Sample Business Contracts


V2500 General Terms of Sale Agreement [Side Letter No. 9] - IAE International Aero Engines AG and JetBlue Airways Corp.



                   [Letterhead of International Aero Engines]

December 31, 2001

JetBlue Airways Corporation
19 Old Kings Highway South, Suite 23
Darien, Connecticut 06820
Attention: Vice President and Treasurer

Subject:    Side Letter No. 9 to the V2500 General Terms of Sale Agreement
            between JetBlue Airways Corporation and IAE International Aero
            Engines AG dated May 4, 1999

Dear Tom:

We refer to the V2500 General Terms of Sale Agreement between JetBlue Airways
Corporation ("JetBlue") and IAE International Aero Engines AG ("IAE") dated May
4, 1999 (the "Contract"). Capitalized terms used herein which are not otherwise
defined shall have the same meaning as those given to them in the Agreement.

This Side Letter No. 9, entered into as of December 31, 2001, details JetBlue's
purchase of additional V2500-A5 powered A320 aircraft and expands IAE's
financial support for certain Firm Aircraft.

1.    PURCHASE OF ADDITIONAL AIRCRAFT

      a.    JetBlue hereby makes the firm and irrevocable election to exercise
            purchase rights for an additional ten (10) A320-200 aircraft each
            powered by V2527-A5 Propulsion Systems for delivery as set forth in
            the Exhibit B-1 to this Side Letter (the "Firm Third Deal
            Aircraft"),

      b.    The definition of "Aircraft" set forth in Clause 1.1 of the Contract
            is removed in its entirety and replaced by the following new Clause
            1.1:

      "1.1  "Aircraft" shall mean (i) the thirty-three (33) new Airbus A320-200
            aircraft each powered by V2527-A5 Propulsion Systems bearing Rank
            No. 1 through 40 in the delivery schedule attached as Exhibit B-1
            hereto, but excluding the aircraft bearing Rank Numbers 18, 23, 26,
            28, 30, 33, and 39 (the "Firm First Deal Aircraft"), (ii) the
            thirty-one (31) new Airbus A320-200 aircraft each powered by
            V2527-A5 Propulsion Systems



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            bearing Rank No. 42 through 74 in the delivery schedule attached as
            Exhibit B-1 hereto, including the aircraft bearing Rank No. 18 (the
            "Firm Second Deal Aircraft"), but excluding the aircraft bearing
            Rank Numbers 41, 44, 63, and 64, (iii) the ten (10) new Airbus
            A320-200 aircraft each powered by V2527-A5 Propulsion Systems
            bearing Rank Numbers 23, 26, 28, 30, 33, 39, 41, 44, 63, and 64
            respectively (the "Firm Third Deal Aircraft"), (iv) JetBlue's option
            to purchase thirty (30) new Airbus A320 family aircraft each powered
            by V2500-A5 Propulsion Systems (the "Option A320 Aircraft"), and (v)
            and reserve options to purchase nineteen (19) new Airbus A320 family
            aircraft each powered by V2500-A5 Propulsion Systems (the "Reserve
            Option Aircraft;" together with the Option A320 Aircraft, the
            "Option Aircraft"), all for delivery as set forth in Exhibit B-1 to
            this Contract. The Firm First Deal Aircraft, Firm Second Deal
            Aircraft and Firm Third Deal Aircraft are together referred to as
            the "Firm Aircraft".

      c.    Exhibit B-1 to the Contract is removed in its entirety and replaced
            by new Exhibit B-1 attached hereto.

2.    FLEET EXPANSION ASSISTANCE FOR FIRM THIRD DEAL AIRCRAFT

      a.    To assist JetBlue with the expansion of its V2527-A5 powered A320
            family fleet, IAE will issue a credit to JetBlue's account with IAE
            in the amount of U.S.$[****] per aircraft for each of the Firm
            Third Deal Aircraft.

      b.    Each such credit will be issued upon delivery to and acceptance by
            JetBlue of the corresponding Firm Third Deal Aircraft.

      c.    Furthermore, each such credit shall be escalated using the IAE
            Escalation formula set forth in Exhibit B-2 to the Contract from a
            base month of [****], to the earlier of: (a) the scheduled
            delivery set forth in Exhibit B-1 to the Contract of the
            corresponding Firm Third Deal Aircraft; or (b) the actual delivery
            date of the corresponding Firm Third Deal Aircraft.

      d.    Each such credit described in Clause 2 may be used by JetBlue
            towards the purchase of V2500 Spare Parts, tooling and services from
            IAE, but unless JetBlue provides written notice to IAE at least
            ninety (90) days prior to delivery of each applicable Firm Third
            Deal Aircraft, the total amount of such credit available for such
            Aircraft shall be assigned to the Aircraft Manufacturer to be
            applied toward the payment for the Propulsion Systems for such Firm
            Third Deal Aircraft.



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Rule 406 under the Securities Act of 1933, as amended.
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      e.      In the event any credit, or portion thereof, under this Clause 2
              is assigned to the Aircraft Manufacturer, JetBlue acknowledges
              that the credit shall nor vest in the Aircraft Manufacturer until
              delivery to and acceptance by JetBlue of the respective Firm Third
              Deal Aircraft.

3.    ADDITIONAL FINANCIAL SUPPORT

      a.      In consideration of JetBlue's exercise of purchase rights for the
              Firm Third Deal Aircraft, IAE is pleased to provide advanced
              credits to JetBlue. These additional credits will be paid at the
              delivery of each of the Firm First Deal Aircraft listed in Exhibit
              A-1 to this Side Letter No. 9.

      b.      The amount of the credit (the "Third Deal Advanced Credits") for
              each of the Firm First Deal Aircraft listed in Exhibit A-l to this
              Side Letter No. 9 will be an additional credit amount which is
              equal to the following: [****]

      c.      Each of the Third Deal Advanced Credits will be issued upon
              delivery to end acceptance by Jet Blue of the corresponding Firm
              First Deal Aircraft.

      d.      Each such Third Deal Advanced Credits described may be used by
              JetBlue towards the purchase of V2500 Spare Parts, tooling and
              services from IAE, but unless JetBlue provides written notice to
              IAE at least ninety (90) days prior to delivery of each applicable
              Firm First Deal Aircraft, the total amount of such credit
              available for such Firm First Deal Aircraft shall be assigned to
              the Aircraft Manufacturer to be applied toward the payment for the
              Propulsion Systems for such Firm First Deal Aircraft.

4.    SPARE ENGINE PURCHASE

      a.      Clause 2.2.2 of the Contract is removed in its entirety and
              replaced by the following new Clause 2.2.2 as follows:

      "2.2.2  JetBlue hereby places a firm and unconditional order with IAE for
              the purchase of a minimum of twelve (12) new V2527-A5 spare
              Engines (the



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the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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              "Firm Spare Engines") for delivery according to the schedule set
              forth in Exhibit B-2 to this Contract."

      b.      Section 3 to Side Letter No. 1 to the Contract is replaced in its
              entirety by new Section 3 as follows:

      "3.     SPARE ENGINE ASSISTANCE CREDIT

      3.1     To assist JetBlue in its purchase from IAE of new spare V2500
              Engines to support the JetBlue Aircraft, IAE will issue to
              JetBlue's account with IAE a credit in an amount equal to [****]
              percent ([****]%) of the Basic Contract Price of the Firm Spare
              Engines or Option Spare Engines, as the case may be, delivered in
              accordance with the schedule set forth in Exhibit B-2 to the
              Contract.

      3.2     Each such credit amount, escalated from the base month of [****]
              in accordance with the IAE Escalation Formula set forth in
              Exhibit B-2 to the Contract, will be escalated to the earlier of
              scheduled or actual delivery date of the corresponding Firm
              or Option Spare Engine. Each such credit may be used by JetBlue
              toward the final payment for the corresponding Firm or Option
              Spare Engine or for the purchase of V2500 spare parts from IAE.

              3.2.1   In the event of an inexcusable delay of the delivery of
                      such spare engine caused solely by IAE, the credit amounts
                      shall be escalated to the actual delivery date of the
                      corresponding Firm or Option Spare Engine.

      3.3     Each such credit will be issued upon the delivery to and
              acceptance by JetBlue of the corresponding spare Engine.
              Acceptance by JetBlue of this credit from IAE shall be deemed for
              this Contract confirmation of JetBlue's acceptance of the
              corresponding spare Engine.

      3.4     IAE agrees to make reasonable efforts to effect delivery of the
              Purchased Items under Clause 2.5.1 Ex-Works (INCOTERMS 1990)
              Connecticut, U.S.A."

5.    CREDIT AVAILABILITY AND REIMBURSEMENT

      a.      JetBlue and IAE hereby agree that if JetBlue fails to take
              scheduled delivery of any Firm Aircraft or informs IAE or Airbus,
              or IAE in its sole discretion determines, that it will not take
              scheduled delivery, of any or all of such Aircraft, then IAE will
              promptly discontinue the issuance of the Third Deal Advanced
              Credits to JetBlue and JetBlue will promptly repay to IAE (i) all
              FIA Credits (as such advanced credits are defined in Side Letter
              No. 8) not yet



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              repaid according to the terms of Side Letter No. 8 and (ii) all
              Third Deal Advanced Credits already paid to JetBlue, subject to
              the limitations in 5.b. below, with interest as set forth herein.
              Scheduled delivery is herein defined as delivery in accordance
              with the delivery schedule attached as Exhibit B-1 to this Side
              Letter No. 9. In addition, if:

                  (i)    The present ownership of JetBlue, or a portion thereof
                         which is greater than 50 percent of the present
                         ownership is transferred to a third party, or
                         there has been a change in the beneficial
                         ownership of the total voting power of all classes of
                         stock then outstanding which are normally entitled to
                         vote in the election of JetBlue's directors. If JetBlue
                         can demonstrate to the satisfaction of IAE that the
                         surviving company resulting from the transfer is at
                         least as credit worthy as JetBlue prior to such
                         transfer then IAE will waive its rights under this
                         Paragraph (i).

                  (ii)   JetBlue fails to make payment of any indebtedness for
                         borrowed money which, in the aggregate, is greater than
                         U.S.$[****] (or its equivalent in other currencies)
                         when due (subject to any applicable period of grace) or
                         any default or event of default occurs which causes
                         such indebtedness to become, or to permit any person to
                         declare the same, due prior to its normally maturity
                         and such person has not waived its right to declare the
                         same due.

                  (iii)  JetBlue commences any case, proceeding or other action
                         with respect to JetBlue or its property in any
                         jurisdiction relating to bankruptcy, insolvency,
                         reorganization, dissolution, liquidation, winding-up,
                         or relief from, or with respect to, or readjustment of,
                         debts or obligations.

                  (iv)   JetBlue seeks the appointment of a receiver, trustee,
                         custodian, or other similar official for JetBlue for
                         all or substantially all of its assets, or JetBlue
                         makes a general assignment for the benefit or its
                         creditors.

                  (v)    JetBlue otherwise becomes the object of any case,
                         proceeding or action of the type referred to in the
                         preceding clauses (iii) or (iv) which remains unstayed,
                         undismissed or undischarged for a period of sixty (60)
                         days.

                  (vi)   An action is commenced against JetBlue seeking issuance
                         of a warrant of attachment, execution, distraint or
                         similar process against all or any substantial part of
                         its assets which remains unstayed, undismissed or
                         undischarged for a period of sixty (60) days; or



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the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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                  (vii)  In the opinion of IAE, a material adverse change has
                         occurred with respect to the financial condition or
                         operations of JetBlue since the date of this side
                         letter.

                  Then, in the event that any of the conditions listed in the
                  above paragraphs (i) through (vii) occur, JetBlue will no
                  longer receive: 1) any Third Deal Advanced Credits as
                  described in this Side Letter. JetBlue will instead
                  immediately pay IAE in immediately available funds (i) all FIA
                  Credit amounts already advanced and not yet repaid, and (ii)
                  all Third Deal Advanced Credits, subject to the limitations in
                  5.b. below, together with interest on the late payment of any
                  such amounts at [****] ([****]%), such rate to be determined
                  as of the date that the original payments were due. An
                  interest penalty for late payment will be applied from the
                  date such FIA Credits (as such advanced credits are defined in
                  Side Letter No. 8) or Third Deal Advanced Credits were due to
                  be paid to IAE until the date that IAE receives payment
                  therfor.

            b.    In the event that the repayment of the Third Deal Advanced
                  Credits is triggered pursuant to the foregoing Clause 5.a.,
                  the amount of Third Deal Advanced Credits not requiring
                  repayment to IAE is based upon the ratio of Third Deal
                  Aircraft delivered in accordance with the schedule in Exhibit
                  B-1 to the number of Third Deal Aircraft firmly ordered by
                  JetBlue. Such ratio will be calculated at the time the
                  repayment is triggered as provided above. So, for example, if
                  at the time repayment is triggered, JetBlue has taken delivery
                  of [****] out of the ten (10) firmly ordered Third Deal
                  Aircraft, JetBlue will be required to repay IAE [****]
                  ([****]%), with interest as provided above, of the Third Deal
                  Advance Credits provided to JetBlue.

Except as expressly amended by this Side Letter No. 9 all provisions of the
Contract remain in full force and effect.

Very truly yours,                           Agreed to and Accepted on behalf of:
IAE International Aero Engines AG           JetBlue Airways Corporation


      /s/ ILLEGIBLE                              /s/ T.E. Anderson
----------------------------------          ------------------------------------
Name                                        Name

        TREASURER                                   VICE PRESIDENT
----------------------------------          ------------------------------------
Title                                       Title

         1/8/02                                         1/8/02
----------------------------------          ------------------------------------
Date                                        Date



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the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
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                                   EXHIBIT A-1

         FIRM AIRCRAFT ELIGIBLE FOR APPLICATION OF THIRD DEAL ADVANCED
                                     CREDIT

<TABLE>
<CAPTION>
RANK NO.       AIRCRAFT                      DELIVERY
<S>            <C>                           <C>
No. 14         Firm Aircraft                 [****] 2002
No. 15         Firm Aircraft                 [****] 2002
No. 16         Firm Aircraft                 [****] 2002
No. 17         Firm Aircraft                 [****] 2002
No. 19         Firm Aircraft                 [****] 2002
No. 20         Firm Aircraft                 [****] 2002
No. 21         Firm Aircraft                 [****] 2002
No. 22         Firm Aircraft                 [****] 2002
No. 24         Firm Aircraft                 [****] 2002
No. 25         Firm Aircraft                 [****] 2002
No. 27         Firm Aircraft                 [****] 2003
No. 29         Firm Aircraft                 [****] 2003
No. 31         Firm Aircraft                 [****] 2003
No. 32         Firm Aircraft                 [****] 2003
No. 34         Firm Aircraft                 [****] 2003
No. 35         Firm Aircraft                 [****] 2003
No. 36         Firm Aircraft                 [****] 2003
No. 37         Firm Aircraft                 [****] 2003
No. 38         Firm Aircraft                 [****] 2003
No. 40         Firm Aircraft                 [****] 2004
</TABLE>



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[****] Represents material which has been redacted and filed separately with
the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>

                                  EXHIBIT B-1

                          AIRCRAFT DELIVERY SCHEDULES

                               As of December 2001

<TABLE>
<CAPTION>
RANK NO.       AIRCRAFT                      DELIVERY
<S>            <C>                           <C>
No. 1          Firm Aircraft                 [****] 2000
No. 2          Firm Aircraft                 [****] 2000
No. 3          Firm Aircraft                 [****] 2000
No. 4          Firm Aircraft                 [****] 2000
No. 5          Firm Aircraft                 [****] 2000
No. 6          Firm Aircraft                 [****] 2000
No. 7          Firm Aircraft                 [****] 2001
No. 8          Firm Aircraft                 [****] 2001
No. 9          Firm Aircraft                 [****] 2001
No. 10         Firm Aircraft                 [****] 2001
No. 11         Firm Aircraft                 [****] 2001
No. 12         Firm Aircraft                 [****] 2001
No. 13         Firm Aircraft                 [****] 2001
No. 14         Firm Aircraft                 [****] 2002
No. 15         Firm Aircraft                 [****] 2002
No. 16         Firm Aircraft                 [****] 2002
No. 17         Firm Aircraft                 [****] 2002
No. 18         Firm Aircraft*                [****] 2002
No. 19         Firm Aircraft                 [****] 2002
No. 20         Firm Aircraft                 [****] 2002
No. 21         Firm Aircraft                 [****] 2002
No. 22         Firm Aircraft                 [****] 2002
No. 23         Firm Aircraft**               [****] 2002
No. 24         Firm Aircraft                 [****] 2002
No. 25         Firm Aircraft                 [****] 2002
No. 26         Firm Aircraft**               [****] 2002
No. 27         Firm Aircraft                 [****] 2003
No. 28         Firm Aircraft**               [****] 2003
No. 29         Firm Aircraft                 [****] 2003
No. 30         Firm Aircraft**               [****] 2003
No. 31         Firm Aircraft                 [****] 2003
No. 32         Firm Aircraft                 [****] 2003
No. 33         Firm Aircraft**               [****] 2003
No. 34         Firm Aircraft                 [****] 2003
No. 35         Firm Aircraft                 [****] 2003
No. 36         Firm Aircraft                 [****] 2003
No. 37         Firm Aircraft                 [****] 2003
</TABLE>



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the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>

<TABLE>
<S>            <C>                           <C>
No. 38         Firm Aircraft                 [****] 2003
No. 39         Firm Aircraft**               [****] 2003
No. 40         Firm Aircraft                 [****] 2004
No. 41         Firm Aircraft**               [****] 2004
No. 42         Firm Aircraft*                [****] 2004
No. 43         Firm Aircraft*                [****] 2004
No. 44         Firm Aircraft**               [****] 2004
No. 45         Firm Aircraft*                [****] 2004
No. 46         Firm Aircraft*                [****] 2004
No. 47         Firm Aircraft*                [****] 2004
No. 48         Firm Aircraft*                [****] 2004
No. 49         Firm Aircraft*                [****] 2004
No. 50         Firm Aircraft*                [****] 2004
No. 51         Firm Aircraft*                [****] 2004
No. 52         Firm Aircraft*                [****] 2004
No. 53         Firm Aircraft*                [****] 2005
No. 54         Firm Aircraft*                [****] 2005
No. 55         Firm Aircraft*                [****] 2005
No. 56         Firm Aircraft*                [****] 2005
No. 57         Firm Aircraft*                [****] 2005
No. 58         Firm Aircraft*                [****] 2005
No. 59         Firm Aircraft*                [****] 2005
No. 60         Firm Aircraft*                [****] 2005
No. 61         Firm Aircraft*                [****] 2005
No. 62         Firm Aircraft*                [****] 2005
No. 63         Firm Aircraft**               [****] 2005
No. 64         Firm Aircraft**               [****] 2005
No. 65         Firm Aircraft*                [****] 2006
No. 66         Firm Aircraft*                [****] 2006
No. 67         Firm Aircraft*                [****] 2006
No. 68         Firm Aircraft*                [****] 2006
No. 69         Firm Aircraft*                [****] 2006
No. 70         Firm Aircraft*                [****] 2007
No. 71         Firm Aircraft*                [****] 2007
No. 72         Firm Aircraft*                [****] 2007
No. 73         Firm Aircraft*                [****] 2007
No. 74         Firm Aircraft*                [****] 2007
</TABLE>

*Firm Second Deal Aircraft
**Firm Third Deal Aircraft



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the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>

OPTION AIRCRAFT

<TABLE>
<S>            <C>                           <C>
No. 75         Option Aircraft               [****] 2004
No. 76         Option Aircraft               [****] 2006
No. 77         Option Aircraft               [****] 2006
No. 78         Option Aircraft               [****] 2006
No. 79         Option Aircraft               [****] 2006
No. 80         Option Aircraft               [****] 2006
No. 81         Option Aircraft               [****] 2006
No. 82         Option Aircraft               [****] 2006
No. 83         Option Aircraft               [****] 2007
No. 84         Option Aircraft               [****] 2007
No. 85         Option Aircraft               [****] 2007
No. 86         Option Aircraft               [****] 2007
No. 87         Option Aircraft               [****] 2007
No. 88         Option Aircraft               [****] 2007
No. 89         Option Aircraft               [****] 2007
No. 90         Option Aircraft               [****] 2008
No. 91         Option Aircraft               [****] 2008
No. 92         Option Aircraft               [****] 2008
No. 93         Option Aircraft               [****] 2008
No. 94         Option Aircraft               [****] 2008
No. 95         Option Aircraft               [****] 2008
No. 96         Option Aircraft               [****] 2008
No. 97         Option Aircraft               [****] 2008
No. 98         Option Aircraft               [****] 2008
No. 99         Option Aircraft               [****] 2008
No. 100        Option Aircraft               [****] 2009
No. 101        Option Aircraft               [****] 2009
No. 102        Option Aircraft               [****] 2009
No. 103        Option Aircraft               [****] 2009
No. 104        Option Aircraft               [****] 2009
</TABLE>

Under the terms of its purchase agreement with Airbus for the Aircraft, JetBlue
has the right to receive delivery positions for Purchase Right Aircraft (also
referred to as Reserve Option Aircraft hereunder) equal to the number of Option
Aircraft as to which JetBlue has exercised its option purchase rights. Airbus
has granted JetBlue conversion rights for each of the nineteen (19) Option
Aircraft and Purchase Right Aircraft (also referred to as Reserve Option
Aircraft hereunder) from A320 Aircraft to the A321-200 or A319 aircraft type on
twenty-one months notice to Airbus. No dates are specified for delivery of these
Purchase Right Aircraft (also referred to as Reserve Option Aircraft hereunder).
Such delivery dares will be determined at the time options are exercised by
JetBlue.



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the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>

LEASED AIRCRAFT

<TABLE>
<CAPTION>
             YEAR         NUMBER       DELIVERY PERIOD
             ----         ------       ---------------
           <S>             <C>         <C>
             1999           1          (1) [****]
             2000           3          (1) [****], (1) [****], (1) [****]
             2001           4          (1) [****], (2) [****], (1) [****]
             2003           1          (1) [****]
            TOTAL           9          All but the last of the leased aircraft
                                       have been delivered
</TABLE>



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the Commission pursuant to a request for confidential treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.
<Page>

                                  EXHIBIT B-2

                            PURCHASED ITEMS, PRICE,

                        ESCALATION FORMULA AND DELIVERY

                              As of December 2001

<TABLE>
<CAPTION>
                                      Basic Contract
  Rank          Purchased Item             Price        Qty.      Delivery Date
  No.                                  U.S. Dollars
                                     (January 1999)
--------------------------------------------------------------------------------
<S>        <C>                         <C>              <C>         <C>
1          V2527-A5 spare Engine:      $[****]           1           [****]/99*
2          V2527-A5 spare Engine:      $[****]           1           [****]/00*
3          V2527-A5 spare Engine:      $[****]           1           [****]/01*
4          V2527-A5 spare Engine:      $[****]           1           [****]/02
5          V2527-A5 spare Engine:      $[****]           1           [****]/02
6          V2527-A5 spare Engine:      $[****]           1           [****]/03
7          V2527-A5 spare Engine:      $[****]           1           [****]/04
8          V2527-A5 spare Engine:      $[****]           1           [****]/05
9          V2527-A5 spare engine       $[****]           1           [****]/06
10         V2527-A5 spare Engine:      $[****]           1           [****]/06
11         V2527-A5 spare Engine:      $[****]           1           [****]/07
12         V2527-A5 spare Engine:      $[****]           1           [****]/08

<CAPTION>
           Option Spare Engines
           --------------------
<S>        <C>                        <C>
           V2524-A5 spare Engine:     $[****]
           V2527-A5 spare Engine:     $[****]
           V2533-A5 spare Engine:     $[****]
</TABLE>

* These spare Engines have been delivered to JetBlue.



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Rule 406 under the Securities Act of 1933, as amended.
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                             IAE ESCALATION FORMULA

1.    Any unit base price or other sum expressed to be subject to escalation
      from a base month to a month of delivery or other date of determination in
      accordance with the IAE Escalation Formula will be subject to escalation
      in accordance with the following formula:

      P = Pb ([****] L + [****] M + [****] E)
                   -        -       -
                   Lo       Mo      Eo

      Where:

      P = the invoiced purchase price or escalated sum rounded to the nearest
      U.S. Dollar.

      Pb = unit base price or other sum.

      Lo = the "Average Hourly Earnings of Aircraft Engine and Engine Parts
      Production Workers" SIC Code 3724 published by the Bureau of Labor
      Statistics in the U.S. Department of Labor for the month preceding the
      base month by four months.

      L = the "Average Hourly Earnings of Aircraft Engine and Engine Parts
      Production Workers" SIC Code 3724 for the month preceding the month of
      delivery or other date of determination by four months.

      Mo = the "Producer Price Index, Code 10, for Metals and Metal Products"
      published by the Bureau of Labor Statistics in the U.S. Department of
      Labor for the month preceding the base month by four months.

      M = the "Producer Price Index, Code 10, for Metals and Metal Products" for
      the month preceding the month of delivery or other date of determination
      by four months.

      Eo = the "Producer Price Index, Code 5, for Fuel and Related Products and
      Power" published by the Bureau of Labor Statistics in the U.S. Department
      of Labor for the month preceding the base month by four months.

      E = the "Producer Price Index, Code 5, for Fuel and Related Products and
      Power" for the month preceding the month of delivery or other date of
      determination by four months.


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2.    The values of the factors [****] L and [****] M and [****] E
                                     -          -          -
                                     Lo         Mo         Eo

      respectively, shall be determined to the nearest fourth decimal place. If
      the fifth decimal is five or more, the fourth decimal place shall be
      raised to the next higher number.

3.    If the U.S. Department of Labor ceases to publish the above statistics or
      modifies the basis of their calculation, then IAE may substitute any
      officially recognized and substantially equivalent statistics.

4.    The Basic Contract Prices contained in this Exhibit B are subject to
      escalation from a Base Month of January 1999 to the month of delivery
      using Lo, Mo and Eo values for September 1998.

5.    If the application of the formula contained in this Exhibit B results in a
      Purchase Price which is lower than the Basic Contract Price, the Basic
      Contract Price will be deemed to be the Purchase Price for such Supplies.



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Rule 406 under the Securities Act of 1933, as amended.


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