UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
August 18, 2006 (August 17, 2006)

Aircastle Limited
(Exact name of registrant as specified in its charter)


Bermuda 001-32959 98-0444035
(State or other jurisdiction of incorporation) (Commission
File Number)
(IRS Employer
Identification No.)

c/o Aircastle Advisor LLC, 300 First Stamford Place,
Stamford, Connecticut
06902
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code     (203) 504-1020

            

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[    ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[    ]  Soliciting material pursuant to Rule 19a-12 under the Exchange Act (17 CFR 240.19a-12)
[    ]  Pre-commencement communications pursuant to Rule 19d-2(b) under the Exchange Act (17 CFR 240.19d-2(b))
[    ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



SECTION 1 — REGISTRANT'S BUSINESS AND OPERATIONS

Item 1.01    Entry into a Material Definitive Agreement

On August 17, 2006, Aircastle Limited (the ‘‘Company’’) issued a press release , attached hereto and incorporated herein by reference as Exhibit 99.1, announcing that one of its subsidiaries agreed to acquire six Boeing B737-700 aircraft (each an ‘‘Aircraft’’) currently leased to Sterling Airlines A/S (the ‘‘Lessee’’) in Denmark from affiliates of A.P. Moeller – Maersk Group (each a ‘‘Seller’’ and together, the ‘‘Sellers’’) for a total purchase price of approximately $165 million.

Each of the Aircraft will be purchased pursuant to an Aircraft Sale and Purchase Agreement, in the form attached hereto and incorporated herein by reference as Exhibit 10.1 (each an ‘‘Aircraft Purchase Agreement’’ and together the ‘‘Aircraft Purchase Agreements’’), dated on or about August 17, 2006, between Wells Fargo Bank Northwest, N.A., as owner trustee (the ‘‘Owner Trustee’’, and for purposes of the Aircraft Purchase Agreement, a ‘‘Buyer’’), in trust for Aircastle Investment Holdings 2 Limited (the ‘‘Owner Participant’’), a wholly owned indirect subsidiary of the Company, and the applicable Seller. Aircastle Holding Corporation Limited, a wholly owned subsidiary of the Company, has guaranteed the obligations of the Owner Participant under each Aircraft Purchase Agreement. Prior to the execution of the Aircraft Purchase Agreements, there were no material relationships between the Company and the Sellers.

Each Aircraft Purchase Agreement provides that the relevant Aircraft is to be sold and delivered to the applicable Buyer (for each Aircraft, its ‘‘Delivery’’) on an ‘‘as-is, where-is’’ basis, and is subject to a pre-delivery inspection by that Buyer (the ‘‘Inspection’’). Either party may terminate its obligations under the relevant Aircraft Purchase Agreement if the related Aircraft suffers a total loss or any damage beyond a certain threshold after Inspection but prior to Delivery or if the Delivery fails to occur prior to August 31, 2006. Buyer and Seller have rights of indemnification against each other for losses suffered by the other party relating to the Aircraft, subject to customary limitations.

Delivery of four of the Aircraft occurred on August 17, 2006 and Delivery of the remaining two Aircraft is anticipated, subject to customary closing conditions, on or before August 31, 2006.

Novation Agreements

As a condition to the purchase of the Aircraft pursuant to each Aircraft Purchase Agreement, each Buyer and the respective Seller must enter into an Aircraft Lease Novation and Amendment Agreement, in the form attached hereto and incorporated herein by reference as Exhibit 10.2 (each a ‘‘Novation Agreement’’) with the Lessee. Each Novation Agreement provides that the applicable Buyer will assume and succeed to, and the applicable Seller will be released from and will not longer be entitled to, the obligations and benefits of the ‘‘lessor’’ under the related Lease (as defined below), which obligations and benefits arise from and after the Delivery of the relevant Aircraft. Obligations assumed by each Buyer, and from which the relevant Seller is released, include claims raised by the Lessee on or after Delivery in relation to maintenance contributions to be made pursuant to the relevant Lease.

The Novation Agreements contain customary representations and warranties and are subject to customary closing conditions. Each Novation Agreement will terminate automatically if the Aircraft Purchase Agreement related thereto is terminated for any reason.

The Novation Agreement for each of the four Aircraft Delivered on August 17, 2006 has become effective.

Lease Agreements

Upon Delivery of each Aircraft, the related Novation Agreement will become effective, and the applicable Buyer will assume the obligations and be entitled to the benefits of the ‘‘lessor’’ under the Lease Agreements in the form attached hereto and incorporated herein by reference as Exhibit 10.3 (each, a ‘‘Lease, and, together, the ‘‘Leases’’) between the Lessee and the applicable Seller (as




‘‘Lessor’’), relating to that Aircraft. Each Lease provides for a 72-month term from September 2005. Rentals are paid monthly in advance, and maintenance reserves are paid monthly in arrears under each Lease. The Buyer will be obliged to reimburse the Lessee under each Lease, out of maintenance reserve collections and in certain cases for additional sums, for agreed categories of maintenance. The Buyer will also agree to reimburse the Lessee for certain airworthiness directive compliance costs for each Aircraft during the lease term.

Under each Lease, the Lessee makes a number of customary covenants, including that it will ensure that maintenance is performed on the relevant Aircraft and that the relevant Aircraft is insured for casualty loss, and that it provides liability insurance for the benefit of the Buyer and certain related parties. The Lessee also has agreed to indemnify these parties for liabilities arising out of or associated with the Aircraft and for certain tax liabilities, in each case subject to customary exclusions.

The Lessee has the option to terminate up to two Leases per year out of nine lease agreements to which it is a party (which includes the six Leases, together with three other lease agreements in respect of 737-500 aircraft unrelated to this transaction or to the Company). Such early termination options may be exercised upon the giving of not less than 12 months’ notice, provided that no notice can be given for a redelivery prior to October 21, 2007. It is therefore possible that up to two of the Leases may be terminated on this basis in each twelve-month period, commencing October 21, 2007.

Item 2.01 Completion of Acquisition or Disposition of Assets

The disclosure included under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.

SECTION 9 — FINANCIAL STATEMENTS AND EXHIBITS

Item 9.01    Financial Statements and Exhibits

(c)    Exhibits


10 .1
Aircraft Sale and Purchase Agreement, dated as of August 17, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) in respect of Aircraft msn 28010*†
10 .2
Aircraft Lease Novation and Amendment Agreement, dated as of August 17, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) and Sterling Airlines A/S in respect of Aircraft msn 28010*†
10 .3
Lease Agreement, dated as of September 12, 2005, between Maersk Aircraft A/S and Sterling Airlines A/S in respect of Aircraft msn 28010*†
99 .1
Press Release dated August 17, 2006
* In accordance with Instruction 2 to Item 601(a) of Regulation S-K, the Company is filing only one copy of each of the transaction documents referenced in Item 1.01 above. The documents omitted, and any material differences between such documents and those filed, are described in Schedule 1 attached hereto.
Certain information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


  AIRCASTLE LIMITED
(Registrant)
  /s/ David Walton
  David Walton
Chief Operating Officer, General Counsel and Secretary

Date: August 18, 2006




EXHIBIT INDEX


Exhibit Number Exhibit
10 .1
Aircraft Sale and Purchase Agreement, dated as of August 17, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) in respect of Aircraft msn 28010*†
10 .2
Aircraft Lease Novation and Amendment Agreement, dated as of August 17, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) and Sterling Airlines A/S in respect of Aircraft msn 28010*†
10 .3
Lease Agreement, dated as of September 12, 2005, between Maersk Aircraft A/S and Sterling Airlines A/S in respect of Aircraft msn 28010* †
99 .1
Press Release dated August 17, 2006
* In accordance with Instruction 2 to Item 601(a) of Regulation S-K, the Company is filing only one copy of each of the transaction documents referenced in Item 1.01 above. The documents omitted, and any material differences between such documents and those filed, are described in Schedule 1 attached hereto.
Certain information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.



Schedule 1

The following documents have been omitted from this Current Report on Form 8-K, in accordance with Instruction 2 to Item 601(a) of Regulation S-K, as they are substantially identical in all material respects to the documents filed.

1.    Aircraft Sale and Purchase Agreement, to be dated on or about August 21, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) in respect of Aircraft msn 28008.

2.    Aircraft Sale and Purchase Agreement, to be dated on or about August 23, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) in respect of Aircraft msn 28009.

3.    Aircraft Sale and Purchase Agreement, dated August 17, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) in respect of Aircraft msn 28013.

4. Aircraft Sale and Purchase Agreement, dated August 17, 2006, between A/S Maersk Aviation Holding and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) in respect of Aircraft msn 28014.

5.    Aircraft Sale and Purchase Agreement, dated August 17, 2006, between A/S Maersk Aviation Holding and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) in respect of Aircraft msn 28015.

6.    Aircraft Lease Novation and Amendment Agreement, to be dated on or about August 21, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) and Sterling Airlines A/S in respect of Aircraft msn 28008.

7.    Aircraft Lease Novation and Amendment Agreement, to be dated on or about August 23, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) and Sterling Airlines A/S in respect of Aircraft msn 28009.

8.    Aircraft Lease Novation and Amendment Agreement, dated August 17, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) and Sterling Airlines A/S in respect of Aircraft msn 28013.

9.    Aircraft Lease Novation and Amendment Agreement, dated August 17, 2006, between A/S Maersk Aviation Holding and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) and Sterling Airlines A/S in respect of Aircraft msn 28014.

10.    Aircraft Lease Novation and Amendment Agreement, dated August 17, 2006, between Maersk Aircraft A/S and Wells Fargo Bank Northwest, N.A. (not in its individual capacity but solely as Owner Trustee) and Sterling Airlines A/S in respect of Aircraft msn 28015.

11.    Lease Agreement, dated September 12, 2005, between Maersk Aircraft A/S and Sterling Airlines A/S in respect of msn 28008.

12.    Lease Agreement, dated September 12, 2005, between Maersk Aircraft A/S and Sterling Airlines A/S in respect of msn 28009.

13.    Lease Agreement, dated September 12, 2005, between Maersk Aircraft A/S and Sterling Airlines A/S in respect of msn 28013.

14.    Lease Agreement, dated as of September 12, 2005, between A/S Maersk Aviation Holding and Sterling Airlines A/S in respect of msn 28014.

15.    Lease Agreement, dated as of September 12, 2005, between A/S Maersk Aviation Holding and Sterling Airlines A/S in respect of msn 28015.




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Exhibit 10.1

Registration marks OY-MRG, msn 28010

Aircraft Sale and Purchase Agreement

dated 17 August 2006

Maersk Aircraft A/S

and

Wells Fargo Bank Northwest, National Association (not in its individual capacity but solely as Owner Trustee)

relating to the Boeing B737-7L9 aircraft, msn 28010, Danish registration marks OY-MRG.

PORTIONS OF THIS EXHIBIT MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.




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This AIRCRAFT SALE AND PURCHASE AGREEMENT is made on this      day of August 2006

between

MAERSK AIRCRAFT A/S, a limited company incorporated in Denmark with its registered office at Copenhagen Airport, DK-2791 Dragoer, Denmark (the ‘‘Seller’’);

and

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION (not in its individual capacity but solely as Owner Trustee pursuant to the Trust Agreement (as defined below)), a national banking association incorporated under the laws of the State of Utah, United States of America, having its principal place of business at 299 South Main Street, 12th Floor, Salt Lake City, Utah, UT 84111, United States of America (the ‘‘Buyer’’).

WHEREAS the Seller and the Buyer desire to effect, on the Delivery Date, the transfer by the Seller to the Buyer of all of the Seller’s right, title and interest in, under and with respect to the Aircraft.

Now, therefore, the parties hereto agree as follows:

Definitions and Interpretation
1.1  Definitions

In this Agreement the following terms have the meanings, except where the context otherwise requires, given to them in this Clause 1.1:


‘‘Acceptance Certificate’’   means a certificate substantially in the form of Schedule 3, Acceptance Certificate to be signed by the Buyer and the Seller on Delivery
‘‘Additional Rent’’   shall have the meaning given to it in the Sterling Lease.
‘‘Aircraft’’   means the Boeing B737-7L9 aircraft, Danish registration marks OY-MRG and manufacturer’s serial number 28010 together with its Engines, parts and Aircraft Documents relative thereto as the Aircraft is further described in Schedule 1, description of Aircraft.
‘‘Aircraft Documents’’   shall have the meaning given to it in the Sterling Lease.
‘‘Airframe’’   means the Aircraft excluding the Engines relative thereto.
‘‘Assignments of Warranties’’   means the assignments of warranties from the Seller to the Buyer in relation to Airframe and Engines warranties as contemplated by clause 9.
‘‘Beneficiary’’   means Aircastle Investment Holdings 2 Limited.
‘‘Bill of Sale’’   means a bill of sale in respect of the Aircraft substantially in the form of Schedule 2, Bill of Sale.
‘‘Business Day’’   means a day on which banks are open for business in Copenhagen, New York and the Buyer’s Jurisdiction.
‘‘Buyer Deposit’’   means the USD *** deposit made on behalf of the Buyer under the letter of intent between the Aircastle Advisor International Limited and the Seller dated 29 May 2006.
‘‘Buyer’s Jurisdiction’’   means the State of Utah, United States of America.

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‘‘Damage’’   means a fault in or damage to the Aircraft the costs of rectification of which exceed USD 500,000 if the damage is uninsured and USD 1,000,000 if the damage is insured.
‘‘Delivery’’   means delivery of the Aircraft by the Seller to the Buyer pursuant to and in accordance with this Agreement.
‘‘Delivery Date’’   means the date on which Delivery occurs.
‘‘Delivery Location’’   means Copenhagen, Denmark or such other location as may be agreed between the Seller and the Buyer.
‘‘Effective Time Notice’’   shall have the meaning given to it in the Novation Agreement.
‘‘Engine’’   means each engine relative to the Aircraft and as identified in Schedule 1, description of Aircraft.
‘‘Final Delivery Date’’   means 31 August 2006.
‘‘Governmental Entity’’   means and includes (i) any national, government, political sub-division thereof or local jurisdiction therein, (ii) any board, commission, department, division, organ, instrumentality, court, exchange control authority or agency of any thereof, however constituted and (iii) any association, organisation or institution of which any thereof is a member or to whose jurisdiction any thereof is subject or in whose activities any thereof is a participant.
‘‘Inspection’’   means the Buyer’s predelivery inspection of the Aircraft as referred to in clause 6.
‘‘Law’’   means and includes (i) any statute, decree, constitution, regulation, order, judgment or other directive of any Governmental Entity, (ii) any treaty, pact, compact or other agreement to which any Governmental Entity is a signatory or party (iii) any judicial or administrative interpretation or application of any thereof; and (iv) any amendment or revision of any thereof.
‘‘Lease Certificate of Acceptance’’   shall have the meaning given to ‘‘Certificate of Acceptance’’ in the Novation Agreement.
‘‘Lease Declaration’’   means any lease declaration registered over and against the Aircraft with the Danish Register of Rights over Aircraft in respect of the Sterling Lease.
‘‘Lessee’’   means Sterling Airlines A/S.
‘‘Losses’’   means losses, liabilities, actions, claims, proceedings, penalties, fines, judgments, damages, Taxes, fees, costs and expenses.
‘‘Maintenance Contributions’’   shall have the meaning given to it in the Novation Agreement.
‘‘Manufacturer’’   means the manufacturer of the Airframe, Engines, or any component, as applicable in the context used herein.

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‘‘Novation Agreement’’   means the lease amendment and novation agreement to be entered into on or prior to the Delivery Date between the Seller, the Buyer and the Lessee in respect of the Sterling Lease.
‘‘Parent Guarantee’’   means a performance guarantee document by Aircastle Holding Corporation Limited a Bermudan corporation, in the form of Schedule 4, Parent Guarantee.
‘‘Permitted Liens’’   means the Lease Declaration and ‘‘Permitted Liens’’ as such term is defined under the Sterling Lease.
‘‘Purchase Price’’   means the amount calculated as follows:
    P − (R + AR + SD + D) + INT
    where:
    ‘‘P’’ means USD ***.
    ‘‘R’’ means any Rent received by or payable to the Seller under the Sterling Lease for the period from and including *** up to but excluding the Delivery Date.
    ‘‘AR’’ means any Additional Rent received by or payable to the Seller under the Sterling Lease less any Maintenance Contributions.
    ‘‘SD’’ means the Security Deposit.
    ‘‘D’’ means the Buyer Deposit
    ‘‘INT’’ means interest at *** per annum or the amount designated as ‘‘P’’ above from and including *** up to, but excluding the Delivery Date.
‘‘Rent’’   shall have the meaning given to it in the Sterling Lease.
‘‘Replacement Security Deposit Agreement’’   means the replacement security deposit agreement to be entered into on or prior to the Delivery Date between the Seller, the Buyer, the Lessee and *** in respect of a security deposit agreement dated 13 September 2005 and made between, inter alios, the Seller, the Lessee and *** in replacement of, inter alia, the ‘‘Letter of Credit’’ as such term shall be understood in the Sterling Lease.
‘‘Scheduled Delivery Date’’   means 17 August 2006.
‘‘Security Deposit’’   shall have the meaning given to ‘‘Deposit’’ in the Sterling Lease.
‘‘Security Interest’’   shall have the meaning given to it in the Sterling Lease.
‘‘Sterling Lease’’   means the Aircraft Lease Agreement in respect of the Aircraft between the Seller and the Lessee dated 12 September 2005 and the Lease Certificate of Acceptance.
‘‘Taxes’’   means all present and future taxes, levies, imposts, duties, stamp duties, registration taxes and fees, sale and withholding taxes, value added taxes (VAT) and charges of any nature in any jurisdiction.

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‘‘Total Loss’’   shall have the meaning given to it in the Sterling Lease.
‘‘Transaction Documents’’   means this Agreement, the Novation Agreement, the Acceptance Certificate, the Replacement Security Deposit Agreement, the Bill of Sale, the Assignment of Warranties and any agreement amending or supplementing any of the foregoing documents.
‘‘Trust Agreement’’   means that certain trust agreement dated on or about 15 August 2006 between the Buyer and the Beneficiary relating to the Aircraft.
‘‘USD’’   means the lawful currency of the United States of America.
1.2  Interpretation

References in this Agreement to:

(a)  Sections, clauses or schedules are, unless otherwise specified, references to sections of, clauses of, and schedules to, this Agreement;
(b)  any statutory or other legislative provision shall be construed as including any statutory or legislative modification or re-enactment thereof, or any substitution therefor;
(c)  the word person or persons or to words importing persons include, without limitation, individuals, partnerships, corporations, government agencies, committees, departments, authorities and other bodies corporate or unincorporated, whether having distinct legal personality or not; and
(d)  where the context so requires, definitions importing the singular only shall also include the plural and vice versa.
1.3  Headings

Clause headings are for ease of reference only.

Representations and Warranties

PART A – Seller’s Representations and Warranties

2.1  Seller’s Representations and Warranties

The Seller represents and warrants to the Buyer that the statements set out in Clause 2.2 to Clause 2.10 are at the date hereof, and on the Delivery Date will be, true and accurate.

2.2  Status

The Seller is a limited liability company (in Danish ‘‘aktieselskab’’) incorporated and validly existing under the laws of Denmark and has the corporate power to enter into and implement the transactions contemplated by the Transaction Documents to which it is a party.

2.3  Due Authorisation

The execution, delivery and performance of the Transaction Documents to which the Seller is a party have been duly authorised by all necessary corporate action on the part of the Seller.

2.4  Binding Obligations

The Transaction Documents to which the Seller is a party constitute legal, valid and binding obligations of the Seller.

2.5  Consents

Each consent required by the Seller to authorise, or required by it in connection with the execution, delivery, performance, legality, validity or enforceability of the Transaction Documents to which it is a party has been obtained and is in full force and effect, and there is no default in the observance or performance of any of the conditions and restrictions (if any) imposed on or in connection therewith.

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2.6  No Conflict

The execution, delivery and performance by the Seller of the Transaction Documents to which it is a party will not (i) conflict with, or result in any material breach of, any of the terms of, or constitute a default under, any agreement or document to which it is a party or by which it or any of its property or assets may be bound or (ii) contravene or conflict with the provisions of its constitutive documents or applicable laws, regulations, judgments and orders.

2.7  Title to Aircraft

The Seller will at Delivery have full legal and beneficial ownership of the Aircraft free from any Security Interest other than Permitted Liens and shall with full title guarantee transfer to Buyer good and marketable title in and to the Aircraft.

2.8  No Material Litigation

No legal action, suit, proceeding or investigation is currently pending against Seller (and to the best of Seller’s knowledge and belief no legal action, suit, proceeding or investigation is currently threatened against Seller) which, if adversely determined, would materially impair (i) its ability to perform under this Agreement or any other Transaction Documents or (ii) the validity or enforceability of this Agreement or any other Transaction Documents to which the Seller is a party.

2.9  The Seller is not in default in respect of any obligation to be performed by the Seller pursuant to the Sterling Lease.
2.10  No liquidator, provisional liquidator, receiver, examiner, manager, administrator, custodian, trustee or similar officer has been appointed in respect of all or part of the assets of the Seller nor has any application been made to court which is still pending for an order which will lead to the appointment of such officers or the winding-up, reorganisation, liquidation, examination of the Seller or the entry of any order for relief under any similar insolvency law.

PART B – Buyer’s Representations and Warranties

2.11  Buyer’s Representations and Warranties

The Buyer represents and warrants to the Seller that the statements set out in Clauses 2.12 to 2.18 are true and accurate at the date of this Agreement and on the Delivery Date.

2.12  Status

The Buyer is a national banking association incorporated and validly existing and in good standing under the laws of the Buyer’s Jurisdiction and has the corporate power to enter into and implement the transactions contemplated by the Transaction Documents to which it is a party.

2.13  Due Authorisation

The execution, delivery and performance of the Transaction Documents to which the Buyer is a party have been duly authorised by all necessary corporate action on the part of the Buyer.

2.14  Binding Obligations

The Transaction Documents to which the Buyer is a party constitute legal, valid and binding obligations of the Buyer.

2.15  Consents

Each consent required by the Buyer to authorise, or required by it in connection with the execution, delivery, performance, legality, validity or enforceability of the Transaction Documents to which it is a party has been obtained and is in full force and effect and there is no default in the observance or performance of any of the conditions and restrictions (if any) imposed on or in connection therewith.

2.16  No Conflict

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The execution, delivery and performance by the Buyer of the Transaction Documents to which it is a party will not (i) conflict with, or result in any material breach of, any of the terms of, or constitute a default under any agreement or document to which it is a party or by which it or any of its property or assets may be bound or (ii) contravene or conflict with the provisions of its constitutive documents.

2.17  No Material Litigation

Buyer is not aware of any legal action, suit, proceeding or investigation that is currently pending or threatening against Buyer which, if adversely determined, would materially impair (i) its ability to perform under this Agreement or any other Transaction Documents or (ii) the validity or enforceability of this Agreement or any other Transaction Documents to which the Buyer is a party.

2.18  No liquidator, provisional liquidator, receiver, examiner, manager, administrator, custodian, trustee or similar officer has been appointed in respect of all or part of the assets of the Buyer nor has any application been made to court which is still pending for an order which will lead to the appointment of such officers or the winding-up, reorganisation, liquidation, examination of the Buyer or the entry of any order for relief under any similar insolvency law.
Agreement to Sell and Purchase
3.1  Agreement

Subject to the provisions of this Agreement, the Seller agrees to sell all its rights, title and interest in the Aircraft to the Buyer, on the Delivery Date, and the Buyer agrees to purchase the Aircraft from the Seller, on the Delivery Date at the Delivery Location, in an ‘‘as is, where is’’ condition.

3.2  Transfer of Title

The Seller shall upon Delivery pass good and marketable title with full title guarantee to the Aircraft to the Buyer.

3.3  Security Interests

Save for Permitted Liens, the Aircraft shall upon its Delivery be free and clear of any Security Interests.

3.4  Risk

Risk of loss or destruction of the Aircraft or damage to the Aircraft shall pass from the Seller to the Buyer upon Delivery.

3.5  Total Loss and Damage before Delivery

If after the Inspection, but before Delivery, the Aircraft suffers:

3.5.1  Damage either party may notify the other party that it terminates its obligation to sell or buy (as the case may be) the Aircraft. If a party so wishes to terminate its obligation, it shall notify the other party no later than 3 Business Days after becoming aware of the subject Damage;
3.5.2  a Total Loss this Agreement shall automatically terminate.

If terminated in accordance with 3.5.1 or 3.5.2, the parties’ rights and obligations under this Agreement shall cease and be discharged without further liability of either of the Buyer or Seller (save that the Seller shall forthwith return the Buyer Deposit) and neither party shall have any claims against the other for any Losses resulting from such non-delivery.

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Conditions Precedent
4.1  Seller Conditions

The obligations of the Seller to sell the Aircraft to the Buyer shall be subject to fulfilment of each of the following conditions on or prior to the Delivery Date for the Aircraft:

(a)  receipt by the Seller of the Purchase Price;
(b)  receipt by the Seller of corporate documentation in respect of the Buyer and evidence of due execution by the Buyer of the Transaction Documents;
(c)  receipt by the Seller of legal opinions from (i) Conyers Dill and Pearman, Bermudan counsel to the Buyer in form and substance satisfactory to the Seller regarding, inter alia, the due execution and enforceability of the Parent Guarantee and (ii) Ray Quinney & Nebeker, Special Utah counsel to the Buyer, regarding, inter alia, the due execution and authorisation of those of the Transaction Documents to which the Buyer is a party;
(d)  receipt by the Seller of the Parent Guarantee duly executed by Aircastle Holding Corporation Limited;
(e)  receipt by the Seller of the Novation Agreement duly executed by the parties thereto (other than the Buyer);
(f)  receipt by the Seller of the conditions precedent deliverable to, and/or to be fulfilled in favour of, it under the Novation Agreement; and
(g)  the representations given by the Buyer in Part B of Clause 2 being true and accurate on the Delivery Date.
4.2  Waiver by Seller

The conditions precedent set out in Clause 4.1 have been inserted for the benefit of the Seller and may be waived or deferred in writing, in whole or in part and with or without conditions, by the Seller.

4.3  Buyer Conditions

The obligation of the Buyer to purchase the Aircraft from the Seller shall be subject to fulfilment of each of the following conditions on or prior to the Delivery Date for the Aircraft:

(a)  receipt by the Buyer of corporate documentation in respect of the Seller and evidence of due execution by the Seller of the Transaction Documents;
(b)  receipt by the Buyer of a legal opinion in form and substance satisfactory to the Buyer from Bech-Bruun, in relation to inter alia, the due execution and enforceability of the Transaction Documents and certain registration matters in Denmark;
(c)  receipt by the Buyer of a legal opinion in form and substance satisfactory to the Buyer from Gorrissen Federspiel Kierkegaard in relation to, inter alia, the due execution and enforceability of those of the Transaction Documents to which the Seller is a party;
(d)  the Aircraft is not subject to any Security Interests save for Permitted Liens;
(e)  receipt by the Buyer of the Novation Agreement and the Replacement Security Deposit Agreement duly executed by the parties thereto (other than the Buyer);
(f)  receipt by the Buyer of the conditions precedent deliverable to, and/or to be fulfilled in favour of, it under the Novation Agreement;
(g)  receipt by the Buyer of the Assignments of Warranties, duly executed by the parties thereto and consented to by the Relevant Manufacturer;
(h)  the representations given by the Seller in Part A of Clause 2 being true and accurate on the Delivery Date;

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(i)  no material adverse change in the credit status of the Lessee having occurred between 29 May 2006 and the Delivery Date (including as a result of a sale or proposed sale of the Lessee to an entity with a lower net worth than that of the current owner of the Lessee, FL Group hf consummated or in the process of being consummated prior to the Delivery Date); and
(j)  evidence that all authorisations, filings, consents, registrations and notifications required in connection with this Agreement and the transactions contemplated thereby have been (or will be before any required period) obtained or effected and will be, on their being effected or obtained, in full force and effect.
4.4  Waiver by Buyer

The conditions precedent set out in Clause 4.3 have been inserted for the benefit of the Buyer and may be waived in writing, in whole or in part and with or without conditions, by the Buyer.

4.5  Non-fulfilment by Buyer

If any of the conditions precedent referred to in Clause 4.1 remain outstanding on the Final Delivery Date and are not waived or deferred in writing by the Seller, the Seller shall be entitled at any time after 4 p.m. CET on the Final Delivery Date to terminate its obligation to sell the Aircraft to the Buyer by written notice, whereupon no party to this Agreement shall have any further obligation or liability hereunder. In case of the Agreement being terminated in accordance with this clause due to circumstances solely within the Buyer’s control, the Seller shall be entitled to retain as liquidated damages (and not as penalty) the Buyer Deposit.

4.6  Non-fulfilment by Seller

If any of the conditions precedent referred to in Clause 4.3 remain outstanding on the Final Delivery Date and are not waived or deferred in writing by the Buyer, the Buyer shall be entitled at any time after 4 p.m. CET on the Final Delivery Date to terminate its obligation to purchase the Aircraft by written notice, whereupon no party to this Agreement shall have any further obligation or liability hereunder save that the Seller shall forthwith return the Buyer Deposit.

Purchase Price
5.1  Amount of Purchase Price

The Buyer’s consideration for the Aircraft is the Purchase Price which shall be payable immediately prior to Delivery.

5.2  Seller Bank Details

The Purchase Price shall be transferred in full (without set-off or counterclaim or any deduction or withholding) to the following account in immediately available funds by wire transfer to:

***

All interest payable pursuant to this Agreement shall accrue daily on the basis of the actual number of days elapsed and a three hundred and sixty (360) day year.

Pre-Delivery Inspection
6.1  Inspection

Without prejudice to clause 3.1, the Buyer has at its own cost arranged and carried out a pre-delivery inspection and is satisfied with the condition of the Aircraft.

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Delivery
7.1  Delivery Date

The Seller and the Buyer shall use all reasonable endeavours to procure that Delivery occurs on the Scheduled Delivery Date.

7.2  Delivery

On the Delivery Date and subject to the satisfaction or waiver of the conditions precedent in Clause 4, including the payment by the Buyer of the Purchase Price, the parties shall jointly deliver the Effective Time Notice to the Lessee and the Seller shall execute and deliver the Bill of Sale.

7.3  Delivery Location

The Aircraft shall be delivered to the Buyer while the Aircraft is located at the Delivery Location.

7.4  In the event that Delivery does not occur on or before the Final Delivery Date, for any reason, then the Seller and/or the Buyer shall have the right to terminate this Agreement by giving notice in writing thereof to the other. Following receipt of such notice, each party shall be released from its respective obligations hereunder (other than any obligation of the Seller to refund the Buyer Deposit to the Buyer pursuant to Clause 3.5, Clause 4.6 and Clause 7.5) and neither party shall have any claim against the other for any Losses resulting from such non-delivery.
7.5  If any change occurs after the date of this Agreement in any applicable Law which would make it illegal for either the Buyer or the Seller to perform any of their respective obligations under this Agreement and the Transaction Documents, the parties shall make all reasonable endeavours until the Final Delivery Date or such other date as the parties may agree to re-structure the transaction contemplated by this Agreement so as to avoid the aforementioned illegality. If following such endeavours on the Final Delivery Date or such other date as has been agreed the transaction has not been restructured so as to avoid the illegality, this Agreement shall, without further act, terminate and the rights and obligations of the parties hereunder shall cease and be discharged without further liability on the part of either the Seller or the Buyer (save that Seller shall return the Buyer Deposit to the Buyer forthwith).
7.6  Either party may terminate this Agreement upon serving notice on the other party if an order is granted for the winding up or dissolution of the other party or for the appointment of a trustee, receiver, administrative receiver, examiner or similar officer in respect of that other party or any of its assets.
7.7  To the extent that, after Delivery, the Seller receives from the Lessee any amount of Rent payable by the Lessee pursuant to the Lease (notwithstanding the novation of the Lease) in respect of any period after Delivery, the Seller shall procure that such rent is paid over to the Buyer as soon as is reasonably practicable after its receipt.
Condition of Aircraft
8.1  Disclaimers

BUYER UNCONDITIONALLY AGREES THAT AS BETWEEN BUYER (ON THE ONE HAND) AND SELLER (ON THE OTHER HAND) THE AIRCRAFT AND EACH PART THEREOF IS TO BE SOLD AND PURCHASED IN AN AS IS, WHERE IS CONDITION AS AT THE DELIVERY DATE, AND NO TERM, CONDITION, WARRANTY, REPRESENTATION OR COVENANT OF ANY KIND HAS BEEN MADE OR IS GIVEN BY SELLER OR ITS SERVANTS OR AGENTS IN RESPECT OF THE AIRWORTHINESS, VALUE, QUALITY, DURABILITY, CONDITION, DESIGN, OPERATION, DESCRIPTION, MERCHANTABILITY OR FITNESS FOR USE OR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT, INHERENT

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OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE), AS TO THE COMPLETENESS OR CONDITION OF THE AIRCRAFT DOCUMENTS, OR AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, COPYRIGHT, DESIGN OR OTHER PROPRIETARY RIGHTS; AND ALL CONDITIONS, WARRANTIES AND REPRESENTATIONS (OR OBLIGATION OR LIABILITY, IN CONTRACT OR IN TORT) IN RELATION TO ANY OF THOSE MATTERS, EXPRESSED OR IMPLIED, STATUTORY OR OTHERWISE, ARE EXPRESSLY EXCLUDED.

8.2  Acceptance Certificate

DELIVERY OF THE ACCEPTANCE CERTIFICATE BY BUYER TO SELLER SHALL BE CONCLUSIVE PROOF, AS BETWEEN BUYER AND SELLER, THAT BUYER HAS EXAMINED AND INVESTIGATED THE AIRCRAFT TO WHICH SUCH ACCEPTANCE CERTIFICATE RELATES AND EACH PART THEREOF AND THAT THE AIRCRAFT AND EACH PART THEREOF IS IN EVERY WAY SATISFACTORY TO BUYER.

Manufacturer’s Warranties
9.1  Assignment

On Delivery, the Seller’s right, title and interest (to the extent that such assignment is contractually permitted and to the extent they are still subsisting) in all warranties between the Seller and the Manufacturer relating to the Aircraft are assigned and transferred. Warranties relating to the Engines and the Airframe shall, however, be assigned by way of a specific instrument of assignment which shall be consented to by the Airframe and Engine Manufacturer, respectively.

10  Indemnities and Taxes
10.1  Seller’s Indemnity

The Seller shall indemnify the Buyer in full on demand in respect of all Losses suffered or incurred by the Buyer or any of its officers, employees or agents (regardless of when the same are suffered or incurred) arising out of or connected in any way with:

(a)  the purchase, manufacture, ownership, possession, registration, performance, transportation, management, sale, control, inspection, use or operation, design, condition, testing, delivery, leasing, maintenance, repair, service, modification, overhaul, replacement, removal or redelivery of the Aircraft, or any loss of or damage to the Aircraft, or otherwise in connection with the Aircraft or relating to loss or destruction of or damage to any property, or death or injury to any person caused by, relating to or arising from or out of (in each case whether directly or indirectly) any of the foregoing matters and regardless of when the same arises or occurs, or whether it arises out of or is attributable to any act or omission, negligent or otherwise of the Buyer; or
(b)  any design, article or material in the Aircraft or the operation or use thereof constituting an infringement of patent, copyright, trademark, design or other proprietary right or a breach of any obligation of confidentiality owed to any person;

PROVIDED that such indemnities shall not extend to Losses;

(a)  to the extent that such Losses arise out of any act, omission, event or circumstance occurring after Delivery of the Aircraft or arise out of matters for which the Seller is not liable under Clause 8;
(b)  to the extent that such Losses are caused by the gross negligence, wilful misconduct or recklessness of the Buyer or any of its employees, servants or agents;
(c)  to the extent that such Losses are the result of failure by the Buyer to comply with any of its express obligations under this Agreement or any representation or warranty given by the Buyer not being true and correct;

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(d)  which are ordinary or usual operating or overhead expenses of the Buyer;
(e)  to the extent that such Losses represent a loss of profit, bargain or expectation under this Agreement or relate to the value of the Aircraft;
(f)  which are required to be borne by the Buyer in accordance with any other express provision contained in this Agreement; or
(g)  which relate to special, exemplary, punitive or consequential damages.
10.2  Buyer’s Indemnity

The Buyer shall indemnify the Seller in full on demand in respect of all Losses suffered or incurred by Seller or any of its officers, employees or agents (regardless of when the same are suffered or incurred) arising out of or connected in any way with:

(a)  the purchase, manufacture, ownership, possession, registration, performance, transportation, management, sale, control, inspection, use or operation, design, condition, testing, delivery, leasing, maintenance, repair, service, modification, overhaul, replacement, removal or redelivery of the Aircraft, or any loss of or damage to the Aircraft, or otherwise in connection with the Aircraft or relating to loss or destruction of or damage to any property, or death or injury to any person caused by, relating to or arising from or out of (in each case whether directly or indirectly) any of the foregoing matters and regardless of when the same arises or occurs, or whether it arises out of or is attributable to any act or omission, negligent or otherwise of the Seller; or
(b)  any design, article or material in the Aircraft or the operation or use thereof constituting an infringement of patent, copyright, trademark, design or other proprietary right or a breach of any obligation of confidentiality owed to any person;

Provided that such indemnities shall not extend to Losses:

(a)  to the extent that such Losses arise out of any act, omission, event or circumstance occurring prior to Delivery of the Aircraft;
(b)  to the extent that such Losses are caused by the gross negligence, wilful misconduct or recklessness of the Seller or any of its employees, servants or agents;
(c)  to the extent that such Losses are the result of failure by the Seller to comply with any of its express obligations under this Agreement or any representation or warranty given by the Seller not being true and correct;
(d)  to the extent that such Losses represent a Tax or loss of Tax benefits arising in connection with the transfer of title to the Aircraft, provided always that nothing in this clause 10.2(f) shall limit the obligations of the Seller contained in clause 10.3.2 of this Agreement;
(e)  which are ordinary or usual operating or overhead expenses of the Seller;
(f)  which are required to be borne by the Seller in accordance with any other express provision contained in this Agreement; or
(g)  which relate to special, exemplary, punitive or consequential damages.
10.3  Taxes
10.3.1  The Seller and the Buyer agree that they will cooperate with each other and shall use all commercially reasonable endeavours to eliminate or minimise Taxes with respect of the sale of the Aircraft to the Buyer.
10.3.2  The Seller shall indemnify and hold harmless the Buyer from and against any Taxes arising (i) in Denmark in relation to the purchase of the Aircraft by Buyer (save as set forth in clause 13.7) and (ii) in relation to the Aircraft in respect of the period prior to Delivery.
10.3.3  Neither party shall be responsible for Taxes arising in connection with the transfer of title to the Aircraft save as contemplated by clauses 10.3.2 and 13.7.

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11  Insurance

The Buyer undertakes to use all commercially reasonable endeavours to procure that the Seller is insured as an additional insured with respect to the insurances set forth in clause 13.2.3 of the Sterling Lease for a period of 24 months after the Delivery Date, generally complying with the requirements in clause 13 of the Sterling Lease (mutatis mutandis).

12  Law and Jurisdiction
12.1  This Agreement is governed by and shall be construed in accordance with the laws of England.
12.2  Each of the parties irrevocably agrees that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that accordingly any suit, action or proceedings arising out of or in connection with this Agreement (‘‘Proceedings’’) may be brought in such courts.
12.3  Each of the parties irrevocably waives any objection which it may have now or hereafter to the laying of any Proceedings in any such court as is referred to in this Clause and any claim that any Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgement in any Proceedings brought in any court referred to in this Clause shall be conclusive and binding upon them and may be enforced in the courts of any other jurisdiction.
12.4  Nothing contained in this Clause shall limit the right of a party to take Proceedings against another party in any court of competent jurisdiction, nor shall the taking of any Proceedings in one or more jurisdictions preclude the taking of any Proceedings in any other jurisdiction whether concurrently or not.
12.5  Each of the parties hereby consents generally in respect of any Proceedings arising out of or in connection with this Agreement to the giving of any relief or the issue of any process in connection with such Proceedings including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such Proceedings.
12.6  The Buyer hereby appoints Norose Notices Limited, at the address of its registered office from time to time, presently of Kempson House, Camomile Street, London EC3A 7AN, England, reference PTV/AA96326 as its agent for service of process in England in relation to any Proceedings.
12.7  The Seller hereby appoints The Maersk Company, Maersk House, Braham Street, London E1 5 EP, England as its agent for service of process in England in relation to any Proceedings.
13  Further Provisions
13.1  Further Assurances

Each party agrees from time to time to do and perform such other and further acts and execute and deliver any and all such other instruments as may be required by law or reasonably requested by the other party to establish, maintain and protect the rights and remedies of the parties and to carry out and effect the intent and purpose of this Agreement and of passing or transferring title to the Aircraft in accordance with this Agreement.

13.2  Rights Cumulative, Waivers

The rights of the parties under this Agreement are cumulative, may be exercised, as often as each party considers appropriate and are in addition to its rights under general law. The rights of both of the parties (whether arising under this Agreement or the general law) shall not be capable of being waived or varied otherwise than by an express waiver or variation in writing; and in particular any failure to exercise or any delay in exercising any of such rights shall not operate as a waiver or variation of that or any other such right; any defective or partial exercise of any of such rights shall not preclude any other or further exercise of that or any other such right; and no act or course of conduct or negotiation on the part of either party or on its behalf shall in any way preclude it from exercising any such right or constitute a suspension or any variation of any such right.

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13.3  Variation

The provisions of this Agreement shall not be varied otherwise than by an instrument in writing executed by or on behalf of all of the parties to this Agreement.

13.4  Notices

Any notice or other communication under or in connection with this Agreement shall be in writing in the English language or accompanied by a certified English translation thereof and shall be delivered personally, or by courier services such as Federal Express, DHL or similar services, or facsimile transmission, to the respective addresses or facsimile numbers given below or such other address or facsimile number as the recipient may have notified to the sender in writing. Proof of despatch shall be deemed to be proof of receipt:

(a)  in the case of a notice sent by courier service, upon delivery to the notified party (provided that, if delivery is tendered but refused, such notice shall be deemed effective upon such tender);
(b)  in the case of a facsimile transmission, on the Business Day immediately following the date of despatch or transmission;

to the Seller at:

MAERSK AIRCRAFT A/S
Copenhagen Airport South
DK-2791 Dragoer
Denmark
Attention: The President
Fax: +45 33 63 50 81

to the Buyer at:
Wells Fargo Bank Northwest, National Association
299 South Main Street
12th Floor
Salt Lake City
Utah
UT84111
United States of America
Attention: Corporate Trust Department, MAC: U1228-120
Fax: +1 801 246 5053

with a copy to:

Aircastle Advisor LLC
300 First Stamford Place
5th Floor
Stamford, Connecticut 06902
United States of America
Fax: +1 203-504-1021

or to such other address or facsimile number as is notified by one party to the other party under this Agreement.

13.5  Survival

Notwithstanding anything contained herein to the contrary, all agreements, indemnities, representations and warranties contained in this Agreement shall survive the Delivery Date and the expiration or other termination hereof.

13.6  Invalidity of any Provision

If any of the provisions of this Agreement becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

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13.7  Costs and Expenses

Each of the Seller and the Buyer shall bear its own fees, costs and expenses in connection with the preparation, negotiation and completion of this Agreement and performance of the transactions contemplated hereby, except as expressly provided herein. Notwithstanding the foregoing (i) the Seller shall be responsible for and shall discharge the costs and expenses of the Lessee incurred in connection with the Novation of the Lease and (ii) the Buyer shall be responsible for and shall discharge any and all costs and Taxes payable to the Danish Civil Aviation Authority in relation to the registration of the transfer of title to the Aircraft with the Danish Civil Aviation Authority.

13.8  Counterparts

This Agreement may be executed in any number of separate counterparts by the parties and each counterpart shall when executed and delivered be an original document, but all counterparts shall together constitute one and the same instrument.

13.9  Successors and Assigns

This Agreement shall be binding upon, inure to the benefit of and shall be enforceable by the parties hereto, and their respective successors and assigns; provided, that no party to this Agreement may assign any of its obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed.

13.10  Third Parties Act

A person who is not a party to this Agreement shall have no right under the Contract (Rights of Third Parties) Act 1999 to enforce any term of this Agreement, except for the indemnified parties in clause 10.1 and 10.2.

13.11  No Brokerage

Skytech-AIC has been marketing the Aircraft on behalf of the Seller and any fees in that relation are for the account of the Seller. Otherwise, no brokers have been assisting in bringing about the sale of the Aircraft as contemplated in this Agreement.

13.12  Confidentiality

The parties shall keep this Agreement, and all terms and provisions hereof and thereof, strictly confidential and shall not disclose, or cause to be disclosed, the same to any person, without the prior written consent of the other party, except (a) to prospective and permitted transferees of any party’s interests or their respective counsel or special counsel, certified public accountants, independent insurance brokers or other agents, (b) in connection with any administration or enforcement of any provisions of this Agreement, (c) to its affiliates, (d) to its advisors, insurance brokers and accountants, or (e) as may be required by any applicable statute, court or administrative order or decree or governmental ruling or regulation, including insurance regulatory bodies, banking examiners and other government officials. In the event of disclosure of confidential information, the disclosing party (acting always with the prior written consent of the other party) shall notify that other party of (i) the identity of the recipient of the information and (ii) the content of the information disclosed.

13.13  Entire Agreement

This Agreement and the Transaction Documents constitute the entire agreement between the parties hereto in relation to the sale and purchase of the Aircraft, and supersedes all previous proposals, agreements and other written and oral communications in relation thereto.

13.14  Time of the Essence

Time shall be of the essence in respect of payment and performance under this Agreement.

—o0o—

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In witness whereof the parties hereto have executed this Agreement on the day and year first herein written.

SIGNED by and on behalf of MAERSK AIRCRAFT A/S


By (in print):    Flemming Ipsen                                    
Title:                   Attorney-in-fact                                    
Signature:         /s/ Flemming Ipsen                                

SIGNED by and on behalf of WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION (not in its individual capacity but solely as Owner Trustee)


By (in print):    C. Scott Nielsen                               
Title:                   Vice President                                   
Signature:         /s/ C. Scott Nielsen                               

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Execution page, OY-MRG, msn 28010

Schedule 1, description of Aircraft

One (1) Boeing B737-7L9 aircraft, manufacturer’s serial number 28010 and Danish registration marks OY-MRG with two CFM56-7B22 aircraft engines, manufacturer’s serial number 874956 and 874957.

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Schedule 2, Bill of Sale

For good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, MAERSK AIRCRAFT A/S, a Danish company (‘‘Seller’’) does hereby, on the date hereof grant, convey, transfer, bargain, sell, deliver and set over with full title guarantee to Wells Fargo Bank Northwest, National Association (not in its individual capacity but solely as Owner Trustee) (‘‘Buyer’’), its successors and assigns, forever all of its right, title and interest in and to that certain Boeing B737-7L9 aircraft, bearing manufacturer’s serial number 28010, together with (i) the two (2) CFM56-7B22 engines bearing manufacturer’s serial numbers 874956 and 874957, respectively, (ii) all appliances, parts, instruments, appurtenances, accessories, furnishings, or other equipment or property incorporated, installed in or on or attached to said aircraft and engines (collectively the ‘‘Aircraft’’), and (iii) all Aircraft Documents (as defined in that certain Aircraft Sale and Purchase Agreement dated as of [•] 2006 between Seller and Buyer (the ‘‘Sale Agreement’’).

That Seller hereby warrants to Buyer, its successors and assigns, that it is the holder of title to the Aircraft and the Aircraft Documents and with the right to sell the same as aforesaid and that Seller conveys to Buyer good and marketable title to the Aircraft and the Aircraft Documents with full title guarantee and that Seller will warrant and defend such title forever against all claims and demands whatsoever.

This Bill of Sale is governed by the laws of England.

In witness whereof, Seller has caused this instrument to be executed by its duly authorised signatory/signatories this              day of [•].

MAERSK AIRCRAFT A/S


By (in print):                                                                           
Title:                                                                                          
Signature:                                                                                

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Schedule 3, Acceptance Certificate

Wells Fargo Bank Northwest, N.A. as owner trustee (the ‘‘Purchaser’’) of 299 South Main Street, 12th Floor, Salt Lake City, UT 84111 hereby accepts delivery at[•] CET on this [•] day of August 2006 of the Boeing B737-7L9 aircraft with manufacturer’s serial number 28010 and two CFM56-7B22 engines with serial numbers 874956 and 874957 in accordance with an Aircraft Sale Agreement dated [•] August 2006 between the Purchaser and Maersk Aircraft A/S (the ‘‘Sale Agreement’’) on an ‘‘as is, where is’’ basis.

The Purchaser confirms that the Aircraft is satisfactory in all respects and irrevocably accepts the Aircraft for all purposes of the Sale Agreement.

SIGNED BY

                                            
on behalf of
Wells Fargo Bank Northwest, N.A.
as owner trustee

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Schedule 4, Parent Guarantee

See the attached

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THIS AGREEMENT is made on this 17th day of August 2006

BETWEEN

(1)  MAERSK AIRCRAFT A/S, a limited company incorporated under the laws of the Kingdom of Denmark and having its registered office at Copenhagen Airport South, DK 2791 Dragør, Denmark (the ‘‘Existing Lessor’’);
(2)  WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION (not in its individual capacity but solely as Owner Trustee pursuant to the Trust Agreement (as defined below), a national banking association incorporated under the laws of the State of Utah and having its principal place of business at 299 South Main Street, 12th Floor, Salt Lake City, UT 84111, United States of America (the ‘‘New Lessor’’); and
(3)  STERLING AIRLINES A/S, a limited company incorporated under the laws of the Kingdom of Denmark and having its registered office at Copenhagen Airport South, DK-2791 Dragør, Denmark (the ‘‘Lessee’’).
RECITALS 
(A)  Pursuant to an Aircraft Lease Agreement dated 12 September 2005 between the Existing Lessor as lessor and the Lessee as lessee in respect of the Aircraft (the ‘‘Lease Agreement’’) together with the Certificate of Acceptance (collectively, the ‘‘Lease’’), the Existing Lessor agreed to lease, and the Lessee agreed to take on lease, the Aircraft upon the terms and conditions set out therein.
(B)  Pursuant to an Aircraft Sale and Purchase Agreement dated on or about the date hereof between the Existing Lessor as seller and the New Lessor as purchaser in respect of the Aircraft (the ‘‘Sale Agreement’’), the Existing Lessor has agreed to sell, and the New Lessor has agreed to purchase, the Aircraft upon the terms and conditions set out therein.
(C)  It is a condition precedent to the Existing Lessor’s obligation to sell, and to the New Lessor’s obligation to purchase, the Aircraft under the Sale Agreement that the Existing Lessor, the New Lessor and the Lessee execute this Agreement.
(D)  Accordingly, the Existing Lessor and the New Lessor have requested, and the Lessee has agreed, that with effect from the Effective Time (as defined below) the Existing Lessor shall be released from, and the New Lessor shall assume, all of the Existing Lessor’s rights, obligations, duties and liabilities under the Lease on the terms and subject to the conditions set out herein.
(E)  The Existing Lessor, the New Lessor and the Lessee have agreed to enter into this Agreement for the purpose of giving effect to such novation of the Lease and to amend and modify the Lease in connection with the foregoing.

NOW IT IS AGREED as follows:

Definitions and Interpretation
1.1  In this Agreement, (including the Recitals) the following expressions shall have the following meanings:

‘‘Agent’’ means JP Morgan Chase Bank, N.A., as agent under the Credit Agreement.

‘‘Amendment Agreement’’ means the agreement dated on or about the date hereof between, inter alios, the Existing Lessor and the Lessee amending the Letter Agreement and of which the New Lessor has received a copy.

‘‘Certificate of Acceptance’’ means the certificate of acceptance rendered under the Lease and attached as Schedule 2 hereto;

‘‘Credit Agreement’’ means ***;

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‘‘Effective Time’’ means the date and time of execution by the Existing Lessor, the New Lessor and the Lessee of the Effective Time Notice;

‘‘Effective Time Notice’’ means a notice substantially in the form attached as Schedule 1 hereto;

‘‘Insurances’’ means the insurances taken out in respect of the Aircraft in accordance with the Lease Agreement;

‘‘Lessee Notice’’ means the notice in the form attached at Schedule 3 hereto;

‘‘Letter Agreement’’ means the Letter Agreement dated 13 September 2005 between, amongst others, the Existing Lessor and the Lessee in respect of matters relating to, inter alia, the Lease and of which the New Lessor has received a redacted copy;

‘‘Maintenance Contributions’’ means the contributions paid by the Existing Lessor to the Lessee in accordance with Clause 9.2 of the Lease Agreement prior to the Effective Time;

‘‘Novated Lease’’ means the Lease as novated, amended and supplemented by this Agreement;

‘‘Previous Parties’’ means ***;

‘‘Replacement Security Deposit Agreement’’ means the replacement security agreement to be entered into on or prior to the Effective Time between the New Lessor, the Lessee and ***;

‘‘Security Deposit Transfer Instruction’’ means the written instruction to *** by Existing Lessor, A/S Maersk Aviation Holding and the Lessee for the transfer of the amount of USD *** from account no. *** with *** to the account with the same bank as specified in the Replacement Security Deposit Agreement;

‘‘Secured Parties’’ has the meaning given to such term in the Credit Agreement.

‘‘Trust Agreement’’ means that certain Trust Agreement dated on or about 15 August 2006 between Wells Fargo Bank Northwest, National Association, individually and to the extent set forth therein and in all other respects solely as owner trustee and Aircastle Investment Holdings 2 Limited (the ‘‘Owner Participant’’) as the same may be amended or supplemented from time to time.

1.2  Capitalised terms used, but not defined, in this Agreement shall have the respective meanings assigned to them in the Lease Agreement.
Novation
2.1  As and with effect from the Effective Time and subject, in each case, to Clauses 2.3:
(a)  the New Lessor agrees with the Lessee to assume the rights, obligations, duties and liabilities of the Existing Lessor under the Lease;
(b)  the Lessee releases the Existing Lessor from the Existing Lessor’s obligations, duties and liabilities to the Lessee under the Lease;
(c)  the Existing Lessor releases the Lessee from the Lessee’s obligations, duties and liabilities to the Existing Lessor under the Lease and the Existing Lessor agrees that it has no further rights under the Lease;
(d)  the Lessee agrees that it will not assert against the New Lessor any claim or defence that it may have or have had against the Existing Lessor under the Lease related to the period or arising prior to the Effective Time; and
(e)  the Lessee agrees with the New Lessor to perform its obligations under the Lease (as amended and supplemented by this Agreement) in favour of the New Lessor,

each of the foregoing events and agreements being conditional on, and taking effect simultaneously with, the others.

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2.2  The Existing Lessor, the New Lessor and the Lessee accordingly agree that as and with effect from the Effective Time, the Lease shall be novated to the New Lessor with the effect of constituting a new agreement in the form of the Novated Lease between the New Lessor as lessor and the Lessee as lessee. The Lessee acknowledges that the Aircraft was delivered to the Lessee on 13 September 2005, that the Lessee is in possession of the Aircraft pursuant to such delivery and that the New Lessor may rely on the Certificate of Acceptance issued by the Lessee to the Existing Lessor as though it had been issued to the New Lessor. It is acknowledged by all parties hereto that no further physical delivery by the New Lessor is required or contemplated as a result of this Agreement.
2.3  Without prejudice to the rights of the New Lessor or the Lessee hereunder or under the Novated Lease, the Lessee and the Existing Lessor agree that, in respect of any losses, liabilities, claims, obligations or duties suffered or incurred (and whether or not asserted) by either of them in respect of the part of the Lease Period prior to the Effective Time, each shall have the same rights and remedies against each other as it would have had if the Existing Lessor had remained the ‘‘Lessor’’ under the Lease and this Agreement had not been executed. The New Lessor shall not be responsible to the Lessee and the Lessee shall not be responsible to the New Lessor in respect of any such losses, liabilities, claims, obligations or duties nor shall the Lessee or the New Lessor exercise any set off or counterclaim against each other in respect of any such losses, liabilities, claims, obligations or duties.
2.4  Notwithstanding the provisions of Clause 2.3 above, the parties specifically acknowledge and agree that as of the Effective Time the New Lessor shall assume all duties, obligations and liabilities of the Existing Lessor under the Lease in respect of claims raised by the Lessee on or after 16 June 2006 in relation to contributions of the Lessor under clause 9 of the Lease Agreement and that the Lessee has no rights against the Existing Lessor in respect of the Maintenance Contributions, whether arising on or after 16 June 2006.
2.5  In the event that any claim arising under or relating to the Lease or the Novated Lease is raised by the Lessee at any time after the Effective Time and both the New Lessor and the Existing Lessor reject such claim by asserting that such claim relates to either (i) the period prior to the Effective Time (in the case of the New Lessor) or (ii) the period after the Effective Time (in the case of the Existing Lessor), the New Lessor shall notwithstanding anything set out to the contrary in this Agreement (and without prejudice to any right of recourse as between the New Lessor and the Existing Lessor) be liable towards the Lessee for the fulfilment of such claim.
Lease Amendment
3.1  As of, and with effect from, the Effective Time the Lease, as novated hereby, shall be amended as follows:
(a)  ‘‘Agent’’ means JP Morgan Chase Bank, N.A. as agent under the Credit Agreement;
(b)  ‘‘Credit Agreement’’ means ***;
(c)  by deleting the definition of ‘‘Banks’’ in Clause 1.1 of the Lease Agreement in its entirety and by replacing the reference to ‘‘Bank’’ and ‘‘Banks’’ each time it appears with a reference to ‘‘Financiers’’ and inserting the following new definition:

‘‘Financiers’’ means any lender or agent party to the Credit Agreement from time to time or such other financing party as may be notified from time to time by Lessor to Lessee.

(d)  by deleting the definition of ‘‘Owner’’ in Clause 1.1 of the Lease Agreement and inserting the following new definition:

‘‘Owner’’ means Wells Fargo Bank Northwest, National Association, not in its individual capacity but as owner trustee for the Owner Participant.

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(e)  by deleting the definition of ‘‘Place of Payment’’ in Clause 1.1 of the Lease Agreement and inserting the following new definition:

‘‘Place of Payment’’ means account number ***.

(f)  by replacing the word ‘‘Lenders’’ in line 2 of clause 13.5 by the ‘‘Agent’’;
(g)  the expression ‘‘Lessor’’ wherever it appears in the Lease shall be treated as though it referred to the New Lessor to the exclusion of the Existing Lessor, save in the reference to delivery of the Aircraft in clause 3 of the Lease Agreement and save for any references to ‘‘Lessor’’ which are specifically amended by other provisions of this Agreement;
(h)  by including references to ‘‘Owner Participant’’ and ‘‘Agent’’ after the word ‘‘Owner’’ each time such word appears in clauses 13.6.1, 13.6.4, 13.6.5, 13.6.6, 13.6.7, 13.6.8, 13.7.1, 13.7.2, 13.8.1, 13.8.4, 13.10, 13.12.6, 13.12.7 and 13.13.1 of the Lease Agreement (provided that any extra premium shall be payable by the New Lessor);
(i)  by replacing the word ‘‘Lenders’’ with the word ‘‘Agent’’ after the word ‘‘or’’ in line 2 of clause 15.1 of the Lease Agreement;
(j)  by including the words ‘‘or Owner Participant’’ after the word ‘‘Lessor’’ each time such word is used in clause 15.2 of the Lease Agreement;
(k)  by including the words ‘‘Owner Participant’’ after the word ‘‘Owner’’ and replacing the word ‘‘Lenders’’ with the word ‘‘Agent’’, each time such words are used in clauses 17.1 and 17.2 of the Lease Agreement;
(l)  by deleting the word ‘‘Lessor’’ in line 7 of clause 18.3 of the Lease Agreement and replacing it with the words ‘‘Owner Participant’’;
(m)  by including the words ‘‘novate and transfer’’ after the word ‘‘assign’’ in clause 22.2 of the Lease Agreement.
(n)  where the context so permits, the expression the ‘‘Lease’’ wherever it appears in the Lease Agreement shall be treated as though it referred to the Novated Lease;
(o)  by deleting the notice details for the Lessor in Clause 21.1 of the Lease Agreement and substituting the following therefor:

‘‘(i) if to the Lessor to:
Wells Fargo Bank Northwest, National Association
299 South Main Street
Salt Lake City UT 84111
United States of America

Telefax no.: +1 801 246 5053
Attention: Corporate Trust Department, MAC: U1228-120

with a copy to:

Aircastle Advisor LLC
300 First Stamford Place
Fifth Floor
Stamford, CT 06902

Telefax no.: +1 917 5919106 / +1 203 504 1021’’.

(p)  by substituting the definition of ‘‘Tax Indemnitees’’ in the Lease Agreement for the following new definition:

‘‘Tax Indemnitees’’ means the Owner Participant, the Lessor, the Owner and the Financiers;

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(q)  by deleting Clause 19.2.1 of the Lease Agreement and substituting the following therefor:

‘‘Status: it has been properly formed as a national banking association under the laws of the State of Utah, United States of America’’;

(r)  by deleting the words ‘‘, subject to the Specific Aircraft Lease’’ in line 2 of Annex F to the Lease Agreement.
3.2  With effect from the Effective Time, all references to the Lease contained in any documents delivered under or pursuant to the Lease will be construed as references to the Novated Lease as it may be further amended from time to time.
3.3  New Lessor, Existing Lessor and Lessee further agree:
(a)  as of the date of this Agreement, the Additional Rent paid by Lessee less any Maintenance Contributions made by Existing Lessor are as follows:

  USD
***
***
***
***
***
***
***
***
***
***
***
***
***
***
(b)  as of the date hereof, the Lessee has the following claims in respect of maintenance contributions under Clause 9.2 and 9.3 of the Lease Agreement for which the New Lessor shall be liable for in accordance with clause 2.4, subject to such claims being eligible for coverage under the said clauses:

  USD
***
***
***
***
***
***
***
***
***
***
***
***
***
***
Insurance
4.1  The Lessee shall procure that with effect from the Effective Time (i) the Owner Participant, the New Lessor, the Agent and the Financiers (their respective successors, assigns, shareholders, subsidiaries, affiliates, partners, contractors, directors, officers, servants, agents and employees) are named as additional insureds under the Insurances instead of the Existing Lessor and (ii) the Previous Parties shall be additionally insured under those of the Insurances that are referred to in clause 13.2.3 of the Lease Agreement for a period of 24 months following the Effective Time. The New Lessor shall reimburse the Lessee on demand for any costs incurred by the Lessee in respect of increased premium or otherwise as a result of adding such additional insureds.
4.2  The Lessee agrees with the New Lessor and the Existing Lessor to provide copies of certificates evidencing such amendments as are referred to in Clause 4.1 above to the New Lessor and the Existing Lessor.

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Relevant Interests

As a result of the events referred to in the recitals and clauses 2 and 3, as of the Effective Time, the following interests will exist in relation to the Aircraft:

(a)  New Lessor will be the legal owner of the Aircraft;
(b)  Owner Participant will be the beneficial owner of the Aircraft;
(c)  New Lessor will lease the Aircraft to Lessee pursuant to the Novated Lease;
(d)  Existing Lessor is the previous legal and beneficial owner and previous lessor of the Aircraft; and
(e)  *** are the previous financiers of the Aircraft.
Conditions Precedent
6.1  At the Effective Time, the representation and warranties in this Agreement shall be true and correct. In addition, on or before the Effective Time, the New Lessor shall receive the following from the Lessee in form and substance satisfactory to the New Lessor and the Existing Lessor will have received the items in clauses (a), (b) and (f) below in form and substance satisfactory to the Existing Lessor:
(a)  a legal opinion dated as of the Effective Time addressed to the New Lessor, the Financiers and the Existing Lessor in respect of the due authorisation and execution of this Agreement and related matters from the Lessee’s Danish counsel, Plesner Svane Grønborg;
(b)  evidence of the issue of each approval, licence and consent which may be required in connection with the performance by the Lessee of all its obligations under this Agreement nd the Novated Lease;
(c)  a certified copy of Lessee’s constitutional documents and specimen signatures of the persons authorised to execute and deliver this Agreement on behalf of the Lessee;
(d)  a replacement deregistration power of attorney from the Lessee in favour of the New Lessor in substantially the same form as the deregistration power of attorney provided by the Lessee to the Existing Lessor;
(e)  a replacement letter addressed to Eurocontrol and/or other relevant air traffic control authority executed by the Lessee in favour of the New Lessor, in substantially the same form as the Eurocontrol letter provided by the Lessee to the Existing Lessor;    
(f)  certificates of insurance and reinsurance (if applicable) evidencing compliance with the provisions hereof and of the Lease as to insurances and reinsurances (if applicable) and a broker’s letter of undertaking from the Lessee’s insurance broker;
(g)  original Replacement Security Deposit Agreement;
(h)  evidence that the Security Deposit Transfer Instruction will be rendered to *** immediately following the Effective Time and that *** will effect the transfer as contemplated by the Security Deposit Transfer Instruction; and
(i)  copies of the Lessee’s air transport license, air operator’s certificate and the certificate of airworthiness, the radio license, noise certificate and RVSM approval in respect of the Aircraft.
6.2  On or before the Effective Time, the New Lessor will have received evidence from the Existing Lessor that any security over the Aircraft in connection with any prior financing of the Aircraft has been released and discharged.
6.3  On, before or immediately after the Effective Time, the Lessee shall receive the following from the New Lessor and/or the Existing Lessor in a form and substance satisfactory to the Lessee:
(a)  evidence that each approval, licence and consent which may be required in connection with the performance by the New Lessor of all its obligations under this Agreement and the Novated Lease have or will be issued;

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(b)  the lease declaration in a form capable of being registered with first priority with the Danish Register of Rights over Aircraft; and
(c)  a legal opinion from the legal advisors of each of the New Lessor and the Existing Lessor dated as of the Effective Time addressed to the Lessee in respect of the due incorporation of the New Lessor and due authorisation and due execution by the New Lessor and the Existing Lessor of this Agreement and related matters;

and upon the requirements of this clause 6.3 having been met, either of the New Lessor or the Existing Lessor may require that the Lessee executes the Effective Time Notice.

6.4  The conditions specified in Clause 6.1 and 6.2 are for the benefit of the New Lessor and may be waived or deferred in whole or in part and with or without conditions by the New Lessor. The conditions specified in Clause 6.3 are for the benefit of the Lessee and may be waived or deferred in whole or in part and with or without conditions by the Lessee. The conditions specified in Clause 6.1(a), 6.1(b) and 6.1(f) are for the benefit of the Existing Lessor and the New Lessor and may be waived or deferred in whole or in part and with or without conditions by the New Lessor and the Existing Lessor.
Lessee Notice
7.1  At the Effective Time, the New Lessor and the Agent shall furnish to the Lessee a written notice in substantially the form of Schedule 3 hereto (the ‘‘Lessee Notice’’), and upon receipt by Lessee of the Lessee Notice, Lessee shall take the following actions:
(i)  Lessee shall make all rental and other payments due under the Lease Agreement by wire transfer to the account set forth in the Lessee Notice;
(ii)  Lessee shall cause the hull and liability insurance covenants required to be maintained by the Lessee under the Lease Agreement to be endorsed as specified in the Lessee Notice and Clause 4 hereof; and
(iii)  Lessee will acknowledge the Lessee Notice as provided therein, by delivering to the New Lessor and the Agent a counterpart thereof duly executed by the Lessee.
Undertakings and Acknowledgements
8.1  The Lessee undertakes to procure that the documents listed in Clause 6.1 are delivered to the New Lessor and Existing Lessor (where applicable) no later than at the Effective Time.
8.2  The Lessee undertakes, at the New Lessor’s cost, to replace the fireproof plates currently affixed to the Aircraft and each Engine with new fireproof plates bearing the wording:

‘‘This Aircraft/Engine is owned by Wells Fargo Bank Northwest, National Association as owner trustee, leased to Sterling Airlines A/S and may not be operated by any other person without the prior written consent of Wells Fargo Bank Northwest, National Association’’

and to notify the New Lessor of such replacement, as soon as practicable (but, in any event, not later than 10 Business Days) after the Effective Time.

8.3  The Lessee further undertakes, at no cost to the Lessee, to perform and do all such other and further acts and things and execute and deliver any and all such other instruments (including any notification to the Aviation Authority of changes in the ownership, registration and lease structure of the Aircraft and providing the New Lessor and the Existing Lessor with a copy of the certificate of registration in respect of the Aircraft naming the New Lessor as owner) as the New Lessor may reasonably require to reflect the change in the identity of the owner and lessor of the Aircraft recited in this Agreement.
8.4  The Existing Lessor undertakes to return to the Lessee the original of each of the Deregistration Power of Attorney and the Eurocontrol Letter, delivered by the Lessee to the Existing Lessor under the Lease as soon as practicable after the Effective Time.

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8.5  The New Lessor undertakes to deliver a copy of the bill of sale for the sale of the Aircraft from the Existing Lessor to the New Lessor as soon as practicable after the Effective Time.
Representations and Warranties
9.1  The Lessee represents and warrants to the New Lessor as of the date hereof and as of the Effective Time, that:
(a)  the Lease has not been terminated by either of the parties thereto;
(b)  no Event of Default has occurred and is continuing or will result from the entry into or performance of this Agreement by the Lessee;
(c)  the Existing Lessor and the Lessee have not agreed any changes or amendments to the Maintenance Programme;
(d)  the date of Delivery of the Aircraft to the Lessee under the Lease was 13 September 2005;
(e)  there are no subleases on a dry lease basis in effect at the date hereof and none such will be in effect at the Effective Time;
(f)  no notice of intention to exercise the early termination option conferred by the Letter Agreement has been issued by the Lessee;
(g)  the Lease and the Security Deposit Agreement constitute the sole and entire agreement between the Lessee and the Existing Lessor regarding the leasing of the Aircraft and there are no other documents, instruments or agreements between the Existing Lessor and the Lessee relating to the Aircraft or the Lease, and other than as contemplated by this Agreement, the Certificate of Acceptance, the Security Deposit Agreement, the Letter Agreement and the Amendment Agreement, there have been no assignments, amendments, modifications, waivers or consents entered into with respect to the Lease; and to the best of the Lessee's knowledge no default by the Existing Lessor has occurred and is continuing under the Lease and the transfer of the Aircraft to the New Lessor as contemplated under the Sale Agreement will not result in such a default;
(h)  no claims against the Existing Lessor exist or are pending under or in respect of the Lease; and
(i)  no Eligible Maintenance Event has occurred.
9.2  The Lessee further represents and warrants to the New Lessor and the Existing Lessor, as of the Effective Time, that:
(a)  it is a company duly organised and validly existing under the laws of Denmark and that it has corporate power and authority to enter into and perform this Agreement, this Agreement has been duly authorised by all necessary corporate action on the part of the Lessee and neither the execution and delivery hereof nor the transactions contemplated hereby nor compliance by the Lessee with any terms and provisions hereof or of the Novated Lease will contravene any law applicable to the Lessee or result in any breach of, or constitute any default under, or result in the creation of, any Security Interest upon any property of the Lessee under any agreement or instrument to which the Lessee is a party or by which the Lessee or its properties or assets may be bound or affected;
(b)  the Lessee has complied with every necessary consent, approval, order, or authorisation of, or registration with, or the giving of prior notice to, any government entity having jurisdiction over the Lessee with respect to the execution and delivery of this Agreement or the validity and enforceability hereof or the satisfaction of all monetary and other obligations hereunder;
(c)  this Agreement has been duly entered into and delivered by the Lessee and constitutes the valid, legal and binding obligations of the Lessee enforceable in accordance with its terms;
(d)  no Total Loss has occurred and, to the best of Lessee's knowledge, no event, which with the passing of time would result in a Total Loss, has occurred;

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(e)  no enquiries having been made, the Aircraft is free and clear of all Security Interests (other than Permitted Liens);
(f)  there are no claims known to the Lessee that can be asserted against it or the Aircraft by the Existing Lessor arising out of the Lease;
(g)  there are no insurance claims outstanding by the Lessee with respect to the Aircraft and to the best of Lessee's knowledge no damage has occurred with respect to the Aircraft with a cost of repair in excess of USD 250,000, except for the costs of Required Rectification (as defined in the Amendment Agreement);
(h)  there are no outstanding notices or demands from any governmental, semi-governmental or public authority or instrumentality or any other person claiming authority in respect of the Aircraft requiring any mandatory work or other mandatory action to be taken or the mandatory expenditure of any money in respect thereof; and
(i)  no sums are due by the Lessee to Eurocontrol and/or any other relevant air traffic control authority in respect of all of the aircraft operated by the Lessee.
9.3  The New Lessor represents and warrants to the Lessee and the Existing Lessor, as of the date hereof and as of the Effective Time, that:
(a)  it is a national banking association incorporated and validly existing under the laws of the State of Utah, the United States of America and that this Agreement has been duly authorised by all necessary corporate action on the part of the New Lessor and has been duly executed and delivered by the New Lessor and constitutes the valid, legal and binding obligations of the New Lessor enforceable in accordance with its terms;
(b)  by the execution and delivery of this Agreement, and any of the transactions contemplated hereby, the New Lessor has complied with every necessary consent, approval, order or authorisation of, or registration with, or the giving of prior notice to, any government entity having jurisdiction over the New Lessor with respect to the execution and delivery of this Agreement or the validity and enforceability hereof or the satisfaction of all monetary or other obligations hereunder; and
(c)  neither the execution and delivery of this Agreement, nor the transactions contemplated hereby nor compliance by the New Lessor with any terms and provisions hereof or of the Novated Lease will contravene any law applicable to the New Lessor or result in any breach of, or constitute any default under any agreement or instrument to which the New Lessor is a party or by which the New Lessor or its properties or assets may be bound or effected.
9.4  The New Lessor hereby represents and warrants to the Lessee in the terms of Clause 19.2 to the Lease Agreement (as amended by this Agreement) as if references therein to ‘‘Lessor’’ were to the New Lessor.
9.5  The Existing Lessor represents and warrants to the New Lessor and the Lessee, as of the date hereof and as of the Effective Time, that:
(a)  it is a limited company duly incorporated and validly existing under the laws of the Kingdom of Denmark and that this Agreement has been duly authorised by all necessary corporate action on the part of the Existing Lessor and has been duly executed and delivered by the Existing Lessor and constitutes the valid, legal and binding obligations of the Existing Lessor enforceable in accordance with its terms;
(b)  by the execution and delivery of this Agreement, and any of the transactions contemplated hereby, the Existing Lessor has complied with, every necessary consent, approval, order or authorisation of, or registration with, or the giving of prior notice to, any government entity having jurisdiction over the Existing Lessor with respect to the execution and delivery of this Agreement or the validity and enforceability hereof or the satisfaction of all monetary or other obligations hereunder; and

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(c)  neither the execution and delivery of this Agreement, nor the transactions contemplated hereby nor compliance by the Existing Lessor with any terms and provisions hereof will contravene any law applicable to the Existing Lessor or result in any breach of, or constitute any default under, or result in the creation of, any Security Interest upon any property of the Existing Lessor, any agreement or instrument to which the Existing Lessor is a party, or by which the Existing Lessor or its properties or assets may be bound or effected.
9.6  The Existing Lessor further represents and warrants to the New Lessor, as of the date hereof and as of the Effective Time, that:
(a)  the Lease is in full force and effect and has not been terminated and Existing Lessor is not in breach of its obligations thereunder;
(b)  the Existing Lessor and the Lessee have not agreed any changes or amendments to the Maintenance Programme;
(c)  the date of Delivery of the Aircraft to the Lessee under the Lease was 13 September 2005;
(d)  the Lease and the Certificate of Acceptance constitute the sole and entire agreement between the Lessee and the Existing Lessor regarding the leasing of the Aircraft and there are no other documents, instruments or agreements between the Existing Lessor and the Lessee relating to the Aircraft or to the Lease and, other than as contemplated by this Agreement, the Certificate of Acceptance, the Letter Agreement and the Amendment Agreement there have been no assignments, amendments, modifications, waivers or consents entered into with respect to the Lease; no default by the Existing Lessor has occurred and is continuing under the Lease and the transfer of the Aircraft to the New Lessor as contemplated under the Sale Agreement will not result in such a default;
(e)  to the best of the Existing Lessor’s knowledge, all reasonable enquiries having been made, no Event of Default under the Lease has occurred and is continuing;
(f)  save for claims for Rent and Additional Rent, no claims have been asserted against the Lessee or the Aircraft by the Existing Lessor pursuant to the Lease;
(g)  no amounts (whether in respect of Rent, Additional Rent or otherwise) are due and owing by the Lessee to the Existing Lessor pursuant to the Lease and no amounts are due and owing (and to the best of the Existing Lessor’s knowledge, no claims are pending which would make an amount due and owing) by the Existing Lessor to the Lessee under the Lease.
10  Letter Agreement
10.1  The New Lessor:
(a)  acknowledges the right of the Lessee to terminate the leasing of certain aircraft, including the Aircraft, in accordance with the terms of clause 2 of the Letter Agreement; and
(b)  agrees to discuss in good faith the staggered redelivery of the Aircraft in accordance with clause 7 of the Letter Agreement.
10.2  The parties agree that neither the Letter Agreement or the Amendment Agreement nor the rights and obligations thereunder, shall be transferred nor novated to the New Lessor and the Lessee shall have no rights against the New Lessor in relation to the Letter Agreement and Amendment Agreement.
11  Miscellaneous
11.1  No variation: The provisions of this Agreement shall not be varied otherwise than by an instrument in writing executed by or on behalf of all the parties, provided that the New Lessor and the Lessee shall be entitled to amend, modify or vary the terms of the Novated Lease after the Effective Time without reference to the Existing Lessor.

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11.2  Termination of Sale Agreement: In the event that the Sale Agreement is terminated or cancelled by agreement by the parties thereto or in accordance with its terms or lapses or becomes void without completion and passing of title thereunder having occurred, the Existing Lessor and the New Lessor will promptly notify the Lessee thereof and this Agreement, save for Clause 11.6 hereof, shall thereupon automatically be cancelled and terminated and the rights and obligations of the Existing Lessor and the Lessee under the Lease shall continue unaffected by this Agreement and the Existing Lessor shall forthwith deliver to the Lessee the Lease Declaration in the form and of contents provided for in Annex D, Part II, Section c. to the Lease Agreement and the New Lessor shall forthwith return to the Lessee any and all documents delivered by or on behalf of the Lessee pursuant to clause 6 hereof.
11.3  Continued Representations and Warranties: All representations, warranties and agreements contained in this Agreement, including those incorporated by reference, shall continue in full force and effect after the Effective Time.
11.4  Notice: Every notice, request, demand or other communication under this Agreement shall:
(a)  be in writing delivered personally or by prepaid courier delivery services or other similar services or facsimile;
(b)  be deemed to have been received, subject as otherwise provided in this Agreement, in the case of a facsimile, at the time of dispatch (provided, however, that if the date of dispatch is not a business day in the country of the addressee it shall be deemed to have been received at the opening of business on the next such business day), and in the case of a letter, when delivered; provided, however, that if personal delivery or delivery by courier of a notice is tendered but refused, such notice shall be effective upon such tender; and
(c)  be sent to the New Lessor at the relevant address and facsimile number set out in Clause 21 of the Lease Agreement (as amended by this Agreement), to the Existing Lessor at the relevant address referred to in Clause 21 of the Lease Agreement and to the Lessee at the address set out in Clause 21 of the Lease Agreement.
11.5  Costs: Each of the Existing Lessor and the New Lessor shall pay its own legal and professional costs and expenses in respect of the negotiation, documentation and closing of the transactions contemplated by this Agreement, including, inter alia, the New Lessor paying its own costs and expenses associated with the inspection of the Aircraft. The Existing Lessor shall pay to the Lessee on demand and/or indemnify the Lessee for any costs, expenses or fees, including but not limited to legal fees and the costs of establishing the security arrangement under the Replacement Security Deposit Agreement, reasonably incurred by the Lessee in relation to the negotiating, documentation and closing of the transactions contemplated by this Agreement and in relation to the termination of any liens or other security arrangements with respect to the Aircraft, the Lease and/or any related property in favour of the Existing Lessor’s financiers, save that the New Lessor shall pay to the Lessee on demand any costs, expenses and fees incurred by the Lessee in connection with the registration of the New Lessor and its financiers' title in and to the Aircraft and the Novated Lease. Any other costs, fees and expenses in connection with the registration of the New Lessor’s and its financier’s title in and to the Aircraft and the novated lease shall be for the account of the New Lessor.
11.6  Governing law and jurisdiction: The provisions of Clause 23.1, 23.2 and 23.3 of the Lease Agreement shall apply to this Agreement as if set out in full herein and as if references therein to ‘‘Lessor’’ were to ‘‘Existing Lessor’’ and the ‘‘New Lessor’’ and as if references therein to the ‘‘Lease’’ were references to this Agreement.
11.7  Entire Agreement: The Novated Lease, the Replacement Security Deposit Agreement and this Agreement together constitute the sole and entire agreement between Lessee and the New Lessor in relation to the leasing of the Aircraft and supersede all previous agreements in relation to that leasing.
11.8  Invalidity of Provisions: If any of the provisions of this Agreement become invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

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11.9  Counterparts: This Agreement may be executed in any number of separate counterparts by the parties and each counterpart shall when executed and delivered be an original document, but all counterparts shall together constitute one and the same instrument.
11.10  No Increased Obligations: Notwithstanding anything set out to the contrary in this Agreement, the Lessee’s obligations shall not be increased and its rights shall not be diminished and the Lessee shall not at any time be obligated to make any payment to the Existing Lessor, the New Lessor and/or any Indemnitee under or pursuant to the Lease or the Novated Lease which the Lessee would not have been required to make if this Agreement and the novation contemplated hereby had not become effective, it being understood that the addition of Indemnitees shall not of itself be deemed to constitute an increased obligation, provided that the Lessee’s aggregate payment obligations shall not increase.
11.11  Tax Restructuring: Should Taxes arise as a result of the leasing of the Aircraft under the Novated Lease, the Lessee and the New Lessor shall, on either such party’s reasonable request, negotiate in good faith with a view to restructuring the Lease or to otherwise mitigating such Taxes.
12  Effective Time

This Agreement shall become effective upon execution by the Existing Lessor, the Lessee and the New Lessor of the Effective Time Notice.

IN WITNESS whereof the parties hereto or their duly authorized representatives have executed this Agreement on the date written above.

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SIGNATURE PAGE, LEASE NOVATION AGREEMENT, MSN 28010

SIGNED for and on behalf of
MAERSK AIRCRAFT A/S

                                                            

/s/ Flemming Ipsen            
Name:  Flemming Ipsen

SIGNED for and on behalf of

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION

(not in its individual capacity except as provided herein but otherwise solely as owner trustee)

                                                                

/s/ Brett R. King            
Name:  Brett R. King

SIGNED for and on behalf of

STERLING AIRLINES A/S


/s/ Almar Hilmarsson /s/ Hans Svenningsen
Name:  Almar Hilmarsson Hans Svenningsen

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Schedule 1, Form of Effective Time Notice

                     2006

Aircraft Lease Agreement dated 12 September 2005 between Maersk Aircraft A/S (the ‘‘Existing Lessor’’) and Sterling Airlines A/S (the ‘‘Lessee’’) in respect of one Boeing B737-7L9 aircraft with manufacturer’s serial number 28010 as has been and may be further amended from time to time (the ‘‘Lease’’)

Aircraft Lease Novation and Amendment Agreement dated                  2006 between the Existing Lessor, the Lessee and Wells Fargo Bank Northwest, National Association (not in its individual capacity but solely as Owner Trustee) (the ‘‘New Lessor’’), in respect of the Lease (the ‘‘Novation Agreement’’)

We, the Existing Lessor and the New Lessor confirm that the conditions precedent specified in Clauses 6.1 and 6.2 of the Novation Agreement have been satisfied (or waived in accordance with Clause 6.4 of the Novation Agreement) and we, the Lessee, confirm that the conditions precedent specified in Clause 6.3 of the Novation Agreement have been satisfied or waived in accordance with Clause 6.4 of the Novation Agreement and accordingly that the Effective Time under the Novation Agreement has occurred.

Signed by:                          
for and on behalf of

MAERSK AIRCRAFT A/S

Signed by:                          
for and on behalf of

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION

(not in its individual capacity but solely as Owner Trustee)

Signed by:                          
for and on behalf of

STERLING AIRLINES A/S

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Schedule 2, Lease Agreement Acceptance Certificate

See the attached unnumbered pages.

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Schedule 3, Lessee Notice

THIS LESSEE’S NOTICE (this ‘‘Notice’’) is provided as of this         day of August 2006, to Sterling Airlines A/S (the ‘‘Lessee’’), a limited company incorporated under the laws of the Kingdom of Denmark whose registered office is at Copenhagen Airport South, DK-2791 Dragør, Denmark in connection with (a) the Credit Agreement (2006-A), dated as of February 28, 2006 (the ‘‘Credit Agreement’’), among Aircastle Investment Holdings 2 Limited, Aircastle Ireland No. 3 Limited, the Borrowers party thereto from time to time, including Wells Fargo Bank Northwest, National Association (not in its individual capacity but solely as owner trustee) (the ‘‘Lessor’’), JPMorgan Chase Bank, N.A., as agent (the ‘‘Agent’’), and JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending Inc. and Citibank N.A., and the other Lenders party thereto from time to time (capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement), (b) that certain Aircraft Lease Agreement dated 12 September 2005, as supplemented by a letter agreement dated 13 September 2005 between, amongst others, Maersk Aircraft A/S (the ‘‘Previous Owner’’) and the Lessee and as novated and amended by that certain Aircraft Lease Novation and Amendment Agreement dated          August 2006 among the Previous Lessor as existing lessor, Lessor as new lessor and Lessee (the ‘‘Lease’’) and (c) a Boeing 737-7L9 aircraft having manufacturer’s serial number 28010 and Danish Registration Mark OY-MRG (the ‘‘Aircraft’’).

1.  Notice to Lessee.    The Lessor and Agent hereby provide notice to Lessee of the following:
(a)  The Lessor has granted a security interest to the Agent for the benefit of the Secured Parties in all of the Lessor’s right, title and interest in, to and under the Lease as collateral security for all of the obligations of the Lessor under, or in connection with the transactions contemplated in, the Credit Agreement (the ‘‘Borrower Obligations’’);
(b)  The Agent and the other Secured Parties shall not, prior to becoming a transferee of the rights and obligations of the Lessor under the Lease (the ‘‘Transferee’’), be subject to any liability or obligation under the Lease; and
(c)  Following the occurrence of an Event of Default under the Credit Agreement, and subject to the terms thereof relating to Lessee’s right to quiet enjoyment so long as no default or breach by Lessee exists under the Lease, the Agent shall have the right to exercise its rights thereunder as a secured creditor and collateral assignee of the Lease to make all demands, give all notices, take all actions and exercise all rights of the Lessor under and in accordance with the Lease.

2.    Consents and Acknowledgments by Lessee.    The Lessee hereby:

(a)  acknowledges notice of and irrevocably consents to the assignment by the Lessor to the Agent for the benefit of the Secured Parties of all of the Lessor’s right, title and interest in, to and under the Lease as collateral security for the Borrower Obligations;
(b)  agrees that the Agent and the other Secured Parties shall not, prior to becoming a Transferee, be subject to any liability or obligation under the Lease, and acknowledges the right of the Agent and the other Secured Parties to cure defaults by the Lessor under the Lease within any applicable cure period under the Lease pursuant to the terms of this Notice (notwithstanding anything to the contrary contained in the Lease), without assuming or being responsible for any of the obligations of the Lessor thereunder;
(c)  acknowledges the right of the Agent, following the occurrence of an Event of Default under the Credit Agreement, and subject to the terms thereof relating to Lessee’s right to quiet enjoyment so long as no event of default by Lessee exists under the Lease, to exercise its rights thereunder as a secured creditor and collateral assignee of the Lease to make all demands, give all notices, take all actions and exercise all rights of the Lessor under and in accordance with the Lease; and
(d)  acknowledges and agrees, notwithstanding anything to the contrary contained in the Lease, but subject to the provisions of this Notice, that the collateral assignment of the Lease to the Agent for the use and benefit of the Secured Parties and any enforcement rights executed by the Secured Parties in connection therewith shall not in itself constitute a default or breach by the Lessor under the Lease, provided that any exercise by the Secured Parties of their enforcement

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  rights under such assignment will not interfere with (i) the Lessee’s quiet and uninterrupted use and enjoyment of the Aircraft or (ii) the Lessee’s rights in respect of maintenance contributions or (iii) the Lessee‘s rights under the security deposit agreement dated on or about the date hereof and made between the Lessee, Lessor and ***.
3.  Payments.    Until notified in writing by the Agent to the contrary, the Lessee shall with releasing effect pay any and all amounts of rent payable by it to the Lessor under the Lease directly to the Agent at its address and account specified on Exhibit A hereto, or to such other place or entity or in such other manner as the Agent may from time to time specify in writing to the Lessee.
4.  Other Lessee Notice.    Lessor hereby instructs Lessee that (i) each of the Secured Parties now or hereafter party to the Credit Agreement shall be deemed (x) an ‘‘Indemnitee’’ for all purposes of the Lease, including for purposes of the general indemnity set out in Clause 17.2 of the Lease Agreement and (y) a ‘‘Financier’’ as defined in the Lease Agreement; and (ii) JPMorgan Chase Bank, N.A., Bear Stearns Corporate Lending, Inc. and Citibank, N.A. shall each be named as an additional insured; and (iii) the Agent shall be named (a) ‘‘loss payee’’ and additional named insured or (b) a ‘‘contract party’’ on the all-risk aircraft ground and flight hull insurance required to be maintained by Lessee with respect to the Aircraft under the Lease and the Agent, for the benefit of the Lenders shall be included as additional insured or ‘‘contract party’’ under the liability insurance required to be maintained by Lessee with respect to the Aircraft under the Lease.

5.    Secured Parties Not Liable; Lessor Remains Liable.

(a)  Neither JPMorgan Chase Bank, N.A., in its capacity as Agent or as a Lender, nor any other Secured Party shall have any duty, obligation or liability under the Lease, by reason of this Notice or the transactions contemplated hereby.
(b)  Nothing contained in this Consent or in the relevant Security Assignment shall be construed as any release, discharge, novation or waiver of the Lessor’s obligations and liabilities under the Lease (including without limitation the duty to perform) and the Lessor shall remain fully responsible and liable for all obligations and liabilities of the lessor, as novated to it by the Previous Lessor, under the Lease.

IN WITNESS WHEREOF, the parties hereto have caused this Consent to be duly executed by authority duly given as of the day and year first above written.

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION (not in its individual capacity but solely as owner trustee)
By:                                                                                    
Name:                                                                                    
Title:                                                                                    
STERLING AIRLINES A/S
By:                                                                                    
Name:                                                                                    
Title:                                                                                    
JPMORGAN CHASE BANK, N.A. as Agent
By:                                                                                    
Name:                                                                                    
Title:                                                                                    

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EXHIBIT A, Addresses for Notices

Lessee:

Sterling Airlines A/S
Copenhagen Airport South
DK-2791 Dragør
Denmark
Facsimile:    +45 32 31 44 99
Attention:    The President

Agent:

JPMorgan Chase Bank, N.A.
1111 Fannin Street, 10th Floor
Houston, TX 77002
Attn:    Michael Chau
Tel:    (713) 750-7913
Facsimile:    (713) 750-2938

Account for Payments:

Name of Bank:  ***
Swift:  ***
For the Account of:  ***
Account Name:  ***
Account Number:  ***
ABA:  ***

With a copy to:

JPMorgan Chase Bank, N.A.
270 Park Avenue, 15th Floor
New York, New York 10017
Attn:    Vilma Francis
Tel:    (212) 270-5484
Facsimile:    (212) 270-4016

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Lessor:

Wells Fargo Bank Northwest, National Association
299 South Main Street
12th Floor
Salt Lake City
Utah UT 84111
United States of America
Telefax no.:    +1 801 246 5053
Attention:    Corporate Trust Department, MAC: U1228-120

with a copy to:

Aircastle Advisor LLC
300 First Stamford Place
Fifth Floor
Stamford, CT 06902
Telefax no.:    +1 917 5919106 / +1 203 504 1021
Facsimile:    +353 1 477 3313
Tel:    +1 203-504-1027

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Exhibit 10.2

Execution version, OY-MRG, msn 28010

AIRCRAFT LEASE NOVATION AND AMENDMENT AGREEMENT

between

MAERSK AIRCRAFT A/S

as existing lessor

and

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION

(not in its individual capacity but solely as Owner Trustee)

as new lessor

and

Sterling Airlines A/S

as lessee

Relating to one Boeing B737-7L9 aircraft with manufacturers serial number 28010 and Danish registration marks OY-MRG (the ‘‘Aircraft’’).

Dated 17 August 2006

PORTIONS OF THIS EXHIBIT MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.




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Exhibit 10.3

Aircraft Lease Agreement

between

Maersk Aircraft A/S

as Lessor

and

Sterling Airlines A/S
as Lessee

Relating to one Boeing B737-700 aircraft, manufacturer’s serial number 28010, Danish registration marks OY-MRG

Dated on 12 September 2005

PORTIONS OF THIS EXHIBIT MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.





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