-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FtkZx4OcrUVfYbPVnDTJvjpKlmGgGWKGsX8Zou7R4Qj/ciXA/lYkXotd5pB2v7uZ COoNxfCSlitOh2qtDcRLtQ== 0001047469-03-018490.txt : 20030514 0001047469-03-018490.hdr.sgml : 20030514 20030514170408 ACCESSION NUMBER: 0001047469-03-018490 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVIS GROUP HOLDINGS INC CENTRAL INDEX KEY: 0001040445 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510] IRS NUMBER: 113347585 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13315 FILM NUMBER: 03699938 BUSINESS ADDRESS: STREET 1: 9 WEST 57TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 9734963565 MAIL ADDRESS: STREET 1: 9 WEST 57TH STREET CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: AVIS RENT A CAR INC DATE OF NAME CHANGE: 19970604 10-Q 1 a2110474z10-q.htm FORM 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
COMMISSION FILE NUMBER: 1-13315

AVIS GROUP HOLDINGS, INC.
(Exact Name Of Registrant As Specified In Its Charter)

DELAWARE (State or other jurisdiction of incorporation or organization)		11-3347585 (I.R.S. Employer Identification No.)

6 SYLVAN WAY PARSIPPANY, NJ (Address of principal executive offices)		07054 (Zip Code)

(973) 496-3500
(Registrant's telephone number, including area code)

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

Indicate by checkmark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No ý

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of the Registrant's common stock was 5,537 shares as of April 30, 2003.

Avis Group Holdings, Inc. meets the conditions set forth in General Instructions H (1) (a) and (b) to Form 10-Q and is therefore filing this form with the reduced disclosure format.

Avis Group Holdings, Inc. and Subsidiaries

Index

		Page
PART I	Financial Information
Item 1.	Financial Statements
	Independent Accountants' Report	2
	Consolidated Condensed Statements of Operations for the three months ended March 31, 2003 and 2002	3
	Consolidated Condensed Balance Sheets as of March 31, 2003 and December 31, 2002	4
	Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2003 and 2002	5
	Notes to the Consolidated Condensed Financial Statements	6
Item 2.	Management's Narrative Analysis of the Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosure about Market Risks	19
Item 4.	Controls and Procedures	19
PART II	Other Information
Item 6.	Exhibits and Report on Form 8-K	19
	Signatures	20
	Certifications	21

FORWARD-LOOKING STATEMENTS

Forward-looking statements in our public filings or other public statements are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives. Statements preceded by, followed by or that otherwise include the words "believes", "expects", "anticipates", "intends", "project", "estimates", "plans", "may increase", "may fluctuate" and similar expressions or future or conditional verbs such as "will", "should", "would", "may" and "could" are generally forward-looking in nature and not historical facts. You should understand that the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements:

•: terrorist attacks, such as the September 11, 2001 terrorist attacks on New York City and Washington, D.C., other attacks, acts of war or measures taken by governments in response thereto may negatively affect the travel industry and our financial results and could also result in a disruption in our business;
•: the effect of economic or political conditions or any outbreak or escalation of hostilities or interest rate changes on the economy on a national, regional or international basis and the impact thereof on our business;
•: the effects of a decline in travel, due to political instability, war, pandemic illness, adverse economic changes or otherwise, on our business;
•: competition in the vehicle rental industry and the financial resources of, and products available to, competitors;
•: our ability to provide fully integrated disaster recovery technology solutions in the event of a disaster;
•: our ability to obtain financing on acceptable terms to finance our growth strategy and to operate within the limitations imposed by financing arrangements;
•: our ability to obtain external financing in the event we are unable to obtain financing from Cendant Corporation;
•: competitive and pricing pressures in the vehicle rental industry;
•: changes, if any, in vehicle manufacturer repurchase arrangements;
•: and changes in laws and regulations, including changes in accounting standards, state and federal tax laws and privacy policy regulation.

Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control.

You should consider the areas of risk described above in connection with any forward-looking statements that may be made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors and Stockholder of
Avis Group Holdings, Inc.
Parsippany, New Jersey

We have reviewed the accompanying consolidated condensed balance sheet of Avis Group Holdings, Inc. and subsidiaries (the "Company") as of March 31, 2003, and the related consolidated condensed statements of operations and cash flows for the three-month periods ended March 31, 2003 and 2002. These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such consolidated condensed financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of the Company as of December 31, 2002, and the related consolidated statements of operations, common stockholder's equity, and cash flows for the year then ended (not presented herein); and in our report dated January 29, 2003, we expressed an unqualified opinion (and included an explanatory paragraph relating to the non-amortization provisions for goodwill and other indefinite lived intangible assets and a change in accounting for derivative instruments and hedging activities) on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 2002 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

New York, New York
May 8, 2003

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands)

		Three Months Ended March 31, 2003			Three Months Ended March 31, 2002
Revenues		$	603,580		$	564,603

Expenses
	Operating, net		243,913			224,035
	Vehicle depreciation and lease charges, net		184,042			159,795
	Selling, general and administrative		108,153			114,931
	Vehicle interest, net		54,959			50,647
	Non-vehicle interest		11,113			10,795
	Non-vehicle depreciation and amortization		10,306			8,553

Total expenses			612,486			568,756

Loss before income taxes			(8,906	)		(4,153	)
Benefit for income taxes			(3,286	)		(1,744	)

Net loss		$	(5,620	)	$	(2,409	)

See Notes to Consolidated Condensed Financial Statements.

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share data)

		March 31, 2003			December 31, 2002
ASSETS
	Cash and cash equivalents	$	28,034		$	25,252
	Restricted cash		62,055			59,012
	Receivables, net		147,215			158,730
	Prepaid expenses		43,067			49,798
	Deferred income taxes		522,831			481,335
	Property and equipment, net		278,963			278,830
	Goodwill		1,254,793			1,254,401
	Other assets		61,872			55,517

Total assets exclusive of assets under management programs			2,398,830			2,362,875

Assets under management programs:
	Restricted cash		103,426			2,462
	Vehicles, net		5,239,281			4,173,847
	Due from vehicle manufacturers, net		208,327			258,459

			5,551,034			4,434,768

Total assets		$	7,949,864		$	6,797,643

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
	Accounts payable	$	212,259		$	205,727
	Accrued liabilities		406,381			415,009
	Due to Cendant Corporation and affiliates, net		707,398			551,809
	Non-vehicle debt		439,206			534,231
	Public liability, property damage and other insurance liabilities		217,893			211,786

Total liabilities exclusive of liabilities under management programs			1,983,137			1,918,562

Liabilities under management programs:
	Vehicle debt		5,325,350			4,245,703
	Deferred income taxes		289,909			288,005

			5,615,259			4,533,708

Commitments and contingencies (Note 7)
Stockholder's equity:
	Common stock, $.01 par value—authorized 10,000 shares; issued 5,537 shares		—			—
	Additional paid-in-capital		168,832			168,832
	Retained earnings		236,132			241,752
	Accumulated other comprehensive loss		(53,496	)		(65,211	)

Total stockholder's equity			351,468			345,373

Total liabilities and stockholder's equity		$	7,949,864		$	6,797,643

See Notes to Consolidated Condensed Financial Statements.

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)

			Three Months Ended March 31, 2003			Three Months Ended March 31, 2002
Operating Activities
Net loss			$	(5,620	)	$	(2,409	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities exclusive of management programs:
	Non-vehicle depreciation and amortization			10,306			8,553
	Net change in operating assets and liabilities, excluding the impact of acquisitions and dispositions:
		Receivables		9,736			(5,541	)
		Accounts payable		(40,417	)		(2,453	)
		Accrued liabilities		(14,333	)		23,568
		Other, net		8,814			(17,397	)

Net cash provided by (used in) operating activities exclusive of management programs				(31,514	)		4,321

Management programs:
	Vehicle depreciation			166,376			152,322

Net cash provided by operating activities				134,862			156,643

Investing Activities
Property and equipment additions				(12,846	)		(16,729	)
Proceeds from sales of property and equipment				3,670			4,685
Payment for purchase of rental car franchise licensees				(208	)		(2,835	)

Net cash used in investing activities exclusive of management programs				(9,384	)		(14,879	)

Management programs:
	Decrease (increase) in restricted cash			(100,964	)		305,289
	Decrease in due from vehicle manufacturers			51,623			31,179
	Investment in vehicles			(2,551,990	)		(1,184,801	)
	Payments received on investment in vehicles			1,334,125			701,530

				(1,267,206	)		(146,803	)

Net cash used in investing activities				(1,276,590	)		(161,682	)

Financing Activities
Principal payments on borrowings				(90,988	)		(125	)
Increase (decrease) in due to Cendant Corporation and affiliates, net				158,011			(13,897	)

Net cash provided by (used in) financing activities exclusive of management programs				67,023			(14,022	)

Management programs:
	Proceeds from borrowings			1,461,910			49,703
	Principal payments on borrowings			(380,945	)		(29,456	)
	Payments for debt issuance costs			(3,695	)		(115	)

				1,077,270			20,132

Net cash provided by financing activities				1,144,293			6,110

Effect of changes in exchange rates on cash and cash equivalents				217			118

Net increase in cash and cash equivalents				2,782			1,189
Cash and cash equivalents, beginning of period				25,252			13,311

Cash and cash equivalents, end of period			$	28,034		$	14,500

See Notes to Consolidated Condensed Financial Statements.

Avis Group Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unless otherwise noted, all dollar amounts are in thousands)

1. Summary of Significant Accounting Policies

Basis of Presentation
The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Avis Group Holdings, Inc. and its subsidiaries, including Avis Rent A Car System, Inc. (collectively, "the Company"). The Company is a wholly-owned subsidiary of Cendant Corporation.

In management's opinion, the Consolidated Condensed Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. The results of operations reported for interim periods are not necessarily indicative of the results of operation for the entire year or any subsequent interim period. In addition, management is required to make estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgements and available information. Accordingly, actual results could differ from those estimates. Certain reclassifications have been made to prior period amounts to conform to the current period presentations.

Assets classified under management programs are generated in the Company's core business operations. The Company seeks to offset the interest rate exposures inherent in these assets by matching them with financial liabilities that have similar term and interest rate characteristics. Fees generated from these assets are used, in part, to repay the interest and principal associated with the financial liabilities. Funding for the Company's assets under management programs is also provided by asset-backed financing arrangements, which are classified as debt under management programs. Cash inflows and outflows relating to the generation and acquisition of assets and the principal debt repayment or financing of such assets are classified as activities of the Company's management programs.

Pursuant to certain covenant requirements in an indenture under which the Company issued debt, the Company continues to operate and maintain its status as a separate public reporting entity.

The Consolidated Condensed Financial Statements should be read in conjunction with the Company's Annual Report on Form 10-K filed on March 6, 2003.

Changes in Accounting Policies
Stock-Based Compensation. Under Cendant's existing stock plans, CD common stock awards (including stock options, stock appreciation rights, restricted shares and restricted stock units) are granted to the Company's employees, including directors and officers of the Company. On January 1, 2003, Cendant adopted the fair value method of accounting for stock-based compensation provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which is considered by the Financial Accounting Standards Board ("FASB") to be the preferable accounting method for stock-based employee compensation. Cendant also adopted SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure," in its entirety on January 1, 2003.

Under the fair value method of accounting provisions of SFAS No. 123, Cendant is required to expense all employee stock options over their vesting period based upon the fair value of the award on the date of the grant. Under SFAS No. 148, which amended SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting provisions, Cendant elected to use the prospective transition method when adopting SFAS No. 123. Accordingly, Cendant is only required to expense employee stock options that were granted subsequent to December 31, 2002. Cendant will allocate compensation expense to the Company for all employee stock awards granted to the Company's employees subsequent to December 31, 2002. The expense will be based on the fair value of the award on the date of grant and allocated over the vesting period. During first quarter 2003, Cendant did not allocate any compensation expense to the Company for employee stock awards as there were no such awards granted during the quarter.

Prior to the adoption of SFAS No. 123 and SFAS No. 148, the Company measured its stock-based compensation using the intrinsic value approach under Accounting Principles Board ("APB") Opinion No. 25, as permitted by SFAS No. 123. Accordingly, the Company did not recognize compensation expense upon the issuance of its stock options because the option terms were fixed and the exercise price equaled the market price of the underlying common stock on the grant date. The Company complied with the provisions of SFAS No. 123 by providing pro forma disclosures of net loss giving consideration to the fair value method provisions of SFAS No. 123. The following table illustrates the effect on net loss as if the fair value based method had been applied to all employee stock awards granted to the Company's employees prior to January 1, 2003

	Three Months Ended March 31, 2003			Three Months Ended March 31, 2002
Reported net loss	$	(5,620	)	$	(2,409	)
Add back: Stock-based employee compensation expense included in reported net loss, net of tax		—			—
Less: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax		(665	)		(2,309	)

Pro forma net loss	$	(6,285	)	$	(4,718	)

Pro forma compensation expense reflected for prior period grants is not indicated of future compensation expense that would be recorded by the Company. Future expense may vary based upon factors such as the number of awards granted and the then-current fair market value of such awards.

Early Extinguishment of Debt. On January 1, 2003, the Company adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." Such standard requires any gain or loss on extinguishments of debt to be presented as a component of continuing operations (unless specific criteria are met) whereas SFAS No. 4 required that such gains and losses be classified as an extraordinary item in determining net income. Accordingly, on January 1, 2003, the Company reclassified approximately $1,300 thousand of 2002 pre-tax gains on the early extinguishments of debt to continuing operations as a component of non-vehicle interest ($472 thousand and $822 thousand of which were recorded during the third and fourth quarters of 2002, respectively).

Costs Associated with Exit or Disposal Activities. On January 1, 2003, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." Such standard requires costs associated with exit or disposal activities (including restructurings) initiated after December 31, 2002 to be recognized when the costs are incurred, rather than at a date of commitment to an exit or disposal plan. This standard nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Under SFAS No. 146, a liability related to an exit or disposal activity is not recognized until such liability has actually been incurred whereas under EITF Issue No. 94-3 a liability was recognized at the time of a commitment to an exit or disposal plan.

Guarantees. On January 1, 2003, the Company adopted FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," in its entirety. Such Interpretation elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. It also clarifies that a guarantor is required to recognize, at the inception of any guarantee issued or modified after December 31, 2002, a liability for the fair value of the obligation undertaken in issuing the guarantee. The impact of adopting this Interpretation was not material to the Company's results of operations or financial position.

Recently Issued Accounting Pronouncements
Derivative Instruments and Hedging Activities. On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." Such standard amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of this statement are generally effective for contracts entered into or modified after June 30, 2003. The Company is in the process of assessing the impact of adopting this standard on its consolidated results of operations or financial position.

2. Intangible Assets

Intangible assets consisted of:

		March 31, 2003				December 31, 2002
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized Intangible Assets
	Customer lists	$	18,952	$	2,000	$	18,952	$	1,760

Unamortized Intangible Assets
	Goodwill	$	1,254,793			$	1,254,401

Customer lists are included in other assets on the Company's Consolidated Condensed Balance Sheets. Amortization expense relating to customer lists was approximately $240 thousand for the three months ended March 31, 2003 and 2002, respectively. The Company expects amortization expense on intangible assets to approximate $1 million for the entire 2003 fiscal year and for each of the succeeding five years.

The changes in the carrying amount of goodwill are as follows:

Balance as of January 1, 2003	$	1,254,401
Goodwill acquired during 2003(*)		158
Foreign exchange translation adjustment		234

Balance as of March 31, 2003	$	1,254,793

(*): Relates to the acquisition of a foreign licensee.

3. Vehicles, Net

Vehicles, net consisted of:

	March 31, 2003			December 31, 2002
Rental vehicles	$	5,563,897		$	4,415,761
Vehicles held for sale		35,165			144,283

		5,599,062			4,560,044
Less: accumulated depreciation		(359,781	)		(386,197	)

	$	5,239,281		$	4,173,847

The components of vehicle depreciation and lease charges, net are summarized below:

	Three Months Ended March 31, 2003		Three Months Ended March 31, 2002
Depreciation expense	$	166,376	$	152,322
Lease charges		7,013		7,203
Losses on sales of vehicles, net		10,653		270

	$	184,042	$	159,795

Depreciation expense is net of the amortization of certain incentives and allowances from various vehicle manufacturers of approximately $37.3 million and $24.3 million for the three months ended March 31, 2003 and 2002, respectively. Vehicle interest expense amounts are net of interest income of $1,275 thousand and $677 thousand for the three months ended March 31, 2003 and 2002, respectively.

The Company acquires its fleet through, and leases it from, AESOP Leasing L.P. ("AESOP"), a wholly-owned and consolidated subsidiary. The Company subleases a portion of its fleet to Budget Rent A Car System, Inc. ("Budget"), a wholly-owned subsidiary of Cendant not within the Company's ownership structure. As of March 31, 2003, the Company had $1.5 billion of vehicles recorded on its Consolidated Condensed Balance Sheet that were subleased to Budget. These vehicles were purchased with proceeds received from the issuance of rental car asset-backed notes under the AESOP Funding Program (see Note 6—Vehicle Debt).

The Company charges Budget a monthly fee equal to the leased vehicles' monthly depreciation expense, vehicle debt interest expense and certain related administrative expenses. For the three months ended March 31, 2003 the Company recorded vehicle depreciation expense of $34.3 million and vehicle interest expense of $14.3 million on its Consolidated Condensed Statement of Operations for vehicles subleased to Budget. For the three months ended March 31, 2003, the Company recorded revenue from the Budget vehicle sublease of approximately $48.6 million on its Consolidated Condensed Statement of Operations.

4. Due to Cendant Corporation and Affiliates, Net

Due to (from) Cendant Corporation and affiliates, net, consisted of:

	March 31, 2003			December 31, 2002
Due to Cendant-working capital and trading, net(a)	$	310,006		$	253,032
Due from Cendant-demand-long-term(b)		(121,217	)		(155,246	)
Due to Cendant-long-term(c)		498,976			408,108
Due to other Cendant affiliates, net(d)		55,138			55,467
Due from Budget(e)		(35,505	)		(9,552	)

Total due to Cendant Corporation and affiliates, net	$	707,398		$	551,809

(a): Represents funding for the Company's working capital and trading needs, which is provided by Cendant. Such intercompany funding accrues interest at a rate equal to LIBOR plus 87.5 basis points for amounts borrowed up to $155 million and LIBOR plus 140 basis points for borrowings exceeding such amount.
(b): Represents borrowings by Cendant of the Company's restricted cash under management programs in return for a demand note.
(c): Represents (i) the remaining debt of $137 million that the Company assumed in connection with the acquisition of the Company by Cendant, (ii) $487 million of funding the Company received from Cendant to repay outstanding borrowings of $368 million under its existing revolving credit facility during 2001 and to repurchase $28 million and $91 million of the Company's 11% Senior Subordinated Notes during 2002 and the first quarter of 2003, respectively (see Note 5—Non-Vehicle Debt). Approximately $125 million of the $368 million funded by Cendant in 2001 was forgiven by Cendant as of December 31, 2001. All such funding bears interest at LIBOR plus 140 basis points.

(d): Primarily represents amounts due to a subsidiary of Cendant Corporation for reservation charges incurred during 2002, that are offset in part by other trading and funding activities between the Company and other Cendant affiliates.
(e): Represents amount due from Budget for sublease of vehicles (see Note 3—Vehicles) and corporate overhead expense allocations.

Included within total expenses on the Company's Consolidated Condensed Statements of Operations are the following items charged by Cendant and affiliates, which include allocations from Cendant for services provided to the Company:

	Three Months Ended March 31, 2003		Three Months Ended March 31, 2002
Royalties(a)	$	24,421	$	24,276
Reservations(a)		12,081		12,682
Data processing(b)		7,295		8,265
Rent, corporate overhead allocations and other(b)		16,035		13,779
Interest on amounts due to Cendant Corporation and affiliates, net(c)		3,880		3,399

Total	$	63,712	$	62,401

(a): Included within selling, general and administration expenses on the Company's Consolidated Condensed Statements of Operations. Royalties represent charges to the Company for royalty fees paid to Cendant Corporation for use of the Avis trade name.
(b): Included within operating expenses on the Company's Consolidated Condensed Statements of Operations.
(c): Included within non-vehicle interest, net on the Company's Consolidated Condensed Statements of Operations.

These charges, including corporate overhead allocations, are determined in accordance with various intercompany agreements, which are based upon factors such as square footage, employee salaries and computer usage time.

Additionally, Cendant charges the Company a royalty fee of 4.4% for the use of its Avis trade name. Such fee consists of a base royalty of 3.0% of the gross revenue and a supplemental royalty of 1.4% of the gross revenue payable quarterly in arrears. The supplemental royalty will increase to a maximum of 1.5% in the third quarter of 2003. The contract will continue through 2047.

5. Non-Vehicle Debt

Non-vehicle debt consisted of:

	March 31, 2003		December 31, 2002
11% senior subordinated notes(*)	$	435,240	$	530,146
Other		3,966		4,085

	$	439,206	$	534,231

(*): The change in balance reflects redemptions of $81.2 million in face value of these notes (carrying value of $90.5 million) for $90.8 million in cash and approximately $4.4 million related to the amortization of a premium. In connection with such redemptions, the Company recorded a loss of $0.3 million ($0.2 million after taxes) as a component of non-vehicle interest on the Company's Consolidated Condensed Statement of Operations.

These notes contain restrictive covenants, including restrictions on indebtedness of material subsidiaries, mergers, limitations on liens and liquidations, and also require the maintenance of certain financial ratios. At March 31, 2003, the Company was in compliance with all restrictive and financial covenants.

6. Vehicle Debt

Vehicle debt consisted of:

AESOP Funding Program		March 31, 2003		December 31, 2002
	Series 2003-2 2.74% rental car asset-backed medium term notes	$	299,997	$	—
	Series 2003-2 floating rate rental car asset-backed notes		250,000		—
	Series 2003-2 3.61% rental car asset-backed medium-term notes		99,960		—
	Series 2002-4 variable funding rental car asset-backed notes		215,000		90,000
	Series 2002-2 variable funding rental car asset-backed notes		453,600		404,000
	Series 2002-1 3.85% rental car asset-backed medium-term notes		499,815		499,795
	Series 2002-1 floating rate rental car asset-backed notes		250,000		250,000
	Series 2001-2 auction rate rental car asset-backed notes		500,000		185,000
	Series 2001-1 floating rate rental car asset-backed notes		750,000		750,000
	Series 2000-4 floating rate rental car asset-backed notes		500,000		500,000
	Series 2000-3 floating rate rental car asset-backed notes		200,000		200,000
	Series 2000-2 floating rate rental car asset-backed notes		300,000		300,000
	Series 2000-1 floating rate rental car asset-backed notes		166,667		250,000
	Series 1998-1 6.14% rental car asset-backed medium-term notes		600,000		600,000
Other			240,311		216,908

		$	5,325,350	$	4,245,703

As of March 31, 2003, the Company's asset-backed funding arrangements under the AESOP Funding Program provided for the issuance of up to $5.7 billion of debt and as of at March 31, 2003, approximately $631 million was available. In addition, the Company had availability of approximately $233 million under other funding arrangements as of March 31, 2003.

Debt Maturities and Covenants

The contractual final maturities of vehicle debt at March 31, 2003 are as follows:

Year
Within 1 year	$	1,005,817
Between 1 and 2 years		1,399,009
Between 2 and 3 years		1,476,864
Between 3 and 4 years		327,639
Between 4 and 5 years		1,060,527
Thereafter		55,494

	$	5,325,350

Debt under the Company's AESOP Funding Program contain restrictive covenants, including restrictions on dividends paid to the Company by certain of its subsidiaries and indebtedness of material subsidiaries, mergers, limitations on liens, liquidations, and sale and leaseback transactions, and also require the maintenance of certain financial ratios. At March 31, 2003, the Company was in compliance with all such restrictive and financial covenants.

7. Commitments and Contingencies

The Company is involved in pending litigation in the usual course of business. In the opinion of management, such litigation will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

8. Stockholder's Equity

The components of comprehensive income are summarized as follows:

		Three Months Ended March 31, 2003			Three Months Ended March 31, 2002
Net loss		$	(5,620	)	$	(2,409	)
Other comprehensive income:
	Currency translation adjustment, net of tax		5,513			791
	Unrealized gains on cash flow hedges, net of tax		6,229			11,586
	Minimum pension liability adjustment, net of tax		(27	)		(1,336	)

Total comprehensive income		$	6,095		$	8,632

The after-tax components of accumulated other comprehensive income (loss) are as follows:

	Currency Translation Adjustments		Unrealized Gains (Losses) on Cash Flows Hedges			Minimum Pension Liability Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance, January 1, 2003	$	1,537	$	(48,963	)	$	(17,785	)	$	(65,211	)
Current period change		5,513		6,229			(27	)		11,715

Balance March 31, 2003	$	7,050	$	(42,734	)	$	(17,812	)	$	(53,496	)

9. Subsequent Event

On May 6, 2003, the Company issued $750 million of term notes under its AESOP Funding Program with maturities ranging from three to five years and a blended interest rate of 3.1%.

10. Guarantor and Non-Guarantor Consolidating Condensed Financial Statements

The following consolidating condensed financial information presents the Consolidating Condensed Balance Sheets as of March 31, 2003 and December 31, 2002 and the Consolidating Condensed Statements of Operations and Statements of Cash Flows for the three months ended March 31, 2003 and 2002 of: (a) Avis Group Holdings, Inc. ("the Parent"); (b) the guarantor subsidiaries; (c) the non-guarantor subsidiaries; (d) elimination entries necessary to consolidate the Parent with the guarantor and non-guarantor subsidiaries; and (e) the Company on a consolidated basis.

Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. Separate financial statements and other disclosures with respect to the subsidiary guarantors have not been provided as management believes the following information is sufficient.

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
For the Three Months ended March 31, 2003

		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	532,759		$	70,821	$	—		$	603,580

Expenses
	Operating, net		—			209,905			34,008		—			243,913
	Vehicle depreciation and lease charges, net		—			167,634			16,408		—			184,042
	Selling, general and administrative		—			98,180			9,973		—			108,153
	Vehicle interest, net		3,459			51,209			291		—			54,959
	Non-vehicle interest		8,010			3,103			—		—			11,113
	Non-vehicle depreciation and amortization		240			9,316			750		—			10,306

Total expenses			11,709			539,347			61,430		—			612,486

Income (loss) before equity in earnings of subsidiaries			(11,709	)		(6,588	)		9,391		—			(8,906	)
Equity in earnings (losses) of subsidiaries			(418	)		5,926			—		(5,508	)		—

Income (loss) before income taxes			(12,127	)		(662	)		9,391		(5,508	)		(8,906	)
Provision (benefit) for income taxes			(6,507	)		(244	)		3,465		—			(3,286	)

Net income (loss)		$	(5,620	)	$	(418	)	$	5,926	$	(5,508	)	$	(5,620	)

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
For the Three Months ended March 31, 2002

		Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Avis Group Holdings, Inc. Consolidated
Revenues		$	—		$	507,415	$	57,188	$	—		$	564,603

Expenses
	Operating, net		—			195,760		28,275		—			224,035
	Vehicle depreciation and lease charges, net		—			142,819		16,976		—			159,795
	Selling, general and administrative		—			107,594		7,337		—			114,931
	Vehicle interest, net		459			49,980		208		—			50,647
	Non-vehicle interest		7,657			3,138		—		—			10,795
	Non-vehicle depreciation and amortization		239			7,480		834		—			8,553

Total expenses			8,355			506,771		53,630		—			568,756

Income (loss) before equity in earnings of subsidiaries			(8,355	)		644		3,558		—			(4,153	)
Equity in earnings of subsidiaries			1,571			2,064		—		(3,635	)		—

Income (loss) before income taxes			(6,784	)		2,708		3,558		(3,635	)		(4,153	)
Provision (benefit) for income taxes			(4,375	)		1,137		1,494		—			(1,744	)

Net income (loss)		$	(2,409	)	$	1,571	$	2,064	$	(3,635	)	$	(2,409	)

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED BALANCE SHEET
March 31, 2003

		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Avis Group Holdings, Inc. Consolidated
ASSETS
	Cash and cash equivalents	$	2,000		$	9,809		$	16,225		$	—		$	28,034
	Restricted cash		—			(233	)		62,288			—			62,055
	Receivables, net		—			109,232			37,983			—			147,215
	Prepaid expenses		—			36,488			6,579			—			43,067
	Deferred income taxes		157,713			357,352			7,766			—			522,831
	Property and equipment, net		—			263,572			15,391			—			278,963
	Investment in consolidated subsidiaries		750,962			1,196,181			—			(1,947,143	)		—
	Goodwill		801,243			449,760			3,790			—			1,254,793
	Other assets		14,819			20,547			26,506			—			61,872

Total assets exclusive of assets under management programs			1,726,737			2,442,708			176,528			(1,947,143	)		2,398,830

Assets under management programs:
	Restricted cash		—			116			103,310			—			103,426
	Vehicles, net		—			(93,572	)		5,332,853			—			5,239,281
	Due from vehicle manufacturers, net		—			11,119			197,208			—			208,327

			—			(82,337	)		5,633,371			—			5,551,034

Total assets		$	1,726,737		$	2,360,371		$	5,809,899		$	(1,947,143	)	$	7,949,864

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
	Accounts payable	$	(92,156	)	$	478,808		$	(174,393	)	$	—		$	212,259
	Accrued liabilities		17,977			357,089			31,315			—			406,381
	Due to (from) Cendant Corporation and affiliates, net		1,007,521			538,947			(839,070	)		—			707,398
	Non-vehicle debt		435,240			3,966			—			—			439,206
	Public liability, property damage and other insurance liabilities		—			141,458			76,435			—			217,893

Total liabilities exclusive of liabilities under management programs			1,368,582			1,520,268			(905,713	)		—			1,983,137

Liabilities under management programs:
	Vehicle debt		—			87,722			5,237,628			—			5,325,350
	Deferred income taxes		6,687			1,419			281,803			—			289,909

			6,687			89,141			5,519,431			—			5,615,259

Stockholder's equity			351,468			750,962			1,196,181			(1,947,143	)		351,468

Total liabilities and stockholder's equity		$	1,726,737		$	2,360,371		$	5,809,899		$	(1,947,143	)	$	7,949,864

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED BALANCE SHEET
December 31, 2002

		Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Avis Group Holdings, Inc. Consolidated
ASSETS
	Cash and cash equivalents	$	69		$	10,886		$	14,297		$	—		$	25,252
	Restricted cash		—			—			59,012			—			59,012
	Receivables, net		—			122,436			36,294			—			158,730
	Prepaid expenses		—			40,113			9,685			—			49,798
	Deferred income taxes		157,713			315,856			7,766			—			481,335
	Property and equipment, net		—			264,091			14,739			—			278,830
	Investment in consolidated subsidiaries		746,729			664,644			—			(1,411,373	)		—
	Goodwill		801,243			449,760			3,398			—			1,254,401
	Other assets		15,059			15,903			24,555			—			55,517

Total assets exclusive of assets under management programs			1,720,813			1,883,689			169,746			(1,411,373	)		2,362,875

Assets under management programs:
	Restricted cash		—			83			2,379			—			2,462
	Vehicles, net		—			(102,326	)		4,276,173			—			4,173,847
	Due from vehicle manufacturers, net		—			20,758			237,701			—			258,459

			—			(81,485	)		4,516,253			—			4,434,768

Total assets		$	1,720,813		$	1,802,204		$	4,685,999		$	(1,411,373	)	$	6,797,643

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
	Accounts payable	$	(78,584	)	$	418,917		$	(134,606	)	$	—		$	205,727
	Accrued liabilities		8,683			379,090			27,236			—			415,009
	Due to (from) Cendant Corporation and affiliates, net		908,508			11,997			(368,696	)		—			551,809
	Non-vehicle debt		530,146			4,085			—			—			534,231
	Public liability, property damage and other insurance liabilities		—			142,423			69,363			—			211,786

Total liabilities exclusive of liabilities under management programs			1,368,753			956,512			(406,703	)		—			1,918,562

Liabilities under management programs:
	Vehicle debt		—			97,544			4,148,159			—			4,245,703
	Deferred income taxes		6,687			1,419			279,899			—			288,005

			6,687			98,963			4,428,058			—			4,533,708

Stockholder's equity			345,373			746,729			664,644			(1,411,373	)		345,373

Total liabilities and stockholder's equity		$	1,720,813		$	1,802,204		$	4,685,999		$	(1,411,373	)	$	6,797,643

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2003

		Parent			Guarantor			Non- Guarantor			Eliminations			Avis Group Holdings, Inc. Consolidated
Operating Activities
Net income (loss)		$	(5,620	)	$	(418	)	$	5,926		$	(5,508	)	$	(5,620	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities exclusive of management programs			(8,077	)		10,522			(28,339	)		—			(25,894	)

Net cash provided by (used in) operating activities exclusive of management programs			(13,697	)		10,104			(22,413	)		(5,508	)		(31,514	)

Management programs:
	Vehicle depreciation		—			154,920			11,456			—			166,376

Net cash provided by (used in) operating activities			(13,697	)		165,024			(10,957	)		(5,508	)		134,862

Investing Activities
Property and equipment additions			—			(11,882	)		(964	)		—			(12,846	)
Retirements of property and equipment			—			3,085			585			—			3,670
Payment for purchase of rental car franchise licensees			—			—			(208	)		—			(208	)
Investment in subsidiaries			418			(5,926	)		—			5,508			—

Net cash provided by (used in) investing activities exclusive of management programs			418			(14,723	)		(587	)		5,508			(9,384	)

Management programs:
	Increase in restricted cash		—			(33	)		(100,931	)		—			(100,964	)
	Decrease in due from vehicle manufacturers		—			9,639			41,984			—			51,623
	Investment in vehicles		—			(10,093	)		(2,541,897	)		—			(2,551,990	)
	Payments received on investment in vehicles		—			(150,273	)		1,484,398			—			1,334,125

			—			(150,760	)		(1,116,446	)		—			(1,267,206	)

Net cash provided by (used in) investing activities			418			(165,483	)		(1,117,033	)		5,508			(1,276,590	)

Financing Activities
Net decrease in non-vehicle debt			(90,869	)		(119	)		—			—			(90,988	)
Increase in due to Cendant Corporation and affiliates, net			106,079			3,196			48,736			—			158,011

Net cash provided by financing activities exclusive of management programs			15,210			3,077			48,736			—			67,023

Management programs:
	Net increase in vehicle debt		—			—			1,080,965			—			1,080,965
	Payments for debt issuance costs		—			(3,695	)		—			—			(3,695	)

			—			(3,695	)		1,080,965			—			1,077,270

Net cash provided by (used in) financing activities			15,210			(618	)		1,129,701			—			1,144,293

Effect of changes in exchange rates on cash and cash equivalents			—			—			217			—			217

Net increase (decrease) in cash and cash equivalents			1,931			(1,077	)		1,928			—			2,782
Cash and cash equivalents, beginning of period			69			10,886			14,297			—			25,252

Cash and cash equivalents, end of period		$	2,000		$	9,809		$	16,225		$	—		$	28,034

Avis Group Holdings, Inc. and Subsidiaries
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2002

		Parent			Guarantor			Non- Guarantor			Eliminations			Avis Group Holdings, Inc. Consolidated
Operating Activities
Net income (loss)		$	(2,409	)	$	1,571		$	2,064		$	(3,635	)	$	(2,409	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities exclusive of management programs			(1,423	)		(13,709	)		21,862			—			6,730

Net cash provided by (used in) operating activities exclusive of management programs			(3,832	)		(12,138	)		23,926			(3,635	)		4,321

Management programs:
	Vehicle depreciation		—			142,792			9,530			—			152,322

Net cash provided by (used in) operating activities			(3,832	)		130,654			33,456			(3,635	)		156,643

Investing Activities
Property and equipment additions			—			(16,204	)		(525	)		—			(16,729	)
Retirements of property and equipment			—			4,004			681			—			4,685
Payment for purchase of rental car franchise licensees			—			(2,835	)		—			—			(2,835	)
Investment in subsidiaries			(1,571	)		(2,064	)		—			3,635			—

Net cash provided by (used in) investing activities exclusive of management programs			(1,571	)		(17,099	)		156			3,635			(14,879	)

Management programs:
	Decrease in restricted cash		—			9,138			296,151			—			305,289
	Decrease in due from vehicle manufacturers		—			4,090			27,089			—			31,179
	Investment in vehicles		—			2,102			(1,186,903	)		—			(1,184,801	)
	Payments received on investment in vehicles		—			(133,025	)		834,555			—			701,530

			—			(117,695	)		(29,108	)		—			(146,803	)

Net cash used in investing activities			(1,571	)		(134,794	)		(28,952	)		3,635			(161,682	)

Financing Activities
Net decrease in non-vehicle debt			—			(125	)		—			—			(125	)
Increase (decrease) in due to Cendant Corporation and affiliates, net			5,394			3,400			(22,691	)		—			(13,897	)

Net cash provided by (used in) financing activities exclusive of management programs			5,394			3,275			(22,691	)		—			(14,022	)

Management programs:
	Net increase in vehicle debt		—			—			20,247			—			20,247
	Payments for debt issuance costs		—			(115	)		—			—			(115	)

			—			(115	)		20,247			—			20,132

Net cash provided by (used in) financing activities			5,394			3,160			(2,444	)		—			6,110

Effect of changes in exchange rates on cash and cash equivalents			—			—			118			—			118

Net increase (decrease) in cash and cash equivalents			(9	)		(980	)		2,178			—			1,189
Cash and cash equivalents, beginning of period			18			5,210			8,083			—			13,311

Cash and cash equivalents, end of period		$	9		$	4,230		$	10,261		$	—		$	14,500

Item 2. Management's Narrative Analysis of the Results of Operations

The following discussion should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes thereto included elsewhere herein and with our 2002 Annual Report on Form 10-K filed with the Commission on March 6, 2003. Unless otherwise noted, all dollar amounts are in thousands.

We are one of the largest car rental companies in the world and a wholly-owned subsidiary of Cendant Corporation.

RESULTS OF OPERATIONS

Our comparative results of operations for the three months ended March 31, 2003 and 2002 comprised the following:

	2003			2002			Change
Revenues	$	603,580		$	564,603		$	38,977
Total expenses		612,486			568,756			43,730

Loss before income taxes		(8,906	)		(4,153	)		(4,753	)
Benefit for income taxes		(3,286	)		(1,744	)		(1,542	)

Net loss	$	(5,620	)	$	(2,409	)	$	(3,211	)

Total revenue increased 6.9% primarily due to vehicle leasing revenue generated from Budget Rent A Car, which did not exist in the prior period, and total expenses increased 7.7% principally due to additional vehicles we purchased and financed in 2003 in order to sub-lease vehicles to Budget. The increase in vehicles resulted in an increase in vehicle depreciation expense, vehicle interest expense and related direct operating expenses. Excluding Budget-related revenues, domestic car rental revenues declined $21 million (4%) as a result of the weaker travel environment. Time and mileage revenue per rental day increased slightly but the impact on revenue and expenses was more than offset by a 5% quarter-over-quarter reduction in the total number of days that cars were rented. In addition, since utilization of our fleet was lower in first quarter 2003, the absorption of fixed and vehicle-related costs (such as depreciation on vehicles and interest on vehicle financing) caused a corresponding quarter-over-quarter reduction in profit margin. Despite reduced revenue domestically, revenues from our international operations increased $11 million primarily due to increased transaction volume. Our revenues are primarily derived from car rentals at airport locations. Through February 2003 (the last period for which information is available), approximately 78% of our revenues were generated from car rental locations at airports.

Our overall effective tax rate was 36.9% and 42.0% for the three months ended March 31, 2003 and 2002, respectively. The effective tax rate for the first quarter of 2003 was lower primarily due to a decrease in benefits received from our foreign operations, which was partially offset by an increase in benefits received from higher state taxes.

As a result of the above-mentioned items, net loss increased $3.2 million.

CHANGES IN ACCOUNTING POLICIES

On January 1, 2003, we adopted the following standards:

•: Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation"
•: SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure"
•: SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections"
•: SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
•: FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others"

For more detailed information regarding these changes in accounting policies, see Note 1 to our Consolidated Condensed Financial Statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On April 30, 2003, the Financial Accounting Standards Board issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." Such standard amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The provisions of this statement are generally effective for contracts entered into or modified after June 30, 2003. We are in the process of assessing the impact of adopting this standard on our consolidated results of operations or financial position.

Item 3. Quantitative And Qualitative Disclosure About Market Risks

As previously discussed in our 2002 Annual Report on Form 10-K, we assess our market risk based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings, fair values, and cash flows based on a hypothetical 10% change (increase and decrease) in interest rates. We used March 31, 2003 market rates to perform a sensitivity analysis separately for each of our market risk exposures. The estimates assume instantaneous, parallel shifts in interest rate yield curves. We have determined, through such analyses, that the impact of a 10% change in interest on our earnings, fair values and cash flows would not be material.

Item 4. Controls and Procedures

(a): Evaluation of Disclosure Controls and Procedures. The Company's President and Chief Operating Officer and Senior Vice President and Controller have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's reports filed or submitted under the Exchange Act.
(b): Changes in Internal Controls. Since the Evaluation Date, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect such controls.

PART II—OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a): Exhibits

See Exhibit Index

(b): Reports on Form 8-K

On February 25, 2003, we filed a current report on Form 8-K to report under Item 5 our selected historical consolidated financial data. Additionally, we announced certain management changes.

SIGNATURES

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

		AVIS GROUP HOLDINGS, INC.
			/s/ F. ROBERT SALERNO F. Robert Salerno President, Chief Operating Officer and Director Date: May 14, 2003
			/s/ KURT FREUDENBERG Kurt Freudenberg Senior Vice President and Controller Date: May 14, 2003

CERTIFICATIONS

I, F. Robert Salerno, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Avis Group Holdings, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a): designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c): presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a): all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

/s/ F. ROBERT SALERNO

President and Chief Operating Officer

I, Kurt Freudenberg, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Avis Group Holdings, Inc.;

2.

3.

4.

a): designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c): presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

a): all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

Date: May 14, 2003

/s/ KURT FREUDENBERG

Senior Vice President and Controller

EXHIBIT INDEX

Exhibit No.		Description
3.1		Certificate of Incorporation of Avis Rent A Car, Inc. (Incorporated by reference to the Company's Registration Statement on Form S-1, Registration No. 333-46737, dated February 23, 1998).
3.2		By-Laws of Avis Group Holdings, Inc. (Incorporated by reference to the Company's Registration Statement on Form S-1, Registration No. 333-46737, dated February 23, 1998).
10.11		Series 2003-2 Supplement dated as of March 6, 2003 to the Amended and Restated Base Indenture dated as of July 30, 1997, between AESOP Funding II L.L.C., as Issuer and The Bank of New York, as Trustee and Series 2003-2 Agent.
10.12		Series 2003-1 Supplement dated as of January 28, 2003 to the Amended and Restated Base Indenture dated as of July 30, 1997 between AESOP Funding II LLC, as Issuer, Avis Rent A Car System, Inc., as Administrator, Cendant Corporation, as Purchaser and The Bank of New York, as Trustee and Series 2003-1 Agent.
12		Ratio of Earnings to Fixed Charges
99		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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(i) TABLE OF CONTENTS (continued)

(ii) SERIES 2003-2 SUPPLEMENT, dated as of March 6, 2003 (this "SUPPLEMENT"), among AESOP FUNDING II L.L.C., a special purpose limited liability company established under the laws of Delaware ("AFC-II"), THE BANK OF NEW YORK, a New York banking corporation, as successor in interest to the corporate trust administration of Harris Trust and Savings Bank, as trustee (together with its successors in trust thereunder as provided in the Base Indenture referred to below, the "TRUSTEE"), and THE BANK OF NEW YORK, a New York banking corporation, as agent for the benefit of the Series 2003-2 Noteholders and the Surety Provider (the "SERIES 2003-2 AGENT"), to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AFC-II and the Trustee (as amended, modified or supplemented from time to time, exclusive of Supplements creating a new Series of Notes, the "BASE INDENTURE"). PRELIMINARY STATEMENT WHEREAS, Sections 2.2 and 12.1 of the Base Indenture provide, among other things, that AFC-II and the Trustee may at any time and from time to time enter into a supplement to the Base Indenture for the purpose of authorizing the issuance of one or more Series of Notes; NOW, THEREFORE, the parties hereto agree as follows: DESIGNATION There is hereby created a Series of Notes of three classes to be issued pursuant to the Base Indenture and this Supplement and such Series of Notes shall be designated generally as Series 2003-2 Rental Car Asset Backed Notes. The Series 2003-2 Notes will be issued in three classes: one of which shall be designated as the Series 2003-2 2.74% Rental Car Asset Backed Notes, Class A-1, one of which shall be designated as the Series 2003-2 Floating Rate Rental Car Asset Backed Notes, Class A-2, and one of which shall be designated as the Series 2003-2 3.61% Rental Car Asset Backed Notes, Class A-3. The proceeds from the sale of the Series 2003-2 Notes shall be deposited in the Collection Account and shall be paid to AFC-II and used to make Loans under the Loan Agreements to the extent that the Borrowers have requested Loans thereunder and Eligible Vehicles are available for acquisition or refinancing thereunder on the date hereof. Any such portion of proceeds not so used to make Loans shall be deemed to be Principal Collections. The Series 2003-2 Notes are a non-Segregated Series of Notes (as more fully described in the Base Indenture). Accordingly, all references in this Supplement to "all" Series of Notes (and all references in this Supplement to terms defined in the Base Indenture that contain references to "all" Series of Notes) shall refer to all Series of Notes other than Segregated Series of Notes. ARTICLE I DEFINITIONS (a) All capitalized terms not otherwise defined herein are defined in the Definitions List attached to the Base Indenture as Schedule I thereto. All Article, Section or Subsection references herein shall refer to Articles, Sections or Subsections of this Supplement, except as otherwise provided herein. Unless otherwise stated herein, as the context otherwise requires or if such term is otherwise defined in the Base Indenture, each capitalized term used or defined herein shall relate only to the Series 2003-2 Notes and not to any other Series of Notes issued by AFC-II. (b) The following words and phrases shall have the following meanings with respect to the Series 2003-2 Notes and the definitions of such terms are applicable to the singular as well as the plural form of such terms and to the masculine as well as the feminine and neuter genders of such terms: "AGH" means Avis Group Holdings, Inc., a Delaware corporation. "AUTHORIZED NEWSPAPER" means the LUXEMBURGER WORT or other daily newspaper of general circulation in Luxembourg (or if publication is not practical in Luxembourg, in Europe). "BUSINESS DAY" means any day other than (a) a Saturday or a Sunday or (b) a day on which the Surety Provider or banking institutions in New York City or in the city in which the corporate trust office of the Trustee is located are authorized or obligated by law or executive order to close. "CERTIFICATE OF LEASE DEFICIT DEMAND" means a certificate in the form of ANNEX A to the Series 2003-2 Letters of Credit. "CERTIFICATE OF TERMINATION DATE DEMAND" means a certificate in the form of ANNEX D to the Series 2003-2 Letters of Credit. "CERTIFICATE OF TERMINATION DEMAND" means a certificate in the form of ANNEX C to the Series 2003-2 Letters of Credit. "CERTIFICATE OF UNPAID DEMAND NOTE DEMAND" means a certificate in the form of ANNEX B to the Series 2003-2 Letters of Credit. "CLASS" means a class of the Series 2003-2 Notes, which may be the Class A-1 Notes, the Class A-2 Notes or the Class A-3 Notes. "CLASS A-1 CARRYOVER CONTROLLED AMORTIZATION AMOUNT" means, with respect to any Related Month during the Three-Year Notes Controlled Amortization Period, the amount, if any, by which the portion of the Monthly Total Principal Allocation paid to the Class A-1 Noteholders pursuant to Section 2.5(e) for the previous Related Month was less than the Class A-1 Controlled Distribution Amount for the previous Related Month; PROVIDED, HOWEVER, that for -2- the first Related Month in the Three-Year Notes Controlled Amortization Period, the Class A-1 Carryover Controlled Amortization Amount shall be zero. "CLASS A-1 CONTROLLED AMORTIZATION AMOUNT" means with respect to any Related Month during the Three-Year Notes Controlled Amortization Period, $50,000,000. "CLASS A-1 CONTROLLED DISTRIBUTION AMOUNT" means, with respect to any Related Month during the Three-Year Notes Controlled Amortization Period, an amount equal to the sum of the Class A-1 Controlled Amortization Amount and any Class A-1 Carryover Controlled Amortization Amount for such Related Month. "CLASS A-1 INITIAL INVESTED AMOUNT" means the aggregate initial principal amount of the Class A-1 Notes, which is $300,000,000. "CLASS A-1 INVESTED AMOUNT" means, when used with respect to any date, an amount equal to the Class A-1 Outstanding Principal Amount PLUS the sum of (a) the amount of any principal payments made to the Class A-1 Noteholders on or prior to such date with the proceeds of a demand on the Surety Bond and (b) the amount of any principal payments made to Class A-1 Noteholders that have been rescinded or otherwise returned by the Class A-1 Noteholders for any reason. "CLASS A-1 MONTHLY INTEREST" means, with respect to (i) the initial Series 2003-2 Interest Period, an amount equal to $1,004,666.67 and (ii) any other Series 2003-2 Interest Period, an amount equal to the product of (A) one-twelfth of the Class A-1 Note Rate and (B) the Class A-1 Invested Amount on the first day of such Series 2003-2 Interest Period, after giving effect to any principal payments made on such date. "CLASS A-1 NOTEHOLDER" means the Person in whose name a Class A-1 Note is registered in the Note Register. "CLASS A-1 NOTE RATE" means 2.74% per annum. "CLASS A-1 NOTES" means any one of the Series 2003-2 2.74% Rental Car Asset Backed Notes, Class A-1, executed by AFC-II and authenticated by or on behalf of the Trustee, substantially in the form of EXHIBIT A-1-1, EXHIBIT A-1-2 or EXHIBIT A-1-3. Definitive Class A-1 Notes shall have such insertions and deletions as are necessary to give effect to the provisions of Section 2.18 of the Base Indenture. "CLASS A-1 OUTSTANDING PRINCIPAL AMOUNT" means, when used with respect to any date, an amount equal to (a) the Class A-1 Initial Invested Amount minus (b) the amount of principal payments made to Class A-1 Noteholders on or prior to such date. "CLASS A-2 CARRYOVER CONTROLLED AMORTIZATION AMOUNT" means, with respect to any Related Month during the Three-Year Notes Controlled Amortization Period, the amount, if any, by which the portion of the Monthly Total Principal Allocation paid to the Class A-2 Noteholders pursuant to Section 2.5(e) for the previous Related Month was less than the Class A-2 Controlled Distribution Amount for the previous Related Month; PROVIDED, HOWEVER, that for -3- the first Related Month in the Three-Year Notes Controlled Amortization Period, the Class A-2 Carryover Controlled Amortization Amount shall be zero. "CLASS A-2 CONTROLLED AMORTIZATION AMOUNT" means (i) with respect to any Related Month other than the last Related Month during the Three-Year Notes Controlled Amortization Period, $41,666,666.66 and (ii) with respect to the last Related Month during the Three-Year Notes Controlled Amortization Period, $41,666,666.70. "CLASS A-2 CONTROLLED DISTRIBUTION AMOUNT" means, with respect to any Related Month during the Three-Year Notes Controlled Amortization Period, an amount equal to the sum of the Class A-2 Controlled Amortization Amount and any Class A-2 Carryover Controlled Amortization Amount for such Related Month. "CLASS A-2 INITIAL INVESTED AMOUNT" means the aggregate initial principal amount of the Class A-2 Notes, which is $250,000,000. "CLASS A-2 INVESTED AMOUNT" means, when used with respect to any date, an amount equal to the Class A-2 Outstanding Principal Amount PLUS the sum of (a) the amount of any principal payments made to the Class A-2 Noteholders on or prior to such date with the proceeds of a demand on the Surety Bond and (b) the amount of any principal payments made to Class A-2 Noteholders that have been rescinded or otherwise returned by the Class A-2 Noteholders for any reason. "CLASS A-2 MONTHLY INTEREST" means, with respect to any Series 2003-2 Interest Period, an amount equal to the product of (A) the Class A-2 Invested Amount on the first day of such Series 2003-2 Interest Period, after giving effect to any principal payments made on such date, (B) the Class A-2 Note Rate for such Series 2003-2 Interest Period and (C) the number of days in such Series 2003-2 Interest Period divided by 360. "CLASS A-2 NOTEHOLDER" means the Person in whose name a Class A-2 Note is registered in the Note Register. "CLASS A-2 NOTE RATE" means, for (i) the initial Series 2003-2 Interest Period, 1.58188% per annum and (ii) any other Series 2003-2 Interest Period, the sum of 0.25% PLUS LIBOR for such Series 2003-2 Interest Period. "CLASS A-2 NOTES" means any one of the Series 2003-2 Floating Rate Rental Car Asset Backed Notes, Class A-2, executed by AFC-II and authenticated by or on behalf of the Trustee, substantially in the form of EXHIBIT A-2-1, EXHIBIT A-2-2 or EXHIBIT A-2-3. Definitive Class A-2 Notes shall have such insertions and deletions as are necessary to give effect to the provisions of Section 2.18 of the Base Indenture. "CLASS A-2 OUTSTANDING PRINCIPAL AMOUNT" means, when used with respect to any date, an amount equal to (a) the Class A-2 Initial Invested Amount minus (b) the amount of principal payments made to Class A-2 Noteholders on or prior to such date. "CLASS A-3 CARRYOVER CONTROLLED AMORTIZATION AMOUNT" means, with respect to any Related Month during the Class A-3 Controlled Amortization Period, the amount, if any, by -4- which the Monthly Total Principal Allocation for the previous Related Month was less than the Class A-3 Controlled Distribution Amount for the previous Related Month; PROVIDED, HOWEVER, that for the first Related Month in the Class A-3 Controlled Amortization Period, the Class A-3 Carryover Controlled Amortization Amount shall be zero. "CLASS A-3 CONTROLLED AMORTIZATION AMOUNT" means (i) with respect to any Related Month other than the last Related Month during the Class A-3 Controlled Amortization Period, $16,666,666.66 and (ii) with respect to the last Related Month during the Class A-3 Controlled Amortization Period, $16,666,666.70. "CLASS A-3 CONTROLLED AMORTIZATION PERIOD" means the period commencing at the opening of business on December 1, 2007 (or, if such day is not a Business Day, the Business Day immediately preceding such day) and continuing to the earliest of (i) the commencement of the Series 2003-2 Rapid Amortization Period, (ii) the date on which the Class A-3 Notes are fully paid and the Surety Provider has been paid all Surety Provider Fees and all other Surety Provider Reimbursement Amounts then due, (iii) the Series 2003-2 Termination Date and (iv) the termination of the Indenture. "CLASS A-3 CONTROLLED DISTRIBUTION AMOUNT" means, with respect to any Related Month during the Class A-3 Controlled Amortization Period, an amount equal to the sum of the Class A-3 Controlled Amortization Amount and any Class A-3 Carryover Controlled Amortization Amount for such Related Month. "CLASS A-3 EXPECTED FINAL DISTRIBUTION DATE" means the June 2008 Distribution Date. "CLASS A-3 FINAL DISTRIBUTION DATE" means the June 2009 Distribution Date. "CLASS A-3 INITIAL INVESTED AMOUNT" means the aggregate initial principal amount of the Class A-3 Notes, which is $100,000,000. "CLASS A-3 INVESTED AMOUNT" means, when used with respect to any date, an amount equal to the Class A-3 Outstanding Principal Amount PLUS the sum of (a) the amount of any principal payments made to the Class A-3 Noteholders on or prior to such date with the proceeds of a demand on the Surety Bond and (b) the amount of any principal payments made to Class A-3 Noteholders that have been rescinded or otherwise returned by the Class A-3 Noteholders for any reason. "CLASS A-3 MONTHLY INTEREST" means, with respect to (i) the initial Series 2003-2 Interest Period, an amount equal to $441,222.22 and (ii) any other Series 2003-2 Interest Period, an amount equal to the product of (A) one-twelfth of the Class A-3 Note Rate and (B) the Class A-3 Invested Amount on the first day of such Series 2003-2 Interest Period, after giving effect to any principal payments made on such date. "CLASS A-3 NOTEHOLDER" means the Person in whose name a Class A-3 Note is registered in the Note Register. "CLASS A-3 NOTE RATE" means 3.61% per annum. -5- "CLASS A-3 NOTES" means any one of the Series 2003-2 3.61% Rental Car Asset Backed Notes, Class A-3, executed by AFC-II and authenticated by or on behalf of the Trustee, substantially in the form of EXHIBIT A-3-1, EXHIBIT A-3-2 or EXHIBIT A-3-3. Definitive Class A-3 Notes shall have such insertions and deletions as are necessary to give effect to the provisions of Section 2.18 of the Base Indenture. "CLASS A-3 OUTSTANDING PRINCIPAL AMOUNT" means, when used with respect to any date, an amount equal to (a) the Class A-3 Initial Invested Amount minus (b) the amount of principal payments made to Class A-3 Noteholders on or prior to such date. "CLEARSTREAM" is defined in Section 5.2. "CONSENT" is defined in Article IV. "CONSENT PERIOD EXPIRATION DATE" is defined in Article IV. "DEMAND NOTE ISSUER" means each issuer of a Series 2003-2 Demand Note. "DESIGNATED AMOUNTS" is defined in Article IV. "DISBURSEMENT" means any Lease Deficit Disbursement, any Unpaid Demand Note Disbursement, any Termination Date Disbursement or any Termination Disbursement under a Series 2003-2 Letter of Credit, or any combination thereof, as the context may require. "EXCESS COLLECTIONS" is defined in Section 2.3(f)(i). "INSURANCE AGREEMENT" means the Insurance Agreement, dated as of March 6, 2003, among the Surety Provider, the Trustee and AFC-II, which shall constitute an "Enhancement Agreement" with respect to the Series 2003-2 Notes for all purposes under the Indenture. "INSURED PRINCIPAL DEFICIT AMOUNT" means, with respect to any Distribution Date, the excess, if any, of (a) the Series 2003-2 Outstanding Principal Amount on such Distribution Date (after giving effect to the distribution of the Monthly Total Principal Allocation for the Related Month) over (b) the sum of the Series 2003-2 Available Reserve Account Amount on such Distribution Date, the Series 2003-2 Letter of Credit Amount on such Distribution Date and the Series 2003-2 AESOP I Operating Lease Loan Agreement Borrowing Base on such Distribution Date. "INTEREST RATE CAP COUNTERPARTY" means AFC-II's counterparty under a Series 2003-2 Interest Rate Cap. "LEASE DEFICIT DISBURSEMENT" means an amount drawn under a Series 2003-2 Letter of Credit pursuant to a Certificate of Lease Deficit Demand. "LIBOR" means, with respect to each Series 2003-2 Interest Period, a rate per annum to be determined by the Trustee as follows: -6- (i) On each LIBOR Determination Date, the Trustee will determine the London interbank offered rate for U.S. dollar deposits for one month that appears on Telerate Page 3750 as it relates to U.S. dollars as of 11:00 a.m., London time, on such LIBOR Determination Date: (ii) If, on any LIBOR Determination Date, such rate does not appear on Telerate Page 3750, the Trustee will request that the principal London offices of each of four major banks in the London interbank market selected by the Trustee provide the Trustee with offered quotations for deposits in U.S. dollars for a period of one month, commencing on the first day of such Series 2003-2 Interest Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a principal amount equal to an amount of not less than $250,000 that is representative of a single transaction in such market at such time. If at least two such quotations are provided, "LIBOR" for such Series 2003-2 Interest Period will be the arithmetic mean of such quotations; or (iii) If fewer than two such quotations are provided, "LIBOR" for such Series 2003-2 Interest Period will be the arithmetic mean of rates quoted by three major banks in the City of New York selected by the Trustee at approximately 11:00 a.m., New York City time, on such LIBOR Determination Date for loans in U.S. dollars to leading European banks, for a period of one month, commencing on the first day of such Series 2003-2 Interest Period, and in a principal amount equal to an amount of not less than $250,000 that is representative of a single transaction in such market at such time; PROVIDED, HOWEVER, that if the banks selected as aforesaid by such Trustee are not quoting rates as mentioned in this sentence, "LIBOR" for such Series 2003-2 Interest Period will be the same as "LIBOR" for the immediately preceding Series 2003-2 Interest Period. "LIBOR DETERMINATION DATE" means, with respect to any Series 2003-2 Interest Period, the second London Banking Day preceding the first day of such Series 2003-2 Interest Period. "LONDON BANKING DAY" means any business day on which dealings in deposits in United States dollars are transacted in the London interbank market. "MONTHLY TOTAL PRINCIPAL ALLOCATION" means for any Related Month the sum of all Series 2003-2 Principal Allocations with respect to such Related Month. "MOODY'S" means Moody's Investors Service. "PAST DUE RENT PAYMENT" is defined in Section 2.2(g). "PERMANENT GLOBAL CLASS A-1 NOTE" is defined in Section 5.2. "PERMANENT GLOBAL CLASS A-2 NOTE" is defined in Section 5.2. "PERMANENT GLOBAL CLASS A-3 NOTE" is defined in Section 5.2. -7- "PRE-PREFERENCE PERIOD DEMAND NOTE PAYMENTS" means, as of any date of determination, the aggregate amount of all proceeds of demands made on the Series 2003-2 Demand Notes included in the Series 2003-2 Demand Note Payment Amount as of the Series 2003-2 Letter of Credit Termination Date that were paid by the Demand Note Issuers more than one year before such date of determination; PROVIDED, HOWEVER, that if an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to a Demand Note Issuer occurs during such one year period, (x) the Pre-Preference Period Demand Note Payments as of any date during the period from and including the date of the occurrence of such Event of Bankruptcy to and including the conclusion or dismissal of the proceedings giving rise to such Event of Bankruptcy without continuing jurisdiction by the court in such proceedings shall equal the Pre-Preference Period Demand Note Payments as of the date of such occurrence for all Demand Note Issuers and (y) the Pre-Preference Period Demand Note Payments as of any date after the conclusion or dismissal of such proceedings shall equal the Series 2003-2 Demand Note Payment Amount as of the date of the conclusion or dismissal of such proceedings. "PRINCIPAL DEFICIT AMOUNT" means, as of any date of determination, the excess, if any, of (i) the Series 2003-2 Invested Amount on such date (after giving effect to the distribution of the Monthly Total Principal Allocation for the Related Month if such date is a Distribution Date) over (ii) the Series 2003-2 AESOP I Operating Lease Loan Agreement Borrowing Base on such date; PROVIDED, HOWEVER the Principal Deficit Amount on any date occurring during the period commencing on and including the date of the filing by any of the Lessees of a petition for relief under Chapter 11 of the Bankruptcy Code to but excluding the date on which each of the Lessees shall have resumed making all payments of the portion of Monthly Base Rent relating to Loan Interest required to be made under the AESOP I Operating Lease, shall mean the excess, if any, of (x) the Series 2003-2 Invested Amount on such date (after giving effect to the distribution of Monthly Total Principal Allocation for the Related Month if such date is a Distribution Date) over (y) the sum of (1) the Series 2003-2 AESOP I Operating Lease Loan Agreement Borrowing Base on such date and (2) the lesser of (a) the Series 2003-2 Liquidity Amount on such date and (b) the Series 2003-2 Required Liquidity Amount on such date. "PRO RATA SHARE" means, with respect to any Series 2003-2 Letter of Credit Provider as of any date, the fraction (expressed as a percentage) obtained by dividing (A) the available amount under such Series 2003-2 Letter of Credit Provider's Series 2003-2 Letter of Credit as of such date by (B) an amount equal to the aggregate available amount under all Series 2003-2 Letters of Credit as of such date; PROVIDED, that only for purposes of calculating the Pro Rata Share with respect to any Series 2003-2 Letter of Credit Provider as of any date, if such Series 2003-2 Letter of Credit Provider has not complied with its obligation to pay the Trustee the amount of any draw under its Series 2003-2 Letter of Credit made prior to such date, the available amount under such Series 2003-2 Letter of Credit Provider's Series 2003-2 Letter of Credit as of such date shall be treated as reduced (for calculation purposes only) by the amount of such unpaid demand and shall not be reinstated for purposes of such calculation unless and until the date as of which such Series 2003-2 Letter of Credit Provider has paid such amount to the Trustee and been reimbursed by the Lessee or the applicable Demand Note Issuer, as the case may be, for such amount (PROVIDED that the foregoing calculation shall not in any manner reduce the undersigned's actual liability in respect of any failure to pay any demand under its Series 2003-2 Letter of Credit). -8- "QUALIFIED INTEREST RATE CAP COUNTERPARTY" means a counterparty to a Series 2003-2 Interest Rate Cap who is acceptable to the Surety Provider and who is a bank or other financial institution, which has (i) a short-term senior and unsecured debt rating of at least "A-1" from Standard & Poor's and of "P-1" from Moody's and (ii) (a) on the date the Series 2003-2 Interest Rate Cap is executed, a long-term senior and unsecured debt rating of at least "AA-" from Standard & Poor's and "Aa3" from Moody's and (b) on any other date, a long-term senior and unsecured debt rating of at least "A+" from Standard & Poor's and "A1" from Moody's. "REQUISITE NOTEHOLDERS" means Series 2003-2 Noteholders holding more than 50% of the Series 2003-2 Invested Amount. "RESTRICTED GLOBAL CLASS A-1 NOTE" is defined in Section 5.1. "RESTRICTED GLOBAL CLASS A-2 NOTE" is defined in Section 5.1. "RESTRICTED GLOBAL CLASS A-3 NOTE" is defined in Section 5.1. "SERIES 1998-1 NOTES" means the Series of Notes designated as the Series 1998-1 Notes. "SERIES 2000-1 NOTES" means the Series of Notes designated as the Series 2000-1 Notes. "SERIES 2000-2 NOTES" means the Series of Notes designated as the Series 2000-2 Notes. "SERIES 2000-3 NOTES" means the Series of Notes designated as the Series 2000-3 Notes. "SERIES 2000-4 NOTES" means the Series of Notes designated as the Series 2000-4 Notes. "SERIES 2001-1 NOTES" means the Series of Notes designated as the Series 2001-1 Notes. "SERIES 2001-2 NOTES" means the Series of Notes designated as the Series 2001-2 Notes. "SERIES 2002-1 NOTES" means the Series of Notes designated as the Series 2002-1 Notes. "SERIES 2002-2 NOTES" means the Series of Notes designated as the Series 2002-2 Notes. "SERIES 2002-3 NOTES" means the Series of Notes designated as the Series 2002-3 Notes. -9- "SERIES 2002-4 NOTES" means the Series of Notes designated as the Series 2002-4 Notes. "SERIES 2003-1 NOTES" means the Series of Notes designated as the Series 2003-1 Notes. "SERIES 2003-2 ACCOUNTS" means each of the Series 2003-2 Distribution Account, the Series 2003-2 Reserve Account, the Series 2003-2 Collection Account, the Series 2003-2 Excess Collection Account and the Series 2003-2 Accrued Interest Account. "SERIES 2003-2 ACCRUED INTEREST ACCOUNT" is defined in Section 2.1(b). "SERIES 2003-2 ADJUSTED MONTHLY INTEREST" means (a) for the initial Distribution Date, an amount equal to $1,951,212.67 and (b) for any other Distribution Date, the sum of (i) the sum of (A) for the Series 2003-2 Interest Period ending on the day preceding such Distribution Date, an amount equal to the product of (1) the Class A-1 Note Rate and (2) the Class A-1 Outstanding Principal Amount on the first day of such Series 2003-2 Interest Period, divided by twelve, (B) an amount equal to the product of (1) the Class A-2 Note Rate for such Series 2003-2 Interest Period, (2) the Class A-2 Outstanding Principal Amount on the first day of such Series 2003-2 Interest Period, and (3) a fraction, the numerator of which is the number of days in such Series 2003-2 Interest Period and the denominator of which is 360 and (C) an amount equal to the product of (1) the Class A-3 Note Rate and (2) the Class A-3 Outstanding Principal Amount on the first day of such Series 2003-2 Interest Period, divided by twelve and (ii) any amount described in clause (b)(i) with respect to a prior Distribution Date that remains unpaid as of such Distribution Date (together with any accrued interest on such amount). "SERIES 2003-2 AGENT" is defined in the recitals hereto. "SERIES 2003-2 AESOP I OPERATING LEASE LOAN AGREEMENT BORROWING BASE" means, as of any date of determination, the product of (a) the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of such date and (b) the AESOP I Operating Lease Loan Agreement Borrowing Base as of such date. "SERIES 2003-2 AESOP I OPERATING LEASE VEHICLE PERCENTAGE" means, as of any date of determination, a fraction, expressed as a percentage (which percentage shall never exceed 100%), the numerator of which is the Series 2003-2 Required AESOP I Operating Lease Vehicle Amount as of such date and the denominator of which is the sum of the Required AESOP I Operating Lease Vehicle Amounts for all Series of Notes as of such date. "SERIES 2003-2 AVAILABLE CASH COLLATERAL ACCOUNT AMOUNT" means, as of any date of determination, the amount on deposit in the Series 2003-2 Cash Collateral Account (after giving effect to any deposits thereto and withdrawals and releases therefrom on such date). "SERIES-2003-2 AVAILABLE RESERVE ACCOUNT AMOUNT" means, as of any date of determination, the amount on deposit in the Series 2003-2 Reserve Account (after giving effect to any deposits thereto and withdrawals and releases therefrom on such date). "SERIES 2003-2 CASH COLLATERAL ACCOUNT" is defined in Section 2.8(f). -10- "SERIES 2003-2 CASH COLLATERAL ACCOUNT COLLATERAL" is defined in Section 2.8(a). "SERIES 2003-2 CASH COLLATERAL ACCOUNT SURPLUS" means, with respect to any Distribution Date, the lesser of (a) the Series 2003-2 Available Cash Collateral Account Amount and (b) the lesser of (A) the excess, if any, of the Series 2003-2 Liquidity Amount (after giving effect to any withdrawal from the Series 2003-2 Reserve Account on such Distribution Date) over the Series 2003-2 Required Liquidity Amount on such Distribution Date and (B) the excess, if any, of the Series 2003-2 Enhancement Amount (after giving effect to any withdrawal from the Series 2003-2 Reserve Account on such Distribution Date) over the Series 2003-2 Required Enhancement Amount on such Distribution Date; PROVIDED, HOWEVER that, on any date after the Series 2003-2 Letter of Credit Termination Date, the Series 2003-2 Cash Collateral Account Surplus shall mean the excess, if any, of (x) the Series 2003-2 Available Cash Collateral Account Amount over (y) the Series 2003-2 Demand Note Payment Amount MINUS the Pre-Preference Period Demand Note Payments as of such date. "SERIES 2003-2 CASH COLLATERAL PERCENTAGE" means, as of any date of determination, the percentage equivalent of a fraction, the numerator of which is the Series 2003-2 Available Cash Collateral Amount as of such date and the denominator of which is the Series 2003-2 Letter of Credit Liquidity Amount as of such date. "SERIES 2003-2 CLOSING DATE" means March 6, 2003. "SERIES 2003-2 COLLATERAL" means the Collateral, each Series 2003-2 Letter of Credit, each Series 2003-2 Demand Note, the Series 2003-2 Distribution Account Collateral, the Series 2003-2 Interest Rate Cap Collateral, the Series 2003-2 Cash Collateral Account Collateral and the Series 2003-2 Reserve Account Collateral. "SERIES 2003-2 COLLECTION ACCOUNT" is defined in Section 2.1(b). "SERIES 2003-2 CONTROLLED AMORTIZATION PERIOD" means the Three-Year Notes Controlled Amortization Period and/or the Class A-3 Controlled Amortization Period, as the case may be. "SERIES 2003-2 DEMAND NOTE" means each demand note made by a Demand Note Issuer, substantially in the form of EXHIBIT C to this Supplement, as amended, modified or restated from time to time. "SERIES 2003-2 DEMAND NOTE PAYMENT AMOUNT" means, as of the Series 2003-2 Letter of Credit Termination Date, the aggregate amount of all proceeds of demands made on the Series 2003-2 Demand Notes pursuant to Section 2.5(b) or (c) that were deposited into the Series 2003-2 Distribution Account and paid to the Series 2003-2 Noteholders during the one year period ending on the Series 2003-2 Letter of Credit Termination Date; PROVIDED, HOWEVER, that if an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to a Demand Note Issuer shall have occurred during such one year period, the Series 2003-2 Demand Note Payment Amount as of the Series 2003-2 Letter of Credit Termination Date shall equal the Series 2003-2 Demand Note Payment Amount as if it were calculated as of the date of such occurrence. -11- "SERIES 2003-2 DEPOSIT DATE" is defined in Section 2.2. "SERIES 2003-2 DISTRIBUTION ACCOUNT" is defined in Section 2.9(a). "SERIES 2003-2 DISTRIBUTION ACCOUNT COLLATERAL" is defined in Section 2.9(d). "SERIES 2003-2 ELIGIBLE LETTER OF CREDIT PROVIDER" means a person satisfactory to ARAC, the Demand Note Issuers and the Surety Provider and having, at the time of the issuance of the related Series 2003-2 Letter of Credit, a long-term senior unsecured debt rating (or the equivalent thereof in the case of Moody's or Standard & Poor's, as applicable) of at least "A+" from Standard & Poor's and at least "Al" from Moody's and a short-term senior unsecured debt rating of at least "A-1" from Standard & Poor's and "P-1" from Moody's that is (a) a commercial bank having total assets in excess of $500,000,000, (b) a finance company, insurance company or other financial institution that in the ordinary course of business issues letters of credit and has total assets in excess of $200,000,000 or (c) any other financial institution; PROVIDED, HOWEVER, that if a person is not a Series 2003-2 Letter of Credit Provider (or a letter of credit provider under the Supplement for any other Series of Notes), then such person shall not be a Series 2003-2 Eligible Letter of Credit Provider until AFC-II has provided 10 days' prior notice to the Rating Agencies that such person has been proposed as a Series 2003-2 Letter of Credit Provider. "SERIES 2003-2 ENHANCEMENT" means the Series 2003-2 Cash Collateral Account Collateral, the Series 2003-2 Letters of Credit, the Series 2003-2 Demand Notes, the Series 2003-2 Overcollateralization Amount and the Series 2003-2 Reserve Account Amount. "SERIES 2003-2 ENHANCEMENT AMOUNT" means, as of any date of determination, the sum of (i) the Series 2003-2 Overcollateralization Amount as of such date, (ii) the Series 2003-2 Letter of Credit Amount as of such date, (iii) the Series 2003-2 Available Reserve Account Amount as of such date and (iv) the amount of cash and Permitted Investments on deposit in the Series 2003-2 Collection Account (not including amounts allocable to the Series 2003-2 Accrued Interest Account) and the Series 2003-2 Excess Collection Account as of such date. "SERIES 2003-2 ENHANCEMENT DEFICIENCY" means, on any date of determination, the amount by which the Series 2003-2 Enhancement Amount is less than the Series 2003-2 Required Enhancement Amount as of such date. "SERIES 2003-2 EXCESS COLLECTION ACCOUNT" is defined in Section 2.1(b). "SERIES 2003-2 FINAL DISTRIBUTION DATE" means the Three-Year Notes Final Distribution Date or the Class A-3 Final Distribution Date. "SERIES 2003-2 INITIAL INVESTED AMOUNT" means the sum of the Class A-1 Initial Invested Amount, the Class A-2 Initial Invested Amount and the Class A-3 Initial Invested Amount. "SERIES 2003-2 INTEREST PERIOD" means a period commencing on and including a Distribution Date and ending on and including the day preceding the next succeeding -12- Distribution Date; PROVIDED, HOWEVER that the initial Series 2003-2 Interest Period shall commence on and include the Series 2003-2 Closing Date and end on and include April 20, 2003. "SERIES 2003-2 INTEREST RATE CAP" is defined in Section 2.10(a). "SERIES 2003-2 INTEREST RATE CAP COLLATERAL" is defined in Section 2.10(d). "SERIES 2003-2 INTEREST RATE CAP PROCEEDS" means the amounts received by the Trustee from an Interest Rate Cap Counterparty from time to time in respect of a Series 2003-2 Interest Rate Cap (including amounts received from a guarantor or from collateral). "SERIES 2003-2 INVESTED AMOUNT" means, as of any date of determination, the sum of the Class A-1 Invested Amount as of such date, the Class A-2 Invested Amount as of such date and the Class A-3 Invested Amount as of such date. "SERIES 2003-2 INVESTED PERCENTAGE" means as of any date of determination: (a) when used with respect to Principal Collections, the percentage equivalent (which percentage shall never exceed 100%) of a fraction the numerator of which shall be equal to the sum of the Series 2003-2 Invested Amount and the Series 2003-2 Overcollateralization Amount, determined during the Series 2003-2 Revolving Period as of the end of the Related Month (or, until the end of the initial Related Month, on the Series 2003-2 Closing Date), or, during the Series 2003-2 Controlled Amortization Period and the Series 2003-2 Rapid Amortization Period, as of the end of the Series 2003-2 Revolving Period, and the denominator of which shall be the greater of (I) the Aggregate Asset Amount as of the end of the Related Month or, until the end of the initial Related Month, as of the Series 2003-2 Closing Date, and (II) as of the same date as in clause (I), the sum of the numerators used to determine (i) invested percentages for allocations with respect to Principal Collections (for all Series of Notes and all classes of such Series of Notes) and (ii) overcollateralization percentages for allocations with respect to Principal Collections (for all Series of Notes that provide for credit enhancement in the form of overcollateralization); and (b) when used with respect to Interest Collections, the percentage equivalent (which percentage shall never exceed 100%) of a fraction the numerator of which shall be the Accrued Amounts with respect to the Series 2003-2 Notes on such date of determination, and the denominator of which shall be the aggregate Accrued Amounts with respect to all Series of Notes on such date of determination. "SERIES 2003-2 LEASE INTEREST PAYMENT DEFICIT" means on any Distribution Date an amount equal to the excess, if any, of (a) the aggregate amount of Interest Collections which pursuant to Section 2.2(a), (b), (c) or (d) would have been allocated to the Series 2003-2 Accrued Interest Account if all payments of Monthly Base Rent required to have been made under the Leases from and excluding the preceding Distribution Date to and including such Distribution Date were made in full over (b) the aggregate amount of Interest Collections which pursuant to Section 2.2(a), (b), (c) or (d) have been allocated to the Series 2003-2 Accrued Interest Account (excluding any amounts paid into the Series 2003-2 Accrued Interest Account pursuant to the -13- proviso in Sections 2.2(c)(ii) and/or 2.2(d)(ii)) from and excluding the preceding Distribution Date to and including such Distribution Date. "SERIES 2003-2 LEASE PAYMENT DEFICIT" means either a Series 2003-2 Lease Interest Payment Deficit or a Series 2003-2 Lease Principal Payment Deficit. "SERIES 2003-2 LEASE PRINCIPAL PAYMENT CARRYOVER DEFICIT" means (a) for the initial Distribution Date, zero and (b) for any other Distribution Date, the excess of (x) the Series 2003-2 Lease Principal Payment Deficit, if any, on the preceding Distribution Date OVER (y) the amount deposited in the Distribution Account on such preceding Distribution Date pursuant to Section 2.5(b) on account of such Series 2003-2 Lease Principal Payment Deficit. "SERIES 2003-2 LEASE PRINCIPAL PAYMENT DEFICIT" means on any Distribution Date the sum of (a) the Series 2003-2 Monthly Lease Principal Payment Deficit for such Distribution Date and (b) the Series 2003-2 Lease Principal Payment Carryover Deficit for such Distribution Date. "SERIES 2003-2 LETTER OF CREDIT" means an irrevocable letter of credit, if any, substantially in the form of EXHIBIT D to this Supplement issued by a Series 2003-2 Eligible Letter of Credit Provider in favor of the Trustee for the benefit of the Series 2003-2 Noteholders and the Surety Provider in form and substance satisfactory to the Surety Provider. "SERIES 2003-2 LETTER OF CREDIT AMOUNT" means, as of any date of determination, the lesser of (a) the sum of (i) the aggregate amount available to be drawn on such date under each Series 2003-2 Letter of Credit, as specified therein, and (ii) if the Series 2003-2 Cash Collateral Account has been established and funded pursuant to Section 2.8, the Series 2003-2 Available Cash Collateral Account Amount on such date and (b) the aggregate outstanding principal amount of the Series 2003-2 Demand Notes on such date. "SERIES 2003-2 LETTER OF CREDIT EXPIRATION DATE" means, with respect to any Series 2003-2 Letter of Credit, the expiration date set forth in such Series 2003-2 Letter of Credit, as such date may be extended in accordance with the terms of such Series 2003-2 Letter of Credit. "SERIES 2003-2 LETTER OF CREDIT LIQUIDITY AMOUNT" means, as of any date of determination, the sum of (a) the aggregate amount available to be drawn on such date under each Series 2003-2 Letter of Credit, as specified therein, and (b) if the Series 2003-2 Cash Collateral Account has been established and funded pursuant to Section 2.8, the Series 2003-2 Available Cash Collateral Account Amount on such date. "SERIES 2003-2 LETTER OF CREDIT PROVIDER" means the issuer of a Series 2003-2 Letter of Credit. "SERIES 2003-2 LETTER OF CREDIT TERMINATION DATE" means the first to occur of (a) the date on which the Series 2003-2 Notes are fully paid and the Surety Provider has been paid all Surety Provider Fees and all other Surety Provider Reimbursement Amounts then due, (b) the Series 2003-2 Termination Date and (c) such earlier date consented to by the Surety Provider and the Rating Agencies which consent by the Surety Provider shall be in writing. -14- "SERIES 2003-2 LIMITED LIQUIDATION EVENT OF DEFAULT" means, so long as such event or condition continues, any event or condition of the type specified in clauses (a) through (j) of Article III; PROVIDED, HOWEVER, that any event or condition of the type specified in clauses (a) through (e) and (h) through (j) of Article III shall not constitute a Series 2003-2 Limited Liquidation Event of Default if (i) within such thirty (30) day period, such Amortization Event shall have been cured and, after such cure of such Amortization Event is provided for, the Trustee shall have received the written consent of the Surety Provider waiving the occurrence of such Series 2003-2 Limited Liquidation Event of Default or (ii) the Trustee shall have received the written consent of the Surety Provider waiving the occurrence of such Series 2003-2 Limited Liquidation Event of Default. "SERIES 2003-2 LIQUIDITY AMOUNT" means, as of any date of determination, the sum of (a) the Series 2003-2 Letter of Credit Liquidity Amount on such date and (b) the Series 2003-2 Available Reserve Account Amount on such date. "SERIES 2003-2 MAXIMUM AGGREGATE KIA/ISUZU/SUBARU/HYUNDAI/SUZUKI AMOUNT" means, as of any day, with respect to Kia, Isuzu, Subaru, Hyundai and Suzuki, in the aggregate, an amount equal to 15% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day or such lesser percentage as may be agreed to in writing by AFC-II and the Surety Provider (initially 10%) of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-2 MAXIMUM AMOUNT" means any of the Series 2003-2 Maximum Manufacturer Amounts, the Series 2003-2 Maximum Non-Eligible Manufacturer Amount, the Series 2003-2 Maximum Non-Program Vehicle Amount or the Series 2003-2 Maximum Specified States Amount. "SERIES 2003-2 MAXIMUM INDIVIDUAL KIA/ISUZU/SUBARU/HYUNDAI/SUZUKI AMOUNT" means, as of any day, with respect to Kia, Isuzu, Subaru, Hyundai or Suzuki, individually, an amount equal to 5% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-2 MAXIMUM MANUFACTURER AMOUNT" means, as of any day, any of the Series 2003-2 Maximum Mitsubishi Amount, the Series 2003-2 Maximum Individual Kia/Isuzu/Subaru/Hyundai/Suzuki Amount or the Series 2003-2 Maximum Aggregate Kia/Isuzu/Subaru/Hyundai/Suzuki Amount. "SERIES 2003-2 MAXIMUM MITSUBISHI AMOUNT" means, as of any day, an amount equal to 10% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-2 MAXIMUM NON-ELIGIBLE MANUFACTURER AMOUNT" means, as of any day, an amount equal to 3% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-2 MAXIMUM NON-PROGRAM VEHICLE AMOUNT" means, as of any day, an amount equal to the Series 2003-2 Maximum Non-Program Vehicle Percentage of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. -15- "SERIES 2003-2 MAXIMUM NON-PROGRAM VEHICLE PERCENTAGE" means 25% or such lesser percentage as may be agreed to in writing by AFC-II and the Surety Provider on or after the Series 2003-2 Closing Date, with prompt written notice thereof delivered by AFC-II to the Trustee. "SERIES 2003-2 MAXIMUM SPECIFIED STATES AMOUNT" means, as of any day, an amount equal to 7.5% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-2 MONTHLY INTEREST" means, with respect to any Series 2003-2 Interest Period, the sum of the Class A-1 Monthly Interest, the Class A-2 Monthly Interest and the Class A-3 Monthly Interest with respect to such Series 2003-2 Interest Period. "SERIES 2003-2 MONTHLY LEASE PRINCIPAL PAYMENT DEFICIT" means, on any Distribution Date, an amount equal to the excess, if any, of (a) the aggregate amount of Principal Collections which pursuant to Section 2.2(a), (b), (c) or (d) would have been allocated to the Series 2003-2 Collection Account if all payments required to have been made under the Leases from and excluding the preceding Distribution Date to and including such Distribution Date were made in full over (b) the aggregate amount of Principal Collections which pursuant to Section 2.2(a), (b), (c) or (d) have been allocated to the Series 2003-2 Collection Account (without giving effect to any amounts paid into the Series 2003-2 Accrued Interest Account pursuant to the proviso in Sections 2.2(c)(ii) and/or 2.2(d)(ii)) from and excluding the preceding Distribution Date to and including such Distribution Date. "SERIES 2003-2 NON-PROGRAM VEHICLE PERCENTAGE" means, as of any date of determination, a fraction, expressed as a percentage, the numerator of which is the aggregate Net Book Value of all Non-Program Vehicles leased under the AESOP I Operating Lease as of such date and the denominator of which is the aggregate Net Book Value of all Vehicles leased under the AESOP I Operating Lease as of such date. "SERIES 2003-2 NOTE RATE" means, the Class A-1 Note Rate, the Class A-2 Note Rate or the Class A-3 Note Rate, as the context may require. "SERIES 2003-2 NOTEHOLDER" means any Class A-1 Noteholder, any Class A-2 Noteholder or any Class A-3 Noteholder. "SERIES 2003-2 NOTES" means, collectively, the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes. "SERIES 2003-2 OUTSTANDING PRINCIPAL AMOUNT" means, as of any date of determination, the sum of the Class A-1 Outstanding Principal Amount, the Class A-2 Outstanding Principal Amount and the Class A-3 Outstanding Principal Amount. "SERIES 2003-2 OVERCOLLATERALIZATION AMOUNT" means (i) as of any date on which no AESOP I Operating Lease Vehicle Deficiency exists, the Series 2003-2 Required Overcollateralization Amount as of such date and (ii) as of any date on which an AESOP I Operating Lease Vehicle Deficiency exists, the excess, if any, of (x) the Series 2003-2 AESOP I -16- Operating Lease Loan Agreement Borrowing Base as of such date over (y) the Series 2003-2 Invested Amount as of such date. "SERIES 2003-2 PAST DUE RENT PAYMENT" is defined in Section 2.2(g). "SERIES 2003-2 PERCENTAGE" means, as of any date of determination, a fraction, expressed as a percentage, the numerator of which is the Series 2003-2 Invested Amount as of such date and the denominator of which is the Aggregate Invested Amount as of such date. "SERIES 2003-2 PRINCIPAL ALLOCATION" is defined in Section 2.2(a)(ii). "SERIES 2003-2 PROGRAM VEHICLE PERCENTAGE" means, as of any date of determination, 100% minus the Series 2003-2 Non-Program Vehicle Percentage. "SERIES 2003-2 RAPID AMORTIZATION PERIOD" means the period beginning at the close of business on the Business Day immediately preceding the day on which an Amortization Event is deemed to have occurred with respect to the Series 2003-2 Notes and ending upon the earliest to occur of (i) the date on which the Series 2003-2 Notes are fully paid and the Surety Provider has been paid all Surety Provider Fees and all other Surety Provider Reimbursement Amounts then due, (ii) the Series 2003-2 Termination Date and (iii) the termination of the Indenture. "SERIES 2003-2 REIMBURSEMENT AGREEMENT" means any and each agreement providing for the reimbursement of a Series 2003-2 Letter of Credit Provider for draws under its Series 2003-2 Letter of Credit as the same may be amended, supplemented, restated or otherwise modified from time to time. "SERIES 2003-2 REPURCHASE AMOUNT" is defined in Section 6.1. "SERIES 2003-2 REQUIRED AESOP I OPERATING LEASE VEHICLE AMOUNT" means, as of any date of determination, the sum of the Series 2003-2 Invested Amount and the Series 2003-2 Required Overcollateralization Amount as of such date. "SERIES 2003-2 REQUIRED ENHANCEMENT AMOUNT" means, as of any date of determination, the sum of (i) the product of the Series 2003-2 Required Enhancement Percentage as of such date and the Series 2003-2 Invested Amount as of such date, (ii) the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of the immediately preceding Business Day of the excess, if any, of the Non-Program Vehicle Amount as of such date over the Series 2003-2 Maximum Non-Program Vehicle Amount as of such date, (iii) the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of the immediately preceding Business Day of the excess, if any, of the aggregate Net Book Value of all Vehicles manufactured by Mitsubishi and leased under the Leases as of such date over the Series 2003-2 Maximum Mitsubishi Amount as of such date, (iv) the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of the immediately preceding Business Day of the excess, if any, of the aggregate Net Book Value of all Vehicles manufactured by Kia, Isuzu, Subaru, Hyundai or Suzuki, individually, and leased under the Leases as of such date over the Series 2003-2 Maximum Individual Kia/Isuzu/Subaru/ Hyundai/Suzuki Amount as of such date, (v) the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of the immediately preceding Business Day of the excess, if any, of the -17- aggregate Net Book Value of all Vehicles manufactured by Kia, Isuzu, Subaru, Hyundai or Suzuki, in the aggregate, and leased under the Leases as of such date over the Series 2003-2 Maximum Aggregate Kia/Isuzu/Subaru/Hyundai/Suzuki Amount as of such date, (vi) the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of the immediately preceding Business Day of the excess, if any, of the Specified States Amount as of such date over the Series 2003-2 Maximum Specified States Amount as of such date and (vii) the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of the immediately preceding Business Day of the excess, if any, of the Non-Eligible Manufacturer Amount as of such date over the Series 2003-2 Maximum Non-Eligible Manufacturer Amount as of such date. "SERIES 2003-2 REQUIRED ENHANCEMENT PERCENTAGE" means, as of any date of determination, the sum of (i) the product of (A) 15.0% times (B) the Series 2003-2 Program Vehicle Percentage as of such date and (ii) the product of (A) the Series 2003-2 Required Non-Program Enhancement Percentage as of such date times (B) the Series 2003-2 Non-Program Vehicle Percentage as of such date. "SERIES 2003-2 REQUIRED LIQUIDITY AMOUNT" means, with respect to any Distribution Date, an amount equal to 3.5% of the Series 2003-2 Invested Amount on such Distribution Date (after giving effect to any payments of principal to be made on the Series 2003-2 Notes on such Distribution Date). "SERIES 2003-2 REQUIRED NON-PROGRAM ENHANCEMENT PERCENTAGE" means, as of any date of determination, the greater of (a) 19.5% and (b) the sum of (i) 19.5% and (ii) the highest, for any calendar month within the preceding twelve calendar months, of the greater of (x) an amount (not less than zero) equal to 100% minus the Measurement Month Average for the immediately preceding Measurement Month and (y) an amount (not less than zero) equal to 100% minus the Market Value Average as of the Determination Date within such calendar month (excluding the Market Value Average for any Determination Date which has not yet occurred). "SERIES 2003-2 REQUIRED OVERCOLLATERALIZATION AMOUNT" means, as of any date of determination, the excess, if any, of the Series 2003-2 Required Enhancement Amount over the sum of (i) the Series 2003-2 Letter of Credit Amount as of such date, (ii) the Series 2003-2 Available Reserve Account Amount on such date and (iii) the amount of cash and Permitted Investments on deposit in the Series 2003-2 Collection Account (not including amounts allocable to the Series 2003-2 Accrued Interest Account) and the Series 2003-2 Excess Collection Account on such date. "SERIES 2003-2 REQUIRED RESERVE ACCOUNT AMOUNT" means, with respect to any Distribution Date, an amount equal to the greater of (a) the excess, if any, of the Series 2003-2 Required Liquidity Amount on such Distribution Date over the Series 2003-2 Letter of Credit Liquidity Amount on such Distribution Date (after giving effect to any payments of principal to be made on the Series 2003-2 Notes on such Distribution Date) and (b) the excess, if any, of the Series 2003-2 Required Enhancement Amount over the Series 2003-2 Enhancement Amount (excluding therefrom the Series 2003-2 Available Reserve Account Amount and calculated after giving effect to any payments of principal to be made on the Series 2003-2 Notes) on such Distribution Date. -18- "SERIES 2003-2 RESERVE ACCOUNT" is defined in Section 2.7(a). "SERIES 2003-2 RESERVE ACCOUNT COLLATERAL" is defined in Section 2.7(d). "SERIES 2003-2 RESERVE ACCOUNT SURPLUS" means, with respect to any Distribution Date, the excess, if any, of the Series 2003-2 Available Reserve Account Amount over the Series 2003-2 Required Reserve Account Amount on such Distribution Date. "SERIES 2003-2 REVOLVING PERIOD" means, the period from and including the Series 2003-2 Closing Date to the earlier of (i) the commencement of the Three-Year Notes Controlled Amortization Period and (ii) the commencement of the Series 2003-2 Rapid Amortization Period; provided that if the Class A-1 Notes and the Class A-2 Notes are paid in full on or prior to the June 2006 Distribution Date, then the Series 2003-2 Revolving Period shall also include the period from and including the first day of the calendar month during which the Distribution Date on which the Class A-1 Notes and Class A-2 Notes are paid in full occurs to the earlier of (i) the commencement of the Class A-3 Controlled Amortization Period and (ii) the commencement of the Series 2003-2 Rapid Amortization Period. "SERIES 2003-2 SHORTFALL" is defined in Section 2.3(g). "SERIES 2003-2 TERMINATION DATE" means the June 2009 Distribution Date. "SERIES 2003-2 UNPAID DEMAND AMOUNT" means, with respect to any single draw pursuant to Section 2.5(c) or (d) on the Series 2003-2 Letters of Credit, the aggregate amount drawn by the Trustee on all Series 2003-2 Letters of Credit. "SHADOW RATING" means the rating of the Series 2003-2 Notes by Standard & Poor's or Moody's, as applicable, without giving effect to the Surety Bond. "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SUPPLEMENT" is defined in the preamble hereto. "SURETY BOND" means the Note Guaranty Insurance Policy No. 40546, dated March 6, 2003, issued by the Surety Provider. "SURETY DEFAULT" means (i) the occurrence and continuance of any failure by the Surety Provider to pay upon a demand for payment in accordance with the requirements of the Surety Bond or (ii) the occurrence of an Event of Bankruptcy with respect to the Surety Provider. "SURETY PROVIDER" means MBIA Insurance Corporation, a New York-domiciled stock insurance corporation. The Surety Provider shall constitute an "Enhancement Provider" with respect to the Series 2003-2 Notes for all purposes under the Indenture and the other Related Documents. "SURETY PROVIDER FEE" is defined in the Insurance Agreement. -19- "SURETY PROVIDER REIMBURSEMENT AMOUNTS" means, as of any date of determination, (i) an amount equal to the aggregate of any amounts due as of such date to the Surety Provider pursuant to the Insurance Agreement in respect of unreimbursed draws under the Surety Bond, including interest thereon determined in accordance with the Insurance Agreement, and (ii) an amount equal to the aggregate of any other amounts due as of such date to the Surety Provider pursuant to the Insurance Agreement. "TELERATE PAGE 3750" means the display page currently so designated on the Moneyline Telerate Service (or such other page as may replace that page on that service for the purpose of displaying comparable rates or prices). "TEMPORARY GLOBAL CLASS A-1 NOTE" is defined in Section 5.2. "TEMPORARY GLOBAL CLASS A-2 NOTE" is defined in Section 5.2. "TEMPORARY GLOBAL CLASS A-3 NOTE" is defined in Section 5.2. "TERMINATION DATE DISBURSEMENT" means an amount drawn under a Series 2003-2 Letter of Credit pursuant to a Certificate of Termination Date Demand. "TERMINATION DISBURSEMENT" means an amount drawn under a Series 2003-2 Letter of Credit pursuant to a Certificate of Termination Demand. "THREE-YEAR NOTES CONTROLLED AMORTIZATION PERIOD" means the period commencing at the opening of business on December 1, 2005 (or, if such day is not a Business Day, the Business Day immediately preceding such day) and continuing to the earliest of (i) the commencement of the Series 2003-2 Rapid Amortization Period, (ii) the date on which the Class A-1 Notes and the Class A-2 Notes are fully paid and (iii) the termination of the Indenture. "THREE-YEAR NOTES EXPECTED FINAL DISTRIBUTION DATE" means the June 2006 Distribution Date. "THREE-YEAR NOTES FINAL DISTRIBUTION DATE" means the June 2007 Distribution Date. "TRUSTEE" is defined in the recitals hereto. "UNPAID DEMAND NOTE DISBURSEMENT" means an amount drawn under a Series 2003-2 Letter of Credit pursuant to a Certificate of Unpaid Demand Note Demand. "WAIVABLE AMOUNT" is defined in Article IV. "WAIVER EVENT" means the occurrence of the delivery of a Waiver Request and the subsequent waiver of any Series 2003-2 Maximum Amount. "WAIVER REQUEST" is defined in Article IV. -20- ARTICLE II SERIES 2003-2 ALLOCATIONS With respect to the Series 2003-2 Notes, the following shall apply: Section 2.1 ESTABLISHMENT OF SERIES 2003-2 COLLECTION ACCOUNT, SERIES 2003-2 EXCESS COLLECTION ACCOUNT AND SERIES 2003-2 ACCRUED INTEREST ACCOUNT. (a) All Collections allocable to the Series 2003-2 Notes shall be allocated to the Collection Account. (b) The Trustee will create three administrative subaccounts within the Collection Account for the benefit of the Series 2003-2 Noteholders and the Surety Provider: the Series 2003-2 Collection Account (such sub-account, the "SERIES 2003-2 COLLECTION ACCOUNT"), the Series 2003-2 Excess Collection Account (such sub-account, the "SERIES 2003-2 EXCESS COLLECTION ACCOUNT") and the Series 2003-2 Accrued Interest Account (such sub-account, the "SERIES 2003-2 ACCRUED INTEREST ACCOUNT"). Section 2.2 ALLOCATIONS WITH RESPECT TO THE SERIES 2003-2 NOTES. The net proceeds from the initial sale of the Series 2003-2 Notes will be deposited into the Collection Account. On each Business Day on which Collections are deposited into the Collection Account (each such date, a "SERIES 2003-2 DEPOSIT DATE"), the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate all amounts deposited into the Collection Account in accordance with the provisions of this Section 2.2: (a) ALLOCATIONS OF COLLECTIONS DURING THE SERIES 2003-2 REVOLVING PERIOD. During the Series 2003-2 Revolving Period, the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate on each day, prior to 11:00 a.m. (New York City time) on each Series 2003-2 Deposit Date, all amounts deposited into the Collection Account as set forth below: (i) allocate to the Series 2003-2 Collection Account an amount equal to the sum of (A) the Series 2003-2 Invested Percentage (as of such day) of the aggregate amount of Interest Collections on such day and (B) any amounts received by the Trustee on such day in respect of the Series 2003-2 Interest Rate Caps. All such amounts allocated to the Series 2003-2 Collection Account shall be further allocated to the Series 2003-2 Accrued Interest Account; and (ii) allocate to the Series 2003-2 Excess Collection Account an amount equal to the Series 2003-2 Invested Percentage (as of such day) of the aggregate amount of Principal Collections on such day (for any such day, the "SERIES 2003-2 PRINCIPAL ALLOCATION"); PROVIDED, HOWEVER, if a Waiver Event shall have occurred, then such allocation shall be modified as provided in Article IV. (b) ALLOCATIONS OF COLLECTIONS DURING ANY SERIES 2003-2 CONTROLLED AMORTIZATION PERIOD. With respect to any Series 2003-2 Controlled Amortization Period, the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate, prior to 11:00 a.m. (New York City time) on any Series 2003-2 Deposit Date, all amounts deposited into the Collection Account as set forth below: -21- (i) allocate to the Series 2003-2 Collection Account an amount determined as set forth in Section 2.2(a)(i) above for such day, which amount shall be further allocated to the Series 2003-2 Accrued Interest Account; and (ii) (A) with respect to the Three-Year Notes Controlled Amortization Period, allocate to the Series 2003-2 Collection Account an amount equal to the Series 2003-2 Principal Allocation for such day, which amount shall be used to make principal payments in respect of the Class A-1 Notes and the Class A-2 Notes; PROVIDED, HOWEVER, that if the Monthly Total Principal Allocation exceeds the sum of the Class A-1 Controlled Distribution Amount and the Class A-2 Controlled Distribution Amount, then the amount of such excess shall be allocated to the Series 2003-2 Excess Collection Account; and PROVIDED, FURTHER, that if a Waiver Event shall have occurred, then such allocation shall be modified as provided in Article IV and (B) with respect to the Class A-3 Controlled Amortization Period, allocate to the Series 2003-2 Collection Account an amount equal to the Series 2003-2 Principal Allocation for such day, which amount shall be used to make principal payments in respect of the Class A-3 Notes; PROVIDED, HOWEVER, that if the Monthly Total Principal Allocation exceeds the Class A-3 Controlled Distribution Amount, then the amount of such excess shall be allocated to the Series 2003-2 Excess Collection Account; and PROVIDED, FURTHER, that if a Waiver Event shall have occurred, then such allocation shall be modified as provided in Article IV. (c) ALLOCATIONS OF COLLECTIONS DURING THE SERIES 2003-2 RAPID AMORTIZATION PERIOD. With respect to the Series 2003-2 Rapid Amortization Period, other than after the occurrence of an Event of Bankruptcy with respect to ARAC, any other Lessee or AGH, the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate, prior to 11:00 a.m. (New York City time) on any Series 2003-2 Deposit Date, all amounts deposited into the Collection Account as set forth below: (i) allocate to the Series 2003-2 Collection Account an amount determined as set forth in Section 2.2(a)(i) above for such day, which amount shall be further allocated to the Series 2003-2 Accrued Interest Account; and (ii) allocate to the Series 2003-2 Collection Account an amount equal to the Series 2003-2 Principal Allocation for such day, which amount shall be used to make principal payments in respect of the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, ratably, without preference or priority of any kind, until the Series 2003-2 Invested Amount is paid in full; PROVIDED that if on any Determination Date (A) the Administrator determines that the amount anticipated to be available from Interest Collections allocable to the Series 2003-2 Notes, any amounts payable to the Trustee in respect of Series 2003-2 Interest Rate Caps and other amounts available pursuant to Section 2.3 to pay Series 2003-2 Adjusted Monthly Interest on the next succeeding Distribution Date will be less than the Series 2003-2 Adjusted Monthly Interest for such Distribution Date and (B) the Series 2003-2 Enhancement Amount is greater than zero, then the Administrator shall direct the Trustee in writing to reallocate a portion of the Principal -22- Collections allocated to the Series 2003-2 Notes during the Related Month equal to the lesser of such insufficiency and the Series 2003-2 Enhancement Amount to the Series 2003-2 Accrued Interest Account to be treated as Interest Collections on such Distribution Date. (d) ALLOCATIONS OF COLLECTIONS AFTER THE OCCURRENCE OF AN EVENT OF BANKRUPTCY. After the occurrence of an Event of Bankruptcy with respect to ARAC, any other Lessee or AGH, the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate, prior to 11:00 a.m. (New York City time) on any Series 2003-2 Deposit Date, all amounts attributable to the AESOP I Operating Lease Loan Agreement deposited into the Collection Account as set forth below: (i) allocate to the Series 2003-2 Collection Account an amount equal to the sum of (A) the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of the date of the occurrence of such Event of Bankruptcy of the aggregate amount of Interest Collections made under the AESOP I Operating Lease Loan Agreement for such day and (B) any amounts received by the Trustee in respect of the Series 2003-2 Interest Rate Caps on such day. All such amounts allocated to the Series 2003-2 Collection Account shall be further allocated to the Series 2003-2 Accrued Interest Account; (ii) allocate to the Series 2003-2 Collection Account an amount equal to the Series 2003-2 AESOP I Operating Lease Vehicle Percentage as of the date of the occurrence of such Event of Bankruptcy of the aggregate amount of Principal Collections made under the AESOP I Operating Lease Loan Agreement, which amount shall be used to make principal payments in respect of the Series Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, ratably, without preference or priority of any kind, until the Series 2003-2 Invested Amount is paid in full; PROVIDED that if on any Determination Date (A) the Administrator determines that the amount anticipated to be available from Interest Collections allocable to the Series 2003-2 Notes, any amounts payable to the Trustee in respect of Series 2003-2 Interest Rate Caps and other amounts available pursuant to Section 2.3 to pay Series 2003-2 Adjusted Monthly Interest on the next succeeding Distribution Date will be less than the Series 2003-2 Adjusted Monthly Interest for such Distribution Date and (B) the Series 2003-2 Enhancement Amount is greater than zero, then the Administrator shall direct the Trustee in writing to reallocate a portion of the Principal Collections allocated to the Series 2003-2 Notes during the Related Month equal to the lesser of such insufficiency and the Series 2003-2 Enhancement Amount to the Series 2003-2 Accrued Interest Account to be treated as Interest Collections on such Distribution Date. (e) SERIES 2003-2 EXCESS COLLECTION ACCOUNT. Amounts allocated to the Series 2003-2 Excess Collection Account on any Series 2003-2 Deposit Date will be (w) first, deposited in the Series 2003-2 Reserve Account in an amount up to the excess, if any, of the Series 2003-2 Required Reserve Account Amount for such date over the Series 2003-2 Available Reserve Account Amount for such date, (x) second, used to pay -23- the principal amount of other Series of Notes that are then in amortization, (y) third, released to AESOP Leasing in an amount equal to the product of (A) the Loan Agreement's Share with respect to the AESOP I Operating Lease Loan Agreement as of such date times (B) 100% minus the Loan Payment Allocation Percentage with respect to the AESOP I Operating Lease Loan Agreement as of such date times (C) the amount of any remaining funds and (z) fourth, paid to AFC-II for any use permitted by the Related Documents including to make Loans under the Loan Agreements to the extent the Borrowers have requested Loans thereunder and Eligible Vehicles are available for financing thereunder; PROVIDED, HOWEVER, that in the case of clauses (x), (y) and (z), that no Amortization Event, Series 2003-2 Enhancement Deficiency or AESOP I Operating Lease Vehicle Deficiency would result therefrom or exist immediately thereafter. Upon the occurrence of an Amortization Event, funds on deposit in the Series 2003-2 Excess Collection Account will be withdrawn by the Trustee, deposited in the Series 2003-2 Collection Account and allocated as Principal Collections to reduce the Series 2003-2 Invested Amount on the immediately succeeding Distribution Date. (f) ALLOCATIONS FROM OTHER SERIES. Amounts allocated to other Series of Notes that have been reallocated by AFC-II to the Series 2003-2 Notes (i) during the Series 2003-2 Revolving Period shall be allocated to the Series 2003-2 Excess Collection Account and applied in accordance with Section 2.2(e) and (ii) during the Series 2003-2 Amortization Period shall be allocated to the Series 2003-2 Collection Account and applied in accordance with Section 2.2(b) or 2.2(c), as applicable, to make principal payments in respect of the Series 2003-2 Notes. (g) PAST DUE RENTAL PAYMENTS. Notwithstanding the foregoing, if in the case of Section 2.2(a) or (b), after the occurrence of a Series 2003-2 Lease Payment Deficit, the Lessees shall make payments of Monthly Base Rent or other amounts payable by the Lessees under the Leases on or prior to the fifth Business Day after the occurrence of such Series 2003-2 Lease Payment Deficit (a "PAST DUE RENT PAYMENT"), the Administrator shall direct the Trustee in writing pursuant to the Administration Agreement to allocate to the Series 2003-2 Collection Account an amount equal to the Series 2003-2 Invested Percentage as of the date of the occurrence of such Series 2003-2 Lease Payment Deficit of the Collections attributable to such Past Due Rent Payment (the "SERIES 2003-2 PAST DUE RENT PAYMENT"). The Administrator shall instruct the Trustee in writing pursuant to the Administration Agreement to withdraw from the Series 2003-2 Collection Account and apply the Series 2003-2 Past Due Rent Payment in the following order: (i) if the occurrence of such Series 2003-2 Lease Payment Deficit resulted in one or more Lease Deficit Disbursements being made under the Series 2003-2 Letters of Credit, pay to each Series 2003-2 Letter of Credit Provider who made such a Lease Deficit Disbursement for application in accordance with the provisions of the applicable Series 2003-2 Reimbursement Agreement an amount equal to the lesser of (x) the unreimbursed amount of such Series 2003-2 Letter of Credit Provider's Lease Deficit Disbursement and (y) such Series 2003-2 Letter of Credit Provider's Pro Rata Share of the Series 2003-2 Past Due Rent Payment; -24- (ii) if the occurrence of such Series 2003-2 Lease Payment Deficit resulted in a withdrawal being made from the Series 2003-2 Cash Collateral Account, deposit in the Series 2003-2 Cash Collateral Account an amount equal to the lesser of (x) the amount of the Series 2003-2 Past Due Rent Payment remaining after any payment pursuant to clause (i) above and (y) the amount withdrawn from the Series 2003-2 Cash Collateral Account on account of such Series 2003-2 Lease Payment Deficit; (iii) if the occurrence of such Series 2003-2 Lease Payment Deficit resulted in a withdrawal being made from the Series 2003-2 Reserve Account pursuant to Section 2.3(d), deposit in the Series 2003-2 Reserve Account an amount equal to the lesser of (x) the amount of the Series 2003-2 Past Due Rent Payment remaining after any payments pursuant to clauses (i) and (ii) above and (y) the excess, if any, of the Series 2003-2 Required Reserve Account Amount over the Series 2003-2 Available Reserve Account Amount on such day; (iv) allocate to the Series 2003-2 Accrued Interest Account the amount, if any, by which the Series 2003-2 Lease Interest Payment Deficit, if any, relating to such Series 2003-2 Lease Payment Deficit exceeds the amount of the Series 2003-2 Past Due Rent Payment applied pursuant to clauses (i), (ii) and (iii) above; and (v) treat the remaining amount of the Series 2003-2 Past Due Rent Payment as Principal Collections allocated to the Series 2003-2 Notes in accordance with Section 2.2(a)(ii) or 2.2(b)(ii), as the case may be. Section 2.3 PAYMENTS TO NOTEHOLDERS. On each Determination Date, as provided below, the Administrator shall instruct the Paying Agent in writing pursuant to the Administration Agreement to withdraw, and on the following Distribution Date the Paying Agent, acting in accordance with such instructions, shall withdraw the amounts required to be withdrawn from the Collection Account pursuant to Section 2.3(a) below in respect of all funds available from Series 2003-2 Interest Rate Cap Proceeds and Interest Collections processed since the preceding Distribution Date and allocated to the holders of the Series 2003-2 Notes. (a) NOTE INTEREST WITH RESPECT TO THE SERIES 2003-2 NOTES. On each Determination Date, the Administrator shall instruct the Trustee and the Paying Agent in writing pursuant to the Administration Agreement as to the amount to be withdrawn and paid pursuant to Section 2.4 from the Series 2003-2 Accrued Interest Account to the extent funds are anticipated to be available from Interest Collections allocable to the Series 2003-2 Notes and the Series 2003-2 Interest Rate Cap Proceeds processed from but not including the preceding Distribution Date through the succeeding Distribution Date in respect of (x) first, an amount equal to the Series 2003-2 Monthly Interest for the Series 2003-2 Interest Period ending on the day preceding the related Distribution Date, (y) second, an amount equal to the amount of any unpaid Series 2003-2 Shortfall as of the preceding Distribution Date (together with any accrued interest on such Series 2003-2 Shortfall) and (z) third, an amount equal to the Surety Provider Fee for such Series 2003-2 Interest Period plus any Surety Provider Reimbursement Amounts then due and owing. -25- On the following Distribution Date, the Trustee shall withdraw the amounts described in the first sentence of this Section 2.3(a) from the Series 2003-2 Accrued Interest Account and deposit such amounts in the Series 2003-2 Distribution Account. (b) LEASE PAYMENT DEFICIT NOTICE. On or before 10:00 a.m. (New York City time) on each Distribution Date, the Administrator shall notify the Trustee and the Surety Provider of the amount of any Series 2003-2 Lease Payment Deficit, such notification to be in the form of EXHIBIT E to this Supplement (each a "LEASE PAYMENT DEFICIT NOTICE"). (c) DRAWS ON SERIES 2003-2 LETTERS OF CREDIT FOR SERIES 2003-2 LEASE INTEREST PAYMENT DEFICITS. If the Administrator determines on any Distribution Date that there exists a Series 2003-2 Lease Interest Payment Deficit, the Administrator shall instruct the Trustee in writing to draw on the Series 2003-2 Letters of Credit, if any, and, the Trustee shall, by 12:00 noon (New York City time) on such Distribution Date draw an amount as set forth in such notice equal to the least of (i) such Series 2003-2 Lease Interest Payment Deficit, (ii) the excess, if any, of the sum of the amounts described in clauses (x), (y) and (z) of Section 2.3(a) above on such Distribution Date over the amounts available from the Series 2003-2 Accrued Interest Account and (iii) the Series 2003-2 Letter of Credit Liquidity Amount on the Series 2003-2 Letters of Credit by presenting to each Series 2003-2 Letter of Credit Provider (with a copy to the Surety Provider) a draft accompanied by a Certificate of Lease Deficit Demand and shall cause the Lease Deficit Disbursements to be deposited in the Series 2003-2 Distribution Account on such Distribution Date; PROVIDED, HOWEVER, that if the Series 2003-2 Cash Collateral Account has been established and funded, the Trustee shall withdraw from the Series 2003-2 Cash Collateral Account and deposit in the Series 2003-2 Distribution Account an amount equal to the lesser of (x) the Series 2003-2 Cash Collateral Percentage on such Distribution Date of the least of the amounts described in clauses (i), (ii) and (iii) above and (y) the Series 2003-2 Available Cash Collateral Account Amount on such Distribution Date and draw an amount equal to the remainder of such amount on the Series 2003-2 Letters of Credit. During the continuance of a Surety Default, no amounts in respect of the Surety Provider Fee shall be drawn on the Series 2003-2 Letters of Credit. (d) WITHDRAWALS FROM SERIES 2003-2 RESERVE ACCOUNT. If the Administrator determines on any Distribution Date that the amounts available from the Series 2003-2 Accrued Interest Account plus the amount, if any, to be drawn under the Series 2003-2 Letters of Credit and /or withdrawn from the Series 2003-2 Cash Collateral Account pursuant to Section 2.3(c) are insufficient to pay the sum of the amounts described in clauses (x), (y) and (z) of Section 2.3(a) above on such Distribution Date, the Administrator shall instruct the Trustee in writing to withdraw from the Series 2003-2 Reserve Account and deposit in the Series 2003-2 Distribution Account on such Distribution Date an amount equal to the lesser of the Series 2003-2 Available Reserve Account Amount and such insufficiency. During the continuance of a Surety Default, no amounts in respect of the Surety Provider Fee shall be withdrawn from the Series 2003-2 Reserve Account. The Trustee shall withdraw such amount from the Series 2003-2 Reserve Account and deposit such amount in the Series 2003-2 Distribution Account. -26- (e) SURETY BOND. If the Administrator determines on any Distribution Date that the sum of the amounts available from the Series 2003-2 Accrued Interest Account PLUS the amount, if any, to be drawn under the Series 2003-2 Letters of Credit and/or withdrawn from the Series 2003-2 Cash Collateral Account pursuant to Section 2.3(c) above PLUS the amount, if any, to be withdrawn from the Series 2003-2 Reserve Account pursuant to Section 2.3(d) above is insufficient to pay the Series 2003-2 Adjusted Monthly Interest for such Distribution Date, the Administrator shall instruct the Trustee in writing to make a demand on the Surety Bond and, upon receipt of such notice by the Trustee on or prior to 11:00 a.m. (New York City time) on such Distribution Date, the Trustee shall, by 12:00 noon (New York City time) on such Distribution Date, make a demand on the Surety Bond in an amount equal to such insufficiency in accordance with the terms thereof and shall cause the proceeds thereof to be deposited in the Series 2003-2 Distribution Account. (f) BALANCE. On or prior to the second Business Day preceding each Distribution Date, the Administrator shall instruct the Trustee and the Paying Agent in writing pursuant to the Administration Agreement to pay the balance (after making the payments required in Section 2.3(a), if any, of the amounts available from the Series 2003-2 Accrued Interest Account plus the amount, if any, drawn under the Series 2003-2 Letters of Credit and/or withdrawn from the Series 2003-2 Cash Collateral Account pursuant to Section 2.3(c) plus the amount, if any, withdrawn from the Series 2003-2 Reserve Account pursuant to Section 2.3(d) as follows: (i) on each Distribution Date during the Series 2003-2 Revolving Period or a Series 2003-2 Controlled Amortization Period, (1) first, to the Surety Provider, in an amount equal to (x) the Surety Provider Fee for the related Series 2003-2 Interest Period and, without duplication, (y) any Surety Provider Reimbursement Amounts then due and owing, (2) second, to the Administrator, an amount equal to the Series 2003-2 Percentage as of the beginning of such Series 2003-2 Interest Period of the portion of the Monthly Administration Fee payable by AFC-II (as specified in clause (iii) of the definition thereof) for such Series 2003-2 Interest Period, (3) third, to the Trustee, an amount equal to the Series 2003-2 Percentage as of the beginning of such Series 2003-2 Interest Period of the Trustee's fees for such Series 2003-2 Interest Period, (4) fourth, to pay any Carrying Charges (other than Carrying Charges provided for above) to the Persons to whom such amounts are owed, an amount equal to the Series 2003-2 Percentage as of the beginning of such Series 2003-2 Interest Period of such Carrying Charges (other than Carrying Charges provided for above) for such Series 2003-2 Interest Period and (5) fifth, the balance, if any ("EXCESS COLLECTIONS"), shall be withdrawn by the Paying Agent from the Series 2003-2 Collection Account and deposited in the Series 2003-2 Excess Collection Account; and (ii) on each Distribution Date during the Series 2003-2 Rapid Amortization Period, (1) first, to the Surety Provider, in an amount equal to (x) the Surety Provider Fee for the related Series 2003-2 Interest Period and, without duplication, (y) any Surety Provider Reimbursement Amounts then due and -27- owing, (2) second, to the Trustee, an amount equal to the Series 2003-2 Percentage as of the beginning of such Series 2003-2 Interest Period of the Trustee's fees for such Series 2003-2 Interest Period, (3) third, to the Administrator, an amount equal to the Series 2003-2 Percentage as of the beginning of such Series 2003-2 Interest Period of the portion of the Monthly Administration Fee (as specified in clause (iii) of the definition thereof) payable by AFC-II for such Series 2003-2 Interest Period, (4) fourth, to pay any Carrying Charges (other than Carrying Charges provided for above) to the Persons to whom such amounts are owed, an amount equal to the Series 2003-2 Percentage as of the beginning of such Series 2003-2 Interest Period of such Carrying Charges (other than Carrying Charges provided for above) for such Series 2003-2 Interest Period and (5) fifth, the balance, if any, shall be treated as Principal Collections. (g) SHORTFALLS. If the amounts described in Section 2.3 are insufficient to pay the Series 2003-2 Monthly Interest on any Distribution Date, payments of interest to the Series 2003-2 Noteholders will be reduced on a PRO RATA basis by the amount of such deficiency. The aggregate amount, if any, of such deficiency on any Distribution Date shall be referred to as the "SERIES 2003-2 SHORTFALL." Interest shall accrue on the portion of the Series 2003-2 Shortfall allocable to the Class A-1 Notes at the Class A-1 Note Rate, on the portion of the Series 2003-2 Shortfall allocable to the Class A-2 Notes at the Class A-2 Note Rate and on the portion of the Series 2003-2 Shortfall allocable to the Class A-3 Notes at the Class A-3 Note Rate. (h) LISTING INFORMATION REQUIREMENT. Until the Administrator shall give the Trustee written notice that the Class A-2 Notes are not listed on the Luxembourg Stock Exchange, the Trustee shall, or shall instruct the Paying Agent to, cause the Class A-2 Note Rate for the next succeeding Series 2003-2 Interest Period, the number of days in such Series 2003-2 Interest Period, the Distribution Date for such Series 2003-2 Interest Period and the amount of interest payable on the Class A-2 Notes on such Distribution Date to be (A) communicated to DTC, Euroclear, Clearstream, the Paying Agent in Luxembourg and the Luxembourg Stock Exchange no later than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date and (B) published in the Authorized Newspaper as soon as possible after its determination. Section 2.4 PAYMENT OF NOTE INTEREST. On each Distribution Date, subject to Section 9.8 of the Base Indenture, the Paying Agent shall, in accordance with Section 6.1 of the Base Indenture, pay to the Series 2003-2 Noteholders from the Series 2003-2 Distribution Account the amount deposited in the Series 2003-2 Distribution Account pursuant to Section 2.3. Section 2.5 PAYMENT OF NOTE PRINCIPAL. (a) MONTHLY PAYMENTS DURING CONTROLLED AMORTIZATION PERIOD OR RAPID AMORTIZATION PERIOD. Commencing on the second Determination Date during the Three-Year Notes Controlled Amortization Period or the Class A-3 Controlled Amortization Period, as the case may be, or the first Determination Date after the commencement of the Series 2003-2 Rapid Amortization Period, the Administrator shall instruct the Trustee and the Paying Agent in writing pursuant to the Administration Agreement and in accordance with this Section 2.5 as to (i) the amount allocated to the Series 2003-2 Notes during the Related Month pursuant to Section 2.2(b)(ii), (c)(ii) or (d)(ii), as the case may be, (ii) any -28- amounts to be drawn on the Series 2003-2 Demand Notes and/or on the Series 2003-2 Letters of Credit (or withdrawn from the Series 2003-2 Cash Collateral Account), (iii) any amounts to be withdrawn from the Series 2003-2 Reserve Account and deposited into the Series 2003-2 Distribution Account and (iv) the amount of any demand on the Surety Bond in accordance with the terms thereof. On the Distribution Date following each such Determination Date, the Trustee shall withdraw the amount allocated to the Series 2003-2 Notes during the Related Month pursuant to Section 2.2(b)(ii), (c)(ii) or (d)(ii), as the case may be, from the Series 2003-2 Collection Account and deposit such amount in the Series 2003-2 Distribution Account, to be paid to the holders of the Series 2003-2 Notes. (b) PRINCIPAL DRAWS ON SERIES 2003-2 LETTERS OF CREDIT. If the Administrator determines on any Distribution Date during the Series 2003-2 Rapid Amortization Period that there exists a Series 2003-2 Lease Principal Payment Deficit, the Administrator shall instruct the Trustee in writing to draw on the Series 2003-2 Letters of Credit, if any, as provided below; PROVIDED, HOWEVER, that the Administrator shall not instruct the Trustee to draw on the Series 2003-2 Letters of Credit in respect of a Series 2003-2 Lease Principal Payment Deficit on or after the date of the filing by any of the Lessees of a petition for relief under Chapter 11 of the Bankruptcy Code unless and until the date on which each of the Lessees shall have resumed making all payments of the portion of Monthly Base Rent relating to Loan Interest required to be made under the AESOP I Operating Lease. Upon receipt of a notice by the Trustee from the Administrator in respect of a Series 2003-2 Lease Principal Payment Deficit on or prior to 11:00 a.m. (New York City time) on a Distribution Date, the Trustee shall, by 12:00 noon (New York City time) on such Distribution Date draw an amount as set forth in such notice equal to the lesser of (i) such Series 2003-2 Lease Principal Payment Deficit and (ii) the Series 2003-2 Letter of Credit Liquidity Amount on the Series 2003-2 Letters of Credit by presenting to each Series 2003-2 Letter of Credit Provider a draft accompanied by a Certificate of Lease Deficit Demand and shall cause the Lease Deficit Disbursements to be deposited in the Series 2003-2 Distribution Account on such Distribution Date; PROVIDED, HOWEVER, that if the Series 2003-2 Cash Collateral Account has been established and funded, the Trustee shall withdraw from the Series 2003-2 Cash Collateral Account and deposit in the Series 2003-2 Distribution Account an amount equal to the lesser of (x) the Series 2003-2 Cash Collateral Percentage on such Distribution Date of the Series 2003-2 Lease Principal Payment Deficit and (y) the Series 2003-2 Available Cash Collateral Account Amount on such Distribution Date and draw an amount equal to the remainder of such amount on the Series 2003-2 Letters of Credit. (c) FINAL DISTRIBUTION DATE. The entire Class A-1 Invested Amount and the entire Class A-2 Invested Amount shall be due and payable on the Three-Year Notes Final Distribution Date, and the entire Class A-3 Invested Amount shall be due and payable on the Class A-3 Final Distribution Date. In connection therewith: (i) DEMAND NOTE DRAW. If the amount to be deposited in the Series 2003-2 Distribution Account in accordance with Section 2.5(a) together with any amounts to be deposited therein in accordance with Section 2.5(b) allocable to the Class A-1 Notes or the Class A-2 Notes on the Three-Year Notes Final Distribution Date or the Class A-3 Notes on the Class A-3 Final Distribution Date, as the case may be, is less than the sum of the Class A-1 Invested Amount and the Class A-2 Invested Amount or the Class A-3 Invested Amount, as the -29- case may be, and there are any Series 2003-2 Letters of Credit on such date, then, prior to 10:00 a.m. (New York City time) on the second Business Day prior to such Series 2003-2 Final Distribution Date, the Administrator shall instruct the Trustee in writing (with a copy to the Surety Provider) to make a demand (a "DEMAND NOTICE") substantially in the form attached hereto as EXHIBIT F on the Demand Note Issuers for payment under the Series 2003-2 Demand Notes in an amount equal to the lesser of (i) such insufficiency and (ii) the Series 2003-2 Letter of Credit Amount. The Trustee shall, prior to 12:00 noon (New York City time) on the second Business Day preceding such Series 2003-2 Final Distribution Date, deliver such Demand Notice to the Demand Note Issuers; PROVIDED, HOWEVER, that if an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to a Demand Note Issuer shall have occurred and be continuing, the Trustee shall not be required to deliver such Demand Notice to such Demand Note Issuer. The Trustee shall cause the proceeds of any demand on the Series 2003-2 Demand Notes to be deposited into the Series 2003-2 Distribution Account. (ii) LETTER OF CREDIT DRAW. In the event that either (x) on or prior to 10:00 a.m. (New York City time) on the Business Day immediately preceding any Distribution Date next succeeding any date on which a Demand Notice has been transmitted by the Trustee to the Demand Note Issuers pursuant to clause (i) of this Section 2.5(c), any Demand Note Issuer shall have failed to pay to the Trustee or deposit into the Series 2003-2 Distribution Account the amount specified in such Demand Notice in whole or in part or (y) due to the occurrence of an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to one or more of the Demand Note Issuers, the Trustee shall not have delivered such Demand Notice to any Demand Note Issuer on the second Business Day preceding such Series 2003-2 Final Distribution Date, then, in the case of (x) or (y) the Trustee shall draw on the Series 2003-2 Letters of Credit by 12:00 noon (New York City time) on such Business Day an amount equal to the lesser of (a) the amount that the Demand Note Issuers failed to pay under the Series 2003-2 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) and (b) the Series 2003-2 Letter of Credit Amount on such Business Day by presenting to each Series 2003-2 Letter of Credit Provider (with a copy to the Surety Provider) a draft accompanied by a Certificate of Unpaid Demand Note Demand; PROVIDED, HOWEVER, that if the Series 2003-2 Cash Collateral Account has been established and funded, the Trustee shall withdraw from the Series 2003-2 Cash Collateral Account and deposit in the Series 2003-2 Distribution Account an amount equal to the lesser of (x) the Series 2003-2 Cash Collateral Percentage on such Business Day of the amount that the Demand Note Issuers failed to pay under the Series 2003-2 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) and (y) the Series 2003-2 Available Cash Collateral Account Amount on such Business Day and draw an amount equal to the remainder of the amount that the Demand Note Issuers failed to pay under the Series 2003-2 Demand Notes (or, the amount that the Trustee failed to demand for -30- payment thereunder) on the Series 2003-2 Letters of Credit. The Trustee shall deposit, or cause the deposit of, the proceeds of any draw on the Series 2003-2 Letters of Credit and the proceeds of any withdrawal from the Series 2003-2 Cash Collateral Account to be deposited in the Series 2003-2 Distribution Account. (iii) RESERVE ACCOUNT WITHDRAWAL. If, after giving effect to the deposit into the Series 2003-2 Distribution Account of the amount to be deposited in accordance with Section 2.5(a) and the amounts described in clauses (i) and (ii) of this Section 2.5(c), the amount to be deposited in the Series 2003-2 Distribution Account with respect to a Series 2003-2 Final Distribution Date is or will be less than the Class A-1 Invested Amount, the Class A-2 Invested Amount or the Class A-3 Invested Amount, as the case may be, then, prior to 12:00 noon (New York City time) on the second Business Day prior to such Series 2003-2 Final Distribution Date, the Administrator shall instruct the Trustee in writing to withdraw from the Series 2003-2 Reserve Account, an amount equal to the lesser of the Series 2003-2 Available Reserve Account Amount and such remaining insufficiency and deposit it in the Series 2003-2 Distribution Account on such Series 2003-2 Final Distribution Date. (iv) DEMAND ON SURETY BOND. If after giving effect to the deposit into the Series 2003-2 Distribution Account of the amount to be deposited in accordance with Section 2.5(a) and all other amounts described in clauses (i), (ii) and (iii) of this Section 2.5(c), the amount to be deposited in the Series 2003-2 Distribution Account with respect to such Series 2003-2 Final Distribution Date is or will be less than the Class A-1 Outstanding Principal Amount, the Class A-2 Outstanding Principal Amount or the Class A-3 Outstanding Principal Amount, as the case may be, then the Trustee shall make a demand on the Surety Bond by 12:00 p.m. (New York City time) on the second Business Day preceding such Distribution Date in an amount equal to such insufficiency in accordance with the terms thereof and shall cause the proceeds thereof to be deposited in the Series 2003-2 Distribution Account. (d) PRINCIPAL DEFICIT AMOUNT. On each Distribution Date, other than the Three-Year Notes Final Distribution Date and the Class A-3 Final Distribution Date, on which the Principal Deficit Amount is greater than zero, amounts shall be transferred to the Series 2003-2 Distribution Account as follows: (i) DEMAND NOTE DRAW. If on any Determination Date, the Administrator determines that the Principal Deficit Amount with respect to the next succeeding Distribution Date will be greater than zero and there are any Series 2003-2 Letters of Credit on such date, prior to 10:00 a.m. (New York City time) on the second Business Day prior to such Distribution Date, the Administrator shall instruct the Trustee in writing (with a copy to the Surety Provider) to deliver a Demand Notice to the Demand Note Issuers demanding payment of an amount equal to the lesser of (A) the Principal Deficit Amount and (B) the Series 2003-2 Letter of Credit Amount. The Trustee shall, prior to 12:00 noon (New York City time) on the second Business Day preceding such Distribution Date, deliver such Demand Notice to the Demand Note Issuers; PROVIDED, -31- HOWEVER, that if an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to a Demand Note Issuer shall have occurred and be continuing, the Trustee shall not be required to deliver such Demand Notice to such Demand Note Issuer. The Trustee shall cause the proceeds of any demand on the Series 2003-2 Demand Note to be deposited into the Series 2003-2 Distribution Account. (ii) LETTER OF CREDIT DRAW. In the event that either (x) on or prior to 10:00 a.m. (New York City time) on the Business Day prior to such Distribution Date, any Demand Note Issuer shall have failed to pay to the Trustee or deposit into the Series 2003-2 Distribution Account the amount specified in such Demand Notice in whole or in part or (y) due to the occurrence of an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to any Demand Note Issuer, the Trustee shall not have delivered such Demand Notice to any Demand Note Issuer on the second Business Day preceding such Distribution Date, then, in the case of (x) or (y) the Trustee shall on such Business Day draw on the Series 2003-2 Letters of Credit an amount equal to the lesser of (i) Series 2003-2 Letter of Credit Amount and (ii) the aggregate amount that the Demand Note Issuers failed to pay under the Series 2003-2 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) by presenting to each Series 2003-2 Letter of Credit Provider (with a copy to the Surety Provider) a draft accompanied by a Certificate of Unpaid Demand Note Demand; PROVIDED, HOWEVER, that if the Series 2003-2 Cash Collateral Account has been established and funded, the Trustee shall withdraw from the Series 2003-2 Cash Collateral Account and deposit in the Series 2003-2 Distribution Account an amount equal to the lesser of (x) the Series 2003-2 Cash Collateral Percentage on such Business Day of the aggregate amount that the Demand Note Issuers failed to pay under the Series 2003-2 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) and (y) the Series 2003-2 Available Cash Collateral Account Amount on such Business Day and draw an amount equal to the remainder of the aggregate amount that the Demand Note Issuers failed to pay under the Series 2003-2 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) on the Series 2003-2 Letters of Credit. The Trustee shall deposit into, or cause the deposit of, the proceeds of any draw on the Series 2003-2 Letters of Credit and the proceeds of any withdrawal from the Series 2003-2 Cash Collateral Account to be deposited in the Series 2003-2 Distribution Account. (iii) RESERVE ACCOUNT WITHDRAWAL. If the Series 2003-2 Letter of Credit Amount will be less than the Principal Deficit Amount on any Distribution Date, then, prior to 12:00 noon (New York City time) on the second Business Day prior to such Distribution Date, the Administrator shall instruct the Trustee in writing to withdraw from the Series 2003-2 Reserve Account, an amount equal to the lesser of (x) the Series 2003-2 Available Reserve Account Amount and (y) the amount by which the Principal Deficit Amount exceeds the amounts to be deposited in the Series 2003-2 Distribution Account in accordance with clauses (i) and (ii) of this Section 2.5(d) and deposit it in the Series 2003-2 Distribution Account on such Distribution Date. -32- (iv) DEMAND ON SURETY BOND. If the sum of the Series 2003-2 Letter of Credit Amount and the Series 2003-2 Available Reserve Account Amount will be less than the Principal Deficit Amount on any Distribution Date, then the Trustee shall make a demand on the Surety Bond by 12:00 noon (New York City time) on the second Business Day preceding such Distribution Date in an amount equal to the Insured Principal Deficit Amount and shall cause the proceeds thereof to be deposited in the Series 2003-2 Distribution Account. (e) DISTRIBUTION. On each Distribution Date occurring on or after the date a withdrawal is made from the Series 2003-2 Collection Account pursuant to Section 2.5(a) or amounts are deposited in the Series 2003-2 Distribution Account pursuant to Section 2.5(b), (c) or (d) the Paying Agent shall, in accordance with Section 6.1 of the Base Indenture, pay PRO RATA to each Class A-1 Noteholder, Class A-2 Noteholder or Class A-3 Noteholder, as applicable, from the Series 2003-2 Distribution Account the amount deposited therein pursuant to Section 2.5(a), (b), (c) or (d), to the extent necessary to pay the Class A-1 Controlled Amortization Amount and the Class A-2 Controlled Amortization Amount or the Class A-3 Controlled Amortization Amount during the Three-Year Notes Controlled Amortization Period or the Class A-3 Controlled Amortization Period, as the case may be, or to the extent necessary to pay the Class A-1 Invested Amount, the Class A-2 Invested Amount and the Class A-3 Invested Amount during the Series 2003-2 Rapid Amortization Period. Section 2.6 ADMINISTRATOR'S FAILURE TO INSTRUCT THE TRUSTEE TO MAKE A DEPOSIT OR PAYMENT. If the Administrator fails to give notice or instructions to make any payment from or deposit into the Collection Account required to be given by the Administrator, at the time specified in the Administration Agreement or any other Related Document (including applicable grace periods), the Trustee shall make such payment or deposit into or from the Collection Account without such notice or instruction from the Administrator, PROVIDED that the Administrator, upon request of the Trustee, promptly provides the Trustee with all information necessary to allow the Trustee to make such a payment or deposit. When any payment or deposit hereunder or under any other Related Document is required to be made by the Trustee or the Paying Agent at or prior to a specified time, the Administrator shall deliver any applicable written instructions with respect thereto reasonably in advance of such specified time. Section 2.7 SERIES-2003-2 RESERVE ACCOUNT. (a) ESTABLISHMENT OF SERIES 2003-2 RESERVE ACCOUNT. AFC-II shall establish and maintain in the name of the Series 2003-2 Agent for the benefit of the Series 2003-2 Noteholders and the Surety Provider, or cause to be established and maintained, an account (the "SERIES 2003-2 RESERVE ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series 2003-2 Noteholders and the Surety Provider. The Series 2003-2 Reserve Account shall be maintained (i) with a Qualified Institution, or (ii) as a segregated trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as trustee for funds deposited in the Series 2003-2 Reserve Account; PROVIDED that, if at any time such Qualified Institution is no longer a Qualified Institution or the credit rating of any securities issued by such depositary institution or trust company shall be reduced to below "BBB-" by Standard & Poor's or "Baa2" by Moody's, then AFC-II shall, within 30 days of such reduction, establish a new Series 2003-2 Reserve Account with a new Qualified Institution. If the Series 2003-2 Reserve Account is not maintained in accordance with the previous sentence, AFC-II -33- shall establish a new Series 2003-2 Reserve Account, within ten (10) Business Days after obtaining knowledge of such fact, which complies with such sentence, and shall instruct the Series 2003-2 Agent in writing to transfer all cash and investments from the non-qualifying Series 2003-2 Reserve Account into the new Series 2003-2 Reserve Account. Initially, the Series 2003-2 Reserve Account will be established with The Bank of New York. (b) ADMINISTRATION OF THE SERIES 2003-2 RESERVE ACCOUNT. The Administrator may instruct the institution maintaining the Series 2003-2 Reserve Account to invest funds on deposit in the Series 2003-2 Reserve Account from time to time in Permitted Investments; PROVIDED, HOWEVER, that any such investment shall mature not later than the Business Day prior to the Distribution Date following the date on which such funds were received, unless any Permitted Investment held in the Series 2003-2 Reserve Account is held with the Paying Agent, then such investment may mature on such Distribution Date and such funds shall be available for withdrawal on or prior to such Distribution Date. All such Permitted Investments will be credited to the Series 2003-2 Reserve Account and any such Permitted Investments that constitute (i) physical property (and that is not either a United States security entitlement or a security entitlement) shall be physically delivered to the Trustee; (ii) United States security entitlements or security entitlements shall be controlled (as defined in Section 8-106 of the New York UCC) by the Trustee pending maturity or disposition, and (iii) uncertificated securities (and not United States security entitlements) shall be delivered to the Trustee by causing the Trustee to become the registered holder of such securities. (c) EARNINGS FROM SERIES 2003-2 RESERVE ACCOUNT. All interest and earnings (net of losses and investment expenses) paid on funds on deposit in the Series 2003-2 Reserve Account shall be deemed to be on deposit therein and available for distribution. (d) SERIES 2003-2 RESERVE ACCOUNT CONSTITUTES ADDITIONAL COLLATERAL FOR SERIES 2003-2 NOTES. In order to secure and provide for the repayment and payment of the AFC-II Obligations with respect to the Series 2003-2 Notes, AFC-II hereby grants a security interest in and assigns, pledges, grants, transfers and sets over to the Series 2003-2 Agent, for the benefit of the Series 2003-2 Noteholders and the Surety Provider, all of AFC-II's right, title and interest in and to the following (whether now or hereafter existing or acquired): (i) the Series 2003-2 Reserve Account, including any security entitlement thereto; (ii) all funds on deposit therein from time to time; (iii) all certificates and instruments, if any, representing or evidencing any or all of the Series 2003-2 Reserve Account or the funds on deposit therein from time to time; (iv) all investments made at any time and from time to time with monies in the Series 2003-2 Reserve Account, whether constituting securities, instruments, general intangibles, investment property, financial assets or other property; (v) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the Series 2003-2 Reserve Account, the funds on deposit therein from time to time or the investments made with such funds; and (vi) all proceeds of any and all of the foregoing, including, without limitation, cash (the items in the foregoing clauses (i) through (vi) are referred to, collectively, as the "SERIES 2003-2 RESERVE ACCOUNT COLLATERAL"). The Series 2003-2 Agent shall possess all right, title and interest in and to all funds on deposit from time to time in the Series 2003-2 Reserve Account and in all proceeds thereof, and shall be the only person authorized to originate entitlement orders in respect of the Series 2003-2 Reserve Account. The Series 2003-2 Reserve Account Collateral shall be under the sole dominion and control of the -34- Series 2003-2 Agent for the benefit of the Series 2003-2 Noteholders and the Surety Provider. The Series 2002-4 Agent hereby agrees (i) to act as the securities intermediary (as defined in Section 8-102(a)(14) of the New York UCC) with respect to the Series 2002-4 Reserve Account; (ii) that each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Series 2002-4 Reserve Account shall be treated as a financial asset (as defined in Section 8-102(a)(9) of the New York UCC) and (iii) to comply with any entitlement order (as defined in Section 8-102(a)(8) of the New York UCC) issued by the Trustee. (e) SERIES 2003-2 RESERVE ACCOUNT SURPLUS. In the event that the Series 2003-2 Reserve Account Surplus on any Distribution Date, after giving effect to all withdrawals from the Series 2003-2 Reserve Account, is greater than zero, if no Series 2003-2 Enhancement Deficiency or AESOP I Operating Lease Vehicle Deficiency would result therefrom or exist thereafter, the Trustee, acting in accordance with the written instructions of the Administrator (with a copy of such written instructions to be provided by the Administrator to the Surety Provider) pursuant to the Administration Agreement, shall withdraw from the Series 2003-2 Reserve Account an amount equal to the Series 2003-2 Reserve Account Surplus and shall pay such amount to AFC-II. (f) TERMINATION OF SERIES 2003-2 RESERVE ACCOUNT. Upon the termination of the Indenture pursuant to Section 11.1 of the Base Indenture, the Trustee, acting in accordance with the written instructions of the Administrator, after the prior payment of all amounts owing to the Series 2003-2 Noteholders and to the Surety Provider and payable from the Series 2003-2 Reserve Account as provided herein, shall withdraw from the Series 2003-2 Reserve Account all amounts on deposit therein for payment to AFC-II. Section 2.8 SERIES 2003-2 LETTERS OF CREDIT AND SERIES 2003-2 CASH COLLATERAL ACCOUNT. (a) Series 2003-2 Letters of Credit and Series 2003-2 Cash Collateral Account Constitute Additional Collateral for Series 2003-2 Notes. In order to secure and provide for the repayment and payment of the AFC-II Obligations with respect to the Series 2003-2 Notes, AFC-II hereby grants a security interest in and assigns, pledges, grants, transfers and sets over to the Trustee, for the benefit of the Series 2003-2 Noteholders and the Surety Provider, all of AFC-II's right, title and interest in and to the following (whether now or hereafter existing or acquired): (i) each Series 2003-2 Letter of Credit; (ii) the Series 2003-2 Cash Collateral Account, including any security entitlement thereto; (iii) all funds on deposit in the Series 2003-2 Cash Collateral Account from time to time; (iv) all certificates and instruments, if any, representing or evidencing any or all of the Series 2003-2 Cash Collateral Account or the funds on deposit therein from time to time; (v) all investments made at any time and from time to time with monies in the Series 2003-2 Cash Collateral Account, whether constituting securities, instruments, general intangibles, investment property, financial assets or other property; (vi) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the Series 2003-2 Cash Collateral Account, the funds on deposit therein from time to time or the investments made with such funds; and (vii) all proceeds of any and all of the foregoing, including, without limitation, cash (the items in the foregoing clauses (ii) through (vii) are referred to, collectively, as the "SERIES 2003-2 CASH COLLATERAL ACCOUNT COLLATERAL"). The Trustee shall, for the benefit of the Series 2003-2 Noteholders and the Surety Provider, possess all right, title and interest in all funds on deposit from time to time in the Series 2003-2 Cash Collateral Account and in all proceeds -35- thereof, and shall be the only person authorized to originate entitlement orders in respect of the Series 2003-2 Cash Collateral Account. The Series 2003-2 Cash Collateral Account shall be under the sole dominion and control of the Trustee for the benefit of the Series 2003-2 Noteholders and the Surety Provider. The Series 2002-4 Agent hereby agrees (i) to act as the securities intermediary (as defined in Section 8-102(a)(14) of the New York UCC) with respect to the Series 2002-4 Cash Collateral Account; (ii) that each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Series 2002-4 Cash Collateral Account shall be treated as a financial asset (as defined in Section 8-102(a)(9) of the New York UCC) and (iii) to comply with any entitlement order (as defined in Section 8-102(a)(8) of the New York UCC) issued by the Trustee. (b) SERIES 2003-2 LETTER OF CREDIT EXPIRATION DATE. If prior to the date which is ten (10) days prior to the then scheduled Series 2003-2 Letter of Credit Expiration Date with respect to any Series 2003-2 Letter of Credit, excluding the amount available to be drawn under such Series 2003-2 Letter of Credit but taking into account each substitute Series 2003-2 Letter of Credit which has been obtained from a Series 2003-2 Eligible Letter of Credit Provider and is in full force and effect on such date, the Series 2003-2 Enhancement Amount would be equal to or more than the Series 2003-2 Required Enhancement Amount and the Series 2003-2 Liquidity Amount would be equal to or greater than the Series 2003-2 Required Liquidity Amount, then the Administrator shall notify the Trustee and the Surety Provider (with the Surety Provider to be provided supporting calculations in reasonable detail) in writing no later than two Business Days prior to such Series 2003-2 Letter of Credit Expiration Date of such determination. If prior to the date which is ten (10) days prior to the then scheduled Series 2003-2 Letter of Credit Expiration Date with respect to any Series 2003-2 Letter of Credit, excluding the amount available to be drawn under such Series 2003-2 Letter of Credit but taking into account a substitute Series 2003-2 Letter of Credit which has been obtained from a Series 2003-2 Eligible Letter of Credit Provider and is in full force and effect on such date, the Series 2003-2 Enhancement Amount would be less than the Series 2003-2 Required Enhancement Amount or the Series 2003-2 Liquidity Amount would be less than the Series 2003-2 Required Liquidity Amount, then the Administrator shall notify the Trustee and the Surety Provider (with the Surety Provider to be provided supporting calculations in reasonable detail) in writing no later than two Business Days prior to such Series 2003-2 Letter of Credit Expiration Date of (x) the greater of (A) the excess, if any, of the Series 2003-2 Required Enhancement Amount over the Series 2003-2 Enhancement Amount, excluding the available amount under such expiring Series 2003-2 Letter of Credit but taking into account any substitute Series 2003-2 Letter of Credit which has been obtained from a Series 2003-2 Eligible Letter of Credit Provider and is in full force and effect, on such date, and (B) the excess, if any, of the Series 2003-2 Required Liquidity Amount over the Series 2003-2 Liquidity Amount, excluding the available amount under such expiring Series 2003-2 Letter of Credit but taking into account any substitute Series 2003-2 Letter of Credit which has been obtained from a Series 2003-2 Eligible Letter of Credit Provider and is in full force and effect, on such date, and (y) the amount available to be drawn on such expiring Series 2003-2 Letter of Credit on such date. Upon receipt of such notice by the Trustee on or prior to 10:00 a.m. (New York City time) on any Business Day, the Trustee shall, by 12:00 p.m. (New York City time) on such Business Day (or, in the case of any notice given to the Trustee after 10:00 a.m. (New York City time), by 12:00 p.m. (New York City time) on the next following Business Day), draw the lesser of the amounts set forth in clauses (x) and (y) above on such expiring Series 2003-2 Letter of Credit by presenting a draft (with a copy to the Surety Provider) accompanied by a Certificate -36- of Termination Demand and shall cause the Termination Disbursement to be deposited in the Series 2003-2 Cash Collateral Account. If the Trustee does not receive the notice from the Administrator described in the first paragraph of this Section 2.8(b) on or prior to the date that is two Business Days prior to each Series 2003-2 Letter of Credit Expiration Date, the Trustee shall, by 12:00 p.m. (New York City time) on such Business Day draw the full amount of such Series 2003-2 Letter of Credit by presenting a draft accompanied by a Certificate of Termination Demand and shall cause the Termination Disbursement to be deposited in the Series 2003-2 Cash Collateral Account. (c) SERIES 2003-2 LETTER OF CREDIT PROVIDERS. The Administrator shall notify the Trustee and the Surety Provider in writing within one Business Day of becoming aware that (i) the long-term senior unsecured debt credit rating of any Series 2003-2 Letter of Credit Provider has fallen below "A+" as determined by Standard & Poor's or "Al" as determined by Moody's or (ii) the short-term senior unsecured debt credit rating of any Series 2003-2 Letter of Credit Provider has fallen below "A-1" as determined by Standard & Poor's or "P-1" as determined by Moody's. At such time the Administrator shall also notify the Trustee of (i) the greater of (A) the excess, if any, of the Series 2003-2 Required Enhancement Amount over the Series 2003-2 Enhancement Amount, excluding the available amount under the Series 2003-2 Letter of Credit issued by such Series 2003-2 Letter of Credit Provider, on such date, and (B) the excess, if any, of the Series 2003-2 Required Liquidity Amount over the Series 2003-2 Liquidity Amount, excluding the available amount under such Series 2003-2 Letter of Credit, on such date, and (ii) the amount available to be drawn on such Series 2003-2 Letter of Credit on such date. Upon receipt of such notice by the Trustee on or prior to 10:00 a.m. (New York City time) on any Business Day, the Trustee shall, by 12:00 p.m. (New York City time) on such Business Day (or, in the case of any notice given to the Trustee after 10:00 a.m. (New York City time), by 12:00 p.m. (New York City time) on the next following Business Day), draw on such Series 2003-2 Letter of Credit in an amount equal to the lesser of the amounts in clause (i) and clause (ii) of the immediately preceding sentence on such Business Day by presenting a draft accompanied by a Certificate of Termination Demand and shall cause the Termination Disbursement to be deposited in the Series 2003-2 Cash Collateral Account. (d) TERMINATION DATE DEMANDS ON THE SERIES 2003-2 LETTERS OF CREDIT. Prior to 10:00 a.m. (New York City time) on the Business Day immediately succeeding the Series 2003-2 Letter of Credit Termination Date, the Administrator shall determine the Series 2003-2 Demand Note Payment Amount, if any, as of the Series 2003-2 Letter of Credit Termination Date and, if the Series 2003-2 Demand Note Payment Amount is greater than zero, instruct the Trustee in writing to draw on the Series 2003-2 Letters of Credit. Upon receipt of any such notice by the Trustee on or prior to 11:00 a.m. (New York City time) on a Business Day, the Trustee shall, by 12:00 noon (New York City time) on such Business Day draw an amount equal to the lesser of (i) the Series 2003-2 Demand Note Payment Amount and (ii) the Series 2003-2 Letter of Credit Liquidity Amount on the Series 2003-2 Letters of Credit by presenting to each Series 2003-2 Letter of Credit Provider (with a copy to the Surety Provider) a draft accompanied by a Certificate of Termination Date Demand and shall cause the Termination Date Disbursement to be deposited in the Series 2003-2 Cash Collateral Account; PROVIDED, HOWEVER, that if the Series 2003-2 Cash Collateral Account has been established and funded, the Trustee shall draw an amount equal to the product of (a) 100% minus the Series 2003-2 Cash Collateral -37- Percentage and (b) the lesser of the amounts referred to in clause (i) and (ii) on such Business Day on the Series 2003-2 Letters of Credit as calculated by the Administrator and provided in writing to the Trustee and the Surety Provider. (e) DRAWS ON THE SERIES 2003-2 LETTERS OF CREDIT. If there is more than one Series 2003-2 Letter of Credit on the date of any draw on the Series 2003-2 Letters of Credit pursuant to the terms of this Supplement, the Administrator shall instruct the Trustee, in writing, to draw on each Series 2003-2 Letter of Credit in an amount equal to the Pro Rata Share of the Series 2003-2 Letter of Credit Provider issuing such Series 2003-2 Letter of Credit of the amount of such draw on the Series 2003-2 Letters of Credit. (f) ESTABLISHMENT OF SERIES 2003-2 CASH COLLATERAL ACCOUNT. On or prior to the date of any drawing under a Series 2003-2 Letter of Credit pursuant to Section 2.8(b), (c) or (d) above, AFC-II shall establish and maintain in the name of the Trustee for the benefit of the Series 2003-2 Noteholders and the Surety Provider, or cause to be established and maintained, an account (the "SERIES 2003-2 CASH COLLATERAL ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series 2003-2 Noteholders and the Surety Provider. The Series 2003-2 Cash Collateral Account shall be maintained (i) with a Qualified Institution, or (ii) as a segregated trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as trustee for funds deposited in the Series 2003-2 Cash Collateral Account; PROVIDED, HOWEVER, that if at any time such Qualified Institution is no longer a Qualified Institution or the credit rating of any securities issued by such depository institution or trust company shall be reduced to below "BBB-" by Standard & Poor's or "Baa3" by Moody's, then AFC-II shall, within 30 days of such reduction, establish a new Series 2003-2 Cash Collateral Account with a new Qualified Institution or a new segregated trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as trustee for funds deposited in the Series 2003-2 Cash Collateral Account. If a new Series 2003-2 Cash Collateral Account is established, AFC-II shall instruct the Trustee in writing to transfer all cash and investments from the non-qualifying Series 2003-2 Cash Collateral Account into the new Series 2003-2 Cash Collateral Account. (g) ADMINISTRATION OF THE SERIES 2003-2 CASH COLLATERAL ACCOUNT. AFC-II may instruct (by standing instructions or otherwise) the institution maintaining the Series 2003-2 Cash Collateral Account to invest funds on deposit in the Series 2003-2 Cash Collateral Account from time to time in Permitted Investments; PROVIDED, HOWEVER, that any such investment shall mature not later than the Business Day prior to the Distribution Date following the date on which such funds were received, unless any Permitted Investment held in the Series 2003-2 Cash Collateral Account is held with the Paying Agent, in which case such investment may mature on such Distribution Date so long as such funds shall be available for withdrawal on or prior to such Distribution Date. All such Permitted Investments will be credited to the Series 2003-2 Cash Collateral Account and any such Permitted Investments that constitute (i) physical property (and that is not either a United States security entitlement or a security entitlement) shall be physically delivered to the Trustee; (ii) United States security entitlements or security entitlements shall be controlled (as defined in Section 8-106 of the New York UCC) by the Trustee pending maturity or disposition, and (iii) uncertificated securities (and not United States security entitlements) shall be delivered to the Trustee by causing the Trustee to become the registered holder of such -38- securities. The Trustee shall, at the expense of AFC-II, take such action as is required to maintain the Trustee's security interest in the Permitted Investments credited to the Series 2003-2 Cash Collateral Account. AFC-II shall not direct the Trustee to dispose of (or permit the disposal of) any Permitted Investments prior to the maturity thereof to the extent such disposal would result in a loss of principal of such Permitted Investment. In the absence of written investment instructions hereunder, funds on deposit in the Series 2003-2 Cash Collateral Account shall remain uninvested. (h) EARNINGS FROM SERIES 2003-2 CASH COLLATERAL ACCOUNT. All interest and earnings (net of losses and investment expenses) paid on funds on deposit in the Series 2003-2 Cash Collateral Account shall be deemed to be on deposit therein and available for distribution. (i) SERIES 2003-2 CASH COLLATERAL ACCOUNT SURPLUS. In the event that the Series 2003-2 Cash Collateral Account Surplus on any Distribution Date (or, after the Series 2003-2 Letter of Credit Termination Date, on any date) is greater than zero, the Trustee, acting in accordance with the written instructions (a copy of which shall be provided by the Administrator to the Surety Provider) of the Administrator, shall withdraw from the Series 2003-2 Cash Collateral Account an amount equal to the Series 2003-2 Cash Collateral Account Surplus and shall pay such amount: FIRST, to the Series 2003-2 Letter of Credit Providers to the extent of any unreimbursed drawings under the related Series 2003-2 Reimbursement Agreement, for application in accordance with the provisions of the related Series 2003-2 Reimbursement Agreement, and, SECOND, to AFC-II any remaining amount. (j) POST-SERIES 2003-2 LETTER OF CREDIT TERMINATION DATE WITHDRAWALS FROM THE SERIES 2003-2 CASH COLLATERAL ACCOUNT. If the Surety Provider notifies the Trustee in writing that the Surety Provider shall have paid a Preference Amount (as defined in the Surety Bond) under the Surety Bond, subject to the satisfaction of the conditions set forth in the next succeeding sentence, the Trustee shall withdraw from the Series 2003-2 Cash Collateral Account and pay to the Surety Provider an amount equal to the lesser of (i) the Series 2003-2 Available Cash Collateral Account Amount on such date and (ii) such Preference Amount. Prior to any withdrawal from the Series 2003-2 Cash Collateral Account pursuant to this Section 2.8(j), the Trustee shall have received a certified copy of the order requiring the return of such Preference Amount. (k) TERMINATION OF SERIES 2003-2 CASH COLLATERAL ACCOUNT. Upon the termination of this Supplement in accordance with its terms, the Trustee, acting in accordance with the written instructions of the Administrator, after the prior payment of all amounts owing to the Series 2003-2 Noteholders and to the Surety Provider and payable from the Series 2003-2 Cash Collateral Account as provided herein, shall withdraw from the Series 2003-2 Cash Collateral Account all amounts on deposit therein (to the extent not withdrawn pursuant to Section 2.8(i) above) and shall pay such amounts: FIRST, to the Series 2003-2 Letter of Credit Providers to the extent of any unreimbursed drawings under the related Series 2003-2 Reimbursement Agreement, for application in accordance with the provisions of the related Series 2003-2 Reimbursement Agreement, and, SECOND, to AFC-II any remaining amount. Section 2.9 SERIES 2003-2 DISTRIBUTION ACCOUNT (a) ESTABLISHMENT OF SERIES 2003-2 DISTRIBUTION ACCOUNT. The Trustee shall establish and maintain in the name of the Series -39- 2003-2 Agent for the benefit of the Series 2003-2 Noteholders and the Surety Provider, or cause to be established and maintained, an account (the "SERIES 2003-2 DISTRIBUTION ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series 2003-2 Noteholders and the Surety Provider. The Series 2003-2 Distribution Account shall be maintained (i) with a Qualified Institution, or (ii) as a segregated trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as trustee for funds deposited in the Series 2003-2 Distribution Account; PROVIDED, HOWEVER, that if at any time such Qualified Institution is no longer a Qualified Institution or the credit rating of any securities issued by such depositary institution or trust company shall be reduced to below "BBB-" by Standard & Poor's or "Baa3" by Moody's, then AFC-II shall, within 30 days of such reduction, establish a new Series 2003-2 Distribution Account with a new Qualified Institution. If the Series 2003-2 Distribution Account is not maintained in accordance with the previous sentence, AFC-II shall establish a new Series 2003-2 Distribution Account, within ten (10) Business Days after obtaining knowledge of such fact, which complies with such sentence, and shall instruct the Series 2003-2 Agent in writing to transfer all cash and investments from the non-qualifying Series 2003-2 Distribution Account into the new Series 2003-2 Distribution Account. Initially, the Series 2003-2 Distribution Account will be established with The Bank of New York. (b) ADMINISTRATION OF THE SERIES 2003-2 DISTRIBUTION ACCOUNT. The Administrator may instruct the institution maintaining the Series 2003-2 Distribution Account to invest funds on deposit in the Series 2003-2 Distribution Account from time to time in Permitted Investments; PROVIDED, HOWEVER, that any such investment shall mature not later than the Business Day prior to the Distribution Date following the date on which such funds were received, unless any Permitted Investment held in the Series 2003-2 Distribution Account is held with the Paying Agent, then such investment may mature on such Distribution Date and such funds shall be available for withdrawal on or prior to such Distribution Date. All such Permitted Investments will be credited to the Series 2003-2 Distribution Account and any such Permitted Investments that constitute (i) physical property (and that is not either a United States security entitlement or a security entitlement) shall be physically delivered to the Trustee; (ii) United States security entitlements or security entitlements shall be controlled (as defined in Section 8-106 of the New York UCC) by the Trustee pending maturity or disposition, and (iii) uncertificated securities (and not United States security entitlements) shall be delivered to the Trustee by causing the Trustee to become the registered holder of such securities. (c) EARNINGS FROM SERIES 2003-2 DISTRIBUTION ACCOUNT. All interest and earnings (net of losses and investment expenses) paid on funds on deposit in the Series 2003-2 Distribution Account shall be deemed to be on deposit and available for distribution. (d) SERIES 2003-2 DISTRIBUTION ACCOUNT CONSTITUTES ADDITIONAL COLLATERAL FOR SERIES 2003-2 NOTES. In order to secure and provide for the repayment and payment of the AFC-II Obligations with respect to the Series 2003-2 Notes, AFC-II hereby grants a security interest in and assigns, pledges, grants, transfers and sets over to the Series 2003-2 Agent, for the benefit of the Series 2003-2 Noteholders and the Surety Provider, all of AFC-II's right, title and interest in and to the following (whether now or hereafter existing or acquired): (i) the Series 2003-2 Distribution Account, including any security entitlement thereto; (ii) all funds on deposit therein from time to time; (iii) all certificates and instruments, if any, representing or evidencing any or -40- all of the Series 2003-2 Distribution Account or the funds on deposit therein from time to time; (iv) all investments made at any time and from time to time with monies in the Series 2003-2 Distribution Account, whether constituting securities, instruments, general intangibles, investment property, financial assets or other property; (v) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the Series 2003-2 Distribution Account, the funds on deposit therein from time to time or the investments made with such funds; and (vi) all proceeds of any and all of the foregoing, including, without limitation, cash (the items in the foregoing clauses (i) through (vi) are referred to, collectively, as the "SERIES 2003-2 DISTRIBUTION ACCOUNT COLLATERAL"). The Series 2003-2 Agent shall possess all right, title and interest in all funds on deposit from time to time in the Series 2003-2 Distribution Account and in and to all proceeds thereof, and shall be the only person authorized to originate entitlement orders in respect of the Series 2003-2 Distribution Account. The Series 2003-2 Distribution Account Collateral shall be under the sole dominion and control of the Series 2003-2 Agent for the benefit of the Series 2003-2 Noteholders and the Surety Provider. The Series 2003-2 Agent hereby agrees (i) to act as the securities intermediary (as defined in Section 8-102(a)(14) of the New York UCC) with respect to the Series 2003-2 Distribution Account; (ii) that each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Series 2003-2 Distribution Account shall be treated as a financial asset (as defined in Section 8-102(a)(9) of the New York UCC) and (iii) to comply with any entitlement order (as defined in Section 8-102(a)(8) of the New York UCC) issued by the Trustee. Section 2.10 SERIES 2003-2 INTEREST RATE CAPS. (a) On the Series 2003-2 Closing Date, AFC-II shall acquire one or more interest rate caps acceptable to the Surety Provider (each a "SERIES 2003-2 INTEREST RATE Cap") from a Qualified Interest Rate Cap Counterparty. The aggregate initial notional amount of all Series 2003-2 Interest Rate Caps shall equal the Class A-2 Initial Invested Amount, and the aggregate notional amount of all Series 2003-2 Interest Rate Caps may be reduced pursuant to the related Series 2003-2 Interest Rate Cap but shall not at any time be less than the Class A-2 Invested Amount. The strike rate of each Series 2003-2 Interest Rate Cap shall not be greater than 6.0%. (b) If, at any time, an Interest Rate Cap Counterparty is not a Qualified Interest Rate Cap Counterparty, then AFC-II will cause the Interest Rate Cap Counterparty within 30 days following such occurrence, at the Interest Rate Cap Counterparty's expense, to do either of the following (i) obtain a replacement interest rate cap on the same terms as the Series 2003-2 Interest Rate Cap from a Qualified Interest Rate Cap Counterparty and simultaneously with such replacement AFC-II shall terminate the Series 2003-2 Interest Rate Cap being replaced or (ii) enter into any arrangement satisfactory to Standard & Poor's, Moody's and the Surety Provider, which is sufficient to maintain or restore the immediately prior Shadow Rating; PROVIDED, HOWEVER, that no termination of the Series 2003-2 Interest Rate Cap shall occur until AFC-II has entered into a replacement Series 2003-2 Interest Rate Cap. (c) Each Series 2003-2 Interest Rate Cap must provide that if the Interest Rate Cap Counterparty is required to take any of the actions described in clauses (i) or (ii) of the preceding sentence and such action is not taken within 30 days, then the Interest Rate Cap Counterparty must, until a replacement Series 2003-2 Interest Rate Cap is executed and in effect, collateralize its obligations under such Series 2003-2 Interest Rate Cap in an amount equal to the -41- greatest of (i) the marked to market value of such Series 2003-2 Interest Rate Cap, (ii) the next payment due from the Interest Rate Cap Counterparty and (iii) 1% of the notional amount of such Series 2003-2 Interest Rate Cap. (d) To secure payment of all AFC-II Obligations with respect to the Series 2003-2 Notes, AFC-II grants a security interest in, and assigns, pledges, grants, transfers and sets over to the Series 2003-2 Agent, for the benefit of the Series 2003-2 Noteholders and the Surety Provider, all of AFC-II's right, title and interest in the Series 2003-2 Interest Rate Caps and all proceeds thereof (the "SERIES 2003-2 INTEREST RATE CAP Collateral"). AFC-II shall require all Series 2003-2 Interest Rate Cap Proceeds to be paid to, and the Trustee shall allocate all Series 2003-2 Interest Rate Cap Proceeds to, the Series 2003-2 Accrued Interest Account of the Series 2003-2 Collection Account. Section 2.11 SERIES 2003-2 ACCOUNTS PERMITTED INVESTMENTS. AFC-II shall not, and shall not permit, funds on deposit in the Series 2003-2 Accounts to be invested in: (i) Permitted Investments that do not mature at least one Business Day before the next Distribution Date; (ii) demand deposits, time deposits or certificates of deposit with a maturity in excess of 360 days; (iii) commercial paper which is not rated "P-1" by Moody's; (iv) money market funds or eurodollar time deposits which are not rated at least "AAA" by Standard & Poor's; (v) eurodollar deposits that are not rated "P-1" by Moody's or that are with financial institutions not organized under the laws of a G-7 nation; or (vi) any investment, instrument or security not otherwise listed in clause (i) through (vi) of the definition of "Permitted Investments" in the Base Indenture that is not approved in writing by the Surety Provider. Section 2.12 SERIES 2003-2 DEMAND NOTES CONSTITUTE ADDITIONAL COLLATERAL FOR SERIES 2003-2 NOTES. In order to secure and provide for the repayment and payment of the AFC-II Obligations with respect to the Series 2003-2 Notes, AFC-II hereby grants a security interest in and assigns, pledges, grants, transfers and sets over to the Trustee, for the benefit of the Series 2003-2 Noteholders and the Surety Provider, all of AFC-II's right, title and interest in and to the following (whether now or hereafter existing or acquired): (i) the Series 2003-2 Demand Notes; (ii) all certificates and instruments, if any, representing or evidencing the Series 2003-2 Demand Notes; and (iii) all proceeds of any and all of the foregoing, including, without limitation, cash. On the date hereof, AFC-II shall deliver to the Trustee, for the benefit of the Series 2003-2 Noteholders and the Surety Provider, each Series 2003-2 Demand Note, endorsed in blank. The Trustee, for the benefit of the Series 2003-2 Noteholders and the Surety Provider, shall be the only Person authorized to make a demand for payments on the Series 2003-2 Demand Notes. -42- ARTICLE III AMORTIZATION EVENTS In addition to the Amortization Events set forth in Section 9.1 of the Base Indenture, any of the following shall be an Amortization Event with respect to the Series 2003-2 Notes and collectively shall constitute the Amortization Events set forth in Section 9.1(n) of the Base Indenture with respect to the Series 2003-2 Notes (without notice or other action on the part of the Trustee or any holders of the Series 2003-2 Notes): (a) a Series 2003-2 Enhancement Deficiency shall occur and continue for at least two (2) Business Days; PROVIDED, HOWEVER, that such event or condition shall not be an Amortization Event if during such two (2) Business Day period such Series 2003-2 Enhancement Deficiency shall have been cured in accordance with the terms and conditions of the Indenture and the Related Documents; (b) the Series 2003-2 Liquidity Amount shall be less than the Series 2003-2 Required Liquidity Amount for at least two (2) Business Days; PROVIDED, HOWEVER, that such event or condition shall not be an Amortization Event if during such two (2) Business Day period such insufficiency shall have been cured in accordance with the terms and conditions of the Indenture and the Related Documents; (c) the Collection Account, the Series 2003-2 Collection Account, the Series 2003-2 Excess Collection Account or the Series 2003-2 Reserve Account shall be subject to an injunction, estoppel or other stay or a Lien (other than Liens permitted under the Related Documents); (d) all principal of and interest on the Class A-1 Notes and the Class A-2 Notes is not paid in full on or before the Three-Year Notes Expected Final Distribution Date or all principal of and interest on the Class A-3 Notes is not paid in full on or before the Class A-3 Expected Final Distribution Date; (e) the Trustee shall make a demand for payment under the Surety Bond; (f) the occurrence of an Event of Bankruptcy with respect to the Surety Provider; (g) the Surety Provider fails to pay a demand for payment in accordance with the requirements of the Surety Bond; (h) any Series 2003-2 Letter of Credit shall not be in full force and effect for at least two (2) Business Days and (x) either a Series 2003-2 Enhancement Deficiency would result from excluding such Series 2003-2 Letter of Credit from the Series 2003-2 Enhancement Amount or (y) the Series 2003-2 Liquidity Amount, excluding therefrom the available amount under such Series 2003-2 Letter of Credit, would be less than the Series 2003-2 Required Liquidity Amount; -43- (i) from and after the funding of the Series 2003-2 Cash Collateral Account, the Series 2003-2 Cash Collateral Account shall be subject to an injunction, estoppel or other stay or a Lien (other than Liens permitted under the Related Documents) for at least two (2) Business Days and either (x) a Series 2003-2 Enhancement Deficiency would result from excluding the Series 2003-2 Available Cash Collateral Account Amount from the Series 2003-2 Enhancement Amount or (y) the Series 2003-2 Liquidity Amount, excluding therefrom the Series 2003-2 Available Cash Collateral Amount, would be less than the Series 2003-2 Required Liquidity Amount; and (j) an Event of Bankruptcy shall have occurred with respect to any Series 2003-2 Letter of Credit Provider or any Series 2003-2 Letter of Credit Provider repudiates its Series 2003-2 Letter of Credit or refuses to honor a proper draw thereon and either (x) a Series 2003-2 Enhancement Deficiency would result from excluding such Series 2003-2 Letter of Credit from the Series 2003-2 Enhancement Amount or (y) the Series 2003-2 Liquidity Amount, excluding therefrom the available amount under such Series 2003-2 Letter of Credit, would be less than the Series 2003-2 Required Liquidity Amount. ARTICLE IV RIGHT TO WAIVE PURCHASE RESTRICTIONS Notwithstanding any provision to the contrary in the Indenture or the Related Documents, upon the Trustee's receipt of notice from any Lessee, any Borrower or AFC-II (i) to the effect that a Manufacturer Program is no longer an Eligible Manufacturer Program and that, as a result, the Series 2003-2 Maximum Non-Program Vehicle Amount is or will be exceeded or (ii) that the Lessees, the Borrowers and AFC-II have determined to increase any Series 2003-2 Maximum Amount, (such notice, a "WAIVER REQUEST"), each Series 2003-2 Noteholder may, at its option, waive the Series 2003-2 Maximum Non-Program Vehicle Amount or any other Series 2003-2 Maximum Amount (collectively, a "WAIVABLE AMOUNT") if (i) no Amortization Event exists, (ii) the Requisite Noteholders and the Surety Provider consent to such waiver and (iii) 60 days' prior written notice of such proposed waiver is provided to the Rating Agencies by the Trustee. Upon receipt by the Trustee of a Waiver Request (a copy of which the Trustee shall promptly provide to the Rating Agencies), all amounts which would otherwise be allocated to the Series 2003-2 Excess Collection Account (collectively, the "DESIGNATED AMOUNTS") from the date the Trustee receives a Waiver Request through the Consent Period Expiration Date will be held by the Trustee in the Series 2003-2 Collection Account for ratable distribution as described below. Within ten (10) Business Days after the Trustee receives a Waiver Request, the Trustee shall furnish notice thereof to the Series 2003-2 Noteholders and the Surety Provider, which notice shall be accompanied by a form of consent (each a "CONSENT") in the form of EXHIBIT B hereto by which the Series 2003-2 Noteholders may, on or before the Consent Period Expiration Date, consent to waiver of the applicable Waivable Amount. If the Trustee receives the consent of the Surety Provider and Consents from the Requisite Noteholders agreeing to -44- waiver of the applicable Waivable Amount within forty-five (45) days after the Trustee notifies the Series 2003-2 Noteholders of a Waiver Request (the day on which such forty-five (45) day period expires, the "CONSENT PERIOD EXPIRATION DATE"), (i) the applicable Waivable Amount shall be deemed waived by the consenting Series 2003-2 Noteholders, (ii) the Trustee will distribute the Designated Amounts as set forth below and (iii) the Trustee shall promptly (but in any event within two days) provide the Rating Agency with notice of such waiver. Any Series 2003-2 Noteholder from whom the Trustee has not received a Consent on or before the Consent Period Expiration Date will be deemed not to have consented to such waiver. If the Trustee receives Consents from the Requisite Noteholders on or before the Consent Period Expiration Date, then on the immediately following Distribution Date, the Trustee will pay the Designated Amounts as follows: (i) to the non-consenting Series 2003-2 Noteholders, if any, PRO RATA up to the amount required to pay all Series 2003-2 Notes held by such non-consenting Series 2003-2 Noteholders in full; and (ii) any remaining Designated Amounts to the Series 2003-2 Excess Collection Account. If the amount paid pursuant to clause (i) of the preceding paragraph is not paid in full on the date specified therein, then on each day following such Distribution Date, the Administrator will allocate to the Series 2003-2 Collection Account on a daily basis all Designated Amounts collected on such day. On each following Distribution Date, the Trustee will withdraw a portion of such Designated Amounts from the Series 2003-2 Collection Account and deposit the same in the Series 2003-2 Distribution Account for distribution as follows: (a) to the non-consenting Series 2003-2 Noteholders, if any, PRO RATA an amount equal to the Designated Amounts in the Series 2003-2 Collection Account as of the applicable Determination Date up to the aggregate outstanding principal balance of the Series 2003-2 Notes held by the non-consenting Series 2003-2 Noteholders; and (b) any remaining Designated Amounts to the Series 2003-2 Excess Collection Account. If the Requisite Noteholders or the Surety Provider do not timely consent to such waiver, the Designated Amounts will be re-allocated to the Series 2003-2 Excess Collection Account for allocation and distribution in accordance with the terms of the Indenture and the Related Documents. In the event that the Series 2003-2 Rapid Amortization Period shall commence after receipt by the Trustee of a Waiver Request, all such Designated Amounts will thereafter be considered Principal Collections allocated to the Series 2003-2 Noteholders. -45- ARTICLE V FORM OF SERIES 2003-2 NOTES Section 5.1 RESTRICTED GLOBAL SERIES 2003-2 NOTES. The Series 2003-2 Notes to be issued in the United States will be issued in book-entry form and represented by one or more permanent global Notes in fully registered form without interest coupons (each, a "RESTRICTED GLOBAL CLASS A-1 NOTE", a "RESTRICTED GLOBAL CLASS A-2 NOTE" or a "RESTRICTED GLOBAL CLASS A-3 NOTE", as the case may be), substantially in the forms set forth in EXHIBIT A-1-1, A-2-1 AND A-3-1 hereto, with such legends as may be applicable thereto as set forth in the Base Indenture, and will be sold only in the United States (1) initially to institutional accredited investors within the meaning of Regulation D under the Securities Act in reliance on an exemption from the registration requirements of the Securities Act and (2) thereafter to qualified institutional buyers within the meaning of, and in reliance on, Rule 144A under the Securities Act and shall be deposited on behalf of the purchasers of the Series 2003-2 Notes represented thereby, with the Trustee as custodian for DTC, and registered in the name of Cede as DTC's nominee, duly executed by AFC-II and authenticated by the Trustee in the manner set forth in Section 2.4 of the Base Indenture. Section 5.2 TEMPORARY GLOBAL SERIES 2003-2 NOTES; PERMANENT GLOBAL SERIES 2003-2 NOTES. The Series 2003-2 Notes to be issued outside the United States will be issued and sold in transactions outside the United States in reliance on Regulation S under the Securities Act, as provided in the applicable note purchase agreement, and shall initially be issued in the form of one or more temporary notes in registered form without interest coupons (each, a "TEMPORARY GLOBAL CLASS A-1 NOTE", a "TEMPORARY GLOBAL CLASS A-2 NOTE" or a "TEMPORARY GLOBAL CLASS A-3 NOTE", as the case may be), substantially in the forms set forth in EXHIBITS A-1-2, A-2-2 AND A-3-2 hereto, which shall be deposited on behalf of the purchasers of the Series 2003-2 Notes represented thereby with a custodian for, and registered in the name of a nominee of DTC, for the account of Euroclear Bank S.A./N.V., as operator of the Euroclear System or for Clearstream Banking, societe anonyme ("CLEARSTREAM"), duly executed by AFC-II and authenticated by the Trustee in the manner set forth in Section 2.4 of the Base Indenture. Interests in a Temporary Global Class A-1 Note, a Temporary Global Class A-2 Note or a Temporary Global Class A-3 Note will be exchangeable, in whole or in part, for interests in one or more permanent global notes in registered form without interest coupons (each, a "PERMANENT GLOBAL CLASS A-1 NOTE", a "PERMANENT GLOBAL CLASS A-2 NOTE" or a "PERMANENT GLOBAL CLASS A-3 NOTE", as the case may be), substantially in the form of EXHIBITS A-1-3, A-2-3 AND A-3-3 hereto, in accordance with the provisions of such Temporary Global Class A-1 Note, Temporary Global Class A-2 Note or Temporary Global Class A-3 Note and the Base Indenture (as modified by this Supplement). Interests in a Permanent Global Class A-1 Note, a Permanent Global Class A-2 Note or a Permanent Global Class A-3 Note will be exchangeable for definitive Class A-1 Notes, definitive Class A-2 Notes or definitive Class A-3 Notes, as the case may be, in accordance with the provisions of such Permanent Global Class A-1 Note, Permanent Global Class A-2 Note or Permanent Global Class A-3 Note and the Base Indenture (as modified by this Supplement). -46- ARTICLE VI GENERAL Section 6.1 OPTIONAL REPURCHASE. Each Class of the Series 2003-2 Notes shall be subject to repurchase by AFC-II at its option in accordance with Section 6.3 of the Base Indenture on any Distribution Date after the Class A-1 Invested Amount, the Class A-2 Invested Amount or the Class A-3 Invested Amount, as the case may be, is reduced to an amount less than or equal to 10% of the Class A-1 Initial Invested Amount, the Class A-2 Initial Invested Amount or the Class A-3 Initial Invested Amount, as the case may be (the "SERIES 2003-2 REPURCHASE Amount"); PROVIDED, HOWEVER, that as a condition precedent to any such optional repurchase, on or prior to the Distribution Date on which any Series 2003-2 Note is repurchased by AFC-II pursuant to this Section 6.1, AFC-II shall have paid the Surety Provider all Surety Provider Fees and all other Surety Provider Reimbursement Amounts due and unpaid as of such Distribution Date. The repurchase price for any Series 2003-2 Note shall equal the aggregate outstanding principal balance of such Series 2003-2 Note (determined after giving effect to any payments of principal and interest on such Distribution Date), plus accrued and unpaid interest on such outstanding principal balance. Section 6.2 INFORMATION. The Trustee shall provide to the Series 2003-2 Noteholders, or their designated agent, and the Surety Provider copies of all information furnished to the Trustee or AFC-II pursuant to the Related Documents, as such information relates to the Series 2003-2 Notes or the Series 2003-2 Collateral. In connection with any Preference Amount payable under the Surety Bond, the Trustee shall furnish to the Surety Provider its records evidencing the distributions of principal of and interest on the Series 2003-2 Notes that have been made and subsequently recovered from Series 2003-2 Noteholders and the dates on which such payments were made. Section 6.3 EXHIBITS. The following exhibits attached hereto supplement the exhibits included in the Indenture. EXHIBIT A-1-1: Form of Restricted Global Class A-1 Note EXHIBIT A-1-2: Form of Temporary Global Class A-1 Note EXHIBIT A-1-3: Form of Permanent Global Class-1 Note EXHIBIT A-2-1 Form of Restricted Global Class A-2 Note EXHIBIT A-2-2 Form of Temporary Global Class A-2 Note EXHIBIT A-2-3 Form of Permanent Global Class A-2 Note EXHIBIT A-3-1 Form of Restricted Global Class A-3 Note EXHIBIT A-3-2 Form of Temporary Global Class A-3 Note EXHIBIT A-3-3 Form of Permanent Global Class A-3 Note EXHIBIT B: Form of Consent EXHIBIT C: Form of Series 2003-2 Demand Note EXHIBIT D: Form of Letter of Credit EXHIBIT E: Form of Lease Payment Deficit Notice EXHIBIT F: Form of Demand Notice -47- Section 6.4 RATIFICATION OF BASE INDENTURE. As supplemented by this Supplement, the Base Indenture is in all respects ratified and confirmed and the Base Indenture as so supplemented by this Supplement shall be read, taken, and construed as one and the same instrument. Section 6.5 COUNTERPARTS. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. Section 6.6 GOVERNING LAW. This Supplement shall be construed in accordance with the law of the State of New York, and the obligations, rights and remedies of the parties hereto shall be determined in accordance with such law. Section 6.7 AMENDMENTS. This Supplement may be modified or amended from time to time with the consent of the Surety Provider and in accordance with the terms of the Base Indenture; PROVIDED, HOWEVER, that if, pursuant to the terms of the Base Indenture or this Supplement, the consent of the Required Noteholders is required for an amendment or modification of this Supplement, such requirement shall be satisfied if such amendment or modification is consented to by the Series 2003-2 Noteholders representing more than 50% of the aggregate outstanding principal amount of the Series 2003-2 Notes affected thereby; PROVIDED, FURTHER, that if that consent of the Required Noteholders is required for a proposed amendment or modification of this Supplement that (i) affects only the Class A-1 Notes (and does not affect in any material respect the Class A-2 Notes or Class A-3 Notes, as evidenced by an opinion of counsel to such effect), then such requirement shall be satisfied if such amendment or modification is consented to by the Class A-1 Noteholders representing more than 50% of the aggregate outstanding principal amount of the Class A-1 Notes (without the necessity of obtaining the consent of the Required Noteholders in respect of the Class A-2 Notes or Class A-3 Notes), (ii) affects only the Class A-2 Notes (and does not affect in material respect the Class A-1 Notes or Class A-3 Notes, as evidenced by an opinion of counsel to such effect), then such requirement shall be satisfied if such amendment or modification is consented to by the Class A-2 Noteholders representing more than 50% of the aggregate outstanding principal amount of the Class A-2 Notes (without the necessity of obtaining the consent of the Required Noteholders in respect of the Class A-1 Notes or Class A-3 Notes) or (iii) affects only the Class A-3 Notes (and does not affect in any material respect the Class A-1 Notes or Class A-2 Notes, as evidenced by an opinion of counsel to such effect), then such requirement shall be satisfied if such amendment or modification is consented to by the Class A-3 Noteholders representing more than 50% of the aggregate outstanding principal amount of the Class A-3 Notes (without the necessity of obtaining the consent of the Required Noteholders in respect of the Class A-1 Notes or Class A-2 Notes). Section 6.8 DISCHARGE OF INDENTURE. Notwithstanding anything to the contrary contained in the Base Indenture, no discharge of the Indenture pursuant to Section 11.1(b) of the Base Indenture will be effective as to the Series 2003-2 Notes without the consent of the Required Noteholders. Section 6.9 NOTICE TO SURETY PROVIDER AND RATING AGENCIES. The Trustee shall provide to the Surety Provider and each Rating Agency a copy of each notice, opinion of -48- counsel, certificate or other item delivered to, or required to be provided by, the Trustee pursuant to this Supplement or any other Related Document. Each such opinion of counsel shall be addressed to the Surety Provider, shall be from counsel reasonably acceptable to the Surety Provider and shall be in form and substance reasonably acceptable to the Surety Provider. All such notices, opinions, certificates or other items delivered to the Surety Provider shall be forwarded to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: General Counsel, telephone: (914) 273-4545. Section 6.10 CERTAIN RIGHTS OF SURETY PROVIDER. The Surety Provider shall be deemed to be an Enhancement Provider entitled to receive confirmation of the rating on the Series 2003-2 Notes (without regard to the Surety Bond) pursuant to the definition of "Rating Agency Confirmation Condition." In addition, the Surety Provider shall be deemed to be an Enhancement Provider entitled to exercise the consent rights described in clause (ii) of the definition of "Rating Agency Consent Condition." Section 6.11 SURETY PROVIDER DEEMED NOTEHOLDER AND SECURED PARTY. Except for any period during which a Surety Default is continuing, the Surety Provider shall be deemed to be the holder of 100% of the Series 2003-2 Notes for the purposes of giving any consents, waivers, approvals, instructions, directions, requests, declarations and/or notices pursuant to the Base Indenture and this Supplement. Any reference in the Base Indenture or the Related Documents (including, without limitation, in Sections 2.3, 8.14, 9.1, 9.2 or 12.1 of the Base Indenture) to materially, adversely, or detrimentally affecting the rights or interests of the Noteholders, or words of similar meaning, shall be deemed, for purposes of the Series 2003-2 Notes, to refer to the rights or interests of the Surety Provider. The Surety Provider shall constitute an "Enhancement Provider" with respect to the Series 2003-2 Notes for all purposes under the Indenture and the other Related Documents. Furthermore, the Surety Provider shall be deemed to be a "Secured Party" under the Base Indenture and the Related Documents to the extent of amounts payable to the Surety Provider pursuant to this Supplement and the Insurance Agreement shall constitute an "Enhancement Agreement" with respect to the Series 2003-2 Notes for all purposes under the Indenture and the Related Documents. Moreover, wherever in the Related Documents money or other property is assigned, conveyed, granted or held for, a filing is made for, action is taken for or agreed to be taken for, or a representation or warranty is made for the benefit of the Noteholders, the Surety Provider shall be deemed to be the Noteholder with respect to 100% of the Series 2003-2 Notes for such purposes. Section 6.12 CAPITALIZATION OF AFC-II. AFC-II agrees that on the Series 2003-2 Closing Date it will have capitalization in an amount equal to or greater than 3% of the sum of (x) the Series 2003-2 Invested Amount and (y) the invested amount of the Series 1998-1 Notes, Series 2000-1 Notes, Series 2000-2 Notes, Series 2000-3 Notes, the Series 2000-4 Notes, the Series 2001-1 Notes, the Series 2001-2 Notes, the Series 2002-1 Notes, the Series 2002-2 Notes, the Series 2002-3 Notes, the Series 2002-4 Notes and the Series 2003-1 Notes. Section 6.13 SERIES 2003-2 REQUIRED NON-PROGRAM ENHANCEMENT PERCENTAGE. AFC-II agrees that it will not make any Loan under any Loan Agreement to finance the acquisition of any Vehicle by AESOP Leasing, AESOP Leasing II or ARAC, as the case may be, if, after giving effect to the making of such Loan, the acquisition of such Vehicle and the inclusion -49- of such Vehicle under the relevant Lease, the Series 2003-2 Required Non-Program Enhancement Percentage would exceed 25.0%. Section 6.14 THIRD PARTY BENEFICIARY. The Surety Provider is an express third party beneficiary of (i) the Base Indenture to the extent of provisions relating to any Enhancement Provider and (ii) this Supplement. Section 6.15 PRIOR NOTICE BY TRUSTEE TO SURETY PROVIDER. Subject to Section 10.1 of the Base Indenture, the Trustee agrees that, so long as no Amortization Event shall have occurred and be continuing with respect to any Series of Notes other than the Series 2003-2 Notes, it shall not exercise any rights or remedies available to it as a result of the occurrence of an Amortization Event with respect to the Series 2003-2 Notes (except those set forth in clauses (f) and (g) of Article III) or a Series 2003-2 Limited Liquidation Event of Default until after the Trustee has given prior written notice thereof to the Surety Provider and obtained the direction of the Required Noteholders with respect to the Series 2003-2 Notes. The Trustee agrees to notify the Surety Provider promptly following any exercise of rights or remedies available to it as a result of the occurrence of any Amortization Event or a Series 2003-2 Limited Liquidation Event of Default. Section 6.16 EFFECT OF PAYMENTS BY THE SURETY PROVIDER. Anything herein to the contrary notwithstanding, any distribution of principal of or interest on the Series 2003-2 Notes that is made with moneys received pursuant to the terms of the Surety Bond shall not (except for the purpose of calculating the Principal Deficit Amount) be considered payment of the Series 2003-2 Notes by AFC-II. The Trustee acknowledges that, without the need for any further action on the part of the Surety Provider, (i) to the extent the Surety Provider makes payments, directly or indirectly, on account of principal of or interest on the Series 2003-2 Notes to the Trustee for the benefit of the Series 2003-2 Noteholders or to the Series 2003-2 Noteholders (including any Preference Amounts as defined in the Surety Bond), the Surety Provider will be fully subrogated to the rights of such Series 2003-2 Noteholders to receive such principal and interest and will be deemed to the extent of the payments so made to be a Series 2003-2 Noteholder and (ii) the Surety Provider shall be paid principal and interest in its capacity as a Series 2003-2 Noteholder until all such payments by the Surety Provider have been fully reimbursed, but only from the sources and in the manner provided herein for the distribution of such principal and interest and in each case only after the Series 2003-2 Noteholders have received all payments of principal and interest due to them hereunder on the related Distribution Date. Section 6.17 SERIES 2003-2 DEMAND NOTES. Other than pursuant to a demand thereon pursuant to Section 2.5, AFC-II shall not reduce the amount of the Series 2003-2 Demand Notes or forgive amounts payable thereunder so that the outstanding principal amount of the Series 2003-2 Demand Notes after such reduction or forgiveness is less than the Series 2003-2 Letter of Credit Liquidity Amount. AFC-II shall not agree to any amendment of the Series 2003-2 Demand Notes without first satisfying the Rating Agency Confirmation Condition and the Rating Agency Consent Condition. Section 6.18 SUBROGATION. In furtherance of and not in limitation of the Surety Provider's equitable right of subrogation, each of the Trustee and AFC-II acknowledge that, to -50- the extent of any payment made by the Surety Provider under the Surety Bond with respect to interest on or principal of the Series 2003-2 Notes, including any Preference Amount, as defined in the Surety Bond, the Surety Provider is to be fully subrogated to the extent of such payment and any additional interest due on any late payment, to the rights of the Series 2003-2 Noteholders under the Indenture. Each of AFC-II and the Trustee agree to such subrogation and, further, agree to take such actions as the Surety Provider may reasonably request in writing to evidence such subrogation. Section 6.19 TERMINATION OF SUPPLEMENT. This Supplement shall cease to be of further effect when all outstanding Series 2003-2 Notes theretofore authenticated and issued have been delivered (other than destroyed, lost, or stolen Series 2003-2 Notes which have been replaced or paid) to the Trustee for cancellation, AFC-II has paid all sums payable hereunder, the Surety Provider has been paid all Surety Provider Fees and all other Surety Provider Reimbursement Amounts due under the Insurance Agreement and, if the Series 2003-2 Demand Note Payment Amount on the Series 2003-2 Letter of Credit Termination Date was greater than zero, all amounts have been withdrawn from the Series 2003-2 Cash Collateral Account in accordance with Section 2.8(i). -51- IN WITNESS WHEREOF, AFC-II and the Trustee have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AESOP FUNDING II L.L.C. By: /s/ Jill A. Gordon ------------------------------------- Title: Vice President THE BANK OF NEW YORK (as successor in interest to the corporate trust administration of Harris Trust and Savings Bank), as Trustee By: /s/ Eric A. Lindahl ------------------------------------- Title: Agent THE BANK OF NEW YORK, as Series 2003-2 Agent By: /s/ Eric A. Lindahl ------------------------------------- Title: Agent EX-10.12 4 a2110474zex-10_12.txt EXHIBIT 10.12 EXHIBIT 10.12 AESOP FUNDING II L.L.C., as Issuer AVIS RENT A CAR SYSTEM, INC., as Administrator CENDANT CORPORATION, as Purchaser and THE BANK OF NEW YORK, as Trustee and Series 2003-1 Agent ---------- SERIES 2003-1 SUPPLEMENT dated as of January 28, 2003 to AMENDED AND RESTATED BASE INDENTURE dated as of July 30, 1997 ---------- TABLE OF CONTENTS

(i) TABLE OF CONTENTS (continued)

(ii) SERIES 2003-1 SUPPLEMENT, dated as of January 28, 2003 (this "SUPPLEMENT"), among AESOP FUNDING II L.L.C., a special purpose limited liability company established under the laws of Delaware ("AFC-II"), AVIS RENT A CAR SYSTEM, INC., a Delaware corporation, as administrator (the "ADMINISTRATOR"), CENDANT CORPORATION, as Purchaser (the "PURCHASER" or "CENDANT"), THE BANK OF NEW YORK, a New York banking corporation, as successor in interest to the corporate trust administration of Harris Trust and Savings Bank, as trustee (together with its successors in trust thereunder as provided in the Base Indenture referred to below, the "TRUSTEE") and THE BANK OF NEW YORK, a New York banking corporation, as agent for the benefit of the Series 2003-1 Noteholders (the "SERIES 2003-1 AGENT"), to the Amended and Restated Base Indenture, dated as of July 30, 1997, between AFC-II and the Trustee (as amended, modified or supplemented from time to time, exclusive of Supplements creating a new Series of Notes, the "BASE INDENTURE"). PRELIMINARY STATEMENT WHEREAS, Sections 2.2 and 12.1 of the Base Indenture provide, among other things, that AFC-II and the Trustee may at any time and from time to time enter into a supplement to the Base Indenture for the purpose of authorizing the issuance of one or more Series of Notes; NOW, THEREFORE, the parties hereto agree as follows: DESIGNATION There is hereby created a Series of Notes to be issued pursuant to the Base Indenture and this Supplement and such Series of Notes shall be designated generally as Variable Funding Rental Car Asset Backed Notes, Series 2003-1. The proceeds from the sale of the Series 2003-1 Notes shall be deposited in the Collection Account and shall be paid to AFC-II and used to make Loans under the Loan Agreements to the extent that the Borrowers have requested Loans thereunder and Eligible Vehicles are available for acquisition or refinancing thereunder on the date hereof. Any such portion of proceeds not so used to make Loans shall be deemed to be Principal Collections. The Series 2003-1 Notes are a non-Segregated Series of Notes (as more fully described in the Base Indenture). Accordingly, all references in this Supplement to "all" Series of Notes (and all references in this Supplement to terms defined in the Base Indenture that contain references to "all" Series of Notes) shall refer to all Series of Notes other than Segregated Series of Notes. ARTICLE I DEFINITIONS (a) All capitalized terms not otherwise defined herein are defined in the Definitions List attached to the Base Indenture as Schedule I thereto. All Article, Section or Subsection references herein shall refer to Articles, Sections or Subsections of this Supplement, except as otherwise provided herein. Unless otherwise stated herein, as the context otherwise requires or if such term is otherwise defined in the Base Indenture, each capitalized term used or defined herein shall relate only to the Series 2003-1 Notes and not to any other Series of Notes issued by AFC-II. (b) The following words and phrases shall have the following meanings with respect to the Series 2003-1 Notes and the definitions of such terms are applicable to the singular as well as the plural form of such terms and to the masculine as well as the feminine and neuter genders of such terms: "ADMINISTRATOR" is defined in the recitals hereto. "AGH" means Avis Group Holdings, Inc., a Delaware corporation. "BOARD" means the Board of Governors of the Federal Reserve System or any successor thereto. "BUSINESS DAY" means any day other than (a) a Saturday or a Sunday or (b) a day on which banking institutions in New York, New York, Chicago, Illinois or the city in which the corporate trust office of the Trustee is located are authorized or obligated by law or executive order to close. "CERTIFICATE OF LEASE DEFICIT DEMAND" means a certificate in the form of ANNEX A to the Series 2003-1 Letters of Credit. "CERTIFICATE OF TERMINATION DATE DEMAND" means a certificate in the form of ANNEX D to the Series 2003-1 Letters of Credit. "CERTIFICATE OF TERMINATION DEMAND" means a certificate in the form of ANNEX C to the Series 2003-1 Letters of Credit. "CERTIFICATE OF UNPAID DEMAND NOTE DEMAND" means a certificate in the form of ANNEX B to the Series 2003-1 Letters of Credit. "CHANGE IN CONTROL" means (a) Cendant shall at any time cease to own or control, directly or indirectly, greater than 50% of the Voting Stock of AGH or ARAC, any Lessee, the Sublessee or the Administrator or (b) either AFC-II or AESOP Leasing is no longer indirectly wholly-owned by AGH. "CLAIM" is defined in Section 2.7. "COMPANY INDEMNIFIED PERSON" is defined in Section 2.7. "DECREASE" is defined in Section 2.4(a). "DEMAND NOTE ISSUER" means each issuer of a Series 2003-1 Demand Note. -2- "DISBURSEMENT" means any Lease Deficit Disbursement, any Unpaid Demand Note Disbursement, any Termination Date Disbursement or any Termination Disbursement under a Series 2003-1 Letter of Credit, or any combination thereof, as the context may require. "EFFECTIVE DATE" is defined in Section 5.1. "EXCESS COLLECTIONS" is defined in Section 3.3(e)(i). "EXCLUDED TAXES" means, with respect to the Purchaser or any other recipient of any payment to be made by or on account of any obligation of AFC-II hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America or by any other Governmental Authority, in each case, as a result of a present or former connection between the United States of America or the jurisdiction of such Governmental Authority imposing such tax, as the case may be, and the Purchaser or any other such recipient (except a connection arising solely from the Purchaser's or such recipient's having executed, delivered or performed its obligations hereunder, receiving a payment hereunder or enforcing the Series 2003-1 Notes) and (b) any branch profits tax imposed by the United States of America or any similar tax imposed by any other jurisdiction in which AFC-II is located (except any such branch profits or similar tax imposed as a result of a connection with the United States of America or other jurisdiction as a result of a connection arising solely from the Purchaser's or such recipient's having executed, delivered or performed its obligations hereunder, receiving a payment hereunder or enforcing the Series 2003-1 Notes). "EXPIRY DATE" means the earlier of (a) the Scheduled Expiry Date with respect to the Purchaser and (b) the date on which an Amortization Event with respect to the Series 2003-1 Notes shall have been declared or automatically occurred. "INCREASE" is defined in Section 2.3(a). "INCREASE AMOUNT" is defined in Section 2.3(a). "INCREASE DATE" is defined in Section 2.3(a). "LEASE DEFICIT DISBURSEMENT" means an amount drawn under a Series 2003-1 Letter of Credit pursuant to a Certificate of Lease Deficit Demand. "LIBOR" means, with respect to each Series 2003-1 Interest Period, a rate per annum to be determined by the Trustee as follows: (i) On each LIBOR Determination Date, the Trustee will determine the London interbank offered rate for U.S. dollar deposits for one month that appears on Telerate Page 3750 as it relates to U.S. dollars as of 11:00 a.m., London time, on such LIBOR Determination Date: (ii) If, on any LIBOR Determination Date, such rate does not appear on Telerate Page 3750, the Trustee will request that the principal London offices of each of four major banks in the London interbank market selected by the Trustee provide the Trustee with offered quotations for deposits in U.S. dollars for a period of one month, -3- commencing on the first day of such Series 2003-1 Interest Period, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a principal amount equal to an amount of not less than $250,000 that is representative of a single transaction in such market at such time. If at least two such quotations are provided, "LIBOR" for such Series 2003-1 Interest Period will be the arithmetic mean of such quotations; or (iii) If fewer than two such quotations are provided, "LIBOR" for such Series 2003-1 Interest Period will be the arithmetic mean of rates quoted by three major banks in the City of New York selected by the Trustee at approximately 11:00 a.m., New York City time, on such LIBOR Determination Date for loans in U.S. dollars to leading European banks, for a period of one month, commencing on the first day of such Series 2003-1 Interest Period, and in a principal amount equal to an amount of not less than $250,000 that is representative of a single transaction in such market at such time; PROVIDED, HOWEVER, that if the banks selected as aforesaid by such Trustee are not quoting rates as mentioned in this sentence, "LIBOR" for such Series 2003-1 Interest Period will be the same as "LIBOR" for the immediately preceding Series 2003-1 Interest Period. "LOC PRO RATA SHARE" means, with respect to any Series 2003-1 Letter of Credit Provider as of any date, the fraction (expressed as a percentage) obtained by dividing (A) the available amount under such Series 2003-1 Letter of Credit Provider's Series 2003-1 Letter of Credit as of such date by (B) an amount equal to the aggregate available amount under all Series 2003-1 Letters of Credit as of such date; PROVIDED that only for purposes of calculating the LOC Pro Rata Share with respect to any Series 2003-1 Letter of Credit Provider as of any date, if such Series 2003-1 Letter of Credit Provider has not complied with its obligation to pay the Trustee the amount of any draw under its Series 2003-1 Letter of Credit made prior to such date, the available amount under such Series 2003-1 Letter of Credit Provider's Series 2003-1 Letter of Credit as of such date shall be treated as reduced (for calculation purposes only) by the amount of such unpaid demand and shall not be reinstated for purposes of such calculation unless and until the date as of which such Series 2003-1 Letter of Credit Provider has paid such amount to the Trustee and been reimbursed by the Lessee or the applicable Demand Note Issuer, as the case may be, for such amount (PROVIDED that the foregoing calculation shall not in any manner reduce the undersigned's actual liability in respect of any failure to pay any demand under its Series 2003-1 Letter of Credit). "LIBOR DETERMINATION DATE" means, with respect to any Series 2003-1 Interest Period, the second London Banking Day preceding the first day of such Series 2003-1 Interest Period. "LONDON BANKING DAY" means any business day on which dealings in deposits in United States dollars are transacted in the London interbank market. "MONTHLY TOTAL PRINCIPAL ALLOCATION" means for any Related Month the sum of all Series 2003-1 Principal Allocations with respect to such Related Month. "MOODY'S" means Moody's Investors Service. -4- "OPTIONAL TERMINATION DATE" is defined in Section 2.4(b). "OPTIONAL TERMINATION NOTICE" is defined in Section 2.4(b). "OUTSTANDING" means, with respect to the Series 2003-1 Notes, the Series 2003-1 Invested Amount shall not have been reduced to zero and all accrued interest and other amounts owing on the Series 2003-1 Notes and to the Purchaser hereunder shall not have been paid in full. "PAST DUE RENT PAYMENT" is defined in Section 3.2(f). "PREFERENCE AMOUNT" means any amount previously distributed to the Purchaser on or relating to a Series 2003-1 Note that is recoverable or that has been recovered as a voidable preference by the trustee in a bankruptcy proceeding of a Demand Note Issuer pursuant to the United State Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a final nonappealable order of a court having competent jurisdiction. "PRE-PREFERENCE PERIOD DEMAND NOTE PAYMENTS" means, as of any date of determination, the aggregate amount of all proceeds of demands made on the Series 2003-1 Demand Notes included in the Series 2003-1 Demand Note Payment Amount as of the Series 2003-1 Letter of Credit Termination Date that were paid by the Demand Note Issuers more than one year before such date of determination; PROVIDED, HOWEVER, that if an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to a Demand Note Issuer occurs during such one-year period, (x) the Pre-Preference Period Demand Note Payments as of any date during the period from and including the date of the occurrence of such Event of Bankruptcy to and including the conclusion or dismissal of the proceedings giving rise to such Event of Bankruptcy without continuing jurisdiction by the court in such proceedings shall equal the Pre-Preference Period Demand Note Payments as of the date of such occurrence and (y) the Pre-Preference Period Demand Note Payments as of any date after the conclusion or dismissal of such proceedings shall equal the Series 2003-1 Demand Note Payment Amount as of the date of the conclusion or dismissal of such proceedings. "PRINCIPAL DEFICIT AMOUNT" means, on any date of determination, the excess, if any, of (i) the Series 2003-1 Invested Amount on such date (after giving effect to the distribution of the Monthly Total Principal Allocation for the Related Month if such date is a Distribution Date) over (ii) the Series 2003-1 AESOP I Operating Lease Loan Agreement Borrowing Base on such date. "PURCHASER" is defined in the recitals hereto. "RECORD DATE" means, with respect to each Distribution Date, the immediately preceding Business Day. "SCHEDULED EXPIRY DATE" shall mean the later of (a) January 28, 2006 and (b) the last day of any extension thereof made in accordance with Section 2.5(b). -5- "SERIES 1998-1 NOTES" means the Series of Notes designated as the Series 1998-1 Notes. "SERIES 2000-1 NOTES" means the Series of Notes designated as the Series 2000-1 Notes. "SERIES 2000-2 NOTES" means the Series of Notes designated as the Series 2000-2 Notes. "SERIES 2000-3 NOTES" means the Series of Notes designated as the Series 2000-3 Notes. "SERIES 2000-4 NOTES" means the Series of Notes designated as the Series 2000-4 Notes. "SERIES 2001-1 NOTES" means the Series of Notes designated as the Series 2001-1 Notes. "SERIES 2001-2 NOTES" means the Series of Notes designated as the Series 2001-2 Notes. "SERIES 2002-1 NOTES" means the Series of Notes designated as the Series 2002-1 Notes. "SERIES 2002-2 NOTES" means the Series of Notes designated as the Series 2002-2 Notes. "SERIES 2002-3 NOTES" means the Series of Notes designated as the Series 2002-3 Notes. "SERIES 2002-4 NOTES" means the Series of Notes designated as the Series 2002-4 Notes. "SERIES 2003-1 ACCRUED INTEREST ACCOUNT" is defined in Section 3.1(b). "SERIES 2003-1 AESOP I OPERATING LEASE LOAN AGREEMENT BORROWING BASE" means, as of any date of determination, the product of (a) the Series 2003-1 AESOP I Operating Lease Vehicle Percentage as of such date and (b) the AESOP I Operating Lease Loan Agreement Borrowing Base as of such date. "SERIES 2003-1 AESOP I OPERATING LEASE VEHICLE PERCENTAGE" means, as of any date of determination, a fraction, expressed as a percentage (which percentage shall never exceed 100%), the numerator of which is the Series 2003-1 Required AESOP I Operating Lease Vehicle Amount as of such date and the denominator of which is the sum of the Required AESOP I Operating Lease Vehicle Amounts for all Series of Notes as of such date. "SERIES 2003-1 AGENT" is defined in the recitals hereto. -6- "SERIES 2003-1 AMORTIZATION PERIOD" means the period beginning at the earliest to occur of (a) the close of business on the Business Day immediately preceding the date on which the Expiry Date shall have occurred, (b) the close of business on the Optional Termination Date and (c) the close of business on the Business Day immediately preceding the day on which an Amortization Event is deemed to have occurred or been declared with respect to the Series 2003-1 Notes and ending upon the earlier to occur of (i) the date on which the Series 2003-1 Notes are fully paid and (ii) the termination of the Indenture. "SERIES 2003-1 AVAILABLE CASH COLLATERAL ACCOUNT AMOUNT" means, as of any date of determination, the amount on deposit in the Series 2003-1 Cash Collateral Account (after giving effect to any deposits thereto and withdrawals and releases therefrom on such date). "SERIES-2003-1 AVAILABLE RESERVE ACCOUNT AMOUNT" means, as of any date of determination, the amount on deposit in the Series 2003-1 Reserve Account (after giving effect to any deposits thereto and withdrawals and releases therefrom on such date). "SERIES 2003-1 CASH COLLATERAL ACCOUNT" is defined in Section 3.8(e). "SERIES 2003-1 CASH COLLATERAL ACCOUNT COLLATERAL" is defined in Section 3.8(a). "SERIES 2003-1 CASH COLLATERAL ACCOUNT SURPLUS" means, with respect to any Distribution Date, the lesser of (a) the Series 2003-1 Available Cash Collateral Account Amount and (b) the lesser of (A) the excess, if any, of the Series 2003-1 Liquidity Amount (after giving effect to any withdrawal from the Series 2003-1 Reserve Account on such Distribution Date) over the Series 2003-1 Required Liquidity Amount on such Distribution Date and (B) the excess, if any, of the Series 2003-1 Enhancement Amount (after giving effect to any withdrawal from the Series 2003-1 Reserve Account on such Distribution Date) over the Series 2003-1 Required Enhancement Amount on such Distribution Date; PROVIDED, HOWEVER, that, on any date after the Series 2003-1 Letter of Credit Termination Date, the Series 2003-1 Cash Collateral Account Surplus shall mean the excess, if any, of (x) the Series 2003-1 Available Cash Collateral Account Amount over (y) the Series 2003-1 Demand Note Payment Amount MINUS the Pre-Preference Period Demand Note Payments as of such date. "SERIES 2003-1 CASH COLLATERAL PERCENTAGE" means, as of any date of determination, the percentage equivalent of a fraction, the numerator of which is the Series 2003-1 Available Cash Collateral Amount as of such date and the denominator of which is the Series 2003-1 Letter of Credit Liquidity Amount as of such date. "SERIES 2003-1 CLOSING DATE" is defined in Section 2.1(a). "SERIES 2003-1 COLLATERAL" means the Collateral, each Series 2003-1 Letter of Credit, each Series 2003-1 Demand Note, the Series 2003-1 Distribution Account Collateral, the Series 2003-1 Cash Collateral Account Collateral and the Series 2003-1 Reserve Account Collateral. "SERIES 2003-1 COLLECTION ACCOUNT" is defined in Section 3.1(b). -7- "SERIES 2003-1 DEMAND NOTE" means each demand note made by a Demand Note Issuer, substantially in the form of EXHIBIT C to this Supplement, as amended, modified or restated from time to time. "SERIES 2003-1 DEMAND NOTE PAYMENT AMOUNT" means, as of the Series 2003-1 Letter of Credit Termination Date, the aggregate amount of all proceeds of demands made on the Series 2003-1 Demand Notes pursuant to Section 3.5(c)(iii) or 3.5(d)(ii) that were deposited into the Series 2003-1 Distribution Account and paid to the Series 2003-1 Noteholders during the one-year period ending on the Series 2003-1 Letter of Credit Termination Date; PROVIDED, HOWEVER, that if an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to a Demand Note Issuer shall have occurred during such one-year period, the Series 2003-1 Demand Note Payment Amount as of the Series 2003-1 Letter of Credit Termination Date shall equal the Series 2003-1 Demand Note Payment Amount as if it were calculated as of the date of such occurrence. "SERIES 2003-1 DEPOSIT DATE" is defined in Section 3.2. "SERIES 2003-1 DISTRIBUTION ACCOUNT" is defined in Section 3.9(a). "SERIES 2003-1 DISTRIBUTION ACCOUNT COLLATERAL" is defined in Section 3.9(d). "SERIES 2003-1 ELIGIBLE LETTER OF CREDIT PROVIDER" means a person satisfactory to ARAC and the Demand Note Issuers and having, at the time of the issuance of the related Series 2003-1 Letter of Credit, a long-term senior unsecured debt rating of at least "A" from S&P and a short-term senior unsecured debt rating of at least "A-1" from S&P and a long-term senior unsecured debt rating of at least "A2" from Moody's and a short-term senior unsecured debt rating of "P-1" from Moody's that is a commercial bank having total assets in excess of $500,000,000. "SERIES 2003-1 ENHANCEMENT" means the Series 2003-1 Cash Collateral Account Collateral, the Series 2003-1 Letters of Credit, the Series 2003-1 Demand Notes, the Series 2003-1 Overcollateralization Amount and the Series 2003-1 Reserve Account Amount. "SERIES 2003-1 ENHANCEMENT AMOUNT" means, as of any date of determination, the sum of (i) the Series 2003-1 Overcollateralization Amount as of such date, (ii) the Series 2003-1 Letter of Credit Amount as of such date, (iii) the Series 2003-1 Available Reserve Account Amount as of such date and (iv) the amount of cash and Permitted Investments on deposit in the Series 2003-1 Collection Account (not including amounts allocable to the Series 2003-1 Accrued Interest Account) and the Series 2003-1 Excess Collection Account as of such date. "SERIES 2003-1 ENHANCEMENT DEFICIENCY" means, on any date of determination, the amount by which the Series 2003-1 Enhancement Amount is less than the Series 2003-1 Required Enhancement Amount as of such date. "SERIES 2003-1 EXCESS COLLECTION ACCOUNT" is defined in Section 3.1(b). -8- "SERIES 2003-1 EXPECTED FINAL DISTRIBUTION DATE" means the Distribution Date falling in the seventh calendar month after the calendar month in which the Series 2003-1 Revolving Period ends. "SERIES 2003-1 INITIAL INVESTED AMOUNT" is defined in Section 2.3(a). "SERIES 2003-1 INTEREST PERIOD" means a period commencing on and including a Distribution Date and ending on and including the day preceding the next succeeding Distribution Date; PROVIDED, HOWEVER, that the initial Series 2003-1 Interest Period shall commence on and include the Series 2003-1 Closing Date and end on and include February 20, 2003. "SERIES 2003-1 INVESTED AMOUNT" means, on any date of determination, (a) when used with respect to the Series 2003-1 Closing Date, the Series 2003-1 Initial Invested Amount and (b) when used with respect to any other date, an amount equal to (i) the Series 2003-1 Invested Amount on the immediately preceding Business Day PLUS (ii) the Increase Amount on such date MINUS (iii) the amount of principal payments made to the Purchaser pursuant to Section 3.5(e) on such date PLUS (iv) the amount of principal payments recovered from the Purchaser by a trustee as a preference payment in a bankruptcy proceeding of a Demand Note Issuer or otherwise. "SERIES 2003-1 INVESTED PERCENTAGE" means as of any date of determination: (a) when used with respect to Principal Collections, the percentage equivalent (which percentage shall never exceed 100%) of a fraction the numerator of which shall be equal to the sum of the Series 2003-1 Invested Amount and the Series 2003-1 Overcollateralization Amount, determined during the Series 2003-1 Revolving Period as of the end of the immediately preceding Business Day, or, during the Series 2003-1 Amortization Period, as of the end of the Series 2003-1 Revolving Period, and the denominator of which shall be the greater as of the end of the immediately preceding Business Day of (I) the Aggregate Asset Amount and (II) the sum of the numerators used to determine (i) invested percentages for allocations with respect to Principal Collections (for all Series of Notes and all classes of such Series of Notes) and (ii) overcollateralization percentages for allocations with respect to Principal Collections (for all Series of Notes that provide for credit enhancement in the form of overcollateralization); and (b) when used with respect to Interest Collections, the percentage equivalent (which percentage shall never exceed 100%) of a fraction the numerator of which shall be the Accrued Amounts with respect to the Series 2003-1 Notes on such date of determination, and the denominator of which shall be the aggregate Accrued Amounts with respect to all Series of Notes on such date of determination. "SERIES 2003-1 LEASE INTEREST PAYMENT DEFICIT" means on any Distribution Date an amount equal to the excess, if any, of (a) the aggregate amount of Interest Collections which pursuant to Section 3.2(a), (b) or (c) would have been allocated to the Series 2003-1 Accrued Interest Account if all payments of Monthly Base Rent required to have been made under the Leases from and excluding the preceding Distribution Date to and including such Distribution Date were made in full over (b) the aggregate amount of Interest Collections which pursuant to -9- Section 3.2(a), (b) or (c) have been allocated to the Series 2003-1 Accrued Interest Account (excluding any amounts paid into the Series 2003-1 Accrued Interest Account pursuant to the proviso in Sections 3.2(b)(ii) and 3.2(c)(ii)) from and excluding the preceding Distribution Date to and including such Distribution Date. "SERIES 2003-1 LEASE PAYMENT DEFICIT" means either a Series 2003-1 Lease Interest Payment Deficit or a Series 2003-1 Lease Principal Payment Deficit. "SERIES 2003-1 LEASE PRINCIPAL PAYMENT CARRYOVER DEFICIT" means (a) for the initial Distribution Date, zero and (b) for any other Distribution Date, the excess of (x) the Series 2003-1 Lease Principal Payment Deficit, if any, on the preceding Distribution Date OVER (y) the amount deposited in the Distribution Account on such preceding Distribution Date pursuant to Section 3.5(c) of this Supplement on account of such Series 2003-1 Lease Principal Payment Deficit. "SERIES 2003-1 LEASE PRINCIPAL PAYMENT DEFICIT" means on any Distribution Date the sum of (a) the Series 2003-1 Monthly Lease Principal Payment Deficit for such Distribution Date and (b) the Series 2003-1 Lease Principal Payment Carryover Deficit for such Distribution Date. "SERIES 2003-1 LETTER OF CREDIT" means an irrevocable letter of credit, if any, substantially in the form of EXHIBIT D to this Supplement issued by a Series 2003-1 Eligible Letter of Credit Provider in favor of the Trustee for the benefit of the Series 2003-1 Noteholders. "SERIES 2003-1 LETTER OF CREDIT AMOUNT" means, as of any date of determination, the aggregate outstanding principal amount of the Series 2003-1 Demand Notes on such date. "SERIES 2003-1 LETTER OF CREDIT EXPIRATION DATE" means, with respect to any Series 2003-1 Letter of Credit, the expiration date set forth in such Series 2003-1 Letter of Credit, as such date may be extended in accordance with the terms of such Series 2003-1 Letter of Credit. "SERIES 2003-1 LETTER OF CREDIT LIQUIDITY AMOUNT" means, as of any date of determination, the sum of (a) the aggregate amount available to be drawn on such date under each Series 2003-1 Letter of Credit, as specified therein, and (b) if the Series 2003-1 Cash Collateral Account has been established and funded pursuant to Section 3.8 of this Supplement, the Series 2003-1 Available Cash Collateral Account Amount on such date. "SERIES 2003-1 LETTER OF CREDIT PROVIDER" means the issuer of a Series 2003-1 Letter of Credit. "SERIES 2003-1 LETTER OF CREDIT TERMINATION DATE" means the first to occur of (a) the date on which the Series 2003-1 Notes are fully paid and (b) the Series 2003-1 Termination Date. "SERIES 2003-1 LIMITED LIQUIDATION EVENT OF DEFAULT" means, so long as such event or condition continues, any event or condition of the type specified in clauses (a) through (h) of Article IV; PROVIDED, HOWEVER, that any event or condition of the type specified in clauses -10- (a) through (h) of Article IV shall not constitute a Series 2003-1 Limited Liquidation Event of Default if (i) within such thirty (30) day period, such Amortization Event shall have been cured or (ii) the Trustee shall have received the written consent of each of the Series 2003-1 Noteholders waiving the occurrence of such Series 2003-1 Limited Liquidation Event of Default. "SERIES 2003-1 LIQUIDITY AMOUNT" means, as of any date of determination, the sum of (a) the Series 2003-1 Letter of Credit Liquidity Amount on such date and (b) the Series 2003-1 Available Reserve Account Amount on such date. "SERIES 2003-1 MAXIMUM AGGREGATE KIA/ISUZU/SUBARU/HYUNDAI/SUZUKI AMOUNT" means, as of any day, with respect to Kia, Isuzu, Subaru, Hyundai and Suzuki, in the aggregate, an amount equal to 15% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-1 MAXIMUM AMOUNT" means any of the Series 2003-1 Maximum Manufacturer Amounts, the Series 2003-1 Maximum Non-Eligible Manufacturer Amount, the Series 2003-1 Maximum Non-Program Vehicle Amount or the Series 2003-1 Maximum Specified States Amount. "SERIES 2003-1 MAXIMUM INDIVIDUAL KIA/ISUZU/SUBARU/HYUNDAI/SUZUKI AMOUNT" means, as of any day, with respect to Kia, Isuzu, Subaru, Hyundai or Suzuki, individually, an amount equal to 5% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-1 MAXIMUM INVESTED AMOUNT" means, on any date of determination, $500,000,000, as such amount may be increased or reduced from time to time as provided in Section 2.5. "SERIES 2003-1 MAXIMUM MANUFACTURER AMOUNT" means, as of any day, any of the Series 2003-1 Maximum Mitsubishi Amount, the Series 2003-1 Maximum Nissan Amount, the Series 2003-1 Maximum Individual Kia/Isuzu/Subaru/Hyundai/Suzuki Amount or the Series 2003-1 Maximum Aggregate Kia/Isuzu/Subaru/Hyundai/Suzuki Amount. "SERIES 2003-1 MAXIMUM MITSUBISHI AMOUNT" means, as of any day, an amount equal to 5% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-1 MAXIMUM NISSAN AMOUNT" means, as of any day, an amount equal to 5% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-1 MAXIMUM NON-ELIGIBLE MANUFACTURER AMOUNT" means, as of any day, an amount equal to 3% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-1 MAXIMUM NON-PROGRAM VEHICLE AMOUNT" means, as of any day, an amount equal to 25% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. -11- "SERIES 2003-1 MAXIMUM SPECIFIED STATES AMOUNT" means, as of any day, an amount equal to 7.5% of the aggregate Net Book Value of all Vehicles leased under the Leases on such day. "SERIES 2003-1 MONTHLY INTEREST" means, with respect to any Series 2003-1 Interest Period, an amount equal to the sum for each day in such Series 2003-1 Interest Period of (1) the product of (a) the Series 2003-1 Invested Amount on such day and (b) the Series 2003-1 Note Rate for such Series 2003-1 Interest Period, divided by (2) 360. "SERIES 2003-1 MONTHLY LEASE PRINCIPAL PAYMENT DEFICIT" means on any Distribution Date an amount equal to the excess, if any, of (a) the aggregate amount of Principal Collections which pursuant to Section 3.2(a), (b) or (c) would have been allocated to the Series 2003-1 Collection Account if all payments required to have been made under the Leases from and excluding the preceding Distribution Date to and including such Distribution Date were made in full over (b) the aggregate amount of Principal Collections which pursuant to Section 3.2(a), (b) or (c) have been allocated to the Series 2003-1 Collection Account (without giving effect to any amounts paid into the Series 2003-1 Accrued Interest Account pursuant to the proviso in Sections 3.2(b)(ii) and/or 3.2(c)(ii)) from and excluding the preceding Distribution Date to and including such Distribution Date. "SERIES 2003-1 NON-PROGRAM VEHICLE PERCENTAGE" means, as of any date of determination, a fraction, expressed as a percentage, the numerator of which is the aggregate Net Book Value of all Non-Program Vehicles leased under the AESOP I Operating Lease on such date and the denominator of which is the aggregate Net Book Value of all Vehicles leased under the AESOP I Operating Lease. "SERIES 2003-1 NOTE" means any one of the Series 2003-1 Variable Funding Rental Car Asset Backed Notes, executed by AFC-II authenticated and delivered by or on behalf of the Trustee, substantially in the form of EXHIBIT A. "SERIES 2003-1 NOTE RATE" means, for (i) the initial Series 2003-1 Interest Period, 2.84875% per annum and (ii) any other Series 2003-1 Interest Period, the sum of LIBOR for such Series 2003-1 Interest Period PLUS 1.50%. "SERIES 2003-1 NOTEHOLDER" means a Person in whose name a Series 2003-1 Note is registered in the Note Register. "SERIES 2003-1 OVERCOLLATERALIZATION AMOUNT" means (i) as of any date on which no AESOP I Operating Lease Vehicle Deficiency exists, the Series 2003-1 Required Overcollateralization Amount as of such date and (ii) as of any date on which an AESOP I Operating Lease Vehicle Deficiency exists, the excess, if any, of (x) the Series 2003-1 AESOP I Operating Lease Loan Agreement Borrowing Base as of such date over (y) the Series 2003-1 Invested Amount as of such date. "SERIES 2003-1 PAST DUE RENT PAYMENT" is defined in Section 3.2(f). -12- "SERIES 2003-1 PERCENTAGE" means, as of any date of determination, a fraction, expressed as a percentage, the numerator of which is the Series 2003-1 Invested Amount as of such date and the denominator of which is the Aggregate Invested Amount as of such date. "SERIES 2003-1 PRINCIPAL ALLOCATION" is defined in Section 3.2(a)(ii). "SERIES 2003-1 PROGRAM VEHICLE PERCENTAGE" means, as of any date of determination, 100% minus the Series 2003-1 Non-Program Vehicle Percentage. "SERIES 2003-1 REIMBURSEMENT AGREEMENT" means any and each agreement providing for the reimbursement of a Series 2003-1 Letter of Credit Provider for draws under its Series 2003-1 Letter of Credit as the same may be amended, supplemented, restated or otherwise modified from time to time. "SERIES 2003-1 REQUIRED AESOP I OPERATING LEASE VEHICLE AMOUNT" means, as of any date of determination, the sum of the Series 2003-1 Required Overcollateralization Amount and the Series 2003-1 Invested Amount as of such date. "SERIES 2003-1 REQUIRED ENHANCEMENT AMOUNT" means, as of any date of determination, the sum of (i) the product of the Series 2003-1 Required Enhancement Percentage as of such date and the Series 2003-1 Invested Amount as of such date, (ii) the Series 2003-1 Percentage of the excess, if any, of the Non-Program Vehicle Amount as of such date over the Series 2003-1 Maximum Non-Program Vehicle Amount as of such date, (iii) the Series 2003-1 Percentage of the excess, if any, of the aggregate Net Book Value of all Vehicles manufactured by Mitsubishi and leased under the Leases as of such date over the Series 2003-1 Maximum Mitsubishi Amount as of such date, (iv) the Series 2003-1 Percentage of the excess, if any, of the aggregate Net Book Value of all Vehicles manufactured by Kia, Isuzu, Subaru, Hyundai or Suzuki, individually, and leased under the Leases as of such date over the Series 2003-1 Maximum Individual Kia/Isuzu/Subaru/ Hyundai/Suzuki Amount as of such date, (v) the Series 2003-1 Percentage of the excess, if any, of the aggregate Net Book Value of all Vehicles manufactured by Kia, Isuzu, Subaru, Hyundai or Suzuki, in the aggregate, and leased under the Leases as of such date over the Series 2003-1 Maximum Aggregate Kia/Isuzu/Subaru/Hyundai/Suzuki Amount as of such date, (vi) the Series 2003-1 Percentage of the excess, if any, of the Specified States Amount as of such date over the Series 2003-1 Maximum Specified States Amount as of such date and (vii) the Series 2003-1 Percentage of the excess, if any, of the Non-Eligible Manufacturer Amount as of such date over the Series 2003-1 Maximum Non-Eligible Manufacturer Amount as of such date. "SERIES 2003-1 REQUIRED ENHANCEMENT PERCENTAGE" means, as of any date of determination, the sum of (i) the product of (A) 15.0% times (B) the Series 2003-1 Program Vehicle Percentage as of the immediately preceding Business Day and (ii) the product of (A) the Series 2003-1 Required Non-Program Enhancement Percentage as of such date times (B) the Series 2003-1 Non-Program Vehicle Percentage as of the immediately preceding Business Day. "SERIES 2003-1 REQUIRED LIQUIDITY AMOUNT" means, with respect to any Distribution Date, an amount equal to 0.50% of the Series 2003-1 Invested Amount on such -13- Distribution Date (after giving effect to any payments of principal to be made on the Series 2003-1 Notes on such Distribution Date). "SERIES 2003-1 REQUIRED NON-PROGRAM ENHANCEMENT PERCENTAGE" means, as of any date of determination, the greater of (a) 19.5% and (b) the sum of (i) 19.5% and (ii) the highest, for any calendar month within the preceding twelve calendar months, of the greater of (x) an amount (not less than zero) equal to 100% minus the Measurement Month Average for the immediately preceding Measurement Month and (y) an amount (not less than zero) equal to 100% minus the Market Value Average as of the Determination Date within such calendar month (excluding the Market Value Average for any Determination Date which has not yet occurred). "SERIES 2003-1 REQUIRED OVERCOLLATERALIZATION AMOUNT" means, as of any date of determination, the excess, if any, of the Series 2003-1 Required Enhancement Amount over the sum of (i) the Series 2003-1 Letter of Credit Amount as of such date, (ii) the Series 2003-1 Available Reserve Account Amount on such date and (iii) the amount of cash and Permitted Investments on deposit in the Series 2003-1 Collection Account (not including amounts allocable to the Series 2003-1 Accrued Interest Account) and the Series 2003-1 Excess Collection Account on such date. "SERIES 2003-1 REQUIRED RESERVE ACCOUNT AMOUNT" means, with respect to any Distribution Date, an amount equal to the sum of (A) the excess, if any, of the Series 2003-1 Required Liquidity Amount on such Distribution Date over the Series 2003-1 Letter of Credit Liquidity Amount on such Distribution Date (after giving effect to any payments of principal to be made on the Series 2003-1 Notes on such Distribution Date) and (B) the excess, if any, of the Series 2003-1 Required Enhancement Amount over the Series 2003-1 Enhancement Amount (excluding therefrom the Series 2003-1 Available Reserve Account Amount and calculated after giving effect to any payments of principal to be made on the Series 2003-1 Notes) on such Distribution Date "SERIES 2003-1 RESERVE ACCOUNT" is defined in Section 3.7(a). "SERIES 2003-1 RESERVE ACCOUNT COLLATERAL" is defined in Section 3.7(d). "SERIES 2003-1 RESERVE ACCOUNT SURPLUS" means, with respect to any Distribution Date, the excess, if any, of the Series 2003-1 Available Reserve Account Amount over the Series 2003-1 Required Reserve Account Amount on such Distribution Date. "SERIES 2003-1 REVOLVING PERIOD" means the period from and including, the Series 2003-1 Closing Date to the commencement of the Series 2003-1 Amortization Period. "SERIES 2003-1 SHORTFALL" is defined in Section 3.3(f). "SERIES 2003-1 TERMINATION DATE" means the Distribution Date falling in the nineteenth calendar month after the calendar month in which the Series 2003-1 Revolving Period ends. -14- "SERIES 2003-1 UNPAID DEMAND AMOUNT" means, with respect to any single draw pursuant to Section 3.5(c) or (d) on the Series 2003-1 Letters of Credit, the aggregate amount drawn by the Trustee on all Series 2003-1 Letters of Credit. "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SUPPLEMENT" is defined in the recitals hereto. "TAXES" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "TERMINATION DATE DISBURSEMENT" means an amount drawn under a Series 2003-1 Letter of Credit pursuant to a Certificate of Termination Date Demand. "TERMINATION DISBURSEMENT" means an amount drawn under a Series 2003-1 Letter of Credit pursuant to a Certificate of Termination Demand. "TRUSTEE" is defined in the recitals hereto. "UNPAID DEMAND NOTE DISBURSEMENT" means an amount drawn under a Series 2003-1 Letter of Credit pursuant to a Certificate of Unpaid Demand Note Demand. "VOTING STOCK" of any Person means the common stock or membership interests of such Person and any other security of, or ownership interest in, such Person having ordinary voting power to elect a majority of the board of directors or a majority of the managers (or other Persons serving similar functions) of such Person. ARTICLE II PURCHASE AND SALE OF SERIES 2003-1 NOTES; INCREASES AND DECREASES OF SERIES 2003-1 INVESTED AMOUNT Section 2.1. PURCHASE OF THE SERIES 2003-1 NOTES. (a) INITIAL PURCHASE. Subject to the terms and conditions of this Supplement, including delivery of notice in accordance with Section 2.3, (i) the Purchaser may, in its sole discretion, purchase a Series 2003-1 Note in an amount equal to all or a portion of the Series 2003-1 Initial Invested Amount on any Business Day during the period from the Effective Date (the "SERIES 2003-1 CLOSING DATE") to and including the Expiry Date and the Purchaser may maintain its Series 2003-1 Note, subject to increase or decrease during the period from the Series 2003-1 Closing Date to and including the Expiry Date in accordance with the provisions of this Supplement. Payments by the Purchaser shall be made in immediately available funds on the Series 2003-1 Closing Date to the Trustee for deposit into the Series 2003-1 Collection Account. (b) SERIES 2003-1 MAXIMUM INVESTED AMOUNT. Notwithstanding anything to the contrary contained in this Supplement, at no time shall the Series 2003-1 Invested Amount exceed the Series 2003-1 Maximum Invested Amount at such time. -15- (c) FORM OF SERIES 2003-1 NOTES. The Series 2003-1 Notes shall be issued in fully registered form without interest coupons, substantially in the form set forth in EXHIBIT A hereto. Section 2.2. DELIVERY. (a) On the Series 2003-1 Closing Date, AFC-II shall sign and shall direct the Trustee in writing pursuant to Section 2.2 of the Base Indenture to duly authenticate, and the Trustee, upon receiving such direction, shall so authenticate a Series 2003-1 Note in the name of the Purchaser in an amount equal to the Series 2003-1 Maximum Invested Amount and deliver such Series 2003-1 Note to the Purchaser in accordance with such written directions. (b) The Purchaser shall maintain a record of the Series 2003-1 Invested Amount outstanding on any date of determination, which, absent manifest error, shall constitute PRIMA FACIE evidence of the outstanding Series 2003-1 Invested Amount from time to time. Section 2.3. PROCEDURE FOR INITIAL ISSUANCE AND FOR INCREASING THE SERIES 2003-1 INVESTED AMOUNT. (a) Subject to Section 2.3(c), (i) on the Series 2003-1 Closing Date, the Purchaser may agree to purchase and (ii) on any Business Day during the period from the Effective Date to and including the Expiry Date the Purchaser may agree, in its sole discretion, that the Series 2003-1 Invested Amount may be increased by an amount equal to the Increase Amount (an "INCREASE"), upon the request of AFC-II (each date on which an increase in the Series 2003-1 Invested Amount occurs hereunder being herein referred to as the "INCREASE DATE" applicable to such Increase); PROVIDED, HOWEVER, that AFC-II shall have given the Purchaser (with a copy to the Trustee) irrevocable written notice (effective upon receipt), by telecopy (receipt confirmed), substantially in the form of EXHIBIT B hereto, of such request no later than 3:00 p.m. (New York City time) on the Business Day prior to the Series 2003-1 Closing Date or such Increase Date, as the case may be. Such notice shall state (x) the Series 2003-1 Closing Date or the Increase Date, as the case may be, and (y) the initial invested amount (the "SERIES 2003-1 INITIAL INVESTED AMOUNT") or the proposed amount of the increase in the Series 2003-1 Invested Amount (an "INCREASE AMOUNT"), as the case may be. (b) The Purchaser shall in no event be required to make the initial purchase of a Series 2003-1 Note on the Series 2003-1 Closing Date or to increase the Series 2003-1 Invested Amount on any Increase Date hereunder unless: (i) such Increase Amount is equal to (A) $1,000,000 or an integral multiple of $100,000 in excess thereof or (B) if less, the excess of the Series 2003-1 Maximum Invested Amount over the Series 2003-1 Invested Amount; (ii) after giving effect to the Series 2003-1 Initial Invested Amount or such Increase Amount, the Series 2003-1 Invested Amount would not exceed the Series 2003-1 Maximum Invested Amount; (iii) after giving effect to the Series 2003-1 Initial Invested Amount or such Increase Amount, no AESOP I Operating Lease Vehicle Deficiency would occur and be continuing; -16- (iv) no Amortization Event with respect to the Series 2003-1 Notes or Potential Amortization Event with respect to the Series 2003-1 Notes would occur and be continuing prior to or after giving effect to such Series 2003-1 Initial Invested Amount or such Increase; (v) all of the representations and warranties made by each of AFC-II, the Lessees, the Lessors and the Administrator in the Base Indenture, this Supplement and the Related Documents to which each is a party are true and correct in all material respects on and as of the Series 2003-1 Closing Date or such Increase Date, as the case may be, as if made on and as of such date (except to the extent such representations and warranties are expressly made as of another date); and (vi) all conditions precedent to the making of any Loan under the applicable Loan Agreements would be satisfied. AFC-II's acceptance of funds in connection with (x) the initial purchase of Series 2003-1 Notes on the Series 2003-1 Closing Date and (y) each Increase occurring on any Increase Date shall constitute a representation and warranty by AFC-II to the Purchaser as of the Series 2003-1 Closing Date or such Increase Date (except to the extent such representations and warranties are expressly made as of another date), as the case may be, that all of the conditions contained in this Section 2.3(b) have been satisfied. (c) The Purchaser shall pay in immediately available funds such Increase on the related Increase Date to the Trustee for deposit into the Series 2003-1 Collection Account. Section 2.4. PROCEDURE FOR DECREASING THE SERIES 2003-1 INVESTED AMOUNT; OPTIONAL TERMINATION. (a) On any Business Day prior to the occurrence of an Amortization Event with respect to the Series 2003-1 Notes, upon the written request of AFC-II or the Administrator on behalf of AFC-II, the Series 2003-1 Invested Amount may be reduced (a "DECREASE") by the Trustee's withdrawing from the Series 2003-1 Excess Collection Account, depositing into the Series 2003-1 Distribution Account and distributing to the Purchaser funds on deposit in the Series 2003-1 Excess Collection Account on such day in accordance with Section 3.5(b) in an amount not to exceed the amount of such funds on deposit on such day; PROVIDED that AFC-II shall have given the Purchaser (with a copy to the Trustee) irrevocable written notice (effective upon receipt) of the amount of such Decrease prior to 9:30 a.m. (New York City time) on the Business Day prior to such Decrease; PROVIDED, FURTHER, that any such Decrease shall be in an amount equal to $1,000,000 and integral multiples of $100,000 in excess thereof. Upon each Decrease, the Purchaser shall indicate in its records such Decrease and the Series 2003-1 Invested Amount outstanding after giving effect to such Decrease. (b) On any Business Day, AFC-II shall have the right to deliver an irrevocable written notice (an "OPTIONAL TERMINATION NOTICE") to the Trustee and the Purchaser in which AFC-II declares that the commitment of the Purchaser to consider making an Increase shall terminate on the date (the "OPTIONAL TERMINATION DATE") set forth in such notice (which date, in any event, shall be a Distribution Date not less than three Business Days from the date on which such notice is delivered). -17- (c) From and after the Optional Termination Date, the Series 2003-1 Amortization Period shall commence for all purposes under this Supplement, the Base Indenture and the Related Documents. Section 2.5. INCREASES AND REDUCTIONS OF THE SERIES 2003-1 MAXIMUM INVESTED AMOUNT; EXTENSIONS OF THE SCHEDULED EXPIRY DATE. (a) AFC-II may from time to time request that the Purchaser agree to increase the Series 2003-1 Maximum Invested Amount. An increase in such amount shall be effective hereunder if the Purchaser shall have agreed in its sole discretion in writing to such increase. (b) If AFC-II desires to extend the Scheduled Expiry Date, AFC-II shall notify the Purchaser at least 5 days prior to such Scheduled Expiry Date of its desire to extend the Scheduled Expiry Date. The Purchaser shall notify the Administrator, the Trustee and AFC-II in writing of whether the Purchaser agrees to an extension of the Scheduled Expiry Date; PROVIDED that failure by the Purchaser to respond to such request shall not be construed as a consent by the Purchaser to such extension. The decision to extend or not extend shall be made by the Purchaser in its sole discretion. In the event that the Purchaser desires to extend its Scheduled Expiry Date for an amount that is less than the Series 2003-1 Maximum Invested Amount prior to AFC-II's request for an extension, AFC-II, in its sole discretion, may accept such extension. (c) On any Business Day during the Series 2003-1 Revolving Period, AFC-II may, upon two (2) Business Days' prior written notice to the Purchaser (effective upon receipt) (with copies to the Trustee) reduce the Series 2003-1 Maximum Invested Amount in an amount equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof; PROVIDED that no such termination or reduction shall be permitted if, after giving effect thereto and to any reduction in the Series 2003-1 Invested Amount on such date, the Series 2003-1 Invested Amount would exceed the Series 2003-1 Maximum Invested Amount. Once reduced, the Series 2003-1 Maximum Invested Amount may not be subsequently reinstated without the Purchaser's prior written consent, which consent shall be granted or not in the sole discretion of the Purchaser. Section 2.6. INTEREST. Interest shall be payable on the Series 2003-1 Notes on each Distribution Date pursuant to Section 3.3. Calculations of per annum rates under this Supplement shall be made on the basis of a 360 day year. Section 2.7. INDEMNIFICATION BY AFC-II. AFC-II agrees to indemnify and hold harmless the Trustee, the Administrator, the Purchaser, and each of their respective officers, directors, agents and employees (each, a "COMPANY INDEMNIFIED PERSON") from and against any loss, liability, expense, damage or injury suffered or sustained by (a "CLAIM") such Company indemnified person by reason of (i) any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of AFC-II pursuant to the Indenture or the other Related Documents to which it is a party, (ii) a breach of any representation or warranty made or deemed made by AFC-II (or any of its officers) in the Indenture or other Related Document or (iii) a failure by AFC-II to comply with any applicable law or regulation or to perform its covenants, agreements, duties or obligations required to be performed or observed by it in accordance with the provisions of the Indenture or the other Related Documents, including, but not limited to, any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses -18- incurred in connection with the defense of any actual or threatened action, proceeding or claim, except to the extent such loss, liability, expense, damage or injury resulted from the gross negligence, bad faith or willful misconduct of such Company indemnified person or its officers, directors, agents, principals, employees or employers or includes any Excluded Taxes; PROVIDED that any payments made by AFC-II pursuant to this Section 2.7 shall be made solely from funds available pursuant to Section 3.3(e), shall be non-recourse other than with respect to such funds, and shall not constitute a claim against AFC-II to the extent that such funds are insufficient to make such payment. ARTICLE III SERIES 2003-1 ALLOCATIONS With respect to the Series 2003-1 Notes, the following shall apply: Section 3.1. ESTABLISHMENT OF SERIES 2003-1 COLLECTION ACCOUNT, SERIES 2003-1 EXCESS COLLECTION ACCOUNT AND SERIES 2003-1 ACCRUED INTEREST ACCOUNT. (a) All Collections allocable to the Series 2003-1 Notes shall be allocated to the Collection Account. (b) The Trustee will create three administrative subaccounts within the Collection Account for the benefit of the Series 2003-1 Noteholders: the Series 2003-1 Collection Account (such sub-account, the "SERIES 2003-1 COLLECTION ACCOUNT"), the Series 2003-1 Excess Collection Account (such sub-account, the "SERIES 2003-1 EXCESS COLLECTION ACCOUNT") and the Series 2003-1 Accrued Interest Account (such sub-account, the "SERIES 2003-1 ACCRUED INTEREST ACCOUNT"). Section 3.2. ALLOCATIONS WITH RESPECT TO THE SERIES 2003-1 NOTES. The net proceeds from the initial sale of the Series 2003-1 Notes and any Increase will be deposited into the Collection Account. On each Business Day on which Collections are deposited into the Collection Account (each such date, a "SERIES 2003-1 DEPOSIT DATE"), the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate all amounts deposited into the Collection Account in accordance with the provisions of this Section 3.2: (a) ALLOCATIONS OF COLLECTIONS DURING THE SERIES 2003-1 REVOLVING PERIOD. During the Series 2003-1 Revolving Period, the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate on each day, prior to 11:00 a.m. (New York City time) on each Series 2003-1 Deposit Date, all amounts deposited into the Collection Account as set forth below: (i) allocate to the Series 2003-1 Collection Account an amount equal to the Series 2003-1 Invested Percentage (as of such day) of the aggregate amount of Interest Collections on such day. All such amounts allocated to the Series 2003-1 Collection Account shall be further allocated to the Series 2003-1 Accrued Interest Account; and (ii) allocate to the Series 2003-1 Excess Collection Account the sum of (A) the Series 2003-1 Invested Percentage (as of such day) of the aggregate amount of Principal Collections on such day (for any such day, the "SERIES 2003-1 -19- PRINCIPAL ALLOCATION") and (B) the proceeds from the initial issuance of the Series 2003-1 Notes and from any Increase; (b) ALLOCATIONS OF COLLECTIONS DURING THE SERIES 2003-1 AMORTIZATION PERIOD. With respect to the Series 2003-1 Amortization Period, other than after the occurrence of an Event of Bankruptcy with respect to ARAC, any other Lessee or AGH, the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate, prior to 11:00 a.m. (New York City time) on any Series 2003-1 Deposit Date, all amounts deposited into the Collection Account as set forth below: (i) allocate to the Series 2003-1 Collection Account an amount determined as set forth in Section 3.2(a)(i) above for such day, which amount shall be further allocated to the Series 2003-1 Accrued Interest Account; and (ii) allocate to the Series 2003-1 Collection Account an amount equal to the Series 2003-1 Principal Allocation for such day, which amount shall be used to make principal payments in respect of the Series 2003-1 Notes, ratably, without preference or priority of any kind, until the Series 2003-1 Invested Amount is paid in full; PROVIDED that if on any Determination Date (A) the Administrator determines that the amount anticipated to be available from Interest Collections allocable to the Series 2003-1 Notes and other amounts available pursuant to Section 3.3 to pay Series 2003-1 Monthly Interest on the next succeeding Distribution Date will be less than the Series 2003-1 Monthly Interest for the Series 2003-1 Interest Period ending on the day preceding such Distribution Date and (B) the Series 2003-1 Enhancement Amount is greater than zero, then the Administrator shall direct the Trustee in writing to reallocate a portion of the Principal Collections allocated to the Series 2003-1 Notes during the Related Month equal to the lesser of such insufficiency and the Series 2003-1 Enhancement Amount to the Series 2003-1 Accrued Interest Account to be treated as Interest Collections on such Distribution Date. (c) ALLOCATIONS OF COLLECTIONS AFTER THE OCCURRENCE OF AN EVENT OF BANKRUPTCY. After the occurrence of an Event of Bankruptcy with respect to ARAC, any other Lessee or AGH, the Administrator will direct the Trustee in writing pursuant to the Administration Agreement to allocate, prior to 11:00 a.m. (New York City time) on any Series 2003-1 Deposit Date, all amounts deposited into the Collection Account as set forth below: (i) allocate to the Series 2003-1 Collection Account an amount equal to the Series 2003-1 AESOP I Operating Lease Vehicle Percentage as of the date of the occurrence of such Event of Bankruptcy of the aggregate amount of Interest Collections made under the AESOP I Operating Lease Loan Agreement. All such amounts allocated to the Series 2003-1 Collection Account shall be further allocated to the Series 2003-1 Accrued Interest Account; and (ii) allocate to the Series 2003-1 Collection Account an amount equal to the Series 2003-1 AESOP I Operating Lease Vehicle Percentage as of the date of the occurrence of such Event of Bankruptcy of the aggregate amount of -20- Principal Collections made under the AESOP I Operating Lease Loan Agreement, which amount shall be used to make principal payments in respect of the Series 2003-1 Notes until the Series 2003-1 Notes have been paid in full; PROVIDED that if on any Determination Date (A) the Administrator determines that the amount anticipated to be available from Interest Collections allocable to the Series 2003-1 Notes and other amounts available pursuant to Section 3.3 to pay Series 2003-1 Monthly Interest on the next succeeding Distribution Date will be less than the Series 2003-1 Monthly Interest for the Series 2003-1 Interest Period ending on the day preceding such Distribution Date and (B) the Series 2003-1 Enhancement Amount is greater than zero, then the Administrator shall direct the Trustee in writing to reallocate a portion of the Principal Collections allocated to the Series 2003-1 Notes during the Related Month equal to the lesser of such insufficiency and the Series 2003-1 Enhancement Amount to the Series 2003-1 Accrued Interest Account to be treated as Interest Collections on such Distribution Date. (d) ALLOCATIONS FROM OTHER SERIES. Amounts allocated to other Series of Notes that have been reallocated by AFC-II to the Series 2003-1 Notes (i) during the Series 2003-1 Revolving Period shall be allocated to the Series 2003-1 Excess Collection Account and applied in accordance with Section 3.2(e) and (ii) during the Series 2003-1 Amortization Period shall be allocated to the Series 2003-1 Collection Account and applied in accordance with Section 3.2(b) to make principal payments in respect of the Series 2003-1 Notes. (e) SERIES 2003-1 EXCESS COLLECTION ACCOUNT. Amounts allocated to the Series 2003-1 Excess Collection Account on any Series 2003-1 Deposit Date will be (i) first, deposited in the Series 2003-1 Reserve Account in an amount up to the excess, if any, of the Series 2003-1 Required Reserve Account Amount for such date, after giving effect to any Increase or Decrease on such date, over the Series 2003-1 Available Reserve Account Amount for such date, (ii) second, to the extent directed by AFC-II used to pay the principal amount of other Series of Notes that are then required to be paid, (iii) third, to the extent directed in writing by the Administrator, used to make a voluntary Decrease in the Series 2003-1 Invested Amount, (iv) fourth, to the extent directed in writing by the Administrator used to make a voluntary decrease in the Invested Amount of any other Series of Notes that may be reduced in accordance with the Indenture, (v) fifth, released to AESOP Leasing in an amount equal to the product of (A) the Loan Agreement's Share with respect to the AESOP I Operating Lease Loan Agreement as of such date times (B) 100% minus the Loan Payment Allocation Percentage with respect to the AESOP I Operating Lease Loan Agreement as of such date times (C) the amount of any remaining funds and (vi) sixth, paid to AFC-II, which may be used to make Loans under the Loan Agreements to the extent the Borrowers have requested Loans thereunder and Eligible Vehicles are available for financing thereunder or as otherwise permitted under the Related Documents; PROVIDED, in the case of clauses (iv), (v) and (vi), that no AESOP I Operating Lease Vehicle Deficiency would result therefrom or exist immediately thereafter. Upon the occurrence of an Amortization Event, funds on deposit in the Series 2003-1 Excess Collection Account will be withdrawn by the Trustee, deposited in the Series 2003-1 Collection Account and allocated as Principal Collections to reduce the Series 2003-1 Invested Amount on the immediately succeeding Distribution Date. -21- (f) PAST DUE RENTAL PAYMENTS. Notwithstanding Section 3.2(a), if after the occurrence of a Series 2003-1 Lease Payment Deficit, the Lessees shall make payments of Monthly Base Rent or other amounts payable by the Lessees under the Leases on or prior to the fifth Business Day after the occurrence of such Series 2003-1 Lease Payment Deficit (a "PAST DUE RENT PAYMENT"), the Administrator shall direct the Trustee in writing pursuant to the Administration Agreement to allocate to the Series 2003-1 Collection Account an amount equal to the Series 2003-1 Invested Percentage as of the date of the occurrence of such Series 2003-1 Lease Payment Deficit of the Collections attributable to such Past Due Rent Payment (the "SERIES 2003-1 PAST DUE RENT PAYMENT"). The Administrator shall instruct the Trustee in writing pursuant to the Administration Agreement to withdraw from the Series 2003-1 Collection Account and apply the Series 2003-1 Past Due Rent Payment in the following order: (i) if the occurrence of such Series 2003-1 Lease Payment Deficit resulted in a withdrawal being made from the Series 2003-1 Reserve Account pursuant to Section 3.3(d), deposit in the Series 2003-1 Reserve Account an amount equal to the lesser of (x) the Series 2003-1 Past Due Rent Payment and (y) the excess, if any, of the Series 2003-1 Required Reserve Account Amount over the Series 2003-1 Available Reserve Account Amount on such day; (ii) if the occurrence of the related Series 2003-1 Lease Payment Deficit resulted in one or more Lease Deficit Disbursements being made under the Series 2003-1 Letters of Credit, pay to each Series 2003-1 Letter of Credit Provider who made such a Lease Deficit Disbursement for application in accordance with the provisions of the applicable Series 2003-1 Reimbursement Agreement an amount equal to the lesser of (x) the unreimbursed amount of such Series 2003-1 Letter of Credit Provider's Lease Deficit Disbursement and (y) such Series 2003-1 Letter of Credit Provider's pro rata share, calculated on the basis of the unreimbursed amount of each Series 2003-1 Letter of Credit Provider's Lease Deficit Disbursement, of the amount of the Series 2003-1 Past Due Rent Payment remaining after payment pursuant to clause (i) above; (iii) if the occurrence of such Series 2003-1 Lease Payment Deficit resulted in a withdrawal being made from the Series 2003-1 Cash Collateral Account, deposit in the Series 2003-1 Cash Collateral Account an amount equal to the lesser of (x) the amount of the Series 2003-1 Past Due Rent Payment remaining after any payment pursuant to clauses (i) and (ii) above and (y) the amount withdrawn from the Series 2003-1 Cash Collateral Account on account of such Series 2003-1 Lease Payment Deficit; (iv) allocate to the Series 2003-1 Accrued Interest Account the amount, if any, by which the Series 2003-1 Lease Interest Payment Deficit, if any, relating to such Series 2003-1 Lease Payment Deficit exceeds the amount of the Series 2003-1 Past Due Rent Payment applied pursuant to clauses (i), (ii) and (iii) above; and -22- (v) treat the remaining amount of the Series 2003-1 Past Due Rent Payment as Principal Collections allocated to the Series 2003-1 Notes in accordance with Section 3.2(a)(ii) or 3.2(b)(ii), as the case may be. Section 3.3. NOTE INTEREST WITH RESPECT TO THE SERIES 2003-1 NOTES. (a) Prior to the Determination Date for any Series 2003-1 Interest Period, the Purchaser shall provide to the Administrator its calculation of the Series 2003-1 Monthly Interest, which shall include a reasonable estimate of interest accruing for the remainder of the Series 2003-1 Interest Period. On each Determination Date, the Administrator shall instruct the Trustee and the Paying Agent in writing pursuant to the Administration Agreement as to the amount to be withdrawn and paid pursuant to Section 3.4 from the Series 2003-1 Accrued Interest Account to the extent funds are anticipated to be available from Interest Collections allocable to the Series 2003-1 Notes processed from, but not including, the preceding Distribution Date through the succeeding Distribution Date in respect of (x) first, an amount equal to the Series 2003-1 Monthly Interest for the Series 2003-1 Interest Period ending on the day preceding the related Distribution Date and (y) second, an amount equal to the amount of any unpaid Series 2003-1 Shortfall as of the preceding Distribution Date (together with any accrued interest on such Series 2003-1 Shortfall). On the following Distribution Date, the Trustee shall withdraw the amounts described in the first sentence of this Section 3.3(a) from the Series 2003-1 Accrued Interest Account and deposit such amounts in the Series 2003-1 Distribution Account. If the actual amount of Series 2003-1 Monthly Interest for any Series 2003-1 Interest Period is less than or greater than the amount calculated pursuant to the first sentence of this paragraph, the Purchaser shall notify the Administrator prior to the next Determination Date and the Administrator will reduce or increase the Series 2003-1 Monthly Interest for the next Series 2003-1 Interest Period accordingly. (b) WITHDRAWALS FROM SERIES 2003-1 RESERVE ACCOUNT. If the Administrator determines on any Distribution Date that the amounts available from the Series 2003-1 Accrued Interest Account are insufficient to pay the sum of the amounts described in clauses (x) and (y) of Section 3.3(a) above on such Distribution Date, the Administrator shall instruct the Trustee in writing to withdraw from the Series 2003-1 Reserve Account and deposit in the Series 2003-1 Distribution Account on such Distribution Date an amount equal to the lesser of the Series 2003-1 Available Reserve Account Amount and such insufficiency. The Trustee shall withdraw such amount from the Series 2003-1 Reserve Account and deposit such amount in the Series 2003-1 Distribution Account. (c) LEASE PAYMENT DEFICIT NOTICE. On or before 10:00 a.m. (New York City time) on each Distribution Date, the Administrator shall notify the Trustee of the amount of any Series 2003-1 Lease Payment Deficit, such notification to be in the form of EXHIBIT E to this Supplement (each a "LEASE PAYMENT DEFICIT Notice"). (d) DRAWS ON SERIES 2003-1 LETTERS OF CREDIT FOR SERIES 2003-1 LEASE INTEREST PAYMENT DEFICITS. If the Administrator determines on any Distribution Date that there exists a Series 2003-1 Lease Interest Payment Deficit, the Administrator shall instruct the Trustee in writing to draw on the Series 2003-1 Letters of Credit, if any, and, the Trustee shall, by 12:00 noon (New York City time) on such Distribution Date draw an amount (identified by the Administrator) equal to the least of (i) such Series 2003-1 Lease Interest Payment Deficit, (ii) the excess, if any, of the sum of the amounts described in clauses (x) and (y) of Section 3.3(a) above -23- on such Distribution Date over the amounts available from the Series 2003-1 Accrued Interest Account on such Distribution Date plus the amount withdrawn from the Series 2003-1 Reserve Account pursuant to Section 3.3(b) and (iii) the Series 2003-1 Letter of Credit Liquidity Amount on the Series 2003-1 Letters of Credit by presenting to each Series 2003-1 Letter of Credit Provider a draft accompanied by a Certificate of Lease Deficit Demand and shall cause the Lease Deficit Disbursements to be deposited in the Series 2003-1 Distribution Account on such Distribution Date for distribution in accordance with Section 3.4; PROVIDED, HOWEVER, that if the Series 2003-1 Cash Collateral Account has been established and funded, the Trustee shall withdraw from the Series 2003-1 Cash Collateral Account and deposit in the Series 2003-1 Distribution Account an amount equal to the lesser of (x) the Series 2003-1 Cash Collateral Percentage on such Distribution Date of the least of the amounts described in clauses (i), (ii) and (iii) above and (y) the Series 2003-1 Available Cash Collateral Account Amount on such Distribution Date and draw an amount equal to the remainder of such amount on the Series 2003-1 Letters of Credit. (e) BALANCE. On or prior to the second Business Day preceding each Distribution Date, the Administrator shall instruct the Trustee and the Paying Agent in writing pursuant to the Administration Agreement to pay the balance (after making the payments required in Section 3.3(a)), if any, of the amounts available from the Series 2003-1 Accrued Interest Account as follows: (i) on each Distribution Date during the Series 2003-1 Revolving Period, (1) first, to the Administrator, an amount equal to the Series 2003-1 Percentage as of the beginning of such Series 2003-1 Interest Period of the portion of the Monthly Administration Fee payable by AFC-II (as specified in clause (iii) of the definition thereof) for such Series 2003-1 Interest Period, (2) second, to the Trustee, an amount equal to the Series 2003-1 Percentage as of the beginning of such Series 2003-1 Interest Period of the Trustee's fees for such Series 2003-1 Interest Period, (3) third, to pay any Carrying Charges (other than Carrying Charges provided for above) to the Persons to whom such amounts are owed, an amount equal to the Series 2003-1 Percentage as of the beginning of such Series 2003-1 Interest Period of such Carrying Charges (other than Carrying Charges provided for above) for such Series 2003-1 Interest Period and (4) fourth, the balance, if any ("EXCESS COLLECTIONS"), shall be withdrawn by the Paying Agent from the Series 2003-1 Collection Account and deposited in the Series 2003-1 Excess Collection Account; and (ii) on each Distribution Date during the Series 2003-1 Amortization Period, (1) first, to the Trustee, an amount equal to the Series 2003-1 Percentage as of the beginning of such Series 2003-1 Interest Period of the Trustee's fees for such Series 2003-1 Interest Period, (2) second, to the Administrator, an amount equal to the Series 2003-1 Percentage as of the beginning of such Series 2003-1 Interest Period of the portion of the Monthly Administration Fee (as specified in clause (iii) of the definition thereof) payable by AFC-II for such Series 2003-1 Interest Period, (3) third, to pay any Carrying Charges (other than Carrying Charges provided for above) to the Persons to whom such amounts are owed, an amount equal to the Series 2003-1 Percentage as of the beginning of such Series -24- 2003-1 Interest Period of such Carrying Charges (other than Carrying Charges provided for above) for such Series 2003-1 Interest Period and (4) fourth, the balance, if any, shall be treated as Principal Collections. (f) SHORTFALLS. If the amounts described in Section 3.3 are insufficient to pay the Series 2003-1 Monthly Interest of the Purchaser on any Distribution Date, payments of interest to the Purchaser will be reduced by the amount of such deficiency. The aggregate amount, if any, of such deficiency on any Distribution Date shall be referred to as the "SERIES 2003-1 SHORTFALL." Interest shall accrue on the Series 2003-1 Shortfall at the Series 2003-1 Note Rate plus 2% per annum. Section 3.4. PAYMENT OF NOTE INTEREST. On each Distribution Date, subject to Section 9.8 of the Base Indenture, the Paying Agent shall, in accordance with Section 6.1 of the Base Indenture, pay to the Purchaser from the Series 2003-1 Distribution Account the amounts deposited in the Series 2003-1 Distribution Account pursuant to Section 3.3 PLUS the amount of any unpaid Series 2003-1 Shortfalls relating to unpaid Series 2003-1 Monthly Interest payable to the Purchaser as of the preceding Distribution Date, together with any interest thereon at the Series 2003-1 Note Rate plus 2% per annum. Section 3.5. PAYMENT OF NOTE PRINCIPAL. (a) MONTHLY PAYMENTS DURING SERIES 2003-1 AMORTIZATION PERIOD. Commencing on the first Determination Date after the commencement of the Series 2003-1 Amortization Period, the Administrator shall instruct the Trustee and the Paying Agent in writing pursuant to the Administration Agreement and in accordance with this Section 3.5 as to (i) the amount allocated to the Series 2003-1 Notes during the Related Month pursuant to Section 3.2(b)(ii) or (c)(ii), as the case may be, (ii) any amounts to be withdrawn from the Series 2003-1 Reserve Account and deposited into the Series 2003-1 Distribution Account or (iii) any amounts to be drawn on the Series 2003-1 Demand Notes and/or on the Series 2003-1 Letters of Credit (or withdrawn from the Series 2003-1 Cash Collateral Account). On the Distribution Date following each such Determination Date, the Trustee shall withdraw the amount allocated to the Series 2003-1 Notes during the Related Month pursuant to Section 3.2(b)(ii) or (c)(ii), as the case may be, from the Series 2003-1 Collection Account and deposit such amount in the Series 2003-1 Distribution Account, to be paid to the holders of the Series 2003-1 Notes. (b) DECREASES. On any Business Day during the Series 2003-1 Revolving Period on which a Decrease is to be made pursuant to Section 2.4, the Trustee shall withdraw from the Series 2003-1 Excess Collection Account in accordance with the written instructions of the Administrator an amount equal to the lesser of (i) the funds then allocated to the Series 2003-1 Excess Collection Account and (ii) the amount of such Decrease, and deposit such amount in the Series 2003-1 Distribution Account, to be paid to the Purchaser. (c) PRINCIPAL DEFICIT AMOUNT. On each Distribution Date on which the Principal Deficit Amount is greater than zero, amounts shall be transferred to the Series 2003-1 Distribution Account as follows: (i) RESERVE ACCOUNT WITHDRAWAL. The Administrator shall instruct the Trustee in writing prior to 12:00 noon (New York City time) on such Distribution -25- Date, in the case of a Principal Deficit Amount resulting from a Series 2003-1 Lease Payment Deficit, or prior to 12:00 noon (New York City time) on the second Business Day prior to such Distribution Date, in the case of any other Principal Deficit Amount, to withdraw from the Series 2003-1 Reserve Account, an amount equal to the lesser of (x) the Series 2003-1 Available Reserve Account Amount and (y) such Principal Deficit Amount and deposit it in the Series 2003-1 Distribution Account on such Distribution Date. (ii) PRINCIPAL DRAWS ON SERIES 2003-1 LETTERS OF CREDIT. If the Administrator determines on any Distribution Date during the Series 2003-1 Amortization Period that there exists a Series 2003-1 Lease Principal Payment Deficit, the Administrator shall instruct the Trustee in writing to draw on the Series 2003-1 Letters of Credit, if any, as provided below. Upon receipt of a notice by the Trustee from the Administrator in respect of a Series 2003-1 Lease Principal Payment Deficit on or prior to 11:00 a.m. (New York City time) on a Distribution Date, the Trustee shall, by 12:00 noon (New York City time) on such Distribution Date draw an amount as set forth in such notice equal to the least of (i) such Series 2003-1 Lease Principal Payment Deficit, (ii) the amount by which the Principal Deficit Amount on such Distribution Date exceeds the amount to be deposited in the Series 2003-1 Distribution Account in accordance with clause (i) of this Section 3.5(c) and (iii) the Series 2003-1 Letter of Credit Amount, on the Series 2003-1 Letters of Credit by presenting to each Series 2003-1 Letter of Credit Provider a draft accompanied by a Certificate of Lease Deficit Demand and shall cause the Lease Deficit Disbursements to be deposited in the Series 2003-1 Distribution Account on such Distribution Date; PROVIDED, HOWEVER, that if the Series 2003-1 Cash Collateral Account has been established and funded, the Trustee shall withdraw from the Series 2003-1 Cash Collateral Account and deposit in the Series 2003-1 Distribution Account an amount equal to the lesser of (x) the Series 2003-1 Cash Collateral Percentage on such Distribution Date of the least of the amounts described in clauses (i), (ii) and (iii) above and (y) the Series 2003-1 Available Cash Collateral Account Amount on such Distribution Date and draw an amount equal to the remainder of such amount on the Series 2003-1 Letters of Credit. (iii) DEMAND NOTE DRAW. If on any Determination Date, the Administrator determines that the Principal Deficit Amount on the next succeeding Distribution Date (after giving effect to any withdrawal from the Series 2003-1 Reserve Account pursuant to Section 3.5(c)(i) on such Distribution Date) will be greater than zero, prior to 10:00 a.m. (New York City time) on the second Business Day prior to such Distribution Date, the Administrator shall instruct the Trustee in writing to deliver a Demand Notice to the Demand Note Issuers demanding payment of an amount equal to the lesser of (A) the Principal Deficit Amount and (B) the Series 2003-1 Letter of Credit Amount. The Trustee shall, prior to 12:00 noon (New York City time) on the second Business Day preceding such Distribution Date, deliver such Demand Notice to the Demand Note Issuers; PROVIDED, HOWEVER, that if an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 -26- consecutive days) with respect to a Demand Note Issuer shall have occurred and be continuing, the Trustee shall not be required to deliver such Demand Notice to such Demand Note Issuer. The Trustee shall cause the proceeds of any demand on the Series 2003-1 Demand Notes to be deposited into the Series 2003-1 Distribution Account. (iv) LETTER OF CREDIT DRAW. In the event that either (x) on or prior to 10:00 a.m. (New York City time) on the Business Day immediately preceding any Distribution Date next succeeding any date on which a Demand Notice has been transmitted by the Trustee to the Demand Note Issuers pursuant to clause (ii) of this Section 3.5(c) any Demand Note Issuer shall have failed to pay to the Trustee or deposit into the Series 2003-1 Distribution Account the amount specified in such Demand Notice in whole or in part or (y) due to the occurrence of an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to one or more of the Demand Note Issuers, the Trustee shall not have delivered such Demand Notice to any Demand Note Issuer on the second Business Day preceding the Series 2003-1 Termination Date, then, in the case of (x) or (y) the Trustee shall draw on the Series 2003-1 Letters of Credit, if any, by 12:00 noon (New York City time) on such Business Day an amount equal to the lesser of (a) the amount that the Demand Note Issuers failed to pay under the Series 2003-1 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) and (b) the Series 2003-1 Letter of Credit Amount on such Business Day by presenting to each Series 2003-1 Letter of Credit Provider a draft accompanied by a Certificate of Unpaid Demand Note Demand; PROVIDED, HOWEVER, that if the Series 2003-1 Cash Collateral Account has been established and funded, the Trustee shall withdraw from the Series 2003-1 Cash Collateral Account and deposit in the Series 2003-1 Distribution Account an amount equal to the lesser of (x) the Series 2003-1 Cash Collateral Percentage on such Business Day of the amount that the Demand Note Issuers failed to pay under the Series 2003-1 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) and (y) the Series 2003-1 Available Cash Collateral Account Amount on such Business Day and draw an amount equal to the remainder of the amount that the Demand Note Issuers failed to pay under the Series 2003-1 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) on the Series 2003-1 Letters of Credit. The Trustee shall deposit, or cause the deposit of, the proceeds of any draw on the Series 2003-1 Letters of Credit and the proceeds of any withdrawal from the Series 2003-1 Cash Collateral Account to be deposited in the Series 2003-1 Distribution Account. (d) SERIES 2003-1 TERMINATION DATE. The entire Series 2003-1 Invested Amount shall be due and payable on the Series 2003-1 Termination Date. In connection therewith: (i) RESERVE ACCOUNT WITHDRAWAL. If, after giving effect to the deposit into the Series 2003-1 Distribution Account of the amount to be deposited in accordance with Section 3.5(a), together with any amounts to be deposited therein -27- in accordance with Section 3.5(c) on the Series 2003-1 Termination Date, the amount to be deposited in the Series 2003-1 Distribution Account with respect to the Series 2003-1 Termination Date is or will be less than the Series 2003-1 Invested Amount, then, prior to 12:00 noon (New York City time) on the second Business Day prior to the Series 2003-1 Termination Date, the Administrator shall instruct the Trustee in writing to withdraw from the Series 2003-1 Reserve Account, an amount equal to the lesser of the Series 2003-1 Available Reserve Account Amount and such insufficiency and deposit it in the Series 2003-1 Distribution Account on the Series 2003-1 Termination Date. (ii) DEMAND NOTE DRAW. If the amount to be deposited in the Series 2003-1 Distribution Account in accordance with Section 3.5(a) together with any amounts to be deposited therein in accordance with Section 3.5(c) and Section 3.5(d)(i) on the Series 2003-1 Termination Date is less than the Series 2003-1 Invested Amount, then, prior to 10:00 a.m. (New York City time) on the second Business Day prior to the Series 2003-1 Termination Date, the Administrator shall instruct the Trustee in writing to make a demand (a "DEMAND NOTICE") substantially in the form attached hereto as EXHIBIT F on the Demand Note Issuers for payment under the Series 2003-1 Demand Notes in an amount equal to the lesser of (i) such insufficiency and (ii) the Series 2003-1 Letter of Credit Amount. The Trustee shall, prior to 12:00 noon (New York City time) on the second Business Day preceding the Series 2003-1 Termination Date, deliver such Demand Notice to the Demand Note Issuers; PROVIDED, HOWEVER, that if an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to a Demand Note Issuer shall have occurred and be continuing, the Trustee shall not be required to deliver such Demand Notice to such Demand Note Issuer. The Trustee shall cause the proceeds of any demand on the Series 2003-1 Demand Notes to be deposited into the Series 2003-1 Distribution Account. (iii) LETTER OF CREDIT DRAW. In the event that either (x) on or prior to 10:00 a.m. (New York City time) on the Business Day prior to such Distribution Date, any Demand Note Issuer shall have failed to pay to the Trustee or deposit in the Series 2003-1 Distribution Account the amount specified in such Demand Notice in whole or in part or (y) due to the occurrence of an Event of Bankruptcy (or the occurrence of an event described in clause (a) of the definition thereof, without the lapse of a period of 60 consecutive days) with respect to any Demand Note Issuer, the Trustee shall not have delivered such Demand Notice to any Demand Note Issuer on the second Business Day preceding such Distribution Date, then, in the case of (x) or (y) the Trustee shall on such Business Day draw on the Series 2003-1 Letters of Credit, if any, an amount equal to the lesser of (i) Series 2003-1 Letter of Credit Amount and (ii) the aggregate amount that the Demand Note Issuers failed to pay under the Series 2003-1 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) by presenting to each Series 2003-1 Letter of Credit Provider a draft accompanied by a Certificate of Unpaid Demand Note Demand; PROVIDED, HOWEVER, that if the -28- Series 2003-1 Cash Collateral Account has been established and funded, the Trustee shall withdraw from the Series 2003-1 Cash Collateral Account and deposit in the Series 2003-1 Distribution Account an amount equal to the lesser of (x) the Series 2003-1 Cash Collateral Percentage on such Business Day of the aggregate amount that the Demand Note Issuers failed to pay under the Series 2003-1 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) and (y) the Series 2003-1 Available Cash Collateral Account Amount on such Business Day and draw an amount equal to the remainder of the aggregate amount that the Demand Note Issuers failed to pay under the Series 2003-1 Demand Notes (or, the amount that the Trustee failed to demand for payment thereunder) on the Series 2003-1 Letters of Credit. The Trustee shall deposit into, or cause the deposit of, the proceeds of any draw on the Series 2003-1 Letters of Credit and the proceeds of any withdrawal from the Series 2003-1 Cash Collateral Account to be deposited in the Series 2003-1 Distribution Account. (e) DISTRIBUTION. On each Distribution Date occurring on or after the date a withdrawal is made from the Series 2003-1 Collection Account pursuant to Section 3.5(a) or amounts are deposited in the Series 2003-1 Distribution Account pursuant to Section 3.5(c) and/or (d), the Paying Agent shall, in accordance with Section 6.1 of the Base Indenture, pay to the Purchaser from the Series 2003-1 Distribution Account the amount deposited therein pursuant to Section 3.5(a), (c), and/or (d). Section 3.6. ADMINISTRATOR'S FAILURE TO INSTRUCT THE TRUSTEE TO MAKE A DEPOSIT OR PAYMENT. If the Administrator fails to give notice or instructions to make any payment from or deposit into the Collection Account required to be given by the Administrator, at the time specified in the Administration Agreement or any other Related Document (including applicable grace periods), the Trustee shall make such payment or deposit into or from the Collection Account without such notice or instruction from the Administrator, PROVIDED that the Administrator, upon request of the Trustee, promptly provides the Trustee with all information necessary to allow the Trustee to make such a payment or deposit. When any payment or deposit hereunder or under any other Related Document is required to be made by the Trustee or the Paying Agent at or prior to a specified time, the Administrator shall deliver any applicable written instructions with respect thereto reasonably in advance of such specified time. Section 3.7. SERIES 2003-1 RESERVE ACCOUNT. (a) ESTABLISHMENT OF SERIES 2003-1 RESERVE ACCOUNT. AFC-II shall establish and maintain in the name of the Series 2003-1 Agent for the benefit of the Series 2003-1 Noteholders, or cause to be established and maintained, an account (the "SERIES 2003-1 RESERVE ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series 2003-1 Noteholders. The Series 2003-1 Reserve Account shall be maintained (i) with a Qualified Institution, or (ii) as a segregated trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as trustee for funds deposited in the Series 2003-1 Reserve Account; PROVIDED that, if at any time such Qualified Institution is no longer a Qualified Institution or the credit rating of any securities issued by such depositary institution or trust company shall be reduced to below "BBB-" by S&P or "Baa2" by Moody's, then AFC-II shall, within 30 days of such reduction, establish a new Series 2003-1 Reserve Account with a new -29- Qualified Institution. If the Series 2003-1 Reserve Account is not maintained in accordance with the previous sentence, AFC-II shall establish a new Series 2003-1 Reserve Account, within ten (10) Business Days after obtaining knowledge of such fact, which complies with such sentence, and shall instruct the Series 2003-1 Agent in writing to transfer all cash and investments from the non-qualifying Series 2003-1 Reserve Account into the new Series 2003-1 Reserve Account. Initially, the Series 2003-1 Reserve Account will be established with The Bank of New York. (b) ADMINISTRATION OF THE SERIES 2003-1 RESERVE ACCOUNT. The Administrator may instruct the institution maintaining the Series 2003-1 Reserve Account to invest funds on deposit in the Series 2003-1 Reserve Account from time to time in Permitted Investments; PROVIDED, HOWEVER, that any such investment shall mature not later than the Business Day prior to the Distribution Date following the date on which such funds were received, unless any Permitted Investment held in the Series 2003-1 Reserve Account is held with the Paying Agent, then such investment may mature on such Distribution Date and such funds shall be available for withdrawal on or prior to such Distribution Date. All such Permitted Investments will be credited to the Series 2003-1 Reserve Account and any such Permitted Investments that constitute (i) physical property (and that is not either a United States security entitlement or a security entitlement) shall be physically delivered to the Trustee; (ii) United States security entitlements or security entitlements shall be controlled (as defined in Section 8-106 of the New York UCC) by the Trustee pending maturity or disposition, and (iii) uncertificated securities (and not United States security entitlements) shall be delivered to the Trustee by causing the Trustee to become the registered holder of such securities. (c) EARNINGS FROM SERIES 2003-1 RESERVE ACCOUNT. All interest and earnings (net of losses and investment expenses) paid on funds on deposit in the Series 2003-1 Reserve Account shall be deemed to be on deposit therein and available for distribution. (d) SERIES 2003-1 RESERVE ACCOUNT CONSTITUTES ADDITIONAL COLLATERAL FOR SERIES 2003-1 NOTES. In order to secure and provide for the repayment and payment of the AFC-II Obligations with respect to the Series 2003-1 Notes, AFC-II hereby grants a security interest in and assigns, pledges, grants, transfers and sets over to the Series 2003-1 Agent, for the benefit of the Series 2003-1 Noteholders, all of AFC-II's right, title and interest in and to the following (whether now or hereafter existing or acquired): (i) the Series 2003-1 Reserve Account, including any security entitlement thereto; (ii) all funds on deposit therein from time to time; (iii) all certificates and instruments, if any, representing or evidencing any or all of the Series 2003-1 Reserve Account or the funds on deposit therein from time to time; (iv) all investments made at any time and from time to time with monies in the Series 2003-1 Reserve Account, whether constituting securities, instruments, general intangibles, investment property, financial assets or other property; (v) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the Series 2003-1 Reserve Account, the funds on deposit therein from time to time or the investments made with such funds; and (vi) all proceeds of any and all of the foregoing, including, without limitation, cash (the items in the foregoing clauses (i) through (vi) are referred to, collectively, as the "SERIES 2003-1 RESERVE ACCOUNT COLLATERAL"). The Series 2003-1 Agent shall possess all right, title and interest in and to all funds on deposit from time to time in the Series 2003-1 Reserve Account and in all proceeds thereof, and shall be the only person authorized to originate entitlement orders in respect of the Series 2003-1 Reserve Account. The Series 2003-1 Reserve -30- Account Collateral shall be under the sole dominion and control of the Series 2003-1 Agent for the benefit of the Series 2003-1 Noteholders. The Series 2003-1 Agent hereby agrees (i) to act as the securities intermediary (as defined in Section 8-102(a)(14) of the New York UCC) with respect to the Series 2003-1 Reserve Account; (ii) that each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Series 2003-1 Reserve Account shall be treated as a financial asset (as defined in Section 8-102(a)(9) of the New York UCC) and (iii) to comply with any entitlement order (as defined in Section 8-102(a)(8) of the New York UCC) issued by the Trustee. (e) PREFERENCE AMOUNT WITHDRAWALS FROM THE SERIES 2003-1 RESERVE ACCOUNT OR THE SERIES 2003-1 CASH COLLATERAL ACCOUNT. If the Purchaser notifies the Trustee in writing of the existence of a Preference Amount, then, subject to the satisfaction of the conditions set forth in the next succeeding sentence, on the Business Day on which those conditions are first satisfied, the Trustee shall withdraw from either (x) prior to the Series 2003-1 Letter of Credit Termination Date, the Series 2003-1 Reserve Account or (y) on or after the Series 2003-1 Letter of Credit Termination Date, the Series 2003-1 Cash Collateral Account and pay to the Purchaser an amount equal to such Preference Amount. Prior to any withdrawal from the Series 2003-1 Reserve Account or the Series 2003-1 Cash Collateral Account pursuant to this Section 3.7(e), the Trustee shall have received (i) a certified copy of the order requiring the return of such Preference Amount; (ii) an opinion of counsel satisfactory to the Trustee that such order is final and not subject to appeal; and (iii) a release as to any claim against AFC-II by the Purchaser for any amount paid in respect of such Preference Amount. On the Business Day after the Series 2003-1 Letter of Credit Termination Date, the Trustee shall transfer the amount on deposit in the Series 2003-1 Reserve Account to the Series 2003-1 Cash Collateral Account. (f) SERIES 2003-1 RESERVE ACCOUNT SURPLUS. In the event that the Series 2003-1 Reserve Account Surplus on any Distribution Date, after giving effect to all withdrawals from the Series 2003-1 Reserve Account, is greater than zero, the Trustee, acting in accordance with the written instructions of the Administrator pursuant to the Administration Agreement, shall withdraw from the Series 2003-1 Reserve Account an amount equal to the Series 2003-1 Reserve Account Surplus and shall pay such amount to AFC-II. (g) TERMINATION OF SERIES 2003-1 RESERVE ACCOUNT. Upon the termination of the Indenture pursuant to Section 11.1 of the Base Indenture, the Trustee, acting in accordance with the written instructions of the Administrator, after the prior payment of all amounts owing to the Series 2003-1 Noteholders and payable from the Series 2003-1 Reserve Account as provided herein, shall withdraw from the Series 2003-1 Reserve Account all amounts on deposit therein for payment to AFC-II. Section 3.8. SERIES 2003-1 LETTERS OF CREDIT AND SERIES 2003-1 CASH COLLATERAL ACCOUNT. (a) SERIES 2003-1 LETTERS OF CREDIT AND SERIES 2003-1 CASH COLLATERAL ACCOUNT CONSTITUTE ADDITIONAL COLLATERAL FOR SERIES 2003-1 NOTES. In order to secure and provide for the repayment and payment of the AFC-II Obligations with respect to the Series 2003-1 Notes, AFC-II hereby grants a security interest in and assigns, pledges, grants, transfers and sets over to the Trustee, for the benefit of the Series 2003-1 Noteholders, all of AFC-II's right, title and interest in and to the following (whether now or hereafter existing or acquired): (i) each Series 2003-1 Letter of Credit; (ii) the Series 2003-1 Cash Collateral Account, including any security -31- entitlement thereto; (iii) all funds on deposit in the Series 2003-1 Cash Collateral Account from time to time; (iv) all certificates and instruments, if any, representing or evidencing any or all of the Series 2003-1 Cash Collateral Account or the funds on deposit therein from time to time; (v) all investments made at any time and from time to time with monies in the Series 2003-1 Cash Collateral Account, whether constituting securities, instruments, general intangibles, investment property, financial assets or other property; (vi) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the Series 2003-1 Cash Collateral Account, the funds on deposit therein from time to time or the investments made with such funds; and (vii) all proceeds of any and all of the foregoing, including, without limitation, cash (the items in the foregoing clauses (ii) through (vii) are referred to, collectively, as the "SERIES 2003-1 CASH COLLATERAL ACCOUNT COLLATERAL"). The Trustee shall, for the benefit of the Series 2003-1 Noteholders, possess all right, title and interest in all funds on deposit from time to time in the Series 2003-1 Cash Collateral Account and in all proceeds thereof, and shall be the only person authorized to originate entitlement orders in respect of the Series 2003-1 Cash Collateral Account. The Series 2003-1 Cash Collateral Account shall be under the sole dominion and control of the Trustee for the benefit of the Series 2003-1 Noteholders. The Series 2003-1 Agent hereby agrees (i) to act as the securities intermediary (as defined in Section 8-102(a)(14) of the New York UCC) with respect to the Series 2003-1 Cash Collateral Account; (ii) that each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Series 2003-1 Cash Collateral Account shall be treated as a financial asset (as defined in Section 8-102(a)(9) of the New York UCC) and (iii) to comply with any entitlement order (as defined in Section 8-102(a)(8) of the New York UCC) issued by the Trustee. (b) SERIES 2003-1 LETTER OF CREDIT EXPIRATION DATE. If prior to the date which is ten (10) days prior to the then scheduled Series 2003-1 Letter of Credit Expiration Date with respect to any Series 2003-1 Letter of Credit, excluding the amount available to be drawn under such Series 2003-1 Letter of Credit but taking into account each substitute Series 2003-1 Letter of Credit which has been obtained from a Series 2003-1 Eligible Letter of Credit Provider and is in full force and effect on such date, the Series 2003-1 Enhancement Amount would be equal to or more than the Series 2003-1 Required Enhancement Amount and the Series 2003-1 Liquidity Amount would be equal to or greater than the Series 2003-1 Required Liquidity Amount, then the Administrator shall notify the Trustee in writing no later than two Business Days prior to such Series 2003-1 Letter of Credit Expiration Date of such determination. If prior to the date which is ten (10) days prior to the then scheduled Series 2003-1 Letter of Credit Expiration Date with respect to any Series 2003-1 Letter of Credit, excluding the amount available to be drawn under such Series 2003-1 Letter of Credit but taking into account a substitute Series 2003-1 Letter of Credit which has been obtained from a Series 2003-1 Eligible Letter of Credit Provider and is in full force and effect on such date, the Series 2003-1 Enhancement Amount would be less than the Series 2003-1 Required Enhancement Amount or the Series 2003-1 Liquidity Amount would be less than the Series 2003-1 Required Liquidity Amount, then the Administrator shall notify the Trustee in writing no later than two Business Days prior to such Series 2003-1 Letter of Credit Expiration Date of (x) the greater of (A) the excess, if any, of the Series 2003-1 Required Enhancement Amount over the Series 2003-1 Enhancement Amount, excluding the available amount under such expiring Series 2003-1 Letter of Credit but taking into account any substitute Series 2003-1 Letter of Credit which has been obtained from a Series 2003-1 Eligible Letter of Credit Provider and is in full force and effect, on such date, and (B) the -32- excess, if any, of the Series 2003-1 Required Liquidity Amount over the Series 2003-1 Liquidity Amount, excluding the available amount under such expiring Series 2003-1 Letter of Credit but taking into account any substitute Series 2003-1 Letter of Credit which has been obtained from a Series 2003-1 Eligible Letter of Credit Provider and is in full force and effect, on such date, and (y) the amount available to be drawn on such expiring Series 2003-1 Letter of Credit on such date. Upon receipt of such notice by the Trustee on or prior to 10:00 a.m. (New York City time) on any Business Day, the Trustee shall, by 12:00 p.m. (New York City time) on such Business Day (or, in the case of any notice given to the Trustee after 10:00 a.m. (New York City time), by 12:00 p.m. (New York City time) on the next following Business Day), draw the lesser of the amounts set forth in clauses (x) and (y) above on such expiring Series 2003-1 Letter of Credit by presenting a draft accompanied by a Certificate of Termination Demand and shall cause the Termination Disbursement to be deposited in the Series 2003-1 Cash Collateral Account. If the Trustee does not receive the notice from the Administrator described in the first paragraph of this Section 3.8(b) on or prior to the date that is two Business Days prior to each Series 2003-1 Letter of Credit Expiration Date, the Trustee shall, by 12:00 p.m. (New York City time) on such Business Day draw the full amount of such Series 2003-1 Letter of Credit by presenting a draft accompanied by a Certificate of Termination Demand and shall cause the Termination Disbursement to be deposited in the Series 2003-1 Cash Collateral Account. (c) SERIES 2003-1 LETTER OF CREDIT PROVIDERS. The Administrator shall notify the Trustee in writing within one Business Day of becoming aware that (i) the long-term senior unsecured debt credit rating of any Series 2003-1 Letter of Credit Provider has fallen below "A" as determined by Standard & Poor's or "A2" as determined by Moody's or (ii) the short-term senior unsecured debt credit rating of any Series 2003-1 Letter of Credit Provider has fallen below "A-1" as determined by Standard & Poor's or "P-1" as determined by Moody's. At such time the Administrator shall also notify the Trustee of (i) the greater of (A) the excess, if any, of the Series 2003-1 Required Enhancement Amount over the Series 2003-1 Enhancement Amount, excluding the available amount under the Series 2003-1 Letter of Credit issued by such Series 2003-1 Letter of Credit Provider, on such date, and (B) the excess, if any, of the Series 2003-1 Required Liquidity Amount over the Series 2003-1 Liquidity Amount, excluding the available amount under such Series 2003-1 Letter of Credit, on such date, and (ii) the amount available to be drawn on such Series 2003-1 Letter of Credit on such date. Upon receipt of such notice by the Trustee on or prior to 10:00 a.m. (New York City time) on any Business Day, the Trustee shall, by 12:00 p.m. (New York City time) on such Business Day (or, in the case of any notice given to the Trustee after 10:00 a.m. (New York City time), by 12:00 p.m. (New York City time) on the next following Business Day), draw on such Series 2003-1 Letter of Credit in an amount equal to the lesser of the amounts in clause (i) and clause (ii) of the immediately preceding sentence on such Business Day by presenting a draft accompanied by a Certificate of Termination Demand and shall cause the Termination Disbursement to be deposited in the Series 2003-1 Cash Collateral Account. (d) DRAWS ON THE SERIES 2003-1 LETTERS OF CREDIT. If there is more than one Series 2003-1 Letter of Credit on the date of any draw on the Series 2003-1 Letters of Credit pursuant to the terms of this Supplement, the Administrator shall instruct the Trustee, in writing, to draw on each Series 2003-1 Letter of Credit in an amount equal to the LOC Pro Rata Share of -33- the Series 2003-1 Letter of Credit Provider issuing such Series 2003-1 Letter of Credit of the amount of such draw on the Series 2003-1 Letters of Credit. (e) ESTABLISHMENT OF SERIES 2003-1 CASH COLLATERAL ACCOUNT. On or prior to the date of any drawing under a Series 2003-1 Letter of Credit pursuant to Section 3.8(b) or (c) above, AFC-II shall establish and maintain in the name of the Trustee for the benefit of the Series 2003-1 Noteholders, or cause to be established and maintained, an account (the "SERIES 2003-1 CASH COLLATERAL ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series 2003-1 Noteholders. The Series 2003-1 Cash Collateral Account shall be maintained (i) with a Qualified Institution, or (ii) as a segregated trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as trustee for funds deposited in the Series 2003-1 Cash Collateral Account; PROVIDED that, if at any time such Qualified Institution is no longer a Qualified Institution or the credit rating of any securities issued by such depository institution or trust company shall be reduced to below "BBB-" by S&P or "Baa3" by Moody's, then AFC-II shall, within 30 days of such reduction, establish a new Series 2003-1 Cash Collateral Account with a new Qualified Institution or a new segregated trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as trustee for funds deposited in the Series 2003-1 Cash Collateral Account. If a new Series 2003-1 Cash Collateral Account is established, AFC-II shall instruct the Trustee in writing to transfer all cash and investments from the non-qualifying Series 2003-1 Cash Collateral Account into the new Series 2003-1 Cash Collateral Account. (f) ADMINISTRATION OF THE SERIES 2003-1 CASH COLLATERAL ACCOUNT. AFC-II may instruct (by standing instructions or otherwise) the institution maintaining the Series 2003-1 Cash Collateral Account to invest funds on deposit in the Series 2003-1 Cash Collateral Account from time to time in Permitted Investments; PROVIDED, HOWEVER, that any such investment shall mature not later than the Business Day prior to the Distribution Date following the date on which such funds were received, unless any Permitted Investment held in the Series 2003-1 Cash Collateral Account is held with the Paying Agent, in which case such investment may mature on such Distribution Date so long as such funds shall be available for withdrawal on or prior to such Distribution Date. All such Permitted Investments will be credited to the Series 2003-1 Cash Collateral Account and any such Permitted Investments that constitute (i) physical property (and that is not either a United States security entitlement or a security entitlement) shall be physically delivered to the Trustee; (ii) United States security entitlements or security entitlements shall be controlled (as defined in Section 8-106 of the New York UCC) by the Trustee pending maturity or disposition, and (iii) uncertificated securities (and not United States security entitlements) shall be delivered to the Trustee by causing the Trustee to become the registered holder of such securities. The Trustee shall, at the expense of AFC-II, take such action as is required to maintain the Trustee's security interest in the Permitted Investments credited to the Series 2003-1 Cash Collateral Account. AFC-II shall not direct the Trustee to dispose of (or permit the disposal of) any Permitted Investments prior to the maturity thereof to the extent such disposal would result in a loss of principal of such Permitted Investment. In the absence of written investment instructions hereunder, funds on deposit in the Series 2003-1 Cash Collateral Account shall remain uninvested. -34- (g) EARNINGS FROM SERIES 2003-1 CASH COLLATERAL ACCOUNT. All interest and earnings (net of losses and investment expenses) paid on funds on deposit in the Series 2003-1 Cash Collateral Account shall be deemed to be on deposit therein and available for distribution. (h) SERIES 2003-1 CASH COLLATERAL ACCOUNT SURPLUS. In the event that the Series 2003-1 Cash Collateral Account Surplus on any Distribution Date (or, after the Series 2003-1 Letter of Credit Termination Date, on any date) is greater than zero, the Trustee, acting in accordance with the written instructions of the Administrator, shall withdraw from the Series 2003-1 Cash Collateral Account an amount equal to the Series 2003-1 Cash Collateral Account Surplus and shall pay such amount: FIRST, to the Series 2003-1 Letter of Credit Providers to the extent of any unreimbursed drawings under the related Series 2003-1 Reimbursement Agreement, for application in accordance with the provisions of the related Series 2003-1 Reimbursement Agreement, and, SECOND, to AFC-II any remaining amount. (i) TERMINATION OF SERIES 2003-1 CASH COLLATERAL ACCOUNT. Upon the termination of this Supplement in accordance with its terms, the Trustee, acting in accordance with the written instructions of the Administrator, after the prior payment of all amounts owing to the Series 2003-1 Noteholders and payable from the Series 2003-1 Cash Collateral Account as provided herein, shall withdraw from the Series 2003-1 Cash Collateral Account all amounts on deposit therein (to the extent not withdrawn pursuant to Section 3.8(h) above) and shall pay such amounts: FIRST, to the Series 2003-1 Letter of Credit Providers to the extent of any unreimbursed drawings under the related Series 2003-1 Reimbursement Agreement, for application in accordance with the provisions of the related Series 2003-1 Reimbursement Agreement, and, SECOND, to AFC-II any remaining amount. (j) TERMINATION DATE DEMANDS ON THE SERIES 2003-1 LETTERS OF CREDIT. Prior to 10:00 a.m. (New York City time) on the Business Day immediately succeeding the Series 2003-1 Letter of Credit Termination Date, the Administrator shall determine the Series 2003-1 Demand Note Payment Amount as of the Series 2003-1 Letter of Credit Termination Date. If the Series 2003-1 Demand Note Payment Amount is greater than zero, then the Administrator shall instruct the Trustee in writing to draw on the Series 2003-1 Letters of Credit. Upon receipt of any such notice by the Trustee on or prior to 11:00 a.m. (New York City time) on a Business Day, the Trustee shall, by 12:00 noon (New York City time) on such Business Day draw an amount equal to the lesser of (i) the excess of the Series 2003-1 Demand Note Payment Amount over the Series 2003-1 Available Reserve Account Amount (prior to giving effect to any transfer to the Series 2003-1 Cash Collateral Account pursuant to Section 3.7(e) on such date) and (ii) the Series 2003-1 Letter of Credit Liquidity Amount on the Series 2003-1 Letters of Credit by presenting to each Series 2003-1 Letter of Credit Provider a draft accompanied by a Certificate of Termination Date Demand; PROVIDED, HOWEVER, that if the Series 2003-1 Cash Collateral Account has been established and funded, the Trustee shall draw an amount equal to the product of (a) 100% minus the Series 2003-1 Cash Collateral Percentage and (b) the lesser of the amounts referred to in clause (i) or (ii) on such Business Day on the Series 2003-1 Letters of Credit as calculated by the Administrator and provided in writing to the Trustee. The Trustee shall cause the Termination Date Disbursement to be deposited in the Series 2003-1 Cash Collateral Account. -35- Section 3.9. SERIES 2003-1 DISTRIBUTION ACCOUNT. (a) ESTABLISHMENT OF SERIES 2003-1 DISTRIBUTION ACCOUNT. The Trustee shall establish and maintain in the name of the Series 2003-1 Agent for the benefit of the Series 2003-1 Noteholders, or cause to be established and maintained, an account (the "SERIES 2003-1 DISTRIBUTION ACCOUNT"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series 2003-1 Noteholders. The Series 2003-1 Distribution Account shall be maintained (i) with a Qualified Institution, or (ii) as a segregated trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as trustee for funds deposited in the Series 2003-1 Distribution Account; PROVIDED that, if at any time such Qualified Institution is no longer a Qualified Institution or the credit rating of any securities issued by such depositary institution or trust company shall be reduced to below "BBB-" by S&P or "Baa3" by Moody's, then AFC-II shall, within 30 days of such reduction, establish a new Series 2003-1 Distribution Account with a new Qualified Institution. If the Series 2003-1 Distribution Account is not maintained in accordance with the previous sentence, AFC-II shall establish a new Series 2003-1 Distribution Account, within ten (10) Business Days after obtaining knowledge of such fact, which complies with such sentence, and shall instruct the Series 2003-1 Agent in writing to transfer all cash and investments from the non-qualifying Series 2003-1 Distribution Account into the new Series 2003-1 Distribution Account. Initially, the Series 2003-1 Distribution Account will be established with The Bank of New York. (b) ADMINISTRATION OF THE SERIES 2003-1 DISTRIBUTION ACCOUNT. The Administrator may instruct the institution maintaining the Series 2003-1 Distribution Account to invest funds on deposit in the Series 2003-1 Distribution Account from time to time in Permitted Investments; PROVIDED, HOWEVER, that any such investment shall mature not later than the Business Day prior to the Distribution Date following the date on which such funds were received, unless any Permitted Investment held in the Series 2003-1 Distribution Account is held with the Paying Agent, then such investment may mature on such Distribution Date and such funds shall be available for withdrawal on or prior to such Distribution Date. All such Permitted Investments will be credited to the Series 2003-1 Distribution Account and any such Permitted Investments that constitute (i) physical property (and that is not either a United States security entitlement or a security entitlement) shall be physically delivered to the Trustee; (ii) United States security entitlements or security entitlements shall be controlled (as defined in Section 8-106 of the New York UCC) by the Trustee pending maturity or disposition, and (iii) uncertificated securities (and not United States security entitlements) shall be delivered to the Trustee by causing the Trustee to become the registered holder of such securities. (c) EARNINGS FROM SERIES 2003-1 DISTRIBUTION ACCOUNT. All interest and earnings (net of losses and investment expenses) paid on funds on deposit in the Series 2003-1 Distribution Account shall be deemed to be on deposit and available for distribution. (d) SERIES 2003-1 DISTRIBUTION ACCOUNT CONSTITUTES ADDITIONAL COLLATERAL FOR SERIES 2003-1 NOTES. In order to secure and provide for the repayment and payment of the AFC-II Obligations with respect to the Series 2003-1 Notes, AFC-II hereby grants a security interest in and assigns, pledges, grants, transfers and sets over to the Series 2003-1 Agent, for the benefit of the Series 2003-1 Noteholders, all of AFC-II's right, title and interest in and to the following (whether now or hereafter existing or acquired): (i) the Series 2003-1 Distribution Account, including any security entitlement thereto; (ii) all funds on deposit therein from time to time; -36- (iii) all certificates and instruments, if any, representing or evidencing any or all of the Series 2003-1 Distribution Account or the funds on deposit therein from time to time; (iv) all investments made at any time and from time to time with monies in the Series 2003-1 Distribution Account, whether constituting securities, instruments, general intangibles, investment property, financial assets or other property; (v) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the Series 2003-1 Distribution Account, the funds on deposit therein from time to time or the investments made with such funds; and (vi) all proceeds of any and all of the foregoing, including, without limitation, cash (the items in the foregoing clauses (i) through (vi) are referred to, collectively, as the "SERIES 2003-1 DISTRIBUTION ACCOUNT COLLATERAL"). The Series 2003-1 Agent shall possess all right, title and interest in all funds on deposit from time to time in the Series 2003-1 Distribution Account and in and to all proceeds thereof, and shall be the only person authorized to originate entitlement orders in respect of the Series 2003-1 Distribution Account. The Series 2003-1 Distribution Account Collateral shall be under the sole dominion and control of the Series 2003-1 Agent for the benefit of the Series 2003-1 Noteholders. The Series 2003-1 Agent hereby agrees (i) to act as the securities intermediary (as defined in Section 8-102(a)(14) of the New York UCC) with respect to the Series 2003-1 Distribution Account; (ii) that each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Series 2003-1 Distribution Account shall be treated as a financial asset (as defined in Section 8-102(a)(9) of the New York UCC) and (iii) to comply with any entitlement order (as defined in Section 8-102(a)(8) of the New York UCC) issued by the Trustee. Section 3.10. SERIES 2003-1 DEMAND NOTES CONSTITUTE ADDITIONAL COLLATERAL FOR SERIES 2003-1 NOTES. In order to secure and provide for the repayment and payment of the obligations with respect to the Series 2003-1 Notes, AFC-II hereby grants a security interest in and assigns, pledges, grants, transfers and sets over to the Trustee, for the benefit of the Series 2003-1 Noteholders, all of AFC-II's right, title and interest in and to the following (whether now or hereafter existing or acquired): (i) the Series 2003-1 Demand Notes; (ii) all certificates and instruments, if any, representing or evidencing the Series 2003-1 Demand Notes; and (iii) all proceeds of any and all of the foregoing, including, without limitation, cash. On the date hereof, AFC-II shall deliver to the Trustee, for the benefit of the Series 2003-1 Noteholders, each Series 2003-1 Demand Note, endorsed in blank. The Trustee, for the benefit of the Series 2003-1 Noteholders, shall be the only Person authorized to make a demand for payments on the Series 2003-1 Demand Notes. Section 3.11. PAYMENTS TO PURCHASER. Notwithstanding anything to the contrary herein or in the Base Indenture, amounts distributable by AFC-II, the Trustee, the Paying Agent or the Administrator to the Purchaser shall be paid by wire transfer of immediately available funds no later than 3:00 p.m. (New York time) for credit to the account or accounts designated by the Purchaser. ARTICLE IV AMORTIZATION EVENTS In addition to the Amortization Events set forth in Section 9.1 of the Base Indenture, any of the following shall be an Amortization Event with respect to the Series 2003-1 -37- Notes and collectively shall constitute the Amortization Events set forth in Section 9.1(n) of the Base Indenture with respect to the Series 2003-1 Notes (without notice or other action on the part of the Trustee or any holders of the Series 2003-1 Notes): (a) a Series 2003-1 Enhancement Deficiency shall occur and continue for at least two (2) Business Days; PROVIDED, HOWEVER, that such event or condition shall not be an Amortization Event if during such two (2) Business Day period such Series 2003-1 Enhancement Deficiency shall have been cured in accordance with the terms and conditions of the Indenture and the Related Documents; (b) either the Series 2003-1 Liquidity Amount shall be less than the Series 2003-1 Required Liquidity Amount or the Series 2003-1 Available Reserve Account Amount shall be less than the Series 2003-1 Required Reserve Account Amount for at least two (2) Business Days; PROVIDED, HOWEVER, that such event or condition shall not be an Amortization Event if during such two (2) Business Day period such insufficiency shall have been cured in accordance with the terms and conditions of the Indenture and the Related Documents; (c) an AESOP I Operating Lease Vehicle Deficiency shall occur and continue for at least two (2) Business Days; (d) the Collection Account, the Series 2003-1 Collection Account, the Series 2003-1 Excess Collection Account or the Series 2003-1 Reserve Account shall be subject to an injunction, estoppel or other stay or a Lien (other than Liens permitted under the Related Documents); (e) all principal of and interest on the Series 2003-1 Notes is not paid on the Series 2003-1 Expected Final Distribution Date; (f) any Series 2003-1 Letter of Credit shall not be in full force and effect for at least two (2) Business Days and (x) either a Series 2003-1 Enhancement Deficiency would result from excluding such Series 2003-1 Letter of Credit from the Series 2003-1 Enhancement Amount or (y) the Series 2003-1 Liquidity Amount, excluding therefrom the available amount under such Series 2003-1 Letter of Credit, would be less than the Series 2003-1 Required Liquidity Amount; (g) from and after the funding of the Series 2003-1 Cash Collateral Account, the Series 2003-1 Cash Collateral Account shall be subject to an injunction, estoppel or other stay or a Lien (other than Liens permitted under the Related Documents) for at least two (2) Business Days and either (x) a Series 2003-1 Enhancement Deficiency would result from excluding the Series 2003-1 Available Cash Collateral Account Amount from the Series 2003-1 Enhancement Amount or (y) the Series 2003-1 Liquidity Amount, excluding therefrom the Series 2003-1 Available Cash Collateral Amount, would be less than the Series 2003-1 Required Liquidity Amount; (h) an Event of Bankruptcy shall have occurred with respect to any Series 2003-1 Letter of Credit Provider or any Series 2003-1 Letter of Credit Provider repudiates its Series 2003-1 Letter of Credit or refuses to honor a proper draw thereon and -38- either (x) a Series 2003-1 Enhancement Deficiency would result from excluding such Series 2003-1 Letter of Credit from the Series 2003-1 Enhancement Amount or (y) the Series 2003-1 Liquidity Amount, excluding therefrom the available amount under such Series 2003-1 Letter of Credit, would be less than the Series 2003-1 Required Liquidity Amount; (i) the occurrence of an Event of Bankruptcy with respect to any Permitted Sublessee; and (j) a Change in Control shall have occurred. In the case of an event described above, an Amortization Event with respect to the Series 2003-1 Notes shall have occurred without any notice or other action on the part of the Trustee or any Series 2003-1 Noteholders, immediately upon the occurrence of such event. Amortization Events with respect to the Series 2003-1 Notes described above may be waived with the written consent of the Series 2003-1 Noteholders. ARTICLE V CONDITIONS PRECEDENT Section 5.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SUPPLEMENT. This Supplement shall become effective on the date (the "EFFECTIVE DATE") on which the following conditions precedent have been satisfied or waived: (a) DOCUMENTS. The Purchaser shall have received a copy, each executed and delivered in form and substance satisfactory to it of (i) the Base Indenture, executed by a duly authorized officer of each of AFC-II and the Trustee, (ii) this Supplement, executed by a duly authorized officer of each of AFC-II, the Administrator, the Trustee and the Purchaser, (iii) each Lease, executed by a duly authorized officer of each of AGH, ARAC, as Lessee and Administrator and the Lessor party thereto, (iv) each Loan Agreement, executed by a duly authorized officer of each of AFC-II, the Lessor party thereto and the Permitted Nominees party thereto, (v) each Vehicle Title and Lienholder Nominee Agreement, executed by the duly authorized officer of each of the Permitted Nominee party thereto, ARAC, AGH, the Lessor party thereto and the Trustee and (vi) the Administration Agreement, executed by a duly authorized officer of each of AFC-II and the Administrator. (b) CORPORATE DOCUMENTS; PROCEEDINGS OF AFC-II, THE ADMINISTRATOR, AESOP LEASING, AESOP LEASING II, ORIGINAL AESOP, ARAC AND AGH. The Purchaser shall have received from AFC-II, AESOP Leasing, AESOP Leasing II, Original AESOP, Cherokee, ARAC and AGH true and complete copies of: (i) to the extent applicable, the certificate of incorporation or certificate of formation, including all amendments thereto, of such Person, certified as of a recent date by the Secretary of State or other appropriate authority of the state of incorporation or organization, as the case may be, and a certificate of compliance, of status or of good standing, as and to the extent applicable, of -39- each such Person as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction; (ii) a certificate of the Secretary or an Assistant Secretary of such Person, dated on or prior to the Effective Date and certifying (A) that attached thereto is a true and complete copy of the bylaws, limited liability company agreement or partnership agreement of such Person, as the case may be, as in effect on the Series 2003-1 Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to the Purchaser, of the Board of Directors or Managers of such Person or committees thereof authorizing the execution, delivery and performance of this Supplement and the Related Documents to which it is a party and the transactions contemplated thereby, and that such resolutions have not been amended, modified, revoked or rescinded and are in full force and effect, (C) that the certificate of incorporation or certificate of formation of such Person has not been amended since the date of the last amendment thereto shown on the certificate of good standing (or its equivalent) furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer or authorized signatory executing this Supplement and the Related Documents or any other document delivered in connection herewith or therewith on behalf of such Person; and (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above. (c) REPRESENTATIONS AND WARRANTIES. All representations and warranties of each of AFC-II, the Administrator, AESOP Leasing, AESOP Leasing II, Original AESOP, each of the Permitted Nominees, Cherokee, ARAC and AGH contained in each of the Related Documents shall be true and correct as of the Series 2003-1 Closing Date. (d) NO AMORTIZATION EVENT, POTENTIAL AMORTIZATION EVENT OR AESOP I OPERATING LEASE VEHICLE DEFICIENCY. No Amortization Event or Potential Amortization Event in respect of the Series 2003-1 Notes or any other Series of Notes shall exist and no AESOP I Operating Lease Vehicle Deficiency shall exist. (e) LIEN SEARCHES. The Purchaser shall have received a written search report listing all effective financing statements that name each of AFC-II, AESOP Leasing, AESOP Leasing II, Original AESOP the Permitted Nominees or ARAC as debtor or assignor and that are filed in the State of New York, the State of Delaware and in any other jurisdictions that the Purchaser determines are necessary or appropriate, together with copies of such financing statements, and tax and judgment lien searches showing no such liens that are not permitted by the Base Indenture, this Supplement or the Related Documents. -40- (f) LEGAL OPINIONS. The Purchaser shall have received, with a counterpart addressed to the Trustee, opinions of counsel required by Section 2.2(f) of the Base Indenture and opinions of counsel with respect to such other matters as may be reasonably requested by the Purchaser, in form and substance reasonably acceptable to the addressees thereof. (g) FEES AND EXPENSES. The Purchaser shall have received payment of all fees, out-of-pocket expenses and other amounts due and payable to the Purchaser on or before the Effective Date. (h) ESTABLISHMENT OF ACCOUNTS. The Purchaser shall have received evidence reasonably satisfactory to it that the Series 2003-1 Collection Account, the Series 2003-1 Reserve Account and the Series 2003-1 Distribution Account shall have been established in accordance with the terms and provisions of the Indenture. (i) OPINION. The Purchaser shall have received an opinion of counsel to the Trustee as to the due authorization, execution and delivery by the Trustee of this Supplement and the due execution, authentication and delivery by the Trustee of the Series 2003-1 Notes. (j) PROCEEDINGS. All corporate and other proceedings and all other documents and legal matters in connection with the transactions contemplated by the Related Documents shall be satisfactory in form and substance to the Purchaser and its counsel. ARTICLE VI REPRESENTATIONS AND WARRANTIES, COVENANTS Section 6.1. REPRESENTATIONS AND WARRANTIES OF AFC-II AND THE ADMINISTRATOR. (a) AFC-II and the Administrator each hereby represents and warrants to the Trustee and the Purchaser that: (i) each and every of their respective representations and warranties contained in the Related Documents is true and correct as of the Series 2003-1 Closing Date and true and correct in all material respects as of the Series 2003-1 Initial Funding Date and as of the date of each Increase; and (ii) as of the Series 2003-1 Closing Date, they have not engaged, in connection with the offering of the Series 2003-1 Notes, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (b) AFC-II hereby represents and warrants to the Trustee and the Purchaser that each of the Series 2003-1 Notes has been duly authorized and executed by AFC-II and when duly authenticated by the Trustee and delivered to the Purchaser in accordance with the terms of this Supplement will constitute legal, valid and binding obligations of AFC-II enforceable in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, -41- insolvency, or other similar laws relating to or affecting generally the enforcement of creditors' rights or by general equitable principles. Section 6.2. COVENANTS OF AFC-II AND THE ADMINISTRATOR. AFC-II and the Administrator hereby agree, in addition to their obligations hereunder, that: (a) they shall observe in all material respects each and every of their respective covenants (both affirmative and negative) contained in the Base Indenture and all other Related Documents to which each is a party; (b) they shall afford the Purchaser and the Trustee or any representatives of the Purchaser or the Trustee access to all records relating to the Leases, the Vehicles, the Manufacturer Programs and the Loan Agreements at any reasonable time during regular business hours, upon reasonable prior notice (and with one Business Day's prior notice if an Amortization Event with respect to the Series 2003-1 Notes shall have been deemed to have occurred or shall have been declared to have occurred), for purposes of inspection and shall permit the Purchaser, the Trustee or any representative of the Purchaser or the Trustee to visit any of AFC-II's or the Administrator's, as the case may be, offices or properties during regular business hours and as often as may reasonably be desired to discuss the business, operations, properties, financial and other conditions of AFC-II or the Administrator with their respective officers and employees and with their independent certified public accountants; (c) they shall promptly provide such additional financial and other information with respect to the Related Documents, AFC-II, the Lessors, the Permitted Nominees, the Lessees, the Guarantor, the Related Documents or the Manufacturer Programs as the Purchaser may from time to time reasonably request; and (d) they shall provide to the Purchaser simultaneously with delivery to the Trustee copies of information furnished to the Trustee or AFC-II pursuant to the Related Documents as such information relates to all Series of Notes generally or specifically to the Series 2003-1 Notes or the Series 2003-1 Collateral; ARTICLE VII GENERAL Section 7.1. SUCCESSORS AND ASSIGNS (a). (b) This Supplement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that AFC-II and the Purchaser may not assign or transfer any of its rights under this Supplement without the prior written consent of the other party. Section 7.2. SECURITIES LAW. The Purchaser hereby represents and warrants to AFC-II that it is an "accredited investor" as such term is defined in Rule 501(a) of Regulation D under the Securities Act and has sufficient assets to bear the economic risk of, and sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of, its investment in a Series 2003-1 Note. The Purchaser agrees that its Series 2003-1 Note will be acquired for investment only and not with a view to any public distribution thereof, and that the -42- Purchaser will not offer to sell or otherwise dispose of its Series 2003-1 Note (or any interest therein) in violation of any of the registration requirements of the Securities Act, or any applicable state or other securities laws. The Purchaser acknowledges that it has no right to require AFC-II to register its Series 2003-1 Note under the Securities Act or any other securities law. The Purchaser hereby confirms and agrees that in connection with any transfer by it of an interest in the Series 2003-1 Note, the Purchaser has not engaged and will not engage in a general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Section 7.3. ADJUSTMENTS; SET-OFF. In addition to any rights and remedies of the Purchaser provided by law, the Purchaser shall have the right, without prior notice to AFC-II, any such notice being expressly waived by AFC-II to the extent permitted by applicable law, upon any amount becoming due and payable by AFC-II hereunder or under the Series 2003-1 Notes to set-off and appropriate and apply against any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Purchaser to or for the credit or the account of AFC-II. The Purchaser agrees promptly to notify AFC-II and the Administrator after any such set-off and application made by the Purchaser; PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. Section 7.4. NO BANKRUPTCY PETITION. (a) The Purchaser hereby covenants and agrees that, prior to the date which is one year and one day after the later of payment in full of all Series of Notes, it will not institute against, or join any other Person in instituting against, AFC-II any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other similar proceedings under any federal or state bankruptcy or similar law. (b) This covenant shall survive the termination of this Supplement and the Base Indenture and the payment of all amounts payable hereunder and thereunder. Section 7.5. LIMITED RECOURSE. No recourse under any obligation, covenant or agreement of the Purchaser contained herein shall be had against any incorporator, stockholder, officer, director, employee or agent of the Purchaser or any of its Affiliates by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Supplement is solely a corporate obligation of the Purchaser individually, and that no personal liability whatever shall attach to or be incurred by any incorporator, stockholder, officer, director, employee or agent of the Purchaser or any of its Affiliates (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of the Purchaser contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by the Purchaser of any of such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of this Supplement; PROVIDED that the foregoing shall not relieve any such Person from any liability it might -43- otherwise have as a result of fraudulent actions taken or omissions made by them. The provisions of this Section 7.5 shall survive termination of this Supplement. Section 7.6. COSTS AND EXPENSES. AFC-II agrees to pay on demand (x) all reasonable out-of-pocket costs and expenses of the Purchaser (including, without limitation, reasonable fees and disbursements of counsel to the Purchaser) in connection with (i) the preparation, execution and delivery of this Supplement and the other Related Documents and any amendments or waivers of, or consents under, any such documents and (ii) the enforcement by the Purchaser of the obligations and liabilities of AFC-II, the Lessors, the Lessees, the Guarantor and the Administrator under the Indenture, this Supplement, the other Related Documents or any related document and all costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement and the other Related Documents and (y) all reasonable out of pocket costs and expenses of the Purchaser (including, without limitation, reasonable fees and disbursements of counsel to the Purchaser) in connection with the administration of this Supplement and the other Related Documents. Any payments made by AFC-II pursuant to this Section 7.6 shall be made solely from funds available in the Series 2003-1 Distribution Account, shall be non-recourse other than with respect to such funds, and shall not constitute a claim against AFC-II to the extent that insufficient funds exist to make such payment. The agreements in this Section shall survive the termination of this Supplement and the Base Indenture and the payment of all amounts payable hereunder and thereunder. Section 7.7. EXHIBITS. The following exhibits attached hereto supplement the exhibits included in the Indenture. EXHIBIT A: Form of Variable Funding Note EXHIBIT B: Form of Increase Notice EXHIBIT C: Form of Series 2003-1 Demand Note EXHIBIT D: Form of Series 2003-1 Letter of Credit EXHIBIT E: Form of Lease Payment Deficit Notice EXHIBIT F: Form of Demand Notice Section 7.8. RATIFICATION OF BASE INDENTURE. As supplemented by this Supplement, the Base Indenture is in all respects ratified and confirmed and the Base Indenture as so supplemented by this Supplement shall be read, taken, and construed as one and the same instrument. Section 7.9. COUNTERPARTS. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. Section 7.10. GOVERNING LAW. This Supplement shall be construed in accordance with the law of the State of New York, and the obligations, rights and remedies of the parties hereto shall be determined in accordance with such law. Section 7.11. AMENDMENTS. This Supplement may be modified or amended from time to time in accordance with the terms of the Base Indenture. -44- Section 7.12. DISCHARGE OF INDENTURE. Notwithstanding anything to the contrary contained in the Base Indenture, no discharge of the Indenture pursuant to Section 11.1(b) of the Base Indenture will be effective as to the Series 2003-1 Notes without the consent of the Series 2003-1 Noteholder. Section 7.13. CAPITALIZATION OF AFC-II. AFC-II agrees that on the Series 2003-1 Closing Date and on the date of any increase in the Series 2003-1 Maximum Invested Amount it will have capitalization in an amount equal to or greater than 3% of the sum of (x) the Series 2003-1 Maximum Invested Amount and (y) the invested amount of the Series 1998-1 Notes, Series 2000-1 Notes, Series 2000-2 Notes, Series 2000-3 Notes, the Series 2000-4 Notes, the Series 2001-1 Notes, the Series 2001-2 Notes, the Series 2002-1 Notes, the Series 2002-2 Notes, the Series 2002-3 Notes and the Series 2002-4 Notes. Section 7.14. SERIES 2003-1 DEMAND NOTES. Other than pursuant to a demand thereon pursuant to Section 3.5 of this Supplement, AFC-II shall not reduce the amount of the Series 2003-1 Demand Notes or forgive amounts payable thereunder so that the outstanding principal amount of the Series 2003-1 Demand Notes after such reduction or forgiveness is less than the Series 2003-1 Letter of Credit Liquidity Amount. AFC-II shall not agree to any amendment of the Series 2003-1 Demand Notes without first satisfying the Rating Agency Confirmation Condition and the Rating Agency Consent Condition. Section 7.15. TERMINATION OF SUPPLEMENT. This Supplement shall cease to be of further effect when all outstanding Series 2003-1 Notes theretofore authenticated and issued have been delivered (other than destroyed, lost, or stolen Series 2003-1 Notes which have been replaced or paid) to the Trustee for cancellation and AFC-II has paid all sums payable hereunder and, if the Series 2003-1 Demand Note Payment Amount on the Series 2003-1 Letter of Credit Termination Date was greater than zero, the Series 2003-1 Cash Collateral Account Surplus shall equal zero and all amounts have been withdrawn from the Series 2003-1 Cash Collateral Account in accordance with Section 3.8(h) of this Supplement. Section 7.16. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Trustee or the Purchaser, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. Section 7.17. WAIVER OF SETOFF. Notwithstanding any other provision of this Supplement or any other agreement to the contrary, all payments to the Purchaser hereunder shall be made without set-off or counterclaim. Section 7.18. NOTICES. All notices, requests, instructions and demands to or upon any party hereto to be effective shall be given (i) in the case of AFC-II, the Administrator and the Trustee in the manner set forth in Section 13.1 of the Base Indenture and addressed as follows: If to AFC-II: -45- AESOP Funding II L.L.C. c/o Lord Securities Corporation 48 Wall Street, 27th Floor New York, New York 10005 Attn: Dean A Christiansen Phone: (212) 346-9000 Fax: (212) 346-9012 If to the Administrator: Avis Rent A Car System, Inc. 6 Sylvan Way Parsippany, New Jersey 07054 Attn: Treasurer Phone: (973) 496-5176 Fax: (973) 496-3950 If to the Trustee: The Bank of New York c/o BNY Midwest Trust Company 2 North LaSalle Street, Suite 1020 Chicago, Illinois 60602 Attn: Corporate Trust/Structured Finance Phone: (312) 827-8569 Fax: (312) 827-8562 and (ii) in the case of the Purchaser, in writing, and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand or three days after being deposited in the mail, postage prepaid, in the case of facsimile notice, when received, or in the case of overnight air courier, one Business Day after the date such notice is delivered to such overnight courier, addressed as follows: Cendant Corporation 1 Campus Drive Parsippany, New Jersey 07054 Attn: Treasurer Phone: (973) 496-7312 Fax: (973) 496-5852 -46- IN WITNESS WHEREOF, each of the parties hereto have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AESOP FUNDING II L.L.C., as Issuer By: /s/ Lori Gebron ------------------------------------- Name: Lori Gebron Title: Vice President AVIS RENT A CAR SYSTEM, INC., as Administrator By: /s/ Gerard J. Kennell ------------------------------------- Name: Gerard J. Kennell Title: Vice President and Assistant Treasurer CENDANT CORPORATION, as Purchaser By: /s/ Duncan H. Cocroft ------------------------------------- Name: Duncan H. Cocroft Title: Executive Vice President and Treasurer THE BANK OF NEW YORK (as successor in interest to the corporate trust administration of Harris Trust and Savings Bank), as Trustee By: /s/ Eric A. Lindahl ------------------------------------- Name: Eric A. Lindahl Title: Agent THE BANK OF NEW YORK, as Series 2003-1 Agent By: /s/ Eric A. Lindahl ------------------------------------- Name: Eric A. Lindahl Title: Agent EX-12 5 a2110474zex-12.htm EXHIBIT 12
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Exhibit 12

Avis Group Holdings, Inc. and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)

	Three Months Ended March 31, 2003			Three Months Ended March 31, 2002
Earnings available to cover fixed charges:
Loss before income taxes	$	(8,906	)	$	(4,153	)
Plus: Fixed charges		63,791			72,062
Less: Capitalization of interest		—			(3	)

Earnings available to cover fixed charges	$	54,885		$	67,906

Fixed charges(a):
Interest, including amortization of deferred financing costs		53,079			62,106
Interest portion of rental payment		10,712			9,956

Total fixed charges	$	63,791		$	72,062

Ratio of earnings to fixed charges(b):		0.86	x		0.94	x

(a): Consists of interest expense on all indebtedness (including amortization of deferred financing costs) and the portion of operating lease rental expense that is representative of the interest factor.
(b): Total fixed charges exceed earnings available to cover fixed charges by $8.9 million and $4.2 million for the three months ended March 31, 2003 and 2002, respectively.

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Avis Group Holdings, Inc. and Subsidiaries COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in thousands)
EX-99 6 a2110474zex-99.htm EXHIBIT 99
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Exhibit 99

CERTIFICATION OF CEO AND CFO PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Avis Group Holdings, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), F. Robert Salerno, as President and Chief Operating Officer of the Company, and Kurt Freudenberg, as Senior Vice President and Controller of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1): The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2): The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ F. ROBERT SALERNO F. Robert Salerno President and Chief Operating Officer May 14, 2003
/s/ KURT FREUDENBERG Kurt Freudenberg Senior Vice President and Controller May 14, 2003

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
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