Document:

Exhibit 10.45

 

*** CERTAIN
CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND

FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE

COMMISSION
PURSUANT TO RULE 24B-2 OF THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

 

 

LEASE
AGREEMENT N483HA*

 

 

dated
as of August 29, 2008

 

between

 

WELLS
FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,

not in its individual capacity, except as
expressly
  provided herein, but solely as Owner
Trustee,

 

Lessor

 

and

 

HAWAIIAN
AIRLINES, INC.,

 

Lessee

 

 

 

One
Boeing Model 717-200 Aircraft bearing United States Registration Number N604AT
(to be changed to N483HA) and Manufacturer’s Serial Number 55128, and including
Two Rolls-Royce Deutschland Ltd & Co KG Model BR 700-715 C1-30 Engines
bearing Manufacturer’s Serial Numbers 13392 and 13189

 

 

*The United States
Registration Number of the Aircraft will be changed from N604AT to N483HA

 

 

This Lease Agreement has been executed in multiple counterparts; to the
extent, if any, that this Lease Agreement constitutes chattel paper (as defined
in the Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in Lessor’s right, title, and interest in and to this Lease
Agreement may be perfected by possession except as provided in § 17.5
hereof.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

CONTENTS

 

	
  1.

  	
  DEFINITIONS
  AND CONSTRUCTION

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  DELIVERY
  AND ACCEPTANCE

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Delivery and Lease of
  Aircraft

  	
  1

  
	
  2.2

  	
  Acceptance by Lessee

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  TERM
  AND RENT

  	
  2

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Term

  	
  2

  
	
  3.2

  	
  Rent

  	
  2

  
	
  3.3

  	
  Payments

  	
  4

  
	
   

  	
   

  	
   

  
	
  4.

  	
  DISCLAIMER;
  CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS

  	
  4

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Disclaimer of
  Warranties

  	
  4

  
	
  4.2

  	
  Warranty Rights

  	
  6

  
	
  4.3

  	
  Quiet Enjoyment

  	
  6

  
	
  4.4

  	
  Investment of Funds
  Held as Security

  	
  6

  
	
  4.5

  	
  Title Transfers by
  Lessor

  	
  7

  
	
  4.6

  	
  Lease For U.S. Federal
  Income Tax Law Purposes; Section 1110 of Bankruptcy Code

  	
  8

  
	
   

  	
   

  	
   

  
	
  5.

  	
  RETURN
  OF AIRCRAFT

  	
  9

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Compliance with Annex
  B

  	
  9

  
	
  5.2

  	
  Storage and Related
  Matters

  	
  9

  
	
  5.3

  	
  Return of Other
  Engines

  	
  10

  
	
  5.4

  	
  Failure to Return
  Aircraft

  	
  10

  
	
   

  	
   

  	
   

  
	
  6.

  	
  LIENS

  	
  11

  
	
   

  	
   

  	
   

  
	
  7.

  	
  REGISTRATION;
  OPERATION; POSSESSION AND SUBLEASING

  	
  13

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Registration and
  Operation

  	
  13

  
	
  7.2

  	
  Possession

  	
  14

  
	
  7.3

  	
  Certain Limitations on
  Subleasing or Other Relinquishment of Possession

  	
  22

  
	
  7.4

  	
  Security Assignment of
  Subleases

  	
  23

  
	
  7.5

  	
  Lessor’s Interest in
  Certain Engines

  	
  23

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

i

 

	
  8.

  	
  MAINTENANCE;
  REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS, AND ADDITIONS;
  OTHER LESSEE COVENANTS

  	
  24

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Maintenance;
  Replacement and Pooling of Parts; Alterations, Modifications, and Additions

  	
  24

  
	
  8.2

  	
  Information,
  Certificates, Notices, and Reports

  	
  24

  
	
  8.3

  	
  Lessee Undertakings in
  Other Documents

  	
  27

  
	
   

  	
   

  	
   

  
	
  9.

  	
  LOSS,
  DESTRUCTION, REQUISITION, ETC.

  	
  27

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Event of Loss to the
  Aircraft

  	
  27

  
	
  9.2

  	
  Event of Loss to an
  Engine; Engine Exchanges

  	
  30

  
	
  9.3

  	
  Conditions to any
  Replacement

  	
  31

  
	
  9.4

  	
  Conveyance to Lessee

  	
  35

  
	
  9.5

  	
  Application of
  Payments

  	
  35

  
	
  9.6

  	
  Requisition of
  Aircraft for Use

  	
  36

  
	
  9.7

  	
  Requisition of an
  Engine for Use

  	
  36

  
	
  9.8

  	
  Application of
  Requisition Payments

  	
  37

  
	
  9.9

  	
  Application of
  Payments During Default

  	
  37

  
	
   

  	
   

  	
   

  
	
  10.

  	
  INSURANCE

  	
  37

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Lessee’s Obligation to
  Insure

  	
  37

  
	
  10.2

  	
  Insurance for Own
  Account

  	
  38

  
	
  10.3

  	
  Indemnification by
  Government in Lieu of Insurance

  	
  38

  
	
  10.4

  	
  Application of
  Insurance Proceeds

  	
  39

  
	
  10.5

  	
  Application of
  Payments During Default

  	
  39

  
	
  10.6

  	
  Lessor’s Right to
  Maintain Insurance

  	
  39

  
	
   

  	
   

  	
   

  
	
  11.

  	
  INSPECTION

  	
  40

  
	
   

  	
   

  	
   

  
	
  12.

  	
  ASSIGNMENT;
  SUCCESSOR LESSOR

  	
  41

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  In General

  	
  41

  
	
  12.2

  	
  Successor Lessor

  	
  41

  
	
   

  	
   

  	
   

  
	
  13.

  	
  LEASE
  EVENTS OF DEFAULT

  	
  42

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Payments

  	
  42

  
	
  13.2

  	
  Insurance

  	
  42

  
	
  13.3

  	
  Corporate Existence
  and Commercial Airlines Operations

  	
  42

  
	
  13.4

  	
  Certain Covenants

  	
  43

  
	
  13.5

  	
  Other Covenants

  	
  43

  
	
  13.6

  	
  Representations and
  Warranties

  	
  43

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

ii

 

	
  13.7

  	
  Bankruptcy and
  Insolvency

  	
  44

  
	
  13.8

  	
  Other Obligations

  	
  45

  
	
  13.9

  	
  Judgments

  	
  45

  
	
   

  	
   

  	
   

  
	
  14.

  	
  REMEDIES
  AND WAIVERS

  	
  45

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Remedies

  	
  45

  
	
  14.2

  	
  Limitations Under CRAF

  	
  49

  
	
  14.3

  	
  Right to Perform for
  Lessee

  	
  50

  
	
  14.4

  	
  Determination of Fair
  Market Rental Value and Fair Market Sales Value

  	
  50

  
	
  14.5

  	
  Lessor Appointed
  Attorney-in-Fact

  	
  50

  
	
  14.6

  	
  Remedies Cumulative

  	
  51

  
	
   

  	
   

  	
   

  
	
  15.

  	
  LESSEE’S
  OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.

  	
  51

  
	
   

  	
   

  	
   

  
	
  16.

  	
  ADDITIONAL
  RIGHTS AND OBLIGATIONS

  	
  53

  
	
   

  	
   

  	
   

  
	
  17.

  	
  MISCELLANEOUS

  	
  53

  
	
   

  	
   

  	
   

  
	
  17.1

  	
  Amendments

  	
  53

  
	
  17.2

  	
  Severability

  	
  54

  
	
  17.3

  	
  Third-Party
  Beneficiary

  	
  54

  
	
  17.4

  	
  Reproduction of
  Documents

  	
  54

  
	
  17.5

  	
  Counterparts

  	
  55

  
	
  17.6

  	
  Notices

  	
  55

  
	
  17.7

  	
  Governing Law;
  Jurisdiction and Venue; No Jury Trial

  	
  55

  
	
  17.8

  	
  No Waiver

  	
  57

  
	
  17.9

  	
  Survival

  	
  57

  
	
  17.10

  	
  Entire Agreement

  	
  58

  

 

 

EXHIBITS, SCHEDULES AND ANNEXES

 

	
  EXHIBIT A

  	
  Lease Supplement

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  Aircraft Description

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  Form of Return Acceptance Supplement

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1

  	
  – Part A

  	
  Certain Terms

  	
   

  
	
   

  	
  – Part B

  	
  Additional Terms

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2

  	
  Basic Rent

  	
   

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

iii

 

	
  SCHEDULE 3

  	
  Stipulated Loss Values

  	
   

  
	
  SCHEDULE 4 -

  	
  [RESERVED]

  	
   

  
	
  SCHEDULE 5

  	
  Notional Debt Amortization

  	
   

  
	
  SCHEDULE 6

  	
  Permitted Countries

  	
   

  
	
  SCHEDULE 7

  	
  Placards

  	
   

  
	
   

  	
   

  	
   

  
	
  ANNEX A 

  	
  – Part 1

  	
  Definitions

  	
   

  
	
   

  	
  – Part 2

  	
  Additional Definitions

  	
   

  
	
   

  	
  – Part 3

  	
  Other Definitions

  	
   

  
	
  ANNEX B

  	
  Return Conditions

  	
   

  
	
  ANNEX C

  	
  Maintenance

  	
   

  
	
  ANNEX D

  	
  Insurance

  	
   

  
	
  ANNEX E 

  	
  – Part 1

  	
  Certain Rights and Obligations

  	
   

  
	
   

  	
  – Part 2

  	
  Additional Rights and Obligations

  	
   

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

iv

 

LEASE AGREEMENT N483HA*

 

This
Lease Agreement N483HA* (this “Lease”) is
entered into as of August 29, 2008, between (1) Wells Fargo Bank
Northwest, National Association, a national banking association, not in its
individual capacity (except as expressly provided herein) but solely as Owner
Trustee (“Lessor”), and (2) Hawaiian
Airlines, Inc. (“Lessee”), a
Delaware corporation.

 

Lessor
and Lessee agree as follows:

 

1.                                      DEFINITIONS
AND CONSTRUCTION

 

The
terms defined in Annex A, when capitalized as in Annex A, have the
same meanings when used in this Lease. 
Annex A also contains rules of usage that control construction
in this Lease. The parties agree that this Lease shall constitute a “finance
lease” (as defined by UCC § 2A-103(g)) for purposes of UCC Article 2A.

 

2.                                      DELIVERY
AND ACCEPTANCE; REGISTRATION OF INTERNATIONAL INTERESTS

 

2.1                               Delivery
and Lease of Aircraft

 

Lessor
hereby leases the Aircraft to Lessee for the Term, and Lessee hereby leases the
Aircraft from Lessor for the Term.

 

2.2                               Acceptance
by Lessee

 

Lessee
hereby confirms to Lessor, as evidenced by Lessee’s execution and delivery of
Lease Supplement No. 1, that Lessee has duly and irrevocably accepted
delivery of the Aircraft for all purposes of this Lease and the other Operative
Agreements.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

1

 

2.3                               Registration
of International Interests

 

Lessee and Lessor intend that the lease of the Airframe and
each Engine by Lessor to Lessee shall create International Interests vested in,
and in favor of, Lessor, and accordingly, Lessor and Lessee shall cause the CTC

 

* The United
States Registration Number of the Aircraft will be changed from N604AT to
N483HA.

 

Registrations to be effected on the
International Registry, and Lessee hereby consents to the CTC Registrations and
agrees that Lessor shall be entitled to all of the benefits provided for under
the CTC with respect such International Interests.

 

3.                                      TERM
AND RENT

 

3.1                               Term

 

The
Aircraft shall be leased hereunder for the Term, unless this Lease or the
leasing of the Aircraft is earlier terminated in accordance with any provision
of this Lease.

 

3.2                               Rent

 

3.2.1                     Basic Rent

 

During
the Base Term, Lessee shall pay to Lessor, on each Payment Date, Basic Rent in
the amount specified on Schedule 2 for such Payment Date.

 

3.2.2                     Supplemental
Rent

 

Lessee
shall pay to Lessor, or to whomever is entitled to it, any and all Supplemental
Rent (including any Make-Whole Amount that is Supplemental Rent) when and as it
becomes due and owing.  Lessee will also
pay to Lessor, or to whomever is entitled to it, as Supplemental Rent, to the
extent permitted by applicable Law, interest at the Past-Due Rate on any part
of any amount of Rent (including Supplemental Rent) not paid by 2:00 p.m.,
New York time, on the date when due (so long as, in the case of any Person not
a party to the Participation Agreement, Lessee had received timely notice of
the account to which such payment was required to be made), for the period from
and including the date on which the same was due to (but excluding) the date of
payment in full.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

2

 

3.2.3                     Security
Deposit

 

(a)                                  On
or before the Delivery Date, Lessee shall pay to Lessor a security deposit (the
“Security Deposit”) in the amount set forth on Schedule 1-Part A
hereto.  The Security Deposit will be
held by Lessor for the entire remaining Term of this Lease and may be
commingled with other amounts of Lessor.

 

(b)                                 The
Security Deposit shall be held by Lessor as security for the due and punctual
payment by Lessee of all amounts payable by it, and the due and punctual
observance and performance by Lessee of all of its obligations, hereunder and
under each other Operative Agreement. 
Lessee hereby assigns, transfers and pledges to Lessor, and hereby
grants to Lessor, a first-priority security interest in, the Security Deposit
to secure such payment, observance and performance.  Any interest earned on the Security Deposit
shall be solely for the account of Lessor. 
If an Event of Default shall occur and be continuing, then in addition
to any other rights Lessor may have under applicable Law as a lessor, secured
party or otherwise, or under this Lease or any other Operative Agreement,
Lessor may set off against, use, apply or retain all or any portion of the
Security Deposit in full or partial payment for amounts payable by Lessee under
this Lease or any other Operative Agreement or for amounts necessary to
compensate Lessor and the Indemnitees for their Expenses arising in connection
with such Event of Default.  Any such use
or application shall not, however, be deemed a cure by Lessee, or waiver by
Lessor, of any Event of Default, unless so agreed by Lessor in writing.

 

(c)                                  So
long as no Default or Event of Default shall have occurred and be continuing,
that portion, if any, of the Security Deposit that has not previously been used
or applied, or set off against, as provided for in this Lease, shall be
returned to Lessee by wire transfer of immediately available Dollars to an
account of Lessee located in the United States of America, specified in writing
by Lessee to Lessor at least 10 Business Days prior to the date of such
transfer, (A) on or before the date that is 20 Business Days after and
excluding the date upon which the Aircraft is returned to Lessor in the
condition, and in the manner, required under Annex B to this Lease and
otherwise in accordance with the terms of this Lease, or (B) if an Event
of Loss shall have occurred, and Lessee shall have elected, or shall be deemed
to have elected, the option set forth in Section 9.1.2 hereof, then on or
before the date that is 20 Business Days after and excluding the date upon
which Lessor has 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

3

 

been paid all amounts required to be paid under, and as provided in, Section 9.1.2(a) hereof.

 

3.3                               Payments

 

(a)                                  Payments
of Rent by Lessee shall be paid by wire transfer of immediately available
Dollars, not later than 2:00 p.m., New York City time, on the date when
due, to the account of Lessor specified in Schedule 1 to the Participation
Agreement (or to such other account in the United States as Lessor specifies to
Lessee in writing at least 10 Business Days before such payment of Rent is
due), or, in the case of any payment of Supplemental Rent expressly payable to
a Person other than Lessor, to the Person that shall be entitled thereto, to
such account in the United States as such Person specifies from time to time to
Lessee at least 10 Business Days before such payment of Rent is due.

 

(b)                                 Except
as otherwise expressly provided herein, whenever any payment of Rent shall be
due on a day that is not a Business Day, such payment shall be made on the next
day that is a Business Day, and, if such payment is made on such next Business
Day, no interest shall accrue on the amount of such payment during such
extension.

 

(c)                                  Except
as expressly set forth herein, all computations of interest under this Lease
shall be made on the basis of a year of 365/366 days and actual days elapsed.

 

(d)                                 The
percentages set forth in Schedule 3 with respect to Stipulated Loss Value Dates
have been computed on the assumption that the Basic Rent payable on the Payment
Date corresponding to any such Stipulated Loss Value Date has not been paid to
Lessor.

 

4.                                      DISCLAIMER;
CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS

 

4.1                               Disclaimer
of Warranties

 

Lessor leases and Lessee
takes the Aircraft “as-is, where-is.” Lessee acknowledges and agrees that, as
between Lessee and each of Lessor and Owner Participant, (a) the Airframe
and each Engine are of a size, design, capacity, and manufacture selected by
and acceptable to Lessee, 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

4

 

(b) Lessee is satisfied that the Airframe
and each Engine are suitable for their respective purposes, and (c) Lessor
does not make, has not made, and shall not be deemed to have made, and will be
deemed to have expressly disclaimed, and Lessee hereby waives, releases, and
renounces, any warranty, representation, guaranty, liability, and obligation of
Lessor, and any right, claim and remedy of Lessee against Lessor, express or implied,
arising by operation of law, course of performance, course of dealing, usage of
trade, or otherwise, as to:

 

(1)                                 the title, airworthiness, value, condition, design, operation, or any
implied warranty of merchantability or fitness for use or for any particular
purpose of the Airframe, any Engine, any Part, any data, or any other thing
delivered, sold, or transferred hereunder,

 

(2)                                 the quality of the material or workmanship with respect to the
Airframe, any Engine, any Part, any data, or any other thing delivered, sold,
or transferred hereunder,

 

(3)                                 the absence of latent or any other defect or nonconformance in the
Airframe, any Engine, any Part, any data, or any other thing delivered, sold,
or transferred hereunder, whether or not discoverable, or

 

(4)                                 the absence of any actual or alleged infringement of any patent,
trademark, or copyright, or the like.

 

Lessee further waives, disclaims,
releases, and renounces any liability, right, claim, remedy, or obligation
based on tort, including strict liability, whether or not arising from the
negligence (whether active, passive, or imputed) of Lessor, any obligation,
liability, right, claim, or remedy for loss of or damage to the Airframe, any
Engine, any Part, any data, or any other thing delivered, sold, or transferred
hereunder, or any other representation or warranty whatsoever, express or
implied, with respect to the Airframe, any Engine, any Part, any data, or any
other thing delivered, sold or transferred hereunder, except as expressly set
forth in the Operative Agreements.

 

Nothing set forth in this § 4.1
shall limit or impair Lessee’s rights and interests under, and as set forth in,
§ 7.4.5(a) of the Participation Agreement.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

5

 

4.2                               Warranty
Rights

 

Unless
an Event of Default shall have occurred and be continuing, Lessor agrees to
make available to Lessee such rights as Lessor may have under any warranty with
respect to the Aircraft made, or made available, by Airframe Manufacturer or
Engine Manufacturer, or any of their subcontractors or suppliers.  If an Event of Default shall have occurred
and be continuing, and if at such time Owner Participant is an Affiliate of
Airframe Manufacturer, then until such time as Lessor commences the exercise of
any right or remedy in respect of such Event of Default (whether pursuant to Section 14
or otherwise, and which may include, without limitation, a suspension of
performance by Lessor of any of its obligations under this Lease or any of the
other Operative Agreements), Lessor shall not, without Lessee’s prior written
consent (such consent not to be unreasonably withheld or delayed), waive or
release any such rights under any such warranty made by Airframe Manufacturer.

 

4.3                               Quiet
Enjoyment

 

So
long as no Event of Default exists, Lessor shall not interfere with (or permit
any Person acting at the instruction of, or on behalf of, Lessor or Owner
Participant to interfere with) Lessee’s rights hereunder (or, subject always to
§ 7.2.7(d)(3), the rights of any Permitted Sublessee under a Permitted
Sublease and any permitted sub-sub-lessee pursuant to § 7.2.7(j))to continued
possession, use, and operation of, and quiet enjoyment of, the Aircraft during
the Term. The foregoing, however, shall not be construed or deemed to modify or
condition in any respect the obligations of Lessee pursuant to § 15, which
obligations are absolute and unconditional.

 

4.4                               Investment
of Funds Held as Security

 

4.4.1                     Investment

 

Any
money required to be paid to, or retained or otherwise applied by, Lessor and
that (i) is not required to be paid to Lessee pursuant to § 9.9 or
§ 10.5 or otherwise applied by Lessor (whether because a Special Default
or an Event of Default exists or otherwise), or (ii) is held by Lessor
pending payment to Lessee pursuant to § 9.5, § 9.8, § 10.5,
Schedule 2 (with respect to the Commitment Fee and its application to Basic
Rent) or otherwise, or (iii) is required to be paid to Lessee pursuant to
§ 9.5, § 9.8, or § 10.5 after completion of a replacement to be
made pursuant to § 9.1, § 9.2, or § 9.3, shall, until paid to
Lessee as provided in § 9 or § 10 or otherwise, or applied as
provided herein or otherwise, be held by Lessor as security for the obligations
of Lessee under this Lease and the other Operative Agreements (and Lessee 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

6

 

hereby grants to Lessor a security interest in such money) and shall be
invested by Lessor from time to time as directed in writing by Lessee (or, if
Lessee does not so direct, by or as directed by Lessor in its sole discretion)
and at Lessee’s risk and expense in Cash Equivalents so long as such Cash
Equivalents specified by Lessee or Lessor (as applicable) can be acquired by
Lessor using its commercially reasonable efforts.  Notwithstanding the foregoing, this Section 4.4.1
shall not apply in any respect to (i) the Security Deposit (Sections 3.2.3
and 14.1.6 hereof shall govern the payment, possession, use, application and
repayment of the Security Deposit), or (ii) the Maintenance Reserves (Section F
of Annex C hereto shall govern the payment, possession, use, application and
repayment of the Maintenance Reserves).

 

4.4.2                     Payment of
Gain or Loss

 

Any net gain (including interest received) realized as
the result of investments pursuant to § 4.4.1 (net of any fees, commissions,
and other reasonable expenses incurred in connection with such investment)
shall be held, retained or applied in the same manner as the subject principal
amount is to be held, retained or applied, as set forth in § 9, § 10,
Schedule 2 (with respect to the Commitment Fee and its application to Basic
Rent) or otherwise.  Lessee will promptly
pay to Lessor, on demand, the amount of any loss realized as the result of any
such investment (together with any fees, commissions, and other reasonable
expenses incurred in connection with such investment), such amount so paid to
be held and applied by Lessor as contemplated in § 4.4.1.

 

4.4.3                     Limitation of
Liability

 

All investments under this § 4.4 shall be at
Lessee’s risk and expense, and Lessor shall not be liable for any loss
resulting from any investment made under this § 4.4 other than by reason
of its willful misconduct or gross negligence. Any such investment may be sold
(without regard to its maturity) by Lessor without instructions whenever such
sale is necessary to make a distribution required by this Lease.

 

4.5                               Title
Transfers by Lessor

 

(a)                                  If
Lessor shall be required to transfer title to the Aircraft, the Airframe, or
any Engine to Lessee or any other Person pursuant to § 5.3 or § 9 of
this Lease, then

 

(1) Lessor shall (aa) transfer to Lessee or
such other Person (as 

 

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treatment and filed separately with the SEC

 

7

 

applicable) all of Lessor’s
right, title, and interest in and to the Aircraft, the Airframe, or such Engine
(as applicable), free and clear of all Lessor Liens attributable to Lessor or
Owner Participant, (bb) [RESERVED], (cc) [RESERVED], and (dd) assign
to Lessee or such other Person (as applicable), if and to the extent permitted,
all claims, if any, for damage to the Aircraft, the Airframe, or such Engine,
in each case on an “as is, where is, and with all faults” basis, free of all
Lessor Liens attributable to Lessor or Owner Participant, and without recourse
or warranty of any kind whatsoever (except as to the transfer described in
clause (aa) above and as to the absence of such Lessor Liens), and

 

(2) Lessor shall promptly deliver to Lessee or
such other Person (as applicable), a bill of sale and agreements of assignment,
evidencing such transfer and assignment, and such other instruments of
transfer, all in form and substance reasonably satisfactory to Lessor and
Lessee (or such other Person, as applicable), as Lessee (or such other Person,
as applicable) may reasonably request; and Lessor shall also promptly consent
to the making of such filings on the International Registry as shall be
necessary and sufficient to register any such transfer and assignment, and
Lessor shall also consent to the discharge on the International Registry of any
registrations of International Interests in favor of Lessor with respect to the
subject Airframe or Engine(s) under this Lease.

 

(b)                                 Any
assignment, sale, transfer, or other conveyance of the Aircraft, the Airframe,
or any Engine by Lessor pursuant to this Lease shall be effective to transfer
or convey all right, title, and interest of Lessor in and to such Aircraft,
Airframe or Engine, as the case may be. 
No purchaser or other grantee shall be required to inquire as to the
authorization, necessity, expediency, or regularity of such assignment, sale,
transfer, or conveyance, or as to the application of any sale or other proceeds
with respect thereto by Lessor.

 

4.6                               Lease
For U.S. Federal Income Tax Law Purposes; Section 1110 of Bankruptcy Code

 

(a)                                  Lessee
and Lessor agree that this Lease is, and shall be treated as, a lease for U.S.
federal income tax purposes of the Aircraft, Airframe, Engines, and Parts.

 

(b)                                 Lessee
and Lessor intend that Lessor shall be entitled to the rights 

 

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8

 

and benefits of Section 1110 (or any successor provision of
federal bankruptcy Law), including the right to take possession of the
Aircraft, Airframe, Engines, Parts and Returnable Records as provided in this
Lease, and in any instance where more than one construction of the terms and
conditions of this Lease or any other Operative Agreement is possible, or of
the facts and circumstances underlying the transactions contemplated herein or
therein, Lessor and Lessee agree that a construction which would create and
preserve such rights and benefits shall control over any construction which
would not create and preserve such rights and benefits.

 

(c)                                  Lessor
and Lessee agree that, for all purposes of applicable Law, this Lease
constitutes an agreement of lease, and nothing contained herein shall be
construed as conveying to Lessee any right, title, or interest in the Aircraft,
Airframe, Engines, or Parts except as a lessee only.

 

5.                                      RETURN
OF AIRCRAFT

 

5.1                               Compliance
with Annex B

 

Lessee
shall comply with each of the provisions of Annex B, which provisions are
hereby incorporated by this reference as if set forth in full herein.

 

5.2                               Storage
and Related Matters

 

If
Lessor gives written notice to Lessee, not less than 30 days nor more than 120
days before the end of the Term, requesting storage of the Aircraft upon its
return hereunder, Lessee will provide Lessor (or cause Lessor to be provided)
with outdoor parking facilities for the Aircraft for a period up to 180 days,
starting on the date of such return, at Mojave, California or Marana, Arizona
or Victorville, California, as Lessor may specify, or if Lessor elects not to
store the Aircraft at any of such locations, then the Aircraft shall be stored
at such storage facility in the 48 contiguous states of the United States as
Lessee may select and which is used as a location for the storage of large
commercial aircraft.  At Lessor’s written
request, Lessee shall maintain insurance (if available) for the Aircraft during
such storage period, provided, that
Lessor shall reimburse Lessee for Lessee’s actual incremental out-of-pocket
cost of providing such insurance for any period following the initial 90 days
of such storage period.  Such storage
shall be at Lessor’s risk, and Lessor 

 

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treatment and filed separately with the SEC

 

9

 

shall pay all applicable storage fees, except that Lessee shall pay the
parking fees for the initial 90 days of such storage period; provided,  that Lessee’s
obligation to provide parking shall be subject to Lessor’s entering into an
agreement with the storage facility, before the storage period begins,
providing that, as between the storage facility, Lessee, and Lessor, Lessor
shall bear all maintenance charges (other than maintenance required as a result
of Lessee’s failure to comply with the provisions of Annex B hereto) and other
costs incurred (other than parking fees for the initial 90 days of such storage
period).  In addition, upon the return of
the Aircraft, Lessor shall have no obligation with respect to the amount of any
fuel or oil contained in the fuel or oil tanks of the Aircraft, it being
agreed, however, that Lessee shall not be obligated to return the Aircraft with
any fuel or oil other than as required pursuant to § 7(13) of Annex B.

 

5.3                               Return
of Other Engines

 

If
any Engine owned by Lessor is not installed on the Airframe at the time of
return hereunder, Lessee shall return the Airframe hereunder with a Replacement
Engine meeting the requirements of, and in accordance with, § 9 and
Annex B, as if the Engine replaced had suffered an Event of Loss on or
before the return date and had been replaced on the return date. Thereupon,
Lessor will transfer to Lessee the Engine constituting part of the Aircraft but
not installed on the Airframe at the time of the return of the Airframe, and
will deliver the documentation required therefor pursuant to § 4.5.

 

5.4                               Failure
to Return Aircraft

 

If
Lessee shall, for any reason whatsoever, fail to return the Aircraft and the Returnable
Records at the time and in the manner specified herein, all obligations of
Lessee under this Lease (including the obligation to pay Basic Rent, as
provided in § 4 of Annex B) shall continue in effect with respect to the
Aircraft until the Aircraft and Returnable Records are returned to Lessor; provided, that (i) this § 5.4 shall not be
construed as permitting Lessee to fail to meet its obligation to return the
Aircraft or the Returnable Records at the time and in the manner specified
herein or constitute, or be deemed to constitute, a waiver of any Event of
Default resulting from Lessee’s failure to return the Aircraft or the
Returnable Records or otherwise, and (ii) if Lessee fails to return any
Returnable Records at the time and in the manner specified herein, and if such
failure does not materially impair, delay or otherwise interfere with the
inspection, operation, maintenance, testing, repair, overhaul, marketing,
storage, sale, lease or other disposition of the Aircraft, Airframe or any Engine,

 

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10

 

and if Lessee otherwise
fully performs its obligation to return the Aircraft and the Returnable Records
at the time and in the manner specified herein, then, notwithstanding any such
failure, Lessee shall not be obligated to continue to pay Basic Rent, as set
forth above in this § 5.4.

 

6.                                      LIENS

 

Lessee
shall not, directly or indirectly, create, incur, assume, or suffer to exist
any Lien on or with respect to the Aircraft, the Airframe, any Engine, any
Part, or the Returnable Records, title to any of the foregoing, or any interest
of Lessee therein, or Lessee’s rights in and to this Lease or any Permitted
Sublease, except

 

(a) the rights of Lessor (including, without
limitation, the International Interests of Lessor constituted under this Lease
with respect to the Airframe and Engines), the Owner Participant, and Lessee
under the Operative Agreements, and the rights of any Permitted Sublessee under
any Permitted Sublease, and the rights of Lessor under any assignment by Lessee
to Lessor of a Permitted Sublease (including, without limitation, the
Assignment of any International Interests by Lessee to Lessor, in respect of
any such Permitted Sublease);

 

(b) Lessor Liens attributable to Owner Trustee
(both in its capacity as trustee under the Trust Agreement and in its
individual capacity) or Owner Participant;

 

(c) the rights of others under agreements or
arrangements to the extent permitted by § 7.2, § 7.3, or § C of
Annex C;

 

(d) Liens for Taxes either not yet due or being
contested in good faith by appropriate proceedings if such Liens and such
proceedings do not involve any material risk of the sale, forfeiture, or loss
(including loss of use) of the Aircraft, the Airframe, any Engine or any of the
Returnable Records, or any interest therein or any discernible risk of criminal
liability or any material risk of civil penalty against Lessor or any Owner
Participant;

 

(e) materialmen’s, mechanics’, workers’,
repairers’, employees’, or other like Liens arising in the ordinary course of
business for amounts 

 

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treatment and filed separately with the SEC

 

11

 

the payment of which
either is not yet delinquent or is being contested in good faith by appropriate
proceedings, if such Liens and such proceedings do not involve any material
risk of the sale, forfeiture, or loss (including loss of use) of the Aircraft,
the Airframe, any Engine, or any of the Returnable Records, or any interest
therein or any discernible risk of criminal liability or any material risk of
civil penalty against Lessor or any Owner Participant;

 

(f) Liens arising out of any judgment or award
against Lessee or any Permitted Sublessee, if, within 45 days after the entry
thereof, that judgment or award is discharged or vacated, or has its execution
stayed pending appeal, or is discharged, vacated, or reversed within 45 days
after the expiration of such stay, and if during any such 45-day period there
is not, or any such judgment or award does not involve, any material risk of
the sale, forfeiture, or loss (including loss of use)of the Aircraft, the
Airframe, any Engine or any of the Returnable Records, or any interest therein
or any discernible risk of criminal liability or any material risk of civil
penalty against Lessor or any Owner Participant;

 

(g) any other Lien with respect to which Lessee
or any Permitted Sublessee provides a bond, cash collateral, or other security
that, in the reasonable opinion of Lessor, fully covers the obligations and
liabilities associated with such Lien; and

 

(h) only at the sole discretion of, and only upon
the prior written consent of, Lessor, any other Lien.

 

Lessee,
at its own cost and expense, shall promptly take or cause to be taken such
action as may be necessary duly to discharge and remove (by bonding or
otherwise) any Lien not excepted above that arises in respect of the Aircraft,
the Airframe, any Engine, any Part, any of the Returnable Records, or all or
any other part of the Trust Estate during the Term, and shall promptly notify
Lessor of, and provide to Lessor evidence of, such discharge and removal.

 

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12

 

7.                                      REGISTRATION;
OPERATION; POSSESSION AND SUBLEASING

 

7.1                               Registration
and Operation

 

7.1.1                     Registration
and Recordation

 

Lessee
shall cause the Aircraft to be, and at all times during the Term to remain,
duly registered with the FAA under the Transportation Code, in the name of
Lessor as owner and lessor (except to the extent that such registration under
the Transportation Code is prevented or lost because of Lessor’s or Owner
Participant’s failure to comply with the citizenship requirements for
registration of the Aircraft under the Transportation Code).  Lessor shall execute and deliver all such
documents as Lessee reasonably requests for the purpose of effecting and
continuing such registration.

 

7.1.2                     Markings

 

On
or reasonably promptly after the Delivery Date, Lessee will cause to be affixed
to, and maintained in, the cockpit of the Airframe and on each Engine, in each
case in a clearly visible location, a placard of a reasonable size and shape
bearing the legend set forth in Schedule 7. Such placards may be removed
temporarily, if necessary, in the course of maintenance of the Airframe or
Engines. If any such placard is damaged or becomes illegible, Lessee shall
promptly replace it with a placard complying with the requirements of this
§ 7.1.2. Lessee will not allow the name of any Person to be placed on the
Airframe or any Engine as a designation that reasonably would be interpreted as
a claim of ownership.

 

7.1.3                     Compliance
With Laws

 

Lessee
shall not, and shall not allow any other Person to, operate, use, maintain,
service, test, inspect, repair, or overhaul the Aircraft (a) in violation
of any Law binding on or applicable to Lessee or to the Aircraft, the Airframe,
any Engine, or any of the Aircraft Documents, or to the operation, use,
maintenance, service, repair, or overhaul of the Aircraft, the Airframe, or any
Engine, or (b) in violation of any airworthiness certificate, license, or
registration of any Government Entity relating to Lessee or to the Aircraft,
the Airframe, or any Engine, except (1) immaterial and non-recurring
violations with respect to which corrective measures are taken promptly by
Lessee or a Permitted Sublessee (as applicable) upon discovery thereof, and (2) to
the extent Lessee or any Permitted Sublessee is contesting the validity or
application of any such Law or requirement relating to any such certificate,
license, or registration in good faith in any reasonable manner which does not
involve any material risk of the sale, forfeiture, or loss (including loss of
use) of the Aircraft, the Airframe, any Engine, or any of the Returnable
Records, or any interest therein, or any discernible risk of criminal liability
or any material risk of civil penalty against Lessor or Owner Participant.

 

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13

 

7.1.4                     Operation

 

Lessee
agrees not to operate, use, or locate the Aircraft, the Airframe, or any Engine,
or allow the Aircraft, the Airframe, or any Engine to be operated, used, or
located, (a) in any area excluded from coverage by any insurance required
by the terms of § 10, except in the case of a requisition by the U.S.
Government where the U.S. Government provides an indemnity in lieu of such
insurance, or insurance from the U.S. Government, covering such area, in
accordance with § 10.3, or (b) in any recognized or threatened area
of hostilities unless fully covered in accordance with Annex D by war-risk
insurance as required by the terms of § 10 (including § 10.3), unless
in any case referred to in this § 7.1.4 the Aircraft is only temporarily
operated, used, or located in such area as a result of an emergency, equipment
malfunction, navigational error, hijacking, weather condition, or other similar
unforeseen circumstances, so long as Lessee diligently and in good faith
proceeds to remove the Aircraft from such area immediately.

 

7.1.5                     Grounding and
Storage

 

Subject
to § 7.1.4, and the other provisions hereof, Lessee may voluntarily store
or ground the Aircraft, Airframe or any Engine or Part if and for so long
as (i) the equipment so stored or grounded is fully covered by all
insurance required to be maintained under § 10 and Annex D hereof, and (ii) such
storage or grounding is effected and maintained in accordance with the
Maintenance Program, and with Airframe Manufacturer’s or Engine Manufacturer’s
recommended storage guidelines, as the case may be, and with all applicable
Laws, including, without limitation, all rules, regulations and directives of
the FAA.

 

7.2                               Possession

 

Lessee
will not, without the prior written consent of Lessor, sublease or otherwise in
any manner deliver, transfer, or relinquish possession of the Aircraft, the
Airframe, or any Engine, or install any Engine, or permit any Engine to be
installed, on any airframe other than the Airframe; provided,
that, (i) subject to the provisions of § 7.3, and (ii) if, but
only for so long as, all approvals, consents, or authorizations required to be
obtained from the Aviation Authority or any other Government Entity, in
connection with any sublease, delivery, transfer, or relinquishment of
possession described below, have been obtained and remain in full force and
effect, then Lessee may, without such prior written consent, do any of the
following:

 

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14

 

7.2.1                     Interchange
and Pooling

 

Subject or permit any Permitted Sublessee to subject
any Engine to normal interchange agreements or pooling agreements or
arrangements, in each case customary in the commercial airline industry and
entered into in writing by Lessee, or such Permitted Sublessee, in the ordinary
course of business of Lessee or such Permitted Sublessee; provided, no such agreement or arrangement contemplates or requires
the transfer of title to such Engine, but if Lessor’s title to any such Engine
is divested under any such agreement or arrangement, then such Engine shall be
deemed to have suffered an Event of Loss as of the date of such divestiture,
and consequently Lessee shall be required to replace such Engine with a
Replacement Engine meeting the requirements of, and in accordance with,
§ 9.

 

7.2.2                     Testing and
Service

 

Deliver or permit any Permitted Sublessee to deliver
possession of the Aircraft, Airframe or any Engine to the manufacturer thereof
or to any third-party maintenance provider, for testing, service, repair, maintenance,
or overhaul work on the Aircraft, Airframe or any Engine, or, to the extent
required or permitted by the terms of § D of Annex C, for alterations
or modifications in or additions to the Aircraft, the Airframe or any Engine
(and delivery of Engines may be accomplished by transport on licensed or bonded
common carriers qualified in the shipping and transport of such items).

 

7.2.3                     Transfer to
U.S. Government

 

Transfer, or permit any Permitted Sublessee to
transfer, possession of the Aircraft, the Airframe, or any Engine to the U.S.
Government pursuant to CRAF or otherwise, in which event Lessee shall
immediately notify Lessor and Owner Participant in writing of any such transfer
of possession and in such notification shall identify by name, address, and
telephone numbers the Contracting Office Representative(s) for the
Military Airlift Command of the United States Air Force to whom notices must be
given and to whom requests or claims must be made; and if such transfer
continues beyond the end of the Term, then the Aircraft, Airframe, or
Engine(s), as the case may be, shall be deemed to have suffered an Event of
Loss with the effect that Lessee would be required to pay, in accordance with
§ 9.6, the amounts specified in § 9.1.2.

 

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treatment and filed separately with the SEC

 

15

 

7.2.4                     Installation
of Engines on Owned Airframes

 

Install or permit any Permitted Sublessee to install
an Engine on an airframe owned by Lessee or such Permitted Sublessee, free and
clear of all Liens except (a) Permitted Liens, (b) Liens that do not
(at any time) apply to the Engines, and (c) the rights of third parties
under normal interchange or pooling agreements and arrangements of the type
permitted under § 7.2.1.

 

7.2.5                     Installation
of Engines on Other Airframes

 

Install or permit any Permitted Sublessee to install
an Engine on an airframe leased to Lessee or such Permitted Sublessee, or
purchased or owned by Lessee or such Permitted Sublessee subject to a security
agreement, conditional sale, or other secured financing arrangement, but only
if (a) such airframe is free and clear of all Liens except (1) the
rights of the parties to such lease or secured financing arrangement, covering
such airframe, and (2) Liens of the type permitted by clauses (a) and
(b) of § 7.2.4, and (b) Lessee or such Permitted Sublessee has
received from the lessor, secured party, or conditional seller, in respect of
such airframe, a written agreement (which may be a copy of the lease, security
agreement, conditional sale agreement, or other agreement covering such
airframe), whereby such Person agrees, for the effective and enforceable
benefit of Lessor and Owner Participant, that neither it nor its successors or
assigns will acquire or claim any right, title, or interest in, or Lien on,
such Engine by reason of the installation of such Engine on such airframe at
any time while such Engine is subject to this Lease or is owned by Lessor.

 

7.2.6                     Installation
of Engines on Financed Airframes

 

Install or permit any Permitted Sublessee to install
an Engine on an airframe owned by Lessee or such Permitted Sublessee, leased to
Lessee or such Permitted Sublessee, or purchased or owned by Lessee or such
Permitted Sublessee subject to a conditional sale or other security agreement
under circumstances where neither § 7.2.4 nor § 7.2.5 applies; provided, that any such installation shall be deemed an
Event of Loss with respect to such Engine as of the date of such installation,
with the effect that Lessee shall be required to replace such Engine with a
Replacement Engine meeting the requirements of, and in accordance with,
§ 9. Until § 9 has been fully complied with, Lessor’s interest in any

 

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16

 

such Engine shall
continue in full force and effect.

 

7.2.7                     Subleasing

 

With respect to the Aircraft, the Airframe, or any
Engine, if no Special Default exists, enter into a sublease with any Permitted
Air Carrier, or (if neither Airframe Manufacturer nor any of its Affiliates is
the Owner Participant) any Permitted Manufacturer, but only if:

 

(a)                                  Lessee
provides written notice to Lessor at least 15 days (30 days, if the Sublessee
is not a U.S. Air Carrier) before the sublease term begins;

 

(b)                                 at
the time that Lessee enters into such sublease, such Permitted Air Carrier or
Permitted Manufacturer shall not be subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution, or similar proceeding, and shall not
have substantially all of its property in the possession of any liquidator,
trustee, receiver, or similar Person;

 

(c)                                  any
such sublease shall provide for payment of rent, or any amount in lieu of rent,
no less frequently than monthly and all such rent shall be payable in advance;

 

(d)                                 any
such sublease

 

(1) shall
end before the date that is three months prior to the expiration of the Term;

 

(2) shall
include provisions for the registration, maintenance, operation, possession,
inspection, and insurance of the Aircraft that are the same in all substantive
respects as the applicable provisions of this Lease;

 

 (3) shall be expressly subject and
subordinate to all the terms of this Lease and to Lessor’s rights, powers, and
remedies hereunder, including Lessor’s rights under § 14 to repossess the
Aircraft, Airframe, Engines, and Returnable Records, and to terminate such
sublease if an Event of Default exists; and

 

(4) shall
include no purchase option respecting the Aircraft;

 

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17

 

(e)                                  in
connection with a sublease to a Permitted Foreign Air Carrier, all necessary
governmental approvals (if any) required for the Aircraft, Airframe, or Engine(s) to
be imported to the applicable jurisdiction shall have been obtained prior to
commencement of any such sublease, and any foreign exchange permits necessary
to allow all rent and other payments provided for under such sublease shall be
in full force and effect; and Lessee shall have provided to Lessor (if the same
is reasonably obtainable in such jurisdiction) a power-of-attorney, reasonably
satisfactory in form and substance to Lessor, permitting Lessor to exercise all
rights of Lessee under such sublease in such jurisdiction, upon the occurrence
and continuation of an Event of Default;

 

(f)                                    in
connection with a sublease to a Permitted Foreign Air Carrier or non-U.S.
Permitted Manufacturer, Lessee furnishes to Lessor a favorable opinion, in form
and substance reasonably satisfactory to Lessor, of counsel, selected by Lessee
and reasonably satisfactory to Lessor, located in the country of domicile of
such Permitted Foreign Air Carrier or non-U.S. Permitted Manufacturer, that

 

(1) the
terms of such sublease are legal, valid, and binding obligations of the parties
thereto, enforceable under the laws of such jurisdiction, subject to applicable
bankruptcy, reorganization, or similar laws affecting creditors’ rights
generally (provided that any such qualification, as applied to this part of the
opinion, or to the opinion as a whole, shall not qualify, condition or
otherwise limit the scope or application of that part of the opinion required
under subparagraph (6) of this paragraph (f);

 

(2) it
is not necessary for Owner Participant or Lessor to register or qualify to do
business in such jurisdiction, if not already so registered or qualified, as a
result of the proposed sublease;

 

(3) Lessor’s
title to the Aircraft, Airframe, and Engines will be recognized and enforceable
in such jurisdiction;

 

(4) such
jurisdiction maintains normal diplomatic relations with the United States, and
the Laws of such jurisdiction of domicile require fair compensation by the
government of such jurisdiction, payable in a currency freely convertible into
Dollars, for the loss of use of or title to the Aircraft, Airframe, or Engines
in 

 

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treatment and filed separately with the SEC

 

18

 

the event of the requisition by such government of
such use or title (unless Lessee provides insurance in the amounts required
with respect to hull insurance under § 10 covering the requisition of use
of or title to the Aircraft, Airframe, or Engines by the government of such
jurisdiction so long as the Aircraft, Airframe, or Engines are subject to such
sublease);

 

(5) such
Permitted Air Carrier’s or Permitted Manufacturer’s agreement that its rights
under the sublease are subject and subordinate to all the terms of this Lease
is enforceable against such Permitted Air Carrier or Permitted Manufacturer
under applicable law;

 

(6) the
Laws and the courts of such jurisdiction (aa) will recognize the rights and
interests of Lessor (including Lessor’s title to the Aircraft), and of Owner
Participant, as such rights and interests are described in, and are intended to
be created under, the Operative Agreements, and (bb) will provide that there
are no possessory rights in favor of Lessee, any Permitted Sublessee, or any
third party (including any Government Entity) which would, upon bankruptcy or
other default by Lessee or any Permitted Sublessee, prevent or delay the return
of the Aircraft, Airframe, Engines, Parts or Returnable Documents to Lessor in
accordance with and when required or permitted by the terms of this Lease, or,
if such possessory rights exist, they are not materially greater than those
available to lessees of newly manufactured large passenger aircraft (assuming
such lessees to be U.S. Air Carriers) under then current United States Law
(including Section 1110), and there are no procedural or other impediments
to the return of the Aircraft to Lessor materially greater than under United
States Law (including Section 1110), and there is no material impediment
under the Laws of such jurisdiction to the enforceability (other than immaterial
differences in procedures of enforcement) of the rights and remedies of Lessor
provided for in and under the Operative Agreements;

 

(7) there
is no tort liability imposed on lenders or lessors having no operational
interest in the Aircraft, Airframe, or Engine(s), except liabilities that
Lessee or a Permitted Sublessee has agreed to insure against at its expense to
the reasonable 

 

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treatment and filed separately with the SEC

 

19

 

satisfaction of Owner Participant; and

 

(8) neither
Lessor nor Owner Participant shall be subjected to any adverse tax consequences
as a result of such sublease, unless Lessee is required to indemnify such Person,
under § 9.2 of the Participation Agreement (or otherwise agrees to
indemnify such Person pursuant to a separate indemnity agreement reasonably
satisfactory to such Person) against all such adverse tax consequences;

 

(g)                                 in
connection with any sublease to any U.S. Air Carrier for a term of more than
three months (including any permitted renewals or “back-to-back” or “replacement”
lease arrangements), Lessee shall provide Lessor and Owner Participant an
opinion of counsel (which may be from counsel to the subject sublessee, and may
be the same opinion to be given to Lessee, with the addition of Lessor and
Owner Participant as addressees of such opinion) in form and substance
reasonably satisfactory to Lessor and Owner Participant as to, among other things,
the due authorization, execution and delivery of such sublease (and as to such
other matters, including, without limitation, the legality, validity, binding
effect and enforceability of such sublease, as Lessee may, in using its
commercially reasonable efforts, obtain for its benefit and the benefit of
Lessor and Owner Participant); provided that any such opinion, as provided to
Lessor and Owner Participant, shall be no less favorable in form or substance
than any opinion given to Lessee or to any other party in connection with such
sublease transaction;

 

(h)                                 Lessee
furnishes to Lessor and Owner Participant evidence reasonably satisfactory to
Lessor that the insurance required by § 10 remains in effect;

 

(i)                                     all
necessary documents are duly filed, registered, or recorded in such public
offices as are required fully to establish, protect, and preserve the title of
Lessor in the Aircraft, Airframe, and Engines;

 

(j)                                     no
Sublessee may sub-sublease or otherwise Transfer the Aircraft, the Airframe, or
any Engine, except that a Permitted Manufacturer may sub-sublease to any
Permitted Sublessee to whom a sublease would be permitted under this
§ 7.2; provided, that (i) such
sub-sublease shall not permit any sub-sub-subleasing of the Aircraft, the
Airframe, or any Engine (and Lessee shall ensure that the same does not

 

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treatment and filed separately with the SEC

 

20

 

occur), (ii) Lessee shall comply, and shall cause such
sub-sublease to comply, with all requirements of this § 7.2 as if such
sub-sublease were a direct sublease from Lessee to the sub-sublessee, and (iii) such
sub-sublease meets the requirement of a Permitted Sublease;

 

(k)                                  the
Permitted Sublessee shall not be eligible to assert, or shall have effectively
waived, any right to sovereign immunity;

 

(l)                                     Lessee
shall reimburse Lessor and Owner Participant for all of their reasonable
out-of-pocket fees and expenses (including reasonable fees and disbursements of
counsel) incurred in connection with any such sublease; and

 

(m)                               [RESERVED].

 

In addition to the foregoing requirements, Lessee shall deliver to
Lessor and Owner Participant: (i) on or before the date specified in
§ 7.2.7(a), a notice stating the identity of the sublessee and a copy of
the proposed sublease agreement, (ii) on or before the date specified in
§ 7.2.7(a), an officer’s certificate of a Responsible Officer of Lessee
stating that no Special Default exists and that such sublease complies with
this § 7.2, (iii) on or before the commencement of the Permitted
Sublease, the registration of the International Interests of Lessee constituted
under such Permitted Sublease (if, in Lessor’s reasonable judgment, such
registrations are appropriate or desirable), (iv) on or before the
commencement of the Permitted Sublease, the sublease assignment referred to in
§ 7.4 and (x) financing statements or similar documents under the
applicable Laws of the country of the Permitted Sublessee confirming the
perfected first-priority security interest of Lessor in such Permitted
Sublease, duly executed and delivered, in form and substance reasonably
satisfactory to Lessor and Owner Participant, and duly filed or recorded in all
appropriate places, and (y) such filings and registrations on the
International Registry as may, in Lessor’s reasonable judgment, be appropriate
or desirable with respect to Lessee’s assignment to Lessor of all Associated
Rights relating to Lessee’s International Interests constituted under such
Permitted Sublease, and (z) such evidence as may be reasonably
satisfactory to Lessor that no other filing or registration has been made on
the International Registry that would have priority over Lessor’s interests as
assignee of such Associated Rights, and (iv) on or before the commencement
of the Permitted Sublease, the consent of the Permitted Sublessee to (x) the
registration of the International Interests of Lessee constituted under such
Permitted Sublease (if, in Lessor’s reasonable judgment, such registrations are
appropriate or desirable, and (y) the 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

21

 

assignment of its Permitted Sublease pursuant to § 7.4, and the
registration on the International Registry of such assignment (as described
above in clause (iv)(y)), in each case in a form reasonably satisfactory to
Lessor.  Lessee shall pay all reasonable
out-of-pocket costs and expenses (including reasonable counsel fees and
disbursements) of Lessor and Owner Participant in connection with any sublease
or other transfer pursuant to this § 7.2. 
No sublease or other transfer of any Airframe, Engine, or Part shall
in any way discharge or diminish any of Lessee’s obligations or liabilities
under this Lease or under any other Lessee Operative Agreement.

 

7.3                               Certain
Limitations on Subleasing or Other Relinquishment of Possession

 

Notwithstanding
anything to the contrary in § 7.2:

 

(a)                                  The
rights of any Person who receives possession of the Aircraft in accordance with
§ 7.2 shall be subject and subordinate to all the terms of this Lease, and
to Lessor’s rights, powers, and remedies hereunder, including (1) Lessor’s
right to repossess the Aircraft pursuant to § 14, (2) Lessor’s right
to terminate and avoid such sublease, delivery, transfer, or relinquishment of
possession if an Event of Default has occurred and is continuing, and (3) the
right to require such Person to deliver the Aircraft, the Airframe, and Engines
subject to such transfer forthwith if an Event of Default has occurred and is
continuing.

 

(b)                                 Lessee
shall remain primarily liable hereunder for the performance of all the terms of
this Lease to the same extent as if such transfer had not occurred, and no
transfer of possession of the Aircraft, the Airframe, any Engine, any Part, or
any Aircraft Document shall in any way discharge or diminish any of Lessee’s
obligations to Lessor hereunder or under any other Operative Agreement.

 

(c)                                  Lessee
shall ensure that no sublease, delivery, transfer, or relinquishment permitted
under § 7.2 shall affect the United States registration of the Aircraft.

 

(d)                                 Any
event that constitutes, or would with the passage of time constitute, an Event
of Loss under clauses (3), (4), (5), and (6) of the definition of Event of
Loss set forth in Annex A hereto shall not be deemed to violate the provisions
of § 7.2 hereof.

 

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22

 

(e)                                  No
Wet Lease shall constitute a delivery, transfer, or relinquishment of
possession for purposes of § 7.2, nor shall it be prohibited by the terms
hereof.

 

7.4                               Security
Assignment of Subleases

 

As security for Lessee’s due and punctual payment of all Rent and
performance of all of its other covenants and obligations in the Operative
Agreements, Lessee hereby grants to Lessor a first-priority security interest
in all of Lessee’s right, title, and interest in and to each Permitted Sublease
of any Aircraft, Airframe, or Engine, and all payments, including payments of
rent, insurance proceeds (other than public liability insurance proceeds), and
other amounts due or to become due thereunder. 
Lessee shall enter into a “Sublease Assignment”, in form and substance
reasonably satisfactory to Lessor, with respect to each Sublease.  In furtherance of the provisions of this
§ 7.4; Lessee agrees that each Permitted Sublease shall be accompanied by
such Uniform Commercial Code financing statements, FAA filings, filings and
registrations on the International Registry and other filings and documents as
shall, in Lessor’s reasonable opinion, be required to perfect and protect the
security interest of Lessor in such Permitted Sublease.

 

7.5                               Lessor’s
Interest in Certain Engines

 

If Lessee or a
Permitted Sublessee shall have received from the lessor, conditional seller, or
secured party, in respect of any airframe leased to, or owned by, Lessee or any
Permitted Sublessee and subject to a lease, conditional sale, or other security
agreement, a written agreement complying with clause (b) of
§ 7.2.5, then Lessor agrees, for the benefit of each lessor, conditional
seller, or secured party of any engine leased to, purchased by, or owned by
Lessee or such Permitted Sublessee and subject to a lease, conditional sale, or
other security agreement, that Lessor will not acquire or claim, as against
such lessor, conditional seller, or secured party, any right, title, or
interest in such engine as the result of the installation of such engine on the
Airframe at any time while such engine is subject to such lease, conditional
sale, or other security agreement and owned by such lessor or conditional
seller or subject to a security interest in favor of such secured party.

 

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treatment and filed separately with the SEC

 

23

 

8.                                      MAINTENANCE;
REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS, AND ADDITIONS;
OTHER LESSEE COVENANTS

 

8.1                               Maintenance;
Replacement and Pooling of Parts; Alterations, Modifications, and Additions

 

At all times
during the Term, Lessee shall comply with (or cause to be complied with) each
of the provisions of Annex C, which provisions are hereby incorporated by
this reference as if set forth in full herein.

 

8.2                               Information,
Certificates, Notices, and Reports

 

8.2.1                     Financial
Information

 

To the extent not
otherwise publicly available, Lessee will furnish to Lessor and Owner
Participant:

 

(a)                                  within
60 days after the end of each of the first three fiscal quarters in each fiscal
year of Lessee, a consolidated balance sheet of Lessee as of the end of such
quarter, and related statements of income and cash flows for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, setting forth in each case in comparative form the corresponding figures
for the corresponding period in the preceding fiscal year, prepared in
accordance with GAAP; provided, that
while Lessee is subject to the reporting requirements of the Exchange Act, a
copy of Lessee’s report on Form 10-Q for such fiscal quarter (together
with all documents not available on EDGAR (or its successor) containing such
financial information incorporated by reference therein, if not previously
delivered to Lessor and Owner Participant) will satisfy this clause (a).

 

(b)                                 within
120 days after the end of each fiscal year of Lessee, a consolidated balance
sheet of Lessee as of the end of such fiscal year and related statements of
income and cash flows of Lessee for such fiscal year, in comparative form with
the preceding fiscal year, prepared in accordance with GAAP, together with a
report of Lessee’s independent certified public accountants with respect to
their audit of such financial statements; provided, that
while Lessee is subject to the reporting requirements of the Exchange Act, a
copy of Lessee’s report on Form 10-K for such fiscal year (together with
all documents not available on 

 

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treatment and filed separately with the SEC

 

24

 

EDGAR (or its successor) containing such financial information
incorporated by reference therein, if not previously delivered to Lessor and
Owner Participant) will satisfy this clause (b).

 

8.2.2                     Annual
Certificate

 

Within 120 days
after the close of each fiscal year of Lessee, Lessee shall deliver to Lessor
and Owner Participant an Officer’s Certificate of Lessee to the effect that
such officer is familiar with or has reviewed or caused to be reviewed the
relevant terms of this Lease and the other Operative Agreements, and has made,
or caused to be made under his or her supervision, a review of the transactions
and condition of Lessee during the preceding fiscal year, and that following
such review such officer does not have knowledge of the existence as at the
date of such certificate of any Default (or, if to such officer’s knowledge any
Default existed or exists, specifying the nature and period of existence
thereof and the action Lessee has taken or is taking or proposes to take with
respect thereto).

 

8.2.3                     SEC Reports

 

To the extent not
otherwise publicly available, Lessee will furnish to Lessor and Owner
Participant:

 

(a)                                  promptly
after filing with the SEC, copies of Lessee’s annual reports on Form 10-K
(including all corresponding publicly-available annual reports to stockholders,
if not previously furnished), if any, and quarterly reports on Form 10-Q,
if any (in each case, excluding exhibits unless any such recipient requests
otherwise); and

 

(b)                                 if
provided by Lessee from time to time to aircraft lessors and other aircraft
creditors generally, then (1) promptly after filing with the SEC, copies
of current reports on Form 8-K, or any similar reports filed with the SEC
(in each case, excluding exhibits unless any such recipient requests otherwise),
and (2) promptly upon distribution thereof, copies of all periodic reports
furnished by Lessee to its respective stockholders generally.

 

8.2.4                     Notice of
Default

 

Lessee will furnish to
each of Lessor and Owner Participant, immediately upon acquiring Actual
Knowledge that a Default has occurred, a certificate of 

 

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treatment and filed separately with the SEC

 

25

 

Lessee, signed by any such officer of Lessee, describing such Default
in reasonable detail, with a statement describing the action Lessee has taken
or is taking or proposes to take with respect thereto.

 

8.2.5                     Information
for Filings

 

Upon the
reasonable request of Lessor or Owner Participant, Lessee shall promptly
furnish to Owner Participant and Lessor such information (other than with
respect to the citizenship of Owner Participant and Lessor) within Lessee’s or
any Permitted Sublessee’s possession, or reasonably available to or obtainable
by Lessee or such Permitted Sublessee, as may be required to enable Lessor to
file in a timely manner any reports required to be filed by it as lessor under
the Lease or to enable Owner Participant to file in a timely manner any reports
required to be filed by it as the beneficiary of the Trust Estate, in either
case, with any Government Entity because of, or in connection with, the
interest of Owner Participant or Lessor in the Aircraft, the Airframe, the
Engines, this Lease, or any other part of the Trust Estate; provided, that, with respect to any such information which
Lessee reasonably deems commercially sensitive or confidential, Owner
Participant or Lessor (as applicable) shall afford Lessee a reasonable
opportunity to seek from any such Government Entity a waiver of the obligation
of Owner Participant or Lessor to file any such information, or shall consent
to the filing of such information directly by Lessee in lieu of filing by Owner
Participant or Lessor, and if any such waiver or consent is evidenced to the
reasonable satisfaction of Owner Participant or Lessor (as applicable), then
Lessee shall not be required to furnish such information to Owner Participant
or Lessor.

 

8.2.6                     Other
Information

 

Lessee shall
promptly furnish to Lessor and Owner Participant from time to time such
information with respect to Lessee, the Aircraft, the Airframe, the Engines,
the Aircraft Documents, or Lessee’s financial condition, or otherwise relating
to the transactions or matters contemplated herein and in the other Operative
Agreements, in each case if and to the extent within Lessee’s or any Permitted
Sublessee’s possession, or reasonably available to or obtainable by Lessee or
such Permitted Sublessee, as Lessor or Owner Participant reasonably requests.

 

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26

 

8.3                               Lessee
Undertakings in Other Documents

 

Lessee hereby
agrees with Lessor that it shall perform the agreements, covenants, and
indemnities set forth in the Participation Agreement and the other Operative
Agreements, and hereby restates Lessee’s representations and warranties set
forth in such documents, in each case as fully and to the same extent and with
the same force and effect as if such agreements, covenants, indemnities,
representations and warranties were set forth in full in this § 8.3.

 

9.                                      LOSS,
DESTRUCTION, REQUISITION, ETC.

 

9.1                               Event
of Loss to the Aircraft

 

9.1.1                     Notice and
Election

 

(a)                                  If
an Event of Loss to the Airframe (and any Engine(s) installed thereon)
occurs, Lessee shall promptly (and in any event within 15 days after such
occurrence, or, if later, within 15 days after the determination that an Event
of Loss has occurred) notify Lessor and Owner Participant of such Event of
Loss. Within 45 days after such occurrence or determination, Lessee shall give
to Lessor and Owner Participant written notice of Lessee’s election to make
payment in respect of such Event of Loss, as provided in § 9.1.2, or to
replace the Airframe and any such Engine(s) as provided in § 9.1.3.

 

(b)                                 Lessee’s
failure to give the notice of election described in § 9.1.1(a) shall
be deemed to be an election of the option set forth in § 9.1.2. In
addition, Lessee shall not be entitled to elect the option set forth in
§ 9.1.3 if, at the time Lessor or Owner Participant receives such notice
from Lessee, a Special Default exists.

 

(c)                                  For
purposes of § 9.1.2, an Event of Loss to the Airframe shall be deemed to
constitute an Event of Loss to the Aircraft. For purposes of § 9.1.3, any
Engine not actually suffering an Event of Loss shall not be required to be
replaced.

 

(d)                                 If
insurance proceeds are received, with respect to any Event of Loss, at any time
prior to (1) the date of Lessee’s election, pursuant to paragraph (a) of
this § 9.1, under § 9.1.2 or § 9.1.3, or (2) the date upon
which any amounts are required to be paid by Lessee under § 9.1.2(a) or
§ 9.1.3(c), then such proceeds shall immediately be paid to Lessor to be
held as security 

 

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27

 

for Lessee’s obligations under this § 9.1.  Any amounts paid to Lessor pursuant to this
paragraph shall be credited against any amounts subsequently payable to Lessor
under § 9.1.2(a) or § 9.1.3(c), whichever is applicable.

 

9.1.2                     Payment of
Loss and Termination of Lease

 

(a)                                  If
Lessee elects, in accordance with § 9.1.1, to make payment in respect of
any such Event of Loss, then Lessee shall pay, in the manner and in funds of
the type specified in § 3.3, on the SLV Date next following the earlier of
(x) the 150th day following the date of the occurrence of such Event of
Loss, and (y) the second Business Day following the receipt of the
insurance proceeds with respect to such occurrence (but in any event not
earlier than the date of Lessee’s election under § 9.1.1 to make payment
under this § 9.1.2)(such SLV Date, referred to herein as the “SLV Payment
Date”), Lessee shall pay to Lessor:

 

(1)                                  all
unpaid Basic Rent payable at any time before the SLV Payment Date (it being
understood and agreed that if such SLV Payment Date is also a Payment Date, no
Basic Rent shall be payable on and as of such Date); plus

 

(2)                                  the
Stipulated Loss Value of the Aircraft computed as of the SLV Payment Date; plus

 

(3)                                  all
Transaction Expenses (excluding brokerage commissions and similar expenses
payable to any Person not retained by Lessee) incurred by Lessor and Owner
Participant in connection with such Event of Loss and the related termination
of the Lease; plus

 

(4)                                  to
the extent not taken into account in the foregoing clauses (2) and (3),
all Supplemental Rent due by Lessee to Lessor, Owner Participant or any other
Person entitled thereto, and remaining unpaid under the Lease or any other
Operative Agreement; plus

 

(5)                                  as
provided in § 3.2.2 of the Lease, interest on the amounts specified in the
foregoing clauses (1) through (4) at the Past-Due Rate from and
including the date on which any such amount was due to the date of payment of
such amount in full;

 

provided, that,
(x) if a Payment Date shall occur at any time before the SLV Payment Date,
then Lessee shall pay the Basic Rent due on such Payment Date, and (y) if
a Payment Date shall occur on the SLV Payment Date, or on a 

 

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28

 

date occurring after the
SLV Payment Date but before the date of payment of the amounts specified above
in this clause (a), then Lessee shall pay the Basic Rent due on such Payment
Date, and thereupon such amounts payable under this clause (a) shall be
reduced by the amount of such payment of Basic Rent.

 

(b)                                 Upon
payment in full of all amounts described in the foregoing § 9.1.2(a), the
Term for the Aircraft shall end, and Lessor will transfer the Aircraft to
Lessee, as-is and where-is, and subject to any insurer’s salvage rights, but
otherwise in the manner described in § 4.5.

 

9.1.3                     Replacement
of Airframe and Engines

 

(a)                                  If
Lessee elects, in accordance with § 9.1.1, to replace the Airframe and any
Engine(s) suffering the Event of Loss, then Lessee shall, as promptly as
possible and in any event within 180 days after the occurrence of such Event of
Loss, convey or cause to be conveyed to Lessor, in compliance with § 9.3
and as replacement for the Airframe and any such Engine(s), title to a
Replacement Airframe (which shall comply with § 9.1.3(b)), and for each
such Engine a Replacement Engine, in each case free and clear of all Liens
other than Permitted Liens not of record. If Lessee makes such election, but
for any reason does not effect such replacement within such time period and in
compliance with the requirements set forth in § 9.3, then Lessee shall be
deemed to have initially made the election set forth in § 9.1.2 with the
effect that Lessee shall pay, in the manner and in funds of the type specified
in § 3.3, the amounts required under, and in accordance with,
§ 9.1.2.

 

(b)                                 Any
such Replacement Airframe shall be an airframe that is the same model as the
Airframe to be replaced thereby, or an improved model, and that has a value,
utility, and remaining useful life (without regard to hours or cycles remaining
to the next regular maintenance check) at least equal to, and is in at least as
good operating condition as, the Airframe to be replaced thereby (assuming that
such Airframe was of the value and utility and in the condition and repair
required by the terms hereof immediately prior to the occurrence of the Event
of Loss). Any such Replacement Engine shall meet the requirements of, and be
conveyed by Lessee to Lessor in accordance with, § 9.2 (other than the
notice requirement set forth in § 9.2.1).

 

(c)                                  If
Lessee elects, in accordance with § 9.1.1, to replace the Airframe and any
Engine(s) suffering the Event of Loss, and has not effected such
replacement within 60 days after the Event of Loss occurred, then Lessee shall
immediately pay to Lessor the amounts required pursuant to § 9.1.2(a), to
be 

 

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treatment and filed separately with the SEC

 

29

 

held as security for Lessee’s obligations under this § 9.1. If
Lessee elects, under § 9.1.1, the replacement option in § 9.1.3, and
pays the deposit required by the preceding sentence, and has not effected such
replacement within 180 days, then Lessee shall be deemed to have originally
elected the option set forth in § 9.1.2 and such deposit shall be applied
to Lessee’s obligations under § 9.1.2, and Lessee shall pay any remaining
amounts due under § 9.1.2.

 

9.2                               Event
of Loss to an Engine; Engine Exchanges

 

9.2.1                     Notice

 

If an Event of
Loss to an Engine occurs under circumstances in which no Event of Loss to the
Airframe occurs, Lessee shall promptly (and in any event within 15 days after
acquiring Actual Knowledge of such occurrence) notify Lessor and Owner
Participant of such Event of Loss.

 

9.2.2                     Replacement
of Engine

 

Upon the
occurrence of any such Event of Loss, Lessee shall, within the time period set
forth below, convey or cause to be conveyed to Lessor, in compliance with
§ 9.3 and as replacement for the Engine with respect to which such Event
of Loss occurred, title to a Replacement Engine, free and clear of all Liens
other than Permitted Liens not of record. Such Replacement Engine shall be an
engine manufactured by Engine Manufacturer that is the same model as the Engine
to be replaced thereby, or an improved model (but, in either event, the same
model as the other Engine then subject to this Lease), and that has the same or
better modification status as the Engine to be replaced thereby, and that is
suitable for installation and use on the Airframe.

 

Any such
Replacement Engine shall also be required to have performance and durability
characteristics, and a value and utility at least equal to, and a remaining
useful life (without regard to hours or cycles remaining to the next regular
maintenance check) substantially comparable to, and to be in at least as good
operating condition as, the Engine to be replaced thereby (assuming that such
Engine was of the value and utility and in the condition and repair required by
the terms hereof immediately prior to the occurrence of the Event of
Loss).  Any such replacement shall be
effected promptly after the occurrence of such Event of Loss but in any event
within 60 days thereafter, or within such longer period (not to exceed 120 days
thereafter) if such longer period is reasonably necessary in order to obtain a
Replacement Engine on commercially reasonable terms.

 

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treatment and filed separately with the SEC

 

30

 

9.3                               Conditions
to any Replacement

 

9.3.1                     Documents

 

Before or at the
time of conveyance of title to any Replacement Airframe or Replacement Engine
to Lessor, Lessee shall promptly take each of the following actions, and shall
promptly furnish the following agreements, instruments, certificates, and
documents to (and in each case reasonably satisfactory in form and substance
to) Owner Participant:

 

(a)                                  furnish
Lessor with an FAA bill of sale (in the case of a Replacement Airframe) and a
full warranty (as to title) bill of sale duly conveying to Lessor such
Replacement Airframe or Replacement Engine, in form and substance reasonably
satisfactory to Lessor (together with such evidence of title as Lessor may
reasonably request), and cause such Replacement Airframe to be duly registered
in the name of Lessor pursuant to the Transportation Code, and further cause
such filings to be made on the International Registry as shall, in Lessor’s
reasonable judgment, be necessary and sufficient to register such full warranty
bill of sale as a contract of sale on the International Registry and otherwise
reflect such transfer of title, in such Replacement Airframe or Replacement
Engine, as the case may be, to Lessor;

 

(b)                                 cause
(1) a supplement to this Lease, in form and substance reasonably
satisfactory to Lessor, subjecting such Replacement Airframe or Replacement
Engine to this Lease, duly executed by Lessee, to be delivered to Lessor for
execution, and, upon such execution, to be filed for recordation with the FAA
pursuant to the Transportation Code (or such other applicable law referred to
in clause (a)), and (2) cause such filings to be made on the International
Registry as shall, in Lessor’s reasonable judgment, be necessary and sufficient
to register the interests of Lessor, in such Replacement Airframe or
Replacement Engine, as the case may be, under this Lease as an International
Interest, and (3) such Financing Statements and other filings, as Lessor
reasonably requests, in form and substance reasonably satisfactory to Lessor,
duly executed by Lessee and (to the extent applicable) Lessor (and Lessor shall
execute and deliver the same), to be filed in such location(s) as any such
party reasonably requests;

 

(c)                                  furnish
such evidence of compliance with the insurance provisions of § 10 with
respect to such Replacement Airframe or Replacement Engine as Owner Participant
reasonably requests;

 

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31

 

(d)                                 furnish
an opinion or opinions of Lessee’s counsel (which may be Lessee’s internal
legal department) reasonably satisfactory to Owner Participant and addressed to
Lessor and Owner Participant to the effect that (1) such full warranty
bill of sale referred to in § 9.3.1(a) constitutes an effective
instrument for the conveyance of title to the Replacement Airframe or
Replacement Engine, (2) in the case of a Replacement Airframe, Lessor will
be entitled to the benefits of Section 1110 (or any successor provision of
federal bankruptcy Law) with respect to such Replacement Airframe, (3) in
the case of a Replacement Engine, Lessor will be entitled to the benefits of Section 1110
(or any successor provision of federal bankruptcy Law) with respect to such
Replacement Engine, provided, that
the opinion referred to in this clause (3) need not be delivered with
respect to a Replacement Engine replaced as a result of an Event of Loss to the
extent that, immediately before such replacement, (i) the benefits of Section 1110
(or any successor provision of federal bankruptcy Law) were not, solely by
reason of a change in law, available to Lessor, and (ii) no engine that
would qualify as a Replacement Engine, and that would afford to Lessor the
benefits of Section 1110 (or any successor provision of federal bankruptcy
Law), is available to Lessee on commercially reasonable terms, and (4) to
such further effect as Lessor or Owner Participant may reasonably request;

 

(e)                                  furnish
an opinion of Lessee’s aviation law counsel reasonably satisfactory to Owner
Participant and addressed to Lessor and Owner Participant as to (1) the
due registration of any such Replacement Airframe, the absence of Liens of
record at the FAA and on the International Registry as to any such Replacement
Airframe and Replacement Engine(s), and (2) the due filing for recordation
of each supplement to this Lease with respect to such Replacement Airframe or
Replacement Engine under the Transportation Code, and (iii) with respect
to the full warranty bill of sale conveying to Lessor title in such Replacement
Airframe or Replacement Engine, as the case may be, the registration on the
International Registry of such bill of sale as a contract of sale and such
other documents as may be necessary to reflect such transfer of title, and (iv) the
registration on the International Registry of the interests of Lessor, in such
Replacement Airframe or Replacement Engine, as the case may be, under this
Lease as an International Interest, and (v) the due filing of any
Financing Statements or other filings reasonably requested by Lessor with
respect to such Replacement Airframe or Replacement Engine under applicable Law
and as to such other matters as Owner Participant may reasonably request;

 

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treatment and filed separately with the SEC

 

32

 

(f)                                    with
respect to any Replacement Airframe, furnish an opinion of tax counsel, selected
by Owner Participant and reasonably satisfactory to Lessee, as to the tax
consequences to Owner Participant of any such replacement;

 

(g)                                 with
respect to the replacement of any Engine, furnish a certificate of a qualified
aircraft engineer (who may be an employee of Lessee) certifying that such
Replacement Engine is an engine manufactured by Engine Manufacturer that is the
same model as the Engine to be replaced thereby, or an improved model (but, in
either event, the same model as the other Engine then subject to this Lease),
and that has the same or better modification status as the Engine to be
replaced thereby, and that is suitable for installation and use on the
Airframe, and that has performance and durability characteristics, and a value
and utility at least equal to, and a remaining useful life (determined without
regard to hours or cycles remaining to the next regular maintenance check)
substantially comparable to, the Engine so replaced (assuming that such Engine
was of the value and utility and in the condition and repair required by the
terms hereof immediately prior to the occurrence of the Event of Loss);

 

(h)                                 with
respect to the replacement of the Airframe, furnish a certified report of a
qualified independent aircraft Appraiser, reasonably satisfactory to Owner
Participant, setting forth such Appraiser’s opinion as to the fair market
value, as of the date of conveyance hereunder, of such Replacement Airframe,
and certifying that such Replacement Airframe has performance and durability
characteristics, and a value and utility (including equivalent current value
and estimated residual value at the end of the Term at least equal to, and a
remaining useful life substantially comparable to,  the Airframe so replaced (assuming that the
Airframe was of the value and utility and in the condition and repair required
by the terms hereof immediately prior to the occurrence of the Event of Loss);

 

(i)                                     assign
to Lessor the benefit of all assignable manufacturers, and vendors, warranties
with respect to such Replacement Airframe and such Replacement Engine(s),
provided that Lessor shall, on the terms set forth in  § 4.2, reassign to Lessee the benefits
of such warranties during the Term;

 

(j)                                     furnish
Lessor and Owner Participant with an Officer’s Certificate of Lessee certifying
compliance with this § 9 and, with respect to the replacement of the
Airframe, to the effect that, upon consummation of such replacement, no Special
Default will exist; and

 

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treatment and filed separately with the SEC

 

33

 

(k)                                  take
such other action and furnish such other certificates and documents as Lessor
or Owner Participant reasonably requests in order that such Replacement
Airframe and any such Replacement Engine(s) be properly titled in Lessor
free and clear of all Liens (except Permitted Liens not of record), and leased
hereunder, to the same extent as initially required under the Operative
Agreements with respect to the Airframe and any Engine(s) so replaced.

 

Lessee shall cause an airworthiness certificate, with
respect to such Replacement Airframe, to be duly issued under the
Transportation Code promptly after such substitution.

 

9.3.2                     Other
Conditions

 

Lessee shall not be entitled to replace the Airframe
under § 9.1.3 and this § 9.3, and shall be deemed to have initially
made the election set forth in § 9.1.2, if at the time of such replacement

 

(a)                                  any
Special Default exists; or

 

(b)                                 under
applicable Law and notwithstanding any actions by Lessor and Lessee under
§ 9.3.3(a), Lessor shall for any reason not be entitled to the benefits of
Section 1110 with respect to such Replacement Airframe or with respect to
any Replacement Engine which replaces an Engine installed on the Airframe at
the time of such Event of Loss.

 

9.3.3                     Other
Obligations

 

(a)                                  Lessor
and Lessee agree that, when and after any Replacement Airframe becomes the
Airframe hereunder, and when and after any Replacement Engine becomes an Engine
hereunder, this Lease shall continue to be, and shall be treated as, a lease
for U.S. federal income tax purposes of such Replacement Airframe and such
Replacement Engine. Without limiting the foregoing, Lessee and Lessor intend
that Lessor shall, in all events, be entitled to the rights and benefits of Section 1110
(or any successor provision of federal bankruptcy Law) with respect to any
Replacement Airframe or Replacement Engine (unless, with respect to a
Replacement Engine replaced as a result of an Event of Loss, immediately before
such replacement, (i) the benefits of Section 1110 (or any successor
provision of federal bankruptcy Law) shall not, solely by reason of a change in
law, be available to Lessor, and (ii) no engine that would qualify as a
Replacement Engine, and that would afford to 

 

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34

 

Lessor the benefits of Section 1110 (or any successor provision of
federal bankruptcy Law), is available to Lessee on commercially reasonable
terms), and Lessee and Lessor shall cooperate and take such action as the other
may reasonably request so as to ensure that Lessor shall be entitled to such
rights and benefits.

 

(b)                                 No
Event of Loss to an Engine, or to an Airframe, shall result in, or otherwise
allow or permit (other than as provided in § 9.1.2(b)), any reduction,
deferral, discharge, or other change in the timing or amount of any Rent
payable by Lessee hereunder or any other amount payable by Lessee under any
other Operative Agreement, and (subject to such § 9.1.2(b)) Lessee shall
pay all such Rent and other amounts as though such Event of Loss had not
occurred.

 

9.4                               Conveyance
to Lessee

 

Upon full compliance
by Lessee with the applicable terms of §§ 9.1.3, 9.2, and 9.3, Lessor will
transfer to Lessee the Airframe or Engine(s), as applicable, with respect to
which such Event of Loss occurred, in accordance with § 4.5.

 

9.5                               Application
of Payments

 

Any amounts  received at any time by Lessor, Lessee, or
any Permitted Sublessee, in respect of any Event of Loss (it being understood
that amounts received in respect of property damage or loss not constituting an
Event of Loss are provided for in § 10), from or on behalf of (i) any
Government Entity providing any insurance or indemnity required to be
maintained by Lessee pursuant to § 10.3, or (ii) any insurer
providing any insurance required to be maintained by Lessee pursuant to
§ 10, shall in each such case be paid over to and held by Lessor, to the
extent provided in § B of Annex D, and shall be applied as follows:

 

9.5.1                     Replacement
of Airframe and Engines

 

If such amounts
are received with respect to the Airframe or any Engine(s) installed
thereon at the time of such Event of Loss, upon Lessee’s compliance with the
applicable terms of § 9 with respect to the Event of Loss for which such
amounts are received, such amounts shall, subject to § 9.9, be paid over
to, or (if received by Lessee after such compliance) retained by, Lessee.

 

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9.5.2                     Loss of
Engine

 

If such amounts
are received with respect to an Engine (other than an Engine installed on the
Airframe when the Airframe suffers an Event of Loss), upon Lessee’s compliance
with the applicable terms of § 9 with respect to the Event of Loss for
which such amounts are received, such amounts shall, subject to § 9.9, be
paid over to, or (if received by Lessee after such compliance) retained by,
Lessee.

 

9.5.3                     Payment of
Loss

 

If such amounts
are received, in whole or in part, with respect to the Airframe, and Lessee
makes, has made or is deemed to have made the election set forth in
§ 9.1.2, such amounts shall be applied as follows:

 

(a)                                  first, if the sum described in § 9.1.2 has not then
been paid in full by Lessee, such amounts shall be applied by to the extent
necessary to pay in full such sum; and

 

(b)                                 second, the remainder, if any, shall, subject to § 9.9,
be paid to Lessee.

 

9.6                               Requisition
of Aircraft for Use

 

If any Government
Entity requisitions the use of the Airframe and the Engines or engines
installed thereon, and if the requisition does not constitute an Event of Loss,
Lessee shall promptly notify Lessor and Owner Participant of such requisition,
and all of Lessee’s obligations under this Lease shall continue to the same
extent as if such requisition had not occurred; provided,
that, if the Airframe and Engines or engines installed thereon are not returned
to Lessor by Lessee at the end of the Term, then the Aircraft shall be deemed
to have suffered an Event of Loss and Lessee shall be deemed to have made the
election set forth in § 9.1.2 with the effect that Lessee shall be
obligated to pay the Stipulated Loss Value and all other amounts payable
pursuant to § 9.1.2 with respect to the Aircraft on the last day of the
Term.

 

9.7                               Requisition
of an Engine for Use

 

If any Government
Entity requisitions for use any Engine but not the Airframe, Lessee will
replace such Engine by complying with § 9.2 and § 9.3 to the same
extent as if an Event of Loss with respect to that Engine had occurred, and any
payments received by Lessor or Lessee from such 

 

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36

 

Government Entity with respect to such requisition shall be paid or
retained in accordance with § 9.5.2.

 

9.8                               Application
of Requisition Payments

 

All payments
received by Lessor or Lessee, or any Permitted Sublessee, from any Government
Entity for the use of the Airframe and Engine(s) or engine(s) installed
thereon during the Term shall be paid over to, or retained by, Lessee, and all
payments received by Lessor or Lessee from any Government Entity for the use of
the Airframe and Engine(s) or engine(s) installed thereon after the
Term shall be paid over to, or retained by, Lessor; provided,
that, if such requisition constitutes an Event of Loss, then all such payments
shall be paid over to Lessor, and held and applied as provided in § 9.5.

 

9.9                               Application
of Payments During Default

 

Any amount
described in this § 9 that is payable or creditable to, or retainable by,
Lessee shall not be paid or credited to, or retained by, Lessee if a Special
Default exists when such payment, credit, or retention would otherwise occur,
but shall instead be held by or paid over to Lessor as security for Lessee’s
obligations under the Operative Agreements, and shall be invested pursuant to
§ 4.4 hereof, unless and until such amount is applied, at the option of
Lessor, from time to time during the existence of a Special Default, to Lessee’s
obligations under the Operative Agreements as and when due (any such
application shall be made to such Lessee obligations as Lessor determines in
its sole discretion).  If and when no
Special Default exists, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this § 9.9.

 

10.                               INSURANCE

 

10.1                        Lessee’s
Obligation to Insure

 

Lessee shall
comply with, or cause to be complied with, each of the provisions of
Annex D, which provisions are hereby incorporated by this reference as if
set forth in full herein.

 

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10.2                        Insurance
for Own Account

 

Nothing in this
§ 10 shall limit or prohibit (a) Lessee from maintaining the policies
of insurance required under Annex D with higher limits than those specified in
Annex D, or (b) Lessor or Owner Participant from obtaining insurance for
its own account (and notwithstanding § 10.5 hereof, any proceeds payable
under such separate insurance noted in the foregoing clauses (a) and (b) shall
be payable as provided in the policy relating thereto); provided,
that no insurance may be obtained or maintained under the foregoing clause (b) that
would limit or otherwise adversely affect the coverage of or increase the cost
of any insurance required to be obtained or maintained by Lessee pursuant to
this § 10 and Annex D.

 

10.3                        Indemnification
by Government in Lieu of Insurance

 

During any period
that the Aircraft, the Airframe, or any Engine shall have been requisitioned
for use by, or possession of the Aircraft, the Airframe, or any Engine shall
have been transferred to, the U.S. Government or any other Government Entity,
Lessor and Owner Participant shall (subject to the terms of this § 10.3)
accept, in lieu of insurance against any risk with respect to the Aircraft
described in § B and § C (but, with respect to § C, as to hull
coverage only) of Annex D, indemnification from, or insurance provided by, the
U.S. Government (or upon Owner Participant’s prior written consent, other
Government Entity), against such risk in an amount that, when added to the
amount of insurance (including self-insurance otherwise permitted under the
terms of Annex D), if any, against such risk that Lessee (or any Permitted
Sublessee) may continue to maintain, in accordance with this § 10, during
the period of such requisition or transfer, shall be at least equal to the
amount of insurance against such risk otherwise required by this § 10
(assuming in all cases that the insurance so continued to be maintained would
fully cover the noted increment notwithstanding the existence of the
indemnification or insurance provided by the U.S. Government or other
Government Entity). Any such indemnification or insurance provided by the U.S.
Government shall provide protection no less favorable to the Indemnitees, after
taking into account any insurance the Lessee or any Permitted Sublessee may
continue to maintain, than the insurance coverage that would comply with the
terms of this § 10. Lessee shall provide Lessor and Owner Participant with
(1) evidence of such indemnification or insurance no later than two
Business Days before the date such indemnification or insurance takes effect,
or, if later, promptly after such information becomes available to Lessee, (2) a
certificate of a Responsible Officer of Lessee stating that such
indemnification or insurance complies with the preceding sentence, and (3) any
other information, 

 

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documentation or certificates relating to such indemnity or insurance
as Owner Participant shall reasonably request.

 

10.4                        Application
of Insurance Proceeds

 

All proceeds of
insurance or indemnities required to be maintained by Lessee, in accordance
with this § 10 and § B of Annex D, in respect of any property
damage or loss constituting an Event of Loss shall be paid, held and applied in
accordance with § 9.5. All proceeds of insurance or indemnities required
to be maintained by Lessee, in accordance with this § 10 and § B of
Annex D, in respect of any property damage or loss not constituting an
Event of Loss shall be paid over to and held by Lessor or Lessee, in the
circumstances and to the extent provided in § B of Annex D, and shall
be applied to pay (or to reimburse Lessee) for repairs or for replacement
property, effected or obtained in accordance with the terms of § 8.1 and
Annex C, as provided in said § B of Annex D; and any balance
remaining after such repairs or replacement with respect to such damage or loss
shall be paid over to, or retained by, Lessee.

 

10.5                        Application
of Payments During Special Default

 

Any amount
described in § 9.5.3 or this § 10 that is payable or creditable to,
or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if a Special Default exists when such payment, credit, or retention
would otherwise occur, but shall instead be held by or paid over to Lessor as
security for Lessee’s obligations under this Lease, and shall be invested
pursuant to § 4.4 unless and until such amount is applied, at Lessor’s
option, from time to time during the existence of a Special Default, to Lessee’s
obligations under this Lease and the other Lessee Operative Agreements as and
when due (any such application to be made to such obligations of Lessee as
Lessor determines in its sole discretion). If and when no Special Default
exists, such amount shall be paid to Lessee to the extent not previously
applied in accordance with this § 10.5.

 

10.6                        Lessor’s
Right to Maintain Insurance

 

In the
event that Lessee shall fail to maintain, or cause to be maintained, insurance
as herein provided, Lessor or Owner Participant may at its option (but shall
not be obligated to) provide such insurance and, in such event, Lessee shall,
upon demand, reimburse such person, as Supplemental Rent, for the cost thereof;
provided, that no such action by Lessor or Owner Participant shall be deemed to
cure any Default resulting from such failure by Lessee.

 

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11.                               INSPECTION

 

(a)                                  Lessor,
Owner Participant, or their authorized representatives (the “Inspecting Parties”) may, at the times set forth below in
this paragraph (a), inspect the Aircraft, Airframe, and Engines and the
Aircraft Documents, and Lessee shall cooperate, and shall cause any Permitted
Sublessee to cooperate, with the Inspecting Parties in connection with any such
inspection, and any such Inspecting Party may make copies of the Aircraft
Documents not reasonably deemed confidential by Lessee or a Permitted
Sublessee. Lessee shall make any Permitted Sublease expressly subject to
inspection rights consistent with this § 11.  The Inspecting Parties shall have the right
to conduct such an inspection (i) at any reasonable time, as may be
mutually agreed by Lessor, Owner Participant and Lessee (such agreement not to
be unreasonably withheld by any such Person), it being understood and agreed,
however, that an inspection shall be permitted at least once every 180 days,
and (ii) at any reasonable time if and for so long as a Special Default
shall have occurred and be continuing.

 

(b)                                 Any
inspection of the Aircraft hereunder shall be a visual, walk-around inspection
that may include going on board the Aircraft and examining the contents of any
open panels, bays, or other components of the Aircraft, Airframe, and Engines,
but shall not include the opening of any unopened panels, bays, or other
components of the Aircraft, and no such inspection shall unreasonably interfere
with Lessee’s or any Permitted Sublessee’s maintenance or operation of the
Aircraft, the Airframe, or any Engine.

 

(c)                                  Neither
Lessor nor Owner Participant shall have any duty or liability to make any such
visit, inspection, or survey, or any duty or (except to the extent arising
directly out of its own acts) liability arising out of any such visit,
inspection, or survey or failure to make any such visit, inspection, or survey.

 

(d)                                 Each
Inspecting Party shall bear its own expenses in connection with any such visit,
inspection, or survey (including the cost of any copies made in accordance with
§ 11(a)), unless a Special Default exists or such Party is making such
visit, inspection, or survey to verify the correction of any material failure
by Lessee or any Permitted Sublessee to comply with the terms and provisions of
this Lease discovered in connection with the prior visit, inspection, or
survey, then any such inspection (including the cost of such

 

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40

 

copies) shall be at
Lessee’s expense.

 

(e)                                  If
requested by Lessor, Lessee shall give, or shall cause any Permitted Sublessee
to give, reasonable prior notice (but in any event of not less than 5 days) to
Lessor of the date upon which the Aircraft, the Airframe, or any Engine
undergoes its next major check, and with respect to any Engine the next
off-the-wing maintenance, and shall notify Lessor of the name and location of
the relevant maintenance performer and shall, upon Lessor’s request at least 3
days prior to commencement of such major check or maintenance, make available
for inspection by Lessor all relevant Aircraft Documents at Lessee’s records
facility in the United States, or at such Permitted Sublessee’s records
facility, or at the premises of the maintenance performer.

 

12.                               ASSIGNMENT;
SUCCESSOR LESSOR

 

12.1                        In General

 

This Lease and the
other Lessee Operative Agreements shall bind and benefit Lessor and Lessee and
their successors and permitted assigns. Except as otherwise expressly permitted
in § 7.2 or § 7.3, or as required in the case of any requisition by
the U.S. Government referred to in § 7.1.4, or as permitted by
§ 7.1.9 of the Participation Agreement, Lessee will not, without the prior
written consent of Owner Participant, assign any of its rights under this Lease
(and any such unpermitted assignment shall be void ab
initio). Except as otherwise provided
herein (including under the provisions of § 14), Lessor shall not assign
or convey any of its right, title, and interest in and to this Lease or the
Aircraft without Lessee’s prior written consent, such consent not to be
unreasonably withheld.

 

12.2                        Successor
Lessor

 

If any successor
is appointed to serve as Owner Trustee pursuant to the terms of the
Participation Agreement and the Trust Agreement, such successor shall, upon
written notice by such successor to Lessee, succeed to all the rights, powers,
and title of Lessor hereunder, and shall be deemed to be “Lessor” and the owner
of the Aircraft and the other assets of the Trust Estate for all purposes
hereof, without the need for any consent or approval by Lessee (and Lessee
shall consent, and shall be deemed to have consented, to any 

 

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41

 

filings or registrations on the International Registry that Lessor, in
its reasonable judgment, determines to be necessary of desirable to fully
effectuate such succession) and without in any way altering the terms of this
Lease or Lessee’s obligations under the Operative Agreements. An appointment
and designation of a successor as Owner Trustee shall not exhaust the right to
appoint and designate further successors or additional trustees as Owner
Trustees pursuant to the Participation Agreement and the Trust Agreement, and
such right may be exercised repeatedly as long as this Lease shall be in
effect.

 

13.                               LEASE
EVENTS OF DEFAULT

 

The existence of
any one or more of the following circumstances, conditions, acts, or events,
for any reason whatsoever and whether any such circumstance, condition, act, or
event is voluntary or involuntary or comes about or is effected by operation of
Law or pursuant to or in compliance with any judgment, decree, order, rule, or
regulation of any Government Entity, shall constitute an Event of Default so
long as it shall not have been remedied:

 

13.1                        Payments

 

(a)                                  Lessee
fails to pay any amount of Basic Rent, Stipulated Loss Value or Make-Whole
Amount within 5 Business Days after it becomes due; or

 

(b)                                 Lessee
fails to pay any Supplemental Rent (other than Stipulated Loss Value or
Make-Whole Amount) when due and such failure continues for a period in excess
of 10 Business Days from and after the date of any written notice to Lessee of
the failure to make such payment when due.

 

13.2                        Insurance

 

Lessee fails to
carry and maintain, or cause to be carried and maintained, insurance on and in
respect of the Aircraft, Airframe, and Engines in accordance with the provisions
of § 10, or Lessee shall operate the Aircraft, Airframe, or Engines, or
permit or suffer the Aircraft, Airframe, or Engines to be operated, at any time
when such insurance shall not be in effect.

 

13.3                        Corporate
Existence and Commercial Airlines Operations

 

(a)                                  Lessee
shall fail to maintain at all times its legal existence, as 

 

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42

 

required pursuant to § 7.1.1 of the Participation Agreement, or
Lessee shall otherwise wind-up, liquidate, or dissolve, or Lessee shall take or
fail to take any action that would have the effect of any of the foregoing; or

 

(b)                                 Lessee
shall cease to be a U.S. Air Carrier, as required pursuant to § 7.1.1 of
the Participation Agreement, or Lessee shall discontinue all or substantially
all of its commercial airline operations; provided, that (i) if such
cessation or discontinuance is capable of being corrected and Lessee is
diligently proceeding to effect such correction, and (ii) such cessation
or discontinuance creates no material risk of the sale, forfeiture, or loss
(including loss of use) of, or damage to, the Aircraft, the Airframe, or any
Engine, then such cessation or discontinuance shall not be an Event of Default
unless and until such condition shall have continued unremedied for a period of
(x) 30 days, or (y) if such cessation or discontinuance is not
capable of being corrected within 30 days due to reasons beyond Lessee’s
control (but Lessee is, nonetheless, diligently proceeding to effect such
correction), 120 days.

 

13.4                        Certain
Covenants

 

Lessee shall not observe, perform or comply with, or
shall otherwise breach, any of its obligations under § 7.1 (other than
§ 7.1.2 and § 7.1.3, which shall be subject to § 13.5), or
§ 7.2.7 (in respect of a sublease of the Aircraft or Airframe), or
§ 1 of Annex E, or under § 7.1.5 or § 7.1.9 of the Participation
Agreement.

 

13.5                        Other
Covenants

 

Lessee fails to
observe or perform (or cause to be observed and performed) in any material
respect any other covenant, agreement, or obligation of Lessee in any Operative
Agreement, and such failure continues unremedied for a period of 30 days from
and after the date of written notice thereof to Lessee from Lessor or Owner
Participant unless such failure is capable of being corrected and creates no
material risk of the sale, forfeiture, or loss (including loss of use) of, or
damage to, the Aircraft, the Airframe, or any Engine, or any discernible risk
of criminal liability or any material risk of civil penalty against Lessor or
any Participant, and Lessee is diligently proceeding to correct such failure,
in which case there shall be no Event of Default unless and until such failure
continues unremedied for a period of 180 days after receipt of such
notice.

 

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13.6                        Representations
and Warranties

 

Any representation
or warranty made by Lessee in any Operative Agreement (a) proves to have
been untrue or inaccurate in any material respect as of the date made, (b) is
material at the time in question, and (c) if the effect of such
incorrectness is curable (incorrectness of a representation as to financial
condition being incurable), remains uncured for a period in excess of 30 days
from and after the date of written notice thereof from Lessor or Owner
Participant to Lessee or (if earlier) the date that a Responsible Officer of
Lessee is aware of the incorrectness.

 

13.7                        Bankruptcy
and Insolvency

 

(a)                                  Lessee
consents to the appointment of or the taking of possession by a receiver,
trustee, or liquidator of itself or of all or substantially all of its
property, or Lessee admits in writing its inability to pay its debts generally
as they come due, or does not pay its debts generally as they become due or
makes a general assignment for the benefit of creditors, or Lessee files a
voluntary petition in bankruptcy or a voluntary petition or an answer seeking
reorganization, liquidation or other relief in a case under any bankruptcy Laws
or other insolvency Laws (as in effect at such time) or an answer admitting the
material allegations of a petition filed against Lessee in any such case, or
Lessee seeks relief by voluntary petition, answer, or consent under the
provisions of any other bankruptcy or other similar Law providing for the
reorganization or winding-up of corporations (as in effect at such time); or

 

(b)                                 an
order, judgment, or decree is entered by any court of competent jurisdiction
appointing, without Lessee’s consent, a receiver, trustee, or liquidator of
Lessee or of all or substantially all of its property, or all or substantially
all of Lessee’s property is sequestered, or granting any other relief in
respect of Lessee as a debtor under any bankruptcy Laws or other insolvency
Laws (as in effect at such time), and any such order, judgment, or decree of
appointment or sequestration remains in force undismissed, unstayed, and
unvacated for a period of 60 days after the date of entry thereof; or

 

(c)                                  a
petition against Lessee in a case under any bankruptcy Laws or other insolvency
Laws (as in effect at such time) is filed and not withdrawn or dismissed within
60 days thereafter, or if, under the provisions of any Law providing for
reorganization or winding-up of corporations that applies to Lessee, any court
of competent jurisdiction assumes jurisdiction, custody, or control of Lessee or
of all or substantially all of the property of Lessee, and 

 

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44

 

such jurisdiction, custody or control remains in force unrelinquished,
unstayed, and unterminated for a period of 60 days.

 

13.8                        Other
Obligations

 

(a)                                  An
“Event of Default” exists under a Related Lease; or

 

(b)                                 Lessee
(or any of its Affiliates) fails to pay, when due, any Debt and/or any lease
obligations, involving (whether individually or in the aggregate) obligations
in excess of $5 million, and the holder or holders of such Debt or such lease
obligations (or a trustee on behalf of such holder or holders) accelerates such
Debt or such lease obligations, or takes any action to cancel or terminate the
associated lease arrangement, or otherwise initiates collection or foreclosure
remedies or proceedings to collect such Debt or such lease obligations.

 

13.9                        Judgments

 

                                                Judgment
for the payment of money in excess of $5 million (excluding any amount insured
by a solvent insurer who has admitted coverage for the underlying claim) is
rendered against Lessee (or any of its Affiliates), and the same shall remain
undischarged for a period of 30 days during which execution of such judgment
shall not be effectively stayed.

 

14.                               REMEDIES
AND WAIVERS

 

14.1                        Remedies

 

If any Event of
Default exists, Lessor may, at its option and at any time and from time to
time, exercise any one or more of the following remedies as Lessor in its sole
discretion shall elect:

 

14.1.1              Return and
Repossession

 

Lessor may cause
Lessee, upon giving written notice to Lessee, to return promptly, and Lessee
shall return promptly, all or any part of the Aircraft, Airframe, or Engines,
and any of the Returnable Records, as Lessor shall so demand, to Lessor or its
order in the manner and condition required by, and otherwise in accordance
with, all the provisions of § 5, as if the Aircraft, Airframe, Engines, or
Part, or the Returnable Records, were being returned at 

 

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the end of the Term, or Lessor, at its option, may enter upon the
premises where the Aircraft, the Airframe, any Engine, or any Part thereof,
or any of the Returnable Records, is located and take immediate possession of
and remove the same by summary proceedings or otherwise, all without liability
accruing to Lessor for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise, and Lessee expressly waives any right it may have under applicable
Law to a hearing prior to repossession of the Aircraft, Airframe, any Engine,
or any Part thereof, or any of the Returnable Records.

 

14.1.2              Sale and Use

 

Lessor may sell
all or any part of the Aircraft, the Airframe, or any Engine, or any of the
Returnable Records, at public or private sale, at such time(s) and
place(s), and to such Person(s) (including Owner Participant), as Lessor
determines and, without limiting the generality of the provisions of this
§ 14, Lessor may hold Lessee liable for the payment of any Basic Rent
remaining unpaid at the time of such sale and relating to any period prior to
the date of such sale; or Lessor may otherwise dispose of, hold, use, operate,
lease to others, or keep idle the Aircraft, the Airframe, or any Engine, or any
Part thereof, as Lessor, in its sole discretion, shall determine, all free
and clear of any rights of Lessee and without any duty to account to Lessee
with respect to such action or inaction or for any proceeds with respect
thereto, except as hereinafter set forth in § 14.1.3(b) or as
otherwise provided by applicable Law, and except to the extent that such
proceeds would constitute, under applicable Law, a mitigation of Lessor’s
damages suffered or incurred as a result of the subject Event of Default.  Lessor shall give to Lessee at least
15 days’ prior written notice of the date fixed for any public sale of the
Aircraft, the Airframe, or any Engine, or any Part thereof, or any of the
Returnable Records, or of the date on or after which will occur the execution
of any contract providing for any private sale, and Lessee acknowledges and
agrees that such notice shall for all purposes be deemed to be commercially
reasonable.

 

14.1.3              Certain Liquidated
Damages

 

Whether or not
Lessor shall have exercised, or shall thereafter at any time exercise, any of
its rights under § 14.1.1 or § 14.1.2 with respect to the Aircraft,
the Airframe, any Engine or any of the Returnable Records, Lessor, by written
notice to Lessee specifying a payment date (which shall be the first SLV Date
occurring not less than 10 days after the date of such notice), may demand that
Lessee pay to Lessor, and Lessee shall pay to Lessor, on the 

 

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46

 

payment date so specified and in the manner and in funds of the type
specified in § 3.3, as liquidated damages for loss of a bargain and not as
a penalty (in lieu of the Basic Rent (as applicable) for the Aircraft in respect
of all periods commencing on or after the date specified for payment in such
notice), the following amounts:

 

(a)                                  all
unpaid Basic Rent due at any time before the SLV Date specified in such notice;
plus

 

(b)                                 whichever
of the following amounts Lessor, in its sole discretion specifies in such
notice:

 

(1)                                  an
amount equal to the excess (if any) of the present value, computed as of the
SLV Date specified in such notice, discounted to such date at a rate per annum
equal to 180-day LIBOR, compounded semiannually, of all unpaid Basic Rent
payable during the then-remaining portion of the Term over the Fair Market
Rental Value of the Aircraft for the remainder of the Term, after discounting
such Fair Market Rental Value to present value (at a rate per annum equal to
180-day LIBOR, compounded semiannually) as of the SLV Date specified in such
notice, or

 

(2)                                  an
amount equal to the excess (if any) of the Stipulated Loss Value for the
Aircraft, computed as of the SLV Date specified in such notice, over the Fair
Market Sales Value of the Aircraft, as of the SLV Date specified in such
notice; plus

 

(c)                                  interest
on the amounts specified in the foregoing clause (a) at the Past-Due Rate
from and including the date on which any such amount was due to the date of
payment of such amount; plus

 

(d)                                 interest
on the amount specified in the foregoing clause (b)(1) or (b)(2),
according to Lessor’s election, at the Past-Due Rate from and including the SLV
Date specified in such notice to the date of payment of such amount; plus

 

(e)                                  any
Make-Whole Amount; plus

 

(f)                                    all
other amounts due pursuant to § 14.1.6.

 

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14.1.4              Liquidated Damages
Upon Sale

 

If, pursuant to
§ 14.1.2 or applicable Law, Lessor has sold the Aircraft, the Airframe or
any Engine, then, in lieu of exercising its rights under § 14.1.3 with
respect to the Aircraft, the Airframe or any Engine, Lessor may, if Lessor so
elects, upon giving written notice to Lessee, demand that Lessee to pay to
Lessor, and Lessee shall pay to Lessor, on the date of such sale and in the
manner and in funds of the type specified in § 3.3, as liquidated damages
for loss of a bargain and not as a penalty (in lieu of the Basic Rent payable
for the Aircraft in respect of all periods commencing on or after the date of
such sale), the following amounts:

 

(a)                                  all
unpaid Basic Rent due and payable at any time before the SLV Date that occurs
on or immediately preceding the date of such sale; plus

 

(b)                                 an
amount equal to the excess, if any, of (1) the Stipulated Loss Value of
the Aircraft, the Airframe or the Engine, as the case may be, computed as of
the SLV Date used in the foregoing clause (a) for the computation of
unpaid Rent, over (2) the net proceeds of such sale (minus all reasonable
costs actually incurred by Lessor and Owner Participant in connection with the
sale) or if such sale is a private sale and is made to Owner Participant or any
Affiliate thereof, the Fair Market Sales Value of the Aircraft, Airframe or
Engine, as the case may be, determined as of the date of such sale; plus

 

(c)                                  interest
on the amounts specified in the foregoing clause (a) at the Past-Due Rate
from and including the date on which any such amount was due to the date of
payment of such amount; plus

 

(d)                                 interest
on the sum of the amounts specified in the foregoing clause (b) at the
Past-Due Rate from and including the date of such sale to the date of payment
of such amounts; plus

 

(e)                                  any
Make-Whole Amount; plus

 

(f)                                    all
other amounts due pursuant to § 14.1.6.

 

14.1.5              Rescission

 

Lessor may (a) at
its option, rescind or terminate this Lease as to the Aircraft, the Airframe,
or any Engine, or any Part thereof, or (b) exercise any other right
or remedy that may be available to it under applicable Law or proceed by
appropriate court action to enforce the terms hereof or to recover 

 

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damages for the breach hereof, including Lessee’s agreement to lease
the Aircraft for the Term and to pay Rent.

 

14.1.6              Other Remedies

 

In addition to the
foregoing remedies (but without duplication of amounts otherwise paid under
this § 14), Lessee shall be liable for any and all unpaid Rent due
hereunder before, during, or after (except as otherwise provided herein) the
exercise of any of the foregoing remedies and for all reasonable attorneys’
fees and other costs and expenses of Lessor and Owner Participant, including
interest on overdue Rent at the rate as herein provided, incurred by reason of
the existence of any Event of Default or the exercise of Lessor’s remedies with
respect thereto, including all costs and expenses incurred in connection with
the return of the Aircraft, the Airframe, any Engine, or any Part thereof,
in accordance with the terms of § 5, or in placing the Aircraft, Airframe,
Engine, or Part in the condition and airworthiness required by
§ 5.  Without limiting, and
notwithstanding, any other provision of this Lease or any other Operative
Agreement, Lessor shall be entitled to use and apply all or any portion of the
Security Deposit for the purposes, and in the manner, set forth in Section 3.2.3(b) hereof.

 

14.2                        Limitations
Under CRAF

 

Notwithstanding
the provisions of § 14.1, during any period that the Aircraft, the
Airframe, or any Engine is subject to CRAF in accordance with the provisions of
§ 7.2.3 and in the possession of the U.S. Government, Lessor shall not, as
a result of any Event of Default, exercise its remedies hereunder in such
manner as to limit Lessee’s control under this Lease (or any Permitted
Sublessee’s control under any Permitted Sublease) of the Aircraft, the
Airframe, or such Engine, unless Lessor gives at least 30 days’ (or such other
period as may then apply under CRAF) written notice of default hereunder by
registered or certified mail to Lessee (and any Permitted Sublessee) with a
copy to the Contracting Officer Representative or Representatives for the
Military Airlift Command of the United States Air Force, most-recently
identified by notice from Lessee to Lessor pursuant § 7.2.3, to whom
notices must be given under the contract governing Lessee’s (or any Permitted
Sublessee’s) participation in CRAF with respect to the Aircraft, the Airframe,
or any Engine.

 

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14.3                        Right to
Perform for Lessee

 

If Lessee (a) fails
to make any payment of Rent required to be made by it hereunder or (b) fails
to perform or comply with any of its agreements contained herein, then, after
giving reasonable advance notice (if reasonably practicable (and Lessee agrees
that no more than two day’s advance notice shall be required in any event)) to
Lessee of its intent to do so (with the understanding that, in certain
circumstances, the absence of any advance notice may be reasonable), Lessor or
Owner Participant may (but shall not be obligated to) make such payment or
perform or comply with such agreement, and the amount of such payment and the
amount of the expenses of Lessor or Owner Participant incurred in connection
with such payment or the performance of or compliance with such agreement (as
applicable), together with interest thereon at the Past-Due Rate, shall be
deemed Supplemental Rent, payable by Lessee upon demand by Lessor or Owner Participant,
whichever is entitled thereto.  No such
payment, performance or compliance shall be deemed to waive any Default or
otherwise relieve Lessee of its obligations with respect thereto.

 

14.4                        Determination
of Fair Market Rental Value and Fair Market Sales Value

 

For the purpose of
this § 14, the Fair Market Rental Value or the Fair Market Sales Value of
the Aircraft, the Airframe, or any Engine shall be determined on an “as is,
where is” basis and shall take into account customary brokerage and other out-of-pocket
fees and expenses which typically would be incurred in connection with a
re-lease or sale of such an aircraft, airframe, or engine.  Any such determination shall be made by an
Appraiser selected by Lessor, and the costs and expenses associated therewith
shall be borne by Lessee; provided, that,
if Lessor does not obtain possession of the Aircraft pursuant to this § 14
within a commercially reasonable period, an Appraiser shall not be appointed,
and Fair Market Rental Value and Fair Market Sales Value for purposes of this
§ 14 shall be zero.

 

14.5                        Lessor
Appointed Attorney-in-Fact

 

Lessee hereby appoints Lessor as the attorney-in-fact
of Lessee, with full authority in the place and stead of Lessee and in the name
of Lessee or otherwise, for the purpose of carrying out the provisions of this
and any other Operative Agreement and taking any action and executing any
instrument that Lessor may deem necessary or advisable to accomplish the
purposes hereof;

 

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provided, that
Lessor may only take action or execute instruments under this § 14.5 after
this Lease has been cancelled or terminated because of an Event of
Default.  Lessee hereby declares that the
foregoing powers are granted for valuable consideration, constitute powers
granted as security for the performance of the obligations of Lessee hereunder,
are coupled with an interest, and shall be irrevocable.  Without limiting the generality of the
foregoing or any other rights of Lessor under the Operative Agreements, Lessor
shall (if this Lease has been cancelled or terminated because of an Event of
Default) have the sole and exclusive right and power to (i) settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to or pertaining to the Aircraft, the Airframe, or any Engine, or this
Lease and (ii) make proof of loss, appear in and prosecute any action
arising from any policy or policies of insurance maintained pursuant to this
Lease, and settle, adjust, or compromise any claims for loss, damage, or
destruction under, or take any other action in respect of, any such policy or
policies.

 

14.6                        Remedies
Cumulative

 

Nothing contained
in this Lease shall be construed to limit in any way any right, power, remedy,
or privilege of Lessor hereunder or under any other Operative Agreement or now
or hereafter existing at law or in equity. 
Each and every right, power, remedy, and privilege hereby given to, or
retained by, Lessor in this Lease shall be in addition to and not in limitation
of every other right, power, remedy, and privilege given under the Operative
Agreements or now or hereafter existing at law or in equity.  Each and every right, power, remedy, and
privilege of Lessor under this Lease and any other Operative Agreement may be exercised
from time to time or simultaneously and as often and in such order as may be
deemed expedient by Lessor.  All such
rights, powers, remedies, and privileges shall be cumulative and not mutually
exclusive, and the exercise of one shall not be deemed a waiver of the right to
exercise any other. Lessee hereby waives to the extent permitted by applicable
Law any right which it may have to require Lessor to choose or elect remedies.

 

15.                               LESSEE’S
OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.

 

(a)                                  This
Lease is a net lease, and (except as otherwise provided in the Operative
Agreements) it is intended that Lessee shall pay all costs and expenses of
every character, whether foreseen or unforeseen, ordinary or extraordinary or
structural or nonstructural, in connection with the use, 

 

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operation, maintenance, repair, and reconstruction of the Airframe and
each Engine.  Lessee’s obligation to pay
all Rent payable hereunder and to perform all its other obligations hereunder
shall be absolute and unconditional, and shall be construed as covenants
separate and independent from the agreements or undertakings of any other
Person, including Lessor or Owner Participant, and shall not be affected by any
event or circumstance, including: (1) any setoff, counterclaim,
recoupment, defense, or other right that Lessee may have against Lessor, Owner
Participant, Airframe Manufacturer, Engine Manufacturer, any Indemnitee, or any
other Person for any reason whatsoever; (2) any defect in the title,
airworthiness, condition, design, operation, or fitness for use of, or any
damage to or loss or destruction of, the Aircraft, the Airframe, or any Engine,
or any interruption or cessation in the use or possession thereof by Lessee for
any reason whatsoever; (3) any insolvency, bankruptcy, reorganization, or
similar proceedings by or against Lessee or any other Person; (4) any
restriction, prevention or curtailment of or interference with any use of the
Aircraft, the Airframe, any Engine, or any part thereof; (5) any claim
that Lessee has or might have against any Person; (6) any failure on the
part of Lessor or Owner Participant to perform or comply with any of the terms
of this Lease or any other Operative Agreement, or any breach of any
representation or warranty by Lessor or Owner Participant; (7) any
invalidity or unenforceability or disaffirmance of this Lease or any provision
hereof or any of the other Operative Agreements or any provision thereof, in
each case whether against or by Lessee or otherwise; or (8) any other
circumstance, happening, or event whatsoever, whether or not similar to any of
the foregoing.

 

(b)                                 If
for any reason whatsoever this Lease shall be terminated in whole or in part by
operation of law or otherwise except as specifically provided herein, Lessee
nonetheless agrees to pay an amount equal to each Rent payment at the time such
payment would have become due and payable in accordance with the terms hereof
had this Lease not been terminated in whole or in part.  All Rent payable by Lessee shall be paid
without notice or demand (except as otherwise expressly provided) and without
abatement, suspension, deferment, deduction, diminution, or proration by reason
of any circumstance or occurrence whatsoever. 
Lessee hereby waives, to the extent permitted by applicable law, any and
all rights that it may now have or that at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit, or surrender this
Lease or any part hereof, or to any abatement, suppression, deferment,
diminution, reduction or proration of Rent, except in accordance with the
express terms hereof.  Each payment of
Rent made by Lessee shall be final as to Lessor, Owner Participant and Lessee
and, except for 

 

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any computational error, Lessee will not seek to recover all or any
part of any such payment of Rent for any reason whatsoever.

 

(c)                                  All
obligations, liabilities, covenants, and undertakings of Lessee in this
Agreement or in any other Operative Agreement shall be performed, observed, and
complied with at Lessee’s sole cost and expense, whether or not so expressed,
unless otherwise expressly provided.

 

(d)                                 Nothing
set forth in this § 15 shall be construed to prohibit Lessee from
separately pursuing any claim that it may have from time to time against
Lessor, Owner Participant or any other Person with respect to any matter (other
than the absolute and unconditional nature of Lessee’s obligations hereunder to
pay Rent, and other than the matters specified in paragraphs (a) and (b) above).

 

(e)                                  Nothing
set forth in this § 15 shall be construed to require Lessee to pay for or
reimburse any costs or expenses incurred with respect to the deregistration of
the Aircraft prior to or on the Delivery Date.

 

16.                               ADDITIONAL
RIGHTS AND OBLIGATIONS

 

 In addition to the other terms and provisions
of this Lease, Lessee and Lessor shall have the rights and obligations set
forth in Annex E (both Parts 1 and 2 thereof), the provisions of which are
hereby incorporated by this reference as if set forth in full herein.

 

17.                               MISCELLANEOUS

 

17.1                        Amendments

 

No provision of
this Lease may be amended, supplemented, waived, modified, discharged,
terminated, or otherwise varied orally, but only by an instrument in writing
that specifically identifies the provision of this Lease that it purports to
amend, supplement, waive, modify, discharge, terminate, or otherwise vary and
is signed by Lessor and Lessee.  Each
such amendment, supplement, waiver, modification, discharge, termination, or
variance shall be effective only in the specific instance and for the specific
purpose for which it is given.  No
provision of this Lease shall be varied or contradicted by oral 

 

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communication, course of dealing or performance, or other manner not
set forth in an agreement, document, or instrument in writing and signed by Lessor
and Lessee.

 

17.2                        Severability

 

If any provision
hereof shall be held invalid, illegal, or unenforceable in any respect in any
jurisdiction, then, to the extent permitted by Law, (a) all other
provisions hereof shall remain in full force and effect in such jurisdiction,
and (b) such invalidity, illegality, or unenforceability shall not affect
the validity, legality, or enforceability of such provision in any other
jurisdiction.  If, however, any Law
pursuant to which such provisions are held invalid, illegal, or unenforceable
may be waived, Lessor and Lessee hereby waive such Law to the full extent
permitted, to the end that this Lease shall be deemed to be a valid and binding
agreement in all respects, enforceable in accordance with its terms.

 

17.3                        Third-Party
Beneficiary

 

This Lease is not
intended to provide, and shall not provide, any Person not a party hereto
(other than the Benefitted Persons) with any rights of any nature whatsoever
against either of the parties hereto, and, except as expressly provided in the
Participation Agreement or any other Operative Agreement, no Person not a party
hereto (other than the Benefitted Persons) shall have any right, power, or
privilege in respect of this Lease, or have any benefit or interest arising out
of this Lease. For purposes of this § 17.3, the term “Benefitted Persons”
shall mean Owner Participant, any Permitted Sublessee (but only to the extent
provided in § 4.3), the Persons referred to in § 7.5, and any
Indemnitee or Tax Indemnitee under § 9 of the Participation Agreement.

 

17.4                        Reproduction
of Documents

 

This Lease
(including all annexes, schedules, and exhibits hereto) and all agreements,
instruments, and documents relating hereto, including (a) consents,
waivers, and modifications that may hereafter be executed, and (b) financial
statements, certificates, and other information previously or hereafter
furnished to any party hereto, may be reproduced by such party by any
photographic, photostatic, microfilm, micro-card, miniature photographic, or
other similar process, and such party may destroy any original documents so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not
the 

 

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original is in existence and whether or not such reproduction was made
by such party in the regular course of business), and any enlargement,
facsimile, or further reproduction of such reproduction likewise is admissible
in evidence.

 

17.5                        Counterparts

 

This Lease and any
amendments, waivers, consents, or supplements hereto may be executed in any
number of counterparts (or upon separate signature pages bound together
into one or more counterparts), each fully-executed set of which when so
executed shall be deemed to be an original, and all of which counterparts,
taken together, shall constitute one and the same instrument. The single
fully-executed original of this Lease marked “Original” on the signature page hereof
is the original for chattel paper purposes, and all other counterparts are
duplicates for chattel paper purposes and are marked “duplicate” on the
signature page hereof. No security interest in this Lease may be perfected
by the possession of any counterpart other than the “Original”.

 

17.6                        Notices

 

Unless otherwise
expressly permitted by the terms hereof, all notices, requests, demands,
authorizations, directions, consents, waivers, and other communications
required or permitted to be made, given, furnished, or filed hereunder shall be
made, given, furnished, or filed, and shall become effective, in the manner
prescribed in § 14.7 of the Participation Agreement.

 

17.7                        Governing
Law; Jurisdiction and Venue; No Jury Trial

 

(a)                                  This
Lease shall in all respects be governed by the laws of the State of New York,
including all matters of construction, validity, and performance, without
reference to any rules relating to conflicts of laws (other than Sections
5-1401 and 5-1402 of the New York General Obligations Law); provided that, all
matters in any way relating to, or arising in connection with, the CTC, the CTC
Registrations, or the International Interests of Lessor relating to the
Airframe and the Engines and constituted under and pursuant to this Lease,
shall be construed and interpreted in conformity with the “Official Commentary
on the Convention on International Interests in Mobile Equipment and the
Protocol thereto on Matters Specific to Aircraft Equipment”, Revised Edition
2008, written by Professor Sir Roy Goode and published by the International
Institute for the Unification of Pricate Law (Unidroit).

 

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(b)                                  Each
party hereto hereby irrevocably agrees, accepts, and submits itself to the
non-exclusive jurisdiction of the courts of the State of New York in the City
and County of New York and of the United States for the Southern District of
New York, in connection with any legal action, suit, or proceeding with respect
to any matter relating to or arising out of or in connection with the Operative
Agreements.

 

(c)                                  Each
party hereto hereby irrevocably consents and agrees to the service of any and
all legal process, summons, notices, and documents of any of the aforementioned
courts in any such suit, action, or proceeding may be made by delivering copies
thereof by registered or certified mail, postage prepaid, at the address set
forth pursuant to § 17.6.  Each
party hereto hereby agrees that service upon it, or any of its agents, in each
case in accordance with this § 17.7(c), shall constitute valid and effective
personal service upon such party, and each party hereto hereby agrees that the
failure of any of its agents to give any notice of such service to any such
party shall not impair or affect in any way the validity of such service on
such party or any judgment rendered in any action or proceeding based thereon.

 

(d)                                  Each
party hereto hereby irrevocably waives, to the extent permitted by applicable
law, and agrees not to assert, by way of motion, as a defense, or otherwise, in
any legal action or proceeding brought hereunder in any of the above-named
courts, that such action or proceeding is brought in an inconvenient forum,
that venue for the action or proceeding is improper, or that any Operative
Agreement may not be enforced in or by such courts.

 

(e)                                  Each
party hereto hereby waives its right to a jury trial of any claim or cause of
action in any court in any jurisdiction based upon or arising out of or
relating to the Operative Agreements.

 

(f)                                    Each
party hereto irrevocably and unconditionally agrees that final judgment against
it in any of the aforesaid actions, suits, or proceedings shall be conclusive
(subject to permitted appeals) and may be enforced in any other jurisdiction,
within or outside the United States of America, by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of its obligations and liabilities.

 

(g)                                 Each
party hereto represents and warrants that it has reviewed this § 17.7 with
its legal counsel, and that it knowingly and voluntarily accepts and agrees to
this § 17.7 following consultation with 

 

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such legal
counsel.  This § 17.7 is irrevocable
and unconditional, and shall apply to all amendments, supplements, and
modifications to the Operative Agreements.

 

17.8                        No Waiver

 

No failure on the
part of Lessor to exercise, and no delay by Lessor in exercising, any of its
rights, powers, remedies, or privileges under this Lease or provided at Law, in
equity or otherwise shall impair, prejudice, or constitute a waiver of any such
right, power, remedy, or privilege or be construed as a waiver of any breach
hereof or default hereunder or as an acquiescence therein, nor shall any single
or partial exercise of any such right, power, remedy, or privilege preclude any
other or further exercise thereof by Lessor or the exercise of any other right,
power, remedy, or privilege by Lessor. No notice to or demand on Lessee in any
case shall, unless otherwise required under this Lease, entitle Lessee to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of Lessor to any other or further action in
any circumstances without notice or demand.

 

17.9                        Survival

 

The
representations, warranties, indemnities, and covenants set forth herein shall,
as to events occurring and circumstances arising or existing at or before the
end of the Term, survive the delivery or return of the Aircraft, the Transfer
of any interest of Owner Participant in this Agreement, the other Operative
Agreements, the Trust Estate, and the Trust Agreement, and the expiration or
other termination of this Lease or any other Operative Agreement, except to the
extent otherwise expressly provided herein or therein.

 

17.10                 Further
Assurances

 

(a)                                  Each
party hereto shall execute, acknowledge, and deliver (or cause to be executed,
acknowledged, and delivered) all such further agreements, instruments,
certificates, or other documents, and shall do and cause to be done such
further things, as the other party hereto reasonably requests in connection
with the administration of, or to carry out more effectively the purposes of
this Lease.

 

(b)                                 Without limiting the foregoing, Lessee shall do or
cause to be done any and all further acts and things which may, in the
reasonable judgment of Lessor, be required under the terms of the CTC (or any
other agreement, treaty, 

 

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convention, pact or by any practice, custom, or
understanding recognized as having wide application or control involving any
jurisdiction in which Lessee or any Permitted Sublessee may operate the
Aircraft or any Engine) to perfect and preserve Lessor’s interests in and to
the Airframe, each Engine and this Lease, and to establish and protect the
rights and remedies created or intended to be created or provided for in favor
of Lessor hereunder and under the other Operative Documents, including without
limitation, promptly and duly executing and delivering to Lessor such further
documents, assurances and consents, and taking such further action as Lessor
may from time to time reasonably request.

 

17.11                 Entire Agreement

 

This Lease,
together with the other Operative Agreements and together with Appendix 1 to
the Letter Agreement, on and as of the date hereof constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof, and all prior understandings or agreements, whether written or oral,
between the parties hereto with respect to such subject matter are hereby superseded
in their entirety.

 

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intentionally left blank.]

 

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IN WITNESS WHEREOF,
Lessor and Lessee have executed this Lease Agreement N483HA.

 

 

	
   

  	
  WELLS FARGO BANK
  NORTHWEST, NATIONAL ASSOCIATION, not in its individual
  capacity, except as expressly provided herein, but solely as trustee under
  the Trust Agreement, as Lessor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HAWAIIAN AIRLINES,
  INC., as Lessee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

This is the Original
executed counterpart of the Lease for chattel paper purposes.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

59

 

EXHIBIT
A — LEASE SUPPLEMENT

 

LEASE
SUPPLEMENT N0.    

 

LEASE N      HA
SUPPLEMENT NO.     , dated
                         ,
20     (this “Lease Supplement”), between WELLS FARGO BANK
NORTHWEST, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust
Agreement N      HA, dated as of
                            ,
200 , with Owner Participant named therein (such Owner Trustee, in its
capacity as such Owner Trustee being herein called “Lessor”), and HAWAIIAN
AIRLINES, INC., a Hawaii corporation, as Lessee (“Lessee”).

 

Lessor and Lessee have heretofore entered into that
certain Lease Agreement N      HA, dated as
of
                        ,
200 , relating to one Boeing Model 717-200 aircraft (herein called
the “Lease” and the defined terms therein being hereinafter used with the same
meanings).  The Lease provides for the
execution and delivery of this Lease Supplement for the purpose of leasing the
Airframe and Engines under the Lease as and when delivered by Lessor to Lessee
in accordance with the terms thereof.

 

The Lease relates to the Airframe and Engines
described below, and a counterpart of the Lease to which this Lease Supplement
is attached and of which this Lease Supplement is a part is being filed for
recordation on the date hereof with the FAA as one document.

 

NOW, THEREFORE, in consideration of the premises and
other good and sufficient consideration, Lessor and Lessee hereby agree as
follows:

 

1.                                       [RESERVED]

 

2.                                       Lessor
hereby delivers and leases to Lessee under the Lease and Lessee hereby accepts
and leases from Lessor under the Lease the following described Boeing
Model 717-200 aircraft (the “Aircraft”), which Aircraft as of the date
hereof consists of the following components:

 

(i)                                     Airframe:
One used 717-200 Model (Generic Model 717-200) airframe bearing U.S.
Registration Mark N      HA and manufacturer’s
serial no.           ,
and that is type-certified by the Aviation Authority to transport (1) at
least eight (8) persons (including crew) or (2) goods in excess of
2750 kilograms (6050 pounds); and

 

(ii)                                  Engines:  two Rolls-Royce Deutschland Ltd & Co
KG Model BR 700-715 C1-30 engines bearing, respectively,

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

1

 

manufacturer’s
serial nos.           
and            (each of which
engines is turbine-powered and has 550 or more rated takeoff horsepower or the
equivalent of such horsepower).

 

3.                                       The
Delivery Date of the Aircraft is the date of this Lease Supplement set forth in
the opening paragraph hereof, and the location of such delivery is
                                          .

 

4.                                       Lessee
hereby confirms its agreement to pay Lessor Rent for the Aircraft in accordance
with Section 3, and the other provisions, of the Lease.

 

5.                                       Lessee
hereby confirms to Lessor that Lessee has duly and irrevocably accepted the
Aircraft under and for all purposes hereof, of the Lease and of the other
Lessee Operative Agreements.

 

6.                                       All
the terms and provisions of this Lease Supplement are hereby incorporated by
reference in the Lease to the same extent as if fully set forth therein.

 

7.                                       This
Lease Supplement may be executed in any number of counterparts (or upon
separate signature pages bound together into one or more counterparts),
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.

 

8.                                       To
the extent, if any, that this Lease Supplement constitutes chattel paper (as
such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction), no security interest in this Lease Supplement may be
created through the transfer or possession of any counterpart other than the
original executed counterpart, which shall be identified as the counterpart
indicating it to be the original counterpart of this Lease Supplement for
chattel paper purposes, on the signature page thereof.

 

[Intentionally left blank.  Signature page follows.]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

2

 

IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.

 

 

	
   

  	
  WELLS FARGO BANK NORTHWEST,
  NATIONAL ASSOCIATION,

  
	
   

  	
   

  	
  not in its individual
  capacity, except as expressly provided herein, but solely as trustee under
  the Trust Agreement, as Lessor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HAWAIIAN AIRLINES, INC.,
  

  
	
   

  	
   

  	
  Lessee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

[This is the Original
counterpart of the Lease Supplement for chattel paper purposes.]

 

[or]

 

[This is a duplicate
executed counterpart, and is not the
original counterpart, of the Lease Supplement, for chattel paper purposes.]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

EXHIBIT B — AIRCRAFT
DESCRIPTION

 

AIRCRAFT
DESCRIPTION

 

The Aircraft is a Boeing model 717-200 aircraft, consisting of (1) an
airframe bearing FAA registration no. N604AT (to be changed to N483HA) and
manufacturer’s serial no. 55128, (2) two Rolls-Royce Deutschland Ltd &
Co KG Model BR 700-715 C1-30 engines (each of which is turbine-powered and has
550 or more rated takeoff horsepower or its equivalent), bearing manufacturer’s
serial nos. 13392 and 13189 and (3) all appliances, parts, instruments,
appurtenances, accessories, furnishings, and other equipment or property
incorporated in such airframe and engines.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

B-1

 

EXHIBIT C - RETURN
ACCEPTANCE SUPPLEMENT

 

RETURN ACCEPTANCE
SUPPLEMENT N      HA

 

This Supplement,
dated
                    ,
20    , is entered into between Wells Fargo Bank Northwest,
National Association,  a national banking
association, not in its individual capacity but solely as Owner Trustee under
Trust Agreement N      HA, dated as of
          , 200 , with
BCC Equipment Leasing Corporation (such Owner Trustee, in its capacity as
trustee, being referred to as “Lessor”), and
Hawaiian Airlines, Inc. (“Lessee”), a
Hawaii corporation.

 

Lessor and Lessee
have entered into Lease Agreement N      HA (the “Lease”), dated as of
          , 200 ,
relating to the Boeing model 717-200 aircraft described below. Terms defined in
the Lease have the same meanings when used in this Supplement.

 

Lessor and Lessee
hereby agree as follows:

 

1.                                       Lessor
and Lessee are executing this Return Acceptance Supplement to confirm that, on
the date hereof, Lessee returned the following Airframe and Engines to Lessor:

 

Airframe:  U.S. registration no.
N      HA; manufacturer’s serial no.     ;
and

 

Engines:  two Rolls-Royce
Deutschland Ltd & Co KG engines, bearing manufacturer’s serial nos.
           and

 

2.                                       This
Return Acceptance Supplement is being delivered in
                                          .

 

3.                                       Lessor
and Lessee agree that the return of the Aircraft complies with § 5 and
Annex B of the Lease, except as set forth below:

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

C-1

 

4.                                       Lessor
and Lessee agree that the Lease is terminated, except for the provisions
thereof that expressly survive termination.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

C-2

 

IN WITNESS WHEREOF,
Lessor and Lessee have executed this Return Acceptance Supplement
N      HA.

 

 

	
   

  	
  WELLS FARGO BANK
  NORTHWEST, NATIONAL ASSOCIATION, not in its individual
  capacity, except as expressly provided herein, but solely as trustee under
  the Trust Agreement, as Lessor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HAWAIIAN AIRLINES,
  INC., as Lessee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

C-3

 

SCHEDULE 1-PART A

 

CERTAIN TERMS

 

	
  Defined Term

  	
   

  	
  Definition

  
	
   

  	
   

  	
   

  
	
  Scheduled Delivery Date

  	
   

  	
  August 29, 2008

  
	
   

  	
   

  	
   

  
	
  Delivery Date

  	
   

  	
  August 29, 2008

  
	
   

  	
   

  	
   

  
	
  Delivery Location

  	
   

  	
  Miami, Florida

  
	
   

  	
   

  	
   

  
	
  Document Date

  	
   

  	
  August 29, 2008

  
	
   

  	
   

  	
   

  
	
  Minimum Liability Insurance Amount

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  Minimum Amount

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  Past-Due Rate

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  Payment Date

  	
   

  	
  (1) the Delivery Date, and (2) thereafter,
  the first day of each calendar month, commencing September 1, 2008 and
  continuing up to and including December 1, 2019[, as set forth on
  Schedule 2 to the Lease].

  
	
   

  	
   

  	
   

  
	
  Purchase Date

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  Scheduled Expiration Date

  	
   

  	
  December 20, 2019

  
	
   

  	
   

  	
   

  
	
  Security Deposit

  	
   

  	
  [...***...]

  
	
   

  	
   

  	
   

  
	
  Threshold Amount

  	
   

  	
  [...***...]

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

SCHEDULE 1-PART B

 

CTC REGISTRATIONS

 

1.                                       International
Interest in respect of the lease of the Airframe from Lessor to Lessee under
the Lease.

 

2.                                       International
Interest in respect of the lease of the Engine bearing manufacturer’s serial
number 13392 from Lessor to Lessee under the Lease.

 

3.                                       International
Interest in respect of the lease of the Engine bearing manufacturer’s serial
number 13189 from Lessor to Lessee under the Lease.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

SCHEDULE 2

 

BASIC RENT

 

[...***...]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

SCHEDULE 3

 

STIPULATED LOSS VALUES

 

[...***...]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

SCHEDULE 4-PART A

 

[RESERVED]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

SCHEDULE 4-PART B

 

[RESERVED]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

SCHEDULE 5

 

NOTIONAL DEBT AMORTIZATION

 

[...***...]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

SCHEDULE 6

 

PERMITTED COUNTRIES

 

[...***...]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

SCHEDULE 7

 

PLACARDS

 

Owned by and Leased from

Wells Fargo Bank Northwest, National Association,

as trustee

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

ANNEX A

 

PART 1

 

DEFINITIONS

 

GENERAL PROVISIONS

 

(a)                                  In
each Operative Agreement, unless otherwise expressly provided, a reference to:

 

(1)                                  each
of “Lessee”, “Lessor”, “Owner Trustee”, “Owner Participant”, and any other
Person includes any successor in interest to it and any permitted transferee,
permitted purchaser, or permitted assignee of it;

 

(2)                                  any
agreement or other document (including any annex, schedule, or exhibit thereto,
or any other part thereof) includes that agreement or other document as
amended, supplemented, or otherwise modified from time to time in accordance
with its terms and in accordance with the Operative Agreements, and any
agreement or other document entered into in substitution or replacement
therefor;

 

(3)                                  any
provision of any Law includes any such provision as amended, modified,
supplemented, substituted, reissued, or reenacted before the Delivery Date, and
thereafter from time to time;

 

(4)                                  “Agreement”,
“this Agreement”, “hereby”, “herein”, “hereto”, “hereof”, “hereunder”, and
words of similar import, when used in any Operative Agreement, refer to such
Operative Agreement as a whole and not to any particular provision of such
Operative Agreement;

 

(5)                                  “including”,
“include”, and terms or phrases of similar import means “including [etc.],
without limitation”; and

 

(6)                                  a
reference to a “section” or “§”, an “Exhibit”, an “Annex”, or a “Schedule” in
any Operative Agreement, or in any annex 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

1

 

thereto,
is a reference to a section of, or an exhibit, an annex, or a schedule to, such
Operative Agreement or such annex, respectively.

 

(b)                                 Each
exhibit, annex, and schedule to each Operative Agreement is incorporated in,
and is a part of, such Operative Agreement.

 

(c)                                  Unless
otherwise defined or specified in any Operative Agreement, all accounting terms
therein shall be construed and all accounting determinations thereunder shall
be made in accordance with GAAP.

 

(d)                                 Headings
used in any Operative Agreement are for convenience only, and shall not in any
way affect the construction of, or be taken into consideration in interpreting,
such Operative Agreement.

 

(e)                                  Unless otherwise indicated, references in
this Lease to Articles, Chapters and the Preamble of the CTC are references to
the English language version of the Consolidated Text and any reference herein
to a provision of the Consolidated Text is a reference to the English language
version of the provision of the Convention or the Aircraft Protocol from which
it is derived, the Convention and the Aircraft Protocol being read and
interpreted together as a single instrument as required by Article 6(1) of
the Convention.

 

(f)                                    CTC-related provisions of any Operative
Agreement will prevail in the case of a conflict with non-CTC-related
provisions.

 

DEFINED TERMS

 

Actual
Knowledge: (a) as it applies to Owner Trustee, actual
knowledge of a Responsible Officer in the Corporate Trust Department, and (b) as
it applies to Owner Participant or Lessee, actual knowledge of a Vice President
or more-senior officer of Owner Participant or Lessee (respectively), or any
Responsible Officer of Owner Participant or Lessee (respectively); provided, that each of Lessee, Owner Participant, and Owner
Trustee shall be deemed to have “Actual Knowledge” of any matter as to which it
has received notice from Lessee, Owner Participant, or Owner Trustee, given
pursuant to § 14.7 of the Participation Agreement.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

2

 

Additional
Insured: defined in § D of Annex D to the Lease.

 

Affiliate
of any Person: any other Person directly or indirectly controlling, controlled
by, or under common control with such Person. 
For purposes of this definition, “control” means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract,
or otherwise, and “controlling”, “controlled by”, and “under common control
with” have correlative meanings.

 

After-Tax
Basis: a basis such that any payment to be received or
receivable by any Person is supplemented by a further payment to that Person so
that the sum of the two payments, after deducting all Taxes (taking into
account any related deduction, credit, reduction in income or other Tax benefit
recognized and actually utilized by such Person or any of its Affiliates in
reducing its Taxes), is equal to the payment due to such Person.

 

Aircraft:
the Airframe and the two Engines.

 

Aircraft
Description Exhibit: Exhibit B to the Lease.

 

Aircraft
Documents: all technical data, manuals, and log books, and
all inspection, modification, and overhaul records and other service, repair,
maintenance, and technical records that are required by the FAA, the Lease or
the Maintenance Program to be maintained with respect to the Aircraft,
Airframe, Engines, or Parts, or that are of a type required to be delivered by
Lessee upon return of the Aircraft, Airframe, or Engines under § 5 of the
Lease; and such term shall include all additions, renewals, revisions, and
replacements of any such materials from time to time made, or required to be
made, in accordance with the Lease, the Maintenance Program, or such FAA
regulations, in each case in whatever form and by whatever means or medium
(including microfiche, microfilm, paper, or computer disk or other electronic
medium) such materials are maintained or retained by or on behalf of Lessee (provided,  that all such
materials shall be maintained in the English language), and shall include all
Returnable Documents.

 

Aircraft Protocol: the Protocol to the Convention on International Interests in
Mobile Equipment on Matters Specific to
Aircraft Equipment which was adopted on November 16, 2001 at a diplomatic
conference held in Cape Town, 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

3

 

South Africa (as amended, supplemented or modified from time to time)
and from and after the effective date of the Convention in the relevant
Contracting State shall mean when referring to the Aircraft Protocol with
respect to such Contracting State, the Aircraft Protocol, as in effect in such
Contracting State unless otherwise indicated.

 

Airframe:
(1) the aircraft (excluding Engines or engines from time to time installed
thereon) manufactured by Airframe Manufacturer and identified by Airframe
Manufacturer’s model number, United States registration number, and Airframe
Manufacturer’s serial number set forth in the Aircraft Description Exhibit, or (2) any
Replacement Airframe, including in either case any and all Parts incorporated
or installed in or attached or appurtenant to such airframe, and any and all
Parts removed from such airframe, unless title to such Parts does not vest in
Lessor in accordance with § 8.1 and Annex C of the Lease.  Upon substitution of a Replacement Airframe
under and in accordance with the Lease, such Replacement Airframe shall become
subject to the Lease and shall be the “Airframe” for all purposes of the
Operative Agreements, and the replaced Airframe shall cease to be subject to
the Lease and shall cease to be the “Airframe”.

 

Airframe
Manufacturer: McDonnell Douglas Corporation, a Maryland
corporation.

 

Appraiser:
a firm of independent aircraft appraisers internationally
recognized as having experience and expertise in appraising large commercial
jet passenger aircraft.

 

APU:
the auxiliary power unit installed on the Aircraft on the Delivery Date,
whether or not installed on the Aircraft from time to time thereafter, unless
title to such auxiliary power unit shall not be vested in Lessor in accordance
with § 8.1 of the Lease, and any replacement or substituted auxiliary
power unit installed on the Aircraft in accordance with the Lease as to which
title is required to be vested in Lessor in accordance with § 8.1 of the
Lease.

 

Associated Rights: is defined in the CTC.

 

Aviation
Authority: the FAA.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

4

 

Bankruptcy
Code: the United States Bankruptcy Code, 11 U.S.C. § 101
et seq.

 

Basic
Rent: the rent payable for the Aircraft pursuant to
§ 3.2.1 of the Lease.

 

Business
Day: any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized or required by law to close in New York,
NY, Honolulu, Hawaii, Salt Lake City, UT, or Seattle, WA (solely with respect
to a payment by Owner Participant).

 

Cash
Equivalents: the following securities (which shall mature
within 90 days of the date of purchase thereof): (1) direct obligations of
the U.S. Government; (2) obligations fully guaranteed by the U.S.
Government; (3) certificates of deposit issued by, or bankers’ acceptances
of, or time deposits or a deposit account with, WFB or any bank, trust company,
or national banking association incorporated or doing business under the laws
of the United States or any state thereof having a combined capital and surplus
and retained earnings of at least $1 billion and having a rating of “A” or
better from Fitch Ratings, Ltd.; or (4) commercial paper of any issuer
doing business under the laws of the United States or one of the states thereof
and in each case having a rating assigned to such commercial paper by Standard &
Poor’s or Moody’s equal to or higher than A1 or P1, respectively.

 

Citizen
of the United States: defined in § 40102(a)(15) of the
Transportation Code and in the FARs.

 

Closing:
the closing of the transactions contemplated by the Participation Agreement on
the Delivery Date.

 

Code:
the Internal Revenue Code of 1986.

 

Consolidated Text: the Consolidated Text of the CTC which was adopted on November 16,
2001 at a diplomatic conference held in Cape Town, South Africa (as amended,
supplemented or modified from time to time).

 

Convention: the Convention on
International Interests in Mobile Equipment which was adopted on November 16, 2001 at a diplomatic conference
held in Cape Town, South Africa (as amended, supplemented or modified from time
to time) and from and after the effective date of the

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

5

 

Convention in the
relevant Contracting State shall mean when referring to the Convention with
respect to such Contracting State, the Convention, as in effect in such
Contracting State unless otherwise indicate.

 

Contracting State:
a country that has ratified, accepted, approved or acceded to the CTC in accordance with its terms and
any denunciation by such Contracting
State of the CTC which in
accordance with the terms of the CTC
has not yet taken effect.

 

CTC: the Convention and the Aircraft Protocol together
and, from and after the effective date of the CTC in the relevant Contracting
State, shall mean when referring to the CTC with respect to such Contracting
State, the CTC, as in
effect in such Contracting State
unless otherwise indicated.

 

CTC Registrations: the registrations set forth in Schedule 1 - Part B to the Lease.

 

Corporate
Trust Department or Trust Office:
Owner Trustee’s principal corporate trust office, located from time to time at
Owner Trustee’s address for notices under the Participation Agreement, or such
other office at which Owner Trustee’s corporate trust business shall be
administered and which Owner Trustee specifies by notice in writing to Lessee
and Owner Participant.

 

CRAF:
the Civil Reserve Air Fleet Program established pursuant to 10 U.S.C.
§ 9511 - 13, or any similar substitute program.

 

Debt:
any liability for borrowed money, or any liability for the payment of money in
connection with any letter of credit transaction, or any other liabilities
evidenced or to be evidenced by bonds, debentures, notes, or other similar
instruments.

 

Default:
any condition, circumstance, act, or event that, with the giving of notice or
the lapse of time, or both, would constitute an Event of Default.

 

Delivery
Date: defined in Schedule 1 — Part A to the Lease, such
date being the date, which shall be a Business Day, when the Aircraft is
delivered to and accepted by Lessee under the Lease and when the Closing
occurs.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

6

 

Delivery
Deadline: 5:00 p.m., local time at the Delivery
Location, on the date that is the last day of the second month following the
month of the Scheduled Delivery Date.

 

Delivery
Location: defined in Schedule 1 — Part A to the Lease.

 

Document
Date: defined in Schedule 1 — Part A to the Lease.

 

Dollars,
United States Dollars, or $: the lawful currency of the United States.

 

Engine:
(1) each of the engines manufactured by Engine Manufacturer and identified
by Engine Manufacturer’s model number and Engine Manufacturer’s serial number
in the Aircraft Description Exhibit and originally installed on the
Airframe on delivery thereof pursuant to the Lease, or (2) any Replacement
Engine, in any case whether or not from time to time installed on the Airframe
or installed on any other airframe or aircraft, including (for both clauses (1) and
(2)) any and all Parts incorporated or installed in or attached or appurtenant
to such engine, and any and all Parts removed from such engine, unless title to
such Parts does not vest in Lessor in accordance with § 8.1 and Annex C of
the Lease.  Upon substitution of a
Replacement Engine under and in accordance with the Lease, such Replacement Engine
shall become subject to the Lease and shall be an “Engine” for all purposes of
the Operative Agreements, and the replaced Engine shall cease to be subject to
the Lease and shall cease to be an “Engine”.

 

Engine
Manufacturer: Rolls-Royce Deutschland Ltd. and Co. KG.

 

ERISA:
the Employee Retirement Income Security Act of 1974.

 

Event of
Default: any one or more of the conditions, circumstances,
acts, or events set forth in § 13 of the Lease.

 

Event of
Loss with respect to the Aircraft, the Airframe, or any
Engine: any of the following circumstances, conditions, or events with respect
to such property, for any reason whatsoever:

 

(1)                                  the
destruction of such property, damage to such property beyond practical or
economic repair, or rendition of such property permanently unfit for normal use
by Lessee;

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

7

 

(2)                                  the
actual or constructive total loss of such property, or any damage to such
property, or requisition of title or use of such property, which results in an
insurance settlement with respect to such property on the basis of a total loss
or constructive or compromised total loss;

 

(3)                                  any
loss of such property or loss of use of such property that continues until the
earlier of (aa) the last day of the Term, and (bb) the date that is 90 days
after the commencement of such loss, as a consequence of any theft, hijacking,
or disappearance of such property;

 

(4)                                  any
taking of title to such property by any Government Entity or purported
Government Entity (whether by seizure, condemnation, confiscation, requisition,
or otherwise);

 

(5)                                  any
seizure, condemnation, confiscation, taking, or requisition of use of such
property that continues until the earliest of (aa) the last day of the
Term, (bb) the date upon which the Aircraft is modified, altered, or
adapted in such a manner as would render conversion of such property for use in
normal commercial passenger service impractical or uneconomical, (cc) the
date on which the restrictions set forth in § 7.1.5 are violated (because
such property is operated or located in any area excluded from coverage by any
insurance policy or indemnity required to be maintained in respect of such
property), or (dd) the date that is 90 days following the commencement of
such loss of use (unless such loss of use results from action by the U.S.
Government, in which case this clause (dd) shall not apply to such loss of
use;

 

(6)                                  as
a result of any law, rule, regulation, order, or other action by the Aviation
Authority or by any Government Entity otherwise having jurisdiction over the
operation or use of the Aircraft, the use of such property in the normal course
of Lessee’s business of passenger air transportation is prohibited for a period
expiring on the earlier to occur of (aa) the last day of the Term, and
(bb) the date that is 180 days following commencement of such prohibition,
unless, before the expiration of such 180-day period, Lessee undertakes and is
diligently carrying forward such steps as are necessary or desirable to permit
the 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

8

 

normal use of such
property by Lessee, then the date that is 360 days following commencement of
such prohibition; and

 

(7)                                  the
basing of the Aircraft, while under requisition for use by any Government
Entity, in any area excluded from coverage by any required insurance policy
(unless the required U.S. governmental indemnity in lieu of such insurance,
provided for in § 10.3 of the Lease, is in place).

 

The date of such Event of Loss shall be the date of such loss, damage,
insurance settlement, seizure, condemnation, confiscation, taking or
requisition of title or use, or prohibition, except that for purposes of
clauses (3), (5), and (6) above, no Event of Loss shall be deemed to
have occurred until the date of expiration of the applicable period referred to
therein.

 

Exchange Act: 
the Securities Exchange Act of 1934, as amended and
supplemented from time to time.

 

Expenses:
any and all liabilities, obligations, losses, damages, settlements, penalties,
claims (including claims or liabilities based or asserted upon (a) negligence,
(b) strict or absolute liability, (c) liability in tort, (d) infringement
of patent, trademark, or other property or other right, and (e) liabilities
arising out of violation of any Law), actions, suits, costs, expenses, and
disbursements (including reasonable fees and disbursements of legal counsel,
accountants, appraisers, inspectors, or other professionals, and costs of
investigation), including all such costs, expenses, and disbursements incurred
by any person in asserting, or in defending any claims arising out of its
assertion of, any rights it may have under, or its cooperation in connection
with any Expenses indemnified pursuant to, § 9 of the Participation
Agreement; provided, however, that Expenses shall not include any costs or
expenses with respect to the deregistration of the Aircraft incurred on or
prior to the Delivery Date.

 

FAA:
the Federal Aviation Administration of the United States, or any Government
Entity succeeding to the functions of such Federal Aviation Administration.

 

FAA
Counsel: McAfee & Taft. P.C..

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

9

 

FAA-Filed
Documents: the Lease, the Lease Supplement No. 1, the
Trust Agreement, an application for registration of the Aircraft with the FAA
in Owner Trustee’s name, and the related affidavits of U.S. citizenship.

 

FARs:
the Federal Aviation Regulations issued or promulgated pursuant to the
Transportation Code from time to time.

 

Fair
Market Rental Value: the fair market rental value in Dollars
for the Aircraft that would apply in an arm’s-length transaction between an
informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, for the applicable period,
assuming that (1) rent would be paid monthly, in advance, and (2) the
Aircraft would be leased during any such applicable period on the same terms
and conditions (except for Basic Rent amount) as during the Term.

 

Fair
Market Sales Value: the fair market sales value in Dollars
for the Aircraft that would apply in an arm’s-length all cash transaction
between an informed and willing buyer under no compulsion to buy, and an
informed and willing seller under no compulsion to sell, in a transaction that
would close on or about the relevant time of determination.

 

Financing
Statements: UCC-1 financing statements covering the Aircraft,
as a precautionary matter, by Lessee, as lessee, showing Owner Trustee as
lessor, for filing in Delaware, and each other jurisdiction where (in Owner
Trustee’s opinion) filing is reasonably desirable.

 

Force
Majeure:  any delay or
nonperformance due to or arising out of acts of God or public enemy, civil war,
insurrection or riot, fire, flood, explosion, earthquake, accident, epidemic,
quarantine restriction, any act of government, governmental priority,
allocation, regulation or order affecting, directly or indirectly, the
Aircraft, Lessor, Owner Participant or any other Person, or any materials or
facilities, strike or labor dispute causing cessation, slowdown or interruption
of work, inability after due and timely diligence to procure equipment, data or
materials from suppliers in a timely manner, or any other cause to the extent
that such cause is beyond the control of Lessor or Owner Participant whether
above mentioned or not and whether or not similar to the foregoing

 

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and filed separately with the SEC

 

10

 

GAAP:
generally accepted accounting principles as set forth in the statements of
financial accounting standards issued by the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants, as varied by
any applicable financial accounting rules or regulations issued by the
SEC, and applied on a basis consistent with prior periods except as disclosed
in the pertinent Person’s financial statements.

 

Government
Entity: (1) any federal, state, provincial, or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency, or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative, or regulatory
functions of such government, or (2) any other government entity
(including, without limitation, the Supervisory Authority and the Registrar, as
defined in Article 1(yy) and Article 1(qq), respectively, of the CTC)
having jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.

 

Indemnitee:
(1) WFB  and Owner Trustee; (2) each
separate or additional trustee appointed pursuant to the Trust Agreement; (3) Owner
Participant; (4) the Trust Estate; (5) each Affiliate of the Persons
described in clauses (1), (2), and (3), (6) the directors, officers,
employees, and agents of each of the Persons described in clauses (1) through
(3) and in clause (5); and (7) the successors and permitted assigns
of the Persons described in clauses (1) through (3), and in clauses (5) and
(6).  If any Indemnitee is Airframe
Manufacturer or Engine Manufacturer, such Person shall be an Indemnitee only in
its capacity as Owner Participant.

 

Inspection
Location:  the
facilities of AirTran Airways, Inc in or around the city of Atlanta, Georgia,
the facilities of AAR Corp. in or around Miami International Airport, Miami,
Florida and/or such other place as the parties shall agree.

 

International Interest: is defined in the Convention.

 

International Registry: the international registration
facilities established for the
purposes of and pursuant to the CTC by
Aviareto in Dublin, Ireland.

 

International Registry Regulations:
the regulations issued pursuant to 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

11

 

Article 17(2) of the Convention and Article XVIII of the
Aircraft Protocol.

 

Law:
(1) any constitution, statute, law, decree, regulation, order, rule, or
directive of any Government Entity, (2) any multinational or international
treaties, conventions or accords to which any Government Entity is signatory or
party (including, without limitation, the CTC and all International Registry
Regulations), and (3) any judicial or administrative interpretation or
application of, or decision under, any of the foregoing.

 

Lease
or Lease Agreement: Lease Agreement N483HA,
dated as of the Document Date, between Owner Trustee and Lessee.

 

Lease
Supplement:  a
supplement to the Lease, in the form of Exhibit A to the Lease.

 

Lease
Supplement No. 1:  the
initial Lease Supplement, dated the Delivery Date.

 

Lessee:
Hawaiian Airlines, Inc., a Delaware corporation.

 

Lessee
Operative Agreements: the Participation Agreement, the Lease,
the Lease Supplement No. 1, and each other agreement between Lessee and
any other party to the Participation Agreement, relating to the Transactions,
delivered on the Delivery Date or otherwise designated by Lessee and such other
party as a “Lessee Operative Agreement”.

 

Lessor:
Owner Trustee in its capacity as lessor under the Lease.

 

Lessor
Lien: with respect to any Person, on any property (including
the Trust Estate, the Aircraft, Airframe, Engines, Parts, or Aircraft
Documents) or any payments, any Lien on such property or payments that results
from (1) claims against such Person (if such Person is a trustee, whether
in its individual capacity or in its capacity as a trustee) not related to any
of the Transactions, (2) acts or omissions of such Person (if such Person
is a trustee, whether in its individual capacity or in its capacity as a trustee)
in violation of its obligations under any of the terms of the Operative
Agreements, or not related to the Transactions, (3) Taxes against such
Person (if such Person is a trustee, whether in its individual capacity or in
its capacity as a trustee) or any of its Affiliates that Lessee is not required
to indemnify under the Participation Agreement or any other Operative
Agreement, or (4) from claims against such 

 

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treatment and filed separately with the SEC

 

12

 

Person arising out of its transfer of all or part of its interest in
the Aircraft, the Trust Estate, or the Operative Agreements, other than a
Transfer required by the terms of the Operative Agreements or occurring
pursuant to the exercise of remedies set forth in § 14 of the Lease.

 

Letter
Agreement: that certain Letter Agreement, dated June 4,
2008, between Lessee and BCC Capital Corporation.

 

LIBOR:
a rate per annum (calculated on the basis of a 360-day year and actual days
elapsed) equal to the offered rate quoted for Dollars on Telerate Page 3750
as of 11:00 a.m. (London time), on the day two London Business Days prior
to the determination date, for a 180-day period.

 

Lien:
any mortgage, pledge, lien, charge, claim, encumbrance, lease, or security
interest affecting the title to or any interest in property, including without
limitation any International Interest or Associated Right.

 

Maintenance
Program: defined in Annex C to the Lease.

 

Maintenance
Reserves:  defined in Section F
of Annex C to the Lease.

 

Make-Whole
Amount: an amount equal to the greater of (a) zero and (b) (1) the
present value, discounted on a semiannually compounded basis utilizing an
interest factor equal to the Reinvestment Yield, of the principal payments
(including the payment at final maturity), and the interest payments, shown in
the notional debt amortization set forth on Schedule 5 to the Lease, from the
respective dates on which, but for the occurrence of the event or circumstance
(as provided for in the Lease) giving rise to the requirement to calculate a
Make-Whole Amount, such notional principal payments and interest payments would
have been payable pursuant to such Schedule 5 to the Lease, minus (2) the
notional debt balance (as shown on such Schedule 5 to the Lease and determined
as of the date specified in the applicable provisions of the Lease, and in any
event determined as of the same date as the amount described in the foregoing
clause (1)) plus accrued but unpaid interest thereon.  For purposes of this definition, “Reinvestment
Yield” shall mean the sum of one-half of one percent (.50%) plus the arithmetic
mean of the two most recent weekly average yields to maturity for actively
traded marketable U.S. Treasury fixed interest rate securities (adjusted to
constant maturities equal to the remaining weighted average life to maturity of
such 

 

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treatment and filed separately with the SEC

 

13

 

notional debt, and determined as of the same date as the amounts
described in the foregoing clauses (1) and (2)), as published by the
Federal Reserve Board in its Statistical Release H.15(519) or any successor
publication for the two calendar weeks ending on the Saturday next preceding
such date or, if such average is not published for such period, of such
reasonably comparable index as may be designated in good faith by Lessor.  If no possible maturity exactly corresponds
to such weighted average life to maturity, yields for the two most closely
corresponding published maturities shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Yield shall be interpolated
from such yields on a straight-line basis, rounding each of such relevant
periods to the nearest month.

 

Materially
Adverse Change with respect to any Person: any event,
condition, or circumstance that materially adversely affects (i) such
Person’s business, business prospects or consolidated financial condition, or (ii) such
Person’s ability to observe and perform its obligations, liabilities, and
agreements under the Operative Agreements; provided that, with respect to
Lessee, and solely for purposes of any determination under § 5.1.10 of the
Participation Agreement, (x) the elements described in the preceding
clause (i) shall not be considered applicable, and (y) there shall be
excluded from the operation and effect of the preceding clause (ii) any
material adverse change in the national regulatory regime covering the
operations of U.S. Air Carriers, generally, and any material adverse change in
the financial condition or business prospects of the United States airline
industry generally.

 

Minimum
Liability Insurance Amount: defined in Schedule 1 — Part A
to the Lease.

 

Moody’s:
Moody’s Investors Service, Inc. and its successors and assigns, and, if
Moody’s Investors Service, Inc. and its successors and assigns no longer
issues securities ratings, the term “Moody’s” shall
include at the option of the Lessee, any other Person that issues
internationally accepted securities ratings designated by the Lessee in a
written notice to the Owner Participant and reasonably acceptable to the Owner
Participant, and, upon the inclusion in this definition of such other Person,
each reference in the Operative Documents to a rating issued by Moody’s shall
be deemed automatically replaced with a reference to the comparable rating
issued by such Person.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

14

 

Net Worth
for any Person: the excess of its total tangible assets over its total
liabilities.

 

Non-U.S.
Person: any Person, other than a United States person as
defined in Code § 7701(a)(30).

 

Officer’s
Certificate of any party to the Participation Agreement: a
certificate signed by the Chairman, the President, any Vice President
(including those with varying ranks such as Executive, Senior, Assistant, or
Staff Vice President), the Treasurer, or the Secretary of such party.

 

Operative
Agreements: the Participation Agreement, the Trust Agreement,
the Lease, the Lease Supplement No. 1 and each other Lessee Operative
Agreement.

 

Owner
Participant: BCC Equipment Leasing Corporation and its
permitted transferees; except that, after an Owner Participant Transfers its
interest to a successor Owner Participant, such transferor shall not be an “Owner
Participant”.

 

Owner Participant
Agreements: the Participation Agreement, the Trust Agreement,
and each other agreement between Owner Participant and any other party to the
Participation Agreement relating to the Transactions, delivered on the Delivery
Date or otherwise designated by Owner Participant and such other party as an “Owner
Participant Agreement”.

 

Owner
Trustee: Wells Fargo Bank Northwest, National Association, a
national banking association, not in its individual capacity, except as
expressly provided in any Operative Agreement, but solely as Owner Trustee
under the Trust Agreement.

 

Owner
Trustee Agreements: the Participation Agreement, the Lease,
the Lease Supplement No. 1, the Trust Agreement, and each other agreement
between Owner Trustee and any other party to the Participation Agreement,
relating to the Transactions, delivered on the Delivery Date or otherwise
designated by Owner Trustee and such other party as an “Owner Trustee Agreement”.

 

Participation
Agreement: Participation Agreement N483HA, dated as of the
Document Date, among Lessee, Owner Participant, Owner Trustee.

 

*** Material has been omitted pursuant to a request for confidential
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15

 

Parts:
all appliances, parts, components, instruments, appurtenances, accessories,
furnishings, seats, and other equipment of whatever nature (including avionics
and the APU, but excluding Engines or engines) from time to time installed or
incorporated in or attached or appurtenant to the Airframe or any Engine, and
as such term may be further defined in Annex C to the Lease.

 

Past-Due
Rate: defined in Schedule 1 — Part A to the Lease.

 

Payment
Date: defined in Schedule 1 — Part A to the Lease.

 

Payment
Period: each of the periods during any two consecutive
Payment Dates, in each case beginning on a Payment Date, the first such period
commencing on and including the Delivery Date.

 

Permitted
Air Carrier: any Permitted Foreign Air Carrier or U.S. Air
Carrier.

 

Permitted
Country: any country listed on Schedule 6 to the Lease or
otherwise agreed to in writing by Lessor, Owner Participant and Lessee, as
provided for on such Schedule 6, except any such country that, when the
pertinent sublease or other transfer begins, (1) does not maintain normal
diplomatic relations with the United States, or (2) is involved in civil
or internal war or military conflict, or (3) is involved in external war
or military conflict that involves, or materially threatens, domestic military
operations or such country’s civil order, or (4) is a country with which
it would constitute a breach of Law for Lessor or Owner Participant to engage
directly or indirectly in business.

 

Permitted
Foreign Air Carrier: any air carrier that (1) is domiciled
and has its principal executive offices in, and a substantial part of its
commercial operations in, a Permitted Country, (2) possesses all licenses,
approvals, and other authorizations necessary to conduct commercial airline
operations and to operate the Aircraft under the applicable Laws of such
Permitted Country and each other country or territory having any jurisdiction
over or with respect to its business or operations and in which the Aircraft
will be operated, and (3) at the time that the sublease or other pertinent
Transfer is entered into, has not declared or effected, or announced its
intention to declare or effect, any suspension or moratorium of payments or the
performance of other material 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

16

 

obligations, or otherwise materially delayed or failed to make or
perform any payment or other material obligation, in the conduct of its
business, and is not subject (as debtor) to any bankruptcy, insolvency,
liquidation, reorganization, dissolution, or similar proceeding, and does not
have substantially all of its property in the possession of any liquidator,
trustee, receiver, or similar Person.

 

Permitted
Institution: (a) any bank, trust company, insurance
company, financial institution, or any other corporation, limited liability
company or other legally cognizable entity, in each case with a combined
capital and surplus or Net Worth of at least $50,000,000, or (b) any
Affiliate of any Person described in clause (a) in respect of which
such person has provided a written guarantee of the obligations assumed by such
Affiliate under the Owner Participant Agreements in form and substance
reasonably satisfactory to Lessee and Lessor, or (c) any trustee or other
disclosed agent acting on behalf of any Person described in clause (a) or
(b); provided that “Permitted Institution” shall not, without Lessee’s consent,
include any person who, at the time of the subject such transaction, is (1) a
commercial air carrier with flight operations that directly compete with the
then-existing commercial air carrier flight operations of Lessee, or (2) is
an Affiliate of a person described in the foregoing clause (1), or (3) a
party then adverse to Lessee or an Affiliate of Lessee in any material
litigation, arbitration or other similar proceeding, or (4) is an
Affiliate of a person described in the foregoing clause (3) if, but only
if, the Net Worth of such adverse party constitutes more than half of the
aggregate Net Worth of all Persons within such adverse party’s group of
Affiliates.

 

Permitted
Lien: any Lien described in clauses (a) through (h) of
§ 6 of the Lease.

 

Permitted
Manufacturer: Airframe Manufacturer, Engine Manufacturer, or
any wholly-owned subsidiary of any of the foregoing; provided, that such
Person, at the time that the sublease or other pertinent Transfer is entered
into, has not declared or effected, or announced its intention to declare or
effect, any suspension or moratorium of payments or the performance of other
material obligations, or otherwise materially delayed or failed to make or
perform any payment or other material obligation, in the conduct of its
business, and is not subject (as debtor) to any bankruptcy, insolvency,
liquidation, reorganization, dissolution, or similar proceeding, and does not 

 

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treatment and filed separately with the SEC

 

17

 

have substantially all of its property in the possession of any
liquidator, trustee, receiver, or similar Person.

 

Permitted
Sublease: a sublease or sub-sublease permitted under
§ 7.2.7 of the Lease.

 

Permitted
Sublessee: any Permitted Air Carrier or Permitted
Manufacturer eligible to be the sublessee under a Permitted Sublease, as
determined in accordance with § 7.2.7 of the Lease.

 

Person
or person: an individual, firm,
partnership, joint venture, trust, trustee, Government Entity, organization,
association, corporation, limited liability company, government agency,
committee, department, authority, and other body, corporate or incorporate,
whether having distinct legal status or not, or any member of any of the same.

 

Plan:
any employee benefit plan within the meaning of ERISA § 3(3), or any plan
within the meaning of Code § 4975(e)(1).

 

Prime
Rate: the prime, base, or equivalent rate as from time to
time announced by JPMorgan Chase, National Association (or its successor).

 

Prospective International
Interest: is defined
in the Convention.

 

PUE: a “professional
user entity” as defined in the International Registry Regulations.

 

Related
Lease: each other lease agreement (if any) between the Lessee
and Owner Participant (or an Affiliate thereof), or a trustee acting on its or
its Affiliate’s behalf, and each covering a Boeing 717-200 aircraft, if but
only if, at the time that the Event of Default first existed that made the
existence of this term relevant, the lessor or owner participant under that
lease agreement is the Owner Participant (or an Affiliate thereof).

 

Removable
Parts: defined in § D of Annex C to the Lease.

 

Rent:
Basic Rent and Supplemental Rent.

 

Reorganization:
defined in § 7.1.9 of the Participation Agreement.

 

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treatment and filed separately with the SEC

 

18

 

Replacement
Airframe: an airframe substituted for the Airframe pursuant
to § 9 of the Lease.

 

Replacement
Engine: an engine substituted for an Engine pursuant to
§ 5.3, § 7.2, § 9, or Annex B of the Lease.

 

Responsible
Officer of a Person: (1) the President or Chief
Financial Officer of such Person, (2) any other officer of such Person customarily
bearing responsibility for matters relating to the transactions contemplated by
the Operative Agreements, or (3) any officer of such Person specifically
authorized to take responsibility for any matter relating to the transactions
contemplated by the Operative Agreements.

 

Return
Acceptance Supplement: a Return Acceptance Supplement, dated
as of the date the Aircraft is returned to Lessor pursuant to § 5 of the
Lease, entered into by Lessor and Lessee, substantially in the form of Exhibit C  to the Lease.

 

Returnable
Records: defined in § 3 of Annex B to the Lease.

 

Scheduled
Delivery Date: defined in Schedule 1 — Part A to the
Lease.

 

Scheduled
Expiration Date: defined in Schedule 1 — Part A to the
Lease.

 

SEC:
the Securities and Exchange Commission of the United States, or any Government
Entity succeeding to the functions of the Securities and Exchange Commission.

 

Section 1110:
11 U.S.C. § 1110 of the Bankruptcy Code, or any successor section of the
federal bankruptcy Law in effect from time to time.

 

Securities
Act: the Securities Act of 1933.

 

Security:
a “security” as defined in § 2(1) of the Securities Act.

 

Security
Deposit:  defined in Section 3.2.3
of the Lease.

 

SLV Date:
each or any of the dates specified in Schedule 3 to the Lease.

 

SLV Payment
Date: defined in § 9.1.2(a) of the Lease.

 

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treatment and filed separately with the SEC

 

19

 

Special
Default: (1) Lessee’s failure to pay any amount of Rent,
or any amount of rent under a Related Lease, in each such case when due, (2) any
Default referred to in § 13.7 of the Lease, or any similar default set
forth in any Related Lease, or (3) any Event of Default.

 

Standard &
Poor’s or S&P:
Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and its successor and assigns and, if Standard &
Poor’s Ratings Group and its successors and assigns no longer issues securities
ratings, the term “Standard & Poor’s”
shall include, at the option of the Lessee, any other Person that issues
internationally accepted securities ratings designated by the Lessee in a
written notice to the Owner Participant and reasonably acceptable to the Owner
Participant and, upon the inclusion in this definition of such other Person,
each reference in the Operative Documents to a rating issued by Standard &
Poor’s shall be deemed automatically replaced with a reference to the
comparable rating issued by such Person.

 

Stipulated
Loss Value for the Aircraft: during the Term, the amount set
forth in the column for SLV in Schedule 3 to the Lease for the pertinent
SLV Date.

 

Successor:
defined in § 7.1.9 of the Participation Agreement.

 

Supplemental
Rent: without duplication, all amounts, liabilities,
indemnities, and obligations (other than Basic Rent) that Lessee assumes or
becomes obligated to pay or agrees to pay under any Operative Agreement to or
on behalf of Lessor or any other Person, including the Security Deposit and the
Maintenance Reserves, and any Stipulated Loss Value, and, if applicable,
Make-Whole Amount, and any indemnity payments under § 9 of the
Participation Agreement.

 

Tax
Indemnitee: (1) WFB and Owner Trustee, (2) each
separate or additional trustee appointed pursuant to the Trust Agreement, (3) Owner
Participant, (4) the Trust Estate, and (5) the successors, assigns,
and agents of the foregoing.  For
purposes of this definition, the term “Owner Participant” shall include any
member of an affiliated group (within the meaning of Code § 1504) of which
Owner Participant is a member at the pertinent time, if consolidated, joint, or
combined returns are filed for such affiliated group for federal, state, or
local income tax purposes.  If any Tax
Indemnitee is Airframe 

 

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treatment and filed separately with the SEC

 

20

 

Manufacturer or Engine Manufacturer, such Person shall be a Tax
Indemnitee only in its capacity as Owner Participant.

 

Taxes:
all taxes, levies, imposts, duties, fees, charges, assessments, or withholdings
of any nature whatsoever imposed by any Taxing Authority, and any penalties,
additions to tax, fines, or interest thereon or additions thereto.

 

Taxing
Authority: any federal, state, or local government or other
taxing authority in the United States, any foreign government or political
subdivision or taxing authority thereof, any international taxing authority, or
any territory or possession of the United States or taxing authority thereof.

 

Term:
the period for which the Aircraft is leased pursuant to § 3 of the Lease,
commencing on and including the Delivery Date and ending on the Scheduled
Expiration Date, or such earlier date on which the Term terminates in
accordance with the provisions of the Lease.

 

Threshold
Amount: defined in Schedule 1 — Part A to the Lease.

 

Transaction
Expenses: all costs and expenses, and all fees and other
charges, payable or incurred by Lessor, Owner Trustee or WFB, or by Owner
Participant or Lessee, in connection with (a) the negotiation,
preparation, execution, and delivery of the Operative Agreements, the Owner
Trustee Agreements, and the Owner Participant Agreements, including the
reasonable fees and disbursements of (1) Ray, Quinney & Nebeker
(special counsel for Owner Trustee and WFB), (2) FAA Counsel, (3) McDermott,
Will & Emery LLP (special counsel to Lessee), and (4) Perkins
Coie LLP (special counsel to Owner Participant), (b) the recording or
filing of any documents, certificates, or instruments in connection with any of
the Transactions or in accordance with any Operative Agreement, Owner Trustee
Agreement, or any Owner Participant Agreement, including the FAA Filed
Documents, the CTC Registrations, the Financing Statements and any documents,
certificates or instruments filed in connection with any deregistration (other
than any deregistration occurring on or prior to the Delivery Date) or
reregistration of the Aircraft, or any termination of the Lease or any sublease,
(c) any proposed or consummated sublease or other Transfer of the
Aircraft, Airframe or any Engine, or any proposed or consummated termination or
cancellation of the Lease or any sublease (including the cost of any appraisal
conducted in connection with any such sublease, Transfer or termination), or
any Event of Loss with respect to 

 

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treatment and filed separately with the SEC

 

21

 

the Aircraft, Airframe or any Engine or Part, or any payment of
Stipulated Loss Value or Make-Whole Amount, and any replacement of the Airframe
or any Engine or Part pursuant to the Lease, (d) all consents,
waivers, amendments or other agreements in connection with the Operative
Agreements, the Owner Trustee Agreements or the Owner Participant Agreements or
the Transactions contemplated thereby, in each case (except during the
continuation of a Default) only to the extent requested by Lessee or required
by or made pursuant to the terms of the Operative Agreements, the Owner Trustee
Agreements or the Owner Participant Agreements (unless such requirement results
from the actions of the party incurring such costs or expenses not required by
or made pursuant to the Operative Agreements, the Owner Trustee Agreements or
the Owner Participant Agreements), whether or not any of the same are also
indemnified against by any other Person, and (e) with respect to Owner
Trustee, all initial and ongoing fees, disbursements and expenses of Owner
Trustee or otherwise in connection with the Trust Estate or the administration
of the transactions contemplated by the Operative Agreements, the Owner Trustee
Agreements and the Owner Participant Agreements, including, without limitation, the
reasonable fees and disbursements of counsel for Owner Trustee.

 

Transactions:
the transactions contemplated by the Operative Agreements, the Owner Trustee
Agreements, and the Owner Participant Agreements.

 

Transfer:
the transfer, sale, assignment, or other conveyance of all or any interest in
any property, right, or interest.

 

Transferee:
a Person to whom Owner Participant or Owner Trustee, purports or intends to
Transfer any or all of its right, title, or interest in the Trust Estate, as
described in § 10.1 of the Participation Agreement.

 

Transportation
Code: subtitle VII of title 49, United States Code, as
amended and supplemented from time to time.

 

Trust:
the trust created by the Trust Agreement.

 

Trust
Agreement: Trust Agreement N483HA, consisting of that certain
Amended and Restated Trust Agreement N604AT, dated as of February 2, 2004,
between Owner Participant and WFB, and that certain Amendment No. 1 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

22

 

to Amended and Restated Trust Agreement N604AT to be known hereafter as
Trust Agreement N483HA, dated as of the Document Date, between Owner
Participant and WFB.

 

Trust
Estate: all Owner Trustee’s estate, right, title, and
interest in and to the Aircraft and the Lease, including all Basic Rent and
Supplemental Rent (including insurance proceeds and requisition, indemnity, or
other payments of any kind for of with respect to the Aircraft).

 

TUE: a “transaction
user entity” as defined in the International Registry Regulations.

 

UCC:
the Uniform Commercial Code as in effect in any applicable jurisdiction.

 

United
States or U.S.: the
United States of America; provided, that
for geographic purposes, “United States” means the 50 states and the District
of Columbia of the United States of America.

 

U.S. Air
Carrier: any United States air carrier who is a Citizen of
the United States holding an air carrier operating certificate issued by the Secretary
of Transportation pursuant to chapter 447 of the Transportation Code for
aircraft capable of carrying 10 or more individuals or 6000 pounds or more of
cargo, and as to whom there is in force an air carrier operating certificate
issued pursuant to Section 41101 of the Federal Aviation Act, or who may
operate as an air carrier by certification or otherwise under any successor or
substitute provisions therefor or in the absence thereof, and, at the time that
the sublease or other pertinent Transfer is entered into, has not declared or
effected, or announced its intention to declare or effect, any suspension or
moratorium of payments or the performance of other material obligations, or
otherwise materially delayed or failed to make or perform any payment or other
material obligation, in the conduct of its business, and is not subject (as
debtor) to any bankruptcy, insolvency, liquidation, reorganization,
dissolution, or similar proceeding, and does not have substantially all of its
property in the possession of any liquidator, trustee, receiver, or similar
Person.

 

U.S.
Government: the federal government of the United States, or
any instrumentality or agency thereof the obligations of which are guaranteed
by the full faith and credit of the federal government of the United States.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

23

 

U.S.
Person: any Person described in Code § 7701(a)(30).

 

Wet
Lease: any arrangement whereby Lessee or a Permitted
Sublessee agrees to furnish an aircraft to a third party under arrangements
pursuant to which the aircraft (a) shall at all times be in the sole
possession and control of Lessee or such Permitted Sublessee, (b) shall be
operated in all respects solely by regular employees of Lessee or such
Permitted Sublessee, and (c) shall in all events be maintained, insured,
and otherwise used and operated in compliance with the terms and provisions of
the Lease and, to the extent not inconsistent with the Lease, the subject
Permitted Sublease; provided, that (i) Lessee’s
obligations under this Lease (and such Permitted Sublessee’s under the subject
Permitted Sublease) shall continue in full force and effect notwithstanding any
such arrangement, (ii) such third party shall not have any possessory
interest whatsoever in or with respect to the Aircraft, Airframe and Engines,
and the rights of such third party with respect to the Aircraft, Airframe and
Engines are subject and subordinate in all respects to the rights, title and
interests of Lessor and Owner Participant under and in connection with the
Operative Agreements, and of Lessee under and in connection with the Lease, and
(iii) the term of such Wet Lease shall not extend beyond the Term of the
Lease.

 

WFB:
Wells Fargo Bank Northwest, National Association, a national banking
association, not in its capacity as trustee under the Trust Agreement, but in
its individual capacity.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

24

 

ANNEX A

 

PART 2

 

ADDITIONAL DEFINITIONS

 

1.                                       New Definitions

 

Annex A- Part 1 is hereby deemed to be amended by
adding to the “Defined Terms” set forth therein the following additional
defined terms:

 

[...***...]

 

JAA:  the European Joint Aviation
Authority, or any Government Entity succeeding to the functions of such Joint
Aviation Authority.

 

Minimum
Amount: defined in Schedule 1 — Part A to the
Lease.

 

Purchase
Date: defined in Schedule 1 — Part A to the Lease.

 

Purchase
Notice: defined in § 3.1 of Annex E — Part 1 to the
Lease.

 

2.                                       Amended Definitions

 

The “Defined Terms” set forth in Annex A-1 are hereby
deemed to be further amended by deleting, in their respective entireties, the
definitions for the terms “Aircraft Documents”, “Aviation
Authority”, “Event of Loss”, “Fair Market Sales Value”, and “Replacement Engine”, and by replacing the same with the
definitions set forth below:

 

Aircraft
Documents: all technical data, manuals, and log books, and
all inspection, modification, and overhaul records and other service, repair,
maintenance, and technical records that are required by the FAA (or the
relevant Aviation Authority), the Lease or the Maintenance Program to be
maintained with respect to the Aircraft, Airframe, Engines, or Parts, or that
are of a type required to be delivered by Lessee upon return of the Aircraft,
Airframe, or Engines under § 5 of the Lease; and such term shall include
all additions, renewals, revisions, and replacements of any such materials from
time to time made, or required to be made, in accordance with the Lease, the

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

25

 

Maintenance Program, or
such FAA (or other Aviation Authority) regulations, in each case in whatever
form and by whatever means or medium (including microfiche, microfilm, paper,
or computer disk or other electronic medium) such materials are maintained or
retained by or on behalf of Lessee (provided,  that all such materials shall be maintained
in the English language), and shall include all Returnable Documents.

 

Aviation
Authority: the FAA or, if the Aircraft is registered with any
other Government Entity under and in accordance with § 1 of Annex E — Part 1
to the Lease, such other Government Entity.

 

Event of
Loss with respect to the Aircraft, the Airframe, or any
Engine: any of the following circumstances, conditions, or events with respect
to such property, for any reason whatsoever:

 

(1)                                  the
destruction of such property, damage to such property beyond practical or
economic repair, or rendition of such property permanently unfit for normal use
by Lessee;

 

(2)                                  the
actual or constructive total loss of such property, or any damage to such
property, or requisition of title or use of such property, which results in an
insurance settlement with respect to such property on the basis of a total loss
or constructive or compromised total loss;

 

(3)                                  any
loss of such property or loss of use of such property that continues until the
earlier of (aa) the last day of the Term, and (bb) the date that is 90 days
after the commencement of such loss, as a consequence of any theft, hijacking,
or disappearance of such property;

 

(4)                                  any
taking of title to such property by any Government Entity or purported
Government Entity (whether by seizure, condemnation, confiscation, requisition,
or otherwise);

 

(5)                                  any
seizure, condemnation, confiscation, taking, or requisition of use of such
property that continues until the earliest of (aa) the last day of the
Term, (bb) the date upon which the Aircraft is modified, altered, or
adapted in such a manner as would render conversion of such property for use in
normal commercial passenger 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

26

 

service
impractical or uneconomical, (cc) the date on which the restrictions set
forth in § 7.1.5 are violated (because such property is operated or
located in any area excluded from coverage by any insurance policy or indemnity
required to be maintained in respect of such property), or (dd) the date
that is 90 days following the commencement of such loss of use (unless such
loss of use results from action by the U.S. Government, in which case this
clause (dd) shall not apply to such loss of use;

 

(6)                                  as
a result of any law, rule, regulation, order, or other action by the Aviation
Authority or by any Government Entity of the government of registry of the
Aircraft or by any Government Entity otherwise having jurisdiction over the
operation or use of the Aircraft, the use of such property in the normal course
of Lessee’s business of passenger air transportation is prohibited for a period
expiring on the earlier to occur of (aa) the last day of the Term, and
(bb) the date that is 180 days following commencement of such prohibition,
unless, before the expiration of such 180-day period, Lessee undertakes and is
diligently carrying forward such steps as are necessary or desirable to permit
the normal use of such property by Lessee, then the date that is 2 years
following commencement of such prohibition; and

 

(7)                                  the
basing of the Aircraft, while under requisition for use by any Government
Entity, in any area excluded from coverage by any required insurance policy
(unless the required U.S. governmental indemnity in lieu of such insurance,
provided for in § 10.3 of the Lease, is in place).

 

The date of such Event of Loss shall be the date of such loss, damage,
insurance settlement, seizure, condemnation, confiscation, taking or
requisition of title or use, or prohibition, except that for purposes of
clauses (3), (5), and (6) above, no Event of Loss shall be deemed to
have occurred until the date of expiration of the applicable period referred to
therein.

 

Fair
Market Sales Value: the fair market sales value in Dollars
for the Aircraft that would apply in an arm’s-length all cash transaction
between an informed and willing buyer under no compulsion to buy, and an
informed and willing seller under no compulsion to sell, in a transaction that
would close on or about the relevant time of determination, assuming that (1) the
Aircraft has 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

27

 

been maintained in accordance with the Lease, and is in the condition
required by the Lease, and (2) the Aircraft will be delivered to such
informed and willing buyer in the return condition required by the Lease; provided, that any determination under § 14 of the
Lease shall be made on the basis of the actual condition of the Aircraft at
that time, and without the assumptions in clause (1) or (2) of this
definition.

 

Replacement
Engine: an engine substituted for an Engine pursuant to
§ 5.3, § 7.2, § 9, Annex B or § 4 of Annex E — Part 1,
of the Lease.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

28

 

ANNEX A

 

PART 3

 

OTHER DEFINITIONS

 

1.                                       [RESERVED]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

29

 

ANNEX B

 

RETURN CONDITIONS

 

                                                The
terms defined in Annex A to Lease Agreement N483HA, when capitalized as in
Annex A, have the same meanings when used in this Annex B. Annex A
also contains rules of usage that control construction in this Annex B.
Unless otherwise noted, section references refer to sections in this Annex B.

 

[...***...]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

B-1

 

RETURN ACCEPTANCE
SUPPLEMENT

 

dated
                              ,
20

 

to Lease No.

 

relating to Boeing model 717-200 Aircraft

 

between

 

Wells Fargo Bank Northwest, National Association, not in its individual capacity but solely as trustee

(Lessor)

 

and

 

Hawaiian Airlines, Inc.

(Lessee)

 

This Return Acceptance Supplement is executed by the parties hereto to
confirm that on the date of this Return Acceptance Supplement at
    :      .m.
[                    
time] the following described aircraft (the Aircraft):

 

	
  Manufacturer

  	
  Boeing

  
	
   

  	
   

  
	
  Model

  	
  717-200

  
	
   

  	
   

  
	
  Manufacturer’s Serial
  No.

  	
   

  
	
   

  	
   

  
	
  Aircraft Hours and
  Cycles

  	
  (See Attachment 1)

  

 

including the following described engines installed thereon:

 

	
  Manufacturer

  	
   

  	
  Make
  and Model

  	
   

  	
  Manufacturer’s
  

  Serial No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

B-2

 

was delivered by Lessee to Lessor.

 

This Return Acceptance Supplement is intended to be delivered by Lessor
to Lessee in
                                            .

 

IN WITNESS WHEREOF, the parties hereto have caused this Return
Acceptance Supplement to be executed by their duly authorized representatives
as of the day and year first above written.

 

 

	
  HAWAIIAN
  AIRLINES, INC.

  (Lessee)

  	
   

  	
  WELLS FARGO BANK
  NORTHWEST, NATIONAL ASSOCIATION, not in its individual
  capacity but solely as trustee  

  (Lessor)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its

  	
   

  	
   

  	
  Its

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its

  	
   

  	
   

  	
   

  

 

 

ATTACHMENT “Aircraft
Hours and Cycles”

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

B-3

 

AIRCRAFT HOURS AND CYCLES

 

as of
                              ,
20

 

Boeing model 717-200 aircraft

 

	
  REGISTRATION MARKINGS

  	
  SERIAL NUMBER

  

 

A.                                   AIRFRAME:

 

Aircraft Total Time (Hours)

 

Aircraft Total Landings (Cycles)

 

Aircraft (and Engine) A Check - Hours to next check

 

Aircraft (and Engine) B Check - Hours to next check 

 

Aircraft (and Engine) C Check - Hours to next check

 

Aircraft (and Engine) D Check - Hours to next check

 

Aircraft Special Checks Hours/Cycles/Months to next task

 

B.                                     ENGINES
- MODEL:

 

	
  Position

  	
   

  	
  Serial

  Number

  	
   

  	
  Total

  Engine

  Cycles

  	
   

  	
  Total Time

  	
   

  	
  Time Since

  Last Shop

  Visit

  	
   

  	
  Hours/Cycles

  to Next

  Replacement

  of Lowest Life

  Limited Part

  	
   

  
	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

B-4

 

C.                                     APU
- MODEL:

 

	
  Serial

  Number

  	
   

  	
  Total

  Hours/Cycles

  	
   

  	
  Hours Since

  Overhaul

  	
   

  	
  Hours Since

  Last Shop

  Visit

  	
   

  	
  Hours/Cycles

  to Next

  Replacement of

  Lowest Life

  Limited Part

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

D.                                    LANDING
GEAR:

 

	
   

  	
   

  	
  Serial

  Number

  	
   

  	
  Hours/Cycles

  	
   

  	
  Total

  Hours/Cycles

  Since Last

  Overhaul

  	
   

  	
  Hours/Cycles

  to Next

  Overhaul

  	
   

  
	
  Nose Landing
  Gear

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Left Main Gear

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Right Main Gear

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

E.                                      MAINTENANCE
PROGRAM:

 

A
Check

 

B
Check

 

C
Check

 

D
Check

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

B-5

 

Accomplish
Engine HSI

 

Accomplish
Engine Heavy Maintenance

 

Accomplish
APU HSI

 

Accomplish
APU Heavy Maintenance

 

	
  NOTE:

  	
  Lessee’s
  Maintenance Program as it applies to the Aircraft will be shown above at the
  time of return of the Aircraft to Lessor

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

B-6

 

AIRCRAFT CONFIGURATION DESCRIPTION

 

The Aircraft will be
delivered to Lessor in the configuration defined by Detail Specification
CS7172E, dated February 15, 1999, as amended and supplemented by various
Specification Change Notices, and as such Aircraft has been modified, as
permitted under the terms of the Lease, from the date of its initial delivery
to Lessee, including all Parts.

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

B-7

 

AIRCRAFT DOCUMENTS

 

1.                                       Current,
or last U.S. Airworthiness Certificate.

 

2.                                       Current,
or last registration.

 

3.                                       Current,
or last Export Airworthiness Certificate, if applicable.

 

4.                                       Certificate
of Sanitary Construction for galleys and lavatories, as applicable.

 

5.                                       Aircraft
specification sheet and status summary for the Airframe, each Engine, each
landing gear and the APU, hours and cycles.

 

6.                                       All
historical records for airframe and engines.

 

7.                                       APU
historical records and schedule of overhaul or last shop visit.

 

8.                                       Current
status of APU inspection and operating times.

 

9.                                       List
and status of time- and cycle-controlled components — airframe, engines, APU,
landing gear, and accessories.

 

10.                                 List
and status of time- and cycle-controlled Life Limited Parts — airframe,
engines, APU, and landing gear.

 

11.                                 List
of all installed components (LRUs) showing Lessee’s available data, as required
by Lessee’s Maintenance Program, regarding part number, serial number, manufacturer,
avionics computers software programs modification levels, and accumulated time
and cycles.

 

12.                                 Summary
and control status of FAA Airworthiness Directives — including engines,
auxiliary power unit and equipment, and the method of incorporation (i.e.,
repetitive inspections, interim fix, or terminating action).

 

13.                                 List
of manufacturer’s Service Bulletins incorporated and method of incorporation (i.e., repetitive inspections, interim fix, or terminating
action) for airframe, engines, and equipment. Where only a portion of a service
bulletin is accomplished, Lessee will so identify which portion 

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

B-8

 

was accomplished.

 

14.                                 List of
modifications or alterations (excluding manufacturer’s Service Bulletins if
accomplished pursuant to the manufacturer’s instructions) accomplished on the
aircraft, engines, and equipment, together with one copy of each modification,
alteration, engineering order, FAA Form 8110-3 approval, and associated
drawings, manuals, or data.

 

15.                                 List
of incorporated FAA Supplemental Type Certificates (STCs), together with a copy
of each certificate, list of drawings, manuals, or associated data.

 

16.                                 List
of maintenance watch items (including any system or structural defects and
special condition repetitive inspection requirements).

 

17.                                 List
of special, non-SRM, or non-MM repairs accomplished to the airframe, engines,
APU, and landing gear, together with on copy of each such repair, engineering
order, FAA Form 8110-3 approval, and associated drawings or data.

 

18.                                 Inventory
list of aircraft loose equipment (to include all galley equipment, flight deck
and passenger cabin emergency equipment, cargo compartment removable cargo
stops, and restraint nets).

 

19.                                 Current
interior arrangement diagram (LOPA).

 

20.                                 Current
emergency equipment installation drawing /diagram.

 

21.                                 FAA
8130-3 Forms or Airline Part tags, and shop overhaul reports for all time-
and cycle-controlled components — airframe, engines, APU, landing gear, and
accessories — changed since original Aircraft delivery from Airframe
Manufacturer.

 

22.                                 FAA 8130-3
Forms or Airline Part tags for all time- and cycle-controlled Life Limited
Parts — airframe, engines, APU, and landing gear — changed since original
Aircraft delivery from Airframe Manufacturer.

 

23.                                 Burn
Certification Test Data or FAA 8130-3 forms for cabin interior materials
replaced since original Aircraft delivery from Airframe Manufacturer (to
include materials used for all interior seating, curtains, partitions,
sidewalls, and carpets).

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

B-9

 

24.                                 Record
of last compass swing.

 

25.                                 List
of oils and fluids used for aircraft engines, APU, and airframe systems.

 

26.                                 Aircraft
flight log books.

 

27.                                 Aircraft
maintenance/readiness log books.

 

28.                                 Aircraft
cabin log books.

 

29.                                 All
FAA Form 337s, Major repair and alterations.

 

30.                                 All
repair records, Major and Class 1, 2, 3.

 

31.                                 Corrosion
Prevention Control Program (CPCP) summary, and compliance documents.

 

32.                                 Aging
Aircraft program summary, and compliance documents.

 

33.                                 Last
aircraft weight and balance report.

 

34.                                 Last
aircraft flight control surfaces weight and balance reports.

 

35.                                 All
engines’ trend monitoring program documents.

 

36.                                 Last
accomplished Digital Flight Data Recorder (DFDR) calibration and algorithms
report.

 

37.                                 Acceptance
flight test reports — last flight accomplished prior to re-delivery.

 

38.                                 Scheduled
maintenance check status.

 

39.                                 Quality
Control Department Statements:

 

(a)                                  Maintenance
Program Certification or Approval.

 

(b)                                 Letter
detailing any major incidents or accidents involving the aircraft (if none, the
letter should so state).

 

(c)                                  Letter
detailing any leased or loaned parts that are installed on the aircraft (if
none, the letter should so state).

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

B-10

 

(d)                                 Letter
certifying time/cycles on airframe, engines, life-limited parts,
time-controlled items, hard-time items, landing gear, APU, etc.

 

40.                                 [RESERVED].

 

41.                                 List
of equipment to be removed prior to Lease return delivery.

 

42.                                 Significant
Service Item summary.

 

43.                                 Operator’s
maintenance program tasks-to-Maintenance Review Board (MRB) tasks
cross-reference list.

 

44.                                 Scheduled
maintenance program requirements summary.

 

45.                                 [RESERVED].

 

46.                                 Original
aircraft manufacturer’s packing list, if available.

 

47.                                 FAA-approved
Airplane Flight Manual (AFM).

 

48.                                 Dispatch
Deviation Procedures Guide.

 

49.                                 Minimum
Equipment List (MEL), Master Minimum Equipment List (MMEL), Configuration
Destination List (CDL).

 

50.                                 MEL
Procedures Manual.

 

51.                                 Fault
Isolation Manuals.

 

52.                                 Fault
Reporting Manual.

 

53.                                 Ramp
Maintenance Manuals.

 

54.                                 Manufacturer’s
Maintenance Manuals — airframe and engines.

 

55.                                 Manufacturer’s
Illustrated Parts Catalogs (IPC) — airframe and engines.

 

56.                                 Manufacturer’s
Structural Repair Manuals (SRM).

 

57.                                 Manufacturer’s
Component Maintenance Manuals (CMM) — airframe and engines.

 

58.                                 Manufacturer’s
Overhaul Manuals (OHM) — airframe and engines.

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

B-11

 

59.                                 Powerplant
Build-up Manuals.

 

60.                                 Non-Destructive
Testing Manuals (NDTM).

 

61.                                 Corrosion
Prevention Manual (CPM).

 

62.                                 Wiring
Diagram Manual, including wiring diagram equipment lists.

 

63.                                 System
Schematic Manuals.

 

64.                                 Aircraft
Weight and Balance Manual.

 

65.                                 Aircraft
Weight and Balance Supplement — Equipment list.

 

66.                                 [Reserved].

 

67.                                 Service
Bulletin Index and Service Bulletins.

 

68.                                 Airplane
Recovery Document.

 

69.                                 Fuel
Measuring Stick Calibration Document.

 

70.                                 Non-proprietary
Vendor Maintenance Manuals, and Component Maintenance Manuals for specialized
equipment (galleys, lavatories, flight crew seating, passenger seating, video
systems, passenger entertainment, etc.).

 

71.                                 Special
Tool and Ground Handling Equipment Index, if available.

 

72.                                 Illustrated
Tool and Equipment Catalog.

 

73.                                 Flight
Crew Operating Manual (FCOM).

 

74.                                 Pilot’s
Quick Reference Handbook (QRH).

 

75.                                 Dent
and Buckle Report.

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

B-12

 

AIRCRAFT DOCUMENTATION
RETURN RECEIPT

 

Hawaiian Airlines, Inc. (“Lessee”), a
Hawaiian corporation, and Wells Fargo Bank Northwest, National Association, not
in its individual capacity but solely as trustee (“Lessor”),
hereby confirm the return delivery by Lessee and receipt by Lessor of the
Aircraft Documentation listed on the Attachment I hereto and made a part
hereof, on
                                ,
20    , in
                                              ,
at
                            
local time. Lessor is executing this return receipt pursuant to the
instructions of BCC Equipment Leasing Corporation (“Owner
Participant”), a Delaware corporation, such instructions attached
hereto as Attachment II.

 

 

	
  HAWAIIAN
  AIRLINES, INC.

  (Lessee)

  	
   

  	
  WELLS FARGO BANK
  NORTHWEST, NATIONAL ASSOCIATION, not in its individual
  capacity but solely as trustee

  (Lessor)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
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ATTACHMENTS (2)

 

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B-13

 

AIRCRAFT DOCUMENTATION

 

	
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*** Material has been
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B-14

 

ANNEX C

 

MAINTENANCE

 

The terms defined
in Annex A to Lease Agreement N483HA, when capitalized as in Annex A,
have the same meanings when used in this Annex C. Annex A also contains rules of
usage that control construction in this Annex C. Unless otherwise noted,
section references refer to sections in this Annex C.

 

A.                                    Maintenance

 

At its own cost and expense, Lessee shall maintain,
inspect, service, repair, test, and overhaul the Aircraft (or cause the
Aircraft to be maintained, inspected, serviced, repaired, tested, and
overhauled) in accordance with a written, continuous airworthiness maintenance
and inspection program that (1) so long as the Aircraft is registered in
the United States, meets FAA requirements for U.S. commercial passenger airline
operations by U.S. Air Carriers, and that is authorized and approved by the
FAA, and (2) so long as the Aircraft is registered in a jurisdiction other
than the United States, is substantially as stringent as such requirements by
the FAA or the JAA for the Aircraft, and that, in either such case, otherwise
meets the requirements of this Annex C (the “Maintenance Program”).
The Maintenance Program shall include a corrosion prevention and control
program which meets the requirements set forth in the applicable FAA
Airworthiness Directive(s), as the same may be amended, superseded, or replaced
from time to time. The Maintenance Program requirements shall also include, but
shall not be limited to, compliance with all service, inspection, maintenance,
modification, repair, and overhaul regulations, directives, and instructions
which are made mandatory by the FAA upon United States operators of Boeing
Model 717 aircraft and Rolls-Royce Deutschland Ltd & Co KG
model BR 700-715 C1-30 engines.

 

Lessee shall perform or cause to be performed the
requirements of the Maintenance Program, so as (aa) to keep the Aircraft,
Airframe, and Engines in as good operating condition as originally delivered
hereunder, ordinary wear and tear excepted; (bb) to keep the Aircraft in
such operating condition as may be necessary to enable the applicable
airworthiness certificate for the Aircraft to be maintained under the regulations
of the FAA or other Aviation Authority then having jurisdiction over the
operation of the Aircraft (but in any event in 

 

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C-1

 

accordance with the Maintenance Program), other than during (i) temporary
periods of storage in accordance with applicable regulations and the
Maintenance Program; (ii) maintenance and modifications permitted
hereunder; and (iii) periods when the FAA or such other Aviation Authority
has revoked or suspended the airworthiness certificates for all similar
aircraft; and (cc) to keep in full force and effect all applicable insurance.
In the event that the Maintenance Program does not address all matters
necessary to the performance of the undertakings set forth in the clauses (aa),
(bb), and (cc) above, then such additional matters shall be addressed in
accordance with applicable service, inspection, maintenance, modification, repair,
and overhaul manuals published by the manufacturers of the Airframe, Engines,
or Parts, as the case may be. All service, inspection, maintenance,
modification, repair, and alteration of the Aircraft, Airframe, Engines, or
Parts shall be performed by persons authorized or qualified, in compliance with
the FARs (or equivalent rules of the other Aviation Authority then having
jurisdiction over the operation of the Aircraft), to do such work.

 

In maintaining the Aircraft, Airframe, and Engines,
Lessee shall use and observe the same maintenance standards and practices as
Lessee employs with respect to similar aircraft operated by Lessee and, during
any period in which a Permitted Sublease is in effect, Lessee shall cause the
Permitted Sublessee to use and observe the same maintenance standards and
practices as such Permitted Sublessee employs with respect to similar aircraft
operated by such Permitted Sublessee; provided, that
in either such case, such maintenance shall at all times be performed in
compliance with the Maintenance Program.

 

Lessee further agrees that the Aircraft will be
maintained, inspected, used, serviced, repaired, tested, overhauled, or
inspected in compliance with applicable Laws with respect to the maintenance of
the Aircraft and in compliance with each applicable airworthiness certificate,
license, and registration relating to the Aircraft issued by the Aviation
Authority, other than minor and nonrecurring violations with respect to which
corrective measures are taken upon discovery thereof and except to the extent
Lessee or Permitted Sublessee is contesting in good faith the validity or
application of any such Law or requirement relating to any such certificate,
license, or registration in any reasonable manner which does not create any
material risk of sale, loss (including loss of use), or forfeiture of the
Aircraft, the Airframe, or any Engine, or any of the Returnable Records, or any
interest therein or any discernible risk of criminal liability or any material
risk of civil penalty against Lessor or Owner Participant; provided,
that no contest shall excuse the failure to maintain the

 

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C-2

 

airworthiness
certification for the Aircraft in good standing without Lessor’s written
consent, nor shall the pendency of any contest prevent a prohibition of use
from becoming an Event of Loss.  Lessee
shall cause the Aircraft Documents to be maintained in English.

 

If Lessee desires to have a third party accomplish
some or all of the maintenance requirements (including engine maintenance)
under the Maintenance Program, such third party shall be an FAA-certified
repair station, a U.S. Air Carrier or (x) a foreign air carrier or (y) a
foreign repair station which, in the case of (x) or (y), issues JAA-1 or
8130 tags or the equivalent thereof, and such maintenance by such third party
must be accomplished in accordance with the provisions of this
Annex C.  Any such arrangement shall
ensure that Lessor shall have access, and all of the other rights specified in
the Lease and in this Annex C and in any other applicable agreements
between Lessor and Lessee, to inspect the Aircraft, Airframe, Engines, and Parts
during the performance of such maintenance.

 

B.                                    Replacement of
Parts

 

Except as
otherwise provided herein, Lessee, at its own cost and expense, will promptly
replace (or cause to be replaced) all Parts that are from time to time
incorporated or installed in or attached to the Airframe or any Engine, and
that become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair, or permanently rendered unfit for use for any reason whatsoever;
provided, that, except as otherwise
provided herein, Lessee will replace or cause the replacement of such Parts as
promptly as practicable.  All replacement
Parts shall be serviceable and approved under the Maintenance Program for use
on the Airframe or Engines and shall be free and clear of all Liens, except for
Permitted Liens and pooling arrangements to the extent permitted by § C
below, and shall be in good operating condition and (except in the case of
replacement property installed on the basis of temporary operational
exigencies) have a value and utility not less than the value and utility of the
Parts replaced (assuming such replaced Parts were in the condition required
under this Lease).

 

Except as
otherwise provided herein, all Parts at any time removed from the Airframe or
any Engine shall remain the property of Lessor, no matter where located, until
they are replaced by Parts that have been incorporated or installed in or
attached to the Airframe or Engine, as the case may be, and that meet the
requirements for replacement Parts specified above.  As soon as a replacement Part is
incorporated or installed in or attached to the Airframe or 

 

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C-3

 

Engine as above provided, without further act, (1) title to the
replaced Part shall vest in Lessee (or if a Permitted Sublease is then in
effect, in the Permitted Sublessee), in “as-is, where-is” condition, free and
clear of all Lessor Liens attributable to Lessor or Owner Participant, and all
rights of Lessor, and the replaced Part shall no longer be deemed a Part hereunder,
(2) title to such replacement Part shall vest in Lessor, subject only
to Permitted Liens and pooling arrangements to the extent permitted by § C
below, and except in the case of replacement property temporarily installed on
an emergency basis, and (3) such replacement Part shall become
subject to this Lease and be deemed part of the Aircraft for all purposes
hereof and thereof to the same extent as the Parts originally incorporated or
installed in or attached to the Aircraft.

 

C.                                    Pooling of Parts

 

Any Part removed
from the Airframe or any Engine may be subjected by Lessee to a normal pooling
arrangement customary in the airline industry of the United States (or by a
Permitted Sublessee to a normal pooling arrangement with other air carriers
customary in the airline industry of the country of registry under the subject
sublease) and entered into in the ordinary course of business of Lessee (or
such Permitted Sublessee), so long as there are no U.S. government restrictions
on transactions with such air carrier, and so long as a Part replacing
such removed Part shall be incorporated or installed in or attached to the
Airframe or Engine, as the case may be, in accordance with § B of this
Annex C as promptly as practicable after the removal of such removed Part.  In addition, any replacement Part when
incorporated or installed in or attached to the Airframe or Engine, as the case
may be, may be owned by any third party subject to such a normal pooling
arrangement, so long as Lessee or Permitted Sublessee, as promptly thereafter
as reasonably possible, either (1) causes title to such replacement Part to
vest in Lessor in accordance with § B of this Annex C, free and clear of
all Liens (except Permitted Liens), or (2) replaces (or causes to be
replaced) such replacement Part by incorporating or installing in or
attaching to the Airframe or Engine, as the case may be, a further replacement Part owned
by Lessee or a Permitted Sublessee free and clear of all Liens (except
Permitted Liens) and by causing title to such further replacement Part to
vest in Lessor in accordance with § B of this Annex C.

 

D.                                    Alterations,
Modifications, and Additions

 

Lessee, at its own
cost and expense, shall make (or cause to be made) such alterations and
modifications in and additions to the Aircraft as may be 

 

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C-4

 

necessary in order to comply with the mandatory directives and other
requirements of the FAA and, if the Aviation Authority is not then the FAA, the
requirements of the Aviation Authority in respect of the Aircraft, or in order
to maintain or cause to be maintained the standard certificate of airworthiness
issued by the FAA or the Aviation Authority for the Aircraft (a “Mandatory Modification”); provided,
that Lessee or any Permitted Sublessee may, in good faith and by appropriate
procedure, contest the validity or application of any law, rule, regulation, or
order in any reasonable manner which does not materially adversely affect
Lessor’s interest in the Aircraft and does not involve any material risk of
sale, forfeiture, or loss (including loss of use) of the Aircraft, the
Airframe, any Engine, or any of the Returnable Records, or any interest
therein, or any discernible risk of criminal liability or any material risk of
civil penalty against Lessor or any Participant.

 

In addition,
Lessee may make or permit to be made, at its own cost and expense, such
alterations and modifications in and additions to the Aircraft (each an “Optional Modification”) as Lessee or any Permitted
Sublessee deems desirable in the proper conduct of its business, including
removal of Parts which Lessee deems are obsolete or no longer suitable or
appropriate for use in the Aircraft (except that the aggregate value of Parts
that have been so removed and not replaced shall not, over the Term, exceed
[...***...]); provided, that such Optional
Modification (i) shall be performed pursuant to (A) an FAA-approved
service bulletin or (B) Lessee’s or a Permitted Sublessee’s engineering
orders, the design and installation of which must be in accordance with the
Maintenance Program, (ii) shall not diminish the value, utility,
condition, or remaining useful life of the Aircraft, Airframe, or any Engine
below its value, utility, condition, or remaining useful life immediately
before such Optional Modification (assuming the Aircraft, Airframe, or Engine,
as the case may be, was in the condition required by the Lease immediately
before such Optional Modification), (iii) shall not change the basic
configuration of the Aircraft, or adversely affect the capability of the
Aircraft, Airframe, or such Engine to be used in commercial scheduled passenger
service in the United States, and (iv) shall not cause the type
certificate or the standard certificate of airworthiness of the Aircraft issued
by the FAA or the Aviation Authority to become invalid.

 

Except as
otherwise provided herein, title to all Parts other than Removable Parts (as
defined below) incorporated or installed in or attached to the Aircraft as the
result of such Optional Modification shall, without further act, vest in Lessor
and become subject to this Lease. Notwithstanding anything 

 

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C-5

 

to the contrary in this § D, Lessee or a Permitted Sublessee may,
if no Event of Default exists, at any time during the Term, remove any Part (such
Part being referred to herein as a “Removable Part”)
if (aa) such Part is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or
attached to the Aircraft, the Airframe, or any Engine at the time of delivery
thereof to Lessee, or any Part in replacement of, or substitution for, any
such Part, (bb) such Part is not required to be incorporated or
installed in or attached to the Aircraft, the Airframe, or any Engine pursuant
to the terms of this Lease, and (cc) such Part can be removed from
the Aircraft, Airframe, or Engine without resulting in unrepaired damage
thereto and without diminishing the value, utility, or remaining useful life
that the Aircraft, Airframe, or Engine would have had at the time of removal
had such removal not occurred, assuming that such Aircraft, Airframe, or Engine
was in the condition and repair required to be maintained by the terms of this
Lease, and such Removable Part had not been incorporated or installed in
or attached to the Aircraft, Airframe, or Engine. Removable Parts may be leased
from or financed by third parties other than Lessor.

 

Title to Removable
Parts shall not vest in Lessor, except as provided in the next succeeding
paragraph.  Upon removal of a Removable Part by
Lessee or a Permitted Sublessee, title thereto shall, without further act,
remain in Lessee or such Permitted Sublessee (or, if applicable, a third-party
owner) free and clear of Lessor Liens attributable to Lessor or Owner
Participant, and such Part shall no longer be deemed part of the Aircraft,
Airframe, or such Engine and shall no longer be deemed a “Part”.  Lessee shall promptly repair any damage to
the Aircraft or Airframe, or any Engine, which results from such removal of any
Removable Part.

 

Any Removable Part not removed as above provided
prior to the return or repossession of the Aircraft, the Airframe, or such
Engine under the Lease shall become the property of Lessor free and clear of
all Liens; provided, that Lessor may require
Lessee, in connection with the return or repossession of the Aircraft, the
Airframe, or any Engine to remove any such Part and to repair and restore
the Aircraft, the Airframe, or such Engine, as the case may be, as provided
above.

 

E.                                      Records

 

Lessee shall maintain (or cause to be maintained) all
Aircraft Documents.  All Returnable
Records shall be the property of Lessor, but shall become the property of
Lessee upon Lessee’s purchase of the Aircraft pursuant to the terms 

 

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C-6

 

of this Lease or upon the occurrence of an Event of Loss and Lessee’s
compliance with § 9.

 

F.                                      Maintenance
Reserves

 

1.                                       [...***...]

 

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C-7

 

ANNEX D

 

INSURANCE

 

The terms defined
in Annex A to Lease Agreement N483HA, when capitalized as in Annex A,
have the same meanings when used in this Annex D. Annex A also contains rules of
usage that control construction in this Annex D. Unless otherwise noted,
section references refer to sections in this Annex D.

 

A.                                    Liability
Insurance

 

1.                                       Except
as provided in § A2 below, Lessee will carry, or cause to be carried, at
all times throughout the Term and for a period of two years following the
termination or expiration of the Lease, at no expense to Lessor or Owner
Participant, airline legal liability (including third-party and passenger
liability, personal injury liability, liability war risk and property damage,
including baggage (checked and unchecked), cargo and mail, premises,
products/completed operations liability and contractual liability insurance
(which insurance shall, among other matters, include coverage of the indemnification
agreements of Lessee set forth in § 9.1 of the Participation Agreement, to
the extent of coverage under the policies)) with respect to the Aircraft which
is (a) in an amount not less than the greater of (x) the amount of
airline legal liability insurance from time to time applicable to aircraft
operated by Lessee of the same type and operating on similar routes as the
Aircraft, and (y) the Minimum Liability Insurance Amount per occurrence
and aggregate as applicable; (b) of the same type and covering the same
risks as from time to time applicable to similar aircraft operated by U.S. Air
Carriers engaged in the same or similar business as Lessee, similarly situated
as Lessee, and owning or operating similar aircraft and engines; and (c) maintained
in effect with insurers of nationally or internationally recognized
responsibility and substantial financial capacity which are disclosed to Lessor
(such insurers being referred to herein as “Approved Insurers”).

 

2.                                       During
any period that the Aircraft is grounded and not in operation, Lessee may carry
or cause to be carried, in lieu of the insurance required by § A1 above,
insurance otherwise conforming with the provisions of § A1 except
that the type of insurance, the amounts of coverage and the scope of the
risks covered shall not be less than (i) the same as from time to time, in

 

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D-1

 

each case, customary in the United States for U.S. Air Carriers
similarly situated with Lessee in respect of similar aircraft which are
grounded and not in operation, or (ii) the same as from time to time,
applicable to aircraft operated by Lessee of the same type which are grounded
and not in operation.

 

3.                                       The
insurance carried in accordance with this § A shall not be subject to any
deductible or self-insurance other than deductibles that are standard in the
market with respect to major U.S. airlines.

 

B.                                    Hull
Insurance

 

1.                                       Except
as provided in § B2 below, Lessee will carry, or cause to be carried, at
all times throughout the Term, at no expense to Lessor or Owner Participant,
with Approved Insurers:

 

(i)                                     ground
and flight aircraft hull insurance, covering the Aircraft (including the
Engines when they are installed on the Airframe or any other airframe), which
is of the same type and covering the same risks as is from time to time
customarily obtained for aircraft operated by U.S. Air Carriers engaged in the
same or similar business as Lessee, similarly situated as Lessee and owning or
operating similar aircraft and engines, for an amount denominated in United
States Dollars not less than the Stipulated Loss Value of the Aircraft; and

 

(ii)                                  physical
loss or damage (including while in transit and including the risks of fire,
flood, and earthquake, and including the risks of war and confiscation while in
international transit) insurance, covering Engines and Parts while removed from
the Aircraft (to the extent such Engines and Parts are not covered by aircraft
hull insurance), which is of the same type and covering the same risks as is
from time to time customarily obtained for engines and parts (while removed
from aircraft) owned or operated by, or otherwise in the possession of, U.S.
Air Carriers engaged in the same or similar business as Lessee, similarly
situated as Lessee, for an amount denominated in United States Dollars not less
than the replacement cost of such Engines and Parts.

 

Any policies of
insurance carried in accordance with this § B1 covering the Aircraft and
any policies taken out in substitution or replacement for any such policies (a) shall
name Lessor as sole loss payee for any proceeds to be paid under such policies
up to an amount equal to the Stipulated Loss Value, and (b) shall provide
that (aa) all proceeds payable in respect of any Event of Loss shall be
paid in full to Lessor, up to an amount equal to the Stipulated 

 

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D-2

 

Loss Value, and Lessor agrees that any proceeds payable in excess of
such Stipulated Loss Value shall be paid to Lessee or its order, (bb) in the
event of a loss, not constituting an Event of Loss, involving proceeds in
excess of the Threshold Amount, the entire amount of the proceeds in excess of
the Threshold Amount in respect of such loss up to an amount equal to the
Stipulated Loss Value for the Aircraft shall be payable to Lessor (except in
the case of a loss with respect to an Engine installed on an airframe other
than the Airframe, in which case Lessee (or any Permitted Sublessee) shall
endeavor to arrange for any payment of insurance proceeds in respect of such
loss to be held for the account of Lessor, whether such payment is made to
Lessee (or any Permitted Sublessee) or any third party) and, upon receipt of
evidence reasonably satisfactory to Lessor that the damage giving rise to such
payment has been repaired or that such payment is then required to pay for
repairs then being made, Lessor shall, unless a Special Default exists, pay the
amount of such payment (i) to Lessee or its order against presentment of
the receipts or other reasonably satisfactory evidence of the repairers
evidencing payment of their invoices, or (ii) to the repairers against
presentment of their invoices, or (iii) in the case of the loss or
destruction of any Engine where the Airframe has not suffered an Event of Loss,
to the transferor of a Replacement Engine, and (cc) in the event of a
loss, not constituting an Event of Loss, involving proceeds less than the
Threshold Amount, the entire amount of the proceeds in respect of such loss up
to an amount equal to the Threshold Amount shall be paid to Lessee or its order
unless a Special Default exists and the insurers have been notified thereof by
Lessor or Owner Participant.  In the case
of a loss with respect to an engine (other than an Engine) installed on the
Airframe, Lessor shall hold any payment to it of any insurance proceeds for
that loss for the account of Lessee or any other third party who is entitled to
receive such proceeds.

 

2.                                       During
any period that the Aircraft is grounded and not in operation, Lessee may omit
from the insurance required by § B1 above, all flight insurance, except
that the type of insurance, the amounts of coverage and the scope of risks
covered shall not be less than (i) the same as from time to time, in each
case, customary in the United States for U.S. Air Carriers similarly situated
with Lessee in respect of similar aircraft which are grounded and not in
operation, or (ii) the same as from time to time applicable to aircraft
operated by Lessee of the same type similarly on the ground and not in
operation, provided, that Lessee shall maintain
insurance against risk of loss or damage to the Aircraft in an amount equal to
the Stipulated Loss Value of the 

 

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D-3

 

Aircraft during such period that the Aircraft is on the ground and not
in operation.

 

3.                                       The
insurance carried in accordance with this § B shall not be subject to any
deductible or self-insurance other than a deductible that is standard (which
shall not be applicable in the case of a total loss) with respect to the ground
and flight aircraft hull insurance which shall be disclosed to Lessor, and
which shall be no greater than the lesser of (x) [...***...], and (y) such
deductible that is covered by Lessee with respect to other aircraft similar to
the Aircraft and operated on similar routes.

 

C.                                    War-Risk,
Hijacking, and Allied Perils Insurance

 

Lessee (or any Permitted Sublessee) shall maintain or
cause to be maintained war-risk, hijacking, and allied perils insurance (and
with respect to hull war risk such insurance shall be in accordance with Lloyd’s
Aviation Underwriters Association Standard Policy Form, LSW 555B (or its
equivalent or successor wording)), of substantially the same type carried by
prudent, major U.S. Air Carriers operating the same or comparable models of
aircraft on similar routes or in such areas, and in no event in an amount less
than (x) the amount set forth in § A with respect to liability
coverage and (y) the values stated in § B (i) and (ii) with
respect to hull coverage, and such insurance shall, to the extent generally
maintained by major U.S. Air Carriers, cover the perils of (i) war,
invasion, acts of foreign enemies, hostilities (whether war be declared or
not), civil war, rebellion, revolution, insurrection, martial law, military or
usurped power or attempts at usurpation of power; (ii) strikes, riots,
civil commotion or labor disturbances; (iii) any act of one or more Persons,
whether or not agents of a sovereign power, for political or terrorist purposes
and whether the loss or damage resulting therefrom is accidental or
intentional; (iv) any malicious act or act of sabotage; (v) confiscation,
nationalization, seizure, restraint, detention, appropriation, requisition for
title or use by or under the order of any government (whether civil, military
or de facto) or public or local authority (excluding confiscation by the United
States government); and (vi) hijacking or any unlawful seizure or wrongful
exercise of control of the Aircraft or any Engine or any airframe on which any
Engine is installed or of crew in flight (including any attempt at such seizure
or control) made by any Person or Persons on board the Aircraft or such airframe
acting without the consent of the Lessee. The insurance carried in accordance
with this § C shall not be subject to any deductible or self-insurance
other than as provided above in § A3 and § B3.

 

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D-4

 

D.                                    General
Provisions

 

Any policies of
insurance carried in accordance with §§ A, B, and C, including any
policies taken out in substitution or replacement for such policies:

 

(1)                                  with
respect to liability insurance under § A, and with respect to war risk
insurance (insofar as it covers liability risks) under § C, shall name
each Indemnitee as an additional insured (the “Additional
Insureds”); and with respect to hull insurance under § B, and
with respect to war risk insurance (insofar as it covers hull risks) under
§ C, shall name Lessor as sole loss payee for any proceeds to be paid
under such policies up to an amount equal to the Stipulated Loss Value;

 

(2)                                  shall
apply worldwide and have no territorial restrictions or limitations (except
only in the case of war, hijacking, and allied perils insurance required under
§ C, which shall apply to all territories over or to which the Aircraft
will be operated);

 

(3)                                  shall
provide that, in respect of the interests of the Additional Insureds in such
policies, the insurance shall not be invalidated or impaired by any act or
omission (including misrepresentation and nondisclosure) by Lessee (or any Permitted
Sublessee) or any other Person (including use for illegal purposes of the
Aircraft or any Engine), and shall insure the Additional Insureds regardless of
any breach or violation of any representation, warranty, declaration, term, or
condition contained in such policies by Lessee (or any Permitted Sublessee) or
any other Person (provided that such Additional Insured shall not have
knowingly caused or contributed to such act or omission);

 

(4)                                  shall
provide that, if the insurers cancel such insurance for any reason whatsoever,
or if it is cancelled for nonpayment of premium, or if any material change is
made in the insurance which adversely affects the interest of any of the
Additional Insureds, such cancellation or change shall not be effective as to the
Additional Insureds for 30 days (seven days, or such shorter period as may be
customary, in the case of war risk, hijacking, and allied perils insurance)
after issuance to the Additional Insureds of written notice by such insurers of
such cancellation or change;

 

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D-5

 

(5)                                  shall
waive any rights of recourse, subrogation, setoff (including for unpaid
premiums), recoupment, counterclaim, or other deduction, whether by attachment
or otherwise, against each Additional Insured;

 

(6)                                  with
respect to liability insurance under § A, and with respect to war risk
insurance (insofar as it covers liability risks) under § C, shall be
primary without right of contribution from any other insurance that may be
available to any Additional Insured;

 

(7)                                  shall
provide that all of the liability insurance provisions thereof, except the
limits of liability, shall operate in all respects as if a separate policy had
been issued covering each party insured thereunder;

 

(8)                                  shall
provide that none of the Additional Insureds shall be liable for any insurance
premium;

 

(9)                                  with
respect to hull insurance under § B, and with respect to war risk
insurance (insofar as it covers hull risks) under § C, shall contain a
50/50 Clause per Lloyd’s Aviation Underwriters’ Association Standard Policy Form AVS
103 or its equivalent;

 

(10)                            shall
be payable in Dollars;

 

(11)                            with
respect to liability insurance under § A, and with respect to war risk
insurance (insofar as it covers liability risks) under § C, and only to
the extent of coverage provided by the policies, shall specifically refer to
the Lease and this Annex D and shall acknowledge, and (to the extent reasonably
available at no additional material cost) cover, the indemnification agreements
of Lessee set forth in Section 9 of the Participation Agreement;

 

(12)                            shall
provide that all losses shall be adjusted by Lessee, unless and until Lessor or
Owner Participant shall have notified the underwriters that an Event of Default
exists, in which event all losses shall be adjusted by Lessor, Owner
Participant or the designee of either such party; and

 

(13)                            shall
provide coverages in accordance with Lloyd’s Aviation Underwriters’ Association
Standard Policy Form AVN.67B (Airline Finance/Lease Contract Endorsement),
Lloyd’s Aviation Underwriters’ 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

D-6

 

Association Standard Policy Form AVN.67B (Airline
Finance/Lease Contract Endorsement (Hull War)), and Lloyd’s Aviation
Underwriters’ Association Standard Policy Form AVN.99 (Airline
Finance/Lease Contract — Continuing Liability Endorsement); or if such
endorsements are not used, shall otherwise provide coverages that are, in scope
and substance, at least as extensive as, and no more restrictive than (with
respect to additional insureds or loss payees), such Standard Policy Forms;

 

provided, that any such
endorsements may be subject to any limitations on endorsements that are in
keeping with general market standards in the airline insurance marketplace at
the time.

 

E.                                      Reports
and Certificates; Other Information

 

On or before the Delivery Date and on or before each
renewal date of the insurance policies required hereunder, Lessee will furnish
or cause to be furnished to Lessor and Owner Participant insurance
certificates, or other equivalent documentation reasonably satisfactory to
Lessor and Owner Participant, describing in reasonable detail the insurance
maintained hereunder and a report, signed by Lessee’s or a Permitted Sublessee’s
regular independent insurance broker (the “Insurance Broker”),
stating the opinion of such Insurance Broker that (1) all premiums for the
insurance then due have been paid, and (2) such insurance complies with
the terms of this Annex D.  At any time,
but not more than once a year, Lessor may request, and Lessee will cause its
Insurance Broker to render, a report stating that in the opinion of such broker
Lessee’s insurance coverages comply with this Annex D and confirming that all premiums
in respect thereof have been paid. 
Lessee will also cause the Insurance Broker to agree to notify Lessor
and Owner Participant in writing of any default in the payment of any premium
and to notify Lessor and Owner Participant in writing at least 30 days (seven
days for war-risk and allied perils coverage, or such shorter period therefor
as is the longest notice period then obtainable in the international insurance
market, as applicable) before the cancellation or Materially Adverse Change of
any insurance maintained pursuant to this Annex D.  Lessor and Owner Participant shall also be
entitled to such other information as they may reasonably request of Lessee,
the Approved Insurers or the Insurance Broker from time to time with respect to
the insurances to be provided hereunder.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

D-7

 

F.                                      Right
to Pay Premiums

 

Each Additional
Insured shall have the rights but not the obligations of an additional
insured.  No Additional Insured shall
have any obligation to pay any premium, commission, assessment, or call due on
any such insurance (including reinsurance). 
Notwithstanding the foregoing, in the event of cancellation of any
required insurance due to the nonpayment of premium, each of Lessor and Owner
Participant shall have the option, in its sole discretion, to pay any such
premium and to maintain such coverage, as Lessor or Owner Participant may
require, until the scheduled expiry date of such insurance and, in such event,
Lessee shall, upon demand, reimburse Lessor and Owner Participant for amounts
that they so pay.

 

G.                                    No
Discrimination

 

In all events,
Lessee will carry liability and property insurance with respect to the Aircraft
and Engines at least as favorable to Lessor and each Additional Insured as
insurance maintained by Lessee for comparable aircraft and engines operated by
Lessee.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

D-8

 

ANNEX E

 

PART 1

 

CERTAIN RIGHTS AND
OBLIGATIONS

 

The terms defined
in Annex A to Lease Agreement N483HA, when capitalized as in Annex A, have
the same meanings when used in this Annex E — Part 1.  Annex A also contains rules of
usage that control construction in this Annex E.  Unless otherwise noted, section references
refer to sections in this Annex E — Part 1.

 

1.                                      FOREIGN
REGISTRATION

 

1.1                               Right
to Reregister

 

(a)                                  Subject
to all the provisions of this § 1, Lessee shall be entitled to register
the Aircraft, or cause the Aircraft to be registered, in a country other than
the United States, if Lessee furnishes to Lessor and Owner Participant at least
45 days’ prior written notice of such proposed re-registration, and if Lessor
and Owner Participant are reasonably satisfied that:

 

(1)                                  [RESERVED];

 

(2)                                  no
unindemnifiable Tax could reasonably be expected to result in any way from any
such change in registration;

 

(3)                                  no
Special Default exists at the time of Lessee’s notice or will exist at the time
of, or as a result of, such re-registration;

 

(4)                                  such
proposed change of registration will be made in connection with a Permitted
Sublease to a Permitted Foreign Air Carrier (or in connection with a
sub-sublease to a Permitted Foreign Air Carrier by a Permitted Manufacturer who
is a Permitted Sublessee);

 

(5)                                  such
country is a Permitted Country;

 

(6)                                  any
and all import permits and certificates of registration, and (to the extent
customarily obtained or reasonably obtainable in connection with leases or
subleases into such Permitted Country from any other country) any and all
export permits and certificates of deregistration, and other licenses,
authorizations, and approvals necessary to take the Aircraft 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-1

 

into and out of, and to operate the Aircraft under the laws of, such
Permitted Country, and any exchange permits necessary to allow the expatriation
of money constituting Rent and other payments provided for under the Permitted
Sublease, shall each be in full force and effect at all relevant times;

 

(7)                                  after
giving effect to such change in registration, Lessor’s right, title, and
interest in and to the Aircraft and the Lease will continue as valid and
duly-perfected ownership and security interests, respectively, and all filing,
recording, or other action (including, without limitation, any filings on the
International Registry that Lessor, in its reasonable judgment, specifies)
necessary to protect the same have been accomplished (or, if such assurance
cannot be given at the time of such proposed change in registration because
such change in registration is not yet effective, Lessor and Owner Participant
shall receive a certificate from Lessee that all possible preparations to
accomplish such filing, recording, and other actions are done, and such filing,
recording, and other action are accomplished, and a supplemental certificate to
that effect shall be delivered by Lessee to Lessor and Owner Participant
promptly after the effective date of such change in registration);

 

(8)                                  all
action has been or will be taken as Owner Participant reasonably deems
necessary (including any increase in or changes or additions to types of
insurance coverage to take into account differences in applicable Laws) to
ensure that all insurance provided for in the Operative Agreements shall be in
full force and effect before, at the time of, and after such change in
registration, and the Lessee shall otherwise be in full compliance with the
provisions of § 10 of the Lease after giving effect to such change of registration;
and Owner Participant and Lessor shall receive, from Lessee’s or the Permitted
Sublessee’s insurance broker, (aa) not less than five days before the date of
such change in registration, a draft of the insurance certificate(s) to
such effect, and (bb) not later than the date of such change in registration,
one or more certificate(s) to such effect;

 

(9)                                  all
action has been or will be taken as Owner Participant reasonably deems
necessary (including any increase in or changes or additions to indemnities to
take into account differences in applicable Laws) to ensure that the tax and
other indemnities provided for in, and in favor of each Person named as an
indemnitee under, any Operative 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-2

 

Agreement shall be in full force and effect at the time of and after
such change in registration, and afford to each such Person the same protection
as provided before such change of registration;

 

(10)                            the
Laws and the courts of such Permitted Country (aa) will recognize the rights
and interests of Lessor (including Lessor’s title to the Aircraft), and of
Owner Participant, as such rights and interests are described in, and are
intended to be created under, the Operative Agreements, and (bb) will provide
that there are no possessory rights in favor of Lessee, any Permitted
Sublessee, or any third party (including any Government Entity) which would,
upon bankruptcy or other default by Lessee or any Permitted Sublessee, prevent
or delay the return of the Aircraft, Airframe, Engines, Parts, or Returnable
Documents to Lessor in accordance with and when required or permitted by the
terms of the Lease, or, if such possessory rights exist, they are not
materially greater than those available to lessees of newly manufactured large
passenger aircraft (assuming such lessees to be U.S. Air Carriers) under then
current United States Law (including Section 1110), and there are no
procedural or other impediments to the return of the Aircraft to Lessor
materially greater than under United States Law (including Section 1110),
and upon termination of any Permitted Sublease, registration shall be
terminable without material burden or delay and there is no material impediment
under the Laws of such country of registration to the enforceability (other
than immaterial differences in procedures of enforcement) of the rights and
remedies of Lessor provided for in and under the Operative Agreements;

 

(11)                            the
Laws of such Permitted Country impose, or Lessee agrees to cause the Aircraft
to be maintained in accordance with, a maintenance program substantially
similar to the Maintenance Program as required by, and on the terms set forth
in, Annex C to the Lease;

 

(12)                            no
Liens (except Permitted Liens) on the Aircraft, Airframe, Engines, Parts, or
any Aircraft Documents, or on the Trust Estate, shall arise in any way by
reason of such re-registration;

 

(13)                            any
export licenses, certificates of deregistration, and powers of attorney
required in connection with any repossession or return of the Aircraft will be
able to be obtained in the normal course without material delay, and without
material burden on Lessor (however, Lessee shall be responsible for the cost
thereof);

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-3

 

(14)                            the
Aircraft has been duly certificated as to type and airworthiness by the
appropriate aviation authority of such Permitted Country, it being understood
and agreed, however, that such certification of airworthiness may be effected,
at the inception of any such reregistration, by a temporary certificate of
airworthiness duly authorized and issued by the appropriate aviation authority
of such Permitted Country, if (i) such temporary certificate shall, under
the Laws of such Permitted Country, remain in full force and effect (and is
legally sufficient under such Laws to establish and maintain the airworthiness
certification of the Aircraft) until a permanent certificate is duly authorized
and issued, and (ii) the issuance of such permanent certificate is not
subject to any conditions, consents or approvals, or other act or event, other
than those obtained, taken or occurring in connection with the temporary
certificate;

 

(15)                            Lessee
shall have paid or caused to be paid, to the Person entitled thereto (which may
be Lessor or Owner Participant) any and all value-added taxes, tariffs, customs
or import fees or duties, all filing, recording, license, or franchise fees,
and all other governmental charges or Taxes of any nature whatsoever arising in
any way, directly or indirectly, in connection with the change in registration
and then due; and

 

(16)                            Lessee
shall have paid all Expenses (including reasonable fees and disbursements of
counsel) of Lessor and Owner Participant, arising in any way in connection with
such change of registration, as incurred or accrued up to the date of such
change in registration and invoiced to Lessee at least five days before such
date.

 

(b)                                 In
addition, as a condition precedent to any change in registration, Lessor and
Owner Participant shall have received an opinion of counsel reasonably
satisfactory to Owner Participant, addressed to each such party, to the effect
that:

 

(1)                                  such
country recognizes Lessor’s title to, and ownership interest in, the Aircraft,
Airframe and Engines;

 

(2)                                  Lessee’s
obligations, and Lessor’s rights and remedies, under the Lease and under any
assignment to Lessor by Lessee of Lessee’s rights and remedies under the
Permitted Sublease (including (aa) the right to terminate the Permitted
Sublease, and to repossess and export the Aircraft, based solely upon the
occurrence of an Event of Default 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-4

 

under the Lease, (bb) the limitations on the Permitted Sublessee’s
rights under the Permitted Sublease arising as a result of such rights of the
Permitted Sublease being subject and subordinate to the rights of Lessor under
the Lease, and (cc) the right to require that, upon the giving of notice to the
Permitted Sublessee, all payments of rent under the Permitted Sublease be made
directly to Lessor), are in each such case valid, binding, and enforceable
under the Laws of such jurisdiction (or the Laws of the jurisdiction to which
the Laws of such jurisdiction would refer as the applicable governing law);

 

(3)                                  after
giving effect to such change in registration, Lessor’s right, title, and
interest in and to the Aircraft and under the Lease will continue as valid and
enforceable ownership and contractual interests, respectively, and all filing,
recording, or other action (including, without limitation, any filings on the
International Registry that Lessor, in its reasonable judgment, specifies)
necessary to protect the same have been accomplished (or, if such opinion
cannot be given at the time of such proposed change in registration because
such change in registration is not yet effective, the opinion shall detail what
filing, recording, or other action is necessary, and shall state that all
possible preparations to accomplish such filing, recording, and other action
are done, and at such time as such filing, recording, and other action are
accomplished, a supplemental opinion to that effect shall be delivered to
Lessor and Owner Participant);

 

(4)                                  it
is not necessary, as a consequence of such change in registration and the
presence or operation of such Aircraft in such Permitted Country (but without
giving effect to any other activity of Lessor or Owner Participant (or any
Affiliate thereof) in such Permitted Country), for Lessor or Owner Participant
to qualify to do business in, or to obtain any other license, consent,
approval, or authorization from any Government Entity in, such jurisdiction in
order for Lessor to exercise, through the courts or other juridical bodies of
such jurisdiction, any rights or remedies under the Lease or the Permitted
Sublease (as the assignee of Lessee) or with respect to the Aircraft, Airframe,
Engines, Parts, or Aircraft Documents;

 

(5)                                  there
is no tort liability of, or imputed to, the owner or lessor of an aircraft or
engines, having no operational interest therein, under the laws of such
jurisdiction (or, if such opinion cannot be given in a 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-5

 

form satisfactory to Owner Participant, insurance reasonably
satisfactory to Owner Participant is provided, at no expense to Lessor or Owner
Participant, and not later than the date of such change in registration, to
cover such risk);

 

(6)                                  unless
Lessee provides, at no expense to Lessor or Owner Participant and not later
than the date of such change in registration, insurance reasonably satisfactory
to Owner Participant covering the risk of requisition of title or use of the
Aircraft by the government of such Permitted Country (so long as the Aircraft
is registered under the laws of such country), the laws of such Permitted Country
require fair compensation by the government of such country, for the taking or
requisition by such government of such title or use, payable in currency freely
convertible into Dollars and freely removable from such country (without
license or permit, unless Lessee before such proposed change in registration
has obtained such license or permit, and such license or permit is, as a matter
of applicable Law, wholly sufficient to effect such conversion and removal);

 

(7)                                  such
Permitted Country maintains normal diplomatic relations with the United States,
and no executive, legislative or judicial act by any Government Entity in such
country has been taken that could reasonably be expected to adversely affect
the maintenance of such normal diplomatic relations; and

 

(8)                                  to
the effect set forth in clauses (2), (5), (6), (7), (8), (9), (10), (12) (as to
Liens arising by operation of the Laws of such Permitted Country), (13), (14),
and (15), of paragraph (a) of this § 1.1 (and Lessee covenants to
deliver to Lessor and Owner Participant, with respect to clause (7), an annual
filing opinion), and to such further effect and with respect to such other
matters as Owner Participant may reasonably request; provided that (aa) the
opinion with respect to clause (8) need only identify any additional
uninsured risks attributable to such re-registration, (bb) the opinion with
respect to clause (9) need only identify any additional unindemnified tax
risks attributable to such re-registration, (cc) the opinion with respect to clause
(15) need only identify any such governmental charges or taxes then due and
payable as a result of such re-registration.

 

(c)                                  In
addition, as a condition precedent to any change in registration, and to the
extent reasonably obtainable in connection with subleases in such 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-6

 

Permitted Country, Lessee or any Permitted Sublessee shall, if
requested by Owner Participant, and for purposes of enforcement of the rights
and remedies provided for in § 14 of the Lease, execute an irrevocable
power of attorney in form and substance reasonably satisfactory to Owner
Participant (and, if appropriate, in Lessor’s reasonable judgment, shall also
execute a “De-registration and Export Request Authorization” as provided for
in, and in the form specified by, Article XIII of the Protocol (Article 25
of the CTC)) providing for, after the cancellation of the Lease because of the
existence of an Event of Default, (1) the deregistration of the Aircraft, (2) the
reregistration of the Aircraft in the United States by Lessor, including the
ability to obtain export licenses and take any other action necessary or advisable
for the repossession, export, and redelivery to Lessor of the Aircraft,
Airframe, Engines and Returnable Records, and (3) all other things
reasonably necessary to accomplish the results described in the foregoing
clauses (1) and (2) of this paragraph (c).

 

(d)                                 The
parties hereto acknowledge to each other that none of such parties has
conducted a review of the Permitted Countries to determine whether, on the date
hereof, any of the criteria set forth in this § 1 are currently met.

 

1.2                               Annual Opinion

 

If the Aircraft is registered in a country other than
the United States pursuant to this § 1, Lessee will furnish to Lessor and
Owner Participant annually while the Aircraft is not U.S.-registered (starting
with the calendar year after such registration is effected) an opinion of
special counsel reasonably satisfactory to Owner Participant stating that, in
the opinion of such counsel, either (a) such action has been taken with
respect to the recording, filing, re-recording, and re-filing of the Operative
Agreements and any supplements and amendments thereto, and with respect to
filings and registrations on the International Registry, as is necessary to
establish, perfect, and protect Lessor’s right, title and interest in and to
the Aircraft and the Operative Agreements, reciting the details of such
actions, or (b) no such action is necessary to maintain the perfection of
such right, title, and interest.

 

1.3                               Expenses

 

All matters relating to any such change in
registration, including all legal opinions and any consents or approvals of, or
filings with, any Government Entity, shall be at the sole expense of Lessee,
and Lessee shall pay, or cause to 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-7

 

be paid, all Expenses of Lessor and Owner Participant (including the
reasonable fees and disbursements of legal counsel) arising in any way in
connection with any request to change (and the evaluation thereof), and any
actual change, of registration of the Aircraft (including, without limitation,
all such Expenses arising in any way in connection with the later
de-registration, and re-registration in the United States, of the Aircraft).

 

1.4                               Related Matters

 

(a)                                  For
purposes of this Annex E — Part 1, § 7.1.1 of the Lease is hereby
deemed to be amended (1) by inserting, immediately after the words “. . .
with the FAA under the Transportation Code”, the words “or with such other
country of registry as shall be permitted under § 1 of Annex E — Part 1”,
and (2) by inserting, immediately after the words “. . . effecting and
continuing such registration”, the words “; provided, that
the review, negotiation, execution, and delivery of such documents shall be at
the sole cost and expense of Lessee in instances where any such document
relates to the registration or deregistration of the Aircraft in a country of
registry other than the United States”.

 

(b)                                 For
purposes of this Annex E — Part 1, § 7.2.7(f)(6) of the Lease is
hereby deemed to be amended (1) by inserting, immediately after the words “.
.. . materially greater than under United States Law (including Section 1110”,
the words “, and upon termination of any Permitted Sublease, registration shall
be terminable without material burden or delay”, and (2) by inserting,
immediately after the words “. . . the Laws of such jurisdiction”, the words “,
or the jurisdiction of registration (if other than the United States),”.

 

(c)                                  For
purposes of this Annex E — Part 1, § 7.3(c) of the Lease is
hereby deemed to be amended by inserting, immediately after the words “. . .
United States registration of the Aircraft”, the words “, unless any
reregistration is effected in accordance with § 1 of Annex E — Part 1”.

 

(d)                                 For
purposes of this Annex E — Part 1, § 9.3.1(a) of the Lease is
hereby deemed to be amended by inserting, immediately after the words “. . .
pursuant to the Transportation Code”, the words “(or such other applicable Law
of the jurisdiction other than the United States where the related aircraft is
registered in accordance with § 1 of Annex E — Part 1)”.

 

(e)                                  For
purposes of this Annex E — Part 1, § 9.3.1(e) of the Lease is
hereby deemed to be amended (1) by inserting, immediately after the words “.
.. . Liens of record at the FAA”, the words “(or such other Aviation Authority
or 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-8

 

appropriate Government Entity where the related aircraft is registered
in accordance with § 1 of Annex E — Part 1)”, and (2) by
inserting, immediately after the words “. . . under the Transportation Code”,
the words “(or such other applicable Law referred to in clause (a))”.

 

(f)                                    For
purposes of this Annex E — Part 1, § 9.3.1 of the Lease is hereby
deemed to be amended by inserting, at the end thereof, a new paragraph reading
as follows:

 

“If, at the time of any
replacement of the Airframe or any Engine(s) as contemplated in this
§ 9, the Airframe was registered in a jurisdiction other than the United
States, then the requirements set forth above in this § 9.3.1 relating to
compliance with the requirements of the Transportation Code or the FAA shall be
deemed to refer to the comparable applicable Law of, and the Aviation Authority
of, such other jurisdiction.”

 

2.                                      [RESERVED]

 

[...***...]

 

4.                                      SUBSTITUTION
OF ENGINES

 

Notwithstanding
the limitations set forth in § 7.2 of the Lease with respect to transfers of
Engines, Lessee may, upon not less than 30 days prior written notice to Lessor
and Owner Participant, replace any Engine then leased under and pursuant to the
Lease with another engine meeting all of the requirements of § 9.2.2 of the
Lease; provided that (i) no such replacement shall be permitted unless,
based upon the typical operation and utilization of similar engines by Lessee
in its commercial airline business, such Replacement Engine can reasonably be
expected to be fully in compliance with § 5 and Annex B of the Lease upon the
expiration of the Term, (ii) no such replacement shall be permitted if and
for so long as there shall have occurred and be continuing any Special Default,
and (iii) any such replacement must be effected, if at all, in full
compliance with § 9.3 of the Lease.  Any
such engine 

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-9

 

meeting the foregoing requirements of this § 4 shall be deemed to
be a “Replacement Engine”.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-10

 

ANNEX E

 

PART 2

 

ADDITIONAL RIGHTS AND OBLIGATIONS

 

The terms defined
in Annex A to Lease Agreement N483HA, when capitalized as in Annex A, have
the same meanings when used in this Annex E — Part 2.  Annex A also contains rules of
usage that control construction in this Annex E.  Unless otherwise noted, section references
refer to sections in this Annex E — Part 2.

 

1.                                      [RESERVED]

 

2.                                      OTHER
MATTERS

 

2.1.                            Liens.

 

Clause (a) of
§ 6 of the Lease is hereby deemed to be amended by inserting, immediately
after the words “. . . the Operative Agreements”, the words “, or of any third
party pursuant to Annex B of the Participation Agreement”.

 

2.2.                            Defaults.

 

(a)                                  [...***...]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

E1-11Exhibit 10.46

 

*** CERTAIN CONFIDENTIAL
INFORMATION HAS BEEN OMITTED AND

FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE

COMMISSION PURSUANT TO RULE
24B-2 OF THE

SECURITIES EXCHANGE ACT OF
1934, AS AMENDED

 

 

LEASE AGREEMENT

(Aircraft No. 2)

 

 

PEGASUS AVIATION FINANCE COMPANY,

 

a Delaware Corporation,

Lessor

 

and

 

HAWAIIAN AIRLINES, INC.,

 

a Delaware Corporation,

Lessee

 

 

Dated as of

October 21, 2008

 

 

Relating to One (1) Airbus
Model A330-200 Aircraft

 

 

COUNTERPART NO.
      OF 5 SERIALLY NUMBERED, MANUALLY EXECUTED
COUNTERPARTS.  TO THE EXTENT THAT THIS
LEASE AGREEMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE IN
THE UNITED STATES OR ANY CORRESPONDING LAW IN ANY FOREIGN JURISDICTION, NO
SECURITY INTEREST IN THIS LEASE AGREEMENT MAY BE PERFECTED THROUGH THE
TRANSFER OR POSSESSION OF ANY COUNTERPART HERETO OTHER THAN COUNTERPART NO.
1.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1.

  	
  DEFINITIONS AND
  INTERPRETATION

  	
  1-1

  
	
  1.1

  	
  Definitions

  	
  1-1

  
	
  1.2

  	
  Interpretation

  	
  1-11

  
	
  ARTICLE
  2.

  	
  DELIVERY
  AND ACCEPTANCE UNDER LEASE

  	
  2-1

  
	
  2.1

  	
  Agreement to Lease

  	
  2-1

  
	
  2.2

  	
  Conditions
  Precedent

  	
  2-1

  
	
  2.3

  	
  Time
  of Delivery

  	
  2-4

  
	
  2.4

  	
  Place of Delivery

  	
  2-5

  
	
  2.5

  	
  Delivery
  Fuel

  	
  2-5

  
	
  2.6

  	
  Inspection;
  Demonstration Flight

  	
  2-5

  
	
  2.7

  	
  Specification
  Change Notices

  	
  2-6

  
	
  2.8

  	
  Manufacturer
  Specification Change Notices; Development Changes

  	
  2-6

  
	
  2.9

  	
  Buyer
  Furnished Equipment

  	
  2-7

  
	
  ARTICLE
  3.

  	
  TERM
  AND RENT

  	
  3-1

  
	
  3.1

  	
  Term

  	
  3-1

  
	
  3.2

  	
  Basic
  Rent

  	
  3-1

  
	
  3.3

  	
  Security
  Deposit

  	
  3-1

  
	
  3.4

  	
  Supplemental
  Rent

  	
  3-2

  
	
  3.5

  	
  Payments
  on Business Days

  	
  3-2

  
	
  3.6

  	
  Place
  of Payment

  	
  3-2

  
	
  3.7

  	
  Computation
  of Interest and Other Payments

  	
  3-3

  
	
  3.8

  	
  Prohibition
  Against Setoff, Counterclaim, etc.

  	
  3-3

  
	
  ARTICLE
  4.

  	
  DISCLAIMERS;
  WAIVERS; REPRESENTATIONS AND WARRANTIES

  	
  4-1

  
	
  4.1

  	
  Lessor
  Disclaimer and Exclusion of
  Representations and Warranties

  	
  4-1

  
	
  4.2

  	
  Waiver by Lessee

  	
  4-1

  
	
   

  	
   

  	
   

  

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

i

 

	
  4.3

  	
  Confirmation
  by Lessee

  	
  4-2

  
	
  4.4

  	
  Assignment
  of Warranties

  	
  4-2

  
	
  4.5

  	
  Lessee’s
  Representations and Warranties

  	
  4-3

  
	
  4.6

  	
  Lessor’s
  Representations and Warranties

  	
  4-4

  
	
  ARTICLE
  5.

  	
  POSSESSION
  AND USE

  	
  5-1

  
	
  5.1

  	
  Possession

  	
  5-1

  
	
  5.2

  	
  Lawful
  Operations; Use

  	
  5-1

  
	
  5.3

  	
  Maintenance

  	
  5-3

  
	
  5.4

  	
  Maintenance
  Payments

  	
  5-6

  
	
  5.5

  	
  Registration
  and Insignia

  	
  5-14

  
	
  5.6

  	
  Transfer
  of Engines Within Lessee’s Fleet

  	
  5-14

  
	
  ARTICLE
  6.

  	
  REPLACEMENT
  AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND ADDITIONS

  	
  6-1

  
	
  6.1

  	
  Replacement
  of Parts

  	
  6-1

  
	
  6.2

  	
  Pooling
  of Parts

  	
  6-3

  
	
  6.3

  	
  Alterations,
  Modifications and Additions

  	
  6-3

  
	
  ARTICLE
  7.

  	
  INSPECTION;
  FINANCIAL INFORMATION; RECORDS

  	
  7-1

  
	
  7.1

  	
  Information
  and Inspection

  	
  7-1

  
	
  7.2

  	
  Financial
  and Other Information

  	
  7-1

  
	
  7.3

  	
  Reports
  of Aircraft Use

  	
  7-2

  
	
  ARTICLE
  8.

  	
  INDEMNIFICATION
  BY LESSEE

  	
  8-1

  
	
  8.1

  	
  General
  Indemnity

  	
  8-1

  
	
  8.2

  	
  Withholding
  Tax Indemnity

  	
  8-1

  
	
  8.3

  	
  Value
  Added Taxes

  	
  8-2

  
	
  8.4

  	
  General
  Tax Indemnity

  	
  8-2

  
	
  8.5

  	
  After-Tax
  Nature of Indemnity

  	
  8-6

  
	
  8.6

  	
  Survival
  of Indemnities

  	
  8-6

  
	
  8.7

  	
  Tax
  Forms

  	
  8-6

  
	
  ARTICLE 9.

  	
  DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION

  	
  9-1

  
	
  9.1

  	
  Event
  of Loss with Respect to Aircraft

  	
  9-1

  
	
  9.2

  	
  Event
  of Loss with Respect to an Engine

  	
  9-1

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

ii

 

	
  9.3

  	
  Application
  of Payments from Governmental Entity in Respect of Event of Loss

  	
  9-5

  
	
  9.4

  	
  Application
  of Payments During Existence of Event or Event of Default

  	
  9-5

  
	
  ARTICLE
  10.

  	
  INSURANCE

  	
  10-1

  
	
  10.1

  	
  Liability
  and Property Damage Insurance

  	
  10-1

  
	
  10.2

  	
  Insurance
  Against Loss or Damage to Aircraft

  	
  10-1

  
	
  10.3

  	
  Requirements
  in Insurance Policies

  	
  10-2

  
	
  10.4

  	
  Uninsured
  Operations

  	
  10-4

  
	
  10.5

  	
  Application
  of Insurance Proceeds for Event of Loss

  	
  10-4

  
	
  10.6

  	
  Application
  of Insurance Proceeds for Other than Event of Loss

  	
  10-5

  
	
  10.7

  	
  Application
  in Default

  	
  10-5

  
	
  10.8

  	
  Reports,
  Certificates, etc.

  	
  10-5

  
	
  10.9

  	
  Insurance
  - General

  	
  10-6

  
	
  10.10

  	
  Insurance
  of Lessee’s Interest

  	
  10-6

  
	
  10.11

  	
  Insurance
  of Removed Engines

  	
  10-7

  
	
  10.12

  	
  Assignment
  of Rights by Lessor

  	
  10-7

  
	
  ARTICLE 11.

  	
  MORTGAGES, LIENS, ETC.

  	
  11-1

  
	
  ARTICLE 12.

  	
  RECORDATION
  AND FURTHER ASSURANCES

  	
  12-1

  
	
  12.1

  	
  Recordation

  	
  12-1

  
	
  12.2

  	
  Conventions

  	
  12-1

  
	
  12.3

  	
  Further Assurances

  	
  12-1

  
	
  ARTICLE
  13.

  	
  RETURN
  OF AIRCRAFT AND RECORDS

  	
  13-1

  
	
  13.1

  	
  Return

  	
  13-1

  
	
  13.2

  	
  Inspection;
  Demonstration Flight

  	
  13-1

  
	
  13.3

  	
  Flight
  Hours/Cycles/Time Requirements

  	
  13-2

  
	
  13.4

  	
  General
  Return Requirements

  	
  13-4

  
	
  13.5

  	
  Records

  	
  13-9

  
	
  13.6

  	
  Warranty
  Rights

  	
  13-11

  
	
  13.7

  	
  Navigation
  Charges, Landing Fees, etc.

  	
  13-11

  
	
  13.8

  	
  Technical
  Acceptance; Ferry Flight

  	
  13-12

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

iii

 

	
  13.9

  	
  Delay in Return

  	
  13-12

  
	
  13.10

  	
  Aid
  in Disposition

  	
  13-13

  
	
  13.11

  	
  Storage

  	
  13-14

  
	
  13.12

  	
  Discharge
  of International Interests

  	
  13-14

  
	
  ARTICLE
  14.

  	
  EVENTS
  OF DEFAULT

  	
  14-1

  
	
  14.1

  	
  Non-Payment

  	
  14-1

  
	
  14.2

  	
  Insurance

  	
  14-1

  
	
  14.3

  	
  Certain Breaches-Immediate Event of Default

  	
  14-1

  
	
  14.4

  	
  Other Breaches

  	
  14-1

  
	
  14.5

  	
  Representations

  	
  14-1

  
	
  14.6

  	
  Certain Insolvency/Bankruptcy Events

  	
  14-1

  
	
  14.7

  	
  Appointment of Receiver, etc.

  	
  14-1

  
	
  14.8

  	
  Involuntary Bankruptcy

  	
  14-2

  
	
  14.9

  	
  Adverse Judgment

  	
  14-2

  
	
  14.10

  	
  Suspension of Licenses, etc.

  	
  14-2

  
	
  14.11

  	
  Companion Leases

  	
  14-2

  
	
  ARTICLE
  15.

  	
  REMEDIES

  	
  15-1

  
	
  15.1

  	
  Remedies of Lessor

  	
  15-1

  
	
  15.2

  	
  Additional Damages

  	
  15-3

  
	
  15.3

  	
  Remedies Not Exclusive

  	
  15-3

  
	
  15.4

  	
  Rescission of Effect of Notice of Default

  	
  15-4

  
	
  ARTICLE
  16.

  	
  EXCUSABLE
  DELAY

  	
  16-1

  
	
  16.1

  	
  General

  	
  16-1

  
	
  16.2

  	
  Twelve
  (12) Months’ Excusable Delay

  	
  16-1

  
	
  16.3

  	
  Consequence
  of Termination

  	
  16-1

  
	
  16.4

  	
  Failure
  to Terminate

  	
  16-1

  
	
  16.5

  	
  Damage
  to or Destruction of Aircraft — Delivery Delay

  	
  16-1

  
	
  16.6

  	
  Termination
  Rights Exclusive

  	
  16-2

  
	
  16.7

  	
  Compensation

  	
  16-2

  
	
  ARTICLE
  17.

  	
  MISCELLANEOUS

  	
  17-1

  
	
  17.1

  	
  Construction
  and Applicable Law

  	
  17-1

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

iv

 

	
  17.2

  	
  Notices

  	
  17-1

  
	
  17.3

  	
  Lessor’s
  Right to Perform for Lessee

  	
  17-3

  
	
  17.4

  	
  Corporate
  Existence; Merger

  	
  17-3

  
	
  17.5

  	
  Integration

  	
  17-3

  
	
  17.6

  	
  Quiet
  Enjoyment

  	
  17-3

  
	
  17.7

  	
  Assignment

  	
  17-3

  
	
  17.8

  	
  Expenses

  	
  17-5

  
	
  17.9

  	
  Survival

  	
  17-5

  
	
  17.10

  	
  English
  Language

  	
  17-5

  
	
  17.11

  	
  Jurisdiction;
  Service of Process

  	
  17-5

  
	
  17.12

  	
  Lessor’s
  Payment Obligations

  	
  17-7

  
	
  17.13

  	
  Currency

  	
  17-7

  
	
  17.14

  	
  Counterparts

  	
  17-7

  
	
  17.15

  	
  Execution
  by Facsimile

  	
  17-7

  
	
  17.16

  	
  Confidentiality

  	
  17-7

  
	
  17.17

  	
  Servicing
  Agreement

  	
  17-8

  
	
  17.18

  	
  Federal
  Bankruptcy Code

  	
  17-9

  
	
  17.19

  	
  Product
  Services

  	
  17-9

  
	
  17.20

  	
  Additional
  Covenant

  	
  17-9

  
	
  ARTICLE
  18.

  	
  CRAF
  PROGRAM

  	
  18-1

  
	
  18.1

  	
  Commitment
  to CRAF

  	
  18-1

  
	
  18.2

  	
  Indemnification
  by United States Government

  	
  18-1

  
	
  18.3

  	
  No
  Geographical Limit

  	
  18-1

  
	
  18.4

  	
  Notice
  of Default

  	
  18-2

  
	
  18.5

  	
  Receipt
  of Payments

  	
  18-2

  
	
  Schedule “1”

  	
  S-1

  
	
  Exhibit A LEASE
  SUPPLEMENT

  	
  A-1

  
	
  Exhibit B TRAINING
  AND OTHER SUPPORT SERVICES

  	
  B-1

  

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

v

 

LEASE AGREEMENT

(Aircraft No. 2)

 

This Lease Agreement,
dated as of October 21, 2008, is entered into by and between:

 

1.     Pegasus
Aviation Finance Company, a Delaware corporation, having a mailing
address at c/o AWAS Aviation Services, Inc., One West Street, Suite 100-5,
New York, NY 10004 (herein called “Lessor”), and

 

2.     Hawaiian Airlines, Inc., a Delaware
corporation, having its principal place of business at 3375 Koapaka Street, Suite G350,
Honolulu, Hawaii 96819 (herein called “Lessee”).

 

RECITALS

 

Lessee desires to lease from Lessor and Lessor is
willing to lease to Lessee the Aircraft described herein upon and subject to
the terms and conditions of this Lease. In consideration of the mutual promises
herein, Lessor and Lessee agree as follows:

 

IT IS AGREED AS
FOLLOWS:

 

ARTICLE
1.          DEFINITIONS
AND INTERPRETATION.

 

1.1          Definitions.

 

In this Lease, the following terms shall have the
following meanings and shall be equally applicable to both the singular and the
plural forms of the terms defined herein:

 

“Adjustment
Factor” has the meaning assigned to such term in paragraph 1 of
Schedule “1” hereto.

 

“Aeronautics
Authority” or “FAA” means,
as the context may require or permit, the United States Federal Aviation
Administration, the Department of Transportation, the Administrator of the
Federal Aviation Administration, and any person, governmental department,
bureau, commission or agency succeeding to the functions of any of the
foregoing.

 

“Affiliate”
means, with respect to any person, a person (i) that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under a common control with, such person, (ii) without limiting the
effect of clause (i), above, that beneficially owns, controls or holds with
power to vote 10% or more (by number of votes) of any class of the voting stock
(or in the case of a person that is not a corporation, 10% or more of the
equity or beneficial interest) of such person, or (iii) without limiting
the effect of clause (i) above, 10% or more (by number of 

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

1-1

 

votes) of whose voting stock (or in the case of a
person that is not a corporation, 10% or more of the equity or beneficial
interest) is beneficially owned, controlled or held by such person or a
subsidiary of such person. The term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract or otherwise. The term “person” means any
individual, partnership, corporation, limited liability company, trust,
association, business organization, joint venture, government (or department or
agency thereof), or any other entity.

 

“Airbus
Aircraft Specification”
means the Airbus A330-200 Standard Specification, Reference G 000 02000, Issue
4.3, dated July 13, 2006, as modified by Manufacturer to incorporate
developmental changes or by mutual written agreement of Lessor and Lessee from
time to time.

 

“Aircraft”
means the Airframe to be leased hereunder, together with each Engine initially
installed on the Airframe when delivered and leased hereunder (or any engine
substituted for any such Engine pursuant to the terms of this Lease), whether
or not any of such initial or substituted Engines may from time to time no
longer be installed on the Airframe or on any other aircraft.

 

“Aircraft
Documentation” means the
log books, manuals, technical data, and all inspection, modification, and
overhaul records and other service, repair, maintenance and technical records
that are required by the Aeronautics Authority, this Lease, or the Maintenance Program to be maintained with respect to
the Aircraft, Airframe, Engines or any Part, or that are of a type required to
be delivered by Lessee upon return of the Aircraft, Airframe, or Engines under Article 13
of this Lease; and such term shall include all additions, renewals, revisions,
and replacements of any such materials from time to time made or required to be
made, in accordance with this Lease, the Maintenance Program or such Aeronautics
Authority regulations.

 

“Airframe”
means:

 

(i)            the
factory new Airbus Model A330-200 aircraft, excluding any Engines or other
engines that may be installed on such aircraft from time to time, to be
manufactured and sold by Manufacturer to Lessor pursuant to the Purchase
Agreement and leased by Lessor to Lessee hereunder; and

 

(ii)           any
and all Parts, so long as the same shall be incorporated in or installed on or
attached to the Airframe or so long as title thereto shall remain vested in
Lessor in accordance with the terms of Article 6 hereof after removal from
the Airframe.

 

“Approved
Maintenance Performer” means any maintenance performer chosen by
Lessee and approved by Lessor, which approval shall not be unreasonably
withheld, and holding all necessary approvals of the Aeronautics Authority
(FAR145) for the performance of the maintenance tasks to be performed in
respect of the Airframe, Engines and Parts, including the APU or Landing Gear.

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

1-2

 

“APU”
means the auxiliary power unit installed in the Airframe on the Delivery Date
(or such auxiliary power unit as may be substituted therefor after the Delivery
Date with the prior consent of Lessor and in accordance with the requirements
of this Lease).

 

“APU Hour”
means, in respect of the APU or other auxiliary power unit, each hour or part
thereof which elapses from the time the APU or such other auxiliary power unit
is turned on to the time the APU or such other auxiliary power unit is turned
off.

 

“Assignment of
Warranties” means
assignment of warranties agreements, in form and substance reasonably
satisfactory to Lessee and Lessor, to be executed by Lessor in favor of Lessee,
together with the consent thereto of the Manufacturer in respect of the
Airframe warranties and the consent of the Engine manufacturer in respect of
the Engines warranties, pursuant to which Lessor will assign to Lessee the
right to enforce the warranties in respect of the Aircraft.

 

“Basic Rent”
for the Aircraft means the basic rent payable for the Aircraft pursuant to Article 3.2
hereof (as supplemented by Schedule “1” hereto).

 

“BFE”
means the items of equipment that are described in the Airbus Aircraft Standard
Specification as being furnished for the Aircraft by Lessor, and such other
items of equipment as Lessor and Lessee may agree to incorporate into the
Aircraft pursuant to Article 2.9 hereof.

 

“BFE Budgeted Amount”
has the meaning assigned to such term in paragraph 3 of Schedule “1” hereto.

 

“Business Day”
means any day other than a Saturday, Sunday or other day on which commercial
banking institutions in the city of Honolulu, Hawaii, or New York, New York (or
such other city as may be designated by Lessor from time to time pursuant to Article 3.6
hereof) are authorized by applicable Law to be closed.

 

“Cape Town
Convention” means the Convention on International Interests in
Mobile Equipment and the Protocol to the Convention on International Interests
in Mobile Equipment on Matters Specific to Aircraft Equipment, both signed in
Cape Town, South Africa, on November 16, 2001, together with any
protocols, regulations, rules, orders, agreements, instruments, amendments,
supplements, revisions or otherwise that have or will be subsequently made in
connection with the Cape Town Convention by the “Supervisory Authority” (as
defined in the Cape Town Convention), the “International Registry” or “Registrar”
(as defined in the Cape Town Convention) or any other appropriate “registry
authority” (as defined in the Cape Town Convention) or other international or
national body or authority. For the avoidance of doubt, references to the Cape
Town Convention are to be deemed references to the English language version of
the Cape Town Convention.

 

“Certificated Air Carrier”
means an air carrier holding an air carrier operating certificate issued by the
United States Secretary of Transportation pursuant to chapter 447 of title 49
of the United States Code Annotated, or under similar provisions of any statute
enacted in lieu thereof.

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

1-3

 

“Citizen of the United
States” has the meaning set forth in Section 40102(a)(15)(c) of
the Title 49 of the United States Code.

 

“Companion Lease”
means:  (i) each of the four Lease
Agreements dated as of September 20, 2001, between AWMS I, a Delaware
statutory trust (an Affiliate of Lessor), and Lessee pursuant to each of which
AWMS I has leased to Lessee one Boeing Model 767-300AER aircraft (as modified,
amended or supplemented from time to time), (ii) the Lease Agreement dated
the date of this Lease, between Lessor or an Affiliate of Lessor and Lessee
pursuant to which Lessor or such Affiliate has agreed to lease to Lessee
another Airbus Model A330-200 aircraft (as modified, amended or supplemented
from time to time), and (iii) each lease agreement or sublease agreement
that may hereafter be entered into between Lessee, as lessee, and Lessor or any
Affiliate of Lessor, as lessor, in respect of any aircraft (as modified,
amended or supplemented from time to time).

 

“Consent to Security
Assignment” means the acknowledgement and consent to the
Security Assignment to be executed by Lessee in the form provided to Lessee by
Lessor and Mortgagee.

 

“Contractual
Definition Freeze Date” means the date by which, pursuant to the
Purchase Agreement, the contractual definition of the Aircraft must be
finalized and all SCN’s must be executed by Lessor in conjunction with Lessee
pursuant to Article 2.7 to enable Manufacturer to incorporate the SCN’s
into the manufacturing of the Aircraft and to be able to deliver the Aircraft
during the contracted delivery month under the Purchase Agreement.

 

“Country of
Registration” means the United States of America.

 

“Cycle”
means:

 

(i)            with
respect to the Airframe, one take-off and landing of the Airframe,

 

(ii)           with
respect to an Engine or other engine,  the operation of
such Engine or other engine from the time the Airframe or other airframe on which such Engine or other
engine is installed leaves the ground until it touches the
ground at the end of a flight
(but, an aborted take-off, an aborted landing or a touch and go landing shall
also be considered as a Cycle);

 

(iii)          with respect to any Part or part, one take-off and landing of the Aircraft or
other aircraft on which such Part or part is installed.

 

“Delivery Date”
means the date of the Lease Supplement for the Aircraft, which date shall be
the same date the Aircraft is delivered to, and accepted by, Lessee hereunder.

 

“Dollars”
or “$” means lawful
currency of the United States of America.

 

“EASA”
means the European Aviation Safety Agency, created pursuant to the European
Union and Council Regulation No. 1592/2002 (as the same may be amended,
modified, superseded or

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

1-4

 

re-enacted from time to time), or any successor
thereof, and any other person or Governmental Entity succeeding to any of the
functions thereof.

 

“EMP” or “Engine Management Program” means
the engine management program proposed by the Engine manufacturer and agreed by
Lessee (which, among other things, specifies the Engine configuration, Lessee’s
specific instructions for the incorporation of airworthiness directives, alert
service bulletins and other recommended service bulletins and the shop
management requirements for the repair of Lessee’s engines) and included in the
Maintenance Program which is approved by the Aeronautics Authority, so long as
the same is reasonably acceptable to Lessor (which acceptance will not be
unreasonably withheld or delayed), and as may be amended from time to time with
the consent of Lessor (which consent will not be unreasonably withheld or
delayed) following proposals by the Engine manufacturer and agreed and approved
by Lessee and the Aeronautics Authority.

 

“Engine”
means:

 

(i)            each
of the two Rolls Royce Trent 772B engines, rated at 71,100 lbs. nominal thrust,
specified by manufacturer’s serial numbers in the Lease Supplement entered into
on the Delivery Date (or an engine which may from time to time be substituted
for such an Engine pursuant to Article 9.2), whether or not from time to
time installed on the Airframe or installed on any other aircraft, and

 

(ii)           any
and all Parts, so long as the same shall be incorporated in or installed on or
attached to such Engine (or engine) or so long as title thereto shall remain
vested in Lessor in accordance with the terms of Article 6 hereof after
removal from such Engine (or engine).

 

“Equipment”
means, as the context may require, the Aircraft, Airframe and Engines then
leased hereunder. An “Item of Equipment”
means, as the context may require, the Aircraft, Airframe or any Engine then
leased hereunder.

 

“Eurocontrol”
means the European Organization for the Safety of Air Navigation established by
the Convention related to the Co-operation for the Safety of Air Navigation
(Eurocontrol) signed on 13 December 1960, as amended by the protocol
thereto signed on 12 February 1981.

 

“Event”
means an event or occurrence which, with the passing of time and/or the giving
of notice, would constitute an Event of Default.

 

“Event of Default”
means any of the events referred to in Article 14 hereof.

 

“Event of Loss”
with respect to any Item of Equipment means any of the following events with
respect to such Item of Equipment:

 

(i)            loss
of such Item of Equipment or the use thereof due to hijacking, theft or
disappearance for a period in excess of ninety (90) days, or destruction,
damage

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

1-5

 

beyond economic repair or rendition of such Item of
Equipment permanently unfit for normal use for any reason whatsoever;

 

(ii)           any
loss of or damage to such Item of Equipment which results in an insurance
settlement with respect thereto on the basis of a total loss, or a constructive
or compromised total loss;

 

(iii)          the condemnation, confiscation, deprivation
or seizure of, or requisition of title to or use of, such Item of Equipment,
other than a requisition for use of such Item of Equipment by any Governmental
Entity of the Country of Registration of the Aircraft for a period of less than
ninety (90) days; or

 

(iv)          as
a result of any rule, regulation, order, or other action by the Aeronautics
Authority or other governmental body having jurisdiction, the use of such Item
of Equipment in the normal course of air transportation of persons shall have
been prohibited for a period of six consecutive months.

 

An Event of Loss to the Aircraft shall be deemed to
have occurred if an Event of Loss occurs with respect to the Airframe of the
Aircraft.

 

“Excusable Delay”
shall have the meaning set forth in Article 16 hereof.

 

“FAR”
means the United States Federal Aviation Regulations issued by the FAA pursuant
to the Federal Aviation Act of 1994, embodied in Title 14 of the United States
Code of Federal Regulations, as amended or supplemented from time to time.

 

“Flight Hour”
means:

 

(i)            with
respect to the Airframe, each hour or part thereof which elapses from the time
the wheels of the Airframe leave the ground on takeoff to the time when the
wheels of the Airframe touch the ground on landing; and

 

(ii)           with
respect to an Engine or other engine or any Part or part, including the
APU, each hour or part thereof which elapses from the time the wheels of the
airframe, whether or not the Airframe leased hereunder, on which such Engine or
other engine or Part or part is installed, leave the ground on takeoff to
the time when the wheels of such airframe touch the ground on landing.

 

“GAAP”
means generally accepted accounting principles in the United States of America
applied on a consistent basis.

 

“Governmental
Entity” means:

 

(i)            any
national, federal, state or local government, or any board, commission, bureau,
department, division, instrumentality, court, agency, regulatory authority,
taxing authority or political subdivision thereof; and

 

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(ii)           any
association, organization or institution of which any entity referred to in
clause (i) is a member or to whose jurisdiction any such entity is subject
or in whose activities any such entity is a participant.

 

“Holdings”
means Hawaiian Holdings, Inc., a Delaware corporation and the parent of
Lessee.

 

“Incentive Rate”
means a rate equal to two (2) percentage points above the prime or base
rate of interest charged by Citibank, N.A., in New York from time to time as
its prime or base commercial lending rate, but, if prohibited by applicable
Law, the maximum contract rate permitted by applicable Law.

 

“International
Interest” has the meaning assigned in the Cape Town Convention.

 

“International
Registry” means the registration operations established pursuant
to the Cape Town Convention by Aviareto in Dublin, Ireland.

 

“Landing Gear”
means the landing gear (as per the Manufacturer’s definition, i.e.,
excluding actuating mechanisms, etc.) installed on the Airframe on the Delivery
Date (or such landing gear as may be substituted therefor after the Delivery
Date with the prior consent of Lessor and in accordance with the requirements
of this Lease).

 

“Law”
means any:

 

(i)            statute,
law, decree, constitution, regulation, rule, order or directive of any
Governmental Entity;

 

(ii)           treaty,
pact, compact or other agreement to which any Governmental Entity is a
signatory or party; and

 

(iii)          judicial or administrative interpretation or
application of any of the foregoing, as any of the foregoing may be revised,
amended, substituted or re-enacted.

 

“Lease Agreement,”
“this Lease,” “this Agreement,” “herein,” “hereof,” “hereunder”
or other like words means this Lease Agreement as the same may hereafter from
time to time be supplemented, amended, waived or modified pursuant to the
applicable provisions hereof, including, without limitation, supplementation
hereof by one or more Lease Supplements.

 

“Lease Supplement”
means each Lease Supplement, substantially in the form of Exhibit ”A”
hereto, to be entered into between Lessor and Lessee for the purpose of leasing
an Item of Equipment under and pursuant to the terms of this Lease Agreement.

 

“Lender”
means each bank, financial institution or other entity (including any facility agent or other agent or representative
acting on behalf of such entities) that has entered into the Loan Agreement
with Lessor (and any Affiliate(s) of
Lessor) for the purpose of
financing the acquisition of the Aircraft by Lessor, and their respective successors and
assigns.

 

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“Lessor Lien”
means:

 

(i)            the
rights of Lessor, Lender or any other person or entity having an ownership,
mortgage or security interest in the Aircraft or this Lease which has been
granted or conveyed by Lessor, including the interests created pursuant to the
Security Documents; and

 

(ii)           Liens
which result from claims against Lessor or Lender that are not to be paid or
indemnified against by Lessee under this Lease.

 

“Lien”
means any mortgage, pledge, lien, charge, encumbrance, lease, security
interest, statutory detention right or claim (including any claim for
nonpayment of fees or charges by Eurocontrol, any airport authority or traffic
control authority or any claim for airport or landing fees or related charges).

 

“Loan Agreement”
means the loan agreement, credit
agreement or similar agreement to be entered into between each Lender, Lessor and certain other entities more particularly
identified therein, pursuant to which each Lender will make a loan to Lessor to finance the purchase of the Aircraft by Lessor, as such loan agreement may be modified,
amended or supplemented from time to time.

 

“Maintenance
Payments” means the maintenance payments payable by Lessee
pursuant to Article 5.4 (as supplemented by Schedule “1” hereto).

 

“Maintenance
Program,” as of any date of determination, means Lessee’s
program of overhaul and maintenance for the Equipment, approved by the
Aeronautics Authority and which:

 

(i)            at
all times complies in all material respects with the then latest revision of
the MPD;

 

(ii)           at
all times complies in all material respects with the Engine manufacturer’s then
latest recommendations for on-wing maintenance of the Engines; and

 

(iii)          is reasonably satisfactory to Lessor.

 

“Manufacturer”
means Airbus S.A.S., a societe par actions simplifiee, created and existing
under French Law.

 

“Mortgage”
means the aircraft mortgage agreement, indenture or similar agreement to be
entered into between Lessor, Mortgagee and certain other entities more
particularly described therein, pursuant to which Lessor will mortgage its
right, title and interest in and to the Aircraft and certain other property (as
more particularly described in the Mortgage) as security for, among other
things, the obligations of Lessor under the Loan Agreement, as the same may be
amended, modified or supplemented from time to time.

 

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“Mortgagee”
means the entity identified in the Lease Supplement to be entered into on the
Delivery Date as the mortgagee under the Mortgage, and its successors and
assigns.

 

“MPD”
means the Manufacturer’s Maintenance Planning Document for Airbus A330
aircraft, as the same may have been revised, amended, supplemented or updated
from time to time.

 

“Participants”
means Servicer, each Sub-Servicer, AWAS Aviation Trading Limited, AWAS Aviation
Capital Limited, and Mortgagee (and any other person or entity hereafter
acquiring an ownership or mortgage interest in the Aircraft, whether as owner
trustee, indenture trustee, mortgagee, owner participant, loan participant or
otherwise).

 

“Parts”
means all appliances, components, parts, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature, including BFE,
the APU and Landing Gear (but excluding whole Engines or engines), so long as
the same shall be furnished with, incorporated in, installed on, or attached to
the Aircraft, Airframe or any Engine or so long as title thereto shall remain
vested in Lessor in accordance with the terms of Article 6 hereof after
removal from the Aircraft, Airframe or such Engine.

 

“Performance
Restoration” of an Engine means a
shop visit for such Engine performed by an Approved Maintenance Performer that
involves a full refurbishment workscope (minimum of level 3 in accordance with
the EMP) in respect of Module 41 (HPC, HPT and Combustor), and Module 51 (IPT)
of the Engine, to the extent required by the Rolls Royce Engine Manual and the
EMP, and which results in performance restoration of such Engine and the
zero-timing of  Module 41 (HPC, HPT and
Combustor) and Module 51 (IPT) for soft-life purposes in accordance with the
EMP.

 

“PMA Parts”
shall mean Parts manufactured in accordance with a Parts Manufacturing Approval
Supplement issued by the FAA.

 

“Prevailing Swap Rate,” for purposes of adjusting the Basic Rent payment amount
pursuant to Article 3.2.2, means the eight (8) year Dollar swap ask
rate as quoted on Reuters on the third (3rd) Business Day preceding the Delivery
Date.

 

“Purchase
Agreement” means the A330-200 Purchase Agreement between
Manufacturer and Lessor (by assignment in respect of the Aircraft), dated as of
December 21, 2006, including the Aircraft General Terms Agreement between
Manufacturer and Lessor (by assignment in respect of the Aircraft), also dated
as of December 21, 2006, and the Airbus Aircraft Specification, to the
extent the same relates to the Aircraft, as such Purchase Agreement has
heretofore been, and may hereafter from time to time be, assigned, novated,
supplemented, amended, waived or modified.

 

“Rent”
means Basic Rent and Supplemental Rent.

 

“RFC” shall
have the meaning set forth in Article 2.7 hereof.

 

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“Scheduled
Aircraft Delivery” for the Aircraft means the month set forth in
Article 2.3.1 in which Lessor and Lessee anticipate that the Aircraft will
be ready to be delivered to Lessee in accordance with the requirements of this
Lease.

 

“SCN”
means a specification change notice, including the specification change notices
incorporated in the Aircraft as contemplated by Article 2.7 and 2.8, which
amend the Airbus Aircraft
Specification.

 

“Security
Assignment” means any security assignment to be entered into by
Lessor in favor of Mortgagee or a Lender pursuant to which Lessor will assign
its rights and interests under this Lease as collateral security for, among
other things, the obligations of Lessor under the Loan Agreement.

 

“Security Document”
means the Mortgage, the Security Assignment and any other document or agreement
creating a Lien over the Aircraft or this Lease in favor of Mortgagee or any
Lender identified as such from time to time by Lessor to Lessee.

 

“Security Deposit”
means the cash security deposited with Lessor pursuant to Article 3.3 (as
supplemented by Schedule “1”).

 

“Servicer”
means AWAS (Ireland) Limited, and its successors, transferees and assigns.

 

“Stipulated Loss
Value” for an Item of Equipment, as of any date of computation,
means the applicable sum specified in paragraph 2 of Schedule “1” hereto as the
Stipulated Loss Value for such Item of Equipment as of such date of
computation.

 

“Sub-Servicer”
means any of AWAS Aviation Services, Inc., a New York corporation, and AWAS
(Singapore) Pte. Ltd., a Singapore company, and each of their respective
successors, transferees and assigns.

 

“Supplemental
Rent” means any and all amounts, liabilities and obligations
which Lessee assumes or agrees hereunder to pay to Lessor or others, including
Maintenance Payments and Stipulated Loss Value payments, but excluding Basic
Rent.

 

“Term,”
in respect of an Item of Equipment, means the lease term for which such Item of
Equipment is leased hereunder pursuant to Article 3.1 hereof, including
the extended Term (but only on and after the date Lessee notifies Lessor of its
election to exercise such option to extend).

 

“TotalCare Agreement” means an
agreement with respect to the Engines between Lessee and the Engine
manufacturer (or a member of the Engine manufacturer’s affiliated group of
companies that customarily enters into such agreements) providing, among other
services, for the repair and maintenance of the Engines, including the
performance of Performance Restoration shop visits for the Engines. For the avoidance of doubt, the TotalCare
Agreement does not include the replacement of life-limited Parts of the
Engines, in the absence of additional charges.

 

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1.2          Interpretation.

 

In this Lease Agreement, headings and the table of
contents are inserted for convenience of reference only and have no legal
effect and shall be ignored in the interpretation of this Lease. Unless the
context otherwise requires:

 

(i)            words
denoting the singular shall include the plural and vice versa;

 

(ii)           words
denoting a person include individuals, corporations, partnerships, firms, joint
ventures, trusts, Governmental Entities and other entities and bodies, whether
incorporated or unincorporated, and whether having distinct legal personality
or not, and vice versa;

 

(iii)          words denoting any gender include all
genders;

 

(iv)          references
to any document or agreement are deemed to include references to any such
document or agreement as amended, novated, supplemented, varied or replaced
from time to time;

 

(v)           references
to any party to this Lease Agreement or any other document or agreement include
its successors and permitted assigns;

 

(vi)          reference
to Articles are references to Articles of this Lease Agreement; and

 

(vii)         the term “including”, when used in this Lease
Agreement, means “including without limitation” and “including but not limited
to”.

 

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ARTICLE
2.          DELIVERY
AND ACCEPTANCE UNDER LEASE.

 

2.1          Agreement to Lease. Lessor hereby
agrees to lease to Lessee hereunder, and Lessee hereby agrees to lease from
Lessor hereunder, the Aircraft upon delivery thereof by Manufacturer under the
Purchase Agreement, as further evidenced by the execution by Lessor and Lessee
of a Lease Supplement on the Delivery Date.

 

2.2          Conditions Precedent. Lessor’s
obligation to lease the Aircraft to Lessee hereunder shall be subject to the
following conditions precedent being complied with to Lessor’s satisfaction or
being waived by Lessor in its discretion:

 

2.2.1       Pre-Delivery. On or prior to the date specified below,
Lessor shall have received:

 

(i)            within
thirty (30) days following the date this Lease is signed by Lessor and Lessee,
and in any event prior to the date the Aircraft is ready for delivery to Lessee
hereunder, (1) a copy of the constitutional documents of Lessee, and (2) a
copy of a resolution of the Board of Directors of Lessee, certified by the
appropriate officer(s) of Lessee, duly authorizing or ratifying the lease
of the Aircraft hereunder and the execution, delivery and performance of this
Lease, the Lease Supplement and all other documents and agreements that are to
be executed and delivered by Lessee pursuant hereto;

 

(ii)           on
the date this Lease is signed by Lessor and Lessee, the second portion of the
Security Deposit required as of such date pursuant to the first sentence of
paragraph 4 of Schedule “1”; and no later than February 1, 2010 (or such
later date as may be determined under the circumstances contemplated in
paragraph 4 of Schedule “1”), the third portion of the Security Deposit
required as of such date pursuant to the second sentence of paragraph 4 of
Schedule “1”; and

 

(iii)          at least three (3) Business Days prior
to the Scheduled Aircraft Delivery date, a copy of the Maintenance Program for
the Aircraft approved by the Aeronautics Authority, to enable Lessor to verify
to its satisfaction that the Maintenance Program fully complies with the MPD.

 

2.2.2       Delivery. The following additional conditions shall be
complied with to Lessor’s satisfaction (or be waived by Lessor) at or prior to
the time the Aircraft is ready for delivery from Lessor to Lessee hereunder or
on such earlier date as may be applicable to such condition:

 

(i)            Lessor shall have received the following:

 

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(A)          the
Lease Supplement for the Aircraft, duly authorized and executed by Lessee and
dated the Delivery Date for the Aircraft;

 

(B)           the
first installment of Basic Rent for the Aircraft required under Article 3.2;

 

(C)           payment
of any remaining portion of the Security Deposit required pursuant to the
second paragraph of paragraph 4 of Schedule “1”;

 

(D)          at
least three (3) Business Days prior to the Delivery Date, a certificate
and a letter of undertaking signed by independent aircraft insurance brokers as
to the due compliance with the insurance provisions of Article 10 hereof;

 

(E)           a
favorable opinion of Lessee’s internal and external counsel, addressed to
Lessor and Mortgagee and dated the Delivery Date for the Aircraft, concerning
the matters set forth in Article 4.5.1 through 4.5.7, and as to such other
matters as Lessor shall specify;

 

(F)           at
Lessee’s expense, a favorable opinion of FAA counsel satisfactory to Lessor
concerning the proper registration of the Aircraft with the FAA and (provided
Lessor and Mortgagee have taken all action required to be taken by them in
connection with the financing by Lessor of the Aircraft) the recordation of
Lessor’s and Mortgagee’s interests in the Aircraft and in this Lease with the
FAA and at the International Registry;

 

(G)           evidence
satisfactory to Lessor that Lessee has duly obtained any required import
license to import the Aircraft into the Country of Registration, and has paid
all import duties, if any, resulting from the transactions contemplated by this
Lease;

 

(H)          a
copy of Lessee’s Air Transport License and Lessee’s Operator’s Certificate
listing the Aircraft thereon, issued by the Aeronautics Authority;

 

(I)            the
Consent to Security Assignment, duly executed by Lessee, acknowledging the
notice of the assignment of this Lease to be provided to Lessee by Lessor and
Mortgagee (which notice of assignment shall contain a covenant of quiet
enjoyment from Mortgagee to the effect that if, and as long as, Lessee performs
and observes each and every covenant and agreement to be performed or observed
by it hereunder and no Event of Default shall have occurred and be continuing,
Lessee shall quietly enjoy the Aircraft

 

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without hindrance or interference by Mortgagee or by
any other person lawfully claiming through Mortgagee); and

 

(J)            such
other documents as Lessor may reasonably request.

 

(ii)           During
the period commencing June 30, 2008, through the Delivery Date for the
Aircraft, the following statements shall be true and Lessor shall have received
a certificate, signed by a duly authorized officer of Lessee, dated the
Delivery Date, stating that:

 

(A)          the
representations and warranties contained in Article 4.5 hereof are true
and accurate throughout such period as though made on and as of each date in
such period (except to the extent that such representations and warranties
relate solely to an earlier date);

 

(B)           no
event has occurred and is continuing, or would result from the lease of the
Aircraft, which constitutes an Event or an Event of Default; and

 

(C)           as
of the Delivery Date, all necessary approvals, authorizations, consents,
licenses, certificates and orders of the Aeronautics Authority and any other
Governmental Entity having jurisdiction with respect to the ownership, use or
operation of the Aircraft or the transactions contemplated by this Lease have
been obtained, and such approvals, authorizations, consents, licenses,
certificates and orders are in full force and effect and constitute sufficient
authorization therefor.

 

(iii)          Lessor shall be satisfied, in Lessor’s
reasonable opinion, that no material adverse change has occurred in Lessee’s
financial condition or operations at any time during the period December 31,
2007, through the date the Aircraft is ready for delivery hereunder.

 

If any of the
conditions contained in Article 2.2.1 or 2.2.2 have not been fulfilled,
observed or complied with, other than as a result of Lessor’s failure to
perform its obligations hereunder, the same shall constitute an Event of
Default under this Lease.

 

2.2.3       Conditions of Lessee’s Performance. Lessee’s
obligation to lease the Aircraft from Lessor hereunder shall be subject to the
following conditions precedent being complied with to Lessee’s satisfaction or
being waived by Lessee in its discretion:

 

(i)            Subject
to compliance by Lessee with the conditions precedent specified in this Article 2,
Lessee shall have received the
following:

 

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(A)          guaranty agreement, duly executed in favor of
Lessee by AWAS Aviation Trading Limited, guaranteeing performance of Lessor’s
obligations hereunder;

 

(B)           executed copies of the Assignment of
Warranties in respect of the Airframe and the Engines, together with the
consents of the Manufacturer and the manufacturer of the Engines in respect
thereof;

 

(C)           a certificate from Lessor confirming that the
representations and warranties contained in Article 4.6 hereof are true
and accurate on and as of such date as though made on and as such date (except
to the extent that such representations and warranties relate solely to an
earlier date);

 

(D)          a copy of this Lease Agreement and the Lease
Supplement, each duly executed
by Lessor;

 

(E)           a receipt for the Security Deposit; and

 

(F)           the
Aircraft shall be painted in Lessee’s livery and shall be in compliance with
the Airbus Aircraft Specification.

 

As promptly as
possible following the Delivery Date (but in any event prior to the first
payment required to be made by Lessee following the Delivery Date), Lessor
shall provide (or Lessor (or Lessor’s assignees or transferees, other than an
assignee for security purposes) shall ensure that any entity or person that
acquires a direct or beneficial interest in this Lease by assignment, sale,
novation or transfer pursuant to Article 17.7 shall provide) to Lessee a
true, complete and accurate Form W-8BEN, W-8ECI, W-9, or similar form,
duly executed by the person(s) treated as the recipient(s), for U.S. tax
purposes, of the payments made by Lessee under this Lease.

 

2.3          Time of Delivery.

 

2.3.1       Scheduled Aircraft Delivery. Subject to the provisions of Article 16,
and the satisfaction (or waiver) of the conditions set
forth in Article 2 hereof,
the Aircraft shall be delivered to Lessee, and Lessee shall accept delivery of
the Aircraft hereunder, upon tender of delivery of the Aircraft by Manufacturer
under the Purchase Agreement and conformity of the Airbus Aircraft
Specification with such SCN’s as shall be agreed between Lessor and Lessee,
currently scheduled to occur during the month of April, 2011. Lessor shall give
Lessee at least seven (7) days’ advance notice of the date on which the
Aircraft is expected to be delivered to Lessee hereunder, and shall promptly
advise Lessee if such expected Delivery Date is required to be delayed (and, if
a delay is required, Lessor shall advise Lessee of the revised expected
Delivery Date and shall keep Lessee fully advised of any developments in
respect thereof).

 

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2.3.2       Delay or Failure in Delivery. Subject to Article 16
hereof, Lessor shall not be liable
for any loss or expense, including loss of profit, or other damage suffered by
Lessee based on or resulting from any delay or failure in delivery of the
Aircraft to Lessee, unless such delay or failure is the direct result of the
willful misconduct or gross negligence of Lessor. In no event will Lessor be liable for any delay or failure in delivery
which is caused by a breach or delay on the part of the Manufacturer under the
Purchase Agreement.

 

2.3.3       Lessee Failure to Perform. If the Aircraft is tendered for delivery to
Lessee in compliance with the requirements of the Purchase Agreement and this
Lease but delivery of the Aircraft does not occur due to Lessee’s fault or
responsibility, without limiting Lessor’s rights to cancel
or terminate this Lease and to
recover damages as the result of Lessee’s failure to take delivery of the
Aircraft, Lessee shall promptly reimburse Lessor for all reasonable costs and
expenses incurred by Lessor as a result of such delay, including but not
limited to reasonable amounts for transportation, storage, insurance, taxes,
preservation or protection of the Aircraft, legal expenses attributable to the
delay, and costs incurred by Lessor in connection with financing of the
Aircraft to the extent attributable to the delay, and any interest on payments
payable or that would have been payable in respect of the Aircraft to
Manufacturer, and Lessee shall also be obligated to pay Lessor, on demand, an
amount equal to the Basic Rent that would have been payable in respect of the
Aircraft hereunder if Lessee had taken delivery of the Aircraft on such
expected Delivery Date, prorated on a daily basis for each day from and
including such expected Delivery Date to the earlier of the date the Aircraft
is delivered to Lessee hereunder or the date this Lease is terminated or
canceled by Lessor as a result of Lessee’s failure to take delivery of the
Aircraft in accordance with the terms and conditions of this Lease. For the
avoidance of doubt, Lessor shall use commercially reasonable efforts to
mitigate such damages.

 

2.4          Place of Delivery.
The Aircraft shall be delivered to Lessee hereunder at the Manufacturer’s
delivery location in Toulouse, France, or, at Lessee’s expense, at such
alternate site as may be mutually agreed upon in writing by Lessor and Lessee.

 

2.5          Delivery Fuel. Promptly after the
Delivery Date for the Aircraft, but in no event more than thirty (30) days
thereafter, Lessee shall reimburse Lessor for the cost of the fuel contained in
the fuel tanks of the Aircraft on delivery.

 

2.6          Aircraft Condition at Delivery. The
Aircraft shall be delivered to Lessee hereunder factory new from Manufacturer
in the Airbus Aircraft Specification, and evidence thereof (or waiver thereof
by Lessee) shall be conclusively demonstrated by Lessee’s execution of the Lease
Supplement on the Delivery Date (subject to any minor discrepancies that
Manufacturer, Lessor and Lessee agree are inconsistent with the requirements of
the Purchase Agreement and this Lease and are listed by Lessor and Lessee in
the schedule to the Lease Supplement for correction by Manufacturer subsequent
to delivery of the Aircraft).

 

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Lessee shall participate with Lessor in Manufacturer’s
customary configuration development process for the Aircraft and shall consult
with Lessor in a timely fashion to establish a mutually agreeable final
specification for the Aircraft prior to the respective cut-off dates dictated
by the Customization Milestones Chart to be supplied by Manufacturer to Lessor
and Lessee pursuant to the Purchase Agreement. In any event, the final
specification for the Aircraft shall be agreed by the Contractual Definition
Freeze Date, both parties acting reasonably and in good faith.

 

Lessor shall permit (and shall cause Manufacturer to
permit) Lessee to observe the Manufacturer’s technical acceptance process for
the Aircraft and to attend and observe the acceptance tests of the Aircraft
contemplated for the Aircraft under the Purchase Agreement. In furtherance
thereof, Lessor shall enter into a Participation Agreement with Lessee, which
shall be consented to by Manufacturer, providing for Lessee’s participation in
such process and tests.

 

2.7  Specification Change
Notices. Subject to the terms of the
Purchase Agreement, the Airbus Aircraft Specification may, by mutual agreement
between Lessee and Lessor, be amended from time to time, such agreement not to
be unreasonably withheld. Lessor shall notify Manufacturer of each such
proposed change agreed between Lessor and Lessee by way of a request for change
(“RFC”) and, if accepted by
Manufacturer, the proposed change referenced in the RFC will be detailed in an
SCN issued by Manufacturer, which shall set forth the effect, if any, of such
particular changes on the design, performance, weight, expected delivery date,
BFE and price of the Aircraft. Such SCN’s and other written agreements shall be
signed on behalf of Lessor by its duly authorized representative. For the
avoidance of doubt, title to any Parts and any documentation relating to any
SCN shall at all times be and remain the property of Lessor.

 

2.8  Manufacturer Specification
Change Notices; Development Changes. The
Airbus Aircraft Specification also may be revised by Manufacturer without
Lessee’s consent to incorporate development changes if such changes do not
adversely affect Lessor’s cost or the Scheduled Aircraft Delivery, weight, performance or
interchangeability or replaceability requirements. Development changes are
changes deemed necessary to correct defects, improve the Aircraft, prevent
industrial delay, or ensure compliance with the Purchase Agreement.

 

In addition,
in the event Manufacturer proposes a specification change to the Aircraft that
is not a development change referred to in the preceding paragraph and
adversely affects Lessor’s cost or the Scheduled Aircraft
Delivery, weight, performance or interchangeability or replaceability
requirements, Manufacturer will furnish Lessor with a notice of such a change
via a Manufacturer Specification Change Notice (“MSCN”). Lessor will promptly
provide Lessee with the MSCN received by Lessor from Manufacturer (if not
already advised to Lessee by Manufacturer) regarding the proposed specification
change. Lessor and Lessee shall mutually decide whether to accept or reject
such MSCN’s. Unless Lessee notifies Lessor in writing within twenty one (21)
days of receipt of the MSCN that the change specified therein is not acceptable
to Lessee, the same may be accepted by Lessor and, if so accepted, the Airbus
Aircraft Specification shall be changed accordingly. If no notice of rejection
is received by Manufacturer rejecting an MSCN, the MSCN shall be deemed to have
been accepted. For the avoidance of doubt, title to any Parts and any
documentation relating to any developmental changes or 

 

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Manufacturer
proposed specification changes to the Aircraft shall at all times be and remain
the property of Lessor.

 

2.9  Buyer Furnished Equipment. In addition to or in lieu of the BFE contemplated for the Aircraft
pursuant to the current Airbus Aircraft Specification, Lessee may request
Lessor to purchase other items of equipment for installation in the Aircraft as
BFE. Lessor agrees to purchase, or procure that an Affiliate of Lessor
purchases, each such item of equipment, provided any such request of Lessee is
reasonably acceptable to Lessor, such BFE is approved by Manufacturer, and
Lessee’s request is made by such date as will allow Lessor sufficient time,
exercising all reasonable diligence, to arrange for Lessor or an Affiliate of
Lessor to purchase such item of equipment and have the same delivered to
Manufacturer with sufficient time to permit installation in the Aircraft and
delivery of the Aircraft in accordance with the relevant delivery schedule
under the Purchase Agreement. Lessee shall pay to Lessor prior to the date on
which Lessor, or its relevant Affiliate, is contractually required to pay to
the BFE supplier any taxes, shipping, non-recurring costs or other costs (other
than direct equipment cost) that may be incurred by Lessor, or its relevant
Affiliate, in the acquisition or delivery of any item of BFE.

 

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ARTICLE
3.          TERM
AND RENT.

 

3.1          Term.     (i)  Initial Term. Except as
otherwise provided herein, the Aircraft shall be leased to Lessee hereunder for
a Term of ten (10) years, commencing on the Delivery Date for the
Aircraft.

 

(ii)  Extended Term.
Lessee may at its option elect to extend the initial Term for an additional two
(2) years, commencing on the expiration of the initial Term. Such election
to extend the initial Term must be made by written notice given by Lessee to
Lessor no later than the first day of the fifteenth (15th) month prior to the tenth (10th) anniversary of the Delivery
Date. Once such notice is given by Lessee, the election to extend the initial
Term is irrevocable and the Term shall be extended on the same terms and
conditions as are applicable during the initial Term (except for this Article 3.1(ii) and
as otherwise provided in Article 3.2). Notwithstanding any of the
foregoing, if an Event or Event of Default shall have occurred or be continuing
at the time Lessee notifies Lessor of its election to extend the initial Term,
or on the last day of the initial Term, at Lessor’s option, Lessee shall not
have the option to extend the initial Term and such option or election made
pursuant to such option shall lapse and be null and void.

 

3.2          Basic Rent. Lessee shall pay Lessor
Basic Rent for the Aircraft in one hundred twenty (120) consecutive
monthly-in-advance payments in the amount and on the dates set forth in
paragraph 3 of Schedule “1” hereto. During the extended Term, if any, Lessee
shall pay Lessor Basic Rent for the Aircraft in twenty-four (24) consecutive
monthly-in-advance payments in the amount and on the dates set forth in
paragraph 3 of Schedule “1” hereto.

 

3.3          Security Deposit.

 

3.3.1       Security Deposit. Lessee shall provide
Lessor with the cash Security Deposit referred to in paragraph 4 of Schedule “1”
hereto, to be held by Lessor as security for performance of all Lessee’s
obligations hereunder and under the Companion Leases. Lessee agrees to maintain
the Security Deposit with Lessor for the full amount required under this Article 3.3
and paragraph 4 of Schedule “1” until all Lessee’s obligations hereunder have
been fully performed; and if the Security Deposit is reduced below the amount
required hereby as the result of Lessor’s application thereof towards payment
of any of Lessee’s unperformed obligations hereunder or under a Companion
Lease, Lessee shall immediately on demand replenish the Security Deposit to the
amount required hereby. Lessor may commingle the Security Deposit with its
general funds, and Lessee shall not be entitled to any interest or other
earnings thereon.

 

3.3.2       Application of Security
Deposit. In the event
Lessee fails to take delivery of the Aircraft as provided herein in breach of
its obligations hereunder or if any other Event of Default occurs and shall be
continuing or shall result in the termination or cancellation of this Lease, in addition
to any other rights or remedies available hereunder or under a Companion Lease,
Lessor shall be entitled, at its option, to apply the Security Deposit

 

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3-1

 

towards any or all amounts due under this
Lease or any Companion Lease, whether such amounts due constitute Basic Rent
payments hereunder or thereunder, damages for breach of this Lease or such
Companion Lease, or other Rent payments hereunder or thereunder, all in Lessor’s
sole discretion.

 

3.3.3       Security Deposit Under
Companion Lease.    The Security
Deposit required hereunder is in addition to the security deposit required
under each Companion Lease.

 

3.3.4       Return of
Security Deposit. Upon full performance by Lessee of all its
obligations hereunder, and provided no Event or Event of Default shall have
occurred and be continuing, Lessor shall promptly return the Security Deposit
to Lessee, without interest.

 

3.4          Supplemental Rent. Lessee also agrees
to pay to Lessor, or to whomsoever Lessor shall direct, any and all
Supplemental Rent promptly as the same shall become due and owing, and in the
event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor
shall have all the rights, powers and remedies provided for herein, by Law or
otherwise, as in the case of non-payment of Basic Rent. Lessee will also pay to
Lessor, as Supplemental Rent, on demand, interest at the Incentive Rate on any
part of any Basic Rent not paid when due and on any payment of Supplemental
Rent not paid when due or, if due on demand, when demanded by Lessor in
accordance with the terms hereof for the period for which the same shall become
due until the same shall be paid. Such interest will accrue on a day to day
basis and be compounded monthly.

 

3.5          Payments on Business Days. If any date
on which a payment of Rent becomes due and payable is not a Business Day, the
Rent payment otherwise due and payable on such date shall be due and payable on
the immediately preceding Business Day.

 

3.6          Place of Payment. All Rent shall be
payable in Dollars, in immediately available funds, not later than 11:00 a.m.
(local time in the place of payment), on the due date thereof, at the following
bank and account:

 

 

	
  BANK:

  	
   

  	
  Citibank N.A.

  111 Wall Street

  New York, New York 10043

  
	
   

  	
   

  	
   

  
	
  ACCOUNT NO:

  	
   

  	
  30736705

  
	
   

  	
   

  	
   

  
	
  SWIFT:

  	
   

  	
  CITIUS33

  
	
   

  	
   

  	
   

  
	
  ACCOUNT NAME:

  	
   

  	
  Pegasus Aviation Finance Company

  
	
   

  	
   

  	
   

  
	
  REFERENCE

  	
   

  	
  Hawaiian Airlines/A330-200#2

  

 

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3-2

 

 

 

 

or at such other location or account in the United
States as Lessor shall from time to time designate in writing to Lessee at
least five (5) Business Days before the relevant Rent payment is due. Rent
payments payable hereunder shall be deemed to have been paid only at the time
actually credited to such account of Lessor.

 

3.7          Computation of Interest and Other Payments.
Except as otherwise provided herein, all interest and other payments payable
hereunder that are pro-rated on an annualized or other periodic basis shall be
calculated on the basis of a year consisting of 360 days and twelve 30-day
months.

 

3.8          Prohibition Against Setoff, Counterclaim, etc.
Lessee’s obligation to pay Rent hereunder shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation:

 

(i)                  any
setoff, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor, Manufacturer, any Participant or any other person for any
reason whatsoever;

 

(ii)                 any
defect in the title, airworthiness, condition, design, operation, or fitness
for any particular purpose or for use, or any damage to or loss or destruction,
of the Aircraft, or any interruption or cessation in the use or possession
thereof by Lessee for any reason whatsoever;

 

(iii)                any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessor, Lessee,
Manufacturer, any Participant or other person; or

 

(iv)                any
other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.

 

Lessee hereby waives, to the extent permitted by
applicable Law, any and all rights which it may now have or which may at any
time hereafter be conferred upon it by statute or otherwise to terminate,
cancel, quit, or surrender this Lease or the Aircraft or to reject or revoke
acceptance of the Aircraft, or to any abatement, suspension, deferment or
reduction of Rent or the performance of any other obligations, except in
accordance with the express terms hereof.

 

Nothing in this Article 3.8 shall be construed to
limit or otherwise prejudice Lessee’s right to commence legal proceedings
against Lessor to recover damages from Lessor for the breach by Lessor of any
of its obligations under this Lease.

 

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3-3

 

ARTICLE
4.          DISCLAIMERS;
WAIVERS; REPRESENTATIONS AND WARRANTIES.

 

4.1          Lessor Disclaimer and Exclusion of Representations and
Warranties. THE AIRCRAFT IS DELIVERED
TO LESSEE AND ACCEPTED BY LESSEE AND LEASED HEREUNDER “AS-IS, WHERE-IS,” WITH
ALL FAULTS. LESSEE UNCONDITIONALLY ACKNOWLEDGES THAT NEITHER LESSOR NOR ANY
PARTICIPANT, NOR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS,
EMPLOYEES, AFFILIATES, AGENTS OR REPRESENTATIVES, HAS MADE OR SHALL BE DEEMED
TO HAVE MADE ANY PROMISE, GUARANTY, REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE DESCRIPTION, TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN,
AGE, OPERATION, PERFORMANCE, MERCHANTABILITY, FITNESS FOR USE OR FOR ANY
PARTICULAR PURPOSE, OF ANY ITEM OF EQUIPMENT OR ANY PART THEREOF, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT OR ANY PART THEREOF OR AS TO
THE CONFORMITY OF ANY ITEM OF EQUIPMENT TO THE DESCRIPTION OR CONDITIONS SET
FORTH IN THIS LEASE OR THE PURCHASE AGREEMENT, OR AS TO THE ADEQUACY OF
ANY DOCUMENTATION OR RECORDS PROVIDED OR TO BE PROVIDED TO LESSEE UNDER THIS
LEASE OR AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE AND WHETHER KNOWN OR UNKNOWN, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT OR ANY PART THEREOF,
ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND EXTINGUISHED.

 

4.2          Waiver by Lessee. LESSEE
HEREBY WAIVES, AS BETWEEN ITSELF AND LESSOR AND THE PARTICIPANTS, AND AGREES
NOT TO SEEK TO ESTABLISH OR ENFORCE ANY RIGHTS, REMEDIES OR CLAIMS (WHETHER
STATUTORY OR OTHERWISE) AGAINST LESSOR OR ANY PARTICIPANT IN RESPECT OF ANY OF
THE MATTERS SET FORTH IN ARTICLE 4.1. WITHOUT LIMITING THE FOREGOING, LESSEE
WAIVES ANY CLAIM, LIABILITY, OR
RESPONSIBILITY (WHETHER KNOWN OR UNKNOWN) THAT LESSEE OR ANY OTHER PERSON
CLAIMING UNDER OR THROUGH LESSEE MAY NOW OR HEREAFTER HAVE OR CLAIM
AGAINST LESSOR OR ANY PARTICIPANT WITH RESPECT TO:

 

(i)            ANY COST, LOSS OR
DAMAGE (CONSEQUENTIAL OR OTHERWISE), LOSS OF PROFIT OR REVENUE, LOSS OR
SUSPENSION OF CERTIFICATION OF THE AIRCRAFT, GROUNDING OF THE AIRCRAFT, OR ANY
OTHER CLAIM WHATSOEVER ARISING FROM THE CONDITION OF ANY ITEM OF EQUIPMENT OR PART
THEREOF, ANY MAINTENANCE, REPAIR OR REPLACEMENT OF ANY ITEM OF EQUIPMENT, ANY
ALTERATION, MODIFICATION OR ADDITION TO ANY ITEM OF EQUIPMENT, OR ANY
INSPECTION OF THE AIRCRAFT OR ITS RECORDS PERFORMED BY LESSOR OR

 

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4-1

 

LESSEE, OR THE LACK OF SUCH
INSPECTION BY LESSOR OR LESSEE; AND

 

(iii)         ANY
OBLIGATION OR LIABILITY OF LESSOR OR ANY PARTICIPANT WITH RESPECT TO ANY
IMPLIED WARRANTY OF MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE
OF PERFORMANCE, COURSE OF DEALING, USAGE OR TRADE, ANY IMPLIED WARRANTY OF
FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE, AND ANY OBLIGATION OR CLAIM FOR
LOSS OF USE OF OR THE LOSS OF OR DAMAGE TO THE EQUIPMENT, OR ANY PART THEREOF,
FOR ANY REASON, AND FOR ANY LIABILITY OF LESSEE TO ANY THIRD PARTY AND FOR ANY
OTHER DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND OR
NATURE, WHETHER OR NOT ARISING FROM THE NEGLIGENCE (ACTUAL OR IMPUTED) OF
LESSOR OR ANY PARTICIPANT, AND ANY RISKS WITH RESPECT THERETO ARE HEREBY
ASSUMED BY LESSEE.

 

4.3          Confirmation by Lessee. Lessee confirms
to Lessor that Lessee is fully aware of and understands the full meaning of the
provisions of Articles 4.1 and 4.2, and acknowledges that Basic Rent and the
other provisions of this Lease have been agreed in reliance on Lessee’s
agreements in, and the effectiveness of, Articles 4.1 and 4.2.

 

4.4          Assignment of Warranties.

 

4.4.1       Assignment. Provided no Event or Event of Default shall
have occurred and be continuing), Lessor agrees to assign or otherwise make
available to Lessee, without representation, warranty or recourse of any kind,
express or implied, such rights as Lessor may have with respect to the Aircraft
under any warranty, service policy or product support plan of Manufacturer, the
Engine manufacturer or any other manufacturer, vendor, subcontractor or
supplier with respect to the Aircraft, any Engine or any Part, to the extent
the same may legally be assigned or otherwise made available to Lessee. Lessor agrees that it will not amend the Purchase Agreement if the
amendment would have a materially adverse effect on the Aircraft or alter the Airbus
Aircraft Specification or if it would affect the Scheduled Aircraft Delivery of
the Aircraft, unless Lessee otherwise consents, which consent will not be
unreasonably withheld.

 

4.4.2       Further Action. Lessor
further agrees, if requested by Lessee and at Lessee’s expense, to take such
further action as Lessee may reasonably request to confirm Lessee’s authority
to enforce any such rights and to assist Lessee in the enforcement thereof.

 

4.4.3       Reassignment.
Upon the occurrence of an Event of Default or the cancellation or sooner
termination of the Term, Lessee shall no longer be entitled to enforce or
obtain the benefits of such rights and the same will immediately revert and be
deemed reassigned to

 

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Lessor, without
further act, but on request by Lessor Lessee will immediately execute all
documents required by Lessor to evidence and confirm such reversion and
reassignment.

 

4.5  Lessee’s Representations and Warranties.
Lessee represents and warrants that:

 

4.5.1       Formation.  Lessee
is a corporation duly organized and existing in good standing under the Laws of
Delaware, has full power, authority and legal right to own its properties and
to carry on its business as presently conducted and to perform its obligations
under this Lease, holds all licenses, certificates and permits from each
Governmental Entity necessary for the conduct of its business, and is duly
qualified to do business as a corporation in good standing in each jurisdiction
in which the failure to be so qualified would have a materially adverse effect
on Lessee or on its ability to perform its obligations hereunder.

 

4.5.2       Authorization.  This
Lease has been duly authorized by all necessary action on the part of Lessee,
including any required authorization of the stockholders of Lessee, and neither
the execution and delivery hereof nor the consummation of the transactions
contemplated hereby nor compliance by Lessee with any of the terms and
provisions hereof does or will violate any provision of the articles of
incorporation or by-laws of Lessee or any Law or judgment of any Governmental
Entity having jurisdiction over Lessee or any of its activities or properties,
or does or will result in any breach of, or constitute any default under, or
result in the creation of any Lien upon any property of Lessee under, any
indenture, mortgage, deed of trust, conditional sale contract, loan or credit
agreement, or other agreement or instrument to which Lessee is a party or by
which Lessee or its properties may be bound or affected.

 

4.5.3       Consents.  Neither
the execution and delivery by Lessee of this Lease nor the performance by
Lessee of any of the transactions contemplated hereby require the consent,
approval, order or authorization of, or registration with, or the giving of
notice to, the Aeronautics Authority or any other domestic or foreign
Governmental Entity, except for those that have heretofore been obtained, true
and complete copies of which have been delivered to Lessor.

 

4.5.4       Due Execution.  This
Lease has been duly executed and delivered by Lessee and constitutes, and the
Lease Supplement when executed and delivered by Lessee will constitute, legal,
valid and binding obligations of Lessee, enforceable in accordance with their
terms, except where the enforceability thereof may be limited by applicable
bankruptcy, insolvency or other laws affecting creditors’ rights generally.

 

4.5.5       Filing of Documents, etc.
Except for the registration of the Aircraft with the Aeronautics Authority in
the name of Lessor as
contemplated hereby and the filing for recordation of the Security Documents,
this Lease and the Lease Supplement with the Aeronautics Authority and the
registration of the International Interests with the International Registry in
respect of the Aircraft, the Engines, the Security Documents and this Lease, no
other registration and no further filing or recording of this Lease, the

 

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4-3

 

Security Documents or of any other instrument or
document is necessary or advisable under the Laws of the United States or any
State therein to:  (1) establish the
priority, legality, validity or enforceability of the obligations of Lessee
under this Lease, or (2) fully protect, establish and perfect Lessor’s title to and Lessor’s and Mortgagee’s interest in
the Equipment or their respective rights and interests hereunder and thereunder
(including with respect to the Security Deposit) as against Lessee and any
third parties in any jurisdiction.

 

4.5.6       Certificated
Air Carrier. Lessee is a Certificated Air Carrier within the
meaning of Section 41102 of Title 49 of the United States Code Annotated,
and Lessor is entitled to the benefits and protections of Section 1110 of
the Bankruptcy Code (11 U.S.C. Section 1110) in respect of the Aircraft
leased to Lessee under this Lease.

 

4.5.7       Legal
Proceedings. There are no suits or proceedings pending or, to
the knowledge of Lessee, threatened in any Governmental Entity against or
affecting Lessee which may have a materially adverse effect on the financial condition
or business of Lessee except those described in writing to Lessor prior to the
date hereof.

 

4.5.8       Tax Returns.
Lessee has filed or caused to be filed all material tax returns which are
required to be filed and:  (i) has
paid or caused to be paid all taxes shown to be due or payable on said returns
and on any assessment received by Lessee, to the extent that such taxes have
become due and payable, or (ii) has provided adequate reserves for the
payment thereof to the extent any such taxes have not become due and payable.

 

4.5.9       Balance
Sheet. The balance sheet of Lessee as of December 31, 2007,
and the statements of income and cash flows of Lessee for the three fiscal
years then ended (copies of which have been furnished to Lessor), are complete
and correct and fairly set forth Lessee’s financial condition as of such dates
and the results of its operations for such periods, and since December 31,
2007, there has been no material adverse change in such condition or
operations.

 

4.5.10     Prohibited Persons.
Lessee is not (i) a person identified on, nor does it have any affiliation
of any kind with any person identified on any “watch list” established by the
United States Office of Foreign Assets Control (“OFAC”), including, without
limitation, OFAC’s list of specially designated nationals and blocked persons;
and (ii) resident in, nor does it have funds that are transferred from or
through, nor does it have operations in, any jurisdiction identified as
non-cooperative by the Financial Action Task Force of the United States or
sanctioned by OFAC.

 

4.5.11     Cape Town Convention.
Lessee is a “Transaction User Entity” and has appointed an “Administrator” that
has authorized specific “Transaction User Entities” and/or “Professional User
Entities” (as such terms are defined in the Cape Town Convention) to consent to
the Cape Town Convention registrations contemplated hereby.

 

4.6  Lessor’s Representations and Warranties.
Lessor represents and warrants that:

 

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4.6.1  Formation.
Lessor is a corporation duly organized and existing under the Laws of Delaware, has full power, authority
and legal right to own its properties and to carry on its business as presently
conducted and to perform its obligations under this Lease, holds all licenses,
certificates and permits from each Governmental Entity necessary for the
conduct of its business, and is duly qualified to do business as a corporation
in good standing in each jurisdiction in which the failure to be so qualified
would have a materially adverse effect on Lessor or on its ability to perform
its obligations hereunder.

 

4.6.2  Consents.
Neither the execution and delivery by Lessor of this Lease, nor the performance
by it of its obligations hereunder, requires the consent or approval of, the
giving of notice to, or the registration or filing with, or the taking of any
other action in respect of, the Aeronautics Authority or any domestic
Governmental Entity, except for those that have already been obtained.

 

4.6.3  Conflict.  The
execution and delivery of this Lease, the performance of Lessor’s obligations
hereunder, the consummation of the transactions contemplated hereby, and
compliance by Lessor with the terms and provisions hereof do not or will not
violate any provision of Lessor’s constitutional documents, or any Law or
judgment of any Governmental Entity applicable to it, or court having
jurisdiction over it or any of its activities or properties, and do not and
will not result in any breach of or constitute a default under or result in the
creation of any lien upon any of Lessor’s property, under any indenture,
mortgage, deed of trust, conditional sale contract or credit agreement or other
instrument or agreement to which it is a party or by which it may be bound or
to which any of its property or assets may be subject or affected.

 

4.6.4  Authorization.
The execution, delivery and performance by Lessor of this Lease has been duly
authorized by all necessary action on its part, and this Lease constitutes its
valid, legal and binding obligation, enforceable against it in accordance with
its terms, except where the enforceability thereof may be limited by applicable
bankruptcy, insolvency or other laws affecting creditors’ rights generally.

 

THE WARRANTIES OF LESSOR SET FORTH IN THIS ARTICLE 4.6
ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OF LESSOR, INCLUDING FITNESS
FOR USE OR FOR A PARTICULAR PURPOSE AND MERCHANTABILITY, WHETHER WRITTEN OR
ORAL, EXPRESS OR IMPLIED.

 

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ARTICLE
5.          POSSESSION AND USE.

 

5.1          Possession. Subject to the right of
Lessee to deliver possession of any Item of Equipment to the manufacturer
thereof for testing or other similar purposes or to any organization for
service, repair, maintenance or overhaul work on such Item of Equipment or any
part thereof or for alterations or modifications in or additions to such Item
of Equipment to the extent required or permitted by the terms of Article 6
hereof, LESSEE SHALL NOT SUBLEASE, ASSIGN OR OTHERWISE TRANSFER OR RELINQUISH
POSSESSION OR CONTROL OF ANY ITEM OF EQUIPMENT, OR ANY PART THEREOF,
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, which consent shall not be
unreasonably withheld or delayed (provided that if Lessee seeks consent from
Lessor for a proposed sublease, Lessee shall be responsible (whether or not
Lessor consents to the proposed sublease) for all expenses, including
reasonable attorneys’ fees, incurred by Lessor in connection with assessing or
implementing the proposed sublease, and any such sublease shall be and be expressly
made subject and subordinate to this Lease and all Lessor’s rights and remedies
hereunder).

 

5.2          Lawful Operations;
Use.

 

5.2.1       Compliance with Laws.       Lessee will not cause or
permit any Item of Equipment to:

 

(i)            be
maintained, used or operated in violation of any Law or airworthiness directive
of any Governmental Entity having jurisdiction (domestic or foreign), or in
violation of any airworthiness certificate, license or registration relating to
any Item of Equipment issued by any such authority, and if any such Law,
airworthiness directive, airworthiness certificate, license or registration
requires addition to or modification or alteration of the Equipment, Lessee
shall conform therewith at its expense and Lessee shall maintain the same in
proper condition for operation under such Laws, airworthiness directives,
airworthiness certificates, licenses or registrations; or

 

(ii)           enter
any airspace or be flown or transported to, or to remain at, any airport or
country that is prohibited under the Laws of any Governmental Entity having
jurisdiction applicable to the Aircraft, Lessor or Lessee, including any
country that is the subject of a prohibition order or similar order, directive
or sanction of, or does not maintain normal diplomatic relations with, the
Government of the United States of America or the Country of Registration or
the subject of prohibition order or similar order, directive or sanction of any
international authority or control or treaty organization of which the United
States of America or the Country of Registration is a member.

 

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Without limiting the foregoing, Lessee shall base the
Equipment in Hawaii and shall use the Equipment solely in its commercial
operations for which it is duly licensed.

 

5.2.2       Operations. Lessee
shall ensure that the Aircraft is at all times operated by, and under control
of, qualified and duly licensed pilots employed by Lessee, with proper ratings.
Lessee agrees not to cause or permit any person under any circumstance to cause
the Aircraft or any Engine to be:

 

(i)            flown
or otherwise operated or used for any military purpose;

 

(ii)           operated
or used for any purpose for which such Item of Equipment was not designed and
reasonably suited; or

 

(iii)          operated or used at any time for any illegal
purpose or in any illegal manner.

 

5.2.3       I.A.T.A. Requirements.  Lessee further
agrees that it will not use or permit the use of the Aircraft for the carriage
of:

 

(i)            whole
animals, living or dead, except in the cargo compartments according to I.A.T.A.
regulations, and except domestic pet animals carried in a suitable container to
prevent the escape of any liquid and to ensure the welfare of the animal;

 

(ii)           acids,
toxic chemicals, other corrosive materials, explosives, nuclear fuels, nuclear
wastes, or any nuclear assemblies or components, except as permitted for cargo
under the “Restriction of Goods” schedule issued by I.A.T.A. from time to time
and provided that all the requirements for packaging or otherwise contained
therein are fulfilled;

 

(iii)          any
other goods, materials or items of cargo which could reasonably be expected to
cause damage to the Aircraft and which would not be adequately covered by the
insurances maintained in accordance with Article 10 hereof; or

 

(iv)          any
illegal item or substance.

 

5.2.4       Eurocontrol.  Lessee agrees
that it will not use or permit the use of the Aircraft for in or over any
airspace subject to the jurisdiction of Eurocontrol unless Lessee first
provides Lessor with a letter from Lessee, in form and
substance satisfactory to Lessor, addressed to Eurocontrol pursuant to which
Lessee authorizes Eurocontrol to issue to Lessor, upon Lessor’s request from
time to time, a statement of account of all sums due by Lessee to Eurocontrol
in respect of the Aircraft (and in respect of any other aircraft for which
Eurocontrol may have the right to claim against the Aircraft) as at the dates
of each such request.

 

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5-2

 

5.3          Maintenance.

 

5.3.1       Maintenance
of Aircraft and Records. Lessee, at its own cost and expense,
shall:

 

(i)            cause
each Item of Equipment leased hereunder to be serviced, repaired, maintained,
modified, overhauled and tested only by Approved Maintenance Performers holding
all required certificates and approvals for each of the tasks performed and:

 

(A)          so
as to keep such Item of Equipment in the same condition and appearance as when
delivered to Lessee hereunder, reasonable wear and tear from normal flight
operations excepted, and in good operating condition;

 

(B)           so
as to keep the Aircraft in the condition necessary to maintain the
airworthiness certificate for the Aircraft under the Federal Aviation Act of
1994, 49 United States Code Ann., title 49, section 40101, et seq., as amended,
and to be operated under FAR Part 121; and

 

(C)           in
strict compliance with the Maintenance Program, a true and complete copy of
which has heretofore been or will promptly be delivered by Lessee to Lessor
(and Lessee agrees not to modify or otherwise vary or permit the same to be
done to the Maintenance Program unless required by applicable Law or unless
otherwise agreed to by Lessor and the Aeronautics Authority);

 

(ii)           maintain
all records, logs and other materials required by the Aeronautics Authority to
be maintained with respect to such Equipment. All such records, logs, and other
materials shall be maintained in the English language; and

 

(iii)          promptly furnish to Lessor such information
as may be required to enable Lessor or any Participant to file any reports
required to be filed by Lessor or such Participant with any Governmental Entity
because of Lessor’s or such Participant’s interest in the Equipment.

 

All deficiencies revealed by any inspection of
the Equipment by Lessee, Lessor or any of Lessee’s maintenance providers shall
be promptly corrected by proper cleaning, sealing, repairing, replacement,
overhaul, modification and adjustment.

 

5.3.2       Repairs. All
repairs performed to the Aircraft during the Term shall be permanent and
performed in accordance with the Manufacturer’s Structural Repair Manual and in
compliance with the Manufacturer’s damage tolerance assessment process (to the
highest level of compliance possible). If the Manufacturer’s Structural Repair
Manual authorizes as permanent a non-flush structural patch repair or a
flush-type

 

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5-3

 

structural patch repair, such repair shall be a
flush-type permanent repair. Any repair not covered by the Manufacturer’s
Structural Repair Manual or the Engine manufacturer’s approved manual, as the
case may be, shall be in accordance with FAA-approved data, and shall be
approved by Manufacturer or the Engine manufacturer, as the case may be. Lessee
shall maintain complete data and documentation to verify and substantiate
certification and methods of compliance for all repairs performed during the
Term, and Lessee shall keep and maintain a complete summary listing of all repairs
performed (with dirty fingerprint accomplishment records).

 

5.3.3       Maintenance
Program; Revision Services.    Lessee
shall ensure that the Maintenance Program at all times complies in all material
respects with the then latest revision of the MPD. Lessee shall, at its
expense, obtain and maintain in effect throughout the Term appropriate revision
services necessary to maintain all documentation, manuals and records required
to be maintained for the Aircraft hereunder or by applicable Law in a current,
up-to-date status and in accordance with the best practices of major
international commercial airlines.

 

5.3.4       Documentation
for Parts.  Lessee shall
ensure that only EASA/FAA-approved parts and materials that have EASA Form 1
or FAA 8130-3 release notes or serviceable tags (hereafter “release tags”) are
installed or used on the Aircraft during the Term. Lessee shall also ensure
that:

 

(i)            all
release tags for life-limited Parts installed in the Aircraft during the Term
shall have the Flight Hours/Cycles since new stated thereon, as applicable;

 

(ii)           all
release tags for hard time components installed in the Aircraft during the Term
shall have the Flight Hours/Cycles since overhaul or since last shop visit
(and, if applicable, calendar time since overhaul/last shop visit) stated
thereon; and

 

(iii)          if a modification has been carried out on a
hard time Part or an “on condition/condition monitored” Part during
an overhaul or shop visit during the Term which has altered the part number for
that component, the new part number shall be stated on the release tag for such
Part.

 

Lessee shall ensure that all parts installed or used
on the Aircraft during the Term shall not adversely affect any of the
warranties for the Aircraft, the Airframe, any Engine or any Part, and shall
not adversely affect the certification of an installation or assembly into
which or in respect of which such part is installed or used.

 

For the avoidance of doubt, Lessee shall install only
original equipment manufacturer (hereinafter “OEM”) parts, as fitted at
delivery of the Aircraft or as subsequently modified per an approved OEM
service bulletin, on the Engines, the APU, the Landing Gears and any OEM
manufactured structural assemblies. In addition, Lessee agrees that it

 

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5-4

 

 

shall replace life-limited Parts and serialized
rotable Parts with OEM parts, as fitted at delivery of the Aircraft or at a
newer modification status or as subsequently modified per an approved OEM
service bulletin.

 

Without limiting the foregoing, Lessee may install or
use on the Aircraft during the Term any part that is listed in the Manufacturer’s
illustrated parts catalog.

 

5.3.5       Non-Discrimination.
Lessee agrees that:

 

(i)            it
will maintain and use, and cause the Equipment to be maintained and used, in
substantially the same manner and with substantially the same care as used by
Lessee with respect to similar equipment owned or operated by Lessee;

 

(ii)           it
will not nor will it permit anyone to discriminate against the Equipment (as
compared to other equipment of the same type owned or operated by Lessee) with
respect to its use, operation or maintenance in contemplation of the
expiration, cancellation or termination of this Lease Agreement, other than the
withdrawal of the Equipment from use and operation as is necessary to prepare
the Equipment for return to Lessor upon such expiration, cancellation or
termination. To that end, without limitation, Lessee agrees to incorporate all
Manufacturer, Engine manufacturer and other vendor service bulletins that Lessee,
within the Term, schedules to incorporate into other similar aircraft in Lessee’s
fleet of aircraft, whether owned or leased;

 

(iii)          it will not remove any Engine or Part from
the Aircraft prior to expiration of the Term to avoid overhaul, refurbishment,
replacement, etc., thereof in connection with the return of the Aircraft (and
such Engine or Part) at the end of the Term; and

 

(iv)          it
will not discriminate against the Engines with respect to Performance
Restoration build standards and life limited Parts and other Parts replacements
as compared to the other engines of the same type as the Engines in Lessee’s
fleet (whether owned or leased), and, without limiting the foregoing, Lessee
will ensure that all life limited Parts and other Parts of an Engine undergoing
a Performance Restoration shop visit will have at least the same number of
Flight Hours and Cycles remaining thereon as the number of Flight Hours/Cycles
expected to be remaining on the Engine after giving effect to the Performance
Restoration shop visit.

 

5.3.6       Removal from Service.
If the Aircraft, any Engine or any Part is out of revenue service (except
for the active performance of maintenance, repair or overhaul procedures), the
Aircraft, such Engine or such Part shall be properly and safely

 

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maintained and stored in accordance with accepted
industry and manufacturer specifications and procedures.

 

5.3.7       Notification of Loss,
Damage, etc.    Lessee shall
notify Lessor promptly of all details relating to any loss, damage or
destruction to the Aircraft, or any part thereof, that affects the
airworthiness of the Aircraft, and any loss, theft, damage or destruction to
the Aircraft, or any part thereof, exceeding the sum of $300,000 (or the
equivalent in any other currency).

 

5.4          Maintenance Payments.

 

5.4.1       Calculation of Amount
and Payment. In addition to the Basic Rent required to be paid for the
Aircraft pursuant to Article 3.2, Lessee shall pay to Lessor the 4C
Airframe Payments, 8C Airframe Payments, Performance Restoration Payments,
Engine Life-Limited Parts Payments, APU Payments and Landing Gear Payments
(collectively, the “Maintenance Payments”) set forth in paragraph 5 of Schedule
“1” hereto.

 

Maintenance Payments shall be payable within fifteen
(15) days following the end of each calendar month, commencing with the month
in which the Delivery Date occurs, through and including the month in which
this Lease is cancelled, terminated or expires and the Equipment is returned to
Lessor in accordance with the terms of this Lease, computed on the number of
Flight Hours/Cycles or for the calendar month (or portion thereof), as the case
may be, accumulated on the relevant Items of Equipment, APU and Landing Gear
during the month immediately preceding such payment date.

 

5.4.2       Adjustment of
Maintenance Payments.  The Maintenance Payments amounts
shall be subject to adjustment by Lessor as follows:

 

(i)            Operational Criteria.  The amount of
the Performance Restoration Payments is based on the assumed annual utilization
of 4,000 Flight Hours and an average annual sector flight time of 6.0 hours. Lessor
shall have the right to adjust the Performance Restoration Payment amounts
payable hereunder in respect of the Engines as provided in paragraph 6 of
Schedule “1” hereto.

 

(ii)           Performance Restoration Shop Visit.  In
addition to the adjustments pursuant to clause (i), above, each time an Engine
undergoes Performance Restoration during the Term, Lessor shall have the right
to adjust the rate for the Performance Restoration Payments thereafter payable
by Lessee in respect of the Engines to ensure payment by Lessee of an hourly
rate sufficient to meet the projected costs of future Performance Restoration
of the Engines. The amount of such adjustment shall be determined by reference
to the amount obtained by dividing:

 

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(A) the actual total cost of the Performance
Restoration shop visit performed for an Engine by

 

(B) the lesser of:

 

(1) the actual number of Flight Hours that were accumulated
on such Engine from the date of the Performance Restoration shop visit
immediately preceding the Performance Restoration shop visit referred to in
clause (A), above, to the date of the Performance Restoration shop visit for
such Engine referred to in clause (A), or

 

(2) the number of Flight Hours that constitutes
the then current industry mean time between removals (excluding removals for
foreign object damage or operator convenience, such as to address vibration,
fan blade rework, etc.) for engines of similar type, age and characteristics as
the Engines, as determined from records maintained by the Engine manufacturer
on the basis of the average of the industry mean time between removals
(excluding removals for foreign object damage or operator convenience, such as
to address vibration, fan blade rework, etc.) over the immediately preceding
twelve (12) months.

 

For example (but subject to any necessary adjustments
to give effect to the other relevant circumstances), if the total cost incurred
for Performance Restoration of an Engine is $5,000,000 and the number to be
used as the result of the calculation described in clause (B), above, is the
industry mean time between removals and such industry mean time between
removals is 20,000 Flight Hours, the hourly rate that Lessee will thereafter be
required to pay for Performance Restoration Payments for each Engine will be
$250 per Flight Hour.

 

(iii)          Annual
Review. In addition to the adjustment to the Performance
Restoration Payment amounts pursuant to clauses (i) and (ii), above, the
Maintenance Payment rates payable pursuant to this Article 5.4 (other than
for the Engine Life-Limited Parts Payments) shall be increased by the
percentage specified in the last paragraph of paragraph 5 of Schedule “1” hereto,
compounded annually, as of each anniversary of the Delivery Date, and such
increased rates shall be applicable to Aircraft use on and after such
anniversary date until the next anniversary date throughout the Term; and, as
of each anniversary of the Delivery Date, the Engine Life-Limited Parts
Payments rate shall be increased (and which shall include a 5% stub life value)
to reflect:  (A) the increases in
the Manufacturer’s catalogue

 

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prices that have occurred during the preceding annual
period, and (B) the increase, if any, required as the result of a change
in the relationship between the catalogue price of an Engine life-limited Part and
the Engine manufacturer’s warranted or, in the case of a Group B Part, declared
cyclic life of such Engine life-limited Part, and such increased rates in each
case shall be applicable to Engine use on and after such anniversary date until
the next anniversary date throughout the Term.

 

5.4.3       Payment from Maintenance
Payments by Lessor. Maintenance Payments paid by Lessee to Lessor will
be reimbursed to Lessee as follows:

 

(i)            Airframe-4C. If the Airframe undergoes
a scheduled block “4C”/6-year check when due (including the airframe
systems/zonal/structural inspections, corrosion prevention and control and
aging aircraft inspections, if any, and the corresponding lower level checks
(i.e., “A” checks and all lower level “C” checks), and all out-of-sequence
inspections due at that time), as defined in the then latest revision of the
MPD (and herein referred to as the “4C Check”), performed by an Approved
Maintenance Performer reasonably acceptable to Lessor, Lessor will pay Lessee
the 4C Airframe Payments referred to in paragraph 9(i) of Schedule “1”
hereto. Any cost in excess of such amount to be paid by Lessor pursuant to the
preceding sentence shall be Lessee’s sole responsibility and shall be promptly
paid by Lessee. Lessee agrees to provide Lessor with a copy of the workscope
for the 4C Check contemplated by this clause (i) at least 30 days prior to
introduction of the Aircraft for the 4C Check, and to obtain Lessor’s prior
approval of the workscope and warranties for the 4C Check (which warranties
shall expressly be assignable to Lessor). Lessor agrees that it will not
unreasonably withhold or delay its approval of the workscope or the warranties
for the 4C Check.

 

(ii)           Airframe-8C. If the Airframe undergoes
a scheduled block “8C”/10year check (or “8C”/11 or 12-year check, as the case
may be) when due (including the airframe systems/zonal/structural inspections,
corrosion prevention and control and aging aircraft inspections, if any, and
the corresponding lower level checks (i.e., “A” checks and all lower level “C”
checks), and all out-of-sequence inspections due at that time), as defined in
the then latest revision of the MPD (and herein referred to as the “8C Check”),
performed by an Approved Maintenance Performer reasonably acceptable to Lessor,
Lessor will pay Lessee the 8C Airframe Payments referred to in paragraph 9(ii) of
Schedule “1” hereto. Any cost in excess of such amount to be paid by Lessor
pursuant to the preceding sentence shall be Lessee’s sole responsibility and
shall be promptly paid by Lessee. Lessee agrees to provide Lessor with a copy
of the workscope for the 8C Check contemplated by this clause (i) at least
30 days prior to introduction

 

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of the Aircraft for the 8C Check, and to obtain Lessor’s
prior approval of the workscope and warranties for the 8C Check (which
warranties shall expressly be assignable to Lessor). Lessor agrees that it will
not unreasonably withhold or delay its approval of the workscope or the
warranties for the 8C Check.

 

(iii)          Engine
Performance Restoration.   If
at any time any Engine is not covered by the TotalCare Agreement, and such
Engine undergoes a shop visit for Performance Restoration performed by an
Approved Maintenance Performer pursuant to the Maintenance Program and the then
latest revision of the Trent 700 Engine Management Programme for Airbus A330
aircraft approved by the Engine manufacturer, Lessor will pay Lessee the
Performance Restoration Payments referred to in paragraph 9(iii) of
Schedule “1” hereto. Any cost in excess of such amount to be paid by Lessor
pursuant to the preceding sentence shall be Lessee’s sole responsibility and
shall be promptly paid by Lessee.

 

Whether or not an Engine is covered by the TotalCare
Agreement, Lessee agrees to provide Lessor with a copy of the workscope for the
Performance Restoration shop visit for such Engine and to obtain Lessor’s prior
approval of the workscope and warranties for the Performance Restoration shop
visit for such Engine (which warranties shall expressly be assignable to
Lessor). Lessor agrees that it will not unreasonably withhold or delay its
approval of the workscope or warranties for the Performance Restoration shop
visit for such Engine.

 

(iv)          Engine Life-limited Parts. If as required pursuant to the Engine manual published
by the Engine manufacturer a life-limited Part of an Engine is required to
be replaced at the time such Engine undergoes a shop visit, Lessor will pay
Lessee the Engine Life-Limited Parts Payments referred to in paragraph 9(iv) of
Schedule “1” hereto, less the amount of any credits, rebates, warranty benefit
or remedy or other allowances for any Cycles or time remaining on the replaced
life-limited Part. Any cost in excess of such amount to be paid by Lessor
pursuant to the preceding sentence shall be Lessee’s sole responsibility and
shall be promptly paid by Lessee.

 

(v)           APU. If the APU undergoes a heavy
repair shop visit (as defined by the APU manufacturer) pursuant to the
Maintenance Program, subject to the penultimate sentence of this clause (v),
Lessor will pay Lessee the APU Payments referred to in paragraph 9(v) of
Schedule “1” hereto. Any cost in excess of such amount to be paid by Lessor
pursuant to the preceding sentence shall be Lessee’s sole responsibility and
shall be promptly paid by Lessee. Lessor will pay the APU Payments to Lessee
for the cost of the heavy repair shop visit of the removed APU: (x) when
Lessee reinstalls such APU in the Airframe following such shop visit or (y) when

 

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Lessee replaces such APU with an auxiliary power unit
fresh from a heavy repair shop visit that meets all requirements of this Lease,
including Article 6 hereof (determined immediately after giving effect to
a heavy repair shop visit for the removed APU and on the assumption that the
removed APU had been reinstalled in the Airframe). Lessee agrees to provide
Lessor with a copy of the warranties for the heavy repair shop visit of the APU
for approval by Lessor (which warranties shall expressly be assignable to
Lessor), which approval will not be unreasonably withheld.

 

(vi)          Landing Gear.  If the Landing
Gear undergoes an overhaul as defined in Manufacturer’s component maintenance
manual, or equivalent, which results in full refurbishment of the Landing Gear,
subject to the penultimate sentence of this clause (vi), Lessor will pay Lessee
the Landing Gear Payments referred to in paragraph 9(vi) of Schedule “1”
hereto. Any cost in excess of such amount to be paid by Lessor pursuant to the
preceding sentence shall be Lessee’s sole responsibility and shall be promptly
paid by Lessee. Lessor will pay the Landing Gear Payments to Lessee for the
cost of such overhaul of the removed Landing Gear: (x) when Lessee
reinstalls such Landing Gear in the Airframe following such overhaul or (y) when
Lessee replaces such Landing Gear with a freshly overhauled landing gear that
meets the requirements of this Lease, including Article 6 hereof
(determined immediately after giving effect to such overhaul of the removed
Landing Gear and on the assumption that the removed Landing Gear had been
reinstalled in the Airframe). Lessee agrees to provide Lessor with a copy of
the warranties for the overhaul for approval by Lessor (which warranties shall
expressly be assignable to Lessor), which approval will not be unreasonably
withheld.

 

5.4.4       Foreign Object Damage to Engines.
If an Engine is required to undergo a Performance Restoration shop visit
following foreign object damage, Lessor shall reimburse the Performance
Restoration Payments theretofore paid by Lessee in respect of such Engine to
Lessee for the cost of such Performance Restoration shop visit as contemplated in Article 5.4.3(iii)(as
supplemented by Schedule “1”), subject to the following conditions:

 

(i)            Lessee
and the Approved Maintenance Performer confirm to Lessor that the Performance
Restoration is required as the result of the foreign object damage,

 

(ii)           Lessee provides Lessor with the workscope for
the Performance Restoration shop visit,

 

(iii)          the Approved Maintenance Performer confirms
to Lessor that the Performance Restoration shop visit has been completed in
accordance with the

 

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Engine manufacturer’s Trent 700 Engine Management
Programme for Airbus A330 aircraft,

 

(iv)          all
proceeds of insurance that are payable in connection with the foreign object
damage are first applied towards the cost of the Performance Restoration shop
visit, and the Performance Restoration Payments to be refunded by Lessor shall
only be applied to the remaining unpaid balance of the cost of the Performance
Restoration shop visit, and

 

(v)           the
Approved Maintenance Performer confirms to Lessor that it has been fully paid
for the cost of the Performance Restoration shop visit and will not assert a
Lien against the Engine or its records as a result of the shop visit.

 

When the conditions in clauses (i) through (v) have
been satisfied, Lessor will pay to Lessee the Performance Restoration Payments
in respect of such Engine referred to in paragraph 10 of Schedule “1” hereto.

 

5.4.5       Procedures for
Reimbursement. Prior to performing any maintenance or overhaul for
which Lessee will seek reimbursement under this Article 5.4, Lessee shall
submit to Lessor for approval an estimate of the cost of such maintenance or
overhaul to be performed by an Approved Maintenance Performer. Estimates and
invoices submitted for maintenance and overhaul work to be paid for out of the
applicable Maintenance Payments shall contain billing only in respect of the
Airframe, the Engine(s), the APU or the Landing Gear, and shall contain or be
accompanied with the following substantiating data or reasonable equivalent (to
the extent such data is applicable):

 

Invoice:

 

(i)                                    work
scope (routine, non-routine, hard time items, materials)

(ii)                                 vendor
repair and overhaul instructions

(iii)                             engine removal message and
report

(iv)                             vendor
invoice and billing summary (and for Engines, broken down by major modules)

(v)                                 list
of airworthiness directives and service bulletins accomplished during
maintenance visit, and cost breakdown for each

(vi)                              insurance
claims submitted

(vii)                          date of
removal

(viii)                       reason for
removal

(ix)                               Flight
Hours and Cycles since last shop visit and since new

(x)                                  data
supporting Lessee payment of invoices must be submitted for reimbursement

(xi)                               FAA
Form 337 (or EASA equivalent)

(xii)                            FAA
8130-3 Serviceable Tag (or EASA Form 1)

(xiii)                        vendor
tear down report

(xiv)                        current
disk sheet for engine

(xv)                           total
Flight Hours and Cycles at removal for the relevant maintenance event

 

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(xvi)                         for
Engines, work description per major module, test cell results (including EGT
margin), post-test cell full gas path borescope inspection results

 

Provided no Event or Event of Default has occurred and
is continuing, within fifteen (15) Business Days after receipt of the invoice
for such maintenance or overhaul work for an Item of Equipment, APU, Landing
Gear or for the purchase of an Engine life-limited Part, with the required accompanying
data, and provided that Lessee has paid such invoice amount in full, Lessor
will reimburse Lessee for such invoice amount for such Item of Equipment, APU,
Landing Gear or Engine life-limited Part, out of the applicable Maintenance
Payments theretofore paid to Lessor with respect to such Item of Equipment,
APU, Landing Gear or Engine life-limited Part, except for any amounts which are
materially inconsistent with the estimate previously approved by Lessor (and as
to such amounts Lessor and Lessee agree to seek to resolve any such disputes as
expeditiously as possible). Alternatively: 
(i) if Lessee has paid a portion of the invoice amount and if such
amount paid by Lessee, together with the amount to be paid by Lessor hereunder,
will constitute full payment for such maintenance or overhaul work or (ii) whether
or not Lessee has paid a portion of the invoice amount, if the amount to be
paid by Lessor hereunder will constitute full payment for such maintenance or
overhaul work, and (iii) in either case, provided Lessor is satisfied that
the Approved Maintenance Performer will release the Aircraft free of Liens upon
receipt of such payment from Lessor, Lessor will pay such amount directly to
the Approved Maintenance Performer if so requested by Lessee. Lessee
acknowledges and agrees that in the event the cost of such overhaul or
maintenance for an Item of Equipment, APU, Landing Gear or the cost of an
Engine life-limited Part exceeds the unused balance of the applicable
Maintenance Payments theretofore paid to Lessor for such Item of Equipment,
APU, Landing Gear or Engine life-limited Part, Lessee shall be solely
responsible for and shall have paid such excess amount, without affecting any
of Lessee’s other obligations hereunder or entitling Lessee to any further
claim for reimbursement in respect thereof.

 

5.4.6                     Character
of Maintenance Payments. Lessee acknowledges that the Maintenance
Payments constitute additional Rent payable for the use of the Equipment and
such Maintenance Payments shall become the unencumbered property of Lessor upon
payment thereof by Lessee, except as otherwise expressly set forth herein, free
of any claims or right, title or interest therein or thereto by Lessee. Lessor
acknowledges, however, that to the extent of the unused balance of the
applicable Maintenance Payments paid to Lessor for an Item of Equipment, APU,
Landing Gear or Engine life-limited Part, as the case may be, Lessor is
obligated to pay the invoices submitted to Lessor for maintenance for such Item
of Equipment, APU or Landing Gear, or for the payment of such life-limited
Part, as the case may be, contemplated by Article 5.4, upon and subject to
the terms and conditions of Article 5.4. If Maintenance Payments are used
to pay for the cost of any maintenance or life-limited Parts replacement
contemplated in Article 5.4, any recoveries from Manufacturer or any
subcontractor, vendor or supplier in respect thereof shall be reimbursed to
Lessor.

 

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5.4.7                     Additional Exclusions from Reimbursement. Notwithstanding
anything in this Article 5.4 to the contrary, none of the Maintenance
Payments will be available to pay for:  (A) any
maintenance or Parts replacement required as the result of foreign object
damage (except with respect to the Engines to the extent provided in Article 5.4.4),
or (B) taxes or shipping and handling charges or the like incurred in
connection with any of the foregoing maintenance or overhaul or purchase of
life-limited Parts.

 

5.4.8                     No
Inspection Obligation of Lessor.  NEITHER LESSOR NOR ANY
PARTICIPANT SHALL HAVE ANY DUTY TO DETERMINE WHETHER ANY ITEM OF EQUIPMENT, APU
OR LANDING GEAR IS REQUIRED TO BE OVERHAULED OR MAINTAINED, OR TO OBSERVE OR
INSPECT THE MAINTENANCE OF ANY ITEM OF EQUIPMENT, APU OR LANDING GEAR, AND
NEITHER LESSOR NOR ANY PARTICIPANT SHALL INCUR ANY LIABILITY OR OBLIGATION BY
REASON OF THE FAILURE OF ANY EQUIPMENT TO BE PROPERLY MAINTAINED OR BY REASON
OF ITS ELECTION TO OBSERVE OR INSPECT OR NOT TO OBSERVE OR INSPECT ANY OVERHAUL
OR MAINTENANCE OF ANY EQUIPMENT.

 

5.4.9                     Reimbursement
Following Aircraft Return. Lessee shall be irrevocably barred from
requesting Lessor to reimburse Lessee or pay any amounts from the Maintenance
Payments following the date Lessee returns the Aircraft to Lessor at the end of
the Term unless, on or prior to such date, Lessee notifies Lessor in writing
that such request(s) for reimbursement are forthcoming and such notice
sets forth the details of the anticipated request(s), i.e., the relevant
Item of Equipment involved, the maintenance task(s) involved, and the
anticipated cost thereof (but, for the avoidance of doubt, Lessee’s request for
reimbursement shall not be limited to the anticipated amount set forth in
Lessee’s notice to Lessor, which is merely Lessee’s good faith estimate of the
anticipated cost). So long as Lessee has provided such notice to Lessor, Lessee
shall be allowed to submit invoices thereafter received for the relevant Item(s) of
Equipment and maintenance tasks described in Lessee’s notice to Lessor, but
only until the date that is twelve (12) months after the end of the Term. Thereafter,
Lessee shall be barred from requesting any reimbursement.

 

5.4.10              Monthly Reports.
Together with each monthly Maintenance Payment, Lessee shall notify Lessor of
the number of Flight Hours and Cycles which have been accumulated on the
Airframe, each Engine, the Landing Gear and the APU, respectively, during the
preceding calendar month, and Lessee shall provide Lessor with such supporting
or other information and documentation as Lessor may from time to time request.

 

5.4.11              Non-Payment in
Event of Default. Any amount referred to in Article 5.4 which is
payable to Lessee shall not be paid to Lessee if at the time of such payment an
Event or an Event of Default shall have occurred and be continuing. In such
event, all such amounts shall continue to be held by Lessor as security for the
performance by Lessee of its obligations under this Lease and under any
Companion Lease or, at Lessor’s option,

 

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applied by Lessor toward payment of any of such
obligations of Lessee at the time due hereunder or under the Companion Lease as
Lessor may in its sole discretion elect. At such time as Lessee shall have
cured all Events and Events of Default, all such amounts at the time held by
Lessor which should have been distributed to Lessee, in excess of the amounts,
if any, which Lessor shall have elected to apply as above provided, shall be
paid to Lessee.

 

5.5  Registration and Insignia.
Lessee agrees that it will, on behalf of Lessor and at Lessee’s expense,
forthwith upon delivery of the Aircraft, cause the Aircraft to be duly
registered, and at all times thereafter to remain duly registered, in
accordance with Title 49 of the United States Code, as amended. Lessor agrees
that throughout the Term, Lessor will either be and remain a Citizen of the
United States or shall otherwise be qualified to register the Aircraft without
restricting Lessee’s operational use of the Aircraft, so that the Lessee will
be able to comply with the requirements of this Article 5.

 

Upon delivery of the Aircraft and throughout the Term,
unless Lessor otherwise directs, Lessee shall cause (provided Lessor has
notified Manufacturer of the appropriate details within any time period
required by the Manufacturer) to be fastened and maintained in the cockpit of
the Aircraft adjacent to the airworthiness certificate for the Aircraft, in a
prominent location, a metal nameplate satisfactory to Lessor bearing the
legend:

 

“THIS AIRCRAFT IS OWNED BY [OWNER NAME]

C/O AWAS (IRELAND) LIMITED

AND SUBJECT TO A MORTGAGE INTEREST IN

FAVOR OF [MORTGAGEE NAME]”

 

and Lessee shall also cause (provided Lessor has
notified Manufacturer of the appropriate details within any time period
required by the Manufacturer) to be fastened and maintained on each Engine, in
a prominent location, metal nameplates satisfactory to Lessor bearing the
legend:

 

“THIS ENGINE IS OWNED BY [OWNER NAME]

C/O AWAS (IRELAND) LIMITED

AND SUBJECT TO A MORTGAGE INTEREST IN

FAVOR OF [MORTGAGEE NAME]”

 

Except as above provided, Lessee will not allow the
name of any person, firm or corporation to be placed on the Airframe or any
Engine as a designation that might be interpreted as a Lien thereon; provided,
however, Lessee may cause the Airframe or any Engine to be lettered in an
appropriate manner for convenience of identification of the interest of Lessee
therein.

 

5.6                               Transfer
of Engines Within Lessee’s Fleet. So long as no Event or Event of
Default shall have occurred and be continuing, Lessee may install an Engine on
an airframe owned by Lessee free of Liens or leased to Lessee or owned by
Lessee subject to a security agreement or mortgage or purchased by Lessee
subject to a conditional sale agreement, provided that (i) such

 

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airframe is (and for so long as it continues to be)
free and clear of all Liens, except, in the case of a leased aircraft or
aircraft subject to a security interest, mortgage or conditional sale, the
rights of the parties to the lease, security agreement, mortgage or conditional
sale agreement covering such airframe, (ii) prior to such installation on
a leased aircraft or aircraft subject to a security interest, mortgage or
conditional sale, Lessor shall have received from the lessor, secured party,
mortgagee or conditional seller of such airframe a written agreement (which may
be the lease, security agreement, mortgage or conditional sale agreement
covering such airframe), in form and substance reasonably satisfactory to
Lessor, whereby such lessor, secured party, mortgagee or conditional seller
expressly agrees that neither it/they nor its/their successors or assigns will
acquire or claim any right, title or interest in any Engine by reason of such
Engine being installed on such airframe at any time while such Engine is
subject to this Lease or is owned by Lessor, (iii) upon request of Lessor, Lessor shall have
received from counsel for Lessee reasonably acceptable to Lessor an opinion, in
form and substance reasonably satisfactory to Lessor, based on applicable law,
to the effect that the lessor, secured party, mortgagee or conditional seller
of such airframe will not acquire any right, title or interest in such Engine
by reason of such Engine being installed on such airframe at any time while
such Engine is subject to this Lease or is owned by Lessor, and (iv) Lessee
maintains insurance in respect of the Engine while it is installed on such
airframe for the Stipulated Loss Value set forth in paragraph 2 of Schedule “1”
hereto and otherwise on terms acceptable to Lessor in its reasonable
discretion.

 

Lessor hereby agrees for the benefit of any lessor of
any engine leased to Lessee or any secured party or mortgagee of an engine
owned by Lessee subject to a security interest or mortgage granted by Lessee or
any conditional seller of an engine purchased by Lessee subject to a
conditional sale agreement that neither Lessor nor its successors or assignees
will acquire or claim, as against such lessor, secured party, mortgagee or
conditional vendor, or its assignee, any right, title or interest in any engine
owned by such lessor under such lease or subject to a security interest,
mortgage or conditional sale interest in favor of such secured party, mortgagee
or conditional seller under such security agreement, mortgage or conditional
sale agreement as the result of such engine being installed on the Airframe at
any time while such engine is subject to such lease, security interest,
mortgage or conditional sale agreement.

 

Nothing in this Article 5.6 shall diminish or otherwise
affect any of Lessee’s obligations otherwise required to be performed or
observed by it under this Lease.

 

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5-15

 

ARTICLE
6.                             REPLACEMENT
AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND ADDITIONS.

 

6.1                               Replacement
of Parts.

 

6.1.1                     Required Replacement.  Lessee, at its own cost
and expense (but subject to Article 5.4), will promptly replace all Parts
which may from time to time become unserviceable, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for
use for any reason whatsoever.

 

6.1.2                     Optional Removal.  In the ordinary course of maintenance,
service, repair, overhaul or testing, Lessee may at its own cost and expense
remove any Parts, whether or not unserviceable, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for
use, provided that Lessee shall replace such Parts as promptly as practicable
and in any event within sixty (60) days after removal or, if earlier, on the
expiration or earlier cancellation or termination of the Term. For the
avoidance of doubt, Lessee may not remove any Part or permit any Part to
be removed from the Aircraft for the purpose of installing such Part on
any other aircraft or engine in order to operate such other aircraft or engine
while the Aircraft or an Engine leased hereunder is undergoing maintenance or is
otherwise not in use, unless Lessee complies with all of the following
conditions:  (i) such Part is
removed from the Aircraft and installed on another aircraft in Lessee’s fleet
in order to avoid a grounding of such other aircraft (“AOG aircraft”), (ii) Lessee,
after reasonable effort, is not able to otherwise obtain the required part
within the available ground time for the AOG aircraft, and (iii) the
original Part is re-installed (or a replacement part complying with all
the requirements hereof for replacement parts is installed) in the Aircraft as
soon as practicable and in any event within ten (10) days after removal
or, if earlier, on the expiration or earlier cancellation
or termination of the Term.

 

6.1.3                     Requirements for Replacement Parts.  Each replacement
part shall:

 

(i)                                     be
free and clear of all Liens and shall be in as good operating condition as, and
shall have a value, utility, modification status and service bulletin
accomplishment status and useful life at least equal to, the Part replaced,
assuming such replaced Part was in the condition and repair and had the
value, utility, modification status and useful life required to be maintained
by the terms hereof;

 

(ii)                                  have
a current valid FAA 8130-3 or EASA Form 1 serviceable tag of the manufacturer
or maintenance repair facility providing such part to Lessee, identifying the
manufacturer, vendor, part number, make, model and serial number, as well as
the accumulated hours or cycles and whether such part is new, serviceable or
overhauled;

 

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(iii)                               not
have total hours and cycles accumulated thereon since new that are greater than
the total hours and cycles accumulated on the Part to be replaced thereby;
and

 

(iv)                              not
have less hours or cycles remaining thereon until refurbishment or replacement
than the Part to be replaced thereby.

 

6.1.4                     Temporary Replacement Parts.                       Lessee
may temporarily replace any Part that has become
unserviceable, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use with a part that does
not meet the requirements of Article 6.1.3 or 6.1.5 if a complying part
cannot be obtained within the available ground time of the Aircraft, provided
the original Part is re-installed or the non-complying part is removed and
replaced by a complying part as soon as practicable and in any event within
sixty (60) days or, if earlier, on the expiration or earlier cancellation
or termination of the Term.

 

6.1.5                     Life-Limited Replacement Parts.               Except as
provided in Article 6.1.4, Lessee shall ensure that no part that is a life-limited
part shall be installed on the Airframe or any Engine after the
Delivery Date unless such part is new or Lessee has complete certified,
back-to-birth records.

 

6.1.6                     Removal of Parts; Title.                All Parts at any time removed from the
Aircraft, Airframe or any Engine shall remain the property of Lessor, no matter
where located, until such time as such Parts shall be replaced by parts which
have been paid for by Lessee and incorporated or installed in or attached to
the Aircraft, Airframe or such Engine in compliance with the requirements for
replacement parts specified herein.

 

Immediately upon any replacement part paid for by
Lessee becoming incorporated or installed in or attached to the Aircraft,
Airframe or an Engine as above provided, without further act:

 

(i)                                     title
to such replacement part shall thereupon vest in Lessor,

 

(ii)                                  such
replacement part shall become subject to this Lease and be deemed part of the
Aircraft, Airframe or such Engine, as the case may be, for all purposes hereof
to the same extent as the Part originally incorporated or installed in or
attached to the Aircraft, Airframe or such Engine, and

 

(iii)                               title to the removed Part shall
thereupon vest in Lessee, free and clear of all rights of Mortgagee and Lessor,
and shall no longer be deemed a Part hereunder.

 

If any replacement Part is paid for by Lessor
pursuant to Article 5.4, such replacement Part and the Part replaced
thereby shall be and remain the property of Lessor, and Lessee will assist
Lessor in all reasonable respects to preserve, store, overhaul or dispose of
such replaced Parts, all as may be reasonably directed by Lessor.

 

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6.2                               Pooling
of Parts. Any Part may be removed from the Airframe or an Engine
as provided in this Article 6 and replaced by a replacement part that is
subject to a normal pooling arrangement customary in the airline industry
entered into in the ordinary course of Lessee’s business with an air carrier
approved by Lessor, provided Lessee, at its expense, as promptly thereafter as
possible either:

 

(i)                                     causes
title to such replacement part (which must comply in all respect with Article 6.1.3
and 6.1.5) to vest in Lessor in accordance with Article 6.1.6 by Lessee
acquiring title thereto for the benefit of, and transferring such title to,
Lessor free and clear of all Liens; or

 

(ii)                                  replaces
such replacement part by incorporating or installing in or attaching to the
Airframe or such Engine a further replacement part owned by Lessee free and
clear of all Liens (which must comply in all respect with Article 6.1.3
and 6.1.5) and causing title to such further replacement part to vest in Lessor
in accordance with Article 6.1.6.

 

6.3                               Alterations,
Modifications and Additions.

 

6.3.1                     Required
Modifications.              Lessee,
at its own expense, shall make such alterations and modifications in and
additions to the Equipment, and shall perform and comply with all airworthiness
directives from time to time issued by the Aeronautics Authority, all FAR
requirements and all mandatory, alert or Manufacturer recommended service
bulletins (and all service bulletins which are required to be performed to
maintain the warranties for the Equipment) as may be issued from time to time,
to meet the requirements of the Manufacturer, the Engine manufacturer and the
other vendors in respect of the Equipment and the standards and airworthiness
directives of the Aeronautics Authority and any other Governmental Entity
having jurisdiction. For the avoidance of doubt, Lessor shall not be obligated
to contribute towards the cost of any inspections, modifications, shop visits,
repairs or alterations required to be performed in respect of the Aircraft,
whether in connection with any maintenance contemplated in Article 5.4,
any airworthiness directives or service bulletins, or otherwise.

 

6.3.2                     Optional Modifications.                 Lessee, at its own expense, may from
time to time make such alterations and modifications in and additions to each
Item of Equipment as Lessee may deem desirable in the proper conduct of its
business, provided that no such alteration, modification or addition:

 

(i)                                     materially
and adversely alters the specification, structure or performance of the
Aircraft;

 

(ii)                                  adversely
affects the interchangeability or replaceability of Parts;

 

(iii)                               invalidates any
warranties applicable to the Aircraft; or

 

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(iv)                              in
any other way diminishes the value, utility or useful life of any Item of
Equipment or impairs the condition or airworthiness thereof below the value,
utility, useful life, condition and airworthiness thereof immediately prior to
such alteration, modification or addition, assuming such Item of Equipment was
then of the value, utility and useful life and in the condition and
airworthiness required to be maintained by the terms of this Lease.

 

In addition to the foregoing, Lessee must obtain
Lessor’s prior written consent to any alteration, modification or addition to
the Airframe or any Engine contemplated by this Article 6.3.2, if the
aggregate cost thereof exceeds $350,000 (or the
equivalent in any other currency).

 

6.3.3.                  Title to
Modifications, Additions, etc.  Title to all Parts
incorporated or installed in or attached or added to any Item of Equipment as
the result of any alteration, modification or addition shall, without further
act, vest in Lessor; provided, however, that so long as no Event or Event of
Default shall have occurred and be continuing, at any time during the Term in
effect for an Item of Equipment, Lessee may remove any Part from such Item
of Equipment, provided that:

 

(i)                                     such
Part is in addition to, and not in replacement of or in substitution for,
any Part originally incorporated or installed in or attached to such Item
of Equipment at the time of the delivery thereof hereunder or any Part in
replacement of, or substitution for, any such Part;

 

(ii)                                  such
Part is not required to be incorporated or installed in or attached or
added to such Item of Equipment pursuant to the terms of Article 5.2.1(i) or
5.3 or Article 6.3.1; and

 

(iii)                               such Part can be
removed from such Item of Equipment without causing any material damage thereto
and without diminishing or impairing the value, utility, useful life,  condition or airworthiness which such Item of
Equipment would have had at such time had such alteration, modification or addition
not occurred.

 

Upon the removal by Lessee of any such Part as
above provided, title thereto shall, without further act, vest in Lessee and
such Part shall no longer be deemed a Part hereunder. Any Part not
removed by Lessee as above provided prior to the return of the Item of
Equipment to Lessor hereunder shall remain the property of Lessor. In any
event, neither Lessor nor any Participant shall bear any liability or cost for
any alteration, modification, addition, or for any grounding or suspension of
certification of any Item of Equipment or for loss of revenue.

 

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6-4

 

ARTICLE
7.                             INSPECTION;
FINANCIAL INFORMATION; RECORDS.

 

7.1                               Information
and Inspection. During the Term of this Lease, Lessee shall furnish to
Lessor such additional information concerning the location, condition, use and
operation of each Item of Equipment as Lessor may reasonably request, and
Lessee shall permit any person designated by Lessor in writing, at Lessor’s
expense, to inspect each Item of Equipment, its condition, use, and operation
and the records maintained in connection therewith, and to visit and inspect
the facilities and to discuss the business affairs and finances of Lessee with
the principal officers of Lessee, to the extent the same relate to Lessee’s
ability to perform its obligations hereunder, all at such reasonable times and
as often as Lessor may reasonably request; 
provided, however, if an Event of Default has occurred and is continuing
Lessee shall reimburse Lessor for all reasonable costs and expenses incurred in
conducting such inspection (for an inspection team of no more than five). Lessee
shall also provide Lessor with at least sixty (60) days’ prior written notice
of the time and place at which the Airframe shall undergo any major check
(i.e., any “C” check or above). Neither Lessor nor any Participant shall have
any duty to make any such inspection and shall not incur any liability or
obligation by reason of not making such inspection. Any such inspection, whether at Lessee’s facilities, during the “C”
check, or otherwise, shall not interfere with Lessee’s normal operation or the
performance of the relevant maintenance check, as applicable.

 

7.2  Financial and Other Information.
From the date this Lease is entered into between Lessor and Lessee, Lessee
shall furnish Lessor with the following (unless available to Lessor via the
internet and Lessee has so advised Lessor):

 

(i)                                     within
sixty (60) days (or, if Lessee has obtained an extension of time from the
Securities and Exchange Commission to file its Form 10-Q, within 90 days)
after the end of each of the first three fiscal quarters of each fiscal year of
Holdings, a copy of the Form 10-Q filed by Holdings with the Securities
and Exchange Commission for such quarterly period, or if no Form 10-Q
shall have been filed for such quarterly period, its consolidated balance sheet
and related statements of operations, stockholders’ equity and cash flows as of
the end of and (in the case of the statement for operations) for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in
comparative form the figures for the corresponding period or periods (or, in
the case of the balance sheet, as of the end of the corresponding period or
periods) of the previous fiscal year, all certified by one of Holdings’
financial officers as presenting fairly in all material respect the financial
condition and results of operations of Lessee and its consolidated subsidiaries
on a consolidated basis in accordance with GAAP, subject to normal year-end
audit adjustments and the absence of footnotes;

 

(ii)                                  within
ninety (90) days (or, if Lessee has obtained an extension of time from the
Securities and Exchange Commission to file its Form 10-K, within 120 days)
after the end of each fiscal year of Holdings, a copy of the Form 10-K
filed by Holdings with the Securities and Exchange Commission for such fiscal
year, or if

 

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SEC

 

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no Form 10-K shall have been filed for such
fiscal year, its audited consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the close of and for such
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by independent public accountants of
recognized national standing to the effect that such consolidated financial
statements present fairly in all material respects the consolidated financial
condition and results of operations of Lessee and its consolidated subsidiaries
on a consolidated basis in accordance with GAAP;

 

(iii)                               together with each set
of financial statements referred to in clauses (i) and (ii), a certificate
signed by a principal officer of Lessee, to the effect that such officer has
reviewed the relevant terms of this Lease and has made, or caused to be made
under his supervision, a review of the transactions and condition of Lessee
during the accounting period covered by such financial statements, and that
such review has not disclosed the existence during such accounting period, nor
does such officer have any knowledge of the existence, as at the date of such
certificate, of any condition or event which constitutes an Event or an Event
of Default, or, if such condition or event which constitutes an Event or an
Event of Default existed or exists, specifying the nature and period of
existence thereof and what action Lessee has taken or is taking or proposes to
take with respect thereto; and

 

(iv)                              such
other data and information as Lessor may from time to time reasonably request.

 

7.3                               Reports
of Aircraft Use. Within fifteen (15) days following the end of each
calendar month throughout the Term and at the time of return of the Aircraft to
Lessor, Lessee shall:

 

(i)                                     notify
Lessor of the number of Flight Hours and Cycles which have been accumulated on
the Airframe, each Engine, the Landing Gear and the APU, respectively, during
the preceding calendar month; and

 

(ii)                                  provide
Lessor with details of:  (A) replacement
of Engine, APU, Landing Gear and control surface changes (and the reason for
such changes), (B) major repairs, modifications, alterations and additions
to an Item of Equipment, (C) service bulletins and airworthiness
directives applicable to and accomplished with respect to any Item of
Equipment, and (D) copies of any repair or modification drawings or data
covering any unique or nonstandard modifications to an Item of Equipment, in
each case with respect to such preceding calendar month. For the avoidance of
doubt, Lessee is not required to report to Lessor with respect to any of the
events described in clauses (A) through (D) for any calendar month if
any such event did not occur in such calendar month.

 

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7-2

 

ARTICLE
8.                             INDEMNIFICATION
BY LESSEE.

 

8.1                               General
Indemnity. Lessee agrees to pay, and on demand to indemnify and hold
harmless, Lessor, each Participant and the Lenders, and their respective
officers, directors, managers, employees, servants, agents, shareholders,
Affiliates, successors, assigns and transferees (individually, an “Indemnitee”),
from and against any and all claims, damages, losses, liabilities (including,
but not limited to, any claim or liability for strict liability in tort or
otherwise, including, without limitation, liability arising under any
applicable environment, noise or pollution control statute, rule or
regulation), demands, suits, judgments, causes of action and all legal
proceedings, whether civil or criminal, penalties, fines and other sanctions,
and any costs and expenses incurred in connection therewith, including
reasonable attorney’s fees, which may directly or indirectly result from,
relate to or arise out of the assigned portions of the Purchase Agreement, this
Lease or the condition, ownership, manufacture, purchase, design, demonstration
flight, inspection, delivery, nondelivery, acceptance, nonacceptance,
rejection, import, export, registration, lease, sublease, possession, control,
storage, return, transportation, disposition, use or operation of any Item of
Equipment (except as to an Indemnitee for claims that are the result of the
gross negligence or willful misconduct of such Indemnitee), or which may be
caused by any malfunction or defect in any Item of Equipment, latent or
otherwise, arising from the material or any article used therein or from the
design, testing or use thereof or from any maintenance, service, repair,
overhaul, improvement, modification or alteration thereof, regardless of when
such defect shall be discovered, whether or not such Item of Equipment is at
the time in the possession of Lessee and wherever located.

 

Notwithstanding anything to the contrary contained in
this Article 8.1, the indemnification provided for in this Article 8.1
shall only apply to events or circumstances which:

 

(i)                                     occur
prior to the expiration or sooner cancellation or termination of this Lease and
return of the Aircraft pursuant to the terms hereof, regardless of when
asserted;

 

(ii)                                  are
caused by or attributable to acts or omissions of Lessee, or any of its
officers, directors, employees, servants, agents, contractors or Affiliates; or

 

(iii)                               are not covered under Article 8.4.

 

8.2                               Withholding
Tax Indemnity. Lessee agrees that each payment of Rent payable by
Lessee pursuant to this Lease shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future taxes,
fees and other charges of any nature whatsoever now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Entity and required
to be withheld or deducted from any Rent payable by, or on behalf of, Lessee
hereunder, and Lessee shall indemnify, defend and hold harmless Lessor, on an
after-tax basis, with respect to any withholding taxes whenever imposed (all
such taxes, fees and other charges being herein referred to as “Withholding
Taxes”). If any Withholding Taxes are

 

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8-1

 

required by operation of Law or otherwise to be
withheld or deducted from any Rent payment payable by Lessee hereunder, Lessee
shall:

 

(i)                                     make
the appropriate withholding and pay to the appropriate Governmental Entity the
amount of such Withholding Taxes, and make such reports and filings in
connection therewith in the time and manner required by applicable Law; and

 

(ii)                                  pay
to Lessor such additional amounts as Rent as will be necessary to result in the
receipt by Lessor, on the due date for payment of such Rent payment, of all
sums necessary to enable Lessor to receive and retain, after such withholding
and after deduction by Lessor for any taxes (domestic or foreign) that may be required
to be paid as the result of Lessor’s receipt or accrual of such additional
amounts payable by Lessee, the amount that Lessor would have received and
retained had no such deduction or withholding been required; and

 

(iii)                               promptly furnish to
Lessor an official receipt or other documentation evidencing payment of such
Withholding Taxes to such Governmental Entity.

 

8.3                               Value
Added Taxes. All Basic Rent and other amounts payable by Lessee under
this Lease are exclusive of any value added tax, turnover tax or similar tax or
duty. If a value added tax or any similar tax or duty is payable in any
jurisdiction in respect of an Item of Equipment or any Basic Rent or other
amounts payable by Lessee under this Lease, Lessee will pay such value added
tax or similar tax or duty and indemnify Lessor against any claims for the same
and any related claims, losses or liabilities.

 

8.4                               General
Tax Indemnity.

 

8.4.1                     Indemnity.  In addition to the obligation to
indemnify Lessor in respect of Withholding Taxes pursuant to Article 8.2
and value added tax, turnover tax and similar taxes pursuant to Article 8.3,
and not by way of limiting Article 8.2 or Article 8.3, Lessee agrees
to pay, and on written demand to indemnify and hold harmless the Indemnitees
from all license, recording and registration fees and all sales, use, personal
property, stamp, documentary, customs, excise, income, consumption, value added
and other taxes, levies, imposts, duties, assessments, charges and withholdings
of any nature whatsoever, together with any penalties, fines, additions and
interest thereon (collectively, “taxes, fees and other charges”) imposed
against an Indemnitee, Lessee or any Item of Equipment or any part thereof by
any Governmental Entity (domestic or foreign), upon or with respect to any Item
of Equipment or any part thereof or upon or with respect to the purchase,
acceptance, ownership, delivery, registration, leasing, subleasing, possession,
use, operation, departure, landing, maintenance, repair, modification,
location, importation, exportation, sale, return, storage or other disposition
thereof, or upon or with respect to the rentals, receipts or earnings arising
therefrom or received with respect thereto, or upon or with respect to the
assigned portions of the Purchase Agreement or this Lease, and all costs and
expenses, including legal and accounting fees and disbursements, incurred in
connection therewith (including those that may be incurred in connection with

 

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the preparation and filing of any income tax or other
returns that Lessor may be required to file in the Country of Registration),
unless, but only so long as, such taxes, fees and other charges are being
contested by Lessee in good faith and by appropriate proceedings, so long as,
in Lessor’s reasonable judgment, such proceedings do not involve any danger of
the sale, forfeiture or loss of any Item of Equipment, or any interest therein.

 

8.4.2                     Exclusions from General Tax Indemnity.  Notwithstanding
anything to the contrary in Article 8.2, 8.3 or 8.4.1, Lessee shall not be
liable to indemnify an Indemnitee for or in respect of any of the following:

 

(i)                                     United States federal income taxes based on
or measured by the net income or gross receipts of such Indemnitee, or taxes in
lieu thereof (including minimum taxes and taxes on or measured by any item of
tax preference),

 

(ii)                                  income, business or franchise taxes imposed
by any jurisdiction in which such Indemnitee has its principal place of
business or is otherwise subject to such tax as a result of business
transactions or other presence unrelated to the transactions contemplated by
this Lease, except to the extent such taxes, fees, or other charges are imposed
solely as a result of: (A) the use, operation, location or registration of
any Equipment in such jurisdiction, (B) the place of incorporation,
commercial domicile, or other presence in such jurisdiction of Lessee, any
sublessee or any user of or person in possession of the Aircraft, the Airframe,
any Engine, any Part, or any part of any of the foregoing, or (C) any
payments made under this Lease or related documents being made from such
jurisdiction,

 

(iii)                               any taxes, fees, or other charges imposed
upon such Indemnitee who is a successor by merger, acquisition, spinoff,
assignment (pursuant to Article 17.7 hereof), divestiture or similar
transaction to an Indemnitee existing on the Delivery Date, to the extent that
such taxes, fees or other charges exceed the taxes, fees or other charges that
would have been imposed on the original Indemnitee; or

 

(iv)                              any taxes, fees, or other charges imposed
as the result of the voluntary or involuntary sale, transfer, assignment,
novation or other disposition by an Indemnitee of all or a portion of its
interest in this Lease or any Item of Equipment or any legal or beneficial
ownership of any Person that holds a direct or indirect interest in this Lease
or any Item of Equipment, unless such sale, transfer, assignment, novation or
other disposition occurs following the occurrence and during the continuance of
an Event of Default or Event of Loss, and in any event only to the extent such taxes, fees, or other charges are in excess
of the taxes, fees, or other charges that would have been imposed had there
been no such sale, transfer, assignment, novation or other disposition.

 

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8.4.3                     Contest.   If
a written claim is made against an Indemnitee or Lessee for any taxes, fees and
other charges, such Indemnitee or Lessee, as the case may be, shall within
thirty (30) days after receipt of such claim notify the other, but the failure
to so notify shall not affect Lessee’s obligations under this Article 8.4
except to the extent such failure actually or effectively precludes Lessee’s
right to contest such claim. If requested by Lessee in writing within thirty
(30) days after such notification, Lessor shall or shall cause such Indemnitee,
upon receipt of indemnity satisfactory to it and at the expense of Lessee
(including without limitation, all reasonable costs, expenses, losses, legal
and accounting fees and disbursements, penalties and interest) in good faith to
contest the validity, applicability or amount of such taxes, fees and other
charges in the forum selected by such Indemnitee by:

 

(i)                                  resisting
payment thereof if practicable; or

 

(ii)                               if
payment is made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings;

 

provided, that if an Indemnitee controls such
contest, Lessee may participate in such contest at its own expense; the
Indemnitee shall on request inform Lessee of all material developments in the
contest; the Indemnitee shall consult with Lessee regarding all material issues
of the contest and shall in reasonable good faith attempt to implement all
reasonable advice of Lessee regarding the resolution of the contest; and the Indemnitee
(unless required by law) shall not settle any contest or make any payments
regarding such contest without the consent of Lessee, provided that such
consent shall not be unreasonably withheld by Lessee); provided, however,
Lessor shall not be required to take or to cause any Indemnitee to take any
action to contest a claim unless:

 

(A)                           Lessee
provides Lessor, together with such written request, with an opinion of
independent tax counsel satisfactory to Lessor both as to counsel and
substance, to the effect that there is a meritorious basis for such contest;

 

(B)                             such
action to be taken will not result in the risk of an imposition of criminal
penalties or, in Lessor’s reasonable judgment, any risk of any sale, forfeiture
or loss of, or creation of any Lien on any Equipment, or any interest therein;

 

(C)                             no
Event or Event of Default shall have occurred and be continuing;

 

(D)                            if
such Indemnitee shall pay such tax and seek a refund, Lessee has advanced the
amount of such tax to such Indemnitee with respect to such advance;

 

(E)                              the
amount of the taxes at issue exceeds $25,000 (or the
equivalent in any other currency); and

 

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(F)                              Lessee
shall have provided such Indemnitee with a written acknowledgment of liability
if and to the extent that the contest is not successful.

 

8.4.4                     Refund.      If
an Indemnitee shall obtain a refund of all or any part of such taxes, fees and
other charges paid by Lessee, Lessor shall cause such Indemnitee to pay Lessee
the amount of such refund, after deducting all costs and expenses that were
incurred by such Indemnitee in connection therewith; provided that such amount
shall not be payable before such time as Lessee shall have made all payments
and indemnities then due hereunder. If in addition to such refund an amount
representing interest on the amount of such refund is received, Lessee shall be
paid that proportion of such interest which is fairly attributable to taxes,
fees and other charges paid by Lessee prior to the receipt of such refund;
provided, however, that no amount shall be payable under this or the preceding
sentence during any period in which an Event or an Event of Default has
occurred and is continuing. In case any report or return is required to be made
with respect to any obligation of Lessee under or arising out of Article 8,
Lessee will either make such report or return in such manner as will show the
interests of Lessor and the Participants in the Aircraft and send a copy of
such report or return to Lessor, or will notify Lessor of such requirement and
make such report or return in such manner as shall be satisfactory to Lessor.

 

If an Indemnitee (i) shall obtain a refund of all
or any part of any taxes, fees and other charges paid or reimbursed by Lessee
or (ii) shall realize and recognize a reduction in its liability for taxes
on or measured by net income due to the incurrence or payment of any taxes,
fees and other charges for which Lessee shall have indemnified such Indemnitee,
Lessor shall pay to Lessee (or if such Indemnitee is an Indemnitee other than
Lessor, Lessor shall cause such Indemnitee to pay to Lessee) an amount equal to
the lesser of (A) the sum of such refund (after deducting all costs and
expenses that were incurred by such Indemnitee and not reimbursed by Lessee for
the purpose of obtaining such refund) or tax saving plus any additional net tax
saving realized by such Indemnitee as a result of such payment and (B) the
amounts previously paid by Lessee to such Indemnitee pursuant to this Article 8.4,
less all prior payments made by such Indemnitee to Lessee pursuant to this
sentence, provided that such amount shall not be payable if and to the extent
that and only so long as any amount payable by Lessee to such Indemnitee
hereunder is due and unpaid. If in addition to such refund an amount
representing interest on the amount of such refund is received, Lessee shall be
paid that proportion of such interest which is fairly attributable to taxes,
fees and other charges paid or indemnified by Lessee prior to the receipt of
such refund; provided, however, that no amount shall be payable under this or
the preceding sentence during any period in which an Event or Event of Default
has occurred and is continuing; and, provided, further, that if an Indemnitee
loses any tax benefit or savings with respect to which payment has been made
pursuant to the foregoing provisions of this paragraph subsequent to any
payment to Lessee with respect thereto, Lessee shall indemnify such Indemnitee
with respect to such loss pursuant to the provisions of this Article 8.4
(but without regard to any exclusion thereof).

 

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8.5                               After-Tax
Nature of Indemnity. Lessee further agrees that any payment or
indemnity  by Lessee under this Article 8
shall include any amount necessary to hold the Indemnitees harmless on an
after-tax basis from all withholding taxes and other taxes, fees and other
charges required to be paid with respect to such payment or indemnity under the
Laws of any domestic or foreign Governmental Entity.

 

8.6                               Survival
of Indemnities. All of the obligations of Lessee under Article 8
shall continue in full force and effect notwithstanding the expiration or
sooner cancellation or termination of this Lease and are expressly made for the
benefit of, and shall be enforceable by, the Indemnitees and their successors
and assigns.

 

8.7                               Tax
Forms. Promptly following the written request of Lessee, Lessor (or any
assignee or transferee of Lessor, other than an assignee for security purposes)
shall provide Lessee a new, true, complete and accurate Form W-8BEN,
W-8ECI, W-9, or similar form, duly executed by the person(s) treated as
the recipient(s), for U.S. tax purposes, of the payments made by Lessee under
this Lease.

 

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8-6

 

ARTICLE
9.                             DAMAGE,
DESTRUCTION, REQUISITION, CONDEMNATION.

 

9.1                               Event
of Loss with Respect to Aircraft. From the time of delivery of the
Aircraft to Lessee hereunder until the return of the Aircraft to Lessor in
compliance with the requirements of Article 13 hereof, Lessee shall bear
all risks of loss or damage to the Aircraft, no matter how occasioned and from
every source or cause whatsoever. Upon the occurrence of an Event of Loss with
respect to the Airframe or the Airframe and any Engines or engines then
installed thereon, Lessee shall give Lessor prompt written notice thereof and
shall pay or cause to be paid to Lessor within ninety (90) days of such Event
of Loss all Basic Rent payments payable for the Aircraft (and all other accrued
and unpaid Rent) through the date of such payment, together with the Stipulated
Loss Value of the Aircraft, computed as of the Basic Rent payment date
immediately preceding such Event of Loss. At such time as Lessor has received
the foregoing sums:

 

(i)                                   the
obligation of Lessee to pay Basic Rent hereunder shall terminate;

 

(ii)                                the
Term for the Aircraft shall end; and

 

(iii)                             Lessor
will transfer or cause to be transferred to Lessee (or to the relevant
insurers, as the case may be), without representation, recourse or warranty of
any kind, express or implied (except a warranty that the Aircraft is free of
Lessor Liens and defects in title resulting from Lessor’s acts), all of Lessor’s
right, title and interest, if any, in and to the Aircraft.

 

9.2                               Event
of Loss with Respect to an Engine.

 

9.2.1           Replacement
Engine.  Upon the occurrence of an Event of Loss with
respect to an Engine not then installed on the Airframe, or in the Event of
Loss with respect to an Engine installed on the Airframe but not involving an
Event of Loss with respect to the Airframe, Lessee shall give Lessor prompt
written notice thereof and Lessee shall, as promptly as possible and in any
event within ninety (90) days after the occurrence of such Event of Loss, duly
convey to Lessor, as a
replacement for the Engine with respect to which such Event of Loss occurred,
title to another Rolls Royce Trent 772B engine, rated at 71,100 lbs. thrust,
owned by Lessee free and clear of all Liens and having a value, utility,
modification status and useful life at least equal to, and being in as good
operating condition (including (x) the incorporation of all airworthiness
directives and service bulletins on such engine as on the Engine with respect
to which such Event of Loss occurred, (y) no greater number of Flight
Hours or Cycles accumulated on such engine as compared to the Engine with respect to which such Event of Loss
occurred, and (z) having, in aggregate, no less Cycles remaining on the
life-limited parts of such engine as compared to the Engine with respect to
which such Event of Loss occurred, with no one life-limited part having less
than 95% of the Cycles (or 90% of the Cycles under the circumstances described
in and subject to the provisions of the last paragraph of this
Article 9.2.1) remaining thereon as compared to the Engine with respect to
which such Event of Loss occurred) as, the Engine with respect to

 

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9-1

 

which such Event of Loss occurred, assuming such
Engine was of the value, utility, modification status and useful life and in
the condition and repair required by the terms hereof immediately prior to the
occurrence of such Event of Loss; and in such case, Lessee, at its own expense,
will promptly:

 

(i)                                   furnish
Lessor with a bill of sale for such replacement engine, in form and substance
satisfactory to Lessor, and take such action, at Lessee’s expense and as Lessor
may request, to register such bill of sale with the International Registry;

 

(ii)                                execute
a supplement hereto in form and substance satisfactory to Lessor subjecting
such replacement engine to this Lease and cause the same to be duly recorded
pursuant to the Laws of the Country of Registration and with the International
Registry;

 

(iii)                             furnish
Lessor with evidence of Lessee’s title to such replacement engine (including,
if requested, an opinion of Lessee’s counsel) and of compliance with the
insurance provisions of Article 10 hereof with respect to such replacement
engine as Lessor may reasonably request; and

 

(iv)                            take
such other action as Lessor may reasonably request in order that title to such
replacement engine be duly and properly vested in Lessor and leased hereunder to the same extent as the Engine
replaced thereby.

 

Lessee shall cause such replacement engine to become
subject to the TotalCare Agreement to the same extent as if the replacement
engine had been delivered with the Aircraft on the Delivery Date, and shall
ensure that the replacement engine shall be eligible to become subject to an
equivalent TotalCare Agreement between the Engine manufacturer and Lessor, or
Lessee shall pay Lessor, on demand, an amount equal to the amount payable
pursuant to Paragraph 5(iii) of Schedule “1”, as such amount has been
adjusted to the date of payment pursuant to the provisions of this Lease, for each
Flight Hour accumulated on such engine to the date of payment since new, if
such engine has not undergone a Performance Restoration shop visit, or since
its last Performance Restoration shop visit if is has undergone a Performance
Restoration shop visit, and Lessee shall continue to pay Lessor Performance
Restoration Payments for such engine for each Flight Hour accumulated on such
engine thereafter in accordance with the provisions of this Lease.

 

Without limiting the
foregoing, if any life-limited part of the replacement engine has less Cycles
remaining thereon than on the life limited Parts of the Engine to be replaced
and as a result thereof such life-limited part is reasonably expected to cause
such replacement engine to undergo a Performance Restoration shop visit or a
shop visit to replace such life-limited part earlier than would have been
required if such life limited part(s) had at least the same number of
Cycles remaining thereon as on the life limited Part(s) of the 

 

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Engine to be replaced (each
such shop visit being hereafter referred to as a “Premature Visit”), Lessee
shall compensate Lessor as follows:

 

(a)                                  if the replacement engine is subject to the
TotalCare Agreement to the same extent as if the replacement engine had been
delivered with the Aircraft on the Delivery Date (and so long as the
replacement engine is eligible to become subject to an equivalent TotalCare
Agreement between the Engine manufacturer and Lessor following the expiration
or sooner termination of the Term), and
if the Premature Visit of such engine will occur during the Term, Lessee shall at the time of replacement of
such Engine compensate Lessor for the missing Cycles from such life-limited
part(s) of the replacement engine and for the lost utility of any other
life-limited part of the replacement engine that, in accordance with prudent
engine rebuild standards, will be replaced during the Premature Visit, in each
case using the then current Engine Life-Limited Parts Payment amount to
determine the amount of such compensation, and Lessee shall reconcile with the
Engine manufacturer for Performance Restoration shop visits for the replacement
engine under the TotalCare Agreement. If the Premature Visit of such engine
will not occur during the Term, Lessee shall at the time of replacement of such
Engine compensate Lessor for the amounts described above in this clause (a) and,
in addition, if it appears that the replacement engine will not remain subject
to the Engine manufacturer’s TotalCare Program following the end of the Term, then, at the time of
return of the Aircraft to Lessor at the end of the Term Lessee will also
compensate Lessor for the anticipated number of Flight Hours available on such
replacement engine that are expected to be lost as a result of such replacement
engine undergoing a Premature Visit involving Performance Restoration, such
compensation to be determined by multiplying the number of such Flight Hours by
an amount equal to the amount payable pursuant to Paragraph 5(iii) of
Schedule “1”, as such amount has been adjusted to the date of payment pursuant
to the provisions of this Lease; or

 

(b)                                 if the replacement engine is not subject to
the TotalCare Agreement (or is not eligible to become subject to an
equivalent TotalCare Agreement between the Engine manufacturer and Lessor
following the expiration or sooner termination of the Term), Lessee shall at the time of replacement of
such Engine:  (A) compensate Lessor
for the missing Cycles from such life-limited part(s) of the replacement
engine and the lost utility of any other life-limited part of the replacement
engine that, in accordance with prudent engine rebuild standards, will be
replaced during the Premature Visit, in each case using the then current Engine
Life-Limited Parts Payment amount to determine the amount of such compensation,
and (B) pay Lessor an amount equal to the amount payable pursuant
to Paragraph 5(iii) of Schedule “1”, as such amount has been adjusted to
the date of payment pursuant to the provisions of this Lease, for each Flight
Hour accumulated on such engine to the date of payment since new, if such
engine has not undergone a Performance Restoration shop visit, or since its
last Performance Restoration shop visit if is has undergone a Performance
Restoration

 

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9-3

 

shop visit, and Lessee shall continue to pay Lessor
Performance Restoration Payments for such engine for each Flight Hour
accumulated on such engine thereafter in accordance with the provisions of this
Lease.

 

Notwithstanding the
requirement in the first paragraph of this Article 9.2.1 that no
life-limited part of the replacement engine may have less than 95% of the
Cycles remaining thereon as compared to the life-limited Part(s) of the
Engine to be replaced, provided no one life-limited part of the replacement
engine has less than 90% of the Cycles remaining thereon as compared to the
life-limited Part(s) of the Engine to be replaced and such life-limited
part(s) is not reasonably expected to cause such replacement engine to
undergo a Premature Visit, Lessee shall at the time of replacement of such
Engine compensate Lessor for the missing Cycles, using the then current Engine
Life-Limited Parts Payment amount to determine the amount of such compensation.

 

9.2.2                     Transfer of Title to Engine.   Upon full
compliance by Lessee with the terms of Article 9.2.1, Lessor will transfer
to Lessee (or to the relevant insurers, as the case may be), without
representation, recourse or warranty of any kind, express or implied (except a
warranty that such Engine is free of Lessor Liens and defects in title
resulting from Lessor’s acts), all of Lessor’s right, title and interest, if
any, in and to the Engine with respect to which such Event of Loss occurred
and, for all purposes hereof, such replacement engine shall be deemed an “Engine”
as defined herein. No Event of Loss with respect to an Engine shall, except as
otherwise expressly provided in this Article 9, result in any reduction in
Basic Rent. If Lessee replaces an Engine that has been subjected to an Event of
Loss (the “Destroyed Engine”) with an engine that is new and unused (i.e., no
Cycles or Flight Hours accumulated thereon or on any part thereof), Lessor will
refund to Lessee the Performance Restoration Payments and Engine Life-Limited
Parts Payments that have theretofore been paid to Lessor in respect of the
Destroyed Engine, less the amount theretofore paid or for which Lessor
has any obligation to pay from such Performance Restoration Payments or Engine
Life-Limited Parts Payments in respect of any maintenance or purchase of
life-limited Parts contemplated by Article 5.4 hereof for the Destroyed
Engine. If Lessee replaces a Destroyed Engine with a used engine that has less
Flight Hours/Cycles accumulated thereon than the Destroyed Engine, Lessor and
Lessee shall in good faith consult with each other in the effort to determine
whether (and, if so, how much) Performance Restoration Payments and Engine
Life-Limited Parts Payments that have theretofore been paid to Lessor in
respect of the Destroyed Engine should be refunded to Lessee, all with the goal
that neither party should receive a windfall nor be at a disadvantage after
taking the overall condition and history of the replacement engine into account.
In any event, the Performance Restoration Payments and Engine Life-Limited
Parts Payments that have theretofore been paid to Lessor in respect of the
Destroyed Engine will be made available to Lessee for Performance Restoration
and life-limited Parts replacement of the replacement engine on the same terms
as if such replacement engine were the Destroyed Engine.

 

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9.3                               Application
of Payments from Governmental Entity in Respect of Event of Loss. Any
payments (other than insurance proceeds, the application of which is provided
for in Article 10 hereof) received at any time by Lessor or Lessee from
any Governmental Entity or other person with respect to an Event of Loss with
respect to any Item of Equipment will be applied as follows:

 

(i)                                   if
such payments are received with respect to an Event of Loss relating to the
Airframe or the Airframe and the Engines or engines installed on the Airframe,
after reimbursement to Lessor for all costs and expenses, including attorneys
fees, incurred in connection with such Event of Loss, so much of such payment
as shall not exceed the amounts due under Article 9.1 shall be applied in
reduction of Lessee’s obligation to pay such amounts, if not already paid by
Lessee, or, if already paid by Lessee, shall be applied to reimburse Lessee for
its payment of such amounts, and the balance, if any, of such payment remaining
thereafter will be paid over to or retained by Lessor; and

 

(ii)                                if
such payments are received with respect to an Engine under circumstances
contemplated by Article 9.2.1, so much of such payments remaining after
reimbursement to Lessor for all costs and expenses, including attorneys fees,
incurred in connection with such Event of Loss shall be paid over to, or
retained by, Lessee, provided that Lessee shall have fully performed or
concurrently therewith will fully perform the terms of Article 9.2.1.

 

9.4                               Application
of Payments During Existence of Event or Event of Default. Any amount
referred to in Article 9.3(i) or (ii) which is payable to Lessee
shall not be paid to Lessee or, if such amount has been previously paid to
Lessee, shall not be retained by Lessee, if at the time of such payment an
Event or an Event of Default shall have occurred and be continuing. In such
event, all such amounts shall be paid to and held by Lessor as security for the
performance by Lessee of its obligations hereunder and under the Companion
Lease or, at Lessor’s option, applied by Lessor toward payment of any of such
obligations of Lessee at the time due hereunder or thereunder as Lessor may
elect in its sole discretion. At such time as Lessee shall have cured all
Events and Events of Default, all such amounts at the time held by Lessor in
excess of the amounts, if any, which Lessor shall have elected to apply as
above provided shall be paid to Lessee.

 

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9-5

 

ARTICLE
10.                      INSURANCE.

 

10.1                        Liability
and Property Damage Insurance. Lessee will carry and maintain in effect
with respect to the Aircraft, at its own expense, with insurers of recognized
responsibility and substantial financial capacity acceptable to Lessor in its
sole discretion, comprehensive aircraft third party, passenger, baggage, cargo,
products, mail and airline general third party legal liability insurance (including,
inter alia, contractual liability), including war and allied perils as per AVN
52E (or war risks insurance provided by the U.S. Government per Chapter 443 war
risks insurance, as may exist from time to time (“FAA War Risks Insurance”), in
amounts which are not less than and of the types usually carried by companies
engaged in the same or similar business, similarly situated with Lessee, and
owning or operating similar aircraft and engines and which covers risks of the
kind customarily insured against by such companies, including, inter alia,
bodily injury and property damage of whatever nature; provided, however, in no
event shall such amounts of insurance coverage be less than a combined single
limit of liability of $1,000,000,000 for any one occurrence and in the
aggregate for products liability and AVN 52E (or FAA War Risks Insurance (or
such higher amounts as Lessor may from time to time reasonably require). In no
event shall Lessee discriminate against the Aircraft in respect of the amount
or other aspects of liability insurance for the Aircraft as compared to the
amount or other aspects of liability insurance for other similar aircraft in
Lessee’s fleet.

 

10.2                        Insurance
Against Loss or Damage to Aircraft. Lessee shall carry and maintain in
effect, at its own expense, with insurers of recognized responsibility and
substantial financial capacity acceptable to Lessor in its sole discretion,
all-risk ground, flight, taxiing and ingestion aircraft hull insurance on an
agreed value basis covering the Aircraft, and all-risk insurance on an agreed
value basis with respect to the Engines while not installed in the Aircraft and
on a full replacement cost basis with respect to Parts while not installed in
the Aircraft, in each case which is of the type and in substantially the
amounts usually carried by companies engaged in the same or similar business
and similarly situated with Lessee, and shall include war risk insurance (or
FAA War Risks Insurance) covering the perils of:

 

(i)                                   war,
invasion, acts of foreign enemies, hostilities (whether war be declared or
not), civil war, rebellion, revolution, insurrection, martial law, military or
usurped power, or attempts at usurpation of power;

 

(ii)                                strikes,
riots, civil commotions or labor disturbances;

 

(iii)                             any
act of one or more persons, whether or not agents of a sovereign power, for
political or terrorist purposes and whether the loss or damage resulting
therefrom is accidental or intentional;

 

(iv)                            any
malicious act or act of sabotage;

 

(v)                               confiscation,
nationalization, seizure, restraint, detention, appropriation, requisition for
title or use by or under the order of any Governmental Entity 

 

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10-1

 

(whether civil, military or de facto) and/or public or
local authority including the government of the Country of Registration; and

 

(vi)                            hijacking
or any unlawful seizure or wrongful exercise of control of the Aircraft or crew
in flight (including any attempt at such seizure or control) made by any person
or persons on board the Aircraft acting without the consent of Lessee;

 

provided, however, that all
hull insurance required by this Article 10.2 shall at all times while the
Aircraft is subject to this Lease be for an amount not less than the Stipulated
Loss Value from time to time computed for the Aircraft. Lessee may self-insure,
by means of a deductible or similar clause, the aircraft hull risk required to
be insured against pursuant to this Article 10.2, provided that the amount
of such self-insurance shall not exceed the lesser of $1,000,000 for any one
occurrence or the lowest amount of self-insurance/deductible applying to any
similar aircraft in Lessee’s fleet. All of the foregoing insurance policies
required under this Article 10.2 shall provide that any loss which exceeds
$1,000,000 shall be adjusted with Lessor and Lessee and shall be payable to the
order of Mortgagee in Dollars.

 

10.3                        Requirements
in Insurance Policies.

 

10.3.1              Requirements.                All insurance
policies carried in accordance with Article 10.1 and 10.2 and all policies
taken out in substitution or replacement for any such policies, shall:

 

(i)                                    be
subject to Lessor’s approval;

 

(ii)                                 include
a waiver of any rights of subrogation, set-off, counterclaim or other
deduction, whether by attachment or otherwise as against Lessor and each
Participant, and their respective successors and assigns (hereafter
collectively referred to as the “Additional Insureds”), and the Indemnitees (as
defined in Article 8.1);

 

(iii)                              name
the Additional Insureds and the Indemnitees in respect of the insurance carried
in accordance with Article 10.1 as additional insureds, as their
respective interests appear (but without imposing upon any such Additional
Insured or Indemnitee any obligation imposed upon the insured, including, inter
alia, the liability to pay the premium for such policies);

 

(iv)                             provide
that in respect of the interests of the Additional Insureds and Indemnitees in
such policies, the insurance shall not be impaired or invalidated by any action
or omission of Lessee or any other insured (other than action of such
Additional Insured), and shall insure the Additional Insureds and Indemnitees,
as their respective interests appear, regardless of any breach or violation by
Lessee or any other person (other than such

 

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Additional Insured) of
any warranties, declarations or conditions contained in such policies;

 

(v)                               provide
that if such insurance is canceled or terminated for any reason whatsoever or
is changed in any adverse material respect in relation to the interests of an
Additional Insured or if such insurance is cancelled for nonpayment of premium,
such cancellation, termination or change shall not be effective as to such
Additional Insured for thirty (30) days (seven (7) days, or such lesser
period as is customarily available in accordance with industry practice, in the
case of any war risk and allied perils coverage) after issuance to Lessor and
the Participants of written notice by such insurers of such cancellation,
termination or change;

 

(vi)                            in
respect of the insurance carried in accordance with Article 10.2, in the
event Lessee maintains separate policies to cover all risk aircraft hull and
war risk and related perils insurances, all such policies shall include a 50/50
provisional claims settlement arrangement in the event of dispute over which
policy covers the loss;

 

(vii)                         in
respect of the insurance carried in accordance with Article 10.1, be
primary without right of contribution from any other insurance carried by any
Additional Insured or Indemnitee with respect to its interest as such in the
Aircraft;

 

(viii)                      provide for
worldwide geographical coverage, except for excluded areas acceptable to
Lessor;

 

(ix)                              provide
that if Lessee installs an engine that is owned by it or a third party on the
Airframe either: (a) the hull insurance carried in respect of the Aircraft
will automatically increase to such higher amount as is necessary in order to
satisfy the requirement under this Lease for Lessor to receive the full amount
of Stipulated Loss Value payable hereunder as the result of an Event of Loss to
the Aircraft and for the third party engine owner to receive the full amount
payable to the third party engine owner as the result of an Event of Loss to
such third party engine, or (b) separate additional insurance on such the
third party engine will attach in order to satisfy separately the requirements
of the third party engine owner in respect of such third party engine;

 

(x)                                 provide
satisfactory coverage against the risks associated with electronic date recognition
problems, in the form of AVN2000A, AVN2001A and AVN2002A, or equivalent,
substitute or replacement in respect thereof in accordance with then current
market practice (and Lessee shall make and comply with the warranties,
representations, and undertakings required to be given in connection with
obtaining/maintaining such clauses); and

 

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(xi)                              comply
to the extent necessary with the insurance requirements set forth in the
Manufacturer’s product support and customer training agreements.

 

10.3.2              Additional
Requirements for Liability Insurance. Each liability insurance
policy carried in accordance with Article 10.1 shall contain a
cross-liability endorsement so that each insured, Additional Insured and
Indemnitee shall be protected from claims by each other insured, Additional
Insured or Indemnitee, and a severability of interest provision which shall
expressly provide that all of the provisions thereof shall operate in the same
manner as if there were a separate policy covering each insured, Additional
Insured and Indemnitee; provided, however, such policies shall not operate to
increase the insurers’ limit of liability. Lessee shall cause its insurers to
agree that the indemnity and hold harmless provisions of Article 8.1 are
insured as a contractual assumption of liability by Lessee’s insurers, but only
to the extent of the risks covered by the policy of insurance.

 

10.4                        Uninsured
Operations. Lessee shall not operate or locate any Item of Equipment,
or suffer the same to be operated or located, in any recognized or threatened
area of hostilities or in any area or on any route excluded from coverage by
any insurance contemplated by this Article 10. Lessee shall not operate
any Item of Equipment, or suffer the same to be operated, in any manner or for
any purpose which is not covered by the insurance which Lessee is required to
carry and maintain pursuant to this Article 10.

 

10.5                        Application
of Insurance Proceeds for Event of Loss. All insurance payments
received as the result of the occurrence of an Event of Loss (other than an
Event of Loss referred to in Article 9.3) with respect to an Item of
Equipment, or any part thereof, will be applied as follows:

 

(i)                                   if
such payments are received with respect to an Event of Loss relating to the
Airframe or the Airframe and Engines installed on the Airframe, so much of such
payments remaining after reimbursement to Lessor for all costs and expenses
including attorneys fees incurred in connection with such Event of Loss as
shall not exceed the amounts due under Article 9.1 shall be applied in
reduction of Lessee’s obligation to pay such amounts, if not already paid by
Lessee, or, if already paid by Lessee, shall be applied to reimburse Lessee for
its payment of such amounts, and the balance, if any, of such payment remaining
thereafter will be paid over to or retained by, Lessee; or

 

(ii)                                if
such payments are received with respect to an Engine under the circumstances
contemplated by Article 9.2.1, so much of such payments remaining after
reimbursement to Lessor for all costs and expenses including attorneys fees
incurred in connection with such Event of Loss shall be paid over to, or
retained by, Lessee, provided that Lessee shall have fully performed or,
concurrently therewith, will fully perform the terms of Article 9.2.1.

 

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for confidential treatment and filed separately with the SEC

 

10-4

 

10.6                        Application
of Insurance Proceeds for Other than Event of Loss. The insurance
proceeds of any damage to the Airframe or any Engine, or part thereof, not
constituting an Event of Loss will be applied in payment (or to reimburse
Lessee) for repairs or for replacement property in accordance with the terms of
Articles 5 and 6 hereof, and any balance remaining after compliance with such
Articles with respect to such loss shall be paid to, or retained by, Lessee.

 

10.7                        Application
in Default. Any amount referred to in Article 10.5(i) or (ii) or
in Article 10.6 which is payable to Lessee shall not be paid to Lessee or,
if it has been previously paid directly to Lessee, shall not be retained by
Lessee, if at the time of such payment an Event or an Event of Default shall
have occurred and be continuing. In such event, all such amounts shall be paid
to and held by Lessor as security for the performance by Lessee of its obligations
hereunder and under the Companion Leases or, at Lessor’s option, applied by
Lessor toward payment of any such obligations of Lessee at the time due
hereunder or thereunder as Lessor may elect. At such time as Lessee shall have
cured all Events and Events of Default, all such amounts at the time held by
Lessor in excess of the amounts, if any, which Lessor shall have elected to
apply as above provided shall be paid to Lessee.

 

10.8                        Reports,
Certificates, etc.

 

10.8.1              Delivery
of Certificate.                    At
least three (3) Business Days prior to the Delivery Date of the Aircraft
and concurrently with the renewal of each insurance policy (but in no event
less frequently than once each calendar year), Lessee will furnish to Lessor
and each Participant a certificate signed by a firm of independent aircraft
insurance brokers of recognized standing and responsibility in the
international aviation insurance industry, appointed by Lessee and acceptable
to Lessor, describing in reasonable detail the insurance then carried and maintained
on the Equipment and certifying that the insurance then carried and maintained
on the Aircraft and Engines complies with the terms hereof.

 

10.8.2              Renewal
of Insurance.                        Lessee
shall commence negotiation to renew the insurance required by this Article 10
at least thirty (30) days prior to the expiration date thereof and upon written
application from Lessor shall provide Lessor with a written status report
regarding such renewal negotiations at least ten (10) Business Days prior
to such expiration date, and facsimile confirmation of completion of renewal
prior to such expiration date.

 

10.8.3              Advice
of Default or Termination Regarding Insurance. Lessee will
advise and will cause the insurance brokers referred to in Article 10.8.1
to agree to advise Lessor and each Participant in writing promptly of any
default in the payment of any premium. Lessee will also advise and will also
cause the insurance brokers referred to in Article 10.8.1 to agree to advise
Lessor and each Participant in writing of the termination date of any insurance
carried and maintained on the Aircraft or any Engine pursuant to this Article at
least thirty (30) days (seven (7) days, or such lesser period as is
customarily available in accordance with industry practice, in the case of any
war risk and allied perils coverage) prior to such termination date.

 

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10-5

 

10.8.4              Policy
of Insurance. Upon request by Lessor, Lessee will deliver to
Lessor a true and complete copy of all policies of insurance carried by Lessee
in accordance with the requirements of this Article 10; provided that any such request
shall not be made any more frequently than once per year so long as no Event of
Default is continuing.

 

10.8.5              Failure
to Maintain Insurance.                          In
the event that Lessee shall fail to maintain insurance as herein provided,
without limiting Lessor’s other rights or remedies hereunder, Lessor may at its
option obtain such insurance and, in such event, Lessee shall, upon demand,
reimburse Lessor, as Supplemental Rent, for the cost thereof.

 

10.9                        Insurance
- General.

 

10.9.1              Lessor’s
Changes to Insurance.                   If
at any time, whether due to changes in aviation insurance market practices or
otherwise, Lessor determines that Lessor’s approval of any insurer or insurance
should be revoked in the interests of the Additional Insureds, Lessor agrees to
consult with Lessee and Lessee’s insurance brokers regarding revocation of such
approval. If, following such consultation, Lessor determines that revocation is
required, Lessee will promptly arrange or procure the arrangement of
alternative cover satisfactory to Lessor.

 

10.9.2              Evidence of
Insurance Payments.  Lessee shall, on request, provide Lessor
with satisfactory evidence that the premiums in respect of the insurance
required hereby have been paid.

 

10.9.3              Lessee’s
Changes to Insurance.                   Lessee
shall not make, or permit to be made, any modification to or alteration of the
insurance required hereby adverse to the interests of any of the Additional
Insureds or Indemnitees.

 

10.9.4              Deductible.                 Lessee shall be
responsible for and promptly pay any deductible in respect of the insurances
required hereby.

 

10.9.5              Additional
Information.                  Lessee
shall provide any other insurance-related information or assistance in respect
of the insurances required hereby, as Lessor may reasonably request.

 

10.9.6              Continuing
Obligation.                  Lessee
shall at its own expense maintain insurance following the expiration or sooner
cancellation or termination of the Term in respect of Lessee’s indemnity and
hold harmless obligations set forth in Article 8.1, for such period as
Lessor may reasonably require (but in any event not more than two (2) years)
naming each Indemnitee (as defined in Article 8) as an additional insured.
Lessee’s obligation under the preceding sentence shall not be affected by
Lessee ceasing to be the lessee of the Aircraft or by any of the Indemnitees
(as defined in Article 8) ceasing to have an interest in respect of the
Aircraft.

 

10.10  Insurance of Lessee’s Interest.
Nothing contained in this Lease shall prevent Lessee from carrying insurance
against Events of Loss with respect to the Equipment in excess of that 

 

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10-6

 

required hereunder, and nothing herein shall prevent
any Additional Insured, at its own expense, from carrying additional insurance
against Events of Loss with respect to the Equipment; provided, however:

 

(i)                                   Lessee
shall not procure insurance or permit Lessee to be named assured in any
insurance with respect to any Item of Equipment which could prejudice any
Additional Insured’s rights under the insurance required hereunder or any right
of recovery under any such insurance; and

 

(ii)                                in
the event there is a limitation on the aggregate amount of insurance which may
be carried or collected by any or all parties in respect of any Equipment,
Lessee’s right to carry and collect insurance on such Equipment in excess of
that required hereunder shall be subordinate to and shall not in any way
prejudice the right of any Additional Insured to carry and collect insurance on
such Equipment in excess of such amounts,

 

and provided, further, that in no event may any hull
all risk or hull war and allied perils insurance carried on the Aircraft by
Lessee in excess of Stipulated Loss Value from time to time payable in respect
of the Aircraft exceed 10% of the Stipulated Loss Value from time to time
payable in respect of the Aircraft.

 

10.11                 Insurance of
Removed Engines. On or prior to the Delivery Date, Lessee shall obtain
and at all times thereafter throughout the Term shall maintain all risk
insurance covering each Engine when removed from the Airframe on an “agreed
value” basis for the Stipulated Loss Value of an Engine set forth in paragraph
1 of Schedule “1” and otherwise on terms acceptable to Lessor in its sole
discretion, and Lessee shall provide to Lessor a certificate signed by the firm
of independent aircraft insurance brokers who have provided the certificates of
insurance required by the other provisions of this Article 10 with respect
to the Aircraft, certifying on terms acceptable to Lessor that such additional
all risk insurance in respect of such Engine is in effect.

 

10.12                 Assignment of Rights by Lessor. Should
Lessor, in accordance with the terms hereof, assign, novate or otherwise
transfer any or all of its rights, title or interest in, to or under this Lease
or sell, encumber or otherwise dispose of any interest in the Aircraft, Lessee
will, upon request, procure that the party acquiring such right, title or
interest will be added as loss payee and/or additional insured in the policies
of insurance carried pursuant to this Lease and that such party will enjoy the
same rights and benefits theretofore provided to Lessor under the policies of
insurance. In addition, Lessor will continue to be covered by such policies of
insurance.

 

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10-7

 

ARTICLE
11.                      MORTGAGES,
LIENS, ETC. Lessee shall not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to any Item of Equipment,
any part thereof, title thereto or any interest therein, except:

 

(i)                                   Lessor
Liens;

 

(ii)                                Liens
for taxes either not yet due or being contested in good faith by appropriate
proceedings, but only so long as, in Lessor’s judgment, such proceedings do not
involve any danger of the sale, forfeiture or loss of any Item of Equipment, or
interest therein; and

 

(iii)                             materialmen’s,
mechanics’, workmen’s, repairmen’s, airport charges, employees’ or other like
liens arising by operation of Law in the ordinary course of business and for
amounts the payment of which is either not delinquent or is being contested in
good faith by appropriate proceedings, but only so long as, in Lessor’s
judgment, such proceedings do not involve any danger of the sale, forfeiture or
loss of any Item of Equipment, or any interest therein.

 

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11-1

 

ARTICLE
12.                      RECORDATION
AND FURTHER ASSURANCES.

 

12.1                        Recordation.
Lessee shall, at its own cost and expense, cause the Security Documents, this
Lease and the Lease Supplement, and any and all additional instruments which
shall be executed pursuant to the terms hereof, so far as permitted by
applicable Law, to be kept, filed, registered and recorded at all times in the
appropriate offices pursuant to the Laws of the Country of Registration,
pursuant to the Cape Town Convention, and in such other places, whether within
or outside the Country of Registration, as may be required by applicable Law or
as Lessor may reasonably request to perfect and preserve Lessor’s title to and
interest in the Equipment and rights hereunder (including Lessor’s rights to
the Security Deposit), and Lessee shall on request furnish to Lessor an opinion
of counsel satisfactory to Lessor or other evidence satisfactory to Lessor of
each such filing, recordation and registration. Notwithstanding the foregoing,
Lessor shall be solely responsible for the FAA and International Registry
recording/registration fees (and the legal fees incurred in connection
therewith) related to the recording/registration of the Security Documents with
the FAA and the International Registry.

 

12.2                        Conventions.
Without limiting Article 12.1, Lessee shall do or cause to be done, at its
own cost and expense, any and all acts and things which may be reasonably
required under the terms of the Convention for the International Recognition of
Rights in Aircraft, signed at Geneva, Switzerland, on June 18, 1948, to
perfect and preserve the title and interests of Lessor in the Equipment, and
Lessee shall also do or cause to be done at its own expense any and all acts
and things which may be required under the terms of any other agreement,
treaty, convention, pact, or by any practice, custom, or understanding
involving any State in which Lessee may operate, and any and all acts and things
which Lessor may reasonably request, to perfect and preserve the rights of
Lessor in the Equipment and hereunder. Lessee at its own cost and expense shall
also from time to time do or cause to be done any and all acts and things, and
provide, execute and deliver any documents requested by Lessor and which are
necessary or advisable to register any interest in the Aircraft (or any part
thereof) or in or under this Lease, or any additional instruments which shall
be executed pursuant to the terms hereof or in connection herewith, in
accordance with the Cape Town Convention, in order to have the full benefit of
the Cape Town Convention in respect of the Aircraft, the Engines and this
Lease, including but not limited to:  (i) 
all matters relating to the registration, perfection, preservation or
enhancement of any International Interests with respect to the Aircraft, the
Engines, the Security Documents or this Lease; (ii)  entry into agreements
(subordination or otherwise) to protect and/or enhance and/or improve the
priority of any International Interests relating to the Aircraft, any Engine or
this Lease; and (iii)  excluding in writing the application of the
non-mandatory provisions of the Cape Town Convention, to the extent such
provisions are inconsistent with the terms of this Lease.

 

12.3                        Further
Assurances. Lessee will promptly and duly execute and deliver to Lessor
such documents and assurances and take such further action as Lessor may from
time to time reasonably request in order to more effectively carry out the
intent and purpose of this Lease, and to establish and protect the rights and
remedies created or intended to be created in favor of Lessor hereunder.

 

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12-1

 

ARTICLE
13. RETURN OF AIRCRAFT AND RECORDS.

 

13.1                        Return.
Except as otherwise provided herein, at the expiration of the Term for the
Aircraft or upon the sooner cancellation or termination of this Lease, Lessee,
at its own expense, shall return the Aircraft and Aircraft Documentation and
records to Lessor by delivering the same to Lessor at an airport in Honolulu,
Hawaii (or other location in the continental United States as may be mutually
agreed) in full compliance with all Lessee’s obligations hereunder, cleared
through all appropriate customs (it being understood that Lessee shall be
responsible for the payment of all customs and export duties, and Lessee will,
immediately upon return of the Aircraft to Lessor, cause the deregistration of
the Aircraft in the Country of Registration). The Aircraft, at the time of
return to Lessor, shall be fully equipped with two (2) Engines properly
installed thereon. Promptly following the return of the Aircraft and Aircraft
Documentation to Lessor in compliance with the requirements of this Lease, but
in no event more than thirty (30) days thereafter, Lessor shall reimburse
Lessee for the cost of the fuel contained in the fuel tanks of the Aircraft on
return.

 

13.2                        Inspection;
Demonstration Flight. During the last sixty (60) days of the Term for
the Aircraft, Lessor shall have the right to inspect the Aircraft and its
records, including all maintenance, pilots and aircraft systems functional
check reports, to determine whether the Aircraft and its records will be in
compliance with the requirements for return at the end of the Term, including
confirmation of the serviceability status of each component of the Aircraft. Lessee
shall make such personnel available to Lessor for such inspection of the
Aircraft and its records as Lessor may reasonably require. Lessor’s right of
inspection shall include:

 

13.2.1              Document Inspection. The right to a complete and thorough
inspection of all documents and records maintained for the Aircraft by or for
Lessee (including the then current Maintenance Program and the Engine
performance monitoring data), which Lessee shall make available to Lessor’s
representatives and designees in one central room at the location at which the
Aircraft will be technically accepted by Lessor as contemplated in Article 13.8,
below;

 

13.2.2              Functional/Operational
Inspection. The right to
conduct a full systems functional and operational inspection of the Engines and
APU, including the right to undertake a maximum power assurance run of the
Engines and inspect the magnetic chip detectors of the Engines and APU in
accordance with the Aircraft maintenance manual; and

 

13.2.3              Demonstration Flight. The right, following completion of the “C”
check referred to in Article 13.3.1, to have up to four of its
representatives or designees (including potential or prospective
lessees/purchasers) participate as direct observers in a demonstration flight of
the Aircraft to be conducted by Lessee (at Lessee’s expense) in accordance with
the Manufacturer’s standard flight operation check flight procedures. The demonstration flight
shall demonstrate the airworthiness of the Aircraft and the proper functioning
of all systems and components within limits, and shall be for a

 

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13-1

 

duration
necessary to perform such demonstration flight but in any event not more than of a
maximum of ninety (90) minutes.

 

All discrepancies and deficiencies from the return
conditions provided herein shall be corrected by Lessee at its expense. If an
additional demonstration flight is required after correction of such
discrepancies and deficiencies discovered on the initial demonstration flight
or during the inspections, Lessee shall provide such additional demonstration
flight. Requests of Lessor’s representatives and designees during such
demonstration flight(s) shall be carried out by the flight crew, provided
that such request is not manifestly unreasonable and does not endanger the
Aircraft or the crew.

 

13.3                        Flight
Hours/Cycles/Time Requirements. At the time of return of the Aircraft
to Lessor:

 

13.3.1              “C” Check, etc. The Airframe shall be not more than thirty (30)
days out of its next sequential block systems/zonal/structural “C” check or
equivalent block-type maintenance (with no Flight Hours or Cycles accumulated
thereon, other than for the demonstration flight and any ferry flight required
to return the Aircraft to Lessor), and the corresponding lower level checks
(i.e., “A” checks and all lower level “C” checks), and Lessee shall have
performed all other inspections and tasks, including corrosion prevention and
control and aging aircraft inspections, if any, and all out-of-sequence
inspections due at that time, and all routine and non-routine tasks due at that
time, all with full fault rectification, sufficient to clear the Aircraft for
operation for the next 6,000 Flight Hours, 3,000 Cycles
and eighteen (18) months, all in
accordance with the then latest revision of the MPD and all without taking into
account any sampling programs. If Lessor has authorized Lessee to adopt a
Maintenance Program that permits such “C” check to be performed in phases,
prior to return Lessee shall perform all phases of such maintenance check
immediately prior to return of the Aircraft to Lessor in order to align such
maintenance of the Aircraft with the then latest revision of the Manufacturer’s
“block type” MPD to the same extent as if the Maintenance Program did not
permit such maintenance check to be performed in phases. During such “C” check,
Lessee shall also perform any other work reasonably requested by Lessor and not
otherwise required hereunder, and Lessor will reimburse Lessee for the cost of
such work (including labor and materials), billed at Lessee’s most preferred
customer’s rates. Lessee shall give Lessor at least thirty (30) days prior
notice of the date on which such “C” check is to be performed. Such
maintenance, inspections and checks shall be performed by an Approved
Maintenance Performer.

 

13.3.2              Seat Covers; Carpets. All seat covers and carpets in the Aircraft
interior shall be FAA (FAR) and/or EASA compliant and to Lessor’s cosmetic standard in
respect of uniform decor/pattern throughout, and all TSO tags
will be legible.

 

13.3.3              Engines. Neither Engine shall have accumulated more
than 7,500 Flight Hours and 1,250 Cycles thereon since its last Performance
Restoration shop visit (subject to paragraph 7 of Schedule “1” hereto). If an Engine undergoes a Performance Restoration 

 

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13-2

 

shop visit
during the Term, then, notwithstanding Article 13.3.6, each life-limited Part of
such Engine shall have at least sufficient Cyclic life remaining thereon as the
anticipated remaining life of such Engine, determined by reference to the then
known industry mean time between removals for engines of similar type, age and
characteristics (excluding removals for FOD or operator convenience, such as to
address vibration, fan blade rework, etc.), as indicated in the Engine manufacturer’s
records and based on the average of the industry mean time between removals
over the immediately preceding twelve (12) months.

 

13.3.4              APU. The APU shall be in a
serviceable condition and have accumulated not more than 2,000 APU Hours since
its last shop visit for heavy repair (as defined by the APU manufacturer) (subject to paragraph 8 of Schedule “1”
hereto).

 

13.3.5              Landing Gear. The Landing Gear shall be fresh from overhaul
(i.e., zero Flight Hours/Cycles accumulated thereon), but if the Landing Gear
is overhauled earlier than the manufacturer’s overhaul manual interval, Lessee
may request Lessor to amend this return condition appropriately, and Lessor
agrees to act reasonably in evaluating Lessee’s request. If the Term is
extended as contemplated in Article 3.1, the Landing Gear shall be
returned with at least 15,000 Cycles or ninety-six (96) months (whichever is
more limiting) remaining until its next scheduled
overhaul in accordance with the MPD.

 

13.3.6              Life-Limited Parts. Each life limited Part of the Engines,
the Landing Gear and the APU shall have at least 3,500 Cycles remaining until
replacement in accordance with the overhaul and maintenance manual of the
Engine manufacturer, the Landing Gear manufacturer, or the APU manufacturer, as
applicable.

 

13.3.7              “Hard Time” Components. All “hard time” components of the Aircraft
(except those referred to in the next sentence of this Article 13.3.7),
shall have at least 6,000 Flight Hours, 3,000 Cycles or eighteen (18) months
(whichever is limiting) remaining until its next scheduled overhaul, shop
visit, inspection or replacement in accordance with the MPD. If a “hard time”
component of the Aircraft has a time between overhauls, shop visits,
inspections or replacements of less than 6,000 Flight Hours, 3,000 Cycles or
eighteen (18) months (whichever is limiting), such component shall be fresh
from overhaul, shop visit, inspection or replacement. In
addition, no “hard time” component of the Aircraft shall have accumulated more
than 110% of the total number of Flight Hours or Cycles accumulated on the
Airframe.

 

13.3.8              “On Condition”/”Condition
Monitored” Parts. Each
component of the Aircraft which is “on condition” or “condition monitored”
shall be in serviceable condition.

 

13.3.9  ETOPS. The Aircraft’s ETOPS compliance status shall
be in accordance with the Manufacturer’s then current 180 minutes (or greater)
ETOPS Configuration and Maintenance Procedures document.

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13-3

 

13.3.10  Interior.  The interior of the Aircraft shall be in substantially the same
dual-class configuration as at delivery hereunder, unless otherwise agreed by
Lessor and Lessee in writing (such consent not to be unreasonably withheld),
except that Lessee may (with all necessary Aeronautics Authority approvals)
change the ratio of first and economy class seats in the front cabin of the
Aircraft and upgrade systems such as in-flight entertainment systems and
seats.  For the avoidance of doubt, no
cabin monuments (cabin monuments are limited to galleys, lavatories, cabin
dividers with cabin attendant seats attached, closets and stowage areas with
full cabin ceiling height) may be removed, changed or altered in connection
with any such reconfiguration, without Lessor’s consent (at Lessor’s sole
discretion).

 

All of the foregoing
overhauls, checks, maintenance and visits shall have been performed by an
Approved Maintenance Performer and be in compliance with the Maintenance
Program (except to the extent otherwise specified above).  Lessee shall not be entitled to any
adjustment or to be reimbursed or in any way compensated if the Airframe, any
Engine or any Parts are returned in a better condition than as required under this
Article 13.

 

13.4                        General
Return Requirements.  The
Airframe, Engines and Parts shall have been maintained, serviced and repaired
throughout the Term in accordance with (i) all the requirements of this
Lease, (ii) the Maintenance Program, and (iii) the rules and
regulations of the FAA, and shall be in compliance with all such requirements
and also in compliance with the following:

 

13.4.1              Airworthiness Certificate;
Registration.  The Aircraft when returned to Lessor shall
have a currently effective airworthiness certificate or an airworthiness
certificate for export to a location designated by Lessor issued by the
FAA.  In addition, the Aircraft shall be
in such condition and shall have such supporting documentation as would be
required for a qualified owner to immediately obtain an airworthiness
certificate from the FAA for FAR Part 121 passenger operations with no
restrictions and an FAA certificate of registration.

 

13.4.2              General Condition.  (i) 
Each Item of Equipment shall be in the same condition as when delivered to
Lessee, reasonable wear and tear from normal flight operations (but subject to
the obligations set forth in Articles 5.3 and 13.4.2(iii)(A) through (E),
and alterations and modifications properly made by Lessee as permitted under
this Lease) excepted, shall be in good operating condition, and shall be free
and clear of all Liens, except Lessor Liens. 
The Aircraft shall be
serviceable and clean, internally and externally, by international commercial
passenger airline industry operating standards, and shall have installed thereon
and furnished therewith all Engines, Parts and equipment installed thereon or
furnished therewith (including all cabin passenger service and loose equipment)
at the commencement of the Term or replacements therefor (as herein authorized)
and additions and improvements thereto made in accordance with the provisions
of this Lease.

 

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13-4

 

(ii)  The Aircraft shall be in compliance with the then current
Aircraft flight manual.  The Engines
shall not be on “watch” for any reason requiring any special or out-of-sequence
inspection and shall comply with the operations specification of Lessee and the
Engine manufacturer (or, if such requirements differ, whichever is the more
limiting), without waiver, carryover, deferment, restriction or exception.  If the historical and technical records
and/or trend monitoring data indicate an acceleration in the rate of
deterioration in the performance of an Engine or the APU which is higher than
normal based on Lessee’s maintenance experience in operating such Engine or
APU, Lessee shall, prior to return, correct such conditions that are determined
to be causing such accelerated rate of deterioration or that otherwise exceed
Lessee’s or the manufacturer’s maintenance manual tolerances.

 

(iii) 
Without limiting any of the foregoing, on return the Aircraft shall comply with
the following:

 

(A)                              Exterior;
Windows and Doors:

 

(1)                      The
fuselage, wings and empennage shall be free of dents and abrasions which are
out of Manufacturer’s Structural Repair Manual limits, and free of loose or
pulled rivets.

 

(2)                      Windows
shall be free of delamination, distortion and blemishes out of Manufacturer’s
maintenance manual limits and shall be properly sealed and free of crazing.

 

(3)                      Doors
shall be free-moving, correctly rigged, and fitted with serviceable seals.

 

(4)                      All
external placards and markings shall be installed and legible.

 

(5)                      All
leading edges shall be free from damage out of Manufacturer’s Structural Repair
Manual limits.

 

(6)                      The
fuselage, wings, empennage and fuel tanks shall be free of hydraulic, oil and
fuel leaks.

 

(7)                      All
flight controls shall be properly balanced.

 

(B)                                Interior:

 

(1)                      The
interior of the Aircraft, including galleys, ovens and the cockpit, shall be
deep-cleaned.

 

(2)                      All
passenger, cabin attendant and cockpit seats, including lap straps, harnesses
restraints and mechanisms, and all seat covers and cushions shall conform to
Aeronautics Authority and

 

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13-5

 

FAA/EASA fire-resistance and crash-worthiness regulations, and shall be
fully cleaned, serviceable and in good condition, and repainted as necessary.

 

(3)                      All
plastic moldings in the seats shall be free from cracks.

 

(4)                      All
passenger, cabin attendant and cockpit seat covers shall be freshly dry cleaned
and not frayed or worn, and any seat covers that have stains or unsightly
blemishes shall be replaced with equivalent covers in like pattern and color.

 

(5)                      The
passenger service units shall be serviceable, secure, clean and free of cracks
and stains, and all lights, vents, call buttons and signs installed therein or
thereon shall function correctly; any cuts or peeling laminates shall be
repaired or replaced; and all hinges and hatches in the compartments shall be
serviceable and all compartment doors shall be correctly aligned and shall have
serviceable “hold open” actuators.

 

(6)                      All
carpets shall be in good condition, shall not be threadbare or fraying and
shall be free of stains and marks.

 

(7)                      All
loose equipment delivered with the Aircraft at the commencement of the Term,
including any emergency equipment, shall be fitted and be fully serviceable,
and shall otherwise be in compliance with all other requirements hereof.

 

(8)                      All
placards, interior placards, signs, decals and markings shall be clean, fully
legible, secure and correctly mounted and/or positioned.

 

(9)                      All
floor proximity lighting covers and systems shall be clean and free from cracks
and be fully serviceable.

 

(10)                Any
cracked or broken cockpit trim or panels shall be replaced or repaired, any
scratched, flaking or missing paint shall be restored, and any missing or
broken cockpit switch knobs shall be replaced.

 

(11)                All
galley structures, galley inserts, galley carts and other galley equipment
shall be fully clean and serviceable, and shall not have any cracks, leaks,
stains or other defects.  All galley
areas shall not have any cracks, stains or corrosion, shall meet the safety and
health standards of the Country of Registration and the FAA, shall present a
good appearance and shall be free of food and contamination.  All galley floors shall be sealed and
stain-free,

 

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13-6

 

shall have effective non-skid coating and shall meet the safety and
health standards of the Country of Registration and the FAA.

 

(12)                All
ceiling, side walls and respective lighting, doors, overhead and bulkhead and
fairing panels shall be serviceable, secure, clean and free of cracks and
stains and otherwise have a cosmetic appearance reasonably acceptable by
international passenger airline standards.

 

(13)                All
cabin equipment shall also have their technical standards order identification,
as applicable, and, if passenger, cockpit or flight attendant seat cushions or
covers are replaced, then Lessee shall provide all FAR/EASA required data
reflecting compliance with flammability and burn test requirements.

 

(14)                All
floor coverings shall be clean and effectively secured and sealed.

 

(C)                                Cargo
Compartments:

 

(1)                      All
panels and nets shall be in good condition.

 

(2)                      All
rollers and cargo-restraint and moving mechanisms (if required to be fitted)
shall be serviceable.

 

(3)                      All
compartments shall meet then current FAA fire regulations.

 

(4)                      All
doors shall be rigged and functioning properly. 
All compartments shall be clean.

 

(D)                               Landing
Gear and Wheel Wells:

 

(1)                      The
Landing Gear and all wheel wells shall be clean, free of leaks, and repaired as
necessary.

 

(2)                      All
placards and markings shall be clean, secure, and legible.

 

(E)                                 Lavatories:

 

(1)                      All
lavatories shall be fully functional and serviceable, deep cleaned, and free of
cracks, stains and corrosion; meet safety and health
standards of the Country of Registration and the FAA; present a good
appearance; and be free of contamination.

 

(2)                      All
lavatory floors and floor coverings shall be in good condition and clean, shall
be sealed and stain-free, and shall have an effective non-skid coating.

 

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13-7

 

(3)                      Mirrors
shall be free of cracks and delamination and free of scratches.

 

(4)                      All
doors and latches shall be properly fitted and fully functional.

 

(5)                      Lavatory
systems shall be clean, free of leaks, cracks and other defects and shall be
properly sealed and fully functional.

 

(6)                      Any
cracked lavatory surrounds shall be repaired or replaced.

 

(F)                                 Tires
and Brakes:  All tires and brakes
shall be fully serviceable and have at least 50% wear-life remaining.  No tire shall have more than two recaps.

 

13.4.3              Modifications.  At Lessor’s request, Lessee shall, at Lessee’s
expense, remove any or all alterations or modifications in or additions to any
Item of Equipment accomplished during the Term if the same are not required to
be incorporated or installed in or attached to such Item of Equipment to
maintain the airworthiness certificate and registration from the FAA, and
Lessee shall, at Lessee’s expense, restore such Item of Equipment to the value,
utility, condition and airworthiness thereof which would have existed had such
alterations, modifications or additions not been made.  Without limiting any other obligations
of Lessee under this Lease, all alterations and modifications made to the
Aircraft during the Term shall be in accordance with FAA-approved data.

 

13.4.4              Terminating Action.  Lessee shall perform all deferred and carryover
maintenance items and clear all pilot discrepancies with respect to the
Aircraft on a terminating action basis. 
All airworthiness directives issued by either the FAA or EASA and all
changes required by any amendments or changes to the FAR’s or EASA requirements
applicable to the Equipment and having a date for compliance that falls on or
prior to 6,000 Flight Hours, 3,000 Cycles or eighteen (18) months, as the case
may be, after the expiration of the Term (or return of the Aircraft, if later)
shall be accomplished in compliance with the issuing entity’s specific
instructions without regard to any alternate means of compliance, waiver or
operator exemptions delaying compliance. 
Without limiting the foregoing, any such
airworthiness directives or FAA or EASA requirements which require inspection
or terminating action to be taken on or prior to 6,000 Flight Hours, 3,000
Cycles or eighteen (18) months, as the case may be, after the expiration of the
Term (or return of the Aircraft, if later) shall have been accomplished on a
terminating action basis.  If there is no
terminating action, then the required inspection or modification compliance
shall be completed at the highest level of compliance possible prior to return;
and all manufacturer’s and vendor’s service bulletins which are rendered
mandatory by the Manufacturer’s then current ETOPS Compliance Configuration and
Maintenance Procedures Guide and which require a repetitive inspection,
modification or terminating compliance on or prior to 6,000 Flight Hours, 3,000
Cycles or eighteen (18) months, as the case may be, after the expiration of the
Term (or return of the Aircraft, if later) shall have such inspection,
modification or terminating compliance completed at the highest level of
compliance possible prior to

 

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13-8

 

return.  The
Aircraft shall also be in compliance with United States and ICAO noise and
environmental regulations.  For the
avoidance of doubt, if compliance with an FAA airworthiness directive would
conflict with compliance with an EASA airworthiness directive, and the dual
compliance cannot otherwise reasonably be reconciled, Lessee shall comply with
the FAA airworthiness directive and not the EASA airworthiness directive.  Further, if EASA has issued an airworthiness
directive but the FAA has not yet issued an equivalent airworthiness directive,
Lessee shall comply with the EASA airworthiness directive.

 

13.4.5              Borescope Inspection.  Lessor
shall have the right at Lessor’s expense immediately prior to return of the
Aircraft to Lessor to carry out a video borescope inspection of the full gas
path of the Engines and APU.  Lessee
shall at Lessee’s expense correct any watch items or unserviceable or reject
conditions or defects found during such inspection that are not in compliance
with manufacturer’s maintenance manual limits.

 

13.4.6              Kits.  Lessee shall have ordered during the Term all
no-charge kits for the Aircraft offered by Manufacturer, the Engine
manufacturer and other vendors, and, if not incorporated in the Aircraft at the
time of return hereunder (unless required to do so by the terms hereof), Lessee
shall return such kits to Lessor with the Aircraft.  Lessor shall be provided with all
modification kits and other such items that are on order for the Aircraft.

 

13.4.7              Leaks, etc.  The Airframe, Engines and APU shall be free of fuel,
hydraulic and oil leaks, and the fuel system of the
Aircraft, including the Engines, shall have been tested and free of
bacteriological, fungus and other contamination and corrosion and shall show no
indication of breakdown.  The hydraulic
and oil systems of the Aircraft, including the Engines, shall have been tested
and found free of contamination and corrosion and shall show no indication of
breakdown.  Lessee
shall provide copies of the results of laboratory tests of all such systems to
Lessor and of full bacteriological and fungus tests of all fuel tanks performed
no more than thirty (30) days prior to return of the Aircraft.  Any bacteriological, fungus or other
contamination or corrosion revealed thereby shall be corrected or treated to
Lessor’s reasonable satisfaction prior to
return.

 

13.4.8              Painting.  Lessee
shall remove all special markings of Lessee, and shall strip the paint from the
Aircraft and repaint the Aircraft in a livery specified by Lessor (not
exceeding three colors, comprising one base color and two decorative colors)
after application of corrosion protection and performance of other procedures,
in accordance with industry practice, with control surfaces balanced and other
procedures performed in accordance with Manufacturer’s maintenance procedures,
all at Lessee’s expense.  Lessee shall
also weigh the Aircraft.

 

13.5                        Records.

 

13.5.1              Records at Return.  Upon the return of the Aircraft:

 

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13-9

 

(i)                                     the
Airframe, Engines and all Parts shall be documented with work orders, vendor
serviceable tags, etc. to have been maintained, repaired and overhauled
throughout the Term by FAR 145/EASA 145 certified repair stations and in a
manner so that such equipment is approved by the FAA for use on United States
registered and certificated aircraft; and

 

(ii)                                  Lessee
shall deliver to Lessor:

 

(A)      all
logs, manuals, certificates, data and inspection, modification, maintenance and
overhaul records, amended to their latest amendment revision available,
required to be maintained with respect thereto under applicable rules and
regulations of the Aeronautics Authority or other Governmental Entity having
jurisdiction;

 

(B)        all
logs, manuals and catalogs included with the Aircraft on the Delivery Date
therefor or supplied during the Term hereof, amended to their latest amendment
revision available; and

 

(C)        “Dirty
Finger Print” documentation for airworthiness directives accomplishment,
complete Engine shop visit packages, and component tags for all rotable Parts.

 

13.5.2              FAA Required
Records.               Without
limiting Article 13.5.1, all records required by the FAA to certify the
Equipment and place the Equipment on an FAA-approved maintenance program in
accordance with FAR Part 121 requirements shall be returned with the
Equipment, and Lessee shall provide Lessor with all EASA Form 1 or FAA
8130-3 serviceable tags for all Parts installed in the Aircraft during the Term
and remaining in the Aircraft at the time of return thereof to Lessor.  All documentation and records shall be in
English, in good condition, readable
and capable of being reproduced using standard reproduction processes.  All documentation shall have the necessary
stamps, endorsements, certifications and signatures where appropriate.  Bulk storage media (microfilm, CD, DVD) shall
be in an industry standard format, requiring no proprietary or “fee added”
software to access.  One set of any such
bulk storage media or one set of paper documentation shall be provided.  If Lessee subscribes to Manufacturer’s
on-line data access services, Lessee must nonetheless return the Aircraft
manuals with all current revisions provided by Manufacturer in CD, microfilm or
other format acceptable to Lessor.

 

13.5.3              Computerized
Records.                 If
only computerized copies of some or all of the maintenance records are
available, then Lessee shall take action with the pertinent regulatory agencies
to insure that Lessor and the FAA are provided with all requested necessary and
proper guarantees of methods of compliance, component overhaul and management,
scheduling, quality control, serial number verification, etc.

 

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13-10

 

13.5.4              Quality Control
Certification.                              The
head of Lessee’s Quality Control Department shall certify in writing that the
data and information contained in all documentation and records returned to
Lessor is true and correct.  For any
computerized records, the head of Lessee’s Quality Control Department shall
sign or initial each computer page.

 

13.5.5              Service
Histories; Traceability.                     All
Parts identified with life limits shall be identified with their back-to-birth
service histories, accumulated Cycles or Flight Hours, as applicable, and
remaining service lives on a separate listing. 
All Parts which are identified in the maintenance records by part
numbers and serial numbers other than the manufacturer’s shall be provided with
interchange or cross reference listing necessary to establish complete
traceability.

 

13.5.6                Missing Records.                      In the event
of missing, incomplete or noncompliant records, Lessee shall at its expense
reaccomplish the tasks necessary to produce such records in accordance with an
FAA-approved maintenance program prior to return of the Equipment to
Lessor.  Without limiting any of the
foregoing, all overhaul and repair procedures shall as to quality and
documentation be such as to enable immediate transfer to a new operator under
FAR Part 121.

 

13.5.7              No Lessee
Responsibility.    Notwithstanding
any of the foregoing, Lessee shall not be obligated to:

 

(i)                                     create
any documentation, logs, manuals, certificates, data or other records required
pursuant to the foregoing provisions that should have existed prior to the
Delivery Date but did not exist; or

 

(ii)                                  correct
deficiencies, if any, that existed prior to the Delivery Date (or any
subsequent deficiencies which are the direct result of such deficiency at
delivery) in any documentation, logs, manuals, certificates, data or other
records required pursuant to the foregoing provisions.

 

13.6 
Warranty Rights.  At Lessor’s request, Lessee shall assign or
otherwise make available to Lessor all rights and benefits of any and all
warranties, representations, service policies and the like of any maintenance
or overhaul facility that has provided any maintenance, modifications,
alterations or other services or Parts in respect of any of the Equipment (or
any part thereof), and of any subcontractor or supplier or vendor in respect of
any thereof, to the extent the same are assignable.  If any of the foregoing rights and benefits
are not assignable by Lessee to Lessor, Lessee agrees, on request of Lessor, to
enforce all such rights and benefits as directed by Lessor for the benefit of
Lessor.

 

13.7 
Navigation Charges, Landing Fees, etc.  At the time of return of the Aircraft to
Lessor hereunder, Lessee shall also provide Lessor with an officer’s
certificate certifying that, to best knowledge and belief, Lessee has fully
paid and discharged all navigation charges, airport landing fees and other
amounts that, if the same remain unpaid, could result in a Lien against the

 

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13-11

 

Aircraft (unless such amounts are in good faith
dispute, which shall be described to Lessor in reasonable detail), and that if
any such charges, fees or other amounts in relation to the Aircraft become due
and payable in the future, Lessee shall promptly pay the same before the same
could result in a Lien on the Aircraft or any part thereof.

 

13.8                        Technical
Acceptance.

 

13.8.1              Technical
Acceptance.                      Upon
completion of the final inspection of the Aircraft and records by Lessor and,
unless otherwise agreed in writing by Lessor and Lessee, correction of any
discrepancies or deficiencies required to be corrected by Lessee prior to
redelivery to Lessor, Lessor shall execute and deliver to Lessee, a technical
acceptance certificate which shall constitute Lessor’s technical acceptance of
the Aircraft, except as noted in such technical acceptance certificate.  Notwithstanding the execution and delivery of
such technical acceptance certificate by Lessor, all
Lessee’s obligations hereunder shall continue in full force and effect until
actual return of the Aircraft to and final acceptance of the Aircraft by Lessor
at the location specified in Article 13.1, in full compliance with all
Lessee’s obligations hereunder, to the same extent as if such technical
acceptance certificate had not been executed by Lessor (it being understood,
without limitation, that Lessee shall:

 

(i)                                     bear
the full risk of damage and loss to the Aircraft and shall promptly repair or
cause to be repaired any damage to the Aircraft which may occur prior to
completion of ferry flight referred to below, and

 

(ii)                                  maintain
insurance in respect of the Aircraft as required by Article 10 hereof to
and including the time of redelivery of the Aircraft to Lessor).

 

13.8.2              Ferry Flight.  Upon
technical acceptance of the Aircraft by Lessor, Lessee shall promptly ferry the
Aircraft at Lessee’s cost to the redelivery location referred to in Article 13.1
hereof or the place for storage designated pursuant to Article 13.11, as
the case may be.  Lessor shall have the
right for up to five (5) representatives or designees (including prospective or
potential lessees or purchasers) to travel on the Aircraft on such ferry
flight.

 

13.9                        Delay
in Return.

 

13.9.1              Lessee Failure
Regarding Return.     If:

 

(i)                                     repairs
or other work items are required to cause the Aircraft to comply with the
return requirements provided herein, or

 

(ii)                                  Lessor,
through no fault of its own, has not been allowed a full and thorough right to
inspect the Aircraft and its records prior to the end of the Term as
contemplated herein, or

 

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13-12

 

(iii)                               Lessee
for any other reason fails to return the Aircraft and its records to Lessor at
the time or place and in the condition required hereunder,

 

Lessee shall forthwith take such action as may be necessary to remedy
such non-compliance to enable Lessee to return the Aircraft and its records to
Lessor in accordance with the requirements hereof.

 

13.9.2              Lessee Payment
Obligation.  Without waiving any other rights or remedies
Lessor may have as a result of any of the circumstances referred to in Article 13.9.1,
Lessor shall have the right to claim from Lessee, and Lessee shall pay
Lessor:  (i) for the first thirty
(30) days following the expiration of the Term, an amount equal to 125% of the
monthly Basic Rent for the Aircraft, prorated on a daily basis, payable weekly
in arrears, for each day following the expiration of the Term until Lessor has
been allowed and has completed a full and thorough inspection of the Aircraft
and Aircraft Documentation as contemplated herein and the Aircraft and Aircraft
Documentation are returned to Lessor in the condition required hereunder, and (ii) for
each day after the first thirty (30) days following the expiration of the Term,
an amount equal to twice the monthly Basic Rent for the Aircraft, prorated on a
daily basis, payable weekly in arrears, until Lessor has been allowed and has
completed a full and thorough inspection of the Aircraft and Aircraft
Documentation as contemplated herein and the Aircraft and Aircraft Documentation
are returned to Lessor in the condition required hereunder at the time of
return to Lessor.  In the meantime Lessee
shall not operate the Aircraft (other than for maintenance, repair or return
purposes) and all of Lessee’s other obligations hereunder shall remain in full
force and effect.  Nothing in Article 13.9
shall be interpreted to give Lessee the right to retain the Aircraft after the
end of the Term.

 

13.9.3              Lessor Option to
Require Return.  If the Aircraft (or its records) is not in
the condition required by this Lease for return to Lessor, Lessor, at Lessor’s
sole option, may nevertheless elect to accept or demand return of the Aircraft
and records (either at the time Lessee first tenders the Aircraft to Lessor for
return or at any time thereafter), in which event Lessee shall return the
Aircraft and records to Lessor.  Return
of the Aircraft (or its records) to Lessor by Lessee shall not be deemed a
waiver of any of Lessee’s obligations under this Article 13, and Lessee
shall remain fully obligated in respect thereof, including the obligation to
pay an amount equal to twice the monthly Basic Rent for the Aircraft as
provided in the preceding paragraph until the Aircraft and its records are put
in the condition required for return in accordance with the requirements of
this Lease.  Further, Lessee shall
indemnify Lessor for all costs and expenses suffered or incurred by Lessor to
cause the Aircraft and its records to be put in the condition required for
return hereunder, and Lessee shall, on demand by Lessor, provide Lessor with
cash security for the estimated costs and expenses that Lessor anticipates it
may incur to cause the Aircraft and its records to be put in the condition
required by this Article 13.

 

13.10                 Aid in
Disposition.  Lessee agrees that
during the last 180 days of the Term (and during the storage period set forth
in Article 13.11) it will cooperate in all reasonable respects with the
efforts of Lessor to lease or sell the Aircraft, including, without limitation,
permitting potential

 

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13-13

 

(or the prospective) lessees or purchasers to inspect
the Aircraft and the records relating thereto, provided that the same shall not
interfere with Lessee’s use of the Aircraft or require Lessee to incur
out-of-pocket expenses for which it is not reimbursed.

 

13.11      Storage.  Upon expiration or sooner termination of the
Term, at the written request of Lessor, Lessee will arrange ramp storage
facilities and storage maintenance for the Aircraft at an appropriate storage
area (which shall include any of Lessee’s hangar facilities suitable for such
aircraft and reasonably acceptable to Lessor) for up to ninety (90) days at
Lessor’s risk and expense.  Lessee shall
cause the Aircraft to be delivered to such storage location free of charge to
Lessor.

 

13.12 
Discharge of International Interest.  Upon expiration or sooner termination of this
Lease and the return of the Aircraft to Lessor pursuant hereto, Lessee shall,
at its expense, promptly take all actions necessary, including providing any
necessary consents, to release all International Interests in respect of the
Aircraft, the Engines and this Lease from the International Registry.

 

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13-14

 

ARTICLE 14.       EVENTS
OF DEFAULT.  The following
events shall constitute Events of Default (whether any such event shall be
voluntary or involuntary or come about or be effected by operation of Law of
any Governmental Entity):

 

14.1        Non-Payment.  Lessee shall fail to make any payment of Rent
as and when due and the same shall remain unpaid for five (5) calendar
days.

 

14.2        Insurance.  Lessee
shall fail to carry and maintain insurance in accordance with the provisions of
Article 10 hereof.

 

14.3        Certain
Breaches-Immediate Event of Default.  Lessee shall
fail to perform or observe any term, condition or agreement to be performed or
observed by it under Article 3.3 (as supplemented in Schedule “1”), Article 5.1
or 5.2, Article 10.4 or Article 12.1.

 

14.4        Other
Breaches.  Lessee shall fail to perform or observe any
other term, condition, covenant or agreement to be performed or observed by it
hereunder or under any other agreement between Lessor and Lessee and such
failure shall continue unremedied for a period of thirty (30) days after actual
knowledge thereof by Lessee; provided, however, if such failure cannot be
remedied within such 30-day period and Lessee is taking all such action as
Lessor deems appropriate and necessary to remedy such failure, such period
shall be extended for an additional sixty (60) days (but only so long as it
reasonably appears that such failure can be remedied within such additional
60-day period).

 

14.5        Representations.  Any representation or warranty made by Lessee
herein or in any document or certificate furnished Lessor in connection
herewith or pursuant hereto shall prove to be false or incorrect in any
material respect as of the date made or deemed made.

 

14.6        Certain
Insolvency/Bankruptcy Events. 
Lessee shall consent to the appointment of a receiver, custodian,
administrator, trustee, liquidator or any similar official of itself or of a
substantial part of its property, or shall become insolvent or fail to pay or
admit in writing its inability to pay its debts generally as they come due, or
shall make a general assignment for the benefit of creditors, or Lessee shall
file a voluntary petition for an order for relief pursuant to Section 301
of Title 11 of the United States Code, or any superseding statute, as amended
from time to time, or a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization in a proceeding under any
bankruptcy Laws (as now or hereafter in effect) or an answer admitting the
material allegations of a petition filed against Lessee for an order for relief
or in any such proceeding, or Lessee shall by voluntary petition, answer or
consent, seek relief under the provisions of any other now existing or future
bankruptcy or other similar Law providing for the reorganization, liquidation
or winding-up of corporations, or providing for an arrangement, composition,
extension or adjustment with its creditors.

 

14.7        Appointment
of Receiver, etc.  An
order, judgment or decree shall be entered by any court of competent
jurisdiction appointing, without the consent of Lessee, a receiver, custodian,
administrator, trustee, liquidator or similar official of Lessee or of any
substantial part

 

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14-1

 

of its property, or any substantial part of the
property of Lessee shall be sequestered, and any such order, judgment or decree
of appointment or sequestration shall remain in force undismissed, unstayed or
unvacated for a period of sixty (60) days after the date of entry thereof.

 

14.8        Involuntary
Bankruptcy.  A petition
against Lessee for an order for relief pursuant to Section 303 of Title 11
of the United States Code, or any superseding statute, as amended from time to
time, or in any proceeding under any bankruptcy Laws or other insolvency Laws
(as now or hereafter in effect) shall be filed and shall not be withdrawn or
dismissed within sixty (60) days thereafter, or, under the provisions of any
Law providing for reorganization, liquidation or winding-up of corporations
which may apply to Lessee, any court of competent jurisdiction shall assume
jurisdiction, custody or control of Lessee or of any substantial part of its
property and such jurisdiction, custody or control shall remain in force
unrelinquished, unstayed or unterminated for a period of sixty (60) days.

 

14.9        Adverse
Judgment.  Final judgment
for the payment of money in excess of $5,000,000 (or the equivalent in any other currency) shall be
rendered against Lessee and the same shall remain unpaid, unstayed, unbonded or
undischarged for a period of thirty (30) days.

 

14.10  Suspension
of Licenses, etc.  The
franchises, concessions, permits, certificates, licenses (including, without
limitation, its air operating certificate or air transport license), rights or
privileges required for the conduct of Lessee’s airline operations are revoked,
canceled, suspended, not renewed or otherwise terminated, or Lessee shall cease
to be a Certificated Air Carrier.

 

14.11      Companion
Leases.  To the extent an
Affiliate of Lessor is the owner of the Aircraft, an “Event of Default” under,
and as such term is defined in, any Companion Lease shall have occurred and be
continuing.

 

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14-2

 

ARTICLE 15.       REMEDIES.

 

15.1        Remedies
of Lessor.  Upon the
occurrence of any Event of Default and at any time thereafter so long as the
same shall be continuing, Lessor may, at its option, declare this Lease to be
in default and Lessor may, in addition to any other remedies provided herein or
by applicable Law, exercise one or more of the following remedies with respect
to the Aircraft, or any part thereof, as Lessor in its sole discretion shall
elect:

 

15.1.1     Return
of Aircraft.  Demand that
Lessee, and Lessee shall upon the written demand of Lessor and at Lessee’s
expense, return promptly to Lessor the Aircraft in the manner and condition
required by, and otherwise in accordance with all of the provisions of, Article 13
hereof as if the Aircraft were being returned at the end of the Term therefor;
or Lessor, at its option, may enter upon the premises where all or any part of
the Aircraft or any Engine is located and take immediate possession of and
remove the same (together with any engine which is not an Engine but which is
installed on the Airframe and any other property in the Aircraft, subject to
all of the rights of the owner, lessor, lienor or secured party of such engine
or other property, provided, however, that the Airframe with an engine (which
is not an Engine) installed thereon or any property therein may be flown to a
location within the United States, and such engine or other property shall be
held for the account of any such owner, lessor, lienor or secured party or, in
the case of an engine owned by Lessee, may, at the option of Lessor, be
exchanged with Lessee for an Engine in accordance with the terms of Article 13
hereof) by summary proceedings or otherwise, all without liability accruing to
Lessor for or by reason of such entry or taking of possession, whether for the
restoration of damage to property caused by such taking or otherwise.

 

15.1.2     Sale;
Lease, etc.   Sell the
Aircraft, or part thereof, at public or private sale, or otherwise dispose of,
hold, use, operate, lease to others or keep idle the Aircraft, or part thereof,
as Lessor in its sole discretion may determine, all free and clear of any
rights of Lessee and without any duty to account to Lessee with respect to such
action or inaction or for any proceeds with respect thereto, except to the
extent required by Article 15.1.3, below, in the event Lessor exercises
its rights under such paragraph.

 

15.1.3     Damages
After Re-Lease or Sale.    In
the event Lessor, pursuant to Article 15.1.2, above, shall have re-leased
the Aircraft or shall have sold the Aircraft, Lessor, in lieu of exercising its
rights under Article 15.1.4, below (but without limiting any of its other
rights hereunder or under Law), may, if it shall so elect, demand that Lessee
pay Lessor and Lessee shall pay Lessor, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Basic Rent for the Aircraft due
for the period commencing as of the commencement of the term of the re-leasing
or the date of sale, as the case may be) any accrued but unpaid Basic Rent for
the Aircraft due up to and including the date of the commencement of the term
of the re-leasing or the date of sale plus:

 

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15-1

 

(i)                                     in
the case of a re-leasing, the excess of (A) the aggregate unpaid Basic
Rent for the Aircraft which would otherwise have become due hereunder over the
Term but for the Event of Default, discounted monthly to present value as of
the date of the commencement of the term of the re-leasing at 4% per annum,
over (B) the aggregate basic rental payments to become due under the
re-leasing from the date of the commencement of the term of the re-leasing to
the date upon which the Term for the Aircraft would have expired but for Lessee’s
default, discounted monthly to present value as of the date of the commencement
of the term of the re-leasing at 4% per annum, or

 

(ii)                                  in
the case of a sale, the excess of (A) the Stipulated Loss Value for the
Aircraft, computed as of the Basic Rent payment date immediately preceding the
date of sale, over (B) the net cash proceeds of such sale.

 

The amounts specified in this Article 15.1.3 shall continue to
bear interest at the Incentive Rate from the date of the commencement of the
term of the re-leasing or the date of sale, as the case may be, until payment
is made.

 

15.1.4     Estimation
of Damages.      If Lessor
shall have obtained possession of the Aircraft as contemplated in Article 15.1.1,
above, but shall not have re-leased or sold the Aircraft as contemplated by Article 15.1.3,
above, Lessor shall have the right (but without limiting any of its other
rights hereunder or under Law), by written notice to Lessee specifying a
payment date, to demand that Lessee pay to Lessor, and Lessee shall pay to Lessor,
on the payment date specified in such notice: 
(A) all accrued but unpaid Basic Rent for the Aircraft due to and
including the payment date specified in such notice, plus (B) the
aggregate unpaid Basic Rent for the Aircraft which would otherwise have accrued
over the remainder of the Term but for the Event of Default, discounted monthly
to present value as of the payment date specified in such notice at 4% per
annum.  The amounts referred to in this Article 15.1.4
shall continue to bear interest at the Incentive Rate from the payment date
specified in said notice until payment is made. 
Following payment of all amounts payable by Lessee as provided in this Article 15.1.4
and payment of all other amounts payable pursuant to any other provisions of
this Lease, including amounts payable in connection with Lessor’s exercise of
its remedies hereunder, if Lessor subsequently re-leases the Aircraft for any
portion of the Term that would have remained in effect hereunder if an Event of
Default had not occurred, Lessor shall refund to Lessee an amount equal to the
basic rental payments paid to Lessor under the re-leasing, as the same are
received by Lessor, for the period from the commencement of the term of the
re-leasing to the date upon which the Term for the Aircraft would have expired
but for Lessee’s default, but only to the extent of the amount referred to in
clause (B) of this Article 15.1.4; provided always that Lessee shall
not be entitled to any such refund under this Article 15.1.4 if and to the
extent such refund would result in Lessor receiving and retaining less than the
full amount of all payments that Lessor would have been entitled to receive and
retain under this Lease (after giving effect to any discounting

 

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15-2

 

of future payments) if Lessee had fully performed its obligations
hereunder throughout the entire Term of this Lease.

 

15.1.5     Court
Action.  Proceed by
appropriate court action or actions to enforce performance by Lessee of the
applicable covenants of this Lease and to recover damages for the breach
hereof.

 

15.1.6     Lease
Cancellation.  Cancel this
Lease, which cancellation shall be effective immediately upon Lessor having
given notice of cancellation to Lessee, whereupon Lessee’s right to possess and
use the Equipment shall immediately cease, but such cancellation shall not
relieve Lessee of any of its obligations hereunder which accrued prior to the
time of cancellation nor shall such cancellation be deemed a release or a
waiver of Lessee’s obligations for the unperformed balance of this Lease or
Lessee’s obligation to compensate Lessor for all damages suffered by Lessor as
a result of Lessee’s breach of this Lease, including, without limitation,
damages described in Article 15.1.3, Article 15.1.4, or Article 15.1.5,
above.

 

15.1.7     Finance
Costs.  Recover from
Lessee any losses, premiums, fees, costs or expense that are paid or incurred
by Lessor in connection with the repayment of funds obtained to finance or
otherwise acquire the Aircraft, or in unwinding any swap, forward interest rate
agreement or other financial instrument to the extent relating in whole or in
part to the financing of the Aircraft, or in connection with the borrowing of
funds to refinance the Aircraft, if any.

 

15.2        Additional
Damages.  Except as
otherwise specifically provided above, Lessee shall also be liable for all
unpaid Rent due hereunder before, during or after the exercise of any of the
foregoing remedies and for all legal fees and other costs and expenses incurred
by reason of the occurrence of any Event of Default or the exercise of any of
Lessor’s rights or remedies with respect thereto, including all costs and
expenses incurred in connection with the repossession or return of the Aircraft
in accordance with the terms of Article 13 hereof, in placing the Aircraft
in the condition and airworthiness as required by Article 13, for the cost
of storage, insurance, and re-leasing or sale of the Aircraft.

 

15.3        Remedies
Not Exclusive.  Except
as otherwise expressly provided above, no remedy referred to in this Article is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Lessor at Law or in
equity; and the exercise or beginning of exercise by Lessor of any one or more
of such remedies shall not preclude the simultaneous or later exercise by
Lessor of any or all of such other remedies. 
No express or implied waiver by Lessor of any Event or Event of Default
shall in any way be, or be construed to be, a waiver of any future or
subsequent Event or Event of Default.  To
the extent permitted by applicable Law, Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use the Aircraft or any Engine in mitigation of Lessor’s
damages as set forth in this Article or which may otherwise limit or
modify any of Lessor’s rights or remedies hereunder.

 

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15.4        Rescission
of Effect of Notice of Default.  By written notice to Lessee, Lessor may, in
its sole discretion, elect to waive or provide a new or additional grace period(s) in
respect of any Event or Event of Default and its consequences and/or rescind
and annul or postpone the effectiveness of any prior notice of termination or
cancellation of this Lease or the termination or cancellation of this Lease, in
which case, the respective rights of Lessor and Lessee will be restored to the
same extent as if no Event or Event of Default had occurred and no notice of
termination or cancellation of this Lease had been given or to such other
extent as Lessor, in such written notice, shall provide.

 

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ARTICLE 16.       EXCUSABLE DELAY.

 

16.1        General.  Lessor shall not be responsible for nor be
deemed to be in default under this Lease on account of any delay in delivery of
the Aircraft or other performance hereunder due to any of the following causes:
acts of God or the public enemy; war, civil war, warlike operations, terrorism,
insurrections or riots; fires; explosions; natural disasters; compliance with
any applicable foreign or domestic governmental regulation or order; labor
disputes causing cessation, slow-down or interruption of work; inability after
due and timely diligence to procure any materials, equipment or parts; general
hindrance in transportation; or delay or default by the Manufacturer under the
Purchase Agreement; or failure or delay by any subcontractor or supplier to
furnish materials, equipment or parts; or due to any other cause beyond Lessor’s
control or not occasioned by Lessor’s fault or negligence.  Delays resulting from any of the foregoing
causes are referred to herein as “Excusable Delays.” Lessor shall promptly
notify Lessee of any delay or anticipated delay in delivery of the Aircraft.

 

16.2 
Twelve (12) Months’ Excusable Delay.  If, due to Excusable Delays, delivery of the
Aircraft is delayed, or the Manufacturer concludes, based on its appraisal of
the facts, that delivery of the Aircraft will be delayed, for a period of more
than twelve (12) months after the end of the calendar month of the Scheduled
Aircraft Delivery, unless Manufacturer has elected to terminate the Purchase
Agreement with respect to the Aircraft, then if Manufacturer has or when
Manufacturer does internally reschedule delivery of the Aircraft to a date
reflecting such delay and notifies Lessor thereof, Lessor shall promptly notify
Lessee in writing of such delay and rescheduling, in which event Lessee may
terminate this Agreement by giving written notice to that effect to Lessor not
later than fifteen (15) days after receipt by Lessee of such notice of delay and
rescheduling.

 

16.3        Consequence
of Termination. 
Termination under Article 16.2 or termination by Manufacturer under
the circumstances contemplated by Article 16.2 shall terminate and
discharge all obligations and liabilities of Lessee and Lessor hereunder and
all undelivered items and services to be furnished hereunder which are related
thereto, except that, within five (5) Business Days, subject to the
provisions of Article 16.7, Lessor shall return the Security Deposit
theretofore paid by Lessee to Lessor.

 

16.4        Failure
to Terminate.  If,
following notice of delay or anticipated delay under Article 16.2, this
Lease is not terminated in accordance with the provisions of such Article, then
the Scheduled Aircraft Delivery for the Aircraft otherwise required hereunder
shall be extended by a period equal to the resulting delay.

 

16.5        Damage
to or Destruction of Aircraft - Delivery Delay.  In the event that prior to delivery the
Aircraft is, due to any cause, lost, destroyed or damaged beyond repair, or is
damaged to the extent that it cannot be repaired to new condition by
replacement parts and delivered in accordance with the Scheduled Aircraft
Delivery, unless this Agreement is terminated in accordance with this Article 16
(to the extent applicable), the time reasonably 

 

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16-1

 

required to furnish a replacement for the Aircraft or
to accomplish such repairs shall be deemed an Excusable Delay.

 

16.6        Termination
Rights Exclusive. 
The termination rights of Lessee set forth in this Article 16 are
in substitution for any other rights of termination or contract lapse which
Lessee might have arising by operation of law by virtue of delays in
performance for which Lessor is not deemed to be in default or to have breached
its duties hereunder.

 

16.7 
Compensation. 
If, due to Excusable Delays, delivery of the Aircraft is delayed, or the
Manufacturer concludes, based on its appraisal of the facts, that delivery of
the Aircraft will be delayed, for a period of more than twelve (12) months
after the end of the calendar month of the Scheduled Aircraft Delivery, and as
the result thereof this Lease is terminated, Lessee shall compensate Lessor for
the value of any training or other goods or services theretofore received by
Lessee in connection with this Lease and the cost of any modifications to the
Aircraft or BFE or other equipment or items purchased by Lessor at the request
of Lessee in connection with this Lease (collectively, “Lessee Items”).  The value and cost of the Lessee Items shall
be equal to the amount paid by Lessor for such Lessee Items.  Promptly following payment by Lessee, Lessor
shall transfer title to such Lessee Items to Lessee, free and clear of Liens
created by or through Lessor.

 

Notwithstanding the foregoing:  (a) Lessor may elect to retain all or
any portion of the Lessee Items for its own account, in which case Lessee shall
not be obligated to compensate Lessor for such Lessee Items retained by Lessor,
and (b) as to any of the Lessee Items not retained by Lessor, Lessee may
elect to retain all or any such remaining Lessee Items for its own account, in
which case Lessee shall compensate Lessor for such Lessee Items retained by
Lessee as provided in this Article 16.7. 
Any of the Lessee Items not been retained by Lessor or Lessee shall be
sold by Lessor to third parties, and if the net sale proceeds of such Lessee
Items obtained by Lessor is less than the original prices paid for such Lessee
Items by Lessor, Lessee shall on demand compensate Lessor for one-half of such
difference.

 

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16-2

 

ARTICLE 17.       MISCELLANEOUS.

 

17.1        Construction
and Applicable Law.

 

17.1.1     Severability of Provisions.  Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining such provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.

 

17.1.2     Waiver. 
To the extent permitted by applicable Law, Lessor and Lessee each hereby
waives any provision of Law which renders any provision hereof prohibited or
unenforceable in any respect.

 

17.1.3     Writing Required.  No term or provision of this Lease may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom the enforcement of the change, waiver,
discharge or termination is sought.

 

17.1.4     True Lease.  This Lease shall constitute an agreement of
lease, and nothing herein shall be construed as conveying to Lessee any right,
title or interest in the Aircraft or any Engine except as a lessee only.  Lessee and Lessor further agree that this Lease
is intended to be, and shall be treated by them as, a lease of the Aircraft,
Airframe, Engines, and Parts for U.S. federal income tax purposes.

 

17.1.5     Captions.  The captions in this Lease are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.

 

17.1.6     Governing Law.  This Lease and the rights, obligations and
liabilities hereunder shall in all respects be governed by, and construed in
accordance with, the internal Laws of the State of New York (without regard to
any conflict of Laws rule that might result in the application of the Laws
of any other jurisdiction), including all matters of construction, validity and
performance.

 

17.2        Notices.  All notices, demands and other communications
required or permitted under the terms hereof shall be in writing (which shall
include facsimile and electronic mail), in English, and shall be deemed given
and received:

 

(i)                                     if
sent by registered or certified mail, on the third Business Day after deposit
in the national mail service of the country from which it is sent, postage
prepaid, return receipt requested;

 

(ii)                                  if
sent by any other means of physical delivery, e.g., hand delivery or
courier service, when delivered to the appropriate address provided below;

 

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17-1

 

(iii)                               if sent by facsimile,
when transmitted to the appropriate facsimile number provided below and the
sender’s facsimile machine produces a transmission or verification report
confirming that such transmission has been sent; and

 

(iv)                              if
sent by electronic mail, when transmitted to the appropriate electronic mail
address provided below and the sender’s computer produces a transmission or
verification report confirming that such transmission has been sent.

 

All such notices, demands and other communications
shall be addressed and/or facsimiled and/or e-mailed to the appropriate party
at its address and/or facsimile number and/or electronic mail address set forth
below, or at such other address or facsimile number or electronic mail address
as such party may from time to time hereafter designate to such other parties
in writing:

 

If to Lessee:                                                                               Hawaiian
Airlines, Inc.

3375 Koapaka Street

Suite G350

Honolulu, Hawaii 96819

Attention:  Executive Vice President 
      and Chief Financial Officer;

Executive Vice President and General Counsel

 

Facsimile No.:  
(808) 835-3699

 

E-Mail Address: 
peter.ingram@hawaiianair.com;
                             
hoyt.ziahawaiianair.com

 

If to Lessor:                                                                                Pegasus Aviation Finance Company

c/o AWAS Aviation Services, Inc.,

One West Street, Suite 100-5

New York, NY 10004 

Attention:  Secretary

 

Facsimile No.: 
(+1 646) 274 1422

 

E-Mail Address: 
notices@awas.com

 

With a copy to:                                                             AWAS
(Ireland) Limited

4th Floor, Block B, Riverside IV,

Sir John Rogerson’s Quay

Dublin 2, Ireland

Attention:  Business and Legal Services

 

Facsimile No.: 
(+353) 1 635 5001

 

E-Mail Address: 
notices@awas.com

 

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17-2

 

17.3        Lessor’s Right to Perform for Lessee.  If Lessee fails to make any payment of
Supplemental Rent required to be made by it hereunder or fails to perform or
comply with any of its agreements contained herein, Lessor may itself make such
payment or perform or comply with such agreement, and the amount of such
payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the Incentive
Rate, shall be deemed Supplemental Rent, payable by Lessee upon demand.

 

17.4        Corporate Existence; Merger.  Lessee will preserve and maintain its
corporate existence and all its rights, privileges and franchises in every
jurisdiction in which the character of its property or the nature of its
business makes licensing or qualification necessary.  Lessee will not merge or consolidate with or
into or be acquired by any person or entity or sell, lease or otherwise dispose
of all or substantially all of its properties, without the prior written
consent of Lessor, which consent will not be unreasonably withheld.

 

17.5        Integration.  This Lease Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior written and oral agreements and understandings between the
parties hereto with respect to the subject matter hereof.

 

17.6        Quiet Enjoyment.  Lessor covenants that if,
and as long as, Lessee performs and observes each and every covenant and
agreement to be performed or observed by it hereunder and no Event of Default
shall have occurred and be continuing, Lessee shall quietly enjoy the Aircraft
without hindrance or interference by Lessor, any Participant, any Lender or by
any other person lawfully claiming through Lessor, any Participant or any
Lender.

 

17.7        Assignment.  THIS LEASE AND ALL OR ANY PART OF LESSEE’S
RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION, ITS RIGHTS IN RESPECT OF THE
SECURITY DEPOSIT AND TO THE RETURN THEREOF, SHALL NOT BE ASSIGNED, NOVATED,
HYPOTHECATED OR OTHERWISE TRANSFERRED BY LESSEE WITHOUT LESSOR’S PRIOR WRITTEN
CONSENT, AND ANY PURPORTED ASSIGNMENT, NOVATION, HYPOTHECATION OR TRANSFER
SHALL BE VOID.  Subject to the foregoing,
this Lease shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. 
Lessor’s interest in this Lease Agreement and in the Aircraft are freely
saleable, novateable and assignable by Lessor in whole or in part without
restriction, and upon such sale, novation or assignment (unless the assignment
is solely for collateral security purposes), Lessor shall be discharged from
all obligations hereunder in respect of such interest or Equipment sold or
assigned for any claims or damages arising after the effective date of any such
sale or assignment and Lessor’s assignee or transferee shall succeed to all of
Lessor’s rights, interests and obligations in respect thereof as though such
assignee or transferee had been the initial owner or lessor, as the case may
be, in respect thereof; provided, however, that any such sale, novation,
assignment or other transfer will not adversely affect the ability of the
Aircraft to remain registered in the United States of America to the same
extent as existed immediately preceding such assignment, sale, disposition,
novation or other transfer.  Lessor may
also assign for collateral security purposes or otherwise mortgage its fixed or
contingent rights to receive money hereunder or its interests in this Lease or
in the Aircraft, in whole or in

 

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17-3

 

part.  Lessee
shall comply with all reasonable requests of Lessor, its successors,
transferees and assigns in respect of the sale, assignment, novation,
hypothecation or other transfer (including, if requested, execution of a
consent thereto, reaffirming its representations, warranties and obligations
hereunder in favor of such assignee, successor or transferee or execution of a
lease agreement on terms substantially identical to this Lease Agreement
substituting the name of such transferee, successor or assignee for Lessor, and
in either case providing the assignee, successor or transferee with an
insurance certificate and broker’s report, addressed to such assignee,
successor or transferee, in compliance with the requirements of Article 10
hereof and completing all appropriate registrations with the International
Registry).  Notwithstanding any such
sale, assignment, novation or other transfer, Lessor and the Participants shall
continue to be Indemnitees pursuant to Article 8.1 and shall continue to
be named as additional insureds on all liability policies carried by Lessee
pursuant to Article 10 hereof. 
Except as otherwise specifically provided herein, no such assignment,
sale, novation, transfer by Lessor shall result in any increase in Lessee’s
obligations hereunder, including, without limitation, its obligations under
Articles 8.1, 8.2, 8.3 and 8.4, as compared to such obligations as they would
have existed or arisen had such assignment, sale, novation, transfer not
occurred.  Lessor (and any assignee or
transferee of Lessor, other than an assignee for security purposes) agrees to
reimburse Lessee for all of Lessee’s reasonable transaction expenses (including
reasonable attorneys fees) in connection with any such assignment, sale,
novation, transfer or restructure, and further agrees to provide to Lessee a
true, complete and accurate Form W-8BEN, W-8ECI, W-9, or similar form,
duly executed by the person(s) treated as the recipient(s), for U.S. tax
purposes, of the payments made by Lessee under this Lease, as soon as possible
but in any event prior to the first payment required to be made by Lessee
following such assignment, sale, novation, transfer or change in legal or
beneficial ownership.

 

Unless any assignment, sale, novation or other
transfer of this Lease contemplated above is: (i) to a company or other
entity in the same group of companies as Lessor (and, for the avoidance of
doubt, specifically including a statutory, grantor or other trust acting for
the benefit of Lessor or an Affiliate of Lessor), (ii) to a company that
is not an Affiliate of Lessor but such company has a net worth of at least
$20,000,000 (or, if it does not have such a net worth, whose obligations
hereunder or in respect hereof are guaranteed in a manner reasonably
satisfactory to Lessee by a company or other entity that has such a net worth),
(iii) to a company that does not meet the conditions set forth in clause (i) or
(ii), above, but to which Lessee shall have consented, which consent shall not
be unreasonably withheld, or (iv) to a company or other entity established
for the purpose of “securitizing” this Lease and other leases, then, at the
reasonable request of Lessee, the Security Deposit and Maintenance Payments shall be placed into an escrow account
satisfactory to Lessee and such assignee or other transferee (the cost of which
shall be shared equally by Lessee and such assignee or other transferee), but
any interest accruing thereon shall be for the sole benefit of the assignee or
other transferee.

 

Lessee acknowledges that, prior to or concurrently
with the Delivery Date, Lessor intends to novate or assign its rights and
obligations under this Lease to a special purpose company that is in the same
group of companies as Lessor.  The
obligations of the assignee or transferee under this Lease will be guaranteed
by AWAS Aviation Trading Limited under a guaranty agreement equivalent to the
guaranty agreement referred to in Article 2.2.3(i)(A), and Lessor will be

 

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17-4

 

relieved of all of its obligations hereunder, except
to the extent any such obligations are not assumed by the assignee or
transferee.  Notwithstanding anything to
the contrary in this Article 17.7, Lessee agrees, at its expense (except that
Lessor shall reimburse Lessee for its reasonable transaction expenses,
including reasonable attorneys fees, in an aggregate amount not to exceed
$10,000), to cooperate fully to give effect to such novation or assignment in
favor of such special purpose company, and shall comply with the reasonable
requests of Lessor in connection therewith, but such novation or assignment
shall not result in the increase of any of Lessee’s obligations under Articles
8.2, 8.3 and 8.4 (including the amount of any taxes, fees and other charges),
as compared to such obligations as they would have existed or arisen had such
assignment or novation not occurred. 
Following such assignment or novation, the assignee or transferee of
this Lease under this paragraph shall provide to Lessee a true, complete and
accurate Form W-8BEN, W-8ECI, W-9, or similar form, duly executed by the
person(s) treated as the recipient(s), for U.S. tax purposes, of the
payments made by Lessee under this Lease as soon as possible but in any event
prior to the first payment required to be made by Lessee following such
assignment or novation.

 

17.8        Expenses.  The prevailing party in any action or
proceeding between Lessor and Lessee to enforce the terms of this Lease shall
be entitled to recover from the other party all its costs and expenses,
including reasonable attorneys’ fees incurred by such prevailing party in such
action or proceeding.  In addition,
Lessee shall also reimburse Lessor for all out-of-pocket costs and expenses,
including reasonable attorneys fees, incurred by Lessor in connection with any
approvals, consents, waivers, modifications or amendments hereto requested by
Lessee.

 

17.9        Survival.  The representations, warranties and indemnities
of Lessee in this Lease, as they relate
to events occurring and circumstances arising or existing at or before the end
of the Term and return of the Aircraft in compliance with the terms of this
Lease, shall survive the delivery of the Aircraft and the expiration or
other cancellation or termination of this Lease and are expressly made for the
benefit of, and shall be enforceable by Lessor and its successors and assigns.

 

17.10      English Language.  All information, notices, communications,
opinions, reports, records, logs, manuals and the like required to be given,
kept or maintained by Lessee or to be delivered to Lessor hereunder, if not in
the English language, shall be accompanied by a certified English translation;
provided, however, that the English version of all such information, notices,
communications, opinions, reports, records, logs, manuals and other documents,
including this Lease, shall govern in the event of any conflict with the
non-English version thereof.

 

17.11      Jurisdiction; Service of Process.

 

17.11.1  Submission to Jurisdiction.  Lessee irrevocably and unconditionally:

 

(i)                                     consents
to any suit, action or proceeding arising out of or relating to this Lease
being brought against it by Lessor in the United States District Court for the
Southern District of New York or in the Supreme Court of New York for the
Borough of New York;

 

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17-5

 

(ii)                                  waives
any objection which it may have now or hereafter to the laying of the venue of
any such suit, action or proceeding under clause (i), above, in any such court,
or claim that any such suit, action or proceeding under clause (i), above, has
been brought in an inconvenient forum; and

 

(iii)                               acknowledges the
competence of any such court and submits to the jurisdiction of any such court
in any such suit, action or proceeding.

 

17.11.2  Appointment of Agent.  For the purpose of any suit, action or
proceeding taken in the State or Federal court in the State of New York
referred to in Article 17.11.1(i), Lessor and Lessee shall, at all times
during the Term of this Lease, maintain an agent for service of process in
accordance with this Article 17.11.2 in New York, New York.  To this effect:

 

(i)            Lessee
hereby irrevocably designates, appoints and empowers CT Corporation System,
having its offices, at the date hereof, at 111 Eighth Avenue, New York, New
York 10011, as its duly authorized and lawful agent to receive process for and
on behalf of Lessee in any State or Federal suit, action or proceeding in the
state of New York based on, arising out of or connected with this Lease.  Lessee agrees that service of process upon
such agent and notice of service to Lessee at its address set forth in Article 17.2
(from Lessor or such agent), shall be deemed in every respect effective service
of process.  Lessee further irrevocably
consents to service of process upon it out of said courts in any such suit,
action or proceeding by mailing copies thereof by registered or certified air
mail, postage prepaid, to Lessee at its address referred to in Article 17.2.  If such agent shall cease to have an office
in New York, New York, for receipt of service of process, Lessee shall
forthwith irrevocably designate a substitute agent reasonably acceptable to
Lessor in New York, New York, for such purpose or, if it shall fail to do so,
without limiting any rights Lessor may have against Lessee for breach of its
obligation under this Article 17.11.2(i), service of process hereunder may
be made by mailing copies thereof by registered or certified airmail, postage
prepaid, to Lessee at its address set forth in Article 17.2; and

 

(ii)           Lessor
hereby irrevocably designates, appoints and empowers AWAS Aviation Services, Inc.,
having its offices, at the date hereof, at One West Street, Suite 100-5,
New York, New York 10004, as its duly authorized and lawful agent to receive
process for and on behalf of Lessor in any State or Federal suit, action or
proceeding in the state of New York based on, arising out of or connected with
this Lease.  Lessor agrees that service
of process upon such agent and notice of service to Lessor at its address set forth
in Article 17.2 (from Lessee or such agent), shall be deemed in every
respect effective service of process. 
Lessee further irrevocably consents to service of process upon it out of
said courts in any such suit, action or proceeding by mailing copies thereof by
registered or certified air mail, postage prepaid, to Lessor at its address
referred to in Article 17.2.  If
such agent shall cease to have an office in New York, New York, for receipt of
service of process, Lessor shall forthwith irrevocably designate a substitute
agent reasonably acceptable to Lessee in New York, New York, for such

 

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17-6

 

purpose or, if it shall fail to do so, without
limiting any rights Lessee may have against Lessor for breach of its obligation
under this Article 17.11.2(ii), service of process hereunder may be made
by mailing copies thereof by registered or certified airmail, postage prepaid,
to Lessor at its address set forth in Article 17.2.

 

17.11.3  Non-Exclusive.  The foregoing provisions of Article 17.11
shall not limit the rights of Lessor to serve process in any other country or
any other manner permitted by Law or to bring any legal action or proceeding or
to obtain an attachment or execution of judgment in any competent jurisdiction,
including in the courts of Hawaii.

 

17.12  Lessor’s Payment Obligations.  Lessor shall not be obligated to pay or
release any amounts that are to be paid or released to Lessee pursuant to any
provision of this Lease unless, at the time such payment is to be paid or
released:

 

(i)                                     all
amounts at the time due and payable by Lessee under this Lease or any Companion
Lease are paid in full; and

 

(ii)                                  no
Event or Event of Default shall have occurred and be continuing.

 

17.13      Currency.  If for the purpose of obtaining judgment in
any court in any country it becomes necessary to convert the amount due under
this Lease into the currency of such country, then the conversion shall be at
the rate of exchange prevailing on the day on which the court judgment is
given.  For this purpose, “rate of
exchange” means the rate at which Lessor is able on the relevant date to
purchase Dollars with such currency in such country.  In the event that there is a change in the
rate of exchange prevailing between the day on which the judgment is given and
the date of payment of the amount due, Lessee shall pay such additional amount
as may be necessary to insure that the amount paid on such date is the amount
in the currency of such country which, when converted at the rate of exchange
prevailing on the date of payment, is the amount then due under this Lease in
Dollars.  Any amount due from Lessee
under this Article 17.13 shall be due as a separate debt and shall not be
affected by judgment being obtained for any other sums due under or in respect
of this Lease.

 

17.14      Counterparts.  This Lease may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.

 

17.15  Execution by Facsimile.  Delivery by Lessor or Lessee to the other by
facsimile transmission of an executed counterpart of this Lease or of any other
document executed pursuant hereto shall be deemed as effective as delivery of
an originally executed counterpart thereof. 
Such party shall promptly deliver to the other party an originally
executed counterpart thereof, but the failure of such party to deliver an
executed counterpart shall not affect the validity or effectiveness of this
Lease or such other document.

 

17.16  Confidentiality.  Neither Lessor nor Lessee shall, without the
other’s prior written consent, communicate or disclose the terms of this Lease
Agreement or the transactions

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

 

17-7

 

contemplated hereby or any information or documents
furnished pursuant to this Lease Agreement (except to the extent that the same
are within the public domain) to any third party, other than to:

 

(i)                                     any
Participant, any Lender or any Affiliate, agent or employee of Lessor or Lessee
(provided that the recipient agrees
with the disclosing party to
maintain the confidentiality thereof as contemplated herein);

 

(ii)                                  any
prospective assignee or transferee of Lessor, including any person or entity
that acquires or may be interested in acquiring or is offered the right to
acquire the Aircraft or this Lease from Lessor (provided that the recipient agrees with the disclosing
party to maintain the confidentiality
thereof as contemplated herein);

 

(iii)                               the respective external
legal advisers, auditors, insurance brokers or underwriters of Lessor, Lessee
or any of such other parties referred to in clauses (i) and (ii), above;

 

(iv)                              the
Manufacturer, Engine manufacturer or APU manufacturer (provided that the recipient agrees with the disclosing
party to maintain the confidentiality
thereof as contemplated herein); or

 

(v)                                 the
extent required by generally accepted accounting principles, by applicable Law,
by any procedure for discovery of documents in any proceedings before any
court, pursuant to any order of a court or other Governmental Entity, or in
connection with any litigation or enforcement of rights relating to the
transactions contemplated by this Lease Agreement or in connection with any
mandatory disclosure or reporting provision of Law applicable to Lessor or
Lessee.

 

17.17  Servicing Agreement.  Pursuant to servicing agreements among
Lessor, Servicer and certain of its Affiliates (and pursuant to separate
sub-servicing agreements between Servicer and each Sub-Servicer) Servicer (and
each Sub-Servicer) shall, among other things, act as Lessor’s servicing agent
for matters related to this Lease and the Aircraft.  Accordingly, subject to any notice from
Lessor to the contrary, Lessee shall communicate with, and respond to any
demands, requests or other communications made in accordance with this Lease by,
Servicer or any Sub-Servicer on behalf of Lessor in respect to all matters
relating to this Lease and the Aircraft. 
Actions, demands, requests or other communications taken or given by
Servicer or any Sub-Servicer may be conclusively relied upon by Lessee, and
shall bind Lessor to the same extent as if taken or given by Lessor, but Lessor
reserves the right to elect to take action in its own name in respect of this
Lease, including, without limitation, giving any consents or waivers, making
any demands, or otherwise dealing with Lessee in respect of this Lease.  All notices to Lessee by Servicer or a
Sub-Servicer shall be given in accordance with the notice provisions of Article 17.2.  In no event shall Lessee be obligated to
provide notices to any person other than Lessor and all such notices shall be
given in accordance with the provisions of Article 17.2.

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

17-8

 

17.18      Federal Bankruptcy Code.  In accordance with Section 1110 of Title
11 of the United States Bankruptcy Code, or any superseding statute, as amended
from time to time, Lessee hereby agrees that Lessor’s title to the Aircraft and
Engines and any right of Lessor to take possession of the Aircraft and Engines
in compliance with the provisions of this Lease shall not be affected by the
provisions of Section 105, 362, 363 or any other applicable Section of
Title 11, as amended and in effect from time to time.  In the event Section 1110 is amended, or
if it is repealed and another statute is enacted in lieu thereof, Lessor and
Lessee agree to amend this Lease and take such other reasonable action as
Lessor deems necessary so as to afford to Lessor the rights and benefits as
such amended or substituted statute confers upon owners and lessors of
aircraft.

 

17.19      Product Services.  Provided no Event or Event of Default has
occurred and is continuing hereunder, Lessor agrees to assign to Lessee the
right to training, support services, data and documents available in respect of
the Aircraft under the Purchase Agreement listed in Exhibit “B”.  Lessor shall not have any liability or
responsibility for the adequacy of such training, support services or technical
data and documents or for Manufacturer’s performance or nonperformance in
respect thereof, all of which is, as to Lessor, without recourse,
representation or warranty, express or implied. 
Lessee hereby agrees, to the extent that it has been provided with the
applicable provisions of the Purchase Agreement, to assume the insurance and
indemnity obligations imposed on the “Buyer” under the Purchase Agreement and
to be bound by the exclusion of liabilities provisions of the Purchase
Agreement in relation to such training, support services and technical data and
documents to the same extent as if Lessee had been the original “Buyer” of the
Aircraft under the Purchase Agreement.

 

17.20      Additional Covenant.  Lessee agrees to comply
with the covenant in paragraph 11 of Schedule “1” hereto.

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

17-9

 

ARTICLE
18.  CRAF PROGRAM.

 

18.1  Commitment to CRAF.  So long as no Event or Event of Default shall
have occurred and be continuing, Lessee may use the Aircraft in connection with
contract solicitations by the Air Mobility Command of the United States
Government (“AMC”) and may transfer possession of the Aircraft to the United
States Government or any instrumentality or agency thereof pursuant to the
Civil Reserve Air Fleet Program authorized under 10 U.S.C. § 9511 et seq.,
or any substantially similar or substitute program (hereafter, the “CRAF Program”),
for a period not extending beyond the last day of the Term, provided that:  (i) the rights of the AMC or the
recipient under the CRAF Program shall be subject and subordinate to all the
terms of this Lease, including the right of Lessor to terminate this Lease and
immediately repossess the Aircraft following an Event of Default, (ii) Lessee
shall remain primarily liable for the performance of all the terms of this
Lease to the same extent as if such use or transfer had not occurred, and (iii) Lessee
shall promptly notify Lessor upon subjecting the Airframe or any Engine to the
CRAF Program in any contract year and provide Lessor with the name and address
of the Contracting Office Representative for the AMC to whom notice must be
given in connection with the enforcement of remedies under this Lease pursuant
to Article 15 hereof.  Lessee agrees
to promptly notify Lessor in writing of the transfer of possession of the
Airframe and any Engine to the CRAF Program and of any activation of the
Airframe and any Engine under the CRAF Program.

 

18.2  Indemnification by United States
Government.  Notwithstanding any other provision of
this Lease requiring Lessee to maintain insurance in respect of the Aircraft,
Lessor agrees to accept, in lieu of commercial insurance against any risk with
respect to the Aircraft, insurance provided by the FAA under Chapter 443 of
Title 49 of the United States Code or indemnification from the United States
Government in favor of Lessor against such risk in an amount which, when added
to the amount of commercial or FAA insurance against such risk maintained by
Lessee (including permitted self-insurance) with respect to the Aircraft, shall
be at least equal to the amount of insurance against such risk otherwise
required by Article 10 of this Lease, provided that Lessee shall promptly
notify Lessor as to the existence of such FAA insurance or United States
Government indemnification and promptly furnish to Lessor a copy of such FAA
insurance or United States Government indemnification agreement and a
certificate of a firm of independent aircraft insurance brokers of recognized
standing and responsibility, appointed by Lessee, certifying that such
indemnification and other insurance maintained by Lessee with respect to the
Aircraft is in full compliance with all the requirements of this Article 18
of this Lease.

 

18.3  No Geographical Limits.  So
long as the Aircraft is operated pursuant to the CRAF Program pursuant to which
the United States Government has assumed liability for any damage, loss,
destruction or failure to return possession of the Aircraft and for injury to
persons and damage to property of others and all other liabilities and risks
required to be insured against

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

18-1

 

pursuant to Article 10, there will be no
limitation on the geographic area in which the Aircraft may be operated
pursuant to the CRAF Program.

 

18.4        Notice
of Default.  If
an Event of Default occurs under this Lease and Lessor elects to pursue its
remedies under Article 15 to terminate this Lease and repossess the
Aircraft, Lessor will so notify the United States Government by sending a
written communication to that effect to the following address:

 

Headquarters Air Mobility Command

AMC Contracting Office - DOYAI

402 Scott Drive, Unit 3A1

Scott Air Force Base, Illinois 
62225-5302

 

18.5        Receipt of Payments. 
So long as no Event or Event of Default has occurred and is continuing,
all payments received by Lessee from the United States Government or any
instrumentality or agency thereof for the use and operation of the Aircraft
under the CRAF Program will be paid over to or retained by Lessee.  If an Event or an Event of Default has
occurred and is continuing, all payments received by Lessee from the United
States Government or any instrumentality or agency thereof for the use and
operation of the Aircraft under the CRAF Program shall be paid to Lessor and
may be used by Lessor to satisfy any obligations owing by Lessee under this
Lease and the Companion Leases.  In
furtherance thereof, Lessee hereby assigns to Lessor, as security for the
performance of Lessee’s obligations hereunder and under the Companion Leases,
all of Lessee’s present and future rights to payments from the United States
Government or any instrumentality or agency thereof for the use and operation
of the Aircraft under the CRAF Program. 
On request by Lessor, Lessee shall at its sole expense take all actions
necessary to perfect Lessor’s rights and interests in respect thereof,
including, without limitation, compliance with the Assignment of Claims Act, 31
U.S.C., Section 3727, and Lessee shall provide Lessor with a legal
opinion, in form and substance reasonably satisfactory to Lessor, as to the due
perfection of such assignment.

 

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

*** Material has been
omitted pursuant to a request for confidential treatment and filed separately
with the SEC

 

18-2

 

IN WITNESS WHEREOF,
Lessor and Lessee have each caused this Lease Agreement to be duly executed by
their authorized officers or representatives as of the day and year first above
written.

 

	
   

  	
  LESSOR:

  
	
   

  	
   

  
	
   

  	
  PEGASUS
  AVIATION FINANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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  LESSEE:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HAWAIIAN AIRLINES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

18-3

 

SCHEDULE “1”

 

Intentionally
omitted from FAA filing counterpart as containing confidential financial
information

 

[...***...]

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

S-1

 

Exhibit “A”

 

LEASE SUPPLEMENT

 

COUNTERPART NO.        OF 5 SERIALLY
NUMBERED, MANUALLY EXECUTED COUNTERPARTS. 
TO THE EXTENT THAT THIS LEASE SUPPLEMENT CONSTITUTES CHATTEL PAPER UNDER
THE UNIFORM COMMERCIAL CODE IN THE UNITED STATES OR ANY CORRESPONDING LAW IN
ANY FOREIGN JURISDICTION, NO SECURITY INTEREST IN THIS LEASE SUPPLEMENT MAY BE
PERFECTED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HERETO
OTHER THAN COUNTERPART NO. 1.

 

THIS LEASE SUPPLEMENT,
dated                           ,
between Pegasus Aviation
Finance Company (the “Lessor”) and Hawaiian Airlines, Inc. (the “Lessee”).

 

Lessor and Lessee have
heretofore entered into a Lease Agreement dated as of October     ,
2008 (herein the “Lease Agreement” and the terms defined therein being herein
used with the same meaning), which Lease Agreement provides for the execution
and delivery of a Lease Supplement, substantially in the form hereof for the
purpose of leasing a specific Aircraft under the Lease Agreement as and when
delivered by Lessor to Lessee in accordance with the terms thereof.

 

The Lease Agreement
relates to the Airframe and Engines described below, and a counterpart of the
Lease Agreement is attached hereto and made a part hereof and this Lease
Supplement, together with such attachment, is being filed for recordation on
the date hereof with the Federal Aviation Administration as one document.

 

NOW, THEREFORE, in
consideration of the premises and other good and sufficient consideration,
Lessor and Lessee hereby agree as follows:

 

(1)           Lessor hereby delivers and leases to
Lessee, and Lessee hereby accepts and leases from Lessor, under the Lease
Agreement, the following described Airbus Model A330-200 aircraft and engines
(hereafter, the “Delivered Equipment”):

 

(i)            Airframe:
U.S Identification No. N-                
Manufacturer’s Serial No.           ;
and

 

(ii)           Engines:  Two (2) Rolls Royce Trent 772B engines, rated at 71,100 lbs. thrust, bearing, respectively, manufacturer’s serial
numbers                 
and               
(each of which engines has 550 or more rated takeoff horsepower or the
equivalent of such horsepower).

 

(2)           The Delivery Date of the Delivered
Equipment is the date of this Lease Supplement set forth in the opening
paragraph hereof.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

A-1

 

 

(3)           The Term for the Delivered Equipment
shall commence on the Delivery Date therefor and shall end on                         ,
202 .

 

(4)           Lessee hereby confirms its agreement
to pay Lessor Rent with respect to the Delivered Equipment throughout the Term
therefor in accordance with the terms of the Lease Agreement.

 

(5)           The Lenders referred to in the Lease
Agreement are:                                                     ,
[include addresses].

 

(6)           The Mortgagee referred to in the
Lease Agreement is                                 ,
with an address at                      .

 

(7)           The fuel in the fuel tanks of the
Aircraft on the Delivery Date is                 .

 

(8)           Lessee hereby confirms to Lessor that
the Airframe and Engines described above have been duly marked as showing Lessor’s title thereto and Mortgagee’s
interest therein in accordance with the terms of the Lease Agreement (provided
Lessor has notified Manufacturer and Engine manufacturer of the appropriate
details within any time period required by the relevant manufacturer) and that
Lessee has accepted the Delivered Equipment for all purposes of the Lease
Agreement.  By Lessee’s execution hereof,
Lessee confirms that Lessee has been given adequate opportunity to inspect the
Delivered Equipment, and that Lessee has determined (or has waived any
requirement) that the Aircraft is airworthy, in accordance with specifications
and requirements of the Lease Agreement (except to the extent otherwise
provided in Schedule 1 hereto), in good working order and repair and without
defect or inherent vice in condition, design, operation or fitness for use,
whether or not discoverable by Lessee as of the date hereof, and free and clear
of all Liens (other than any Lessor Liens); provided, however, that nothing
contained herein or in the Lease Agreement shall in any way diminish or
otherwise affect any right Lessee or Lessor may have with respect to the
Delivered Equipment as against Manufacturer or any other person.

 

(9)           All of the terms and provisions of
this Lease Supplement are hereby incorporated by reference into the Lease
Agreement to the same extent as if fully set forth therein.

 

(10)         This Lease Supplement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.

 

(11)         This Lease Supplement shall in all
respects be governed by, and construed in accordance with, the Laws of the
State of New York, including all matters of construction, validity and
performance.

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

A-2

 

IN WITNESS WHEREOF,
Lessor and Lessee have each caused this Lease Supplement to be duly executed by
their authorized officers or agents as of the date and year first above
written.

 

	
   

  	
  LESSOR:

  
	
   

  	
   

  
	
   

  	
  PEGASUS
  AVIATION FINANCE COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LESSEE:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HAWAIIAN AIRLINES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

A-3

 

EXHIBIT “B”

 

TRAINING AND OTHER SUPPORT SERVICES

 

The Airbus training package provided for this Aircraft and the aircraft
to be leased under the Companion Lease referred to in clause (ii) of the
definition thereof (without duplication) is as follows:

 

1.             Flight
Crew Transition (standard transition course or cross crew qualification (CCQ)
as applicable) FOC for sixteen (16) of Lessee’s flight crews, consisting of one
(1) Captain and one (1) First Officer.

 

2.             One
(1) Transition Type Rating Instructor course

 

3.             One
(1) Instructor Cabin Attendant Familiarization Course for up to three (3) Cabin
Attendant Instructor crews.  The number
of Lessee students who may attend this course shall be in accordance with the
Airbus pro forma allowance

 

4.             100
maintenance trainee days

 

5.             6
man-months on-site Airbus customer representative with no more than two
representatives simultaneously

 

*** Material has been omitted pursuant to a request for confidential
treatment and filed separately with the SEC

 

B-1

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