Netjets - Financial Guide

How to Pay for Your NetJets Share ®

Learn about which financing option best suits your needs

For more information, call 877-NETJETS(638-5387) or visit us online at www.netjets.com NetJets Inc. is a Berkshire Hathaway company

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INTRODUCTION Once you have made the decision to acquire a fractional share and have determined your aircraft type and share size, your next decision may be how to pay for it. You may be surprised to learn that there are many options available to you. Although many companies and individuals purchase their shares outright, more and more Owners choose to lease or finance their fractional aircraft share. In fact, over half the corporate jets sold in the United States are leased or financed and this is expected to continue to grow. NetJets – the pioneer and worldwide leader in fractional aircraft ownership – created this guide to educate NetJets share Owners and prospective Owners on the many different types of financing options available. It provides a comprehensive review of the wide range of leasing and financing options, and it explains how each of these can provide you with financial flexibility. Of course, we always recommend that you discuss this information with your financial advisor or accountant.

NetJets can help you customize a financial solution to make acquiring your fractional share an easy and simple process. We work directly with our financing partner, CIT, to offer a wide range of competitive, easy-to-use lease and loan options that can provide you with the financial flexibility to meet your specific needs. ©Copyright 2006 NetJets Inc. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher.

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WHICH FINANCING OPTION WORKS BEST FOR YOU—LEASING OR FINANCING? Each individual or company has their own set of financial objectives. Some companies or individuals may choose to lease their share to avoid tapping into their cash reserves while others may choose to finance their share. To gain a better understanding of which financing option may best suit your specific financial needs, ask yourself and/or your financial advisor the following basic questions:

DIFFERENT TYPES OF LEASES

How do you plan to use your aircraft? If you plan to use your aircraft for business purposes, you may be able to take advantage of certain tax benefits, best maximized with an outright purchase or loan financing. If you will be using the aircraft primarily for personal use, a lease may be a compelling alternative, whereby the Lessor will pass on the depreciation to you in your lease payment.

FINANCIAL SITUATION

SOLUTION

ADVANTAGES

Do you have a balance sheet consideration?

Operating Lease

What is your financial status? Before you choose a lease or loan program to meet your financial needs, you need to evaluate your financial status. To do this, you need to know whether or not: • your cash flow is cyclical or predictable. • you have the ability to take full advantage of depreciation for tax purposes. • you have any accounting (balance sheet) or residual value considerations.

An Operating Lease transfers the aircraft detail to the footnotes in your financial statement rather than on the balance sheet. This may improve your financial ratios or help to satisfy certain bank covenants. The Lessor transfers only the right to use the share for a fraction of its useful life. Lease payments can be expensed on your income statement with no debt on your balance sheet, which may also help preserve existing lines of credit. You are not considered the owner of the aircraft for either book or tax purposes but retain all of the rights under the NetJets Program as it relates to the service.

Would you prefer no responsibility for the future value of the aircraft share?

Operating Lease

An Operating Lease enables you to simply walk away from the lease with no further obligations to the Lessor at the end of the term, regardless of what the aircraft share is worth.

The next two sections will provide you with an overview on leasing and financing. After reading the following information, you should have a better understanding of the different options available for paying for your share.

Are you able to use the tax benefits of depreciation?

Tax Lease

A Tax Lease will meet IRS guidelines and allow the Lessor to depreciate the share, and will pass on the benefits in a lower monthly lease payment.

LEASING Leasing allows a company or individual to secure the benefits of a fractional share without a large cash outlay. By leasing, you pay only for the use of the aircraft, retaining working capital for other uses. Leasing your fractional share can often be less expensive than buying or financing when you consider the effect of taxes and the value of money over time. Your specific situation and time frame will determine whether leasing makes sense for you. Leasing may be a good option if you:

Can you use the tax benefits, but also prefer an off balance sheet product?

Hybrid or Synthetic Lease

The Hybrid or Synthetic Lease is treated as a lease for accounting purposes under FASB guidelines and therefore remains off-balance sheet. For tax purposes, this is treated as a loan, not a lease, and entitles the lessee to be the Owner of the share for tax purposes, and entitles you to the tax benefits of ownership. For some companies, a Synthetic Lease is the best of both worlds, from a tax and accounting perspective

• are unable to take advantage of accelerated tax depreciation. Under a lease scenario, the Lessor (and Title owner of the share) takes the depreciation credit, and can pass it on to you in lower monthly payments.

Is your business subjected to seasonal cash flow fluctuations?

Step Down or Step Up Lease

A Step Down Lease allows for specified decreases in payments at certain dates in the future, while Step Up Leases allow for specified increases.

If you already own your share, but want to turn it into a lease to benefit from any of the scenarios outlined above, then a Sale and Leaseback may be right for you.

Sale and Leaseback

A Sale and Leaseback enables the Lessor to buy the share from you for its current value, then lease it back to you for the balance of the existing Management Agreement term, or possibly over an extended term. A Sale and Leaseback will transfer title from you to Lessor.

The chart below provides an overview of different financial situations, the leasing solution, and accounting advantages. We recommend you have a tax advisor or your accountant review your particular situation.

Do you want to preserve a line of credit to acquire a share? If restrictive bank covenants require your company to maintain certain financial ratios or if you prefer to preserve your credit lines for other purposes, leasing may be your best option.

• prefer not to be subject to residual value risk. At the end of your contract, the Lessor, as owner, will bear the full asset risk or differential on the aircraft. • have certain restrictive bank covenants that prohibit the assumption of additional debt or require you to maintain certain balances. With leasing, you acquire no new debt and you can maintain your cash balances for other uses. The obligation will not appear on your balance sheet but will instead be listed in the footnotes. Historically, leasing has been the overwhelming preference for publicly traded companies or for private companies with such bank covenants.

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LOAN FINANCING If you plan to keep your aircraft for a long time, financing your aircraft share purchase may be the right solution. Loan financing is also a good option if you have no balance sheet considerations and a strong cash position. When you finance your aircraft share, your financing source will perform credit due diligence, and you will have to decide the parameters of the loan that will work best for your specific situation. There are many benefits to financing your aircraft share. Financing allows your equity to increase with each payment and frees up cash for working capital versus an outright purchase. Payment terms can be matched to your financial needs and goals. Loans can be used to acquire new shares or to refinance existing shares. In addition, refinancing enables you to use the equity built up in your aircraft assets to consolidate other existing aircraft loans you may have into one monthly payment. Your cash balances may improve and your financing costs may be lowered. You will have to decide how much to borrow and whether to select a fixed or floating interest rate. Your ultimate decision will most likely depend on the rates available to you at that time. You will also have to consider how long you want your loan to amortize. Through amortization, you will be repaying your loan in equal installments with some of the payment going toward interest due for the period and the rest going toward reduction of your principal, or loan balance. As the loan balance goes down, more of each payment goes toward reducing the principal until it is 100% fully amortized and you own the share outright at the end of the loan payment schedule. Or if you renew your Management Agreement, any loan balances or balloons can be refinanced over the extended period.

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DIFFERENT TYPES OF LOANS Loan candidates often ask how rate structures work. It is difficult to answer this question because so many factors are involved in setting interest rates. The size of your transaction, length of term, and whether you select a fixed or floating rate all come into play. Another common question is how much of a down payment is required. The answer depends on the individual’s or company’s credit rating and the value of the aircraft being considered for purchase. Within these basic guidelines, a loan can be structured to accommodate a variety of your financial and business needs. The chart below explains the different types of financing available.

TYPE OF LOAN

HOW IT WORKS

Conventional Financing

You can finance any amount up to and including 100% of the share cost, amortizing to a balloon payment comparable to the aircraft’s value at the end of the term.

Interest-only Financing

Loans with limited cash down can be arranged, where your payments consist only of the amount of interest accrued. Subject to credit review, these loans usually require 20-35% cash down. Sometimes, 70% or more of the share cost may be financed on an interest-only basis, again subject to credit approval, and up to 100% financing on an interest-only basis may be available to those with exceptionally low credit risk.

Variable Payments

Loan financing, like leasing, can also accommodate seasonal cash flow fluctuations with step down or step up payments to meet your company’s business needs. Variable payment periods (monthly, quarterly, etc.), deferred payment, no down payment, or fixed monthly payments options can be incorporated as part of any loan structure.

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FINANCIAL COMPARISON OF LEASE AND LOAN OPTIONS Below is a general comparison of sample costs between some of the more commonly used financial products. Actual proposals will be customized to suit your unique needs and objectives to address individual tax, accounting, cash flow and credit profiles. The following assumptions apply to a hypothetical share at $500,000 for an outright purchase. The aircraft is assumed to be newly delivered by the manufacturer and assumes a standard five year term. Note: With NetJets, you are free to sell back your share without penalty at any time after two or three years depending on the aircraft type.

Residual values of NetJets shares have historically been very strong in comparison to the general aviation marketplace and to other fractional

Initial outlay Monthly cost

Outright Purchase – The benefit of ownership is that you have no debt associated with the asset. However there are opportunity costs and your capital may be put to better use since there are other means available to pay for your share.

$500,000

Typical Operating Lease –The benefits of leasing include: low monthly payments, potential tax benefits, “off-balance sheet” financing, and you do not bear any residual risk at end of term, thereby hedging any downturn in the market.

$0

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End of term options

$500,000

You own the share and can either sell it back to NetJets or renew your share over a new extended period at the end of 5 years.

programs. Because NetJets buys the most desirable aircraft and maintains them well, they’ve historically held a significant

Conventional Financing Loan – The $0 benefits of conventional financing are that you may finance up to 100% of the share cost and the value of the share drives the amortization. The asset would appear on your balance sheet as an asset and liability. If the share is used for business purposes, then the asset can be depreciated on an accelerated basis. Fully Amortizing Loan $0

Interest Only Loan

N/A

Total payments

25-35% down

$4,950 per month (fixed payment subject to standard indexing)

$297,000

$5,313.40 amortizing to 66% balloon in month 60.

$643,490

You can sell the share back to NetJets and use the proceeds to pay off the loan, or you can renew the Management Agreement with NetJets and refinance the balloon ($330,000) with the lender.

$9,783

$586,980

You own the share and will have no balloon payment due at maturity, so you have full equity in the share value – you can sell the share to NetJets or you can renew your Management Agreement.

$2,021

$619,240 (includes 25% down and the principal balance due at maturity)

You own the share but have the full principal balance due and payable at maturity – you can sell the share back to NetJets or renew the Management Agreement, in which case, the principal balance can be refinanced under the new term.

You can purchase the share for its then Fair Market Value from CIT, you can walk away having made your lease payments, or you can renew the lease subject to a renewal of the Management Agreement with NetJets.

portion of their value.

Another alternative to fly with NetJets An alternative for flyers who have flying needs less than 50 hours per year and/or are not sure of their long term requirements, is the Marquis Jet Card. With the Marquis Jet Card, you can have access to the NetJets fleet in 25-hour increments for a one-time prepaid lease. Each Marquis Jet Card represents a sublease of a NetJets fractional share for which Marquis Jet Partners is the Owner. All Marquis Jet Card flights are operated by NetJets under its FAR Part 135 Air Carrier Certificate. By purchasing a Marquis Jet Card, you have no responsibility for the aircraft value at the end of the term and no long term commitment, but will pay more per hour of flight time. CONSULT YOUR ACCOUNTANT OR FINANCIAL ADVISOR Once you have had a chance to review this guide, we recommend you share the information with your accountant or financial advisor who can give you more specific information about the various options and help you determine the one that best maximizes your resources and uses of capital. No one structure is best for all individuals or all companies, and NetJets does not advocate one over another. Only you and your financial advisor can decide what is right for you. In short, an outright purchase is not your only option to fly with NetJets. We would be more than happy to help you customize a financial solution that works for you. NetJets has always been about choice. We offer the most aircraft choices, the ability to exchange between aircraft types, and programs in the U.S., Europe and the Middle East. Similiarly, you can choose the financial terms that are right for you.

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THE NETJETS-CIT PARTNERSHIP This guide was written in cooperation with CIT, NetJets' financing partner. CIT is a national leader in the highly specialized fractional aircraft leasing and financing marketplace with more experience arranging fractional aircraft financing than any other company. They can assist you in creating a lease structure or financing solution that will enable you to make payments that are in line with your unique business or personal situation. ABOUT NETJETS NetJets Inc. (formerly Executive Jet, Inc.) was founded in 1964 as the first private business jet charter and aircraft management company in the world. The NetJets program was created in 1986 by Richard Santulli, the Chairman and CEO of NetJets Inc., as the world’s first fractional aircraft ownership program. In 1998, after being a satisfied NetJets customer for three years, Warren Buffett, Chairman and CEO of the Berkshire Hathaway company, acquired NetJets Inc. NetJets is the pioneer and worldwide leader in fractional aircraft ownership programs. The NetJets fleet is the largest and most diversified. It includes 14 of the most popular business jets. NetJets is the only worldwide fractional ownership program and is available in the U.S., Europe, and the Middle East. NetJets has the most experience of any fractional program provider. Last year, NetJets flew over 300,000 flights to more than 140 countries for its Owners. ABOUT CIT CIT had closed nearly $700 million in NetJets share transactions by 2004, with over 400 of our Owners taking advantage of their products and services to date. CIT (NYSE: CIT) is a member of both the Fortune 500 and the S&P 500, with origins dating back to 1908. Today, the company manages $60 billion in assets, and has a market capitalization exceeding $9 billion. CIT has over 6,000 employees and has offices throughout North America and Europe. NetJets Owners are free to work with any financing sources they wish. However, since 1995, CIT has handled more than 90% of NetJets financing transactions, principally because they offer the widest range of easy to use products with the fewest limitations, delivered with the world class service NetJets clients expect and require. Because of CIT’s level of expertise in fractional aircraft lending with NetJets, they have the ability to lend you up to 100% of the share cost. As with any financing arrangement, CIT considers your credit worthiness and will perform a simple and standard credit due diligence and review before issuing you a timely credit decision.

For more information, call: 1-877-NETJETS (877-638-5387) or visit www.netjets.com

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NetJets Management Ltd. and NetJets Middle East are subsidiaries or affiliates of NetJets Inc. The Gulfstream Large Cabin Fleet is operated by NetJets International. The BBJ is operated by NetJets Large Aircraft Company. All other aircraft offered by NetJets in the United States are operated by NetJets Aviation. Each of these operating companies is a wholly owned subsidiary of NetJets Inc. All aircraft offered by NetJets in Europe are operated by NetJets Transportes Aéreos, SA, an E.U. air carrier. The Marquis Jet Card Program is operated by NetJets under its FAR Part 135 Air Carrier Certificate. While the representations contained in this guide are accurate, the actual terms and conditions are subject to the definitive agreements with individual NetJets Owners. NetJets is a registered trademark of NetJets Inc.