated by
the Related Documents, the Issuer shall, and shall cause each ACS Bermuda
Subsidiary to, maintain certain policies and procedures relating to its
existence as a separate corporation, company or other legal entity as follows:

          (i) The Issuer acknowledges its receipt of a copy of that certain
opinion letter issued by Conyers Dill & Pearman, dated as of the Initial Closing
Date addressed to, among others, the Initial Purchasers, the Trustee, the Policy
Provider and the Initial Credit Facility Provider and addressing the issue of
substantive consolidation as it may relate to the Issuer and each ACS Bermuda
Subsidiary (which is incorporated under the laws of Bermuda), on the one hand,
and Aircastle Limited and each of its subsidiaries (other than any ACS Group
Member), on the other. The Issuer hereby agrees to maintain, and to cause each
ACS Bermuda Subsidiary to maintain, in place all policies and procedures, and
take and continue to take all actions, described in the factual assumptions set
forth in such opinion letter and relating to the Issuer or such ACS Bermuda
Subsidiaries, as applicable; provided, however, that the Issuer or any such ACS
Bermuda Subsidiary may cease to maintain any policy or procedure (A) if and to
the extent that the Issuer or such ACS Bermuda Subsidiary delivers to the
Trustee, the Initial Credit Facility Provider and the Policy Provider an Opinion
of Counsel reasonably acceptable to the Trustee, the Initial Credit Facility
Provider and the Policy Provider providing that such policy or procedure is no
longer necessary, due to a change in law or otherwise, for the rendering of such
earlier opinion relating to the issue of substantive consolidation and (B) a
Rating Agency Confirmation and the prior written consent of the Policy Provider,
in each case, is obtained with respect to ceasing to maintain such policy or
procedure.

          (ii) The Issuer shall, and shall cause each ACS Bermuda Subsidiary to:

          (A) maintain its own books and records and bank accounts separate from
those of each Aircastle Entity and any other Person except as otherwise
contemplated by the constitutional documents of the ACS Group Members;

          (B) maintain its assets in such a manner that it is not difficult to
segregate, identify or ascertain such assets;

          (C) except with respect to any U.S. Trust, have a board of directors
separate from that of each Aircastle Entity and any other Person; provided that
the individuals serving as directors of each board of directors may be the same
individuals on each board of directors;

          (D) except with respect to any U.S. Trust, cause its board of
directors to meet at least annually or act pursuant to written consent and keep
minutes of such meetings and actions and observe all other corporate and other
legal formalities;

          (E) hold itself out to creditors and the public as a legal entity
separate and distinct from each Aircastle Entity and any other Person;

          (F) prepare separate financial statements and separate Tax returns,
and if separate returns for the Issuer and each Aircastle Entity are required
under applicable Tax law, or



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if part of a consolidated group, then it will be shown as a separate member of
such group, and pay any Taxes required to be paid under applicable Tax law;

          (G) allocate and charge fairly and reasonably any common overhead
shared with Affiliates;

          (H) conduct business in its own name, use separate invoices,
stationery and checks and strictly comply with all organizational formalities to
maintain its separate existence;

          (I) not commingle its assets or funds with those of any other Person
(including any Aircastle Entity);

          (J) not hold out its credit or assets as being available to satisfy
the obligations of others;

          (K) not assume, guarantee or pay the debts or obligations of any other
Person or otherwise pledge its assets for the benefit of any other Person;

          (L) correct any known misunderstanding regarding its separate
identity;

          (M) other than as expressly contemplated by Sections 3.08, 3.09 and
3.15, pay its own liabilities only out of its own funds other than where
indemnified by another party as contemplated by the Related Documents;

          (N) not acquire the securities of any Aircastle Entity;

          (O) cause its Board and any officers, managers, agents and other
representatives of the Issuer or such ACS Bermuda Subsidiary, as applicable, to
act at all times with respect to the Issuer or such ACS Bermuda Subsidiary, as
the case may be, consistently and in furtherance of the foregoing and in
compliance with applicable law; and

          (P) maintain adequate capital in light of its contemplated business
purpose, transactions and liabilities.

          (r) Independent Director. The Issuer shall cause each ACS Bermuda
Subsidiary (except any trust of which the Issuer or an ACS Bermuda Subsidiary is
the holder of the legal and beneficial interest) to have at least one
Independent Director.

          (s) Registered Office. The Issuer shall cause each ACS Bermuda
Subsidiary that is incorporated under the laws of Ireland to, (a) maintain its
registered office in Ireland in accordance with the Irish Companies Acts 1963 to
2005, (b) maintain its centre of main interests (as that phrase is used in
Article 3(l) of the Regulation) in Ireland and (c) maintain its primary
insolvency jurisdiction (as that term is defined in the Cape Town Convention on
International Interests in Mobile Equipment and the Aircraft Equipment Protocol
thereto) in Ireland.



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     Section 5.03 Operating Covenants. The Issuer covenants with the Trustee as
follows:

          (a) Concentration Limits. Without receipt of a Rating Agency
Confirmation from Moody's and the prior written consent of the Policy Provider,
the Issuer shall not permit any ACS Bermuda Subsidiary to lease or re-lease any
Aircraft if entering into such proposed Lease would cause the ACS Group
Portfolio to exceed any of the Concentration Limits set forth in Exhibit C
hereto (as such limits may be adjusted by the Issuer from time to time, subject
to receipt of a Rating Agency Confirmation and the prior written consent of the
Policy Provider, the "Concentration Limits"); provided that the Issuer or any
ACS Bermuda Subsidiary shall be entitled to renew or extend any Lease to the
existing Lessee thereunder irrespective of the effect of such renewal or
extension on the Concentration Limits with the prior written consent of the
Policy Provider. The Issuer shall not, and shall not permit any ACS Bermuda
Subsidiary to, (i) lease (including any renewal or extension of any existing
Lease) any Aircraft to any Lessee habitually based or domiciled in any of the
jurisdictions set forth as "Prohibited" in the last section of the Concentration
Limits as set forth on Exhibit C hereto and as amended from time to time upon
the receipt of a Rating Agency Confirmation and the prior written consent of the
Policy Provider (each such jurisdiction, a "Prohibited Country"), (ii) enter
into any Lease (including any renewal or extension of any existing Lease) that
expressly permits the Lessee to sublease an Aircraft to a sublessee habitually
based or domiciled in a Prohibited Country, or (iii) consent to a sublease of an
Aircraft to a sublessee habitually based or domiciled in a Prohibited Country.

          (b) Compliance with Law, Maintenance of Permits. The Issuer shall (i)
comply, and cause each ACS Bermuda Subsidiary to comply, in all material
respects with all Applicable Laws, (ii) obtain, and cause each ACS Bermuda
Subsidiary to obtain, all material governmental (including regulatory)
registrations, certificates, licenses, permits and authorizations required for
the use and operation of the Aircraft owned by it, including, without
limitation, a current certificate of airworthiness for each such Aircraft
(issued by the Applicable Aviation Authority and in the appropriate category for
the nature of the operations of such Aircraft), except that (A) no certificate
of airworthiness shall be required for any Aircraft (x) during any period when
such Aircraft is undergoing maintenance, modification or repair, (y) following
the withdrawal or suspension by such Applicable Aviation Authority of
certificates of airworthiness in respect of all aircraft of the same model or
period of manufacture as such Aircraft (in which case the Issuer shall comply,
and cause each ACS Bermuda Subsidiary to comply, with all directions of such
Applicable Aviation Authority in connection with such withdrawal or suspension),
(B) no registrations, certificates, licenses, permits or authorizations required
for the use or operation of any Aircraft need be obtained with respect to any
period when such Aircraft is not being operated and (C) no such registrations,
certificates, licenses, permits or authorizations shall be required to be
maintained for any Aircraft that is not the subject of a Lease, except to the
extent required under Applicable Laws, (iii) not cause or knowingly permit,
directly or indirectly, through any ACS Bermuda Subsidiary, any Lessee to
operate any Aircraft under any Lease in any material respect contrary to any
Applicable Law and (iv) not knowingly permit, directly or indirectly, through
any ACS Bermuda Subsidiary, any Lessee not to obtain all material governmental
(including regulatory) registrations, certificates, licenses, permits and
authorizations required for such Lessee's use and operation of any Aircraft
under any operating Lease except as provided, mutatis mutandis, in clauses
(ii)(A) and (ii)(B) above.



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          Notwithstanding the foregoing, no breach of this Section 5.03(b) shall
be deemed to have occurred by virtue of any act or omission of a Lessee or
sub-lessee, or of any Person which has possession of the Aircraft or any Engine
for the purpose of repairs, maintenance, modification or storage, or by virtue
of any requisition, seizure, or confiscation of the Aircraft (other than seizure
or confiscation arising from a breach by the Issuer or an ACS Bermuda Subsidiary
of this Section 5.03(b)) (each, a "Third Party Event"); provided that (i)
neither the Issuer nor any ACS Bermuda Subsidiary consents or has consented to
such Third Party Event; and (ii) the Issuer or ACS Bermuda Subsidiary which is
the lessor or owner of such Aircraft promptly and diligently takes such
commercially reasonable actions as any leading international aircraft operating
lessor would reasonably take in respect of such Third Party Event, including, as
deemed appropriate (taking into account, inter alia, the laws of the
jurisdictions in which the Aircraft are located), seeking to compel such Lessee
or other relevant Person to remedy such Third Party Event or seeking to
repossess the relevant Aircraft or Engine.

          (c) Maintenance of Assets. The Issuer shall (i) with respect to each
Aircraft and Engine that is subject to a Lease, cause, directly or indirectly,
through any ACS Bermuda Subsidiary, such Aircraft and Engine to be maintained in
a state of repair and condition consistent with the reasonable commercial
practice of any leading international aircraft operating lessor with respect to
similar aircraft under lease, taking into consideration, among other things, the
identity of the relevant Lessee (including the credit standing and operating
experience thereof), the age and condition of the Aircraft and the jurisdiction
in which such Aircraft will be operated or registered under such Lease and (ii)
with respect to each Aircraft that is not subject to a Lease, maintain, and
cause each ACS Bermuda Subsidiary to maintain, such Aircraft in a state of
repair and condition consistent with the reasonable commercial practice of any
leading international aircraft operating lessor with respect to aircraft not
under lease. Notwithstanding the foregoing, no breach of this Section 5.03(c)
shall be deemed to have occurred by virtue of any Third Party Event; provided
that (i) neither the Issuer nor any ACS Bermuda Subsidiary consents or has
consented to such Third Party Event; and (ii) the Issuer or such ACS Bermuda
Subsidiary which is the lessor or owner of such Aircraft promptly and diligently
takes such commercially reasonable actions as any leading international aircraft
operating lessor would reasonably take in respect of such Third Party Event,
including as deemed appropriate, seeking to compel such Lessee or other relevant
Person to remedy such Third Party Event or seeking to repossess the relevant
Aircraft or Engine.

          (d) Notification of Trustee, Holders, Policy Provider, Initial Credit
Facility Provider, Administrative Agent and Cash Manager. The Issuer shall
notify the Trustee, the Holders, the Policy Provider, the Initial Credit
Facility Provider, the Administrative Agent and the Cash Manager in writing as
soon as the Issuer or any ACS Bermuda Subsidiary becomes aware of any loss,
theft, damage, confiscation, requisition or destruction to any Initial Aircraft,
Additional Aircraft or Engine if the potential cost of repair or replacement of
such asset (without regard to any insurance claim related thereto) may exceed
the greater of $2,000,000 and the damage notification threshold contained in the
applicable Lease.

          (e) Leases. The Issuer shall adopt and shall cause the Bermudian
Remarketing Servicer to utilize the pro forma lease in the form provided to the
Issuer on the Initial Closing Date (or, with respect to the Back-Up Remarketing
Servicer, the "Commencement Date" as defined in the Back-Up Remarketing Services
Agreement) as such pro forma lease agreement or



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agreements may be revised for purposes of the ACS Bermuda Group specifically or
generally from time to time by the Bermudian Remarketing Servicer (the
"Bermudian Remarketing Servicer's Pro Forma Lease") in a manner consistent with
the Bermudian Remarketing Servicer's "Standard of Care" and the Bermudian
Remarketing Servicer's "Conflicts Standard" (as each term is defined in the
Bermudian Remarketing Services Agreement), for use by the Bermudian Remarketing
Servicer on behalf of the Issuer, any ACS Bermuda Subsidiary as a starting point
in the negotiation of Future Leases with Persons who are not ACS Bermuda Group
Members; provided, however, that with respect to any Future Lease entered into
in connection with (x) the renewal or extension of an Initial Lease, (y) the
leasing of an Aircraft to a Person that is or was a Lessee under an Initial
Lease or (z) the leasing of an Aircraft to a Person that is or was the lessee
under an operating lease of an aircraft that is being managed or serviced by the
Bermudian Remarketing Servicer (such Future Lease, a "Renewal Lease"), a form of
lease substantially similar to such Initial Lease or operating lease (a
"Precedent Lease"), as the case may be, may be used by the Bermudian Remarketing
Servicer in lieu of the Bermudian Remarketing Servicer's Pro Forma Lease on
behalf of the Issuer or any ACS Bermuda Subsidiary as a starting point in the
negotiation of such Future Lease with Persons who are not ACS Bermuda Group
Members and provided further, however, that if the Board determines, in an
annual review of the Bermudian Remarketing Servicer's Pro Forma Lease on or
before each anniversary of the relevant Closing Date, that any revision to the
Bermudian Remarketing Servicer's Pro Forma Lease made from time to time since
the preceding review by the Board (or, with respect to the first anniversary of
the Initial Closing Date, since the Initial Closing Date) is substantially
inconsistent with the core lease provisions of the Issuer set forth in Exhibit F
to this Indenture (as such provisions may be amended from time to time, the
"Core Lease Provisions") in a manner and to such a degree as to have a material
adverse effect on the Holders, taking into consideration, inter alia, such
revision and any risk that the Aircraft might not be able to be leased on terms
consistent with the provisions of the Bermudian Remarketing Servicer's Pro Forma
Lease without such revisions, then the Board shall direct the Bermudian
Remarketing Servicer not to include such revision in the Bermudian Remarketing
Servicer's Pro Forma Lease to be used thereafter as the starting point in the
negotiation of any Future Lease with respect to the Aircraft. If the Board
determines that any such revision to the Bermudian Remarketing Servicer's Pro
Forma Lease will not have a material adverse effect on the Holders, then the
Board shall (i) amend the applicable Core Lease Provisions to incorporate such
revisions (ii) notify the Rating Agencies, the Policy Provider and the Initial
Credit Facility Provider of any Future Lease entered into the terms of which are
materially less favorable from the point of view of the lessor than any of the
Leases then in effect, including without limitation, such changes to the Core
Lease Provisions; provided that the Core Lease Provisions may not be amended
without the prior written consent of the Policy Provider.

          The Issuer shall not enter into, and shall not permit any ACS Bermuda
Subsidiary to enter into, any Future Lease the Rental Payments under which are
denominated in a currency other than U.S. dollars unless the Issuer receives a
Rating Agency Confirmation and the prior written consent of the Policy Provider;
provided, that the Issuer may enter any Future Lease the Rental Payments under
which are denominated in euros if (a) the sum of the Assumed Base Values as of
the Payment Date immediately preceding any date of determination of each ACS
Group Aircraft subject to leases the Rental Payments under which are denominated
in euros does not exceed 5% of the sum of the Assumed Base Values as of such
Payment Date of all ACS Group Aircraft and (b) the currency exposure is hedged
in accordance with the Issuer's hedging



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policy.

          (f) Opinions. The Issuer shall not enter into, and shall not permit
any ACS Bermuda Subsidiary to enter into, any Future Lease with any Person that
is not an ACS Bermuda Group Member or change the jurisdiction of registration of
any Aircraft that is subject to a Lease, unless, upon entering into such Future
Lease or changing the jurisdiction or registration of such Aircraft (or within a
commercially reasonable period thereafter), the Bermudian Remarketing Servicer
obtains such legal opinions, if any, with regard to compliance with the
registration requirements of the relevant jurisdiction, enforceability of the
Future Lease and such other matters customary for such transactions to the
extent that receiving such legal opinions is consistent with the reasonable
commercial practice of any leading international aircraft operating lessor.

          (g) Insurance. The Issuer shall maintain or cause, directly or
indirectly through the ACS Bermuda Subsidiaries, to be maintained with reputable
and responsible insurers or, provided that the applicable reinsurance policy
contains a cut-through clause requiring the reinsurers to pay the insured
directly (other than in any instances where local law requirements mandate
otherwise), with reputable and responsible insurers that maintain relevant
reinsurance with reputable and responsible reinsurers (i) airline hull insurance
for each Aircraft in an amount at least equal to the Note Target Price for such
Aircraft (or the equivalent thereof from time to time if such insurance is
denominated in a currency other than U.S. dollars) and (ii) airline liability
insurance for each Aircraft and occurrence in an amount at least equal to the
relevant amount set forth on Exhibit D hereto for each model of aircraft and as
amended from time to time pursuant to the receipt of a Rating Agency
Confirmation from Standard & Poor's and prior written notice of such amendment
is provided to Moody's and the prior written consent of the Policy Provider and
(iii) airline repossession insurance ("Repossession Insurance") for each
Aircraft subject to a Lease to a Lessee habitually based in a jurisdiction set
forth under the "Repossession Guidelines" set forth in Exhibit C hereto, which
may be amended from time to time only pursuant to the receipt of a Rating Agency
Confirmation and the prior written consent of the Policy Provider, in an amount
at least equal to the Note Target Price (or the equivalent thereof from time to
time if such insurance is denominated in a currency other than U.S. dollars) for
such Aircraft; provided, however, that with respect to any such insurance for
any Aircraft subject to a Lease, such insurance may be subject to commercially
reasonable deductible and self-insurance arrangements and may take into account
any customary reductions in limits for Aircraft in storage and not in operation
(in each case taking into account, inter alia, the creditworthiness and
experience of the Lessee, if any, the type of aircraft and market practices in
the aircraft insurance industry generally). The coverage and terms (including
endorsements, deductibles and self-insurance arrangements) of any insurance
maintained with respect to any Aircraft not subject to a Lease shall be
substantially consistent with the reasonable commercial practices of any leading
international aircraft operating lessor regarding similar aircraft.

          In determining the amount of insurance required to be maintained by
this Section 5.03(g), the Issuer may take into account any indemnification from,
or insurance provided by, any governmental, supranational or inter-governmental
authority or agency (other than, with respect to Repossession Insurance, any
governmental authority or agency of any jurisdiction for which Repossession
Insurance must be obtained), the sovereign foreign currency debt of which is
rated at least AA, or the equivalent, by at least one of the Rating Agencies,



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against any risk with respect to an Aircraft at least in an amount which, when
added to the amount of insurance against such risk maintained by the Issuer (or
which the Issuer has caused to be maintained), shall be at least equal to the
amount of insurance against such risk otherwise required by this Section 5.03(g)
(taking into account self-insurance permitted by this Section 5.03(g)). Any such
indemnification or insurance provided by such government shall provide
substantially similar protection as the insurance required by this Section
5.03(g).

          The Issuer shall cause, or shall cause the applicable ACS Group
Subsidiary to cause, each Lessee to be obligated under its respective Lease to
maintain War Risk Coverage as part of the insurance requirements in such Lease.
The Issuer shall cause, or shall cause the applicable ACS Group Subsidiary to
cause, each Lessee to maintain War Risk Coverage in accordance with the
requirements set forth in Exhibit D hereto. In the event that a Lessee does not
maintain such requisite level of War Risk Coverage or allows such War Risk
Coverage to lapse, the Issuer shall cause the applicable ACS Group Subsidiary
lessor to immediately bring enforcement proceedings against the applicable
Lessee under the terms of the applicable Lease to repossess the applicable
Aircraft and use commercially reasonable efforts of a leading international
aircraft operating lessor to ensure that such Aircraft does not operate without
War Risk Coverage at such required levels; provided, however, that so long as
the Issuer is in compliance with the requirements set forth in the next
succeeding sentence and the applicable Lessee is not otherwise in default under
the related Lease, the Issuer shall have 180 days to cause, or to cause the
applicable ACS Group Subsidiary lessor to cause, the Lessee to comply with the
insurance requirements set forth herein and under the Lease prior to bringing
any such enforcement proceedings; provided further that if, for any reason,
neither the Issuer nor the applicable ACS Group Subsidiary lessor has a right
under the applicable Lease to require a Lessee to maintain War Risk Coverage at
the requisite levels, the Issuer shall nevertheless be obligated to cause such
Lessee to maintain War Risk Coverage at the requisite levels described in
Exhibit D hereto (by negotiating in good faith with such Lessee or otherwise) or
shall otherwise cause War Risk Coverage to be maintained at the requisite levels
described in Exhibit D hereto, subject only to the additional time provided in
the immediately preceding proviso if the Issuer is in compliance with
requirements set forth in the next succeeding sentence and the applicable Lessee
is not otherwise in default under the related Lease. The Issuer shall carry
contingent and excess War Risk Coverage in accordance with the requirements set
forth in Exhibit D hereto.

          The obligations set forth in the foregoing paragraph shall be waived
if (a) prior written notice shall be provided to the Rating Agencies and (b) the
Policy Provider shall have provided a written consent to such waiver.

          (h) Indemnity. The Issuer shall, and shall cause each ACS Bermuda
Subsidiary to, include in each Lease between the Issuer or such ACS Bermuda
Subsidiary and a Person who is not an ACS Bermuda Group Member an indemnity from
such Person in respect of any losses or liabilities arising from the use or
operation of the Aircraft during the term of such Lease, subject to such
exceptions, limitations and qualifications as are consistent with the reasonable
commercial practice of any leading international aircraft operating lessor.

          (i) Appraisal of Aircraft. The Issuer shall, within 90 days after the
Expected Final Payment Date of the ACS Group Subclass A-1 Securities, deliver to
the Trustee, the Policy



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Provider and the Rating Agencies three appraisals of the Base Value of each of
the Aircraft from each of Initial Appraisers or, if any of the Initial
Appraisers is unable to provide an appraisal, from the remaining Initial
Appraisers and such other Appraisers selected by the Issuer, each such appraisal
to be dated within 30 days prior to its delivery to the Trustee, the Policy
Provider and the Rating Agencies.

     Section 5.04 Compliance Through Agents. The Issuer shall be entitled to
delegate the performance of any of its covenants hereunder to one or more
Service Providers pursuant to one or more Related Documents entered into in
accordance with the terms of this Indenture so long as each such Related
Document is subject to the Lien of the Security Trust Agreement. Nothing in this
Section 5.04 is intended to, or shall, relieve the Issuer from any liability or
consequences hereunder arising from the failure of the Issuer or any such
Service Provider to perform any such covenant strictly in accordance with the
terms of this Indenture.

                                   ARTICLE VI

                                   THE TRUSTEE

     Section 6.01 Acceptance of Trusts and Duties. The duties and
responsibilities of the Trustee shall be as provided by the TIA and as set forth
herein and in the Guarantor Indenture. The Trustee accepts the trusts hereby
created and applicable to it and agrees to perform the same but only upon the
terms of this Indenture and in the Guarantor Indenture and the TIA and agrees to
receive and disburse all moneys received by it in accordance with the terms
hereof and in the Guarantor Indenture. The Trustee in its individual capacity
shall not be answerable or accountable under any circumstances, except for its
own willful misconduct or negligence or breach of any of its representations or
warranties set forth herein and the Trustee shall not be liable for any action
or inaction of the Issuer or any other parties to any of the Related Documents.
The fees and out-of-pocket expenses of the Trustee shall be Expenses of the
Issuer.

     Section 6.02 Absence of Duties. Except in accordance with written
instructions or requests furnished hereunder, the Trustee shall have no duty to
ascertain or inquire as to the performance or observance of any covenants,
conditions or agreements on the part of any Lessee.

     Section 6.03 Representations or Warranties. The Trustee does not make and
shall not be deemed to have made any representation or warranty as to the
validity, legality or enforceability of this Indenture, the Securities or any
other document or instrument or as to the correctness of any statement contained
in any thereof, except that the Trustee in its individual capacity hereby
represents and warrants (i) that each such specified document to which it is a
party has been or will be duly executed and delivered by one of its officers who
is and will be duly authorized to execute and deliver such document on its
behalf, and (ii) this Indenture is the legal, valid and binding obligation of
Deutsche Bank Trust Company Americas, enforceable against Deutsche Bank Trust
Company Americas in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally.

     Section 6.04 Reliance; Agents; Advice of Counsel. The Trustee may
conclusively rely upon and shall be fully protected and Incur no liability to
anyone in acting or refraining from



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acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or paper believed by
it to be genuine and believed by it to be signed by the proper party or parties.
The Trustee shall have no obligation to confirm the veracity of the content of
any such item provided to it (absent manifest error). The Trustee may accept a
copy of a resolution of, in the case of the Issuer, the Board and, in the case
of any other party to any Related Document, the governing body of such Person,
certified in an accompanying Officer's Certificate as duly adopted and in full
force and effect, as conclusive evidence that such resolution has been duly
adopted and that the same is in full force and effect. As to any fact or matter
the manner of ascertainment of which is not specifically described herein, the
Trustee shall be entitled to receive and may for all purposes hereof
conclusively rely on a certificate, signed by an officer of any duly authorized
Person, as to such fact or matter, and such certificate shall constitute full
protection to the Trustee for any action taken or omitted to be taken by it in
good faith in reliance thereon. The Trustee shall furnish to the Administrative
Agent upon written request such information and copies of such documents as the
Trustee may have and as are necessary for the Administrative Agent to perform
its duties under Articles II and III hereof. The Trustee shall assume, and shall
be fully protected in assuming, that the Issuer is authorized by its
constitutional documents to enter into this Indenture and to take all action
permitted to be taken by it pursuant to the provisions hereof, and shall not
inquire into the authorization of the Issuer with respect thereto.

          The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within its rights or
powers or for any action it takes or omits to take in accordance with the
direction of the Controlling Party, in accordance with Section 4.12 hereof
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Indenture.

          The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of, any
such agent, attorney, custodian or nominee appointed with due care by it
hereunder.

          The Trustee may consult with counsel as to any matter relating to this
Indenture and any Opinion of Counsel or any advice of such counsel shall be full
and complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance with such
advice or Opinion of Counsel.

          The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Holders, pursuant to the provisions of this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities which may be
Incurred therein or thereby (the basis of such costs, expenses or liability, if
in respect of any third party liability, shall be supported by an Opinion of
Counsel).



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          The Trustee shall not be required to expend or risk its own funds or
otherwise Incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Indenture shall in any event require
the Trustee to perform, or be responsible or liable for the manner of
performance of, any obligations of the Issuer or the Administrative Agent under
this Indenture or any of the Related Documents.

          The Trustee shall not be liable for any Costs or Taxes (except for
Taxes relating to any compensation, fees or commissions of any entity acting in
its capacity as Trustee hereunder) or in connection with the selection of
Permitted Account Investments or for any investment losses resulting from
Permitted Account Investments.

          When the Trustee Incurs expenses or renders services in connection
with an Event of Default specified in Section 4.01(e) or 4.01(f) hereof, such
expenses (including the fees and expenses of its counsel) and the compensation
for such services are intended to constitute expenses of administration under
any bankruptcy law or law relating to creditors' rights generally.

          The Trustee shall not be charged with knowledge of an Event of Default
unless a Responsible Officer of the Trustee obtains actual knowledge of such
event, including receiving written notice of such event from the Issuer, the
Administrative Agent, the Policy Provider or any Holder.

          The Trustee shall have no duty to monitor the performance of the
Issuer, the Cash Manager or any other party to the Related Documents, nor shall
it have any liability in connection with the malfeasance or nonfeasance by such
parties. The Trustee shall have no liability in connection with the appointment
of the Administrative Agent or compliance by the Issuer, the Administrative
Agent, the Cash Manager or any lessee under a Lease with statutory or regulatory
requirements related to any Aircraft or any Lease. The Trustee shall have no
obligation, or liability in respect thereto, to verify or recalculate any of the
determinations made by the Administrative Agent pursuant to the Related
Documents. The Trustee shall not make or be deemed to have made any
representations or warranties with respect to any Aircraft or any Lease or the
validity or sufficiency of any assignment or other disposition of any Aircraft
or any Lease.

     Section 6.05 Not Responsible in Individual Capacity. The Trustee acts
hereunder solely as trustee unless otherwise expressly provided; and all
Persons, other than the Holders to the extent expressly provided in this
Indenture, having any claim against the Trustee by reason of the transactions
contemplated hereby shall look, subject to the lien and priorities of payment as
herein provided, only to the property of the Issuer for payment or satisfaction
thereof.

     Section 6.06 No Compensation from Holders. The Trustee agrees that it shall
have no right against the Holders, the Policy Provider or, except as provided in
Article III hereof, the property of the Issuer, for any fee as compensation for
its services hereunder.



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     Section 6.07 Notice of Defaults. As promptly as practicable after, and in
any event within 30 days after, the occurrence of any Default or Event of
Default hereunder, the Trustee shall transmit by mail to the Issuer, the
Guarantor, the Guarantor Trustee, the Controlling Party, the Policy Provider,
the Initial Credit Facility Provider, the Cash Manager, the Rating Agencies and
the Holders holding Securities of the related subclass, notice of such Default
or Event of Default hereunder actually known to a Responsible Officer of the
Trustee, unless such Default shall have been cured or waived.

     Section 6.08 May Hold Securities. The Trustee, any Paying Agent, the
Registrar or any of their Affiliates or any other agent in their respective
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 310(b) and 311 of the Trust Indenture Act, may
otherwise deal with the Issuer with the same rights it would have if it were not
Trustee, Paying Agent, Registrar or such other agent.

     Section 6.09 Corporate Trustee Required; Eligibility. If the Indenture is
qualified under the Trust Indenture Act, there shall at all times be a Trustee
which shall be eligible to act as a trustee under Section 310(a) of the Trust
Indenture Act and shall meet the Eligibility Requirements. If such corporation
publishes reports of conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section 6.09, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of conditions so
published.

     In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 6.09 to act as Trustee, the Trustee shall
resign immediately as Trustee in the manner and with the effect specified in
Section 7.01 hereof.

     Section 6.10 Disqualification of Trustee. The Trustee shall be subject to
the provisions of Section 310(b) of the Trust Indenture Act during the period of
time provided for therein. If the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
Nothing herein shall prevent the Trustee from filing with the Commission the
application referred to in the second to last paragraph of Section 310(b) of the
Trust Indenture Act.

     Section 6.11 Preferential Collection of Claims Against Issuer. The Trustee
shall comply with Section 311(a) of the Trust Indenture Act, excluding any
creditor relationship listed in Section 311(b) of the Trust Indenture Act. A
Trustee who has resigned or been removed shall be subject to Section 311(a) of
the Trust Indenture Act to the extent indicated therein.

     Section 6.12 Reports by the Issuer. (a) The Issuer shall furnish to the
Trustee, within 120 days after the end of each fiscal year ending December 31, a
brief certificate from the principal executive officer, principal accounting
officer or principal financial officer of the Administrative Agent, as
applicable, as to his or her knowledge of the Issuer's compliance with all
conditions and covenants under this Indenture (it being understood that for
purposes of this Section 6.12, such compliance shall be determined without
regard to any period of grace or requirement of notice provided under this
Indenture).



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          (b) The Issuer shall furnish to the Trustee and the Policy Provider
within 30 days after the end of each calendar quarter a certification as to
compliance with certain of its obligations hereunder and certain other matters
in the form set forth in Exhibit G hereto.

     Section 6.13 Holder Lists. The Issuer will furnish or cause to be furnished
to the Trustee with respect to the Securities of each class:

          (a) semi-annually, not later than 15 days after such semi-annual dates
as may be specified by the Trustee, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Regular
Record Date or semi-annual date, as the case may be, and

          (b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Issuer of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, excluding from any such list names and addresses received by the
Trustee in its capacity as Registrar.

     Section 6.14 Preservation of Information; Communications to Holders. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list furnished
to the Trustee as provided in Section 6.13 hereof and the names and addresses of
Holders received by the Trustee in its capacity as Registrar. The Trustee may
destroy any list furnished to it as provided in Section 6.13 hereof upon receipt
of a new list so furnished.

          (b) If three or more Holders of Securities of any series (hereinafter
referred to as "applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Security of such
series for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other Holders of Securities of such series or with the Holders
of all Securities with respect to their rights under this Indenture or under
such Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall,
within five Business Days after the receipt of such application, at its
election, either

          (i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 6.14(a) hereof, or

          (ii) inform such applicants as to the approximate number of Holders of
Securities of such series or all Securities, as the case may be, whose names and
addresses appear in the information preserved at the time by the Trustee in
accordance with Section 6.14(a) hereof, and as to the approximate cost of
mailing to such Holders the form of proxy or other communication, if any,
specified in such application.

          If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of a Security



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of such series or to all Holders, as the case may be, whose names and addresses
appear in the information preserved at the time by the Trustee in accordance
with Section 6.14(a) hereof, a copy of the form of proxy or other communication
which is specified in such request, with reasonable promptness after a tender to
the Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses in connection with such mailing.

          (c) Every Holder of Securities, by receiving and holding the same,
agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee
shall be held accountable by reason of the disclosure of any such information as
to the names and addresses of the Holders in accordance with Section 6.14(b)
hereof, regardless of the source from which such information was derived, and
that the Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under Section 6.14(b) hereof.

                                   ARTICLE VII

                               SUCCESSOR TRUSTEES

     Section 7.01 Resignation and Removal of Trustee. The Trustee may resign as
to all or any of the subclasses of the Securities at any time without cause by
giving at least 90 days' prior written notice to the Issuer, the Guarantor, the
Policy Provider, the Initial Credit Facility Provider, the Administrative Agent,
the Cash Manager, the Remarketing Servicers, the Back-Up Remarketing Servicer
and the Holders, such resignation to be effective only upon acceptance of any
appointment of a replacement trustee by a Senior Trustee. Holders of a majority
of the Outstanding Principal Balance of any subclass of the Securities (or, with
respect to the Subclass A-1 Securities or any other subclass of Covered Class A
Securities, the Policy Provider or, so long as it is entitled to be a
Controlling Party, the Initial Credit Facility Provider) may at any time remove
the Trustee as to such subclass without cause by an instrument in writing
delivered to the Issuer, the Guarantor, the Guarantor Trustee, the
Administrative Agent, the Cash Manager, the Remarketing Servicers, the Back-Up
Remarketing Servicer, the Security Trustee, the Senior Trustee and the Trustee
being removed, such removal to be effective only upon the acceptance of the
appointment by a successor Trustee. In addition, the Issuer may remove the
Trustee as to any of the subclasses of the Securities if: (i) this Indenture has
been qualified under Trust Indenture Act and such Trustee fails to comply with
Section 310 of the TIA after written request therefor by the Issuer or the
Holder of the related subclass who has been a bona fide Holder for at least six
months, (ii) such Trustee fails to comply with Section 7.02(c) hereof, (iii)
such Trustee is adjudged a bankrupt or an insolvent, (iv) a receiver or public
officer takes charge of such Trustee or its property or (v) such Trustee becomes
incapable of acting, such removal to be effective only upon the acceptance of
the appointment by a successor Trustee. References to the Trustee in this
Indenture include any successor Trustee as to all or any of the subclasses of
the Securities appointed in accordance with this Article VII.

     Section 7.02 Appointment of Successor. (a) In the case of the resignation
or removal of the Trustee as to any subclass of the Securities under Section
7.01 hereof, the Issuer shall promptly appoint a successor Trustee as to such
subclass; provided that a majority of the Outstanding Principal Balance of such
subclass of the Securities may appoint, within one year



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after such resignation or removal, a successor Trustee as to such subclass which
may be other than the successor Trustee appointed by the Issuer, and such
successor Trustee appointed by the Issuer shall be superseded by the successor
Trustee so appointed by the Holders. If a successor Trustee as to any subclass
of the Securities shall not have been appointed and accepted its appointment
hereunder within 60 days after the Trustee gives notice of resignation as to
such subclass, the retiring Trustee, the Issuer, the Administrative Agent, the
Cash Manager, the Bermudian Remarketing Servicer, the Policy Provider, the
Initial Credit Facility Provider or a majority of the Outstanding Principal
Balance of such subclass of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee as to such subclass. Any
successor Trustee so appointed by such court shall immediately and without
further act be superseded by any successor Trustee appointed as provided in the
first sentence of this paragraph within one year from the date of the
appointment by such court.

          (b) Any successor Trustee as to any subclass of the Securities,
however appointed, shall execute and deliver to the Issuer, the Guarantor, the
Guarantor Trustee, the Administrative Agent, the Cash Manager, the Bermudian
Remarketing Servicer, the Back-Up Remarketing Servicer, the Policy Provider, the
Initial Credit Facility Provider and the predecessor Trustee as to such subclass
an instrument accepting such appointment, and thereupon such successor Trustee,
without further act, shall become vested with all the estates, properties,
rights, powers, duties and trusts of such predecessor Trustee hereunder in the
trusts hereunder applicable to it with like effect as if originally named the
Trustee as to such subclass herein; provided that, upon the written request of
such successor Trustee, such predecessor Trustee shall, upon payment of all
amounts due and owing to it, execute and deliver an instrument transferring to
such successor Trustee, upon the trusts herein expressed applicable to it, all
the estates, properties, rights, powers and trusts of such predecessor Trustee,
and such predecessor Trustee shall duly assign, transfer, deliver and pay over
to such successor Trustee all moneys or other property then held by such
predecessor Trustee hereunder solely for the benefit of such subclass of the
Securities.

          (c) If a successor Trustee is appointed with respect to one or more
(but not all) subclasses of the Securities, the Issuer, the predecessor Trustee
and each successor Trustee with respect to each subclass of Securities shall
execute and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
subclasses of Securities as to which the predecessor Trustee is not retiring
shall continue to be vested in the predecessor Trustee, and shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the Securities hereunder by more than
one Trustee.

          (d) Each Trustee shall be an Eligible Institution and shall meet the
Eligibility Requirements, if there be such an institution willing, able and
legally qualified to perform the duties of a Trustee hereunder; provided that
the Rating Agencies shall receive notice of any replacement Trustee.

          (e) Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation to which substantially all



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the business of the Trustee may be transferred, shall, subject to the terms of
paragraph (c) of this Section 7.02, be the Trustee under this Indenture without
further act.

                                  ARTICLE VIII

                                    INDEMNITY

     Section 8.01 Indemnity. The Issuer shall indemnify each of the Trustee and
the Drawing Agent (and its officers, directors, employees and agents) for, and
hold it harmless against, any loss, liability or expense Incurred by it without
negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture, the
Securities and the other Related Documents, including the costs and expenses of
defending itself against any claim or liability and of complying with any
process served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties and hold it harmless against, any
loss, liability or reasonable expense Incurred without negligence or bad faith
on its part, arising out of or in connection with actions taken or omitted to be
taken in reliance on any Officer's Certificate furnished hereunder, or the
failure to furnish any such Officers' Certificate required to be furnished
hereunder. Each of the Trustee and the Drawing Agent shall notify the Issuer,
the Guarantor, the Policy Provider and the Initial Credit Facility Provider
promptly of any claim asserted against the Trustee or the Drawing Agent, as
applicable, for which it may seek indemnity; provided, however, that failure to
provide such notice shall not invalidate any right to indemnity hereunder. The
Issuer shall defend the claim and the Trustee or the Drawing Agent, as
applicable, shall cooperate in the defense. The Trustee and the Drawing Agent
may have separate counsel and the Issuer shall pay reasonable fees and expenses
of such counsel. The Issuer need not pay for any settlements made without its
consent; provided that such consent shall not be unreasonably withheld or
delayed. The Issuer need not reimburse any expense or indemnity against any loss
or liability Incurred by the Trustee or the Drawing Agent, as applicable,
through negligence or bad faith. The provisions of this Section 8.01 and Section
8.02 hereof shall survive the termination of this Indenture or the earlier
resignation or removal of the Trustee or the Drawing Agent, as applicable.

     Section 8.02 Holders' Indemnity. Each of the Trustee and the Drawing Agent
shall be entitled to be indemnified (except with respect to losses, damages or
obligations arising from the Trustee's or Drawing Agent's, as applicable,
negligence or bad faith) by the Holders of any subclass of the Securities before
proceeding to exercise any right or power under this Indenture or the Cash
Management Agreement at the request or direction of such Holders (the basis of
any loss, damage or obligation, if in respect of any third party liability,
shall be supported by an Opinion of Counsel).

                                   ARTICLE IX

                                  MODIFICATION

     Section 9.01 Modification with Consent of Holders and the Policy Provider.
With the consent of Holders of a majority of the Outstanding Principal Balance
of the Class A Securities on the date of any vote of such Holders (voting as a
single class), the Policy Provider and the Initial Credit Facility Provider and
upon receipt of a Rating Agency Confirmation, the Issuer,



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when authorized by one or more Board Resolutions, may amend or modify this
Indenture or the Securities; provided that (i) without the consent of the
Guarantor and the Policy Provider, no such amendment may modify the provisions
of this Indenture to the extent that such amendment could reasonably be expected
to have a material adverse affect on the Guarantor and (ii) without the consent
of the Policy Provider, each provider of an Eligible Credit Facility, the
Guarantor and each Holder of any Securities, in each instance affected thereby,
no such amendment may, except as otherwise provided in Section 3.11 hereof,
modify the provisions of this Indenture or the Securities setting forth the
frequency or the currency of payment of, the maturity of, or the method of
calculation of the amount of, any interest, principal, Redemption Price or
Policy Premium payable in respect of any subclass of Securities or to the Policy
Provider, or reduce the percentage of the aggregate Outstanding Principal
Balance of any subclass of Securities required to approve any amendment or
waiver of this Section 9.01 or, except as otherwise provided in Section 3.09
hereof, alter the manner or priority of payment of such subclass of Securities
(each, a "Basic Terms Modification").

          It shall not be necessary for the consent of the Holders under this
Section 9.01 to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof;
provided, however, that it shall be necessary for the Policy Provider to approve
the particular form of any proposed amendment or waiver (such approval not to be
unreasonably withheld). Any such modification approved by the required Holders
of any class or subclass of Securities will be binding on the Holders of the
relevant class or subclass of Securities and each party to this Indenture.

          The Issuer shall give the Policy Provider, each provider of an
Eligible Credit Facility and each Rating Agency prior notice of any amendment
under this Section 9.01 and any amendments of the constitutive documents by the
Issuer or any ACS Group Subsidiaries, and, after an amendment under this Section
9.01 becomes effective, the Issuer shall mail to the Holders, the Policy
Provider, each provider of an Eligible Credit Facility and the Rating Agencies a
notice briefly describing such amendment. Any failure of the Issuer to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amendment.

          After an amendment under this Section 9.01 becomes effective, it shall
bind every Holder whether or not notation thereof is made on any Security held
by such Holder.

     Section 9.02 Modification Without Consent of Holders or the Providers of
Eligible Credit Facilities or the Policy Provider. Subject to Section 9.01
hereof, the Trustee may agree with the Issuer, without the consent of any
Holder, the Policy Provider or any provider of an Eligible Credit Facility (but
in the case of clauses (b), (c) and (d) below, with the consent of the Policy
Provider and further, in the case of clause (c) below, with the consent of the
Initial Credit Facility Provider), (a) to any modification (other than a Basic
Terms Modification) of, or the waiver or authorization of any breach or
prospective breach of, any provision of any Related Document or of the relevant
subclass of Securities to correct a manifest error or an error which is of a
formal, minor or technical nature, (b) to modify the provisions of this
Indenture or the Cash Management Agreement relating to the timing of movement of
Rental Payments or other monies received or Expenses Incurred among the Accounts
by the Cash Manager, (c) to add or reflect any Eligible Credit Facility, (d) to
any amendment (other than a Basic Terms Modification) of an



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immaterial nature necessary to facilitate the issuance of Refinancing Securities
and/or Additional Securities and related acquisition of Additional Aircraft (all
in a manner consistent with the provisions of this Indenture) or (e) to comply
with the requirements of the Commission in connection with the qualification of
this Indenture under the TIA. Any such modification shall be notified to the
Holders as soon as practicable thereafter and shall be binding on all the
Holders.

          Upon any such modification, the Issuer shall deliver to the Holders,
the Trustee, the Policy Provider and the Initial Credit Facility Provider a
certificate of the Issuer certifying that such modification will not adversely
affect the Holders, the Policy Provider or the Initial Credit Facility Provider.

     Section 9.03 Subordination and Priority of Payments. The subordination
provisions contained in Section 3.08, Section 3.09 and Article X hereof may not
be amended or modified without the consent of the Policy Provider (so long as
any subclass of Covered Class A Securities remain outstanding or any Policy
Provider Obligations remain due and owing), each provider of an Eligible Credit
Facility, each Hedge Provider, each Holder of the subclass of Securities
affected thereby and each Holder of any subclass of Securities ranking senior
thereto. In no event shall the provisions set forth in Section 3.08 hereof
relating to the priority of the Expenses, Hedge Payments and payments under all
Eligible Credit Facilities be amended or modified.

     Section 9.04 Execution of Amendments by Trustee. In executing, or accepting
the additional trusts created by, any amendment or modification to this
Indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties,
immunities or indemnities under this Indenture or otherwise.

     Section 9.05 Conformity with Trust Indenture Act. Every indenture
supplemental hereto pursuant to this Article IX shall conform to the
requirements of the Trust Indenture Act as then in effect.

                                    ARTICLE X

                                  SUBORDINATION

     Section 10.01 Subordination of the Securities and Other Subordinated
Obligations. (a) The Issuer, each Holder (by its acceptance of its Security) and
each other Secured Party (by its acceptance of the benefits of the Security
Trust Agreement) agree that (i) the Securities and the other Obligations shall
be subject to the provisions of this Article X and, in the case of the Secured
Obligations, to the provisions of Article VII of the Security Trust Agreement
and (ii) each Subordinated Claimant (and each Subordinated Representative of any
thereof) agree for the benefit of each Senior Claimant (and the Controlling
Party and the Trustee acting therefor) that each Subordinated Claim shall be
subordinated fully in right of payment to each Senior



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Claim as provided in Section 3.08 hereof, Section 3.09 hereof (if applicable),
this Article X and Article VII of the Security Trust Agreement.

          (b) For the purposes of this Agreement, no Senior Claims shall be
deemed to have been paid in full until and unless the Senior Claimant (or the
Trustee therefor) of such Senior Claims shall have received payment in full in
cash of such Senior Claims.

          (c) All payments or distributions upon or with respect to any
Obligations that are received by any Subordinated Claimant (or any Subordinated
Representative thereof) contrary to the provisions of this Indenture or in
excess of the amounts to which such Subordinated Claimant is entitled under
Section 3.08 hereof shall be received for the benefit of the Senior Claimant,
shall be segregated from other funds and property held by such Subordinated
Claimant (or any Subordinated Representative therefor) and shall be forthwith
paid over to the Trustee in the same form as so received (with any necessary
endorsement) to be applied (in the case of cash) to or held as collateral (in
the case of non-cash property or securities) for the payment or prepayment of
the Senior Claims in accordance with the terms hereof.

          (d) Notwithstanding anything contained herein to the contrary,
payments (or the proceeds thereof) (i) deposited in any Cash Collateral Account
or drawn under any Eligible Credit Facility, (ii) drawn under the Policy or
(iii) deposited in the Defeasance/Redemption Account (or, in the case of a
Refinancing, the Refinancing Account) in respect of a Redemption under Section
3.10 hereof or in respect of the defeasance of Securities pursuant to Article
XII hereof shall not be subordinated to the prior payment of any Senior
Claimants in respect of any Senior Claims or subject to any other restrictions
set forth in this Article X and Article VII of the Security Trust Agreement, and
none of the Holders shall be obligated to pay over any payments from any such
property to the Security Trustee or any other creditor of any of the Grantors
(as defined in the Security Trust Agreement).

          (e) The Senior Representative is hereby authorized to demand specific
performance of the provisions of this Article X at any time when any
Subordinated Claimant (or any Subordinated Representative thereof) shall have
failed to comply with any of such provisions applicable to them. The
Subordinated Claimants (and each Subordinated Representative of any thereof)
hereby irrevocably waive any defense based on the adequacy of a remedy at law
that might be asserted as a bar to such remedy of specific performance.

     Section 10.02 Rights of Subrogation. The Subordinated Claimants (and each
Subordinated Representative of any thereof) agree that no payment or
distribution to any Senior Claimant (or the Trustee therefor) pursuant to the
provisions of this Indenture shall entitle any Subordinated Claimant (or any
Subordinated Representative thereof) to exercise any rights of subrogation in
respect thereof until all Obligations constituting Senior Claims with respect to
such Person shall have been paid in full.

     Section 10.03 Further Assurances of Subordinated Representatives. Each of
the Subordinated Representatives shall, at the expense of the Issuer, at any
time and from time to time promptly execute and deliver all further instruments
and documents, and take all further action, that the Controlling Party (or the
Policy Provider if the Policy Provider is not the Controlling Party; provided
that if the Subordinated Representatives receive conflicting requests,



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the request of the Controlling Party shall apply only) may reasonably request,
in order to effectuate the provisions of this Article X.

     Section 10.04 Enforcement. Each Subordinated Claimant (and the Subordinated
Representative therefor) agrees that the provisions of this Article X shall be
enforceable against it under all circumstances, including without limitation in
any proceeding referred to in Sections 4.01(e) and 4.01(f) hereof.

     Section 10.05 Continued Effectiveness. The provisions of this Article X
shall continue to be effective or shall be revived or reinstated, as the case
may be, if at any time any payment of any of the Senior Claims is rescinded or
must otherwise be returned by any Senior Claimant upon the insolvency,
bankruptcy or reorganization of any ACS Bermuda Group Member, or otherwise, all
as though such payment had not been made.

     Section 10.06 Senior Claims and Subordinated Claims Unimpaired. Nothing in
this Article X shall impair, as between the Issuer and any Senior Claimant or
any Subordinated Claimant, the obligations of the Issuer to such Person,
including without limitation the Senior Claims and the Subordinated Claims;
provided that it is understood that the enforcement of rights and remedies shall
be subject to the terms of this Indenture and the Security Trust Agreement.

     Section 10.07 Ranking of the Guarantee. The Guarantor's Guarantee of the
Securities (the "Guarantee") shall rank pari passu with its obligation to make
payments on or otherwise perform in accordance with the terms of the Guarantor
Class A Securities.

                                   ARTICLE XI

                                    GUARANTEE

     Section 11.01 Guarantee. The Guarantor hereby fully and unconditionally
guarantees to each Holder of Securities, the Trustee on behalf of such Holder,
each Service Provider, the Policy Provider, the Initial Credit Facility
Provider, any Hedge Provider and each other Secured Party (each, a "Guaranteed
Party" and, collectively, the "Guaranteed Parties"), in each case, the due and
punctual performance of all obligations of the Issuer to each Guaranteed Party
under the Securities, this Indenture and the Related Documents (the "Guaranteed
Obligations"), all in accordance with this Indenture, the Securities and the
other Related Documents. The liability of the Guarantor under this Guarantee is
limited to the maximum amount that will result in the obligations of the
Guarantor not constituting a fraudulent conveyance or fraudulent transfer under
Applicable Law.

          This Guarantee shall be a Guarantee of payment and performance and not
merely of collection only. The Guarantor hereby agrees that it shall not be
required that any Guaranteed Party assert or enforce any rights against the
Issuer or any other person before or as a condition to the obligation of the
Guarantor subject to this Guarantee.

          The Guarantor hereby waives diligence, presentment, filing of claims
with a court in the event of merger or bankruptcy of the Issuer or any other ACS
Bermuda Group Member, any right to require a proceeding first against the Issuer
or any other ACS Bermuda Group Member, the benefit of discussion, protest or
notice with respect to any Security or the debt



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evidenced thereby and all demands whatsoever (except as specified above), and
covenants that this Article XI shall not be discharged as to any such Security
except by payment in full of the Guaranteed Obligations. The maturity of the
Securities and related obligations guaranteed hereby may be accelerated as
provided in Article IV for the purposes of this Article XI. In the event of any
declaration of acceleration of such obligations as provided in Article IV of
this Indenture, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantor for the purpose of this
Article XI. In addition, without limiting the foregoing provisions, upon the
effectiveness of an acceleration under Article IV of this Indenture, the Trustee
shall be entitled to make a demand for payment on the Securities under the
Guarantee provided for in this Article XI.

          The Guarantor hereby waives any claim or other claim or other rights
which it may now or hereafter acquire against the Issuer or any other ACS
Bermuda Group Member that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution, indemnification, any right to participate in any claim or remedy
of a Guaranteed Party against the Issuer or any other ACS Bermuda Group Member,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Issuer or any other ACS Bermuda Group Member, directly or
indirectly, in cash or other property or in any other manner, payment or
security on account of such claim or other rights, until all of the Guarantor's
obligations under this Indenture have been satisfied. If any amount shall be
paid to the Guarantor in violation of the preceding sentence and the Guaranteed
Obligations shall not have been paid in full, such amount shall be deemed to
have been paid to the Guarantor for the benefit of, and held in trust for the
benefit of, such Guaranteed Party, and shall forthwith be paid to such
Guaranteed Party. The Guarantor acknowledges that it will receive direct and
indirect benefits from the issuance of the Securities pursuant to this Indenture
and that the waiver set forth in this paragraph is knowingly made in
contemplation of such benefits.

          Any right which at any time the Guarantor has under the existing or
future laws of Ireland and Bermuda to require that recourse be had to the assets
of the Issuer or any other ACS Ireland Group Member before any claim is enforced
against the Guarantor in respect of the obligations hereby assumed by the
Guarantor, is hereby abandoned and waived and the Guarantor undertakes that if
at any time any Guaranteed Party sues the Guarantor in respect of any such
obligations and the Issuer or any other ACS Bermuda Group Member is not sued
also, the Guarantor shall not claim that the Issuer or any other ACS Bermuda
Group Member be made a party to the proceedings and the Guarantor agrees to be
bound by this guarantee whether or not the Guarantor is made party to legal
proceedings for the recovery of the amount due or owing to such Guaranteed Party
as aforesaid by the Issuer and whether the formalities required by any law of
Bermuda whether existing or future in regard to the rights or obligations of
sureties shall or shall not have been observed.

          Any right which the Guarantor may have under the existing or future
laws of Ireland and Bermuda to require that any liability under this Guarantee
be divided or apportioned with any other person or reduced in any manner
whatsoever is hereby abandoned and waived.



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          The Guarantee set forth in this Section 11.01 shall not be valid or
become obligatory for any purpose with respect to the Guaranteed Obligations
until the execution of this Indenture or, with respect to a Security, until the
certificate of authentication on such Security shall have been signed by or on
behalf of the Trustee. The Guarantees given by the Guarantor to the Guaranteed
Parties pursuant to this Section 11.01 are, for purposes of this Article XI,
hereinafter referred to as the "Guarantee".

     Section 11.02 Reinstatement. The Guarantor hereby agrees that the guarantee
provided for in Section 11.01 hereof shall continue to be effective or be
reinstated, as the case may be, if at any time, payment, or any part thereof, of
any obligations guaranteed or interest thereon is rescinded or must otherwise be
restored by a Guaranteed Party to the Issuer upon the bankruptcy, reorganization
or insolvency of the Issuer or the Guarantor or otherwise.

     Section 11.03 Unconditional Nature of Guarantee. The Guarantor hereby
agrees that its obligations under the Guarantee shall be irrevocable and
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture or any other Related Document against the Issuer or
any other ACS Bermuda Group Member, the absence of any action to enforce the
Issuer's or any other ACS Bermuda Group Member's obligations under the
Securities, this Indenture or any other Related Document, any waiver or consent
by a Holder with respect to any provisions thereof or any provisions of this
Indenture and the Related Documents, any amendment to the terms under which the
Securities are issued, any release of collateral related to the Securities or
the Issuer's or any other ACS Bermuda Group Member's obligations under this
Indenture or any other Related Document, the bankruptcy of the Issuer or any
other ACS Bermuda Group Member or any circumstance with might otherwise
constitute a legal or equitable discharge or defense of a guarantor; provided,
however, that the Guarantor shall be entitled to exercise any right that the
Issuer could have exercised under this Indenture to cure any default in respect
of its obligations under this Indenture or the Securities, if any, but only to
the extent such right, if any, is provided to the Issuer under this Indenture or
the Securities.

          The Guarantor hereby waives each of the following to the fullest
extent of the law: (i) all statutes of limitation as a defense to any action
brought by any party against the Guarantor in connection with this Guarantee,
(ii) any defense based upon (a) the lack of perfection or failure of priority of
any security for the Guaranteed Obligations; (b) any act or omission of any
Guaranteed Party that directly or indirectly results in the discharge or release
of any Issuer or any other Person, or any of the obligations subject to this
Guarantee or any security therefor; or (c) any other defense of the Issuer or
any other Person with respect to the Guaranteed Obligations, whether consensual
or arising by operation of law or any bankruptcy, insolvency or debtor-relief
proceeding, or from any other cause, (iii) any right (whether now or hereafter
existing) to require any Guaranteed Party, as a condition to the enforcement of
this Guarantee, to (a) accelerate the Issuer's obligations, (b) give notice to
the Guarantor of the terms, time and place of any public or private sale of any
security for the Guaranteed Obligations; or (c) exhaust any security for the
Guaranteed Obligations, (iv) any right to presentment, demand, protest and
notice of any kind, including, without limitation, notices of default and
notices of acceptance of this Guarantee, (v) all suretyship defenses and rights
of every nature otherwise available under New York law and the laws of any other
jurisdiction, and (vi) all other rights and defenses, the



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assertion or exercise of which would in any way diminish the liability of the
Guarantor hereunder.

                                   ARTICLE XII

                       DISCHARGE OF INDENTURE; DEFEASANCE

     Section 12.01 Discharge of Liability on the Securities; Defeasance. (a)
When (i) the Issuer delivers to the Trustee all Outstanding Securities (other
than Securities replaced pursuant to Section 2.08 hereof) for cancellation or
(ii) all Outstanding Securities have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Section
3.10(c) hereof and the Issuer irrevocably deposits in the Defeasance/Redemption
Account funds sufficient to pay at maturity or upon redemption all Outstanding
Securities, including without limitation interest thereon to maturity or the
Redemption Date (other than Securities replaced pursuant to Section 2.08 hereof
and any Required Expense Amount), and if in either case the Issuer pays all
other sums payable hereunder by the Issuer (including any Hedge Breakage Costs
resulting from the discharge of this Indenture), then this Indenture shall,
subject to Section 12.01(c) hereof, cease to be of further effect. The Trustee
shall acknowledge satisfaction and discharge of this Indenture on demand of the
Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, at the
cost and expense of the Issuer, to the effect that any conditions precedent to a
discharge of this Indenture have been met.

          (b) Subject to Sections 12.01(c) and 12.02 hereof, the Issuer at any
time may terminate (i) all its obligations under the Securities and this
Indenture ("Legal Defeasance" option) or (ii) its obligations under Sections
4.01 (other than with respect to a failure to comply with Sections 4.01(a),
4.01(b), 4.01(e) (only with respect to the Issuer) and 4.01(f) (only with
respect to the Issuer)), 5.02 and 5.03 hereof ("Covenant Defeasance" option).
The Issuer may exercise its Legal Defeasance option notwithstanding its prior
exercise of its Covenant Defeasance option.

          If the Issuer exercises its Legal Defeasance option, payment of any
Securities subject to such Legal Defeasance may not be accelerated because of an
Event of Default. If the Issuer exercises its Covenant Defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
(other than with respect to a failure to comply with Sections 4.01(a), 4.01(b),
4.01(e) (other than with respect to the Issuer), 4.01(f) (other than with
respect to the Issuer)) and 5.02(n) hereof.

          Upon satisfaction of the conditions set forth herein and upon request
of the Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuer terminates.

          (c) Notwithstanding clauses (a) and (b) above, the Issuer's
obligations in Sections 2.01, 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08 and 2.09,
5.02(n), Article VI, Sections 8.01, 12.04, 12.05 and 12.06 hereof shall survive
until all the Securities have been paid in full. Thereafter, the Issuer's
obligations in Sections 8.01, 12.04 and 12.05 hereof shall survive.



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     Section 12.02 Conditions to Defeasance. The Issuer may exercise its Legal
Defeasance option or its Covenant Defeasance option only if:

          (a) the Issuer irrevocably deposits in trust in the
Defeasance/Redemption Account any one or any combination of (i) money, (ii)
obligations of, and supported by the full faith and credit of, the U.S.
Government ("U.S. Government Obligations") or (iii) obligations of corporate
issuers ("Corporate Obligations") (provided that any such Corporate Obligations
are rated AA+ or higher by Standard & Poor's and Aa2 or higher by Moody's at
such time and shall not have a maturity of longer than three years from the date
of defeasance) for the payment of all principal or Redemption Price, and
interest (A) on the Securities or any class or subclass of Securities being
defeased, in the case of Legal Defeasance, or (B) on all of the Securities in
the case of Covenant Defeasance, in either case, to maturity or redemption, as
the case may be;

          (b) the Issuer delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations or the Corporate Obligations plus any
deposited money without investment will provide cash at such times and in such
amounts as will be sufficient to pay principal and interest when due (i) on each
class or subclass of Securities being defeased, in the case of Legal Defeasance,
or (ii) on all of the Securities in the case of Covenant Defeasance, in either
case, to maturity or redemption, as the case may be;

          (c) 91 days pass after the deposit described in clause (a) above is
made and during the 91-day period no Event of Default specified in Section
4.01(e) or (f) hereof with respect to the Issuer occurs which is continuing at
the end of the period;

          (d) the deposit described in clause (a) above does not constitute a
default under any other agreement binding on the Issuer;

          (e) the Issuer delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit described in clause (a) does
not constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940, as amended;

          (f) in the case of the Legal Defeasance option, the Issuer shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Issuer has
received from, or there has been published by, the U.S. Internal Revenue Service
a ruling, or (ii) since the date of this Indenture there has been a change in
the applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that the Holders will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;

          (g) in the case of the Covenant Defeasance option, the Issuer shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such Covenant Defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Covenant Defeasance had not occurred;



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          (h) if the related Securities are then listed on any securities
exchange, the Issuer delivers to the Trustee an Opinion of Counsel to the effect
that such deposit, defeasance and discharge will not cause such Securities to be
delisted;

          (i) a Rating Agency Confirmation and the prior written consent of each
of the Policy Provider and the Initial Credit Facility Provider is obtained
relating to the defeasance contemplated by this Section 12.02;

          (j) in the case of a Legal Defeasance only, the Policy shall be
terminated and surrendered to the Policy Provider for cancellation;

          (k) all amounts due and owing to the Policy Provider and the Initial
Credit Facility Provider have been paid (or provided for under Section
12.02(a)); and

          (l) the Issuer delivers to the Trustee an Opinion of Counsel and an
Officer's Certificate that all conditions precedent to such defeasance has been
satisfied.

     Section 12.03 Application of Trust Money. The Trustee shall hold in trust
in the Defeasance/Redemption Account money, U.S. Government Obligations or
Corporate Obligations deposited with it pursuant to this Article XII. It shall
apply the deposited money and the money from U.S. Government Obligations or
Corporate Obligations in accordance with this Indenture to the payment of
principal, premium, if any, and interest on the class or subclass of Securities.
Money and securities so held in trust are not subject to Article X hereof or to
Article VII of the Security Trust Agreement.

     Section 12.04 Repayment to Issuer. The Trustee shall promptly turn over to
the Issuer upon written request any excess money or securities held by it at any
time after application of the appropriate defeasance option.

          Subject to any applicable abandoned property law, the Trustee shall
pay to the Issuer upon written request any money held by it for the payment of
principal or interest that remains unclaimed for two years and, thereafter,
Holders entitled to the money must look to the Issuer for payment as general
creditors.

     Section 12.05 Indemnity for Government Obligations and Corporate
Obligations. The Issuer shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or Corporate Obligations, or the principal and interest
received on such U.S. Government Obligations or Corporate Obligations, which has
been remitted by the Trustee to the U.S. government or any taxing authority.

     Section 12.06 Reinstatement. If the Trustee is unable to apply any money or
U.S. Government Obligations or Corporate Obligations in accordance with this
Article XII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuer's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article XII until such time as the Trustee
is permitted to apply all such money, U.S. Government Obligations or Corporate
Obligations in accordance with this Article XII; provided, however, that, if the
Issuer has made any payment of interest on or



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principal of any Securities because of the reinstatement of its obligations, the
Issuer shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money, U.S. Government Obligations or Corporate
Obligations held by the Trustee.

                                  ARTICLE XIII

                                  MISCELLANEOUS

     Section 13.01 Right of Trustee to Perform. If the Issuer for any reason
fails to observe or punctually to perform any of its obligations to the Trustee,
whether under this Indenture or any of the other Related Documents or otherwise,
the Trustee shall have power (but shall have no obligation), on behalf of or in
the name of the Issuer or otherwise, to perform such obligations and to take any
steps which the Trustee may, in its absolute discretion, consider appropriate
with a view to remedying, or mitigating the consequences of, such failure by the
Issuer; provided that no exercise or failure to exercise this power by the
Trustee shall in any way prejudice the Trustee's other rights under this
Indenture or any of the other Related Documents.

     Section 13.02 Waiver. Any waiver by any party of any provision of this
Indenture or any right, remedy or option hereunder shall only prevent and estop
such party from thereafter enforcing such provision, right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances, or in a course of dealing,
upon the strict performance of any of the terms or provisions of this Indenture
by any party hereto or the partial exercise of any right, remedy or option
hereunder shall not be construed as a waiver or relinquishment of any such term
or provision, but the same shall continue in full force and effect. No failure
on the part of the Trustee to exercise, and no delay on its part in exercising,
any right or remedy under this Indenture will operate as a waiver thereof, nor
will any single or partial exercise of any right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy. The
rights and remedies provided in this Indenture are cumulative and not exclusive
of any rights or remedies provided by law. The Trustee shall notify the Paying
Agent promptly of any waiver by any party of any provision of this Indenture
pursuant to this Section 13.02.

     Section 13.03 Severability. In the event that any provision of this
Indenture or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Indenture shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable and the remainder of this Indenture, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of this Indenture. The parties hereto further agree
that the holding by any court of competent jurisdiction that any remedy pursued
by the Trustee hereunder is unavailable or unenforceable shall not affect in any
way the ability of the Trustee to pursue any other remedy available to it.

     Section 13.04 Restrictions on Exercise of Certain Rights. (a) The Trustee
and, during the continuance of a payment Default with respect to the Senior
Class, the Senior Trustee, in its



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capacity as trustee of such class and except as otherwise provided in Section
4.04 hereof, may sue for recovery or take any other steps for the purpose of
recovering any of the obligations hereunder or any other debts or liabilities
whatsoever owing to it by the Issuer. Each of the parties hereto and each Holder
by virtue of its acceptance of the Securities (other than the Trustee) hereby
agrees that it shall not take any steps for the purpose of procuring the
appointment of an administrative receiver, Irish law examiner, receiver or
similar officer or the making of an administration order or for instituting any
bankruptcy, reorganization, arrangement, insolvency, winding up, liquidation,
composition, examinership or any like proceedings under the laws of Bermuda.

          (b) If after the occurrence and continuance of an Event of Default,
the obligations of the Issuer in respect of the Securities and any other claims
of any Secured Party will be limited to the net proceeds of the disposal and/or
realization of the Collateral by the Security Trustee pursuant to the provisions
of the Indentures and the Security Trust Agreement, the Secured Parties shall
have no further claim against the Issuer in respect of such unpaid amounts and
will accordingly not have any right hereunder to be able to petition for the
winding up of the Issuer or to take any steps for the purpose of procuring the
appointment of an administrative receiver, Irish law examiner, receiver or
similar officer or the making of an administration order or for instituting any
bankruptcy, reorganization, arrangement, insolvency, winding up, liquidation,
composition, examinership or any like proceedings under the laws of Bermuda as a
consequence of such shortfall.

     Section 13.05 Notices. All notices, demands, certificates, requests,
directions, instructions and communications hereunder ("Notices") shall be in
writing and shall be effective (a) upon receipt when sent through the mails,
registered or certified mail, return receipt requested, postage prepaid, with
such receipt to be effective the date of delivery indicated on the return
receipt, or (b) one Business Day after delivery to an overnight courier, or (c)
on the date personally delivered to an authorized officer of the party to which
sent, or (d) on the date transmitted by legible telecopier transmission with a
confirmation of receipt, in all cases addressed to the recipient as follows:

     if to the Issuer, to:

               ACS Aircraft Finance Bermuda Limited
               Clarendon House
               2 Church Street
               Hamilton HM11
               Bermuda
               Attention: The Company Secretary
               Fax: +1 (441) 292-4720

               with a copy to:

               Aircastle Advisor LLC
               300 First Stamford Place, 5th Floor
               Stamford, CT 06902
               Attention: Lease Management



                                                                             149


               Fax: (203) 504-1021

     if to the Guarantor, to:

               ACS Aircraft Finance Ireland plc
               25/28 North Wall Quay
               International Financial Services Centre
               Dublin 1
               Ireland
               Attention: Secretary
               Fax: +353 (1) 649-2649

               with a copy to:

               Aircastle Advisor LLC
               300 First Stamford Place, 5th Floor
               Stamford, CT 06902
               Attention: Lease Management
               Fax: (203) 504-1021

     if to the Administrative Agent, to:

               Aircastle Advisor LLC
               300 First Stamford Place, 5th Floor
               Stamford, CT 06902
               Attention: Lease Management
               Fax: (203) 504-1021

     if to the Bermudian Remarketing Servicer, to:

               Aircastle Advisor LLC
               300 First Stamford Place, 5th Floor
               Stamford, CT 06902
               Attention: Lease Management
               Fax: (203) 504-1021

     if to the Irish Remarketing Servicer, to:

               Aircastle Advisor (Ireland) Limited
               Harcourt Centre
               Harcourt Road
               Dublin 2
               Ireland
               Attention: Lease Management



                                                                             150


               Fax: +353 (1) 477-3313

     if to the Cash Manager, to:

               Deutsche Bank Trust Company Americas
               60 Wall Street, 26th Floor
               New York, New York 10005
               Attn: Structured Finance Services/Trust & Securities Services
               Fax: (212) 553-2459

     with a copy to:

               Deutsche Bank International Limited
               Global Transaction Banking Trust and Securities Services
               Floor 4
               St. Paul's Gate
               New Street
               Jersey, Channel Islands
               Attn: The Directors, Deutsche International Corporate Services
                  Limited
               Fax: 00 44 1534 889884

     if to the Initial Credit Facility Provider, to:

               Calyon
               9, quai du President Paul Doumer
               92920 Paris la Defense cedex
               France
               Attn: Hassan Azoulary (Securitisation Group - Middle Office)
               Fax: +331 5787 1756

     if to the Trustee, the Registrar or the Paying Agent, to:

               Deutsche Bank Trust Company Americas
               60 Wall Street, 26th Floor
               New York, New York 10005
               Attn: Structured Finance Services/Trust & Securities Services
               Fax: (212) 553-2459

     if to the Policy Provider, to:

               Financial Guaranty Insurance Company
               125 Park Avenue
               New York, New York 10017
               Attention: Surveillance, Commercial Structured Finance
               Fax: (212) 312-3220



                                                                             151


     if to the Drawing Agent, to:

               Deutsche Bank Trust Company Americas
               60 Wall Street, 26th Floor
               New York, New York 10005
               Attn: Structured Finance Services/Trust & Securities Services
               Fax: (212) 553-2459

     A copy of each notice given hereunder to any party hereto shall also be
given to each of the other parties hereto. Each party hereto may, by notice
given in accordance herewith to each of the other parties hereto, designate any
further or different address to which subsequent Notices shall be sent.

     Section 13.06 Assignments; Third Party Beneficiary. This Indenture shall be
a continuing obligation of the Issuer and shall (i) be binding upon the Issuer
and its successors and assigns and (ii) inure to the benefit of and be
enforceable by the Trustee, and by its successors, transferees and assigns. The
Issuer may not assign any of its obligations under this Indenture, or delegate
any of its duties hereunder. Each Hedge Provider and each provider of an
Eligible Credit Facility shall be a third party beneficiary of this Indenture.

     Section 13.07 Currency Conversion. (a) If any amount is received or
recovered by the Cash Manager or the Trustee in respect of this Indenture or any
part thereof (whether as a result of the enforcement of the security created
under the Security Trust Agreement or pursuant to this Indenture or any judgment
or order of any court or in the liquidation or dissolution of the Issuer or by
way of damages for any breach of any obligation to make any payment under or in
respect of the Issuer's obligations hereunder or any part thereof or otherwise)
in a currency (the "Received Currency") other than the currency in which such
amount was expressed to be payable (the "Agreed Currency"), then the amount in
the Received Currency actually received or recovered by the Trustee or the Cash
Manager shall, to the fullest extent permitted by Applicable Law, only
constitute a discharge to the Issuer to the extent of the amount of the Agreed
Currency which the Cash Manager or the Trustee was or would have been able in
accordance with its normal procedures to purchase on the date of actual receipt
or recovery (or, if that is not practicable, on the next date on which it is so
practicable), and, if the amount of the Agreed Currency which the Cash Manager
or Trustee is or would have been so able to purchase is less than the amount of
the Agreed Currency which was originally payable by the Issuer, the Issuer shall
pay to the Cash Manager such amount as the Cash Manager shall determine to be
necessary to indemnify the Trustee and the Cash Manager against any Loss
sustained by it as a result (including the cost of making any such purchase and
any premiums, commissions or other charges paid or Incurred in connection
therewith) and so that such indemnity, to the fullest extent permitted by
Applicable Law, (i) shall constitute a separate and independent obligation of
the Issuer distinct from its obligation to discharge the amount which was
originally payable by the Issuer and (ii) shall give rise to a separate and
independent cause of action and apply irrespective of any indulgence granted by
the Cash Manager or the Trustee and continue in full force and effect
notwithstanding any judgment, order, claim or proof for a liquidated amount in
respect of



                                                                             152


the amount originally payable by the Issuer or any judgment or order and no
proof or evidence of any actual loss shall be required.

          (b) For the purpose of or pending the discharge of any of the moneys
and liabilities hereby secured the Cash Manager may convert any moneys received,
recovered or realized by the Cash Manager under this Indenture (including the
proceeds of any previous conversion under this Section 13.07) from their
existing currency of denomination into the currency of denomination (if
different) of such moneys and liabilities and any conversion from one currency
to another for the purposes of any of the foregoing shall be made at the
Trustee's then prevailing spot selling rate at its office by which such
conversion is made. If not otherwise required to be applied in the Received
Currency, the Cash Manager, acting on behalf of the Security Trustee, shall
promptly convert any moneys in such Received Currency other than U.S. dollars
into U.S. dollars. Each previous reference in this section to a currency extends
to funds of that currency and funds of one currency may be converted into
different funds of the same currency.

     Section 13.08 Application to Court. The Senior Trustee may at any time
after the service of a Default Notice apply to any court of competent
jurisdiction for an order that the terms of this Indenture be carried into
execution under the direction of such court and for the appointment of a
Receiver of the Collateral or any part thereof and for any other order in
relation to the administration of this Indenture as the Senior Trustee shall
deem fit and it may assent to or approve any application to any court of
competent jurisdiction made at the instigation of any of the Holders or the
Policy Provider and shall be indemnified by the Issuer against all costs,
charges and expenses Incurred by it in relation to any such application or
proceedings.

     Section 13.09 Governing Law. THIS INDENTURE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

     Section 13.10 Jurisdiction. (a) Each of the parties hereto agrees that the
United States federal and New York State courts located in The City of New York
shall have jurisdiction to hear and determine any suit, action or proceeding,
and to settle any disputes, which may arise out of or in connection with this
Indenture and, for such purposes, submits to the jurisdiction of such courts.
Each of the parties hereto waives any objection which it might now or hereafter
have to the United States federal or New York State courts located in The City
of New York being nominated as the forum to hear and determine any suit, action
or proceeding, and to settle any disputes, which may arise out of or in
connection with this Indenture and agrees not to claim that any such court is
not a convenient or appropriate forum. Each of the parties hereto (except for
the Cash Manager, the Trustee, the Drawing Agent, the Initial Credit Facility
Provider and the Policy Provider) agrees that the process by which any suit,
action or proceeding is begun may be served on it by being delivered in
connection with any suit, action or proceeding in The City of New York to
Corporation Service Company, with an office on the date hereof at 1133 Avenue of
the Americas, Suite 3100, New York, New York 10036 and each of the parties
hereby appoints Corporation Service Company, its designee, appointee and agent
to receive, accept and acknowledge for and on its behalf such service of legal
process, with the exception of the Trustee



                                                                             153


and the Policy Provider, who hereby consents to receive any such service of
process directly at the address set forth in Section 13.05 herein, and the
Initial Credit Facility Provider, who hereby consents to receive any such
service of process at Calyon Building, 1301 Avenue of the Americas, New York,
New York 10019.

          (b) The submission to the jurisdiction of the courts referred to in
Section 13.10(a) hereof shall not (and shall not be construed so as to) limit
the right of the Trustee to take proceedings against the Issuer in any other
court of competent jurisdiction nor shall the taking of proceedings in any one
or more jurisdictions preclude the taking of proceedings in any other
jurisdiction, whether concurrently or not.

          (c) Each of the parties hereto hereby consents generally in respect of
any legal action or proceeding arising out of or in connection with this
Indenture to the giving of any relief or the issue of any process in connection
with such action or proceeding, including the making, enforcement or execution
against any property whatsoever (irrespective of its use or intended use) of any
order or judgment which may be made or given in such action or proceeding.

     Section 13.11 Counterparts. This Indenture may be executed in two or more
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.

     Section 13.12 Table of Contents, Headings, Etc. The Table of Contents and
headings of the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms and provisions hereof.

     Section 13.13 Compliance with Applicable Anti-Terrorism and Anti-Money
Laundering Regulations. In order to comply with the laws, rules, regulations and
executive orders in effect from time to time applicable to banking institutions,
including those relating to the funding of terrorist activities and money
laundering (collectively, "Applicable Regulations"), the Trustee is required to
obtain, verify and record certain information relating to individuals and
entities which maintain a business relationship with the Trustee. Accordingly,
each of the parties agrees to provide to the Trustee upon its request from time
to time such identifying information and documentation as may be available for
such party in order to enable the Trustee to comply with such Applicable
Regulations.



          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.

                                 ACS AIRCRAFT FINANCE BERMUDA LIMITED, as
                                    the Issuer


                                 By /s/ Mark Schulte
                                    -------------------------------------
                                    Name:  Mark Schulte
                                    Title: Director



                                 SIGNED SEALED AND DELIVERED

                                 On behalf of ACS AIRCRAFT FINANCE IRELAND PLC,
                                    as the Guarantor

                                 by its duly appointed attorney


                                 By /s/ J.P. Clarkin
                                    -------------------------------------
                                    Name:  J.P. Clarkin
                                    Title: Director

                                 in the presence of:


                                 By /s/ Eoin Kealy
                                    -------------------------------------
                                    Name:  Eoin Kealy
                                    Title: Trainee Solicitor




                                 DEUTSCHE BANK TRUST COMPANY AMERICAS, as
                                    the Trustee


                                 By /s/ Eileen M. Hughes
                                    -------------------------------------
                                    Name:  Eileen M. Hughes
                                    Title: Vice President


                                 By /s/ Louis Bodi
                                    -------------------------------------
                                    Name:  Louis Bodi
                                    Title: Vice President

                                 DEUTSCHE BANK TRUST COMPANY AMERICAS,
                                    as the Cash Manager


                                 By /s/ Eileen M. Hughes
                                    -------------------------------------
                                    Name:  Eileen M. Hughes
                                    Title: Vice President


                                 By /s/ Louis Bodi
                                    -------------------------------------
                                    Name: Louis Bodi
                                    Title: Vice President


                                 DEUTSCHE BANK TRUST COMPANY AMERICAS, as
                                    the Drawing Agent


                                 By /s/ Eileen M. Hughes
                                    -------------------------------------
                                    Name:  Eileen M. Hughes
                                    Title: Vice President


                                 By /s/ Louis Bodi
                                    -------------------------------------
                                    Name:  Louis Bodi
                                    Title: Vice President




                                 CALYON, as the Initial Credit Facility Provider


                                 By /s/ Thierry Sebton
                                    -------------------------------------
                                    Name:  Thierry Sebton
                                    Title: M.D.


                                 By /s/ C. Champion
                                    -------------------------------------
                                    Name:  C. Champion
                                    Title: Executive Director




                                 FINANCIAL GUARANTY INSURANCE COMPANY,
                                    as the Policy Provider


                                 By /s/ Peter Cardinale
                                    -------------------------------------
                                    Name:  Peter Cardinale
                                    Title: Director






                                   SCHEDULE 1

                                INITIAL AIRCRAFT

Type of Aircraft   Manufacturer's Serial Number
----------------   ----------------------------
Airbus A320-200                  667
Airbus A319-100                 1160
Airbus A319-100                 1336
Airbus A319-100                 1388
Boeing 737-700                 29078
Boeing 767-300ER               25365
Boeing 737-400                 27001
Boeing 737-400                 27003
Boeing 737-800                 28381
Boeing 737-800                 28384
Boeing 737-300                 24672
Boeing 737-300                 24669
Boeing 737-300                 24671
Boeing 737-800                 28227
Airbus A330-200                  343
Airbus A320-200                  967
Boeing 737-300QC               23835
Boeing 737-300QC               23836
Boeing 737-300QC               23837
Boeing 737-300QC               24283
Boeing 737-800                 28056
Boeing 737-800                 28220
Boeing 767-300ER               25280
Airbus A320-200                  739
Airbus A320-200                  743
Boeing 767-300ER               28656
Boeing 737-500                 25001
Boeing 737-500                 25008
Boeing 737-500                 25009
Airbus A310-300F                 502
Boeing 737-400                 26280
Boeing 737-400                 25147
Boeing 737-400                 27094
Boeing 737-300                 23955
Boeing 737-300                 23956
Airbus A320-200                  758




                                                                               4




                                   SCHEDULE 2

                            ACS BERMUDA SUBSIDIARIES

Entity                                         Jurisdiction of Organization
------                                         ----------------------------
Aircraft MSN 28227 Trust                       Utah
Aircraft MSN 967 Trust                         Utah
Aircraft MSN 23955 Trust                       Utah
Aircraft MSN 23956 Trust                       Utah
Aircraft MSN 502 Trust                         Utah
Aircraft MSN 27001 Trust                       Utah
Aircraft MSN 27003 Trust                       Utah
Aircraft MSN 24669 Trust                       Utah
Aircraft MSN 24671 Trust                       Utah
Aircraft MSN 24672 Trust                       Utah
Aircraft MSN 25001 Trust                       Utah
Aircraft MSN 25008 Trust                       Utah
Aircraft MSN 25009 Trust                       Utah
Aircraft MSN 25280 Trust                       Utah
Aircraft MSN 758 Trust                         Utah
Aircraft MSN 25147 Trust                       Utah
Aircraft MSN 27094 Trust                       Utah
Aircraft MSN 343 Trust                         Utah
Aircraft MSN 23835 Trust                       Utah
Aircraft MSN 23836 Trust                       Utah




                                                                               5




Aircraft MSN 23837 Trust                       Utah
Aircraft MSN 24283 Trust                       Utah
Aircraft MSN 28056 Trust                       Utah
Aircraft MSN 28220 Trust                       Utah
Aircraft MSN 29078 Trust                       Utah
Aircraft MSN 28384 Trust                       Utah
Aircraft MSN 28656 Trust                       Utah
Aircraft MSN 28381 Trust                       Utah
Aircraft MSN 26280 Trust                       Utah
Aircraft MSN 739 Trust                         Utah
Aircraft MSN 743 Trust                         Utah
Aircraft MSN 1336 Trust                        Utah
Aircraft MSN 1388 Trust                        Utah
Aircraft MSN 667 Trust                         Utah
Aircraft MSN 1160 Trust                        Utah
Aircraft MSN 25365 Trust                       Utah
ACS Aircraft Leasing (Ireland) Limited         Ireland
Constellation Aircraft Leasing (France) SARL   France
Intrepid Aircraft Leasing (France) SARL        France
Endeavor Aircraft Leasing (Sweden) AB          Sweden




                                                                               6




                                   SCHEDULE 3

                        MINIMUM TARGET PRINCIPAL BALANCE

  PAYMENT DATE      MINIMUM TARGET
  OCCURRING IN    PRINCIPAL BALANCE
---------------   -----------------
June, 2006           560,000,000
July, 2006           558,251,647
August, 2006         556,495,991
September, 2006      554,733,014
October, 2006        552,962,695
November, 2006       551,185,015
December, 2006       549,399,955
January, 2007        547,607,495
February, 2007       545,807,616
March, 2007          544,000,297
April, 2007          542,185,521
May, 2007            540,363,265
June, 2007           538,533,512
July, 2007           536,696,240
August, 2007         534,851,431
September, 2007      532,999,064
October, 2007        531,139,120
November, 2007       529,271,578
December, 2007       527,396,418
January, 2008        525,513,621
February, 2008       523,623,166
March, 2008          521,725,033
April, 2008          519,819,202
May, 2008            517,905,652
June, 2008           515,984,364
July, 2008           514,055,317
August, 2008         512,118,490
September, 2008      510,173,863
October, 2008        508,221,416
November, 2008       506,261,129
December, 2008       504,292,980
January, 2009        502,316,948
February, 2009       500,333,015
March, 2009          498,341,157
April, 2009          496,341,356
May, 2009            494,333,589
June, 2009           492,317,837
July, 2009           490,294,077
August, 2009         488,262,290
September, 2009      486,222,455
October, 2009        484,174,550
November, 2009       482,118,553
December, 2009       480,054,445
January, 2010        477,982,204
February, 2010       475,901,808
March, 2010          473,813,237
April, 2010          471,716,468
May, 2010            469,611,481
June, 2010           467,498,255
July, 2010           465,376,767
August, 2010         463,246,996
September, 2010      461,108,921
October, 2010        458,962,519
November, 2010       456,807,770
December, 2010       454,644,652
January, 2011        452,473,143
February, 2011       450,293,220
March, 2011          448,104,863
April, 2011          445,908,049
May, 2011            443,702,756
June, 2011           441,488,962
July, 2011           435,184,826
August, 2011         428,926,828
September, 2011      422,715,252
October, 2011        416,550,380
November, 2011       410,432,497
December, 2011       404,361,888
January, 2012        398,338,839
February, 2012       392,363,636
March, 2012          386,436,570
April, 2012          380,557,927
May, 2012            374,727,999
June, 2012           368,947,078
July, 2012           363,215,454
August, 2012         357,533,422
September, 2012      351,901,275
October, 2012        346,319,310
November, 2012       340,787,821
December, 2012       335,307,108
January, 2013        329,877,467
February, 2013       324,499,199
March, 2013          319,172,604
April, 2013          313,897,984
May, 2013            308,675,640
June, 2013           303,505,878
July, 2013           298,389,000
August, 2013         293,325,314
September, 2013      288,466,920
October, 2013        283,653,127
November, 2013       278,884,199
December, 2013       274,160,398
January, 2014        269,481,988
February, 2014       264,849,234
March, 2014          260,262,402
April, 2014          255,721,758
May, 2014            251,227,571




                                                                               7




  PAYMENT DATE      MINIMUM TARGET
  OCCURRING IN    PRINCIPAL BALANCE
---------------   -----------------
June, 2014           246,780,107
July, 2014           242,379,638
August, 2014         238,026,432
September, 2014      233,720,763
October, 2014        229,462,901
November, 2014       225,253,120
December, 2014       221,091,694
January, 2015        216,978,898
February, 2015       212,915,009
March, 2015          208,900,302
April, 2015          204,935,057
May, 2015            201,019,551
June, 2015           197,154,066
July, 2015           193,338,881
August, 2015         189,574,278
September, 2015      185,860,541
October, 2015        182,197,952
November, 2015       178,586,797
December, 2015       175,211,478
January, 2016        171,877,001
February, 2016       168,630,795
March, 2016          165,450,324
April, 2016          162,306,859
May, 2016            159,226,532
June, 2016           156,208,291
July, 2016           153,224,518
August, 2016         150,303,510
September, 2016      147,415,659
October, 2016        144,561,156
November, 2016       141,740,188
December, 2016       138,952,948
January, 2017        136,273,838
February, 2017       133,688,684
March, 2017          131,129,408
April, 2017          128,596,158
May, 2017            126,089,085
June, 2017           123,635,912
July, 2017           121,207,546
August, 2017         118,804,133
September, 2017      116,425,815
October, 2017        114,099,237
November, 2017       111,821,937
December, 2017       109,567,007
January, 2018        107,334,577
February, 2018       105,148,425
March, 2018          102,983,867
April, 2018          100,841,027
May, 2018             98,744,507
June, 2018            96,715,560
July, 2018            94,704,892
August, 2018          92,712,610
September, 2018       90,738,823
October, 2018         88,783,638
November, 2018        86,847,164
December, 2018        84,929,510
January, 2019         83,030,787
February, 2019        81,151,103
March, 2019           79,290,570
April, 2019           77,449,297
May, 2019             75,627,395
June, 2019            73,845,604
July, 2019            72,082,388
August, 2019          70,337,855
September, 2019       68,612,111
October, 2019         66,905,266
November, 2019        65,249,170
December, 2019        63,610,620
January, 2020         61,989,716
February, 2020        60,386,560
March, 2020           58,801,253
April, 2020           57,233,896
May, 2020             55,684,592
June, 2020            54,153,444
July, 2020            52,640,553
August, 2020          51,146,025
September, 2020       49,669,962
October, 2020         48,212,467
November, 2020        46,773,646
December, 2020        45,353,604
January, 2021         43,952,444
February, 2021        42,570,273
March, 2021           41,207,196
April, 2021           39,863,320
May, 2021             38,538,751
June, 2021            37,233,595
July, 2021            35,947,960
August, 2021          34,681,954
September, 2021       33,435,684
October, 2021         32,209,259
November, 2021        31,002,788
December, 2021        29,816,378
January, 2022         28,650,141
February, 2022        27,504,186
March, 2022           26,378,622
April, 2022           25,273,561
May, 2022             24,189,113
June, 2022            23,125,390
July, 2022            22,106,841
August, 2022          21,146,223
September, 2022       20,203,174
October, 2022         19,277,789
November, 2022        18,370,162
December, 2022        17,480,391
January, 2023         16,608,569
February, 2023        15,754,795
March, 2023           14,965,030
April, 2023           14,213,276
May, 2023             13,476,580
June, 2023            12,755,022
July, 2023            12,048,683




                                                                               8




  PAYMENT DATE      MINIMUM TARGET
  OCCURRING IN    PRINCIPAL BALANCE
---------------   -----------------
August, 2023          11,357,645
September, 2023       10,681,989
October, 2023         10,021,798
November, 2023         9,377,153
December, 2023         8,748,137
January, 2024          8,134,833
February, 2024         7,537,323
March, 2024            6,955,691
April, 2024            6,390,022
May, 2024              5,840,397
June, 2024             5,329,726
July, 2024             4,852,999
August, 2024           4,436,065
September, 2024        4,053,695
October, 2024          3,682,479
November, 2024         3,322,473
December, 2024         2,973,738
January, 2025          2,636,331
February, 2025         2,310,312
March, 2025            2,017,759
April, 2025            1,757,995
May, 2025              1,526,518
June, 2025             1,303,604
July, 2025             1,089,298
August, 2025             883,643
September, 2025          686,683
October, 2025            537,721
November, 2025           395,165
December, 2025           259,048
January, 2026            147,877
February, 2026            42,322
March, 2026                    0
April, 2026                    0
May, 2026                      0
June, 2026                     0
July, 2026                     0
August, 2026                   0
September, 2026                0
October, 2026                  0
November, 2026                 0
December, 2026                 0
January, 2027                  0
February, 2027                 0
March, 2027                    0
April, 2027                    0
May, 2027                      0
June, 2027                     0
July, 2027                     0
August, 2027                   0
September, 2027                0
October, 2027                  0
November, 2027                 0
December, 2027                 0
January, 2028                  0
February, 2028                 0
March, 2028                    0
April, 2028                    0
May, 2028                      0
June, 2028                     0
July, 2028                     0
August, 2028                   0
September, 2028                0
October, 2028                  0
November, 2028                 0
December, 2028                 0
January, 2029                  0
February, 2029                 0
March, 2029                    0
April, 2029                    0
May, 2029                      0
June, 2029                     0
July, 2029                     0
August, 2029                   0
September, 2029                0
October, 2029                  0
November, 2029                 0
December, 2029                 0
January, 2030                  0
February, 2030                 0
March, 2030                    0
April, 2030                    0
May, 2030                      0
June, 2030                     0
July, 2030                     0
August, 2030                   0
September, 2030                0
October, 2030                  0
November, 2030                 0
December, 2030                 0
January, 2031                  0
February, 2031                 0
March, 2031                    0
April, 2031                    0
May, 2031                      0
June, 2031                     0




                                                                               9




                                   SCHEDULE 4

                                NOTE POOL FACTORS

  PAYMENT DATE
  OCCURRING IN    NOTE POOL FACTOR
---------------   ----------------
June, 2006            1.0000000
July, 2006            0.9968779
August, 2006          0.9937428
September, 2006       0.9905947
October, 2006         0.9874334
November, 2006        0.9842590
December, 2006        0.9810713
January, 2007         0.9778705
February, 2007        0.9746565
March, 2007           0.9714291
April, 2007           0.9681884
May, 2007             0.9649344
June, 2007            0.9616670
July, 2007            0.9583861
August, 2007          0.9550918
September, 2007       0.9517840
October, 2007         0.9484627
November, 2007        0.9451278
December, 2007        0.9417793
January, 2008         0.9384172
February, 2008        0.9350414
March, 2008           0.9316518
April, 2008           0.9282486
May, 2008             0.9248315
June, 2008            0.9214006
July, 2008            0.9179559
August, 2008          0.9144973
September, 2008       0.9110248
October, 2008         0.9075382
November, 2008        0.9040377
December, 2008        0.9005232
January, 2009         0.8969946
February, 2009        0.8934518
March, 2009           0.8898949
April, 2009           0.8863238
May, 2009             0.8827386
June, 2009            0.8791390
July, 2009            0.8755251
August, 2009          0.8718969
September, 2009       0.8682544
October, 2009         0.8645974
November, 2009        0.8609260
December, 2009        0.8572401
January, 2010         0.8535396
February, 2010        0.8498247
March, 2010           0.8460951
April, 2010           0.8423508
May, 2010             0.8385919
June, 2010            0.8348183
July, 2010            0.8310299
August, 2010          0.8272268
September, 2010       0.8234088
October, 2010         0.8195759
November, 2010        0.8157282
December, 2010        0.8118655
January, 2011         0.8079878
February, 2011        0.8040950
March, 2011           0.8001873
April, 2011           0.7962644
May, 2011             0.7923263
June, 2011            0.7775888
July, 2011            0.7641957
August, 2011          0.7507295
September, 2011       0.7357306
October, 2011         0.7221143
November, 2011        0.7084598
December, 2011        0.6946009
January, 2012         0.6794717
February, 2012        0.6656621
March, 2012           0.6515447
April, 2012           0.6361937
May, 2012             0.6222532
June, 2012            0.6065583
July, 2012            0.5924799
August, 2012          0.5782855
September, 2012       0.5636446
October, 2012         0.5479899
November, 2012        0.5336508
December, 2012        0.5187913
January, 2013         0.5029222
February, 2013        0.4884764
March, 2013           0.4734541
April, 2013           0.4574771
May, 2013             0.4428284
June, 2013            0.4274818
July, 2013            0.4113027
August, 2013          0.3939376
September, 2013       0.3789162
October, 2013         0.3632483
November, 2013        0.3489531
December, 2013        0.3339348
January, 2014         0.3182989
February, 2014        0.3040772
March, 2014           0.2890935
April, 2014           0.2743269
May, 2014             0.2596217




                                                                              10




  PAYMENT DATE
  OCCURRING IN    NOTE POOL FACTOR
---------------   ----------------
June, 2014            0.2447841
July, 2014            0.2294586
August, 2014          0.2140247
September, 2014       0.1988930
October, 2014         0.1833581
November, 2014        0.1677079
December, 2014        0.1525189
January, 2015         0.1372642
February, 2015        0.1219378
March, 2015           0.1069095
April, 2015           0.0914405
May, 2015             0.0759859
June, 2015            0.0605357
July, 2015            0.0449406
August, 2015          0.0292123
September, 2015       0.0134617
October, 2015         0.0000000
November, 2015        0.0000000
December, 2015        0.0000000
January, 2016         0.0000000
February, 2016        0.0000000
March, 2016           0.0000000
April, 2016           0.0000000
May, 2016             0.0000000
June, 2016            0.0000000
July, 2016            0.0000000
August, 2016          0.0000000
September, 2016       0.0000000
October, 2016         0.0000000
November, 2016        0.0000000
December, 2016        0.0000000
January, 2017         0.0000000
February, 2017        0.0000000
March, 2017           0.0000000
April, 2017           0.0000000
May, 2017             0.0000000
June, 2017            0.0000000
July, 2017            0.0000000
August, 2017          0.0000000
September, 2017       0.0000000
October, 2017         0.0000000
November, 2017        0.0000000
December, 2017        0.0000000
January, 2018         0.0000000
February, 2018        0.0000000
March, 2018           0.0000000
April, 2018           0.0000000
May, 2018             0.0000000
June, 2018            0.0000000
July, 2018            0.0000000
August, 2018          0.0000000
September, 2018       0.0000000
October, 2018         0.0000000
November, 2018        0.0000000
December, 2018        0.0000000
January, 2019         0.0000000
February, 2019        0.0000000
March, 2019           0.0000000
April, 2019           0.0000000
May, 2019             0.0000000
June, 2019            0.0000000
July, 2019            0.0000000
August, 2019          0.0000000
September, 2019       0.0000000
October, 2019         0.0000000
November, 2019        0.0000000
December, 2019        0.0000000
January, 2020         0.0000000
February, 2020        0.0000000
March, 2020           0.0000000
April, 2020           0.0000000
May, 2020             0.0000000
June, 2020            0.0000000
July, 2020            0.0000000
August, 2020          0.0000000
September, 2020       0.0000000
October, 2020         0.0000000
November, 2020        0.0000000
December, 2020        0.0000000
January, 2021         0.0000000
February, 2021        0.0000000
March, 2021           0.0000000
April, 2021           0.0000000
May, 2021             0.0000000
June, 2021            0.0000000
July, 2021            0.0000000
August, 2021          0.0000000
September, 2021       0.0000000
October, 2021         0.0000000
November, 2021        0.0000000
December, 2021        0.0000000
January, 2022         0.0000000
February, 2022        0.0000000
March, 2022           0.0000000
April, 2022           0.0000000
May, 2022             0.0000000
June, 2022            0.0000000
July, 2022            0.0000000
August, 2022          0.0000000
September, 2022       0.0000000
October, 2022         0.0000000
November, 2022        0.0000000
December, 2022        0.0000000
January, 2023         0.0000000
February, 2023        0.0000000
March, 2023           0.0000000
April, 2023           0.0000000
May, 2023             0.0000000
June, 2023            0.0000000
July, 2023            0.0000000




                                                                              11




  PAYMENT DATE
  OCCURRING IN    NOTE POOL FACTOR
---------------   ----------------
August, 2023          0.0000000
September, 2023       0.0000000
October, 2023         0.0000000
November, 2023        0.0000000
December, 2023        0.0000000
January, 2024         0.0000000
February, 2024        0.0000000
March, 2024           0.0000000
April, 2024           0.0000000
May, 2024             0.0000000
June, 2024            0.0000000
July, 2024            0.0000000
August, 2024          0.0000000
September, 2024       0.0000000
October, 2024         0.0000000
November, 2024        0.0000000
December, 2024        0.0000000
January, 2025         0.0000000
February, 2025        0.0000000
March, 2025           0.0000000
April, 2025           0.0000000
May, 2025             0.0000000
June, 2025            0.0000000
July, 2025            0.0000000
August, 2025          0.0000000
September, 2025       0.0000000
October, 2025         0.0000000
November, 2025        0.0000000
December, 2025        0.0000000
January, 2026         0.0000000
February, 2026        0.0000000
March, 2026           0.0000000
April, 2026           0.0000000
May, 2026             0.0000000
June, 2026            0.0000000
July, 2026            0.0000000
August, 2026          0.0000000
September, 2026       0.0000000
October, 2026         0.0000000
November, 2026        0.0000000
December, 2026        0.0000000
January, 2027         0.0000000
February, 2027        0.0000000
March, 2027           0.0000000
April, 2027           0.0000000
May, 2027             0.0000000
June, 2027            0.0000000
July, 2027            0.0000000
August, 2027          0.0000000
September, 2027       0.0000000
October, 2027         0.0000000
November, 2027        0.0000000
December, 2027        0.0000000
January, 2028         0.0000000
February, 2028        0.0000000
March, 2028           0.0000000
April, 2028           0.0000000
May, 2028             0.0000000
June, 2028            0.0000000
July, 2028            0.0000000
August, 2028          0.0000000
September, 2028       0.0000000
October, 2028         0.0000000
November, 2028        0.0000000
December, 2028        0.0000000
January, 2029         0.0000000
February, 2029        0.0000000
March, 2029           0.0000000
April, 2029           0.0000000
May, 2029             0.0000000
June, 2029            0.0000000
July, 2029            0.0000000
August, 2029          0.0000000
September, 2029       0.0000000
October, 2029         0.0000000
November, 2029        0.0000000
December, 2029        0.0000000
January, 2030         0.0000000
February, 2030        0.0000000
March, 2030           0.0000000
April, 2030           0.0000000
May, 2030             0.0000000
June, 2030            0.0000000
July, 2030            0.0000000
August, 2030          0.0000000
September, 2030       0.0000000
October, 2030         0.0000000
November, 2030        0.0000000
December, 2030        0.0000000
January, 2031         0.0000000
February, 2031        0.0000000
March, 2031           0.0000000
April, 2031           0.0000000
May, 2031             0.0000000
June, 2031            0.0000000




                                                                              12




                                   SCHEDULE 5

                           EXTENDED NOTE POOL FACTORS

  PAYMENT DATE    EXTENDED NOTE
  OCCURRING IN     POOL FACTOR
---------------   -------------
June, 2006          1.0000000
July, 2006          0.9968779
August, 2006        0.9937428
September, 2006     0.9905947
October, 2006       0.9874334
November, 2006      0.9842590
December, 2006      0.9810713
January, 2007       0.9778705
February, 2007      0.9746565
March, 2007         0.9714291
April, 2007         0.9681884
May, 2007           0.9649344
June, 2007          0.9616670
July, 2007          0.9583861
August, 2007        0.9550918
September, 2007     0.9517840
October, 2007       0.9484627
November, 2007      0.9451278
December, 2007      0.9417793
January, 2008       0.9384172
February, 2008      0.9350414
March, 2008         0.9316518
April, 2008         0.9282486
May, 2008           0.9248315
June, 2008          0.9214006
July, 2008          0.9179559
August, 2008        0.9144973
September, 2008     0.9110248
October, 2008       0.9075382
November, 2008      0.9040377
December, 2008      0.9005232
January, 2009       0.8969946
February, 2009      0.8934518
March, 2009         0.8898949
April, 2009         0.8863238
May, 2009           0.8827386
June, 2009          0.8791390
July, 2009          0.8755251
August, 2009        0.8718969
September, 2009     0.8682544
October, 2009       0.8645974
November, 2009      0.8609260
December, 2009      0.8572401
January, 2010       0.8535396
February, 2010      0.8498247
March, 2010         0.8460951
April, 2010         0.8423508
May, 2010           0.8385919
June, 2010          0.8348183
July, 2010          0.8310299
August, 2010        0.8272268
September, 2010     0.8234088
October, 2010       0.8195759
November, 2010      0.8157282
December, 2010      0.8118655
January, 2011       0.8079878
February, 2011      0.8040950
March, 2011         0.8001873
April, 2011         0.7962644
May, 2011           0.7923263
June, 2011          0.7883731
July, 2011          0.7740836
August, 2011        0.7598836
September, 2011     0.7457738
October, 2011       0.7317547
November, 2011      0.7178269
December, 2011      0.7039909
January, 2012       0.6902473
February, 2012      0.6765967
March, 2012         0.6630397
April, 2012         0.6495768
May, 2012           0.6362086
June, 2012          0.6229358
July, 2012          0.6097588
August, 2012        0.5966784
September, 2012     0.5836950
October, 2012       0.5708092
November, 2012      0.5580217
December, 2012      0.5453331
January, 2013       0.5327439
February, 2013      0.5202547
March, 2013         0.5078662
April, 2013         0.4955789
May, 2013           0.4833935
June, 2013          0.4713106
July, 2013          0.4593307
August, 2013        0.4426778
September, 2013     0.4311388
October, 2013       0.4196994
November, 2013      0.4083605
December, 2013      0.3971224
January, 2014       0.3859860
February, 2014      0.3749516
March, 2014         0.3640200




                                                                              13




  PAYMENT DATE    EXTENDED NOTE
  OCCURRING IN     POOL FACTOR
---------------   -------------
April, 2014         0.3531918
May, 2014           0.3424674
June, 2014          0.3318477
July, 2014          0.3213331
August, 2014        0.3109242
September, 2014     0.3006217
October, 2014       0.2904263
November, 2014      0.2803384
December, 2014      0.2703587
January, 2015       0.2604879
February, 2015      0.2507266
March, 2015         0.2410753
April, 2015         0.2315348
May, 2015           0.2221056
June, 2015          0.2127884
July, 2015          0.2035838
August, 2015        0.1944925
September, 2015     0.1855150
October, 2015       0.1766521
November, 2015      0.1624715
December, 2015      0.1542281
January, 2016       0.1447683
February, 2016      0.1360915
March, 2016         0.1283129
April, 2016         0.1199784
May, 2016           0.1118163
June, 2016          0.1044443
July, 2016          0.0965465
August, 2016        0.0894268
September, 2016     0.0824023
October, 2016       0.0754737
November, 2016      0.0686414
December, 2016      0.0607204
January, 2017       0.0532931
February, 2017      0.0470249
March, 2017         0.0408423
April, 2017         0.0347457
May, 2017           0.0284988
June, 2017          0.0226287
July, 2017          0.0168433
August, 2017        0.0111430
September, 2017     0.0054804
October, 2017       0.0000000
November, 2017      0.0000000
December, 2017      0.0000000
January, 2018       0.0000000
February, 2018      0.0000000
March, 2018         0.0000000
April, 2018         0.0000000
May, 2018           0.0000000
June, 2018          0.0000000
July, 2018          0.0000000
August, 2018        0.0000000
September, 2018     0.0000000
October, 2018       0.0000000
November, 2018      0.0000000
December, 2018      0.0000000
January, 2019       0.0000000
February, 2019      0.0000000
March, 2019         0.0000000
April, 2019         0.0000000
May, 2019           0.0000000
June, 2019          0.0000000
July, 2019          0.0000000
August, 2019        0.0000000
September, 2019     0.0000000
October, 2019       0.0000000
November, 2019      0.0000000
December, 2019      0.0000000
January, 2020       0.0000000
February, 2020      0.0000000
March, 2020         0.0000000
April, 2020         0.0000000
May, 2020           0.0000000
June, 2020          0.0000000
July, 2020          0.0000000
August, 2020        0.0000000
September, 2020     0.0000000
October, 2020       0.0000000
November, 2020      0.0000000
December, 2020      0.0000000
January, 2021       0.0000000
February, 2021      0.0000000
March, 2021         0.0000000
April, 2021         0.0000000
May, 2021           0.0000000
June, 2021          0.0000000
July, 2021          0.0000000
August, 2021        0.0000000
September, 2021     0.0000000
October, 2021       0.0000000
November, 2021      0.0000000
December, 2021      0.0000000
January, 2022       0.0000000
February, 2022      0.0000000
March, 2022         0.0000000
April, 2022         0.0000000
May, 2022           0.0000000
June, 2022          0.0000000
July, 2022          0.0000000
August, 2022        0.0000000
September, 2022     0.0000000
October, 2022       0.0000000
November, 2022      0.0000000
December, 2022      0.0000000
January, 2023       0.0000000
February, 2023      0.0000000
March, 2023         0.0000000




                                                                              14




  PAYMENT DATE    EXTENDED NOTE
  OCCURRING IN     POOL FACTOR
---------------   -------------
April, 2023         0.0000000
May, 2023           0.0000000
June, 2023          0.0000000
July, 2023          0.0000000
August, 2023        0.0000000
September, 2023     0.0000000
October, 2023       0.0000000
November, 2023      0.0000000
December, 2023      0.0000000
January, 2024       0.0000000
February, 2024      0.0000000
March, 2024         0.0000000
April, 2024         0.0000000
May, 2024           0.0000000
June, 2024          0.0000000
July, 2024          0.0000000
August, 2024        0.0000000
September, 2024     0.0000000
October, 2024       0.0000000
November, 2024      0.0000000
December, 2024      0.0000000
January, 2025       0.0000000
February, 2025      0.0000000
March, 2025         0.0000000
April, 2025         0.0000000
May, 2025           0.0000000
June, 2025          0.0000000
July, 2025          0.0000000
August, 2025        0.0000000
September, 2025     0.0000000
October, 2025       0.0000000
November, 2025      0.0000000
December, 2025      0.0000000
January, 2026       0.0000000
February, 2026      0.0000000
March, 2026         0.0000000
April, 2026         0.0000000
May, 2026           0.0000000
June, 2026          0.0000000
July, 2026          0.0000000
August, 2026        0.0000000
September, 2026     0.0000000
October, 2026       0.0000000
November, 2026      0.0000000
December, 2026      0.0000000
January, 2027       0.0000000
February, 2027      0.0000000
March, 2027         0.0000000
April, 2027         0.0000000
May, 2027           0.0000000
June, 2027          0.0000000
July, 2027          0.0000000
August, 2027        0.0000000
September, 2027     0.0000000
October, 2027       0.0000000
November, 2027      0.0000000
December, 2027      0.0000000
January, 2028       0.0000000
February, 2028      0.0000000
March, 2028         0.0000000
April, 2028         0.0000000
May, 2028           0.0000000
June, 2028          0.0000000
July, 2028          0.0000000
August, 2028        0.0000000
September, 2028     0.0000000
October, 2028       0.0000000
November, 2028      0.0000000
December, 2028      0.0000000
January, 2029       0.0000000
February, 2029      0.0000000
March, 2029         0.0000000
April, 2029         0.0000000
May, 2029           0.0000000
June, 2029          0.0000000
July, 2029          0.0000000
August, 2029        0.0000000
September, 2029     0.0000000
October, 2029       0.0000000
November, 2029      0.0000000
December, 2029      0.0000000
January, 2030       0.0000000
February, 2030      0.0000000
March, 2030         0.0000000
April, 2030         0.0000000
May, 2030           0.0000000
June, 2030          0.0000000
July, 2030          0.0000000
August, 2030        0.0000000
September, 2030     0.0000000
October, 2030       0.0000000
November, 2030      0.0000000
December, 2030      0.0000000
January, 2031       0.0000000
February, 2031      0.0000000
March, 2031         0.0000000
April, 2031         0.0000000
May, 2031           0.0000000
June, 2031          0.0000000





                                                                              15




                                   SCHEDULE 6

                        CURRENT WAR RISK COVERAGE AMOUNTS

AIRCRAFT MSN   WAR RISK COVERAGE AMOUNT
------------   ------------------------
343                $1,000,000,000.00
502                $  500,000,000.00
667                $  900,000,000.00
739                $  750,000,000.00
743                $  750,000,000.00
758                $1,000,000,000.00
967                $1,000,000,000.00
1160               $1,000,000,000.00
1336               $1,000,000,000.00
1388               $1,000,000,000.00
23835              $1,000,000,000.00
23836              $1,000,000,000.00
23837              $1,000,000,000.00
23955              $1,000,000,000.00
23956              $1,000,000,000.00
24283              $1,000,000,000.00
24669              $  500,000,000.00
24671              $  500,000,000.00
24672              $  600,000,000.00
25001              $  600,000,000.00
25008              $  600,000,000.00
25009              $  600,000,000.00
25147              $  600,000,000.00
25280              $  750,000,000.00
25365              $  750,000,000.00
26280              $  600,000,000.00
27001              $  600,000,000.00
27003              $  600,000,000.00
27094              $  600,000,000.00
28056              $1,000,000,000.00
28220              $1,000,000,000.00
28227              $1,000,000,000.00
28381              $  600,000,000.00
28384              $  600,000,000.00
28656              $1,000,000,000.00
29078              $1,000,000,000.00





                                                                   Exhibit 10.27

                                                               EXECUTION VERSION

                                 TRUST INDENTURE
                            dated as of June 15, 2006

                                      among

                        ACS AIRCRAFT FINANCE IRELAND PLC,

                                  as the Issuer

                      ACS AIRCRAFT FINANCE BERMUDA LIMITED,

                                as the Guarantor

                      DEUTSCHE BANK TRUST COMPANY AMERICAS,

                               as the Cash Manager

                      DEUTSCHE BANK TRUST COMPANY AMERICAS,

                      as the Trustee and the Drawing Agent

                                     CALYON,

                     as the Initial Credit Facility Provider

                                       and

                      FINANCIAL GUARANTY INSURANCE COMPANY,

                             as the Policy Provider



                                TABLE OF CONTENTS



                                                                                                           Page
                                                                                                           ----

ARTICLE I DEFINITIONS...................................................................................     1

   Section 1.01    Definitions..........................................................................     1
   Section 1.02    Rules of Construction................................................................    47
   Section 1.03    Compliance Certificates and Opinions.................................................    48
   Section 1.04    Acts of Holders......................................................................    49

ARTICLE II THE SECURITIES...............................................................................    50

   Section 2.01    Authorized Amount; Terms; Form; Execution and Delivery...............................    50
   Section 2.02    Restrictive Legends..................................................................    52
   Section 2.03    Registrar and Paying Agent...........................................................    53
   Section 2.04    Paying Agent to Hold Money in Trust..................................................    54
   Section 2.05    Method of Payment....................................................................    55
   Section 2.06    Minimum Denomination.................................................................    56
   Section 2.07    Transfer and Exchange; Cancellation..................................................    56
   Section 2.08    Mutilated, Destroyed, Lost or Stolen Securities......................................    57
   Section 2.09    Payments of Transfer Taxes...........................................................    57
   Section 2.10    Refinancing of Securities............................................................    58
   Section 2.11    Delivery of Remaining Aircraft.......................................................    60
   Section 2.12    Additional Securities................................................................    61
   Section 2.13    Special Transfer Provisions..........................................................    63
   Section 2.14    Temporary Securities.................................................................    64
   Section 2.15    Statements to Holders................................................................    64
   Section 2.16    CUSIP, CINS and ISIN Numbers.........................................................    66
   Section 2.17    Holder Representations and Covenants.................................................    66
   Section 2.18    European Union Insolvency Regulation.................................................    67

ARTICLE III ACCOUNTS; PRIORITY OF PAYMENTS..............................................................    67

   Section 3.01    Accounts.............................................................................    67
   Section 3.02    Investments of Cash..................................................................    74
   Section 3.03    Closing Date Deposits, Withdrawals and Transfers.....................................    75
   Section 3.04    Interim Deposits, Transfers and Withdrawals..........................................    76
   Section 3.05    Withdrawals and Transfers Relating to the Acquisition of Aircraft and Interim
                   Deposits and Withdrawals for Aircraft Sales..........................................    77
   Section 3.06    Calculation Date Calculations........................................................    79
   Section 3.07    Payment Date First Step Withdrawals and Transfers....................................    84
   Section 3.08    Payment Date Second Step Withdrawals.................................................    86
   Section 3.09    Allocations of Principal Payments Among Subclasses of the Securities.................    93
   Section 3.10    Certain Redemptions; Certain Premiums................................................    93
   Section 3.11    Adjustment of Certain Percentages, Factors and Balances..............................    96



                                      -i-





                                                                                                           Page
                                                                                                           ----

   Section 3.12    Initial Credit Facility..............................................................    96
   Section 3.13    Eligible Credit Facilities...........................................................   100
   Section 3.14    The Policy...........................................................................   101
   Section 3.15    Contributions........................................................................   105
   Section 3.16    DSCR Failure.........................................................................   105

ARTICLE IV DEFAULT AND REMEDIES.........................................................................   105

   Section 4.01    Events of Default....................................................................   105
   Section 4.02    Acceleration, Rescission and Annulment...............................................   107
   Section 4.03    Other Remedies.......................................................................   108
   Section 4.04    Limitation on Suits..................................................................   108
   Section 4.05    Waiver of Existing Defaults..........................................................   109
   Section 4.06    Restoration of Rights and Remedies...................................................   109
   Section 4.07    Remedies Cumulative..................................................................   109
   Section 4.08    Authority of Courts Not Required.....................................................   110
   Section 4.09    Rights of Holders to Receive Payment.................................................   110
   Section 4.10    Trustee May File Proofs of Claim.....................................................   110
   Section 4.11    Undertaking for Costs................................................................   110
   Section 4.12    Control by Holders...................................................................   110

ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................................   111

   Section 5.01    Representations and Warranties.......................................................   111
   Section 5.02    General Covenants....................................................................   113
   Section 5.03    Operating Covenants..................................................................   127
   Section 5.04    Compliance Through Agents............................................................   132

ARTICLE VI THE TRUSTEE..................................................................................   132

   Section 6.01    Acceptance of Trusts and Duties......................................................   132
   Section 6.02    Absence of Duties....................................................................   133
   Section 6.03    Representations or Warranties........................................................   133
   Section 6.04    Reliance; Agents; Advice of Counsel..................................................   133
   Section 6.05    Not Responsible in Individual Capacity...............................................   135
   Section 6.06    No Compensation from Holders.........................................................   135
   Section 6.07    Notice of Defaults...................................................................   135
   Section 6.08    May Hold Securities..................................................................   135
   Section 6.09    Corporate Trustee Required; Eligibility..............................................   135
   Section 6.10    Disqualification of Trustee..........................................................   136
   Section 6.11    Preferential Collection of Claims Against Issuer.....................................   136
   Section 6.12    Reports by the Issuer................................................................   136
   Section 6.13    Holder Lists.........................................................................   136
   Section 6.14    Preservation of Information; Communications to Holders...............................   136

ARTICLE VII SUCCESSOR TRUSTEES..........................................................................   137

   Section 7.01    Resignation and Removal of Trustee...................................................   137
   Section 7.02    Appointment of Successor.............................................................   138



                                      -ii-





                                                                                                           Page
                                                                                                           ----

ARTICLE VIII INDEMNITY..................................................................................   139

   Section 8.01    Indemnity............................................................................   139
   Section 8.02    Holders' Indemnity...................................................................   140

ARTICLE IX MODIFICATION.................................................................................   140

   Section 9.01    Modification with Consent of Holders and the Policy Provider.........................   140
   Section 9.02    Modification Without Consent of Holders or the Providers of Eligible Credit
                   Facilities or the Policy Provider....................................................   141
   Section 9.03    Subordination and Priority of Payments...............................................   141
   Section 9.04    Execution of Amendments by Trustee...................................................   142
   Section 9.05    Conformity with Trust Indenture Act..................................................   142

ARTICLE X SUBORDINATION.................................................................................   142

   Section 10.01   Subordination of the Securities and Other Subordinated Obligations...................   142
   Section 10.02   Rights of Subrogation................................................................   143
   Section 10.03   Further Assurances of Subordinated Representatives...................................   143
   Section 10.04   Enforcement..........................................................................   143
   Section 10.05   Continued Effectiveness..............................................................   143
   Section 10.06   Senior Claims and Subordinated Claims Unimpaired.....................................   143
   Section 10.07   Ranking of the Guarantee.............................................................   144

ARTICLE XI GUARANTEE....................................................................................   144

   Section 11.01   Guarantee............................................................................   144
   Section 11.02   Reinstatement........................................................................   145
   Section 11.03   Unconditional Nature of Guarantee....................................................   145

ARTICLE XII DISCHARGE OF INDENTURE; DEFEASANCE..........................................................   146

   Section 12.01   Discharge of Liability on the Securities; Defeasance.................................   146
   Section 12.02   Conditions to Defeasance.............................................................   147
   Section 12.03   Application of Trust Money...........................................................   148
   Section 12.04   Repayment to Issuer..................................................................   149
   Section 12.05   Indemnity for Government Obligations and Corporate Obligations.......................   149
   Section 12.06   Reinstatement........................................................................   149

ARTICLE XIII MISCELLANEOUS..............................................................................   149

   Section 13.01   Right of Trustee to Perform..........................................................   149
   Section 13.02   Waiver...............................................................................   150
   Section 13.03   Severability.........................................................................   150
   Section 13.04   Restrictions on Exercise of Certain Rights...........................................   150
   Section 13.05   Notices..............................................................................   151
   Section 13.06   Assignments; Third Party Beneficiary.................................................   154
   Section 13.07   Currency Conversion..................................................................   154
   Section 13.08   Application to Court.................................................................   155



                                      -iii-





                                                                                                           Page
                                                                                                           ----

   Section 13.09   Governing Law........................................................................   155
   Section 13.10   Jurisdiction.........................................................................   155
   Section 13.11   Counterparts.........................................................................   156
   Section 13.12   Table of Contents, Headings, Etc.....................................................   156
   Section 13.13   Compliance with Applicable Anti-Terrorism and Anti-Money Laundering Regulations......   156



                                      -iv-



                                    Schedules

Schedule 1  -   Initial Aircraft
Schedule 2  -   ACS Ireland Subsidiaries
Schedule 3  -   Minimum Target Principal Balance
Schedule 4  -   Note Pool Factors
Schedule 5  -   Extended Note Pool Factors
Schedule 6  -   Initial Leases - Current War Risk Coverage Amounts

                                  Exhibits

Exhibit A-1 -   Form of Class A Floating Rate Note
Exhibit A-2 -   Form of Class A Fixed Rate Note
Exhibit B   -   Form of Class E Security
Exhibit C   -   Concentration Limits
Exhibit D   -   Insurance Provisions
Exhibit E   -   Form of Monthly Report to Each Holder
Exhibit F   -   Core Lease Provisions
Exhibit G   -   Compliance Certificate


                                      -v-



          This TRUST INDENTURE, dated as of June 15, 2006 (this "Indenture"), is
made among ACS AIRCRAFT FINANCE IRELAND PLC, an Irish public limited liability
company (the "Issuer"), ACS AIRCRAFT FINANCE BERMUDA LIMITED, a Bermuda exempted
company (the "Guarantor"), DEUTSCHE BANK TRUST COMPANY AMERICAS, in its capacity
as the Cash Manager, DEUTSCHE BANK TRUST COMPANY AMERICAS, in its capacity as
the person accepting appointment as the Trustee under this Indenture, CALYON, a
societe anonyme organized under the laws of France (the "Initial Credit Facility
Provider") and FINANCIAL GUARANTY INSURANCE COMPANY, a New York stock insurance
company (the "Policy Provider") and DEUTSCHE BANK TRUST COMPANY AMERICAS, in its
capacity as the Drawing Agent (the "Drawing Agent").

          The parties to this Indenture hereby agree as follows.

                                    ARTICLE I
                                   DEFINITIONS

     Section 1.01 Definitions. For purposes of this Indenture, the following
terms shall have the meanings indicated below:

          "Acceleration" means, with respect to the principal, interest and
other amounts payable in respect of the Securities, such amounts becoming
immediately due and payable by declaration or otherwise. "Accelerate,"
"Accelerated" and "Accelerating" have meanings correlative to the foregoing.

          "Acceleration Default" means any Event of Default of the type
described in Section 4.01(e) or 4.01(f) hereof.

          "Account" means any or, in its plural form, all of the accounts
established pursuant to Section 3.01(a) hereof and any ledger accounts and
ledger subaccounts maintained therein in accordance with this Indenture.

          "Accrual Period" means, as to each subclass of ACS Group Securities,
each of the following periods: the period commencing on (and including) the
relevant Closing Date and ending on (but excluding) the first Payment Date
thereafter and each successive period beginning on (and including) a Payment
Date and ending on (but excluding) the next succeeding Payment Date; provided
that the final Accrual Period with respect to any subclass of ACS Group
Securities shall end on but exclude the date such subclass of ACS Group
Securities is repaid in full. Account balances with respect to each Accrual
Period ending on a Payment Date shall be determined by reference to the balances
of funds on deposit in the Accounts as of the close of business on the
Calculation Date immediately preceding such Payment Date.

          "Accrued Senior Interest" means, with respect to the Certificates, as
of any date of determination, all amounts of accrued and unpaid interest on the
Certificates at the Stated Rate of Interest for the Certificates.



                                                                               2


          "Acquisition Agreements" means the Purchase Agreement and any
agreements pursuant to which Additional Aircraft (or related Aircraft Interest)
are acquired.

          "Acquisition Date" means, with respect to any Aircraft Interest (and
the ACS Group Aircraft subject to that Aircraft Interest), the Delivery Date
with respect to such ACS Group Aircraft.

          "ACS Bermuda Group" means, collectively, the Guarantor and each ACS
Bermuda Subsidiary.

          "ACS Bermuda Group Member" means the Guarantor or an ACS Bermuda
Subsidiary, as applicable.

          "ACS Bermuda Subsidiary" means each subsidiary of the Guarantor
(including each trust of which the Guarantor or another ACS Bermuda Subsidiary
is the holder of the beneficial interest) listed on Schedule 2 to the Guarantor
Indenture and any other subsidiary (including any such trust) of the Guarantor.

          "ACS Group" means, collectively, the ACS Ireland Group and the ACS
Bermuda Group.

          "ACS Group Acquisition Agreements" means, collectively, the
Acquisition Agreements and the Guarantor Acquisition Agreements.

          "ACS Group Additional Aircraft" means, collectively, the Additional
Aircraft and the Guarantor Additional Aircraft.

          "ACS Group Additional Securities" means, collectively, the Additional
Securities and the Guarantor Additional Securities.

          "ACS Group Aircraft" means, collectively, the Aircraft and the
Guarantor Aircraft.

          "ACS Group Aircraft Agreement" means an Aircraft Agreement or a
Guarantor Aircraft Agreement, as applicable.

          "ACS Group Aircraft Conversion" means an Aircraft Conversion or a
Guarantor Aircraft Conversion, as applicable.

          "ACS Group Class A Securities" means, collectively, the Class A
Securities and the Guarantor Class A Securities.

          "ACS Group Class A Security Portion" means, as of any date of
determination, a fraction the numerator of which is the Initial Outstanding
Balance of the ACS Group Initial Class A Securities and the denominator of which
is the aggregate Initial Appraised Values of all of the ACS Group Initial
Aircraft.



                                                                               3


          "ACS Group Conversion Payments" means, collectively, Conversion
Payments and Guarantor Conversion Payments.

          "ACS Group Fixed Rate Securities" means, collectively, the Fixed Rate
Securities and the Guarantor Fixed Rate Securities.

          "ACS Group Floating Rate Securities" means, collectively, the Floating
Rate Securities and the Guarantor Floating Rate Securities.

          "ACS Group Initial Aircraft" means, collectively, the Initial Aircraft
and the Guarantor Initial Aircraft.

          "ACS Group Initial Class A Securities" means, collectively, the
Initial Class A Securities and the Guarantor Class A Securities.

          "ACS Group Initial Leases" means, collectively, the Initial Leases and
the Guarantor Initial Leases

          "ACS Group Initial Securities" means, collectively, the Initial
Securities and the Guarantor Initial Securities.

          "ACS Group Leases" means, collectively, the Leases and the Guarantor
Leases.

          "ACS Group Members" means, collectively, the ACS Bermuda Group Members
and the ACS Ireland Group Members.

          "ACS Group Modification Payments" means, collectively, Modification
Payments and Guarantor Modification Payments.

          "ACS Group Portfolio" means, as of any date of determination, all ACS
Group Aircraft owned by the ACS Group as of such date.

          "ACS Group Purchase Agreements" means, collectively, the Purchase
Agreement and the Guarantor Purchase Agreement.

          "ACS Group Redemption Date" means a Redemption Date or a Guarantor
Redemption Date, as applicable.

          "ACS Group Refinancing" means a Refinancing or a Guarantor
Refinancing, as applicable.

          "ACS Group Refinancing Expenses" means, collectively, Refinancing
Expenses and Guarantor Refinancing Expenses.

          "ACS Group Refinancing Securities" means, collectively, the
Refinancing Securities and the Guarantor Refinancing Securities.

          "ACS Group Securities" means, collectively, the Securities and the
Guarantor Securities.



                                                                               4


          "ACS Group Subclass A-1 Securities" means, collectively, the Subclass
A-1 Securities and the Guarantor Subclass A-1 Securities.

          "ACS Group Subsidiaries" means, collectively, the ACS Bermuda
Subsidiaries and the ACS Ireland Subsidiaries.

          "ACS Ireland Group" means, collectively, the Issuer and each ACS
Ireland Subsidiary.

          "ACS Ireland Group Member" means the Issuer or an ACS Ireland
Subsidiary, as applicable.

          "ACS Ireland Subsidiary" means each subsidiary of the Issuer
(including each trust of which the Issuer or another ACS Ireland Subsidiary is
the holder of the beneficial interest) listed on Schedule 2 to this Indenture
and any other subsidiary (including any such trust) of the Issuer.

          "ACS Pass Through Trust" means the ACS 2006-1 Pass Through Trust
formed pursuant to the Pass Through Trust Agreement.

          "Act" has, with respect to any Holder, the meaning given to such term
in Section 1.04(a) hereof.

          "Additional Aircraft" means any aircraft and any related Engine
acquired by any ACS Ireland Group Member from a Seller or an Affiliate of a
Seller, from another ACS Group Member or (upon receipt of a Rating Agency
Confirmation with respect thereto) or from any other Person after the Initial
Closing Date (other than any Initial Aircraft, Remaining Aircraft or Substitute
Aircraft) (in any such case in accordance with the provisions hereof including
obtaining the prior written consent of the Policy Provider and the Initial
Credit Facility Provider) including any Aircraft acquired by way of a
contribution but excluding any such Aircraft after it has been sold or disposed
of by way of a completed Aircraft Sale.

          "Additional Issuance" has the meaning given to such term in Section
2.12 hereof.

          "Additional Lease" means, with respect to each Additional Aircraft,
each aircraft lease agreement, conditional sale agreement, hire purchase
agreement or other similar arrangement with respect to such Additional Aircraft
on the relevant Closing Date.

          "Additional Premium" has the meaning given to such term in the Policy
Fee Letter.

          "Additional Securities" means any Securities of any subclass of the
Class A Securities (other than the Subclass A-1 Securities issued as of the
Initial Closing Date) and the Class E Securities (other than the Subclass E-1
Securities issued as of the Initial Closing Date) issued pursuant to this
Indenture.



                                                                               5


          "Administrative Agency Agreement" means the Administrative Agency
Agreement dated as of the Initial Closing Date among the Administrative Agent,
the Trustees, the Security Trustee, the Issuers and the Policy Provider.

          "Administrative Agent" means the Person acting, at the time of
determination, in the capacity of the administrative agent of the Issuers and
the ACS Group Subsidiaries under the Administrative Agency Agreement or any
replacement agreement therefor. The initial Administrative Agent is Aircastle
Advisor LLC.

          "Affiliate" has the meaning given to such term in Section 5.02(b)
hereof.

          "Aggregate Minimum Principal Payment Amount" means, for any Payment
Date, the sum of (x) the aggregate unpaid Minimum Principal Payment Amount, if
any, with respect to the previous Payment Dates (less any Allocable Principal
Conversion Amounts transferred to the Aircraft Conversion Account in connection
with one or more Conversion Elections) plus (y) the Minimum Principal Payment
Amount for such Payment Date.

          "Agreed Currency" has the meaning given to such term in Section
13.07(a) hereof.

          "Agreed Value Payment" means a payment to be made by or on behalf of a
Lessee under an ACS Group Lease upon or following a Total Loss of an ACS Group
Aircraft with respect to such Total Loss.

          "Aircastle Entity" means, collectively, the Remarketing Servicers, the
Administrative Agent, the Irish Seller and any other Aircastle Related Entity
(other than any ACS Group Member).

          "Aircastle Related Entity" means Aircastle Limited, any Holder of the
Class E Securities or any Affiliate of any such Person.

          "Aircraft" means, collectively, the Initial Aircraft (or related
Aircraft Interest) and the Additional Aircraft (or related Aircraft Interest).

          "Aircraft Agreement" means any lease, sublease, conditional sale
agreement, finance leases, hire purchase agreement or other agreement (other
than an agreement relating to maintenance, modification or repairs) or any
purchase option granted to a Person (other than a Purchase Option granted to an
ACS Ireland Group Member) to purchase an Aircraft, in each case pursuant to
which any Person acquires or is entitled to acquire legal title, or the economic
benefits of ownership of, such Aircraft.

          "Aircraft Allocation Amount", with respect to each ACS Group Aircraft,
has the meaning given to such term in the applicable ACS Group Purchase
Agreement for such ACS Group Aircraft or, with respect to any ACS Group
Additional Aircraft, the meaning given to that or any comparable term in the
relevant ACS Group Acquisition Agreement for such ACS Group Additional Aircraft.



                                                                               6


          "Aircraft Assets Related Documents" means all ACS Group Leases and
related documents and other contracts and agreements including any side letters,
assignments of warranties or option agreements of ACS Group Members the terms of
which relate to or affect any of the ACS Group Aircraft.

          "Aircraft Conversion" has the meaning given to such term in Section
5.02(i) hereof.

          "Aircraft Conversion Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Aircraft Interest" means (a) the Ownership Interest or Guarantor
Ownership Interest in any Person, including without limitation a trust, that
owns an ACS Group Aircraft or (b) the Ownership Interest or Guarantor Ownership
Interest in any Person that holds, directly or indirectly, the interest referred
to in clause (a) above. The acquisition or disposition of all of the Aircraft
Interest with respect to an ACS Group Aircraft constitutes, respectively, the
acquisition or disposition of that ACS Group Aircraft.

          "Aircraft Purchase Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Aircraft Purchase Price", with respect to any ACS Group Initial
Aircraft, means the "Purchase Price" (as defined in the applicable Purchase
Agreement or the Guarantor Purchase Agreement, as applicable) for the entity
owning such ACS Group Initial Aircraft or, with respect to any ACS Group
Additional Aircraft, the meaning given to that or any comparable term in the ACS
Group Acquisition Agreement pursuant to which such ACS Group Aircraft is
acquired by an ACS Group Member.

          "Aircraft Sale" means any sale or other disposition of any ACS Group
Aircraft, including by reason of such ACS Group Aircraft suffering a Total Loss.

          "Allocable Equity Conversion Amount" means, for any Payment Date, with
respect to any ACS Group Aircraft Conversion, the difference, if positive,
between (A) the applicable ACS Group Conversion Payment and (B) the Allocable
Principal Conversion Amount for such ACS Group Conversion Payment.

          "Allocable Principal Conversion Amount" means, for any Payment Date,
with respect to any ACS Group Aircraft Conversion, the product of the ACS Group
Class A Security Portion and the applicable ACS Group Conversion Payment.

          "Allowed Restructuring" has the meaning given to such term in Section
5.02(e) hereof.

          "Annual Report" has the meaning given to such term in Section 2.15(a)
hereof.

          "Applicable Allocation Percentage" means, in the case of (i) the
Holders of the Class E Securities, a fraction, the numerator of which is the
aggregate Assumed Base Values of



                                                                               7


the ACS Group Aircraft owned by the ACS Ireland Group and the denominator of
which is the aggregate Assumed Base Values of the ACS Group Aircraft in the ACS
Group Portfolio and (ii) the Shareholders, a fraction, the numerator of which is
the aggregate Assumed Base Values of the ACS Group Aircraft owned by the ACS
Bermuda Group and the denominator of which is the aggregate Assumed Base Values
of the ACS Group Aircraft in the ACS Group Portfolio.

          "Applicable Aviation Authority" means, in relation to any Aircraft,
each governmental or regulatory authority that has responsibility for the
supervision of civil aviation and/or the registration and operations of civil
aircraft in the State of Registration of such Aircraft.

          "Applicable Governmental Program" has the meaning given to such term
in Exhibit D hereto.

          "Applicable Law" means, with respect to any Person, all laws, rules,
regulations and orders of governmental regulatory authorities applicable to such
Person, including, without limitation, the regulations of each Applicable
Aviation Authority applicable to such Person or the Aircraft owned or operated
by it or as to which it has a contractual responsibility.

          "Applicable Regulations" has the meaning given to such term in Section
13.13 hereof.

          "applicants" has the meaning given to such term in Section 6.14(b)
hereof.

          "Appraiser" means any independent appraiser that is a member of the
International Society of Transport Aircraft Trading or any similar organization.

          "Assumed Base Value" means, with respect to any Payment Date, for any
ACS Group Aircraft, the product of (a) the Initial Appraised Value of such ACS
Group Aircraft (or, in the case of any ACS Group Aircraft with respect to which
an ACS Group Aircraft Conversion has been completed, the sum of the Assumed Base
Value for such ACS Group Aircraft as of the Payment Date immediately succeeding
the completion of such ACS Group Aircraft Conversion (assuming such ACS Group
Aircraft Conversion shall not have occurred) plus the aggregate amount of the
Conversion Payments made in respect of such ACS Group Aircraft) and (b) the
quotient obtained by dividing the Depreciation Factor applicable to such ACS
Group Aircraft on the Calculation Date related to such Payment Date by the
Depreciation Factor applicable to such ACS Group Aircraft on the relevant
Closing Date (or, in the case of any ACS Group Aircraft with respect to which an
ACS Group Aircraft Conversion has been completed, on the Payment Date
immediately succeeding the completion of such ACS Group Aircraft Conversion).

          "Assumed Monthly Depreciation" means, with respect to any Payment Date
(a "Current Payment Date"), the sum of the amount, with respect to each ACS
Group Aircraft in the ACS Group Portfolio as of the Calculation Date preceding
the preceding Payment Date (a "Preceding Payment Date") (not including any ACS
Group Aircraft acquired by way of a contribution), obtained by subtracting (x)
the Assumed Base Value of such ACS Group Aircraft with respect to such Current
Payment Date from (y) the Assumed Base Value of such ACS Group Aircraft with
respect to such Preceding Payment Date (or if such Current Payment Date is the
initial Payment Date, the Initial Closing Date), provided that if an Aircraft
Sale or a Non-



                                                                               8


Delivery Event has occurred with respect to any such ACS Group Aircraft after
the Calculation Date preceding such Preceding Payment Date (or the Initial
Closing Date, as applicable), the Assumed Base Value for the purpose of such
calculation of such ACS Group Aircraft with respect to such Current Payment Date
shall be deemed to be zero.

          "Assumed Portfolio Value" means, with respect to any Payment Date and
for all ACS Group Aircraft in the ACS Group Portfolio (not including any ACS
Group Aircraft acquired by way of a contribution), the sum of the product of,
with respect to each ACS Group Aircraft in the ACS Group Portfolio on the
Calculation Date preceding such Payment Date, (a) the Initial Appraised Value of
such ACS Group Aircraft and (b) the quotient obtained by dividing the
Depreciation Factor applicable to such ACS Group Aircraft on such Calculation
Date by the Depreciation Factor applicable to such ACS Group Aircraft on the
relevant Closing Date.

          "Authorized Agent" means, with respect to the Securities of any
subclass, any authorized Paying Agent or Registrar for the Securities of such
subclass.

          "Available Amount" means, as of any date of determination, an amount
equal to the Initial Credit Facility Amount less the aggregate amount of the
Credit Facility Drawings theretofore made by the Initial Credit Facility
Provider under the Initial Credit Facility, prior to such date, which has not
been reimbursed as of such date; provided that, following a Downgrade Drawing, a
Non-Extension Drawing or a Final Drawing, the Available Amount shall be zero.

          "Available Collections" means, as of any Calculation Date, amounts on
deposit in the Collections Account. The Available Collections with respect to
any payment to be made therefrom shall be determined after giving effect to all
payments, if any, having priority to such payment under Section 3.08 hereof.

          "Available Holder Amount" has the meaning given to such term in
Section 3.06(h) hereof.

          "Available Minimum Principal Amount" has the meaning given to such
term in Section 3.06(g) hereof.

          "Avoidance Drawing" has the meaning given to such term in Section
3.14(e) hereof.

          "Avoided Payment" means any amount paid or required to be paid in
respect of any Certificates to a holder of such Certificates which is avoided
under any applicable bankruptcy, insolvency, receivership or similar law in an
insolvency proceeding by or against the Issuer, the Guarantor, any ACS Group
Subsidiary, the Initial Credit Facility Provider or any other provider of an
Eligible Credit Facility and, as a result of such an avoidance event, the
Drawing Agent, the Pass Through Trustee or any holder of such Certificates is
required to return all or any portion of such avoided payment made or to be made
in respect of such Certificates (including any disgorgement from the holders of
the Certificates resulting from any insolvency proceeding, whether such
disgorgement is determined on a theory of preferential conveyance or otherwise).



                                                                               9


          "Back-Up Remarketing Servicer" means the Person acting, at the time of
determination, in the capacity of the back-up remarketing servicer of the ACS
Group under the Back-Up Remarketing Services Agreement or any replacement
agreement therefor. The initial Back-Up Remarketing Servicer is International
Lease Finance Corporation.

          "Back-Up Remarketing Services Agreement" means the Back-Up Remarketing
Services Agreement dated as of the Initial Closing Date among the Issuers, the
Back-Up Remarketing Servicer, the Administrative Agent and the Policy Provider.

          "Base Value" means the value of an ACS Group Aircraft in an open,
unrestricted, stable market environment with a reasonable balance of supply and
demand, and with full consideration of the ACS Group Aircraft's "highest and
best use", presuming an arm's-length, cash transaction between willing, able and
knowledgeable parties, acting prudently, with an absence of duress and with a
reasonable period of time available for marketing, adjusted to account for the
maintenance status of such ACS Group Aircraft (with such assumptions as to use
since the last reported status as may be reasonably stated in the appraisal
setting forth such Base Value).

          "Basic Terms Modification" has the meaning given to such term in
Section 9.01 hereof.

          "Bermudian Remarketing Servicer" means the Person acting, at the time
of determination, in the capacity of the remarketing servicer under the
Bermudian Remarketing Services Agreement. When the Bermudian Remarketing
Services Agreement or the Back-Up Remarketing Services Agreement provides that
the Back-Up Remarking Agent is to perform all or any part of the services called
for by the Bermudian Remarketing Services Agreement in place of the Bermudian
Remarketing Servicer, the terms "Bermudian Remarketing Servicer" and "Bermudian
Remarketing Services Agreement" mean, as to such services, the Back-Up
Remarketing Servicer and the Back-Up Remarketing Services Agreement. The initial
Bermudian Remarketing Servicer is Aircastle Advisor LLC.

          "Bermudian Remarketing Services Agreement" means the Remarketing
Services Agreement dated as of the Initial Closing Date among the Bermudian
Remarketing Servicer, the Issuer, the Guarantor, the Policy Provider and the
Administrative Agent.

          "Bermudian Secretarial Services Provider" means the Person acting, at
the time of determination, in the capacity of the local administrator of the
Guarantor under the local administration agreement with the Guarantor dated as
of the Initial Closing Date (or any successor agreement). The initial Bermudian
Secretarial Services Provider is Codan Services Limited.

          "Bermudian Sellers" means, collectively, Aircastle Investment Holdings
Limited, Aircastle Investment Holdings 2 Limited, Aircastle Bermuda Holding II
Limited, Aircastle Bermuda Holding III Limited, Aircastle Bermuda Holding IV
Limited, Aircastle Bermuda Holding V Limited, Aircastle Bermuda Holding VI
Limited, Aircastle Bermuda Holding IX Limited, ABH 10 Limited and ABH 11 Limited
and "Bermudian Seller" means any one of the foregoing.



                                                                              10


          "Board" means the board of directors of the Issuer.

          "Board Resolution" means a copy of a resolution certified as having
been duly adopted by the Board and being in full force and effect on the date of
such certification.

          "Business Day" means (i) a day on which commercial banks and foreign
exchange markets are open in New York, New York, and, with respect to the
determination or payment of interest on any Floating Rate Security, a day on
which U.S. dollar deposits may be dealt in on the London inter-bank market and,
with respect to payments to or withdrawals from the Non-Trustee Accounts, a day
on which the financial institution at which such account is located is open for
business or (ii) solely with respect to drawings under the Policy, any date
other than a Saturday, a Sunday or a day on which (a) the fiscal agent under
such Policy, at its office specified in the Policy, (b) the Policy Provider, at
its office specified in such Policy, (c) commercial banking institutions in the
cities in which the corporate trust office of the Trustee or (d) insurance
companies in New York, New York are, in any such case, required or authorized by
law or executive order to close; provided that, to the extent action is required
of the Irish Paying Agent, Dublin, Ireland will also be considered in
determining "Business Day" for purposes of determining when such Irish Security
Paying Agent action is required.

          "Calculation Date" means the sixth Business Day immediately preceding
a Payment Date.

          "Cash Collateral Account" means the Senior Cash Collateral Account and
each other Eligible Credit Facility account established as an Account pursuant
to Section 3.01(a) hereof. Neither the Issuer nor the Guarantor shall be deemed
a provider of an Eligible Credit Facility with respect to any Cash Collateral
Account.

          "Cash Management Agreement" means the Cash Management Agreement dated
as of the Initial Closing Date among the Cash Manager, the Trustees, the
Security Trustee and the Issuers.

          "Cash Management Services" means the services described in Section
2.01(a) of the Cash Management Agreement.

          "Cash Manager" means the Person acting, at the time of determination,
in the capacity of the cash manager under the Cash Management Agreement. The
initial Cash Manager is Deutsche Bank Trust Company Americas.

          "Certificate Account" means the account in the name of the Pass
Through Trustee at the Operating Bank with respect to the Certificates.

          "Certificates Purchase Agreement" means the Certificates Purchase
Agreement dated as of June 1, 2006 among the Issuers, Aircastle Limited and
Citigroup Global Markets Inc., on behalf of the Initial Purchasers.

          "Certificates" means the Class G-1 Floating Rate Asset Backed
Certificates Series 2006-1 issued by the ACS Pass Through Trust in the aggregate
initial face amount of



                                                                              11


$560,000,000, including any certificates issued in replacement or substitution
therefor and any refinancing certificate issued to refinance any such
Certificate, in each case pari passu in order of payment priority with the
Certificates.

          "Charitable Trust" means the charitable trust established under the
laws of Ireland which owns 100% of the issued shares of the Irish Parent.

          "Charitable Trust Dividend" means, if the Administrative Agent has
notified the Cash Manager that an annual dividend has been declared by the
Board, $1,500 per annum.

          "Charitable Trustee" means the trustee of the Charitable Trust.

          "Class A Note Target Price" means, as of any date of determination
thereof and with respect to any Aircraft (not including any Aircraft acquired by
way of a contribution), an amount equal to the product of the Designated
Percentage with respect to such Aircraft and the then (determined after the
intended application of Available Collections (but without taking into account
any Net Sale Proceeds from the Aircaft Sale of such Aircraft) as of the next
succeeding Payment Date) Pool Balance of the Certificates.

          "Class A Securities" means, collectively, all Securities designated as
a subclass of Class A, including the Initial Securities so designated
(consisting of the Subclass A-1 Securities issued as of the Initial Closing
Date), all Additional Securities, if any, so designated and all Refinancing
Securities, if any, so designated, in each case, pursuant to this Indenture.

          "Class E Securities" means, collectively, all Securities designated as
a subclass of Class E, including the Initial Securities so designated
(consisting of the Subclass E-1 Securities issued as of the Initial Closing
Date), all Additional Securities, if any, so designated and all Refinancing
Securities, if any, so designated.

          "Clearstream" means Clearstream Banking, societe anonyme, Luxembourg.

          "Closing Date" means in the case of (a) the ACS Group Initial
Securities and the ACS Group Initial Aircraft, the Initial Closing Date or, in
the case of Class E Securities issued in connection with a delivery of the
Remaining Aircraft and the Remaining Aircraft, the applicable Acquisition Date,
(b) any ACS Group Refinancing Securities or ACS Group Additional Securities, the
relevant date of issuance of such ACS Group Securities and (c) any ACS Group
Additional Aircraft, the date of issuance of the ACS Group Additional Securities
issued to finance the acquisition of such ACS Group Additional Aircraft.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Collateral" has the meaning given to such term in the Security Trust
Agreement.

          "Collections" means without duplication (a) Rental Payments and all
other amounts received by any ACS Group Member pursuant to any ACS Group Lease
or Related Collateral Document, (b) amounts transferred from any Cash Collateral
Account to the Collections Account pursuant to Section 3.01(p) hereof, (c)
amounts received in respect of claims for damages or claims in respect of any
breach of contract, (d) amounts received by an



                                                                              12


ACS Group Member in connection with any Aircraft Sale or otherwise received
under any ACS Group Aircraft Agreement, including sale proceeds, Total Loss
Proceeds, Agreed Value Payments, proceeds of Repossession Insurance, Requisition
Compensation and all Partial Loss Proceeds, less, in each case, any expenses
payable by such ACS Group Member to any Person that is not an ACS Group Member
in connection therewith, (e) amounts received by any ACS Group Member from
insurance with respect to any ACS Group Aircraft, (f) any amounts transferred
from a Lessee Funded Account or from the Security Deposit Account into the
Collections Account in accordance with Section 3.07 hereof, (g) any Hedge
Payments, (h) the proceeds of any Investments of the funds in the Accounts
(except (i) to the extent that any such proceeds are required to be paid over to
any Lessee under an ACS Group Lease or (ii) the proceeds of any Investments of
the funds in the Aircraft Purchase Accounts, the Initial Liquidity Payment
Account, or the Credit Facility Reserve Account), (i) any amounts transferred
from the Aircraft Purchase Account into the Collections Account in accordance
with Section 3.04(g) hereof, (j) any amounts received by an ACS Group Member
under an ACS Group Acquisition Agreement, including any loss proceeds and other
amounts under the ACS Group Purchase Agreements, and (k) any other amounts
received by any ACS Group Member (including any amounts received from any other
ACS Group Member, whether by way of distribution, dividend, repayment of a loan
or otherwise, and any proceeds received in connection with any Allowed
Restructuring under this Indenture and the Guarantor Indenture (as defined
herein and therein)); provided that Collections shall not include (i) payments
under the Policy, (ii) Segregated Funds transferred to a Lessee Funded Account,
(iii) security deposits under any ACS Group Lease that are not Segregated Funds
transferred to the Security Deposit Account, (iv) amounts deposited in the
Defeasance/Redemption Account or the Refinancing Account in connection with a
Redemption hereunder or a Guarantor Redemption (which shall not include, for the
avoidance of doubt, any amounts that are amounts described under clauses (a)
through (k) above), (v) amounts received in connection with a Refinancing
hereunder or a Guarantor Refinancing under the Guarantor Indenture, (vi) except
as provided above with respect to any amounts transferred therefrom to the
Collections Account, amounts in any Cash Collateral Account and any Aircraft
Purchase Account, (vii) amounts to be paid to any Person not an ACS Group Member
or expenses incurred in connection with the receipt of any Collections or
amounts otherwise not to be included as Collections pursuant to any Related
Document, in each case subject to the restrictions set forth in this Indenture
and the Guarantor Indenture, and (viii) payments under the Initial Credit
Facility.

          "Collections Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Commission" means the U.S. Securities and Exchange Commission.

          "Company" has the meaning given to such term in the Purchase
Agreement.

          "Concentration Default" means an Event of Default under Section
5.03(a) hereof which would arise if effect were given to any sale, transfer or
other disposition or any purchase or other acquisition pursuant to an Aircraft
Agreement as of the date of such Aircraft Agreement regardless of whether such
sale, transfer or other disposition or purchase or other acquisition is
scheduled or expected to occur after the date of such Aircraft Agreement.



                                                                              13


          "Concentration Limits" has the meaning given to such term in Section
5.03(a) hereof.

          "Contribution Amounts" has the meaning give to such term in Section
3.15 hereof.

          "Control" has the meaning given to such term in Section 5.02(b)
hereof. "Controlled" and "Controlling" have meanings correlative to the
foregoing.

          "Controlling Party" means, at any time of determination, the Policy
Provider until such time as the Covered Class A Securities and the Policy
Provider Obligations have been paid or repaid in full except that if a Policy
Provider Default has occurred and is continuing, the Controlling Party shall be
the Senior Trustee; provided, however, that, for the Initial Credit Facility
and, for any other Eligible Credit Facility, if and only if so provided in the
Board Resolution and Guarantor Board Resolution providing for such Eligible
Credit Facility, at any time from and including the date that is no earlier than
30 months from the earlier to occur of (a) the date on which the entire amount
available under such Eligible Credit Facility shall have been drawn (except as a
result of (i) a Downgrade Drawing or (ii) a Non-Extension Drawing, in each case
not applied to pay expenses, hedge payments or interest in accordance with the
terms hereof) and remain unreimbursed and (b) the date on which the Securities
shall have been Accelerated, the provider of such Eligible Credit Facility shall
have the right to elect, by Written Notice to the Trustee and the Policy
Provider, to become the Controlling Party (in place of the Policy Provider or
the Senior Trustee, as applicable) thereafter (subject to the next succeeding
proviso) but only for so long as any Credit Facility Obligations due to such
provider remain unpaid; provided further that if, notwithstanding the foregoing,
within 15 Business Days after its receipt of any such Written Notice from such
provider of such Eligible Credit Facility (which notice may be given on or after
the 15th Business Day prior to the end of such 30-month period) the Policy
Provider pays to such provider of such Eligible Credit Facility all outstanding
Credit Facility Obligations owing to such provider of such Eligible Credit
Facility in respect of its Eligible Credit Facility, and interest accrued
thereon to such date, the Policy Provider (if it otherwise would have been the
Controlling Party) shall remain the Controlling Party so long as no Policy
Provider Default has occurred and is continuing. At any time after such 30-month
period, if a Policy Provider Default has occurred and is continuing and the
provider of such Eligible Credit Facility does not elect to be the Controlling
Party or if no Credit Facility Obligations remain outstanding, then the Senior
Trustee shall continue to be the Controlling Party.

          "Conversion Agreement" means any agreement entered into from time to
time between the Issuer or Guarantor (or their respective agents) and any
maintenance facility with respect to the conversion of an ACS Group Aircraft to
a freighter or mixed-use aircraft.

          "Conversion Election" has the meaning given to such term in Section
3.06(h) hereof.

          "Conversion Payment" has the meaning given to such term in Section
5.02(i) hereof.



                                                                              14


          "Core Lease Provisions" has the meaning given to such term in Section
5.03(e) hereof.

          "Corporate Obligations" has the meaning given to such term in Section
12.02(a) hereof.

          "Corporate Trust Office" means, with respect to the Trustee for each
subclass of Securities, the office of such Trustee at which at any particular
time its corporate trust business shall be principally administered. The initial
Corporate Trust Office is 60 Wall St., New York, NY 10006, Attention: Structured
Finance Services/Trust & Securities Services, Facsimile No.: (212) 553-2459.

          "Costs" means liabilities, obligations, damages, judgments,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel and costs of investigation).

          "Covenant Defeasance" has the meaning given to such term in Section
12.01(b) hereof.

          "Covered Class A Securities" means the ACS Group Subclass A-1
Securities issued on the Initial Closing Date and any other subclass of ACS
Group Class A Securities for which the corresponding class of Certificates is
supported by a financial guaranty insurance policy issued by the Policy
Provider.

          "Credit Facility Advance Obligations" means all Credit Facility
Obligations other than Credit Facility Expenses.

          "Credit Facility Drawing" has the meaning given to such term in
Section 3.12(a) hereof.

          "Credit Facility Event of Default" has the meaning given to such term
in the Initial Credit Facility.

          "Credit Facility Expenses" means all Credit Facility Obligations other
than (i) the principal amounts under, or the principal amount of any drawings
under, any Eligible Credit Facility, (ii) interest accrued on Credit Facility
Obligations and (iii) Special Indemnity Payments to the Initial Credit Facility
Provider.

          "Credit Facility Interest Class A Shortfall" has the meaning given to
such term in Section 3.06(f) hereof.

          "Credit Facility Obligations" means all principal, interest, fees and
other amounts (including expenses, indemnity payments or costs incurred by the
providers of Eligible Credit Facilities) owing to the providers of Eligible
Credit Facilities.

          "Credit Facility Reserve Account" has the meaning given to such term
in Section 3.01(a) hereof.



                                                                              15


          "Current War Risk Coverage Amount" has the meaning given to such term
in Exhibit D hereto.

          "Default" means a condition, event or act that, with the giving of
notice or the lapse of time or both, would constitute an Event of Default.

          "Default Notice" means a notice given pursuant to Section 4.02 hereof,
declaring all outstanding principal of, and accrued and unpaid interest on the
Securities to be immediately due and payable.

          "Defeasance/Redemption Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Deficiency Drawing" has the meaning given to such term in Section
3.14(b) hereof.

          "Deficiency Shortfall" means has the meaning given to such term in
Section 3.06(i)(ii) hereof.

          "Delivery" means, with respect to any ACS Group Initial Aircraft, the
transfer of the beneficial interest or shares of the ACS Group Member that has
title to such ACS Group Aircraft in accordance with the Purchase Agreement or
the Guarantor Purchase Agreement, as applicable, and, with respect to any ACS
Group Additional Aircraft, the meaning given to such term or any comparable term
in any other ACS Group Acquisition Agreement. The term "Deliver" or "Delivered"
used as verbs have a correlative meaning.

          "Delivery Date" means, with respect to any ACS Group Aircraft, the
date on which Delivery therefor occurs in accordance with the Purchase Agreement
or the Guarantor Purchase Agreement, as applicable, or that or any comparable
term in any other ACS Group Acquisition Agreement.

          "Delivery Expiry Date" means, as to the ACS Group Initial Aircraft,
the meaning given to such term in the Purchase Agreement or the Guarantor
Purchase Agreement, as applicable, or, as to any ACS Group Additional Aircraft,
the meaning given to that or any comparable term in any other ACS Group
Acquisition Agreement.

          "Depreciation Factor" means (a) with respect to each ACS Group Initial
Aircraft on any date of determination, if positive, [1-((1-R)/L)xA]x(1+I)(A/12),
where "R" equals the assumed residual percentage of 0.10 for widebody and
classics airframes and 0.12 for all other airframe types, "L" equals the
Expected Useful Life of such ACS Group Aircraft expressed in months (25 years,
or, in the case of (i) any ACS Group Aircraft that undergoes an ACS Group
Aircraft Conversion, 30 years or (ii) the four B737-330QCs and the A310-300F
Aircraft, 30 years), "A" equals the current age of such ACS Group Aircraft
expressed in months and "I" equals 0.02; provided that, with respect to each ACS
Group Additional Aircraft (not including any ACS Group Additional Aircraft
acquired by way of a contribution), the Depreciation Factor will be determined
by the Directors of the Issuer or the Guarantor, as applicable, in connection
with the issuance of the relevant ACS Group Additional Securities funding the
acquisition of



                                                                              16


such ACS Group Additional Aircraft (subject to the consent of the Policy
Provider, the Initial Credit Facility Provider and receipt of a Rating Agency
Confirmation).

          "Designated Percentage" means, as of any date of determination
thereof, and with respect to any ACS Group Aircraft, the percentage obtained by
dividing the then most recent Assumed Base Value of such ACS Group Aircraft by
the then most recent Assumed Portfolio Value.

          "Developed Markets" has the meaning determined, from time to time, in
accordance with Note (3) to Exhibit C hereof.

          "Direction" has the meaning given to such term in Section 1.04(c)
hereof.

          "Director" means a member of the board of directors of the Issuer.

          "Distribution Date" has the meaning given to such term in the Pass
Through Trust Agreement.

          "Downgrade Drawing" has the meaning given to such term in Section
3.12(c) hereof.

          "Downgrade Event" has the meaning given to such term in the Initial
Credit Facility.

          "Drawing Agent" has the meaning given to such term in the preamble
hereof, or any successor thereto, as drawing agent appointed under the Pass
Through Trust Agreement.

          "DSCR" means, as of any Calculation Date, the amount obtained by
dividing (a) the amount of DSCR Available Cash as of such Calculation Date by
(b) the sum of (i) the DSCR Aggregate Interest Amount for the related Payment
Date and (ii) the DSCR Aggregate Minimum Principal Amount for such Payment Date.

          "DSCR Aggregate Interest Amount" means, with respect to any Payment
Date, the sum of (a) the Interest Amount on the ACS Group Class A Securities for
such Payment Date plus the net amounts payable (or minus the net amounts
receivable) under any Hedge Agreement on such Payment Date (whether or not
actually paid or received on such Payment Date) and (b) (without duplication)
the aggregate Interest Amount on the ACS Group Class A Securities for the
previous five Payment Dates plus the net amounts payable (or minus the net
amounts receivable) under any Hedge Agreement on the related Payment Date
(whether or not actually paid or received on such Payment Date).

          "DSCR Aggregate Minimum Principal Amount" means, with respect to any
Payment Date, the sum of (a) the Minimum Principal Payment Amount for such
Payment Date and (b) (without duplication) the aggregate Minimum Principal
Payment Amount for the previous five Payment Dates.

          "DSCR Available Cash" means, as of any Calculation Date, an amount
equal to the difference between (a) the sum of the aggregate Rental Payments
(not including any



                                                                              17


maintenance reserves which may be Rental Payments) actually received by the ACS
Group during the six-month period ending on such Calculation Date and (b) the
sum of the aggregate Re-leasing Expenses incurred by the ACS Group during the
six-month period ending on such Calculation Date.

          "DSCR Failure" means the occurrence on two consecutive Payment Dates,
each occurring after the 34th month after the Initial Closing Date, of the
amount of DSCR for each such Payment Date equaling less than 1.70.

          "Eligibility Requirements" has the meaning given to such term in
Section 2.03(b) hereof.

          "Eligible Account" means (a) a segregated trust account or demand
deposit account maintained on the books and records of an Eligible Institution
in the name of the Security Trustee as a Securities Account under, and as
defined in, the Security Trust Agreement (except with respect to any demand
deposit account, which shall not be a Securities Account), (b) a deposit or
other account maintained on the books and records of an Eligible Institution in
the name of an ACS Ireland Group Member as a Non-Trustee Account, in compliance
with the terms of the Security Trust Agreement and (c) the Irish VAT Refund
Account and the Irish Rental Account.

          "Eligible Credit Facility" means (a) the Initial Credit Facility, (b)
any credit agreement, letter of credit, guarantee, credit or liquidity
enhancement facility or other credit facility provided by, or guaranteed by a
further such credit facility provided by, an Eligible Provider in favor of any
ACS Group Member and that is, in any such case, subject to the lien of the
Security Trust Agreement and designated by a Board Resolution and Guarantor
Board Resolution as an Eligible Credit Facility or (c) any Account established
for the purpose of providing like credit or liquidity support and designated by
a Board Resolution and Guarantor Board Resolution as an Eligible Credit
Facility.

          "Eligible Institution" means (a) Deutsche Bank Trust Company Americas
in its capacity as the Operating Bank in respect of any Eligible Account, so
long as it (i) has either (A) a long-term unsecured debt rating of A or better
by Standard & Poor's or A2 or better by Moody's or (B) a short-term unsecured
debt rating of A-1 by Standard & Poor's and P-1 by Moody's and (ii) can act as a
securities intermediary under the New York Uniform Commercial Code; (b) any
Irish Bank in respect of the Irish VAT Refund Account or other bank not
organized under the laws of the United States of America or any state thereof or
the District of Columbia (or any branch of a foreign bank licensed under any
such laws) so long as it has either (i) a long-term unsecured debt rating of A
or better by Standard & Poor's or A2 or better by Moody's or (ii) a short-term
unsecured debt rating of A-1+ by Standard & Poor's and P-1 by Moody's; and (c)
any bank organized under the laws of the United States of America or any state
thereof, or the District of Columbia (or any branch of a foreign bank licensed
under any such laws) appointed as the Operating Bank in respect of any Eligible
Account, so long as it (i) has either (A) a long-term unsecured debt rating of
AA or better by Standard & Poor's or Aa2 or better by Moody's by each Rating
Agency or (B) a short-term unsecured debt rating of A-l+ by Standard & Poor's
and P-1 by Moody's and (ii) can act as a securities intermediary under the New
York Uniform Commercial Code, including a Person providing an Eligible Credit
Facility



                                                                              18


so long as such Person shall otherwise so qualify and shall have waived all
rights of set-off and counterclaim with respect to the account to be maintained
as an Eligible Account.

          "Eligible Provider" means a Person whose short-term unsecured debt is
rated A-1+ by Standard & Poor's and P-1 by Moody's or is otherwise designated as
an Eligible Provider by the Board and Guarantor Board subject to the prior
written consent of the Policy Provider and receipt of a Rating Agency
Confirmation.

          "Encumbrance" has the meaning given to such term in Section 5.02(b)
hereof.

          "Engine" means each engine installed (or constituting a spare for an
engine installed) on any ACS Group Aircraft, including any engine replacing a
previously installed engine under the relevant ACS Group Lease, and any and all
Parts incorporated in, installed on or attached to any such engine.

          "Euroclear" means Euroclear Bank, S.A./N.V., as operator of the
Euroclear System.

          "Event of Default" has the meaning, with respect to a class of
Securities, given to such term in Section 4.01 hereof.

          "Excess Policy Rate" has the meaning given to such term in the Policy
Provider Agreement.

          "Exchange Act" means the U.S. Securities Exchange Act of 1934.

          "Expected Final Payment Date" means with respect to (a) the ACS Group
Subclass A-1 Securities, June 15, 2011; (b) the Subclass E-1 Securities, June
15, 2011; and (c) any ACS Group Refinancing Securities or ACS Group Additional
Securities, the Expected Final Payment Date, if any, established by or pursuant
to a Board Resolution, or Guarantor Board Resolution, as applicable, or in any
indenture supplemental hereto or to the Guarantor Indenture, as applicable,
providing for the issuance of such ACS Group Securities or specified in the form
of such ACS Group Securities.

          "Expected Useful Life" means, with respect to each ACS Group Initial
Aircraft, 25 years or, in the case of (i) any ACS Group Aircraft that undergoes
an ACS Group Aircraft Conversion, 30 years or (ii) the four B737-330QCs and the
A310-300F Aircraft, 30 years, and, with respect to any ACS Group Additional
Aircraft (not including any ACS Group Additional Aircraft acquired by way of a
contribution), the "Expected Useful Life" established by or pursuant to a Board
Resolution or Guarantor Board Resolution, as applicable, or in any indenture
supplemental hereto or to the Guarantor Indenture providing for the issuance of
ACS Group Additional Securities to fund the acquisition of such ACS Group
Additional Aircraft or ACS Group Aircraft Conversion (subject to the consent of
the Policy Provider, the Initial Credit Facility Provider and receipt of a
Rating Agency Confirmation, in the case of the issuance of the ACS Group
Additional Securities).

          "Expense Account" has the meaning given to such term in Section
3.01(a) hereof.



                                                                              19


          "Expenses" means, collectively, any Taxes, fees, costs or expenses
Incurred by an ACS Group Member in the course of the business activities
permitted under Section 5.02(e) hereof, including, without limitation, any fees,
expenses and indemnification amounts of, or owing to, any Service Provider, any
Director, any Guarantor Director, any Authorized Agent, the Charitable Trustee,
the Pass Through Trustee, any Lessee (including any amounts required to be
transferred or reimbursed to such Lessee in accordance with the applicable ACS
Group Lease or Related Collateral Documents), any Credit Facility Expenses
(other than any Special Indemnity Payments), any Policy Expenses, and (subject
to a limit of 2% of the average monthly Rental Payments with respect to the
relevant ACS Group Aircraft (or other amount approved by a Board Resolution or
Guarantor Board Resolution, as applicable, with receipt of a Rating Agency
Confirmation and the prior written consent of the Policy Provider with respect
thereto) with respect to each ACS Group Subsidiary entitled thereto) the
shortfall between Rental Payments received by or on behalf of such ACS Group
Subsidiary in respect of an ACS Group Lease of an ACS Group Aircraft and the
amount payable by such ACS Group Subsidiary, as head lease rent with respect of
such ACS Group Aircraft, to another ACS Group Member; provided, however, that,
except as expressly provided herein, Expenses shall not include any amount
payable on the ACS Group Securities, under any Hedge Agreement, any Policy
Premium or any interest accrued on any Policy Premium, any Special Indemnity
Payment or Credit Facility Advance Obligations.

          "Extended Note Pool Factor" means, with respect to each subclass of
Class A Securities, the "Extended Note Pool Factor" set forth in Schedule 5
hereto with respect to such subclass of Securities, as the same may be adjusted
or, with respect to any new subclass of Securities, as may be determined in
accordance with Section 3.11 hereof.

          "Extension Amount" has the meaning given to such term in Section 3.09
hereof.

          "Final Amount" has the meaning given to such term in Section
3.06(i)(iv) hereof.

          "Final Drawing" has the meaning given to such term in Section 3.12(i)
hereof.

          "Final Maturity Date" means (a) with respect to the ACS Group Initial
Securities, the fourth Business Day prior to the Legal Final Distribution Date
and (b) with respect to any ACS Group Refinancing Securities or ACS Group
Additional Securities, the date, if any, specified in the form of such ACS Group
Securities.

          "Final Order" means in respect of an Avoided Payment, a final,
nonappealable order of a court exercising jurisdiction in an insolvency
proceeding by or against the Issuer, the Guarantor, any ACS Group Member, the
Initial Credit Facility Provider or any other provider of an Eligible Credit
Facility.

          "Final Policy Election" has the meaning given to such term in Section
3.14(c) hereof.

          "Fixed Rate Securities" means any Refinancing Securities or Additional
Securities issued with a fixed rate of interest.



                                                                              20


          "Floating Rate Securities" means any Securities constituting Initial
Securities and any Refinancing Securities or Additional Securities issued with a
floating or variable rate of interest.

          "Future Lease" means, with respect to each Aircraft, any aircraft
lease agreement as may be in effect at any time after the relevant Closing Date
between an ACS Ireland Group Member and a Person not an ACS Ireland Group Member
(as lessee or purchaser), in each case other than any Initial Lease or
Additional Lease; provided that if, under any sub-leasing arrangement with
respect to an Aircraft, the lessor thereof agrees to receive payments or
collateral directly from, or is to make payments directly to, the sub-lessee in
any such case to the exclusion of the related Lessee, then the relevant
sub-lease shall constitute the "Lease", and the sub-lessee shall constitute the
related "Lessee" with respect to such Aircraft, but only to the extent of the
provisions of such sub-lease agreement relevant to such payments and collateral
and to the extent agreed by the relevant lessor.

          "Governmental Authority" means any Federal, state, municipal, national
or other government (whether foreign or domestic and including the European
Union) or governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state or local government of the U.S., the U.S., or a foreign
entity or foreign government.

          "guarantee" has the meaning given to such term in Section 5.02(f)
hereof.

          "Guarantee" has the meaning given to such term in Section 11.01
hereof.

          "Guaranteed Obligations" has the meaning given to such term in Section
11.01 hereof.

          "Guaranteed Parties" has the meaning given to such term in Section
11.01 hereof.

          "Guarantor" has the meaning given to such term in the preamble hereof.

          "Guarantor Acquisition Agreements" means the Guarantor Purchase
Agreement and any agreements pursuant to which Guarantor Additional Aircraft are
acquired.

          "Guarantor Additional Aircraft" means any aircraft and any related
Engine acquired by any ACS Bermuda Group Member from a Seller or an affiliate of
a Seller or (upon a receipt of a Rating Agency Confirmation with respect
thereto), from any other Person after the Initial Closing Date (other than any
Guarantor Initial Aircraft, Remaining Aircraft or Substitute Aircraft), in each
case in accordance with the provisions hereof including obtaining the prior
written consent of the Policy Provider other than in the case of any Guarantor
Aircraft acquired by way of a contribution, excluding any such Guarantor
Aircraft after it has been sold or disposed of by way of a completed Aircraft
Sale.

          "Guarantor Additional Lease" means, with respect to each Guarantor
Additional Aircraft, each aircraft lease agreement, conditional sale agreement,
hire purchase agreement or



                                                                              21


other similar arrangement with respect to such Guarantor Additional Aircraft on
the relevant Closing Date.

          "Guarantor Additional Securities" means any Guarantor Securities of
any subclass of the Guarantor Class A Securities (other than the Guarantor
Initial Class A Securities) issued pursuant to the Guarantor Indenture.

          "Guarantor Aircraft" means the Guarantor Initial Aircraft and the
Guarantor Additional Aircraft.

          "Guarantor Aircraft Agreement" means any lease, sublease, conditional
sale agreement, finances lease, hire purchase agreement or other agreement
(other than an agreement relating to maintenance, modification or repairs) or
any purchase option (other than a Purchase Option granted to an ACS Bermuda
Group Member) to purchase a Guarantor Aircraft, in each case pursuant to which
any Person acquires or is entitled to acquire legal title to, or the economic
benefits of ownership of, such Guarantor Aircraft.

          "Guarantor Aircraft Conversion" has the meaning given to "Aircraft
Conversion" in Section 5.02(i) of the Guarantor Indenture.

          "Guarantor Board" means the board of directors of the Guarantor.

          "Guarantor Board Resolution" means a copy of a resolution certified as
having been duly adopted by the Guarantor Board and being in full force and
effect on the date of such certification.

          "Guarantor Class A Securities" means, collectively, all Guarantor
Securities designated as a subclass of Class A, including the Guarantor Initial
Securities so designated (consisting of the Guarantor Subclass A-1 Securities
issued as of the Initial Closing Date), all Guarantor Additional Securities, if
any, so designated and, all Guarantor Refinancing Securities, if any, so
designated, in each case, pursuant to this Indenture.

          "Guarantor Conversion Payments" has the meaning given to "Conversion
Payments" in Section 5.02(i) of the Guarantor Indenture.

          "Guarantor Director" means a member of the board of directors of the
Guarantor.

          "Guarantor Fixed Rate Securities" means any Guarantor Refinancing
Securities or Guarantor Additional Securities issued with a fixed rate of
interest.

          "Guarantor Floating Rate Securities" means any Securities constituting
Initial Securities and any Guarantor Refinancing Securities or Guarantor
Additional Securities issued with a floating or variable rate of interest.

          "Guarantor Future Lease" means, with respect to each Guarantor
Aircraft, any aircraft lease agreement as may be in effect at any time after the
relevant Closing Date between an ACS Bermuda Group Member and a Person not an
ACS Bermuda Group Member (as lessee or purchaser), in each case other than any
Guarantor Initial Lease or Guarantor Additional Lease;



                                                                              22


provided that if, under any sub-leasing arrangement with respect to a Guarantor
Aircraft, the lessor thereof agrees to receive payments or collateral directly
from, or is to make payments directly to, the sub-lessee in any such case to the
exclusion of the related Lessee, then the relevant sub-lease shall constitute
the "Guarantor Lease", and the sub-lessee shall constitute the related "Lessee"
with respect to such Guarantor Aircraft, but only to the extent of the
provisions of such sub-lease agreement relevant to such payments and collateral
and to the extent agreed by the relevant lessor.

          "Guarantor Indenture" means the trust indenture dated as of the
Initial Closing Date among the Guarantor as issuer of the Guarantor Securities
issued thereunder, the Issuer, as guarantor of the Guarantor Securities issued
thereunder, Deutsche Bank Trust Company Americas as the Cash Manager, Deutsche
Bank Trust Company Americas as the trustee thereunder and Drawing Agent, Calyon
as Initial Credit Facility Provider and Financial Guaranty Insurance Company as
Policy Provider.

          "Guarantor Initial Aircraft" means each of the aircraft identified in
Schedule 1 to the Guarantor Indenture (including any related Engines and Parts
and any Remaining Aircraft) and any Substitute Aircraft, excluding any such
aircraft (or related Aircraft Interest) sold or disposed of by way of a
completed Aircraft Sale and any Remaining Aircraft for which a Substitute
Aircraft is Delivered.

          "Guarantor Initial Class A Securities" means the Guarantor Subclass
A-1 Securities issued on the Initial Closing Date pursuant to the Guarantor
Indenture.

          "Guarantor Initial Lease" means, with respect to each Guarantor
Initial Aircraft, each aircraft lease agreement, conditional sale agreement,
hire purchase agreement or other similar arrangement subject to a written
agreement with respect to such Guarantor Initial Aircraft in existence as of the
date of this Indenture that is listed in Schedule 7 to the Guarantor Purchase
Agreement or with respect to any Substitute Aircraft, each aircraft lease
agreement, conditional sale agreement, hire purchase agreement or other similar
arrangement subject to a written agreement with respect to such Substitute
Aircraft in existence as of the relevant Acquisition Date with respect to such
Substitute Aircraft, as such agreement or arrangement may be amended, modified,
extended, supplemented, assigned or novated from time to time.

          "Guarantor Initial Securities" means the Guarantor Initial Class A
Securities.

          "Guarantor Leases" means the Guarantor Initial Leases, the Guarantor
Future Leases and the Guarantor Additional Leases.

          "Guarantor Modification Payments" has the meaning given to
"Modification Payments" in Section 5.02(i) of the Guarantor Indenture.

          "Guarantor Securities" means the Guarantor Initial Securities, all
Guarantor Additional Securities, if any, all Guarantor Refinancing Securities,
if any, and all Guarantor Securities, if any, issued in replacement or
substitution of a Guarantor Security pursuant to the Guarantor Indenture.



                                                                              23


          "Guarantor Ownership Interest" has the meaning given to "Ownership
Interest" in Section 5.02(b) of the Guarantor Indenture.

          "Guarantor Purchase Agreement" means the Purchase Agreement dated as
of June 15, 2006 between the Bermudian Sellers and the Guarantor.

          "Guarantor Redemption" has the meaning given to "Redemption" in
Section 3.10(c) of the Guarantor Indenture.

          "Guarantor Redemption Date" means the date, which shall in each case
be a Payment Date, on which Guarantor Securities are redeemed pursuant to
Section 3.10 of the Guarantor Indenture.

          "Guarantor Redemption Price" has the meaning given to "Redemption
Price" in the Guarantor Indenture.

          "Guarantor Refinancing" has the meaning given to "Refinancing" in
Section 2.10 of the Guarantor Indenture.

          "Guarantor Refinancing Expenses" means all out-of-pocket costs and
expenses Incurred in connection with an offering and issuance of Guarantor
Refinancing Securities.

          "Guarantor Refinancing Securities" means any subclass of Guarantor
Securities issued by the Guarantor under the Guarantor Indenture at any time and
from time to time after the date thereof, in a Guarantor Refinancing under
Section 2.10 of the Guarantor Indenture.

          "Guarantor Securities" means the Guarantor Initial Securities, all
Guarantor Additional Securities, if any, all Guarantor Refinancing Securities,
if any, and all Guarantor Securities, if any, issued in replacement or
substitution of a Guarantor Security, in each case, pursuant to the Guarantor
Indenture.

          "Guarantor Subclass A-1 Securities" means the Guarantor Initial
Securities that are designated "Subclass A-1 Securities" under the Guarantor
Indenture, all Guarantor Additional Securities, if any, so designated, all
Guarantor Refinancing Securities, if any, so designated and all Guarantor
Securities, if any, issued in replacement or substitution therefor.

          "Guarantor Trustee" means, with respect to each subclass of Guarantor
Securities the Person appointed, at the time of determination, as the trustee of
such subclass of Guarantor Securities in accordance with the Guarantor
Indenture. The initial Guarantor Trustee is Deutsche Bank Trust Company
Americas.

          "Hedge Agreement" means any interest rate or currency hedge, swap,
cap, floor, Swaption, or other interest rate or currency hedging agreement
between the applicable ACS Group Member and any Hedge Provider existing on the
Initial Closing Date (including the Initial Hedge Agreements) or entered into in
accordance with Section 5.02(e)(iv) hereof.



                                                                              24


          "Hedge Breakage Costs" means any amounts payable by any ACS Group
Member to a Hedge Provider as a result of any early termination (however
described or defined therein) of any Hedge Agreement.

          "Hedge Guarantee" has the meaning given to such term in any Hedge
Agreement.

          "Hedge Overview Services Agreement" means the Hedge Overview Services
Agreement dated as of the Initial Closing Date among the Hedge Services Provider
and the Issuers.

          "Hedge Provider" means any counterparty to any ACS Group Member under
any Hedge Agreement.

          "Hedge Payment" means a net payment to be made by a Hedge Provider
into the Collections Account under a Hedge Agreement and includes any such
payment made by a guarantor under any related Hedge Guarantee or any termination
payment received from any counterparty to a Hedge Agreement.

          "Hedge Services Provider" means the Person acting, at the time of
determination, in the capacity of the hedge services provider under the Hedge
Overview Services Agreement. The initial Hedge Services Provider will be
Citibank Canada.

          "Holder" means any Person in whose name (a) a Class A Security or
Class E Security is registered from time to time in the Register for such
Securities or (b) a Guarantor Class A Security is registered from time to time
in the Register (as defined in the Guarantor Indenture) for such Guarantor
Securities.

          "Holder Conversion Election" has the meaning given to such term in
Section 3.06(h) hereof.

          "Incur" has the meaning given to such term in Section 5.02(f) hereof.

          "Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (a) all indebtedness of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (d) all the obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of purchasing
such property or service or taking delivery and title thereto or the completion
of such services, and payment deferrals arranged primarily as a method of
raising finance or financing the acquisition of such property or service, (e)
all obligations of such Person under a lease of (or other agreement conveying
the right to use) any property (whether real, personal or mixed) that is
required to be classified and accounted for as a capital lease obligation under
U.S. GAAP, (f) all Indebtedness of other Persons secured by a lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person, and
(g) all Indebtedness of other Persons guaranteed by such Person.

          "Indenture" has the meaning given to such term in the preamble hereof.



                                                                              25


          "Independent Director" means a Person that is not at the time of its
appointment or at any time when such Person is serving as an Independent
Director and has not been for the five years prior to its appointment as an
Independent Director (i) an employee, officer, director, consultant, customer or
supplier, or the beneficial holder (directly or indirectly) of more than 5% of
any Ownership Interest, of any Aircastle Related Entity; provided, however, that
any such Person may serve as a trustee, manager or director of another special
purpose vehicle that is an Affiliate of the Issuer or Aircastle Limited, or (ii)
a spouse of, or Person related to (but not more remote than first cousins), a
Person referred to at (i) above.

          "Initial Aircraft" means each of the aircraft identified in Schedule 1
hereto (including any related Engines and Parts and any Remaining Aircraft) and
any Substitute Aircraft, excluding any such aircraft (or related Aircraft
Interest) sold or disposed of by way of a completed Aircraft Sale and any
Remaining Aircraft for which a Substitute Aircraft is Delivered or for which the
Aircraft Interest for such Remaining Aircraft is not Delivered by the Delivery
Expiry Date to the Issuer.

          "Initial Appraisal Dates" means the dates as of which the Initial
Appraisers calculated the Base Value of each ACS Group Initial Aircraft, which
date in the case of BK Associates, Inc. is as of October 2005, in the case of
Airclaims Limited is as of November 2005 (except with respect to four ACS Group
Aircraft, which appraisals are as of December 2005) and in the case of Aircraft
Information Services, Inc. is as of November 2005.

          "Initial Appraised Value" means (a) in the case of each ACS Group
Initial Aircraft (other than a Substitute Aircraft), the lessor of the mean and
the median of the appraisals by each of the Initial Appraisers of the Base Value
of such ACS Group Initial Aircraft as of the Initial Appraisal Dates, (b) in the
case of any Substitute Aircraft, the average of the appraisals by each of the
Initial Appraisers of the Base Value of such ACS Group Initial Aircraft as of a
date not more than six months prior to the date of the delivery of such ACS
Group Initial Aircraft and (c) in the case of any ACS Group Additional Aircraft,
the average of the appraisals by each of the Appraisers of the Base Value of
such ACS Group Additional Aircraft as of a date not more than six months prior
to the Closing Date for the issuance of the relevant ACS Group Additional
Securities.

          "Initial Appraisers" means Aircraft Information Services, Inc., BK
Associates, Inc. and Airclaims Limited.

          "Initial Class A Securities" means the Subclass A-1 Securities issued
on the Initial Closing Date.

          "Initial Class E Securities" means the Subclass E-1 Securities issued
on the Initial Closing Date.

          "Initial Closing Date" means June 15, 2006.

          "Initial Credit Facility" means the revolving credit agreement dated
as of the Initial Closing Date among the Initial Credit Facility Provider, the
Issuer, the Guarantor and the Cash Manager, as amended, supplemented or
otherwise modified from time to time in



                                                                              26


accordance with its terms and as so replaced and so designated pursuant to
Section 3.12(e)(iii) hereof.

          "Initial Credit Facility Amount" means $42,000,000.

          "Initial Credit Facility Non-Consent Event" means the occurrence of
the following: (i) the termination of the Initial Credit Facility and (ii) the
payment of all Credit Facility Obligations owed to the Initial Credit Facility
Provider in full.

          "Initial Credit Facility Provider" means Calyon or any provider of an
Eligible Credit Facility so designated by a Board Resolution and a Guarantor
Board Resolution.

          "Initial Expenses" means Expenses related to the issuance of the ACS
Group Initial Securities and the acquisition of the ACS Group Initial Aircraft
(other than Expenses related to the acquisition of the Remaining Aircraft
incurred after the Initial Closing Date).

          "Initial Hedge Agreements" means the series of monthly forward
contracts under the ISDA Master Agreement dated as of June 1, 2006 between the
Issuer and Citibank Canada.

          "Initial Lease" means, with respect to each Initial Aircraft, each
aircraft lease agreement, conditional sale agreement, hire purchase agreement or
other similar arrangement subject to a written agreement with respect to such
Initial Aircraft that is in existence as of the date of this Indenture listed in
Schedule 7 to the Purchase Agreement or with respect to any Substitute Aircraft
, each aircraft lease agreement, conditional sale agreement, hire purchase
agreement or other similar arrangement subject to a written agreement with
respect to such Substitute Aircraft in existence as of the relevant Acquisition
Date with respect to such Substitute Aircraft, as such agreement or arrangement
may be amended, modified, extended, supplemented, assigned or novated from time
to time.

          "Initial Liquidity Payment Account" has the meaning given to such term
in Section 3.01(a) hereof.

          "Initial Outstanding Balance" means, with respect to any subclass of
ACS Group Securities the initial Outstanding Principal Balance thereof on the
date of issuance of such ACS Group Securities.

          "Initial Purchasers" means Citigroup Global Markets Inc., Bear,
Stearns & Co. Inc. and J.P. Morgan Securities Inc.

          "Initial Reserved Cash" means, with respect to the Senior Cash
Collateral Account, $0.

          "Initial Securities" means the Initial Class A Securities and the
Initial Class E Securities.

          "Insolvency Proceeding" means any proceeding of the type referred to
in Section 4.01(e) or (f) hereof in respect of the Issuer.



                                                                              27


          "Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.

          "Insured Minimum Principal Payment Amount" means, with respect to the
Regular Distribution Date following each Calculation Date occuring on or after
the date that is 24 months after the date of an Event of Default under Section
4.01(a) or Section 4.01(b) hereof or an Acceleration of the Securities, the
excess, if any, of (a) the Pool Balance of the Certificates as of such Regular
Distribution Date over (b) the Minimum Target Principal Balance of the ACS Group
Subclass A-1 Securities on the Payment Date that preceded such Regular
Distribution Date by 24 months.

          "Intercompany Loan" has the meaning given to such term in Section
5.02(f)(vi) hereof.

          "Interest Amount" means, with respect to each subclass of ACS Group
Securities (other than any subclass of Class E Securities), on any Payment Date,
(a) the amount of interest accrued and unpaid to such Payment Date at the Stated
Rate of Interest with respect to such subclass of ACS Group Securities for the
Accrual Period ending on such Payment Date (and for any accrued and unpaid
interest for any other Accrual Period, at the Stated Rate of Interest for such
period), determined in accordance with the terms of such subclass of ACS Group
Securities, plus (b) interest at the rate specified in clause (a) above on any
Interest Amount due but not paid on any prior Payment Date.

          "Interest Drawing" has the meaning given to such term in Section
3.14(a) hereof.

          "Interest Shortfall" means has the meaning given to such term in
Section 3.06(i)(i) hereof.

          "Investment" has the meaning given to such term in Section 5.02(c)
hereof.

          "Investment Earnings" means investment earnings on funds on deposit in
any Account net of losses and investment expenses of the Cash Manager in making
such investments.

          "Irish Account Charge" has the meaning given to such term in Section
3.01(a) hereof.

          "Irish Bank" means any bank duly authorized under the laws of Ireland.

          "Irish Parent" means Tormina Holding Limited, a holding company
incorporated under the laws of Ireland which beneficially owns 95% of the issued
shares of the Issuer.

          "Irish Paying Agent" has the meaning given to such term in Section
2.03 hereof. The initial Irish Paying Agent shall be Deutsche International
Corporate Services (Ireland) Limited.

          "Irish Remarketing Servicer" means the Person acting, at the time of
determination, in the capacity of the remarketing servicer under the Irish
Remarketing Services



                                                                              28


Agreement. When the Irish Remarketing Services Agreement or the Back-Up
Remarketing Services Agreement provides that the Back-Up Remarking Agent is to
perform all or any part of the services called for by the Irish Remarketing
Services Agreement in place of the Irish Remarketing Servicer, the terms "Irish
Remarketing Servicer" and "Irish Remarketing Services Agreement" mean, as to
such services, the Back-Up Remarketing Servicer and the Back-Up Remarketing
Services Agreement. The initial Irish Remarketing Servicer is Aircastle Advisor
(Ireland) Limited.

          "Irish Remarketing Servicer's Pro Forma Lease" has the meaning given
to such term in Section 5.03(e) hereof.

          "Irish Remarketing Services Agreement" means the Remarketing Services
Agreement dated as of the Initial Closing Date among the Irish Remarketing
Servicer, the Issuer, the Guarantor, the Policy Provider and the Administrative
Agent.

          "Irish Rental Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Irish Secretarial Services Provider" means the Person providing, at
the time of determination, secretarial services to the Issuer under the
secretarial services letter with the Issuer dated as of the Initial Closing Date
(or any successor agreement). The initial Irish Secretarial Services Provider is
Goodbody Secretarial Limited.

          "Irish Seller" means Aircastle Ireland No. 1 Limited.

          "Irish VAT Refund Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Issuer" has the meaning given to such term in the preamble hereof.

          "Issuers" means, collectively, the Issuer and the Guarantor (in its
capacity as issuer under the Guarantor Indenture).

          "Leases" means the Initial Leases, the Future Leases and the
Additional Leases.

          "Legal Defeasance" has the meaning given to such term in Section
12.01(b) hereof.

          "Legal Final Distribution Date" has the meaning given to such term in
the Pass Through Trust Agreement.

          "Lessee" means each Person who is the lessee of an ACS Group Aircraft
from time to time leased from an ACS Group Member pursuant to an ACS Group
Lease.

          "Lessee Funded Account" has the meaning given to such term in Section
3.01(a) hereof.



                                                                              29


          "LIBOR" means the London interbank offered rate for one month U.S.
dollar deposits, determined pursuant to the Reference Agency Agreement, or such
other interest rate so denominated, with respect to any ACS Group Additional
Securities or ACS Group Refinancing Securities, in an indenture supplemental
hereto and to the Guarantor Indenture for any such ACS Group Securities or in
the form thereof.

          "Listing Agent" means A&L Listing Limited.

          "Material Hedge Agreement Terms" means events of default, termination
events, additional termination events, subordinated hedge payment provisions,
Policy Provider step-in rights, Policy Provider consent rights to amendments,
assignments and transfers, provisions relating to the obligation of the Hedge
Provider to any ACS Group Member to post collateral, find a replacement
counterparty or take other remedial action upon a downgrade in its credit rating
(together with the associated ratings thresholds) and a provision stating that
the Policy Provider is an intended third-party beneficiary.

          "Maximum Commitment" has the meaning given to such term in the Initial
Credit Facility.

          "Minimum Principal Payment Amount" means, with respect to any subclass
of ACS Group Class A Securities, as of any Payment Date, the product of (i) the
ACS Group Class A Security Portion for such Payment Date and (ii) the Assumed
Monthly Depreciation for such Payment Date.

          "Minimum Principal Shortfall" has the meaning given to such term in
Section 3.06(i)(iii) hereof.

          "Minimum Target Principal Balance" means, with respect to the ACS
Group Class A Securities on any Payment Date, the amount set forth in Schedule 3
to this Indenture and set forth in Schedule 3 to the Guarantor Indenture for
such Payment Date, subject to the following adjustment.

If any ACS Group Initial Aircraft ceases to be owned by the ACS Group before the
end of the useful life of such ACS Group Initial Aircraft, the Minimum Target
Principal Balance for each Payment Date occurring after the Calculation Date
next succeeding the date of such cessation will be adjusted to be equal to: (x)
if such Payment Date occurs on or before the fifth anniversary of the Initial
Closing Date, the Assumed Portfolio Value for such Payment Date multiplied by
the ACS Group Class A Security Portion or (y) if such Payment Date occurs after
the fifth anniversary of the Initial Closing Date, the sum for all ACS Group
Initial Aircraft then owned by the ACS Group of the product of (1) the Assumed
Base Value of each such ACS Group Initial Aircraft for such Payment Date, (2)
the ACS Group Class A Security Portion and (3) a fraction (a) the numerator of
which shall be equal to the remaining Expected Useful Life in months of such ACS
Group Aircraft as of such Payment Date and (b) the denominator of which shall be
equal to the remaining Expected Useful Life of such ACS Group Aircraft in months
as of the fifth anniversary of the Initial Closing Date, provided that in no
event the Minimum Target Principal Balance for any Payment Date shall be less
than zero.



                                                                              30


If any ACS Group Initial Aircraft has undergone a conversion, the Minimum Target
Principal Balance for each Payment Date occurring after the Calculation Date
next succeeding the later of the fifth anniversary of the Initial Closing Date
or the date of the completion of such conversion will be adjusted to be equal to
the sum for all ACS Group Initial Aircraft then owned by the ACS Group of the
product of (1) the Assumed Base Value of each such ACS Group Initial Aircraft
for such Payment Date, (2) the ACS Group Class A Security Portion and (3) a
fraction (a) the numerator of which shall be equal to the remaining Expected
Useful Life in months of such ACS Group Aircraft as of such Payment Date and (b)
the denominator of which shall be equal to the remaining Expected Useful Life of
such ACS Group Aircraft in months as of the fifth anniversary of the Initial
Closing Date (for the purpose of this clause (b), the Expected Useful Life of
such ACS Group Aircraft will be deemed to have been extended by 60 months as of
such fifth anniversary), provided that in no event the Minimum Target Principal
Balance for any Payment Date shall be less than zero.

          "Modification Payment" has the meaning given to such term in Section
5.02(i) hereof.

          "Monthly Report" has the meaning given to such term in Section 2.15(a)
hereof.

          "Moody's" means Moody's Investors Service, Inc.

          "Net Sale Proceeds" means, with respect to any sale or other
disposition of any assets, the aggregate amount of cash received or to be
received from time to time (whether as initial or deferred consideration) by or
on behalf of the seller in connection with such transaction after deducting
therefrom (without duplication) (a) reasonable and customary brokerage
commissions and other similar fees and commissions (including fees received by
the Irish Remarketing Servicer under the Irish Remarketing Services Agreement)
and (b) the amount of Taxes payable in connection with or as a result of such
transaction, in each case to the extent, but only to the extent, that the
amounts so deducted are, at the time of receipt of such cash, actually paid to a
Person that is not an Affiliate of the seller and are properly attributable to
such transaction or to the asset that is the subject thereof.

          "No Proceeds Drawing" has the meaning given to such term in Section
3.14(c) hereof.

          "Non-Delivery Event" has the meaning given to such term in Section
3.05(c) hereof.

          "Non-Extension Drawing" has the meaning given to such term in Section
3.12(d) hereof.

          "Non-Extended Facility" has the meaning given to such term in Section
3.12(d) hereof.

          "Non-Performance Period" has the meaning given to such term in Section
3.14(c) hereof.



                                                                              31


          "Non-Significant Subsidiary" means a direct or indirect subsidiary of
the Issuer or Guarantor with respect to which an order or decree described in
Section 4.01(e) has been entered or an event described in Section 4.01(f) has
occurred if, as of the date of the entry of such order or decree or of such
event, as the case may be, such subsidiary, together with all of the
subsidiaries of the Issuer or the Guarantor, as applicable, that have been and
continue to be subject to such order or decree or event, as the case may be,
since the Initial Closing Date, own or lease ACS Group Aircraft having an
aggregate Assumed Base Value of less than 10% of the Assumed Portfolio Value as
of such applicable date of such order or decree or event.

          "Non-Trustee Account" has the meaning given to such term in Section
3.01(g) hereof.

          "Note Pool Factor" means, with respect to each subclass of Class A
Securities on any Payment Date, the "Note Pool Factor" for such Payment Date set
forth in Schedule 4 hereto as the same may be adjusted or, with respect to any
new subclass of Securities, as may be determined in accordance with Section 3.11
hereof.

          "Note Target Price" means, in respect of any Aircraft (not including
any Aircraft acquired by way of a contribution), an amount equal to the product
of (i) the Designated Percentage with respect to such Aircraft and (ii) the sum
of (A) the then Outstanding Principal Balance of the ACS Group Class A
Securities, (B) any accrued but unpaid interest on the ACS Group Class A
Securities, (C) any related Hedge Breakage Costs, (D) any Policy Premium and
Policy Expenses then due and payable to the Policy Provider and (E) any Credit
Facility Expenses then due and payable to the Initial Credit Facility Provider.

          "Notice of Avoided Payment" has the meaning given to such term in the
Policy.

          "Notice of Nonpayment" has the meaning given to such term in the
Policy.

          "Notices" has the meaning given to such term in Section 13.05 hereof.

          "Novations" has the meaning given to such term in the Policy Provider
Agreement.

          "Obligations" means the Secured Obligations and the payments to be
made to either Issuer or any Holder of a Class E Security or Shareholder under
Section 3.08 hereof.

          "Officer's Certificate" means a certificate signed by, with respect to
the Issuer, any Director and, with respect to any other Person, any authorized
officer, director, trustee or equivalent representative.

          "Operating Bank" means the Person acting, at the time of
determination, as the Operating Bank under the Security Trust Agreement. The
initial Operating Bank is Deutsche Bank Trust Company Americas.

          "Opinion of Counsel" means a written opinion signed by legal counsel,
who may be an employee of or counsel to the Issuer, that meets the requirements
of Section 1.03 hereof.



                                                                              32


          "Optional Redemption" means a Redemption of Securities pursuant to
Section 3.10(a) hereof.

          "Outstanding" means (a) with respect to the ACS Group Securities, of
any class or subclass at any time, all ACS Group Securities of such class or
subclass theretofore authenticated and delivered by the Trustee or the Guarantor
Trustee, as applicable, except (i) any such ACS Group Securities cancelled by,
or delivered for cancellation to, the Trustee or the Guarantor Trustee, as
applicable, (ii) any such ACS Group Securities, or portions thereof, for the
payment of principal of and accrued and unpaid interest on which moneys have
been deposited in the applicable Securities Account or distributed to Holders by
the Trustee and the Guarantor Trustee and any such ACS Group Securities, or
portions thereof, for the payment or redemption of which moneys in the necessary
amount have been deposited in the Defeasance/Redemption Account; provided that
if such ACS Group Securities are to be redeemed prior to the maturity thereof in
accordance with the requirements of Section 3.10(a) or 3.10(b) hereof or of the
Guarantor Indenture, as applicable, notice of such redemption shall have been
given as provided in Section 3.10(c) hereof or of the Guarantor Indenture, or
provision satisfactory to the Trustee or Guarantor Trustee, as applicable, shall
have been made for giving such notice, and (iii) any such ACS Group Securities
in exchange or substitution for which other ACS Group Securities, as the case
may be, have been authenticated and delivered, or which have been paid pursuant
to the terms of this Indenture or the Guarantor Indenture, as applicable,
(unless proof satisfactory to the Trustee or the Guarantor Trustee, if
applicable, is presented that any of such ACS Group Securities is held by a
Person in whose hands such ACS Group Security is a legal, valid and binding
obligation of the Issuer or the Guarantor, as applicable); and (b) when used
with respect to any evidence of indebtedness other than any ACS Group Securities
means, at any time, any principal amount thereof then unpaid and outstanding
(whether or not due or payable).

          "Outstanding Balance" has the meaning given to such term in Section
3.14(c) hereof.

          "Outstanding Principal Balance" means, with respect to any ACS Group
Securities, the total principal amount evidenced by such ACS Group Securities
unpaid and outstanding at any time as determined in accordance with Section 3.06
hereof and Section 3.06 of the Guarantor Indenture.

          "Ownership Interest" has the meaning given to such term in Section
5.02(b) hereof.

          "Part" means any part, component, appliance, accessory, instrument or
other item of equipment (other than any Engine) installed in or attached to (or
constituting a spare for any such item installed in or attached to) any ACS
Group Aircraft (other than any Engine).

          "Partial Loss" means, with respect to any ACS Group Aircraft, any
event or occurrence of loss, damage, destruction or the like which is not a
Total Loss.

          "Partial Loss Proceeds" means, with respect to any ACS Group Aircraft,
the total proceeds of the insurance or reinsurance (other than in respect of
liability insurance) paid in respect of any Partial Loss to any ACS Group
Member.



                                                                              33


          "Pass Through Trust Agreement" means the pass through trust agreement
dated as of June 15, 2006 among the Pass Through Trustee and the Issuers, and a
supplement thereto dated as of June 15, 2006 with respect to the ACS Pass
Through Trust and any further supplements thereto (with respect to additional
pass through trusts that may be formed in the future).

          "Pass Through Trustee" means Wilmington Trust Company.

          "Paying Agent" has the meaning given to such term in Section 2.03
hereof.

          "Payment Date" means the 15th day of each month, commencing on July
15, 2006; provided that (a) if any Payment Date would otherwise fall on a day
that is not a Business Day, such Payment Date shall be the first following day
that is a Business Day and (b) the Payment Date in June 2031 shall be the fourth
Business Day prior to the Legal Final Distribution Date.

          "Permitted Account Investments" means, in each case (except with
regard to clause (f) hereof), book-entry securities, negotiable instruments or
securities in bearer or registered form that evidence:

          (a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America (having original maturities of
no more than 365 days, or such lesser time as is required for the distribution
of funds);

          (b) demand deposits, time deposits or certificates of deposit of the
Operating Bank or of depository institutions or trust companies organized under
the laws of the United States of America or any state thereof, or the District
of Columbia (or any domestic branch of a foreign bank) (i) having original
maturities of no more than 365 days, or such lesser time as is required for the
distribution of funds; provided that at the time of Investment or contractual
commitment to invest therein, the short-term debt rating of such depository
institution or trust company shall be at least A-1 by Standard & Poor's, P-1 by
Moody's or (ii) having maturities of more than 365 days and, at the time of the
Investment or contractual commitment to invest therein, a rating of AA by
Standard & Poor's and Aa2 by Moody's; provided that, during any applicable
period, not more than 20% of the Issuers' aggregate Permitted Account
Investments may be made in investments described under this clause (b);

          (c) corporate or municipal debt obligations (including, without
limitation, commercial paper) (i) having remaining maturities of no more than
365 days, or such lesser time as is required for the distribution of funds,
having, at the time of the Investment or contractual commitment to invest
therein, a rating of at least A-1+ or AA by Standard & Poor's and P-1 or Aa2 by
Moody's or (ii) having maturities of more than 365 days and, at the time of the
Investment or contractual commitment to invest therein, a rating of AA by
Standard & Poor's and Aa2 by Moody's;

          (d) Investments in money market funds (including funds in respect of
which the Trustee or any of its Affiliates is investment manager or advisor)
having a rating of at least AA by Standard & Poor's and Aa2 by Moody's; or



                                                                              34


          (e) notes or bankers' acceptances (having original maturities of no
more than 365 days, or such lesser time as is required for the distribution of
funds) issued by any depository institution or trust company referred to in (b)
above;

          provided, however, that no Investment shall be made in any obligations
of any depository institution or trust company which has a contractual right to
set off and apply any deposits held, and other indebtedness owing, by any ACS
Group Member to or for the credit or the account of such depository institution
or trust company; provided further that if, at any time, the rating of any of
the foregoing investments falls below "BBB" by Standard & Poor's or "Baa2" by
Moody's, such downgraded investment shall no longer constitute a "Permitted
Account Investment".

          "Permitted Accruals" has the meaning given to such term in Section
3.08(a) hereof and in Section 3.08(a) of the Guarantor Indenture.

          "Permitted Additional Aircraft Acquisition" has the meaning given to
such term in Section 5.02(h) hereof.

          "Permitted Encumbrance" has the meaning given to such term in Section
5.02(b) hereof.

          "Person" means any natural person, firm, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any political subdivision
thereof or any other legal entity, including public bodies.

          "Pledged Beneficial Interest" has the meaning given to such term in
the Security Trust Agreement.

          "Pledged Debt" has the meaning given to such term in the Security
Trust Agreement.

          "Pledged Share" has the meaning given to such term in the Security
Trust Agreement.

          "Policy" means the Financial Guarantee Insurance Policy No. 06030066,
issued as of the Initial Closing Date by the Policy Provider, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.

          "Policy Drawing" means any payment of a claim under the Policy.

          "Policy Expenses" means all amounts (including, but not limited to,
all amounts in respect of fees, indemnities or costs and expenses incurred by
the Policy Provider, including, without limitation, in connection with the
enforcement, defense or preservation of any rights in respect of any of the
Related Documents) due to the Policy Provider under the Policy Provider
Agreement or any other Policy Provider Document other than (i) reimbursement of
any Policy Drawing, (ii) any Policy Premium and Policy Redemption Premium, if
any, (iii) any interest accrued on any Policy Drawings or any Policy Premium,
and (iv) reimbursement of and interest



                                                                              35


on any Credit Facility Advance Obligations in respect of any Eligible Credit
Facility paid by the Policy Provider to any provider of an Eligible Credit
Facility.

          "Policy Fee Letter" means the fee letter, dated as of June 15, 2006
from the Policy Provider to the Issuer, Guarantor, the Trustees and the Drawing
Agent setting forth the Policy Premium and certain other amounts payable in
respect of the Policy.

          "Policy Non-Consent Event" means the occurrence of (i) the payment of
the Certificates in full, (ii) the termination and surrender of the Policy to
the Policy Provider for cancellation and (iii) the payment of all Policy
Provider Obligations in full.

          "Policy Premium" has the meaning given to such term in the Policy Fee
Letter.

          "Policy Provider" means Financial Guaranty Insurance Company, a New
York stock insurance company.

          "Policy Provider Agreement" means the Insurance and Indemnity
Agreement, dated as of the date of issuance of the Certificates, among the
Drawing Agent, the Issuer, the Guarantor, the Trustee, the Guarantor Trustee,
the Pass Through Trustee and the Policy Provider.

          "Policy Provider Default" means the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure by the
Trustee, the Guarantor Trustee, Cash Manager, Operating Bank or the
Administrative Agent to the Policy Provider, or (b) the Policy Provider (i)
files any petition or commences any case or proceeding under any provisions of
any federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) makes a general assignment for the benefit
of its creditors or (iii) has an order for relief entered against it under any
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization that is final and nonappealable, or (c) a court of
competent jurisdiction, the New York Insurance Department or another competent
judicial or regulatory authority enters a final and nonappealable order,
judgment or decree (i) appointing a custodian, trustee, agent or receiver for
the Policy Provider or for all or any material portion of its property or (ii)
authorizing the taking of possession by a custodian, trustee, agent or receiver
of the Policy Provider (or taking of possession of all or any material portion
of the Policy Provider's property).

          "Policy Provider Documents" means the Policy, the Policy Fee Letter,
the Policy Provider Agreement and the Policy Provider Indemnification Agreement.

          "Policy Provider Indemnification Agreement" means the Indemnification
Agreement dated as of June 1, 2006 entered into among the Policy Provider, the
Issuer, the Guarantor and the Initial Purchasers.

          "Policy Provider Obligations" means all reimbursements and other
amounts, including without limitation, fees, expenses, interest and indemnities,
due to the Policy Provider hereunder, or under the Policy Provider Documents,
all such amounts to be paid only as



                                                                              36


expressly provided hereunder and without duplication whether by reason of any
rights of subrogation or otherwise.

          "Policy Redemption Premium" has the meaning given to such term in the
Policy Fee Letter.

          "Pool Balance" has the meaning given to such term in the Pass Through
Trust Agreement.

          "Precedent Lease" has the meaning given to such term in Section
5.03(e) hereof.

          "Primary Expenses" means all Expenses other than ACS Group
Modification Payments and ACS Group Refinancing Expenses.

          "Principal Conversion Election" has the meaning given to such term in
Section 3.06(g) hereof.

          "Prior Ranking Amounts" has the meaning given to such term in Section
3.08(a) hereof.

          "Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in Section 2.02(a) hereof.

          "Prohibited Countries" has the meaning determined, from time to time,
in accordance with Section 5.03(a) hereof.

          "Purchase Agreement" means the Purchase Agreement dated as of June 15,
2006 between the Irish Seller and the Issuer.

          "Purchase Option" means a contractual option granted by the lessor or
owner under an ACS Group Aircraft Agreement (including pursuant to a conditional
sale agreement) as to the purchase of the applicable ACS Group Aircraft.

          "Quarterly Report" has the meaning given to such term in Section
2.15(a) hereof.

          "Rating Agency" means each of Moody's and Standard & Poor's and any
other nationally recognized rating agency designated by the Issuers; provided
that such organizations shall only be deemed to be a Rating Agency for purposes
of this Indenture with respect to the Certificates they are then rating.

          "Rating Agency Confirmation" means a prior written confirmation from
each (unless specified otherwise) Rating Agency received by the Issuers and the
Trustees that a specified action or event shall not result in the downgrade,
qualification or withdrawal of such Rating Agency's then current credit rating,
if any, of any Certificates (such rating, in the case of the Certificates, as
determined without regard to the Policy).

          "Received Currency" has the meaning given to such term in Section
13.07(a) hereof.



                                                                              37


          "Receiver" means any Person or Persons appointed as (and any
additional Person or Persons appointed or substituted as) administrative
receiver, receiver, manager or receiver and manager.

          "Record Date" means, with respect to each Payment Date, the close of
business on the day that is 15 days prior to such Payment Date or, if 15 days
has not passed since the Initial Closing Date, the Initial Closing Date, in any
event whether or not such day is a Business Day.

          "Redemption" has the meaning given to such term in Section 3.10(c)
hereof.

          "Redemption Date" means the date, which shall in each case be a
Payment Date, on which Securities of any subclass are redeemed pursuant to
Section 3.10 hereof.

          "Redemption Premium" means in respect of any Initial Class A Security
being redeemed in an Optional Redemption on any date, the Redemption Premium
indicated for such Initial Security with respect to such date in the table
below:



               REDEMPTION DATE                 SUBCLASS A-1
--------------------------------------------   ------------
On or after the Initial Closing Date               103%
On or after the date that is 11 months after
   the Initial Closing Date                        102%
On or after the date that is 21 months after
   the Initial Closing Date                        101%
On or after the date that is 31 months after
   the Initial Closing Date                        100%


          "Redemption Price" means an amount (determined as of the Calculation
Date for the Redemption Date for any Redemption pursuant to Section 3.10(a)
hereof) equal to:

          (a) with respect to any Initial Class A Securities being redeemed and
except as otherwise provided in clause (d) below, the product of the applicable
Redemption Premium and the portion of the Outstanding Principal Balance being
redeemed;

          (b) with respect to any Class E-1 Securities being redeemed and except
as otherwise provided in clause (c) below, the Outstanding Principal Balance
being redeemed;

          (c) with respect to any Securities being redeemed under Section
3.10(a) hereof after the giving of a Default Notice or the Acceleration of any
of the Securities or under Section 3.10(b) hereof, the then Outstanding
Principal Balance thereof; and

          (d) with respect to any Securities other than the Initial Securities,
as provided in the Board Resolution providing for the issuance of such
Securities.

          "Reference Agency Agreement" means the Reference Agency Agreement
dated as of the Initial Closing Date, among the Issuers, the Reference Agent and
the Cash Manager pursuant to which LIBOR is determined from time to time.



                                                                              38


          "Reference Agent" means the Person acting, at the time of
determination, in the capacity of the Reference Agent under the Reference Agency
Agreement. The initial Reference Agent is Deutsche Bank Trust Company Americas.

          "Reference Date" means, with respect to each Accrual Period, the day
that is two Business Days prior to the commencement of such Accrual Period.

          "Refinancing" has the meaning given to such term in Section 2.10(a)
hereof.

          "Refinancing Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Refinancing Expenses" means all out-of-pocket costs and expenses
Incurred in connection with an offering and issuance of Refinancing Securities
and any corresponding refinancing of the Certificates.

          "Refinancing Securities" means any subclass of Securities issued by
the Issuer under this Indenture at any time and from time to time after the date
hereof, in a Refinancing under Section 2.10 hereof.

          "Register" has the meaning given to such term in Section 2.07(a)
hereof.

          "Regular Distribution Date" has the meaning given to such term in the
Pass Through Trust Agreement.

          "Regulation" has the meaning given to such term in Section 2.18
hereof.

          "Related Collateral Document" means any letter of credit, third-party
or bank guarantee or cash collateral provided by or on behalf of a Lessee to
secure such Lessee's obligations under an ACS Group Lease.

          "Related Documents" means the Administrative Agency Agreement, the
Cash Management Agreement, each Eligible Credit Facility, this Indenture, the
Guarantor Indenture, the ACS Group Securities, the Reference Agency Agreement,
the Security Documents, the Policy Provider Documents, the Remarketing Services
Agreements, the Back-Up Remarketing Services Agreement, the Hedge Overview
Services Agreement, the ACS Group Purchase Agreements and any other ACS Group
Acquisition Agreement, any Hedge Agreements and any Hedge Guarantees.

          "Re-leasing Expenses" means, with respect to any period, all
out-of-pocket costs and expenses incurred by the ACS Group in connection with
the re-leasing of ACS Group Aircraft during such period, including but not
limited to the following:

          (a) storage, maintenance, test flight, navigation, landing, ferry
flights, shipping, fuel, reconfiguration, modification, refurbishment and repair
expenses incurred in connection with the re-leasing of such ACS Group Aircraft
during such period;



                                                                              39


          (b) insurance premiums, fees and expenses incurred by or on behalf of
the ACS Group for possessed hull and liability insurance while such ACS Group
Aircraft is off-lease during such period;

          (c) expenses incurred in connection with the acceptance of delivery,
and in connection with the transition of such ACS Group Aircraft, to such
re-lease during such period; and

          (d) outside legal counsel fees and expenses and other professional
fees and expenses, and all court costs, filing fees, bonding costs and other
expenses, and other governmental fees and costs related to any re-lease of such
ACS Group Aircraft during such period;

provided that Re-leasing Expenses shall not include those expenses against
which, under leases that require maintenance reserves to be paid, lessees
customarily pay maintenance reserves.

          "Relevant Information" means any information provided to the Cash
Manager by any Service Provider or any other service provider retained from time
to time by an ACS Group Member pursuant to the Related Documents.

          "Remaining Aircraft" has the meaning given to such term in the
Purchase Agreement or the Guarantor Purchase Agreement, as applicable.

          "Remaining Aircraft Allocation Amount" has the meaning given to such
term in Section 2.11 hereof.

          "Remarketing Servicers" means, collectively, the Irish Remarketing
Servicer and the Bermudian Remarketing Servicer.

          "Remarketing Services Agreements" means, collectively, the Irish
Remarketing Services Agreement and the Bermudian Remarketing Services Agreement.

          "Renewal Lease" has the meaning given to such term in Section 5.03(e)
hereof.

          "Rental Account" has the meaning given to such term in Section 3.01(a)
hereof.

          "Rent Payment Reimbursement Amount" means, for any Aircraft to be
Delivered, the Investment Earnings on the funds deposited in the related
Aircraft Purchase Account received during the relevant Rent Transfer Period.

          "Rental Payments" means all rental payments and other amounts
equivalent to a rental payment payable by or on behalf of a Lessee under an ACS
Group Lease, including payments under any Purchase Option.

          "Rent Transfer Period" means, for each Aircraft to be Delivered, the
period from the Initial Closing Date and ending on (but excluding) the first
Calculation Date thereafter and each successive period beginning on (and
including) a Calculation Date and ending on (but excluding) the next succeeding
Calculation Date.



                                                                              40


          "Replacement Credit Facility" means, for the Initial Credit Facility,
an irrevocable revolving credit agreement (or agreements) in substantially the
form of the Initial Credit Facility, including reinstatement provisions, or in
such other form or forms (which may include a letter of credit, surety bond,
swap, financial insurance policy or guaranty) as shall permit the Rating
Agencies to confirm in writing their respective ratings then in effect for the
Certificates (before downgrading of such ratings, if any, as a result of the
downgrading of the ratings of the replaced Initial Credit Facility Provider;
such rating as determined without regard to the Policy) and, if not in form and
substance substantially the same as the Initial Credit Facility as reasonably
determined by the Policy Provider, that has been approved in writing by the
Policy Provider, in a face amount (or in an aggregate face amount) equal to the
then Maximum Commitment for the replaced Initial Credit Facility and issued by
an Eligible Provider or Eligible Providers having an unsecured short-term or
long-term (as the case may be) debt rating and a short-term or long-term (as the
case may be) issuer credit rating, as the case may be, issued by Moody's and
Standard & Poor's which are equal to or higher than the Threshold Rating (and
consented to in writing by the Policy Provider if any such rating which is equal
to the Threshold Rating shall not have a stable or positive outlook according to
the Rating Agencies) or, with the written consent of the Policy Provider, such
other ratings and qualifications as shall permit the Rating Agencies to confirm
in writing their respective ratings then in effect for the Certificates (before
the downgrading of such ratings, if any, as a result of the downgrading of the
ratings of the replaced Initial Credit Facility Provider; such rating as
determined without regard to the Policy). Without limitation of the form that a
Replacement Credit Facility otherwise may have pursuant to the preceding
sentence, a Replacement Credit Facility may have a stated expiration date
earlier than 15 days after the Final Maturity Date of the ACS Group Subclass A-1
Securities so long as such Replacement Credit Facility provides for a
Non-Extension Drawing as contemplated by Section 3.12(d).

          "Replacement Credit Facility Provider" means a Person (or Persons) who
issues a Replacement Credit Facility.

          "Repossession Insurance" has the meaning given to such term in Section
5.03(g) hereof and Section 5.03(g) of the Guarantor Indenture.

          "Required Amount" means, (a) initially (i) with respect to the Initial
Credit Facility, zero; provided that, if a Downgrade Drawing, a Non-Extension
Drawing or (for the purposes of Section 3.12(f)(ii) hereof and Article II of the
Initial Credit Facility only) a Final Drawing shall have occurred, the "Required
Amount" shall be the Maximum Commitment, and (ii) with respect to the Senior
Cash Collateral Account, an amount equal to the Initial Reserved Cash therefor,
and (b) thereafter, on any Payment Date, with respect to the Senior Cash
Collateral Account, and any other Eligible Credit Facility, such amounts as
designated in a Board Resolution and Guarantor Board Resolution (and for which a
Rating Agency Confirmation has been received and prior written consent of the
Policy Provider and the Initial Credit Facility Provider has been received),
plus the increase, if any, in the Required Amount for any such Cash Collateral
Account or Eligible Credit Facility provided for by the terms of any ACS Group
Additional Securities or ACS Group Refinancing Securities.

          "Required Expense Amount" means, with respect to each Payment Date,
the amount of Expenses of the ACS Group due and payable on the Calculation Date
relating to such Payment Date or reasonably anticipated to become due and
payable before the next succeeding



                                                                              41


Payment Date, the accrual of which would be prudent in light of the size and
timing of such Expenses, and with respect to any maintenance expenditures,
before the third succeeding Payment Date, to the extent such Expenses consist of
(a) Primary Expenses and (b) any ACS Group Modification Payments or ACS Group
Refinancing Expenses in respect of which a Permitted Accrual was previously
effected by a deposit in the Expense Account (whether or not any such deposit
has been previously used to pay any other Primary Expense but excluding any
portion of such deposit previously used to pay any ACS Group Modification
Payments or ACS Group Refinancing Expenses) in each case after giving effect to
any withdrawal from any Lessee Funded Account or any drawing upon a Related
Collateral Document that is then available for the payment of any such Expense;
provided, however, that the Required Expense Amount shall not include any
Initial Expenses.

          "Required Expenses Shortfall" has the meaning given to such term in
Section 3.06(f) hereof.

          "Requisition Compensation" means all monies or other compensation
receivable by any ACS Group Member from any government, whether civil, military
or de facto, or public or local authority in relation to an ACS Group Aircraft
in the event of its requisition for title, confiscation, restraint, detention,
forfeiture or compulsory acquisition or seizure or requisition for hire by or
under the order of any government or public or local authority.

          "Responsible Officer" means (a) with respect to the Trustee, any
officer within the Corporate Trust Office, including any Vice President,
Managing Director, Assistant Vice President, Director or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the above designated officers and also, with respect to a particular matter,
any other officer to whom such matter is referred because of such officer's
knowledge and familiarity with the particular subject, (b) with respect to the
Issuer, any Director and (c) with respect to any Person providing an Eligible
Credit Facility and the Cash Manager or any other Service Provider, any
authorized officer of such Person.

          "Restricted Security" means any Security bearing the Private Placement
Legend.

          "Secured Obligations" has the meaning given to such term in the
Security Trust Agreement.

          "Secured Parties" has the meaning given to such term in the Security
Trust Agreement.

          "Securities" means the Initial Securities, all Additional Securities,
if any, all Refinancing Securities, if any, and all Securities, if any, issued
in replacement or substitution of a Security, in each case, pursuant to this
Indenture.

          "Securities Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Securities Act" means the Securities Act of 1933.



                                                                              42


          "Security Deposit Account" has the meaning given to such term in
Section 3.01(a) hereof.

          "Security Documents" means the Security Trust Agreement and any
document executed pursuant thereto, or otherwise, for the purpose of granting a
security interest in any Collateral to the Security Trustee for the benefit of
the Secured Parties or for the purpose of perfecting such security interest.

          "Security Interests" means the security interests granted or expressed
to be granted in the Collateral pursuant to the Security Trust Agreement.

          "Security Trust Agreement" means the Security Trust Agreement dated as
of the Initial Closing Date, among the Issuers, the Security Trustee, the Cash
Manager, the Operating Bank and each other party thereto.

          "Security Trustee" means the Person appointed, at the time of
determination, as the trustee for the benefit of the Secured Parties pursuant to
Section 5.01 of the Security Trust Agreement. The initial Security Trustee is
Deutsche Bank Trust Company Americas.

          "Segregated Funds" means, with respect to each ACS Group Lease, (a)
all security deposits provided for under such ACS Group Lease that have been
received from the relevant Lessee or pursuant to the relevant ACS Group
Acquisition Agreement with respect to such ACS Group Lease, (b) any security
deposit pledged to the relevant Lessee by an ACS Group Member and (c) all other
funds, including any maintenance reserves, received from the relevant Lessee or
pursuant to the relevant ACS Group Acquisition Agreement with respect to such
ACS Group Lease and in each case of clause (a), (b) and (c) not permitted,
pursuant to the terms of such ACS Group Lease, to be commingled with the funds
of the ACS Group.

          "Sellers" means the Irish Seller and the Bermudian Sellers and any
Affiliates thereof that are sellers of (i) a Company or U.S. Trust or (ii)
entities that own an Additional Aircraft or a related Aircraft Interest, in each
case to an ACS Group Member.

          "Senior Cash Collateral Account" has the meaning given to such term in
Section 3.01(a) hereof. The Senior Cash Collateral Account is an Eligible Credit
Facility.

          "Senior Cash Collateral Event" has the meaning given to such term in
Section 3.01(p) hereof.

          "Senior Claim" means, with respect to any Obligations (other than
Expenses), all other Obligations the payment of which constitutes a Prior
Ranking Amount with respect thereto.

          "Senior Claimant" means the holder of a Senior Claim.

          "Senior Class" means (a) with respect to the Securities, (i) so long
as any Class A Securities are Outstanding, the Class A Securities and (ii) after
the Class A Securities have been paid in full, the Class E Securities and (b)
with respect to the Guarantor Securities, the Guarantor Class A Securities.



                                                                              43


          "Senior Hedge Payment" means, on any Payment Date, a net payment to a
Hedge Provider by any ACS Group Member (including, but not limited to, any Hedge
Breakage Costs payable by any ACS Group Member to a Hedge Provider if such Hedge
Breakage Costs result from an early termination of the related Hedge Agreement,
unless the applicable Hedge Provider is the "Defaulting Party" or an "Affected
Party" (as such terms are defined in the related Hedge Agreement); provided
that, where the applicable Hedge Provider is an "Affected Party", such Hedge
Breakage Costs are Senior Hedge Payments unless subordinated pursuant to the
applicable Hedge Agreement), other than any Subordinated Hedge Payment.

          "Senior Hedge Payments Shortfall" has the meaning given to such term
in Section 3.06(f) hereof.

          "Senior Trustee" means the Trustee of the Senior Class; provided that
if the same Person shall not be the Trustee of each of the subclasses of the
Senior Class, then the Senior Trustee shall be the Trustee of the subclass of
such Securities with the lowest numerical designation then Outstanding. If as a
result of the foregoing, the Senior Trustee and the Operating Bank are not the
same Person, the Senior Trustee shall assume the obligations of the Operating
Bank under, and become a party to, the Security Trust Agreement.

          "Service Provider" means each of the Operating Bank, the Remarketing
Servicers, the Back-Up Remarketing Servicer, the Trustee, the Guarantor Trustee,
the Security Trustee, any Authorized Agent, the Administrative Agent, the Cash
Manager, the Hedge Services Provider, the Bermudian Secretarial Services
Provider, the Irish Secretarial Services Provider, the Drawing Agent and the
Reference Agent.

          "Shareholders" means the holder(s) of the shares of the Guarantor as
shall be notified from time to time by the Guarantor to the Trustee and the
Guarantor Trustee.

          "Shareholders Account" has the meaning given to such term in Section
3.01(a) hereof.

          "Special Distribution Date" has the meaning given to such term in the
Pass Through Trust Agreement.

          "Special Indemnity Payments" means (a) any indemnity amounts owing at
any time and from time to time by either Issuer to the Initial Purchasers under
the Certificates Purchase Agreement, to the Remarketing Servicer under Section
12.01 of the applicable Remarketing Services Agreement (exclusive of such
indemnities owing to the Back-Up Remarketing Servicer), to the Policy Provider
under the Policy Provider Indemnification Agreement or to the Initial Credit
Facility Provider under Sections 3.01 and 3.09 of the Initial Credit Facility
and (b) any other indemnity amounts owing at any time and from time to time to
any other Person (other than the Back-Up Remarketing Servicer) party to a
Related Document which arise from violations of the Securities Act, the U.S.
Securities Exchange Act of 1934, as amended or any other securities law.



                                                                              44


          "Specified Aircraft" means the ACS Group Initial Aircraft with respect
to which the Lessee under the related ACS Group Lease shall have entered into a
Novation with respect to such ACS Group Lease.

          "Specified Number" means 33 minus the number of ACS Group Initial
Aircraft purchased by the Issuers within five Business Days of the Initial
Closing Date (or such longer period as the Policy Provider may agree in
writing).

          "Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.

          "State of Registration" means, in relation to an Aircraft at any time,
the country or state on whose national register such Aircraft is registered at
that time under the laws of such country or state in accordance with the
applicable provisions of any Lease relating to such Aircraft or, in the absence
of any such provisions, Applicable Law.

          "Stated Expiration Date" has the meaning given to such term in Section
3.12(d) hereof.

          "Stated Rate of Interest" means (i) with respect to each subclass of
ACS Group Securities (other than Class E Securities), the interest rate set
forth in such ACS Group Securities and (ii) with respect to the Certificates,
has the meaning given to such term in the Pass Through Trust Agreement.

          "Subclass A-1 Securities" means the Initial Securities that are
designated "Subclass A-1 Securities" under the Indenture, all Additional
Securities, if any, so designated, all Refinancing Securities, if any, so
designated and all Securities, if any, issued in replacement or substitution
therefor, in each case, pursuant to this Indenture.

          "Subclass E-1 Securities" means the Initial Securities that are
designated Subclass E-1 Securities, all Additional Securities, if any, so
designated, all Refinancing Securities, if any, so designated and all
Securities, if any, issued in replacement or substitution therefor, in each
case, pursuant to this Indenture.

          "Subordinated Claim" means a claim that is subordinate in right of
payment to each Senior Claim as provided in Section 3.08 hereof.

          "Subordinated Claimant" means the holder of a Subordinated Claim.

          "Subordinated Hedge Payments" means any amounts payable by any ACS
Group Member to a Hedge Provider that are subordinated in accordance with the
relevant Hedge Agreement (including, but not limited to, any Hedge Breakage
Costs payable by any ACS Group Member to a Hedge Provider if such Hedge Breakage
Costs result from an early termination of the related Hedge Agreement with
respect to which such Hedge Provider is the "Defaulting Party" or, to the extent
subordinated in any Hedge Agreement, an "Affected Party" (as such terms are
defined in the related Hedge Agreement)).



                                                                              45


          "Subordinated Representative" means, as applicable, the Issuer with
respect to any Subordinated Claim consisting of any of the Class E Securities,
the Trustee with respect to any Subordinated Claim consisting of any subclass of
Securities of which it is the Trustee and any other Person acting as the
representative of one or more Subordinated Claimants.

          "Substitute Aircraft" has the meaning given to such term in the
Purchase Agreement or the Guarantor Purchase Agreement, as applicable, and that
has been approved by the Policy Provider.

          "Swaption" means any option agreement with respect to a Hedge
Agreement.

          "Taxes" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs Incurred or imposed with respect thereto) imposed or otherwise
assessed by any Governmental Authority, including, without limitation: taxes or
other charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth and similar charges; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods
and services, gains taxes, license, registration and documentation fees, customs
duties, tariffs, and similar charges.

          "Termination Notice" has the meaning given to such term in the Initial
Credit Facility.

          "Third Party Event" has the meaning given to such term in Section
5.03(b) hereof.

          "Threshold Rating" means the short-term issuer credit rating of A-1+
by Standard & Poor's (or, in the absence of a short-term issuer credit rating by
Standard & Poor's, a long-term issuer credit rating of AA- by Standard & Poor's)
and a short-term unsecured debt rating of P-1 by Moody's (or, in the absence of
a short-term unsecured debt rating by Moody's, a long-term unsecured debt rating
of A1 by Moody's).

          "Total Loss" means, with respect to any ACS Group Aircraft (a) if the
same is subject to an ACS Group Lease, a Casualty Occurrence, Total Loss or
Event of Loss (each as defined in such ACS Group Lease) or the like (however so
defined); or (b) if the same is not subject to an ACS Group Lease, (i) its
actual, constructive, compromised, arranged or agreed total loss, (ii) its
destruction, damage beyond repair or being rendered permanently unfit for normal
use for any reason whatsoever, (iii) its requisition for title, confiscation,
restraint, detention, forfeiture or any compulsory acquisition or seizure or
requisition for hire (other than a requisition for hire for a temporary period
not exceeding 180 days) by or under the order of any government (whether civil,
military or de facto) or public or local authority or (iv) its hijacking, theft
or disappearance, resulting in loss of possession by the owner or operator
thereof for a period of 30 consecutive days or longer. A Total Loss with respect
to any ACS Group Aircraft shall be deemed to occur on the date on which such
Total Loss is deemed pursuant to the relevant ACS Group Lease to have occurred
or, if such Lease does not so deem or the relevant ACS Group Aircraft is not
subject to an ACS Group Lease, (A) in the case of an actual total loss



                                                                              46


or destruction, damage beyond repair or being rendered permanently unfit, the
date on which such loss, destruction, damage or rendering occurs (or, if the
date of loss or destruction is not known, the date on which the relevant ACS
Group Aircraft was last heard of); (B) in the case of a constructive,
compromised, arranged or agreed total loss, the earlier of (1) the date 30 days
after the date on which notice claiming such total loss is issued to the
insurers or brokers and (2) the date on which such loss is agreed or compromised
by the insurers; (C) in the case of requisition for title, confiscation,
restraint, detention, forfeiture, compulsory acquisition or seizure, the date on
which the same takes effect; (D) in the case of a requisition for hire, the
expiration of a period of 180 days from the date on which such requisition
commenced (or, if earlier, the date upon which insurers make payment on the
basis of a Total Loss); or (E) in the case of clause (iv) above, the final day
of the period of 30 consecutive days referred to therein.

          "Total Loss Proceeds" means, in relation to an ACS Group Aircraft, the
total net proceeds of the insurance and reinsurance paid in respect of a Total
Loss thereof and includes, in the case of a Total Loss of an airframe which does
not involve the Total Loss of all Engines or Parts installed thereon at the time
when such Total Loss occurred, the net sale proceeds of any such surviving
Engines or Parts.

          "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
(15 U.S. Code Section 77aaa-77bbbb), as in effect on the date this Indenture was
executed, except as provided in Section 9.05 hereof.

          "Trustee" means, with respect to each subclass of Securities the
Person appointed, at the time of determination, as the trustee of such subclass
of Securities in accordance with this Indenture. The initial Trustee for each
subclass of Securities is Deutsche Bank Trust Company Americas.

          "Trustees" means, collectively, the Trustee and the Guarantor Trustee.

          "Unrestricted Security" means any Security not bearing the Private
Placement Legend.

          "U.S." means the United States of America.

          "U.S. GAAP" means generally accepted accounting principles in the
United States.

          "U.S. Government Obligations" has the meaning given to such term in
Section 12.02(a) hereof.

          "U.S. Trust" has the meaning given to such term in the Purchase
Agreement.

          "War Risk Coverage" has the meaning given to such term in Exhibit D
hereto.

          "Written Notice" means, with reference to the Issuer, the Trustee, the
Cash Manager, the Operating Bank, the Administrative Agent or the provider of
any Eligible Credit Facility, a written instrument executed by a Responsible
Officer of such Person.



                                                                              47


     Section 1.02 Rules of Construction. Unless the context otherwise requires:

          (a) A term has the meaning assigned to it and an accounting term not
otherwise defined has the meaning assigned to it in accordance with U.S. GAAP.

          (b) The terms "herein", "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision.

          (c) Unless otherwise indicated in context, all references to Articles,
Sections, Schedules or Exhibits refer to an Article or Section of, or a Schedule
or Exhibit to, this Indenture.

          (d) Words of the masculine, feminine or neuter gender shall mean and
include the correlative words of other genders, and words in the singular shall
include the plural, and vice versa.

          (e) The terms "include", "including" and similar terms shall be
construed as if followed by the phrase "without limitation".

          (f) Unless otherwise indicated, references to a subclass of
Securities, Guarantor Securities or ACS Group Securities shall be to the
Subclass A-1 Securities, the Guarantor Subclass A-1 Securities or the ACS Group
Subclass A-1 Securities, respectively, the Subclass E-1 Securities or to a
subclass of Refinancing Securities, Guarantor Refinancing Securities or ACS
Group Refinancing Securities or Additional Securities, Guarantor Additional
Securities or ACS Group Additional Securities; and references to a class of
Securities, Guarantor Securities or ACS Group Securities shall be to the Class A
Securities, the Guarantor Class A Securities or the ACS Group Class A Securities
or the Class E Securities or to a class of Refinancing Securities, Guarantor
Refinancing Securities or ACS Group Refinancing Securities or Additional
Securities, Guarantor Additional Securities or ACS Group Additional Securities.

          (g) References in this Indenture to an agreement or other document
(including this Indenture) include references to such agreement or document as
amended, replaced or otherwise modified (without, however, limiting the effect
of the provisions of this Indenture with regard to any such amendment,
replacement or modification), and the provisions of this Indenture apply to
successive events and transactions. References to any Person shall include such
Person's successors in interest and permitted assigns.

          (h) References in this Indenture to Section 3.01 through Section 3.08
and Section 3.12 through Section 3.15 shall include reference to the equivalent
Section 3.01 through Section 3.08 and Section 3.12 through Section 3.15 of the
Guarantor Indenture.

          (i) References in this Indenture to any statute or other legislative
provision shall include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor, and references to any
governmental Person shall include reference to any governmental Person
succeeding to the relevant functions of such Person.

          (j) References in this Indenture to the Securities of any class or
subclass include the conditions applicable to the Securities of such class or
subclass; and any reference to any



                                                                              48


amount of money due or payable by reference to the Securities of any class or
subclass shall include any sum covenanted to be paid by the Issuer under this
Indenture.

          (k) References in this Indenture to any action, remedy or method of
judicial proceeding for the enforcement of the rights of creditors or of
security shall be deemed to include, in respect of any jurisdiction other than
the State of New York, references to such action, remedy or method of judicial
proceeding for the enforcement of the rights of creditors or of security
available or appropriate in such jurisdiction as shall most nearly approximate
such action, remedy or method of judicial proceeding described or referred to in
this Indenture.

          (l) Where any payment is to be made, funds applied or any calculation
is to be made hereunder on a day which is not a Business Day, unless any Related
Document otherwise provides, such payment shall be made, funds applied and
calculation made on the next succeeding Business Day, and payments shall be
adjusted accordingly.

          (m) Where the Irish Remarketing Servicer or any replacement
remarketing servicer (including the Back-Up Remarketing Servicer) or the
Administrative Agent or any replacement administrative agent are performing or
may perform lease management and/or remarketing services pursuant to a Related
Document in relation to one or more different Aircraft at the same time, a
reference in this Indenture to the "Remarketing Servicer" or the "Administrative
Agent", as applicable, shall be construed as a reference to each of the Irish
Remarketing Servicer or replacement remarketing servicer, as the case may be, or
Administrative Agent or replacement administrative agent, as applicable, and the
rights and obligations of the parties hereto shall be construed accordingly.

     Section 1.03 Compliance Certificates and Opinions. Upon any application or
request by the Issuer to the Trustee to take any action under any provision of
this Indenture, the Issuer shall furnish to the Trustee an Officer's Certificate
stating that, in the opinion of the signers thereof, all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with, and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.

          Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture or any indenture
supplemental hereto shall include:

          (a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Indenture relating thereto;

          (b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

          (c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and



                                                                              49


          (d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.

     Section 1.04 Acts of Holders. (a) Any direction, consent, waiver or other
action provided by this Indenture in respect of the Securities of any subclass
to be given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent or proxy duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee, to each Rating Agency where it is
hereby expressly required pursuant to this Indenture and to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose under
this Indenture and conclusive in favor of the Trustee or the Issuer, if made in
the manner provided in this Section.

          (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or such other officer and where such execution is by
an officer of a corporation or association, trustee of a trust or member of a
partnership, on behalf of such corporation, association, trust or partnership,
such certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other reasonable manner which the Trustee deems sufficient.

          (c) In determining whether the Holders have given any direction,
consent, request, demand, authorization, notice, waiver or other Act (a
"Direction"), under this Indenture, Securities owned by the Issuer or any
Affiliate of the Issuer shall be disregarded and deemed not to be Outstanding
for purposes of any such determination; provided that for the purposes of this
Section 1.04(c) the Holders of the Class E Securities shall not be considered
Affiliates of the Issuer. In determining whether the Trustee shall be protected
in relying upon any such Direction, only Securities which a Responsible Officer
of the Trustee actually knows to be so owned shall be so disregarded.
Notwithstanding the foregoing, (i) if any such Person owns 100% of the
Securities of any subclass Outstanding, such Securities shall not be so
disregarded as aforesaid, and (ii) if any amount of Securities of such subclass
so owned by any such Person have been pledged in good faith, such Securities
shall not be disregarded as aforesaid if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Issuer or any Affiliate of the
Issuer.

          (d) The Issuer may at its option, by delivery of Officers'
Certificates to the Trustee, set a record date other than the Record Date to
determine the Holders in respect of the Securities of any subclass entitled to
give any Direction in respect of such Securities. Such record date shall be the
record date specified in such Officer's Certificate which shall be a date not
more than 30 days prior to the first solicitation of Holders in connection
therewith. If such a record date is fixed, such Direction may be given before or
after such record date, but only the



                                                                              50


Holders of record of the applicable subclass at the close of business on such
record date shall be deemed to be Holders for the purposes of determining
whether Holders of the requisite proportion of Outstanding Securities of such
subclass have authorized or agreed or consented to such Direction, and for that
purpose the Outstanding Securities of such subclass shall be computed as of such
record date; provided that no such Direction by the Holders on such record date
shall be deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than one year after the record date.

          (e) Any Direction or other action by the Holder of any Security shall
bind the Holder of every Security issued upon the transfer thereof or in
exchange therefor or in lieu thereof, whether or not notation of such action is
made upon such Security.

                                   ARTICLE II

                                 THE SECURITIES

     Section 2.01 Authorized Amount; Terms; Form; Execution and Delivery. (a)
The Outstanding Principal Balance of any subclass of Securities which may be
authenticated and delivered from time to time under this Indenture shall not
exceed the initial Outstanding Principal Balance set forth for such subclass of
Securities in the definition thereof or, with respect to any subclass of
Refinancing Securities or Additional Securities, authorized in one or more Board
Resolutions; provided that at no time may the Outstanding Principal Balance of
any subclass of Refinancing Securities exceed the Redemption Price of the
subclass of Securities being refinanced thereby plus Refinancing Expenses
relating thereto, any Policy Premium and any Policy Redemption Premium, if any,
due and payable to the Policy Provider and any amount to be deposited in a Cash
Collateral Account for such Refinancing Securities; and provided further that
any Additional Securities shall be issued in accordance with Section 2.12
hereof. All Securities of any class or subclass need not be issued at the same
time and any class or subclass of Securities may be reopened, without the
consent of any Holder, for issuances of Additional Securities or Refinancing
Securities of such class or subclass, subject in all cases to Sections 2.10,
2.12, 3.09, 3.11 and 5.02 hereof and any other applicable provision of this
Indenture.

          The Initial Securities issuable hereunder on the Initial Closing Date
shall be issued in two subclasses. The Initial Securities shall be designated
the Subclass A-1 Securities and the Subclass E-1 Securities.

          Interest shall accrue on any subclass of the Floating Rate Securities
(other than any subclass of Class E Securities) from the relevant Closing Date
and shall be computed for each Accrual Period on the basis of a 360-day year and
the actual number of days elapsed in such Accrual Period on the Outstanding
Principal Balance of such Security. Interest shall accrue on any subclass of the
Fixed Rate Securities from the relevant Closing Date and shall be computed for
each Accrual Period on the basis of a 360-day year and one-twelfth of an annual
interest payment on the Outstanding Principal Balance and, in the case of the
first Accrual Period and any incomplete Accrual Period, on the basis of a
360-day year consisting of twelve 30-day months and the actual number of days
elapsed in such Accrual Period.



                                                                              51


          Any amount of premium or interest on any subclass of Securities not
paid when due shall, to the fullest extent permitted by applicable law, bear
interest at an interest rate per annum equal to the Stated Rate of Interest for
such Securities from the date when due until such amount is paid or duly
provided for, due and payable on the next succeeding Payment Date, subject to
the availability of the Available Collections therefor after making payments
entitled to priority under Section 3.08 hereof.

          (b) There shall be issued and delivered and authenticated on the
relevant Closing Date, to each of the Holders, Securities in the principal
amounts and maturities and bearing the interest rates, in each case in
definitive, certificated, registered form as described herein or in any
indenture supplemental hereto, and substantially in the form set forth in the
applicable exhibit to this Indenture or in any indenture supplemental hereto,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements
printed, lithographed or engraved thereon, as may be required to comply with the
rules of any securities exchange on which such Securities may be listed or to
conform to any usage in respect thereof, or as may, consistently herewith, be
prescribed by the Director executing such Securities, such determination by the
Director to be evidenced by his or her execution of the Securities.

          Securities of each subclass shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the Director executing such Securities, as
evidenced by his or her execution of such Securities.

          Each subclass of Securities shall be offered and sold in reliance on
Section 4(2) of the Securities Act and shall be duly executed by the Issuer,
authenticated by the Trustee and held by the Pass Through Trustee as hereafter
provided.

          (c) On the date of any Refinancing, the Issuer shall issue and deliver
as provided in Section 2.10 hereof an aggregate principal amount of Refinancing
Securities having the maturities and bearing the interest rates and such other
terms authorized by one or more Board Resolutions or in any indenture
supplemental hereto providing for the issuance of such Securities or specified
in the form of such Securities, in each case in accordance with such Section
2.10.

          (d) On the date of the issuance, if any, of any Additional Securities,
the Issuer shall issue and deliver, as provided in Sections 2.12 and 5.02(f)
hereof, an aggregate principal amount of Additional Securities having the
maturities and bearing the interest rates and such other terms authorized by one
or more Board Resolutions or in any indenture supplemental hereto providing for
the issuance of such Securities or specified in the form of such Securities, in
each case in accordance with such Section 2.12.

          (e) The Securities shall be executed on behalf of the Issuer by the
manual or facsimile signature of a Director or other authorized officer of the
Issuer.

          (f) Each Security bearing the manual or facsimile signatures of any
individual who was at the time such Security was executed a Director or other
authorized officer of the



                                                                              52


Issuer shall bind the Issuer, notwithstanding that any such individual has
ceased to hold such office prior to the authentication and delivery of such
Securities or any payment thereon.

          (g) At any time and from time to time after the execution of any
Securities, the Issuer may deliver such Securities to the Trustee for
authentication and, upon receipt of a written instruction by the Issuer, subject
to the provisions of clause (h) below, the Trustee shall authenticate such
Securities by manual or facsimile signature upon receipt by it of written orders
of the Issuer. The Securities shall be authenticated on behalf of the Trustee by
any Responsible Officer of the Trustee.

          (h) No Security shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless it shall have been executed on
behalf of the Issuer as provided in clause (e) above and authenticated by or on
behalf of the Trustee as provided in clause (g) above. Such signatures shall be
conclusive evidence that such Security has been duly executed and authenticated
under this Indenture. Each Security shall be dated the date of its
authentication.

          (i) The Issuer shall execute and the Trustee shall, in accordance with
this Section 2.01, authenticate the Securities and, in the case of the Class A
Securities, the Registrar shall register the Securities in the name of the Pass
Through Trustee and the Trustee shall deliver the Securities to the Pass Through
Trustee and, in the case of the Class E Securities, the Registrar shall register
the Securities in the names of the Holders of the Class E Securities and the
Trustee shall deliver the Securities to the Holders of the Class E Securities.

          (j) The Class E Securities will, for purposes of U.S. Federal, state
and local income tax, be treated as equity.

     Section 2.02 Restrictive Legends. (a) Except as specified in Section
2.13(a) hereof, each Security (and all Securities issued in exchange therefor or
upon registration of transfer or substitution thereof) shall bear the following
legend on the face thereof:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 AS
AMENDED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY IN
ANY JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE IN THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION.

          (b) Each Security (except as provided in Section 2.13(a)) shall also
bear the following legend on the face thereof:

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR SUCH
CERTIFICATES AND OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
THE TRANSFER COMPLIES WITH THE



                                                                              53


FOREGOING RESTRICTIONS AND THE OTHER RESTRICTIONS CONTAINED IN THE INDENTURE.

          (c) Each Security other than a Class E Security shall also bear the
following legend on the face thereof:

EACH PURCHASER OR TRANSFEREE OF THIS SECURITY OR ANY INTEREST HEREIN WILL BE
REQUIRED TO REPRESENT, WARRANT AND AGREE THAT EITHER: (A) NO ASSETS OF (I) AN
EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), (II) A PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (III)
A PLAN, ACCOUNT OR ARRANGEMENT (SUCH AS A GOVERNMENTAL, CHURCH OR NON-U.S. PLAN)
THAT IS SUBJECT TO ANY U.S. FEDERAL, STATE, LOCAL OR NON U.S. LAW THAT IS
SUBSTANTIALLY SIMILAR TO SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE
("SIMILAR LAW") OR (IV) AN ENTITY WHOSE UNDERLYING ASSETS ARE DEEMED TO INCLUDE
ASSETS OF ANY SUCH EMPLOYEE BENEFIT PLAN, PLAN, ACCOUNT OR ARRANGEMENT, HAVE
BEEN USED TO ACQUIRE THIS SECURITY OR ANY INTEREST HEREIN; OR (B) THE
ACQUISITION, HOLDING AND DISPOSITION OF THIS SECURITY OR ANY INTEREST HEREIN BY
THE HOLDER WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR A VIOLATION OF ANY
SIMILAR LAW, AS APPLICABLE.

          (d) Each Class E Security shall also bear the following legend on the
face thereof:

BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS AND WARRANTS THAT NO ASSETS OF
AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR A PLAN OR ARRANGEMENT SUBJECT TO
SECTION 4975 OF THE INTERNAL REVENUE CODE OR A FUND OR ENTITY THAT IS USING
ASSETS OF, OR IS ACTING FOR THE BENEFIT OF, ANY SUCH EMPLOYEE BENEFIT PLAN, PLAN
OR ARRANGEMENT (INCLUDING ANY HELD INDIRECTLY THROUGH THE GENERAL ACCOUNT OF AN
INSURANCE COMPANY) HAVE BEEN USED TO PURCHASE THE SECURITIES.

     Section 2.03 Registrar and Paying Agent. (a) With respect to each subclass
of Securities, there shall at all times be maintained by the Registrar (i) an
office or agency in the location set forth in Section 13.05 hereof where
Securities of such subclass may be presented or surrendered for registration of
transfer or for exchange, (ii) an office or agency in the location set forth in
Section 13.05 (other than Ireland) for payment of Securities of any subclass
(each, a "Paying Agent") and (iii) an office or agency where notices and demands
in respect of the payment of such Securities may be served. For so long as any
Securities are listed on the Alternative Securities Market of the Irish Stock
Exchange, the Issuer shall appoint and maintain a Paying Agent in Ireland (the
"Irish Paying Agent"). Written notice of the location of each such other office
or agency and of any change of location thereof shall be given by the Trustee to
the Issuer and the Holders of such subclass. In the event that no such office or
agency shall be maintained or no such notice of location or of change of
location shall be given, presentations



                                                                              54


and demands may be made and notices may be served at the Corporate Trust Office
of the Trustee.

          (b) Each Authorized Agent shall be a bank or trust company, shall be a
corporation organized and doing business under the laws of the United States or
any state or territory thereof or of the District of Columbia, with a combined
capital and surplus of at least $75,000,000 (or having a combined capital and
surplus in excess of $5,000,000 and the obligations of which, whether now in
existence or hereafter Incurred, are fully and unconditionally guaranteed by a
corporation organized and doing business under the laws of the United States,
any state or territory thereof or of the District of Columbia and having a
combined capital and surplus of at least $75,000,000) and shall be authorized
under the laws of the United States or any state or territory thereof to
exercise corporate trust powers, subject to supervision by Federal or state
authorities (such requirements, the "Eligibility Requirements"). The Trustee
shall initially be a Paying Agent and Registrar hereunder with respect to the
Securities of each subclass.

          (c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.

          (d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee and the Issuer. The Issuer may, and at the
request of the Trustee shall, at any time terminate the agency of any Authorized
Agent by giving written notice of termination to such Authorized Agent and to
the Trustee. Upon the resignation or termination of an Authorized Agent or if at
any time any such Authorized Agent shall cease to be eligible under this Section
(when, in either case, no other Authorized Agent performing the functions of
such Authorized Agent shall have been appointed by the Trustee), the Issuer
shall promptly appoint one or more qualified successor Authorized Agents,
reasonably satisfactory to the Trustee, to perform the functions of the
Authorized Agent which has resigned or whose agency has been terminated or who
shall have ceased to be eligible under this Section. The Issuer shall give
written notice of any such appointment made by it to the Trustee; and in each
case the Trustee shall mail notice of such appointment to all Holders of the
related subclass as their names and addresses appear on the Register for such
subclass.

          (e) The Issuer agrees to pay, or cause to be paid, from time to time
to each Authorized Agent reasonable compensation for its services and to
reimburse it for its reasonable expenses to be agreed to pursuant to separate
agreements with each such Authorized Agent.

     Section 2.04 Paying Agent to Hold Money in Trust. The Trustee shall require
each Paying Agent other than the Trustee to agree in writing that all moneys
deposited with any Paying Agent for the purpose of any payment on the Securities
or to the Policy Provider shall be deposited and held in trust for the benefit
of the Holders (with regard to payments on the Securities) entitled to such
payment, or the Policy Provider, as the case may be, subject to the



                                                                              55


provisions of this Section. Moneys so deposited and held in trust shall
constitute a separate trust fund for the benefit of the Holders with respect to
which such money was deposited.

          The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

     Section 2.05 Method of Payment. (a) On each Payment Date, the Trustee
shall, or shall instruct the Paying Agent (other than the Irish Paying Agent)
to, pay, to the extent of the Available Collections therefor transferred to a
Securities Account, to the Holders as of the Record Date for such Payment Date
all principal or Redemption Price of, and interest on the Securities of each
subclass (other than payments received following an Event of Default in respect
of any subclass of Securities); provided that in the event and to the extent
receipt of any payment is not confirmed by the Trustee or Paying Agent (other
than the Irish Paying Agent) by 1:00 p.m. (New York time) on such Payment Date
or any Business Day thereafter, distribution thereof shall be made on the
Business Day following the Business Day such payment is received.

          (b) Any payments on a Payment Date with respect to the Class A
Securities shall be made by wire transfer to or as instructed by the Pass
Through Trustee at least five Business Days before the applicable Payment Date
so long as it is the Holder thereof. Alternatively, upon application in writing
to the Trustee, not later than the applicable Record Date, by a Holder other
than the Pass Through Trustee of one or more Class A Securities of such subclass
having an aggregate principal amount of not less than $1,000,000, any such
payments shall be made by wire transfer to an account designated by such Holder
at a financial institution in New York, New York.

          (c) Any payments on a Payment Date with respect to the Class E
Securities shall be made by check mailed to each Holder of such Security on the
applicable Record Date at its address appearing on the applicable Register
maintained with respect to the Class E Securities. Alternately, upon application
in writing to the Trustee not later than the applicable Record Date, by a Holder
of one or more Class E Securities having an aggregate principal amount of
$1,000,000, any such payments shall be made by one transfer to an account
designated by such Holder at a financial institution in New York, New York.

          The final payment for each subclass of Securities shall be made only
upon presentation and surrender of the Securities of such subclass by the Holder
or its agent at the Corporate Trust Office or agency of the Trustee or Paying
Agent (other than the Irish Paying Agent) specified in the notice of such final
payment given by the Trustee or Paying Agent. The Trustee or Paying Agent shall
mail such notice of the final payment of such subclass to each of the Holders of
such subclass, specifying the date and amount of such final payment no later
than five Business Days prior to such final payment and such notice shall also
be published by such publication as the Alternative Securities Market of the
Irish Stock Exchange may require and in such other publication as the Irish
Paying Agent may determine to comply with its obligations hereunder.



                                                                              56


     Section 2.06 Minimum Denomination. Each subclass of Class A Securities
shall be issued in minimum denominations of $100,000 and integral multiples of
$1,000 in excess thereof. Each subclass of Class E Securities shall be issued in
minimum denominations of $500,000.

     Section 2.07 Transfer and Exchange; Cancellation. (a) The Trustee agrees
with the Issuer that the Trustee shall keep a register (herein referred to as
the "Register") in which provisions shall be made for the registration of
Securities and the registration of transfers of Securities and a record of the
dates and payments made with respect to the Securities. The Register shall be
kept at the Corporate Trust Office, and the Trustee is hereby appointed
"Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided. A Holder may transfer a Security only by written
application to the Registrar stating the name of the proposed transferee and
otherwise complying with the terms of this Indenture, including, without
limitation, the provisions of this Section 2.07. No such transfer shall be
effective until, and such transferee shall succeed to the rights of a Holder
only upon, final acceptance and registration of the transfer by the Registrar in
the Register.

          (b) Upon surrender for registration or transfer of any Security at the
Corporate Trust Office, the Issuer shall execute, upon the written request of
such Holder, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
class and of a like aggregate principal amount. At the option of a Holder, its
Securities may be exchanged for other Securities of the same class of any
authorized denomination, of a like aggregate principal amount, upon surrender of
the Securities to be exchanged at the Corporate Trust Office. Each new Class A
Security issued upon transfer or exchange shall be in a principal amount of at
least $100,000 and each new Class E Security issued upon transfer or exchange
shall be in a principal amount of at least $500,000 (and, in each case, if less,
the then unpaid principal amount thereof) and dated the date or dates to which
interest on the Security surrendered shall have been paid or, if no such
interest shall have been paid, the applicable date of issuance. Whenever any
Securities are so surrendered for exchange, the Issuer shall execute, and the
Trustee shall authenticate and deliver, the Securities which the Holder making
the exchange is entitled to receive. All Securities issued upon any registration
of transfer or exchange of Securities shall be the valid obligations of the
Issuer evidencing the same respective obligations, and entitled to the same
security and benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange. When Securities are presented to the
Registrar with a request to register their transfer or to exchange them for an
equal principal amount of Securities of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if the
requirements for such transactions are met (including, in the case of a
transfer, that such Securities are duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and Registrar duly
executed by the Holder thereof or by an attorney who is authorized in writing to
act on behalf of the Holder). In addition, the Trustee may require evidence
satisfactory to it as to the compliance of any such transfer with the Securities
Act of 1933, as amended. The Trustee shall make a notation on each new Security
or Securities of the amount of all payments of principal previously made on the
old Security or Securities with respect to which such new Security is issued and
the date to which interest accrued on such old Security or Securities has been
paid.



                                                                              57


          (c) Prior to the due presentment for registration of transfer of a
Security, the Issuer and the Trustee may deem and treat the applicable
registered Holder as the absolute owner and Holder of such Security for the
purpose of receiving payment of all amounts payable with respect to such
Security and for all other purposes and shall not be affected by any notice to
the contrary.

          (d) The Issuer shall not be required to exchange any surrendered
Securities as above provided during the 15 calendar day period preceding the due
date of any payment on such Securities. The Issuer shall not be required to
exchange or register the transfer of any Securities as above provided during the
15 calendar days preceding the Final Maturity Date of any such Securities or
during the 15 calendar days preceding the first mailing of any notice of
Redemption or Refinancing of Securities to be redeemed or refinanced. The Issuer
shall not be required to exchange or register the transfer of any Securities
that have been selected, called or are being called for Redemption or
Refinancing except, in the case of any Securities where notice has been given
that such Securities are to be redeemed in part, the portion thereof not so to
be redeemed.

          (e) A Security may not be exchanged for another Security other than as
provided in this Section 2.07 and Section 2.08 hereof.

          (f) The Issuer at any time may deliver Securities to the Trustee for
cancellation. The Trustee and no one else shall cancel and destroy in accordance
with its customary practices in effect from time to time (subject to the record
retention requirements of the Exchange Act) any such Securities, together with
any other Securities surrendered to it for registration of transfer, exchange or
payment.

     Section 2.08 Mutilated, Destroyed, Lost or Stolen Securities. If any
Security shall become mutilated, destroyed, lost or stolen, the Issuer shall,
upon the written request of the Holder thereof and presentation of the Security
or satisfactory evidence of destruction, loss or theft thereof to the Trustee or
Registrar (including, in the case of Securities listed on the Alternative
Securities Market of the Irish Stock Exchange, at the offices of the
co-registrar in Ireland, if any), issue, and the Trustee shall authenticate and
deliver in exchange therefor or in replacement thereof, a new Security of the
same subclass, payable to such Holder in the same principal amount, of the same
maturity, with the same payment schedule, bearing the same interest rate and
dated the date of its authentication. If the Security being replaced has become
mutilated, such Security shall be surrendered to the Trustee or a Registrar and
forwarded to the Issuer by the Trustee or such Registrar. If the Security being
replaced has been destroyed, lost or stolen, the Holder thereof shall furnish to
the Issuer, the Trustee or a Registrar (i) such security or indemnity as may be
required by them to save the Issuer, the Trustee and such Registrar harmless and
(ii) evidence satisfactory to the Issuer, the Trustee and such Registrar of the
destruction, loss or theft of such Security and of the ownership thereof. The
Holders will be required to pay any tax or other governmental charge imposed in
connection with such exchange or replacement and any other expenses (including
the fees and expenses of the Trustee and any Registrar) connected therewith.

     Section 2.09 Payments of Transfer Taxes. Upon the transfer of any Security
or Securities pursuant to Section 2.07 hereof, the Issuer or the Trustee may
require from the party requesting such new Security or Securities payment of a
sum to reimburse the Issuer or the



                                                                              58


Trustee for, or to provide funds for the payment of, any transfer Tax or similar
governmental charge payable in connection therewith.

     Section 2.10 Refinancing of Securities. (a) Subject to Section 2.01(a)
hereof, paragraphs (b) and (c) below and Section 5.02(f)(ii) hereof, the Issuer
may issue Refinancing Securities pursuant to this Indenture for the purpose of
refinancing the Outstanding Principal Balance of any subclass of Securities
(including refinancings of Refinancing Securities). Each refinancing of any
subclass of Securities with the proceeds of an offering of Refinancing
Securities (a "Refinancing") shall be authorized pursuant to one or more Board
Resolutions and shall be effected only following receipt of a Rating Agency
Confirmation and upon obtaining the prior written consent of the Policy Provider
(unless a Policy Non-Consent Event has occurred or will occur in connection with
such Refinancing) and the Initial Credit Facility Provider (unless an Initial
Credit Facility Non-Consent Event has occurred or will occur in connection with
such Refinancing). Each Refinancing Security shall constitute a "Security" for
all purposes under this Indenture, and shall have the class or subclass
designation and such further designations added or incorporated in such title as
specified in the related Board Resolutions, in any indenture supplemental hereto
providing for the issuance of such Securities or specified in the form of such
Securities, as the case may be.

          (b) A Refinancing of any subclass of Securities in whole or in part
may occur on any Payment Date after the Initial Closing Date and shall be
effected as an Optional Redemption pursuant to Section 3.10 hereof. On the date
of any Refinancing, the Issuer shall issue and sell an aggregate principal
amount of Refinancing Securities not to exceed the Redemption Price of the
Securities being refinanced thereby and any accrued and unpaid interest plus the
Refinancing Expenses relating thereto, any Policy Premium and Policy Redemption
Premium due and payable to the Policy Provider and any amount to be deposited in
any Cash Collateral Account for such Refinancing Securities. The proceeds of
each sale of Refinancing Securities shall be used to make the deposit required
by Section 3.10(d) hereof, to pay such Refinancing Expenses, such Policy Premium
and Policy Redemption Premium and to fund such Cash Collateral Account.

          (c) Each Refinancing Security shall contain such terms as may be
established in or pursuant to the related Board Resolution (subject to Section
2.01 hereof), in any indenture supplemental hereto providing for the issuance of
such Securities or specified in the form of such Securities to the extent
permitted below, and shall have the same ranking pursuant to Section 3.08 hereof
with respect to all other Obligations as the Securities of the class to which
such Refinancing Securities belong (and, with respect to other subclasses of
such class, as provided in Section 3.09 hereof). No less than seven Business
Days, prior to any Refinancing, any or all of the following, as applicable, with
respect to the related issue of each subclass of Refinancing Securities shall
have been determined by the Issuer and set forth in such Board Resolutions, in
any indenture supplemental hereto or specified in the form of such Securities,
as the case may be:

          (i) the Securities to be refinanced by such Refinancing Securities;

          (ii) the aggregate principal amount of such Refinancing Securities
     that may be issued;



                                                                              59


          (iii) the proposed date of such Refinancing;

          (iv) the Expected Final Payment Date and the Final Maturity Date of
     such Refinancing Securities;

          (v) whether such Refinancing Securities are to have the benefit of any
     Eligible Credit Facility and, if so, the amount and other terms thereof
     and/or any increase in the Required Amount for any Cash Collateral Account;

          (vi) the rate at which such Refinancing Securities shall bear interest
     or the method by which such rate shall be determined;

          (vii) if other than denominations of $100,000 or higher integral
     multiples of $1,000 (with respect to Class A Securities), or $500,000 (with
     respect to Class E Securities), the denomination or denominations in which
     such Refinancing Securities shall be issuable;

          (viii) whether such Refinancing Securities are to be issuable
     initially in registered or global form and, if global, whether holders of
     any such global Refinancing Security may exchange such Securities for
     Refinancing Securities of the same class or subclass and of like tenor of
     any authorized form and denomination and the circumstances under which any
     such exchanges may occur, if other than in the manner provided in Section
     2.07 hereof, and the circumstances under which and the place or places
     where any such exchanges may be made;

          (ix) any adjustments to be made, consistent with Sections 3.09 and
     3.11 hereof, to the applicable Note Pool Factors or Extended Note Pool
     Factors as a result of the issuance of such Refinancing Securities;

          (x) the class and subclass of Securities to which such Refinancing
     Securities belong;

          (xi) whether such Refinancing Securities are to be Covered Class A
     Securities; and

          (xii) any other terms, conditions, rights and preferences (or
     limitations on such rights and preferences) relating to such Refinancing
     Securities (which terms shall comply with Applicable Law and not be
     inconsistent with the requirements or restrictions of this Indenture,
     including Section 5.02(f)(ii) hereof).

          If any of the terms of any issue of Refinancing Securities are
established by action taken pursuant to one or more Board Resolutions, such
Board Resolutions shall be delivered to the Trustee setting forth the terms of
such Refinancing Securities.

          (d) In connection with any Refinancing of the Subclass A-1 Securities
or any other subclass of Covered Class A Securities that has occurred with the
prior written consent of the Policy Provider, each of the Policy and the Policy
Provider Agreement shall be amended to cover the corresponding class of
Certificates relating to such subclass of Covered Class A Securities and the
Policy Provider shall deliver a new Policy or amended Policy, as applicable, to
the Drawing Agent; provided that if the Refinancing Securities of such
Refinancing will not be



                                                                              60


Covered Class A Securities, no amendment of the Policy and the Policy Provider
Agreement shall be required and no delivery of an amended Policy or new Policy
shall be required; provided further that, notwithstanding anything to the
contrary herein, Class A Securities that are not Covered Class A Securities may
not be issued while the Policy remains outstanding. In connection with the
amendment of the Policy to cover the Certificates relating to the Refinancing
Securities, the Policy Provider agrees to deliver to the Issuer, the Guarantor
and Drawing Agent, on or prior to the date of Refinancing, legal opinions and
corporate documents in respect of the amended Policy, substantially similar in
form, scope and substance to the legal opinions and corporate documents
delivered by the Policy Provider on the Initial Closing Date. The Policy
Provider agrees that its rights of reimbursement in respect of the Policy
Drawings under the amended Policy will be the same as its rights of
reimbursement set forth in Section 3.08 and premium payable in respect of the
amended Policy shall be on the same basis and terms as the Policy Premium and
the Policy Redemption Premium paid in respect of the Policy issued on the
Initial Closing Date (unless otherwise agreed to by the Issuer, the Guarantor
and the Drawing Agent and the Policy Provider).

          (e) In connection with any Refinancing of a subclass of Class A
Securities that has occurred with the prior written consent of the Initial
Credit Facility Provider, the Initial Credit Facility if so required by the
terms of such Refinancing shall be amended to cover such subclass of Class A
Securities and the Initial Credit Facility Provider shall deliver a new Eligible
Credit Facility or amended Initial Credit Facility, as applicable, to the
Trustee. In connection with the amendment of the Initial Credit Facility to
cover the Refinancing Securities, the Initial Credit Facility Provider agrees to
deliver to the Issuer and the Guarantor, on or prior to the date of Refinancing,
legal opinions and corporate documents in respect of the amended Initial Credit
Facility, substantially similar in form, scope and substance to the legal
opinions and corporate documents delivered by the Initial Credit Facility
Provider on the Initial Closing Date. The Initial Credit Facility Provider
agrees that its rights of reimbursement in respect of the drawings under the
amended Initial Credit Facility will be the same as its rights of reimbursement
set forth in Section 3.08, and fees payable in respect of the amended Initial
Credit Facility shall be on the same basis and terms as the fees paid in respect
of the Initial Credit Facility entered into on the Initial Closing Date.

          (f) In connection with any Refinancing, the Issuer shall pay to all
parties to the Related Documents all reasonable costs and expenses related
thereto.

          (g) Notwithstanding anything to the contrary herein, if the Class A
Securities are refinanced with Class A Securities that are not covered by the
Policy, the issuance of such new uninsured Class A Securities shall be subject
to the following conditions precedent:

          (i) the payment in full of all outstanding Policy Provider Obligations
to the Policy Provider; and

          (ii) the return of the Policy to the Policy Provider for cancellation
and termination.

     Section 2.11 Delivery of Remaining Aircraft. Upon receipt by the Trustee of
a certificate executed by a Director stating (i) that a Remaining Aircraft has
been delivered under and in accordance with the Purchase Agreement, (ii) that no
waiver of the conditions specified in



                                                                              61


Clauses 4.1.1, 4.1.2, 4.1.3, 4.2, 14.2 and 14.3 of the Purchase Agreement has
occurred with respect to such Remaining Aircraft (or the relevant Company)
without the receipt of a Rating Agency Confirmation and the prior written
consent of the Policy Provider and the Initial Credit Facility Provider, (iii)
that an additional Subclass E-1 Security shall be issued to the relevant Seller
in the principal amount of the Subclass E-1 Securities allocable to such
Remaining Aircraft, as set forth in column VII of Exhibit A to the Purchase
Agreement and as such allocable amount may be adjusted according to the Purchase
Agreement with respect to the Subclass E-1 Securities, and specifying the
principal amount of such Subclass E-1 Security to be issued and (iv) the amount
of cash payable from the Aircraft Purchase Account allocable to such Remaining
Aircraft, as set forth in column V of Exhibit A to the Purchase Agreement, net
of the amounts provided for in the Purchase Agreement (any such amount, a
"Remaining Aircraft Allocation Amount"), and wire instructions for the payment
of such funds, the Trustee shall (x) issue an additional Subclass E-1 Security
in a principal amount equal to the amount certified by the Issuer with respect
to such Remaining Aircraft to, and register such Security in the name of, the
relevant Seller and (y) transfer funds in the amount of the Remaining Aircraft
Allocation Amount for such Remaining Aircraft from the relevant Aircraft
Purchase Account in the amount so certified and in accordance with the written
instructions provided by the Cash Manager in accordance with Section 3.05(a).

     Section 2.12 Additional Securities. (a) Subject to paragraph (b) below and
Section 5.02(f)(iv) hereof without limiting the provisions of Section
5.02(l)(ii) hereof, as applicable, the Issuer may issue Additional Securities
pursuant to this Indenture the proceeds of which shall be used to acquire
Additional Aircraft or make Conversion Payments, as the case may be, make
payments into a Cash Collateral Account or pay expenses related thereto (each,
an "Additional Issuance)". Each Additional Issuance shall be authorized pursuant
to one or more Board Resolutions and shall be effected only following receipt of
a Rating Agency Confirmation and upon obtaining the prior written consent of the
Policy Provider (unless a Policy Non-Consent Event has occurred) and the Initial
Credit Facility Provider (unless an Initial Credit Facility Non-Consent Event
has occurred). Each Additional Security shall have such subclass and such
further designations added or incorporated in such title as specified in the
related Board Resolutions, in any indenture supplemental hereto providing for
the issuance of such Securities or specified in the form of such Securities, as
the case may be.

          (b) Each Additional Security shall contain such terms as may be
established in or pursuant to the related Board Resolutions (subject to Section
2.01 hereof), in any indenture supplemental hereto providing for the issuance of
such Securities or specified in the form of such Securities to the extent
permitted below, and shall have the same ranking pursuant to Section 3.08 hereof
with respect to all other Obligations as the Securities of the class to which
such Additional Securities belong (and, with respect to other subclasses of such
class, as provided in Section 3.09 hereof). No less than seven Business Days
prior to any issuance, any or all of the following, as applicable, with respect
to the related Additional Issuance shall have been determined by the Issuer and
set forth in such Board Resolutions, in any indenture supplemental hereto or
specified in the form of such Securities, as the case may be:

          (i) the subclass of Additional Securities to be issued;



                                                                              62


          (ii) with respect to each such subclass of Additional Securities:

               (A) the aggregate principal amount of any such Additional
Securities which may be issued;

               (B) the proposed date of such Additional Issuance;

               (C) the Expected Final Payment Date and the Final Maturity Date
of any such Additional Securities;

               (D) whether any such Additional Securities are to have the
benefit of any Eligible Credit Facility and/or any increase in the Required
Amount for any Cash Collateral Account for the related class or classes of
Securities and, if so, the amount and terms thereof;

               (E) the rate at which any such Additional Securities shall bear
interest or the method by which such rate shall be determined;

               (F) if other than denominations of $100,000 or higher integral
multiples of $1,000 (with respect to Class A Securities) or $500,000 (with
respect to Class E Securities), the denomination or denominations in which any
such Additional Securities shall be issuable;

               (G) any adjustments to be made, consistent with Sections 3.09 and
3.11 hereof, to the applicable Note Pool Factors or Extended Note Pool Factors
as result of the issuance of any such Additional Securities; and

               (H) any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) relating to any such Additional
Securities (which terms shall comply with Applicable Law and not be inconsistent
with the requirements or restrictions of this Indenture, including Section
5.02(f) hereof); and

          (iii) to what extent the proceeds of such Additional Securities are to
be used to acquire Additional Aircraft or to make Conversion Payments, or both,
and:

               (A) in the case of Additional Aircraft, a description of such
Additional Aircraft and the Expected Useful Life of such Additional Aircraft;
and

               (B) in the case of Conversion Payments, a description of the
Aircraft to be converted.

          If any of the terms of any issue of any such Additional Securities are
established by action taken pursuant to one or more Board Resolutions, such
Board Resolutions shall be delivered to the Trustee setting forth the terms of
such Additional Securities.

          (c) In the event Additional Securities are issued as Class A
Securities with the prior consent of the Policy Provider, each of the Policy and
the Policy Provider Agreement shall be amended to cover the corresponding class
of Certificates of such Additional Securities and the Policy Provider shall
deliver a new Policy or amended Policy, as applicable, to the Drawing Agent;
provided that if the Additional Securities of such Additional Issuance will not
be Covered



                                                                              63


Class A Securities, no amendment of the Policy and the Policy Provider Agreement
shall be required and no delivery of an amended Policy or new Policy shall be
required; provided further, that, notwithstanding anything to the contrary
herein, no Class A Securities may be issued without the prior written consent of
the Policy Provider (unless a Policy Non-Consent Event has occurred or will
occur in connection with such Additional Issuance) and the prior written consent
of the Initial Credit Facility Provider (unless an Initial Credit Facility
Non-Consent Event has occurred or will occur in connection with such Additional
Issuance); provided further, that, notwithstanding anything to the contrary
herein, Class A Securities that are not Covered Class A Securities may not be
issued while the Policy remains outstanding. In connection with any issuance of
Additional Securities as a subclass of Class A Securities and amendment of the
Policy, the Policy Provider agrees to deliver to the Issuer, the Guarantor and
the Drawing Agent, on or prior to the date of issuance, legal opinions and
corporate documents in respect of the amended Policy, substantially similar in
form, scope and substance to the legal opinions and corporate documents
delivered by the Policy Provider on the Initial Closing Date. The Policy
Provider agrees that its rights of reimbursement in respect of any Policy
Drawings under the amended Policy will be the same as its rights of
reimbursement set forth in Section 3.08, and premium payable in respect of the
amended Policy shall be on the same basis and terms as the Policy Premium and
Policy Redemption Premium (if any) paid in respect of the Policy issued on the
Initial Closing Date (unless otherwise agreed to by the Issuer, Guarantor and
Drawing Agent and the Policy Provider).

          (d) In connection with any issuance of Additional Securities, the
Issuer shall pay to all parties to the Related Documents all reasonable costs
and expenses related thereto.

     Section 2.13 Special Transfer Provisions.

          (a) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the Trustee
shall deliver Securities that do not bear the Private Placement Legend, as
applicable. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Trustee shall deliver only Securities that bear
the Private Placement Legend, as applicable, unless there is delivered to the
Trustee an Opinion of Counsel reasonably satisfactory to the Issuer and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.

          (b) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such Security acknowledges the restrictions on
transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture. The Registrar shall not register a transfer of any Security
unless such transfer complies with the restrictions on transfer of such Security
set forth in this Indenture. In connection with any transfer of Securities, each
Holder agrees by its acceptance of such Securities to furnish the Trustee the
certifications and legal opinions described herein to confirm that such transfer
is being made pursuant to an exemption from, or a transaction not subject to,
the registration requirements of the Securities Act; provided that the Trustee
shall not be required to determine (but may rely on a determination made by the
Issuer with respect to) the sufficiency of any such legal opinions.



                                                                              64


          (c) Transfers of Class E Securities. The Class E Securities may not be
transferred unless (a) the transferee is Aircastle Limited or any of its direct
or indirect wholly-owned Subsidiaries or (b) the Trustee and the Issuer shall
have received an Opinion of Counsel from counsel or tax advisors in Ireland to
the effect that no ACS Ireland Group Member should suffer materially increased
Irish taxes as a result of the transfer.

          The Initial Securities shall be issued pursuant to an exemption from
registration under the Securities Act.

          The Trustee shall retain copies of all letters, notices and other
written communications received pursuant to this Section 2.13 in accordance with
applicable law. The Issuer shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable Written Notice to the Trustee during the term of
this Agreement and for a period of three months thereafter.

     Section 2.14 Temporary Securities. Pending the preparation of Securities of
any subclass, the Issuer may execute and the Trustee may authenticate and
deliver temporary Securities of such subclass which are printed, lithographed,
typewritten or otherwise produced, in any denomination, containing substantially
the same terms and provisions as are set forth in the applicable exhibit hereto
or in any indenture supplemental hereto, except for such appropriate insertions,
omissions, substitutions and other variations relating to their temporary nature
as the Director executing such temporary Securities may determine, as evidenced
by his or her execution of such temporary Securities.

          If temporary Securities of any subclass are issued, the Issuer will
cause Securities of such subclass to be prepared without unreasonable delay.
After the preparation of Securities of such subclass, the temporary Securities
shall be exchangeable for Securities upon surrender of such temporary Securities
at the Corporate Trust Office of the Trustee, without charge to the Holder
thereof. Upon surrender for cancellation of any one or more temporary
Securities, the Issuer shall execute and the Trustee shall authenticate and
deliver in exchange therefor Securities of like subclass, in authorized
denominations and in the same aggregate principal amounts. Until so exchanged,
such temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as Securities.

     Section 2.15 Statements to Holders. (a) On the second Business Day before
each Payment Date, the Issuers shall cause the Administrative Agent to deliver
to the Pass Through Trustee, the Trustees, the Cash Manager, the Directors and
the Policy Provider, and the Trustee shall (or shall instruct any Paying Agent
to) promptly thereafter distribute or make available to each Holder of record
with respect to such Payment Date, the Policy Provider, the Initial Credit
Facility Provider and each Rating Agency, a report, substantially in the form
attached as Exhibit E hereto prepared by the Administrative Agent and setting
forth the information described therein after giving effect to such payment
(each, a "Monthly Report") in respect of the Calculation Date immediately
preceding such Payment Date and the month then ended. Each Monthly Report
provided to the Pass Through Trustee, the Trustees, Directors, the Policy
Provider, the Initial Credit Facility Provider and each Rating Agency for each
May, August and November shall be accompanied by (i) a statement setting forth
an analysis of the Collections Account activity for the preceding quarter ended
on the Calculation Date occurring in the



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immediately preceding March, June and September, respectively, (ii) a discussion
and analysis of such activity and of any significant developments affecting the
ACS Group in such quarter and (iii) an updated description of the ACS Group
Aircraft in the ACS Group Portfolio and the related Lessees as of the end of
such quarter (each, a "Quarterly Report"). Each Monthly Report provided to the
Pass Through Trustee, the Trustees, Directors, the Policy Provider, the Initial
Credit Facility Provider and each Rating Agency for each April shall be
accompanied by (x) a statement setting forth an analysis of the Collections
Account activity for the year ended on the Calculation Date occurring in the
immediately preceding January, (y) a discussion and analysis of such activity
and of any significant developments affecting the ACS Group in such year and (z)
updated information with respect to the ACS Group Aircraft in the ACS Group
Portfolio as of the end of such year (each, an "Annual Report"). Each Quarterly
Report and Annual Report, as the case may be, shall contain a listing of the ACS
Group Aircraft that are not subject to any ACS Group Lease. The Trustees shall
deliver a copy of, or make available via a website, each Quarterly Report and
Annual Report to any Holder or other Secured Party who requests a copy thereof.

          (b) After the end of each calendar year but not later than the latest
date permitted by law, the Issuer shall cause the Administrative Agent to
deliver to the Trustee, the Cash Manager, the Policy Provider, the Initial
Credit Facility Provider and the Directors, and the Trustee shall (or shall
instruct any Paying Agent to) furnish to each Person who at any time during such
calendar year was a Holder of record of any subclass of Securities a statement
prepared by the Administrative Agent containing the sum of the amounts
determined pursuant to Exhibit E hereto with respect to the subclass of
Securities for such calendar year or, in the event such Person was a Holder of
record of any subclass during only a portion of such calendar year, for the
applicable portion of such calendar year, and such other items as are readily
available to the Administrative Agent and which a Holder shall reasonably
request as necessary for the purpose of such Holder's preparation of its U.S.
federal income or other tax returns. In the event that any such information has
been provided by any Paying Agent directly to such Person through other
tax-related reports or otherwise, the Trustee in its capacity as Paying Agent
shall not be obligated to comply with such request for information.

          (c) The Issuer shall cause a copy of each report described in Section
2.15(a) above to be concurrently delivered by the Administrative Agent to the
Listing Agent, on behalf of the Alternative Securities Market of the Irish Stock
Exchange, each Rating Agency and the Irish Remarketing Servicer.

          (d) The Trustee shall forward the information furnished pursuant to
Section 2.15 to each Holder of record of each Security of such subclass for the
relevant period of ownership of such Security as appears on the records of the
Registrar.

          (e) Prior to a Refinancing or Redemption, the Trustee shall cause
notice thereof to be given by publication by the Irish Paying Agent in the Irish
Times or, if such newspaper shall cease to be published or timely publication
therein shall not be practicable, in such English language newspaper or
newspapers as the Trustee shall approve having a general circulation in Europe
or by way of announcement by the Irish Listing Agent at the Companies
Announcement office at the Irish Stock Exchange and by either of (A) the
information contained in such notice appearing on the relevant page of the
Reuters Screen or such other medium for the electronic



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display of data as may be approved by the Trustee and notified to Holders or (B)
publication in the Financial Times (European Edition) and The Wall Street
Journal (National Edition) or, if either newspaper shall cease to be published
or timely publication therein shall not be practicable, in such English language
newspaper or newspapers as the Trustee shall approve having a general
circulation in Europe and the United States, with no further publication
requirement.

          (f) Notices referred to in this Section 2.15 to Holders of the Class E
Securities generally will only be made by the Trustee directly to the registered
holders thereof by any of the methods referred to in Section 13.05 hereof.

          (g) The Trustee shall be at liberty to sanction some other method of
giving notice to the Holders of any subclass if, in its opinion, such other
method is reasonable, having regard to the number and identity of the Holders of
such subclass and/or to market practice then prevailing, is in the best
interests of the Holders of such subclass and will comply with the rules of the
Alternative Securities Market of the Irish Stock Exchange as confirmed by the
Listing Agent or such other stock exchange (if any) on which the Securities of
such subclass are then listed, and any such notice shall be deemed to have been
given on such date as the Trustee may approve; provided that notice of such
method is given to the Holders of such subclass in such manner as the Trustee
shall require with no further publication requirement.

          (h) Notwithstanding the above, any notice specifying the rate, amount
or Payment Date in respect of the Securities of any subclass bearing interest at
a floating rate or in respect of any repayment of principal on any Securities
shall, for so long as such Securities (for the avoidance of doubt, not including
the Class E Securities) are listed on the Alternative Securities Market of the
Irish Stock Exchange and so long as the rules of the Alternative Securities
Market of the Irish Stock Exchange so require, be given to the Listing Agent by
the Irish Paying Agent; provided that any notice specifying redemption of
principal of any Securities must be published in the Irish Times or another
daily newspaper of general circulation in Ireland or by way of announcement by
the Irish Listing Agent at the Companies Announcement office at the Irish Stock
Exchange. Any such notice or announcement, as the case may be, shall be deemed
to have been given on the first day on which any of such conditions shall have
been met.

     Section 2.16 CUSIP, CINS and ISIN Numbers. The Issuer in issuing the
Securities may use "CUSIP", "CINS", "ISIN" or other identification numbers (if
then generally in use), and if so, the Trustee shall use CUSIP numbers, CINS
numbers, ISIN numbers or other identification numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; provided that any
such notice shall state that no representation is made as to the correctness of
such numbers either as printed on the Securities or as contained in any notice
of redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Securities; provided further that failure
to use "CUSIP", "CINS", "ISIN" or other identification numbers in any notice of
redemption or exchange shall not affect the validity or sufficiency of such
notice.

     Section 2.17 Holder Representations and Covenants. Each Holder and
beneficial owner of a Security (other than a Class E Security), by the purchase
of such Security or beneficial interest therein, covenants and agrees that it
will treat such Security as indebtedness for all



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purposes and will not take any action contrary to such characterization,
including, without limitation, filing any tax returns or financial statements
inconsistent therewith.

     Section 2.18 European Union Insolvency Regulation. Each of the parties
hereto (other than the Issuer), and each Holder and beneficial owner of a
Security by the purchase of such Security or beneficial interest therein, hereby
acknowledges and agrees that, for the purposes of European Union Council
Regulation (EC) No. 1346/2000 on insolvency proceedings (the "Regulation") the
"centre of main interests" (as that term is defined in the Regulation) of the
Issuer is Ireland and that it has entered into this Indenture in reliance upon
the centre of main interests of the Issuer being and continuing to be in
Ireland.

                                  ARTICLE III
                         ACCOUNTS; PRIORITY OF PAYMENTS

     Section 3.01 Accounts. (a) Establishment of Accounts. The Cash Manager,
acting on behalf of the Security Trustee, shall direct the Operating Bank in
writing to establish and maintain on its books and records in the name of the
Security Trustee the following non-interest bearing accounts: (i) a collections
account (the "Collections Account"), an aircraft purchase account (each, an
"Aircraft Purchase Account") with respect to each Initial ACS Group Aircraft not
acquired on the Initial Closing Date, one or more rental accounts (each, a
"Rental Account"), one or more lessee funded accounts as provided in the Cash
Management Agreement (each, a "Lessee Funded Account"), an aircraft conversion
account (the "Aircraft Conversion Account"), a security deposit account (the
"Security Deposit Account"), an expense account (the "Expense Account"), one
note account for each subclass of the initial ACS Group Securities (each, a
"Securities Account"), an account for the Shareholders (the "Shareholders
Account"), a senior cash collateral account (the "Senior Cash Collateral
Account"), a liquidity reserve account (the "Credit Facility Reserve Account")
and a payment account for the Initial Credit Facility (the "Initial Liquidity
Payment Account") in each case on or before the Initial Closing Date and (ii)
one or more Rental Accounts and any additional Lessee Funded Accounts, in each
case provided for in the Cash Management Agreement, any additional Securities
Accounts, a defeasance/redemption account (the "Defeasance/Redemption Account"),
a refinancing account (the "Refinancing Account"), and any other Account
(including any additional Cash Collateral Account) the establishment of which is
set forth in a Board Resolution or Guarantor Board Resolution, as applicable,
delivered to the Trustee and the Guarantor Trustee, the Security Trustee and the
Cash Manager, in each case at such time as is set forth in this Section 3.01 or
in such Board Resolution or such Guarantor Board Resolution. The Issuer shall
establish a rental account (the "Irish Rental Account") and an Irish collections
account (the "Irish VAT Refund Account") in its name at an Eligible Institution.
Each Account shall be established and maintained as an Eligible Account in
accordance with the terms of the Security Trust Agreement (or, in the case of
the Irish VAT Refund Account and the Irish Rental Account, a charge over bank
account governed by Irish law with respect thereto (the "Irish Account Charge"))
so as to create, perfect and establish the priority of the security interest of
the Security Trustee in such Account and all cash, Investments and other
property therein under the Security Trust Agreement (or, in the case of the
Irish Rental Account and the Irish VAT Refund Account, the Irish Account Charge)
and otherwise to effectuate the Security Trust Agreement (or, in the case of the
Irish



                                                                              68


Rental Account and Irish VAT Refund Account, the Irish Account Charge). Each new
Account established pursuant to Section 2.03(a) of the Cash Management Agreement
shall, when so established, be the Account of such name and purposes for all
purposes of this Indenture. A Certificate Account for the benefit of the holders
of the Certificates shall be established and maintained in accordance with the
terms of the Pass Through Trust Agreement.

          (b) Withdrawals and Transfers Generally. Any provision of this
Indenture relating to any deposit to, withdrawal from, or any transfer to or
from, any Account by the Cash Manager shall mean any such deposit, withdrawal or
transfer effected by the Operating Bank at the Written Notice of the Cash
Manager (such direction to be provided to the Operating Bank by 1:00 p.m. (New
York City time) on the date of such deposit, transfer or withdrawal) given in
accordance with the terms of this Indenture, the Cash Management Agreement and
the Security Trust Agreement. Each such Written Notice to the Operating Bank
shall be also communicated in computer file format or in such other form as the
Cash Manager, the Operating Bank, the Trustees and the Security Trustee agree,
provided that, in the case of communication in computer file format or any other
form other than a written tangible form, a written tangible form thereof shall
promptly thereafter be sent to the Operating Bank. No deposit to, withdrawal
from or transfer from or to any Account shall be made except in accordance with
the terms of this Indenture, the Security Trust Agreement and the Cash
Management Agreement or by any Person other than the Cash Manager (or, upon the
written direction of the Cash Manager, the Operating Bank) or, in the case of
the Securities Accounts, the Trustee or Guarantor Trustee (in which respect such
Trustee or Guarantor Trustee agrees it is acting as the agent of the Security
Trustee). Each of the parties to this Indenture acknowledges that the terms of
this Indenture contemplate that the Cash Manager will receive certain
information from other parties to this Indenture and the Related Documents in
order for the Cash Manager to be able to perform all or any part of its
obligations hereunder, that the Cash Manager will be able to perform its
obligations hereunder only to the extent such information is provided to the
Cash Manager by the relevant parties and that the Cash Manager may conclusively
rely, absent manifest error, on such information as it receives without
undertaking any independent verification of that information. The Cash Manager
agrees that if it does not receive any such information expected to be received
by it, it will promptly notify the Administrative Agent that it has not received
such information and which party who was to provide such information of such
failure.

          (c) Collections Account. All Collections (including amounts
transferred from the Rental Accounts) shall be, when received, deposited in the
Collections Account, and all cash, Investment and other property in the
Collections Account shall be transferred from the Collections Account in
accordance with the terms of this Indenture.

          (d) Lessee Funded Account. Any Segregated Funds received from time to
time from any Lessee or pursuant to any ACS Group Acquisition Agreement shall be
transferred by the Operating Bank at the written direction of the Cash Manager
(which direction shall be given pursuant to a Written Notice from the
Administrative Agent) from the Collections Account into the related Lessee
Funded Account. The Cash Manager shall not make any withdrawal from, or transfer
from or to, any Lessee Funded Account in respect of (i) any portion of the
Segregated Funds therein consisting of a security deposit except, upon the
termination of the related ACS Group Lease, as provided in such ACS Group Lease
or (ii) any Segregated Funds that is contrary to the requirements of the
respective ACS Group Leases as to Segregated Funds and the



                                                                              69


requirements of the Security Trust Agreement (including the agreement of the
Security Trustee that it designate on its account records that it holds its
interest in each Lessee Funded Account for the benefit of the respective Lessee
in respect of whom such Segregated Funds are held). Without limiting the
foregoing, no cash, Investment and other property in a Lessee Funded Account may
be used to make payments, other than as permitted under Section 3.07 hereof, in
respect of the ACS Group Securities at any time, including after the delivery of
a Default Notice. Any Segregated Funds relating to an expired ACS Group Lease
that remain in a Lessee Funded Account after expiration or termination of such
ACS Group Lease and that are not due and owing to the relevant Lessee under such
expired or terminated ACS Group Lease shall, if so required under the terms of a
subsequent ACS Group Lease, if any, relating to such ACS Group Aircraft, be
credited in a Lessee Funded Account or the Security Deposit Account for the
benefit of the next Lessee of the relevant ACS Group Aircraft to the extent
required under the terms of such subsequent ACS Group Lease and, to the extent
not so required, transferred to the Collections Account. When and as provided in
the Cash Management Agreement the Cash Manager shall cause to be established
such additional Lessee Funded Accounts as requested by the Administrative Agent
and as are provided for in accordance with Section 3.01(a) hereof.

          (e) Security Deposit Account. Any cash security deposits received from
time to time from any Lessee or pursuant to any ACS Group Acquisition Agreement
(other than any cash security deposit required to be Segregated Funds, which
shall be deposited in the related Lessee Funded Account) shall be transferred by
the Operating Bank at the written direction of the Cash Manager (which direction
shall be given pursuant to a Written Notice from the Administrative Agent) from
the Collections Account into the Security Deposit Account. No cash, Investment
and other property in the Security Deposit Account may be used to make payments,
other than as permitted under Section 3.07 hereof, in respect of the ACS Group
Securities at any time, including after the delivery of a Default Notice. Any
security deposits relating to an expired ACS Group Lease that remain in the
Security Deposit Account after expiration or termination of such ACS Group Lease
and that are not due and owing to the relevant Lessee under such expired or
terminated ACS Group Lease shall, if so required under the terms of a subsequent
ACS Group Lease, if any, relating to such ACS Group Aircraft, be credited in the
Security Deposit Account or a Lessee Funded Account for the benefit of the next
Lessee of the relevant ACS Group Aircraft and, to the extent not so required,
transferred to the Collections Account.

          (f) Expense Account. On each Payment Date, such amounts as are
provided in Section 3.08 hereof in respect of the Required Expense Amount and
Permitted Accruals shall be deposited into the Expense Account from the
Collections Account. Expenses shall be paid from the Expenses Account as
provided in Section 3.04 hereof.

          (g) Rental Accounts. All Rental Payments and other amounts received
pursuant to any Related Collateral Document shall be deposited into such Rental
Account (including any Non-Trustee Account) as the Cash Manager may determine or
as provided for in the Cash Management Agreement or, with respect to any ACS
Group Aircraft held by the ACS Ireland Group, all Rental Payments and other
amounts received pursuant to any Related Collateral Document related to such ACS
Group Aircraft shall be deposited into the Irish Rental Account. Except with
respect to amounts, if any, that for local tax or other regulatory or legal
reasons must be retained on deposit or as to the transfer of which the Cash
Manager determines (based on information provided to the Cash Manager in a
Written Notice from the Administrative Agent) there is any substantial
uncertainty, all amounts so deposited shall, within one Business Day of their
receipt (or, with respect to any Non-Trustee Account or the Irish Rental
Account, within three Business Days of their receipt), be transferred by the
Cash Manager to the Collections Account. If the Cash Manager determines (based
on



                                                                              70


information provided to the Cash Manager in a Written Notice from the
Administrative Agent) that, for any tax or other regulatory or legal reason, any
such Collections may not be deposited into an account in the name of the
Security Trustee, then, notwithstanding the requirements of Section 3.01(a)
hereof, the relevant ACS Group Member may establish one or more Rental Accounts
(each, a "Non-Trustee Account"), for such Collections in its own name or in the
name of a nominee or trustee acting on its behalf (but subject to the direction
and control of the Cash Manager on behalf of the Security Trustee) at any
Eligible Institution provided that the ACS Group Member that is the lessor under
the relevant Lease is or becomes a party to a Security Document with respect to
such Account.

          (h) Refinancing Account. Upon notice to it of an ACS Group
Refinancing, the Cash Manager shall cause the Operating Bank to establish and
maintain a Refinancing Account pursuant to Section 3.01(a) hereof in the name of
the Security Trustee for the benefit of the Holders of the subclass of ACS Group
Securities, if any, to be refinanced. All net cash proceeds of such ACS Group
Refinancing shall be deposited in the Refinancing Account and shall be held in
such Account until such proceeds are applied to pay the Redemption Price or
Guarantor Redemption Price, as applicable, of and all accrued and unpaid
interest on such ACS Group Securities until such ACS Group Securities are
cancelled by the Trustees and Refinancing Expenses (and any Policy Premium due
and payable to the Policy Provider) with respect thereto (except to the extent
the Directors and the Guarantor Directors have determined, as evidenced by a
Board Resolution and a Guarantor Board Resolution, respectively, to pay the same
from funds available therefor as Permitted Accruals in the Expense Account) and
as otherwise provided in Section 5.02(f)(ii)(D) hereof.

          (i) Defeasance/Redemption Account. Upon notice to it that any subclass
of ACS Group Securities is to be redeemed pursuant to Section 3.10 hereof or the
Guarantor Indenture (other than in an ACS Group Refinancing) or defeased under
Article XII hereof or the Guarantor Indenture, the Cash Manager shall cause the
Operating Bank to establish and maintain a Defeasance/Redemption Account
pursuant to Section 3.01(a) hereof or of the Guarantor Indenture in the name of
the Security Trustee for the benefit of the Holders of such subclass. All
amounts received for the purpose of any such redemption or defeasance shall be
deposited in the Defeasance/Redemption Account.

          (j) Aircraft Purchase Accounts. As and to the extent provided in
Section 3.04 hereof (or, in the case of any ACS Group Additional Aircraft, in
the terms of any indenture supplemental hereto or to the Guarantor Indenture, as
applicable, or a Board Resolution or Guarantor Board Resolution, as applicable,
with respect to the related ACS Group Additional Securities), an amount equal to
the Aircraft Allocation Amount for each Remaining Aircraft acquired on the
relevant Acquisition Date or, in the case of an Additional ACS Group Aircraft,
on the Closing Date for the related ACS Group Additional Securities will be
transferred from the Collections Account out of the proceeds of the ACS Group
Initial Securities or ACS Group Additional Securities (as the case may be) to
the Aircraft Purchase Account for such ACS Group Aircraft. The amount so
deposited will be held in such Account and invested in Permitted



                                                                              71


Account Investments until applied as provided in Section 3.04 or 3.05 hereof.
The Issuer or the Guarantor, as applicable, shall notify the Security Trustee
and the Administrative Agent of the satisfaction or waiver (specifying which) of
all conditions for the payment of the Aircraft Purchase Price of any ACS Group
Aircraft not acquired on a Closing Date.

          (k) Aircraft Conversion Account. As and to the extent provided in
Section 3.04(g) and Section 5.02(i) hereof (or in the terms of any indenture
supplement hereto or indenture supplement to the Guarantor Indenture or a Board
Resolution or Guarantor Board Resolution with respect to the related ACS Group
Additional Securities), an amount equal to any expected ACS Group Conversion
Payment (or in the case of a Conversion Election, a portion thereof) will be
transferred from the Collections Account (i) in the event of a Conversion
Election for any Payment Date, in an amount equal to the sum of (A) the
Available Minimum Principal Amount (or a portion thereof) to fund the Allocable
Principal Conversion Amount and (B) the Available Holder Amount (or a portion
thereof) to fund the Allocable Equity Conversion Amount for such Payment Date,
or (ii) out of the proceeds of the ACS Group Additional Securities, in each case
to the Aircraft Conversion Account. The amount so deposited will be held in the
Aircraft Conversion Account and invested in Permitted Account Investments until
applied as provided in Section 3.04 or 3.08 hereof and upon payment of all ACS
Group Conversion Payments required for such Aircraft Conversion, any remaining
amounts in the Aircraft Conversion Account shall be promptly transferred to the
Collections Account. The Administrative Agent shall notify the Security Trustee
and the Cash Manager of the satisfaction or waiver (specifying which) of all
conditions for the payment of any ACS Group Conversion Payment, and no amounts
may be withdrawn or transferred from the Aircraft Conversion Account until
receipt of such notice as to such ACS Group Conversion Payment.

          (l) Securities Account. Upon the issuance of ACS Group Securities of
any subclass for which a Securities Account was not previously established, the
Cash Manager shall cause the Operating Bank to establish and maintain a
Securities Account for such subclass in accordance with Section 3.01(a) hereof
in the name of the Security Trustee for the benefit of the Holders of the ACS
Group Securities of such subclass. Upon the transfer of any amounts to the
Securities Account for any subclass of ACS Group Securities in accordance with
Section 3.08 hereof, the Trustee or the Guarantor Trustee, as applicable, on the
same day shall pay all such amounts to the Holders of such subclass of
Securities as of the related Record Date in accordance with the terms of this
Indenture or the Guarantor Indenture, as applicable; provided that with respect
to the Securities Account for any subclass of ACS Group Class A Securities, so
long as the Pass Through Trustee is the Holder of any subclass of ACS Group
Class A Securities, all amounts in the Securities Account for such subclass of
ACS Group Class A Securities shall be promptly transferred to the Certificate
Account.

          (m) Shareholders Account. Upon the transfer of any amounts to the
Shareholders Account for the Shareholders in accordance with Section 3.08
hereof, the Guarantor Trustee on the same day shall pay all such amounts to the
Shareholders.

          (n) Irish VAT Refund Account. All payments of refunds with respect to
Irish value-added Tax and any similar amounts related to Irish Tax payments
payable to the Issuers or any ACS Group Subsidiary shall be, when received,
deposited in the Irish VAT Refund Account. Funds held in the Irish VAT Refund
Account shall be converted into U.S. dollars with a



                                                                              72


recognized foreign exchange dealer or foreign commercial bank (which may be the
bank where the Irish VAT Refund Account is located or the Cash Manager or an
affiliate). The conversion of currency into U.S. dollars shall be pursuant to
the conversion procedures set forth in Section 13.07. Upon conversion and
receipt of U.S. dollars, the Cash Manager shall cause such amounts to be
deposited from the Irish VAT Refund Account to the Collections Account as soon
as administratively practicable. The cost and expense of any such conversion
shall be added to and reflected in the rate obtained for conversion and in no
event shall the Cash Manager or any of its affiliates be liable in respect of
the exchange rate obtained for any such conversion or any related cost or
expense.

          All amounts held in the Irish VAT Refund Account from time to time
shall remain uninvested pending conversion to U.S. dollars and transfer to the
Collections Account.

          The Administrative Agent shall promptly notify the Cash Manager in
writing of the expected payment of any such refund and the anticipated amount as
set forth in the Administrative Agency Agreement.

          (o) Credit Facility Reserve Account. Following the funding of the
Credit Facility Reserve Account with a Downgrade Drawing, a Final Drawing or a
Non-Extension Drawing, if the Cash Manager determines on any Calculation Date,
after all withdrawals and transfers are made with respect to the Payment Date
related to such Calculation Date, there will be insufficient funds in the
Collections Account (x) to transfer to the Expense Account an amount such that
the amount on deposit therein is equal to the Required Expense Amount for such
Payment Date, (y) to pay Senior Hedge Payments to each applicable Hedge Provider
and (z) to pay the Interest Amount for the ACS Group Subclass A-1 Securities, in
each case as provided in Section 3.08 hereof, the Operating Bank shall withdraw
from the Credit Facility Reserve Account on such Payment Date the lesser of the
amount equal to the shortfall in making the payments set forth in clauses (x),
(y) and (z) above and the amount on deposit therein. The amount so withdrawn
shall be applied in the following manner: FIRST, to the Expense Account an
amount such that the amount on deposit therein is at least equal to the Required
Expense Amount for such Payment Date and SECOND, in no order of priority inter
se, but pro rata, (A) to the Securities Accounts for the ACS Group Subclass A-1
Securities, the Interest Amount on each such subclass of ACS Group Class A
Securities in no order of priority inter se, but pro rata according to the
amount of accrued and unpaid interest on the ACS Group Subclass A-1 Securities
and (B) pro rata, to any Hedge Provider, an amount equal to any Senior Hedge
Payment due from any ACS Group Member pursuant to any Hedge Agreement.

          (p) Senior Cash Collateral Account. (A) If the Cash Manager determines
on any Calculation Date that, on any Payment Date after making all payments and
transfers to be made with respect to such Payment Date (for the avoidance of
doubt, prior to any drawings under the Initial Credit Facility or the Policy
and/or withdrawals, if any, from the Credit Facility Reserve Account), there are
insufficient funds in the Collections Account (x) to transfer to the Expense
Account an amount such that the amount on deposit therein is equal to the
Required Expense Amount, (y) to pay Senior Hedge Payments to each applicable
Hedge Provider and (z) to pay the Interest Amount for each subclass of ACS Group
Class A Securities, in each case as provided in Section 3.08, the Cash Manager
shall so notify the Trustee and the Guarantor Trustee and direct the Operating
Bank in writing on such Payment Date to withdraw from the Senior Cash



                                                                              73


Collateral Account the lesser of an amount equal to the shortfall in making the
payments set forth in clauses (x), (y) and (z) above and the amount on deposit
therein. The amount so withdrawn shall be applied, FIRST, to the Expense Account
an amount such that the amount on deposit therein is at least equal to the
Required Expense Amount and SECOND, in no order of priority inter se, but pro
rata, (A) to the Securities Accounts for each subclass of ACS Group Class A
Securities, the Interest Amount on such subclass of ACS Group Class A Securities
in no order of priority inter se, but pro rata according to the amount of
accrued and unpaid interest on such subclass of ACS Group Class A Securities;
and (B) pro rata, to any Hedge Provider, an amount equal to any Senior Hedge
Payment due from any ACS Group Member pursuant to any Hedge Agreement. If the
Cash Manager determines that, on any Payment Date, the amount on deposit in the
Senior Cash Collateral Account, after making any withdrawals therefrom to be
made on such Payment Date, exceeds the aggregate Outstanding Principal Balance
of the ACS Group Class A Securities, the Cash Manager shall so notify the
Trustee and Guarantor Trustee in writing and, upon receipt of written consent of
the Issuer and the Guarantor, direct the Operating Bank in writing to withdraw
the collected credit balance of the Senior Cash Collateral Account and apply
such balance, FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, in the order of priority by subclass set forth in Section
3.09 hereof, an amount equal to the Outstanding Principal Balance of each such
subclass and SECOND, to the Collections Account, for application on the next
succeeding Payment Date in accordance with Section 3.08 hereof (any such
application, a "Senior Cash Collateral Event"). Unless applied in connection
with a Senior Cash Collateral Event, no amount in the Senior Cash Collateral
Account shall be available for any shortfall in the payment of principal of the
ACS Group Class A Securities. Amounts deposited in the Senior Cash Collateral
Account are not subject to the payment priorities set forth in Section 3.08
hereof.

          (q) Certificate Account. The proceeds of any Policy Drawing shall be,
when received, deposited in the Certificate Account. Any amounts so paid shall
be distributed by the Pass Through Trustee to the holders of the Certificates in
accordance with the terms of the Pass Through Trust Agreement.

          (r) Additional Cash Collateral Accounts. Upon receipt by the Cash
Manager and the Trustee and Guarantor Trustee of a Board Resolution and
Guarantor Board Resolution providing for the establishment of any additional
Cash Collateral Account as an Eligible Credit Facility for one or more
subclasses of Securities or in respect of any other Obligation, the Cash Manager
shall, by Written Notice, cause the Operating Bank to establish (within three
Business Days of the giving of such Written Notice) and maintain such Cash
Collateral Account pursuant to Section 3.01(a) hereof in the name of the
Security Trustee for the benefit of the Holders of the ACS Group Securities of
each such subclass and/or the Secured Parties holding such other Obligation
(and, with respect to any additional Cash Collateral Account to be an Eligible
Credit Facility (other than any Cash Collateral Account in respect of which (a)
amounts will be deposited therein and (b) there is no obligation to reimburse
any Person in respect of such amounts), upon receipt of the prior written
consent of the Initial Credit Facility Provider and the Policy Provider to such
additional Cash Collateral Account). All amounts provided in connection with any
such Board Resolution and Guarantor Board Resolution for deposit in such Account
and all amounts to be deposited in such Account under Section 3.08 hereof as an
Eligible Credit Facility shall be held in such Cash Collateral Account for
application, and all replenishment shall be made, in accordance with the terms
of the Board Resolution and



                                                                              74


Guarantor Board Resolution relating to such Eligible Credit Facility, which
Board Resolution and Guarantor Board Resolution shall include the basis of any
replenishment of the Cash Collateral Account.

          (s) Guarantor Indenture. For the avoidance of doubt, (a) references to
this Section 3.01 shall include reference to the equivalent Section 3.01 in the
Guarantor Indenture and (b) the Accounts under this Indenture shall be the same
accounts, with such names and for such purposes, as the "Accounts" under the
Guarantor Indenture.

     Section 3.02 Investments of Cash. (a) For so long as any ACS Group
Securities remain Outstanding, the Cash Manager, on behalf of the Security
Trustee, shall, or shall direct the Operating Bank in writing to, invest and
reinvest, at the written direction of the Issuers, the funds on deposit in the
Accounts in Permitted Account Investments; provided, however, that the Initial
Credit Facility Provider shall be entitled to direct the Cash Manager to invest
the amounts standing (if any) in the Credit Facility Reserve Account in
Permitted Account Investments; provided further that following the giving of a
Default Notice or during the continuance of an Acceleration Default, the Cash
Manager shall invest such amount at the written direction of the Security
Trustee in Permitted Account Investments described in clause (d) of the
definition thereof (but in the case of a Lessee Funded Account only to the
extent any such investment credited to such Lessee Funded Account is permitted
by the ACS Group Leases pursuant to which such funds were received) from the
time of receipt thereof until such time as such amounts are required to be
distributed pursuant to the terms of this Indenture and the Guarantor Indenture.
The Cash Manager shall make such investments and reinvestments, and the Issuer,
the Initial Credit Facility Provider and/or the Security Trustee as specified in
the immediately preceding sentence shall provide such direction, in accordance
with the terms of the following provisions:

          (i) the Permitted Account Investments shall have maturities and other
terms such that sufficient funds shall be available to make required payments
pursuant to this Indenture and the Guarantor Indenture (A) before the next
Payment Date after which such investment is made, in the case of investments of
funds on deposit in the Collections Account and the Expense Account, or (B) in
accordance with a Written Notice provided by the Administrative Agent, the
requirements of the relevant ACS Group Leases or ACS Group Aircraft Agreements,
in the case of investments of funds on deposit in the Lessee Funded Accounts or
the Security Deposit Account; provided that an investment maturing within one
year of the date of investment shall nevertheless be a Permitted Account
Investment if it has been acquired with funds which are not reasonably
anticipated, at the discretion of the Cash Manager (at the direction of the
Administrative Agent), to be required to be paid to any other Person or
otherwise transferred from the applicable Account prior to such maturity;

          (ii) if any funds to be invested are not received in the Accounts by
1:00 p.m. (New York City time) on any Business Day, such funds shall, if
possible, be invested in overnight Permitted Account Investments described in
clause (d) of the definition thereof; provided that none of the Trustee, the
Guarantor Trustee or the Security Trustee shall be liable for any losses
Incurred in respect of the failure to invest funds not thereby received; and

          (iii) if required by the terms of a ACS Group Lease as set forth in a
Written Notice from the Administrative Agent to the Cash Manager, any
investments of funds on deposit



                                                                              75


in a Lessee Funded Account or the Security Deposit Account shall be made on
behalf of the relevant Lessee in such investments as may be required thereunder.

          (b) It is understood and agreed that the Cash Manager or its
affiliates are permitted to receive additional compensation that could be deemed
to be in the Cash Manager's economic self-interest for (1) serving as investment
adviser, administrator, shareholder servicing agent, custodian or sub-custodian
with respect to certain of the Permitted Account Investments, (2) using
affiliates to effect transactions in certain Permitted Account Investments and
(3) effecting transactions in Permitted Account Investments.

          (c) Except as provided expressly hereunder, the Cash Manager shall
have no obligation to invest and reinvest any cash held in the Accounts in the
absence of timely and specific written investment direction from the Issuers (or
the Administrative Agent), the Initial Credit Facility Provider or the Security
Trustee, as the case may be. In no event shall the Cash Manager be liable for
the selection of investments or for investment losses incurred thereon. The Cash
Manager shall have no liability in respect of losses incurred as a result of the
liquidation of any investment prior to its stated maturity or the failure of
Issuers to provide timely written investment direction.

     Section 3.03 Closing Date Deposits, Withdrawals and Transfers. The Cash
Manager shall, on each Closing Date, at the written direction of the Issuer,
upon the Operating Bank's receipt thereof, make, or direct the Operating Bank in
writing to make, the following deposits and transfers to the Accounts:

          (a) on the Initial Closing Date,

          (i) (A) deposit in the Collections Account the proceeds of the
issuance of the ACS Group Initial Securities, (B) deposit in the relevant Lessee
Funded Accounts the amount of the initial Segregated Funds, if any, received or
deemed to have been received pursuant to the terms of the relevant ACS Group
Acquisition Agreements and (C) deposit in the Security Deposit Account the
amount of the initial security deposits that are not Segregated Funds received
or deemed to have been received pursuant to the terms of the relevant ACS Group
Acquisition Agreements,

          (ii) after making the deposits required by clause (i) above and in the
following order (A) transfer from the Collections Account to the Expense
Account, an amount equal to the Required Expense Amount for the initial Accrual
Period, (B) pay from the Collections Account to each relevant Seller an amount
equal to the respective Aircraft Allocation Amount for each ACS Group Aircraft,
if any, being acquired from such Seller on the Initial Closing Date pursuant to
the Purchase Agreement or the Guarantor Purchase Agreement, as applicable, minus
the amount of any security deposits that are not Segregated Funds held by an ACS
Group Member, minus the amount equal to any basic rent received by an ACS Group
Member attributable to the period after the Initial Closing Date, (C) transfer
from the Collections Account to the Senior Cash Collateral Account an amount
equal to the Required Amount for such Account and (D) retain in the Collections
Account the balance, if any, remaining after making the foregoing transfers,



                                                                              76


          (iii) transfer to each applicable Aircraft Purchase Account from the
Collections Account any Aircraft Allocation Amount as to each ACS Group Initial
Aircraft not acquired on the Initial Closing Date, and

          (iv) withdraw from the Expense Account such amount as is needed to
discharge any Expenses due and payable on the Initial Closing Date and pay such
amount to the appropriate payees thereof as specified in a Written Notice of the
Cash Manager;

          (b) in the case of a Closing Date for any ACS Group Additional
Securities issued to acquire any ACS Group Additional Aircraft pay from the
Collections Account to each respective Seller the Aircraft Allocation Amount for
each such ACS Group Additional Aircraft;

          (c) in the case of a Closing Date for any ACS Group Additional
Securities issued to finance any ACS Group Aircraft Conversion, transfer from
the Collections Account to the Aircraft Conversion Account such amount as the
relevant Conversion Agreement requires to be paid on or before that Closing
Date; and

          (d) in the case of a Closing Date with respect to any Refinancing
Securities, deposit the proceeds of such Refinancing Securities for application
in accordance with the terms hereof.

     Section 3.04 Interim Deposits, Transfers and Withdrawals. On any Business
Day the Cash Manager, upon the Operating Bank's receipt thereof, may make, or
direct the Operating Bank in writing to make, without duplication, the following
deposits, transfers and withdrawals for the following purposes, in each case
after Written Notice from the Cash Manager to the Trustee and the Guarantor
Trustee (which Written Notice of the Cash Manager shall, as a condition to any
such deposit, withdrawal and transfer, be accompanied by a Written Notice of the
Administrative Agent setting forth the amounts of such deposits, withdrawals and
transfers), identifying the basis for such deposit, transfer or withdrawal in
reasonable detail:

          (a) withdraw from a Lessee Funded Account or the Security Deposit
Account to the extent that funds on deposit therein or available thereunder may
be withdrawn or drawn pursuant to the terms of the related ACS Group Lease for
payment thereof, to discharge any Expense then due and payable and pay such
amount to the appropriate payees thereof;

          (b) withdraw from the Expense Account (to the extent of funds on
deposit therein) such amount as is needed to discharge (i) any Primary Expenses
and (ii) any ACS Group Modification Payments or ACS Group Refinancing Expenses
in respect of which a Permitted Accrual was previously effected by a deposit in
the Expense Account (whether or not any such deposit has been previously used to
pay any other Primary Expense but excluding any portion of such deposit
previously used to pay any ACS Group Modification Payments or ACS Group
Refinancing Expenses) then due and payable and pay such amount to the
appropriate payees thereof;

          (c) transfer from the Collections Account from time to time (but in no
event upon less than one Business Day's prior Written Notice to the Trustee and
the Guarantor Trustee (unless such one Business Day's notice requirement is
waived by the Trustee and the Guarantor Trustee)), other amounts from the
Collections Account to the Expense Account, in each case



                                                                              77


only to the extent that such funds are to be applied to Primary Expenses that
become due and payable during such Accrual Period and for the payment of which
there are insufficient funds in the Expense Account; provided that no such
transfer from the Collections Account in respect of Primary Expenses shall be
made prior to the next succeeding Payment Date if, in the reasonable judgment of
the Cash Manager, such transfer would have a material adverse effect on the
ability of the Issuers to make payments of accrued and unpaid interest on the
Senior Class then Outstanding on the next Payment Date therefor in accordance
with Section 3.08 hereof;

          (d) withdraw Segregated Funds from a Lessee Funded Account or security
deposits from the Security Deposit Account or draw under or cause to be drawn
under any applicable Related Collateral Document, in any case to the extent
required by or necessary in connection with an ACS Group Lease or any documents
related thereto and the Related Collateral Documents, for deposit in the
Collections Account to satisfy any default in Rental Payments under any related
ACS Group Lease;

          (e) transfer any Segregated Funds from the Collections Account to a
Lessee Funded Account in accordance with the terms of any ACS Group Lease;

          (f) transfer any security deposits that are not Segregated Funds from
the Collections Account to the Security Deposit Account;

          (g) subject to Section 5.02(i) hereof, withdraw from the Aircraft
Conversion Account an amount equal to all or a portion of the ACS Group
Conversion Payment for any ACS Group Aircraft Conversion, to the extent the
relevant ACS Group Conversion Agreement requires payment on that or the next
Business Day; and

          (h) transfer to the Collections Account, or any other applicable
Account, any Contribution Amounts.

     Section 3.05 Withdrawals and Transfers Relating to the Acquisition of
Aircraft and Interim Deposits and Withdrawals for Aircraft Sales. (a)
Acquisition. On the Acquisition Date (other than a Closing Date) with respect to
an ACS Group Aircraft, the Cash Manager may make, or direct the Operating Bank
to make, the following deposits, withdrawals and transfers to the Accounts, in
each case as specified in a Written Notice of the Cash Manager to the Trustee,
the Guarantor Trustee, the Security Trustee and the Operating Bank (which
Written Notice of the Cash Manager shall, as a condition to any such deposit,
withdrawal and transfer be accompanied by a Written Notice of the Administrative
Agent (i) stating that the conditions to payment for an ACS Group Aircraft (or
related Aircraft Interest) specified in the applicable ACS Group Acquisition
Agreement have been fulfilled and (ii) setting forth the amounts of such
deposits, withdrawals and transfers):

          (i) deposit into the relevant Lessee Funded Account, the amount of any
Segregated Funds received in respect of such ACS Group Aircraft under the
applicable ACS Group Acquisition Agreement;

          (ii) pay out of the Aircraft Purchase Account for such ACS Group
Aircraft to the applicable Seller the Aircraft Allocation Amount for such ACS
Group Aircraft plus Investment Earnings, if any, remaining in such Aircraft
Purchase Account minus the amount of



                                                                              78


any security deposits that are not Segregated Funds held by an ACS Group
Subsidiary as lessor under the Lease with respect to such ACS Group Aircraft;
and

          (iii) transfer from the Aircraft Purchase Account for such ACS Group
Aircraft to the Security Deposit Account the amount of any security deposits
that are not Segregated Funds held by an ACS Group Subsidiary as lessor under
the ACS Group Lease with respect to such ACS Group Aircraft.

          (b) Aircraft Payments. The payments of the Aircraft Allocation Amount
for any ACS Group Aircraft to be made pursuant to Section 3.05(a)(ii) to any
Seller shall, subject to the delivery as to such ACS Group Aircraft of the
Written Notice referred to in Section 3.05(a), be made as so provided
notwithstanding the giving of any Default Notice or any other exercise of
remedies hereunder.

          (c) Delivery Expiry Date. Upon Written Notice of the Administrative
Agent to the Cash Manager, the Trustee, the Guarantor Trustee, the Security
Trustee and the Operating Bank that the Issuer or Guarantor, as applicable, is
no longer required, pursuant to the terms of the applicable ACS Group
Acquisition Agreement, to purchase any ACS Group Initial Aircraft or ACS Group
Additional Aircraft (whether by reason of the passing of the Delivery Expiry
Date (including, without limitation, if at least 33 of the ACS Group Initial
Aircraft are not purchased within five Business Days after the Initial Closing
Date and the Policy Provider has not extended the period for purchase of the
Specified Number of the ACS Group Initial Aircraft in writing, then the Delivery
Expiry Date shall be deemed to have occurred with respect to the Specified
Number of ACS Group Aircraft selected by the Policy Provider from among the
Specified Aircraft not purchased during such period), the exercise by the Issuer
of any termination right under that ACS Group Acquisition Agreement or otherwise
(any such event, a "Non-Delivery Event")), the Cash Manager shall direct the
Operating Bank to (i) transfer from the Aircraft Purchase Account for each ACS
Group Aircraft so affected to the Collections Account (for application in
accordance with Section 3.08 hereof) the Aircraft Allocation Amount for such ACS
Group Aircraft, and (ii) transfer to the applicable Seller, an amount equal to
the Investment Earnings remaining in such Aircraft Purchase Account.

          (d) Rent Payment Reimbursement Amount. On each Payment Date prior to
an Acquisition Date with respect to a Remaining Aircraft, the Cash Manager shall
pay or shall direct the Operating Bank to pay to the relevant Seller an amount
equal to the Rent Payment Reimbursement Amount for such Remaining Aircraft for
the Rent Transfer Period ending immediately preceding such Payment Date, such
payment to be made from the Investment Earnings in the Aircraft Purchase Account
for such Remaining Aircraft accrued during such Rent Transfer Period.

          (e) Aircraft Sales. The Cash Manager shall cause the Operating Bank to
deposit any and all proceeds received in respect of any Aircraft Sale by any ACS
Group Member (including any loss proceeds and any other amounts under the
relevant ACS Group Purchase Agreement), in each case in the Collections Account
(other than in connection with any sale of all or substantially all of the
assets of the ACS Ireland Group or ACS Bermuda Group, as applicable, in which
case the Cash Manager shall deposit any and all proceeds of any thereof into the
Defeasance/Redemption Account in connection with the redemption of each subclass
of the



                                                                              79


Securities or Guarantor Securities, as applicable), in each case as specified in
a Written Notice of the Cash Manager to the Trustee, the Security Trustee and
the Operating Bank (which Written Notice of the Cash Manager shall, as a
condition to any such deposit, be accompanied by a Written Notice of the
Administrative Agent setting forth the amount of such deposit). Any funds then
on deposit in a Lessee Funded Account or the Security Deposit Account related to
the ACS Group Aircraft subject to such sale or other disposition shall be
applied on a basis consistent with the terms of the Lease related to such ACS
Group Aircraft, if any, or as otherwise provided by the relevant agreements
related to such sale or other disposition.

     Section 3.06 Calculation Date Calculations. (a) Calculation of Required
Amounts. The Cash Manager shall determine, as soon as practicable after each
Calculation Date, but in no event later than two Business Days preceding the
immediately succeeding Payment Date, based on information known to the Cash
Manager or Relevant Information (and, without limitation, in the case of clauses
(ii), (iii), (iv), (v), (vi), (vii) and (viii) below, a Written Notice from the
Administrative Agent received by the Cash Manager no later than 10:00 a.m. (New
York City time) on the day after such Calculation Date setting forth the amounts
required for the calculations in such clauses) provided to the Cash Manager, the
Collections received during the period commencing on the close of business on
the preceding Calculation Date and ending on the close of business on such
Calculation Date and calculate the following amounts:

          (i) the balance of funds on deposit in the Accounts on the Calculation
Date, the Required Amount with respect to each Cash Collateral Account
(including the Senior Cash Collateral Account) on such Calculation Date and the
amount available under all Eligible Credit Facilities on such Calculation Date;

          (ii) the Required Expense Amount and any amount to be deposited in
respect of Permitted Accruals as of such Calculation Date as set forth in the
Monthly Report prepared by the Administrative Agent and provided to the
Operating Bank;

          (iii) the Available Collections on such Calculation Date (separately
listing any Senior Hedge Payments, Subordinated Hedge Payments and Hedge
Breakage Costs) (provided that, in making such determination, the Cash Manager
may assume that any amount from a Hedge Provider to be paid on such Payment Date
pursuant to any Hedge Agreement will be paid on such Payment Date);

          (iv) the net Segregated Funds and any amounts on deposit in the
Security Deposit Account available to be transferred into the Collections
Account on such Calculation Date;

          (v) any amounts to be withdrawn from any Cash Collateral Account for
the payment of the Interest Amount on the Outstanding Principal Balance of any
class of ACS Group Securities, any Expenses or Senior Hedge Payments;

          (vi) any amounts to be transferred in respect of Eligible Credit
Facilities under clause (iv) of Section 3.08(a) hereof, clause (iii) of Section
3.08(b) hereof or clause (ii) of Section 3.08(c) hereof;

          (vii) any amount to be transferred from any Aircraft Purchase Account
to the Collections Account as provided in Section 3.05(c) hereof; and



                                                                              80


          (viii) the Contribution Amounts, if any, made prior to such
Calculcation Date.

          (b) Calculation of Interest Amounts, Policy Premiums and fees of
Initial Credit Facility Provider. The Cash Manager shall, not later than four
Business Days prior to each Payment Date, make the following calculations or
determinations with respect to Interest Amounts, Policy Premiums and fees of the
Initial Credit Facility Provider due on such Payment Date:

          (i) based on Relevant Information provided to it by the Reference
Agent, the applicable interest rate on each subclass of ACS Group Floating Rate
Securities based on LIBOR determined on the Reference Date for the relevant
Accrual Period;

          (ii) the Interest Amount in respect of each class or subclass of ACS
Group Floating Rate Securities (other than Class E Securities) on such Payment
Date;

          (iii) the Interest Amount in respect of each class or subclass of ACS
Group Fixed Rate Securities on such Payment Date;

          (iv) the DSCR Aggregate Interest Amount for such Payment Date;

          (v) the Policy Premium due and owing to the Policy Provider on such
Payment Date; and

          (vi) any fees due and owing to the Initial Credit Facility Provider on
such Payment Date.

          (c) Calculation of Principal Payment and Other Amounts. The Cash
Manager shall, not later than five Business Days prior to each Payment Date,
calculate or determine the following with respect to principal payments due on
such Payment Date and certain other amounts in respect of such Payment Date:

          (i) the Outstanding Principal Balance of each class and subclass of
the ACS Group Securities on such Payment Date immediately prior to any principal
payment on such date;

          (ii) the Assumed Base Value and Assumed Monthly Depreciation for each
ACS Group Aircraft and the Assumed Portfolio Value on such Payment Date;

          (iii) the DSCR Available Cash on such Payment Date (with the amount of
Re-leasing Expenses with respect to such DSCR Available Cash to be certified to
the Cash Manager by the Administrative Agent on or prior to five Business Days
prior to each Payment Date);

          (iv) the Minimum Principal Payment Amount on such Payment Date with
respect to each subclass of ACS Group Class A Securities;

          (v) the Aggregate Minimum Principal Payment Amount on such Payment
Date with respect to each subclass of ACS Group Class A Securities;



                                                                              81


          (vi) the DSCR Aggregate Minimum Principal Amount with respect to such
Payment Date;

          (vii) the DSCR on such Payment Date;

          (viii) the Applicable Allocation Percentage; and

          (ix) the Allocable Principal Conversion Amount and the Allocable
Equity Conversion Amount.

          (d) Calculation of Refinancing Amounts. The Cash Manager shall, not
later than five Business Days prior to each Payment Date on which an ACS Group
Refinancing or Redemption or Guarantor Redemption, as applicable, of any class
or subclass of ACS Group Securities is scheduled to occur, perform the
calculations necessary to determine the Redemption Price or Guarantor Redemption
Price, as applicable, of and the accrued and unpaid interest on such Securities.

          (e) Application of the Available Collections. The Cash Manager shall,
not later than 1:00 p.m. (New York City time) on the Business Day prior to each
Payment Date, determine the amounts to be applied on such Payment Date to make
each of the payments contemplated by Section 3.08(a), 3.08(b) or 3.08(c) (as
applicable) hereof setting forth separately, the amount to be applied on such
Payment Date pursuant to each clause of Section 3.08(a), 3.08(b) or 3.08(c) (as
applicable) hereof including, where applicable, the allocation of principal of
the ACS Group Securities in accordance with Section 3.09 hereof.

          (f) Calculations in respect of Initial Credit Facility Drawings. As
soon as practicable after each Calculation Date, but in no event later than
12:00 p.m. (New York City time) on the date which is the fourth Business Day
prior to the related Payment Date, the Cash Manager shall determine (after
giving effect to the application of Available Collections in accordance with the
applicable payment priorities set forth in Section 3.08 hereof), whether a
shortfall exists as of such Calculation Date in Available Collections (x) to pay
on the next succeeding Payment Date the Required Expense Amount due on such
Payment Date (any such shortfall in respect of the Required Expense Amount, a
"Required Expenses Shortfall"), (y) to pay in full the Senior Hedge Payments to
each applicable Hedge Provider due on such Payment Date (any such shortfall of
Senior Hedge Payments, the "Senior Hedge Payments Shortfall"), and (z) to pay
the Interest Amount due on each subclass of the ACS Group Class A Securities on
such Payment Date (any such shortfall in respect of the Interest Amount due with
respect to the ACS Group Subclass A-1 Securities, a "Credit Facility Interest
Class A Shortfall").

          (g) Notification of Calculations in respect of Available Minimum
Principal Amounts. So long as a Default Notice has not been issued, an
Acceleration Default has not occurred or a DSCR Failure has not occurred or will
not occur on the next succeeding Payment Date, as soon as practicable after each
Calculation Date, but in no event later than 12:00 p.m. (New York City time) on
the date which is the third Business Day prior to the related Payment Date, the
Cash Manager shall provide notice to the Issuer and the Guarantor of its
calculations of (i) the amount (the "Available Minimum Principal Amount")
available (after giving effect to all Prior Ranking Amounts) to pay the Minimum
Principal Payment Amount for the ACS Group



                                                                              82


Class A Securities (for application in accordance with Section 3.08(a)) for such
Payment Date and (ii) the Allocable Principal Conversion Amount with respect to
any proposed ACS Group Aircraft Conversion and whether the Available Minimum
Principal Amount (after giving effect to any prior transfer to the Aircraft
Conversion Account of any Available Minimum Principal Amounts in respect of a
particular Aircraft Conversion) is sufficient to fund such Allocable Principal
Conversion Amount in full. As soon as practicable after receipt of such
calculations, but in no event later than 12:00 p.m. (New York City time) on the
date which is the second Business Day prior to the related Payment Date, each of
the Issuer and the Guarantor (or the Administrative Agent on their behalf) shall
advise the Cash Manager as to whether the Available Minimum Principal Amount
should be applied in accordance with Section 3.08(a) towards the Minimum
Principal Payment Amount payable for such Payment Date or should be transferred
to the Aircraft Conversion Account (such election to transfer the Available
Minimum Principal Amount (or such lesser amount as may be necessary to fund the
Allocable Principal Conversion Amount for such ACS Group Aircraft Conversion) to
the Aircraft Conversion Account, a "Principal Conversion Election"). For the
avoidance of doubt, the sum of the Available Minimum Principal Amount
transferred to the Aircraft Conversion Account in respect of any proposed ACS
Group Aircraft Conversion may not exceed the Allocable Principal Conversion
Amount for such ACS Group Aircraft Conversion. In the absence of a Principal
Conversion Election, the Available Minimum Principal Amount shall be applied in
accordance with the payment priorities set forth in Section 3.08(a) hereof. A
Principal Conversion Election with respect to any ACS Group Aircraft Conversion
in relation to any Payment Date will be only permitted (i) if a Holder
Conversion Election with respect to such ACS Group Aircraft conversion in
relation to such Payment Date is also made and (ii) in the same proportion as
(x) the amount of Available Holder Amount to be transferred to the Aircraft
Conversion Account to fund the Allocable Equity Conversion Amount in respect of
such Holder Conversion Election on such Payment Date bears to (y) such Allocable
Equity Conversion Amount.

          (h) Notification of Calculations in respect of Available Holder
Amounts. So long as a Default Notice has not been issued, an Acceleration
Default has not occurred or a DSCR Failure has not occurred or will not occur on
the next succeeding Payment Date, as soon as practicable after each Calculation
Date, but in no event later than 12:00 p.m. (New York City time) on the date
which is the third Business Day prior to the related Payment Date, the Cash
Manager shall provide notice to the Issuer and the Guarantor of its calculations
of (i) the amount (the "Available Holder Amount") available (after giving effect
to all Prior Ranking Amounts) to pay the Holder of the Class E Securities and
the Shareholders in accordance with Section 3.08(a) for such Payment Date and
(ii) the Allocable Equity Conversion Amount with respect to any proposed ACS
Group Aircraft Conversion and whether such Available Holder Amount (after giving
effect to any prior transfers to the Aircraft Conversion Account of Available
Holder Amounts in respect of a particular ACS Group Aircraft Conversion) is
sufficient to fund such Allocable Equity Conversion Amount in full. As soon as
practicable after receipt of such calculations, but in no event later than 12:00
p.m. (New York City time) on the date which is the second Business Day prior to
the related Payment Date, each of the Issuer and the Guarantor (or the
Administrative Agent on their behalf) shall advise the Cash Manager as to
whether the Available Holder Amount should be paid to the Holders of the Class E
Securities and the Shareholders pro rata according to the Applicable Allocation
Percentage for such Payment Date or should, in lieu of such payment, be
transferred in whole or in part to the Aircraft Conversion



                                                                              83


Account to fund the Allocable Equity Conversion Amount (such election to
transfer the Available Holder Amount (or such lesser amount as may be necessary
to fund the Allocable Equity Conversion Amount for such ACS Group Aircraft
Conversion) to the Aircraft Conversion Account, a "Holder Conversion Election"
and, together with a Principal Conversion Election, a "Conversion Election").
For the avoidance of doubt, the sum of the Available Holder Amount transferred
to the Aircraft Conversion Account in respect of any proposed ACS Group Aircraft
Conversion may not exceed the Allocable Equity Conversion Amount for such ACS
Group Aircraft Conversion. In the absence of a Holder Conversion Election, the
Available Holder Amount shall be applied in accordance with the payment
priorities set forth in Section 3.08(a) hereof.

          (i) Calculations in respect of Policy Drawings. The Cash Manager shall
make the following calculations or determinations in respect of the Policy:

          (i) as soon as practicable after each Calculation Date, but in no
event later than 12:00 p.m. (New York City time) on the date which is the third
Business Day prior to each Regular Distribution Date, determine (after giving
effect to all payments and transfers to be made with respect to such Regular
Distribution Date and the application of Available Collections in accordance
with the applicable payment priorities set forth in Section 3.08 hereof, the
application of Credit Facility Drawings to be made pursuant to the Initial
Credit Facility, any withdrawals from the Credit Facility Reserve Account and
any withdrawals from the Senior Cash Collateral Account pursuant to Section
3.01(p)), whether a shortfall will exist as of such Regular Distribution Date in
the Available Collections and such other amounts to make payment on such Regular
Distribution Date of Accrued Senior Interest due on the Certificates on such
Regular Distribution Date (any such shortfall in respect of accrued and unpaid
interest on the Certificates on any Regular Distribution Date, an "Interest
Shortfall" therefor);

          (ii) as soon as practicable after the Calculation Date next succeeding
the date of a sale or other disposition of an ACS Group Aircraft (not including
any ACS Group Aircraft acquired by way of contribution) or of an ACS Group
Subsidiary which owns an ACS Group Aircraft (not including any ACS Group
Aircraft acquired by way of contribution), in each case by or on behalf of, or
at the direction of the Controlling Party after an Acceleration of the
Securities, but in no event later than 12:00 p.m. (New York City time) on the
date which is the third Business Day prior to the next succeeding Regular
Distribution Date, determine the shortfall, if any, between the Class A Note
Target Price (determined as of the date of disposition) of the disposed Aircraft
(or of the Aircraft owned by the disposed ACS Group Subsidiary) and the Net Sale
Proceeds from the sale or other disposition of such Aircraft (or of such
disposed ACS Group Subsidiary owning such Aircraft) (the "Deficiency Shortfall"
with respect to the next succeeding Regular Distribution Date);

          (iii) as soon as practicable after each Calculation Date on or
following the date that is 24 months after the date (as determined by the Pass
Through Trustee or the Trustee and notified to the Policy Provider in writing)
of the occurrence of an Event of Default under Section 4.01(a) or Section
4.01(b) hereof or an Acceleration of the Securities, but in no event later than
12:00 p.m. (New York City time) on the date which is the third Business Day
prior to the immediately succeeding Regular Distribution Date, determine (after
giving effect to the application of Available Collections in accordance with the
applicable payment priorities set



                                                                              84


forth in Section 3.08 hereof and the application of any Credit Facility Drawings
(or drawings under any Replacement Credit Facility) and the application of any
withdrawals from the Credit Facility Reserve Account and/or the Senior Cash
Collateral Account, in each case, in accordance with the terms hereof) the
shortfall (determined as of such Calculation Date), if any, of Available
Collections and such other amounts for the payment on the next succeeding
Regular Distribution Date of an amount necessary to reduce the then Pool Balance
of the Certificates by the Insured Minimum Principal Payment Amount, if any, of
the ACS Group Subclass A-1 Securities for such Regular Distribution Date (with
respect to any such Regular Distribution Date, a "Minimum Principal Shortfall");

          (iv) as soon as practicable after the Final Maturity Date, but in no
event later than 12:00 p.m. (New York City time) on the date which is the third
Business Day prior to the applicable Legal Final Distribution Date, determine
(after giving effect to all payments and transfers to be made hereunder and the
application of Available Collections in accordance with the applicable payment
priorities set forth in Section 3.08 hereof on or prior to the Final Maturity
Date and the application of any Credit Facility Drawings (or drawings under any
Replacement Credit Facility), any withdrawals from the Credit Facility Reserve
Account and any withdrawals from the Senior Cash Collateral Account as set forth
in Section 3.01(p), in each case, on such Final Maturity Date) (determined as of
the Final Maturity Date) whether any shortfall will exist in the amount
necessary for the payment in full of the Pool Balance of the Certificates on the
Legal Final Distribution Date therefor together with accrued and unpaid interest
thereon (at the Stated Rate of Interest for the Certificates) (any such
shortfall on the Legal Final Distribution Date, the "Final Amount" therefor);
and

          (v) as promptly as practicable after the date of any Avoided Payment,
calculate the amount of such Avoided Payment.

     Section 3.07 Payment Date First Step Withdrawals and Transfers. Two
Business Days prior to each Payment Date, the Cash Manager shall make or direct
the Operating Bank in writing to make (such direction to be communicated in
computer file format or in such other form as the Cash Manager, the Operating
Bank, the Trustees and the Security Trustee agree, provided that, in the case of
communication in computer file format or any other form other than a written
tangible form, a written tangible form thereof shall promptly thereafter be sent
to the Operating Bank), on such Payment Date, the following withdrawals from and
transfers to the Accounts in each case as specified in a Written Notice of the
Cash Manager to the Trustee, the Security Trustee and the Operating Bank (and,
in the case of clauses (c) and (d) below, such direction shall be based on
information provided by the Administrative Agent in a Written Notice to the Cash
Manager specifying the amounts for such clauses);

          (a) transfer the net proceeds of any ACS Group Refinancing of any ACS
Group Securities from the Refinancing Account to any Cash Collateral Account
established for the related ACS Group Refinancing Securities (up to the Required
Amount therefor in accordance with Section 3.03 hereof) and the balance to the
applicable Securities Accounts, in each case in accordance with Sections 2.10(b)
and 5.02(f) hereof and Sections 2.10(b) and 5.02(f) of the Guarantor Indenture;



                                                                              85


          (b) transfer any amounts on deposit in the Defeasance/Redemption
Account in respect of any Redemption or Guarantor Redemption that is not a
Refinancing or Guarantor Refinancing to the applicable Securities Accounts;

          (c) transfer from each Lessee Funded Account to the Security Deposit
Account or the Collections Account, as applicable, any available Segregated
Funds that are no longer required to be maintained in a segregated account under
the applicable ACS Group Leases;

          (d) transfer from the Security Deposit Account to the Collections
Account any security deposits relating to an expired ACS Group Lease that are
not required under the terms of a subsequent ACS Group Lease to be retained in
the Security Deposit Account;

          (e) transfer from the Collections Account to the relevant Lessee
Funded Accounts the amount of any Segregated Funds then on deposit in the
Collections Account;

          (f) transfer from the Collections Account to the Security Deposit
Account the amount of any security deposits that are not Segregated Funds then
on deposit in the Collections Accounts;

          (g) transfer from any Account (other than the Collections Account, the
Credit Facility Reserve Account, the Initial Liquidity Payment Account, the
Aircraft Conversion Account, and the Aircraft Purchase Accounts) to the
Collections Account the amount of Investment Earnings, if any, on investments of
funds on deposit therein during the preceding Accrual Period, except that (a)
earnings on any portion of the funds on deposit in any Account required under
the terms of the related Lease to be repaid to the related Lessee shall be
retained therein and (b) in the case of any Aircraft Purchase Account, any
earnings on the portion of the purchase price funds in respect of an ACS Group
Aircraft on deposit in such Aircraft Purchase Account shall be retained therein
for application in accordance with Section 3.05 hereof;

          (h) after the giving of a Default Notice, during the continuation of
an Acceleration Default or following the Accrual Period in which an Aircraft
Sale occurs with respect to the last remaining ACS Group Aircraft, transfer any
amounts remaining in the relevant Lessee Funded Account (other than amounts
required to be maintained in such account pursuant to the terms of the related
ACS Group Lease or ACS Group Aircraft Agreement) and the Security Deposit
Account into the Collections Account;

          (i) transfer from the Collections Account to the Aircraft Conversion
Account an amount equal to the Available Minimum Principal Amount (or a portion
thereof) to fund the Allocable Principal Conversion Amount and the Available
Holder Amount (or a portion thereof) to fund the Allocable Equity Conversion
Amount in connection with a Conversion Election; and

          (j) after payment in full of all ACS Group Conversion Payments to be
made for any ACS Group Aircraft Conversion, transfer any balance of the amount
originally deposited in the Aircraft Conversion Account in respect of such ACS
Group Aircraft Conversion from the Aircraft Conversion Account to the
Collections Account for application in accordance with Section 3.08 hereof.



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     Section 3.08 Payment Date Second Step Withdrawals. (a) On each Payment
Date, after the withdrawals and transfers provided for in Section 3.07 hereof
have been made, the Cash Manager shall distribute from the Collections Account
(or retain in the Collections Account, if so indicated in the relevant clause
below), or direct the Operating Bank in writing to do the same (such direction
to be communicated in computer file format or in such other form as the Cash
Manager, the Operating Bank, the Trustees and the Security Trustee agree;
provided that, in the case of communication in computer file format or any other
form other than a written tangible form, a written tangible form thereof shall
promptly thereafter be sent to the Operating Bank), at least two Business Days
prior to such Payment Date the amounts set forth below in the order of priority
set forth below but, in each case, only to the extent that all amounts then
required to be paid (or retained in the Collections Account, as applicable)
ranking prior thereto ("Prior Ranking Amounts") have been paid in full (provided
that the amount to be paid shall be reduced in inverse order of priority by the
amount of any payment by a Hedge Provider under a Hedge Agreement that was
assumed pursuant to Section 3.06(a)(iii) to be, but has not in fact been, paid
on such Payment Date). All payments of Available Collections to be made to or
for the account of Holders of any subclass of ACS Group Securities, pursuant to
this Section 3.08 shall be made through a direct transfer of funds to the
applicable Securities Account with respect to such subclass of ACS Group
Securities. Payments shall be made in the following order of priority:

          (i) to the Expense Account, an amount such that the amount on deposit
therein is at least equal to the Required Expense Amount (including Credit
Facility Expenses due and payable to the Initial Credit Facility Provider and
Policy Expenses due and payable to the Policy Provider);

          (ii) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A), (B) and (C) as follows, (A) FIRST, to the Securities
Accounts for each subclass of ACS Group Class A Securities, the Interest Amount
on such subclass of ACS Group Class A Securities (other than any portion thereof
constituting any interest described in clause (b) of the definition of Interest
Amount to the extent the Policy Provider has made timely payment in respect of
any unpaid Interest Shortfall due on the related Regular Distribution Date on
the Certificates) in no order of priority inter se, but pro rata according to
the Interest Amount on such subclass of ACS Group Class A Securities less the
sum of (1) the amount of any Interest Drawing paid on or before the related
Distribution Date by the Policy Provider under the Policy on or prior to such
Distribution Date to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date and (2) the amount of any Credit Facility
Drawing in respect of the Interest Amount due on such subclass of ACS Group
Class A Securities paid on or before such Payment Date to the extent not
theretofore reimbursed to the Initial Credit Facility Provider as of such
Payment Date; and SECOND, to the Policy Provider, the amounts so paid by the
Policy Provider in respect of such Interest Drawings to the extent not
theretofore reimbursed to the Policy Provider as of such Distribution Date; (B)
pro rata, to any Hedge Provider, an amount equal to any Senior Hedge Payment due
from any ACS Group Member pursuant to any Hedge Agreement; and (C) to the Policy
Provider, an amount equal to accrued interest (at the Stated Rate of Interest
with respect to the Certificates) on the amount of any Policy Drawing paid by
the Policy Provider under the Policy prior to the related Distribution Date and
to the extent not theretofore reimbursed to the Policy Provider as of such
Distribution Date;



                                                                              87


          (iii) to the Policy Provider, an amount equal to any Senior Hedge
Payment made by the Policy Provider on behalf of an ACS Group Member to the
extent not theretofore reimbursed to the Policy Provider as of such Payment
Date;

          (iv) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A), (B) and (C) as follows: (A) FIRST, to the Credit
Facility Reserve Account (if applicable), such amount so that the amount on
deposit in such Account is equal to the Required Amount therefor and SECOND, to
any Persons providing any Eligible Credit Facilities, any Credit Facility
Advance Obligations payable to such Persons under the terms of their respective
Eligible Credit Facilities (after giving effect to any payments made by the
Policy Provider to the Persons providing such Eligible Credit Facilities as
provided in the definition of "Controlling Party"); (B) if the Policy Provider
has paid any such Credit Facility Advance Obligations, as so provided, to the
Policy Provider, the amount of such payments to the extent not theretofore
reimbursed to the Policy Provider (plus interest accrued thereon at the
applicable rate under such Eligible Credit Facility that would have otherwise
been payable to the Persons providing such Eligible Credit Facility from the
date of such payment); and (C) to the Senior Cash Collateral Account, such
amount so that the amount on deposit in such Account is equal to the Required
Amount therefor;

          (v) to the Policy Provider, any Policy Premium due and owing to the
Policy Provider;

          (vi) FIRST, except in connection with a Conversion Election, to the
Securities Accounts for each subclass of ACS Group Class A Securities, in the
order of priority by subclass set forth in Section 3.09 hereof, an amount equal
to the Aggregate Minimum Principal Payment Amount of the ACS Group Class A
Securities for such Payment Date less the amounts of Policy Drawings (such
amount in the aggregate not to exceed such Aggregate Minimum Principal Payment
Amount for such date) in respect of the principal of the ACS Group Class A
Securities (or, without duplication, otherwise applied to reduce the
corresponding portion of the Pool Balance of the Certificates) paid by the
Policy Provider under the Policy for periods prior to the related Distribution
Date to the extent not theretofore reimbursed to the Policy Provider; and
SECOND, to the Policy Provider, an amount, not to exceed the Aggregate Minimum
Principal Payment Amount of the ACS Group Class A Securities for such Payment
Date, equal to the amount of such Policy Drawings in respect of such principal
(or, without duplication, otherwise applied to reduce the corresponding portion
of the Pool Balance of the Certificates) so paid by the Policy Provider under
the Policy prior to such Distribution Date to the extent not theretofore
reimbursed to the Policy Provider as of such Distribution Date;

          (vii) to the Expense Account, such amount as an accrual (the
"Permitted Accruals") in respect of any ACS Group Modification Payments or ACS
Group Refinancing Expenses as the Cash Manager shall determine based on
information provided in a Written Notice to the Cash Manager by the
Administrative Agent;

          (viii) payments to the applicable party, pro rata inter se, of Special
Indemnity Payments;



                                                                              88


          (ix) to the Policy Provider, an amount equal to accrued interest (at
the Excess Policy Rate) on any amounts paid by the Policy Provider under the
Policy prior to the related Distribution Date and to the extent not theretofore
reimbursed to the Policy Provider as of such Distribution Date;

          (x) payments to Hedge Providers, pro rata inter se, that are
Subordinated Hedge Payments;

          (xi) to the Policy Provider, any Additional Premium due and owing to
the Policy Provider;

          (xii) to the Irish Parent, the Charitable Trust Dividend, if any;

          (xiii) in no order of priority inter se but pro rata, not on account
of any obligation or debt (A) to the Securities Account for the Holders of the
Class E Securities, an amount equal to the reimbursement to the Holders of the
Class E Securities of the Contribution Amounts (if any) made by such Holders,
and (B) to the Shareholders Account as a dividend or distribution, an amount
equal to the reimbursement to the Shareholders of the Contribution Amounts (if
any) made by the Shareholders with respect to the Shares; and

          (xiv) the balance, in no order of priority inter se but pro rata in
accordance with the Applicable Allocation Percentages, to the Securities Account
for the Holders of the Class E Securities and to the Shareholders Account for
the Shareholders.

          (b) Anything to the contrary contained in Section 3.08(a) hereof
notwithstanding, following the earlier of (x) the Expected Final Payment Date of
the ACS Group Subclass A-1 Securities or (y) the occurrence of a DSCR Failure,
the allocation of payments described in Section 3.08(a) hereof shall not apply
and the Cash Manager shall direct the Operating Bank in writing (such direction
to be communicated in computer file format or in such other form as the Cash
Manager, the Operating Bank, the Trustees, and the Security Trustee agree,
provided that, in the case of communication in computer file format or any other
form other than a written tangible form, a written tangible form thereof shall
promptly thereafter be sent to the Operating Bank) to cause all amounts on
deposit in the Collections Account and the Expense Account to be applied on each
Payment Date in the following order of priority:

          (i) to the Expense Account, an amount such that the amount on deposit
therein is equal to the Required Expense Amount (including Credit Facility
Expenses due and payable to the Initial Credit Facility Provider and Policy
Expenses due and payable to the Policy Provider);

          (ii) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A), (B), (C) and (D) as follows: (A) FIRST, to the
Securities Accounts for each subclass of ACS Group Class A Securities, the
Interest Amount on such subclass of ACS Group Class A Securities (other than any
portion thereof constituting any interest described in clause (b) of the
definition of Interest Amount to the extent the Policy Provider has made timely
payment in respect of any unpaid Interest Shortfall due on the related
Distribution Date on the Certificates) in no order of priority inter se, but pro
rata according to the Interest Amount of such subclass of ACS Group Securities
less the sum of (1) the amount of any Interest Drawing paid on or before the
related Distribution Date by the Policy Provider under the Policy on or prior to
such Distribution



                                                                              89


Date to the extent not theretofore reimbursed to the Policy Provider as of such
Distribution Date and (2) the amount of any Credit Facility Drawing in respect
of the Interest Amount due on such subclass of ACS Group Class A Securities paid
on or before such Payment Date to the extent not theretofore reimbursed to the
Initial Credit Facility Provider as of such Payment Date; and SECOND, to the
Policy Provider, the amounts so paid by the Policy Provider in respect of such
Interest Drawing to the extent not theretofore reimbursed to the Policy Provider
as of such Distribution Date, (B) pro rata to any Hedge Provider, such amounts
as are required to make any Senior Hedge Payments due to such Hedge Provider
pursuant to any Hedge Agreement; (C) to the Policy Provider, an amount equal to
accrued interest (at the Stated Rate of Interest with respect to the
Certificates) on the amount of any Policy Drawing paid by the Policy Provider
under the Policy prior to the related Distribution Date and to the extent not
theretofore reimbursed to the Policy Provider as of such Distribution Date and
(D) to the Policy Provider, an amount equal to any Senior Hedge Payment made by
the Policy Provider made by the Policy Provider on behalf of an ACS Group Member
to the extent not theretofore reimbursed to the Policy Provider as of such
Payment Date;

          (iii) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A) and (B), (A) to any Persons providing any Eligible
Credit Facilities, pro rata inter se, any Credit Facility Advance Obligations
payable to such Persons under the terms of their respective Eligible Credit
Facilities other than a Cash Collateral Account (after giving effect to any
payments made by the Policy Provider to Persons providing such Eligible Credit
Facilities as provided in the definition of "Controlling Party"); and (B) if the
Policy Provider has paid any such Credit Facility Advance Obligations, as so
provided, to the Policy Provider, the amount of such payments to the extent not
theretofore reimbursed to the Policy Provider (plus interest accrued thereon at
the applicable rate under such Eligible Credit Facility that would have
otherwise been payable to the Person providing such Eligible Credit Facility
from the date of such payment);

          (iv) to the Policy Provider, any Policy Premium due and owing to the
Policy Provider;

          (v) FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, an amount equal to the Aggregate Minimum Principal Payment
Amount of the ACS Group Class A Securities for such Payment Date less the
amounts of Policy Drawings (such amount in the aggregate not to exceed such
Aggregate Minimum Principal Payment Amount for such date) in respect of the
principal of the ACS Group Class A Securities (or, without duplication,
otherwise applied to reduce the corresponding portion of the Pool Balance of the
Certificates) paid by the Policy Provider under the Policy for periods prior to
the related Distribution Date to the extent not theretofore reimbursed to the
Policy Provider; and SECOND, to the Policy Provider, an amount, not to exceed in
the Aggregate Minimum Principal Payment Amount of the ACS Group Class A
Securities for such Payment Date, equal to the amount of such Policy Drawings in
respect of such principal (or, without duplication, otherwise applied to reduce
the corresponding portion of the Pool Balance of the Certificates) so paid by
the Policy Provider under the Policy prior to such Distribution Date to the
extent not theretofore reimbursed to the Policy Provider as of such Distribution
Date;

          (vi) FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, the Outstanding Principal Balance of such subclass of ACS
Group Class A Securities in



                                                                              90


no order of priority inter se, but pro rata according to the amount of the
principal of such subclass of ACS Group Class A Securities less the amounts of
Policy Drawings in respect of the principal of such subclass of the ACS Group
Class A Securities (or, without duplication, otherwise applied to reduce the
corresponding portion of the Pool Balance of the Certificates) paid by the
Policy Provider under the Policy for periods prior to the related Distribution
Date to the extent not theretofore reimbursed to the Policy Provider and SECOND,
to the Policy Provider, an amount equal to the Policy Drawings in respect of
such principal (or, without duplication, otherwise applied to reduce the
corresponding portion of the Pool Balance of the Certificates) so paid by the
Policy Provider under the Policy prior to such Distribution Date to the extent
not theretofore reimbursed to the Policy Provider as of such Distribution Date;

          (vii) payments to the applicable party, pro rata inter se, of Special
Indemnity Payments;

          (viii) to the Policy Provider, an amount equal to accrued interest (at
the Excess Policy Rate) on any amounts paid by the Policy Provider under the
Policy prior to the related Distribution Date and to the extent not theretofore
reimbursed to the Policy Provider as of such Distribution Date;

          (ix) payments to any Hedge Provider, pro rata inter se, that are
Subordinated Hedge Payments;

          (x) to the Policy Provider, any Additional Premium then due and owing
to the Policy Provider;

          (xi) to the Irish Parent, the Charitable Trust Dividend, if any; and

          (xii) in no order of priority inter se but pro rata, not on account of
any obligation or debt (A) to the Securities Account for the Holders of the
Class E Securities, an amount equal to the reimbursement to the Holders of the
Class E Securities of the Contribution Amounts (if any) made by such Holders,
and (B) to the Shareholders Account, an amount equal to the reimbursement to the
Shareholders of the Contribution Amounts, if any, made by the Shareholders; and

          (xiii) the balance in no order of priority inter se but pro rata in
accordance with the Applicable Allocation Percentages, to the Securities Account
for the Holders of the Class E Securities and to the Shareholders Account for
the Shareholders.

          (c) Anything to the contrary contained in Section 3.08(a) or (b)
hereof notwithstanding, following the delivery to the Issuer, the Guarantor or
the Cash Manager of a Default Notice or during the continuance of an
Acceleration Default, the allocation of payments described in Section 3.08(a)
and (b) hereof shall not apply and the Cash Manager shall direct the Operating
Bank in writing (such direction to be communicated in computer file format or in
such other form as the Cash Manager, the Operating Bank, the Trustees, and the
Security Trustee agree, provided that, in the case of communication in computer
file format or any other form other than a written tangible form, a written
tangible form thereof shall promptly thereafter be sent to the Operating Bank)
to cause all amounts on deposit in the Collections Account and the Expense
Account to be applied on each Payment Date in the following order of priority:



                                                                              91


          (i) to the Expense Account, an amount such that the amount on deposit
therein is equal to the Required Expense Amount (including Credit Facility
Expenses due and payable to the Initial Credit Facility Provider and Policy
Expenses due and payable to the Policy Provider);

          (ii) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A) and (B), (A) to any Persons providing any Eligible
Credit Facilities, pro rata inter se, any Credit Facility Advance Obligations
payable to such Persons under the terms of their respective Eligible Credit
Facilities other than a Cash Collateral Account (after giving effect to any
payments made by the Policy Provider to Persons providing such Eligible Credit
Facilities as provided in the definition of "Controlling Party"); and (B) if the
Policy Provider has paid any such Credit Facility Advance Obligations, as so
provided, to the Policy Provider, the amount of such payments to the extent not
theretofore reimbursed to the Policy Provider (plus interest accrued thereon at
the applicable rate under such Eligible Credit Facility that would have
otherwise been payable to the Person providing such Eligible Credit Facility
from the date of such payment);

          (iii) to the Policy Provider, any Policy Premium due and owing to the
Policy Provider;

          (iv) in no order of priority inter se, but pro rata as to the amounts
described in clauses (A), (B), (C) and (D) as follows: (A) FIRST, to the
Securities Accounts for each subclass of ACS Group Class A Securities, the
Interest Amount on such subclass of ACS Group Class A Securities (other than any
portion thereof constituting any interest described in clause (b) of the
definition of Interest Amount to the extent the Policy Provider has made timely
payment in respect of any unpaid Interest Shortfall due on the related
Distribution Date on the Certificates) in no order of priority inter se, but pro
rata according to the Interest Amount of such subclass of ACS Group Securities
less the sum of (1) the amount of any Interest Drawing paid on or before the
related Distribution Date by the Policy Provider under the Policy on or prior to
such Distribution Date to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date and (2) the amount of any Credit Facility
Drawing in respect of the Interest Amount due on such subclass of ACS Group
Class A Securities paid on or before such Payment Date to the extent not
theretofore reimbursed to the Initial Credit Facility Provider as of such
Payment Date; and SECOND, to the Policy Provider, the amounts so paid by the
Policy Provider in respect of such Interest Drawing to the extent not
theretofore reimbursed to the Policy Provider as of such Distribution Date, (B)
pro rata to any Hedge Provider, such amounts as are required to make any Senior
Hedge Payments due to such Hedge Provider pursuant to any Hedge Agreement; (C)
to the Policy Provider, an amount equal to accrued interest (at the Stated Rate
of Interest with respect to the Certificates) on the amount of any Policy
Drawing paid by the Policy Provider under the Policy prior to the related
Distribution Date and to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date and (D) to the Policy Provider, an amount
equal to any Senior Hedge Payment made by the Policy Provider made by the Policy
Provider on behalf of an ACS Group Member to the extent not theretofore
reimbursed to the Policy Provider as of such Payment Date;

          (v) FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, an amount equal to the Aggregate Minimum Principal Payment
Amount of the ACS Group Class A Securities for such Payment Date less the
amounts of Policy Drawings (such amount in the aggregate not to exceed such
Aggregate Minimum Principal Payment Amount for



                                                                              92


such date) in respect of the principal of the ACS Group Class A Securities (or,
without duplication, otherwise applied to reduce the corresponding portion of
the Pool Balance of the Certificates) paid by the Policy Provider under the
Policy for periods prior to the related Distribution Date to the extent not
theretofore reimbursed to the Policy Provider; and SECOND, to the Policy
Provider, an amount, not to exceed in the Aggregate Minimum Principal Payment
Amount of the ACS Group Class A Securities for such Payment Date, equal to the
amount of such Policy Drawings in respect of such principal (or, without
duplication, otherwise applied to reduce the corresponding portion of the Pool
Balance of the Certificates) so paid by the Policy Provider under the Policy
prior to such Distribution Date to the extent not theretofore reimbursed to the
Policy Provider as of such Distribution Date;

          (vi) FIRST, to the Securities Accounts for each subclass of ACS Group
Class A Securities, the Outstanding Principal Balance of such subclass of ACS
Group Class A Securities in no order of priority inter se, but pro rata
according to the amount of the principal of such subclass of ACS Group Class A
Securities less the amounts of Policy Drawings in respect of the principal of
such subclass of the ACS Group Class A Securities (or, without duplication,
otherwise applied to reduce the corresponding portion of the Pool Balance of the
Certificates) paid by the Policy Provider under the Policy for periods prior to
the related Distribution Date to the extent not theretofore reimbursed to the
Policy Provider and SECOND, to the Policy Provider, an amount equal to the
Policy Drawings in respect of such principal (or, without duplication, otherwise
applied to reduce the corresponding portion of the Pool Balance of the
Certificates) so paid by the Policy Provider under the Policy prior to such
Distribution Date to the extent not theretofore reimbursed to the Policy
Provider as of such Distribution Date;

          (vii) payments to the applicable party, pro rata inter se, of Special
Indemnity Payments;

          (viii) to the Policy Provider, an amount equal to accrued interest (at
the Excess Policy Rate) on any amounts paid by the Policy Provider under the
Policy prior to the related Distribution Date and to the extent not theretofore
reimbursed to the Policy Provider as of such Distribution Date;

          (ix) payments to Hedge Providers, pro rata inter se, that are
Subordinated Hedge Payments;

          (x) to the Policy Provider, any Additional Premium then due and owing
to the Policy Provider;

          (xi) to the Irish Parent, the Charitable Trust Dividend, if any;

          (xii) in no order of priority inter se but pro rata, not on account of
any obligation or debt (A) to the Securities Account for the Holders of the
Class E Securities, an amount equal to the reimbursement to the Holders of the
Class E Securities of the Contribution Amounts (if any) made by such Holders,
and (B) to the Shareholders Account, an amount equal to the reimbursement to the
Shareholders of the Contribution Amounts, if any, made by the Shareholders; and



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          (xiii) the balance in no order of priority inter se but pro rata in
accordance with the Applicable Allocation Percentages, to the Securities Account
for the Holders of the Class E Securities and to the Shareholders Account for
the Shareholders.

     Section 3.09 Allocations of Principal Payments Among Subclasses of the
Securities. To the extent that any payment of principal pursuant to Section
3.08(a) and (b) hereof is allocable to any class of Securities on any Payment
Date, such payment will be applied to repay all Securities in such class in the
following order of priority: (i) FIRST, to each subclass, in order of the
earliest issued subclass, the excess, if any, of the Outstanding Principal
Balance of each such subclass over the product of the applicable Extended Note
Pool Factor on such Payment Date and the initial principal balance of each such
subclass (any such difference, the "Extension Amount"); provided that, in the
case of two or more subclasses issued on the same date, the Available
Collections will be applied to each such subclass pro rata according to the
amount of, but not to exceed, the Extension Amount of such subclass; (II)
SECOND, to each subclass, in no order of priority inter se, but pro rata
according to the amount of, but not to exceed, the excess, if any, of the
Outstanding Principal Balance of each such subclass (after giving effect to any
payment under clause (i) above) over the product of the applicable Note Pool
Factor on such Payment Date and the initial principal balance of each such
subclass; (iii) THIRD, to each subclass with an Expected Final Payment Date on
or before such Payment Date, in order of the earliest issued subclass; provided
that, in the case of two or more subclasses issued on the same date, the
Available Collections will be applied to such subclasses in order of the
subclass with the earliest Expected Final Payment Date and, with respect to two
or more subclasses having the same Expected Final Payment Date, the Available
Collections will be applied to such subclasses pro rata according to the
Outstanding Principal Balance of each such subclass (after giving effect to any
payment under clauses (i) and (ii) above) on such Payment Date; and (iv) FOURTH,
to each subclass in order of the earliest Expected Final Payment Date, provided,
in the case of two or more subclasses having the same Expected Final Payment
Date, in no order of priority inter se, but pro rata, according to the
Outstanding Principal Balance of each such subclass (after giving effect to any
payment under clauses (i), (ii) and (iii) above) on such Payment Date.

     Section 3.10 Certain Redemptions; Certain Premiums. (a) Optional
Redemption. Subject to the provisions of Section 3.10(c) hereof, on any Payment
Date the Issuer may elect to redeem (including in connection with any
Refinancing) any subclass of the Securities in whole or in part, out of amounts
available in the Defeasance/Redemption Account or, in the case of a Refinancing,
the Refinancing Account, for such purpose, if any, other than, in either such
case, any funds constituting part of the Available Collections, at the
Redemption Price plus any accrued and unpaid interest (after giving effect to
any payment thereof on such Redemption Date under Section 3.08 hereof) on the
Securities to be redeemed to the Redemption Date; provided that such a
redemption may only occur upon the prior written consent of the Policy Provider
(except that a redemption in full of the ACS Group Subclass A-1 Securities shall
not require any such consent if a Policy Non-Consent Event occurs in connection
with such redemption) and after the giving of a Default Notice or the
Acceleration of any Securities, the Securities may be redeemed only in whole but
not in part pursuant to this Section 3.10(a); provided further that Written
Notice of any such Redemption shall be given by the Issuer (or the
Administrative Agent on its behalf) to the Trustee not less than 30 days and not
more than 45 days prior to such Redemption Date and, for so long as any
Securities are listed on the Alternative Securities Market



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of the Irish Stock Exchange, to the Listing Agent and the Alternative Securities
Market of the Irish Stock Exchange not less than 30 days and not more than 45
days prior to such Redemption Date; and provided further that no Class E
Securities shall be redeemed if any Class A Securities are Outstanding.

          (b) Redemption for Taxation Reasons. Subject to the provisions of
Section 3.10(c) hereof, if, at any time,

          (i) the Issuer is, or on the next succeeding Payment Date will be,
     required to make any withholding or deduction under the laws or regulations
     of any applicable tax authority with respect to any payment on any subclass
     of Securities; or

          (ii) the Issuer is or will be subject to any circumstance (whether by
     reason of any law, regulation, regulatory requirement or double-taxation
     convention, or the interpretation or application thereof, or otherwise)
     that has resulted or will result in the imposition of a Tax (whether by
     direct assessment or by withholding at source) or other similar imposition
     by any jurisdiction that would (A) materially increase the cost to the
     Issuer of making payments in respect of any subclass of Securities or of
     complying with its obligations under or in connection with the Securities;
     (B) materially increase the operating or administrative expenses of the
     Issuer; or (C) otherwise obligate the Issuer or any of its subsidiaries to
     make any material payment on, or calculated by reference to, the amount of
     any sum received or receivable by the Issuer, or by the Cash Manager on
     behalf of the ACS Ireland Group as contemplated by the Cash Management
     Agreement,

then the Issuer shall inform the Trustee in writing at such time of any such
requirement or imposition and shall use commercially reasonable efforts to avoid
the effect of the same; provided that no actions shall be taken by the Issuer to
avoid such effects without receipt of a Rating Agency Confirmation and the prior
written consent of the Policy Provider. If, after using its commercially
reasonable efforts to avoid the adverse effects described above, any ACS Ireland
Group Member has not avoided such effects, the Issuer may, at its election,
redeem the Securities on any Payment Date, in whole, at the Outstanding
Principal Balance thereof plus accrued and unpaid interest (after giving effect
to any payment thereof on such Redemption Date under Section 3.08 hereof)
thereon, the Required Expense Amount and all unpaid Policy Provider Obligations,
Credit Facility Obligations and any amounts payable to any Hedge Provider as of
the Redemption Date to such Payment Date but without premium; provided, however,
that any such Redemptions may not occur more than 30 days prior to such time as
the requirement or imposition described in (i) or (ii) above is to become
effective and each of the Trustee and the Policy Provider shall have received a
certification from the Issuer certifying that the applicable ACS Ireland Group
Member has been unable, after using such commercially reasonable efforts, to
avoid the adverse effects described above; and provided further that Written
Notice of any such Redemption shall be given by the Issuer (or the
Administrative Agent on its behalf) to the Trustee and the Policy Provider not
less than 30 days and not more than 45 days prior to the Redemption Date for
such Redemption and, for so long as any Securities are listed on the Alternative
Securities Market of the Irish Stock Exchange, to the Listing Agent and the
Alternative Securities Market of the Irish Stock Exchange not less than 30 days
and not more than 45 days prior to the Redemption Date for such Redemption.



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          (c) Method of Redemption. Upon receipt of notice from the Issuer or
the Administrative Agent under Section 3.10(a) or 3.10(b) hereof, the Trustee
shall give Written Notice in respect of any such redemption of any subclass of
Securities under Section 3.10(a) or 3.10(b) hereof (a "Redemption") to each
Holder of Securities and the Policy Provider, at least 20 days before the
Redemption Date for such Redemption. Except in the case of a Refinancing, the
Trustee shall not deliver any notice under this Section 3.10(c) unless and until
the Trustee shall have received certification that all conditions precedent to
such Redemption have been satisfied and evidence satisfactory to it that the
amounts required to be deposited pursuant to Section 3.10(d) hereof are, or will
on or before the Redemption Date be, deposited in the Defeasance/Redemption
Account. Each notice in respect of a Redemption given pursuant to this Section
3.10(c) shall state (i) the applicable Redemption Date, (ii) the Trustee's
arrangements for making payments in respect of such Redemption, (iii) the
Redemption Price or the Outstanding Principal Balance of each subclass of
Securities to be redeemed and accrued and unpaid interest, (iv) in the case of a
Redemption of the Securities of any subclass in whole, that Securities of each
subclass to be redeemed must be surrendered to the Trustee to collect the
Redemption Price plus accrued and unpaid interest on such Securities and (v) in
the case of a Redemption of the Securities of any subclass in whole, that,
unless the Issuer defaults in the payment of the Redemption Price and any
accrued and unpaid interest on the Securities to be redeemed, interest on the
subclass of Securities called for Redemption shall cease to accrue on and after
the Redemption Date.

          (d) Deposit of Redemption Amount. On or before 10:00 a.m. (New York
City time) on the fifth day preceding any Redemption Date in respect of a
Redemption under Section 3.10(a) hereof, the Issuer shall, to the extent an
amount equal to the Redemption Price of Securities to be redeemed and all
accrued and unpaid interest thereon (after giving effect to any payment thereof
on such Redemption Date under Section 3.08 hereof) and all unpaid Policy
Provider Obligations as of the Redemption Date is not then held on deposit
therein, deposit or cause to be deposited in the Defeasance/Redemption Account
or, in the case of a Refinancing, the Refinancing Account, other than, in either
case, any funds constituting part of the Available Collections, an amount in
immediately available funds equal to such amount. On or before 10:00 a.m. (New
York City time) on the fifth day preceding any Redemption Date in respect of a
Redemption under Section 3.10(b) hereof, the Issuer shall, to the extent an
amount equal to the Outstanding Principal Balance of Securities to be redeemed
and all accrued and unpaid interest (after giving effect to any payment thereof
on such Redemption Date under Section 3.08 hereof) and all unpaid Policy
Provider Obligations (including any Policy Premium and any Policy Redemption
Premium, if any) as of the Redemption Date is not then held on deposit therein,
deposit or cause to be deposited in the Defeasance/Redemption Account or, in
case of a Refinancing, the Refinancing Account, other than, in either case, any
funds constituting part of Available Collections, an amount in immediately
available funds equal to such amount. In the event the ACS Group Subclass A-1
Securities or any other Covered Class A Securities are redeemed in full, the
Policy shall be surrendered to the Policy Provider for cancellation.

          (e) Securities Payable on Redemption Date. After notice has been given
under Section 3.10(c) hereof, the Outstanding Principal Balance of the
Securities to be redeemed on such Redemption Date shall become due and payable
at the Corporate Trust Office of the Trustee, and from and after such Redemption
Date (unless there shall be a default in the payment of the applicable amount to
be redeemed) such principal amount shall cease to bear interest.



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Upon surrender of any Security for redemption in accordance with such notice,
the Redemption Price or the Outstanding Principal Balance (as applicable) of
such Security, together with accrued and unpaid interest on such Security shall
be paid as provided for in this Section 3.10. If any Security to be redeemed
shall not be so paid upon surrender thereof for redemption, the amount in
respect thereof shall continue to bear interest until paid from the Redemption
Date at the interest rate or Periodic Return applicable to such Security.

     Section 3.11 Adjustment of Certain Percentages, Factors and Balances. Upon
each acquisition of any Additional Aircraft (other than any Additional Aircraft
acquired by way of a contribution) or the issuance of any Additional Securities
or Refinancing Securities, subject to Sections 5.02(f) and 5.02(h) hereof (as
applicable), the Note Pool Factors and Extended Note Pool Factors for any
subclass of Securities may be adjusted or, in the case of any new subclass of
Securities, determined to take into account such Permitted Additional Aircraft
Acquisition or the issuance of such Refinancing Securities in the manner
specified in the Board Resolution providing for such action subject to the prior
written consent of the Policy Provider and the Initial Credit Facility Provider;
provided that no Note Pool Factor or Extended Note Pool Factor for any subclass
of Securities may be adjusted so as to change the original Average Life of the
affected subclass of Securities or alter the rate at which such subclass of
Securities was originally scheduled to amortize. The Administrative Agent shall
include such adjusted Note Pool Factors, Extended Note Pool Factors and Minimum
Target Principal Balances in each Quarterly Report and Annual Report.

     Section 3.12 Initial Credit Facility.

          (a) Credit Facility Drawings. If the Cash Manager determines in
accordance with Section 3.06(f) hereof that after making all withdrawals (prior
to any drawings under the Policy but after any withdrawals from the Senior Cash
Collateral Account and the Credit Facility Reserve Account) and transfers to be
made with respect to the applicable Payment Date, there is (x) a Required
Expenses Shortfall, (y) a Senior Hedge Payments Shortfall and/or (z) a Credit
Facility Interest Class A Shortfall, in each case as calculated in Section
3.06(f) hereof, the Cash Manager shall so notify the Trustees in writing and
shall, no later than 1:00 p.m. (New York City time) three Business Days prior to
such Payment Date, request a drawing (each such drawing, a "Credit Facility
Drawing") under the Initial Credit Facility, to be paid on or prior to such
Payment Date, in an amount equal to the lesser of (a) the aggregate amount of
the shortfall from clauses (x), (y) and (z) above and (b) the Available Amount
under the Initial Credit Facility.

          (b) Application of Credit Facility Drawings. The proceeds of any
Credit Facility Drawing shall be deposited into the Initial Liquidity Payment
Account and withdrawn by the Operating Bank, upon Written Notice from the Cash
Manager, for application on the applicable Payment Date in the following manner:
FIRST, to the Expense Account an amount such that the amount on deposit therein
is at least equal to the Required Expense Amount for such Payment Date and
SECOND, in no order of priority inter se, but pro rata, (1) to the Securities
Accounts for the ACS Group Subclass A-1 Securities, the amount of accrued and
unpaid interest on the ACS Group Subclass A-1 Securities with respect to the
applicable Payment Date in no order of priority inter se, but pro rata; and (2)
pro rata, to any Hedge Provider, an amount equal to any Senior Hedge Payment due
from any ACS Group Member pursuant to any Hedge Agreement.



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          (c) Downgrade Drawings. The Initial Credit Facility Provider shall
notify the Issuers, the Cash Manager and the Policy Provider promptly upon the
occurrence of a Downgrade Event. If at any time a Downgrade Event has occurred
and within 10 days after notice of such event (but not later than the expiration
date of the Initial Credit Facility) (i) the Initial Credit Facility Provider or
the Issuer or the Guarantor does not arrange to replace the Initial Credit
Facility with a Replacement Credit Facility, (ii) the Initial Credit Facility
Provider shall not have received a Rating Agency Confirmation with respect to
the Downgrade Event and the written consent of the Policy Provider to the
retention of such Initial Credit Facility Provider shall not have been obtained
or (iii) the Policy Provider shall not have confirmed in writing that such
downgrading will not constitute a Downgrade Event, on such 10th day (or if such
10th day is not a Business Day, on the next succeeding Business Day) (or, if
earlier, the expiration date of the Initial Credit Facility), then the Cash
Manager shall, upon the occurrence of a Downgrade Event with respect to the
Initial Credit Facility, request a drawing in accordance with and to the extent
permitted by the Initial Credit Facility (such drawing, a "Downgrade Drawing")
of the Available Amount thereunder. Amounts drawn pursuant to a Downgrade
Drawing shall be deposited into the Credit Facility Reserve Account.

          (d) Non-Extension Drawings. If the Initial Credit Facility is
scheduled to expire on a date (the "Stated Expiration Date") prior to the date
that is 15 days after the Final Maturity Date with respect to the ACS Group
Subclass A-1 Securities, then, no earlier than the 60th day and no later than
the 30th day prior to the applicable Stated Expiration Date then in effect, the
Cash Manager shall request that the Initial Credit Facility Provider extend the
Stated Expiration Date until the earlier of (i) the date which is 15 days after
such Final Maturity Date with respect to the ACS Group Subclass A-1 Securities
and (ii) the date that is immediately preceding the 364th day occurring after
the Stated Expiration Date then in effect (unless the obligations of the Initial
Credit Facility Provider under the Initial Credit Facility are earlier
terminated in accordance with the Initial Credit Facility). If on or before the
date which is 10 days prior to the Stated Expiration Date, (A) the Initial
Credit Facility shall not have been replaced in accordance with Section 3.12(e)
hereof or (B) the Initial Credit Facility Provider fails irrevocably and
unconditionally to advise the Cash Manager that such Stated Expiration Date then
in effect shall be so extended (whether or not the Cash Manager has in fact
requested an extension), the Cash Manager shall immediately, in accordance with
the terms of the Initial Credit Facility (a "Non-Extended Facility"), request a
drawing under such Initial Credit Facility (such drawing, a "Non-Extension
Drawing") for the Available Amount thereunder. Amounts drawn pursuant to a
Non-Extension Drawing shall be deposited into the Credit Facility Reserve
Account.

          (e) Issuance of Replacement Credit Facility.

          (i) If the Initial Credit Facility Provider shall determine not to
extend the Initial Credit Facility in accordance with Section 3.12(d) hereof,
then either the Initial Credit Facility Provider or either the Issuer or the
Guarantor may, at their respective options, arrange for a Replacement Credit
Facility to replace the Initial Credit Facility during the period no earlier
than 35 days and no later than 10 days prior to the then effective Stated
Expiration Date.

          (ii) If a Downgrade Event shall have occurred with respect to the
Initial Credit Facility in accordance with Section 3.12(c) hereof, then either
the Initial Credit Facility Provider or the Issuer or the Guarantor may, at
their respective options, arrange for a Replacement Credit



                                                                              98


Facility to replace the Initial Credit Facility within 10 days after receiving
notice of such Downgrade Event (but not later than the expiration date of the
Initial Credit Facility); provided, however, that the Initial Credit Facility
Provider may, at its option, arrange for a Replacement Credit Facility at any
time following a Downgrade Drawing so long as neither the Issuer nor the
Guarantor has already arranged for a Replacement Credit Facility.

          (iii) (A) At any time after the then Stated Expiration Date of the
Initial Credit Facility which has been extended for a period in excess of a
364-day period, the Initial Credit Facility Provider may, at its option, arrange
for a Replacement Credit Facility to replace the Initial Credit Facility.

          (B) No Replacement Credit Facility arranged by the Initial Credit
Facility Provider or the Issuer or the Guarantor in accordance with clauses
(e)(i), (e)(ii) and (e)(iii)(A) above shall become effective and no such
Replacement Credit Facility shall be deemed an Eligible Credit Facility under
this Indenture, unless and until (y) each of the conditions referred to in
subclause (C) below shall have been satisfied, and (z) in the case of a
Replacement Credit Facility arranged by the Initial Credit Facility Provider,
such Replacement Credit Facility is acceptable to the Issuer and the Guarantor.

          (C) In connection with the issuance of each Replacement Credit
Facility, (x) the Cash Manager shall, prior to the issuance of such Replacement
Credit Facility, have received a Rating Agency Confirmation with respect to the
Certificates (without regard to any downgrading of any rating of the Initial
Credit Facility Provider being replaced pursuant to Section 3.12(c) hereof and
without regard to the Policy), (y) upon receipt of a Written Notice from the
Administrative Agent to the Cash Manager setting forth the amount of Credit
Facility Obligations then owing to the replaced Initial Credit Facility
Provider, the Cash Manager shall direct the Operating Bank pursuant to a Written
Notice of the Cash Manager setting forth the amount of Credit Facility
Obligations then owing to the replaced Initial Credit Facility Provider to pay
to the replaced Initial Credit Facility Provider all Credit Facility Obligations
then owing to the replaced Initial Credit Facility Provider and upon receipt of
such Written Notice, the Operating Bank shall pay such amount to the Initial
Credit Facility Provider (which payment shall be made first from available funds
in the Credit Facility Reserve Account, and thereafter from any other available
source, including, without limitation, a drawing under the Replacement Credit
Facility) and (z) the issuer of the Replacement Credit Facility shall deliver
the Replacement Credit Facility to the Cash Manager, together with a legal
opinion opining that such Replacement Credit Facility has been duly authorized,
executed and delivered by, and is an enforceable obligation of, such Replacement
Credit Facility Provider, such legal opinion to be reasonably satisfactory to
the Policy Provider unless the legal opinion of counsel to the Replacement
Credit Facility Provider is in form and substance substantially the same as the
legal opinion of counsel to the Initial Credit Facility Provider delivered on
the Initial Closing Date.

          (D) Upon satisfaction of the conditions set forth in clauses (B) and
(C) of this Section 3.12(e)(iii) with respect to a Replacement Credit Facility,
(w) the replaced Initial Credit Facility shall terminate, (x) the Cash Manager
shall, if and to the extent so requested by the Issuer or the Guarantor or the
Initial Credit Facility Provider being replaced, execute and deliver any
certificate or other instrument furnished to it required in order to terminate
the replaced Initial Credit Facility, shall surrender the replaced Initial
Credit Facility to the Initial Credit



                                                                              99


Facility Provider being replaced and shall execute and deliver the Replacement
Credit Facility, (y) each of the parties hereto shall enter into any amendments
to this Indenture, the Guarantor Indenture and any other Related Documents
necessary to give effect to (1) the replacement of the applicable Initial Credit
Facility Provider with the applicable Replacement Credit Facility Provider and
(2) the replacement of the applicable Initial Credit Facility with the
applicable Replacement Credit Facility and (z) such Replacement Credit Facility
Provider shall be deemed to be an Eligible Provider with the rights and
obligations of the Initial Credit Facility Provider hereunder and under the
other Related Documents and such Replacement Credit Facility shall be deemed to
be an Eligible Credit Facility (and, if so designated by a Board Resolution and
Guarantor Board Resolution, deemed to be the Initial Credit Facility) hereunder
and under the other Related Documents.

          (f) Credit Facility Reserve Account; Withdrawals; Investments. All
amounts drawn under the Initial Credit Facility by the Cash Manager pursuant to
Section 3.12(c), 3.12(d) or 3.12(i) hereof shall be deposited by the Cash
Manager into the Credit Facility Reserve Account. All amounts on deposit in the
Credit Facility Reserve Account, including any amount deposited in accordance
with clause (iv) of Section 3.08(a) hereof, shall be invested and reinvested in
accordance with Section 3.02 hereof. Upon a request by the Initial Credit
Facility Provider, the Cash Manager shall provide the Initial Credit Facility
Provider with the amount of Investment Earnings held in the Credit Facility
Reserve Account as of the applicable date of determination. On each Payment
Date, the Cash Manager shall direct the Operating Bank to pay to the Initial
Credit Facility Provider all Investment Earnings on amounts on deposit in the
Credit Facility Reserve Account. Amounts on deposit in the Credit Facility
Reserve Account shall be withdrawn by or at the direction of the Cash Manager
under the following circumstances:

          (i) in accordance with Section 3.01(o) hereof;

          (ii) on any Payment Date, if the amount in the Credit Facility Reserve
Account exceeds the Required Amount therefor, then the Cash Manager shall direct
the Operating Bank to withdraw, upon Written Notice from the Cash Manager, from
the Credit Facility Reserve Account such excess and pay such amount to the
Initial Credit Facility Provider;

          (iii) if a Replacement Credit Facility is established following the
date on which funds have been deposited into the Credit Facility Reserve
Account, the Cash Manager shall direct the Operating Bank to withdraw, upon
Written Notice from the Cash Manager, all amounts on deposit in the Credit
Facility Reserve Account and shall pay such amounts to the replaced Initial
Credit Facility Provider until all Credit Facility Obligations owed to such
Person shall have been paid in full, and shall deposit any remaining amount in
the Collections Account;

          (iv) upon the payment in full of the Outstanding Principal Balance of,
and accrued and unpaid interest on, the ACS Group Subclass A-1 Securities, the
Cash Manager shall direct the Operating Bank to withdraw, upon Written Notice
from the Cash Manager, all amounts from the Credit Facility Reserve Account and
pay such amounts to the Initial Credit Facility Provider until all Credit
Facility Obligations owed to such Initial Credit Facility Provider have been
paid in full, and shall deposit any remaining amount in the Collections Account;
and



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          (v) 15 days after the Final Maturity Date with respect to the ACS
Group Subclass A-1 Securities, the Operating Bank shall withdraw, upon Written
Notice from the Cash Manager, all amounts on deposit in the Credit Facility
Reserve Account and pay such amounts to the Initial Credit Facility Provider
until all Credit Facility Obligations owed to such Person shall have been paid
in full, and shall deposit any remaining amount in the Collections Account.

          (g) Reinstatement. With respect to any Credit Facility Drawing under
the Initial Credit Facility, upon the reimbursement to the Initial Credit
Facility Provider in full or in part of the amount of such Credit Facility
Drawing, together with any accrued interest thereon, the Available Amount of the
Initial Credit Facility shall be reinstated by an amount equal to the amount of
such Credit Facility Drawing so reimbursed to the Initial Credit Facility
Provider but not to exceed the Maximum Commitment; provided, however, that the
Initial Credit Facility shall not be so reinstated in part or in full at any
time if (x) a Credit Facility Event of Default shall have occurred and be
continuing or (y) a Downgrade Drawing, Non-Extension Drawing or Final Drawing
shall have occurred.

          (h) Reimbursement. The amount of each Credit Facility Drawing under
the Initial Credit Facility and any amounts withdrawn from the Credit Facility
Reserve Account following a Downgrade Drawing, Non-Extension Drawing or a Final
Drawing shall be due and payable, together with interest thereon, on the dates
and at the rates, respectively, provided in the Initial Credit Facility but only
to the extent that Available Collections are sufficient to pay such amounts in
the order of priority set forth in Section 3.08 hereof.

          (i) Final Drawing. Upon receipt from the Initial Credit Facility
Provider of a Termination Notice with respect to the Initial Credit Facility,
the Cash Manager shall, not later than the date specified in such Termination
Notice, in accordance with the terms of the Initial Credit Facility, request a
drawing under the Initial Credit Facility of the Available Amount thereunder (a
"Final Drawing"). Proceeds of a Final Drawing shall be deposited into the Credit
Facility Reserve Account for application in accordance with Section 3.12(f)
hereof.

          (j) Initial Credit Facility Provider Consent. To the extent that the
Initial Credit Facility Provider's consent or approval (including with respect
to any amendment) is required under this Indenture, the Guarantor Indenture or
any other Related Document, such consent is not required in the event that (x)
no ACS Group Subclass A-1 Securities are Outstanding and (y) no Credit Facility
Advance Obligations are due and owing to the Initial Credit Facility Provider
(and, in the case of the issuance of ACS Group Additional Securities, if any, an
Initial Credit Facility Non-Consent Event has occurred).

     Section 3.13 Eligible Credit Facilities. Notwithstanding Section 3.08
hereof, Article X hereof, or anything else to the contrary contained in the
Indenture, Guarantor Indenture or the Security Trust Agreement, all amounts
available in any Cash Collateral Account or drawn against any other Eligible
Credit Facility (other than the Initial Credit Facility) shall be paid to
Holders of the subclass of ACS Group Securities (and holders of other
obligations) for whose benefit such Eligible Credit Facility is stated to be
established except to the extent otherwise provided in the Board Resolutions and
Guarantor Board Resolutions providing for such Eligible Credit Facility.



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     Section 3.14 The Policy. The Policy Provider shall issue a Policy in favor
of the Drawing Agent for the benefit of the holders of the Certificates, and the
following shall apply to the Policy and the Certificates subject thereto:

          (a) Interest Drawings. If the Cash Manager determines that there is an
Interest Shortfall with respect to any Regular Distribution Date (other than the
Legal Final Distribution Date and the date of the Final Policy Election) in
respect of the Certificates (calculated as provided in Section 3.06(i) hereof),
the Cash Manager shall, prior to 12:00 p.m. (New York City time) on the third
Business Day prior to such Regular Distribution Date, instruct the Drawing Agent
to request and the Drawing Agent shall, no later than 12:00 p.m. (New York City
time) on the second Business Day prior to such Regular Distribution Date,
request a Policy Drawing under the Policy (for payment into the Certificate
Account) in an amount equal to such Interest Shortfall (each, an "Interest
Drawing"). Any request received after 12:00 p.m. (New York City time) on any
Business Day shall be deemed to have been received by the Policy Provider on the
next Business Day. Upon receipt of any such request for a Policy Drawing, the
Policy Provider or its fiscal agent shall pay, no later than 12:00 p.m. (New
York City time) on the later of (i) the applicable Regular Distribution Date and
(ii) the second Business Day following the Business Day on which the Policy
Provider received the Drawing Agent's request referred to above, into the
Certificate Account, the amount of the Interest Shortfall with respect to such
Regular Distribution Date. Upon receipt, the Pass Through Trustee shall direct
the payment of the amount in the Certificate Account to the holders of the
Certificates in payment of the Interest Shortfall therefor.

          (b) Proceeds Deficiency Drawing. If at any time after the Acceleration
of the Securities, there is a sale or other disposition of an ACS Group Aircraft
(not including any ACS Group Aircraft acquired by way of contribution) or of an
ACS Group Subsidiary that owns an ACS Group Aircraft (not including any ACS
Group Aircraft acquired by way of contribution) by, on behalf of or at the
direction of the Controlling Party, and there is a Deficiency Shortfall
resulting therefrom (calculated as provided in Section 3.06(i)(ii)), the Cash
Manager shall, prior to 12:00 p.m. (New York City time) on the third Business
Day prior to the next succeeding Regular Distribution Date, instruct the Drawing
Agent to request and the Drawing Agent, no later than 12:00 p.m. (New York City
time) on the second Business Day prior to such Regular Distribution Date, shall
request a Policy Drawing (each a "Deficiency Drawing") under the Policy in an
amount equal to the Deficiency Shortfall (for payment into the Certificate
Account) with respect to such Regular Distribution Date. Any request received
after 12:00 p.m. (New York City time) on any Business Day shall be deemed to
have been received by the Policy Provider on the next Business Day. Upon receipt
of any such request, the Policy Provider or its fiscal agent shall, no later
than 12:00 p.m. (New York City time) on the later of (i) the applicable Regular
Distribution Date and (ii) the second Business Day following the Business Day on
which the Policy Provider received the Drawing Agent's request referred to
above, pay under the Policy, in respect of the Certificates, an amount equal to
the Deficiency Shortfall for the Certificates with respect to such Regular
Distribution Date. Upon receipt, the Pass Through Trustee shall direct the
payment of the amount in the Certificate Account to the holders of the
Certificates in payment of the Deficiency Shortfall therefor.

          (c) No Proceeds Drawing. If, on any Calculation Date (other than the
Calculation Date occurring immediately prior to the Legal Final Distribution
Date of the



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Certificates) falling on or after the date that is 24 months after the date of
the occurrence of an Event of Default under Section 4.01(a) or Section 4.01(b)
hereof or an Acceleration of the Securities (the "Non-Performance Period"),
there is a Minimum Principal Shortfall in respect of the Certificates for the
then next succeeding Regular Distribution Date (calculated as provided in
Section 3.06(i)(iii) hereof), the Cash Manager shall, no later than 12:00 p.m.
(New York City time) on the third Business Day prior to such Regular
Distribution Date, instruct the Drawing Agent to request and the Drawing Agent
shall, no later than 12:00 p.m. (New York City time) on the second Business Day
prior to such Regular Distribution Date, request, a Policy Drawing (each, a "No
Proceeds Drawing") under the Policy (for payment into the Certificate Account)
in an amount equal to the Minimum Principal Shortfall with respect to such
Regular Distribution Date. Any request received after 12:00 p.m. (New York City
time) on any Business Day shall be deemed to have been received by the Policy
Provider on the next Business Day. Upon receipt of such request, the Policy
Provider or its fiscal agent shall, no later than 12:00 p.m. (New York City
time) on the later of (i) the applicable Regular Distribution Date and (ii) the
second Business Day following the Business Day on which the Policy Provider
receives the Drawing Agent's request referred to above, pay under the Policy an
amount equal to the Minimum Principal Shortfall with respect to such Regular
Distribution Date. Upon receipt, the Pass Through Trustee shall direct the
payment of the amount in the Certificate Account to the holders of the
Certificates in payment of the Minimum Principal Shortfall therefor.

          Notwithstanding the preceding paragraph, with respect to any Regular
Distribution Date occurring on or after the date of the occurrence of an Event
of Default with respect to the ACS Group Subclass A-1 Securities continuing on
the date of a Final Policy Election, and the occurrence of the earlier of (x)
the date of a Policy Drawing and (y) the fifth anniversary of the Initial
Closing Date, the Policy Provider may, so long as a Policy Provider Default
shall not have occurred and be continuing, elect (a "Final Policy Election"),
upon at least four Business Days' prior written notice to the Drawing Agent
(with a copy to the Cash Manager and the Trustee), to pay on such Regular
Distribution Date, an amount sufficient (after giving effect to the application
of Available Collections in accordance with the applicable payment priorities
set forth in Section 3.08 hereof, the application of any Credit Facility
Drawings (or drawings under any Replacement Credit Facility) and the application
of any withdrawals from the Credit Facility Reserve Account and/or withdrawals
from the Senior Cash Collateral Account in accordance with the terms hereof) to
pay the then Pool Balance of the Certificates, plus accrued and unpaid interest
(at the Stated Rate of Interest for Certificates) thereon, for the period from
the immediately preceding Regular Distribution Date to such Regular Distribution
Date (any such amount to be paid by such Policy Provider, the "Outstanding
Balance"). Upon receipt of any such notice, the Cash Manager shall (a) calculate
the then Outstanding Balance for the Policy Provider and (b) prior to 12:00 p.m.
(New York City time) on the third Business Day prior to such Regular
Distribution Date, instruct the Drawing Agent to request, and the Drawing Agent
shall request no later than 12:00 p.m. (New York City time) on the second
Business Day prior to such Regular Distribution Date, a Policy Drawing from the
Policy Provider in the amount of the then Outstanding Balance (for payment into
the Certificate Account) for the Certificates. Upon receipt of any such request,
the Policy Provider or its fiscal agent shall, no later than 12:00 p.m. (New
York City time) on the later of (i) the applicable Regular Distribution Date and
(ii) the second Business Day following the Business Day on which such Policy
Provider receives the Drawing Agent's request referred to above, pay under the
Policy an amount equal to the Outstanding Balance. Upon receipt, the Pass
Through Trustee shall direct the



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payment of the amount in the Certificate Account to the holders of the
Certificates in payment of the Outstanding Balance therefor.

          (d) Final Policy Drawing. If the Cash Manager determines (calculated
as provided in Section 3.06(i)(iv)) that on the Legal Final Distribution Date of
the Certificates there will be insufficient funds available for the payment in
full of the Final Amount with respect to the Certificates as of such date, the
Cash Manager shall, prior to 12:00 p.m. (New York City time) on the third
Business Day prior to such Legal Final Distribution Date, instruct the Drawing
Agent to request, and the Drawing Agent shall, no later than 12:00 p.m. (New
York City time) on the second Business Day prior to such Legal Final
Distribution Date, request a Policy Drawing under the Policy (for payment into
the Certificate Account) in an amount sufficient to pay the Final Amount with
respect to the Certificates. Upon receipt of such request for a Policy Drawing,
the Policy Provider or its fiscal agent shall, no later than 12:00 p.m. (New
York City time) on the later of (i) such Legal Final Distribution Date and (ii)
the second Business Day following the Business Day on which the Policy Provider
receives the Drawing Agent's request referred to above, pay under and in
accordance with the terms of the Policy, an amount sufficient to pay the Final
Amount in respect of the Certificates. Any request received by the Policy
Provider after 12:00 p.m. (New York City time) on any Business Day shall be
deemed to have been received by the Policy Provider on the next Business Day.
Upon receipt, the Pass Through Trustee shall direct the payment of the amount in
the Certificate Account to the holders of the Certificates in payment of the
Final Amount therefor.

          (e) Avoidance Drawings. If at any time the Drawing Agent shall have
actual knowledge of the issuance of any Final Order, the Drawing Agent shall
promptly give notice thereof to the Trustee, the Guarantor Trustee, the Cash
Manager and the Policy Provider. The Cash Manager shall thereupon determine the
Avoided Payment with respect to the Certificates resulting therefrom and shall
promptly: (i) send to the Drawing Agent a Written Notice of such amount and (ii)
prior to the expiration of the Policy, instruct the Drawing Agent to, and the
Drawing Agent shall, deliver to the Policy Provider or its fiscal agent a Notice
of Avoided Payment under the Policy, together with a copy of the documentation
required by the Policy with respect thereto, requesting a Policy Drawing (each,
an "Avoidance Drawing") thereunder (for payment to the receiver, conservator,
debtor-in-possession, trustee in bankruptcy or the Drawing Agent (for deposit
into the Certificate Account), as applicable), in an amount equal to the amount
of the relevant Avoided Payment. To the extent that any portion of such
Avoidance Drawing is to be paid to the Drawing Agent such Written Notice shall
also set the date for the distribution of such portion of the proceeds of such
Policy Drawing which date shall constitute a Special Distribution Date and shall
be the third Business Day following the date of such Written Notice referred to
in clause (b) above. Upon receipt, the Drawing Agent shall pay the proceeds of
the specified Policy Drawing under the Policy to the Certificate Account and the
Pass Through Trustee shall direct the payment of such amount in the Certificate
Account to the holders of the Certificates.

          (f) Application of Policy Drawings. Notwithstanding anything to the
contrary contained in this Indenture, all payments received by the Drawing Agent
or the Pass Through Trustee in respect of a Policy Drawing (including, without
limitation, that portion, if any, of the proceeds of a Policy Drawing for any
Avoided Payment that is to be paid to the Drawing Agent



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and not to any receiver, conservator, debtor-in-possession or trustee in
bankruptcy as provided in the Policy) shall be promptly paid to the holders of
the Certificates.

          (g) Resubmission of a Notice of Payment. If the Policy Provider at any
time informs the Drawing Agent in accordance with the Policy that a Notice of
Nonpayment or Notice of Avoided Payment submitted by the Drawing Agent does not
satisfy the requirements of the Policy, the Drawing Agent shall, as promptly as
possible after being so informed, submit to the Policy Provider an amended and
revised Notice of Nonpayment or Notice of Avoided Payment, as the case may be,
and shall transfer to the Certificate Account the amount received pursuant to
such amended or revised Notice of Nonpayment or Notice of Avoided Payment when
received.

          (h) No Discharge of the Issuer's Obligations. Except to the extent
reimbursed to the Policy Provider, the payment on the Certificates with funds
drawn under the Policy shall not reduce the Outstanding Principal Balance of, or
interest due, on the ACS Group Class A Securities, or be deemed to discharge the
Issuer's obligation to repay such funds drawn under the Policy to the Policy
Provider, which obligation shall continue in full force and effect.

          (i) Interest Coverage. The interest payable by the Policy Provider
under the Policy shall include interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding.

          (j) Policy Provider Consent. The Policy Provider agrees that to the
extent its consent or approval (including with respect to any amendment) is
required under this Indenture or any other Related Document, such consent is not
required in the event that (x) a Policy Non-Consent Event has occurred or (y) in
the case of any consent required under Section 5.03, a Policy Provider Default
has occurred and is continuing. If the Policy Provider fails to provide any
party hereto with a written response with respect to any request for approval
(x) to perform maintenance or modifications to any Aircraft if such maintenance
or modification is required in connection with the remarketing of such Aircraft,
(y) to acquire a replacement Part or Engine by any ACS Group Member for purposes
of remarketing an Aircraft or (z) in connection with any action that would cause
the ACS Group Portfolio to exceed any of the Concentration Limits so long as a
Rating Agency Confirmation from Moody's has been obtained in connection
therewith, within the time indicated by the Issuer or such Remarketing Servicer
in its proposal or, in any event, not less than fifteen Business Days after
receipt of such proposal (which proposal shall be in writing and contains a
legend stating that the Policy Provider's consent shall be deemed to have been
provided unless a response is received from the Policy Provider within fifteen
Business Days of receipt thereof) by the Policy Provider, the Policy Provider
shall be deemed to have approved such proposal, provided that, in connection
with any such proposal, the Issuer or a Remarketing Servicer on its behalf has
promptly provided all information with respect to such proposal reasonably
requested by the Policy Provider. If the Issuer or the Remarketing Servicer has
not provided the Policy Provider with such requested information promptly then
the Policy Provider shall not be deemed to have consented to such proposal.

          (k) Release of Policy Provider. Notwithstanding anything to the
contrary herein, and for the avoidance of doubt, if the Policy is terminated and
surrendered to the Policy Provider



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for cancellation, all obligations of the Policy Provider under this Indenture
(including, but not limited to, all obligations set forth in this Section 3.14)
shall be terminated and released.

     Section 3.15 Contributions. In the event that the amounts available for
distribution under Section 3.08 hereof and from any Eligible Credit Facility are
insufficient to pay in full any of the Secured Obligations or any other
Obligations, the Issuer or Guarantor may, out of funds provided to it by a
Holder of a Class E Security or a Shareholder (and not out of any amounts in the
Collections Account or any other Account or any other Collateral), pay such
shortfall with respect to such Obligations on the applicable Payment Date by
giving Written Notice of its intention to do so (specifying the amount thereof)
to the Cash Manager and the Trustee at least two Business Days prior to such
Payment Date by transferring funds in such amount (the "Contribution Amounts")
to the Trustee one Business Day prior to such Payment Date for deposit into the
applicable Account related to such Holder of a Class E Security or Shareholder,
as the case may be. All Contribution Amounts so deposited shall (a) be paid out
of such Account to the applicable Person or transferred to the applicable
Account notwithstanding Section 3.08 hereof, Article X hereof or anything else
to the contrary contained in this Indenture or the Security Trust Agreement and
(b) not constitute an obligation or debt of the Issuer.

     Section 3.16 DSCR Failure. In the event that the Cash Manager determines,
in accordance with Section 3.06(c) hereof, that a DSCR Failure for the related
Payment Date will occur, it shall provide Written Notice thereof (not later than
two Business Days prior to such Payment Date) to the Issuer, the Guarantor, the
Administrative Agent, the Trustees, the Pass Through Trustee, the Policy
Provider and the Rating Agencies. Following the occurrence of a DSCR Failure,
all proceeds on deposit in the Collections Account shall be applied in
accordance with Section 3.08(b) hereof.

                                   ARTICLE IV

                              DEFAULT AND REMEDIES

     Section 4.01 Events of Default. Each of the following events shall
constitute an "Event of Default" hereunder with respect to any subclass of
Securities, and each such Event of Default shall be deemed to exist and continue
so long as, but only so long as, it shall not have been remedied:

          (a) failure to pay when due interest on any Class A Security of such
subclass, and the continuance of such default unremedied for a period of five
Business Days after the same shall have become due and payable;

          (b) failure to pay when due principal of any Security of such subclass
on the applicable Final Maturity Date;

          (c) failure to pay any amount (other than interest) when due and
payable in connection with any Security of such subclass to the extent that
there are, on any Payment Date, amounts available for such payment in the
Collections Account or the Senior Cash Collateral



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Account with respect to the Securities of such subclass, and the continuance of
such default for a period of five or more Business Days after such Payment Date;

          (d) failure of any of the representations or warranties of the Issuer
under this Indenture to be true and correct or failure by the Issuer to comply
with any of the covenants, obligations, conditions or provisions binding on it
under this Indenture or any of the Securities (other than a payment default for
which provision is made in Section 4.01(a), (b) or (c) above), if such failure
or such breach materially adversely affects the Holders of such subclass of
Securities and continues for a period of 30 days (or, if such failure or breach
is capable of remedy within 90 days (or in the case of a breach or failure with
respect to a covenant contained in Section 5.03, 180 days) of the date of the
written notice referred to below and the Administrative Agent has promptly
provided the Trustee with a certificate stating that the Issuer has commenced,
or will promptly commence, and diligently pursue all reasonable efforts to
remedy such failure or breach, 90 days (or 180 days, as applicable), so long as
the Issuer or any ACS Ireland Subsidiary is diligently pursuing such remedy but
in any event no longer than 90 days (or 180 days, as applicable)) after written
notice thereof has been given to the Issuer by the Controlling Party or by the
Holders of at least a majority of the aggregate Outstanding Principal Balance of
the Securities of the Senior Class;

          (e) a court having jurisdiction in the premises enters a decree or
order for (i) relief in respect of the Issuer or the Guarantor or any direct or
indirect subsidiary thereof (other than a Non-Significant Subsidiary) under any
Applicable Law relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization, Irish law examinership, relief of debtors or other
similar law now or hereafter in effect; (ii) appointment of a receiver,
liquidator, Irish law examiner, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or the Guarantor or any direct or indirect
subsidiary thereof (other than a Non-Significant Subsidiary); or (iii) the
winding up or liquidation of the affairs of the Issuer or the Guarantor or any
direct or indirect subsidiary thereof (other than a Non-Significant Subsidiary)
and, in each case, such decree or order shall remain unstayed or such writ or
other process shall not have been stayed or dismissed within 90 days from entry
thereof;

          (f) the Issuer or the Guarantor or any direct or indirect subsidiary
thereof (other than a Non-Significant Subsidiary) (i) commences a voluntary case
under any Applicable Law relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization, Irish law examinership, relief of
debtors or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in any involuntary case under any such law; (ii)
consents to the appointment of or taking possession by a receiver, liquidator,
Irish law examiner, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or the Guarantor or any direct or indirect subsidiary
thereof (other than a Non-Significant Subsidiary) or for all or substantially
all of the property and assets of the Issuer or the Guarantor or any direct or
indirect subsidiary thereof (other than a Non-Significant Subsidiary); or (iii)
effects any general assignment for the benefit of creditors;

          (g) one or more judgments or orders for the payment of money that are
in the aggregate in excess of 5% of the aggregate Assumed Portfolio Value shall
be rendered against any ACS Group Member and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 10 consecutive days



                                                                             107


during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; provided, however, that any
such judgment or order shall not be an Event of Default under this Section
4.01(g) if and for so long as (i) the amount of such judgment or order is
covered by a valid and binding policy of insurance between the defendant and the
insurer covering payment thereof and (ii) such insurer, which shall be rated at
least "A" by A.M. Best Company or any similar successor entity, has been
notified of, and has not disputed the claim made for payment of, the amount of
such judgment or order;

          (h) the constitutional documents creating the Issuer or the Guarantor
cease to be in full force and effect without replacement documents having the
same terms being in full force and effect; or

          (i) an Event of Default (as defined in the Guarantor Indenture) has
occurred and is continuing under the Guarantor Indenture.

     Section 4.02 Acceleration, Rescission and Annulment. (a) If an Event of
Default with respect to the Senior Class (including the Class A-1 Securities so
long as any Class A-1 Securities are outstanding and the Policy Non-Consent
Event has not occurred) or any subclass thereof (other than an Event of Default
under Section 4.01(e) or (f) hereof) occurs and is continuing, the Controlling
Party may, and (if the Controlling Party is the Senior Trustee) upon the written
direction of Holders representing not less than a majority of the aggregate
Outstanding Principal Balance of the Senior Class shall give a Default Notice to
the Issuer, the Cash Manager, the Administrative Agent, the Security Trustee,
the Guarantor, the Trustee, the Guarantor Trustee, and the Pass Through Trustee
declaring the Outstanding Principal Balance of the Securities and all accrued
and unpaid interest thereon to be due and payable. If the Controlling Party is
the Policy Provider or the Initial Credit Facility Provider, only it may give a
Default Notice. Upon delivery of a Default Notice, such Outstanding Principal
Balance and all accrued and unpaid interest thereon shall be due and payable. At
any time after the Controlling Party has declared the Outstanding Principal
Balance of the Securities to be due and payable and prior to the exercise of any
other remedies pursuant to this Article IV, the Controlling Party may (and if
the Controlling Party is the Senior Trustee, upon the written direction of
Holders of a majority of the aggregate Outstanding Principal Balance of the
Senior Class shall) by Written Notice to the Issuer, the Senior Trustee (if not
the Controlling Party), the provider of any Eligible Credit Facility (if not the
Controlling Party), the Cash Manager, the Administrative Agent, the Security
Trustee and the Trustee, subject to Section 4.05(a) hereof, rescind and annul
such declaration and thereby annul its consequences if: (i) there has been paid
to or deposited with the Senior Trustee an amount sufficient to pay all overdue
installments of interest on the Securities, and the principal or Redemption
Price of the Securities that would have become due otherwise than by such
declaration of acceleration, (ii) the rescission or annulment would not conflict
with any judgment or decree and (iii) all other Defaults and Events of Default,
other than nonpayment of interest and principal on the Securities that have
become due solely because of such acceleration, have been cured or waived. If
the Controlling Party is the Policy Provider or the Initial Credit Facility
Provider, only it may give a notice of annulment. If an Event of Default under
Section 4.01(e) or (f) hereof occurs, the Outstanding Principal Balance of the
Securities and all accrued and unpaid interest thereon shall automatically
become due and payable without any further action by any party.



                                                                             108


          (b) Notwithstanding this Section 4.02 and Section 4.03 hereof, after
the occurrence and during the continuation of an Event of Default, no Holders of
any class of Securities other than the Senior Class may give or direct the
giving of a Default Notice or exercise or direct the exercise of any remedy in
respect of such Event of Default, and no Person other than the Controlling Party
may give a Default Notice or exercise any such remedy.

          (c) The Trustee shall provide each Rating Agency with a copy of any
Default Notice it receives pursuant to this Indenture.

          (d) Notwithstanding anything herein to the contrary, upon the delivery
of a Default Notice or if the Outstanding Principal Balance of the Securities
shall otherwise become due and payable pursuant to Section 4.02(a), if the net
assets of the Issuer available to be distributed to the Holders of the Class E
Securities under clause (xiii) of Section 3.08(c) are less than the outstanding
principal amount of the Class E Securities, then the outstanding principal
amount of the Class E Securities shall in the aggregate be deemed reduced to an
amount equal to such amount of net assets and the Holders of the Class E
Securities shall not have a claim for the difference between such amount of net
assets and the outstanding principal amount of the Class E Securities.

     Section 4.03 Other Remedies. If an Event of Default occurs and is
continuing, the Senior Trustee (at the direction of the Controlling Party if the
Senior Trustee is not the Controlling Party) may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal or Redemption
Price of, or interest on, the Securities or to enforce the performance of any
provision of the Securities or this Indenture.

     The Senior Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding.

     Section 4.04 Limitation on Suits. Without limiting the provisions of
Section 4.09 hereof and the final sentence of Section 13.04(a) hereof, no Holder
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, the Security Trust Agreement or the Securities, or
for the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:

          (a) the Senior Trustee is the Controlling Party;

          (b) such Holder holds Securities of the Senior Class and has
previously given written notice to the Senior Trustee of a continuing Event of
Default;

          (c) the Holders of a majority of the aggregate Outstanding Principal
Balance of the Senior Class make a written request to the Senior Trustee to
pursue a remedy hereunder;

          (d) such Holder or Holders offer to the Senior Trustee an indemnity
reasonably satisfactory to the Senior Trustee against any costs, expenses and
liabilities to be Incurred in complying with such request;

          (e) the Senior Trustee does not comply with such request within 60
days after receipt of the request and the offer of indemnity; and



                                                                             109


          (f) during such 60-day period, Holders of a majority of the
Outstanding Principal Balance of the Senior Class do not give the Senior Trustee
a revocation or direction inconsistent with such request.

          No one or more Holders may use this Indenture to affect, disturb or
prejudice the rights of another Holder or to obtain or seek to obtain any
preference or priority not otherwise created by this Indenture and the terms of
the Securities over any other Holder or to enforce any right under this
Indenture, except in the manner herein provided.

     Section 4.05 Waiver of Existing Defaults. (a) The Controlling Party or (if
the Controlling Party is the Senior Trustee) the Holders of a majority of the
Outstanding Principal Balance of the Senior Class by notice to the Senior
Trustee and the Issuer may waive any existing Default hereunder and its
consequences, except a Default: (i) in the deposit or distribution of any
payment required to be made on any Securities, (ii) in the payment of the
interest on, principal of or premium, if any, with respect to any Security or
(iii) in respect of a covenant or provision hereof which under Article IX hereof
cannot be modified or amended without the consent of the Holder of each Security
affected thereby, which (in the case of such Defaults described in clauses (i),
(ii) and (iii)) may not be waived. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture, but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon. Each such notice of waiver shall also be given to each Rating Agency.

          (b) Any written waiver of a Default or an Event of Default given by
the Controlling Party or the Holders to the Trustee and the Issuer in accordance
with the terms of this Indenture shall be binding upon the Trustee and the other
parties hereto. Unless such writing expressly provides to the contrary, any
waiver so granted shall extend only to the specific event or occurrence which
gave rise to the Default or Event of Default so waived and not to any other
similar event or occurrence which occurs subsequent to the date of such waiver.

     Section 4.06 Restoration of Rights and Remedies. If the Trustee or any
Holder of Securities of the Senior Class has instituted any proceeding to
enforce any right or remedy under this Indenture, and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or such Holder, then in every such case the Issuer, the Trustee and
the Holders shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding has been instituted.

     Section 4.07 Remedies Cumulative. Each and every right, power and remedy
herein given to the Trustee (or the Controlling Party) specifically or otherwise
in this Indenture shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given or now or hereafter existing
at law, in equity or by statute, and each and every right, power and remedy
whether specifically herein given or otherwise existing may be exercised from
time to time and as often and in such order as may be deemed expedient by the
Trustee (or the Controlling Party), and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any



                                                                             110


other right, power or remedy. No delay or omission by the Trustee (or the
Controlling Party) in the exercise of any right, remedy or power or in the
pursuance of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any Default on the part of the Issuer or to be an
acquiescence therein.

     Section 4.08 Authority of Courts Not Required. The parties hereto agree
that, to the greatest extent permitted by law, the Trustee shall not be obliged
or required to seek or obtain the authority of, or any judgment or order of, the
courts of any jurisdiction in order to exercise any of its rights, powers and
remedies under this Indenture, and the parties hereby waive any such requirement
to the greatest extent permitted by law.

     Section 4.09 Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
principal or Redemption Price of, or interest on its Security on or after the
respective due dates therefor expressed in such Security, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.

     Section 4.10 Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of any Holder allowed in any
judicial proceedings relating to any Issuer on the Securities, its creditors or
its property.

     Section 4.11 Undertaking for Costs. All parties to this Indenture agree,
and each Holder by its acceptance thereof shall be deemed to have agreed, that
in any suit for the enforcement of any right or remedy under this Indenture or
in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and the court in
its discretion may assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defense made by the party litigant. This Section
4.11 does not apply to a suit instituted by the Trustee, a suit instituted by
any Holder for the enforcement of the payment of principal or Redemption Price
of, or interest on its Security on or after the respective due dates expressed
in such Security, or a suit by a Holder or Holders of not less than a majority
of the Outstanding Principal Balance of any class or subclass of the Securities.

     Section 4.12 Control by Holders. Subject always to the provisions of this
Article IV, the Controlling Party shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee for such
class under this Indenture and other Related Documents; provided that, for such
class (a) such direction shall not be in conflict with any rule of law or with
this Indenture and would not involve the Trustee in personal liability or
expense; and (b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.



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                                    ARTICLE V

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 5.01 Representations and Warranties. The Issuer represents and
warrants to the Trustee as follows:

          (a) Due Organization. The Issuer is an Irish public limited liability
company, and each ACS Ireland Subsidiary is a special purpose entity duly formed
in its respective jurisdiction of formation, in each case with full power and
authority to conduct its business; and none of the Issuer or any ACS Ireland
Subsidiary is in liquidation, Irish law examinership, bankruptcy or suspension
of payments.

          (b) Special Purpose Status. The Issuer has not engaged in any
activities since its organization (other than those incidental to its
incorporation and other appropriate steps and arrangements for the payment of
fees to, and director's and officer's insurance for, the Directors, the
authorization and issuance of the Initial Securities, the execution of the
Related Documents to which it is a party and the activities referred to in or
contemplated by such agreements), and the Issuer has not paid any dividends or
other distributions since its organization.

          (c) Non-Contravention. The purchase of the Initial Aircraft and
interests in the Initial Leases pursuant to the Purchase Agreement, the creation
of the Initial Securities, the issuance, execution and delivery by the Issuer
of, and the compliance by the Issuer with the terms of the Initial Securities,
and the execution and delivery by each ACS Ireland Group Member of, and
compliance by it with the terms of each of the Related Documents to which it is
a party:

          (i) do not and will not at the Initial Closing Date or any Payment
Date conflict with, or result in a breach of any of the terms or provisions of,
or constitute a default under, the constitutional documents of the Issuer or the
constituent documents of any ACS Ireland Subsidiary or with any existing law,
rule or regulation applying to or affecting the Issuer or any ACS Ireland
Subsidiary or any judgment, order or decree of any government, governmental body
or court having jurisdiction over the Issuer or any ACS Ireland Subsidiary; and

          (ii) do not and will not at the Initial Closing Date or any Payment
Date constitute a default under, any deed, indenture, agreement or other
instrument or obligation to which the Issuer or any ACS Ireland Subsidiary is a
party or by which any of them or any part of their undertaking, assets, property
or revenues are bound.

          (d) Due Authorization. The purchase of the Initial Aircraft and
interests in the Initial Leases, the creation, execution and issuance of the
Initial Securities, the execution and issue or delivery by the Issuer and each
ACS Ireland Subsidiary of the Related Documents executed by it and the
performance by each of them of their obligations hereunder and thereunder and
the arrangements contemplated hereby and thereby to be performed by each of them
have been duly authorized by each of them.

          (e) Validity and Enforceability. This Indenture constitutes, and the
Related Documents to which it is a party, when executed and delivered and, in
the case of the Initial



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Securities, when issued and authenticated, will constitute valid, legally
binding and (subject to general equitable principles, insolvency, liquidation,
examination, reorganization and other laws of general application relating to
creditors' rights or claims or the concepts of materiality, reasonableness, good
faith and fair dealing) enforceable obligations of the Issuer and each ACS
Ireland Subsidiary executing the same.

          (f) No Defaults. There exists no Default, Event of Default nor any
event which, had the Initial Securities already been issued, would constitute a
Default or an Event of Default.

          (g) No Encumbrances. Subject to the Security Interests created in
favor of the Security Trustee and except for Permitted Encumbrances, there
exists no Encumbrance over the assets or undertaking of the Issuer or any ACS
Ireland Subsidiary which ranks prior to or pari passu with the obligation to
make payments on the Initial Securities.

          (h) No Consents. All consents, approvals, authorizations or other
orders of all regulatory authorities required (excluding any required by the
other parties to the Related Documents) for or in connection with the execution
and performance of the Related Documents by the Issuer and each ACS Ireland
Subsidiary and the issue and performance of the Initial Securities and the
offering of the Initial Securities by the Issuer has been obtained and are in
full force and effect and not contingent upon fulfillment of any condition.

          (i) No Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Issuer, threatened
against or affecting, the Issuer or any ACS Ireland Subsidiary before any court
or arbitrator or any governmental body, agency or official which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Indenture (including the Exhibits and
Schedules attached hereto) and the Related Documents or which could reasonably
be expected to have a material adverse effect on the ability of the Issuer or
any other ACS Ireland Group Member to perform its obligations under the Related
Documents.

          (j) Employees, Subsidiaries. The Issuer and each ACS Ireland
Subsidiary have no employees. Set forth in Schedule 2 hereto is a true and
complete list, as of the date hereof, of all ACS Ireland Subsidiaries, together
with their jurisdictions of organization.

          (k) Ownership. The Issuer or an ACS Ireland Subsidiary is the legal
and beneficial owner of the Pledged Shares, the Pledged Debt, the Pledged
Beneficial Interest and the Non-Trustee Accounts pledged by the Issuer or any
such ACS Ireland Subsidiary pursuant to the Security Documents, free from all
Encumbrances and claims whatsoever other than Permitted Encumbrances.

          (l) No Filings. Under the laws of Ireland, the State of New York and
the Federal laws of the United States of America in force at the date hereof, it
is not necessary or desirable that this Indenture or any Related Document to
which an ACS Ireland Subsidiary is a party (other than any filings with respect
to the Security Interests) be filed, recorded or enrolled with any court or
other authority in any such jurisdictions or that any stamp, registration or
similar tax be paid on or in relation to this Indenture or any of the other
Related Documents, other than the payment of Irish stamp duty in respect of the
Security Trust Agreement.



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          (m) Aircraft Assets. Schedule 1 contains a true and complete list of
all Aircraft constituting the Initial Aircraft as of the Initial Closing Date
and each Person within the ACS Group that will own such Initial Aircraft as of
the applicable Delivery Date. Except as otherwise set forth therein, once each
Initial Aircraft listed in Schedule 1 has been delivered under the ACS Group
Purchase Agreement, each Person within the ACS Group listed as an owner of an
Aircraft on such Schedule will have such title to such Aircraft as was conveyed
to such Person, free and clear of all Liens created by or through such Person.

          (n) Aircraft Assets Related Documents. Each Aircraft Assets Related
Document is a legal, valid and binding agreement of the Person within the ACS
Group that is a party thereto (including by way of assignment or novation) and
is enforceable against such Person within the ACS Group that is a party thereto
in accordance with its terms except where enforceability may be limited by
general equitable principles, insolvency, liquidation, reorganization and other
laws of general application relating to creditors' rights or claims or the
concepts of materiality, reasonableness, good faith and fair dealing. No Person
within the ACS Group has modified, amended or waived any provision of or
terminated any Aircraft Assets Related Documents referred to in Schedule 5.01(b)
of the Remarketing Services Agreements except as disclosed therein.

          (o) Other Representations. The representations and warranties made by
the Issuer, the Guarantor, and each ACS Ireland Subsidiary in any of the other
Related Documents are true and accurate.

          (p) Insurance. Each Lessee under an Initial Lease carries War Risk
Coverage in an amount at least equal to the Current War Risk Coverage Amount set
forth in Schedule 6 hereto with respect to such Lessee.

     Section 5.02 General Covenants. The Issuer covenants with the Trustee as
follows:

          (a) No Release of Obligations. The Issuer shall not take, or knowingly
permit any ACS Ireland Subsidiary to take, any action which would amend,
terminate (other than any termination in connection with the replacement of such
agreement with an agreement on terms substantially no less favorable to the ACS
Ireland Group than the agreement being terminated) or discharge or prejudice the
validity or effectiveness of this Indenture (other than as permitted herein),
the Security Trust Agreement, the Purchase Agreement, the Cash Management
Agreement, any organizational document of the Issuer or any ACS Ireland
Subsidiary (unless such ACS Ireland Subsidiary no longer holds any direct or
indirect interest in an Aircraft or a Lease), the Policy (other than as
expressly permitted hereunder), the Initial Credit Facility (other than as
expressly permitted hereunder), the Irish Remarketing Services Agreement, the
Back-Up Remarketing Services Agreement, the Administrative Agency Agreement or
the Hedge Overview Services Agreement or any other Related Document to which the
Issuer or any ACS Ireland Subsidiary (unless such ACS Ireland Subsidiary no
longer holds any interest in an Aircraft or a Lease) is a party or permit any
other party (other than an ACS Group Member) to any such document to be released
from such obligations, except, in each case, as permitted or contemplated by the
terms of such document and except that in no event shall the Policy be so
terminated (other than as expressly permitted hereunder), and provided that such
actions may be taken or permitted and such releases may be permitted (other than
with respect to the termination



                                                                             114


of the Policy) if the Issuer shall have first obtained a Board Resolution
determining that such action, permitted action or release does not materially
adversely affect the interests of the Holders of the Securities, the Policy
Provider or the Initial Credit Facility Provider and having given notice thereof
to the Rating Agencies and the prior written consent of the Policy Provider and
the Initial Credit Facility Provider has been obtained; and provided further
that, in any case (i) the Issuer shall not take any action which would result in
any amendment or modification to the conflicts standard or duty of care in such
agreements, (ii) except in the circumstances expressly contemplated in this
Indenture, the Issuer may not amend the Policy without the unanimous consent of
the Holders of the Covered Class A Securities and without obtaining a Rating
Agency Confirmation and (iii) there must be at all times an administrative agent
with respect to the ACS Group Services (as defined in the Administrative Agency
Agreement) and a remarketing servicer with respect to all ACS Group Aircraft.

          (b) Limitation on Encumbrances. The Issuer shall not, and shall not
permit any ACS Ireland Subsidiary to, create, Incur, assume or suffer to exist
any mortgage, pledge, lien, encumbrance, charge or security interest (in each
case, an "Encumbrance"), including, without limitation, any conditional sale,
any sale with recourse against any ACS Ireland Subsidiary or any Affiliate of
any ACS Ireland Subsidiary, or any agreement to give any security interest over
or with respect to any of the Issuer's or any ACS Ireland Subsidiary's assets
(other than the segregation of the Segregated Funds) including, without
limitation, all shares of capital stock, all beneficial interests in trusts, all
ordinary shares and preferred shares and any options, warrants and other rights
to acquire such shares or beneficial interests ("Ownership Interest") and any
Indebtedness of any ACS Ireland Subsidiary held by the Issuer or any ACS Ireland
Subsidiary.

          Notwithstanding the foregoing, the Issuer may create, Incur, assume or
suffer to exist (i) any Permitted Encumbrance, (ii) any security interest
created or required to be created under the Security Documents, (iii)
Encumbrances over rights in or derived from Leases, upon prior written consent
of the Policy Provider and receipt of a Rating Agency Confirmation (provided
that any transaction or series of transactions resulting in such Encumbrance,
taken as a whole, does not materially adversely affect the amount of Collections
that would have been received by the Issuer and any other ACS Ireland Group
Member from such Lease had such Encumbrance not been created), (iv) any other
Encumbrance the validity or applicability of which is being contested in good
faith in appropriate proceedings by the Issuer or any ACS Ireland Subsidiary,
(v) any Encumbrance in connection with any transfer of title to or Lease of
Aircraft (A) to or in favor of a trust or an entity (which, in either case, is
not an ACS Group Member) for the purpose of registering the Aircraft under the
laws of an applicable jurisdiction so long as, however, the Issuer or any ACS
Ireland Subsidiary retains the beneficial or economic ownership of the Aircraft
or (B) from such trust or entity to the Issuer or an ACS Ireland Subsidiary
(subject in the case of this subclause (v) to the limitations set forth in
subclause (vi) of Section 5.02(g) below), and (vi) any lien created in favor of
the issuer of a surety bond, letter of credit or similar instrument to be
obtained by the Issuer or any ACS Ireland Subsidiary in connection with the
repossession of an Aircraft or other enforcement action under a Lease.

          For purposes of this Indenture, "Affiliate" means, with respect to any
Person, any other Person that, directly or indirectly, Controls, is Controlled
by or is under common control with, such Person or is a director or officer of
such Person; "Control" of a Person means the possession, direct or indirect, of
the power to direct or cause the direction of the management and



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policies of such Person, whether through the ownership of voting Ownership
Interest, by contract or otherwise. For the avoidance of doubt, each ACS Group
Member shall be an "Affiliate" of each other ACS Group Member. For the purposes
of this Indenture, "Permitted Encumbrance" means (i) any lien for Taxes not yet
due and payable or which are being contested in good faith by appropriate
proceedings; (ii) in respect of any Aircraft, any lien of a repairer, carrier or
hangar keeper arising in the ordinary course of business by operation of law or
any engine or parts-pooling arrangements or other similar lien; (iii) any
permitted lien or encumbrances on any Aircraft, Engines or Parts as defined
under any Lease thereof (other than liens or encumbrances created by the
relevant lessor); (iv) any lien created by or through or arising from debt or
liabilities or any act or omission of any Lessee in each case either in
contravention of the relevant Lease (whether or not such Lease has been
terminated) or without the consent of the relevant lessor (provided that if such
lessor becomes aware of any such lien, it shall use commercially reasonable
efforts to have any such lien lifted); (v) any head lease, lease, conditional
sale agreement or Purchase Option under the Initial Lease of any Initial
Aircraft existing on the date of acquisition of such Aircraft or otherwise
existing on the relevant Closing Date or Aircraft Agreement meeting the
requirements of clause (iii) or (v) of the second paragraph of Section 5.02(g)
hereof; (vi) any lien for air navigation authority, airport tending, gate or
handling (or similar) charges or levies; (vii) any lien created in favor of the
Issuer, any ACS Ireland Subsidiary or the Security Trustee; (viii) any
Encumbrance arising under an Eligible Credit Facility or a Conversion Agreement;
and (ix) any other lien not referred to in clauses (i) through (viii) of this
paragraph which would not adversely affect the owner's rights provided that the
amount secured by liens under this clause (ix) does not exceed, individually,
$250,000 per Aircraft or, in the aggregate, 0.25% of the Initial Appraised Value
of the ACS Group Portfolio.

          (c) Limitation on Restricted Payments. The Issuer shall not, and shall
not permit any ACS Ireland Subsidiary to (i) purchase, redeem, retire or
otherwise acquire for value any shares of Ownership Interest in the Issuer, the
Guarantor, any ACS Ireland Subsidiary or ACS Bermuda Subsidiary held by or on
behalf of Persons other than the Issuer or any ACS Ireland Subsidiary or other
ACS Group Member other than as provided in Sections 2.12 and 5.02(l)(ii)(B)
hereof; (ii) make any payment of principal, interest or premium, if any, on the
Securities or make any voluntary or optional repurchase, defeasance or other
acquisition or retirement for value of Indebtedness of the Issuer or such ACS
Ireland Subsidiary that is not owed to the Issuer, the Guarantor, such ACS
Ireland Subsidiary or such ACS Bermuda Subsidiary or other ACS Group Member
other than in accordance with Articles II, III and XII hereof, the Policy
Provider Documents and otherwise provided for in the Related Documents; provided
that the Issuer or any of its Affiliates may repurchase, defease or otherwise
acquire or retire any of the Securities other than from the Available
Collections so long as any new notes of the Issuer issued in connection with
such transaction rank pari passu with the Securities being repurchased,
defeased, acquired or retired and the Board shall determine that such action
does not materially adversely affect the Holders and shall have obtained prior
written consent of the Policy Provider and a Rating Agency Confirmation with
respect thereto or (iii) make any Investments (other than Permitted Account
Investments, Allowed Restructurings, Investments permitted under Section 5.02(e)
hereof and Investments in any ACS Ireland Group Member and any other ACS Group
Member pursuant to the Purchase Agreement or a Permitted Additional Aircraft
Acquisition; provided that written notification of the organization or
acquisition of each



                                                                             116


such ACS Ireland Group Member shall have been given to the Policy Provider and
the Initial Credit Facility Provider).

          The term "Investment" for purposes of the above restriction means any
loan or advance to a Person, any purchase or other acquisition of any beneficial
interest, capital stock, warrants, rights, options, obligations or other
securities of such Person, any contribution to such Person or any other
Investment in such Person. For the avoidance of doubt, "Investment" shall not
include any obligation of a purchaser of an Aircraft to make deferred or
installment payments pursuant to any Aircraft Agreement specified in (iii) or
(v) of the second paragraph of Section 5.02(g) hereof so long as the ACS Ireland
Group retains a security interest in the relevant Aircraft until all such
obligations are discharged and shall not include any payment owing to a Lessee.

          (d) Limitation on Restrictions on Dividends and Other Payments. The
Issuer shall not, and shall not permit any ACS Ireland Subsidiary to, create or
otherwise suffer to exist any consensual encumbrance or restriction of any kind
on the ability of any ACS Ireland Subsidiary to (i) declare or pay dividends or
make any other distributions permitted by Applicable Law, or purchase, redeem or
otherwise acquire for value, the Ownership Interest of the Issuer or such ACS
Ireland Subsidiary, as the case may be; (ii) pay any Indebtedness owed to the
Issuer or such ACS Ireland Subsidiary; (iii) make loans or advances to the
Issuer or such ACS Ireland Subsidiary; or (iv) transfer any of its property or
assets to the Issuer or any other ACS Ireland Subsidiary.

          The foregoing provisions shall not restrict any consensual
encumbrances or other restrictions: (i) existing on the Initial Closing Date or,
in the case of any Aircraft, the Acquisition Date of such Aircraft, under any
Related Document, and any amendments, extensions, refinancings, renewals or
replacements of such documents; provided that such consensual encumbrances and
restrictions in any such amendments, extensions, refinancings, renewals or
replacements are no less favorable in any material respect to the Holders than
those previously in effect and being amended, extended, refinanced, renewed or
replaced; or (ii) in the case of clause (iv) of the preceding paragraph, that
restrict in a customary manner the subletting, assignment or transfer of any
property or asset that is a lease, license, conveyance or contract or similar
property or asset.

          (e) Limitation on Engaging in Business Activities. The Issuer shall
not, and shall not permit any ACS Ireland Subsidiary to, engage in any business
or activity other than:

          (i) purchasing or otherwise acquiring (subject to Section 5.02(h)
     hereof), owning, holding, converting, maintaining, modifying (subject to
     Section 5.02(i) hereof), managing, operating, leasing, re-leasing and,
     subject to the limitations set forth in Section 5.02(g) hereof, selling or
     otherwise disposing of the Aircraft and entering into all contracts and
     engaging in all related activities incidental thereto, including from time
     to time accepting, exchanging, holding or permitting any ACS Ireland
     Subsidiary to accept, exchange, sell or hold promissory notes, contingent
     payment obligations or equity interests, of Lessees or their Affiliates
     issued in connection with the bankruptcy, reorganization or other similar
     process, or in settlement of delinquent obligations or



                                                                             117


     obligations anticipated to be delinquent, of such Lessees or their
     respective Affiliates in the ordinary course of business (an "Allowed
     Restructuring");

          (ii) providing loans to, guaranteeing or otherwise supporting the
     obligations and liabilities of any ACS Ireland Group Member or any ACS
     Bermuda Group Member, in each case whether or not the Issuer or any ACS
     Ireland Subsidiary derives a benefit therefrom so long as such loans,
     guarantees or other supports are provided in connection with the purposes
     set forth in clause (i) of this Section 5.02(e); provided that written
     notification shall have been given to each Rating Agency, the Policy
     Provider and the Initial Credit Facility Provider of such loan, guarantee
     or other support; provided that, no such notice shall be required for any
     guarantee provided by an ACS Ireland Group Member with respect to any
     obligations of another ACS Ireland Group Member or an ACS Bermuda Group
     Member;

          (iii) financing or refinancing the business activities described in
     clause (i) of this Section 5.02(e) through the offer, sale and issuance of
     any securities of the Issuer upon such terms and conditions as the Board
     sees fit, for cash or in payment or in partial payment for any property
     purchased or otherwise acquired by any ACS Ireland Group Member;

          (iv) engaging in currency and interest rate exchange transactions for
     the purposes of avoiding, reducing, minimizing, hedging against or
     otherwise managing the risk of any loss, cost, expense or liability
     arising, or which may arise, directly or indirectly, from any change or
     changes in any interest rate or currency exchange rate or in the price or
     value of any of the Issuer's or any ACS Ireland Subsidiary's property or
     assets, within limits and with providers specified by the Board Resolution
     providing therefor from time to time and submitted to the Rating Agencies,
     the Policy Provider and the Initial Credit Facility Provider, including
     dealings, whether involving purchases, sales or otherwise, in foreign
     currency, spot and forward interest rate exchange contracts, forward
     interest rate agreements, caps, floors and collars, futures, options,
     hedges and any other currency, interest rate and other similar hedging
     arrangements and such other instruments as are similar to, or derivatives
     of, any of the foregoing; provided, however, that the Issuer shall not, and
     shall not permit any ACS Ireland Subsidiary to, enter into any such hedging
     arrangements or other instruments that (x) are not entered into solely for
     hedging interest rate or currency risks associated with the Securities
     and/or the Leases or (y) are not U.S. dollar-denominated interest rate
     hedges, hedges, currency hedges, Swaptions, caps or floors (except in
     instances where the hedging instrument is entered into substantially to
     hedge risks associated with non-U.S. dollar-denominated Aircraft Lease)
     without the prior written consent of the Policy Provider; provided further
     that the Issuer shall not, and shall not permit any ACS Ireland Subsidiary
     to (unless with respect to any action permitted under Section 5.02(g) and
     Section 5.02(j) with respect to disposition or transfer to another ACS
     Group Member), (A) terminate or transfer such hedging arrangements without
     the prior written consent of the Policy Provider and (B) enter into any
     Hedge Agreement after the Initial Closing Date without the prior written
     consent of the Policy Provider unless such Hedge Agreement contains the
     Material Hedge Agreement Terms that are no less favorable to the Issuer,
     any applicable ACS



                                                                             118


     Ireland Subsidiary and the Policy Provider than those contained in the
     Initial Hedge Agreements;

          (v) (A) establishing, promoting and aiding in promoting, constituting,
     forming or organizing companies, trusts, syndicates, partnerships or other
     entities of all kinds in any part of the world for the purposes set forth
     in clause (i) above; provided that written notification shall have been
     given to the Policy Provider and the Initial Credit Facility Provider that
     such company, trust, syndicate, partnership or other entity is set up in
     compliance with this Indenture; (B) acquiring, holding and disposing of
     shares, securities and other interests in any such trust, company,
     syndicate, partnership or other entity and (C) disposing of shares,
     securities and other interests in, or causing the dissolution of, any
     existing subsidiary; provided that any such disposition which results in
     the disposition of an Aircraft meets the requirements set forth in Section
     5.02(g) hereof;

          (vi) taking out, acquiring, surrendering and assigning policies of
     insurance and assurances with any insurance company or companies which the
     Issuer or any ACS Ireland Subsidiary may think fit and to pay the premiums
     thereon; and

          (vii) engaging in the transactions contemplated by the Policy Provider
Documents and the Initial Credit Facility.

          (f) Limitation on Indebtedness. The Issuer shall not, and shall not
permit any ACS Ireland Subsidiary to, incur, create, issue, assume, guarantee or
otherwise become liable for or with respect to, or become responsible for, the
payment of, contingently or otherwise, whether present or future (in any such
case, to "Incur"), Indebtedness.

          Notwithstanding the foregoing, the Issuer and any ACS Ireland
Subsidiary may Incur each and all of the following:

          (i) Indebtedness in respect of any Initial Securities issued on the
Initial Closing Date or the guarantee of the Issuer in respect of the Guarantor
Initial Securities issued on the Initial Closing Date;

          (ii) Indebtedness in respect of any Refinancing Securities or other
Indebtedness described in the proviso to Section 5.02(c)(ii) hereof; provided
that (A) the Certificates related to such Refinancing Securities or other
Indebtedness receive ratings from the Rating Agencies at the close of such
Refinancing or repurchase equal to or higher than those of the Certificates
related to the subclass being refinanced or repurchased (determined at the date
of Incurrence), (B) taking into account such Refinancing or repurchase, a Rating
Agency Confirmation is obtained prior to such Refinancing or repurchase with
respect to the Certificates related to each subclass of Securities Outstanding
at such time, (C) the Issuer receives the prior written consent of each of the
Policy Provider and the Initial Credit Facility Provider and (D) the net
proceeds of any such Refinancing or other Indebtedness shall be applied only (x)
to repay the Redemption Price of the subclass of Securities being so refinanced
or repurchased plus the Refinancing Expenses relating thereto and pay any Policy
Premium and Policy Redemption Premium (if any) due and unpaid to the Policy
Provider, (y) to fund any Cash Collateral Account established for the related
Refinancing Securities (up to the Required Amount therefor) and (z) for deposit
into



                                                                             119


any Cash Collateral Account (including in connection with an increase in any
Required Amount effected under this Indenture in connection with the issuance of
such Refinancing Securities);

          (iii) Indebtedness in respect of guarantees by any ACS Ireland Group
Member that are in the ordinary course of the aircraft operating leasing
business and within the reasonable commercial practice of a leading aircraft
operating lessor;

          (iv) Indebtedness in respect of any Additional Securities the net
proceeds of which are applied (A) in the case of any Additional Securities
related to any Contribution Amounts only, for deposit into the Collections
Account, (B) to finance a Permitted Additional Aircraft Acquisition, (C) to fund
any Cash Collateral Account established for such Additional Securities (up to
the Required Amount therefor), (D) for deposit into any Cash Collateral Account
(including in connection with an increase in any Required Amount effected under
this Indenture in connection with the issuance of such Additional Securities)
and (E) to fund expenses related thereto; provided that (except in the case of
any Additional Securities that are Class E Securities) (w) a Rating Agency
Confirmation is obtained prior to the Incurrence of such Indebtedness of
Certificates related to Securities Outstanding at such time, (x) the Issuer
receives the prior written consent of each of the Policy Provider (unless a
Policy Non-Consent Event has occurred) and the Initial Credit Facility Provider
(unless a Initial Credit Facility Non-Consent Event has occurred), (y) the net
proceeds of such Indebtedness shall be applied only for the purposes specified
above in this clause (iv) and (z) such Additional Securities will be
cross-collateralized with all Secured Obligations by the Collateral under the
Security Trust Agreement;

          (v) obligations to each Seller under each Acquisition Agreement and
any related lease assignment and assumption agreements and obligations to
Lessees and others under the documents related thereto, including any
Indebtedness owed to any Lessee under any such agreement or the Lease with
respect to maintenance contributions, redelivery condition adjustment payments
or any other obligation to a Lessee incurred in the ordinary course of the
aircraft operating leasing business and within the reasonable commercial
practice of a leading aircraft operating lessor of the Issuer or any ACS Ireland
Subsidiary;

          (vi) Indebtedness under any agreements between the Issuer or any ACS
Ireland Subsidiary and any other ACS Ireland Group Member or other ACS Group
Member (each, an "Intercompany Loan"); provided that such Indebtedness shall be
evidenced in writing, which may be in electronic form, and, written notification
shall have been given to each Rating Agency, the Policy Provider and the Initial
Credit Facility Provider of the Incurrence of such Indebtedness on behalf of the
Issuer;

          (vii) Indebtedness of the Issuer under any Eligible Credit Facility,
provided that a Rating Agency Confirmation and the prior written consent of the
Policy Provider and the Initial Credit Facility Provider is obtained prior to
entering into an Eligible Credit Facility not in existence on the Initial
Closing Date;

          (viii) Indebtedness required in connection with repossession of an
Aircraft or any Engine;



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          (ix) Indebtedness in favor of the issuer of a surety, letter of credit
or similar instrument to be obtained by Issuer or any ACS Ireland Subsidiary in
connection with the repossession or detention of an Aircraft or other
enforcement action under a Lease; and

          (x) Indebtedness of the Issuer under the Policy Provider Documents.

          For the purposes of this Indenture, "guarantee" means any obligation,
contingent or otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and, without limiting the
generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term "guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "guarantee" when used as
a verb has a corresponding meaning.

          (g) Limitation on Aircraft Dispositions. The Issuer shall not, and
shall not permit any ACS Ireland Subsidiary to, sell, transfer or otherwise
dispose of any Aircraft or any interest therein other than as provided in the
Irish Remarketing Services Agreement.

          In addition, and notwithstanding any provision of the Irish
Remarketing Services Agreement, the Issuer and any ACS Ireland Subsidiary shall
only be permitted to sell, transfer or otherwise dispose of, directly or
indirectly, (a) any Engine or Part purchased on the date such Aircraft is
acquired, (b) any Engine or Part in connection with the replacement of such
Engine or Part in accordance with a Lease or (c) one or more Aircraft or an
interest therein (i) pursuant to a Purchase Option or other agreements of a
similar character existing with respect to the Initial Aircraft on the Initial
Closing Date or, with respect to any Substitute Aircraft or Additional Aircraft,
on the Closing Date therefor, (ii) within or among the Issuer and the ACS
Ireland Subsidiaries and other ACS Group Members without limitation, and among
the Issuer and/or any other ACS Ireland Group Member and any other ACS Group
Member provided that no such sale, transferor or other disposition shall be made
if such sale, transfer or disposition would materially adversely affect the
Holders or the Policy Provider as confirmed by a certification of the Issuer;
provided further that written notification shall have been given to each Rating
Agency and the Policy Provider of such sale, transfer or disposition, (iii)
pursuant to any Aircraft Agreement (including a Purchase Option); provided that
such sale does not result in a Concentration Default and the net present value
of the cash Net Sale Proceeds is not less than 107% of the Note Target Price;
provided further that the number of Aircraft sold pursuant to this clause (iii)
shall not exceed four for all of the ACS Group Members without the prior written
consent of the Policy Provider, (iv) pursuant to receipt of insurance proceeds
in connection with an event of loss, (v) pursuant to an Aircraft Agreement the
net present value of the cash Net Sale Proceeds is less than 107% of the Note
Target Price, provided that (with respect to this clause (v)), (x) in any one
calendar year such sales do not exceed 10% of the Assumed Portfolio Value as of
the first day of such calendar year of the ACS Group Portfolio as a whole for
such calendar year, (y) the prior written consent of the Policy Provider is
obtained and (z) such sale, transfer or disposition would not materially
adversely affect the Holders or Policy Provider as confirmed by a certificate of
the Issuer, or (vi) in connection with a transfer of title or another



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interest in an Aircraft (A) to or in favor of a trust or another entity which,
in either case, is not an ACS Group Member for the purposes of registering the
Aircraft under the laws of an applicable jurisdiction where the Issuer or an ACS
Ireland Subsidiary retains the beneficial or economic ownership of the Aircraft
or (B) from such trust or entity to the Issuer or an ACS Ireland Subsidiary,
except that without the consent of the Policy Provider at any time not more than
two Aircraft may be subject to the arrangements described in this subclause (vi)
and subclause (v) of the second paragraph of Section 5.02(b) hereof.

          For the purpose of this Section 5.02(g), the net present value of the
cash Net Sale Proceeds of any sale, transfer or other disposition of any
Aircraft means the present value of all payments received or to be received by
the Issuer or any ACS Ireland Subsidiary from the date of execution or option
granting date, as the case may be, of the relevant Aircraft Agreement through
and including the date of transfer of title to such Aircraft, discounted back to
the date of execution or option granting date, as the case may be, of such
Aircraft Agreement at the weighted average cost of funds of the Issuer (based on
the cost of funds represented by the Securities (excluding any payments on the
Class E Securities) and taking into account any Hedge Agreements).

          (h) Limitation on Aircraft Acquisitions. The Issuer shall not, and
shall not permit any ACS Ireland Subsidiary to, purchase or otherwise acquire
any Aircraft other than the Initial Aircraft or any interest therein.

          Notwithstanding the foregoing, the Issuer may, and may permit any ACS
Ireland Subsidiary to, (A) purchase or otherwise acquire, directly or
indirectly, Additional Aircraft from time to time (a "Permitted Additional
Aircraft Acquisition"); provided that (i) no Event of Default shall have
occurred and be continuing, (ii) the acquisition does not result in a
Concentration Default, (iii) with respect to Additional Aircraft acquired by
means of issuance of Additional Securities (other than solely through the
issuance of Class E Securities), Rating Agency Confirmation has been received
and the prior written consent of each of the Policy Provider and the Initial
Credit Facility Provider has been obtained, (B) purchase or otherwise acquire,
directly or indirectly, (x) Remaining Aircraft pursuant to the Purchase
Agreement or (y) Substitute Aircraft, provided that, with respect to Substitute
Aircraft, each of a Rating Agency Confirmation and the prior written consent of
the Policy Provider has been received and (C) so long as such acquisition does
not result in a Default or a Concentration Default, acquire, as a contribution
from a Holder of a Class E Security or a Shareholder an Additional Aircraft,
provided that, the representations and warranties with respect to Aircraft set
forth in Section 5.01 hereto shall be made on the date of such acquisition; and
provided further that any such Additional Aircraft holds or is capable of
holding a noise reduction certificate issued under Chapter 3 of Volume I, Part
II of annex 16 of the Chicago Convention or comply with the Stage 3 noise levels
set out in Section 36.3 of Appendix C of Part 36 of the United States Federal
Aviation Regulations (in each case without the use of noise reduction kits).

          (i) Limitation on Modification Payments and Capital Expenditures.
Except for provisions for capital expenditures existing in Initial Leases on the
related Closing Date under the terms hereof, the Issuer shall not, and shall not
permit any ACS Ireland Subsidiary to, make any capital expenditures for the
purpose of effecting any optional improvement or modification of any Aircraft,
including without limitation the optional conversion (an "Aircraft Conversion")



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of any Aircraft from a passenger aircraft to a freighter or mixed-use aircraft,
or for the purpose of purchasing or otherwise acquiring any Engines or Parts
outside of the ordinary course of business, excluding any capital expenditure
made in the ordinary course of business in connection with a new lease of such
Aircraft (each such non-excluded expenditure, a "Modification Payment", and each
Modification Payment in respect of an Aircraft Conversion, a "Conversion
Payment").

          Notwithstanding the foregoing, the Issuer may, and may permit any ACS
Ireland Subsidiary to: (x) make Conversion Payments from any amounts on deposit
in the Aircraft Conversion Account as a result of one or more Conversion
Elections; provided that (i) the full amount of the cost of such Aircraft
Conversion is on deposit in the Aircraft Conversion Account prior to any
Conversion Payments for such Aircraft Conversion being made (other than any
deposit or similar amount); (ii)(a) the Issuer has provided an information
memorandum containing information and analysis with respect to the related
Aircraft Conversion to the Policy Provider and the Rating Agencies, together
with a certification by the Issuer that such Aircraft Conversion will not
materially adversely affect the Holders or the Policy Provider, (b) the Issuer
has provided written notification to the Initial Credit Facility Provider at
least five Business Days prior to making a Conversion Election, and (c) with
respect to any widebody aircraft, the prior written consent of the Policy
Provider and a Rating Agency Confirmation has been obtained; provided that, if
the estimated total cost of the conversion (as determined by a quote from the
maintenance facility where such Aircraft Conversion is to take place) exceeds
$4,000,000, the prior written consent of the Policy Provider to such Aircraft
Conversion has been received; (iii) the Aircraft Conversion will not result in a
Concentration Default; (iv) not more than three Aircraft Conversions with
respect to any narrowbody aircraft for all of the ACS Group Members may be made
without obtaining a Rating Agency Confirmation and the prior written consent of
the Policy Provider; (v) after the fifth anniversary of the Initial Closing
Date, or in the event a DSCR Failure has occurred, no Aircraft Conversions may
be made (which begin after the fifth anniversary of the Initial Closing Date or
the occurrence of a DSCR Failure) without obtaining a Rating Agency Confirmation
and the prior written consent of the Policy Provider;(vi) a scheduled conversion
slot has been obtained by the relevant ACS Ireland Group Member and (vii) an
executed letter of intent has been entered into with a lessee with respect to
such Aircraft; (y) make Modification Payments if the prior written consent of
the Policy Provider and (after May 31, 2016 only) the Initial Credit Facility
Provider has been obtained (other than with respect to any Conversion Payments);
provided that (i) each Modification Payment (other than Conversion Payments),
together with all other Modification Payments (other than Conversion Payments)
made after the Initial Closing Date pursuant to this Section 5.02(i) with
respect to any single Aircraft, do not exceed the aggregate amount of funds that
would be necessary to perform one incidence of heavy maintenance (as described
in the Irish Remarketing Services Agreement) on such Aircraft, including the
airframe and the related Engines thereof; and (ii) (A) such Modification Payment
is included in the annual operating budget of the ACS Ireland Group, (B) the
amount of funds necessary to make such Modification Payment shall have been
accrued in advance as a Permitted Accrual in the Expense Account through
transfers into the Expense Account pursuant to Section 3.08(a) hereof or
otherwise allowed to be paid under Section 5.02(f) hereof or (C) the amount of
funds to make such Modification Payment is in the Aircraft Conversion Account;
and (z) make any Conversion Payment from the proceeds of Additional Securities
issued in accordance with Section 2.12 hereof in which case the limitations in
clause (x) do not apply.



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          (j) Limitation on Amalgamation, Consolidation, Merger and Transfer of
Assets. The Issuer shall not, and shall not permit any ACS Ireland Subsidiary
to, amalgamate, consolidate or merge with or into, or sell, convey, transfer,
lease or otherwise dispose of its property and assets (as an entirety or
substantially an entirety in one transaction or in a series of related
transactions) to, any other Person, or permit any other Person to amalgamate,
consolidate or merge with or into the Issuer or any ACS Ireland Subsidiary,
unless (i) the resulting entity is a special purpose entity, the constitutional
documents of which is substantially similar to those of the Issuer or the
equivalent constitutional documents of such ACS Ireland Subsidiary, as the case
may be, and, after such amalgamation, consolidation, merger, sale, conveyance,
transfer, lease or other disposition, payments from such resulting entity to the
Holders do not give rise to any withholding tax payments less favorable to the
Holders than the amount of any withholding tax payments which would have been
required had such event not occurred, (ii) in the case of any amalgamation,
consolidation, merger or transfer by the Issuer, the shares of the Issuer shall
remain outstanding or new Ownership Interests shall be issued in exchange
therefor having substantially the same terms and conditions as the exchanged
shares of the Issuer and the surviving successor or transferee entity shall
expressly assume all of the obligations of the Issuer under this Indenture, the
Securities and each other Related Document to which the Issuer is then a party,
and in the case of any amalgamation, consolidation, merger or transfer by any
ACS Ireland Subsidiary, the surviving successor or transferee entity shall
expressly assume all of the obligations of such ACS Ireland Subsidiary under
each Related Document to which it is then a party, (iii) a Rating Agency
Confirmation is obtained with respect to such amalgamation, consolidation,
merger, sale, conveyance, transfer, lease or disposition, (iv) the Issuer
receives the prior written consent of the Initial Credit Facility Provider
(unless a Initial Credit Facility Non-Consent Event has occurred) (such consent
not to be unreasonably withheld), (v) the Issuer receives the prior written
consent of the Policy Provider (unless a Policy Non-Consent Event has occurred)
(such consent not to be unreasonably withheld), (vi) such transaction does not
result in a recognition of gain or loss by the Holders for U.S. federal income
tax purposes, (vii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing, and (viii) the Issuer
delivers to the Trustee an Officer's Certificate and an Opinion of Counsel, in
each case stating that such amalgamation, consolidation, merger or transfer and
such supplemental indenture comply with the above criteria and, if applicable,
Section 5.02(g) hereof and that all conditions precedent provided for herein
relating to such transaction have been complied with; provided that this
covenant shall not apply to any such amalgamation, consolidation, merger, sale,
conveyance, transfer, lease or disposition (a) within and among the ACS Ireland
Group or ACS Group if such amalgamation, consolidation, merger, sale,
conveyance, transfer, lease or disposition, as the case may be, would not
materially adversely affect the Holders and written notification is given to
each Rating Agency, to the Policy Provider and to the Initial Credit Facility
Provider by the Issuer or its agent and is otherwise consistent with Sections
5.02(p) and (q) hereof, (b) complying with the terms of Section 5.02(g) hereof
or (c) effected as part of a single transaction providing for the redemption or
defeasance of Securities in accordance with Section 3.10 or Article XII hereof,
respectively.

          (k) Limitation on Transactions with Affiliates. The Issuer shall not,
and shall not permit any ACS Ireland Subsidiary, directly or indirectly, to
enter into, renew or extend any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service) with any Affiliate of the Issuer or any ACS Ireland Subsidiary, except
upon fair and reasonable terms no less favorable to the Issuer or such ACS



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Ireland Subsidiary than could be obtained, at the time of such transaction or at
the time of the execution of the agreement providing therefor, in a comparable
arm's-length transaction with a Person that is not such an Affiliate and
pursuant to enforceable agreements.

          The foregoing limitation does not limit, and shall not apply to: (i)
any transaction in connection with the establishment of the ACS Ireland Group or
ACS Bermuda Group pursuant to the Related Documents and the acquisition of the
Initial Securities from the Issuer and the guarantee by the Issuer of the
Guarantor Initial Securities; (ii) any Contribution Amount or any contribution
in the form of an Additional Aircraft pursuant to the terms of this Indenture
made by any Holder of a Class E Security or any Shareholder; (iii) the payment
by the Issuer of reasonable and customary fees to, and the provision of
reasonable and customary liability insurance in respect of, the Directors; (iv)
any Permitted Additional Aircraft Acquisition or any transaction complying with
Section 5.02(g) hereof; or (v) sale of the Issuer or any ACS Ireland
Subsidiaries as part of a single transaction providing for the redemption or
defeasance of all of the Securities in accordance with Section 3.10 or Article
XII hereof, respectively.

          (l) Limitation on the Issuance, Delivery and Sale of Equity Interests.
The Issuer shall not (i) issue, deliver or sell any shares, interests,
participations or other equivalents (however designated, whether voting or
non-voting, other than beneficial interests, shares, participations or other
equivalents existing on the Initial Closing Date) in equity of the Issuer, or
(ii) sell, or permit any ACS Ireland Subsidiary, directly or indirectly, to
issue, deliver or sell, any shares, interests, participations or other
equivalents in equity (however designated, whether voting or non-voting, other
than beneficial interests, shares, participations or other equivalents existing
on the Initial Closing Date), except (A) the issuance, sale, delivery, transfer
or pledge of Ownership Interest in any ACS Ireland Group Member to or for the
benefit of any other ACS Ireland Group Member or other ACS Group Member, (B)
issuances or sales of shares of Ownership Interest of foreign ACS Ireland
Subsidiaries to nationals in the jurisdiction of incorporation or organization
of such ACS Ireland Subsidiary, as the case may be, to the extent required by
applicable law or necessary in the determination of the Board to avoid adverse
tax consequences or to facilitate the registration or leasing of Aircraft,
provided that the prior written consent of the Policy Provider has been obtained
in connection therewith, (C) the pledge of the Pledged Shares and Pledged
Beneficial Interests pursuant to the Security Documents, and (D) the sale of any
Ownership Interest in an ACS Group Subsidiary in order to effect the sale of all
Aircraft owned by such ACS Group Subsidiary in compliance with Section 5.02(g)
hereof.

          (m) Bankruptcy and Insolvency; Corporate Governance. The Issuer (i)
shall promptly provide the Trustee, the Policy Provider, the Initial Credit
Facility Provider and the Rating Agencies with written notice of the institution
of any proceeding by or against the Issuer or any ACS Ireland Subsidiary, as the
case may be, seeking to adjudicate any of them bankrupt or insolvent, or seeking
liquidation, Irish law examinership, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of their debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver, Irish
law examiner, trustee or other similar official for it or for any substantial
part of its property; (ii) shall not take any action to waive, repeal, amend,
vary, supplement or otherwise modify its constitutional documents that would
adversely affect the rights, privileges or preferences of any Holder of the
Securities, the Policy Provider or the Initial Credit Facility Provider, as
determined by the Board; and (iii) shall not, without an



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affirmative unanimous Board Resolution, take any action to waive, repeal, amend,
vary, supplement or otherwise modify (A) the provisions of its constitutional
documents which require a unanimous resolution of the shareholders of the
Issuer, or limits the actions of beneficial interest holders, with respect to
voluntary insolvency proceedings or consents to involuntary insolvency
proceedings or (B) any similar provisions of the constitutional documents of the
ACS Ireland Subsidiaries. The Issuer shall have at least two Independent
Directors and any Independent Director appointed to replace an Independent
Director with respect to the Issuer shall be subject to the prior written
consent of the Policy Provider (except that if such consent is not obtained in a
timely manner, the Issuer shall nevertheless appoint such Independent Director
if so required by, and in accordance with, the terms of the Issuer's
constitutional documents).

          (n) Payment of Principal, Premium, if any, and Interest. The Issuer
shall duly and punctually pay the principal, premium, if any, and interest on
the Securities in accordance with the terms of this Indenture and the
Securities.

          (o) Limitation on Employees. The Issuer shall not, and shall not
permit any ACS Ireland Subsidiary to, employ or maintain any employees other
than as required by any provisions of local law; provided that indenture
trustees and directors shall not be deemed to be employees for purposes of this
Section 5.02(o).

          (p) Compliance and Agreement. The Issuer shall comply, and shall cause
each ACS Ireland Subsidiary to comply, with the provisions of the Related
Documents. The Issuer shall ensure that title to each Aircraft shall be held in
a separate special purpose bankruptcy remote entity whose constitutional
documents contain restrictions similar to the restrictions (including, but not
limited to, the provisions regarding limited purpose, maintaining separateness
from other entities and bankruptcy remoteness) contained in the constitutional
documents of the ACS Group Subsidiaries existing on the Initial Closing Date.
The constitutional documents of the ACS Group Subsidiaries shall contain
provisions requiring the ACS Group Subsidiaries to comply with the provisions of
the Related Documents and any amendment to such provision shall be subject to
the prior written consent of the Policy Provider.

          (q) Maintenance of Separate Existence. Except to the extent provided
in this Indenture or the other Related Documents or as otherwise contemplated by
the Related Documents, the Issuer shall, and shall cause each ACS Ireland
Subsidiary to, maintain certain policies and procedures relating to its
existence as a separate corporation, company or other legal entity as follows:

          (i) The Issuer acknowledges its receipt of a copy of that certain
opinion letter issued by A & L Goodbody, dated as of the Initial Closing Date
addressed to, among others, the Initial Purchasers, the Trustee, the Policy
Provider and the Initial Credit Facility Provider and addressing the issue of
substantive consolidation as it may relate to the Issuer and each ACS Ireland
Subsidiary (which is incorporated under the laws of Ireland), on the one hand,
and Aircastle Limited and each of its subsidiaries (other than any ACS Group
Member), on the other. The Issuer hereby agrees to maintain, and to cause each
ACS Ireland



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Subsidiary to maintain, in place all policies and procedures, and take and
continue to take all actions, described in the factual assumptions set forth in
such opinion letter and relating to the Issuer or such ACS Ireland Subsidiaries,
as applicable; provided, however, that the Issuer or any such ACS Ireland
Subsidiary may cease to maintain any policy or procedure (A) if and to the
extent that the Issuer or such ACS Ireland Subsidiary delivers to the Trustee,
the Initial Credit Facility Provider and the Policy Provider an Opinion of
Counsel reasonably acceptable to the Trustee, the Initial Credit Facility
Provider and the Policy Provider providing that such policy or procedure is no
longer necessary, due to a change in law or otherwise, for the rendering of such
earlier opinion relating to the issue of substantive consolidation and (B) a
Rating Agency Confirmation and the prior written consent of the Policy Provider,
in each case, is obtained with respect to ceasing to maintain such policy or
procedure.

          (ii) The Issuer shall, and shall cause each ACS Ireland Subsidiary to:

          (A) maintain its own books and records and bank accounts separate from
those of each Aircastle Entity and any other Person except as otherwise
contemplated by the constitutional documents of the ACS Group Members;

          (B) maintain its assets in such a manner that it is not difficult to
segregate, identify or ascertain such assets;

          (C) except with respect to any U.S. Trust, have a board of directors
separate from that of each Aircastle Entity and any other Person; provided that
the individuals serving as directors of each board of directors may be the same
individuals on each board of directors;

          (D) except with respect to any U.S. Trust, cause its board of
directors to meet at least quarterly or act pursuant to written consent and keep
minutes of such meetings and actions and observe all other corporate and other
legal formalities;

          (E) hold itself out to creditors and the public as a legal entity
separate and distinct from each Aircastle Entity and any other Person;

          (F) prepare separate financial statements and separate Tax returns,
and if separate returns for the Issuer and each Aircastle Entity are required
under applicable Tax law, or if part of a consolidated group, then it will be
shown as a separate member of such group, and pay any Taxes required to be paid
under applicable Tax law;

          (G) allocate and charge fairly and reasonably any common overhead
shared with Affiliates;

          (H) conduct business in its own name, use separate invoices,
stationery and checks and strictly comply with all organizational formalities to
maintain its separate existence;

          (I) not commingle its assets or funds with those of any other Person
(including any Aircastle Entity);

          (J) not hold out its credit or assets as being available to satisfy
the obligations of others;

          (K) not assume, guarantee or pay the debts or obligations of any other
Person or otherwise pledge its assets for the benefit of any other Person;



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          (L) correct any known misunderstanding regarding its separate
identity;

          (M) other than as expressly contemplated by Sections 3.08, 3.09 and
3.15, pay its own liabilities only out of its own funds other than where
indemnified by another party as contemplated by the Related Documents;

          (N) not acquire the securities of any Aircastle Entity; and

          (O) cause its Board and any officers, managers, agents and other
representatives of the Issuer or such ACS Ireland Subsidiary, as applicable, to
act at all times with respect to the Issuer or such ACS Ireland Subsidiary, as
the case may be, consistently and in furtherance of the foregoing and in
compliance with applicable law.

          (r) Independent Director. The Issuer shall cause each ACS Ireland
Subsidiary (except any trust of which the Issuer or an ACS Ireland Subsidiary is
the holder of the legal and beneficial interest) to have at least one
Independent Director.

          (s) Registered Office. The Issuer shall, and shall cause each ACS
Ireland Subsidiary that is incorporated under the laws of Ireland to, (a)
maintain its registered office in Ireland in accordance with the Irish Companies
Acts 1963 to 2005, (b) maintain its centre of main interests (as that phrase is
used in Article 3(l) of the Regulation) in Ireland and (c) maintain its primary
insolvency jurisdiction (as that term is defined in the Cape Town Convention on
International Interests in Mobile Equipment and the Aircraft Equipment Protocol
thereto) in Ireland.

     Section 5.03 Operating Covenants. The Issuer covenants with the Trustee as
follows:

          (a) Concentration Limits. Without receipt of a Rating Agency
Confirmation from Moody's and the prior written consent of the Policy Provider,
the Issuer shall not permit any ACS Ireland Subsidiary to lease or re-lease any
Aircraft if entering into such proposed Lease would cause the ACS Group
Portfolio to exceed any of the Concentration Limits set forth in Exhibit C
hereto (as such limits may be adjusted by the Issuer from time to time, subject
to receipt of a Rating Agency Confirmation and the prior written consent of the
Policy Provider, the "Concentration Limits"); provided that the Issuer or any
ACS Ireland Subsidiary shall be entitled to renew or extend any Lease to the
existing Lessee thereunder irrespective of the effect of such renewal or
extension on the Concentration Limits with the prior written consent of the
Policy Provider. The Issuer shall not, and shall not permit any ACS Ireland
Subsidiary to, (i) lease (including any renewal or extension of any existing
Lease) any Aircraft to any Lessee habitually based or domiciled in any of the
jurisdictions set forth as "Prohibited" in the last section of the Concentration
Limits as set forth on Exhibit C hereto and as amended from time to time upon
the receipt of a Rating Agency Confirmation and the prior written consent of the
Policy Provider (each such jurisdiction, a "Prohibited Country"), (ii) enter
into any Lease (including any renewal or extension of any existing Lease) that
expressly permits the Lessee to sublease an Aircraft to a sublessee habitually
based or domiciled in a Prohibited Country, or (iii) consent to a sublease of an
Aircraft to a sublessee habitually based or domiciled in a Prohibited Country.

          (b) Compliance with Law, Maintenance of Permits. The Issuer shall (i)
comply, and cause each ACS Ireland Subsidiary to comply, in all material
respects with all Applicable



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Laws, (ii) obtain, and cause each ACS Ireland Subsidiary to obtain, all material
governmental (including regulatory) registrations, certificates, licenses,
permits and authorizations required for the use and operation of the Aircraft
owned by it, including, without limitation, a current certificate of
airworthiness for each such Aircraft (issued by the Applicable Aviation
Authority and in the appropriate category for the nature of the operations of
such Aircraft), except that (A) no certificate of airworthiness shall be
required for any Aircraft (x) during any period when such Aircraft is undergoing
maintenance, modification or repair, (y) following the withdrawal or suspension
by such Applicable Aviation Authority of certificates of airworthiness in
respect of all aircraft of the same model or period of manufacture as such
Aircraft (in which case the Issuer shall comply, and cause each ACS Ireland
Subsidiary to comply, with all directions of such Applicable Aviation Authority
in connection with such withdrawal or suspension), (B) no registrations,
certificates, licenses, permits or authorizations required for the use or
operation of any Aircraft need be obtained with respect to any period when such
Aircraft is not being operated and (C) no such registrations, certificates,
licenses, permits or authorizations shall be required to be maintained for any
Aircraft that is not the subject of a Lease, except to the extent required under
Applicable Laws, (iii) not cause or knowingly permit, directly or indirectly,
through any ACS Ireland Subsidiary, any Lessee to operate any Aircraft under any
Lease in any material respect contrary to any Applicable Law and (iv) not
knowingly permit, directly or indirectly, through any ACS Ireland Subsidiary,
any Lessee not to obtain all material governmental (including regulatory)
registrations, certificates, licenses, permits and authorizations required for
such Lessee's use and operation of any Aircraft under any operating Lease except
as provided, mutatis mutandis, in clauses (ii)(A) and (ii)(B) above.

          Notwithstanding the foregoing, no breach of this Section 5.03(b) shall
be deemed to have occurred by virtue of any act or omission of a Lessee or
sub-lessee, or of any Person which has possession of the Aircraft or any Engine
for the purpose of repairs, maintenance, modification or storage, or by virtue
of any requisition, seizure, or confiscation of the Aircraft (other than seizure
or confiscation arising from a breach by the Issuer or an ACS Ireland Subsidiary
of this Section 5.03(b)) (each, a "Third Party Event"); provided that (i)
neither the Issuer nor any ACS Ireland Subsidiary consents or has consented to
such Third Party Event; and (ii) the Issuer or ACS Ireland Subsidiary which is
the lessor or owner of such Aircraft promptly and diligently takes such
commercially reasonable actions as any leading international aircraft operating
lessor would reasonably take in respect of such Third Party Event, including, as
deemed appropriate (taking into account, inter alia, the laws of the
jurisdictions in which the Aircraft are located), seeking to compel such Lessee
or other relevant Person to remedy such Third Party Event or seeking to
repossess the relevant Aircraft or Engine.

          (c) Maintenance of Assets. The Issuer shall (i) with respect to each
Aircraft and Engine that is subject to a Lease, cause, directly or indirectly,
through any ACS Ireland Subsidiary, such Aircraft and Engine to be maintained in
a state of repair and condition consistent with the reasonable commercial
practice of any leading international aircraft operating lessor with respect to
similar aircraft under lease, taking into consideration, among other things, the
identity of the relevant Lessee (including the credit standing and operating
experience thereof), the age and condition of the Aircraft and the jurisdiction
in which such Aircraft will be operated or registered under such Lease and (ii)
with respect to each Aircraft that is not subject to a Lease, maintain, and
cause each ACS Ireland Subsidiary to maintain, such Aircraft in a state of
repair and condition consistent with the reasonable commercial practice of any
leading



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international aircraft operating lessor with respect to aircraft not under
lease. Notwithstanding the foregoing, no breach of this Section 5.03(c) shall be
deemed to have occurred by virtue of any Third Party Event; provided that (i)
neither the Issuer nor any ACS Ireland Subsidiary consents or has consented to
such Third Party Event; and (ii) the Issuer or such ACS Ireland Subsidiary which
is the lessor or owner of such Aircraft promptly and diligently takes such
commercially reasonable actions as any leading international aircraft operating
lessor would reasonably take in respect of such Third Party Event, including as
deemed appropriate, seeking to compel such Lessee or other relevant Person to
remedy such Third Party Event or seeking to repossess the relevant Aircraft or
Engine.

          (d) Notification of Trustee, Holders, Policy Provider, Initial Credit
Facility Provider, Administrative Agent and Cash Manager. The Issuer shall
notify the Trustee, the Holders, the Policy Provider, the Initial Credit
Facility Provider, the Administrative Agent and the Cash Manager in writing as
soon as the Issuer or any ACS Ireland Subsidiary becomes aware of any loss,
theft, damage, confiscation, requisition or destruction to any Initial Aircraft,
Additional Aircraft or Engine if the potential cost of repair or replacement of
such asset (without regard to any insurance claim related thereto) may exceed
the greater of $2,000,000 and the damage notification threshold contained in the
applicable Lease.

          (e) Leases. The Issuer shall adopt and shall cause the Irish
Remarketing Servicer to utilize the pro forma lease in the form provided to the
Issuer on the Initial Closing Date (or, with respect to the Back-Up Remarketing
Servicer, the "Commencement Date" as defined in the Back-Up Remarketing Services
Agreement) as such pro forma lease agreement or agreements may be revised for
purposes of the ACS Ireland Group specifically or generally from time to time by
the Irish Remarketing Servicer (the "Irish Remarketing Servicer's Pro Forma
Lease") in a manner consistent with the Irish Remarketing Servicer's "Standard
of Care" and the Irish Remarketing Servicer's "Conflicts Standard" (as each term
is defined in the Irish Remarketing Services Agreement), for use by the Irish
Remarketing Servicer on behalf of the Issuer, any ACS Ireland Subsidiary as a
starting point in the negotiation of Future Leases with Persons who are not ACS
Ireland Group Members; provided, however, that with respect to any Future Lease
entered into in connection with (x) the renewal or extension of an Initial
Lease, (y) the leasing of an Aircraft to a Person that is or was a Lessee under
an Initial Lease or (z) the leasing of an Aircraft to a Person that is or was
the lessee under an operating lease of an aircraft that is being managed or
serviced by the Irish Remarketing Servicer (such Future Lease, a "Renewal
Lease"), a form of lease substantially similar to such Initial Lease or
operating lease (a "Precedent Lease"), as the case may be, may be used by the
Irish Remarketing Servicer in lieu of the Irish Remarketing Servicer's Pro Forma
Lease on behalf of the Issuer or any ACS Ireland Subsidiary as a starting point
in the negotiation of such Future Lease with Persons who are not ACS Ireland
Group Members and provided further, however, that if the Board determines, in an
annual review of the Irish Remarketing Servicer's Pro Forma Lease on or before
each anniversary of the relevant Closing Date, that any revision to the Irish
Remarketing Servicer's Pro Forma Lease made from time to time since the
preceding review by the Board (or, with respect to the first anniversary of the
Initial Closing Date, since the Initial Closing Date) is substantially
inconsistent with the core lease provisions of the Issuer set forth in Exhibit F
to this Indenture (as such provisions may be amended from time to time, the
"Core Lease Provisions") in a manner and to such a degree as to have a material
adverse effect on the Holders, taking into consideration, inter alia, such
revision and any risk that the Aircraft might not be able to be



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leased on terms consistent with the provisions of the Irish Remarketing
Servicer's Pro Forma Lease without such revisions, then the Board shall direct
the Irish Remarketing Servicer not to include such revision in the Irish
Remarketing Servicer's Pro Forma Lease to be used thereafter as the starting
point in the negotiation of any Future Lease with respect to the Aircraft. If
the Board determines that any such revision to the Irish Remarketing Servicer's
Pro Forma Lease will not have a material adverse effect on the Holders, then the
Board shall (i) amend the applicable Core Lease Provisions to incorporate such
revisions (ii) notify the Rating Agencies, the Policy Provider and the Initial
Credit Facility Provider of any Future Lease entered into the terms of which are
materially less favorable from the point of view of the lessor than any of the
Leases then in effect, including without limitation, such changes to the Core
Lease Provisions; provided that the Core Lease Provisions may not be amended
without the prior written consent of the Policy Provider.

          The Issuer shall not enter into, and shall not permit any ACS Ireland
Subsidiary to enter into, any Future Lease the Rental Payments under which are
denominated in a currency other than U.S. dollars unless the Issuer receives a
Rating Agency Confirmation and the prior written consent of the Policy Provider;
provided, that the Issuer may enter any Future Lease the Rental Payments under
which are denominated in euros if (a) the sum of the Assumed Base Values as of
the Payment Date immediately preceding any date of determination of each ACS
Group Aircraft subject to leases the Rental Payments under which are denominated
in euros does not exceed 5% of the sum of the Assumed Base Values as of such
Payment Date of all ACS Group Aircraft and (b) the currency exposure is hedged
in accordance with the Issuer's hedging policy.

          (f) Opinions. The Issuer shall not enter into, and shall not permit
any ACS Ireland Subsidiary to enter into, any Future Lease with any Person that
is not an ACS Ireland Group Member or change the jurisdiction of registration of
any Aircraft that is subject to a Lease, unless, upon entering into such Future
Lease or changing the jurisdiction or registration of such Aircraft (or within a
commercially reasonable period thereafter), the Irish Remarketing Servicer
obtains such legal opinions, if any, with regard to compliance with the
registration requirements of the relevant jurisdiction, enforceability of the
Future Lease and such other matters customary for such transactions to the
extent that receiving such legal opinions is consistent with the reasonable
commercial practice of any leading international aircraft operating lessor.

          (g) Insurance. The Issuer shall maintain or cause, directly or
indirectly through the ACS Ireland Subsidiaries, to be maintained with reputable
and responsible insurers or, provided that the applicable reinsurance policy
contains a cut-through clause requiring the reinsurers to pay the insured
directly (other than in any instances where local law requirements mandate
otherwise), with reputable and responsible insurers that maintain relevant
reinsurance with reputable and responsible reinsurers (i) airline hull insurance
for each Aircraft in an amount at least equal to the Note Target Price for such
Aircraft (or the equivalent thereof from time to time if such insurance is
denominated in a currency other than U.S. dollars) and (ii) airline liability
insurance for each Aircraft and occurrence in an amount at least equal to the
relevant amount set forth on Exhibit D hereto for each model of aircraft and as
amended from time to time pursuant to the receipt of a Rating Agency
Confirmation from Standard & Poor's and prior written notice of such amendment
is provided to Moody's and the prior written consent of the Policy Provider and
(iii) airline repossession insurance ("Repossession Insurance") for each
Aircraft subject to a Lease to a Lessee habitually based in a jurisdiction set
forth under the "Repossession Guidelines" set forth in Exhibit C hereto, which
may be amended from time to time only pursuant to the receipt of a Rating Agency
Confirmation and the prior written consent of the



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Policy Provider, in an amount at least equal to the Note Target Price (or the
equivalent thereof from time to time if such insurance is denominated in a
currency other than U.S. dollars) for such Aircraft; provided, however, that
with respect to any such insurance for any Aircraft subject to a Lease, such
insurance may be subject to commercially reasonable deductible and
self-insurance arrangements and may take into account any customary reductions
in limits for Aircraft in storage and not in operation (in each case taking into
account, inter alia, the creditworthiness and experience of the Lessee, if any,
the type of aircraft and market practices in the aircraft insurance industry
generally). The coverage and terms (including endorsements, deductibles and
self-insurance arrangements) of any insurance maintained with respect to any
Aircraft not subject to a Lease shall be substantially consistent with the
reasonable commercial practices of any leading international aircraft operating
lessor regarding similar aircraft.

          In determining the amount of insurance required to be maintained by
this Section 5.03(g), the Issuer may take into account any indemnification from,
or insurance provided by, any governmental, supranational or inter-governmental
authority or agency (other than, with respect to Repossession Insurance, any
governmental authority or agency of any jurisdiction for which Repossession
Insurance must be obtained), the sovereign foreign currency debt of which is
rated at least AA, or the equivalent, by at least one of the Rating Agencies,
against any risk with respect to an Aircraft at least in an amount which, when
added to the amount of insurance against such risk maintained by the Issuer (or
which the Issuer has caused to be maintained), shall be at least equal to the
amount of insurance against such risk otherwise required by this Section 5.03(g)
(taking into account self-insurance permitted by this Section 5.03(g)). Any such
indemnification or insurance provided by such government shall provide
substantially similar protection as the insurance required by this Section
5.03(g).

          The Issuer shall cause, or shall cause the applicable ACS Group
Subsidiary to cause, each Lessee to be obligated under its respective Lease to
maintain War Risk Coverage as part of the insurance requirements in such Lease.
The Issuer shall cause, or shall cause the applicable ACS Group Subsidiary to
cause, each Lessee to maintain War Risk Coverage in accordance with the
requirements set forth in Exhibit D hereto. In the event that a Lessee does not
maintain such requisite level of War Risk Coverage or allows such War Risk
Coverage to lapse, the Issuer shall cause the applicable ACS Group Subsidiary
lessor to immediately bring enforcement proceedings against the applicable
Lessee under the terms of the applicable Lease to repossess the applicable
Aircraft and use commercially reasonable efforts of a leading international
aircraft operating lessor to ensure that such Aircraft does not operate without
War Risk Coverage at such required levels; provided, however, that so long as
the Issuer is in compliance with the requirements set forth in the next
succeeding sentence and the applicable Lessee is not otherwise in default under
the related Lease, the Issuer shall have 180 days to cause, or to cause the
applicable ACS Group Subsidiary lessor to cause, the Lessee to comply with the
insurance requirements set forth herein and under the Lease prior to bringing
any such enforcement proceedings; provided further that if, for any reason,
neither the Issuer nor the applicable ACS Group Subsidiary lessor has a right
under the applicable Lease to require a Lessee to maintain War Risk Coverage at
the requisite levels, the Issuer shall nevertheless be



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obligated to cause such Lessee to maintain War Risk Coverage at the requisite
levels described in Exhibit D hereto (by negotiating in good faith with such
Lessee or otherwise) or shall otherwise cause War Risk Coverage to be maintained
at the requisite levels described in Exhibit D hereto, subject only to the
additional time provided in the immediately preceding proviso if the Issuer is
in compliance with requirements set forth in the next succeeding sentence and
the applicable Lessee is not otherwise in default under the related Lease. The
Issuer shall carry contingent and excess War Risk Coverage in accordance with
the requirements set forth in Exhibit D hereto.

          The obligations set forth in the foregoing paragraph shall be waived
if (a) prior written notice shall be provided to the Rating Agencies and (b) the
Policy Provider shall have provided a written consent to such waiver.

          (h) Indemnity. The Issuer shall, and shall cause each ACS Ireland
Subsidiary to, include in each Lease between the Issuer or such ACS Ireland
Subsidiary and a Person who is not an ACS Ireland Group Member an indemnity from
such Person in respect of any losses or liabilities arising from the use or
operation of the Aircraft during the term of such Lease, subject to such
exceptions, limitations and qualifications as are consistent with the reasonable
commercial practice of any leading international aircraft operating lessor.

          (i) Appraisal of Aircraft. The Issuer shall, within 90 days after the
Expected Final Payment Date of the ACS Group Subclass A-1 Securities, deliver to
the Trustee, the Policy Provider and the Rating Agencies three appraisals of the
Base Value of each of the Aircraft from each of Initial Appraisers or, if any of
the Initial Appraisers is unable to provide an appraisal, from the remaining
Initial Appraisers and such other Appraisers selected by the Issuer, each such
appraisal to be dated within 30 days prior to its delivery to the Trustee, the
Policy Provider and the Rating Agencies.

     Section 5.04 Compliance Through Agents. The Issuer shall be entitled to
delegate the performance of any of its covenants hereunder to one or more
Service Providers pursuant to one or more Related Documents entered into in
accordance with the terms of this Indenture so long as each such Related
Document is subject to the Lien of the Security Trust Agreement. Nothing in this
Section 5.04 is intended to, or shall, relieve the Issuer from any liability or
consequences hereunder arising from the failure of the Issuer or any such
Service Provider to perform any such covenant strictly in accordance with the
terms of this Indenture.

                                   ARTICLE VI

                                   THE TRUSTEE

     Section 6.01 Acceptance of Trusts and Duties. The duties and
responsibilities of the Trustee shall be as provided by the TIA and as set forth
herein and in the Guarantor Indenture. The Trustee accepts the trusts hereby
created and applicable to it and agrees to perform the same but only upon the
terms of this Indenture and in the Guarantor Indenture and the TIA and agrees to
receive and disburse all moneys received by it in accordance with the terms
hereof and in the Guarantor Indenture. The Trustee in its individual capacity
shall not be answerable or accountable under any circumstances, except for its
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breach of any of its representations or warranties set forth herein and the
Trustee shall not be liable for any action or inaction of the Issuer or any
other parties to any of the Related Documents. The fees and out-of-pocket
expenses of the Trustee shall be Expenses of the Issuer.

     Section 6.02 Absence of Duties. Except in accordance with written
instructions or requests furnished hereunder, the Trustee shall have no duty to
ascertain or inquire as to the performance or observance of any covenants,
conditions or agreements on the part of any Lessee.

     Section 6.03 Representations or Warranties. The Trustee does not make and
shall not be deemed to have made any representation or warranty as to the
validity, legality or enforceability of this Indenture, the Securities or any
other document or instrument or as to the correctness of any statement contained
in any thereof, except that the Trustee in its individual capacity hereby
represents and warrants (i) that each such specified document to which it is a
party has been or will be duly executed and delivered by one of its officers who
is and will be duly authorized to execute and deliver such document on its
behalf, and (ii) this Indenture is the legal, valid and binding obligation of
Deutsche Bank Trust Company Americas, enforceable against Deutsche Bank Trust
Company Americas in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally.

     Section 6.04 Reliance; Agents; Advice of Counsel. The Trustee may
conclusively rely upon and shall be fully protected and Incur no liability to
anyone in acting or refraining from acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion, bond
or other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Trustee shall have no obligation to
confirm the veracity of the content of any such item provided to it (absent
manifest error). The Trustee may accept a copy of a resolution of, in the case
of the Issuer, the Board and, in the case of any other party to any Related
Document, the governing body of such Person, certified in an accompanying
Officer's Certificate as duly adopted and in full force and effect, as
conclusive evidence that such resolution has been duly adopted and that the same
is in full force and effect. As to any fact or matter the manner of
ascertainment of which is not specifically described herein, the Trustee shall
be entitled to receive and may for all purposes hereof conclusively rely on a
certificate, signed by an officer of any duly authorized Person, as to such fact
or matter, and such certificate shall constitute full protection to the Trustee
for any action taken or omitted to be taken by it in good faith in reliance
thereon. The Trustee shall furnish to the Administrative Agent upon written
request such information and copies of such documents as the Trustee may have
and as are necessary for the Administrative Agent to perform its duties under
Articles II and III hereof. The Trustee shall assume, and shall be fully
protected in assuming, that the Issuer is authorized by its constitutional
documents to enter into this Indenture and to take all action permitted to be
taken by it pursuant to the provisions hereof, and shall not inquire into the
authorization of the Issuer with respect thereto.

          The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within its rights or
powers or for any action it takes or omits to take in accordance with the
direction of the Controlling Party, in accordance with Section 4.12 hereof
relating to the time, method and place of conducting any proceeding for any
remedy



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available to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture.

          The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of, any
such agent, attorney, custodian or nominee appointed with due care by it
hereunder.

          The Trustee may consult with counsel as to any matter relating to this
Indenture and any Opinion of Counsel or any advice of such counsel shall be full
and complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance with such
advice or Opinion of Counsel.

          The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Holders, pursuant to the provisions of this Indenture, unless such
Holders shall have offered to the Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities which may be
Incurred therein or thereby (the basis of such costs, expenses or liability, if
in respect of any third party liability, shall be supported by an Opinion of
Counsel).

          The Trustee shall not be required to expend or risk its own funds or
otherwise Incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Indenture shall in any event require
the Trustee to perform, or be responsible or liable for the manner of
performance of, any obligations of the Issuer or the Administrative Agent under
this Indenture or any of the Related Documents.

          The Trustee shall not be liable for any Costs or Taxes (except for
Taxes relating to any compensation, fees or commissions of any entity acting in
its capacity as Trustee hereunder) or in connection with the selection of
Permitted Account Investments or for any investment losses resulting from
Permitted Account Investments.

          When the Trustee Incurs expenses or renders services in connection
with an Event of Default specified in Section 4.01(e) or 4.01(f) hereof, such
expenses (including the fees and expenses of its counsel) and the compensation
for such services are intended to constitute expenses of administration under
any bankruptcy law or law relating to creditors' rights generally.

          The Trustee shall not be charged with knowledge of an Event of Default
unless a Responsible Officer of the Trustee obtains actual knowledge of such
event, including receiving written notice of such event from the Issuer, the
Administrative Agent, the Policy Provider or any Holder.

          The Trustee shall have no duty to monitor the performance of the
Issuer, the Cash Manager or any other party to the Related Documents, nor shall
it have any liability in



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connection with the malfeasance or nonfeasance by such parties. The Trustee
shall have no liability in connection with the appointment of the Administrative
Agent or compliance by the Issuer, the Administrative Agent, the Cash Manager or
any lessee under a Lease with statutory or regulatory requirements related to
any Aircraft or any Lease. The Trustee shall have no obligation, or liability in
respect thereto, to verify or recalculate any of the determinations made by the
Administrative Agent pursuant to the Related Documents. The Trustee shall not
make or be deemed to have made any representations or warranties with respect to
any Aircraft or any Lease or the validity or sufficiency of any assignment or
other disposition of any Aircraft or any Lease.

     Section 6.05 Not Responsible in Individual Capacity. The Trustee acts
hereunder solely as trustee unless otherwise expressly provided; and all
Persons, other than the Holders to the extent expressly provided in this
Indenture, having any claim against the Trustee by reason of the transactions
contemplated hereby shall look, subject to the lien and priorities of payment as
herein provided, only to the property of the Issuer for payment or satisfaction
thereof.

     Section 6.06 No Compensation from Holders. The Trustee agrees that it shall
have no right against the Holders, the Policy Provider or, except as provided in
Article III hereof, the property of the Issuer, for any fee as compensation for
its services hereunder.

     Section 6.07 Notice of Defaults. As promptly as practicable after, and in
any event within 30 days after, the occurrence of any Default or Event of
Default hereunder, the Trustee shall transmit by mail to the Issuer, the
Guarantor, the Guarantor Trustee, the Controlling Party, the Policy Provider,
the Initial Credit Facility Provider, the Cash Manager, the Rating Agencies and
the Holders holding Securities of the related subclass, notice of such Default
or Event of Default hereunder actually known to a Responsible Officer of the
Trustee, unless such Default shall have been cured or waived.

     Section 6.08 May Hold Securities. The Trustee, any Paying Agent, the
Registrar or any of their Affiliates or any other agent in their respective
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 310(b) and 311 of the Trust Indenture Act, may
otherwise deal with the Issuer with the same rights it would have if it were not
Trustee, Paying Agent, Registrar or such other agent.

     Section 6.09 Corporate Trustee Required; Eligibility. If the Indenture is
qualified under the Trust Indenture Act, there shall at all times be a Trustee
which shall be eligible to act as a trustee under Section 310(a) of the Trust
Indenture Act and shall meet the Eligibility Requirements. If such corporation
publishes reports of conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section 6.09, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of conditions so
published.

     In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 6.09 to act as Trustee, the Trustee shall
resign immediately as Trustee in the manner and with the effect specified in
Section 7.01 hereof.



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     Section 6.10 Disqualification of Trustee. The Trustee shall be subject to
the provisions of Section 310(b) of the Trust Indenture Act during the period of
time provided for therein. If the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
Nothing herein shall prevent the Trustee from filing with the Commission the
application referred to in the second to last paragraph of Section 310(b) of the
Trust Indenture Act.

     Section 6.11 Preferential Collection of Claims Against Issuer. The Trustee
shall comply with Section 311(a) of the Trust Indenture Act, excluding any
creditor relationship listed in Section 311(b) of the Trust Indenture Act. A
Trustee who has resigned or been removed shall be subject to Section 311(a) of
the Trust Indenture Act to the extent indicated therein.

     Section 6.12 Reports by the Issuer. (a) The Issuer shall furnish to the
Trustee, within 120 days after the end of each fiscal year ending December 31, a
brief certificate from the principal executive officer, principal accounting
officer or principal financial officer of the Administrative Agent, as
applicable, as to his or her knowledge of the Issuer's compliance with all
conditions and covenants under this Indenture (it being understood that for
purposes of this Section 6.12, such compliance shall be determined without
regard to any period of grace or requirement of notice provided under this
Indenture).

          (b) The Issuer shall furnish to the Trustee and the Policy Provider
within 30 days after the end of each calendar quarter a certification as to
compliance with certain of its obligations hereunder and certain other matters
in the form set forth in Exhibit G hereto.

     Section 6.13 Holder Lists. The Issuer will furnish or cause to be furnished
to the Trustee with respect to the Securities of each class:

          (a) semi-annually, not later than 15 days after such semi-annual dates
as may be specified by the Trustee, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Regular
Record Date or semi-annual date, as the case may be, and

          (b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Issuer of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, excluding from any such list names and addresses received by the
Trustee in its capacity as Registrar.

     Section 6.14 Preservation of Information; Communications to Holders. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of Holders contained in the most recent list furnished
to the Trustee as provided in Section 6.13 hereof and the names and addresses of
Holders received by the Trustee in its capacity as Registrar. The Trustee may
destroy any list furnished to it as provided in Section 6.13 hereof upon receipt
of a new list so furnished.



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          (b) If three or more Holders of Securities of any series (hereinafter
referred to as "applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Security of such
series for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other Holders of Securities of such series or with the Holders
of all Securities with respect to their rights under this Indenture or under
such Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall,
within five Business Days after the receipt of such application, at its
election, either

          (i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 6.14(a) hereof, or

          (ii) inform such applicants as to the approximate number of Holders of
Securities of such series or all Securities, as the case may be, whose names and
addresses appear in the information preserved at the time by the Trustee in
accordance with Section 6.14(a) hereof, and as to the approximate cost of
mailing to such Holders the form of proxy or other communication, if any,
specified in such application.

          If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of a Security of such series or to all Holders,
as the case may be, whose names and addresses appear in the information
preserved at the time by the Trustee in accordance with Section 6.14(a) hereof,
a copy of the form of proxy or other communication which is specified in such
request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment, of the
reasonable expenses in connection with such mailing.

          (c) Every Holder of Securities, by receiving and holding the same,
agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee
shall be held accountable by reason of the disclosure of any such information as
to the names and addresses of the Holders in accordance with Section 6.14(b)
hereof, regardless of the source from which such information was derived, and
that the Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under Section 6.14(b) hereof.

                                   ARTICLE VII

                               SUCCESSOR TRUSTEES

     Section 7.01 Resignation and Removal of Trustee. The Trustee may resign as
to all or any of the subclasses of the Securities at any time without cause by
giving at least 90 days' prior written notice to the Issuer, the Guarantor, the
Policy Provider, the Initial Credit Facility Provider, the Administrative Agent,
the Cash Manager, the Remarketing Servicers, the Back-Up Remarketing Servicer
and the Holders, such resignation to be effective only upon acceptance of any
appointment of a replacement trustee by a Senior Trustee. Holders of a majority
of the Outstanding Principal Balance of any subclass of the Securities (or, with
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A-1 Securities or any other subclass of Covered Class A Securities, the Policy
Provider or, so long as it is entitled to be a Controlling Party, the Initial
Credit Facility Provider) may at any time remove the Trustee as to such subclass
without cause by an instrument in writing delivered to the Issuer, the
Guarantor, the Guarantor Trustee, the Administrative Agent, the Cash Manager,
the Remarketing Servicers, the Back-Up Remarketing Servicer, the Security
Trustee, the Senior Trustee and the Trustee being removed, such removal to be
effective only upon the acceptance of the appointment by a successor Trustee. In
addition, the Issuer may remove the Trustee as to any of the subclasses of the
Securities if: (i) this Indenture has been qualified under Trust Indenture Act
and such Trustee fails to comply with Section 310 of the TIA after written
request therefor by the Issuer or the Holder of the related subclass who has
been a bona fide Holder for at least six months, (ii) such Trustee fails to
comply with Section 7.02(c) hereof, (iii) such Trustee is adjudged a bankrupt or
an insolvent, (iv) a receiver or public officer takes charge of such Trustee or
its property or (v) such Trustee becomes incapable of acting, such removal to be
effective only upon the acceptance of the appointment by a successor Trustee.
References to the Trustee in this Indenture include any successor Trustee as to
all or any of the subclasses of the Securities appointed in accordance with this
Article VII.

     Section 7.02 Appointment of Successor. (a) In the case of the resignation
or removal of the Trustee as to any subclass of the Securities under Section
7.01 hereof, the Issuer shall promptly appoint a successor Trustee as to such
subclass; provided that a majority of the Outstanding Principal Balance of such
subclass of the Securities may appoint, within one year after such resignation
or removal, a successor Trustee as to such subclass which may be other than the
successor Trustee appointed by the Issuer, and such successor Trustee appointed
by the Issuer shall be superseded by the successor Trustee so appointed by the
Holders. If a successor Trustee as to any subclass of the Securities shall not
have been appointed and accepted its appointment hereunder within 60 days after
the Trustee gives notice of resignation as to such subclass, the retiring
Trustee, the Issuer, the Administrative Agent, the Cash Manager, the Irish
Remarketing Servicer, the Policy Provider, the Initial Credit Facility Provider
or a majority of the Outstanding Principal Balance of such subclass of the
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee as to such subclass. Any successor Trustee so appointed
by such court shall immediately and without further act be superseded by any
successor Trustee appointed as provided in the first sentence of this paragraph
within one year from the date of the appointment by such court.

          (b) Any successor Trustee as to any subclass of the Securities,
however appointed, shall execute and deliver to the Issuer, the Guarantor, the
Guarantor Trustee, the Administrative Agent, the Cash Manager, the Irish
Remarketing Servicer, the Back-Up Remarketing Servicer, the Policy Provider, the
Initial Credit Facility Provider and the predecessor Trustee as to such subclass
an instrument accepting such appointment, and thereupon such successor Trustee,
without further act, shall become vested with all the estates, properties,
rights, powers, duties and trusts of such predecessor Trustee hereunder in the
trusts hereunder applicable to it with like effect as if originally named the
Trustee as to such subclass herein; provided that, upon the written request of
such successor Trustee, such predecessor Trustee shall, upon payment of all
amounts due and owing to it, execute and deliver an instrument transferring to
such successor Trustee, upon the trusts herein expressed applicable to it, all
the estates, properties, rights, powers and trusts of such predecessor Trustee,
and such predecessor Trustee shall duly assign, transfer, deliver and pay over
to such successor Trustee all



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moneys or other property then held by such predecessor Trustee hereunder solely
for the benefit of such subclass of the Securities.

          (c) If a successor Trustee is appointed with respect to one or more
(but not all) subclasses of the Securities, the Issuer, the predecessor Trustee
and each successor Trustee with respect to each subclass of Securities shall
execute and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
subclasses of Securities as to which the predecessor Trustee is not retiring
shall continue to be vested in the predecessor Trustee, and shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the Securities hereunder by more than
one Trustee.

          (d) Each Trustee shall be an Eligible Institution and shall meet the
Eligibility Requirements, if there be such an institution willing, able and
legally qualified to perform the duties of a Trustee hereunder; provided that
the Rating Agencies shall receive notice of any replacement Trustee.

          (e) Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation to which substantially all the business of the Trustee may be
transferred, shall, subject to the terms of paragraph (c) of this Section 7.02,
be the Trustee under this Indenture without further act.

                                  ARTICLE VIII

                                    INDEMNITY

     Section 8.01 Indemnity. The Issuer shall indemnify each of the Trustee and
the Drawing Agent (and its officers, directors, employees and agents) for, and
hold it harmless against, any loss, liability or expense Incurred by it without
negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture, the
Securities and the other Related Documents, including the costs and expenses of
defending itself against any claim or liability and of complying with any
process served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties and hold it harmless against, any
loss, liability or reasonable expense Incurred without negligence or bad faith
on its part, arising out of or in connection with actions taken or omitted to be
taken in reliance on any Officer's Certificate furnished hereunder, or the
failure to furnish any such Officers' Certificate required to be furnished
hereunder. Each of the Trustee and the Drawing Agent shall notify the Issuer,
the Guarantor, the Policy Provider and the Initial Credit Facility Provider
promptly of any claim asserted against the Trustee or the Drawing Agent, as
applicable, for which it may seek indemnity; provided, however, that failure to
provide such notice shall not invalidate any right to indemnity hereunder. The
Issuer shall defend the claim and the Trustee or the Drawing Agent, as
applicable, shall cooperate in the defense. The Trustee and the Drawing Agent
may have separate counsel and the Issuer shall pay reasonable fees and expenses
of such counsel. The Issuer need not pay for any settlements made without its
consent; provided that such consent shall not be unreasonably withheld or
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reimburse any expense or indemnity against any loss or liability Incurred by the
Trustee or the Drawing Agent, as applicable, through negligence or bad faith.
The provisions of this Section 8.01 and Section 8.02 hereof shall survive the
termination of this Indenture or the earlier resignation or removal of the
Trustee or the Drawing Agent, as applicable.

     Section 8.02 Holders' Indemnity. Each of the Trustee and the Drawing Agent
shall be entitled to be indemnified (except with respect to losses, damages or
obligations arising from the Trustee's or Drawing Agent's, as applicable,
negligence or bad faith) by the Holders of any subclass of the Securities before
proceeding to exercise any right or power under this Indenture or the Cash
Management Agreement at the request or direction of such Holders (the basis of
any loss, damage or obligation, if in respect of any third party liability,
shall be supported by an Opinion of Counsel).

                                   ARTICLE IX

                                  MODIFICATION

     Section 9.01 Modification with Consent of Holders and the Policy Provider.
With the consent of Holders of a majority of the Outstanding Principal Balance
of the Class A Securities on the date of any vote of such Holders (voting as a
single class), the Policy Provider and the Initial Credit Facility Provider and
upon receipt of a Rating Agency Confirmation, the Issuer, when authorized by one
or more Board Resolutions, may amend or modify this Indenture or the Securities;
provided that (i) without the consent of the Guarantor and the Policy Provider,
no such amendment may modify the provisions of this Indenture to the extent that
such amendment could reasonably be expected to have a material adverse affect on
the Guarantor and (ii) without the consent of the Policy Provider, each provider
of an Eligible Credit Facility, the Guarantor and each Holder of any Securities,
in each instance affected thereby, no such amendment may, except as otherwise
provided in Section 3.11 hereof, modify the provisions of this Indenture or the
Securities setting forth the frequency or the currency of payment of, the
maturity of, or the method of calculation of the amount of, any interest,
principal, Redemption Price or Policy Premium payable in respect of any subclass
of Securities or to the Policy Provider, or reduce the percentage of the
aggregate Outstanding Principal Balance of any subclass of Securities required
to approve any amendment or waiver of this Section 9.01 or, except as otherwise
provided in Section 3.09 hereof, alter the manner or priority of payment of such
subclass of Securities (each, a "Basic Terms Modification").

          It shall not be necessary for the consent of the Holders under this
Section 9.01 to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof;
provided, however, that it shall be necessary for the Policy Provider to approve
the particular form of any proposed amendment or waiver (such approval not to be
unreasonably withheld). Any such modification approved by the required Holders
of any class or subclass of Securities will be binding on the Holders of the
relevant class or subclass of Securities and each party to this Indenture.

          The Issuer shall give the Policy Provider, each provider of an
Eligible Credit Facility and each Rating Agency prior notice of any amendment
under this Section 9.01 and any amendments of the constitutive documents by the
Issuer or any ACS Group Subsidiaries, and,



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after an amendment under this Section 9.01 becomes effective, the Issuer shall
mail to the Holders, the Policy Provider, each provider of an Eligible Credit
Facility and the Rating Agencies a notice briefly describing such amendment. Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment.

          After an amendment under this Section 9.01 becomes effective, it shall
bind every Holder whether or not notation thereof is made on any Security held
by such Holder.

     Section 9.02 Modification Without Consent of Holders or the Providers of
Eligible Credit Facilities or the Policy Provider. Subject to Section 9.01
hereof, the Trustee may agree with the Issuer, without the consent of any
Holder, the Policy Provider or any provider of an Eligible Credit Facility (but
in the case of clauses (b), (c) and (d) below, with the consent of the Policy
Provider and further, in the case of clause (c) below, with the consent of the
Initial Credit Facility Provider), (a) to any modification (other than a Basic
Terms Modification) of, or the waiver or authorization of any breach or
prospective breach of, any provision of any Related Document or of the relevant
subclass of Securities to correct a manifest error or an error which is of a
formal, minor or technical nature, (b) to modify the provisions of this
Indenture or the Cash Management Agreement relating to the timing of movement of
Rental Payments or other monies received or Expenses Incurred among the Accounts
by the Cash Manager, (c) to add or reflect any Eligible Credit Facility, (d) to
any amendment (other than a Basic Terms Modification) of an immaterial nature
necessary to facilitate the issuance of Refinancing Securities and/or Additional
Securities and related acquisition of Additional Aircraft (all in a manner
consistent with the provisions of this Indenture) or (e) to comply with the
requirements of the Commission in connection with the qualification of this
Indenture under the TIA. Any such modification shall be notified to the Holders
as soon as practicable thereafter and shall be binding on all the Holders.

          Upon any such modification, the Issuer shall deliver to the Holders,
the Trustee, the Policy Provider and the Initial Credit Facility Provider a
certificate of the Issuer certifying that such modification will not adversely
affect the Holders, the Policy Provider or the Initial Credit Facility Provider.

          In addition, the Issuer may, without providing the certificate
mentioned in the preceding paragraph, and without the consent of the Trustee,
any Holder or any provider of an Eligible Facility, the Policy Provider or the
Initial Credit Facility Provider or any other party, list the Securities on the
Alternative Securities Market of the Irish Stock Exchange.

     Section 9.03 Subordination and Priority of Payments. The subordination
provisions contained in Section 3.08, Section 3.09 and Article X hereof may not
be amended or modified without the consent of the Policy Provider (so long as
any subclass of Covered Class A Securities remain outstanding or any Policy
Provider Obligations remain due and owing), each provider of an Eligible Credit
Facility, each Hedge Provider, each Holder of the subclass of Securities
affected thereby and each Holder of any subclass of Securities ranking senior
thereto. In no event shall the provisions set forth in Section 3.08 hereof
relating to the priority of the Expenses, Hedge Payments and payments under all
Eligible Credit Facilities be amended or modified.



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     Section 9.04 Execution of Amendments by Trustee. In executing, or accepting
the additional trusts created by, any amendment or modification to this
Indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Trustee's own rights, duties,
immunities or indemnities under this Indenture or otherwise.

     Section 9.05 Conformity with Trust Indenture Act. Every indenture
supplemental hereto pursuant to this Article IX shall conform to the
requirements of the Trust Indenture Act as then in effect.

                                    ARTICLE X

                                  SUBORDINATION

     Section 10.01 Subordination of the Securities and Other Subordinated
Obligations. (a) The Issuer, each Holder (by its acceptance of its Security) and
each other Secured Party (by its acceptance of the benefits of the Security
Trust Agreement) agree that (i) the Securities and the other Obligations shall
be subject to the provisions of this Article X and, in the case of the Secured
Obligations, to the provisions of Article VII of the Security Trust Agreement
and (ii) each Subordinated Claimant (and each Subordinated Representative of any
thereof) agree for the benefit of each Senior Claimant (and the Controlling
Party and the Trustee acting therefor) that each Subordinated Claim shall be
subordinated fully in right of payment to each Senior Claim as provided in
Section 3.08 hereof, Section 3.09 hereof (if applicable), this Article X and
Article VII of the Security Trust Agreement.

          (b) For the purposes of this Agreement, no Senior Claims shall be
deemed to have been paid in full until and unless the Senior Claimant (or the
Trustee therefor) of such Senior Claims shall have received payment in full in
cash of such Senior Claims.

          (c) All payments or distributions upon or with respect to any
Obligations that are received by any Subordinated Claimant (or any Subordinated
Representative thereof) contrary to the provisions of this Indenture or in
excess of the amounts to which such Subordinated Claimant is entitled under
Section 3.08 hereof shall be received for the benefit of the Senior Claimant,
shall be segregated from other funds and property held by such Subordinated
Claimant (or any Subordinated Representative therefor) and shall be forthwith
paid over to the Trustee in the same form as so received (with any necessary
endorsement) to be applied (in the case of cash) to or held as collateral (in
the case of non-cash property or securities) for the payment or prepayment of
the Senior Claims in accordance with the terms hereof.

          (d) Notwithstanding anything contained herein to the contrary,
payments (or the proceeds thereof) (i) deposited in any Cash Collateral Account
or drawn under any Eligible Credit Facility, (ii) drawn under the Policy or
(iii) deposited in the Defeasance/Redemption Account (or, in the case of a
Refinancing, the Refinancing Account) in respect of a Redemption under Section
3.10 hereof or in respect of the defeasance of Securities pursuant to Article
XII



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hereof shall not be subordinated to the prior payment of any Senior Claimants in
respect of any Senior Claims or subject to any other restrictions set forth in
this Article X and Article VII of the Security Trust Agreement, and none of the
Holders shall be obligated to pay over any payments from any such property to
the Security Trustee or any other creditor of any of the Grantors (as defined in
the Security Trust Agreement).

          (e) The Senior Representative is hereby authorized to demand specific
performance of the provisions of this Article X at any time when any
Subordinated Claimant (or any Subordinated Representative thereof) shall have
failed to comply with any of such provisions applicable to them. The
Subordinated Claimants (and each Subordinated Representative of any thereof)
hereby irrevocably waive any defense based on the adequacy of a remedy at law
that might be asserted as a bar to such remedy of specific performance.

     Section 10.02 Rights of Subrogation. The Subordinated Claimants (and each
Subordinated Representative of any thereof) agree that no payment or
distribution to any Senior Claimant (or the Trustee therefor) pursuant to the
provisions of this Indenture shall entitle any Subordinated Claimant (or any
Subordinated Representative thereof) to exercise any rights of subrogation in
respect thereof until all Obligations constituting Senior Claims with respect to
such Person shall have been paid in full.

     Section 10.03 Further Assurances of Subordinated Representatives. Each of
the Subordinated Representatives shall, at the expense of the Issuer, at any
time and from time to time promptly execute and deliver all further instruments
and documents, and take all further action, that the Controlling Party (or the
Policy Provider if the Policy Provider is not the Controlling Party; provided
that if the Subordinated Representatives receive conflicting requests, the
request of the Controlling Party shall apply only) may reasonably request, in
order to effectuate the provisions of this Article X.

     Section 10.04 Enforcement. Each Subordinated Claimant (and the Subordinated
Representative therefor) agrees that the provisions of this Article X shall be
enforceable against it under all circumstances, including without limitation in
any proceeding referred to in Sections 4.01(e) and 4.01(f) hereof.

     Section 10.05 Continued Effectiveness. The provisions of this Article X
shall continue to be effective or shall be revived or reinstated, as the case
may be, if at any time any payment of any of the Senior Claims is rescinded or
must otherwise be returned by any Senior Claimant upon the insolvency,
bankruptcy or reorganization of any ACS Ireland Group Member, or otherwise, all
as though such payment had not been made.

     Section 10.06 Senior Claims and Subordinated Claims Unimpaired. Nothing in
this Article X shall impair, as between the Issuer and any Senior Claimant or
any Subordinated Claimant, the obligations of the Issuer to such Person,
including without limitation the Senior Claims and the Subordinated Claims;
provided that it is understood that the enforcement of rights and remedies shall
be subject to the terms of this Indenture and the Security Trust Agreement.



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     Section 10.07 Ranking of the Guarantee. The Guarantor's Guarantee of the
Securities (the "Guarantee") shall rank pari passu with its obligation to make
payments on or otherwise perform in accordance with the terms of the Guarantor
Class A Securities.

                                   ARTICLE XI

                                    GUARANTEE

     Section 11.01 Guarantee. The Guarantor hereby fully and unconditionally
guarantees to each Holder of Securities, the Trustee on behalf of such Holder,
each Service Provider, the Policy Provider, the Initial Credit Facility
Provider, any Hedge Provider and each other Secured Party (each, a "Guaranteed
Party" and, collectively, the "Guaranteed Parties"), in each case, the due and
punctual performance of all obligations of the Issuer to each Guaranteed Party
under the Securities, this Indenture and the Related Documents (the "Guaranteed
Obligations"), all in accordance with this Indenture, the Securities and the
other Related Documents. The liability of the Guarantor under this Guarantee is
limited to the maximum amount that will result in the obligations of the
Guarantor not constituting a fraudulent conveyance or fraudulent transfer under
Applicable Law.

          This Guarantee shall be a Guarantee of payment and performance and not
merely of collection only. The Guarantor hereby agrees that it shall not be
required that any Guaranteed Party assert or enforce any rights against the
Issuer or any other person before or as a condition to the obligation of the
Guarantor subject to this Guarantee.

          The Guarantor hereby waives diligence, presentment, filing of claims
with a court in the event of merger or bankruptcy of the Issuer or any other ACS
Ireland Group Member, any right to require a proceeding first against the Issuer
or any other ACS Ireland Group Member, the benefit of discussion, protest or
notice with respect to any Security or the debt evidenced thereby and all
demands whatsoever (except as specified above), and covenants that this Article
XI shall not be discharged as to any such Security except by payment in full of
the Guaranteed Obligations. The maturity of the Securities and related
obligations guaranteed hereby may be accelerated as provided in Article IV for
the purposes of this Article XI. In the event of any declaration of acceleration
of such obligations as provided in Article IV of this Indenture, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Article XI. In addition,
without limiting the foregoing provisions, upon the effectiveness of an
acceleration under Article IV of this Indenture, the Trustee shall be entitled
to make a demand for payment on the Securities under the Guarantee provided for
in this Article XI.

          The Guarantor hereby waives any claim or other claim or other rights
which it may now or hereafter acquire against the Issuer or any other ACS
Ireland Group Member that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution, indemnification, any right to participate in any claim or remedy
of a Guaranteed Party against the Issuer or any other ACS Ireland Group



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Member, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Issuer or any other ACS Ireland Group Member, directly
or indirectly, in cash or other property or in any other manner, payment or
security on account of such claim or other rights, until all of the Guarantor's
obligations under this Indenture have been satisfied. If any amount shall be
paid to the Guarantor in violation of the preceding sentence and the Guaranteed
Obligations shall not have been paid in full, such amount shall be deemed to
have been paid to the Guarantor for the benefit of, and held in trust for the
benefit of, such Guaranteed Party, and shall forthwith be paid to such
Guaranteed Party. The Guarantor acknowledges that it will receive direct and
indirect benefits from the issuance of the Securities pursuant to this Indenture
and that the waiver set forth in this paragraph is knowingly made in
contemplation of such benefits.

          Any right which at any time the Guarantor has under the existing or
future laws of Ireland and Bermuda to require that recourse be had to the assets
of the Issuer or any other ACS Ireland Group Member before any claim is enforced
against the Guarantor in respect of the obligations hereby assumed by the
Guarantor, is hereby abandoned and waived and the Guarantor undertakes that if
at any time any Guaranteed Party sues the Guarantor in respect of any such
obligations and the Issuer or any other ACS Ireland Group Member is not sued
also, the Guarantor shall not claim that the Issuer or any other ACS Ireland
Group Member be made a party to the proceedings and the Guarantor agrees to be
bound by this guarantee whether or not the Guarantor is made party to legal
proceedings for the recovery of the amount due or owing to such Guaranteed Party
as aforesaid by the Issuer and whether the formalities required by any law of
Ireland whether existing or future in regard to the rights or obligations of
sureties shall or shall not have been observed.

          Any right which the Guarantor may have under the existing or future
laws of Ireland and Bermuda to require that any liability under this Guarantee
be divided or apportioned with any other person or reduced in any manner
whatsoever is hereby abandoned and waived.

          The Guarantee set forth in this Section 11.01 shall not be valid or
become obligatory for any purpose with respect to the Guaranteed Obligations
until the execution of this Indenture or, with respect to a Security, until the
certificate of authentication on such Security shall have been signed by or on
behalf of the Trustee. The Guarantees given by the Guarantor to the Guaranteed
Parties pursuant to this Section 11.01 are, for purposes of this Article XI,
hereinafter referred to as the "Guarantee".

     Section 11.02 Reinstatement. The Guarantor hereby agrees that the guarantee
provided for in Section 11.01 hereof shall continue to be effective or be
reinstated, as the case may be, if at any time, payment, or any part thereof, of
any obligations guaranteed or interest thereon is rescinded or must otherwise be
restored by a Guaranteed Party to the Issuer upon the bankruptcy, reorganization
or insolvency of the Issuer or the Guarantor or otherwise.

     Section 11.03 Unconditional Nature of Guarantee. The Guarantor hereby
agrees that its obligations under the Guarantee shall be irrevocable and
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture or any other Related Document against the Issuer or
any other ACS Ireland Group Member, the absence of any action to enforce the
Issuer's or any other ACS Ireland Group Member's obligations under the
Securities, this Indenture or any other Related Document, any waiver or consent
by a Holder with respect to any provisions thereof or any provisions of this
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Documents, any amendment to the terms under which the Securities are issued, any
release of collateral related to the Securities or the Issuer's or any other ACS
Ireland Group Member's obligations under this Indenture or any other Related
Document, the bankruptcy of the Issuer or any other ACS Ireland Group Member or
any circumstance with might otherwise constitute a legal or equitable discharge
or defense of a guarantor; provided, however, that the Guarantor shall be
entitled to exercise any right that the Issuer could have exercised under this
Indenture to cure any default in respect of its obligations under this Indenture
or the Securities, if any, but only to the extent such right, if any, is
provided to the Issuer under this Indenture or the Securities.

          The Guarantor hereby waives each of the following to the fullest
extent of the law: (i) all statutes of limitation as a defense to any action
brought by any party against the Guarantor in connection with this Guarantee,
(ii) any defense based upon (a) the lack of perfection or failure of priority of
any security for the Guaranteed Obligations; (b) any act or omission of any
Guaranteed Party that directly or indirectly results in the discharge or release
of any Issuer or any other Person, or any of the obligations subject to this
Guarantee or any security therefor; or (c) any other defense of the Issuer or
any other Person with respect to the Guaranteed Obligations, whether consensual
or arising by operation of law or any bankruptcy, insolvency or debtor-relief
proceeding, or from any other cause, (iii) any right (whether now or hereafter
existing) to require any Guaranteed Party, as a condition to the enforcement of
this Guarantee, to (a) accelerate the Issuer's obligations, (b) give notice to
the Guarantor of the terms, time and place of any public or private sale of any
security for the Guaranteed Obligations; or (c) exhaust any security for the
Guaranteed Obligations, (iv) any right to presentment, demand, protest and
notice of any kind, including, without limitation, notices of default and
notices of acceptance of this Guarantee, (v) all suretyship defenses and rights
of every nature otherwise available under New York law and the laws of any other
jurisdiction, and (vi) all other rights and defenses, the assertion or exercise
of which would in any way diminish the liability of the Guarantor hereunder.

                                   ARTICLE XII

                       DISCHARGE OF INDENTURE; DEFEASANCE

     Section 12.01 Discharge of Liability on the Securities; Defeasance. (a)
When (i) the Issuer delivers to the Trustee all Outstanding Securities (other
than Securities replaced pursuant to Section 2.08 hereof) for cancellation or
(ii) all Outstanding Securities have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Section
3.10(c) hereof and the Issuer irrevocably deposits in the Defeasance/Redemption
Account funds sufficient to pay at maturity or upon redemption all Outstanding
Securities, including without limitation interest thereon to maturity or the
Redemption Date (other than Securities replaced pursuant to Section 2.08 hereof
and any Required Expense Amount), and if in either case the Issuer pays all
other sums payable hereunder by the Issuer (including any Hedge Breakage Costs
resulting from the discharge of this Indenture), then this Indenture shall,
subject to Section 12.01(c) hereof, cease to be of further effect. The Trustee
shall acknowledge satisfaction and discharge of this Indenture on demand of the
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Certificate and an Opinion of Counsel, at the cost and expense of the Issuer, to
the effect that any conditions precedent to a discharge of this Indenture have
been met.

          (b) Subject to Sections 12.01(c) and 12.02 hereof, the Issuer at any
time may terminate (i) all its obligations under the Securities and this
Indenture ("Legal Defeasance" option) or (ii) its obligations under Sections
4.01 (other than with respect to a failure to comply with Sections 4.01(a),
4.01(b), 4.01(e) (only with respect to the Issuer) and 4.01(f) (only with
respect to the Issuer)), 5.02 and 5.03 hereof ("Covenant Defeasance" option).
The Issuer may exercise its Legal Defeasance option notwithstanding its prior
exercise of its Covenant Defeasance option.

          If the Issuer exercises its Legal Defeasance option, payment of any
Securities subject to such Legal Defeasance may not be accelerated because of an
Event of Default. If the Issuer exercises its Covenant Defeasance option,
payment of the Securities may not be accelerated because of an Event of Default
(other than with respect to a failure to comply with Sections 4.01(a), 4.01(b),
4.01(e) (other than with respect to the Issuer), 4.01(f) (other than with
respect to the Issuer)) and 5.02(n) hereof.

          Upon satisfaction of the conditions set forth herein and upon request
of the Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuer terminates.

          (c) Notwithstanding clauses (a) and (b) above, the Issuer's
obligations in Sections 2.01, 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08 and 2.09,
5.02(n), Article VI, Sections 8.01, 12.04, 12.05 and 12.06 hereof shall survive
until all the Securities have been paid in full. Thereafter, the Issuer's
obligations in Sections 8.01, 12.04 and 12.05 hereof shall survive.

     Section 12.02 Conditions to Defeasance. The Issuer may exercise its Legal
Defeasance option or its Covenant Defeasance option only if:

          (a) the Issuer irrevocably deposits in trust in the
Defeasance/Redemption Account any one or any combination of (i) money, (ii)
obligations of, and supported by the full faith and credit of, the U.S.
Government ("U.S. Government Obligations") or (iii) obligations of corporate
issuers ("Corporate Obligations") (provided that any such Corporate Obligations
are rated AA+ or higher by Standard & Poor's and Aa2 or higher by Moody's at
such time and shall not have a maturity of longer than three years from the date
of defeasance) for the payment of all principal or Redemption Price, and
interest (A) on the Securities or any class or subclass of Securities being
defeased, in the case of Legal Defeasance, or (B) on all of the Securities in
the case of Covenant Defeasance, in either case, to maturity or redemption, as
the case may be;

          (b) the Issuer delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment on the
deposited U.S. Government Obligations or the Corporate Obligations plus any
deposited money without investment will provide cash at such times and in such
amounts as will be sufficient to pay principal and interest when due (i) on each
class or subclass of Securities being defeased, in the case of Legal Defeasance,
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of the Securities in the case of Covenant Defeasance, in either case, to
maturity or redemption, as the case may be;

          (c) 91 days pass after the deposit described in clause (a) above is
made and during the 91-day period no Event of Default specified in Section
4.01(e) or (f) hereof with respect to the Issuer occurs which is continuing at
the end of the period;

          (d) the deposit described in clause (a) above does not constitute a
default under any other agreement binding on the Issuer;

          (e) the Issuer delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit described in clause (a) does
not constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940, as amended;

          (f) in the case of the Legal Defeasance option, the Issuer shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Issuer has
received from, or there has been published by, the U.S. Internal Revenue Service
a ruling, or (ii) since the date of this Indenture there has been a change in
the applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that the Holders will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;

          (g) in the case of the Covenant Defeasance option, the Issuer shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such Covenant Defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Covenant Defeasance had not occurred;

          (h) if the related Securities are then listed on any securities
exchange, the Issuer delivers to the Trustee an Opinion of Counsel to the effect
that such deposit, defeasance and discharge will not cause such Securities to be
delisted;

          (i) a Rating Agency Confirmation and the prior written consent of each
of the Policy Provider and the Initial Credit Facility Provider is obtained
relating to the defeasance contemplated by this Section 12.02;

          (j) in the case of a Legal Defeasance only, the Policy shall be
terminated and surrendered to the Policy Provider for cancellation;

          (k) all amounts due and owing to the Policy Provider and the Initial
Credit Facility Provider have been paid (or provided for under Section
12.02(a)); and

          (l) the Issuer delivers to the Trustee an Opinion of Counsel and an
Officer's Certificate that all conditions precedent to such defeasance has been
satisfied.

     Section 12.03 Application of Trust Money. The Trustee shall hold in trust
in the Defeasance/Redemption Account money, U.S. Government Obligations or
Corporate



                                                                             149


Obligations deposited with it pursuant to this Article XII. It shall apply the
deposited money and the money from U.S. Government Obligations or Corporate
Obligations in accordance with this Indenture to the payment of principal,
premium, if any, and interest on the class or subclass of Securities. Money and
securities so held in trust are not subject to Article X hereof or to Article
VII of the Security Trust Agreement.

     Section 12.04 Repayment to Issuer. The Trustee shall promptly turn over to
the Issuer upon written request any excess money or securities held by it at any
time after application of the appropriate defeasance option.

          Subject to any applicable abandoned property law, the Trustee shall
pay to the Issuer upon written request any money held by it for the payment of
principal or interest that remains unclaimed for two years and, thereafter,
Holders entitled to the money must look to the Issuer for payment as general
creditors.

     Section 12.05 Indemnity for Government Obligations and Corporate
Obligations. The Issuer shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or Corporate Obligations, or the principal and interest
received on such U.S. Government Obligations or Corporate Obligations, which has
been remitted by the Trustee to the U.S. government or any taxing authority.

     Section 12.06 Reinstatement. If the Trustee is unable to apply any money or
U.S. Government Obligations or Corporate Obligations in accordance with this
Article XII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuer's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article XII until such time as the Trustee
is permitted to apply all such money, U.S. Government Obligations or Corporate
Obligations in accordance with this Article XII; provided, however, that, if the
Issuer has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Issuer shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money, U.S. Government Obligations or Corporate Obligations held by the Trustee.

                                  ARTICLE XIII

                                  MISCELLANEOUS

     Section 13.01 Right of Trustee to Perform. If the Issuer for any reason
fails to observe or punctually to perform any of its obligations to the Trustee,
whether under this Indenture or any of the other Related Documents or otherwise,
the Trustee shall have power (but shall have no obligation), on behalf of or in
the name of the Issuer or otherwise, to perform such obligations and to take any
steps which the Trustee may, in its absolute discretion, consider appropriate
with a view to remedying, or mitigating the consequences of, such failure by the
Issuer; provided that no exercise or failure to exercise this power by the
Trustee shall in any way prejudice the Trustee's other rights under this
Indenture or any of the other Related Documents.



                                                                             150


     Section 13.02 Waiver. Any waiver by any party of any provision of this
Indenture or any right, remedy or option hereunder shall only prevent and estop
such party from thereafter enforcing such provision, right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances, or in a course of dealing,
upon the strict performance of any of the terms or provisions of this Indenture
by any party hereto or the partial exercise of any right, remedy or option
hereunder shall not be construed as a waiver or relinquishment of any such term
or provision, but the same shall continue in full force and effect. No failure
on the part of the Trustee to exercise, and no delay on its part in exercising,
any right or remedy under this Indenture will operate as a waiver thereof, nor
will any single or partial exercise of any right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy. The
rights and remedies provided in this Indenture are cumulative and not exclusive
of any rights or remedies provided by law. The Trustee shall notify the Paying
Agent promptly of any waiver by any party of any provision of this Indenture
pursuant to this Section 13.02.

     Section 13.03 Severability. In the event that any provision of this
Indenture or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Indenture shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable and the remainder of this Indenture, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of this Indenture. The parties hereto further agree
that the holding by any court of competent jurisdiction that any remedy pursued
by the Trustee hereunder is unavailable or unenforceable shall not affect in any
way the ability of the Trustee to pursue any other remedy available to it.

     Section 13.04 Restrictions on Exercise of Certain Rights. (a) The Trustee
and, during the continuance of a payment Default with respect to the Senior
Class, the Senior Trustee, in its capacity as trustee of such class and except
as otherwise provided in Section 4.04 hereof, may sue for recovery or take any
other steps for the purpose of recovering any of the obligations hereunder or
any other debts or liabilities whatsoever owing to it by the Issuer. Each of the
parties hereto and each Holder by virtue of its acceptance of the Securities
(other than the Trustee) hereby agrees that it shall not take any steps for the
purpose of procuring the appointment of an administrative receiver, Irish law
examiner, receiver or similar officer or the making of an administration order
or for instituting any bankruptcy, reorganization, arrangement, insolvency,
winding up, liquidation, composition, Irish law examinership or any like
proceedings under the laws of Ireland.

          (b) If after the occurrence and continuance of an Event of Default,
the obligations of the Issuer in respect of the Securities and any other claims
of any Secured Party will be limited to the net proceeds of the disposal and/or
realization of the Collateral by the Security Trustee pursuant to the provisions
of the Indentures and the Security Trust Agreement, the Secured Parties shall
have no further claim against the Issuer in respect of such unpaid amounts and
will accordingly not have any right hereunder to be able to petition for the
winding up of the Issuer or to take any steps for the purpose of procuring the
appointment of an



                                                                             151


administrative receiver, Irish law examiner, receiver or similar officer or the
making of an administration order or for instituting any bankruptcy,
reorganization, arrangement, insolvency, winding up, liquidation, composition,
Irish law examinership or any like proceedings under the laws of Ireland as a
consequence of such shortfall.

     Section 13.05 Notices. All notices, demands, certificates, requests,
directions, instructions and communications hereunder ("Notices") shall be in
writing and shall be effective (a) upon receipt when sent through the mails,
registered or certified mail, return receipt requested, postage prepaid, with
such receipt to be effective the date of delivery indicated on the return
receipt, or (b) one Business Day after delivery to an overnight courier, or (c)
on the date personally delivered to an authorized officer of the party to which
sent, or (d) on the date transmitted by legible telecopier transmission with a
confirmation of receipt, in all cases addressed to the recipient as follows:

     if to the Issuer, to:

               ACS Aircraft Finance Ireland plc
               25/28 North Wall Quay
               International Financial Services Centre
               Dublin 1
               Ireland
               Attention: Secretary
               Fax: +353 (1) 649-2649

               with a copy to:

               Aircastle Advisor LLC
               300 First Stamford Place, 5th Floor
               Stamford, CT 06902
               Attention: Lease Management
               Fax: (203) 504-1021

     if to the Guarantor, to:

               ACS Aircraft Finance Bermuda Limited
               Clarendon House
               2 Church Street
               Hamilton HM11
               Bermuda
               Attention: The Company Secretary
               Fax: +1 (441) 292-6720

               with a copy to:

               Aircastle Advisor LLC
               300 First Stamford Place, 5th Floor
               Stamford, CT 06902



                                                                             152


               Attention: Lease Management
               Fax: (203) 504-1021

     if to the Administrative Agent, to:

               Aircastle Advisor LLC
               300 First Stamford Place, 5th Floor
               Stamford, CT 06902
               Attention: Lease Management
               Fax: (203) 504-1021

     if to the Irish Remarketing Servicer, to:

               Aircastle Advisor (Ireland) Limited
               Harcourt Centre
               Harcourt Road
               Dublin 2
               Ireland
               Attention: Lease Management
               Fax: +353 (1) 477-3313

     if to the Bermudian Remarketing Servicer, to:

               Aircastle Advisor LLC
               300 First Stamford Place, 5th Floor
               Stamford, CT 06902
               Attention:  Lease Management
               Fax: (203) 504-1021

     if to the Cash Manager, to:

               Deutsche Bank Trust Company Americas
               60 Wall Street, 26th Floor
               New York, New York 10005
               Attn: Structured Finance Services/Trust & Securities Services
               Fax: (212) 553-2459

     with a copy to:

               Deutsche Bank International Limited
               Global Transaction Banking Trust and Securities Services
               Floor 4
               St. Paul's Gate
               New Street



                                                                             153


               Jersey, Channel Islands
               Attn: The Directors, Deutsche International Corporate
                     Services Limited
               Fax: 00 44 1534 889884

     if to the Initial Credit Facility Provider, to:

               Calyon
               9, quai du President Paul Doumer
               92920 Paris la Defense cedex
               France
               Attn: Hassan Azoulary (Securitisation Group - Middle Office)
               Fax: +331 5787 1756

     if to the Trustee, the Registrar or the Paying Agent, to:

               Deutsche Bank Trust Company Americas
               60 Wall Street, 26th Floor
               New York, New York 10005
               Attn: Structured Finance Services/Trust & Securities Services
               Fax: (212) 553-2459

     if to the Policy Provider, to:

               Financial Guaranty Insurance Company
               125 Park Avenue
               New York, New York 10017
               Attention: Surveillance, Commercial Structured Finance
               Fax: (212) 312-3220

     if to the Drawing Agent, to:

               Deutsche Bank Trust Company Americas
               60 Wall Street, 26th Floor
               New York, New York 10005
               Attn: Structured Finance Services/Trust & Securities Services
               Fax: (212) 553-2459

     for so long as the Securities are listed on the Alternative Securities
     Market of the Irish Stock Exchange, if to the Irish Listing Agent, to:

               A&L Listing Limited
               North Wall Quay
               International Financial Services Centre
               Dublin 1



                                                                             154


               Ireland
               Attention: Aideen Lee
               Fax: +353 1 649-2649

     for so long as the Securities are listed on the Alternative Securities
     Market of the Irish Stock Exchange, if to the Irish Paying Agent, to:

               Deutsche International Corporate Services (Ireland) Limited
               5 Harbourmaster Place
               International Financial Services Centre
               Dublin 1
               Ireland
               Attention: Directors
               Fax: +353 1 680-6050

     A copy of each notice given hereunder to any party hereto shall also be
given to each of the other parties hereto. Each party hereto may, by notice
given in accordance herewith to each of the other parties hereto, designate any
further or different address to which subsequent Notices shall be sent.

     Section 13.06 Assignments; Third Party Beneficiary. This Indenture shall be
a continuing obligation of the Issuer and shall (i) be binding upon the Issuer
and its successors and assigns and (ii) inure to the benefit of and be
enforceable by the Trustee, and by its successors, transferees and assigns. The
Issuer may not assign any of its obligations under this Indenture, or delegate
any of its duties hereunder. Each Hedge Provider and each provider of an
Eligible Credit Facility shall be a third party beneficiary of this Indenture.

     Section 13.07 Currency Conversion. (a) If any amount is received or
recovered by the Cash Manager or the Trustee in respect of this Indenture or any
part thereof (whether as a result of the enforcement of the security created
under the Security Trust Agreement or pursuant to this Indenture or any judgment
or order of any court or in the liquidation or dissolution of the Issuer or by
way of damages for any breach of any obligation to make any payment under or in
respect of the Issuer's obligations hereunder or any part thereof or otherwise)
in a currency (the "Received Currency") other than the currency in which such
amount was expressed to be payable (the "Agreed Currency"), then the amount in
the Received Currency actually received or recovered by the Trustee or the Cash
Manager shall, to the fullest extent permitted by Applicable Law, only
constitute a discharge to the Issuer to the extent of the amount of the Agreed
Currency which the Cash Manager or the Trustee was or would have been able in
accordance with its normal procedures to purchase on the date of actual receipt
or recovery (or, if that is not practicable, on the next date on which it is so
practicable), and, if the amount of the Agreed Currency which the Cash Manager
or Trustee is or would have been so able to purchase is less than the amount of
the Agreed Currency which was originally payable by the Issuer, the Issuer shall
pay to the Cash Manager such amount as the Cash Manager shall determine to be
necessary to indemnify the Trustee and the Cash Manager against any Loss
sustained by it as a result (including the cost of making any such purchase and
any premiums, commissions or other charges paid or Incurred in connection
therewith) and so that such indemnity, to the fullest extent



                                                                             155


permitted by Applicable Law, (i) shall constitute a separate and independent
obligation of the Issuer distinct from its obligation to discharge the amount
which was originally payable by the Issuer and (ii) shall give rise to a
separate and independent cause of action and apply irrespective of any
indulgence granted by the Cash Manager or the Trustee and continue in full force
and effect notwithstanding any judgment, order, claim or proof for a liquidated
amount in respect of the amount originally payable by the Issuer or any judgment
or order and no proof or evidence of any actual loss shall be required.

          (b) For the purpose of or pending the discharge of any of the moneys
and liabilities hereby secured the Cash Manager may convert any moneys received,
recovered or realized by the Cash Manager under this Indenture (including the
proceeds of any previous conversion under this Section 13.07) from their
existing currency of denomination into the currency of denomination (if
different) of such moneys and liabilities and any conversion from one currency
to another for the purposes of any of the foregoing shall be made at the
Trustee's then prevailing spot selling rate at its office by which such
conversion is made. If not otherwise required to be applied in the Received
Currency, the Cash Manager, acting on behalf of the Security Trustee, shall
promptly convert any moneys in such Received Currency other than U.S. dollars
into U.S. dollars. Each previous reference in this section to a currency extends
to funds of that currency and funds of one currency may be converted into
different funds of the same currency.

     Section 13.08 Application to Court. The Senior Trustee may at any time
after the service of a Default Notice apply to any court of competent
jurisdiction for an order that the terms of this Indenture be carried into
execution under the direction of such court and for the appointment of a
Receiver of the Collateral or any part thereof and for any other order in
relation to the administration of this Indenture as the Senior Trustee shall
deem fit and it may assent to or approve any application to any court of
competent jurisdiction made at the instigation of any of the Holders or the
Policy Provider and shall be indemnified by the Issuer against all costs,
charges and expenses Incurred by it in relation to any such application or
proceedings.

     Section 13.09 Governing Law. THIS INDENTURE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

     Section 13.10 Jurisdiction. (a) Each of the parties hereto agrees that the
United States federal and New York State courts located in The City of New York
shall have jurisdiction to hear and determine any suit, action or proceeding,
and to settle any disputes, which may arise out of or in connection with this
Indenture and, for such purposes, submits to the jurisdiction of such courts.
Each of the parties hereto waives any objection which it might now or hereafter
have to the United States federal or New York State courts located in The City
of New York being nominated as the forum to hear and determine any suit, action
or proceeding, and to settle any disputes, which may arise out of or in
connection with this Indenture and agrees not to claim that any such court is
not a convenient or appropriate forum. Each of the parties hereto (except for
the Cash Manager, the Trustee, the Drawing Agent, the Initial Credit Facility
Provider and the Policy Provider) agrees that the process by which any suit,
action or proceeding is begun may be



                                                                             156


served on it by being delivered in connection with any suit, action or
proceeding in The City of New York to Corporation Service Company, with an
office on the date hereof at 1133 Avenue of the Americas, Suite 3100, New York,
New York 10036 and each of the parties hereby appoints Corporation Service
Company, its designee, appointee and agent to receive, accept and acknowledge
for and on its behalf such service of legal process, with the exception of the
Trustee and the Policy Provider, who hereby consents to receive any such service
of process directly at the address set forth in Section 13.05 herein, and the
Initial Credit Facility Provider, who hereby consents to receive any such
service of process at Calyon Building, 1301 Avenue of the Americas, New York,
New York 10019.

          (b) The submission to the jurisdiction of the courts referred to in
Section 13.10(a) hereof shall not (and shall not be construed so as to) limit
the right of the Trustee to take proceedings against the Issuer in any other
court of competent jurisdiction nor shall the taking of proceedings in any one
or more jurisdictions preclude the taking of proceedings in any other
jurisdiction, whether concurrently or not.

          (c) Each of the parties hereto hereby consents generally in respect of
any legal action or proceeding arising out of or in connection with this
Indenture to the giving of any relief or the issue of any process in connection
with such action or proceeding, including the making, enforcement or execution
against any property whatsoever (irrespective of its use or intended use) of any
order or judgment which may be made or given in such action or proceeding.

     Section 13.11 Counterparts. This Indenture may be executed in two or more
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.

     Section 13.12 Table of Contents, Headings, Etc. The Table of Contents and
headings of the Articles and Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms and provisions hereof.

     Section 13.13 Compliance with Applicable Anti-Terrorism and Anti-Money
Laundering Regulations. In order to comply with the laws, rules, regulations and
executive orders in effect from time to time applicable to banking institutions,
including those relating to the funding of terrorist activities and money
laundering (collectively, "Applicable Regulations"), the Trustee is required to
obtain, verify and record certain information relating to individuals and
entities which maintain a business relationship with the Trustee. Accordingly,
each of the parties agrees to provide to the Trustee upon its request from time
to time such identifying information and documentation as may be available for
such party in order to enable the Trustee to comply with such Applicable
Regulations.



          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.

                                        SIGNED SEALED AND DELIVERED

                                        On behalf of ACS AIRCRAFT FINANCE
                                           IRELAND PLC, as the Issuer

                                        by its duly appointed attorney


                                        By /s/ J. P. Clarkin
                                           -------------------------------------
                                           Name:  J. P. Clarkin
                                           Title: Director


                                        in the presence of:


                                        By /s/ Eoin Kealy
                                           -------------------------------------
                                           Name:  Eoin Kealy
                                           Title: Trainee Solicitor





                                        ACS AIRCRAFT FINANCE BERMUDA LIMITED, as
                                           the Guarantor


                                        By /s/ Mark Schulte
                                           -------------------------------------
                                           Name:  Mark Schulte
                                           Title: Director





                                        DEUTSCHE BANK TRUST COMPANY AMERICAS, as
                                           the Trustee


                                        By /s/ Eileen M. Hughes
                                           -------------------------------------
                                           Name:  Eileen M. Hughes
                                           Title: Vice President


                                        By /s/ Louis Bodi
                                           -------------------------------------
                                           Name:  Louis Bodi
                                           Title: Vice President


                                        DEUTSCHE BANK TRUST COMPANY AMERICAS, as
                                           the Cash Manager


                                        By /s/ Eileen M. Hughes
                                           -------------------------------------
                                           Name:  Eileen M. Hughes
                                           Title: Vice President


                                        By /s/ Louis Bodi
                                           -------------------------------------
                                           Name:  Louis Bodi
                                           Title: Vice President


                                        DEUTSCHE BANK TRUST COMPANY AMERICAS, as
                                           the Drawing Agent


                                        By /s/ Eileen M. Hughes
                                           -------------------------------------
                                           Name:  Eileen M. Hughes
                                           Title: Vice President


                                        By /s/ Louis Bodi
                                           -------------------------------------
                                           Name:  Louis Bodi
                                           Title: Vice President



                                        CALYON, as the Initial Credit Facility
                                           Provider


                                        By /s/ Thierry Sebton
                                           -------------------------------------
                                           Name:  Thierry Sebton
                                           Title: M.D.


                                        By /s/ C. Champion
                                           -------------------------------------
                                           Name:  C. Champion
                                           Title: Executive Director



                                        FINANCIAL GUARANTY INSURANCE COMPANY, as
                                           the Policy Provider


                                        By /s/ Peter Cardinale
                                           -------------------------------------
                                           Name:  Peter Cardinale
                                           Title: Director







                                   SCHEDULE 1

                                INITIAL AIRCRAFT

Type of Aircraft   Manufacturer's Serial Number
----------------   ----------------------------
Airbus A330-300                 370
Airbus A330-300                 375
Boeing 767-300ER              24844
Boeing 767-200ER              24894




                                                                               2




                                   SCHEDULE 2

                            ACS IRELAND SUBSIDIARIES

Entity                     Jurisdiction of Organization
------------------------   ----------------------------
Aircraft MSN 370 Trust     Utah
Aircraft MSN 375 Trust     Utah
Aircraft MSN 24844 Trust   Utah
Aircraft MSN 24894 Trust   Utah



                                   SCHEDULE 3

                        MINIMUM TARGET PRINCIPAL BALANCE

  PAYMENT DATE      MINIMUM TARGET
  OCCURRING IN    PRINCIPAL BALANCE
---------------   -----------------
June, 2006           560,000,000
July, 2006           558,251,647
August, 2006         556,495,991
September, 2006      554,733,014
October, 2006        552,962,695
November, 2006       551,185,015
December, 2006       549,399,955
January, 2007        547,607,495
February, 2007       545,807,616
March, 2007          544,000,297
April, 2007          542,185,521
May, 2007            540,363,265
June, 2007           538,533,512
July, 2007           536,696,240
August, 2007         534,851,431
September, 2007      532,999,064
October, 2007        531,139,120
November, 2007       529,271,578
December, 2007       527,396,418
January, 2008        525,513,621
February, 2008       523,623,166
March, 2008          521,725,033
April, 2008          519,819,202
May, 2008            517,905,652
June, 2008           515,984,364
July, 2008           514,055,317
August, 2008         512,118,490
September, 2008      510,173,863
October, 2008        508,221,416
November, 2008       506,261,129
December, 2008       504,292,980
January, 2009        502,316,948
February, 2009       500,333,015
March, 2009          498,341,157
April, 2009          496,341,356
May, 2009            494,333,589
June, 2009           492,317,837
July, 2009           490,294,077
August, 2009         488,262,290
September, 2009      486,222,455
October, 2009        484,174,550
November, 2009       482,118,553
December, 2009       480,054,445
January, 2010        477,982,204
February, 2010       475,901,808
March, 2010          473,813,237
April, 2010          471,716,468
May, 2010            469,611,481
June, 2010           467,498,255
July, 2010           465,376,767
August, 2010         463,246,996
September, 2010      461,108,921
October, 2010        458,962,519
November, 2010       456,807,770
December, 2010       454,644,652
January, 2011        452,473,143
February, 2011       450,293,220
March, 2011          448,104,863
April, 2011          445,908,049
May, 2011            443,702,756
June, 2011           441,488,962
July, 2011           435,184,826
August, 2011         428,926,828
September, 2011      422,715,252
October, 2011        416,550,380
November, 2011       410,432,497
December, 2011       404,361,888
January, 2012        398,338,839
February, 2012       392,363,636
March, 2012          386,436,570
April, 2012          380,557,927
May, 2012            374,727,999
June, 2012           368,947,078
July, 2012           363,215,454
August, 2012         357,533,422
September, 2012      351,901,275
October, 2012        346,319,310
November, 2012       340,787,821
December, 2012       335,307,108
January, 2013        329,877,467
February, 2013       324,499,199
March, 2013          319,172,604
April, 2013          313,897,984
May, 2013            308,675,640
June, 2013           303,505,878
July, 2013           298,389,000
August, 2013         293,325,314
September, 2013      288,466,920
October, 2013        283,653,127
November, 2013       278,884,199
December, 2013       274,160,398
January, 2014        269,481,988
February, 2014       264,849,234
March, 2014          260,262,402
April, 2014          255,721,758
May, 2014            251,227,571




                                                                               4




  PAYMENT DATE      MINIMUM TARGET
  OCCURRING IN    PRINCIPAL BALANCE
---------------   -----------------
June, 2014           246,780,107
July, 2014           242,379,638
August, 2014         238,026,432
September, 2014      233,720,763
October, 2014        229,462,901
November, 2014       225,253,120
December, 2014       221,091,694
January, 2015        216,978,898
February, 2015       212,915,009
March, 2015          208,900,302
April, 2015          204,935,057
May, 2015            201,019,551
June, 2015           197,154,066
July, 2015           193,338,881
August, 2015         189,574,278
September, 2015      185,860,541
October, 2015        182,197,952
November, 2015       178,586,797
December, 2015       175,211,478
January, 2016        171,877,001
February, 2016       168,630,795
March, 2016          165,450,324
April, 2016          162,306,859
May, 2016            159,226,532
June, 2016           156,208,291
July, 2016           153,224,518
August, 2016         150,303,510
September, 2016      147,415,659
October, 2016        144,561,156
November, 2016       141,740,188
December, 2016       138,952,948
January, 2017        136,273,838
February, 2017       133,688,684
March, 2017          131,129,408
April, 2017          128,596,158
May, 2017            126,089,085
June, 2017           123,635,912
July, 2017           121,207,546
August, 2017         118,804,133
September, 2017      116,425,815
October, 2017        114,099,237
November, 2017       111,821,937
December, 2017       109,567,007
January, 2018        107,334,577
February, 2018       105,148,425
March, 2018          102,983,867
April, 2018          100,841,027
May, 2018             98,744,507
June, 2018            96,715,560
July, 2018            94,704,892
August, 2018          92,712,610
September, 2018       90,738,823
October, 2018         88,783,638
November, 2018        86,847,164
December, 2018        84,929,510
January, 2019         83,030,787
February, 2019        81,151,103
March, 2019           79,290,570
April, 2019           77,449,297
May, 2019             75,627,395
June, 2019            73,845,604
July, 2019            72,082,388
August, 2019          70,337,855
September, 2019       68,612,111
October, 2019         66,905,266
November, 2019        65,249,170
December, 2019        63,610,620
January, 2020         61,989,716
February, 2020        60,386,560
March, 2020           58,801,253
April, 2020           57,233,896
May, 2020             55,684,592
June, 2020            54,153,444
July, 2020            52,640,553
August, 2020          51,146,025
September, 2020       49,669,962
October, 2020         48,212,467
November, 2020        46,773,646
December, 2020        45,353,604
January, 2021         43,952,444
February, 2021        42,570,273
March, 2021           41,207,196
April, 2021           39,863,320
May, 2021             38,538,751
June, 2021            37,233,595
July, 2021            35,947,960
August, 2021          34,681,954
September, 2021       33,435,684
October, 2021         32,209,259
November, 2021        31,002,788
December, 2021        29,816,378
January, 2022         28,650,141
February, 2022        27,504,186
March, 2022           26,378,622
April, 2022           25,273,561
May, 2022             24,189,113
June, 2022            23,125,390
July, 2022            22,106,841
August, 2022          21,146,223
September, 2022       20,203,174
October, 2022         19,277,789
November, 2022        18,370,162
December, 2022        17,480,391
January, 2023         16,608,569
February, 2023        15,754,795
March, 2023           14,965,030
April, 2023           14,213,276
May, 2023             13,476,580
June, 2023            12,755,022
July, 2023            12,048,683




                                                                               5




  PAYMENT DATE      MINIMUM TARGET
  OCCURRING IN    PRINCIPAL BALANCE
---------------   -----------------
August, 2023          11,357,645
September, 2023       10,681,989
October, 2023         10,021,798
November, 2023         9,377,153
December, 2023         8,748,137
January, 2024          8,134,833
February, 2024         7,537,323
March, 2024            6,955,691
April, 2024            6,390,022
May, 2024              5,840,397
June, 2024             5,329,726
July, 2024             4,852,999
August, 2024           4,436,065
September, 2024        4,053,695
October, 2024          3,682,479
November, 2024         3,322,473
December, 2024         2,973,738
January, 2025          2,636,331
February, 2025         2,310,312
March, 2025            2,017,759
April, 2025            1,757,995
May, 2025              1,526,518
June, 2025             1,303,604
July, 2025             1,089,298
August, 2025             883,643
September, 2025          686,683
October, 2025            537,721
November, 2025           395,165
December, 2025           259,048
January, 2026            147,877
February, 2026            42,322
March, 2026                    0
April, 2026                    0
May, 2026                      0
June, 2026                     0
July, 2026                     0
August, 2026                   0
September, 2026                0
October, 2026                  0
November, 2026                 0
December, 2026                 0
January, 2027                  0
February, 2027                 0
March, 2027                    0
April, 2027                    0
May, 2027                      0
June, 2027                     0
July, 2027                     0
August, 2027                   0
September, 2027                0
October, 2027                  0
November, 2027                 0
December, 2027                 0
January, 2028                  0
February, 2028                 0
March, 2028                    0
April, 2028                    0
May, 2028                      0
June, 2028                     0
July, 2028                     0
August, 2028                   0
September, 2028                0
October, 2028                  0
November, 2028                 0
December, 2028                 0
January, 2029                  0
February, 2029                 0
March, 2029                    0
April, 2029                    0
May, 2029                      0
June, 2029                     0
July, 2029                     0
August, 2029                   0
September, 2029                0
October, 2029                  0
November, 2029                 0
December, 2029                 0
January, 2030                  0
February, 2030                 0
March, 2030                    0
April, 2030                    0
May, 2030                      0
June, 2030                     0
July, 2030                     0
August, 2030                   0
September, 2030                0
October, 2030                  0
November, 2030                 0
December, 2030                 0
January, 2031                  0
February, 2031                 0
March, 2031                    0
April, 2031                    0
May, 2031                      0
June, 2031                     0




                                                                               6




                                   SCHEDULE 4

                               NOTE POOL FACTORS

 PAYMENT DATE
 OCCURRING IN     NOTE POOL FACTOR
---------------   ----------------
June, 2006            1.0000000
July, 2006            0.9968779
August, 2006          0.9937428
September, 2006       0.9905947
October, 2006         0.9874334
November, 2006        0.9842590
December, 2006        0.9810713
January, 2007         0.9778705
February, 2007        0.9746565
March, 2007           0.9714291
April, 2007           0.9681884
May, 2007             0.9649344
June, 2007            0.9616670
July, 2007            0.9583861
August, 2007          0.9550918
September, 2007       0.9517840
October, 2007         0.9484627
November, 2007        0.9451278
December, 2007        0.9417793
January, 2008         0.9384172
February, 2008        0.9350414
March, 2008           0.9316518
April, 2008           0.9282486
May, 2008             0.9248315
June, 2008            0.9214006
July, 2008            0.9179559
August, 2008          0.9144973
September, 2008       0.9110248
October, 2008         0.9075382
November, 2008        0.9040377
December, 2008        0.9005232
January, 2009         0.8969946
February, 2009        0.8934518
March, 2009           0.8898949
April, 2009           0.8863238
May, 2009             0.8827386
June, 2009            0.8791390
July, 2009            0.8755251
August, 2009          0.8718969
September, 2009       0.8682544
October, 2009         0.8645974
November, 2009        0.8609260
December, 2009        0.8572401
January, 2010         0.8535396
February, 2010        0.8498247
March, 2010           0.8460951
April, 2010           0.8423508
May, 2010             0.8385919
June, 2010            0.8348183
July, 2010            0.8310299
August, 2010          0.8272268
September, 2010       0.8234088
October, 2010         0.8195759
November, 2010        0.8157282
December, 2010        0.8118655
January, 2011         0.8079878
February, 2011        0.8040950
March, 2011           0.8001873
April, 2011           0.7962644
May, 2011             0.7923263
June, 2011            0.7775888
July, 2011            0.7641957
August, 2011          0.7507295
September, 2011       0.7357306
October, 2011         0.7221143
November, 2011        0.7084598
December, 2011        0.6946009
January, 2012         0.6794717
February, 2012        0.6656621
March, 2012           0.6515447
April, 2012           0.6361937
May, 2012             0.6222532
June, 2012            0.6065583
July, 2012            0.5924799
August, 2012          0.5782855
September, 2012       0.5636446
October, 2012         0.5479899
November, 2012        0.5336508
December, 2012        0.5187913
January, 2013         0.5029222
February, 2013        0.4884764
March, 2013           0.4734541
April, 2013           0.4574771
May, 2013             0.4428284
June, 2013            0.4274818
July, 2013            0.4113027
August, 2013          0.3939376
September, 2013       0.3789162
October, 2013         0.3632483
November, 2013        0.3489531
December, 2013        0.3339348
January, 2014         0.3182989
February, 2014        0.3040772
March, 2014           0.2890935
April, 2014           0.2743269
May, 2014             0.2596217




                                                                               7




 PAYMENT DATE
 OCCURRING IN     NOTE POOL FACTOR
---------------   ----------------
June, 2014            0.2447841
July, 2014            0.2294586
August, 2014          0.2140247
September, 2014       0.1988930
October, 2014         0.1833581
November, 2014        0.1677079
December, 2014        0.1525189
January, 2015         0.1372642
February, 2015        0.1219378
March, 2015           0.1069095
April, 2015           0.0914405
May, 2015             0.0759859
June, 2015            0.0605357
July, 2015            0.0449406
August, 2015          0.0292123
September, 2015       0.0134617
October, 2015         0.0000000
November, 2015        0.0000000
December, 2015        0.0000000
January, 2016         0.0000000
February, 2016        0.0000000
March, 2016           0.0000000
April, 2016           0.0000000
May, 2016             0.0000000
June, 2016            0.0000000
July, 2016            0.0000000
August, 2016          0.0000000
September, 2016       0.0000000
October, 2016         0.0000000
November, 2016        0.0000000
December, 2016        0.0000000
January, 2017         0.0000000
February, 2017        0.0000000
March, 2017           0.0000000
April, 2017           0.0000000
May, 2017             0.0000000
June, 2017            0.0000000
July, 2017            0.0000000
August, 2017          0.0000000
September, 2017       0.0000000
October, 2017         0.0000000
November, 2017        0.0000000
December, 2017        0.0000000
January, 2018         0.0000000
February, 2018        0.0000000
March, 2018           0.0000000
April, 2018           0.0000000
May, 2018             0.0000000
June, 2018            0.0000000
July, 2018            0.0000000
August, 2018          0.0000000
September, 2018       0.0000000
October, 2018         0.0000000
November, 2018        0.0000000
December, 2018        0.0000000
January, 2019         0.0000000
February, 2019        0.0000000
March, 2019           0.0000000
April, 2019           0.0000000
May, 2019             0.0000000
June, 2019            0.0000000
July, 2019            0.0000000
August, 2019          0.0000000
September, 2019       0.0000000
October, 2019         0.0000000
November, 2019        0.0000000
December, 2019        0.0000000
January, 2020         0.0000000
February, 2020        0.0000000
March, 2020           0.0000000
April, 2020           0.0000000
May, 2020             0.0000000
June, 2020            0.0000000
July, 2020            0.0000000
August, 2020          0.0000000
September, 2020       0.0000000
October, 2020         0.0000000
November, 2020        0.0000000
December, 2020        0.0000000
January, 2021         0.0000000
February, 2021        0.0000000
March, 2021           0.0000000
April, 2021           0.0000000
May, 2021             0.0000000
June, 2021            0.0000000
July, 2021            0.0000000
August, 2021          0.0000000
September, 2021       0.0000000
October, 2021         0.0000000
November, 2021        0.0000000
December, 2021        0.0000000
January, 2022         0.0000000
February, 2022        0.0000000
March, 2022           0.0000000
April, 2022           0.0000000
May, 2022             0.0000000
June, 2022            0.0000000
July, 2022            0.0000000
August, 2022          0.0000000
September, 2022       0.0000000
October, 2022         0.0000000
November, 2022        0.0000000
December, 2022        0.0000000
January, 2023         0.0000000
February, 2023        0.0000000
March, 2023           0.0000000
April, 2023           0.0000000
May, 2023             0.0000000
June, 2023            0.0000000
July, 2023            0.0000000




                                                                               8




 PAYMENT DATE
 OCCURRING IN     NOTE POOL FACTOR
---------------   ----------------
August, 2023          0.0000000
September, 2023       0.0000000
October, 2023         0.0000000
November, 2023        0.0000000
December, 2023        0.0000000
January, 2024         0.0000000
February, 2024        0.0000000
March, 2024           0.0000000
April, 2024           0.0000000
May, 2024             0.0000000
June, 2024            0.0000000
July, 2024            0.0000000
August, 2024          0.0000000
September, 2024       0.0000000
October, 2024         0.0000000
November, 2024        0.0000000
December, 2024        0.0000000
January, 2025         0.0000000
February, 2025        0.0000000
March, 2025           0.0000000
April, 2025           0.0000000
May, 2025             0.0000000
June, 2025            0.0000000
July, 2025            0.0000000
August, 2025          0.0000000
September, 2025       0.0000000
October, 2025         0.0000000
November, 2025        0.0000000
December, 2025        0.0000000
January, 2026         0.0000000
February, 2026        0.0000000
March, 2026           0.0000000
April, 2026           0.0000000
May, 2026             0.0000000
June, 2026            0.0000000
July, 2026            0.0000000
August, 2026          0.0000000
September, 2026       0.0000000
October, 2026         0.0000000
November, 2026        0.0000000
December, 2026        0.0000000
January, 2027         0.0000000
February, 2027        0.0000000
March, 2027           0.0000000
April, 2027           0.0000000
May, 2027             0.0000000
June, 2027            0.0000000
July, 2027            0.0000000
August, 2027          0.0000000
September, 2027       0.0000000
October, 2027         0.0000000
November, 2027        0.0000000
December, 2027        0.0000000
January, 2028         0.0000000
February, 2028        0.0000000
March, 2028           0.0000000
April, 2028           0.0000000
May, 2028             0.0000000
June, 2028            0.0000000
July, 2028            0.0000000
August, 2028          0.0000000
September, 2028       0.0000000
October, 2028         0.0000000
November, 2028        0.0000000
December, 2028        0.0000000
January, 2029         0.0000000
February, 2029        0.0000000
March, 2029           0.0000000
April, 2029           0.0000000
May, 2029             0.0000000
June, 2029            0.0000000
July, 2029            0.0000000
August, 2029          0.0000000
September, 2029       0.0000000
October, 2029         0.0000000
November, 2029        0.0000000
December, 2029        0.0000000
January, 2030         0.0000000
February, 2030        0.0000000
March, 2030           0.0000000
April, 2030           0.0000000
May, 2030             0.0000000
June, 2030            0.0000000
July, 2030            0.0000000
August, 2030          0.0000000
September, 2030       0.0000000
October, 2030         0.0000000
November, 2030        0.0000000
December, 2030        0.0000000
January, 2031         0.0000000
February, 2031        0.0000000
March, 2031           0.0000000
April, 2031           0.0000000
May, 2031             0.0000000
June, 2031            0.0000000




                                                                               9




                                   SCHEDULE 5

                           EXTENDED NOTE POOL FACTORS

 PAYMENT DATE     EXTENDED NOTE
 OCCURRING IN      POOL FACTOR
---------------   -------------
June, 2006          1.0000000
July, 2006          0.9968779
August, 2006        0.9937428
September, 2006     0.9905947
October, 2006       0.9874334
November, 2006      0.9842590
December, 2006      0.9810713
January, 2007       0.9778705
February, 2007      0.9746565
March, 2007         0.9714291
April, 2007         0.9681884
May, 2007           0.9649344
June, 2007          0.9616670
July, 2007          0.9583861
August, 2007        0.9550918
September, 2007     0.9517840
October, 2007       0.9484627
November, 2007      0.9451278
December, 2007      0.9417793
January, 2008       0.9384172
February, 2008      0.9350414
March, 2008         0.9316518
April, 2008         0.9282486
May, 2008           0.9248315
June, 2008          0.9214006
July, 2008          0.9179559
August, 2008        0.9144973
September, 2008     0.9110248
October, 2008       0.9075382
November, 2008      0.9040377
December, 2008      0.9005232
January, 2009       0.8969946
February, 2009      0.8934518
March, 2009         0.8898949
April, 2009         0.8863238
May, 2009           0.8827386
June, 2009          0.8791390
July, 2009          0.8755251
August, 2009        0.8718969
September, 2009     0.8682544
October, 2009       0.8645974
November, 2009      0.8609260
December, 2009      0.8572401
January, 2010       0.8535396
February, 2010      0.8498247
March, 2010         0.8460951
April, 2010         0.8423508
May, 2010           0.8385919
June, 2010          0.8348183
July, 2010          0.8310299
August, 2010        0.8272268
September, 2010     0.8234088
October, 2010       0.8195759
November, 2010      0.8157282
December, 2010      0.8118655
January, 2011       0.8079878
February, 2011      0.8040950
March, 2011         0.8001873
April, 2011         0.7962644
May, 2011           0.7923263
June, 2011          0.7883731
July, 2011          0.7740836
August, 2011        0.7598836
September, 2011     0.7457738
October, 2011       0.7317547
November, 2011      0.7178269
December, 2011      0.7039909
January, 2012       0.6902473
February, 2012      0.6765967
March, 2012         0.6630397
April, 2012         0.6495768
May, 2012           0.6362086
June, 2012          0.6229358
July, 2012          0.6097588
August, 2012        0.5966784
September, 2012     0.5836950
October, 2012       0.5708092
November, 2012      0.5580217
December, 2012      0.5453331
January, 2013       0.5327439
February, 2013      0.5202547
March, 2013         0.5078662
April, 2013         0.4955789
May, 2013           0.4833935
June, 2013          0.4713106
July, 2013          0.4593307
August, 2013        0.4426778
September, 2013     0.4311388
October, 2013       0.4196994
November, 2013      0.4083605
December, 2013      0.3971224
January, 2014       0.3859860
February, 2014      0.3749516
March, 2014         0.3640200




                                                                              10




 PAYMENT DATE     EXTENDED NOTE
 OCCURRING IN      POOL FACTOR
---------------   -------------
April, 2014         0.3531918
May, 2014           0.3424674
June, 2014          0.3318477
July, 2014          0.3213331
August, 2014        0.3109242
September, 2014     0.3006217
October, 2014       0.2904263
November, 2014      0.2803384
December, 2014      0.2703587
January, 2015       0.2604879
February, 2015      0.2507266
March, 2015         0.2410753
April, 2015         0.2315348
May, 2015           0.2221056
June, 2015          0.2127884
July, 2015          0.2035838
August, 2015        0.1944925
September, 2015     0.1855150
October, 2015       0.1766521
November, 2015      0.1624715
December, 2015      0.1542281
January, 2016       0.1447683
February, 2016      0.1360915
March, 2016         0.1283129
April, 2016         0.1199784
May, 2016           0.1118163
June, 2016          0.1044443
July, 2016          0.0965465
August, 2016        0.0894268
September, 2016     0.0824023
October, 2016       0.0754737
November, 2016      0.0686414
December, 2016      0.0607204
January, 2017       0.0532931
February, 2017      0.0470249
March, 2017         0.0408423
April, 2017         0.0347457
May, 2017           0.0284988
June, 2017          0.0226287
July, 2017          0.0168433
August, 2017        0.0111430
September, 2017     0.0054804
October, 2017       0.0000000
November, 2017      0.0000000
December, 2017      0.0000000
January, 2018       0.0000000
February, 2018      0.0000000
March, 2018         0.0000000
April, 2018         0.0000000
May, 2018           0.0000000
June, 2018          0.0000000
July, 2018          0.0000000
August, 2018        0.0000000
September, 2018     0.0000000
October, 2018       0.0000000
November, 2018      0.0000000
December, 2018      0.0000000
January, 2019       0.0000000
February, 2019      0.0000000
March, 2019         0.0000000
April, 2019         0.0000000
May, 2019           0.0000000
June, 2019          0.0000000
July, 2019          0.0000000
August, 2019        0.0000000
September, 2019     0.0000000
October, 2019       0.0000000
November, 2019      0.0000000
December, 2019      0.0000000
January, 2020       0.0000000
February, 2020      0.0000000
March, 2020         0.0000000
April, 2020         0.0000000
May, 2020           0.0000000
June, 2020          0.0000000
July, 2020          0.0000000
August, 2020        0.0000000
September, 2020     0.0000000
October, 2020       0.0000000
November, 2020      0.0000000
December, 2020      0.0000000
January, 2021       0.0000000
February, 2021      0.0000000
March, 2021         0.0000000
April, 2021         0.0000000
May, 2021           0.0000000
June, 2021          0.0000000
July, 2021          0.0000000
August, 2021        0.0000000
September, 2021     0.0000000
October, 2021       0.0000000
November, 2021      0.0000000
December, 2021      0.0000000
January, 2022       0.0000000
February, 2022      0.0000000
March, 2022         0.0000000
April, 2022         0.0000000
May, 2022           0.0000000
June, 2022          0.0000000
July, 2022          0.0000000
August, 2022        0.0000000
September, 2022     0.0000000
October, 2022       0.0000000
November, 2022      0.0000000
December, 2022      0.0000000
January, 2023       0.0000000
February, 2023      0.0000000
March, 2023         0.0000000




                                                                              11




 PAYMENT DATE     EXTENDED NOTE
 OCCURRING IN      POOL FACTOR
---------------   -------------
April, 2023         0.0000000
May, 2023           0.0000000
June, 2023          0.0000000
July, 2023          0.0000000
August, 2023        0.0000000
September, 2023     0.0000000
October, 2023       0.0000000
November, 2023      0.0000000
December, 2023      0.0000000
January, 2024       0.0000000
February, 2024      0.0000000
March, 2024         0.0000000
April, 2024         0.0000000
May, 2024           0.0000000
June, 2024          0.0000000
July, 2024          0.0000000
August, 2024        0.0000000
September, 2024     0.0000000
October, 2024       0.0000000
November, 2024      0.0000000
December, 2024      0.0000000
January, 2025       0.0000000
February, 2025      0.0000000
March, 2025         0.0000000
April, 2025         0.0000000
May, 2025           0.0000000
June, 2025          0.0000000
July, 2025          0.0000000
August, 2025        0.0000000
September, 2025     0.0000000
October, 2025       0.0000000
November, 2025      0.0000000
December, 2025      0.0000000
January, 2026       0.0000000
February, 2026      0.0000000
March, 2026         0.0000000
April, 2026         0.0000000
May, 2026           0.0000000
June, 2026          0.0000000
July, 2026          0.0000000
August, 2026        0.0000000
September, 2026     0.0000000
October, 2026       0.0000000
November, 2026      0.0000000
December, 2026      0.0000000
January, 2027       0.0000000
February, 2027      0.0000000
March, 2027         0.0000000
April, 2027         0.0000000
May, 2027           0.0000000
June, 2027          0.0000000
July, 2027          0.0000000
August, 2027        0.0000000
September, 2027     0.0000000
October, 2027       0.0000000
November, 2027      0.0000000
December, 2027      0.0000000
January, 2028       0.0000000
February, 2028      0.0000000
March, 2028         0.0000000
April, 2028         0.0000000
May, 2028           0.0000000
June, 2028          0.0000000
July, 2028          0.0000000
August, 2028        0.0000000
September, 2028     0.0000000
October, 2028       0.0000000
November, 2028      0.0000000
December, 2028      0.0000000
January, 2029       0.0000000
February, 2029      0.0000000
March, 2029         0.0000000
April, 2029         0.0000000
May, 2029           0.0000000
June, 2029          0.0000000
July, 2029          0.0000000
August, 2029        0.0000000
September, 2029     0.0000000
October, 2029       0.0000000
November, 2029      0.0000000
December, 2029      0.0000000
January, 2030       0.0000000
February, 2030      0.0000000
March, 2030         0.0000000
April, 2030         0.0000000
May, 2030           0.0000000
June, 2030          0.0000000
July, 2030          0.0000000
August, 2030        0.0000000
September, 2030     0.0000000
October, 2030       0.0000000
November, 2030      0.0000000
December, 2030      0.0000000
January, 2031       0.0000000
February, 2031      0.0000000
March, 2031         0.0000000
April, 2031         0.0000000
May, 2031           0.0000000
June, 2031          0.0000000




                                                                              12




                                   SCHEDULE 6

                        CURRENT WAR RISK COVERAGE AMOUNTS

AIRCRAFT MSN   WAR RISK COVERAGE AMOUNT
------------   ------------------------
370                $3,000,000,000.00
375                $3,000,000,000.00
24844              $1,000,000,000.00
24894              $3,000,000,000.00





                              AMENDED AND RESTATED
                                AIRCASTLE LIMITED
                         2005 EQUITY AND INCENTIVE PLAN

            SECTION 1. PURPOSE OF PLAN.

            The name of this plan is the Amended and Restated Aircastle Limited
2005 Equity and Incentive Plan (as amended from time to time, the "Plan"). The
original Aircastle Investment Limited 2005 Equity and Incentive Plan (the
"Original Plan") was adopted by the Board (as hereinafter defined) on January
17, 2006, and amended and restated by the Board on July ___, 2006, and approved
by the shareholders of Aircastle Limited, formerly Aircastle Investment Limited,
a Bermuda exempted company (or any successor thereto) (the "Company"), on July
___, 2006 prior to the initial public offering of shares in the capital of the
Company (the "Initial Public Offering"). The purpose of the Plan is to provide
additional incentive to selected management employees, directors and Consultants
(as hereinafter defined) of the Company or its Subsidiaries (as hereinafter
defined) whose contributions are essential to the growth and success of the
Company's business, in order to strengthen the commitment of such persons to the
Company and its Subsidiaries, motivate such persons to faithfully and diligently
perform their responsibilities and attract and retain competent and dedicated
persons whose efforts will result in the long-term growth and profitability of
the Company. To accomplish such purposes, the Plan provides that the Company may
grant (a) Options, (b) Share Appreciation Rights, (c) awards of Restricted
Shares, Deferred Shares, Performance Shares, unrestricted Shares or Other
Share-Based Awards, or (d) any combination of the foregoing.

            SECTION 2. DEFINITIONS.

            For purposes of the Plan, the following terms shall be defined as
set forth below:

                        (a)   "Administrator" means the Board or, if and to the
            extent the Board does not administer the Plan, the Committee in
            accordance with Section 3 hereof.

                        (b)   "Affiliate" means an affiliate of the Company (or
            other referenced entity, as the case may be) as defined in Rule
            12b-2 promulgated under Section 12 of the Exchange Act.

                        (c)   "Award" means any Option, Share Appreciation
            Right, Restricted Share, Deferred Share, Performance Share,
            unrestricted Share or Other Share-Based Award granted under the
            Plan.


      -1-



                        (d)   "Award Agreement" means any written agreement,
            contract or other instrument or document evidencing an Award.

                        (e)   "Beneficial Owner" (or any variant thereof) has
            the meaning defined in Rule 13d-3 under the Exchange Act.

                        (f)   "Board" means the Board of Directors of the
            Company.

                        (g)   "Cause" means (i) the continued failure by the
            Participant substantially to perform his or her duties and
            obligations to the Company or any Subsidiary or Affiliate, including
            without limitation repeated refusal to follow the reasonable
            directions of his or her employer, knowing violation of law in the
            course of performance of the duties of Participant's employment with
            the Company or any Subsidiary or Affiliate, engagement in misconduct
            which is materially injurious to the Company or any Subsidiary or
            Affiliate, repeated absences from work without a reasonable excuse,
            or intoxication with alcohol or illegal drugs while on the Company's
            or any Subsidiary's or Affiliate's premises during regular business
            hours (other than any such failure resulting from his or her
            incapacity due to physical or mental illness); (ii) fraud or
            material dishonesty against the Company or any Subsidiary or
            Affiliate; or (iii) a conviction or plea of guilty or nolo
            contendere for the commission of a felony or a crime involving
            material dishonesty. Determination of Cause shall be made by the
            Administrator in its sole discretion. Notwithstanding the foregoing,
            to the extent that a Participant's employment agreement with the
            Company, any Subsidiary or any Affiliate expressly states that the
            definition of cause set forth in such agreement shall override the
            definition of Cause in this Plan, then the definition of cause in
            such employment agreement shall constitute "Cause" for such
            Participant under this Plan.

                        (h)   "Change in Capitalization" means any (i) merger,
            amalgamation, consolidation, reclassification, recapitalization,
            spin-off, spin-out, repurchase or other reorganization or corporate
            transaction or event, (ii) dividend (whether in the form of cash,
            shares or other property), bonus issue, share split or reverse share
            split consolidation or subdivision, (iii) combination or exchange of
            shares, (iv) other change in corporate structure or (v) declaration
            of a special dividend (including a cash dividend) or other
            distribution, which, in any such case, the Administrator determines,
            in its sole discretion, affects the Shares such that an adjustment
            pursuant to Section 5 hereof is appropriate.


      -2-



                        (i)   "Change in Control" shall be deemed to have
            occurred if an event set forth in any one of the following
            paragraphs shall have occurred:

            (i)     any Person other than any Permitted Transferee is or becomes
      the Beneficial Owner, directly or indirectly, of securities of the Company
      representing 50% or more of the combined voting power of the Company's
      then outstanding securities; or

            (ii)    the following individuals cease for any reason to constitute
      a majority of the number of directors then serving on the Board:
      individuals who, on the date hereof, constitute the Board and any new
      director (other than a director whose initial assumption of office is in
      connection with an actual or threatened election contest, including but
      not limited to a consent solicitation, relating to the election of
      directors of the Company) whose appointment or election by the Board or
      nomination for election by the Company's shareholders was approved or
      recommended by a vote of at least two-thirds (2/3) of the directors then
      still in office who either were directors on the date hereof or whose
      appointment, election or nomination for election was previously so
      approved or recommended; or;

            (iii)   there is consummated a merger or amalgamation or
      consolidation of the Company or any direct or indirect subsidiary of the
      Company with any other company, other than a merger or amalgamation or
      consolidation immediately following which the individuals who comprise the
      Board immediately prior thereto constitute at least a majority of the
      Board of the entity surviving, or continuing on, after such merger or
      amalgamation or consolidation or, if the Company or the entity surviving,
      or continuing on, after such merger or amalgamation is then a subsidiary,
      the ultimate parent thereof; or

            (iv)    the shareholders of the Company approve a plan of complete
      liquidation or dissolution of the Company or there is consummated an
      agreement for the sale or disposition by the Company of all or
      substantially all of the Company's assets, other than (a) a sale or
      disposition by the Company of all or substantially all of the Company's
      assets to an entity, at least 50% of the combined voting power of the
      voting securities of which are owned by shareholders of the Company
      following the completion of such transaction in substantially the same
      proportions as their ownership of the Company immediately prior to such
      sale or (b) a sale or disposition of all or substantially all of the
      Company's assets immediately following which the individuals who comprise
      the Board immediately prior thereto constitute at least a majority of the
      board of directors of the entity to which such assets are sold or disposed
      or, if such entity is a subsidiary, the ultimate parent thereof (it being
      understood that no transaction determined by the Administrator, in its
      good faith, to be a securitization or financing transaction shall be
      deemed a sale of all or substantially all of the assets of the Company).


      -3-



      Notwithstanding the foregoing, a "Change in Control" shall not be deemed
to have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the holders of shares in the
capital of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.

                        (j)   "Code" means the U.S. Internal Revenue Code of
            1986, as amended from time to time, or any successor thereto.

                        (k)   "Committee" means any committee or subcommittee
            the Board may appoint to administer the Plan. Subject to the
            discretion of the Board, the Committee shall be composed entirely of
            individuals who meet the qualifications of an "outside director"
            within the meaning of Section 162(m) of the Code, a "non-employee
            director" within the meaning of Rule 16b-3 under the Exchange Act
            and any other qualifications required by the applicable stock
            exchange on which the Shares are traded. If at any time or to any
            extent the Board shall not administer the Plan, then the functions
            of the Administrator specified in the Plan shall be exercised by the
            Committee. Except as otherwise provided in the Company's memorandum
            of association or bye-laws, as amended from time to time, any action
            of the Committee with respect to the administration of the Plan
            shall be taken by a majority vote at a meeting at which a quorum is
            duly constituted or unanimous written consent of the Committee's
            members.

                        (l)   "Consultant" means a consultant or advisor who is
            a natural person, engaged to render bona fide services to the
            Company, or any Subsidiary.

                        (m)   "Deferred Shares" means the right to receive
            Shares at the end of a specified deferral period granted pursuant to
            Section 9 below.

                        (n)   "Disability" means that a Participant (i) is
            unable to engage in any substantial gainful activity by reason of
            any medically determinable physical or mental impairment which can
            be expected to result in death or can be expected to last for a
            continuous period of not less than 12 months, or (ii) is, by reason
            of any medically determinable physical or mental impairment which
            can be expected to result in death or can be expected to last for a
            continuous period of not less than 12 months, receiving income
            replacement benefits for a period of not less than 3 months under an
            accident and health plan, or disability


      -4-



            plan, covering employees of the Company or an Affiliate of the
            Company.

                        (o)   "Eligible Recipient" means a key employee,
            director or Consultant of the Company or any Subsidiary who has been
            selected as an eligible participant by the Administrator.

                        (p)   "Exchange Act" shall mean the U.S. Securities
            Exchange Act of 1934, as amended from time to time.

                        (q)   "Exercise Price" means the per Share price at
            which a holder of an Award granted hereunder may purchase the Shares
            issuable upon exercise of such Award.

                        (r)   "Fair Market Value" as of a particular date shall
            mean the fair market value per Share as determined by the
            Administrator in its sole discretion; provided, however, that (i) if
            the Shares are admitted to trading on a national securities
            exchange, fair market value of the Shares on any date shall be the
            closing sale price reported for such Shares on such last day
            preceding such date on which a sale was reported, (ii) if the Shares
            are admitted to quotation on the National Association of Securities
            Dealers Automated Quotation ("Nasdaq") System or other comparable
            quotation system and have been designated as a National Market
            System ("NMS") security, fair market value of the Shares on any date
            shall be the closing sale price reported for such Shares on such
            system on the last date preceding such date on which a sale was
            reported, or (iii) if the Shares are admitted to quotation on the
            Nasdaq System but have not been designated as an NMS security, fair
            market value of the Shares on any date shall be the average of the
            highest bid and lowest asked prices of such Shares on such system on
            the last date preceding such date on which both bid and ask prices
            were reported.

                        (s)   "Incentive Share Option" shall mean an Option that
            is an "incentive stock option" within the meaning of Section 422 of
            the Code, or any successor provision, and that is designated in the
            applicable Award Agreement as an Incentive Share Option.

                        (t)   "Non-Officer Director" means a director of the
            Company who is not (i) an officer or employee of the Company or of
            any Subsidiary or (ii) the Beneficial Owner, whether directly or
            indirectly, of ten percent (10%) or more of the issued Shares.

                        (u)   "Nonqualified Share Option" means any Option that
            is not an Incentive Share Option, including any Option that


      -5-



            provides (as of the time such Option is granted) that it will not be
            treated as an Incentive Share Option.

                        (v)   "Option" means an option to purchase Shares
            granted pursuant to Section 7 hereof.

                        (w)   "Other Share-Based Awards" means a right or other
            interest granted to a Participant under the Plan that may be
            denominated or payable in, valued in whole or in part by reference
            to, or otherwise based on or related to, the Shares, including but
            not limited to restricted share units, dividend equivalents or
            performance units, each of which may be subject to the attainment of
            Performance Goals or a period of continued employment or other terms
            or conditions as permitted under the Plan.

                        (x)   "Participant" means (i) any Eligible Recipient
            selected by the Administrator, pursuant to the Administrator's
            authority in Section 3 below, to receive grants of Options, Share
            Appreciation Rights, Awards of Restricted Shares, Awards of
            unrestricted Shares, Deferred Shares, Performance Shares, Other
            Share-Based Awards or any combination of the foregoing, and upon his
            or her death, his or her successors, heirs, executors and
            administrators, as the case may be and (ii) any Non-Officer Director
            who is eligible to receive Shares pursuant to Section 11 below.

                        (y)   "Performance Goals" means performance goals based
            on one or more of the following criteria: (i) earnings including
            operating income, earnings before or after taxes, earnings before or
            after interest, depreciation, amortization, or extraordinary or
            special items or book value per Share (which may exclude
            nonrecurring items); (ii) pre-tax income or after-tax income; (iii)
            earnings per Share (basic or diluted); (iv) operating profit; (v)
            revenue, revenue growth or rate of revenue growth; (vi) return on
            assets (gross or net), return on investment, return on capital, or
            return on equity; (vii) returns on sales or revenues; (viii)
            operating expenses; (ix) Share price appreciation; (x) cash flow,
            free cash flow, cash flow return on investment (discounted or
            otherwise), net cash provided by operations, or cash flow in excess
            of cost of capital; (xi) implementation or completion of critical
            projects or processes; (xii) economic value created; (xiii)
            cumulative earnings per Share growth; (xiv) operating margin or
            profit margin; (xv) Share price or total shareholder return; (xvi)
            cost targets, reductions and savings, productivity and efficiencies;
            (xvii) strategic business criteria, consisting of one or more
            objectives based on meeting specified market penetration, geographic
            business expansion, customer satisfaction, employee satisfaction,
            human resources management, supervision of litigation, information
            technology, and goals relating to acquisitions,


      -6-



            divestitures, joint ventures and similar transactions, and budget
            comparisons; (xviii) personal professional objectives, including any
            of the foregoing performance goals, the implementation of policies
            and plans, the negotiation of transactions, the development of long
            term business goals, formation of joint ventures, research or
            development collaborations, and the completion of other corporate
            transactions; and (xix) any combination of, or a specified increase
            in, any of the foregoing. Where applicable, the Performance Goals
            may be expressed in terms of attaining a specified level of the
            particular criteria or the attainment of a percentage increase or
            decrease in the particular criteria, and may be applied to one or
            more of the Company, a Subsidiary or Affiliate, or a division or
            strategic business unit of the Company, or may be applied to the
            performance of the Company relative to a market index, a group of
            other companies or a combination thereof, all as determined by the
            Committee. The Performance Goals may include a threshold level of
            performance below which no payment will be made (or no vesting will
            occur), levels of performance at which specified payments will be
            made (or specified vesting will occur), and a maximum level of
            performance above which no additional payment will be made (or at
            which full vesting will occur). Each of the foregoing Performance
            Goals shall be determined in accordance with generally accepted
            accounting principles and shall be subject to certification by the
            Committee; provided that the Committee shall have the authority to
            make equitable adjustments to the Performance Goals in recognition
            of unusual or non-recurring events affecting the Company or any
            Subsidiary or Affiliate or the financial statements of the Company
            or any Subsidiary or Affiliate, in response to changes in applicable
            laws or regulations, or to account for items of gain, loss or
            expense determined to be extraordinary or unusual in nature or
            infrequent in occurrence or related to the disposal of a segment of
            a business or related to a change in accounting principles.

                        (z)   "Performance Shares" means Shares that are subject
            to restrictions based upon the attainment of specified performance
            objectives granted pursuant to Section 9 below.

                        (aa)  "Permitted Transferee" shall mean, (i) any
            Affiliate of Fortress Investment Fund III LP, a Delaware limited
            partnership, (ii) any investment vehicle (whether formed as a
            private investment fund, company or otherwise) managed directly or
            indirectly by Fortress Investment Group LLC, a Delaware limited
            liability company, or any of its (or its successors' or assigns')
            Affiliates (a "FIG Fund"), or (iii) any general partner, limited
            partner, managing member or person occupying a similar role of or
            with respect to any FIG Fund.


      -7-



                        (bb)  "Person" shall have the meaning given in Section
            3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
            and 14(d) thereof, except that such term shall not include (i) the
            Company or any of its Subsidiaries, (ii) a trustee or other
            fiduciary holding securities under an employee benefit plan of the
            Company or any of its Subsidiaries, (iii) an underwriter temporarily
            holding securities pursuant to an offering of such securities, or
            (iv) a company or corporation owned, directly or indirectly, by the
            shareholders of the Company in substantially the same proportions as
            their ownership of shares of the Company.

                        (cc)  "Restricted Shares" means Shares subject to
            certain restrictions granted pursuant to Section 9 below.

                        (dd)  "Retirement" means a termination of a
            Participant's employment, other than for Cause, on or after
            attainment of age 65.

                        (ee)  "Shares" means common shares of par value U.S.
            $0.01 each in the capital of the Company and any successor (pursuant
            to a merger, amalgamation, consolidation or other reorganization)
            security. Section 5 hereof provides that the Administrator may make
            certain equitable adjustments with respect to Shares and Awards in
            the event of a Change in Capitalization.

                        (ff)  "Share Appreciation Right" means the right
            pursuant to an Award granted under Section 8 below to receive an
            amount equal to the excess, if any, of (i) the aggregate Fair Market
            Value, as of the date such Share Appreciation Right or portion
            thereof is surrendered, of the Shares covered by such right or such
            portion thereof, over (ii) the aggregate Exercise Price of such
            right or such portion thereof.

                        (gg)  "Subsidiary" means any company or corporation in
            an unbroken chain of companies beginning with the Company if, at the
            time of granting of an Award, each of the companies (other than the
            last company or corporation in the unbroken chain) owns shares
            possessing 50% or more of the total combined voting power of all
            classes of shares in one of the other companies in the chain.

            SECTION 3. ADMINISTRATION.

                        (a)   The Plan shall be administered by the
            Administrator and shall be administered in accordance with the
            requirements of Section 162(m) of the Code (but only to the extent
            necessary and desirable to maintain qualification of Awards under
            the


      -8-



            Plan under Section 162(m) of the Code) and, to the extent
            applicable, Rule 16b-3 under the Exchange Act ("Rule 16b-3").

                        (b)   Pursuant to the terms of the Plan, the
            Administrator, subject, in the case of any Committee, to any
            restrictions on the authority delegated to it by the Board, shall
            have the power and authority, without limitation:

                        (1)   to select those Eligible Recipients who shall be
            Participants;

                        (2)   to determine whether and to what extent Share
            Options, Share Appreciation Rights, Awards of Restricted Shares,
            Deferred Shares, Performance Shares, Other Share-Based Awards or a
            combination of any of the foregoing, are to be granted hereunder to
            Participants;

                        (3)   to determine whether Options are intended to be
            Incentive Share Options or Nonqualified Share Options, provided,
            however, that Incentive Share Options can only be granted to
            employees of the Company or any Subsidiary (within the meaning of
            Section 424(e) and (f) of the Code);

                        (4)   to determine the number of Shares to be covered by
            each Award granted hereunder;

                        (5)   to determine the terms and conditions, not
            inconsistent with the terms of the Plan, of each Award granted
            hereunder (including, but not limited to, (x) the restrictions
            applicable to Awards of Restricted Shares or Deferred Shares and the
            conditions under which restrictions applicable to such Awards of
            Restricted Shares or Deferred Shares shall lapse, and (y) the
            performance goals and periods applicable to Awards of Performance
            Shares);

                        (6)   to determine the terms and conditions, not
            inconsistent with the terms of the Plan, which shall govern all
            written instruments evidencing Share Options, Share Appreciation
            Rights, Awards of Restricted Shares, Deferred Shares or Performance
            Shares or any combination of the foregoing granted hereunder;

                        (7)   to determine the Fair Market Value;

                        (8)   to determine the duration and purpose of leaves of
            absence which may be granted to a Participant without constituting
            termination of the Participant's employment for purposes of
            Nonqualified Share Options granted under the Plan;


      -9-



                        (9)   to adopt, alter and repeal such administrative
            rules, guidelines and practices governing the Plan as it shall from
            time to time deem advisable; and

                        (10)  to construe and interpret the terms and provisions
            of the Plan and any Award issued under the Plan (and any Award
            Agreement relating thereto), and to otherwise supervise the
            administration of the Plan and to exercise all powers and
            authorities either specifically granted under the Plan or necessary
            and advisable in the administration of the Plan.

                        (c)   Notwithstanding paragraph (b) of this Section 3,
            (i) the automatic, nondiscretionary grants of Shares shall be made
            to Non-Officer Directors pursuant to and in accordance with the
            terms of Section 11 below and (ii) neither the Board, the Committee
            nor their respective delegates shall have the authority to reprice
            (or cancel and regrant) any Option or, if applicable, other Award at
            a lower exercise, base or purchase price without first obtaining the
            approval of the Company's shareholders.

                        (d)   All decisions made by the Administrator pursuant
            to the provisions of the Plan shall be final, conclusive and binding
            on all persons, including the Company and the Participants. No
            member of the Board or the Committee, nor any officer or employee of
            the Company or any Subsidiary acting on behalf of the Board or the
            Committee, shall be personally liable for any action, omission,
            determination, or interpretation taken or made in good faith with
            respect to the Plan, and all members of the Board or the Committee
            and each and any officer or employee of the Company and of any
            Subsidiary acting on their behalf shall, to the maximum extent
            permitted by law, be fully indemnified and protected by the Company
            in respect of any such action, omission, determination or
            interpretation.

            SECTION 4. SHARES RESERVED FOR ISSUANCE UNDER THE PLAN.

                        (a)   Subject to Section 5 hereof, the total number of
            Shares available for issuance under the Plan shall be equal to
            4,000,000 Shares, as increased by 100,000 Shares on the first day of
            each fiscal year, beginning in 2007 through to and including 2016.
            To the extent it is able, the Company undertakes to make such Shares
            so available for issuance. All such Shares that are available for
            issuance under the Plan shall be available for issuance under
            Incentive Share Options. From and after such time as the Plan is
            subject to Code Section 162(m), the aggregate Awards granted during
            any fiscal year to any single individual who is likely to be a
            "covered employee" as defined


      -10-



            under Code Section 162(m) shall not exceed 2,500,000 Shares.
            Determinations made in respect of the limitation set forth in the
            preceding sentence shall be made in a manner consistent with Section
            162(m) of the Code.

                        (b)   Shares issued or delivered under the Plan may be
            authorized but unissued Shares or Shares acquired on the market or
            otherwise. If any Shares subject to an Award are repurchased or if
            an Award otherwise terminates or expires without an issuance of
            Shares to the Participant, the Shares (or in the event of a
            repurchase of Shares the equivalent number of Shares) with respect
            to such Award shall, to the extent of any such repurchase,
            termination or expiration, again be available for Awards under the
            Plan.

            SECTION 5. EQUITABLE ADJUSTMENTS.

            In the event of any Change in Capitalization, an equitable
substitution or proportionate adjustment shall be made, in each case, in the
manner determined by the Administrator, in (i) the aggregate number of Shares
reserved for issuance under the Plan and the maximum number of Shares that may
be subject to Awards granted to any Participant in any calendar year, (ii) the
kind, number and Exercise Price of Shares subject to outstanding Options and
Share Appreciation Rights granted under the Plan, and (iii) the kind, number and
purchase price of Shares subject to outstanding Awards of Restricted Shares,
Deferred Shares, Performance Shares or Other Share-Based Awards granted under
the Plan, in each case as may be determined by the Administrator, provided,
however, that any fractional shares resulting from the adjustment shall be
eliminated. Such other necessary equitable substitutions or proportionate
adjustments shall be made in the manner determined by the Administrator. Without
limiting the generality of the foregoing, in connection with a Change in
Capitalization, the Administrator may provide for the manner of equitable
substitution to be the cancellation of any outstanding Award granted hereunder
(except fully vested Restricted Shares, fully vested Deferred Shares and fully
vested Performance Shares as to which all restrictions, except any restrictions
described in Section 16(d) hereof, have lapsed) in exchange for payment in cash
or other property of the aggregate Fair Market Value of the Shares covered by
such Award, reduced by the aggregate Exercise Price or purchase price thereof,
if any. Notwithstanding the foregoing, with respect to Incentive Share Options,
any adjustment shall be made in accordance with the provisions of Section 424(h)
of the Code and any regulations or guidance promulgated thereunder, and provided
further that no such adjustment shall cause any Award hereunder which is or
becomes subject to Section 409A of the Code to fail to comply with the
requirements of such Section. The Administrator's determinations pursuant to
this Section 5 shall be final, binding and conclusive.


      -11-



            SECTION 6. ELIGIBILITY.

            Except as set forth in Section 11 below, the Participants under the
Plan shall be selected from time to time by the Administrator, in its sole
discretion, from among Eligible Recipients; provided however that Incentive
Share Options may only be granted to employees of the Company or any Subsidiary.
Notwithstanding the foregoing, Non-Officer Directors shall be eligible for
Awards other than those set forth in Section 11, as determined by the
Administrator from time to time.

            SECTION 7. OPTIONS.

                        (a)   General. Each Participant who is granted an Option
            shall enter into an Award Agreement with the Company, containing
            such terms and conditions as the Administrator shall determine, in
            its discretion, which Award Agreement shall set forth, among other
            things, the Exercise Price of the Option, the term of the Option and
            provisions regarding exercisability of the Option granted
            thereunder. Each Option shall be clearly identified in the
            applicable Award Agreement as either an Incentive Share Option or a
            Nonqualified Share Option. The provisions of each Option need not be
            the same with respect to each Participant. More than one Option may
            be granted to the same Participant and be outstanding concurrently
            hereunder. Options granted under the Plan shall be subject to the
            terms and conditions set forth in this Section 7 and shall contain
            such additional terms and conditions, not inconsistent with the
            terms of the Plan, as the Administrator shall deem desirable that
            are set forth in the applicable Award Agreement.

                        (b)   Exercise Price. The Exercise Price of Shares
            purchasable under an Option shall be determined by the Administrator
            in its sole discretion at the time of grant, provided that the
            Exercise Price of an Incentive Share Option or any Option intended
            to qualify as performance-based compensation under Section 162(m) of
            the Code shall not be less than 100% of the Fair Market Value per
            Share on the date of grant. If a Participant owns or is deemed to
            own (by reason of the attribution rules applicable under Section
            424(d) of the Code) more than 10% of the combined voting power of
            all classes of shares of the Company or of any Subsidiary and an
            Incentive Share Option is granted to such Participant, the Exercise
            Price of such Incentive Share Option (to the extent required at the
            time of grant by the Code) shall be no less than 110% of the Fair
            Market Value per Share on the date such Incentive Share Option is
            granted.

                        (c)   Option Term. The maximum term of each Option shall
            be fixed by the Administrator, but no Option shall be exercisable
            more than ten years after the date such Option is granted.


      -12-



            Each Option's term is subject to earlier expiration pursuant to the
            applicable provisions in the Plan and the Award Agreement.
            Notwithstanding the foregoing, the Administrator shall have the
            authority to accelerate the exercisability of any outstanding Option
            at such time and under such circumstances as it, in it sole
            discretion, deems appropriate.

                        (d)   Exercisability. Each Option shall be exercisable
            at such time or times and subject to such terms and conditions,
            including the attainment of preestablished corporate performance
            goals, as shall be determined by the Administrator in the applicable
            Award Agreement. The Administrator may also provide that any Option
            shall be exercisable only in installments, and the Administrator may
            waive such installment exercise provisions at any time, in whole or
            in part, based on such factors as the Administrator may determine in
            its sole discretion. Notwithstanding anything to the contrary
            contained herein, an Option may not be exercised for a fraction of a
            share.

                        (e)   Method of Exercise. Options may be exercised in
            whole or in part by giving written notice of exercise to the Company
            specifying the number of Shares to be purchased, accompanied by
            payment in full of the aggregate Exercise Price of the Shares so
            purchased in cash or its equivalent, as determined by the
            Administrator. As determined by the Administrator, in its sole
            discretion, with respect to any Option or category of Options,
            payment in whole or in part may also be made (i) in the form of a
            net repurchase of Shares by the Company at Fair Market Value equal
            to the aggregate Exercise Price of such Shares purchased by the
            Participant upon exercise and issued by the Company to the
            Participant, (ii) in the form of repurchase for Fair Market Value of
            unrestricted Shares already owned by the Participant which, (x) in
            the case of unrestricted Shares acquired upon exercise of an Option,
            have been owned by the Participant for more than six months on the
            date of repurchase, and (y) have a Fair Market Value on the date of
            repurchase equal to the aggregate Exercise Price of the Shares as to
            which such Option shall be exercised, (iii) any other form of
            consideration approved by the Administrator and permitted by
            applicable law, (iv) if the Shares are traded on a public exchange,
            through an arrangement with a broker whereby payment of the Exercise
            Price is made with the proceeds of the sale of Shares or (iv) any
            combination of the foregoing.

                        (f)   Limitations on Incentive Share Options. To the
            extent that the aggregate Fair Market Value of the Shares with
            respect to which Incentive Share Options are exercisable for the
            first time by a Participant during any calendar year under the Plan
            and any


      -13-



            other share option plan of the Company shall exceed $100,000, the
            portion of such Incentive Share Options in excess of $100,000 shall
            be treated as Nonqualified Share Options. Such Fair Market Value
            shall be determined as of the date on which each such Incentive
            Share Option is granted. No Incentive Share Option may be granted to
            an individual if, at the time of the proposed grant, such individual
            owns (or is deemed to own under the Code) shares possessing more
            than 10% of the total combined voting power of all classes of shares
            of the Company or of any Subsidiary unless (i) the Exercise Price of
            such Incentive Share Option is at least 110% of the Fair Market
            Value per Share at the time such Incentive Share Option is granted
            and (ii) such Incentive Share Option is not exercisable after the
            expiration of five years from the date such Incentive Share Option
            is granted.

                        (g)   Rights as Shareholder. A Participant shall have no
            rights to dividends or any other rights of a shareholder with
            respect to the Shares subject to an Option until the Participant has
            given written notice of exercise, has paid in full for such Shares,
            has satisfied the requirements of Section 15 hereof and, if
            requested, has given the representation described in paragraph (b)
            of Section 16 hereof, and such Shares have been issued.

                        (h)   Transfers of Options. Except as otherwise
            determined by the Administrator, and in any event in the case of an
            Incentive Share Option, no Option granted under the Plan shall be
            transferable by a Participant otherwise than by will or the laws of
            descent and distribution. Unless otherwise determined by the
            Administrator in accord with the provisions of the immediately
            preceding sentence, an Option may be exercised, during the lifetime
            of the Participant, only by the Participant or, during the period
            the Participant is under a legal disability, by the Participant's
            guardian or legal representative. The Administrator may, in its sole
            discretion, subject to applicable law, permit the gratuitous
            transfer during a Participant's lifetime of a Nonqualified Share
            Option, (i) by gift to a member of the Participant's immediate
            family, (ii) by transfer by instrument to a trust for the benefit of
            such immediate family members, or (iii) to a partnership or limited
            liability company in which such family members are the only partners
            or members; provided, however, that, in addition to such other terms
            and conditions as the Administrator may determine in connection with
            any such transfer, no transferee may further assign, sell,
            hypothecate, charge or otherwise transfer the transferred Option, in
            whole or in part, other than by will or by operation of the laws of
            descent and distribution. Each permitted transferee shall agree to
            be bound by the provisions of this Plan and the applicable Award
            Agreement.


      -14-



                        (i)   Termination of Employment or Service.

                        (1)   Unless the applicable Award Agreement provides
            otherwise, in the event that the employment or service of a
            Participant with the Company or any Subsidiary shall terminate for
            any reason other than Cause, Retirement, Disability, or death, (A)
            Options granted to such Participant, to the extent that they are
            exercisable at the time of such termination, shall remain
            exercisable until the date that is 90 days after such termination,
            on which date they shall expire, and (B) Options granted to such
            Participant, to the extent that they were not exercisable at the
            time of such termination, shall expire at the close of business on
            the date of such termination. The 90-day period described in this
            Section 7(i)(1) shall be extended to one year after the date of such
            termination in the event of the Participant's death during such
            90-day period. Notwithstanding the foregoing, no Option shall be
            exercisable after the expiration of its term.

                        (2)   Unless the applicable Award Agreement provides
            otherwise, in the event that the employment or service of a
            Participant with the Company or any Subsidiary shall terminate on
            account of the Retirement, Disability, or death of the Participant,
            (A) Options granted to such Participant, to the extent that they
            were exercisable at the time of such termination, shall remain
            exercisable until the date that is one year after such termination,
            on which date they shall expire, and (B) Options granted to such
            Participant, to the extent that they were not exercisable at the
            time of such termination, shall expire at the close of business on
            the date of such termination. Notwithstanding the foregoing, no
            Option shall be exercisable after the expiration of its term.

                        (3)   In the event of the termination of a Participant's
            employment or service for Cause, all outstanding Options granted to
            such Participant shall expire at the commencement of business on the
            date of such termination.

                        (j)   Other Change in Employment Status. An Option shall
            be affected, both with regard to vesting schedule and termination,
            by leaves of absence, changes from full-time to part-time
            employment, partial disability or other changes in the employment
            status of an Participant, in the discretion of the Administrator.
            The Administrator shall follow the written policies of the Company
            (if any), including such rules, guidelines and practices as may be
            adopted pursuant to Section 3 hereof, as they may be in effect from
            time to time, with regard to such matters.


      -15-



            SECTION 8. SHARE APPRECIATION RIGHTS.

            (a)   General. Share Appreciation Rights may be granted either
alone ("Free Standing Rights") or in conjunction with all or part of any Share
Option granted under the Plan ("Related Rights"), provided that, in each case,
the Shares underlying the Share Appreciation Rights are traded on an
"established securities market" within the meaning of Section 409A of the Code.
In the case of a Nonqualified Share Option, Related Rights may be granted either
at or after the time of the grant of such Share Option. In the case of an
Incentive Share Option, Related Rights may be granted only at the time of the
grant of the Incentive Share Option. The Administrator shall determine the
Eligible Recipients to whom, and the time or times at which, grants of Share
Appreciation Rights shall be made; the number of Shares to be awarded, the price
per Share, and all other conditions of Share Appreciation Rights.
Notwithstanding the foregoing, no Related Right may be granted for more shares
than are subject to the Share Option to which it relates and any Share
Appreciation Right must be granted with an Exercise Price not less than the Fair
Market Value per Share on the date of grant. The provisions of Share
Appreciation Rights need not be the same with respect to each Participant. Share
Appreciation Rights granted under the Plan shall be subject to the following
terms and conditions set forth in this Section 8 and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Administrator shall deem desirable, as set forth in the applicable Award
Agreement.

            (b)   Awards. The prospective recipient of a Share Appreciation
Right shall not have any rights with respect to such Award, unless and until
such recipient has executed an Award Agreement and delivered a fully executed
copy thereof to the Company, within a period of sixty days (or such other period
as the Administrator may specify) after the award date. Participants who are
granted Share Appreciation Rights shall have no rights as shareholders of the
Company with respect to the grant or exercise of such rights.

            (c)   Exercisability.

                  (1)   Share Appreciation Rights that are Free Standing Rights
("Free Standing Share Appreciation Rights") shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant; provided, however, that no Free Standing Share
Appreciation Right shall be exercisable during the first six months of its term,
except that this additional limitation shall not apply in the event of a
Participant's death or Disability prior to the expiration of such six-month
period.

                  (2)   Share Appreciation Rights that are Related Rights
("Related Share Appreciation Rights") shall be exercisable only at such time or
times and to the extent that the Share Options to which they relate shall be
exercisable in accordance with the provisions of Section 7 above and this
Section 8 of the Plan; provided, however, that a Related Share Appreciation
Right granted in connection with an Incentive Share Option shall be exercisable
only if and when the Fair Market Value per Share of the Shares subject to the
Incentive Share Option exceeds the Exercise Price


      -16-



of such Option; provided, further, that no Related Share Appreciation Right
shall be exercisable during the first six months of its term, except that this
additional limitation shall not apply in the event of a Participant's death or
Disability prior to the expiration of such six-month period.

            (d)   Payment Upon Exercise.

                  (1)   Upon the exercise of a Free Standing Share Appreciation
Right, the Participant shall be entitled to receive up to, but not more than,
that number of Shares equal in value to the excess of the Fair Market Value per
Share as of the date of exercise over the price per Share specified in the Free
Standing Share Appreciation Right (which price shall be no less than 100% of the
Fair Market Value per Share on the date of grant) multiplied by the number of
Shares in respect of which the Free Standing Share Appreciation Right is being
exercised, provided that the Administrator shall have the right to determine the
form of payment in accordance with Section 8(d)(3) hereof.

                  (2)   A Related Right may be exercised by a Participant by
surrendering the applicable portion of the related Option. Upon such exercise
and surrender, the Participant shall be entitled to receive up to, but not more
than, that number of Shares equal in value to the excess of the Fair Market
Value per Share as of the date of exercise over the Exercise Price specified in
the related Option (which price shall be no less than 100% of the Fair Market
Value per Share on the date of grant) multiplied by the number of Shares in
respect of which the Related Share Appreciation Right is being exercised,
provided that the Administrator shall have the right to determine the form of
payment in accordance with Section 8(d)(3) hereof. Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the extent
the Related Rights have been so exercised.

                  (3)   Notwithstanding the foregoing, the Administrator may
determine to settle the exercise of a Share Appreciation Right in cash (or in
any combination of Shares and cash) to the extent that such settlement does not
result in an excise tax being payable pursuant to Section 409A of the Code.

            (e)   Non-Transferability.

                  (1)   Free Standing Share Appreciation Rights shall be
transferable only when and to the extent that an Option would be transferable
under Section 7 of the Plan.

                  (2)   Related Share Appreciation Rights shall be transferable
only when and to the extent that the underlying Option would be transferable
under Section 7 of the Plan.

            (f)   Termination of Employment or Service.

                  (1)   In the event of the termination of employment or service
with the Company or any Subsidiary of a Participant who has been granted one or
more Free Standing Share Appreciation Rights, such rights shall be exercisable
at such time or


      -17-



times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant.

                  (2)   In the event of the termination of employment or service
with the Company or any Subsidiary of a Participant who has been granted one or
more Related Share Appreciation Rights, such rights shall be exercisable at such
time or times and subject to such terms and conditions as set forth in the
related Share Options.

            (g)   Term.

                  (1)   The term of each Free Standing Share Appreciation Right
shall be fixed by the Administrator, but no Free Standing Share Appreciation
Right shall be exercisable more than ten years after the date such right is
granted.

                  (2)   The term of each Related Share Appreciation Right shall
be the term of the Share Option to which it relates, but no Related Share
Appreciation Right shall be exercisable more than ten years after the date such
right is granted.

            SECTION 9. RESTRICTED SHARES, DEFERRED SHARES AND PERFORMANCE
            SHARES.

            (a)   General. Awards of Restricted Shares, Deferred Shares or
Performance Shares may be issued either alone or in addition to other Awards
granted under the Plan. The Administrator shall determine the Eligible
Recipients to whom, and the time or times at which, Awards of Restricted Shares,
Deferred Shares or Performance Shares shall be made; the number of Shares to be
awarded; the price, if any, to be paid by the Participant for the acquisition of
Restricted Shares, Deferred Shares or Performance Shares; the Restricted Period
(as defined in paragraph (c) of this Section 9), if any, applicable to Awards of
Restricted Shares or Deferred Shares; the performance objectives applicable to
Awards of Restricted Shares, Deferred Shares or Performance Shares; and all
other conditions of the Awards of Restricted Shares, Deferred Shares and
Performance Shares. The Administrator may also condition the grant of the Award
of Restricted Shares, Deferred Shares or Performance Shares upon the exercise of
Options, or upon such other criteria as the Administrator may determine, in its
sole discretion. The provisions of the Awards of Restricted Shares, Deferred
Shares or Performance Shares need not be the same with respect to each
Participant.

            (b)   Awards and Certificates. The prospective recipient of Awards
of Restricted Shares, Deferred Shares or Performance Shares shall not have any
rights with respect to any such Award, unless and until such recipient has
executed an Award Agreement and delivered a fully executed copy thereof to the
Company, within a period of sixty days (or such other period as the
Administrator may specify) after the award date. Except as otherwise provided
below in this Section 9(c), (i) each Participant who is granted an Award of
Restricted Shares or Performance Shares shall, upon the issue of such Shares, be
issued a share certificate in respect of such Restricted Shares or Performance
Shares; and (ii) such certificate shall be registered in the name of the


      -18-



Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to any such Award.

            The Company may require that the share certificates evidencing
Restricted Shares or Performance Shares granted hereunder be held in the custody
of the Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Award of Restricted Shares or Performance Shares, the
Participant shall have delivered a share transfer form or other document
required by the Administrator relating to the Shares covered by such Award.

            With respect to Awards of Deferred Shares, at the expiration of the
Restricted Period and upon issuance of such Deferred Shares, share certificates
in respect of such Deferred Shares shall be delivered to the Participant, or his
legal representative, in a number equal to the number of Shares covered by the
Deferred Shares Award.

            (c)   Restrictions and Conditions. The Awards of Restricted Shares,
Deferred Shares and Performance Shares granted pursuant to this Section 9 shall
be subject to the following restrictions and conditions and any additional
restrictions or conditions as determined by the Administrator at the time of
grant or thereafter:

                  (1)   Subject to the provisions of the Plan and the Restricted
Shares Award Agreement, Deferred Shares Award Agreement or Performance Shares
Award Agreement, as appropriate, governing any such Award, during such period as
may be set by the Administrator commencing on the date of grant (the "Restricted
Period"), the Participant shall not be permitted to sell, transfer, charge,
pledge or assign Restricted Shares, Deferred Shares or Performance Shares
awarded under the Plan; provided, however, that the Administrator may, in its
sole discretion, provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part based on such
factors and such circumstances as the Administrator may determine, in its sole
discretion, including, but not limited to, the attainment of certain performance
related goals, the Participant's termination of employment or service as a
director or Consultant to the Company or any Subsidiary, the Participant's death
or Disability. Notwithstanding the foregoing, upon a Change in Control, subject
to applicable law, the provisions of Section 12 shall apply to such outstanding
Awards.

                  (2)   Except as provided in paragraph (c )(l) of this Section
9 or in any relevant Award Agreement, the Participant shall generally have the
rights of a shareholder of the Company with respect to Restricted Shares or
Performance Shares during the Restricted Period. The Participant shall generally
not have the rights of a shareholder with respect to Shares subject to Awards of
Deferred Shares during the Restricted Period; provided, however, that amounts
equal to dividends declared during the Restricted Period with respect to all or
any number of Shares covered by such Award of Deferred Shares may be paid to the
Participant in accordance with a Deferred Shares Award Agreement approved by the
Administrator at the time of the grant of such Award. Certificates for
unrestricted Shares shall be delivered to the Participant promptly after, and
only after, the Restricted Period shall expire without forfeiture (including
repurchase)


      -19-



in respect of such Awards of Restricted Shares, Deferred Shares or Performance
Shares except as the Administrator, in its sole discretion, shall otherwise
determine.

                  (3)   The rights of Participants granted Awards of Restricted
Shares, Deferred Shares or Performance Shares upon termination of employment or
service as a director or Consultant to the Company or to any Subsidiary
terminates for any reason during the Restricted Period shall be set forth in the
Award Agreement.

            SECTION 10. OTHER SHARE-BASED AWARDS.

                              (a)   The Administrator is authorized to grant
            Awards to Participants in the form of Other Share-Based Awards, as
            deemed by the Administrator to be consistent with the purposes of
            the Plan and as evidenced by an Award Agreement. The Administrator
            shall determine the terms and conditions of such Awards, consistent
            with the terms of the Plan, at the date of grant or thereafter,
            including any Performance Goals and performance periods. Shares or
            other securities or property delivered pursuant to an Award in the
            nature of a purchase right granted under this Section 10 shall be
            purchased for such consideration, paid for at such times, by such
            methods, and in such forms, including, without limitation, Shares
            repurchased, other Awards, notes or other property, as the
            Administrator shall determine (provided that the par value of any
            issued Share is paid), subject to any required corporate action.

                              (b)   To the extent that the Plan is subject to
            Section 162(m) of the Code, no payment shall be made to a "covered
            employee" (within the meaning of Section 162(m) of the Code) prior
            to the certification by the Committee that any applicable
            Performance Goals have been attained. The Committee may establish
            other rules applicable to the Other Share-Based Awards, provided,
            however, that in the event that such Other Share-Based Awards are,
            or are likely to be, subject to Section 162(m) of the Code, such
            rules shall be in compliance with Section 162(m) of the Code.

            SECTION 11. NON-OFFICER DIRECTOR GRANTS.

            (a)   Annual Grant. Except as otherwise provided by the
Administrator, on the first business day after the annual general meeting of the
Company in 2007 and each annual general meeting thereafter during the term of
the Plan, each Non-Officer Director shall be granted that number of Shares, the
aggregate Fair Market Value of which shall equal $15,000 on the date of grant
(the "Non-Officer Director Shares"). Any fractional amounts shall be settled in
cash. The Non-Officer Director Shares shall be issued on, and fully vested as
of, the date of grant.

            (b)   Share Availability. In the event that the number of Shares
available for grant under the Plan is not sufficient to accommodate the Awards
of Non-


      -20-



Officer Director Shares, then the remaining Shares available for such automatic
Awards shall be granted to each Non-Officer Director who is to receive such an
Award on a pro-rata basis. No further grants shall be made until such time, if
any, as additional Shares become available for grant under the Plan.

            SECTION 12. ACCELERATED VESTING UPON A CHANGE IN CONTROL.

      Unless otherwise determined by the Administrator and evidenced in an Award
Agreement, in the event of a termination of employment or service by the Company
without Cause within twelve (12) months following a Change of Control, and in
the case of those Participants who are entitled to receive severance under an
employment agreement with the Company upon a termination by the Participant for
good reason (as defined in such employment agreement) upon such a termination
for good reason within twelve (12) months following a Change in Control:

                              (a)   any Award carrying a right to exercise that
            was not previously vested and exercisable shall become fully vested
            and exercisable and shall remain exercisable; and

                              (b)   the restrictions, deferral limitations,
            payment conditions, and forfeiture conditions applicable to any
            other Award granted under the Plan shall immediately lapse and such
            Awards shall be deemed fully vested, and any performance conditions
            imposed with respect to Awards shall be deemed to be fully achieved.

            SECTION 13. AMENDMENT AND TERMINATION.

            The Board may amend, alter or terminate the Plan, but no amendment,
alteration, or termination shall be made that would impair the rights of a
Participant under any Award theretofore granted without such Participant's
consent. Unless the Board determines otherwise, the Board shall obtain approval
of the Company's shareholders for any amendment that would require such approval
in order to satisfy the requirements of Sections 162(m) or 422 of the Code, any
rules of the stock exchange on which the Shares are traded or other applicable
law. The Administrator may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 5 of Plan, no such
amendment shall impair the rights of any Participant without his or her consent.

            SECTION 14. UNFUNDED STATUS OF PLAN.

            The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.


      -21-



            SECTION 15. WITHHOLDING TAXES.

            Whenever cash is to be paid pursuant to an Award granted hereunder,
the Company shall have the right to deduct therefrom an amount sufficient to
satisfy any federal, state and local withholding tax requirements related
thereto. Whenever Shares are to be issued or become vested pursuant to an Award,
the Company shall have the right to require the Participant to remit to the
Company in cash an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. With the approval of the
Administrator, in its sole discretion, the Participant may satisfy the foregoing
requirement by electing to have the Company repurchase unrestricted Shares which
the Participant already owns and in such event the Company shall repurchase such
number of Shares having a value equal to the minimum amount of tax required to
be withheld. Such Shares shall be valued at their Fair Market Value on the date
as of which the amount of tax to be withheld is determined. Any fractional
amounts shall be settled in cash. Such an election may be made with respect to
all or any portion of the Shares to be issued pursuant to an Award.

            SECTION 16. GENERAL PROVISIONS.

                              (a)   Shares shall not be issued or delivered
            pursuant to any Award granted hereunder unless the exercise of such
            Award (if applicable) and/or the issuance and delivery of such
            Shares pursuant thereto shall comply with all relevant provisions of
            law, including, without limitation, Bermuda law, the U.S. Securities
            Act of 1933, as amended, the Exchange Act and the requirements of
            any stock exchange upon which the Shares may then be listed, and
            shall be further subject to the approval of counsel for the Company
            with respect to such compliance.

                              (b)   The Administrator may require each person
            acquiring Shares to represent to and agree with the Company in
            writing that such person is acquiring the Shares without a view to
            distribution thereof. The certificates for such Shares may include
            any legend that the Administrator deems appropriate to reflect any
            restrictions on transfer which the Administrator determines, in its
            sole discretion, arise under applicable securities laws or are
            otherwise applicable.

                              (c)   All Shares issued under the Plan shall be
            subject to such stop-transfer orders and other restrictions as the
            Administrator may deem advisable under the rules, regulations, and
            other requirements of the Securities and Exchange Commission, any
            stock exchange upon which the Shares may then be listed, Bermuda law
            and any applicable federal or state securities law, and the
            Administrator may cause a legend or legends to be placed on any
            certificates representing such Shares to make appropriate reference
            to such restrictions.


      -22-



                              (d)   The Administrator may require a Participant
            receiving Shares pursuant to the Plan, as a condition precedent to
            receipt of such Shares, to enter into a shareholder agreement or
            "lock-up" agreement in such form as the Committee shall determine is
            necessary or desirable to further the Company's interests.

                              (e)   The adoption of the Plan shall not confer
            upon any Eligible Recipient any right to continued employment or
            service with the Company or any Subsidiary, as the case may be, nor
            shall it interfere in any way with the right of the Company or any
            Subsidiary to terminate the employment or service of any of its
            Eligible Recipients at any time.

                              (f)   No Shares shall be issued under the Plan for
            less than par value.

            SECTION 17. EFFECTIVE DATE.

      The Original Plan became effective upon adoption by the Board on January
17, 2006 (the "Effective Date"), subject to requisite approval of shareholders
of the Company and subject to permission being granted by the Bermuda Monetary
Authority pursuant to the Exchange Control Act 1972 (as amended) for the issue
of the Shares pursuant to the Plan.

            SECTION 18. TERM OF PLAN.

            No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the Effective Date, but Awards theretofore granted may extend
beyond that date.

            SECTION 19. GOVERNING LAW.

            The Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of Bermuda.


      -23-




                                                               EXECUTION VERSION

                  FIRST AMENDMENT, dated as of June 15, 2006 (this "Amendment")
to (a) the Credit Agreement, dated as of February 28, 2006 (the "Credit
Agreement"), by and among AIRCASTLE INVESTMENT HOLDINGS 2 LIMITED ("Holdings"),
an exempted company organized and existing under the laws of Bermuda, AIRCASTLE
IRELAND NO. 3 LIMITED ("Irish Holdings"), a limited liability company
incorporated in Ireland and an indirect subsidiary of the Parent, and certain
Holdings Subsidiary Trusts and Holdings SPCs designated as Borrowing Affiliates
(such Holdings Subsidiary Trusts and Holdings SPCs being referred to
individually as a "Borrower" or collectively as the "Borrowers"), JPMORGAN CHASE
BANK, N.A., as administrative agent (the "Administrative Agent") and certain
lenders from time to time parties thereto, and (b) the Parent Guarantor Guaranty
Agreement, dated as of February 28, 2006 (the "Guaranty") by Aircastle Limited
(formerly Aircastle Investment Limited) (the "Guarantor") to the Administrative
Agent. Capitalized terms used but not otherwise defined in this Amendment shall
have the meanings set forth in the Credit Agreement and the rules of
interpretation set forth therein shall apply to this Amendment.

                              W I T N E S S E T H:
                              --------------------

     WHEREAS, Holdings, Irish Holdings, the Borrowers, the Lenders and the
Administrative Agent are parties to the Credit Agreement;

     WHEREAS, Guarantor is party to the Guaranty;

     WHEREAS, the Borrowers have requested that the Lenders amend the Credit
Agreement and the Guaranty, as more fully described herein; and

     WHEREAS, the Lenders are willing to agree to such amendment, but only upon
the terms and subject to the conditions set forth herein;

     NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

         1. Amendment to Section 1.1 of the Credit Agreement. Subsection 1.1 of
the Credit Agreement is hereby amended by inserting, in proper alphabetical
order, the following substitute defined terms and related definitions:

         (a) "Advance Rate Percentage" means (a) until the earlier of (i) six
months after the First Amendment Final Effective Date and (ii) completion of the
Parent IPO, 90% and (b) thereafter, 85%.

         (b) "Consolidated Net Worth" means at any date, all amounts that would,
in conformity with GAAP, be included on a consolidated balance sheet of the
Parent and its Subsidiaries under stockholders' equity at such date plus, until
the completion of the Parent IPO, the uncalled portion of the $100,000,000
Capital Call.

         (c) "First Amendment" means the First Amendment to the Agreement dated
as of June 15, 2006, among the Holdings, Irish Holdings, the Borrowers, the
Lenders and the Administrative Agent.

         (d) "First Amendment Initial Effective Date" means the date on which
the conditions precedent set forth in paragraph 8 of the First Amendment shall
have been satisfied or waived, which date is June 15, 2006.



         (e) "First Amendment Final Effective Date" means the date on which the
conditions precedent set forth in paragraph 9 of the First Amendment shall have
been satisfied or waived.

         (f) "Offering Memorandum" means that certain Offering Memorandum, dated
as of June 1, 2006 whereby ACS 2006-1 Pass Through Trust issues up to
$560,000,000 of Class G-1 Floating Rate Asset Backed Certificates Series 2006-1;

         (g) "Securitization Interests" means the "Class E-1 Securities" issued
by ACS Aircraft Finance Ireland plc pursuant to the Offering Memorandum.

         (h) "Stated Termination Date" means November 15, 2007.

         (i) "Total Revolving Credit Commitment" means a principal amount equal
to $750,000,000, as may be reduced from time to time in accordance with Section
2.7.

         2. Amendments to Sections 2.1(a); 2.3(b)(ii) and (iii), 2.12 and 8.22
of the Credit Agreement. Subsections 2.1(a); 2.3(b)(ii) and (iii) and Sections
2.12 and 8.22 of the Credit Agreement are each hereby amended by replacing
references to "85%" therein with "the Advance Rate Percentage".

         3. Amendments to Section 8.21 of the Credit Agreement. Subsection
8.21(c) of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:

            "ACS Aircraft Finance Bermuda Limited and its successors and assigns
shall continue to be owned 99.1% by AHC Ltd and 0.1% by Holdings (0.1%) or;"

         4. Amendment to Exhibit A to the Credit Agreement. Exhibit A to the
Credit Agreement shall be replaced in its entirety with a new Exhibit A attached
as Annex I to this Amendment.

         5. Amendments to Section 8.3 of the Credit Agreement. Subsection 8.3 of
the Credit Agreement is hereby amended by inserting new clause (xiii) at the end
thereof, as follows:

         "(xiii) Liens on the residual equity interest in ACS Aircraft Finance
Bermuda Limited in favor of Deutsche Bank Trust Company Americas, as Security
Trustee under the security trust agreement (each as referred to in the Offering
Memorandum), to secure the "Secured Obligations" under and as defined in such
security trust agreement."

         6. Amendments to Section 9.1. Subsection 9.1(m) of the Credit Agreement
is hereby amended by inserting at the end of Section 9.1(m) the following:

         "or;
         (n) an "indenture event of default" occurs, as defined in the Offering
Memorandum;"

         7. Amendments to Section 10 of the Guaranty. Subsection 10(m)(ii) of
the Guaranty is hereby amended by inserting at the end thereof the following:

         "; and



         (C) On or following the Final Amendment Effective Date (as defined in
the First Amendment to the Credit Agreement) the Guarantor may make a one-time
distribution consisting of an aggregate amount of up to $37,000,000."

         8. Conditions to Initial Amendment Effective Date. Section 1, clauses b
through g, and Sections 3 through 6 of this Amendment shall become effective
upon the date (the "Initial Amendment Effective Date") when the following
conditions are satisfied:

         (a) Counterparts. The Administrative Agent shall have received
counterparts of this Amendment, duly executed and delivered by Holdings, Irish
Holdings, the Guarantor, the Borrowers and the Lenders;

         (b) No Default. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the transactions
contemplated herein; and

         (c) Representations and Warranties. Each of the representations and
warranties made by the Credit Parties in or pursuant to the Loan Documents shall
be true and correct in all material respects on and as of the date hereof,
before and after giving effect to the effectiveness of this Amendment, as if
made on and as of the date hereof, except to the extent such representations and
warranties expressly relate to a specific earlier date, in which case such
representations and warranties were true and correct as of such earlier date.

         9. Conditions to Final Amendment Effective Date. Section 1, clauses a,
h and i, Section 2 and Section 7 of this Amendment shall become effective upon
the date (the "Final Amendment Effective Date") when the following conditions
are satisfied:

         (a) Counterparts. The Administrative Agent shall have received
counterparts of this Amendment, duly executed and delivered by Holdings, Irish
Holdings, Guarantor, the Borrowers and the Lenders;

         (b) No Default. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the transactions
contemplated herein;

         (c) Representations and Warranties. Each of the representations and
warranties made by the Credit Parties in or pursuant to the Loan Documents shall
be true and correct in all material respects on and as of the date hereof,
before and after giving effect to the effectiveness of this Amendment, as if
made on and as of the date hereof, except to the extent such representations and
warranties expressly relate to a specific earlier date, in which case such
representations and warranties were true and correct as of such earlier date;

         (d) Fees and Expenses. The Borrower shall pay (i) equally among each of
JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending and Citigroup Global
Markets Inc., an arrangement fee in an amount equal to 0.250% of the additional
$250,000,000 of commitments provided on the Final Amendment Effective Date and
(ii) all accrued and unpaid fees, costs and expenses in connection with the
Amendment and the transactions contemplated thereby to the extent then due and
payable, together with the reasonable legal fees and expenses of the
Administrative Agent.

         (e) Repayment of Existing Credit Facility. All obligations under the
Bermuda Holding 1/AI 1 Credit Agreement shall have been repaid in full and all
commitments thereunder terminated.




         10. Continuing Effect of Loan Documents. This Amendment shall not
constitute an amendment or waiver of any provision of the Credit Agreement or
the Guaranty not expressly referred to herein and shall not be construed as an
amendment, waiver or consent to any further or future action on the part of the
Credit Parties that would require an amendment, waiver or consent of the Lenders
or Administrative Agent. Except as expressly amended hereby, the provisions of
the Credit Agreement and the Guaranty are and shall remain in full force and
effect.

         11. Counterparts. This Amendment may be executed by one or more of the
parties hereto on any number of separate counterparts (including by facsimile),
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.

         12. Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         13. Integration. This Amendment and the other Loan Documents represent
the agreement of the Credit Parties, the Administrative Agent and the Lenders
with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.

         14. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.






         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.

                                      AIRCASTLE INVESTMENT HOLDINGS 2 LIMITED

                                      AIRCASTLE IRELAND NO. 3 LIMITED



                                      By: /s/ David Walton
                                         ---------------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------




                                                                               2

                                      AIRCASTLE LIMITED



                                      By: /s/ David Walton
                                         ---------------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------




                                                                               3

                                      WELLS FARGO BANK NORTHWEST,
                                      NATIONAL ASSOCIATION., as Owner Trustee
                                      under the respective Trust Agreements


                                      By: /s/ Nancy M. Dahl
                                         ---------------------------------------
                                         Name:  Nancy M. Dahl
                                              ----------------------------------
                                         Title: Vice President
                                               ---------------------------------




                                                                               4

                                      CONSTITUTION AIRCRAFT LEASING
                                      (IRELAND) 2 LIMITED


                                      By: /s/ Tony Traynor
                                         ---------------------------------------
                                         Name:  Tony Traynor
                                              ----------------------------------
                                         Title: Director
                                               ---------------------------------




                                                                               5

                                      JPMORGAN CHASE BANK, N.A., as Agent and as
                                      a Lender


                                      By: /s/ Matthew H. Massie
                                         ---------------------------------------
                                         Name: Matthew H. Massie
                                              ----------------------------------
                                         Title: Managing Director
                                               ---------------------------------




                                                                               6

                                      BEAR STEARNS CORPORATE LENDING INC.,
                                      as a Lender


                                      By: /s/ Jeffrey Mayer
                                         ---------------------------------------
                                         Name: Jeffrey Mayer
                                              ----------------------------------
                                         Title: Senior Managing Director
                                               ---------------------------------





                                                                               7

                                      CITIBANK, N.A.,
                                      as a Lender


                                      By: /s/ Gaylord C. Holmes
                                         ---------------------------------------
                                         Name: Gaylord C. Holmes
                                              ----------------------------------
                                         Title: Director
                                               ---------------------------------







                                                                               8



                                                                         ANNEX I

                                         EXHIBIT A

                        Applicable Commitment Percentages
                        ---------------------------------


                                                                   Applicable Commitment
Lenders                             Revolving Credit Commitment         Percentage
-------                             ---------------------------    ---------------------

JPMorgan Chase Bank, N.A.               $    250,000,000.00                 33.33%
Bear Stearns Corporate Lending Inc.     $    250,000,000.00                 33.33%
Citigroup Global Markets Inc.           $    250,000,000.00                 33.33%








                                                                  EXECUTION COPY


                             AMENDMENT NO. 1 TO THE
                          364-DAY SENIOR SECURED CREDIT
                     AGREEMENT DATED AS OF OCTOBER 25, 2005

                            Dated as of July 18, 2006

     AMENDMENT NO. 1 TO THE 364-DAY SENIOR SECURED CREDIT AGREEMENT DATED AS OF
OCTOBER 25, 2005 (THIS "AMENDMENT") by and among

         (a) WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Trustee under
     the Trust Agreement (MSN 337), dated as of October 19, 2005 ("BORROWER
     337"), with the Beneficial Owner (as defined below) as trustor;

         (b) WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Trustee under
     the Trust Agreement (MSN 342), dated as of October 19, 2005 ("BORROWER 342"
     and, together with Borrower 337, the "BORROWERS"), with the Beneficial
     Owner as trustor;

         (c) AIRCASTLE IRELAND NO. 2 LIMITED, an Irish private limited liability
     company, as trustor and sole beneficiary of each of the Trusts (in such
     capacity, the "BENEFICIAL OWNER");

         (d) CITIBANK, N.A., a national banking association, in its capacity as
     a Lender under the Credit Agreement (as hereinafter defined); and

         (e) CITIBANK, N.A., in its capacity as agent for the Lenders (in such
     capacity, and together with any successor agent appointed in accordance
     with the terms of Section 10.7 of the Credit Agreement, the "AGENT").

                             PRELIMINARY STATEMENTS:

     (1) The Borrowers, the Lender and the Agent have entered into the 364-Day
Senior Secured Credit Agreement dated as of October 25, 2005 (the "CREDIT
AGREEMENT"; capitalized terms used herein but not defined shall be used herein
as defined in the Credit Agreement).

     (2) The Borrowers, the Lender and the Agent have agreed to amend the Credit
Agreement as hereinafter set forth.

     SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is,
effective as of the date hereof hereby amended as follows:

     (a) Section 1.1 of the Credit Agreement is hereby amended as follows:

         (i) By inserting the following new definitions in alphabetical order:




              "'ADDITIONAL LOAN' means a Term Loan made pursuant to the last
         sentence of Section 2.1(a)."

              "'APPLICABLE PERCENTAGE' means (a) prior to an IPO, 90%, and (b)
         from and after an IPO, 67%."

              "'FIRST AMENDMENT' means Amendment No. 1 to this Agreement dated
         as of July 18, 2006."

              "'IPO' means an initial offering and sale of shares of Aircastle
         Investment Limited's capital stock to the public, whether pursuant to a
         registration statement registering such shares of capital stock with
         the Securities and Exchange Commission in compliance with Section 5 of
         the Securities Act of 1933, as amended, or otherwise."

         (ii) By revising the definition of "APPLICABLE AIRCRAFT ADVANCE RATE"
     to read as follows:

              "'APPLICABLE AIRCRAFT ADVANCE RATE' with respect to any Eligible
         Aircraft means, at any time, the Applicable Percentage."

         (iii) By revising the definition of "LOAN AMOUNT" to read as follows:

              "'LOAN AMOUNT' means, with respect to any Eligible Aircraft at any
         time, the Applicable Aircraft Borrowing Base of such Aircraft at such
         time."

         (iv) By revising the definition of "STATED TERMINATION DATE" to read as
     follows:

              "'STATED TERMINATION DATE' means March 31, 2007."

         (v) By revising the definition of "TOTAL TERM LOAN COMMITMENT" to read
     as follows:

              "'TOTAL TERM LOAN COMMITMENT' means a principal amount equal to
         $110,248,500, minus principal amounts of the Loans prepaid from time to
         time, plus $25,116,000."

(b) Section 2.1 of the Credit Agreement is hereby amended as follows:

         (i) By adding the following sentence at the end of Section 2.1(a):

              "Subject to the terms of this Agreement and the conditions set
         forth in Section 2 of the First Amendment, each Lender also severally
         agrees to make an Additional Loan to each of Borrower 337 and Borrower
         342, on any Business Day specified by such Borrowers on or prior to
         October 31, 2006, in each case in an amount equal to such Lender's
         Applicable Commitment Percentage of $12,558,000; provided, that the
         Lenders will not be required


                                       2


         and shall have no obligation to make any such Loan (i) so long as a
         Default or an Event of Default has occurred and is continuing or (ii)
         if the Agent has accelerated the maturity of any of the Loans as a
         result of an Event of Default."

         (ii) By inserting at the beginning of clause (B) of Section 2.1(c) the
     following: "except in the case of any Additional Loan,".

         (iii) By inserting at the end of the last sentence of Section 2.1(c)(i)
     the following: "or, in the case of any Additional Loan, as directed by the
     Applicable Borrower".

         (c) Section 2.3 of the Credit Agreement is hereby amended by adding a
     new Section 2.3(b)(v) to read as follows:

              "(v) Within three Business Days of the occurrence of an IPO, the
         Borrowers shall prepay the principal of the Loans such that the
         aggregate principal amount of the Loans then outstanding does not
         exceed Applicable Aircraft Borrowing Base (as in effect after giving
         effect to such IPO) of the Eligible Aircraft that have not been
         released from the Lien of this Agreement minus the amount of any
         prepayments made between July 18, 2006 and the date of such IPO."

         (d) Section 2.10 of the Credit Agreement is hereby amended by adding
     the following at the end thereof: "or, in the case of any Additional Loans,
     for such other lawful purposes as may be determined by the Applicable
     Borrower."

     SECTION 2. Conditions to Making Loans. The obligations of the Lenders to
make the Additional Loans is subject to the conditions precedent that on the
date of the making of the Additional Loans (the "ADDITIONAL LOAN DATE"):

         (a) The Agent shall have received, in form and substance satisfactory
     to the Agent and the Lenders, the following:

              (i) executed originals of this First Amendment and a Consent
         substantially in the form of Exhibit A to the First Amendment (the
         "CONSENT" and, together with this Amendment, the "AMENDMENT DOCUMENTS")
         executed by the Guarantors, Holdings and the Parent;

              (ii) (A) the favorable written opinion of Milbank, Tweed, Hadley &
         McCloy LLP, counsel to the Credit Parties and the Parent, (B) the
         favorable written opinion of Ray, Quinney & Nebeker, counsel to Wells
         Fargo Bank Northwest, National Association, the trustee under each of
         the Trust Agreements, and (C) the favorable opinion of A&L Goodbody,
         Irish counsel to the Beneficial Owner, in each case covering such
         matters as the Agent may reasonably require;

              (iii) resolutions of the boards of directors or other appropriate
         governing body (or of the appropriate committee thereof) of each Credit
         Party (or,


                                       3


         in the case of a Credit Party that is a trust, resolutions of the
         appropriate board or committee of each trustee thereof) certified by
         its secretary or assistant secretary as of the Additional Loan Date,
         approving and adopting the Amendment Documents to be executed by such
         Person, and authorizing the execution and delivery thereof;

              (iv) a certificate of the secretary or assistant secretary of each
         Credit Party certifying that the Organizational Documents of such
         Person, as delivered to the Agent on the Closing Date, have not in any
         way been amended or modified and remain in full force and effect as of
         the Additional Loan Date;

              (v) if applicable, a certificate issued as of a recent date by the
         Secretary of State or comparable official of the jurisdiction of
         formation of each Credit Party as to the formation, due existence and
         good standing of such Credit Party; and

              (vi) a Borrowing Notice on behalf of each Applicable Borrower.

         (b) The representations and warranties of the Credit Parties and the
     Holdings set forth in Article VI of the Credit Agreement and in each of the
     other Loan Documents shall be true and correct in all material respects on
     and as of the Additional Loan Date, with the same effect as though such
     representations and warranties had been made on and as of such date, except
     to the extent that such representations and warrants expressly relate to an
     earlier date; and

         (c) In the good faith judgment of the Agent and the Lenders:

              (i) no litigation, action, suit, investigation or other arbitral,
         administrative or judicial proceeding shall be pending or threatened
         which could reasonably be likely to result in a Material Adverse
         Effect; and

              (ii) the Credit Parties and Holdings shall have received all
         approvals, consents and waivers, and shall have made or given all
         necessary filings and notices as shall be required to consummate the
         transactions contemplated hereby without the occurrence of any default
         under, conflict with or violation of (A) any applicable law, rule,
         regulation, order or decree of any Governmental Authority or arbitral
         authority or (B) any agreement (including, without limitation,
         servicing agreements), document or instrument to which any of the
         Credit Parties is a party or by which any of them or their properties
         is bound;

         (d) No default or Event of Default specified in Article IX of the
     Credit Agreement shall have occurred and be continuing.

     SECTION 3. Confirmation of the Representations and Warranties. The
Borrowers hereby represent and warrant, on and as of the date hereof and the
Additional Loan Date, that the representations and warranties contained in the
Credit Agreement are correct in all material respects on and as of the date
hereof or the Additional Loan Date (as the case may be),


                                       4


after giving effect to this Amendment, as though made on and as of the date
hereof or the Additional Loan Date (as the case may be), other than any such
representations or warranties made only as of, or relating to, an earlier date.

     SECTION 4. Reference to and Effect on the Credit Agreement and Loan
Documents.

         (a) On and after the date hereof, each reference in the Credit
     Agreement to "this Agreement", "hereunder", "hereof" or words of like
     import referring to the Credit Agreement, and each reference in the Loan
     Documents to "the Credit Agreement", "thereunder", "thereof" or words of
     like import referring to the Credit Agreement, shall mean and be a
     reference to the Credit Agreement, as amended by this Amendment.

         (b) The Credit Agreement and Loan Documents, as specifically amended by
     this Amendment, are and shall continue to be in full force and effect and
     are hereby in all respects ratified and confirmed. Without limiting the
     generality of the foregoing, the Security Instruments and all of the
     Collateral described therein do and shall continue to secure the payment of
     all Obligations of the Credit Parties under the Loan Documents to the
     extent provided therein, in each case as amended by this Amendment.

         (c) The execution, delivery and effectiveness of this Amendment shall
     not, except as expressly provided herein, operate as a waiver of any right,
     power or remedy of any Lender or the Agent under the Credit Agreement or
     any of the Loan Documents, nor constitute a waiver of any provision of the
     Credit Agreement or any of the Loan Documents.

     SECTION 5. Costs and Expenses. The Borrowers agree to pay on demand all
costs and expenses of the Agent in connection with the preparation, execution,
delivery, administration, modification and amendment of this Amendment and the
other instruments and documents to be delivered hereunder (including, without
limitation, the reasonable fees and expenses of counsel for the Agent) in
accordance with the terms of Section 11.5 of the Credit Agreement. In addition,
the Borrowers shall pay any and all stamp and other taxes payable or determined
to be payable in connection with the execution and delivery of this Amendment
and the other instruments and documents to be delivered hereunder, and agrees to
save the Agent and each Lender harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes.

     SECTION 6. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement. Delivery
of an executed counterpart of a signature page to this Amendment by telecopier
shall be effective as delivery of a manually executed counterpart of this
Amendment.


                                       5


     SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.

                  [Rest of this page intentionally left blank.]


                                       6


     IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
made, executed and delivered by their duly authorized officers as of the day and
year first above written.

                                       AIRCASTLE IRELAND NO. 2 LIMITED,
                                       as Beneficial Owner


                                       By: /s/ Tony Traynor
                                           -------------------------------------
                                           Name:  Tony Traynor
                                                  ------------------------------
                                           Title: Director
                                                  ------------------------------




                  Signature Page to Aircastle Amendment No. 1






                                       BORROWERS:
                                       ----------

                                       WELLS FARGO BANK NORTHWEST,
                                       NATIONAL ASSOCIATION,
                                       not in its individual capacity but solely
                                       as Owner Trustee under the Trust
                                       Agreement (MSN 337), dated as of October
                                       19, 2005, to which it is a party


                                       By: /s/ Val T. Orton
                                           -------------------------------------
                                           Name:  Val T. Orton
                                                  ------------------------------
                                           Title: Vice President
                                                  ------------------------------

                                       WELLS FARGO BANK NORTHWEST,
                                       NATIONAL ASSOCIATION,
                                       not in its individual capacity but solely
                                       as Owner Trustee under the Trust
                                       Agreement (MSN 342), dated as of October
                                       19, 2005, to which it is a party


                                       By: /s/ Val T. Orton
                                           -------------------------------------
                                           Name:  Val T. Orton
                                                  ------------------------------
                                           Title: Vice President
                                                  ------------------------------




                  Signature Page to Aircastle Amendment No. 1




                                       CITIBANK, N.A.,
                                       as Agent and as a Lender


                                       By: /s/ Gaylord C. Holmes
                                           ---------------------------
                                       Name: Gaylord C. Holmes
                                       Title: Director




                  Signature Page to Aircastle Amendment No. 1




                          EXHIBIT A TO AMENDMENT NO. 1


                                     CONSENT

                                                     Dated as of ______ __, 2006



     The undersigned hereby consents to the foregoing Amendment No. 1 (the
"AMENDMENT") and hereby confirms and agrees that:

     (a) notwithstanding the effectiveness of the Amendment, each of the Loan
Documents to which the undersigned is a party is, and shall continue to be, in
full force and effect and is hereby ratified and confirmed in all respects,
except that, on and after the effectiveness of such Amendment, each reference in
each such Loan Document to the "Credit Agreement", "thereunder", "thereof" or
words of like import shall mean and be a reference to the Credit Agreement as
amended by the Amendment, and

     (b) the Security Instruments (if any) to which the undersigned is a party
and all of the Collateral described therein do, and shall continue to, secure
the payment of all of obligations purported to be secured thereby.



                                       [GUARANTOR] [PARENT] [HOLDINGS]


                                       By
                                          --------------------------------------
                                          Title:





Table of Contents

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption ‘‘Experts’’ and to the use of our report dated March 31, 2006 in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-134669) and the related Prospectus of Aircastle Limited for the registration of its common shares.

/s/ Ernst & Young LLP

New York, New York
July 24, 2006




Table of Contents

Exhibit 23.6

CONSENT OF Aviation Specialists Group (‘‘ASG’’)

As a provider of aircraft appraisals, market analysis and aviation industry insight, we hereby consent to the use of the Aircraft Lease Rates data contained in this Registration Statement (Registration No. 333-134669) on Form S-1, as amended, which references our company as the source of such data and to all references to our company included in such Registration Statement. We also consent to the reference to us under the heading ‘‘Experts’’ in the Registration Statement.

/s/ Fred Klein                            
Fred Klein
President

Aviation Specialists Group, Inc.
1037 Sterling Road, Suite 203
Herndon, Virginia 20170
July 5, 2006




Table of Contents

Exhibit 99.1

CONSENT AND ACKNOWLEDGMENT

The undersigned is a proposed director of Aircastle Limited (the ‘‘Company’’). As such, the undersigned understands that such person must be included in the Company's prospectus as a proposed director. Accordingly, the undersigned hereby consents to the inclusion of the undersigned's name as a proposed director of the Company, along with a required description of the undersigned's business experience, in the Company's Registration Statement on Form S-1, including any amendments thereto, to be filed with the Securities and Exchange Commission.

July 7, 2006.

/s/ Peter Ueberroth
Peter Ueberroth



Table of Contents

Exhibit 99.2

CONSENT AND ACKNOWLEDGMENT

The undersigned is a proposed director of Aircastle Limited (the ‘‘Company’’). As such, the undersigned understands that such person must be included in the Company's prospectus as a proposed director. Accordingly, the undersigned hereby consents to the inclusion of the undersigned's name as a proposed director of the Company, along with a required description of the undersigned's business experience, in the Company's Registration Statement on Form S-1, including any amendments thereto, to be filed with the Securities and Exchange Commission.

July 24, 2006.

/s/ Ronald L. Merriman    
Ronald L. Merriman



Table of Contents

Exhibit 99.3

CONSENT AND ACKNOWLEDGMENT

The undersigned is a proposed director of Aircastle Limited (the ‘‘Company’’). As such, the undersigned understands that such person must be included in the Company's prospectus as a proposed director. Accordingly, the undersigned hereby consents to the inclusion of the undersigned's name as a proposed director of the Company, along with a required description of the undersigned's business experience, in the Company's Registration Statement on Form S-1, including any amendments thereto, to be filed with the Securities and Exchange Commission.

July 24, 2006.

/s/ Douglas A. Hacker    
Douglas A. Hacker



Table of Contents

Exhibit 99.4

CONSENT AND ACKNOWLEDGMENT

The undersigned is a proposed director of Aircastle Limited (the ‘‘Company’’). As such, the undersigned understands that such person must be included in the Company's prospectus as a proposed director. Accordingly, the undersigned hereby consents to the inclusion of the undersigned's name as a proposed director of the Company, along with a required description of the undersigned's business experience, in the Company's Registration Statement on Form S-1, including any amendments thereto, to be filed with the Securities and Exchange Commission.

July 24, 2006.

/s/ Ronald W. Allen    
Ronald W. Allen



Table of Contents

Exhibit 99.5

CONSENT AND ACKNOWLEDGMENT

The undersigned is a proposed director of Aircastle Limited (the ‘‘Company’’). As such, the undersigned understands that such person must be included in the Company's prospectus as a proposed director. Accordingly, the undersigned hereby consents to the inclusion of the undersigned's name as a proposed director of the Company, along with a required description of the undersigned's business experience, in the Company's Registration Statement on Form S-1, including any amendments thereto, to be filed with the Securities and Exchange Commission.


July 23, 2006 /s/ John Z. Kukral
  John Z. Kukral