Document:

exv10w2

 

Exhibit 10.2

FORM
OF AIRCRAFT LEASE AGREEMENT (SN [See Schedule I])

dated as of December _______, 2005
(“Agreement”)

This Agreement (together with all supplements, annexes, exhibits and schedules hereto hereinafter
referred to as the “Lease”) is between CFS Air, LLC, with an office at 44 Old Ridgebury Road,
Danbury, CT 06810 (together with its successors and assigns, if
any “Lessor”) and Air Logistics,
L.L.C., a limited liability company organized and existing under the laws of the State of Louisiana
with its mailing address and chief place of business at 4605 Industrial Drive, New Iberia, LA 70560
(hereinafter called “Lessee”).

	1.	 	LEASING:

     (a) Subject to the terms and conditions set forth below, Lessor agrees to lease to Lessee, and
Lessee agrees to lease from Lessor, the aircraft, including the airframe, engines and all
appurtenant equipment and property (together hereinafter the “Aircraft”) described in Annex A.

     (b) Lessor shall purchase the Aircraft from Lessee and lease it to Lessee if on or before the
Last Delivery Date (specified in Annex B) Lessor receives each of the following documents in form
and substance satisfactory to Lessor: (i) a copy of this Lease executed by Lessee, (ii) a Bill of
Sale from Lessee to Lessor in the form of Annex C; (iii) copies of insurance policies or, at
Lessor’s option, such other evidence of insurance which complies with the requirements of Section
10, (iv) evidence of an N number for the Aircraft; (v) evidence that the Aircraft has been duly
certified as to type and airworthiness by the Federal Aviation Administration (“FAA”); (vi)
evidence that Lessor’s designated FAA escrow agent (which may be FAA counsel) has received in
escrow the executed bill(s) of sale (which shall include, without limitation, a standard form FAA
Bill of Sale) and AC Form 8050-1 Aircraft Registration Form (except for the pink copy which shall
be available to be placed on the Aircraft upon acceptance thereof), and an executed duplicate of
this Lease all in proper form for filing with the FAA; (vii) resolution of Lessee authorizing this
Lease in the form of Annex D; (viii) a completed inspection and/or survey with respect to the
Aircraft in accordance with the requirements set forth in the Certificate of Acceptance; (ix) an
Additional Collateral Agreement executed by Lessee in a form and substance satisfactory to Lessor;
and (x) a Corporate Guaranty agreement executed by Offshore Logistics, Inc. (the “Guarantor”) in a
form and substance satisfactory to Lessor (the “Guaranty”). Lessor’s obligation to lease the
Aircraft hereunder is further conditioned upon (1) the cost to Lessor of the acquisition of the
Aircraft not exceeding the Capitalized Lessor’s Cost stated on Annex A; (2) upon delivery of the
Aircraft, Lessee’s execution and delivery to Lessor of a Certificate of Acceptance in the form of
Annex E; and (3) filing of all necessary documents with, and the acceptance thereof by, the FAA.

     (c) Lessor hereby appoints Lessee its agent for inspection and acceptance of the Aircraft from
the Supplier. Once the Certificate of Acceptance has been signed, Lessee may not cancel this Lease
other than in accordance with its express terms.

	2.	 	TERM, RENT AND PAYMENT:

     (a) The rent (“Rent”) payable for the Aircraft and Lessee’s right to use the Aircraft begins
on the date of the Certificate of Acceptance (“Commencement Date”). The term (“Term”) of this
Lease shall commence on the Commencement Date and shall continue, unless earlier terminated
pursuant to the provisions of this Lease, until and including the Expiration Date stated in Annex
B. If any Term is extended or renewed, the word “Term” shall be deemed to refer to all extended or
renewal Terms, and all provisions of this Lease shall apply during any such extension or renewal
Terms, except as may be otherwise specifically provided in writing.

     (b) Lessee shall pay rent to Lessor at its address stated above, except as otherwise directed
by Lessor. Rent payments shall be in the amount, payable at such intervals and due in accordance
with the provisions of Annex B. (Each payment of Rent is hereinafter referred to as a “Rent
Payment”). If any Interim Rent (as defined in Annex B) or Advance Rent (as defined in Annex B) is
payable, such Interim Rent and/or Advance Rent shall be set forth on Annex B and due in accordance
with the provisions of Annex B, and when received by Lessor, such Interim Rent shall be applied to
the Rent Payment due for the Interim Period as set forth on Annex B and such Advance Rent shall be
applied to the first Basic Term for Rent Payment as set forth on Annex B and any balance, if any,
shall be applied to the next scheduled Rent Payment. In no event shall any Advance Rent, Interim
Rent or any other Rent Payment be refunded to Lessee. If Lessor does not receive from Lessee
payment in full of any Rent Payment or other payment due hereunder on or prior to the due date
thereof, then Lessee shall pay to Lessor a late fee equal to 3% of the amount due but not received
within 10 days after the due date therefor, in addition to, the unpaid amount of such Rent Payment,
but not exceeding the lawful maximum, if any. Such late fee will be immediately due and payable
and is in addition to any other costs, fees and expenses Lessee may owe as a result of such late
payment.

 

 

	3.	 	RENT ADJUSTMENT:

     (a) If, solely as a result of Congressional enactment of any law (including, without
limitation, any modification of, or amendment or addition to, the Internal Revenue Code of 1986, as
amended, (“Code”)), the maximum effective corporate income tax rate (exclusive of any minimum tax
rate) for calendar-year taxpayers (“Effective Rate”) is higher than thirty-five percent (35%) for
any year during the Term of this Lease, then Lessor shall have the right to increase such rent
payments by requiring payment of a single additional sum. The additional sum shall be equal to the
product of (i) the Effective Rate (expressed as a decimal) for such year less .35 (or, in the event
that any adjustment has been made hereunder for any previous year, the Effective Rate (expressed as
a decimal) used in calculating the next previous adjustment) times (ii) the adjusted Termination
Value (defined below) divided by (iii) the difference between the new Effective Rate (expressed as
a decimal) and one (1). The adjusted Termination Value shall be the Termination Value (calculated
as of the first rental due in the year for which such adjustment is being made) minus the Tax
Benefits that would be allowable under Section 168 of the Code (as of the first day of the year for
which such adjustment is being made and all future years of the lease term). The Termination
Values are defined on Annex F and the Tax Benefits are defined on Annex B. Lessee shall pay to
Lessor the full amount of the additional rent payment on the later of (i) receipt of notice or (ii)
the first day of the year for which such adjustment is being made.

     (b) Lessee’s obligations under this Section 3 accruing prior to the expiration or termination
of this Lease shall survive any expiration or termination of this Agreement.

4. TAXES AND FEES: If permitted by law, Lessee shall report and pay promptly all taxes, fees and
assessments due, imposed, assessed or levied against the Aircraft or any part thereof or any engine
thereof (or purchase, disposition, ownership, delivery, leasing, possession, use or operation
thereof), this Agreement (or any rents or receipts hereunder), any Schedule, Lessor or Lessee, by
any domestic or foreign governmental entity or taxing authority during or related to the term of
this Agreement, including, without limitation, all license and registration fees, and all sales,
use, personal property, excise, gross receipts, franchise, stamp, value added, custom duties,
landing fees, airport charges, navigation service charges, route navigation charges or other taxes,
imposts, duties and charges, together with any penalties, fines or interest thereon (collectively
“Taxes”). Lessee shall have no liability for Taxes imposed by the United States of America or any
state or political subdivision thereof which are on or measured by the net income of Lessor except
as provided in Sections 3 and 14(c) (“Income Taxes”). Lessee shall promptly reimburse (on an after
tax basis) Lessor for any Taxes charged to or assessed against Lessor other than Income Taxes
except as provided in Sections 3 and 14(c). Lessee shall show Lessor as the owner of the Aircraft
on all tax reports or returns, and send Lessor a copy of each report or return and evidence of
Lessees payment of Taxes upon request. All of Lessor’s rights, privileges and indemnities
contained in this Section 4 shall survive the expiration or other termination of this Lease. The
rights, privileges and indemnities contained herein are expressly made for the benefit of, and
shall be enforceable by Lessor, its successors and assigns.

5. REPORTS: Lessee will provide Lessor with the following in writing within the time periods
specified: (a) notice of any tax or other lien which attaches to the Aircraft and the full
particulars of the tax or lien, within thirty (30) days after Lessee becomes aware of the tax or
lien, (b) Guarantor’s complete financial statements, certified by a recognized firm of certified
public accountants, within ninety (90) days of the close of each fiscal year of Guarantor, and any
further financial information or reports, upon reasonable request (it being understood that so long
as Guarantor continues to report its financial statements in SEC form 10-K, and such 10-K remains
publicly available, Guarantor shall have no further obligation to deliver annual financial
statements); (c) notice to Lessor of the Aircraft’s location, and the location of all information,
logs, documents and records relating to the Aircraft and its use, maintenance and/or condition,
immediately upon reasonable request; (d) notice to Lessor of the relocation of the Aircraft’s
primary hangar location, as soon as practicable upon intent by Lessee to so relocate and in any
event at least simultaneously with any relocation; (e) notice of loss or damage to the Aircraft
which would cost more than the lesser of (i) ten percent (10%) of the original Capitalized Lessor’s
Cost or (ii) two hundred fifty thousand Dollars ($250,000.00) to repair or replace, within ten (10)
days of such loss or damage; (f) notice of any accident involving the Aircraft causing personal
injury or property damage, within the earlier of twenty (20) days of such accident or when required
to be reported to the FAA; (g) copies of the insurance policies or other evidence of insurance
required by the terms hereof, promptly upon request by Lessor; (h) copies of all information, logs,
documents and records relating to the Aircraft and its use, maintenance and/or condition, required
to be reported to the FAA or reasonably requested by Lessor; (i) such information as may be
required to enable Lessor to file any reports required by any governmental authority as a result of
Lessor’s ownership of the Aircraft, promptly upon request of Lessor; (j) copies of any
manufacturer’s maintenance service program contract for the airframe or engines, promptly upon
request by Lessor; (k) evidence of Lessee’s compliance with FAA airworthiness directives and
advisory circulars and of compliance with other maintenance provisions of Section 7 hereof and the
return provisions of Section 11, promptly upon request of Lessor; and (l) notice of any change

 

 

in Lessee’s state of incorporation or organization, within thirty (30) days of such change and (m)
such other reports or information as Lessor may reasonably request.

	6.	 	DELIVERY, REGISTRATION, USE AND OPERATION:

     (a) The Aircraft shall be delivered directly from the Supplier to Lessee unless the Aircraft
is being leased pursuant to a sale leaseback transaction in which case Lessee acknowledges that it
is in possession of the Aircraft as of the Commencement Date.

     (b) Lessee, at its own cost and expense, shall cause the Aircraft to be duly registered in the
name of Lessor under the Title 49, Subtitle VII of the United States Code, as amended (the “FAA
Act”), and shall not register the Aircraft under the laws of any other country.

     (c) The possession, use and operation of the Aircraft shall be at the sole risk and expense of
Lessee. Lessee acknowledges that it accepts full “operational control” of the Aircraft (as defined
in the Federal Aviation Regulations (“FAR”). Lessee agrees that the Aircraft will be used and
operated: (i) in compliance with any and all statutes, laws, ordinances, regulations and standards
or directives issued by any governmental agency applicable to the use or operation thereof; (ii) in
compliance with any airworthiness certificate, license or registration relating to the Aircraft
issued by any agency; (iii) in compliance with all safety and security directives of the FAA and
similar government regulations relating to aircraft security; and (iv) in a manner that does not
modify or impair any existing warranties on the Aircraft or any part thereof. Lessee will operate
the Aircraft predominantly in the conduct of its business and will not use or operate, or permit
the Aircraft to be used or operated, (aa) in violation of any United States export control law,
(bb) in a manner wherein the predominant use during any twelve month period is for a purpose other
than transportation for Lessee, its affiliates or its customers, or in a manner, for any time
period, such that Lessor or a third party shall be deemed to have “operational control” of the
Aircraft (except as otherwise expressly permitted hereunder), or (cc) for the transport of mail or
contraband. The Aircraft will, at all times be operated by duly qualified pilots holding at least
a valid pilot certificate for aircraft having the same weight as the Aircraft and instrument rating
and any other certificate, rating, type rating or endorsement appropriate to the Aircraft, purpose
of flight, condition of flight or as otherwise required by the FAR. Every pilot of the Aircraft
shall be employed and/or paid and contracted for by Lessee or its affiliates (except for any FAA
pilot who operates the Aircraft as part of an FAA inspection or to certify an airman), shall meet
all recency of flight requirements and shall meet the requirements established and specified by the
insurance policies required under this Lease and the FAA. The primary hangar location of the
Aircraft shall be as stated in Annex B (subject to Section 5(d)). Lessee shall not relocate the
primary hangar location to a hangar location outside the United States. Lessor may examine and
inspect the Aircraft, wherever located, on land and in flight, after giving Lessee reasonable prior
notice.

     (d) AT ALL TIMES DURING THE TERM OF THE LEASE, THE AIRCRAFT WILL BE LOCATED AND USED SOLELY
WITHIN THE CONTINENT OF NORTH AMERICA (INCLUDING MEXICO) AND THE CARIBBEAN (INCLUDING TRINIDAD)
WITH THE EXCEPTION OF CUBA. NOTWITHSTANDING THE FOREGOING, AT ALL TIMES DURING THE TERM OF THE
LEASE, LESSEE AGREES NOT TO OPERATE OR LOCATE THE AIRCRAFT, OR ALLOW THE AIRCRAFT TO BE OPERATED
OR LOCATED IN OR OVER (i) ANY COUNTRY OR JURISDICTION THAT DOES NOT MAINTAIN FULL DIPLOMATIC
RELATIONS WITH THE UNITED STATES, (ii) ANY AREA OF HOSTILITIES, (iii) ANY GEOGRAPHIC AREA WHICH IS
NOT COVERED BY THE INSURANCE POLICIES REQUIRED BY THIS LEASE, OR (iv) ANY JURISDICTION OR NATION
WHEREIN THE OPERATION OR LOCATION THEREOF WOULD VIOLATE ANY APPLICABLE LAW, REGULATION, OR
RESTRICTION, INCLUDING, BUT NOT LIMITED TO, THE U.S. EXPORT ADMINISTRATION REGULATIONS AND THE U.S.
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS. LESSEE ALSO AGREES TO PROHIBIT ANY NATIONAL OF SUCH
RESTRICTED NATIONS FROM OPERATING THE AIRCRAFT.

     (e) The engines set forth on Annex A shall be used only on the airframe described in Annex A
and shall only be removed for maintenance in accordance with the provisions of this Lease, except
as otherwise expressly permitted herein.

     (f) Lessor shall not disturb Lessee’s quiet enjoyment of the Aircraft during the Term of this
Lease unless an Event of Default has occurred and is continuing under this Lease. Lessor shall not
create or permit to exist any lien, encumbrance or defect of title on the Aircraft other than this
Lease or other liens in favor of Lessor.

     (g) At all times prior to the termination or expiration of this Lease in accordance with its
terms, Lessee expressly assumes sole and exclusive responsibility for the determination and
implementation of all security measures and systems necessary or appropriate for the proper
protection of the Aircraft (whether on the ground or in flight) against theft, vandalism,
hijacking, destruction, bombing, terrorism or similar acts directly or indirectly affecting the
Aircraft, any part thereof, or any persons who (whether or not on board the Aircraft) may sustain
any injury or damage as a result of any such acts. Lessee expressly acknowledges that Lessee’s
implementation of such security measures and systems is a

 

 

material obligation of Lessee under this Lease, and that Lessor shall have absolutely no
responsibility therefor. Lessee shall provide Lessor with such evidence as is reasonably requested
by Lessor regarding Lessee’s compliance with its obligations under this Section. However, in no
event shall Lessor have any duty or obligation to monitor, review or assess any security measures
maintained by Lessee or Lessee’s compliance with the provisions of this Section. Any review by
Lessor of such evidence as is provided pursuant to Lessor’s request hereunder shall be for Lessor’s
informational purposes only, and there shall be no inference or implication therefrom that Lessor
has reviewed or approved the adequacy or sufficiency of such recommendations or of the actual
security measures or systems employed by Lessee. Without limiting the generality of the foregoing,
it is expressly understood and acknowledged that Lessee, being in sole “operational control” of the
Aircraft, is uniquely in a position to identify and implement those security measures necessary to
comply with this Section and that in doing so, Lessee has not relied upon, and shall not rely upon,
any statement, act, or omission of Lessor.

	7.	 	MAINTENANCE:

     (a) Lessee agrees that the Aircraft will be maintained in compliance with any and all
statutes, laws, ordinances, regulations and standards or directives issued by any governmental
agency applicable to the maintenance thereof, in compliance with any airworthiness certificate,
license or registration relating to the Aircraft issued by any agency and in a manner that does not
modify or impair any existing warranties on the Aircraft or any part thereof.

     (b) Lessee shall maintain, inspect, service, repair, overhaul and test the Aircraft (including
each engine) in accordance with (i) all maintenance manuals initially furnished with the Aircraft,
including any subsequent amendments or supplements to such manuals issued by the manufacturer from
time to time, (ii) all mandatory “Service Bulletins” issued, supplied, or available by or through
the manufacturer and/or the manufacturer of any engine or part with respect to the Aircraft, (iii)
all airworthiness directives applicable to the Aircraft issued by the FAA or similar regulatory
agency having jurisdictional authority, and causing compliance to such directives to be completed
through corrective modification in lieu of operating manual restrictions (except for temporary
operating manual restrictions for a flight to a repair facility), and (iv) all maintenance
requirements set forth in Annex G hereto. Lessee shall maintain all records, logs and other
materials required by the manufacturer for enforcement of any warranties or by the FAA. All
maintenance procedures required hereby shall be undertaken and completed in accordance with the
manufacturer’s recommended procedures, and by properly trained, licensed, and certificated
maintenance sources and maintenance personnel, so as to keep the Aircraft and each engine in as
good operating condition as when delivered to Lessee hereunder, ordinary wear and tear excepted,
and so as to keep the Aircraft in such operating condition as may be necessary to enable the
airworthiness certification of such Aircraft to be maintained in good standing at all times under
the FAA.

     (c) Lessee agrees, at its own cost and expense, to (i) cause the Aircraft and, subject to
Section 8 hereof, each engine thereon to be kept numbered with the identification in serial number
therefor as specified in Annex A; (ii) prominently display on the Aircraft that N number, and only
that N number, specified in Annex A; and (iii) notify Lessor in writing thirty (30) days prior to
making any change in the configuration (other than changes in configuration mandated by the FAA),
appearance and coloring of the Aircraft from that in effect at the time the Aircraft is accepted by
Lessee hereunder, and in the event of such change or modification of configuration, coloring or
appearance, to restore, upon request of Lessor, the Aircraft to the configuration, coloring or
appearance in effect on the Commencement Date or, at Lessor’s option to pay to Lessor an amount
equal to the reasonable cost of such restoration. Lessee will not place the Aircraft in operation
or exercise any control or dominion over the same until such Aircraft marking has been placed
thereon. Lessee will replace promptly any such Aircraft marking which may be removed, defaced or
destroyed. Notwithstanding anything in this Section 7(c), it is agreed and understood by Lessor
and Lessee that (i) the Aircraft will be re-painted a new color scheme in red, white and blue
during the Term when the Aircraft is brought in for maintenance and (ii) at such time, the marking
on the Aircraft that reads “Air Logistics” will be changed to read “Air Logistics, a Bristow
company” (the changes contemplated by clause (i) and (ii), collectively, the “Approved Changes”).
Lessor agrees that Lessee shall not be obligated to restore the Aircraft to its configuration,
coloring and appearance it had in order to merely remove the Approved Changes.

     (d) Lessee shall be entitled from time to time during the Term of this Lease to acquire and
install on the Aircraft at Lessee’s expense, any additional accessory, device or equipment as
Lessee may desire (each such accessory, device or equipment, an “Addition”), but only so long as
such Addition (i) is ancillary to the Aircraft; (ii) is not required to render the Aircraft
complete for its intended use by Lessee; (iii) does not alter or impair the originally intended
function or use of the Aircraft; and (iv) can be readily removed without causing material damage.
Title to each Addition which is not removed by Lessee prior to the return of the Aircraft to Lessor
shall vest in Lessor upon such return. Lessee shall repair all damage to the Aircraft resulting
from the installation or removal of any Addition so as to restore the Aircraft to its condition
prior to installation, ordinary wear and tear excepted.

 

 

     (e) Any alteration or modification (each an “Alteration”) with respect to the Aircraft that
may at any time during the Term of this Lease (i) that are necessary or advisable to comply with
Lessee’s obligations pursuant to this Lease or (ii) may be required to comply with any applicable
law or any governmental rule or regulation shall be made at the expense of Lessee. Any repair made
by Lessee of or upon the Aircraft or replacement parts, including any replacement engine, installed
thereon in the course of repairing or maintaining the Aircraft, or any Alteration, shall be deemed
an accession, and title thereto shall be immediately vested in Lessor without cost or expense to
Lessor.

     (f) Except as permitted under this Section 7, Lessee will not modify the Aircraft or affix or
remove any accessory to the Aircraft leased hereunder.

     (g) The Aircraft shall be maintained and operated in accordance with the applicable Part 135
standards.

	8.	 	LIENS, SUBLEASE AND ASSIGNMENT:

     (a) LESSEE SHALL NOT SELL, TRANSFER, ASSIGN OR ENCUMBER THE AIRCRAFT, ANY ENGINE OR ANY PART
THEREOF, LESSOR’S TITLE OR ITS RIGHTS UNDER THIS LEASE, EXCEPT AS OTHERWISE EXPRESSLY PERMITTED
HEREIN. LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, SUBLET, CHARTER OR PART
WITH POSSESSION OF THE AIRCRAFT OR ANY ENGINE OR PART THEREOF OR ENTER INTO ANY INTERCHANGE
AGREEMENT EXCEPT AS OTHERWISE PERMITTED HEREIN. Lessee shall keep the Aircraft, each engine and
any part thereof free and clear of all liens and encumbrances other than those which result from
(i) the respective rights of Lessor and Lessee as herein provided; (ii) liens arising from the acts
of Lessor or its agents; (iii) liens for taxes not yet due or being reasonably disputed in good
faith so long as Lessee delivers collateral to Lessor in an amount satisfactory to Lessor and such
amount does not result in any imminent risk of loss or forfeiture of the Aircraft or any civil or
criminal liability on Lessor; and (iv) materialmen’s, mechanics’, workmen’s, repairmen’s,
employees’ or other like liens (whether inchoate or not) arising in the ordinary course of business
of Lessee for sums not yet delinquent or being contested in good faith (and for the payment of
which adequate assurances in Lessor’s judgment have been provided Lessor).

     Notwithstanding the foregoing, so long as Lessee is not in default hereunder, Lessee may
charter the Aircraft so long as:

     (i) The rights of any users of the Aircraft are subject and subordinate to all terms of the
Lease and all rights of Lessor in and to the Aircraft and under the Lease including, without
limitation, the right of Lessor to inspect and take possession of the Aircraft from time to time
according to the terms and provisions of the Lease and applicable law;

     (ii) Lessee acknowledges that Lessor shall have none of Lessee’s obligations or duties with
respect to the Aircraft contained in any charter arrangement, including but not limited to
maintenance, repairs, service or insurance;

     (iii) Lessee shall maintain accurate and complete records of all charter operations in which
the Aircraft is used, including without limitation copies of all receipts and invoices relating to
any such operations; and (ii) make any and all such records fully available to both Lessor and any
governmental agency (including, without limitation any state or federal taxing authority) promptly
upon demand from any such parties;

     (iv) Lessee currently has, and will maintain all required Federal Aviation Administration
(“FAA”) licenses to operate a chartering company and to perform all of its obligations thereunder.
Lessee shall at all times maintain a Certificate pursuant to Part 135 of the FAA Regulations. The
Aircraft shall not be used for any pilot training activities except recurrent training for Lessee’s
and Lessee’s affiliates’ pilots who will be flying the Aircraft. Lessee shall at all times
maintain “operational control,” (as defined in the FAA Regulations) of the Aircraft;

     (v) Any default by Lessee under the Lease shall constitute a default under the
chartering arrangements;

     (vi) Lessee agrees that the Aircraft shall not be used by any governmental entity, any tax
exempt entity or any person or entity that would cause any Loss of, or otherwise adversely affect
any of, Lessor’s Tax Benefits in the Aircraft; and

     (vii) Lessee shall not allow the use of the Aircraft in violation of the Lease.

     Notwithstanding anything contained in this Lease to the contrary, so long as Lessee is not in
default hereunder, Lessee may replace parts and the engines on the Aircraft in accordance with its
customary arrangements with Turbomeca, its other maintenance service providers or its customary
business practices so long as (i) the replacement part or engine shall be the same make and model
and have the same or better fair market value as the part or engine being replaced (assuming such
engine or part had been maintained in accordance with the provisions hereof and has not experienced
any damage or other casualty event) (a “Replacement Engine” or a “Replacement Part”, as the case
may be), (ii) with respect to any Replacement Engine, Lessor shall acquire title to such
Replacement Engine which may occur pursuant to a limited assignment of such customary arrangements
with Turbomeca and Lessee shall have made all appropriate filings to protect Lessor’s interest in
the replacement engines with the FAA, the UCC and if the Cape Town Convention on International
Interests in Mobile Equipment (the “Convention”) and the Protocol thereto On Matters Specific To
Aircraft Equipment (the “Protocol”) concluded in Cape Town in November 2001 (the Convention and

 

 

the Protocol, each, in the official English language text thereof, are collectively referred to
herein as the “Cape Town Convention”) comes into force prior to the effectiveness of such
replacement an AC Form 8050-135 FAA Entry Point Filing Form International Registry for filing with
the FAA and the international registry (the “International Registry”) established pursuant to the
Cape Town Convention and any other form proscribed by the International Registry or the FAA, and
(iii) with respect to any Replacement Part, Lessor shall have acquired title thereto which will
vest automatically upon installation of such Replacement Part in the Aircraft. Upon the
acquisition of title by Lessor to any such Replacement Engine or Replacement Part, as the case may
be, together with the fulfillment of all Lessee’s obligations set forth in this paragraph, this
Lease shall terminate with respect to any engine or part being so replaced by such Replacement
Engine or Replacement Part, as the case may be, and title thereto shall be conveyed by Lessor, at
the sole cost and expense of Lessee, to Lessee on an AS IS BASIS, without representation or
warranty of any kind, other than the absence of liens created by or though Lessor.

     (b) Lessor and any assignee of Lessor may assign this Lease, or any part hereof and/or the
Aircraft to any person or entity so long as (A) (x) such person or entity or its affiliates is
either not operating in the same line of business as Lessee or (y) such person or entity is a
financial institution or an insurance company having a tangible net worth at least equal to
$50,000,000 and (B) such person or entity is not in material litigation with Lessee as disclosed in
Guarantor’s most recent public filings on Form 10-Q or Form 10-K, as the case may be (and/or any
filing on Form 8-K filed after the date of such most recent Form 10-Q or Form 10-K, as the case may
be). Lessee hereby waives and agrees not to assert against any such assignee, or assignee’s
assigns, any defense, set-off, recoupment claim or counterclaim which Lessee has or may at any time
have against Lessor for any reason whatsoever. Lessee agrees that if Lessee receives written
notice of an assignment from Lessor, Lessee will pay all rent and all other amounts payable under
this Lease to such assignee or as instructed by Lessor. Lessee also agrees to confirm in writing
receipt of the notice of assignment as may be reasonably requested by assignee and shall cooperate
with Lessor and any such assignee in delivering to such assignee a certificate of insurance
reflecting assignee as loss payee and additional insured.

9. LOSS, DAMAGE AND STIPULATED LOSS VALUE: Lessee hereby assumes and shall bear the entire risk of
any loss, theft, confiscation, expropriation, requisition, damage to, or destruction of, the
Aircraft, any engine or part thereof from any cause whatsoever, including without limitation,
intentional criminal acts and acts of terrorism. If for any reason the Aircraft, or any engine
thereto becomes worn out, lost, stolen, confiscated, expropriated, requisitioned, hijacked,
destroyed, irreparably damaged, or unusable (“Casualty Occurrences”) Lessee shall promptly and
fully notify Lessor in writing. If, in the opinion of Lessor, a Casualty Occurrence has occurred
which affects only the engine(s) of the Aircraft, then Lessee, at its own cost and expense, shall
replace such engine(s) with a Replacement Engine(s) or other engine acceptable to Lessor and shall
cause title to such Replacement Engine(s) or engine to be transferred to Lessor for lease to Lessee
under this Lease. Upon transfer of title to Lessor of such engine(s), such engine(s) shall be
subject to the terms and conditions of this Lease, and Lessee shall execute whatever documents or
filings Lessor deems necessary and appropriate in connection with the substitution of such
replacement engine(s) for the original engine(s). If, in the opinion of Lessor, a Casualty
Occurrence has occurred with respect to the Aircraft in its entirety, on the Rent Payment Date no
later than ninety (90) days after a Casualty Occurrence (the “Payment Date”), Lessee shall pay
Lessor the sum of (i) the Stipulated Loss Value as set forth in Annex F calculated as of the Rent
Payment Date prior to such Casualty Occurrence; and (ii) all Rent and other amounts which are due
under this Lease as of the Payment Date. In the event Lessor receives insurance proceeds after
receipt in full of the amounts set forth in clause (i) and (ii) in the foregoing sentence, Lessor
shall refund to Lessee the all amounts received from Lessee in respect of Stipulated Loss Value up
to the amount of the insurance proceeds Lessor actually received. Upon payment of all sums due
hereunder, the Term of this Lease as to the Aircraft shall terminate and Lessee shall have no
further right to use or operate the Aircraft.

10. INSURANCE: Lessee shall secure and maintain in effect at its own expense throughout the Term
of the Lease insurance against such hazards and for such risks as Lessor may require; provided that
Lessor shall not require insurance in greater amounts or covering additional risks with respect to
the Aircraft than Lessor generally requires of its lessees to whom it leases similar aircraft.
All such insurance shall be with companies with a AM Best rating of “A” or better or otherwise
satisfactory to Lessor. Without limiting the generality of the foregoing, Lessee shall maintain
(i) liability insurance covering public liability and property, cargo and sudden accidental
pollution coverage, in amounts not less than fifty million (50,000,000) United States dollars for
any single occurrence; (ii) all-risk aircraft hull and engine insurance (including, without
limitation, with respect to engine or part thereof while removed from the aircraft and foreign
object damage insurance) in an amount which is not less than the then Stipulated Loss Value; and
(iii) confiscation, expropriation and war risk, hijacking and allied perils insurance (which
insurance shall include coverage against acts of terrorism and similar criminal acts) in an amount
which is (x) for physical damage, not less than the then Stipulated Loss Value and (y) for
liability coverage, not less than fifty million (50,000,000) United States dollars for any single
occurrence. All insurance shall: (1) name Lessor as owner of the Aircraft and as loss payee and
additional insured (without responsibility for premiums), (2) provide that any cancellation or
substantial change in coverage shall not be effective as to the Lessor for thirty (30) days (ten
(10) days in the event of non-payment of premiums, seven (7) days in the case of war risks
coverage) after receipt by Lessor of written notice from the insurer of such cancellation or
change, (3) insure Lessor’s interest regardless of any breach of warranty or other act or omission
of Lessee, (4) include a

 

 

severability of interest clause providing that such policy shall operate in the same manner as if
there were a separate policy covering each insured, (5) waive any right of set-off against Lessee
or Lessor, and any rights of subrogation against Lessor, and (6) be primary and not be subject to
any offset by any other insurance carried by Lessor or Lessee. Lessee hereby appoints Lessor as
Lessee’s attorney-in-fact to make proof of loss and claim for and to receive payment of and to
execute or endorse all documents, checks or drafts in connection with all policies of insurance in
respect of the Aircraft. Lessor shall not act as Lessees attorney-in-fact until the occurrence and
during a continuation of an Event of Default or any incipient default under Sections 12(a)(i),
(vii) or (viii). Lessee shall pay any reasonable expenses of Lessor in adjusting or collecting
insurance proceeds. Lessor shall pay proceeds of any insurance claim in an amount not exceeding
five hundred thousand ($500,000) _ United States dollars to Lessee and Lessee shall, as promptly as
practicable, repair the Aircraft or repair or replace any part thereof. Lessor may, at its option,
apply proceeds of insurance with respect to claims in excess of five hundred thousand ($500,000) United States dollars , in whole or in part, to (A) repair the Aircraft, or repair or replace any
part thereof, or (B) satisfy any obligation of Lessee to Lessor due under this Lease.

	11.	 	RETURN OF AIRCRAFT:

     (a) At
expiration or termination of this Lease (the “Return
Date”), Lessee shall return the
Aircraft to Lessor, at a location within the Gulf Coast region of the United States as Lessor shall
direct. Lessee shall also return all logs, loose equipment, manuals and data associated with the
Aircraft, including without limitation, inspection, modification and overhaul records required to
be maintained with respect to the Aircraft under this Lease or under the applicable rules and
regulations of the FAA or the manufacturer’s recommended maintenance program, along with a
currently effective FAA airworthiness certificate. Lessee shall, upon request, assign to Lessor
its rights under any manufacturer’s maintenance service contract or extended warranty for the
Aircraft, any engine or part thereof. The Aircraft shall be returned in the condition in which the
Aircraft is required to be maintained pursuant to Section 7, but with all logos or other
identifying marks of Lessee removed. Additionally, Lessee shall ensure that the Aircraft complies
with all requirements and conditions set forth on Annex G hereto. Lessee shall pay for all costs
to comply with this Section 11(a).

     (b) Lessor shall arrange for the inspection of the Aircraft on the Return Date to determine if
the Aircraft has been maintained and returned in accordance with the provisions of this Lease.
Lessee shall be responsible for the cost of such inspection and shall pay Lessor such amount as
additional Rent within ten (10) days of demand. If the results of such inspection indicate that
the Aircraft, any engine thereto or part thereof, has not been maintained or returned in accordance
with the provisions of this Lease, Lessee shall pay to Lessor within ten (10) days of demand, as
liquidated damages, the estimated cost (“Estimated Cost”) of servicing or repairing the Aircraft,
engine or part. The Estimated Cost shall be determined by Lessor by obtaining two quotes for such
service or repair work, with one quote selected by Lessee reasonably acceptable to Lessor and one
quote selected by Lessor reasonably acceptable to Lessee and taking their average. Lessee shall
bear the cost, if any, incurred by Lessor in obtaining such quotes.

     (c) If Lessee fails to return the Aircraft on the Return Date, Lessor shall be entitled to
damages equal to the higher of (i) the Rent for the Aircraft, pro-rated on a per diem basis, for
each day the Aircraft is retained beyond the Return Date; or (ii) the daily fair market rental for
the Aircraft at the Return Date. Such damages for retention of the Aircraft after the Return Date
shall not be interpreted as an extension or reinstatement of the Term.

     (d) All of Lessor’s rights contained in this Section shall survive the expiration or other
termination of this Lease.

	12.	 	EVENTS OF DEFAULT AND REMEDIES:

     (a) Lessee shall be in default under this Lease and each of the other Documents (as that term
is defined in Section 16 below) upon the occurrence of any of the following “Events of Default”:
(i) Lessee breaches its obligation to pay Rent or any other sum when due and fails to cure the
breach within ten (10) days of written invoice from Lessor; (ii) Lessee breaches any of its
insurance obligations under Section 10; (iii) Lessee breaches any of its other obligations in any
material respect and fails to cure that breach within thirty (30) days after written notice from
Lessor to Lessee; (iv) any representation or warranty made by Lessee in connection with this Lease
or Bill of Sale, or Guarantor in connection with the Guaranty agreement shall be false or
misleading in any material respect; (v) Lessee or Guarantor or other obligor for any of the
obligations hereunder (collectively “Guarantor”), dissolves, terminates its existence, becomes
insolvent or ceases to do business as a going concern; (vi) the Aircraft or any other property of
Lessee is illegally used, confiscated, sequestered, seized or levied upon; (vii) a receiver is
appointed for all or of any part of the property of Lessee or any Guarantor, or Lessee or any
Guarantor makes any assignment for the benefit of creditors; (viii) a petition is filed by or
against Lessee or any Guarantor under any bankruptcy, insolvency or similar laws and in the event
of an involuntary petition, the petition is not dismissed within sixty (60) days of the filing
date; (ix) the occurrence of any “Event of Default” under any Aircraft Lease Agreement dated as of
even date herewith between Lessor and Lessee (the “Related Leases”); (x) any Guarantor revokes or
attempts to revoke its

 

 

guaranty or fails to observe or perform any covenant, condition or agreement to be performed under
any guaranty or other related document to which it is a party, (xi) Lessee is declared in default
under any contract or obligation requiring the payment of money in a principal amount outstanding
greater than $10,000,000.00; (xii) there is any dissolution, or termination of existence of the
Lessee or Guarantor, or change in controlling ownership of Lessee (meaning Guarantor fails to own
directly or indirectly more than 50% of the voting equity of the Lessee) or any Guarantor Change of
Control (as defined in Annex H herein) has occurred or (xiii) there is any merger or consolidation
of Guarantor or Lessee in violation of this Lease.

     (b) Upon the occurrence of any Event of Default and so long as the same shall be continuing,
Lessor may, at its option, at any time thereafter, exercise one or more of the following remedies,
as Lessor in its sole discretion shall lawfully elect: (i) demand that Lessee immediately pay as
liquidated damages, for loss of a bargain and not as a penalty, an amount equal to (x) the
Stipulated Loss Value of the Aircraft, computed as of the Basic Term Rent Date prior to such demand
together with (y) all Rent and other amounts due and payable for all periods up to and including
the Basic Term Rent Date following such demand; (ii) demand that Lessee pay all amounts due for
failure to maintain or return the Aircraft as provided herein and cause Lessee to assign to Lessor
Lessee’s rights under any manufacturer’s service program contract or any extended warranty contract
in force for the Aircraft; (iii) proceed by appropriate court action, either at law or in equity,
to enforce the performance by Lessee of the applicable covenants of this Lease or to recover
damages for breach hereof; (iv) by notice in writing terminate this Lease, whereupon all rights of
Lessee to use of the Aircraft or any part thereof shall absolutely cease and terminate, and Lessee
shall immediately return the Aircraft in accordance with Section 11, but Lessee shall remain liable
as provided in Section 11; (v) request Lessee to return the Aircraft to a designated location in
accordance with Section 11; (vi) peacefully enter the premises where the Aircraft may be and take
possession of the Aircraft; (vii) sell or otherwise dispose of the Aircraft at private or public
sale, in bulk or in parcels, with or without notice, and without having the Aircraft present at the
place of sale; (viii) lease or keep idle all or part of the Aircraft; (ix) use Lessee’s premises
for storage pending lease or sale or for holding a sale without liability for rent or costs for
five (5) months; (x) collect from Lessee all actual out-of-pocket costs, charges and expenses,
including reasonable legal fees and disbursements, incurred by Lessor by reason of the occurrence
of any Event of Default or the exercise of Lessor’s remedies with respect thereto; (xi) draw on any
Acceptable Letter of Credit, foreclose on any Additional Collateral or Security Deposit Pledge (as
each such term is defined in the Additional Collateral Agreement, dated as of even date herewith,
between Lessor and Lessee); and/or (xii) declare any Event of Default under the terms of this Lease
to be a default under the Related Leases or any other agreement for borrowed money between Lessor
(and/or General Electric Capital Corporation) on the one hand, and Lessee or Guarantor (or any of
their affiliates or parent entities) on the other hand.

     (c) Lessor shall apply any proceeds of sale, lease or other disposition of the Aircraft or any
other collateral, letter of credit or deposit, if any, and shall have the right to apply same in
the following order of priorities: (i) to pay all of Lessor’s costs, charges and expenses incurred
in enforcing its rights under this Lease or in taking, removing, holding, repairing, selling,
leasing or otherwise disposing of the Aircraft; then, (ii) to the extent not previously paid by
Lessee, to pay Lessor all sums due from Lessee under this Lease or any other Related Lease in any
priority as Lessor determines; then (iii) to reimburse to Lessee any sums previously paid by Lessee
representing Stipulated Loss Value as liquidated damages pursuant to Section 12(b)(i)(x); and (iv)
any surplus shall be retained by Lessor. Lessee shall immediately pay on demand any deficiency in
(i) and (ii) of the immediately preceding sentence. Lessor’s obligation hereunder shall survive
any termination of this Lease.

     (d) The foregoing remedies are cumulative, and any or all thereof may be exercised instead of
or in addition to each other or any remedies at law, in equity, or under statute. Waiver of any
Event of Default shall not be a waiver of any other or subsequent Event of Default.

     (e) Upon the indefeasible payment in full of all amounts owed to Lessor after an Event of
Default (including, without limitation, all accrued Rent, actual out-of-pocket costs and expenses
(including attorney’s fees), indemnity payments and any other sums due and owing hereunder) and, if
so elected by Lessor, delivery of the Aircraft meeting the requirements of Section 11 (provided
that the proceeds thereof shall be applied as set forth in Section 12(c)), this Lease shall
terminate and neither Lessor nor Lessee shall have no further obligations under the Lease, except
with respect to obligations which by the terms of this Lease survive the termination hereof.

	13.	 	NET LEASE:

     This Lease is a net lease. The Lessor shall have no obligation, liability or responsibility
to the Lessee or any other person with respect to operation, maintenance, repairs, alterations,
modifications, correction of faults or defects (whether or not required by applicable law) or
insurance with respect to the Aircraft, all of which matters shall be, as between Lessor and
Lessee, the sole responsibility of Lessee, regardless of upon whom such responsibilities may fall
under applicable law or otherwise, and the Rent payable hereunder has been set in reliance upon the
Lessee’s sole responsibility for all such matters. The Lessee acknowledges and agrees that its
obligations to pay Rent and all other amounts due and owing in accordance with the terms hereof
shall be absolute and unconditional and shall not be released, discharged, waived, reduced, set-off
or affected

 

 

by any circumstance whatsoever. Lessor and Lessee agree that the foregoing shall not operate as a
waiver of any claim for breach Lessee may have against Lessor.

	14.	 	INDEMNIFICATION:

     (a) Lessee hereby agrees to indemnify (on an after tax basis) Lessor and any other entity
which has an ownership interest in, is owned by or is under common ownership with, Lessor, and the
respective or collective officers, directors, agents, employees, successors and assigns of each
(each, an “Indemnified Party”) from and against any and all losses, damages, penalties, injuries,
claims, demands, actions and suits, (collectively
“Claims”) whether in law or equity, or in
contract, tort, or otherwise, including reasonable attorneys’ fees and disbursements and other
costs of investigation or defense, including those incurred upon any appeal arising out of or
relating to the Aircraft or this Lease and shall include, but is not limited to, Lessor’s strict
liability in tort and Claims that may be imposed on, incurred by or asserted against an Indemnified
Party in any way arising out of (i) the selection, manufacture, purchase, acceptance or rejection
of the Aircraft, the ownership of the Aircraft during the term of this Lease, and the delivery,
lease, possession, maintenance, uses, condition, return or operation of the Aircraft (including,
without limitation, latent and other defects, whether or not discoverable by Lessor, any
Indemnified Party or Lessee and any claim for patent, trademark or copyright infringement or
environmental damage); (ii) any breach of Lessee’s obligations under the Lease or the failure by
Lessee to comply with any term, provision or covenant contained in this Lease or any other
agreement executed by Lessee in connection with this Lease or the Aircraft or with any applicable
law, rule or regulation with respect to the Aircraft, or the nonconformity of the Aircraft or its
operation with any applicable law; (iii) vandalism, hijacking, destruction, bombing, terrorism or
similar acts directly or indirectly affecting the Aircraft, any part thereof, or any persons who
(whether or not on board the Aircraft) may sustain any injury or damage as a result of any such
acts, regardless of whether or not Lessee was at the time of such use, complying with the security
requirements of the Lease or applicable law; (iv) any actions brought against any Indemnified Party
that arise out of Lessee’s actions (or actions of Lessee’s agents); or (v) any Indemnified Party’s
reliance on any representation or warranty made or deemed made by Lessee or Guarantor (or any of
their officers) under or in connection with this Lease or any other Document or any report or other
information delivered by Lessee or Guarantor pursuant hereto which shall have been incorrect in any
material respect when made or deemed made or delivered; provided, that Lessee shall not be
obligated to pay and shall have no indemnity liability for any Claims (x) imposed on or against an
Indemnified Party to the extent that such Claims are caused by the gross negligence or willful
misconduct of such Indemnified Party or (y) to the extent imposed with respect to any Claim solely
based on events occurring after the earlier of (A) the expiration or other termination of the Term
in circumstances not requiring the return of the Aircraft and payment in full of all amounts due
from Lessee under this Lease and any other Document and (B) the satisfaction by Lessee of all its
obligations under Section 11 of the Lease and payment in full of all amounts due from Lessee under
this Lease and any Document . Lessee shall pay on demand to each Indemnified Party any and all
amounts necessary to indemnify such Indemnified Party from and against any of the foregoing.
Lessee shall, upon request, defend any actions based on, or arising out of, any of the foregoing.

     (b) Lessee and Lessor agree that, as of the Commencement Date, (i) is the intent of the
parties that Lessor is the owner of the Aircraft for state law and federal income tax purposes,
(ii) Lessor intends to take depreciation deductions with respect to the Aircraft in accordance with
Section 168 of the Internal Revenue Code of 1986, as amended, as set forth on Annex B (“Tax
Benefits”), (iii) it is the intent of the parties that the Aircraft leased under the Lease shall
qualify for all tax deductions in the hands of Lessor, and (iv) at no time during the Term of this
Lease will Lessee take or omit to take, nor will it permit any sublessee or assignee to take or
omit to take, any action (whether or not such act or omission is otherwise permitted by Lessor
unless expressly permitted by this Lease), which will result in the disqualification of the
Aircraft for, or recapture of, all or any portion of such Tax Benefits.

     (c) If as a result of a breach of any representation, warranty or covenant of the Lessee
contained in this Lease (i) independent tax counsel selected by Lessor and reasonably acceptable to
Lessee shall determine that Lessor is not entitled to claim on its Federal income tax return all or
any portion of the Tax Benefits with respect to the Aircraft, or (ii) any Tax Benefit claimed on
the Federal income tax return of Lessor is disallowed or adjusted by the Internal Revenue Service,
or (iii) any Tax Benefit is recalculated or recaptured (any determination, disallowance,
adjustment, recalculation or recapture being a “Loss”), then Lessee shall pay to Lessor, as an
indemnity and as additional rent, an amount that shall, in the reasonable opinion of Lessor, cause
Lessor’s after-tax economic yields and cash flows to equal the Net Economic Return that would have
been realized by Lessor if such Loss had not occurred. Such amount shall be payable within thirty
(30) days of written demand accompanied by a statement describing in reasonable detail such Loss
and the computation of such amount. The economic yields and cash flows shall be computed on the
same assumptions, including tax rates as were used by Lessor in originally evaluating the
transaction (“Net Economic Return”). If an adjustment has been made under Section 3 then the
Effective Rate used in the next preceding adjustment shall be substituted.

     (d) Lessee hereby further represents, warrants and covenants that all amounts includible in
the gross income of Lessor with respect to the Aircraft, and all deductions or credits allowable to
Lessor with respect to the Aircraft, will be treated as derived from or allocable to sources

 

 

within the United States in each and every year taxable year of Lessor throughout the entire term
of this Lease. If as a result of any breach of the representation, warranty and covenant contained
in the immediately preceding sentence, any item of income, credit or deduction with respect to the
Aircraft shall not be treated as derived from or allocable to, sources within the United States for
any taxable year of Lessor (any such event hereinafter referred to as a “Foreign Loss”), then
Lessee shall pay to Lessor as an indemnity, on the next succeeding rental payment date, or in any
event within 30 days after written demand to Lessee by Lessor, such amount as, after deduction of
all taxes required to be paid by Lessor in respect of the receipt of such amounts under the laws of
any federal, state or local government or taxing authority of the United States, shall equal the
sum of: (i) the excess of (x) the foreign tax credits which Lessor would have been entitled to for
such year had no such Foreign Loss occurred over (y) the foreign tax credits to which Lessor was
limited as a result of such Foreign Loss and (ii) the amount of any interest, penalties or
additions to tax payable as a result of such Foreign Loss.

     (e) Lessee shall not be obligated to pay any sums required in Section 14 in the event the
cause of the Loss results from one or more of the following events: (1) a failure of Lessor to
timely claim accelerated cost recovery (or depreciation) deductions for any Aircraft in Lessor’s
tax return, other than a failure resulting from Lessor’s determination, based on opinion of its
counsel or otherwise, that no reasonable basis exists for claiming accelerated cost recovery (or
depreciation) deductions, (2) a failure of Lessor to have sufficient gross income to benefit from
accelerated cost recovery (or depreciation) deductions, or (3) a change in the tax law applicable
to accelerated cost receovery (or depreciation) deductions disallows deductions to which Lessor
would otherwise be entitled unless such loss is caused by an act or omission of Lessee. Lessor
agrees to promptly notify Lessee of any claim made by any federal or state tax authority against
Lessor with respect to the disallowance of such accelerated cost recovery (or depreciation)
deductions, together with sufficient details (to the extent the information is available to Lessor)
of the nature of, or reasons for, the claim by such tax authority and Lessor’s position with
respect thereto (including a copy of any correspondence from the applicable taxing authority). All
references to Lessor in this Section 14 include Lessor and the consolidated taxpayer group of which
Lessor is a member.

     (f) All of Lessor’s rights, privileges and indemnities contained in this Section 14 shall
survive the expiration or other termination of this Lease. The rights, privileges and indemnities
contained herein are expressly made for the benefit of, and shall be enforceable by Lessor, its
successors and assigns.

	15.	 	DISCLAIMER:

     LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE AIRCRAFT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS
AGENTS OR EMPLOYEES AND THAT LESSOR IS LEASING THE AIRCRAFT IN AN “AS IS” CONDITION. LESSOR DOES
NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION,
EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE AIRCRAFT LEASED UNDER THIS LEASE OR
ANY COMPONENT THEREOF, OR ANY ENGINE INSTALLED THEREON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
AS TO CONDITION, AIRWORTHINESS, DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR
WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT, TRADEMARK
OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between Lessor and Lessee, are to be borne
by Lessee. Without limiting the foregoing, Lessor shall have no responsibility or liability to
Lessee or any other person with respect to any of the following: (i) any liability, loss or damage
caused or alleged to be caused directly or indirectly by the Aircraft, any inadequacy thereof, any
deficiency or defect (latent or otherwise) of the Aircraft, or any other circumstance in connection
with the Aircraft; (ii) the use, operation or performance of the Aircraft or any risks relating to
it; (iii) any interruption of service, loss of business or anticipated profits or consequential
damages; or (iv) the delivery, operation, servicing, maintenance, repair, improvement or
replacement of the Aircraft. If, and so long as, no Event of Default has occurred and is
continuing under this Lease, Lessee shall be, and hereby is, authorized during the Term of this
Lease to assert and enforce, at Lessee’s sole cost and expense, in the name of and for the account
of Lessor and/or Lessee, as their interests may appear, whatever claims and rights Lessor may have
against any Supplier of the Aircraft.

	16.	 	REPRESENTATIONS AND WARRANTIES OF LESSEE:

A. Lessee hereby represents and warrants to Lessor that on the date of this Lease :

     (a) Lessee has adequate limited liability company power and capacity to enter into, and
perform under, this Lease and all related documents (together, the
“Documents”) and is duly
qualified to do business wherever necessary to carry on its present business and operations,
including the jurisdiction(s) where the Aircraft has its primary hangar location.

 

 

     (b) The Documents have been duly authorized, executed and delivered by Lessee and constitute
valid, legal and binding agreements, enforceable in accordance with their terms, except to the
extent that the enforcement of remedies may be limited under applicable bankruptcy, insolvency or
creditors’ rights generally laws and principles of equity.

     (c) No approval, consent or withholding of objections is required from any governmental
authority or entity with respect to the entry into or performance by Lessee of the Documents except
such as have already been obtained.

     (d) The entry into and performance by Lessee of the Documents will not: (i) violate any
judgment, order, law or regulation applicable to Lessee or any provision of Lessee’s Certificate of
Formation or Operating Agreement; or (ii) result in any breach of, constitute a default under or
result in the creation of any lien, charge, security interest or other encumbrance upon any
Aircraft pursuant to any indenture, mortgage, deed of trust, bank loan or credit agreement (other
than this Lease) to which Lessee is a party.

     (e) There are no suits or proceedings pending or threatened in court or before any commission,
board or other administrative agency against or affecting Lessee, which will have a material
adverse effect on the ability of Lessee to fulfill its obligations under this Lease.

     (f) The financial statements contained in Guarantor’s report on Form 10-K for fiscal year
ended March 31, 2005 delivered to Lessor has been prepared in accordance with generally accepted
accounting principles consistently applied, and since March 31, 2005, there has been no material
adverse change.

B. Lessee hereby:

     (a) Represents and warrants that its exact legal name is as set forth in the first sentence of
this Lease and Lessee is and will be at all times validly existing and in good standing under the
laws of the State of its incorporation (specified in the first sentence of this Lease) and Lessee
is and will continue to be a “Citizen of the United States” within the meaning of Section 40102(15)
of the FAA. Lessee shall not consolidate, reorganize or merge with any other corporation or entity
(other than a wholly-owned subsidiary of Guarantor) or sell, convey, transfer or lease all or
substantially all of its property to any corporation or entity (other than a wholly-owned
subsidiary of Guarantor) during the Term of this Lease.

     (b) Represents and warrants that its the chief executive office or chief place of
business (as either of such terms is used in Article 9 of the Uniform Commercial Code) of Lessee is
located at the address set forth above, and Lessee agrees to give Lessor prior written notice of
any relocation of said chief executive office or chief place of business from its present location.

     (c) Agrees that a copy of this Lease, and a current and valid AC Form 8050-l will be kept on
the Aircraft at all times during the Term of this Lease.

     (d) Represents and warrants that Lessee has selected the Aircraft, manufacturer and vendor
thereof, and all maintenance facilities required hereby.

     (e) Covenants that it shall maintain all logs, books and records (including any computerized
maintenance records) pertaining to the Aircraft and engines and their maintenance during the Term
in accordance with FAA rules and regulations.

     (f) Represents and warrants that throughout the Term of this Lease, Lessee will not use or
operate and will not permit the Aircraft to be used or operated “predominately” outside the United
States as that phrase is used in Section 168(g)(1)(A) of the Code.

     (g) Represents that it is and covenants that it will remain in material compliance with all
laws and regulations applicable to it including, without limitation, (i) ensuring that no person
who owns a controlling interest in or otherwise controls Lessee is or shall be (Y) listed on the
Specially Designated Nationals and Blocked Person List maintained by the Office of Foreign Assets
Control (“OFAC”), Department of the Treasury, and/or any other similar lists maintained by OFAC
pursuant to any authorizing statute, Executive Order or regulation or (Z) a person designated under
Section 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling
legislation or any other similar Executive Orders, and (ii) compliance with all applicable Bank
Secrecy Act (“BSA”) laws, regulations and government guidance on BSA compliance and on the
prevention and detection of money laundering violations.

     (h) Covenants that it shall duly qualify to do business in any jurisdiction(s) where the
Aircraft shall have its primary hangar location.

 

 

	17.	 	EARLY TERMINATION:

     (a) On or after the First Termination Date (specified in Annex B), Lessee may, so long as no
Event of Default or any event or occurrence which with the giving of notice or passage of time or
both would result in an Event of Default exists and continues under this Lease, terminate this Lease
as of a Rent Payment Date (“Termination Date”). Lessee must give Lessor at least ninety (90) days
prior written notice of the termination.

     (b) Lessee shall, and Lessor may, solicit cash bids for the Aircraft on an AS IS, WHERE IS
basis without recourse to or warranty from Lessor, express or implied (other than the absence of
any liens created by or through Lessor) (“AS IS BASIS”). Prior to the Termination Date, Lessee
shall, (i) certify to Lessor any bids received by Lessee; and (ii) pay to Lessor, (a) the
Termination Value (calculated as of the Termination Date) for the Aircraft; and (b) all Rent and
other sums due and unpaid as of the Termination Date. Neither Lessee nor its agents shall be
permitted to bid.

     (c) If all amounts due hereunder have been paid on the Termination Date, Lessor shall (i) sell
the Aircraft on an AS IS BASIS for cash to the highest bidder; and (ii) refund the proceeds of such
sale (net of any related expenses) to Lessee up to the amount of the Termination Value paid by
Lessee. If such sale is not consummated, no termination shall occur and Lessor shall refund the
Termination Value (less any expenses incurred by Lessor) to Lessee.

     (d) Notwithstanding the foregoing, Lessor may elect by written notice, at any time prior to
the Termination Date, not to sell the Aircraft. In that event, on the Termination Date Lessee
shall: (i) return the Aircraft (in accordance with Section 11); and (ii) pay to Lessor all amounts
required (x) under Section 17(b)(ii)(a) less the amount of the highest bid certified by Lessee to
Lessor and (y) under Section 17(b)(ii)(b).

     (e) If Lessor exercises its rights to increase Lessee’s rental obligations under Section 3(a),
Lessee may, upon ninety (90) days notice and so long as no default exists under the this Lease,
terminate this Lease as of any Rent Payment Date

	18.	 	EARLY PURCHASE OPTION:

     (a) On the Early Purchase Option Date (specified in Annex B), Lessee may, so long as no Event
of Default or any event or occurrence which with the giving of notice or passage of time or both
would result in an Event of Default exists hereunder and this Lease has not been earlier
terminated, purchase the Aircraft on an AS IS BASIS for cash equal to the Early Purchase Option
Price (specified on Annex B), plus all applicable sales taxes. Lessee must give Lessor at least
thirty (30) days, but not more than ninety (90) days, prior written notice of the purchase. Lessor
and Lessee agree that the Option Price is a reasonable prediction of the price that a willing buyer
(who is neither a lessee in possession or a used aircraft dealer) would pay for the Aircraft on the
Early Purchase Option Date in an arm’s length transaction to a willing seller under no compulsion
to sell.

     (b) If Lessee has elected to purchase the Aircraft, then on the Early Purchase Option Date
Lessee shall pay to Lessor the Early Purchase Option Price (plus all applicable sales taxes)
together with any Rent and other sums due and unpaid on the Early Purchase Option Date. Upon
receipt of indefeasible payment in full of such amounts by Lessor, Lessor shall convey all of its
right, title and interest in and to the Aircraft to Lessee on an AS IS BASIS without representation
or warranties of any kind, other than the absence of liens created by or through Lessor.

	19.	 	END OF LEASE PURCHASE OPTION:

     (a) On the Expiration Date (specified in Annex B), Lessee may, so long as no Event of Default
or any event or occurrence which with the giving of notice or passage of time or both would result
in an Event of Default exists hereunder and this Lease has not been earlier terminated, purchase
the Aircraft on an AS IS BASIS for cash equal to its then Fair Market Value (plus all applicable
sales taxes together with any Rent and other sums due and unpaid on the Expiration Date). Upon
receipt of indefeasible payment in full of such amounts by Lessor, Lessor shall convey all of its
right, title and interest in and to the Aircraft to lessee on an AS IS BASIS without representation
or warranties of any kind, other than the absence of liens created by or through Lessor. Lessee
must give Lessor at least ninety (90) days, but not more than one hundred eighty (180) days, prior
written notice of its intent to purchase.

 

 

     (b) “Fair Market Value” shall mean the price which a willing buyer (who is neither a lessee in
possession nor a used equipment dealer) would pay for the Aircraft in an arm’s-length transaction
to a willing seller under no compulsion to sell. In determining the Fair Market Value: (i) the
Aircraft shall be assumed to be in the condition in which it is required to be maintained and
returned under this Lease, (ii) any installed additions to the Aircraft shall be valued on an
installed basis; and (iii) costs of removal of the Aircraft from the current location shall not be
a deduction from the value of the Aircraft. If Lessor and Lessee are unable to agree on the Fair
Market Value at least sixty (60) days before Lease expiration, Lessor shall appoint an independent
appraiser (reasonably acceptable to Lessee) to determine Fair Market Value. The independent
appraisers determination shall be final, binding and conclusive. Lessee shall bear all costs
associated with any such appraisal.

     (c) Lessee shall be deemed to have waived this purchase option unless it provides Lessor with
written notice of its irrevocable election to exercise the option within fifteen (15) days after
the Fair Market Value is told to Lessee.

	20.	 	MISCELLANEOUS:

     (a) LESSEE AND LESSOR HEREBY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY
DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY
RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THIS TRANSACTION . THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

     (b) The Aircraft shall remain Lessor’s property unless Lessee purchases the Aircraft from
Lessor, and until such time Lessee shall only have the right to use the Aircraft as a lessee. Any
cancellation or termination by Lessor of this Lease, pursuant to the provisions of this Lease,
shall not release Lessee from any then outstanding obligations to Lessor hereunder (unless
otherwise expressly stated herein).

     (c) Time is of the essence of this Lease. Lessee agrees, upon Lessor’s request, to execute,
or otherwise authenticate, any document, record or instrument necessary or expedient for filing,
recording or perfecting the interest of Lessor or to carry out the intent of this Agreement. In
addition, Lessee hereby authorizes Lessor to file a financing statement and amendments thereto
describing the Aircraft and any engines, attachments, appurtenances and parts relating thereto and
containing any other information required by the applicable Uniform Commercial Code. At the
request of Lessor following any expiration or termination of this Lease, Lessee shall execute and
deliver to Lessor, for filing with the FAA, such documents as Lessor shall require to evidence and
confirm the expiration or termination of this Lease and the release of the Aircraft from the terms
and conditions hereof, and if Lessee fails for any reason to execute and deliver such documents to
Lessor, Lessee hereby irrevocably authorizes Lessor to sign Lessee’s name to such documents and
file such documents with the FAA. Lessee hereby ratifies its prior authorization for Lessor to
file financing statements and amendments thereto describing the Aircraft and containing any other
information required by any applicable law (including without limitation the Uniform Commercial
Code) if filed prior to the date hereof. All notices required to be given hereunder shall be
deemed adequately given if delivered in hand or sent by registered or certified mail to the
addressee at its address stated herein, or at such other place as such addressee may have
designated in writing. This Lease together with the Annexes hereto constitute the entire agreement
of the parties with respect to the subject matter hereof, and all Annexes referenced herein are
incorporated herein by reference. NO VARIATION OR MODIFICATION OF THIS LEASE OR ANY WAIVER OF ANY
OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF EACH PARTY TO THIS LEASE.

     (d) If Lessee does not comply with any provision of this Agreement, Lessor shall have the
right, but shall not be obligated, to effect such compliance, in whole or in part. All reasonable
amounts spent and obligations incurred or assumed by Lessor in effecting such compliance shall
constitute additional Rent due to Lessor. Lessee shall pay the additional Rent within ten days
after the date Lessor sends an invoice to Lessee requesting payment. Lessor’s effecting such
compliance shall not be a waiver of any Event of Default.

     (e) Any Rent or other amount not paid to Lessor when due shall bear interest from the due date
until paid, at the lesser of twelve percent (12%) per annum or the maximum rate allowed by law.
Any provisions in this Lease which are in conflict with any statute, law or applicable rule shall
be deemed omitted, modified or altered to conform thereto. Notwithstanding anything to the
contrary contained in this Lease, in no event shall this Lease require the payment or permit the
collection of amounts in excess of the maximum permitted by applicable law.

 

 

     (f) THIS LEASE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT
(WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE AIRCRAFT.

     (g) This Lease may be executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument, and either of the parties hereto may execute this
Lease by signing any such counterpart.

     (h) Each party hereto agrees to keep confidential, the terms and provisions of the Documents
and the transactions contemplated hereby and thereby (collectively, the “Transactions”).
Notwithstanding the foregoing, the obligations of confidentiality contained herein, as they relate
to the Transactions, shall not apply to the federal tax structure or federal tax treatment of the
Transactions, and each party hereto (and any employee, representative, or agent of any party
hereto) may disclose to any and all persons, without limitation of any kind, the federal tax
structure and federal tax treatment of the Transactions. The preceding sentence is intended to
cause each Transaction to be treated as not having been offered under conditions of confidentiality
for purposes of Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the Internal Revenue Code of 1986, as amended, and shall be
construed in a manner consistent with such purpose. In addition, each party hereto acknowledges
that it has no proprietary or exclusive rights to the federal tax structure of the Transactions or
any federal tax matter or federal tax idea related to the Transactions .

 

 

     IN WITNESS WHEREOF, Lessee and Lessor have caused this Lease to be executed by their
duly authorized representatives as of the date first above written.

	 	 	 	 	 	 	 	 	 
	LESSOR:	 	 	 	LESSEE:
	 
	 	 	 	 	 	 	 	 
	CFS Air, LLC	 	 	 	Air Logistics, L.L.C.
	By its Manager	 	 	 	By its Manager
	General Electric Capital Corporation	 	 	 	William E. Chiles
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:
	 	William E. Chiles
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:
	 	Manager
	 

	 	 	 	 	 	 	 	 

 

 

ANNEX A (SN     )

TO AIRCRAFT LEASE AGREEMENT (SN     )

DATED AS OF DECEMBER ______, 2005

Description of Aircraft, Lessor’s Cost, and Aircraft Markings

			
	 	 	 
	I. Description 
	 	Cost: $[See Schedule I]

Sikorsky Model S-76C Helicopter which consists of the following components:

(a) Airframe
bearing FAA Registration Mark     and   Manufacturer’s Serial No.  ;

(b) Two (2) Turbomeca Arriel 2S1 engines bearing Manufacturer’s Serial Nos.
and     respectively (each of which has 750 or more rated takeoff
horsepower or the equivalent of such horsepower);

(c) Four (4) 76150-09100-053 main rotor blades bearing Manufacturer’s Serial
Nos.   ,   ,     and      ;

(d) All other property essential and appropriate to the operation
of the Aircraft, including but not limited to all instruments,
avionics, auxiliary power units, equipment and accessories attached
to, connected with or related to the Aircraft, and all logs,
manuals and other documents issued for, or reflecting use or
maintenance of, the Aircraft.

Capitalized Lessor’s Cost     $[See Schedule I]

II. Aircraft Markings (referenced in the MAINTENANCE Section of Lease)

(a) None, unless Aircraft is operated outside the United States and then; Four-by-six
inch plaque to be maintained in cockpit and affixed in conspicuous position stating:

CFS Air, LLC Owner and Lessor.

Air Logistics, L.L.C. Lessee under a certain

Lease (SN     ) dated as of December _____, 2005

has operational control of this aircraft.

(b) Similar markings shall be permanently affixed to each engine.

Initials:

	 	 	 	 	 	 	 	 	 	 	 
	Lessee:

	 	 	 	 	 	Lessor	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

 

 

ANNEX B (SN     )

DATED THIS DECEMBER ______, 2005

TO AIRCRAFT LEASE AGREEMENT (SN     )

DATED AS OF DECEMBER _____, 2005

	 	 	 	 	 
	Lessor & Mailing Address:

	 	 	 	Lessee & Mailing Address:
	CFS Air, LLC

	 	 	 	Air Logistics, L.L.C.
	44 Old Ridgebury Road

	 	 	 	4605 Industrial Drive
	Danbury, CT 06810

	 	 	 	New Iberia, LA 70560

Capitalized terms not defined herein shall have the meanings assigned to them in the Aircraft Lease
Agreement (SN     ) identified above.

A. Aircraft.

     Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to Lessee the
Aircraft described on Annex A (SN     ) to the Lease.

B. Financial Terms.

	 	 	 	 	 	 	 	 	 
	 

	 	1. 
	 	Advance Rent (if any):
	 	(a) Amount: N/A.
	 	 
	 

	 	 	 	 	 	(b) Due Date: N/A	 	 
	 

	 	2. 
	 	Capitalized Lessor’s Cost:
	 	$[See Schedule I]	 	 
	 

	 	3. 
	 	Basic Term Commencement Date:
	 	January 2, 2006.	 	 
	 

	 	4. 
	 	Basic Term:
	 	One Hundred Twenty (120) months.	 	 
	 

	 	5. 
	 	First Basic Term Rent Date:
	 	January 2, 2006.	 	 
	 

	 	6. 
	 	Basic Term Rent Dates:
	 	2nd day of every month.	 	 
	 

	 	7. 
	 	First Termination Date:
	 	(24) months after the Basic Term Commencement Date.	 	 
	 

	 	8. 
	 	Last Basic Term Rent Date:
	 	December 2, 2015.	 	 
	 

	 	9. 
	 	Last Delivery Date:
	 	December 30, 2005 .	 	 
	 

	 	10. 
	 	Primary Hangar Location:
	 	4605 Industrial Drive, New Iberia, LA 70560	 	 
	 

	 	11. 
	 	Supplier:
	 	Sikorsky Aircraft Corporation	 	 
	 

	 	12. 
	 	Lessee Federal Tax ID No.:
	 	72-1412904.	 	 
	 

	 	13. 
	 	Early Purchase Option:
	 	Option Date: January 2, 2011
	 	 
	 

	 	 
	 	 
	 	
Option Price: $[See Schedule I]	 	 
	 

	 	14. 
	 	Expiration Date:
	 	January 1, 2016.	 	 
	 

	 	15. 
	 	Daily Lease Rate Factor:
	 	[See Schedule I]%	 	 
	 

	 	16. 
	 	Basic Term Lease Rate Factor:	 	 	 	 
	 

	 	 	 	 	 	Factor               
                 Rental No.	 	 
	 

	 	 	 	 	 	[See Schedule I]%              1 – 60	 	 
	 

	 	 	 	 	 	[See Schedule I]%              61-120	 	 

C. Tax Benefits.

     Depreciation Deductions:

	 	a.	 	Depreciation Method: 200% declining balance method, switching to straight line
method for the 1st taxable year for which using the straight line method with respect to
the adjusted basis as of the beginning of such year will yield a larger allowance.
	 
	 	b.	 	Recovery Period: Five (5) years
	 
	 	c.	 	Basis: 100% of Capitalized Lessor’s Cost.

 

 

D. Term and Rent (Rent shall mean Interim Rent and Basic Term Rent) .

	 	1.	 	Interim Rent. For the period from and including the Commencement Date to the Basic
Term Commencement Date (“Interim Period”), Lessee shall pay as Rent (“Interim Rent”) for
the Aircraft, the product of the Daily Lease Rate Factor times the Capitalized Lessor’s
Cost of the Aircraft on this Annex B (SN     ) times the number of days in the Interim
Period. Interim Rent shall be due on January 2, 2006.
	 
	 	2.	 	Basic Term Rent. Commencing on January 2, 2006 and on the same day of each month
thereafter (each, a “Rent Payment Date”) during the Basic Term, Lessee shall pay as Rent
(“Basic Term Rent”) the product of the Basic Term Lease Rate Factor times the
Capitalized Lessor’s Cost of the Aircraft on this Annex B (SN     ).

E. Insurance.

	 	1.	 	Public Liability: $ 50,000,000.00 total liability per occurrence.
	 
	 	2.	 	Casualty and Property Damage: An amount which is not less than the then
Stipulated Loss Value of the Aircraft.

F. Funding Holdback.

The Capitalized Lessor’s Cost set forth above and the Stipulated Loss and Termination
Value Tables shown in Annex F (SN     ) include $[See Schedule I] (the “Holdback Amount”)
to be held by Lessor and released to Lessee per the terms of the Additional Collateral
Agreement dated December___, 2005. Lessor shall pay the Holdback Amount in
consideration for, among other obligations, transfer of title to the Aircraft on the
Commencement Date.

G. Amendments to Lease.

Except as expressly modified hereby, all terms and provisions of the Lease shall remain in full
force and effect. This Annex B is not binding or effective with respect to the Lease or the
Aircraft until executed on behalf of Lessor and Lessee by authorized representatives of Lessor and
Lessee, respectively.

 

 

     IN WITNESS WHEREOF, Lessee and Lessor have caused this Annex B to be executed by
their duly authorized representatives as of the date first above written.

	 	 	 	 	 	 	 	 	 
	LESSOR:	 	 	 	LESSEE:
	 
	 	 	 	 	 	 	 	 
	CFS Air, LLC	 	 	 	Air Logistics, L.L.C.
	By its Manager	 	 	 	By its Manager
	General Electric Capital Corporation	 	 	 	William E. Chiles
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:
	 	William E. Chiles
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:
	 	Manager
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Attest
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 
	 

	 	 	 	 	 	 	 	 

 

 

ANNEX C (SN     )

TO

TO AIRCRAFT LEASE AGREEMENT (SN     )

DATED AS OF DECEMBER ______, 2005

BILL OF SALE

Air Logistics, L.L.C. (the “Seller”), in consideration of the sum of [See Schedule I] plus
sales taxes in the amount of Zero Dollars ($0.00) paid by CFS Air, LLC (together with its
successors and assigns, if any, the “Buyer”), receipt of which is acknowledged, hereby grants,
sells, assigns, transfers and delivers to Buyer the aircraft (the “Aircraft”) described in Annex
A (SN ) to the above referenced Aircraft Lease Agreement (SN ) (“Lease”), along with
whatever claims and rights Seller may have against the manufacturer and/or supplier of the
Aircraft (the “Supplier”), including but not limited to all warranties and representations.

Buyer is purchasing the Aircraft for leasing to Lessee pursuant to the Lease. Seller represents
and warrants to Buyer that (1) Buyer will acquire by the terms of this Bill of Sale good title to
the Aircraft free from all liens and encumbrances whatsoever; and (2) Seller has the right to
sell the Aircraft.

Seller agrees to save and hold harmless Buyer from and against any and all federal, state,
municipal and local license fees and taxes of any kind or nature, including, without limiting the
generality of the foregoing, any and all excise, personal property, use and sales taxes, VAT,
stamp, withholding, and from and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions and suits resulting therefrom and imposed upon, incurred by or
asserted against Buyer as a consequence of the sale of the Aircraft to Buyer.

 

 

IN WITNESS WHEREOF, Seller has executed this Bill of Sale this ___day of
December, 2005.

	 	 	 	 	 
	 	 	SELLER:
	 
	 	 	 	 
	 	 	Air Logistics, L.L.C.
	 	 	By its Manager
	 	 	William E. Chiles
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	William E. Chiles
	 
	 	 	 	 
	 

	 	Title:
	 	Manager

 

 

ANNEX D

CERTIFICATE (SN     )

CERTIFICATE OF MANAGERS/MEMBERS OF AIR LOGISTICS, L.L.C.

INTENTIONALLY OMITTED

 

 

ANNEX E

CERTIFICATE OF ACCEPTANCE (SN     )

     AIRCRAFT LEASE AGREEMENT (SN     ) dated as of December ___, 2005 (the
“Lease”), between CFS Air, LLC together with its successors and assigns, if any, as lessor (the
“Lessor”), and Air Logistics, L.L.C. as lessee (the “Lessee”).

     A. The Aircraft: Lessee hereby certifies, as of the date set forth below, that the Aircraft
as set forth and described in Annex A (SN     ) to the Lease has been delivered to Lessee,
inspected by Lessee, found to be in good order and fully equipped to operate as required under
applicable law for its intended purpose, and is fully and finally accepted under the Lease.

     B. Representations by Lessee: Lessee hereby represents and warrants to Lessor that on the
date hereof:

	 	(1)	 	The representations and warranties of Lessee set forth in the Lease and all
certificates delivered in connection therewith were true and correct in all respects
when made and are true and correct as of the date hereof.
	 
	 	(2)	 	Lessee has satisfied or complied with all conditions precedent and requirements
set forth in the Lease which are required to be or to have been satisfied or complied
with on or prior to the date hereof.
	 
	 	(3)	 	No Default or Event of Default under the Lease has occurred and is continuing
on the date hereof.
	 
	 	(4)	 	Lessee has obtained, and there are in full force and effect, such insurance
policies with respect to the Aircraft, as are required to be obtained under the terms
of the Lease.
	 
	 	(5)	 	Lessee has furnished no equipment for the Aircraft other than as sold to Lessor
and as stated on Annex A (SN     ) hereto or permitted as an addition thereto
pursuant to the Lease.
	 
	 	(6)	 	The Lessee has inspected the Aircraft and all pertinent records therefor and
the Aircraft has no damage history.

 

 

     IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be duly
executed by its officers thereunto duly authorized.

	 	 	 	 	 	 	 
	 	 	Lessee:	 	 
	 	 	Air Logistics, L.L.C.	 	 
	 	 	By its Manager	 	 
	 	 	William E. Chiles	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Name: William E. Chiles	 	 
	 
	 	 	 	 	 	 
	 	 	Title: Manager	 	 
	 
	 	 	 	 	 	 
	 	 	Date:	 	 
	 

	 	 	 	 	 	 

 

 

ANNEX F (SN  )

Stipulated Loss and Termination Values

     The Stipulated Loss and Termination Value of the Aircraft shall be the
percentage of Capitalized Lessor’s Cost of the aircraft set forth opposite the applicable
rent payment.

Capitalized
Lessor’s Cost   $ [See Schedule I]

	 	 	 	 	 	 	 	 	 
	# of	 	 	 	 	 	stipulated
	base	 	termination	 	loss
	payments	 	value	 	value
	1 
	 	 	103.300	 	 	 	103.300	 
	2 
	 	 	103.236	 	 	 	103.236	 
	3 
	 	 	103.004	 	 	 	103.004	 
	4 
	 	 	102.744	 	 	 	102.744	 
	5 
	 	 	102.475	 	 	 	102.475	 
	6 
	 	 	102.198	 	 	 	102.198	 
	7 
	 	 	101.911	 	 	 	101.911	 
	8 
	 	 	101.621	 	 	 	101.621	 
	9 
	 	 	101.322	 	 	 	101.322	 
	10
	 	 	101.013	 	 	 	101.013	 
	11
	 	 	100.702	 	 	 	100.702	 
	12
	 	 	100.381	 	 	 	100.381	 
	13
	 	 	100.051	 	 	 	100.051	 
	14
	 	 	99.717	 	 	 	99.717	 
	15
	 	 	99.380	 	 	 	99.380	 
	16
	 	 	99.036	 	 	 	99.036	 
	17
	 	 	98.686	 	 	 	98.686	 
	18
	 	 	98.329	 	 	 	98.329	 
	19
	 	 	97.965	 	 	 	97.965	 
	20
	 	 	97.598	 	 	 	97.598	 
	21
	 	 	97.224	 	 	 	97.224	 
	22
	 	 	96.844	 	 	 	96.844	 
	23
	 	 	96.460	 	 	 	96.460	 
	24
	 	 	96.069	 	 	 	96.069	 
	25
	 	 	95.672	 	 	 	95.672	 
	26
	 	 	95.272	 	 	 	95.272	 
	27
	 	 	94.867	 	 	 	94.867	 
	28
	 	 	94.459	 	 	 	94.459	 
	29
	 	 	94.046	 	 	 	94.046	 
	30
	 	 	93.629	 	 	 	93.629	 
	31
	 	 	93.207	 	 	 	93.207	 
	32
	 	 	92.783	 	 	 	92.783	 
	33
	 	 	92.353	 	 	 	92.353	 

Initials: Lessee                         Lessor:                    

 

 

	 	 	 	 	 	 	 	 	 
	# of	 	 	 	 	 	stipulated
	base	 	            termination	 	loss
	payments	 	            value	 	value
	34
	 	 	91.919	 	 	 	91.919	 
	35
	 	 	91.482	 	 	 	91.482	 
	36
	 	 	91.041	 	 	 	91.041	 
	37
	 	 	90.595	 	 	 	90.595	 
	38
	 	 	90.146	 	 	 	90.146	 
	39
	 	 	89.693	 	 	 	89.693	 
	40
	 	 	89.236	 	 	 	89.236	 
	41
	 	 	88.775	 	 	 	88.775	 
	42
	 	 	88.310	 	 	 	88.310	 
	43
	 	 	87.841	 	 	 	87.841	 
	44
	 	 	87.368	 	 	 	87.368	 
	45
	 	 	86.892	 	 	 	86.892	 
	46
	 	 	86.411	 	 	 	86.411	 
	47
	 	 	85.927	 	 	 	85.927	 
	48
	 	 	85.439	 	 	 	85.439	 
	49
	 	 	84.947	 	 	 	84.947	 
	50
	 	 	84.451	 	 	 	84.451	 
	51
	 	 	83.952	 	 	 	83.952	 
	52
	 	 	83.450	 	 	 	83.450	 
	53
	 	 	82.945	 	 	 	82.945	 
	54
	 	 	82.438	 	 	 	82.438	 
	55
	 	 	81.928	 	 	 	81.928	 
	56
	 	 	81.414	 	 	 	81.414	 
	57
	 	 	80.898	 	 	 	80.898	 
	58
	 	 	80.379	 	 	 	80.379	 
	59
	 	 	79.857	 	 	 	79.857	 
	60
	 	 	79.332	 	 	 	79.332	 
	61
	 	 	78.803	 	 	 	78.803	 
	62
	 	 	78.110	 	 	 	78.110	 
	63
	 	 	77.413	 	 	 	77.413	 
	64
	 	 	76.715	 	 	 	76.715	 
	65
	 	 	76.015	 	 	 	76.015	 
	66
	 	 	75.314	 	 	 	75.314	 
	67
	 	 	74.611	 	 	 	74.611	 
	68
	 	 	73.903	 	 	 	73.903	 
	69
	 	 	73.195	 	 	 	73.195	 
	70
	 	 	72.485	 	 	 	72.485	 
	71
	 	 	71.770	 	 	 	71.770	 
	72
	 	 	71.054	 	 	 	71.054	 
	73
	 	 	70.337	 	 	 	70.337	 
	74
	 	 	69.615	 	 	 	69.615	 
	75
	 	 	68.889	 	 	 	68.889	 
	76
	 	 	68.161	 	 	 	68.161	 
	77
	 	 	67.432	 	 	 	67.432	 
	78
	 	 	66.703	 	 	 	66.703	 
	79
	 	 	65.971	 	 	 	65.971	 

Initials: Lessee                         Lessor:                    

 

 

	 	 	 	 	 	 	 	 	 
	# of	 	 	 	 	 	stipulated
	base	 	            termination	 	loss
	payments	 	            value	 	value
	80
	 	 	65.236	 	 	 	65.236	 
	81
	 	 	64.499	 	 	 	64.499	 
	82
	 	 	63.761	 	 	 	63.761	 
	83
	 	 	63.019	 	 	 	63.019	 
	84
	 	 	62.275	 	 	 	62.275	 
	85
	 	 	61.530	 	 	 	61.530	 
	86
	 	 	60.781	 	 	 	60.781	 
	87
	 	 	60.027	 	 	 	60.027	 
	88
	 	 	59.273	 	 	 	59.273	 
	89
	 	 	58.516	 	 	 	58.516	 
	90
	 	 	57.759	 	 	 	57.759	 
	91
	 	 	57.001	 	 	 	57.001	 
	92
	 	 	56.238	 	 	 	56.238	 
	93
	 	 	55.474	 	 	 	55.474	 
	94
	 	 	54.708	 	 	 	54.708	 
	95
	 	 	53.938	 	 	 	53.938	 
	96
	 	 	53.167	 	 	 	53.167	 
	97
	 	 	52.395	 	 	 	52.395	 
	98
	 	 	51.619	 	 	 	51.619	 
	99
	 	 	50.838	 	 	 	50.838	 
	100
	 	 	50.055	 	 	 	50.055	 
	101
	 	 	49.272	 	 	 	49.272	 
	102
	 	 	48.487	 	 	 	48.487	 
	103
	 	 	47.701	 	 	 	47.701	 
	104
	 	 	46.911	 	 	 	46.911	 
	105
	 	 	46.119	 	 	 	46.119	 
	106
	 	 	45.327	 	 	 	45.327	 
	107
	 	 	44.530	 	 	 	44.530	 
	108
	 	 	43.731	 	 	 	43.731	 
	109
	 	 	42.932	 	 	 	42.932	 
	110
	 	 	42.128	 	 	 	42.128	 
	111
	 	 	41.319	 	 	 	41.319	 
	112
	 	 	40.510	 	 	 	40.510	 
	113
	 	 	39.699	 	 	 	39.699	 
	114
	 	 	38.887	 	 	 	38.887	 
	115
	 	 	38.073	 	 	 	38.073	 
	116
	 	 	37.256	 	 	 	37.256	 
	117
	 	 	36.437	 	 	 	36.437	 
	118
	 	 	35.617	 	 	 	35.617	 
	119
	 	 	34.792	 	 	 	34.792	 
	120
	 	 	33.966	 	 	 	33.966	 

[Note – Termination and Stipulated Loss Values may vary in individual leases by immaterial amounts.]

Initials: Lessee                         Lessor:                    

 

 

ANNEX
G (SN     )

TO

AIRCRAFT LEASE (SN ) DATED DECEMBER _____, 2005

ADDITIONAL MAINTENANCE AND RETURN CONDITIONS

The above captioned Aircraft Lease Agreement (SN ) between CFS Air, LLC (“Lessor”) and
Air Logistics, L.L.C. (“Lessee”) shall be amended by adding the following:

     GENERAL CONDITIONS:

     (1) Upon Lease termination, Lessee shall, at Lessee’s expense, return the Aircraft to a
location in the Continental United States as Lessor shall designate. Lessee shall take reasonable
care to protect the Aircraft from damage and mechanical and appearance degradation. Such
reasonable care shall include, but not be limited to, installation of all covers, tie-downs, and
other protective, shipping or storage devices delivered to Lessee with the Aircraft at Lease
inception.

     (2) Upon Lease termination, it is agreed that, if requested in writing, Lessee will use
reasonable efforts to locate and secure adequate indoor hangar facilities for the storage of the
Aircraft. All costs incurred by Lessee in securing hangar facilities for the Aircraft will be
reimbursed by Lessor on a “net-net” basis, and only after Lessee has received written authorization
from Lessor to secure such storage, including the rate to be paid.

     (3) If so requested in writing by Lessor, Lessee shall, at Lessor’s expense, maintain
uninterrupted insurance coverage with Lessor listed as an “Additional Named Insured”, listing the
Lessor as “Loss Payee”, including a “Lender’s (or Lessor’s/Owner’s) Interest Endorsement” (commonly
referred to as a “Breach of Warranty Endorsement) for a period not to exceed ninety (90) days.
This period may be extended if so agreed in writing by both Lessee and Lessor.

     (4) The Aircraft and all its parts, components, avionics, and installed optional equipment
shall be clear of all liens and encumbrances other than those in favor of Lessor or their assignee
or permitted under Section 8(a) of the Lease.

     (5) Lessee shall make the Aircraft and all related books and records available for inspection
by Lessor or its representative once annually throughout the term of the Lease and any time within
a ninety (90) day period prior to Lease termination. This shall be followed by a return acceptance
inspection by Lessor or its representative concurrent with Lease termination.

     AIRCRAFT CONDITIONS:

     (6) The Aircraft shall be returned to Lessor in good operating condition. It shall be both
flyable and “Airworthy” as described in the Federal Aviation Regulations (“FAR”). All windshields,
“chin windows,” door glass, and fuselage windows shall be free of cracks. All interior trim pieces
shall be free of damage (normal wear and tear excepted). The exterior paint shall be in good
condition (normal wear and tear excepted). All markings applied by, or on behalf of, the Lessee
shall be removed in such a manner so as to return the Aircraft to its appearance as of the time the
Lessee originally took possession of the Aircraft, or which has been subsequently approved by
Lessor.

     (7) All parts and components that have a specified service life or maintenance interval
approved by the Federal Aviation Administration (“FAA”), whether it be an overhaul requirement,
time retirement or inspection, shall have at least 50% of their scheduled life remaining.
Remaining life shall be computed from 50% point of whichever the determining service limit to be
reached first is, whether it be calendar time, number of cycles or flight hours. (When computing
the remaining life of any component, the most recent intervals published by the manufacturer and
approved by the FAA for unrestricted use shall be utilized).

     (8) The dollar figures for calculating the debits of times with a mandatory service life
limit shall be the then-current manufacturer’s list price.

     (9) The dollar figures for calculating the debits of items with manufacturer recommended
overhaul interval shall be determined by the manufacturers then current list price.

     (10) Any parts and components installed at the termination of the Lease shall be of the same
configuration and part number (or approved superceding configuration and part number) as were
installed at Lease inception.

 

 

     (11) The Aircraft must have had an “Annual Inspection” as described in the FARs performed by
an FAA Certificated Repair Station within thirty (30) days of the date of termination of the Lease.
Lessee shall, at their expense, correct any discrepancies discovered during the Annual Inspection,
and any other discrepancies which may become evident prior to Lease termination.

     Lessee shall provide to Lessor evidence that all monies due pursuant to the Power By Hour
maintenance service program has been paid in full to supplier of such program.

     Lessee shall also conduct an engine power assurance check, with the results documented and
signed by the person performing the check. Lessee shall, at their expense, take whatever actions
are necessary to ensure that the engine(s) produce their rated power. Lessee shall also ensure
that main and tail rotor vibration levels shall be equal to, or lower than, the minimum acceptable
limits quoted by the airframe manufacturer. In the absence of published minimum vibration levels,
main and tail rotor vibration levels shall be 0.2 Inches Per Second (“IPS”) or less.

     (12) Commencing with Lease inception, and continuing uninterrupted throughout the duration of
the Lease, the Lessee shall maintain separate consolidated lists of Airworthiness Directives (“AD”)
and mandatory Service Bulletins (“SB”), for both the airframe and engine(s), in a form similar to
the attached sample forms entitled: “Airworthiness Directive Compliance Record” and “Service
Bulletin Compliance Record.”

     NOTE: Computer generated AD & SB compliance reports may be acceptable if EACH PAGE
contains at least the information required in blocks 1 through 11 on the sample forms plus a
certification statement and signature of an appropriately FAA licensed maintenance technician. The
certification statement should be similar to the following:

     I hereby certify that the Airworthiness Directives and manufacturer’s Service Bulletins listed
on this sheet have been checked for compliance and have proven to be accurate. I further certify
that the necessary entries have been made in the permanent Aircraft records in compliance with Part
43 of the Federal Aviation Regulations.

Signed:  
           Certificate Number:  
            Date:  
          
  AFTT:
            Eng #1 TT                        Eng #2 TT:                      

     (13) All maintenance record entries shall be in the form and format specified in FAR Part 43.

     (14) All parts and components installed on the Aircraft shall originate from commercial
manufacturers holding appropriate FAA approvals and shall be traceable to the original
manufacturer, with proper statement of manufacturer’s authority quoted. Invoices for parts should
include the following, or a similarly worded statement:

     The parts identified on this invoice conform to manufacturer’s approved standards, current
(insert OEM name) publications, and FAA requirements.

     (15) The Aircraft shall be returned in the same configuration as it was at the time of
delivery to the Lessee, unless otherwise agreed to by both parties. Any FAA approved modifications
installed by Lessee during the Lease period that cannot be removed without leaving evidence of
their installation shall become a permanent part of the Aircraft and the property of the Lessor.

     (16) The following items shall be returned to Lessor at the termination of the Lease:

	 	(a)	 	All maintenance records
	 
	 	(b)	 	Current copies of all parts, maintenance, and flight manuals and copies of all
SBs and ADs applicable to the Aircraft
	 
	 	(c)	 	All loose equipment (tie-downs, ground handling wheels, tow bars, covers, and
other specialized equipment) that was delivered to Lessee with the Aircraft, or which
have become necessary because of additional installed equipment or modifications to the
Aircraft.

	 	 	 
	Initials:  Lessee                    

	 	Lessor:                    

 

 

ANNEX
H (SN  )

TO

AIRCRAFT LEASE AGREEMENT (SN  )

DATED AS OF DECEMBER ____, 2005

Definition of “Guarantor Change of Control”

“Guarantor Change of Control” means the occurrence of any of the following:

          (1) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of all
or substantially all of the properties or assets of the Guarantor and its
subsidiaries (determined on a consolidated basis);

          (2) the adoption of a plan relating to the liquidation or dissolution of the
Guarantor;

          (3) any “person” (as such term is used in Section 13(d)(3) of the Exchange Act)
becomes the “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly through one or more intermediaries,
of more than 50% of the voting power of the outstanding voting stock of the
Guarantor; or

          (4) the first day on which more than a majority of the members of the board of
directors are not Continuing Directors (as hereinafter defined); provided, however,
that, with respect to clause (3) above, a transaction in which the Guarantor becomes
a subsidiary of another Entity (as hereinafter defined) shall not constitute a
Change of Control if

	 	(a)	 	the stockholders of the Guarantor immediately prior to
such transaction “beneficially own” (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly
through one or more intermediaries, at least a majority of the voting
power of the outstanding voting stock of the Guarantor immediately
following the consummation of such transaction; and
	 
	 	(b)	 	immediately following the consummation of such
transaction, no “person” (as such term is defined above), other than
such other Entity (but including the holders of the equity interests of
such other Entity), “beneficially owns” (as such term is defined
above), directly or indirectly through one or more intermediaries, more
than 50% of the voting power of the outstanding voting stock of the
Guarantor.

In this Section, “Continuing Directors” means, as of any date of determination, any
member of the board of directors who (a) was a member of the board of directors on
June 20, 2003 or (b) was nominated for election to the board of directors with the
approval of, or whose election to the board of directors as ratified by, at least a
majority of the Continuing Directors who were members of the board of directors at
the time of such nomination or election. “Entity” means any corporation,
partnership, joint venture, association, joint-stock company, trust, unincorporated
organization, limited liability company, government or any agency or political
subdivision hereof or any other entity.

Page 30 of 30

 

Schedule I – Summary of Lease-specific Terms

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lease No.	 	Cost / Capitalized Lessor’s Cost	 	Daily Lease Rate Factor	 	Holdback Amount	 	Early
    Purchase Option Price	 	Term
Lease Rate Factor
    
	SN 760527
	 	$	7,110,000.00	 	 	 	0.0255265	%	 	$	1,142,000.00	 	 	 	* * *	 	 	 	* * *	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 									
	SN 760529
	 	$	7,1920,000.00	 	 	 	0.0255267	%	 	$	1,142,000.00	 	 	 	* * *	 	 	 	* * *	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 									
	SN 760531
	 	$	7,410,000.00	 	 	 	0.02552363	%	 	$	1,142,000.00	 	 	 	* * *	 	 	 	* * *	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 									
	SN 760536
	 	$	7,520,000.00	 	 	 	0.015954	%	 	$	1,142,000.00	 	 	 	* * *	 	 	 	* * *	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 									
	SN 760557
	 	$	7,840,000.00	 	 	 	0.016068	%	 	$	1,142,000.00	 	 	 	* * *	 	 	 	* * *	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 									
	SN 760562
	 	$	7,880,000.00	 	 	 	0.0160813	%	 	$	1,142,000.00	 	 	 	* * *	 	 	 	* * *	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 									
	SN 760564
	 	$	7,830,000.00	 	 	 	0.0160643	%	 	$	1,142,000.00	 	 	 	* * *	 	 	 	* * *	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 									
	SN 760579
	 	$	7,920,000.00	 	 	 	0.016095	%	 	$	1,142,000.00	 	 	 	* * *	 	 	 	* * *	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 									
	SN 760580
	 	$	7,940,000.00	 	 	 	0.0160853	%	 	$	1,149,000.00	 	 	 	* * *	 	 	 	* * *	 

[NOTE — INFORMATION
MARKED * * * HAS BEEN OMITTED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SEC PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST UNDER RULE 24b-2.]exv10w16

 

Exhibit 10.16

EXECUTIVE EMPLOYMENT AGREEMENT

     This Employment Agreement (this “Agreement”) is made as of November 28, 2005 (the “Effective
Date”), by and between BMC Software, Inc., a Delaware corporation (the “Employer”), and Denise M.
Clolery (the “Executive”). The Employer and the Executive are each a “party” and are together
“parties” to this Agreement.

RECITALS

     WHEREAS, the Employer desires to employ the Executive, and the Executive wishes to accept such
employment, upon the terms and conditions set forth in this Agreement.

AGREEMENT

     NOW THEREFORE, in consideration of the employment compensation to be paid to the Executive and
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties, intending to be legally bound, agree as follows:

	1.	 	DEFINITIONS

     For the purposes of this Agreement, the following terms have the meanings specified or
referred to in this Section 1.

     “Agreement” refers to this Employment Agreement, including all Exhibits attached hereto, as
amended from time to time.

     “Benefits” as defined in Section 3.1(b).

     “Board of Directors” refers to the board of directors of the Employer.

     “Change of Control” refers to (i) the acquisition of at least 50% of Employer’s outstanding
voting stock; (ii) an unapproved change in the majority of the Employer’s board of directors; (iii)
a merger, consolidation, or similar corporate transaction in which the Company’s shareholders
immediately prior to the transaction do not own more than 60% of the voting stock of the surviving
corporation in the transaction; and (iv) shareholder approval of the company’s liquidation,
dissolution, or sale or substantially all of its assets.

     “Confidential Information” means any and all:

	 	a.	 	trade secrets (as defined herein) concerning the business and
affairs of the Employer, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, past, current, and planned research and
development, current and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated

1

 

	 	 	 	customer requirements, price lists, market studies, business plans, computer
software and programs (including object code and source code), computer
software and database technologies, systems, structures, and architectures
(and related formulae, compositions, processes, improvements, devices,
know-how, inventions, discoveries, concepts, ideas, designs, methods and
information), and any other information, however documented, that is a trade
secret;
	 
	 	b.	 	information concerning the business and affairs of the Employer
(which includes historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and plans,
the names and backgrounds of key personnel, personnel training and techniques
and materials), however documented; and
	 
	 	c.	 	notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based, in whole or in
part, on any information included in the foregoing.

     “Disability” as defined in Section 6.2.

     “Effective Date” is the date stated in the first paragraph of the Agreement.

     “Employee Invention” shall mean any idea, invention, technique, modification, process, or
improvement (whether patentable or not), any industrial design (whether registerable or not), any
mask work, however fixed or encoded, that is suitable to be fixed, embedded or programmed in a
semiconductor product (whether recordable or not), and any work of authorship (whether or not
copyright protection may be obtained for it) created, conceived, or developed by the Executive,
either solely or in conjunction with others, during the Employment Period, or a period that
includes a portion of the Employment Period, that relates in any way to, or is useful in any manner
in, the business then being conducted or proposed to be conducted by the Employer, and any such
item created by the Executive, either solely or in conjunction with others, following termination
of the Executive’s employment with the Employer, that is based upon or uses Confidential
Information.

     “Employment Period” is the term of the Executive’s employment under this Agreement.

     “Fiscal Year” shall mean the Employer’s fiscal year, which shall end on March 31 of each year,
or as changed from time to time.

     “for cause” as defined in Section 6.3.

     “Good Reason” as defined in Section 6.3.

2

 

     “person” is any individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust, association,
organization, or governmental body.

     “Proprietary Items” as defined in Section 7.2(a)(iv).

     “Salary” as defined in Section 3.1(a).

     “trade secrets” shall mean the whole or any part of any scientific or technical information,
design, process, procedure, formula, or improvement that has value and that the owner has taken
measures to prevent from becoming available to persons other than those selected by the owner to
have access for limited purposes.

	2.	 	EMPLOYMENT TERMS AND DUTIES

     2.1 EMPLOYMENT

     The Employer hereby employs the Executive, and the Executive hereby accepts employment by the
Employer, upon the terms and conditions set forth in this Agreement.

     2.2 EMPLOYMENT PERIOD

     Subject to the provisions of Section 6, the term of the Executive’s employment under this
Agreement will commence upon the Effective Date and shall continue in effect through the third
anniversary of the Effective Date (the “Employment Period”); provided, however, that, subject to
the provisions of Section 6, commencing on the day after the Effective Date and on each day
thereafter, the Employment Period shall be automatically extended for one additional day unless the
Employer shall give written notice to Executive that the Employment Period shall cease to be so
extended, in which event the Employment Period shall terminate on the third anniversary of the date
such notice is given. The Employment Period may be further extended by mutual agreement of the
parties.

     2.3 DUTIES

     The Executive will have such duties as are assigned or delegated to the Executive by the Board
of Directors, and will initially serve as the Employer’s Senior
Vice President — General Counsel and Secretary reporting to the Company’s chief executive officer. The Executive will devote her
entire business time, attention, skill, and energy exclusively to the business of the Employer,
will use her best efforts to promote the success of the Employer’s business, and will cooperate
fully with the Board of Directors in the advancement of the best interests of the Employer. The
Executive’s employment will be subject to the policies maintained and established by the Employer,
from time to time. Nothing in this Section 2.3, however, will prevent the Executive from engaging
in additional activities in connection with passive personal investments and community affairs that
are not inconsistent with the Executive’s duties under this Agreement. Additionally, nothing in
this Section 2.3 will prevent the Executive from

3

 

serving on the Board of Directors of other companies or organizations, or engaging in other
activities, so long as such participation does not conflict with the interests or business of
Employer or require such involvement as to interfere with the performance of the Executive’s duties
hereunder and has been expressly approved by the Chief Executive Officer of Employer. If the
Executive is elected as a director of the Employer or as a director or officer of any of its
affiliates, the Executive will fulfill her duties as such director or officer without additional
compensation. The Executive acknowledges and agrees that she owes a fiduciary duty of loyalty,
fidelity and allegiance to act at all times in the best interests of the Employer.

	3.	 	COMPENSATION

	 	3.1	 	COMPENSATION

	 	a.	 	Salary. During the Employment Period, the Executive
will be paid an annual base salary of $375,000 (the “Salary”), which will be
payable in twenty-four (24) equal installments according to the Employer’s
customary payroll practices. Executive may be subject to such increases in
Salary as deemed appropriate in the sole discretion of the Compensation
Committee of the Board of Directors of Employer.
	 
	 	b.	 	Benefits. The Executive will, during the Employment
Period, be permitted to participate in such pension, profit sharing, life
insurance, hospitalization, major medical, and other employee benefit plans of
the Employer that may be in effect from time to time, to the extent the
Executive is eligible under the terms of those plans (collectively, the
“Benefits”).
	 
	 	c.	 	Cash Bonus. Executive will be eligible for a cash
bonus based as described in Attachment A incorporated herein by reference.
	 
	 	d.	 	Stock Options. Executive will, upon execution of this
agreement, receive the right and option to purchase 75,000 shares of stock of
the Employer, such options to be subject to the terms and conditions of the BMC
Software, Inc 1994 Employee Incentive Plan and the Executive Stock Option
Agreement.
	 
	 	e.	 	Long-Term Incentive Plan. Executive will be eligible
to participate in the BMC Long-Term Incentive plan providing a 3-year cash plan
based on Employer’s total shareholder return against a peer group of companies
with the first plan for new members divided into two payments: 18 month
payment (target is at $100,000 payment) and 36 month payment (target is at
$100,000 payment).

4

 

	4.	 	FACILITIES AND EXPENSES

	 	4.1	 	FACILITIES.

     The Employer will furnish the Executive office space, equipment, supplies, and such
other facilities and personnel as the Employer deems necessary or appropriate for the
performance of the Executive’s duties under this Agreement.

	 	4.2	 	EXPENSES.

     The Employer will pay on behalf of the Executive (or reimburse the Executive for)
reasonable expenses incurred by the Executive at the request of, or on behalf of, the
Employer in the performance of the Executive’s duties pursuant to this Agreement, and in
accordance with the Employer’s employment policies, including reasonable expenses incurred
by the Executive in attending business meetings, in appropriate business entertainment
activities, and for promotional expenses. The Executive must file expense reports with
respect to such expenses in accordance with the Employer’s policies then in effect.

	5.	 	VACATIONS AND HOLIDAYS

     The Executive will be entitled to paid vacation during the term of the Agreement in accordance
with the vacation policies of the Employer in effect for its employees from time to time. The
Executive will also be entitled to the paid holidays and other paid leave set forth in the
Employer’s policies.

	6.	 	TERMINATION

	 	6.1	 	EVENTS OF TERMINATION

     The Employment Period, the Executive’s Salary and any and all other rights of the Executive
under this Agreement or otherwise as an employee of the Employer will terminate (except as
otherwise provided in this Section 6):

	 	a.	 	upon the death of the Executive;
	 
	 	b.	 	upon the Disability (as defined in Section 6.2) of the
Executive immediately upon notice from either party to the other;
	 
	 	c.	 	upon termination by the Employer for cause (as defined in
Section 6.3);
	 
	 	d.	 	upon the voluntary retirement from or voluntary resignation of
employment by the Executive for any reason other than those set forth in
Section 6.1(f) below;

5

 

	 	e.	 	upon termination by the Employer for any reason other than
those set forth in Section 6.1(a) through 6.1(d) above; or
	 
	 	f.	 	upon voluntary resignation of employment by the Executive
within 60 days of the occurrence of an event that constitutes Good Reason, as
defined in Section 6.3 below.

     Upon termination of the Employment Period, as provided above or otherwise, Executive’s rights
respecting Benefits, Stock Options, and Cash Bonus will be determined under the applicable plan or
program providing the same.

	 	6.2	 	DEFINITION OF DISABILITY

     For purposes hereof, the term “Disability” shall mean an incapacity by accident, illness or
other circumstance which renders the Executive mentally or physically incapable of performing the
duties and services required of the Executive hereunder on a full-time basis for a period of at
least 180 consecutive days.

	 	6.3	 	DEFINITION OF “FOR CAUSE” AND “GOOD REASON”

	 	a.	 	For purposes of Section 6.1, the phrase “for cause” means: (i)
the Executive’s continued and material failure to perform her obligations under
this Agreement; (ii) the Executive’s material failure to adhere to any Employer
policy or code of conduct; (iii) the appropriation (or attempted appropriation)
of a material business opportunity of the Employer, including attempting to
secure or securing any personal profit in connection with any transaction
entered into on behalf of the Employer; (iv) the Executive’s engaging in
conduct that is materially injurious to the Employer, (v) the misappropriation
(or attempted misappropriation) of any of the Employer’s funds or property;
(vi) the conviction of or the entering of a guilty plea or plea of no contest
with respect to, a felony, the equivalent thereof, or any other crime with
respect to which imprisonment is a punishment; or (vii) the conviction of the
Executive by a court of competent jurisdiction of a crime involving moral
turpitude. The determination of whether the Executive’s employment is
terminated for cause shall be made solely by the Employer, which shall act in
good faith in making such determination.
	 
	 	b.	 	“Good Reason” means:

	 	i.	 	The occurrence, prior to a Change of Control or
on or after the date which is 12 months after a Change of Control
occurs, of any one or more of the following events without the
Executive’s express written consent: (i) Executive no longer being, at
a minimum,

6

 

	 	 	 	Senior Vice President – General Counsel and Secretary with
substantially similar responsibilities (included an alteration in
Executive’s reporting responsibilities); (ii) a reduction in the
Executive’s Salary or target bonus amount from that provided to her
immediately on the Effective Date of this Agreement (or the effective
date of any extension of this Agreement pursuant to Paragraph 7(a))
or as the same may be increased from time to time; (iii) a
diminution in employee benefits (including but not limited to
medical, dental, life insurance and long-term disability plans) and
perquisites applicable to the Executive from those substantially
similar to the employee benefits and perquisites provided by the
Employer (including subsidiaries) to executives with comparable
duties, as such benefits may be modified from time to time; or (iv)
the Employer or a subsidiary thereof requiring Executive to be
permanently based anywhere other than within 50 miles of Houston,
Texas; or
	 
	 	ii.	 	The occurrence, within 12 months after the date
upon which a Change of Control occurs, of any one or more of the
following events without Executive’s express written consent: (i) a
change in Executive’s reporting responsibilities, titles or offices as
in effect immediately prior to the Change of Control or any removal of
Executive from, or any failure to re-elect Executive to, any of such
positions which has the effect of diminishing Executive’s
responsibility or authority; (ii) a reduction by the Employer or a
subsidiary thereof in Executive’s Salary or bonus target amount as in
effect immediately prior to the Change of Control or as the same may be
increased from time to time or a change in the eligibility requirements
or performance criteria under any bonus, incentive or compensation
plan, program or arrangement under which Executive is covered
immediately prior to the Change of Control which adversely affects
Executive; (iii) the Employer or a subsidiary thereof requiring
Executive to be permanently based anywhere other than within 50 miles
of Executive’s job location at the time of the Change of Control; (iv)
without replacement by a plan providing benefits to Executive equal to
or greater than those discontinued, the failure by the Employer or a
subsidiary thereof to continue in effect, within its maximum stated
term, any pension, bonus, incentive, stock ownership, purchase, option,
life insurance, health, accident, disability, or any other employee
benefit plan, program or arrangement in which Executive is
participating at the time of the Change of Control, or the taking of
any action by the Employer or a subsidiary thereof that would adversely
affect Executive’s participation or materially reduce Executive’s
benefits under any of such plans; (v) the taking of any action by the

7

 

	 	 	 	Employer or a subsidiary thereof that would materially adversely
affect the physical conditions existing at the time of the Change of
Control in or under which Executive performs her employment duties;
(vi) if Executive’s primary employment duties are with a subsidiary
of the Employer, the sale, merger, contribution, transfer or any
other transaction in conjunction with which the Employer’s ownership
interest in the subsidiary decreases below a majority interest;
or (vii) any material variance from the terms of this Agreement
by the Employer or a subsidiary thereof.

	 	6.4	 	SEVERANCE

     Should the Executive’s employment with the Employer be terminated during the Employment Period
pursuant to Section 6.1(e) or Section 6.1(f) above, the Executive shall be entitled to:

	 	a.	 	a payment equal to two (2) years of her then current Salary;
and
	 
	 	b.	 	a payment equal to two (2) times her then current cash bonus
target amount.

     Such payments under this section will be made no later than 30 days following the termination
from employment. Severance payments do not constitute continued employment beyond the termination
date.

	 	6.5	 	CHANGE OF CONTROL

     If, within 12 months of a Change of Control, the Executive’s position is eliminated or the
Executive is terminated pursuant to Section 6.1(e) or 6.1(f) above, regardless of whether such
termination event occurs during or after the Employment Period, the Executive shall be entitled to
the following in lieu of the amounts set forth in Section 6.4:

	 	a.	 	a payment equal to two (2) years of her then current Salary;
	 
	 	b.	 	a payment equal to two (2) times her then current cash bonus
target amount;
	 
	 	c.	 	vesting of Executive’s stock option awards, subject to the
terms and conditions of the respective stock option agreements; and
	 
	 	d.	 	continued medical and life insurance benefits at no cost to the
Executive, for the Executive and her dependents (including her spouse) who were
covered as of such termination event under the medical and life insurance
benefit plan as in effect for employees of the Employer during the coverage
period, or the substantial equivalence, for 18 months or until

8

 

	 	 	 	such time that she is re-employed and is provided medical and life insurance
benefits (which coverage shall be promptly reported to the Employer by the
Executive) whichever is sooner.

     Severance payments do not constitute continued employment beyond the termination date.

     Notwithstanding anything to the contrary in this Agreement, if the Executive is a
“disqualified individual” (as defined in Section 280G(c) of the Internal Revenue Code of
1986, as amended (the “Code”)), and the severance benefits provided for in this Section
6.5, together with any other payments and benefits which the Executive has the right to
receive from the Employer and its affiliates, would constitute a “parachute payment” (as
defined in Section 280G(b)(2) of the Code), then the severance benefits provided hereunder
(beginning with any benefit to be paid in cash hereunder) shall be either (1) reduced (but
not below zero) so that the present value of such total amounts and benefits received by
the Executive will be one dollar ($1.00) less than three times the Executive’s “base
amount” (as defined in Section 280G of the Code) and so that no portion of such amounts and
benefits received by the Executive shall be subject to the excise tax imposed by Section
4999 of the Code or (2) paid in full, whichever produces the better net after-tax position
to the Executive (taking into account any applicable excise tax under Section 4999 of the
Code and any other applicable taxes). The determination as to whether any such reduction
in the amount of the severance benefit is necessary shall be made initially by the Employer
in good faith. If a reduced severance benefit is paid hereunder in accordance with clause
(1) of the first sentence of this paragraph and through error or otherwise that payment,
when aggregated with other payments and benefits from the Employer (or its affiliates) used
in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three
times the Executive’s base amount, then the Executive shall immediately repay such excess
to the Employer upon notification that an overpayment has been made.

     6.6 NO MITIGATION

Any remuneration received by the Executive from a third party following the Employment Period shall
not apply to reduce the Employer’s obligations to make payments hereunder.

     6.7 LIQUIDATED DAMAGES

Due to the difficulties in estimating damages for an early termination of the Employment Period,
the Employer and the Executive agree that the payments, if any, to be received by the Executive
hereunder shall be received as liquidated damages.

9

 

	7.	 	NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS

     7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE

     The Executive acknowledges that (a) prior to and during the Employment Period and as a part of
her employment, the Executive has been and will be afforded access to Confidential Information; (b)
public disclosure of such Confidential Information could have an adverse effect on the Employer and
its business; (c) because the Executive possesses substantial technical expertise and skill with
respect to the Employer’s business, the Employer desires to obtain exclusive ownership of each
Employee Invention, and the Employer will be at a substantial competitive disadvantage if it fails
to acquire exclusive ownership of each Employee Invention; and (d) the provisions of this Section 7
are reasonable and necessary to prevent the improper use or disclosure of Confidential Information
and to provide the Employer with exclusive ownership of all Employee Inventions.

     7.2 AGREEMENTS OF THE EXECUTIVE

     In consideration of the compensation and benefits to be paid or provided to the Executive by
the Employer under this Agreement, the Executive covenants the following:

	 	a.	 	Confidentiality.

	 	i.	 	The Executive will hold in confidence the
Confidential Information and will not disclose it to any person except
with the specific prior written consent of the Employer or except as
otherwise expressly permitted by the terms of this Agreement.
	 
	 	ii.	 	Any trade secrets of the Employer will be
entitled to all of the protections and benefits under any applicable
law. If any information that the Employer deems to be a trade secret
is found by a court of competent jurisdiction not to be a trade secret
for purposes of this Agreement, such information will, nevertheless, be
considered Confidential Information for purposes of this Agreement.
The Executive hereby waives any requirement that the Employer submit
proof of the economic value of any trade secret or post a bond or other
security.
	 
	 	iii.	 	None of the foregoing obligations and
restrictions applies to any part of the Confidential Information that
the Executive demonstrates was or became generally available to the
public other than as a result of a disclosure by the Executive.
	 
	 	iv.	 	The Executive will not remove from the
Employer’s premises (except to the extent such removal is for purposes
of the performance of the Executive’s duties at home or while
traveling,

10

 

	 	 	 	or except as otherwise specifically authorized by the Employer) any
document, record, notebook, plan, model, component, device, or
computer software or code, whether embodied in a disk or in any other
form (collectively, the “Proprietary Items”). The Executive
recognizes that, as between the Employer and the Executive, all of
the Proprietary Items, whether or not developed by the Executive, are
the exclusive property of the Employer. Upon termination of this
Agreement by either party, or upon the request of the Employer during
the Employment Period, the Executive will return to the Employer all
of the Proprietary Items in the Executive’s possession or subject to
the Executive’s control, and the Executive shall not retain any
copies, abstracts, sketches, or other physical embodiment of any of
the Proprietary Items.

	 	b.	 	Employee Inventions. Each Employee Invention will
belong exclusively to the Employer. The Executive acknowledges that all of the
Executive’s writing, works of authorship, and other Employee Inventions are
works made for hire and the property of the Employer, including any copyrights,
patents, or other intellectual property rights pertaining thereto. If it is
determined that any such works are not works made for hire, the Executive
hereby assigns to the Employer all of the Executive’s right, title, and
interest, including all rights of copyright, patent, and other intellectual
property rights, to or in such Employee Inventions. The Executive covenants
that she will promptly:

	 	i.	 	disclose to the Employer in writing any
Employee Invention;
	 
	 	ii.	 	assign to the Employer or to a party designated
by the Employer, at the Employer’s request and without additional
compensation, all of the Executive’s right to the Employee Invention
for the United States and all foreign jurisdictions;
	 
	 	iii.	 	execute and deliver to the Employer such
applications, assignments, and other documents as the Employer may
request in order to apply for and obtain patents or other registrations
with respect to any Employee Invention in the United States and any
foreign jurisdictions;
	 
	 	iv.	 	sign all other papers necessary to carry out
the above obligations; and
	 
	 	v.	 	give testimony and render any other assistance
in support of the Employer’s rights to any Employee Invention.

11

 

	 	c.	 	Notice of Intent to Resign. Except in the event of a
resignation for Good Reason, Executive agrees to provide Employer with 90 days
advance notice of her intention to resign (“Notice Period”). During the Notice
Period, Executive shall continue in the diligent fulfillment of all duties of
her position and this Agreement. Should Executive fail to provide Employer
with the full Notice Period, Executive shall forfeit that portion of her earned
pro-rata yearly cash bonus as follows:
	 
	 	 	 	(90 — (number of full days of advance notice) / 90) X(times) pro-rata
earned yearly cash bonus = amount forfeited by Executive.
	 
	 	 	 	Pro-rata earned yearly cash bonus is: (unconditional portion of yearly cash
bonus, if any, targeted for Executive in the current Fiscal Year) / (number
of full months worked in the current Fiscal Year / 12).
	 
	 	d.	 	NonDisparagement. Executive shall not disparage the
Employer or any of its shareholders, directors, officers, employees, or agents.
	 
	 	e.	 	Creative Works. Executive shall not create, assist
with or consult on any creative works which discuss, describe or reference
Employer or any executive of Employer. Creative works includes but is not
limited to novels, nonfiction writings, any authored work, plays, screenplays,
musicals or the like.

	 	7.3	 	DISPUTES OR CONTROVERSIES

     The Executive recognizes that should a dispute or controversy arising from or relating to this
Agreement be submitted for adjudication to any court, arbitration panel, or other third party, the
preservation of the secrecy of Confidential Information may be jeopardized. All pleadings,
documents, testimony, and records relating to any such adjudication will be maintained in secrecy
and will be available for inspection by the Employer, the Executive, and their respective attorneys
and experts, who will agree, in advance and in writing, to receive and maintain all such
information in secrecy, except as may be limited by them in writing.

12

 

	8.	 	NON-COMPETITION AND NON-INTERFERENCE

	 	8.1	 	ACKNOWLEDGMENTS BY THE EXECUTIVE

     The Executive acknowledges that: (a) the services to be performed by her under this Agreement
are of a special, unique, unusual, extraordinary, and intellectual character; (b) the Employer’s
business is international in scope and its products are marketed throughout the United States and
the world; (c) the Employer competes with other businesses that are or could be located in any part
of the United States or the world; (d) the provisions of this Section 8 are reasonable and
necessary to protect the Employer’s business; and (e) in connection with the fulfillment of her
duties hereunder and as an employee of the Employer, the Employer will provide Executive with
Confidential Information necessitating the execution of the covenants contained in this Section 8.

	 	8.2	 	COVENANTS OF THE EXECUTIVE

     In consideration of the acknowledgments by the Executive, and in consideration of the
compensation and benefits to be paid or provided to the Executive by the Employer, the Executive
covenants that during and for eighteen months following the Employment Period she will not,
directly or indirectly:

	 	a.	 	except in the course of her employment hereunder, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the Executive’s name or
any similar name to, lend Executive’s credit to or render services or advice
to, any business whose products or activities compete in whole or in part with
the products or activities of the Employer anywhere in the world, provided,
however, that (i) if Executive is terminated by Employer without cause or if
Executive terminates her employment pursuant to Section 6.1(f) hereof, then
Executive’s non-compete obligation set forth in this Section 8.2(a) shall only
apply to the companies listed in Attachment B hereto and (ii) further provided
that the Executive may purchase or otherwise acquire up to (but not more than)
five percent (5%) of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended;
	 
	 	b.	 	whether for the Executive’s own account or for the account of
any other person, solicit business of the same or similar type being carried on
by the Employer, from any person known by the Executive to be a customer or a
potential customer of the Employer, whether or not the Executive had personal
contact with such person during and by reason of the Executive’s employment
with the Employer;

13

 

	 	c.	 	whether for the Executive’s own account or the account of any
other person, (i) solicit, employ, or otherwise engage as an employee,
independent contractor, or otherwise, any person who is an employee (or was an
employee within two (2) years of the date in question) of the Employer at any
time during the Employment Period or in any manner induce or attempt to induce
any employee of the Employer to terminate his or her employment with the
Employer; or (ii) interfere with the Employer’s relationship with any person,
including any person who at any time during the Employment Period was an
employee, contractor, supplier, or customer of the Employer; or

     If any covenant in this Section 8.2 is held to be unreasonable, arbitrary, or against public
policy, such covenant will be considered to be divisible with respect to scope, time, and
geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of
competent jurisdiction may determine to be reasonable, not arbitrary, and not against public
policy, will be effective, binding, and enforceable against the Executive.

     The period of time applicable to any covenant in this Section 8.2 will be extended by the
duration of any violation by the Executive of such covenant.

	9.	 	GENERAL PROVISIONS

	 	9.1	 	INJUNCTIVE RELIEF AND ADDITIONAL REMEDY

     The Executive acknowledges that the injury that would be suffered by the Employer as a result
of a breach of the provisions of this Agreement (including any provision of Sections 7 and 8) would
be irreparable and that an award of monetary damages to the Employer for such a breach would be an
inadequate remedy. Consequently, the Employer will have the right, in addition to any other rights
it may have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise
to specifically enforce any provision of this Agreement, and the Employer will not be obligated to
post bond or other security in seeking such relief.

	 	9.2	 	COVENANTS OF SECTIONS 7 AND 8 ARE ESSENTIAL AND INDEPENDENT COVENANTS

     The covenants by the Executive in Sections 7 and 8 are essential elements of this Agreement,
and without the Executive’s agreement to comply with such covenants, the Employer would not have
entered into this Agreement or employed the Executive. The Employer and the Executive have
independently consulted with their respective counsel and have been advised in all respects
concerning the reasonableness and propriety of such covenants, with specific regard to the nature
of the business conducted by the Employer.

14

 

     If the Executive’s employment hereunder expires or is terminated, this Agreement will continue
in full force and effect as is necessary or appropriate to enforce the covenants and agreements of
the Executive in Sections 7 and 8.

	 	9.3	 	REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE

     The Executive represents and warrants to the Employer that the execution and delivery by the
Executive of this Agreement do not, and the performance by the Executive of the Executive’s
obligations hereunder will not, with or without the giving of notice or the passage of time, or
both: (a) violate any judgment, writ, injunction, or order of any court, arbitrator, or
governmental agency applicable to the Executive; or (b) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any agreement to which the
Executive is a party or by which the Executive is or may be bound. The Executive further
specifically represents and warrants that she is not subject to, nor will she violate, any
agreement not to compete upon the execution and delivery by her of this Agreement.

     The Executive represents and warrants that she will not utilize or divulge any proprietary
materials or information from her previous employers and acknowledges that Employer has prohibited
Executive from bringing any such materials on to Employer’s premises and has advised Executive that
Executive’s failure to adhere to these prohibitions will subject Executive to immediate
termination.

	 	9.4	 	OBLIGATIONS CONTINGENT ON PERFORMANCE

     The obligations of the Employer hereunder, including its obligation to pay the compensation
provided for herein, are contingent upon the Executive’s performance of the Executive’s obligations
hereunder.

	 	9.5	 	WAIVER

     The rights and remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by either party in exercising any right, power, or privilege
under this Agreement will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement can
be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or demand as provided in
this Agreement.

15

 

     9.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED

     This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto
and their respective successors, assigns, heirs, and legal representatives, including any entity
with which the Employer may merge or consolidate or to which all or substantially all of its assets
may be transferred. The duties and covenants of the Executive under this Agreement, being
personal, may not be delegated or assigned.

     9.7 NOTICES

     All notices, consents, waivers, and other communications under this Agreement must be in
writing and will be deemed to have been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested and signed for by the party
required to receive notice, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the appropriate
addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers
as a party may designate by notice to the other parties):

If to Employer:

BMC Software, Inc.

2101 CityWest Blvd

Houston, Texas 77042

Telephone No.: (713) 918-8800

Facsimile No.: (713) 918-1110

Attn: General Counsel

If to the Executive:

Denise M. Clolery

BMC Software, Inc.

2101 CityWest Blvd

Houston, Texas 77042

Telephone No.: (713) 918-2190

Facsimile No.: (713) 918-1110

16

 

     9.8 ENTIRE AGREEMENT; AMENDMENTS

     Except as provided in (a) plans and programs of the Employer referred to in Sections 3.1(b)
through (d), and (b) any signed written agreement contemporaneously or hereafter executed by the
Employer and the Executive, this Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements and understandings, oral
or written, between the parties hereto with respect to the subject matter hereof. Notwithstanding
the foregoing, this Agreement shall not be construed to supersede any stock option agreements or
restricted stock agreements entered into between Executive and Employer at any time prior to the
execution of this Agreement. This Agreement may not be amended orally, but only by an agreement in
writing signed by the parties hereto.

     9.9 GOVERNING LAW

     This Agreement will be governed by the laws of the State of Texas without regard to conflicts
of laws principles.

     9.10 ARBITRATION

     In the event that there shall be any dispute arising out of or in any way relating to this
Agreement, the contemplated transactions, any document referred to or incorporated herein by
reference or centrally related to the subject matter hereof, or the subject matter of any of the
same, the parties covenant and agree as follows:

	 	a.	 	The parties shall first use their reasonable best efforts to
resolve such dispute among themselves, with or without mediation.
	 
	 	b.	 	If the parties are unable to resolve such dispute among
themselves, such dispute shall be submitted to binding arbitration in Houston,
Texas, under the auspices of, and pursuant to the rules of, the American
Arbitration Association’s Commercial Arbitration Rules as then in effect, or
such other procedures as the parties may agree to at the time, before a
tribunal of three (3) arbitrators, one of which shall be selected by the
Executive, one of which shall be selected by the Employer, and the third of
which shall be selected by the two (2) arbitrators so selected. Any award
issued as a result of such arbitration shall be final and binding between the
parties, and shall be enforceable by any court having jurisdiction over the
party against whom enforcement is sought. A ruling by the arbitrators shall be
non-appealable. The parties agree to abide by and perform any award rendered
by the arbitrators. If either the Executive or Employer seeks enforcement of
the terms of this Agreement or seeks enforcement of any award rendered by the
arbitrators, then the prevailing party (designated by the arbitrators) to such
proceeding(s) shall be entitled to recover its costs and expenses (including
applicable travel expenses) from

17

 

	 	 	 	the non-prevailing party, in addition to any other relief to which it may be
entitled. If a dispute arises and one party fails or refuses to designate
an arbitrator within thirty (30) days after receipt of a written notice that
an arbitration proceeding is to be held, then the dispute shall be resolved
solely by the arbitrator designated by the other party and such arbitration
award shall be as binding as if three (3) arbitrators had participated in
the arbitration proceeding. Either the Executive or the Employer may cause
an arbitration proceeding to commence by giving the other party notice in
writing of such arbitration. Executive and the Employer covenant and agree
to act as expeditiously as practicable in order to resolve all disputes by
arbitration. Notwithstanding anything in this section to the contrary,
neither Executive nor the Employer shall be precluded from seeking court
action in the event the action sought is either injunctive action, a
restraining order or other equitable relief. The arbitration proceeding
shall be held in English.
	 
	 	c.	 	Legal process in any action or proceeding referred to in the
preceding section may be served on any party anywhere in the world.
	 
	 	d.	 	Except as expressly provided herein and except for injunctions
and other equitable remedies that are required in order to enforce this
Agreement, no action may be brought in any court of law and EACH OF THE PARTIES
WAIVES ANY RIGHTS THAT IT MAY HAVE TO BRING A CAUSE OF ACTION IN ANY COURT OR
IN ANY PROCEEDING INVOLVING A JURY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
Each party acknowledges that it has been represented by legal counsel of its
own choosing and has been advised of the intent, scope and effect of this
Section 9.10 and has voluntarily entered into this Agreement and this Section
9.10.
	 
	 	e.	 	Excluded from this Section 9.10 are any claims for temporary
injunctive relief to enforce Sections 7 and 8 of this Agreement.

     9.11 SECTION HEADINGS, CONSTRUCTION

     The headings of Sections in this Agreement are provided for convenience only and will not
affect its construction or interpretation. All references to “Section” or “Sections” refer to the
corresponding Section or Sections of this Agreement unless otherwise specified. All words used in
this Agreement will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word “including” does not limit the preceding words or
terms.

18

 

     9.12 SEVERABILITY

     If any provision of this Agreement is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

     9.13 COUNTERPARTS

     This Agreement may be executed in one or more counterparts, each of which will be deemed to be
an original copy of this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.

     9.14 WAIVER OF JURY TRIAL

     THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT.

     9.15 WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS

The Employer may withhold from any payments and benefits made pursuant to this Agreement all
federal, state, city, and other taxes as may be required pursuant to any law or governmental
regulation or ruling and all other normal deductions made with respect to the Employer’s employees
generally.

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

	 	 	 	 	 	 	 
	 	 	EMPLOYER:	 	 
	 
	 	 	 	 	 	 
	 	 	BMC Software, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ JEROME ADAMS	 	 
	 

	 	 	 

	 	 
	 

	 	Name: Jerome Adams
	 	 
	 

	 	Title: SVP of Administration
	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	   /s/ DENISE M. CLOLERY	 	 
	 	 	 	 	 
	 	 	Denise M. Clolery	 	 

19

 

			
	Denise Clolery
	 	Attachment A

BMC SOFTWARE, INC.

Executive Employment Agreement

Cash Bonus Description

     The Executive will, during the Employment Period, be permitted to participate in the BMC
Short-term Incentive Performance Award Program that may be in effect from time to time. During the
employment period, the Executive will be eligible to receive a target incentive, which is 100% of
base salary. The actual amount received is not guaranteed and is dependent on the performance of
the Company and the Executive in accordance with the BMC Short-term Incentive Performance Award
Program established for each fiscal year during the employment period.

     Each fiscal year, the Executive will receive a detailed description of the BMC Short-term
Incentive Performance Award Program and the targeted measures and objectives for that year.

20

 

			
	Denise M. Clolery
	 	Attachment B

BMC Software, Inc.

Executive Employment Agreement

List of Competitive Companies

Computer Associates

Compuware Corporation International, Inc.

Hewlett-Packard Development Company, L.P.

IBM Corporation

Mercury Interactive Corporation

NetIQ Corporation

Quest Software, Inc.

21

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