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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 2008
Or
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to
Commission File Number 001-33160
Spirit AeroSystems Holdings, Inc.
(Exact name of registrant as specified in its charter)
     
Delaware   20-2436320
(State of Incorporation)   (I.R.S. Employer
    Identification Number)
3801 South Oliver
Wichita, Kansas 67210

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code:
(316) 526-9000
     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer þ
  Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
 
      (Do not check if a smaller reporting company)    
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
     As of July 25, 2008, the registrant had outstanding 103,214,345 shares of class A common stock, $0.01 par value per share and 36,696,560 shares of class B common stock, $0.01 par value per share.
 
 

 


 

TABLE OF CONTENTS
         
    Page  
PART I- FINANCIAL INFORMATION
    3  
    24  
    34  
    34  
PART II- OTHER INFORMATION
    34  
    34  
    35  
    36  
 
    37  
  Employment Agreement
  Inducement Agreement
  Lease Agreement
  Construction Agency Agreement
  Certification of CEO Pursuant to Section 302
  Certification of CFO Pursuant to Section 302
  Certification of CEO Pursuant to Section 906
  Certification of CFO Pursuant to Section 906

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PART I- FINANCIAL INFORMATION
Item 1. Financial Statements
Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
                                 
    For the Three     For the Six  
    Months Ended     Months Ended  
    June 26, 2008     June 28, 2007     June 26, 2008     June 28, 2007  
    ($ in millions, except per share data)  
Net revenues
  $ 1,062.1     $ 958.8     $ 2,098.5     $ 1,912.9  
Operating costs and expenses
                               
Cost of sales
    874.5       788.7       1,731.8       1,583.5  
Selling, general and administrative
    40.9       54.3       80.0       99.4  
Research and development
    10.6       13.7       20.4       24.1  
 
                       
Total operating costs and expenses
    926.0       856.7       1,832.2       1,707.0  
Operating income
    136.1       102.1       266.3       205.9  
Interest expense and financing fee amortization
    (10.5 )     (9.5 )     (19.6 )     (18.4 )
Interest income
    5.0       7.2       10.7       14.8  
Other income, net
    0.2       1.8       1.6       3.8  
 
                       
Income before income taxes
    130.8       101.6       259.0       206.1  
Income tax expense
    (44.4 )     (33.6 )     (87.4 )     (68.3 )
 
                       
Net income
  $ 86.4     $ 68.0     $ 171.6     $ 137.8  
 
                       
Earnings per share
                               
Basic
  $ 0.63     $ 0.50     $ 1.25     $ 1.04  
Diluted
  $ 0.62     $ 0.49     $ 1.23     $ 0.99  
See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
                 
    June 26,     December 31,  
    2008     2007  
    ($ in millions)  
Current assets
               
Cash and cash equivalents
  $ 147.4     $ 133.4  
Accounts receivable, net
    234.3       159.9  
Current portion of long-term receivable
    110.8       109.5  
Inventory, net
    1,652.8       1,342.6  
Prepaids
    15.3       14.2  
Other current assets
    74.9       83.2  
 
           
Total current assets
    2,235.5       1,842.8  
Property, plant and equipment, net
    1,028.8       963.8  
Long-term receivable
    50.8       123.0  
Pension assets
    341.2       318.7  
Other assets
    89.6       91.6  
 
           
Total assets
  $ 3,745.9     $ 3,339.9  
 
           
Current liabilities
               
Accounts payable
  $ 404.9     $ 362.6  
Accrued expenses
    172.3       182.6  
Current portion of long-term debt
    8.9       16.0  
Advance payments, short-term
    159.8       67.6  
Deferred revenue, short-term
    40.0       42.3  
Other current liabilities
    13.8       3.9  
 
           
Total current liabilities
    799.7       675.0  
Long-term debt
    586.2       579.0  
Advance payments, long-term
    745.1       653.4  
Other liabilities
    171.4       165.9  
Shareholders’ equity
               
Preferred stock, par value $0.01, 10,000,000 shares authorized, no shares issued and outstanding
           
Common stock, Class A par value $0.01, 200,000,000 shares authorized, 103,201,380 and 102,693,058 issued and outstanding, respectively
    1.0       1.0  
Common stock, Class B par value $0.01, 150,000,000 shares authorized, 36,713,632 and 36,826,434 shares issued and outstanding, respectively
    0.4       0.4  
Additional paid-in capital
    931.9       924.6  
Accumulated other comprehensive income
    113.9       117.7  
Retained earnings
    396.3       222.9  
 
           
Total shareholders’ equity
    1,443.5       1,266.6  
 
           
Total liabilities and shareholders’ equity
  $ 3,745.9     $ 3,339.9  
 
           
See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statement of Shareholders’ Equity
(unaudited)
                                                           
                            Accumulated                        
                            Other                        
    Common Stock     Additional     Comprehensive     Retained               Comprehensive  
    Shares     Amount     Paid-in Capital     Income     Earnings     Total       Income/(Loss)  
                    ( $ in millions)                            
Balance — December 31, 2007
    139,519,492     $ 1.4     $ 924.6     $ 117.7     $ 222.9     $ 1,266.6       $ 342.1  
 
                                                       
Net income
                                    171.6       171.6         171.6  
Employee equity awards
    497,903             8.0                       8.0            
Stock forfeitures
    (102,383 )           (0.5 )                     (0.5 )          
SFAS 158 measurement date change, net of tax
                                    1.8       1.8            
Excess tax liability from share-based payment arrangements
                    (0.2 )                     (0.2 )          
Unrealized loss on cash flow hedges, net of tax
                            (2.8 )             (2.8 )       (2.8 )
Unrealized loss on currency translation adjustments, net of tax
                            (1.0 )             (1.0 )       (1.0 )
 
                                           
Balance — June 26, 2008
    139,915,012     $ 1.4     $ 931.9     $ 113.9     $ 396.3     $ 1,443.5       $ 167.8  
 
                                           
See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
                 
    For the Six     For the Six  
    Months Ended     Months Ended  
    June 26, 2008     June 28, 2007  
    ($ in millions)  
Operating activities
               
Net income
  $ 171.6     $ 137.8  
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation expense
    57.8       43.7  
Amortization expense
    4.6       3.8  
Accretion of long-term receivable
    (9.3 )     (10.8 )
Employee stock compensation expense
    7.5       21.0  
Excess tax benefit from share-based payment arrangements
          (34.5 )
Loss from the ineffectiveness of hedge contracts
    0.6        
Gain (Loss) on disposition of assets
    (0.4     0.1  
Deferred taxes
    0.5       13.7  
Pension and other post-retirement benefits, net
    (14.3 )     (14.6 )
Changes in assets and liabilities
               
Accounts receivable
    (52.9 )     (44.9 )
Inventory, net
    (310.2 )     (212.4 )
Accounts payable and accrued liabilities
    43.3       28.4  
Customer advances
    183.9       54.2  
Income taxes payable
    10.3       38.5  
Deferred revenue and other deferred credits
    0.3       36.2  
Other
    (14.9 )     4.4  
 
           
Net cash provided by operating activities
    78.4       64.6  
 
           
Investing Activities
               
Purchase of property, plant and equipment
    (119.4 )     (159.2 )
Proceeds from sale of assets
    1.7       0.2  
Long-term receivable (refer to footnote 6)
    56.5       11.4  
Financial derivatives
    0.8       2.5  
Investment in joint venture
    (1.0 )      
 
           
Net cash (used in) investing activities
    (61.4 )     (145.1 )
 
           
Financing Activities
               
Proceeds from revolving credit facility
    75.0        
Payments on revolving credit facility
    (75.0 )      
Proceeds from issuance of debt
    9.4        
Proceeds from government grants
    1.4        
Principal payments of debt
    (7.9 )     (10.8 )
Debt issuance costs
    (6.8 )      
Excess tax benefit from share-based payment arrangements
          34.5  
Executive stock repurchase
          (1.0 )
 
           
Net cash provided by (used in) financing activities
    (3.9 )     22.7  
 
           
Effect of exchange rate changes on cash and cash equivalents
    0.9       0.5  
 
           
Net increase (decrease) in cash and cash equivalents for the period
    14.0       (57.3 )
Cash and cash equivalents, beginning of period
    133.4       184.3  
 
           
Cash and cash equivalents, end of period
  $ 147.4     $ 127.0  
 
           
Supplemental Information
               
Change in value of financial instruments
  $ 3.8     $ 2.0  
Property acquired through capital leases
  $ 3.3     $ 1.6  
See notes to condensed consolidated financial statements (unaudited)

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Spirit AeroSystems Holdings, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
($ in millions other than per share amounts)
1. Organization and Basis of Interim Presentation
     Spirit AeroSystems Holdings, Inc. (“Holdings”) was incorporated in the state of Delaware on February 7, 2005, and commenced operations on June 17, 2005 through the acquisition of The Boeing Company’s (“Boeing”) operations in Wichita, Kansas, Tulsa, Oklahoma and McAlester, Oklahoma (the “Boeing Acquisition”). Holdings provides manufacturing and design expertise in a wide range of products and services for aircraft original equipment manufacturers and operators through its subsidiary, Spirit AeroSystems, Inc. (“Spirit” or the “Company”). Onex Corporation (“Onex”) of Toronto, Canada maintains majority voting power of Holdings. In April 2006, Holdings acquired the aerostructures division of BAE Systems (Operations) Limited (“BAE Aerostructures”), which builds structural components for Airbus, Boeing and Hawker Beechcraft Corporation (formerly Raytheon Aircraft Company). Prior to this acquisition, Holdings sold essentially all of its production to Boeing. Since Spirit’s incorporation, the Company has expanded its customer base to include Sikorsky, Rolls-Royce, Gulfstream, and Cessna. The Company has its headquarters in Wichita, Kansas, with manufacturing facilities in Tulsa and McAlester, Oklahoma; Prestwick, Scotland and in Wichita. Spirit expects to open a new manufacturing facility in Subang, Malaysia in early 2009 and another manufacturing facility in Kinston, North Carolina in 2010 that will produce components for the A350 XWB aircraft.
     Spirit is the majority participant in the Kansas Industrial Energy Supply Company (KIESC), a tenancy-in-common with other Wichita companies established to purchase natural gas. KIESC is fully consolidated as Spirit owns 77.8% of the entity’s equity.
     In November 2007, Spirit entered into a joint venture with Progresstech LTD of Moscow, Russia called Spirit-Progresstech LLC. Spirit and Progresstech LTD each have a 50% ownership interest in the company, which provides aerospace engineering consulting services. The investment in Spirit-Progresstech LLC is accounted for under the equity method of accounting.
     In April 2008, Spirit entered into a joint venture with Hong Kong Aircraft Engineering Company Limited (HAECO), and its subsidiary, Taikoo Aircraft Engineering Company Limited (TAECO), Oklahoma-based First Wave MRO, Inc., Cathay Pacific Airways Limited, and Cal-Asia to develop and implement a state-of-the-art composite and metal bond component repair station in the Asia-Pacific region. The service center will be called Taikoo Spirit AeroSystems Composite Co. Ltd., with Spirit expected to own 25.5% of the company. The investment in Taikoo Spirit AeroSystems Composite Co. Ltd. will be accounted for under the equity method of accounting.
     The accompanying interim condensed consolidated financial statements include Spirit’s financial statements and the financial statements of its majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and Article 10 of Regulation S-X. Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20% to 50% ownership), are accounted for by the equity method. All intercompany balances and transactions have been eliminated in consolidation. Spirit’s U.K. subsidiary uses local currency, the British pound, as its functional currency. All other foreign subsidiaries use local currency as their functional currency with the exception of our Malaysian subsidiary which uses the British pound.
     As part of the monthly consolidation process, the functional currency is translated to U.S. dollars using the end-of-month translation rate for balance sheet accounts and average period currency translation rates for revenue and income accounts as defined by SFAS No. 52, Foreign Currency Translation (as amended ).
     In the opinion of management, the accompanying interim condensed unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the six months ended June 26, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. Certain reclassifications have been made to the prior year financial statements and notes to conform to the 2008 presentation. The interim financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, included in our 2007 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 22, 2008.

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2. Summary of Significant Accounting Policies
     The significant accounting policies set forth in this report should be read in conjunction with the significant accounting policies discussed in the notes to the consolidated financial statements under Part II, Item 8, “Financial Statements and Supplementary Data”, included in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 22, 2008.
Joint Ventures
     The investment resulting in a 50% ownership interest in Spirit-Progresstech LLC totaled $1.0 at June 26, 2008 and is accounted for under the equity method of accounting.
     The investment resulting in a 25.5% ownership interest in Taikoo Spirit AeroSystems Composite Co. Ltd. will be accounted for under the equity method of accounting when we fund our contribution in the third quarter of 2008.
Government Grants
     As part of our site construction projects in Kinston, North Carolina and Subang, Malaysia, we have the potential benefit of government grants related to government funding of a portion of these buildings and other specific capital assets. Due to the terms of the lease agreements, we are deemed to own the construction projects. During the construction phase of the facilities, as amounts eligible under the terms of the grants are expended, we will record that spending as Property, Plant and Equipment (construction in process) and Deferred Grant Income Liability (less the present value of any future minimum lease payments). Upon completion of the facilities, the Deferred Grant Income will be amortized as a component of production cost. This amortization is based on specific terms associated with the different grants. In North Carolina, the Deferred Grant Income related to the capital investment criteria, which represents half of the grant, will be amortized over the lives of the assets purchased to satisfy the capital investment performance criteria. The other half of the Deferred Grant Income will be amortized over the ten year period in a manner consistent with the job performance criteria. In Malaysia, the Deferred Grant Income will be amortized based on the lives of the eligible assets constructed with the grant funds as there are no performance criteria. As of June 26, 2008, we recorded $7.6 within Property, Plant and Equipment and Other Long-Term Liabilities (Deferred Grant Income) related to the use of grant funds in Malaysia. Of the $7.6 of additions, $6.2 represents transactions where funds have been paid directly to contractors by parties other than Spirit so they are not reflected on the Statement of Cash Flows. The remaining $1.4 amount was paid to contractors by Spirit and we received reimbursement from governmental entities so that amount is reflected within Capital Expenditures and Proceeds from Government Grants within the Investing and Financing sections of the Statement of Cash Flows, respectively.
New Accounting Standards
     In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS 157, Fair Value Measurements (SFAS 157) , which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles (“GAAP”) in the United States, and expands disclosures about fair value measures. It is effective for fiscal years beginning after November 15, 2007, with early adoption encouraged. The provisions of SFAS 157 are to be applied on a prospective basis, with the exception of certain financial instruments for which retrospective application is required. On November 14, 2007, the FASB granted a one year deferral solely for non-financial assets and liabilities to comply with SFAS 157. Financial assets have been subject to the rule since the original effective date of November 15, 2007. The partial adoption of SFAS 157 did not affect our financial position or results of operations, but did require additional disclosures about fair value measurement for financial assets. See Note 8, Fair Value Measurements. In February 2008, the FASB issued Staff Position “Partial Deferral of the Effective Date of Statement 157” (FSP No. 157-2), which delayed the adoption date until January 1, 2009 for non-financial assets and liabilities that are measured at fair value on a non-recurring basis, such as goodwill and identifiable intangible assets. We do not expect the adoption of SFAS 157 for non-financial assets and liabilities to have a material impact on our financial position or results of operations.
     In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 , which allows for the option to measure financial instruments, warranties, and insurance contracts at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. It became effective for fiscal years beginning after November 15, 2007. Early adoption was permitted as of the beginning of a fiscal year that began on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. On January 1, 2008, we did not elect to measure any financial assets or liabilities at fair value.

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     In December 2007, the FASB issued SFAS 141(R), Business Combinations (SFAS 141(R)) , which replaces SFAS 141. SFAS 141(R) requires an acquirer to recognize the assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and any goodwill acquired to be measured at their fair value on the acquisition date. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. The adoption of SFAS 141(R) will have an impact on accounting for business combinations completed subsequent to that adoption.
     In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51 (SFAS 160) , which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We do not expect the adoption of SFAS 160 to have a material impact on our financial position or results of operations.
     In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (SFAS 161) , which requires disclosures of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning after November 15, 2008, with early adoption permitted. We do not expect the adoption of SFAS 161 to have a material impact on our financial position or results of operations.
     In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162) , which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity with GAAP in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (“PCAOB”) amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The adoption of SFAS 162 will not have a material impact on our financial position or results of operations.
3. Accounts Receivable
     Accounts receivable, net consists of the following:
                 
    June 26,     December 31,  
    2008     2007  
Trade receivables
  $ 220.1     $ 154.9  
Other
    15.2       6.3  
 
           
Total
    235.3       161.2  
Less: allowance for doubtful accounts
    (1.0 )     (1.3 )
 
           
Accounts receivable, net
  $ 234.3     $ 159.9  
 
           

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4. Inventory
     Inventories are summarized as follows:
                 
    June 26,     December 31,  
    2008     2007  
Raw materials
  $ 166.6     $ 157.8  
Work-in-process
    1,123.9       878.3  
Finished goods
    28.7       27.0  
 
           
Product inventory
    1,319.2       1,063.1  
Capitalized pre-production
    333.6       279.5  
 
           
Total inventory, net
  $ 1,652.8     $ 1,342.6  
 
           
     Inventories are summarized by platform as follows:
                 
    June 26,     December 31,  
    2008     2007  
B737
  $ 363.8     $ 348.7  
B747
    136.3       93.8  
B767
    10.7       17.1  
B777
    174.3       158.0  
B787(1)
    682.9       527.3  
Airbus — All platforms
    90.3       86.4  
Gulfstream(2)
    108.7       44.9  
Rolls-Royce
    29.8       10.8  
Other in-process inventory related to long-term contracts and other programs(3)
    56.0       55.6  
 
           
Total inventory
  $ 1,652.8     $ 1,342.6  
 
           
 
(1)   B787 inventory includes $237.0 and $238.0 in capitalized pre-production costs at June 26, 2008 and December 31, 2007, respectively.
 
(2)   Gulfstream inventory includes $96.6 and $39.5 in capitalized pre-production costs at June 26, 2008 and December 31, 2007, respectively.
 
(3)   Includes contracted non-recurring services for certain derivative aircraft programs to be paid by the original equipment manufacturer, plus miscellaneous other work-in-process.
     Capitalized pre-production costs include certain costs, including applicable overhead, incurred before a product is manufactured on a recurring basis. These costs are typically recovered over a certain number of ship set deliveries and the Company believes these amounts will be fully recovered.
     At June 26, 2008, work-in-process inventory included $167.1 of deferred production costs on certain contracts for the excess of production costs over the estimated average cost per ship set and $(43.7) of credit balances for favorable variances on other contracts between actual costs incurred and the estimated average cost per ship set for units delivered under the current production blocks. These balances were $57.1 and $(50.4), respectively, at December 31, 2007. Recovery of excess over average deferred production costs is dependent on the number of ship sets ultimately sold and actual selling prices and lower production costs associated with future production under these contract blocks. The Company believes these amounts will be fully recovered.
     Sales significantly under estimates or costs significantly over estimates could result in the realization of losses on these contracts in future periods.

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     The following is a roll forward of the inventory obsolescence and surplus reserve included in the inventory balances at June 26, 2008:
         
Balance-December 31, 2007
  $ 21.8  
Charges to costs and expenses
    10.8  
Write-offs, net of recoveries
  (5.9 )
 
     
Balance-June 26, 2008
  $ 26.7  
 
     
5. Property, Plant and Equipment
     Property, plant and equipment, net consists of the following:
                 
    June 26,     December 31,  
    2008     2007  
Land
  $ 19.7     $ 19.2  
Buildings (including improvements)
    183.8       178.2  
Machinery and equipment
    441.9       396.7  
Tooling
    411.8       384.7  
Construction-in-progress
    209.9       164.4  
 
           
Total
    1,267.1       1,143.2  
Less: accumulated depreciation
    (238.3 )     (179.4 )
 
           
Property, plant and equipment, net
  $ 1,028.8     $ 963.8  
 
           
     Interest costs associated with construction-in-progress are capitalized until the assets are completed and ready for use. Capitalized interest was $1.6 and $1.7 for the three months ended June 26, 2008 and June 28, 2007, respectively, and $3.1 and $3.3 for the six months ended June 26, 2008 and June 28, 2007, respectively. Repair and maintenance costs are expensed as incurred. We recognized $27.0 and $25.3 of repair and maintenance expense for the three months ended June 26, 2008 and June 28, 2007, respectively, and $49.6 and $42.7 for the six months ended June 26, 2008 and June 28, 2007, respectively.
6. Long-Term Receivable
     In connection with the Boeing Acquisition, Boeing is required to make future non-interest bearing payments to Spirit attributable to the acquisition of title of various tooling and other capital assets to be determined by Spirit. Spirit will retain usage rights and custody of the assets for their remaining useful lives without compensation to Boeing.
     The following is a schedule of future payments from our long-term and short-term receivables:
         
2008
  $ 59.6  
2009
    115.4  
 
     
Total
  $ 175.0  
 
     
     A discount rate of 9.75% was used to record these payments at their estimated present value of $161.6 and $208.8 at June 26, 2008 and December 31, 2007, respectively. At June 26, 2008, the current portion of the long-term receivable was $110.8.

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7. Other Assets
     Other assets are summarized as follows:
                 
    June 26,     December 31,  
    2008     2007  
Intangible assets
               
Patents
  $ 2.0     $ 2.0  
Favorable leasehold interests
    9.7       9.7  
Customer relationships
    34.4       34.3  
 
           
Total intangible assets
    46.1       46.0  
Less: Accumulated amortization-patents
    (0.5 )     (0.4 )
Accumulated amortization-favorable leasehold interest
    (2.2 )     (1.9 )
Accumulated amortization-customer relationships
    (9.7 )     (7.5 )
 
           
Intangible assets, net
    33.7       36.2  
 
               
Deferred tax asset, non-current
    29.2       30.5  
Deferred financing costs, net
    16.8       12.2  
Fair value of derivative instruments
    1.6       5.5  
Goodwill — Europe
    3.7       3.7  
Other
    4.6       3.5  
 
           
Total other assets
  $ 89.6     $ 91.6  
 
           
     Deferred financing costs are recorded net of $12.2 and $10.1 of accumulated amortization at June 26, 2008 and December 31, 2007, respectively. Included in deferred financing fees was an additional $6.8 of financing costs associated with the March 18, 2008 amendment to the Second Amended and Restated Credit Facility (see Note 9 below).
     The Company recognized $1.2 and $1.3 of amortization expense of intangibles for the three months ended June 26, 2008 and June 28, 2007, respectively, and $2.6 for each of the six month periods ended June 26, 2008 and June 28, 2007.
8. Fair Value Measurements
     We use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates and interest rates. To account for our derivative financial instruments, we follow the provisions of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137 and SFAS 138 . Derivative financial instruments are recognized on the Consolidated Balance Sheets as either assets or liabilities and are measured at fair value. Changes in fair value of derivatives are recorded each period in earnings or accumulated other comprehensive income, depending on whether a derivative is effective as part of a hedge transaction, and if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive income are subsequently included in earnings in the periods in which earnings are affected by the hedged item or when the hedge is no longer effective. We present the cash flows associated with our derivatives as a component of the investing section of the Statement of Cash Flows. Our use of derivatives has generally been limited to interest rate swaps, but in fiscal year 2006 we also began using derivative instruments to manage our risk associated with U.S. dollar denominated contracts negotiated by Spirit Europe.
     Effective January 1, 2008, the Company adopted SFAS 157, which, among other things, requires enhanced disclosures about assets and liabilities carried at fair value. In February 2008, the FASB issued Staff Position FSP No. 157-2, Partial Deferral of the Effective Date of Statement 157 , which delayed the adoption date until January 1, 2009 for non-financial assets and liabilities that are measured at fair value on a non-recurring basis, such as goodwill and identifiable intangible assets. We do not expect the adoption of SFAS 157 for non-financial assets and liabilities to have a material impact on our financial position or results of operations.
     SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard discloses three levels of inputs that may be used to measure fair value:

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Level 1
  Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market. Quoted market prices are used to measure fair value for the underlying investments in our money market fund.
 
   
Level 2
  Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Observable inputs, such as current and forward interest rates and foreign exchange rates, are used in determining the fair value of our interest rate swaps and foreign currency hedges.
 
   
Level 3
  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets and liabilities. Level 3 assets and liabilities includes financial instruments whose value is determined using pricing models, discounted cash flows methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
                                                 
                            Fair Value Measurements
    June 26, 2008   At June 26, 2008, Using
                            Quoted Prices in   Significant    
                            Active Markets   Other   Significant
    Total Carrying   Assets   Liabilities   for Identical   Observable   Unobservable
    Amount on   Measured at   Measured at   Assets   Inputs   Inputs
Description   Balance Sheet   Fair Value   Fair Value   (Level 1)   (Level 2)   (Level 3)
Money Market
  $ 103.4     $ 103.4     $     $ 103.4     $     $  —  
Interest Swaps
  $ (6.8 )   $     $ (6.8 )   $     $ (6.8 )   $  —  
Foreign Currency Hedges
  $ 4.9     $ 7.2     $ (2.3 )   $     $ 4.9     $  —  
     In the second quarter of 2008, the Company recorded an additional $0.3 for the ineffective portion of the change in fair value of interest rate swaps as a component of Interest Expense bringing the total amount recorded as Interest Expense to $0.6 in the first half of 2008. The ineffective portion of the change in fair value for the foreign currency hedges was immaterial at June 26, 2008.
9. Debt
     In connection with the Boeing Acquisition, Spirit executed an $875.0 credit agreement that consisted of a $700.0 senior secured term loan used to fund the acquisition and pay all related fees and expenses associated with the acquisition and the credit agreement, and a $175.0 senior secured revolving credit facility. On November 27, 2006, the credit agreement was amended to, among other things, increase the revolving credit facility to $400.0. Commitment fees associated with the revolver total 50 basis points on the undrawn amount and 225 basis points on letters of credit. On March 18, 2008, Spirit entered into an amendment (the “Amendment”) to its Second Amended and Restated Credit Agreement dated as of November 27, 2006 (as amended). As a result of the Amendment, the revolving credit facility and the $700.0 term loan B were amended to, among other things, (i) increase the amount of the revolver from $400.0 to $650.0, (ii) increase from $75.0 to $200.0 the amount of indebtedness Spirit and its subsidiaries can incur on a consolidated basis to finance acquisition of capital assets, (iii) add a provision allowing Spirit and Spirit Holdings to have additional indebtedness outstanding of up to $300.0, (iv) add a provision allowing Spirit and its subsidiaries on a consolidated basis the ability to make investments in joint ventures not to exceed a total of $50.0 at any given time, and (v) modify the definition of “Change of Control” to exclude certain circumstances that previously would have been considered a Change of Control. The maturity date and interest cost of both our senior secured term loan and revolving credit facility remains unchanged. At June 26, 2008, the Company had no outstanding loans under the revolving credit facility. The entire asset classes of the Company, including inventory and property, plant and equipment, are pledged as collateral for both the term loan and the revolving credit facility.

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Malaysian Term Loan
     On June 2, 2008, Spirit’s wholly owned subsidiary, Spirit AeroSystems Malaysia SDN BHD (“Spirit Malaysia”) entered into a Facility Agreement (“Facility Agreement”) for a term loan facility of Ringgit Malaysia (RM) 69.2 (approximately USD $20.0) (the “Facility”), with EXIM Bank to be used towards partial financing of plant and equipment (including the acquisition of production equipment), materials, inventory and administrative costs associated with the establishment of an aerospace-related composite component assembly plant, plus potential additional work packages in Malaysia at the Malaysia International Aerospace Center in Subang, Selangor, Malaysia (the “Project”). Funds for the Project will be available on a drawdown basis over a twenty-four month period from the date of the Facility Agreement. Spirit Malaysia is scheduled to make periodic draws against the Facility.
     The indebtedness repayment requires quarterly principal installments of RM 3.3 (USD $1.0) from September 2011 through May 2017, or until the entire loan principal has been repaid.
     Outstanding amounts drawn under the Facility are subject to a fixed interest rate of 3.5% per annum, payable quarterly.
     Total debt shown on the balance sheet is comprised of the following:
                 
    June 26,     December 31,  
    2008     2007  
Senior secured debt (short and long-term)
  $ 582.4     $ 583.8  
Malaysian term loan
    9.4        
Present value of capital lease obligations
    3.3       11.2  
 
           
Total
  $ 595.1     $ 595.0  
 
           
10. Pension and Other Post-Retirement Benefits
                                 
    Defined Benefit Plans  
    For the Three     For the Six  
    Months Ended     Months Ended  
    June 26,     June 28,     June 26,     June 28,  
Components of Net Periodic Pension Income   2008     2007     2008     2007  
Service cost
  $ 1.8     $ 1.9     $ 3.7     $ 3.8  
Interest cost
    9.7       9.2       19.3       18.4  
Expected return on plan assets
    (18.0 )     (21.2 )     (35.9 )     (38.3 )
Amortization of prior service cost
                       
Amortization of net (gain)/loss
    (1.2 )           (2.9 )      
 
                       
Net periodic pension income
  $ (7.7 )   $ (10.1 )   $ (15.8 )   $ (16.1 )
 
                       

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    Other Benefits  
    For the Three     For the Six  
    Months Ended     Months Ended  
    June 26,     June 28,     June 26,     June 28,  
Components of Net Periodic Benefit Cost   2008     2007     2008     2007  
Service cost
  $ 0.4     $ 0.3     $ 0.8     $ 0.7  
Interest cost
    0.4       0.4       1.0       0.9  
Expected return on plan assets
                       
Amortization of prior service cost
                       
Amortization of net (gain)/loss
    (0.2 )     (0.1 )     (0.3 )     (0.1 )
 
                       
Net periodic benefit cost
  $ 0.6     $ 0.6     $ 1.5     $ 1.5  
 
                       
Changes Required by SFAS 158
     As outlined in Form 10-K filed with the Securities and Exchange Commission on February 22, 2008 for the period ending December 31, 2007, SFAS 158 requires that we change our measurement date from November 30 to the fiscal year-end, December 31, by year-end 2008. Spirit has elected to apply the transition option under which a 13-month measurement was determined as of November 30, 2007 that covers the period until the fiscal year-end measurement is required on December 31, 2008. As a result, an adjustment to retained earnings was recorded in the first half of fiscal year-end 2008 as follows: pension $3.2 and other post-retirement benefits ($0.3), resulting in a net adjustment of $1.8, net of $1.1 in tax.
Employer Contributions
     We expect to contribute zero dollars to the U.S. qualified pension plan and less than $0.1 to both the Supplemental Executive Retirement Plan (SERP) and post-retirement medical plans in 2008. As of June 26, 2008, our projected contributions to the U.K. pension plan for 2008 were $9.9, of which $5.1 was contributed during the first six months of 2008. We anticipate contributing the additional $4.8 to the U.K. pension plan during the remainder of 2008. In addition, $0.6 was contributed to the U.K. pension plan in January 2008 for the 2007 plan year. The entire amount contributed and the projected contributions can vary based on exchange rate fluctuations.
11. Stock Compensation
     Holdings has established various stock compensation plans which include restricted share grants and stock purchase plans. Compensation values are based on the value of Holdings’ common stock at the grant date. The common stock value is added to equity and charged to period expense or included in inventory and cost of sales.
     For the three months ended June 26, 2008, Holdings recognized a net total of $3.8 of stock compensation expense, which is net of $0.2 resulting from stock forfeitures, as compared to $14.4 of stock compensation expense, net of forfeitures, recognized for the three months ended June 28, 2007. For the six months ended June 26, 2008, Holdings has recognized a net total of $7.5 of stock compensation expense, which is net of $0.5 resulting from stock forfeitures, as compared to $21.0 of stock compensation expense, net of forfeitures, recognized for the six months ended June 28, 2007.
     Of the total $3.8 of net stock compensation expense recorded for the three months ended June 26, 2008, $3.7 was recorded as an expense in selling, general and administrative expense while the remaining $0.1 was capitalized in inventory and is recognized through cost of sales consistent with the accounting methods we follow in accordance with SOP 81-1. Of the total $7.5 of net stock compensation expense recorded year-to-date, $7.3 was recorded as an expense in selling, general and administrative expense while the remaining $0.2 was capitalized in inventory and is recognized through cost of sales.
     The restricted class B common stock grants that occurred after the Boeing Acquisition were approximately 790,230 under the Short-Term Incentive Plan, 141,941 under the Long-Term Incentive Plan, 9,392,652 under the Executive Incentive Plan, and 390,000 under the Director Stock Plan.
     In April 2008, the Director Stock Plan, Short-Term Incentive Plan, and Long-Term Incentive Plan were amended such that all future stock grants under those plans would consist of class A shares. In addition, the Short-Term Incentive Plan and the Long-Term Incentive Plan were amended to increase the number of shares available for grant thereunder by 2,000,000 and 3,000,000 shares, respectively. In May 2008, the

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Board of Directors authorized grants of approximately 327,511 shares of class A common stock under the Long-Term Incentive Plan and 20,816 shares under the Director Stock Plan. The first anticipated grant of class A shares under the Short-Term Incentive Plan is anticipated to be in February of 2009 for 2008 performance. The aggregate fair value of vested class B shares was $61.0 and $58.2 at June 26, 2008 and June 28, 2007, respectively, based on the market value of Holdings’ common stock on those dates.
Board of Directors Stock Awards
     This plan provides non-employee directors the opportunity to receive grants of restricted shares of class A common stock, that vest one year from the grant date, or Restricted Stock Units (RSUs) of class A common stock, that vest upon the later of one year from the grant date or the Director’s separation from service, or both stock and stock units. The maximum aggregate number of shares that may be granted to participants is 3,000,000 shares. In April 2008, the Director Stock Plan was amended such that all issuance of stock pursuant to the plan after that date would be grants of class A common stock or RSUs. All shares granted prior to April 2008 were class B common stock.
     For each non-employee Director of Holdings, one-half of their annual director compensation will be paid in the form of a grant of class A common stock and/or class A common RSUs, as elected by each Director. In addition, each Director may elect to have all or any portion of the remainder of their annual director compensation paid in cash or in the form of a grant of stock and/or RSUs. In addition to this, the Board of Directors or its authorized committee may make discretionary grants of shares or RSUs from time to time.
     Holdings’ restricted class A common stock valued at $0.6 was granted to members of the Holdings’ Board of Directors in May 2008 based on the value of Holdings’ common stock at the grant date. If participants cease to serve as Directors within a year of the grant, the restricted shares are forfeited. Holdings expensed $0.1, and zero during the periods ended June 26, 2008, and June 28, 2007, respectively.
     The following table summarizes stock and RSU grants to members of the Holdings’ Board of Directors for the periods ended December 31, 2007 and June 26, 2008:
                                 
    Shares     Value (1)  
    (Thousands)              
    Class A     Class B     Class A     Class B  
Board of Directors Stock Grants
                               
Nonvested at December 31, 2006
          223     $     $ 3.3  
Granted during period
                       
Vested during period
          (223 )           (3.3 )
Forfeited during period
                       
 
                       
Nonvested at December 31, 2007
                       
Granted during period
    21             0.6        
Vested during period
                       
Forfeited during period
                       
 
                       
Nonvested at June 26, 2008
    21           $ 0.6     $  
 
                       
 
(1)   Value represents grant date fair value.
Short-Term Incentive Plan
     The Short-Term Incentive Plan enables eligible employees to receive incentive benefits in the form of restricted stock in Holdings, cash, or both, as determined by the Board of Directors or its authorized committee. The stock portion vests one year from the date of grant. Restricted shares are forfeited if the employee’s employment terminates prior to vesting. In April 2008, the Short-Term Incentive Plan was amended such that all issuance of stock pursuant to the plan after that date would be grants of class A common stock and to increase by 2,000,000 the number of shares available for grant thereunder. All shares granted prior to April 2008 were class B common stock.
     In the first quarter of 2008, we recognized $0.9 of expense related to the shares granted under the Short-Term Incentive Plan for 2006 performance, which fully vested twelve months from the grant date. For the 2007 plan year, 149,576 shares with a value of $4.2 were granted on February 22, 2008 and will vest on the one-year anniversary of the grant date. Holdings expensed $1.0 and $1.5 for the three and six months

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ended June 26, 2008, respectively, for the 2007 plan year grant. The 2007 cash award of $3.9 was expensed in 2007 and paid in 2008. The intrinsic value of the unvested shares at June 26, 2008 and December 31, 2007 was $3.0 and $8.0, respectively, based on the value of Holdings’ common stock and the number of unvested shares.
     The following table summarizes the activity of the restricted shares under the Short-Term Incentive Plan for the periods ended December 31, 2007 and June 26, 2008:
                 
    Shares     Value(1)  
    (Thousands)          
Short-Term Incentive Plan
               
Nonvested at December 31, 2006
    390     $ 6.6  
Granted during period
    250       7.5  
Vested during period
    (381 )     (6.4 )
Forfeited during period
    (27 )     (0.7 )
 
           
Nonvested at December 31, 2007
    232       7.0  
Granted during period
    150       4.2  
Vested during period
    (231 )     (7.0 )
Forfeited during period
    (6 )     (0.2 )
 
           
Nonvested at June 26, 2008
    145     $ 4.0  
 
           
 
(1)   Value represents grant date fair value.
Long-Term Incentive Plan
     The Long-Term Incentive Plan (“LTIP”) is designed to encourage retention of key employees. In April 2008, the Long-Term Incentive Plan was amended such that all issuance of stock pursuant to the plan after that date would be grants of class A common stock and to increase by 3,000,000 the number of shares available for grant thereunder. All shares granted prior to April 2008 were class B common stock.
     For shares granted in 2007, one-half of the granted restricted shares of class B common stock vest on the second anniversary of the grant date, and the other half vest on the fourth anniversary of the grant date. Restricted shares are forfeited if the employee’s employment terminates prior to vesting. In the first quarter of 2007, 67,391 shares valued at $2.0 were granted. Holdings expensed $0.1 and $0.2 for the unvested class B LTIP shares in the three and six months ended June 26, 2008, respectively. The intrinsic value of the unvested class B LTIP shares at June 26, 2008 and December 31, 2007 was $1.3 and $2.1, respectively, based on the value of Holdings’ common stock and the number of unvested shares.
     In May 2008, 327,511 class A shares valued at $9.4 were granted. Holdings expensed $0.3 for the unvested class A LTIP shares in the three months ended June 26, 2008. Within the May 2008 LTIP grant were three groups of stock, each with a unique vesting schedule. The first group of shares vests over three years, with one-third vesting annually beginning in 2009. The second and third groups also vest in one-third increments, but vesting begins on the second and third anniversary of the grant, respectively. The vesting schedule for the 2008 grant is as follows:
         
    Shares
    (Thousands)
Long-Term Incentive Plan Vesting Schedule
     
May 2009
    7  
May 2010
    26  
May 2011
    109  
May 2012
    103  
May 2013
    83  
 
       
Total
    328  
 
       
     The intrinsic value of unvested class A LTIP shares at June 26, 2008 was $6.8, based on the value of Holdings’ common stock and the number of unvested shares.

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     The following table summarizes the activity of the restricted shares under the Long-Term Incentive Plan for the periods ended December 31, 2007 and June 26, 2008:
                                 
    Shares     Value (1)  
    (Thousands)              
    Class A     Class B     Class A     Class B  
Long-Term Incentive Plan
                               
Nonvested at December 31, 2006
          75     $     $ 1.2  
Granted during period
          67             2.0  
Vested during period
          (75 )           (1.2 )
Forfeited during period
          (5 )           (0.2 )
 
                       
Nonvested at December 31, 2007
          62             1.8  
Granted during period
    328             9.4        
Vested during period
                       
Forfeited during period
          (2 )            
 
                       
Nonvested at June 26, 2008
    328       60     $ 9.4     $ 1.8  
 
                       
 
(1)   Value represents grant date fair value.
12. Income Taxes
     The process for calculating our income tax expense involves estimating actual current taxes due plus assessing temporary differences arising from differing treatment for tax and accounting purposes that are recorded as deferred tax assets and liabilities. Deferred tax assets are periodically evaluated to determine their recoverability. The total net deferred tax assets as of June 26, 2008 and December 31, 2007 were $74.2 and $74.1, respectively.
     We file income tax returns in all jurisdictions in which we operate. We established reserves to provide for additional income taxes that may be due in future years as these previously filed tax returns are audited. These reserves have been established based on management’s assessment as to the potential exposure attributable to permanent differences and interest applicable to both permanent and temporary differences. All tax reserves are analyzed periodically and adjustments made as events occur that warrant modification.
     In general, the Company records income tax expense during the interim periods based on its best estimate of the full year’s effective tax rate. Certain items, however, are given discrete period treatment and, as a result, the tax effects of such items are reported in the relevant interim period. The Company’s effective tax rate was 33.75% for the six months ended June 26, 2008 compared to 33.10% for the same period in 2007. The effective tax rate for the six months ended June 26, 2008 was slightly higher than the same period in 2007 due to the U.S. Research and Experimentation Tax Credit’s expiration effective December 31, 2007, partially offset by an increase in the Domestic Production Activities Deduction and state income tax credits. The 33.75% estimated annualized effective rate may, however, fluctuate due to discrete events and changes to the Company’s liability assessment for uncertain tax positions.
     The Company’s 2005 and 2006 U.S. Federal income tax returns are scheduled for examination. The Company reasonably expects no material change in its recorded unrecognized tax benefit liability in the next 12 months.

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13. Earnings per Share Calculation
     The following table sets forth the computation of basic and diluted earnings per share:
                                                 
    For the Three
    Months Ended
    June 26,   June 28,
    2008   2007
            Shares   Per Share           Shares   Per Share
    Income   (in millions)   Amount   Income   (in millions)   Amount
Basic EPS                                                
Income available to common shareholders
  $ 86.4       137.0     $ 0.63     $ 68.0       134.9     $ 0.50  
Diluted potential common shares
            2.8                       4.3          
 
                                               
Diluted EPS
                                               
Income available to common shareholders + assumed vesting
  $ 86.4       139.8     $ 0.62     $ 68.0       139.2     $ 0.49  
                                                 
    For the Six
    Months Ended
    June 26,   June 28,
    2008   2007
            Shares   Per Share           Shares   Per Share
    Income   (in millions)   Amount   Income   (in millions)   Amount
Basic EPS                                                
Income available to common shareholders
  $ 171.6       136.9     $ 1.25     $ 137.8       132.3     $ 1.04  
Diluted potential common shares
            2.9                       6.9          
 
                                               
Diluted EPS
                                               
Income available to common shareholders + assumed vesting
  $ 171.6       139.8     $ 1.23     $ 137.8       139.2     $ 0.99  
14. Related Party Transactions
     On March 26, 2007, Hawker Beechcraft, Inc. (“Hawker”), of which Onex Partners II LP (an affiliate of Onex) owns approximately a 49% interest, acquired Raytheon Aircraft Acquisition Company and substantially all of the assets of Raytheon Aircraft Services Limited. Spirit’s Prestwick facility provides wing components for the Hawker 800 Series manufactured by Hawker. For the three months ended June 26, 2008 and June 28, 2007, sales to Hawker were $7.4 and $6.3, respectively. Sales to Hawker were $12.5 for each of the six month periods ended June 26, 2008 and June 28, 2007.
     A member of the Holdings’ Board of Directors is also a member of the Board of Directors of Hawker.
     Since February 2007, an executive of the Company has been a member of the Board of Directors of one of Spirit’s suppliers, Precision Castparts Corp. of Portland, Oregon, a manufacturer of complex metal components and products. For the three months ended June 26, 2008 and June 28, 2007, the Company purchased $15.2 and $19.2 of products, respectively, from this supplier. For the six months ended June 26, 2008 and June 28, 2007, the Company purchased $32.9 and $37.6 of products, respectively, from this supplier.
     A member of Holdings’ Board of Directors is the president and chief executive officer of Aviall, Inc., the parent company of one of our customers, Aviall Services, Inc. and a wholly owned subsidiary of Boeing. On September 18, 2006, Spirit entered into a distribution agreement with Aviall Services, Inc. Net revenues under the distribution agreement were $1.3 and $0.9 for the three months ended June 26, 2008 and June 28, 2007, respectively, and $2.9 and $2.6 for the six months ended June 26, 2008 and June 28, 2007, respectively.
     The Company paid $0.2 and less than $0.1 for the three months ended June 26, 2008 and June 28, 2007, respectively, to a subsidiary of Onex for services rendered. Management believes the amounts charged were reasonable in relation to the services provided.

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     Boeing owns and operates significant information technology systems utilized by the Company and, as required under the acquisition agreement for the Boeing Acquisition, is providing those systems and support services to Spirit under a Transition Services Agreement. A number of services covered by the Transition Services Agreement have now been established by the Company, and the Company is scheduled to continue to use the remaining systems and support services it has not yet established. The Company incurred fees of $6.6 and $5.6 for services performed for the three months ended June 26, 2008 and June 28, 2007, respectively, and $12.4 and $12.0 for the six months ended June 26, 2008 and June 28, 2007, respectively. These amounts included accrued liabilities of $2.1 and $1.9 at June 26, 2008 and June 28, 2007, respectively.
     The spouse of one of the Company’s executives is a special counsel at a law firm utilized by the Company and at which the executive was previously employed. The Company paid fees of $0.3 and $0.4 to the firm for the three month periods ended June 26, 2008 and June 28, 2007, respectively, and $0.9 and $1.0 for the six months ended June 26, 2008 and June 28, 2007, respectively.
     An executive of the Company is a member of the Board of Directors of a Wichita, Kansas bank that provides banking services to Spirit. In connection with the banking services provided to Spirit, the Company pays fees consistent with commercial terms that would be available to unrelated third parties. Such fees are not material to Spirit.
15. Commitments, Contingencies and Guarantees
Litigation
     We are from time to time subject to, and are presently involved in, litigation or other legal proceedings arising in the ordinary course of business. While the final outcome of these matters cannot be predicted with certainty, considering, among other things, the meritorious legal defenses available, it is the opinion of the Company that none of these items, when finally resolved, will have a material adverse effect on the Company’s long-term financial position or liquidity. Consistent with the requirements of SFAS 5, Accounting for Contingencies , we had no accruals at June 26, 2008 or December 31, 2007 for loss contingencies. However, an unexpected adverse resolution of one or more of these items could have a material adverse effect on the results of operations in a particular quarter or fiscal year.
     From time to time, in the ordinary course of business and like others in the industry, we receive requests for information from government agencies in connection with their regulatory or investigational authority. Such requests can include subpoenas or demand letters for documents to assist the government in audits or investigations. We review such requests and notices and take appropriate action. We have been subject to certain requests for information and investigations in the past and could be subject to such requests for information and investigations in the future. Additionally, we are subject to federal and state requirements for protection of the environment, including those for disposal of hazardous waste and remediation of contaminated sites. As a result, we are required to participate in certain government investigations regarding environmental remediation actions.
     In 2005, a lawsuit was filed against Spirit, Onex, and Boeing alleging age discrimination in the hiring of employees by Spirit when Boeing sold its Wichita commercial division to Onex. The complaint was filed in U.S. District Court in Wichita, Kansas and seeks class-action status, an unspecified amount of compensatory damages and more than $1.5 billion in punitive damages. The Asset Purchase Agreement requires Spirit to indemnify Boeing for damages resulting from the employment decisions that were made by us with respect to former employees of the commercial aerostructures manufacturing operations at Boeing (“Boeing Wichita”) which relate or allegedly relate to the involvement of, or consultation with, employees of Boeing in such employment decisions. The Company intends to vigorously defend itself in this matter. Management believes the resolution of this matter will not materially affect the Company’s financial position, results of operations or liquidity.
     On December 22, 2006, a lawsuit was filed against Spirit, Boeing, Onex and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) alleging age, disability, sex and race discrimination as well as breach of the duty of fair representation, retaliatory discharge, violation of FMLA (retaliation) and the Employee Retirement Income Security Act (ERISA), arising out of Spirit’s failure to hire eight former Boeing employees at the McAlester, Oklahoma facility. The complaint was filed in the U.S. District Court in the Eastern District of Oklahoma. At Court-ordered mediation on February 28 and 29, 2008, the individual cases were settled by the parties. The settlements do not have a material adverse effect on the Company’s financial position or liquidity.
     In December 2005, a federal grand jury sitting in Topeka, Kansas issued subpoenas regarding the vapor degreasing equipment at our Wichita, Kansas facility. The government’s investigation appeared to focus on whether the degreasers were operating within permit parameters and whether chemical wastes from the degreasers were disposed of properly. The subpoenas covered a time period both before and after our purchase of the Wichita, Kansas facility. Subpoenas were issued to Boeing, Spirit and individuals who were employed by Boeing prior to the Boeing Acquisition, but are now employed by us. We responded to the subpoena and provided additional information to the government as

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requested. On March 25, 2008, the U.S. Attorney’s Office informed the Company that it was closing its criminal file on the investigation. The Company has no present indication that any civil investigation is ongoing.
     Airbus filed oppositions to six European patents originally issued to or applied for by Boeing and acquired by Spirit in the Boeing Acquisition. Airbus claimed that the subject matter in these patents was not patentable because of a lack of novelty and a lack of inventive activity.
     For two of the patents, oral proceedings before a three panel board of the European Patent Office (EPO) were held in May 2005. In one case, the patent was maintained without amendments to the claims. On the second patent, the board accepted the claims with limitation and Spirit appealed. Airbus did not file an admissible appeal in either of the adverse decisions. Therefore, for the first patent, the opposition is complete, the patent is maintained as granted, and nothing further will be done. For the second patent wherein Spirit appealed the EPO’s Opposition Board’s findings, Spirit may now either continue its appeal or accept the claim limitations.
     For a third patent, Oral Proceedings were held on December 13, 2007. The EPO’s Opposition Board accepted certain claim limitations, and therefore, the patent is maintained with limitations. Spirit has not yet determined whether it plans to appeal this decision.
     Spirit and Airbus entered into an agreement in December 2007, wherein Airbus agreed to withdraw all of its pending oppositions, including the three remaining oppositions for which oral proceedings had not yet been held. Airbus subsequently proceeded to do so. The EPO notified Spirit’s European counsel that it will not proceed with the opposition for two of the three pending oppositions. Spirit is awaiting a decision from the EPO regarding the final opposition.
     On February 16, 2007, an action entitled Harkness et al. v. The Boeing Company et al. was filed in the U.S. District Court for the District of Kansas. The defendants were served in early April. Holdings, The Spirit AeroSystems Retirement Plan for the International Brotherhood of Electrical Workers (IBEW), Wichita Engineering Unit (SPEEA WEU) and Wichita Technical Professional Unit (SPEEA WTPU) employees and The Spirit AeroSystems Retirement Plan for International Association of Machinists and Aerospace Workers (IAM) employees, along with The Boeing Company and Boeing retirement and health plan entities, were sued by 12 former Boeing employees, eight of whom were or are employees of Spirit. The plaintiffs assert several claims under ERISA and general contract law and purport to bring the case as a class action on behalf of similarly situated individuals. The putative sub-class members who have asserted claims against the Spirit entities are those individuals who, as of June 2005, were employed by Boeing in Wichita, Kansas, were participants in the Boeing pension plan, had at least 10 years of vesting service in the Boeing plan, were in jobs represented by a union, were between the ages of 49 and 55 and who went to work for Spirit on or about June 17, 2005. Although there are many claims in the suit, the plaintiffs’ claims against the Spirit entities are that the Spirit plans wrongfully have failed to determine that certain plaintiffs are entitled to early retirement “bridging rights” allegedly triggered by their separation from employment by Boeing and that the plaintiffs’ pension benefits were unlawfully transferred from Boeing to Spirit in that their claimed early retirement “bridging rights” are not being afforded these individuals as a result of their separation from Boeing, thereby decreasing their benefits. The plaintiffs seek certification of a class, declaration that they are entitled to the early retirement benefits, an injunction ordering that the defendants provide the benefits, damages pursuant to breach of contract claims and attorney fees. At this time, the Company does not have enough information to make any predictions about the outcome of this matter. However, management believes that any outcome that does result from this matter will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.
Guarantees
     Contingent liabilities in the form of letters of credit, letters of guarantee and performance bonds have been provided by the Company. These letters of credit reduce the amount of borrowings available under the revolving credit facility. As of June 26, 2008 and December 31, 2007, $14.1 and $12.4 was outstanding in respect of these guarantees, respectively.
Service and Product Warranties
     The Company provides service and warranty policies on its products. Liabilities under service and warranty policies are based upon specific claims and a review of historical warranty and service claim experience. Adjustments are made to accruals based on claim data changes and historical experience. In addition, the Company incurs discretionary costs to service its products in connection with product performance issues.

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     The following is a roll forward of the service warranty balances at June 26, 2008:
         
Balance-December 31, 2007
  $ 9.9  
Charges to costs and expenses
    0.1  
Exchange rate
     
 
     
Balance-June 26, 2008
  $ 10.0  
 
     
16. Segment Information
      Spirit operates in three principal segments: Fuselage Systems, Propulsion Systems and Wing Systems. The majority of revenues in the three principal segments are with Boeing, with the exception of Wing Systems, which includes revenues from Airbus and other customers. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services and KIESC. The Company’s primary profitability measure to review a segment’s operating performance is segment operating income before unallocated corporate selling, general and administrative expenses and unallocated research and development. Unallocated corporate selling, general and administrative expenses include centralized functions such as accounting, treasury and human resources that are not specifically related to our operating segments and are not allocated in measuring the operating segments’ profitability and performance and operating margins.
     Spirit’s Fuselage Systems segment includes development, production and marketing of forward, mid and rear fuselage sections and systems, primarily to aircraft OEMs, as well as related spares and maintenance, repairs and overhaul, or MRO services.
     Spirit’s Propulsion Systems segment includes development, production and marketing of struts/pylons, nacelles (including thrust reversers) and related engine structural components primarily to aircraft or engine OEMs, as well as related spares and MRO services.
     Spirit’s Wing Systems segment includes development, production and marketing of wings and wing components (including flight control surfaces) as well as other miscellaneous structural parts primarily to aircraft OEMs, as well as related spares and MRO services. These activities take place at the Company’s facilities in Tulsa and McAlester, Oklahoma and Prestwick, Scotland.
     The Company’s segments are consistent with the organization and responsibilities of management reporting to the chief operating decision-maker for the purpose of assessing performance. The Company’s definition of segment operating income differs from operating income as presented in its primary financial statements and a reconciliation of the segment and consolidated results is provided in the table set forth below. Most selling, general and administrative expenses, and all interest expense or income, related financing costs and income tax amounts, are not allocated to the operating segments.
     While some working capital accounts are maintained on a segment basis, much of the Company’s assets are not managed or maintained on a segment basis. Property, plant and equipment, including tooling, is used in the design and production of products for each of the segments and, therefore, is not allocated to any individual segment. In addition, cash, prepaid expenses, other assets and deferred taxes are managed and maintained on a consolidated basis and generally do not pertain to any particular segment. Raw materials and certain component parts are used in the production of aerostructures across all segments. Work-in-process inventory is identifiable by segment, but is managed and evaluated at the program level. As there is no segmentation of the Company’s productive assets, depreciation expense (included in fixed manufacturing costs and selling, general and administrative expenses) and capital expenditures, no allocation of these amounts has been made solely for purposes of segment disclosure requirements.

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     The following table shows segment information:
                                 
    For the Three     For the Six  
    Months Ended     Months Ended  
    June 26,     June 28,     June 26,     June 28,  
    2008     2007     2008     2007  
Segment Revenues
                               
Fuselage Systems
  $ 493.4     $ 449.7     $ 985.4     $ 894.9  
Propulsion Systems
    296.9       259.2       571.6       519.6  
Wing Systems
    264.4       245.4       526.7       486.6  
All Other
    7.4       4.5       14.8       11.8  
 
                       
 
  $ 1,062.1     $ 958.8     $ 2,098.5     $ 1,912.9  
 
                       
Segment Operating Income
                               
Fuselage Systems
  $ 92.4     $ 82.1     $ 181.5     $ 165.1  
Propulsion Systems
    49.3       44.0       93.8       84.3  
Wing Systems
    32.9       28.4       65.4       51.6  
All Other
    (0.3 )     0.7       0.1       1.5  
 
                       
Business Segment Operating Income
    174.3       155.2       340.8       302.5  
Unallocated corporate SG&A
    (38.0 )     (51.9 )     (74.1 )     (94.4 )
Unallocated research and development
    (0.2 )     (1.2 )     (0.4 )     (2.2 )
 
                       
Total operating income
  $ 136.1     $ 102.1     $ 266.3     $ 205.9  
 
                       

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     The following section may include “forward-looking statements.” Forward-looking statements reflect our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “continue,” “plan,” “forecast,” or other similar words. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements.
Recent Events
     On July 7, 2008, Spirit AeroSystems (Europe) Limited (“Spirit Europe”) announced that it had signed a contract with Airbus to design and produce a major wing structure for the A350 XWB program. Spirit Europe will design and assemble the wing leading edge structure primarily at its facility in Prestwick, Scotland. The Composite Front Spar will be built at Spirit’s recently announced Kinston, North Carolina site with composite sub-assemblies being manufactured at the Spirit AeroSystems Malaysia Sdn Bhd (“Spirit Malaysia”) Facility at Subang, Malaysia. In addition, Spirit Europe announced that it had reached an agreement with Airbus to extend its existing contract to supply leading and trailing edges and other wing structures on the A319, A320, and A321 aircraft family at its Prestwick facility from 2011 until 2015. The total value of the extended agreement is expected to be $1.7 billion.
     On May 14, 2008, Spirit announced that it had signed a contract with Airbus to design and produce a major composite fuselage structure for the A350 XWB program with a total contract value expected to be $2.75 billion over the life of the program. To accommodate this and other work, Spirit announced plans to expand its operations with a new facility in Kinston, North Carolina. Construction of the new facility will begin late this year with operations expected to commence in 2010. Total investment, which includes design engineering, tooling, land, building, infrastructure, and capital equipment, is expected to be approximately $700 million over seven years shared by Spirit, Airbus, suppliers, and local government.
     On April 25, 2008, Spirit announced its participation in a joint venture partnership called Taikoo Spirit AeroSystems Composite Co. Ltd., between several major aviation companies to develop and implement a state-of-the-art composite and metal bond component repair station in the Asia-Pacific region. The new service center will be located in Jinjiang, China and will provide repair services for airlines and aircraft operators across the Asia-Pacific region.
     On April 9, 2008, Boeing announced a revised schedule for the first flight and initial deliveries of the B787 Dreamliner. The date of first flight was projected to occur in the fourth quarter of 2008 rather than the end of the second quarter of 2008, and initial deliveries were rescheduled for the third quarter of 2009 from the first quarter of 2009.
Overview
     We are the largest independent non-OEM (OEM refers to aircraft original equipment manufacturer) parts designer and manufacturer of commercial aerostructures in the world. Aerostructures are structural components, such as fuselages, propulsion systems and wing systems for commercial, military and business jet aircraft. We derive our revenues primarily through long-term supply agreements with Boeing, Airbus, and various business jet and other aerospace customers. For the three months ended June 26, 2008, we generated net revenues of $1,062.1 million and net income of $86.4 million and for the six months ended June 26, 2008, we generated net revenues of $2,098.5 million and net income of $171.6 million.
     We are organized into three principal reporting segments: (1) Fuselage Systems, which include the forward, mid and rear fuselage sections, (2) Propulsion Systems, which include nacelles, struts/pylons and engine structural components, and (3) Wing Systems, which include facilities in Tulsa and McAlester, Oklahoma and Prestwick, Scotland that manufacture wings, wing components, flight control surfaces, and other miscellaneous structural parts. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services and sales of natural gas through a tenancy-in-common with other Wichita companies. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 53%, 28%, 19% and less than 1%, respectively, of our segment operating income before unallocated corporate expenses for the three months ended June 26, 2008. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 53%, 27%, 19% and 1%, respectively, of our segment operating income before unallocated corporate expenses for the six months ended June 26, 2008.

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2008 Outlook
     We expect the following results, or ranges of results, for the year ending December 31, 2008:
             
    2008 Outlook   2007 Actuals  
Revenues
  ~$4.4 billion   $3.9 billion
Earnings per share, fully diluted
  $2.35-2.45 per share   $2.13 per share
Effective tax rate (1)
  ~33%   29.3%  
Cash flow from operations
  ~$400 million   $180 million
Capital expenditures
  ~$275 million   $288 million
Capital reimbursement
  ~$116 million   $46 million
 
(1)   Effective tax rate guidance assumes the benefit of a retroactive extension to the U.S. research tax credit.
Our 2008 outlook is based on the following market assumptions:
    Our revenue guidance for the full-year 2008 remains unchanged and is expected to be approximately $4.4 billion based on 2008 Boeing delivery guidance of 475-480 aircraft, 2008 Airbus delivery guidance of approximately 470 aircraft, and internal Spirit forecasts for other products as well as revenue associated with non-recurring development work.
 
    Fully diluted earnings per share guidance for 2008 has increased to be between $2.35 and $2.45 to reflect improved performance in the first half of 2008 and current expectations for the second half of 2008.
 
    Effective December 31, 2007, the U.S. Research and Experimentation tax credit expired. While there has been legislative activity to retroactively extend this credit, no bill has been signed into law. We have assumed the U.S. Research and Experimentation Tax Credit will be reinstated retroactively to January 1, 2008, and this assumption has been reflected in our effective tax rate 2008 outlook.
 
    Cash flow from operations full-year guidance is unchanged and is expected to be approximately $400 million. Capital expenditures guidance for 2008 is unchanged and is expected to be approximately $275 million.
Results of Operations
                                                 
    Three Months     Three Months             Six Months     Six Months        
    Ended     Ended     Percentage     Ended     Ended     Percentage  
    June 26,     June 28,     Change to Prior     June 26,     June 28,     Change to Prior  
    2008     2007     Year     2008     2007     Year  
    ($ in millions)  
Net revenues
  $ 1,062.1     $ 958.8     11 %     $ 2,098.5     $ 1,912.9     10 %  
Operating costs and expenses
                                               
Cost of sales
    874.5       788.7     11 %       1,731.8       1,583.5     9 %  
Selling, general and administrative
    40.9       54.3     (25 %)       80.0       99.4     (20 %)  
Research and development
    10.6       13.7     (23 %)       20.4       24.1     (15 %)  
 
                                       
Total costs and expenses
    926.0       856.7     8 %       1,832.2       1,707.0     7 %  
Operating income
    136.1       102.1     33 %       266.3       205.9     29 %  
Interest expense and financing fee amortization
    (10.5 )     (9.5 )   11 %       (19.6 )     (18.4 )   7 %  
Interest income
    5.0       7.2     (31 %)       10.7       14.8     (28 %)  
Other income, net
    0.2       1.8     (89 %)       1.6       3.8     (58 %)  
 
                                       
Income before income taxes
    130.8       101.6     29 %       259.0       206.1     26 %  
Income tax provision
    (44.4 )     (33.6 )   32 %       (87.4 )     (68.3 )   28 %  
 
                                       
Net income
  $ 86.4     $ 68.0     27 %     $ 171.6     $ 137.8     25 %  
 
                                       

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     For purposes of measuring production or deliveries for Boeing aircraft in a given period, the term “ship set” refers to sets of structural fuselage components produced or delivered in such period. For purposes of measuring production or deliveries for Airbus aircraft in a given period, the term “ship set” refers to sets of wing components produced or delivered in such period. Other components which are part of the same aircraft ship sets could be produced or shipped in earlier or later accounting periods than the components used to measure production or deliveries, which may result in slight variations in production or delivery quantities of the various ship set components in any given period.
     Comparative ship set deliveries by model are as follows:
                                 
    Three Months   Three Months   Six Months   Six Months
    Ended June 26,   Ended June 28,   Ended June 26,   Ended June 28,
Model   2008   2007   2008   2007
B737
    95       85       188       168  
B747
    7       4       11       9  
B767
    3       4       6       7  
B777
    22       21       42       42  
B787
    1       1       2       1  
 
                               
Total Boeing
    128       115       249       227  
A320 Family
    95       84       190       177  
A330/340
    21       21       45       43  
A380
    2             6        
 
                               
Total Airbus
    118       105       241       220  
Hawker 800 Series
    24       15       39       31  
 
                               
Total
    270       235       529       478  
 
                               
Results of Operations for the Three Months Ended June 26, 2008 and June 28, 2007
      Net Revenues. Net revenues for the three months ended June 26, 2008 were $1,062.1 million, an increase of $103.3 million, or 11%, compared with net revenues of $958.8 million for the same period in the prior year due to increased deliveries on Boeing and Airbus programs. Deliveries to Boeing increased from 115 ship sets during the second quarter of 2007 to 128 ship sets in the second quarter of 2008, an 11% increase. In addition, deliveries to Airbus increased from 105 ship sets during the second quarter of 2007 to 118 ship sets in the second quarter of 2008, a 12% increase. In total, in the second quarter of 2008, we delivered 270 ship sets compared to 235 ship sets delivered for the same period in the prior year, a 15% increase. Approximately 97% of Spirit’s net revenues for the second quarter 2008 came from our two largest customers, Boeing and Airbus.
      Cost of Sales. Cost of sales as a percentage of net revenues was 82% for the three months ended June 26, 2008 and June 28, 2007. During the second quarter of 2008, Spirit updated its contract profitability estimates resulting in a favorable cumulative catch-up adjustment of $4.0 million driven primarily by favorable cost trends within the Fuselage Systems segment’s current contract blocks, as compared to a $3.4 million favorable cumulative catch-up adjustment recorded in the second quarter of 2007, driven primarily by favorable cost trends within the Propulsion Systems segment.
      Selling, General and Administrative. SG&A as a percentage of net revenue for the three months ended June 26, 2008 was 4% as compared to 6% for the same period in the prior year. SG&A expenses for the three months ended June 26, 2008 were lower as a percentage of net revenue due to a decrease in non-cash stock compensation expense and minimal transition related costs. In the second quarter of 2008, we recognized $3.8 million in stock compensation expense as compared to $14.4 million during the second quarter of 2007. Included in the 2007 amount was $7.0 million of stock compensation expense related to the secondary offering. The total amount of expense related to the secondary offering included in SG&A was $9.6 million.
      Research and Development. R&D costs as a percentage of net revenues were approximately 1% for the three months ended June 26, 2008 and June 28, 2007. Total R&D costs declined $3.1 million, or 23%, primarily due to a reduction in R&D spending on new programs. R&D spending on technical development projects has remained constant in recent periods.
      Operating Income. Operating income for the three months ended June 26, 2008 was $136.1 million, an increase of $34.0 million, or 33%, compared to operating income of $102.1 million for the same period in the prior year. The increase was driven by additional gross profit from greater sales volume and lower SG&A and R&D expenses, as compared to the second quarter of 2007.

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      Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the three months ended June 26, 2008 includes $7.6 million of interest and fees paid or accrued in connection with long-term debt and $2.9 million in amortization of deferred financing costs as compared to $8.9 million of interest and fees paid or accrued in connection with long-term debt and $0.6 million in amortization of deferred financing costs for the same period in the prior year. The increase of $1.0 million as compared to the second quarter of 2007 primarily resulted from an increase in amortizable costs associated with the amendment and restatement of our senior credit facility on March 18, 2008.
      Interest Income. Interest income for the three months ended June 26, 2008 consisted of $4.4 million of accretion of the discounted long-term receivable from Boeing for capital expense reimbursement pursuant to the Asset Purchase Agreement for the Boeing Acquisition and $0.6 million in interest income as compared to $5.4 million of accretion of the discounted long-term receivable and $1.8 million of interest income for the same period in the prior year. As we receive additional payments on the receivable, the amount of accretion will decrease.
      Provision for Income Taxes. The income tax provision for the three months ended June 26, 2008 included $40.6 million for federal income taxes, $2.0 million for state taxes, and $1.8 million for foreign taxes. The income tax provision for the three months ended June 28, 2007 included $30.7 million for federal income taxes, $1.1 million for state taxes, and $1.8 million for foreign taxes. The 33.9% effective income tax rate for the three months ended June 26, 2008 differs from the 33.1% effective income tax rate for the same period in the prior year primarily due to the U.S. Research and Experimentation Tax Credit’s expiration effective December 31, 2007, partially offset by an increase in the Domestic Production Activities Deduction and state income tax credits.
      Segments. We are organized into three principal reporting segments: (1) Fuselage Systems, which include the forward, mid and rear fuselage sections, (2) Propulsion Systems, which include nacelles, struts/pylons and engine structural components and (3) Wing Systems, which include facilities in Tulsa and McAlester, Oklahoma and Prestwick, Scotland that manufacture wings, wing components, flight control surfaces, and other miscellaneous structural parts. All other activities fall within the All Other segment, principally made up of sundry sales of miscellaneous services and sales of natural gas through a tenancy-in-common with other Wichita companies.
     The following table shows comparable segment operating income before unallocated corporate expenses for the three months ended June 26, 2008 compared to the three months ended June 28, 2007:
                 
    Three Months Ended     Three Months Ended  
    June 26, 2008     June 28, 2007  
    ($ in millions)  
Segment Net Revenues
               
Fuselage Systems
  $ 493.4     $ 449.7  
Propulsion Systems
    296.9       259.2  
Wing Systems
    264.4       245.4  
All Other
    7.4       4.5  
 
           
 
  $ 1,062.1     $ 958.8  
 
           
Segment Operating Income
               
Fuselage Systems
  $ 92.4     $ 82.1  
Propulsion Systems
    49.3       44.0  
Wing Systems
    32.9       28.4  
All Other
    (0.3 )     0.7  
 
           
 
    174.3       155.2  
Unallocated corporate SG&A
    (38.0 )     (51.9 )
Unallocated research and development
    (0.2 )     (1.2 )
 
           
Total operating income
  $ 136.1     $ 102.1  
 
           
     Improvements to segment net revenues and operating income before unallocated corporate expenses for the three months ended June 26, 2008 compared to the three months ended June 28, 2007 were driven by higher deliveries and lower expenses, primarily R&D associated with new programs. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 46%, 28%, 25% and 1%, respectively, of our net revenues for the three months ended June 26, 2008. Net revenues attributable to Airbus are recorded in the Wing Systems segment. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 53%, 28%, 19% and less than 1%, respectively, of our segment operating income before unallocated corporate expenses for the three months ended June 26, 2008.

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      Fuselage Systems. Fuselage Systems segment net revenues for the three months ended June 26, 2008 were $493.4 million, an increase of $43.7 million, or 10%, over the same period in the prior year. This reflects an increase in Boeing B737, B747 and B777 model production volumes in support of customer deliveries. Fuselage Systems posted segment operating margins of 19% for the three months ended June 26, 2008, up from 18% in the same period of 2007 driven primarily due to lower fringe benefit costs recognized in the second quarter of 2008.
      Propulsion Systems . Propulsion Systems segment net revenues for the three months ended June 26, 2008 were $296.9 million, an increase of $37.7 million, or 15%, over the same period in the prior year. This reflects an increase in Boeing B737, B747 and B777 model production volumes in support of customer deliveries. Propulsion Systems posted segment operating margins of 17% for the second quarters of 2008 and 2007.
      Wing Systems. Wing Systems segment net revenues for the three months ended June 26, 2008 were $264.4 million, an increase of $19.0 million, or 8%, over the same period in the prior year due to higher deliveries to Boeing. Wing Systems posted segment operating margins of 12% for the second quarters of 2008 and 2007.
      All Other. The All Other net revenues consist of sundry sales and miscellaneous services, and revenues from the Kansas Industrial Energy Supply Company, or KIESC. The $2.9 million increase in net revenues for the three months ended June 26, 2008, compared to the three months ended June 28, 2007, was primarily driven by greater tooling sales.
Results of Operations for the Six Months Ended June 26, 2008 and June 28, 2007
      Net Revenues. Net revenues for the six months ended June 26, 2008 were $2,098.5 million, an increase of $185.6 million, or 10%, compared with net revenues of $1,912.9 million for the same period in the prior year. The increase in net revenues is primarily attributable to increased deliveries on Boeing and Airbus programs. Deliveries to Boeing increased from 227 ship sets during the six months ended June 28, 2007 to 249 ship sets in the six months ended June 26, 2008, a 10% increase. In addition, deliveries to Airbus increased from 220 ship sets during the second quarter of 2007 to 241 ship sets in the second quarter of 2008, a 10% increase. In total, for the six months ended June 26, 2008, we delivered 529 ship sets compared to 478 ship sets delivered for the same period in the prior year, an 11% increase. Approximately 98% of Spirit’s net revenues for the six months ended June 26, 2008 came from our two largest customers, Boeing and Airbus.
      Cost of Sales. Cost of sales as a percentage of net revenues was 83% for the six month periods ended June 26, 2008 and June 28, 2007. During the first six months of 2008, Spirit updated its contract profitability estimates resulting in a favorable cumulative catch-up adjustment of $4.8 million driven primarily by favorable cost trends within the Fuselage and Wing Systems segments’ current contract blocks, as compared to $11.3 million of favorable cumulative catch-up adjustment recorded in the first six months of 2007.
      Selling, General and Administrative. SG&A as a percentage of net revenues for the first six months of 2008 was 4% compared to 5% for the same period in the prior year. SG&A expenses in the six months ended June 26, 2008 were lower as a percentage of net revenues due to a decrease in non-cash stock compensation expenses and minimal transition related costs. In the first six months of 2008, we recognized $7.5 million in stock compensation expense as compared to $21.0 million during the first six months of 2007. Included in the 2007 amount was $7.0 million of stock compensation expense related to the secondary offering. The total amount of expense related to the secondary offering included in SG&A was $9.6 million.
      Research and Development. R&D costs as a percentage of net revenues were approximately 1% for the first six month periods ended June 26, 2008 and June 28, 2007. R&D costs declined $3.7 million, or 15%, primarily due to a reduction in R&D spending on new programs in the first six months of 2008 compared to the first six months of 2007.
      Operating Income. Operating income for the six months ended June 26, 2008 was $266.3 million, an increase of $60.4 million, or 29% compared to operating income of $205.9 million for the same period in the prior year. The increase was driven by additional gross profit from greater sales volume and lower transition and R&D expenses compared to the first six months of 2007.
      Interest Expense and Financing Fee Amortization. Interest expense and financing fee amortization for the six months ended June 26, 2008 includes $15.8 million of interest expense associated with long-term debt and $3.8 million in amortization of deferred financing costs as compared to $17.1 million of interest expense associated with long-term debt and $1.3 million in amortization of deferred financing costs for the same period in the prior year. The increase of $1.2 million as compared to the six months ended June

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28, 2007 primarily resulted from an increase in amortizable costs associated with the amendment and restatement of our senior credit facility on March 18, 2008.
      Interest Income. Interest income for the six months ended June 26, 2008 consisted of $9.3 million of accretion of the discounted long-term receivable from Boeing for capital expense reimbursement pursuant to the Asset Purchase Agreement for the Boeing Acquisition and $1.4 million in interest income as compared to $10.8 million of accretion of the discounted long-term receivable and $4.0 million of interest income for the same period in the prior year. As we receive additional payments on the receivable, the amount of accretion will decrease.
      Provision for Income Taxes. The income tax provision for the six months ended June 26, 2008 includes $81.0 million for federal income taxes, $3.1 million for state taxes and $3.3 million for foreign taxes. The income tax provision for the six months ended June 28, 2007 included $64.6 million for federal income taxes, $2.5 million for state taxes, and $1.2 million for foreign taxes. The 33.75% effective income tax rate for the six months ended June 26, 2008 differs from the 33.1% effective income tax rate for the same period in the prior year primarily due to the U.S. Research and Experimentation Tax Credit’s expiration effective December 31, 2007, partially offset by an increase in the Domestic Production Activities Deduction and state income tax credits.
      Segments. The following table shows comparable segment revenues and operating income before unallocated corporate expenses for the six months ended June 26, 2008 compared to the six months ended June 28, 2007:
                 
    Six Months Ended     Six Months Ended  
    June 26, 2008     June 28, 2007  
    ($ in millions)  
Segment Net Revenues
               
Fuselage Systems
  $ 985.4     $ 894.9  
Propulsion Systems
    571.6       519.6  
Wing Systems
    526.7       486.6  
All Other
    14.8       11.8  
 
           
 
  $ 2,098.5     $ 1,912.9  
 
           
Segment Operating Income
               
Fuselage Systems
  $ 181.5     $ 165.1  
Propulsion Systems
    93.8       84.3  
Wing Systems
    65.4       51.6  
All Other
    0.1       1.5  
 
           
 
    340.8       302.5  
Unallocated corporate SG&A
    (74.1 )     (94.4 )
Unallocated research and development
    (0.4 )     (2.2 )
 
           
Total operating income
  $ 266.3     $ 205.9  
 
           
     Improvements to segment net revenues and operating income before unallocated corporate expenses for the six months ended June 26, 2008 compared to the six months ended June 28, 2007 were driven by higher deliveries and lower R&D expenses. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 47%, 27%, 25% and 1%, respectively, of our net revenues for the six months ended June 26, 2008. Net revenues attributable to Airbus are recorded in the Wing Systems segment. Fuselage Systems, Propulsion Systems, Wing Systems and All Other represented approximately 53%, 27%, 19% and 1%, respectively, of our segment operating income before unallocated corporate expenses for the six months ended June 26, 2008.
      Fuselage Systems. Fuselage Systems segment net revenues for the six months ended June 26, 2008 were $985.4 million, an increase of $90.5 million, or 10%, over the same period in the prior year. This reflects an increase in Boeing B737, B747 and B787 model production volumes in support of customer deliveries. Fuselage Systems posted segment operating margins of 18% for the six month periods ended June 26, 2008 and June 28, 2007.
      Propulsion Systems . Propulsion Systems segment net revenues for the six months ended June 26, 2008 were $571.6 million, an increase of $52.0 million, or 10%, over the same period in the prior year. This reflects an increase in Boeing B737, B747 and B787 model production volumes in support of customer deliveries. Propulsion Systems posted segment operating margins of 16% for the six month periods ended June 26, 2008 and June 28, 2007.

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      Wing Systems. Wing Systems segment net revenues for the six months ended June 26, 2008 was $526.7 million, an increase of $40.1 million, or 8%, over the same period in the prior year due to higher deliveries to Boeing and Airbus. Wing Systems posted segment operating margins of 12% for the first six months of 2008, compared to 11% in same period in the prior year, as R&D expenses on new programs declined.
      All Other. The All Other net revenues consist of sundry sales and miscellaneous services, and revenues from the Kansas Industrial Energy Supply Company, or KIESC. The $3.0 million increase in net revenues in the six months ended June 26, 2008, compared to the six months ended June 28, 2007, was primarily driven by an increase in tooling sales.
Cash Flow
    Six Months Ended June 26, 2008 Compared to the Six Months Ended June 28, 2007
      Operating Activities. For the six months ended June 26, 2008, we had a net cash inflow of $78.4 million from operating activities, an increase of $13.8 million, or 21%, compared to a net cash inflow of $64.6 million for the same period in the prior year. The increase in cash provided in the current year was primarily due to higher earnings and increased customer advances, partially offset by additional inventory for the B787, Gulfstream and other general aviation programs. In accordance with the payment terms from the amended B787 Supply Agreement, we received $231.0 million in cash advance payments from Boeing during the first six months of 2008.
      Investing Activities. For the six months ended June 26, 2008, we had a net cash outflow of $61.4 million from investing activities, a decrease of $83.7 million, or 58%, compared to a net cash outflow of $145.1 million for the same period in the prior year. During the first six months of 2008, we invested $119.4 million in property, plant and equipment, software and program tooling which was $39.8 million less than during the same period of 2007. Of 2008 capital expenditures, $40.6 million was related to capital investments related to the start of B787 production as compared to $86.4 million of B787 capital investments during the same period in the prior year. Capital expenditures were partially offset by $56.5 million in capital reimbursements from Boeing received in the first six months of 2008 compared to $11.4 million received in the first six months of 2007. This difference is due to the increased payment amounts as well as a timing difference that resulted in the receipt of two payments in the second quarter of 2008.
      Financing Activities. For the six months ended June 26, 2008, we had a net cash outflow of $3.9 million from financing activities, compared to a net cash inflow of $22.7 million for the same period in the prior year. The change in net cash was due primarily to $34.5 million recorded in 2007 related to excess tax benefits from share-based payment arrangements, which was caused by the secondary offering. In addition, during the first six months of 2008, we borrowed $9.4 million from the Malaysian term loan, partially offset by $6.8 million of debt issuance costs related to the amendment and restatement of our senior credit facility, which occurred in the first quarter of 2008.
Liquidity and Capital Resources
     Liquidity, or access to cash, is an important factor in determining our financial stability. The primary sources of our liquidity include cash flow from operations, borrowing capacity through our credit facilities and advance payments and receivables from customers. Our liquidity requirements and working capital needs depend on a number of factors including the timing and rate of deliveries, payment terms under our contracts, the level of research and development expenditures related to new programs, capital expenditures, growth and contractions in the business cycle, contributions to our union-sponsored pension plans and interest and debt payments.
     On June 2, 2008, Spirit AeroSystems Malaysia SDN BHD (“Spirit Malaysia”) entered into a Facility Agreement (“Facility Agreement”) for a term loan facility of Ringgit Malaysia (RM) 69.2 million (approximately USD $20.0 million) (the “Facility”), with EXIM Bank, to be used towards partial financing of plant and equipment (including the acquisition of production equipment), materials, inventory and administrative costs associated with the establishment of an aerospace-related composite component assembly plant, plus potential additional work packages at Malaysia International Aerospace Center in Subang, Selangor, Malaysia (the “Project”). Funds for the Project will be available on a drawdown basis over a twenty-four month period from the date of the Facility Agreement. Spirit Malaysia is scheduled to make periodic draws against the Facility.
     The indebtedness repayment requires quarterly principal installments of RM 3.3 million (USD $1.0 million) from September 2011 through May 2017, or until the entire loan principal has been repaid.

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     Outstanding amounts drawn under the Facility are subject to a fixed interest rate of 3.5% per annum, payable quarterly.
     On May 14, 2008, Spirit and The North Carolina Global TransPark Authority (“GTPA”) entered into an Inducement Agreement, a Construction Agency Agreement and a Lease Agreement for the construction and lease of a manufacturing facility on an approximately 300 acre site in Kinston, North Carolina (the “NC Facility”). Spirit intends to use the NC Facility for a variety of aerospace manufacturing purposes, including the manufacturing and assembly of aerostructure parts for various customers. Spirit plans to manufacture a portion of the fuselage and the Composite Front Spar for the new Airbus A350 XWB aircraft at the NC Facility.
     Pursuant to the terms of the Construction Agency Agreement, GTPA appointed Spirit as its construction agent for the NC Facility. As the construction agent, Spirit will retain a design company to prepare the plans and specifications for the work and to act as the general contractor for the coordination of the work. The construction will be funded initially from a $100.0 million grant, awarded to GTPA by the Golden L.E.A.F. (Long-Term Economic Advancement Foundation), Inc., with an additional required minimum capital investment of $80.0 million to be funded by Spirit by 2014. The GTPA will pay the contractors directly for construction costs up to the $100.0 million grant value. GTPA will retain title to the site and the NC Facility.
     The Lease Agreement provides that GTPA will lease the site and the NC Facility to Spirit for an initial term of approximately 22 years (such term includes the construction period, which is expected to last approximately 2 years). In addition, Spirit has the option to renew the lease for up to four additional 20-year terms. During the term of the lease, Spirit will make nominal rental payments to GTPA.
     Pursuant to the terms of the Inducement Agreement, Spirit is subject to performance criteria including the creation of 800 jobs by the end of 2018 with measurement to targets beginning in 2010. Failure to meet these targets will result in additional payments to GTPA in future periods, but will not result in any obligation after the initial 22-year term of the lease. The additional payment obligation will be assessed annually based on the aggregate number of positions created at the end of each period; however, a final calculation of the additional amount owing with respect to job creation performance will be assessed on December 31, 2018 based on the total number of sustained eligible jobs created over the performance period. If the minimum number of sustained eligible jobs has been achieved and maintained for any consecutive twelve-quarter period after December 31, 2018, the performance criterion will be considered satisfied and any additional payments will cease.
     Another performance criterion contained in the Inducement Agreement is the requirement for Spirit to make $80.0 million in capital investments at the leased premises by the end of 2014 with measurement to targets beginning in 2009. This requirement is exclusive of any governmental grant proceeds. Failure to meet these targets will result in additional payments to GTPA in future periods, but will not result in any obligation after the initial 22-year term of the lease. The additional payment obligation will be assessed annually based on capital investment spending targets at the end of each period; however, a final calculation of the additional amount owing with respect to capital investment performance will be assessed on December 31, 2014 based on the total $80.0 million capital investment spending target. If additional payments are due, the performance criterion will be considered satisfied and payments will cease once Spirit’s total qualifying capital investment in the leased premises reaches $80.0 million.
     Additionally, Spirit is subject to termination penalties if certain events occur either during or subsequent to the construction phase of the project. Any such termination penalties or additional payments are not expected to be material to Spirit’s financial position or annual results of operations, and are ultimately dependent on the amount of jobs created and capital invested in the Facility.
     On March 26, 2008, Boeing and Spirit amended their existing B787 Supply Agreement to, among other things, provide for revised payment terms for deliveries from Spirit to Boeing. The revised terms will result in additional cash advance payments to Spirit in 2008 approximating the value anticipated to be delivered by Spirit in 2008 in the original B787 program schedule. The additional advances will be applied against the purchase price of the ship sets delivered until fully repaid. The amendment also eliminates the existing delayed payment schedule for ship sets delivered prior to aircraft certification and ties all payments for ship sets not covered by the additional advances to the date of delivery by Spirit to Boeing. During the first and second quarters of 2008, Spirit received $124.0 million and $107.0 million, respectively, in cash advances from Boeing as a result of the amended payment terms.
     On March 18, 2008, we entered into an amendment (the “Amendment”) to our senior credit facility. As a result of the Amendment, the revolving credit facility and the $700.0 million term loan B were amended to, among other things, (i) increase the amount of the revolver from $400.0 million to $650.0 million, (ii) increase from $75.0 million to $200.0 million the amount of indebtedness Spirit and its subsidiaries can incur on a consolidated basis to finance acquisition of capital assets, (iii) add a provision

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allowing Spirit and Spirit Holdings to have additional indebtedness outstanding of up to $300.0 million, (iv) add a provision allowing Spirit and its subsidiaries on a consolidated basis the ability to make investments in joint ventures not to exceed a total of $50.0 million at any given time, and (v) modify the definition of “Change of Control” to exclude certain circumstances that previously would have been considered a Change of Control.
     In June 2008, we entered into $100.0 million of forward starting swaps, which will replace the swaps maturing in July 2008. The term of the forward starting swaps extends from July 14, 2008 through July 14, 2011.
     We ended the second quarter of 2008 with cash and cash equivalents of $147.4 million, an increase of $14.0 million, compared to a cash balance of $133.4 million at December 31, 2007.
     Considering the positive impacts of the additional borrowing capacity under the revolving credit facility and the additional advance payments from Boeing, we believe our liquidity position is fully adequate to fund all intermediate term cash flow needs.
     During the first quarter of 2008, Standard & Poor’s revised the company’s credit outlook from negative to stable following Spirit’s announcement of its increased credit line. Standard & Poor’s and Moody’s confirmed their respective BB and Ba3 corporate ratings for Spirit.
     We use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates and interest rates. To account for our derivative financial instruments, we follow the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 137 and SFAS 138 . Derivative financial instruments are recognized on the Consolidated Balance Sheets as either assets or liabilities and are measured at fair value. The derivatives are valued at “mark to market” with the changes in fair market value of the instruments recorded at each period in earnings or accumulated other comprehensive income, depending on whether a derivative is effective as part of a hedge transaction, and if it is, the type of hedge transaction. Gains and losses on derivative instruments reported in accumulated other comprehensive income are subsequently included in earnings in the periods in which earnings are affected by the hedged item or when the hedge is no longer effective. We present the cash flows associated with our derivatives as a component of the investing section of the Statement of Cash Flows. Our use of derivatives has generally been limited to interest rate swaps, but in fiscal 2006 we also began using derivative instruments to manage our risk associated with U.S. dollar denominated contracts negotiated by Spirit Europe. We believe that the effect of significant increases or decreases in the aggregate fair value of our derivatives will not materially impact our liquidity.
     The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate fair value because of their short maturities.
Repayment of B787 Advance Payments
     The original B787 Supply Agreement required Boeing to make advance payments to us for production articles in the aggregate amount of $700.0 million. These advances were received by the end of 2007. We must repay this advance, without interest, in the amount of a $1.4 million offset against the purchase price of each of the first five hundred B787 ship sets delivered to Boeing. In the event that Boeing does not take delivery of five hundred B787 ship sets, any advances not then repaid will first be applied against any outstanding B787 payments then due by Boeing to us, with any remaining balance repaid at the rate of $84.0 million per year beginning in the year in which we deliver our final B787 production ship set to Boeing, prorated for the remaining portion of the year in which we make our final delivery. Accordingly, portions of the repayment liability are included as current and long-term liabilities in our consolidated balance sheet.
     On March 26, 2008, Boeing and Spirit amended their existing B787 Supply Agreement to, among other things, provide for revised payment terms for deliveries from Spirit to Boeing. The Amended B787 Supply Agreement requires Boeing to make additional advance payments to us in 2008 for production articles in an aggregate amount approximating the value anticipated to be delivered by Spirit in 2008 in the original B787 program schedule, in addition to the $700.0 million received through 2007. The additional advances will be applied against the full purchase price of the ship sets delivered (net of the $1.4 million per ship set applied against the initial $700.0 million of advances described above) until fully repaid. In the event that Boeing does not take delivery of the number of ship sets for which the additional advance payments have been made, any additional advances not then repaid will first be applied against any outstanding B787 payments then due by Boeing to us, with any remaining balance repaid beginning the year in which we deliver our final B787 production ship set to Boeing, with the full amount to be repaid no later than the end of the subsequent year. Accordingly, portions of the repayment liability associated with the additional advances are included as current and long-term liabilities in our consolidated balance sheet.

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Cautionary Statements regarding Forward-Looking Statements
     This quarterly report contains “forward-looking statements.” Forward-looking statements reflect our current expectations or forecasts of future events. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “estimate,” “believe,” “project,” “continue,” “plan,” “forecast,” or other similar words. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties, both known and unknown. Our actual results may vary materially from those anticipated in forward-looking statements. We caution investors not to place undue reliance on any forward-looking statements.
     Important factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to:
    our ability to continue to grow our business and execute our growth strategy;
 
    the build rates of certain Boeing aircraft including, but not limited to, the B737 program, the B747 program, the B767 program and the B777 program, and build rates of the Airbus A320 and A380 programs;
 
    the success and timely progression of Boeing’s new B787 and Airbus’s new A350 aircraft programs, including receipt of necessary regulatory approvals;
 
    our ability to enter into supply arrangements with additional customers and the ability of all parties to satisfy their performance requirements under existing supply contracts with Boeing, Airbus, and other customers;
 
    any adverse impact on Boeing’s and Airbus’s production of aircraft resulting from cancellations or reduced orders by their customers;
 
    the impact of continuing high oil prices on the commercial aviation market;
 
    future levels of business in the aerospace and commercial transport industries;
 
    competition from original equipment manufacturers and other aerostructures suppliers;
 
    the effect of governmental laws, such as U.S. export control laws, the Foreign Corrupt Practices Act, environmental laws and agency regulations, both in the U.S. and abroad;
 
    the effect of new commercial and business aircraft development programs, and the resulting timing and resource requirements that may be placed on us;
 
    the cost and availability of raw materials and purchased components;
 
    our ability to recruit and retain highly skilled employees and our relationships with the unions representing many of our employees;
 
    spending by the United States and other governments on defense;
 
    the outcome or impact of ongoing or future litigation and regulatory actions; and
 
    our exposure to potential product liability claims.
     These factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. Except to the extent required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
     As a result of our operating and financing activities, we are exposed to various market risks that may affect our consolidated results of operations and financial position. These market risks include fluctuations in interest rates and foreign currency exchange rates, which impact the amount of interest we must pay on our variable rate debt. In addition to other information set forth in this report, you should carefully consider the factors discussed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 22, 2008, which could materially affect our business, financial condition or results of operations. There have been no material changes to our market risk since the filing of our Form 10-K for the year ended December 31, 2007.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
     Our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer have evaluated our disclosure controls as of June 26, 2008, and have concluded that these disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
     During the first half of 2008, portions of our new enterprise resource planning (ERP) system were implemented. This conversion affected certain general ledger functions, and resulted in the use of new system reports and additional monitoring controls during the transition from legacy systems. Other than this item, there were no other changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II- OTHER INFORMATION
Item 1. Legal Proceedings
     Information regarding any recent material developments relating to our legal proceedings since the filings of our most recent Annual Report on Form 10-K is included in Note 15 to our condensed consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Item 1A. Risk Factors
     In addition to other information set forth in this report, you should carefully consider the factors discussed in Part 1, Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 22, 2008, which could materially affect our business, financial condition or results of operations.

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Item 4. Submission of Matters to a Vote of Security Holders
At the April 22, 2008 Annual Meeting of shareholders, the following matters were submitted to a vote of the shareholders:
(a) Election of Directors
     The Company’s shareholders elected 10 directors, each for a one-year term.
     The shareholders elected the Company’s 10 nominees to the 10 director positions by the vote shown below:
                 
Nominees   Votes For   Withheld
Charles L. Chadwell
    427,240,144       3,897,928  
Ivor Evans
    426,406,290       4,731,782  
Paul Fulchino
    386,156,040       44,982,032  
Richard Gephardt
    392,809,672       38,328,400  
Robert Johnson
    426,463,812       4,674,260  
Ronald Kadish
    427,270,115       3,867,957  
Francis Raborn
    427,272,180       3,865,892  
Jeffrey L. Turner
    426,252,644       4,885,428  
James L. Welch
    427,244,067       3,894,005  
Nigel Wright
    397,455,958       33,682,114  
(b) Approval to Amend the Company’s Short-Term Incentive Plan
     The shareholders voted to approve amendments to the Company’s Short-Term Incentive Plan to (i) increase the number of shares authorized under the Plan by 2,000,000 and (ii) provide that all future grants of shares under the Plan may only be made in class A common stock as follows:
         
Votes For   Votes Against   Abstentions
380,177,931
  41,047,905   99,779
(c) Approval to Amend the Company’s Long-Term Incentive Plan
     
     The shareholders voted to approve amendments to the Company’s Long-Term Incentive Plan to (i) increase the number of shares authorized under the Plan by 3,000,000 and (ii) provide that all future grants of shares under the Plan may only be made in class A common stock as follows:
         
Votes For   Votes Against   Abstentions
405,183,065   16,041,334   101,216
(d) Ratification of the Appointment of Independent Auditor
     The shareholders voted to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditor in 2008 as follows:
         
Votes For   Votes Against   Abstentions
430,476,559   616,363   45,150

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Item 6. Exhibits
     
Article I. Exhibit    
Number   Section 1.01 Exhibit
10.1*
  Employment Agreement between Spirit AeroSystems, Inc. and Jonathan A. Greenberg dated April 14, 2008.
 
   
10.2*
  Inducement Agreement between Spirit AeroSystems, Inc. and The North Carolina Global TransPark Authority dated May 14, 2008.
 
   
10.3*
  Lease Agreement between Spirit AeroSystems, Inc. and The North Carolina Global TransPark Authority dated May 14, 2008.
 
   
10.4*
  Construction Agency Agreement between Spirit AeroSystems, Inc. and The North Carolina Global TransPark Authority dated May 14, 2008.
 
   
31.1*
  Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
 
   
31.2*
  Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
 
   
32.1*
  Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
 
   
32.2*
  Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
 
*   Filed herewith

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SIGNATURES
     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 thereunto duly authorized.
         
Signature   Title   Date
 
       
/s/ Ulrich Schmidt
 
Ulrich Schmidt
  Executive Vice President and Chief Financial Officer 
(Principal Financial Officer)
  August 1, 2008
 
       
/s/ Daniel R. Davis
 
Daniel R. Davis
  Corporate Controller 
(Principal Accounting Officer)
  August 1, 2008

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Exhibit 10.1
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (“Agreement”), effective as of the 14th day of April, 2008 (the “Effective Date”), is by and between SPIRIT AEROSYSTEMS, INC., a Delaware corporation (the “Company”), and JONATHAN A. GREENBERG (the “Employee”).
Recitals
     WHEREAS, the Company is engaged in the manufacture, fabrication, maintenance, repair, overhaul, and modification of aircraft and aircraft components and markets and sells its services and products to its customers throughout the world (the “Business”); and
     WHEREAS, the Company desires to hire the Employee as its Senior Vice President, General Counsel and Secretary and to perform such other services as the Company may direct; and
     WHEREAS, in the course of performing the Employee’s duties for the Company, the Employee is likely to gain certain confidential and proprietary information belonging to the Company, develop relationships that are vital to the Company’s goodwill, and acquire other important benefits to which the Company has a protectable interest; and
     WHEREAS, the Company has agreed to hire the Employee and the Employee has agreed to accept such employment by the Company upon the terms, conditions, and restrictions contained in this Agreement.
Agreement
     NOW THEREFORE, in consideration of the foregoing, and the representations, warranties, and covenants hereinafter, the parties hereto agree as follows:
Section 1. Employment . In reliance on the representations and warranties made herein, the Company hereby hires the Employee to be its Senior Vice President, General Counsel and Secretary, reporting to the Company’s Chief Executive Officer (CEO) and to perform such duties and services in and about the business of the Company as may from time to time be assigned to the Employee. Following the second anniversary of the Effective Date, and subject to the terms of Section 6 below, the job title and duties referred to in the preceding sentence may be changed by the Company in the Company’s sole discretion. The Employee will devote the Employee’s full time to this employment. The Employee’s employment hereunder will commence on the Effective Date and will continue, subject to earlier termination of employment as hereinafter provided, through the second anniversary of the Effective Date (the “Employment Period”). On the second anniversary of the Effective Date and each annual anniversary thereafter of such date (such second anniversary and each subsequent anniversary thereof a “renewal date”), the Employment Period shall automatically be extended for an additional one-year period unless (a) at least three months before a renewal date either party has given written notice to the other that such party does not wish to extend the term of this Agreement, in which event the Employment

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Period will end on that renewal date, or (b) the parties have agreed to otherwise extend this Agreement.
Section 2. Performance . The Employee will use the Employee’s best efforts and skill to faithfully enhance and promote the welfare and best interests of the Company. The Employee will strictly obey all rules and regulations of the Company, follow all laws and regulations of appropriate government authorities, and be governed by reasonable decisions and instructions of the Company as are consistent with the job duties as described above.
Section 3. Licensing . Commencing as early as practicable, the Employee will promptly apply for, obtain, and maintain an appropriate license to provide legal services in the State of Kansas as an employee of the Company pursuant to either Kansas Supreme Court Rule 703 (admission to the bar without written examination), Kansas Supreme Court Rule 704 (admission to the bar upon written examination), or Kansas Supreme Court Rule 706 (temporary licensure of attorneys performing restricted legal services for single employers), each as in effect from time to time. Employee shall exert best efforts to file an application with the State of Kansas on or before April 14, 2008. Company shall reimburse Employee for any Kansas bar application fees and for annual Kansas, New York and Washington, D.C. bar association dues.
Section 4. Compensation . Except as otherwise provided for herein, for all services to be performed by the Employee in any capacity hereunder, including without limitation any services as an officer, director, member of any committee, or any other duties assigned to the Employee, throughout the Employment Period the Company will pay or provide the Employee with the following, and the Employee will accept the same, as compensation for the performance of the Employee’s undertakings and the services to be rendered by the Employee:
     (a)  Base Salary . Initially, the Employee will be entitled to an annual salary of $300,000 (the “Base Salary”), which will be paid in accordance with the Company’s policies and procedures. The Base Salary will not be reduced during the first two years of the Employee’s employment with the Company, unless the salaries of other comparable-level executives with the Company are also reduced, and in such event the Employee’s salary reduction shall be commensurate in time and amount with the reductions applied to such other comparable-level executives. Thereafter, the Base Salary may be changed from time to time based on the Employee’s and the Company’s performance, which may include, without limitation, participation in a periodic salary evaluation program on the same basis as other employees of the Company of similar position.
     (b)  Sign-On Bonus . The Company will pay the Employee no later than thirty days from the Effective Date, a sign-on bonus equal to (i) $400,000.00, plus (ii) an amount equal to all tax withholding associated with the Employee’s receipt of the foregoing amount (collectively the “Sign-On Bonus”). Payment of the Sign-On Bonus is conditioned upon the Employee remaining employed by the Company for a period of not less than one (1) year after the Effective Date, and the entire Sign-On Bonus must be repaid to the Company by the Employee in the event such condition is not satisfied. The Employee will not be required to repay any portion of the Sign-On Bonus to the Company if the Employee’s employment is involuntarily terminated by the Company without cause (as described below), or if the termination is a result of Employee’s

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death or Disability (as defined below). Upon termination of the Employee’s employment with the Company, the Company may deduct from the Employee’s paycheck(s) or other amounts owed to the Employee the amount of the Employee’s repayment obligation under this Section 4(b), if any (or any other advances previously made to the Employee). To the extent such deductions are insufficient to fully reimburse the Company, the Employee will be liable to the Company for the balance.
     (c)  Annual Incentive Compensation . The Employee will be provided incentive compensation (either in cash or common stock of the Company’s parent), as specified by the administrative committee of the Spirit AeroSystems Holdings, Inc. Short-Term Incentive Plan (the “STIP”), pursuant to and in accordance with the terms and conditions of the STIP. The Employee will be treated as first qualified to participate in the STIP during the plan year beginning January 1, 2008 (which year shall not be pro-rated). The first plan year incentives will include 150% of Base Salary if target performance goals are reached or exceeded, but if the target performance goals are not reached, the Employee will only be entitled to incentive compensation (if any) otherwise determined under the STIP and Company policy.
     (d)  Long-Term Incentive Plan . The Employee will receive an award of shares of common stock of Spirit AeroSystems Holdings, Inc. (“Holdings”) under the Spirit AeroSystems Holdings, Inc. Long-Term Incentive Plan (the “LTIP”), the value of which equals (as determined under such conventions and rules as the Holdings board of directors or the LTIP administrative committee may adopt) 140% of the Employee’s Base Salary, subject to and in accordance with the terms and provisions of the LTIP and the terms and conditions established with respect to such award by the Holdings board of directors and the LTIP administrative committee (including, but not limited to, a vesting schedule). This award will be further subject to, and conditioned upon, (i) approval of the award by the Holdings board of directors following the Company’s recommendation that the award be granted, and (ii) approval during 2008 by the Holdings stockholders of a proposed amendment to the LTIP increasing the number of shares available for grant under the LTIP.
     (e)  Relocation Expenses . The Company will pay to the Employee, or reimburse the Employee for, the following amounts in connection with the Employee’s relocation:
          (i) The real-estate agent commission and other third-party closing costs (including seller’s portion of state and local transfer and recordation taxes, but excluding pro-rated taxes, special assessments, homeowners’ association dues, or similar items) incurred in connection with the sale of the Employee’s current home in Baltimore County.
          (ii) Commencing as of May 1, 2008, the Employee’s monthly mortgage / escrow costs in an amount not to exceed $5,000 per month for the Employee’s current home in Baltimore County until the earlier of the date the Employee sells such home or the date that is 12 months after the Effective Date, so long as the Employee uses reasonable efforts to sell the home as soon as practicable.
          (iii) The reasonable costs of moving the Employee and the Employee’s family and tangible personal property to Wichita.

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          (iv) The reasonable costs of commuting to and searching for a home in Wichita (including round-trip coach airfare for Employee’s travel between Baltimore and Wichita not more than once every week, round-trip coach airfare for Employee’s spouse and children for travel between Baltimore and Wichita not more than once every month, hotel or short-term rental of an executive suite, and rental car) until the earlier of the date the Employee moves into a home in Wichita or the date that is 6 months after the Effective Date.
          (v) Reasonable temporary housing expenses in Wichita until the earlier of the date the Employee moves the Employee’s primary residence to Wichita or the date that is 6 months after the Effective Date.
          (vi) Any real-estate agent commission and all third-party closing costs (excluding any pre-paid interest, taxes, or insurance) incurred in connection with the purchase of a home in Wichita.
          (vii) Payment of all taxes associated with Employee’s receipt of the foregoing benefits, so that after payment of all taxes by Employee, Employee shall have retained the total amount of such benefits. The Employee shall take such steps as the Company may reasonably request to substantiate any of the foregoing expenses in a manner that will permit such expenses to be non-taxable to the Employee.
     (f)  Other Benefit Plans . The Employee shall also participate in the Company’s other employee benefit plans, policies, practices, and arrangements, as the same may be offered to the Employee from time to time, including, without limitation, (i) any defined benefit retirement plan, excess or supplementary plan, profit-sharing plan, savings plan, health and dental plan, disability plan, survivor-income and life-insurance plan, executive-financial-planning program, or other arrangement, or any successors thereto; (ii) the STIP and the LTIP; and (iii) such other benefit plans as the Company may establish or maintain from time to time (collectively the “Benefit Plans”). The Employee’s entitlement to any other compensation or benefits will be determined in accordance with the terms and conditions of the Benefit Plans and other applicable programs, practices, and arrangements then in effect.
     (g)  Earned Time Off . The Employee will be provided with five weeks of earned time off each year and all paid holidays, as determined in accordance with the Company’s policies and practices in effect from time to time.
     (h)  Fringe Benefits . The Employee will be provided with all other fringe benefits and perquisites in accordance with the Company’s policies, as the same may be amended from time to time.
     (i)  Withholding Taxes . The Company will have the right to deduct from all payments made to the Employee hereunder any federal, state, or local taxes required by law to be withheld.

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     (j)  Expenses . During the Employee’s employment, the Company will promptly pay or reimburse the Employee for all reasonable out-of-pocket expenses incurred by the Employee in the performance of duties hereunder in accordance with the Company’s policies and procedures then in effect.
Section 5. Restrictions .
     (a)  Acknowledgements . The Employee acknowledges and agrees that: (1) during the term of the Employee’s employment, because of the nature of the Employee’s responsibilities and the resources provided by the Company, the Employee will acquire valuable and confidential skills, information, trade secrets, and relationships with respect to the Company’s business practices and operations; (2) the Employee may develop on behalf of the Company a personal acquaintance and/or relationship with various persons, including, but not limited to, customers and suppliers, which acquaintances may constitute the Company’s only contact with such persons, and, as a consequence of the foregoing, the Employee will occupy a position of trust and confidence with respect to the Company’s affairs; (3) the Business involves the marketing and sale of the Company’s products and services to customers throughout the entire world, the Company’s competitors, both in the United States and internationally, consist of both domestic and international businesses, and the services to be performed by the Employee for the Company involve aspects of both the Company’s domestic and international business; and (4) it would be impossible or impractical for the Employee to perform the Employee’s duties for the Company without access to the Company’s confidential and proprietary information and contact with persons that are valuable to the goodwill of the Company.
     (b)  Reasonableness . In view of the foregoing and in consideration of the remuneration to be paid to the Employee, the Employee agrees that it is reasonable and necessary for the protection of the goodwill and business of the Company that the Employee make the covenants contained in this Agreement regarding the conduct of the Employee during and subsequent to the Employee’s employment by the Company, and that the Company will suffer irreparable injury if the Employee engages in conduct prohibited by this Agreement.
     (c)  Non-Compete .
          (i) During the term of the Employee’s employment by the Company, neither the Employee nor any other person or entity with the Employee’s assistance nor any entity in which the Employee directly or indirectly has any interest of any kind (without limitation) will, anywhere in the world, directly or indirectly, own, manage, operate, control, be employed by, solicit sales for, invest in, participate in, advise, consult with, or be connected with the ownership, management, operation, or control of any business which is engaged, in whole or in part, in the Business, or any business that is competitive therewith or any portion thereof, except for the exclusive benefit of the Company.
          (ii) For a period of two years after termination of the Employee’s employment by the Company, neither the Employee nor any other person or entity with the Employee’s assistance nor any entity in which Employee directly or indirectly has any interest of any kind (without limitation) will, anywhere in the world, directly or indirectly, own, manage, operate,

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control, be employed by, solicit sales for, invest in, participate in, advise, consult with, or be connected with the ownership, management, operation, or control of any business which is engaged, in whole or in part, in the Business, or any business that is competitive therewith or any portion thereof, except that this covenant will not prevent the Employee from assuming any position in which the Employee provides legal advice or counsel pursuant to an attorney-client relationship, subject to the restrictions set forth below.
          (iii) Following termination of the Employee’s employment by the Company, if the Employee assumes a position in which the Employee provides legal advice or counsel pursuant to an attorney-client relationship, the Employee will comply with all rules of ethics and professional responsibility governing the legal profession. Specifically, but without limiting the foregoing, the Employee will not reveal information relating to the Employee’s prior representation of the Company unless the Company consents after consultation. The Employee will not represent any party in the same or substantially related matters in which that party’s interests are materially adverse to the interests of the Company, unless the Company consents after consultation. Further, the Employee will not use information relating to the Employee’s prior representation of the Company to the disadvantage of the Company.
          (iv) The Employee will not be deemed to have breached the provisions of this Section 5(c) solely by reason of holding, directly or indirectly, not greater than 2% of the outstanding securities of a company listed on or through a national securities exchange.
     (d)  Non-Solicitation . In addition, during the term of the Employee’s employment by the Company and for a period of two years after termination of such employment, neither the Employee nor any person or entity with the Employee’s assistance nor any entity that the Employee or any person with the Employee’s assistance or any person who the Employee directly or indirectly controls will, directly or indirectly, (1) solicit or take any action to induce any employee to quit or terminate their employment with the Company or the Company’s affiliates, or (2) employ as an employee, independent contractor, consultant, or in any other position, any person who was an employee of the Company or the Company’s affiliates during the aforementioned period.
     (e)  Confidentiality . Without the express written consent of the Company, the Employee will not at any time (either during or after the termination of the term of the Employee’s employment) use (other than for the benefit of the Company) or disclose to any other person or business entity proprietary or confidential information concerning the Company, the Company’s parent, or any of their affiliates, or the Company’s, the Company’s parent’s, or any of their affiliates’ trade secrets or inventions of which the Employee has gained knowledge during the Employee’s employment with the Company. This paragraph will not apply to any such information that: (1) the Employee is required to disclose by law; (2) has been otherwise disseminated, disclosed, or made available to the public; or (3) was obtained after the Employee’s employment with the Company ended and from some source other than the Company, which source was under no obligation of confidentiality.
     (f)  Effect of Breach . The Employee agrees that a breach of this Section 5 cannot adequately be compensated by money damages and, therefore, the Company will be entitled, in

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addition to any other right or remedy available to it (including, but not limited to, an action for damages), to an injunction restraining such breach or a threatened breach and to specific performance of such provisions, and the Employee hereby consents to the issuance of such injunction and to the ordering of specific performance, without the requirement of the Company to post a bond or other security.
     (g)  Other Rights Preserved . Nothing in this Section eliminates or diminishes rights which the Company may have with respect to the subject matter hereof under other agreements, the governing statutes, or under provisions of law, equity, or otherwise. Without limiting the foregoing, this Section does not limit any rights the Company may have under any agreement with the Employee regarding trade secrets and confidential information.
Section 6. Termination . This Agreement will terminate upon the following circumstances:
     (a)  Without Cause . At any time at the election of either the Employee or the Company for any reason or no reason, without cause, but subject to the provisions of this Agreement. For purposes of this Agreement, termination by the Company without cause shall include, without limitation, voluntary termination of employment by the Employee under the following circumstances: prior to the second anniversary of the Effective Date, or at any time following a Change in Control of the Company (as defined below), the Employee (A) is not offered continued employment with the Company (or its successor) in the position of Senior Vice President, General Counsel and Secretary having the duties, responsibilities, compensation, benefits, and geographic location that are, in all material respects, at least as favorable as the position previously held by Employee with the Company (a “Comparable Position”), or (B) continues to perform services for the Company (or its successor) after the Change in Control but, within twelve months following the Change in Control, is assigned to a position that is not a Comparable Position.
     For purposes of this Agreement, a “Change in Control” means a transaction pursuant to which an individual, trust, estate, partnership, limited liability company, association, corporation, or other entity (hereinafter “Person”) or more than one Person acting as a group (in either case, however, excluding Onex and the Onex entities), acquires (i) more than 50% of the total voting power of the stock of the Company or the Company’s parent (including, but not limited to acquisition by merger, consolidation, recapitalization, reorganization or sale or transfer of equity interests) or (ii) all or substantially all of the assets of the Company.
     (b)  Cause . At any time at the election of the Company for Cause. “Cause” for this purpose means (i) the Employee committing a material breach of this Agreement (other than a breach described in clauses (ii) through (v) below), which breach is correctable but not corrected by Employee within 5 business days of notification from the Company; (ii) the Employee committing any acts involving moral turpitude, including fraud, dishonesty, disclosure of confidential information, or the commission of a felony, or direct and deliberate acts constituting a material breach of the Employee’s duty of loyalty to the Company; (iii) the Employee willfully or continuously refusing to perform the material duties reasonably assigned to the Employee by the Company that are consistent with the provisions of this Agreement and not resulting from a Disability; (iv) the inability of the Employee to obtain and maintain appropriate United States

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security clearances; or (v) the inability or failure of the Employee to obtain and maintain appropriate licensing to provide legal services in the State of Kansas as an employee of the Company.
     (c)  Disability . The Employee’s death or the Employee’s being unable to render the services required to be rendered by the Employee for a period of one hundred eighty (180) days during any twelve-month period (“Disability”).
Section 7. Effect of Termination .
     (a)  Voluntary Termination and Termination for Cause . If the Employee’s employment is terminated (i) voluntarily by the Employee (i.e. not as a result of actions by the Company that would constitute termination without cause as set forth in Section 6), or (ii) by the Company for Cause, the Company will pay the Employee’s compensation only through the last day of the Employment Period (less any amounts the Company may off-set or deduct as specified in this Agreement or as otherwise permitted), and, except as may otherwise be expressly provided in this Agreement, the STIP, the LTIP, or in any Benefit Plan, the Company will have no further obligation to the Employee.
     (b)  Termination Without Cause . If the Employee’s employment is terminated by the Company without cause during the Employment Period and for so long as the Employee is not in breach of the Employee’s continuing obligations under Section 5, (i) the Company will continue to pay the Employee an amount equal to the Employee’s Base Salary in effect immediately before termination of the Employee’s employment for a period of 12 months (less any amounts the Company may off-set or deduct as specified in this Agreement or as otherwise permitted), (ii) the Company will pay the costs of COBRA medical and dental benefits coverage which are offered to the Employee after termination for a period of 12 months, (iii) solely for purposes of time-based vesting under the STIP with respect to any shares of stock granted to the Employee under the STIP before the date of termination, the Employee will be treated as remaining in continuous active employment with the Company for 12 months after the date of termination, and (iv) solely for purposes of time-based vesting under the LTIP with respect to any shares of stock granted to the Employee under the LTIP before the date of termination, the Employee will be treated as remaining in continuous active employment with the Company for 12 months after the date of termination. Except as may otherwise be expressly provided in this Agreement or in any Benefit Plan, the Company will have no further obligation to the Employee.
     (c)  Termination Due to Death or Disability . If the Employee’s employment is terminated due to death or at a time when the Employee is receiving income-replacement benefits under the Company’s long-term disability insurance program by reason of total disability, (i) solely for purposes of time-based vesting under the STIP with respect to any shares of stock granted to the Employee under the STIP before the date of termination, the Employee will be treated as remaining in continuous active employment with the Company for 12 months after the date of termination, and (ii) solely for purposes of time-based vesting under the LTIP with respect to any shares of stock granted to the Employee under the LTIP before the date of termination, the Employee will be treated as remaining in continuous active employment with the Company for 12 months after the date of termination. Except as may otherwise be expressly

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provided in this Agreement or in any Benefit Plan, the Company will have no further obligation to the Employee.
     (d)  Obligations at Termination . On termination of employment, the Employee will deliver all trade secret, confidential information, records, notes, data, memoranda, and equipment of any nature that are in the Employee’s possession or under the Employee’s control and that are the property of the Company or relate to the business of the Company. Promptly upon termination, Employee and Company will pay to each other any amounts due and owing under this Agreement.
     (e)  Survival . The Employee’s obligations under Section 4(b) and Section 5 through Section 10 of this Agreement will survive the expiration or termination of this Agreement.
Section 8. Representations and Warranties .
     (a)  No Conflicts . The Employee represents and warrants to the Company that the Employee is under no duty (whether contractual, fiduciary, or otherwise) that would prevent, restrict, or limit the Employee from fully performing all duties and services for the Company, and the performance of such duties and services will not conflict with any other agreement or obligation to which the Employee is bound.
     (b)  No Hardship . The Employee represents and acknowledges that the Employee’s experience and/or abilities are such that observance of the covenants contained in this Agreement will not cause the Employee any undue hardship and will not unreasonably interfere with the Employee’s ability to earn a livelihood.
Section 9. Alternative Dispute Resolution .
     (a)  Mediation . The Employee and the Company agree to submit, prior to arbitration, all unsettled claims, disputes, controversies, and other matters in question between them arising out of or relating to this Agreement (including but not limited to any claim that the Agreement or any of its provisions is invalid, illegal, or otherwise voidable or void) or the dealings or relationship between the Employee and the Company (“Disputes”) to mediation in Wichita, Kansas and in accordance with the Commercial Mediation Rules of the American Arbitration Association currently in effect. The mediation will be private, confidential, voluntary, and nonbinding. Any party may withdraw from the mediation at any time before signing a settlement agreement upon written notice to each other party and to the mediator. The mediator will be neutral and impartial. The mediator will be disqualified as a witness, consultant, expert, or counsel for either party with respect to the matters in Dispute and any related matters. The Company and the Employee will pay their respective attorneys’ fee and other costs associated with the mediation, and the Company and the Employee will equally bear the costs and fees of the mediator. If a Dispute cannot be resolved through mediation within ninety (90) days of being submitted to mediation, the parties agree to submit the Dispute to arbitration.
     (b)  Arbitration . Subject to Section 9(a), all Disputes will be submitted for binding arbitration to the American Arbitration Association on demand of either party. Such arbitration

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proceeding will be conducted in Wichita, Kansas and, except as otherwise provided in this Agreement, will be heard by one (1) arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. All matters relating to arbitration will be governed by the federal Arbitration Act (9 U.S.C. §§ 1 et seq.) and not by any state arbitration law. The arbitrator will have the right to award or include in the arbitrator’s award any relief which the arbitrator deems proper under the circumstances, including, without limitation, money damages (with interest on unpaid amounts from the date due), specific performance, injunctive relief, and reasonable attorneys’ fees and costs, provided that the arbitrator will not have the right to amend or modify the terms of this Agreement. The award and decision of the arbitrator will be conclusive and binding upon all parties hereto, and judgment upon the award may be entered in any court of competent jurisdiction. Except as specified above, the Company and the Employee will pay their respective attorneys’ fees and other costs associated with the arbitration, and the Company and the Employee will equally bear the costs and fees of the arbitrator.
     (c)  Confidentiality . The Employee and the Company agree that they will not disclose, or permit those acting on their behalf to disclose, any aspect of the proceedings under Section 9(a) and Section 9(b), including but not limited to the resolution or the existence or amount of any award, to any person, firm, organization, or entity of any character or nature, unless divulged (i) to an agency of the federal or state government, (ii) pursuant to a court order, (iii) pursuant to a requirement of law, (iv) pursuant to prior written consent of the Company or the Employee, or (v) pursuant to a legal proceeding to enforce a settlement agreement or arbitration award. This provision is not intended to prohibit nor does it prohibit the Employee’s or the Company’s disclosures of the terms of any settlement or arbitration award to their attorney(s), accountant(s), financial advisor(s), or family members, provided that they comply with the provisions of this paragraph.
     (d)  Injunctions . Notwithstanding anything to the contrary contained in this Section 9, the Company and the Employee will have the right in a proper case to obtain temporary restraining orders and temporary or preliminary injunctive relief from a court of competent jurisdiction. But the Company and the Employee must contemporaneously submit the Disputes for non-binding mediation under Section 9(a) and then for arbitration under Section 9(b) on the merits as provided herein if such Disputes cannot be resolved through mediation.
Section 10. General .
     (a)  Notices . All notices required or permitted under this Agreement must be in writing and may be made by personal delivery or facsimile transmission, effective on the day of such delivery or receipt of such transmission, or may be mailed by registered or certified mail, effective two (2) days after the date of mailing, addressed as follows:

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To the Company:
Spirit AeroSystems, Inc.
Attention: Senior Vice President, Administration and Human Resources
3801 S. Oliver
P.O. Box 780008, Mail Code K11-60
Wichita, KS 67278-0008
Facsimile Number: (316) 523-8814
     or such other person or address as designated in writing to the Employee.
To the Employee:
Jonathan A. Greenberg
at the Employee’s last known residence address or to such other address as designated by the Employee in writing to the Company.
     (b)  Successors . Neither this Agreement nor any right or interest therein will be assignable or transferable (whether by pledge, grant of a security interest, or otherwise) by the Employee or the Employee’s beneficiaries or legal representatives, except by will, by the laws of descent and distribution, or inter vivos revocable living grantor trust as the Employee’s beneficiaries. This Agreement will be binding upon and will inure to the benefit of the Company, its successors and assigns, and the Employee and will be enforceable by them and the Employee’s heirs, legatees, and legal personal representatives. If the Employee dies during the term of this Agreement, absent actual notice of any probate proceeding, the Company will pay any compensation due under this Agreement to the following person(s) in order of preference: (i) spouse of the Employee; (ii) children of the Employee eighteen years of age and over, in equal shares; or (iii) the person to whom funeral expenses are due. Upon payment of such sum, the Company will be relieved of all further obligations hereunder.
     (c)  Waiver, Modification, and Interpretation . No provisions of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in a writing signed by the Employee and an appropriate officer of the Company empowered to sign the same by the Board of Directors of the Company. No waiver by either party at any time of any breach by the party of, or compliance with, any condition or provision of this Agreement to be performed by the other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same time or at any prior or subsequent time. The validity, interpretation, construction, and performance of this Agreement will be governed by the laws of the State of Kansas, except that the corporate law of the state of incorporation of the Company’s parent will govern issues related to the issuance of shares of its common stock. Except as provided in Section 9, any action brought to enforce or interpret this Agreement will be maintained exclusively in the state and federal courts located in Wichita, Kansas.
     (d)  Interpretation . The headings contained herein are for reference purposes only and will not in any way affect the meaning or interpretation of any provision of this Agreement. No

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provision of this Agreement will be interpreted for or against any party hereto on the basis that such party was the draftsman of such provision; and no presumption or burden of proof will arise disfavoring or favoring any party by virtue of the authorship of any of the provisions of this Agreement.
     (e)  Counterparts . The Company and the Employee may execute this Agreement in any number of counterparts, each of which will be deemed to be an original but all of which will constitute but one instrument. In proving this Agreement, it will not be necessary to produce or account for more than one such counterpart.
     (f)  Invalidity of Provisions . If a court of competent jurisdiction declares that any provision of this Agreement is invalid, illegal, or unenforceable in any respect, and if the rights and obligations of the Parties to this Agreement will not be materially and adversely affected thereby, in lieu of such illegal, invalid, or unenforceable provision the court may add as a part of this Agreement a legal, valid, and enforceable provision as similar in terms to such illegal, invalid, or unenforceable provision as is possible. If such court cannot so substitute or declines to so substitute for such invalid, illegal, or unenforceable provision, (i) such provision will be fully severable; (ii) this Agreement will be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and (iii) the remaining provisions of this Agreement will remain in full force and effect and not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. The covenants contained in this Agreement will each be construed to be a separate agreement independent of any other provision of this Agreement, and the existence of any claim or cause of action of the Employee against the Company, predicated on this Agreement or otherwise, will not constitute a defense to the enforcement by the Company of any of said covenants.
     (g)  Entire Agreement . This Agreement (together with the documents expressly referenced herein) constitutes the entire agreement between the parties, supersedes in all respects any prior agreement between the Company and the Employee and may not be changed except by a writing duly executed and delivered by the Company and the Employee in the same manner as this Agreement.
     (h)  No Deferral of Compensation . The salary continuation amounts payable to the Employee after termination of employment under Section 7(b) (if any) are intended to be exempt from the definition of “deferred compensation” for purposes of Internal Revenue Code (“Code”) Section 409A as amounts payable only in the invent of involuntary termination without Cause. In the event the total of the salary continuation amounts payable to the Employee after termination of employment under Section 7(b) (if any) will exceed two times the lesser of (i) the Employee’s annualized base salary for the calendar year immediately preceding the calendar year in which the Employee’s employment terminates, or (ii) the dollar amount in effect under Code Section 401(a)(17) for the year in which the Employee terminates employment, then all such amounts will be paid to the Employee in equal semi-monthly installments on the first and fifteenth days of each month (or the first business day following any such day, if such day is not a business day) for a period of 12 months, commencing with the first day of the month after termination of the Employee’s employment, and payment of such amounts may not be accelerated.

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     (i)  Offset . If the Employee’s employment is terminated by the Company without cause, as that term is defined in Section 6(a), the amounts payable to the Employee under Section 7(b) will not be offset or reduced on account of any remuneration or benefits provided by any subsequent employment the Employee may obtain (so long as such amounts otherwise are properly payable).
     (j)  Indemnity . The Company will indemnify Employee to the same extent the Company indemnifies other comparable level executives of the Company consistent with the Company Articles of Incorporation and Bylaws.
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first written above.
                     
SPIRIT AEROSYSTEMS, INC.            
 
                   
By:
                   
                 
 
  Name:           Jonathan A. Greenberg    
 
                   
 
  Title:                
 
                   
 
 
      “Company”       “Employee”    

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Exhibit 10.2
Execution Copy
INDUCEMENT AGREEMENT
      THIS INDUCEMENT AGREEMENT (this “ Agreement ”) is made as of the 14 th of May, 2008 between THE NORTH CAROLINA GLOBAL TRANSPARK AUTHORITY , a body politic and corporate of the State of North Carolina, having an office at 2780 Jetport Road Suite A, Kinston, North Carolina 28504-7346 (the “ GTPA ”), and SPIRIT AEROSYSTEMS, INC. , a Delaware corporation, having an office at 3801 South Oliver Street, P.O. Box 780008, Wichita, Kansas 67278-0008 (the “ Company ”).
RECITALS
     A. The GTPA promotes economic growth and development in connection with the North Carolina Global TransPark (the “ TransPark ”) by aiding commerce associated with a cargo airport complex located at the TransPark.
     B. The Company is a manufacturer in the aerospace industry.
     C. The GTPA has entered into negotiations with the Company to induce and cause the Company to locate a new manufacturing facility (the “ Facility ”) on approximately 307 acres of the GTPA’s premises at the TransPark in Lenoir County, North Carolina.
     D. Other communities outside the State of North Carolina have offered attractive incentives attempting to induce the Company to locate the Facility in those communities, and if the Company were unable to obtain the cooperation and assistance of the GTPA for the construction of the Facility, and if the GTPA were unable to secure funding for such construction through a grant from Golden L.E.A.F. (Long-Term Economic Advancement Foundation), Inc. (the “ GLF ”), the Company would not locate the Facility in the State of North Carolina.
     E. The GLF desires to make a grant of $100,000,000 (the “ Grant ”) to the GTPA to allow the GTPA to build the Facility pursuant to the terms and conditions of a Grant Agreement of even date herewith between the GTPA and the GLF (the “ Grant Agreement ”).
     F. The Company’s operations at the Facility are expected to provide (i) a number of new job opportunities for the citizens of eastern North Carolina and (ii) increase investment in real and personal property assets in the region, both by the Company and other vendors and suppliers.
     G. Pursuant to Part 2G of Article 10 of Chapter 143B of the North Carolina General Statutes, the Economic Investment Committee of the State of North Carolina (the “ EIC ”) has determined to award a Jobs Development Incentive Grant (“ JDIG ”) to the Company with respect to the Facility, as evidenced by a JDIG Application dated March 3, 2008 filed by the Company (the “ JDIG Application ”) and a Community Economic Development Agreement to be entered into between the GTPA and the Company with respect to the JDIG (the “ JDIG Grant Agreement ”).

 


 

     H. In consideration of the availability of the proceeds of the Grant, the terms and provisions of this Agreement, the Lease, the Construction Agency Agreement and the Escrow Agreement and the Governmental Incentive Commitments (defined in Section 1 below) (collectively, the “ Inducements ”), the Company has agreed to locate the Facility in the State of North Carolina at the Leased Premises. In that regard and of even date herewith:
     (i) The GLF and the GTPA have entered into the Grant Agreement; and
     (ii) The GTPA and the Company have entered into (i) that certain Construction Agency Agreement dated as of the date hereof (the “ Construction Agency Agreement ”), pursuant to which the GTPA appoints the Company as its exclusive construction agent in connection with the construction of the Facility, and (ii) that certain Lease Agreement dated as of the date hereof (the “ Lease ”), pursuant to which the GTPA will lease the Leased Premises to the Company.
     I. In consideration of the Inducements, the Company has agreed to give the GTPA certain assurances regarding the number and type of jobs it intends to create in North Carolina and the amount of investment in Capital Improvements it intends to make at the Leased Premises after the date hereof.
     J. The Company and the GTPA do now desire to enter this Agreement to set forth the understandings, agreements and obligations of each Party with respect to the Facility and the Company’s operations at the Facility.
      NOW, THEREFORE , in consideration of the mutual covenants and agreements contained in this Agreement, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto covenant and agree, intending to be legally bound, as follows:
     1.  Definitions . As used in this Agreement, the following terms shall have the meanings set forth below:
     “Aggregate Capital Improvements Target” has the meaning set forth in Section 3(b).
     “Aggregate Eligible Positions Target” has the meaning set forth in Section 3(a).
     “Agreement” has the meaning set forth in the introductory paragraph.
     “Annual Capital Improvements Clawback” means, for any applicable Annual Period, the monthly payments to be made pursuant to Section 3(b)(i) with respect to such Annual Period.
     “Annual Job Creation Clawback” means, for any applicable Annual Period, the monthly payments required to be made pursuant to Section 3(a)(i) with respect to such Annual Period.
     “Annual Period” means January 1 through December 31 of any calendar year.

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     “Approved Budget” means the budget for the development and construction of the Facility developed by the Company pursuant to the Construction Agency Agreement and as approved by the GTPA pursuant to the Construction Agency Agreement and the GLF pursuant to the Grant Agreement, as such budget may be modified, amended and changed as provided in the Construction Agency Agreement.
     “Authorized Company Representative” means any officer or employee of the Company who is authorized to execute and deliver documents relating to this Agreement.
     “Capital Improvements” means (i) fixtures to real property that are of the same nature and type as those described in Schedule 1 hereto and (ii) any and all changes, additions (whether or not adjacent to or abutting any then existing buildings), expansions (whether or not adjacent to or abutting any then existing buildings), improvements, buildings, or structures that are located at the Leased Premises by the Company during the term of the Lease.
     “Clawback Payment” means any payment to be made by the Company to the GTPA pursuant to the terms of Section 3 below.
     “Commencement Date” has the meaning assigned to that term in the Lease.
     “Company” has the meaning set forth in the introductory paragraph.
     “Construction Agency Agreement” has the meaning set forth in the Recitals.
     “Construction Agreement” has the meaning assigned to that term in the Construction Agency Agreement.
     “Criteria” has the meaning assigned to that term in the JDIG Grant Agreement.
     “Due Diligence Period” has the meaning assigned to that term in the Lease.
     “EIC” has the meaning set forth in the Recitals.
     “Eligible Position” has the meaning assigned to that term in the JDIG Grant Agreement (except that the phrase “during the Base Period” shall be replaced with the phrase “during all Annual Periods”).
     “Escrow Agent” means a third-party financial institution or title company that is mutually acceptable to the GTPA, the Company and the GLF.
     “Event of Default” has the meaning assigned to that term in the Lease.
     “Existing Crops” has the meaning assigned to that term in the Lease.
     “FAA” has the meaning assigned to that term in the Lease.
     “Facility” has the meaning set forth in the Recitals.

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     “Final Capital Improvements Clawback” means the monthly payments required to be made pursuant to Section 3(b)(ii) below.
     “Final Job Creation Clawback” means the monthly payments required to be made pursuant to Section 3(a)(ii) below.
     “Force Majeure” means any acts, events, or occurrences that are not caused by the negligence or willful misconduct of the affected Party and are beyond the reasonable control of a Party, including without limitation acts of God, earthquakes, unusually severe weather conditions, drought, blight, famine, quarantine, blockade, governmental acts, strikes, lack of availability of labor and materials, court orders or injunctions, terrorism, war, insurrection or civil strife, sabotage or explosions; provided, that, Force Majeure does not include a termination of any OEM Contract.
     “Full Time Employees” has the meaning assigned to that term in the JDIG Grant Agreement.
     “Governmental Incentive Commitments” means (i) the agreements, commitments and other undertakings that are listed on Schedule 2 to this Agreement and, that have been made by cities, counties, utilities, the State of North Carolina and various departments and subdivisions thereof, in favor of the Company in order to induce the Company to execute, deliver and perform this Agreement, the Lease and the Construction Agency Agreement and (ii) the covenants and agreements of the GTPA set forth in Section 4 of this Agreement.
     “Grant” has the meaning set forth in the Recitals.
     “GTPA” has the meaning set forth in the introductory paragraph.
     “Inducements” has the meaning set forth in the Recitals.
     “Initial Term” has the meaning assigned to that term in the Lease.
     “JDIG” has the meaning set forth in the Recitals.
     “JDIG Application” has the meaning set forth in the Recitals.
     “JDIG Grant Agreement” has the meaning set forth in the Recitals.
     “JDIG Grantee Annual Report” has the meaning assigned to that term in the JDIG Grant Agreement.
     “Landlord’s Alterations” has the meaning assigned to that term in the Construction Agency Agreement.
     “Law” shall mean any constitution, statute or rule of law or regulations thereunder.

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     “Lease” has the meaning set forth in the Recitals.
     “Leased Premises” has the meaning assigned to that term in the Lease.
     “OEM Contract” means the contract with the OEM (as defined in Section 28(f) of the Lease).
     “Parties” means the Company and the GTPA.
     “Performance Targets” means the job creation and capital investment targets that are described in Section 3 of this Agreement
     “Renewal Term” has the meaning assigned to that term in the Lease.
     “State” means the State of North Carolina.
     “Sustained Eligible Positions” means, with respect to the Final Job Creation Clawback, the average number of Eligible Positions that results from adding the number of Eligible Positions existing as of the last day of each calendar quarter for twelve (12) consecutive calendar quarters, and then dividing that sum by twelve.
     “Taxiway” has the meaning set forth in Section 4(c)(v) of this Agreement.
     “Termination Fees” means any fee payable by the Company to the GTPA as a result of a termination of the Lease or this Agreement during the Initial Term as a result of an Event of Default by the Company and calculated as provided in Section 5 of this Agreement.
     2.  Conditions . Each Party’s obligations as set forth in this Agreement are subject to the satisfaction of the following conditions precedent on or before September 30, 2008:
     (a) With respect to the GTPA, the Company shall have waived its right to terminate the Lease and this Agreement after the Due Diligence Period (as defined in the Lease) pursuant to Section 3(b) of the Lease.
     (b) With respect to both the Company and the GTPA, (i) the GTPA, the Company, the GLF and the Escrow Agent shall have entered into that certain Escrow Agreement, dated as of the date hereof (the “ Escrow Agreement ”), pursuant to which the Escrow Agent will hold and disburse the Grant in connection with the construction of the Facility, and in substantially the form attached hereto as Exhibit D and (ii) the GLF shall have funded the entire amount of the Grant to the Escrow Agent to be held in escrow and disbursed according to the terms and provisions of the Escrow Agreement and the Construction Agency Agreement.
     (c) With respect to the Company, (i) the GTPA and the GLF shall have approved the Plans and Specifications for the Facility, the budget for the Facility and the Construction Agreement (i.e., an Approved Budget for the Facility shall exist), and shall have appointed the Construction Consultant contemplated by Section 2.8 of the Construction Agency Agreement,

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(ii) the GTPA shall have authorized the Company to execute and deliver the Construction Agreement, (iii) no default shall exist in any of the Inducements and (iv) Tenant has received the OEM Contract.
     3.  Company Obligations . Upon the satisfaction of the conditions precedent set forth in Section 2 of this Agreement, the Company intends to create Eligible Positions and make investments in Capital Improvements to be located at the Leased Premises, as follows:
     (a) Subject to the terms of Section 3(d) of this Agreement, during the period beginning January 1, 2010 through December 31, 2018, by December 31 of each applicable Annual Period, the Company intends to have created, in the aggregate, the number of Eligible Positions indicated in the chart below (each, an “ Aggregate Eligible Positions Target ”):
                                                                         
Date   2010   2011   2012   2013   2014   2015   2016   2017   2018
Aggregate Eligible Positions Target
    125       250       375       500       625       750       1000       1000       1000  
For purposes of calculating the Annual Job Creation Clawback and the Final Job Creation Clawback, only Eligible Positions that satisfy the Criteria that relate specifically to the nature of the Eligible Positions shall be counted.
     (i) With respect to each Annual Period from 2010 through and including 2017, if the Company has not created at least eighty percent (80%) of the applicable Aggregate Eligible Positions Target indicated in the chart above for such Annual Period, as measured by the number of Eligible Positions existing on December 31 of each such Annual Period, the Company will make a payment with respect to each such Annual Period, calculated as follows:
  (A)   Eighty percent (80%) of the applicable Aggregate Eligible Positions Target, minus the actual number of Eligible Positions created as of December 31 of such Annual Period;
 
  (B)   divided by a number equal to eighty percent (80%) of the applicable Aggregate Eligible Positions Target;
 
  (C)   multiplied by $50,000,000;
 
  (D)   divided by the sum of (1) the remaining number of months in the Initial Term beginning on January 1 immediately following such Annual Period plus (2) 240 (i.e., the number of months in one Renewal Term);
 
  (E)   equals , the amount of the applicable Annual Job Creation Clawback.

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For any Annual Period for which an Annual Job Creation Clawback is due, such Annual Job Creation Clawback shall be paid in twelve (12) consecutive equal monthly installments beginning on the first day of the calendar month following determination of the actual number of Eligible Positions created for such Annual Period as provided in Section 3(a)(iii) below. An example of an Annual Job Creation Clawback calculation is set forth on Schedule 4 to this Agreement.
     (ii) If the Company has not, as of December 31, 2018, created at least eight hundred (800) Sustained Eligible Positions, the Company will make a payment, calculated as follows:
  (A)   Eight Hundred (800) Eligible Positions, minus the actual number of Sustained Eligible Positions for the twelve-quarter period ending December 31, 2018;
 
  (B)   divided by 800 Eligible Positions;
 
  (C)   multiplied by $50,000,000;
 
  (D)   then, subtract from that number the sum of all Annual Job Creation Clawback payments paid (or will be paid) on account of any failure to meet the Aggregate Eligible Positions Target for 2016 and 2017;
 
  (E)   then, divide the above result by the sum of (1) the remaining number of months in the Initial Term plus (2) 240 (i.e., the number of months in one Renewal Term);
 
  (F)   equals , the amount of the monthly Final Job Creation Clawback.
Subject to the terms of this Section 3(a)(ii) below, the Final Job Creation Clawback is to be paid in equal monthly installments through the end of the Initial Term beginning on the first day of the calendar month following the determination of the total Sustained Eligible Positions created as of December 31, 2018 pursuant to Section 3(a)(iii) below. An example of a Final Job Creation Clawback calculation is set forth on Schedule 5 to this Agreement. Notwithstanding the foregoing, if the Company is obligated to pay a Final Job Creation Clawback, but as of the end of any calendar quarter occurring after December 31, 2018, the Company creates eight hundred (800) Sustained Eligible Positions for any consecutive twelve-quarter period, then the Company’s job creation requirements shall be deemed satisfied and the Company may cease making payments of any Annual Job Creation Clawback and Final Job Creation Clawback (other than accrued and unpaid Clawback Payments).
     (iii) For each Annual Period beginning with 2010 through and including 2018, not later than March 1 following the last day of the applicable Annual Period, the Company shall submit to the GTPA the following materials in the form attached hereto as

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Exhibit B , prepared by an Authorized Company Representative, and pertaining to the preceding Annual Period:
  (A)   an annual payroll report showing the Eligible Positions created through the end of such Annual Period, the names, social security numbers, and W2 information of the individual Full-Time Employees occupying them, a description of each Eligible Position (including a revised description of each Eligible Position that substantially changed during the preceding year), wage and withholding data for each Eligible Position, the average wage of all Eligible Positions, all of which may be provided on the form entitled “Employment Profile” that is attached to the JDIG Grantee Annual Report that is required to be filed under the JDIG Grant Agreement;
 
  (B)   a certification in the form attached as Exhibit C hereto as to the following:
  (1)   that the Company continues to provide health insurance, as required by the JDIG Grant Agreement to all Full-Time Employees employed at the Facility;
 
  (2)   that the Company has met the requirements, terms and conditions of this Agreement applicable to the preceding Annual Period, and that no event of default or event or condition has occurred, the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an event of default; and
 
  (3)   that the Company has not manipulated or attempted to manipulate the number of Eligible Positions in order to meet the applicable Aggregate Eligible Positions Target.
The Company shall not destroy, purge or dispose of records required to be maintained by this Agreement without the express prior written consent of the GTPA during the Initial Term and for a period of three (3) years after conclusion of the Initial Term. The Company agrees that the GLF shall have the right to inspect (but not copy) records and information provided pursuant to this Section 3(a)(iii) solely for the purpose of determining GTPA’s compliance with the Grant.
     (b) Subject to the terms of Section 3(d) of this Agreement, as of December 31 of each Annual Period from 2009 through and including 2014, the Company intends to have made, in the aggregate, investments in Capital Improvements located on the Leased Premises as indicated in the chart below (each, an “ Aggregate Capital Improvements Target ”):

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Date   2008   2009   2010   2011   2012   2013   2014
Aggregate Capital Improvements Target
    -0-     $19 million   $41.5 million   $50 million   $60 million   $75 million   $100 million
The Company shall use its own funds, exclusive of the proceeds of the Grant and any funds received by the Company as a result of any Governmental Incentive Commitment, to achieve each Aggregate Capital Investments Target.
     (i) If the Company has not, as of December 31 of each Annual Period from 2009 through 2013, invested at least fifty percent (50%) of the applicable Aggregate Capital Improvements Target in Capital Improvements at the Leased Premises, as indicated in the chart above, the Company will make a payment with respect to each such Annual Period, calculated as follows:
  (A)   Fifty percent (50%) of the applicable Aggregate Capital Improvements Target, minus the actual investment in Capital Improvements;
 
  (B)   divided by a number equal to fifty percent (50%) of the applicable Aggregate Capital Improvements Target;
 
  (C)   multiplied by $50,000,000;
 
  (D)   divided by the sum of (1) the remaining number of months in the Initial Term beginning on the January 1 immediately following such Annual Period plus (2) 240 (i.e., the number of months in one Renewal Term);
 
  (E)   equals , the amount of the monthly Annual Capital Improvements Clawback.
For any Annual Period for which an Annual Capital Improvements Clawback is due, such Annual Capital Improvements Clawback shall be paid in twelve (12) consecutive equal monthly installments, beginning on the first day of the calendar month following determination of the amount of investment in Capital Improvements for such Annual Period as provided in Section 3(b)(iii) below. An example of an Annual Capital Improvements Clawback calculation is set forth on Schedule 6 to this Agreement.
     (ii) If the Company has not, as of December 31, 2014, invested at least $80,000,000 in Capital Improvements at the Leased Premises, the Company will make a payment, calculated as follows:
  (A)   Eighty million Dollars ($80,000,000), minus the actual investment in Capital Improvements;

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  (B)   divided by $80,000,000;
 
  (C)   multiplied by $50,000,000;
 
  (D)   divided by the sum of (1) the remaining number of months in the Initial Term plus (2) 240 (i.e., the number of months in one Renewal Term);
 
  (E)   equals , the amount of the monthly Final Capital Improvements Clawback.
Subject to the terms of this Section 3(b)(ii) below, the Final Capital Improvements Clawback is to be paid in equal monthly installments through the end of the Initial Term beginning on the first day of the calendar month following the determination of total investment in Capital Improvements as of December 31, 2014 pursuant to Section 3(b)(iii) below. Notwithstanding the foregoing, if the Company is obligated to pay a Final Capital Improvements Clawback but thereafter the Company has invested, in the aggregate, $80,000,000 in Capital Improvements at the Leased Premises, then the Company’s Capital Improvements investment requirements shall be deemed satisfied and the Company may cease making payments of any Annual Capital Improvements Clawback and Final Capital Improvements Clawback (other than accrued and unpaid Clawback Payments). An example of a Final Capital Improvements Clawback calculation is set forth on Schedule 7 to this Agreement.
     (iii) For each Annual Period beginning with 2009 through and including 2014, not later than March 1 following the last day of the applicable Annual Period, the Company shall provide to the GTPA, a fixed asset report (which may be generated internally by the Company), listing all Capital Improvements installed at the Leased Premises since the date hereof and which continue to be in service as of the last day of the Annual Period in question. The report shall include a description of the asset, asset classification, cost, and in-service date for the asset. In the event any such assets are transferred to the Leased Premises from outside of the State, the value assigned to such asset shall be its book value at the time of transfer rather than original cost. The report shall include a certification from an Authorized Company Representative that none of the Capital Improvements were financed out of the proceeds from the Grant or any other Governmental Incentive Commitment. The Company agrees that the GLF shall have the right to inspect (but not copy) records and information provided pursuant to this Section 3(b)(iii) solely for the purposes of determining GTPA’s compliance with the Grant.
     (c) Other than any accrued and unpaid Clawback Payments, no Clawback Payments will be due or payable during any Renewal Term, it being understood and agreed that no further Clawback Payments shall be imposed after the end of the Initial Term.
     (d) Notwithstanding anything contained in this Section 3 to the contrary, the obligations of the Company to meet the Performance Targets that are set forth in this Section 3 are subject to Force Majeure and in the event of the occurrence of any event of Force Majeure,

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the Company shall have the deadline for meeting any affected Performance Target and all payment obligations related thereto extended by the number of days of delay resulting from the event of Force Majeure; provided , that , the Company is obligated to use commercially reasonable efforts to mitigate the effect of any Force Majeure. To the extent any Performance Target is extended pursuant to this Section 3(d) , the Initial Term under the Lease shall be extended by an identical amount of time.
     (e) The Company shall maintain books and records adequate to document its compliance with this Agreement. Throughout the Initial Term, the Company shall make its payroll and employment books and records, the Facility and information related to the Facility available for inspection or audit by the GTPA, at such times and places as the GTPA may reasonably request. The Company shall provide the GTPA with access to persons and records for the purposes of monitoring, evaluating or auditing this Agreement and the Company’s performance, and for all other purposes required by law, regulation or policy. The Company shall use commercially reasonable efforts to comply with any reasonable request for access to persons or records by the GTPA within ten (10) business days of the receipt of a written request. The GTPA shall conduct such audits in a manner so as to minimize disruptions to the Company’s business operations.
     (f) All Clawback Payments that become due under this Agreement, if any, shall be paid by the Company to Landlord for deposit in a deposit account as designated by Landlord in writing.
     4.  GTPA Obligations . Upon the satisfaction of the conditions precedent set forth in Section 2 of this Agreement:
     (a) The GTPA agrees to make available to the Company, pursuant to the terms of the Lease, the Construction Agency Agreement and the Escrow Agreement, the proceeds of the Grant for the purpose of paying the construction costs for the Facility incurred by the Construction Agent, as the agent for the GTPA, under the Construction Agreement and in accordance with the Approved Budget.
     (b) The GTPA agrees to be responsible for any loss or damage to the Existing Crops as a result of construction of the Facility or any other permitted activity of the Company under the Lease.
     (c) So long as the Company is in compliance with its obligations under the Construction Agency Agreement and the Lease, the GTPA agrees as follows:
     (i) The Company shall have access to and primary right of use for the TransPark Center that currently exists at the TransPark without cost to the Company through June 30, 2020. The TransPark Center will be renamed as “Spirit AeroSystems Advanced Technology Center” and shall remain so named during the term of this Agreement and the Lease.

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     (ii) The Company shall have the right to use the GTPA-3 manufacturing facility (a 27,000 square foot manufacturing facility currently located at the TransPark) for a five year period from the Commencement Date through the fifth year anniversary of the Commencement Date pursuant to a lease agreement substantially in the form attached hereto as Exhibit A (the “ GTPA-3 Lease ”). The GTPA-3 Lease shall provide for (i) a five (5) year extension right at then existing fair market rates and (ii) a purchase option at fair market value (to be determined by an appraisal at the time of exercise). Rent for the GTPA-3 facility will equal to $4.73 per square foot (which rent will be paid directly to the GTPA by The Global TransPark Foundation). Under the GTPA-3 Lease, the Company will pay directly or reimburse the GTPA for amounts equal to all insurance, utility and maintenance costs of the GTPA-3 facility. Other normal and necessary operational costs for the GTPA-3 facility will be either expressly identified in the GTPA-3 Lease or result from new or changed governmental regulations, and will be a direct pass through of the GTPA costs therefor.
     (iii) If requested by the Company, the GTPA shall negotiate in good faith and use commercially reasonable efforts to provide staging space and staging areas for the Company in connection with the construction of Capital Improvements and for other warehousing purposes, on a timetable and under such terms as are to be mutually agreed. Neither the GTPA nor the Company has any obligation under this Section 4(c)(iii) with respect to staging space other than obligations of good faith and commercial reasonableness.
     (iv) The GTPA will, either directly or by maintaining agreements with the City of Kinston and Lenoir County, provide fire, emergency and medical response capacities that comply with the terms and conditions of Schedule 3 to this Agreement.
     (v) Upon the GTPA’s receipt from the North Carolina Department of Transportation of a commitment of funds for such purpose, the GTPA will construct a taxiway from the Leased Premises to the existing TransPark runway (the “ Taxiway ”) in a location and on such terms and conditions as are mutually agreeable to the GTPA and the Company. The GTPA will cooperate with the Company in obtaining and filing necessary documentation with the FAA for the Taxiway.
     (vi) The GTPA will, on or before July 1, 2009, relocate the existing cemetery that is currently located on the Leased Premises to a location that is not part of the Leased Premises.
     (vii) The GTPA will take all actions required of the GTPA as the Grantee and Administrator of FTZ No. 214 and will cooperate with the Company in the Company’s application for, and in obtaining from, all appropriate authorities, Sub-zone designation “C” of the Leased Premises related to the GTPA’s existing Free Trade Zone.

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     (viii) The Company has obtained, as one of the Governmental Incentive Commitments, commitments from the North Carolina Department of Transportation, the North Carolina Railroad Authority, the City of Kinston and Lenoir County to provide the following infrastructure improvements at the TransPark (or funding therefor), sufficient to meet the Company’s needs:
  (A)   Improvements for a new rail spur to and on the Leased Premises;
 
  (B)   Road improvements permitting direct highway access to and from the Leased Premises to C. Felix Harvey Parkway, John Mewborne Road, and Rouse Road; and
 
  (C)   Funding for the GTPA to construct a storm water management basin system pursuant to a funding agreement between the GTPA, the City of Kinston and Lenoir County dated November 5, 2001 (the “ Storm Water Agreement ”).
The GTPA agrees to (i) cooperate with the North Carolina Department of Transportation, the North Carolina Department of Environment and Natural Resources, the North Carolina Railroad Authority, the City of Kinston and Lenoir County by providing access to, and easements across, the GTPA property for the improvements described above, and (ii) construct the storm water management basin system as contemplated by the Storm Water Agreement on or before substantial completion of Landlord’s Alterations. The parties agree and acknowledge that because the storm water basin system will be located entirely on the Leased Premises and that the Company is responsible under the Lease for the maintenance and repair of the storm water basin system, no third party (including, without limitation, the GTPA) will be permitted to have storm water drain into the storm water basin system located on the Leased Premises.
     (ix) As soon as commercially practical, during the Due Diligence Period, the GTPA will either (A) seek FAA release from the GTPA’s Airport Improvement Program (“AIP”) grant obligations and modify the ISO exhibit “A” property map (the “ISO Map”) to remove the Leased Premises from the ISO Map, or (B) in the event the GTPA is unsuccessful causing the removal of the Leased Premises from the ISO Map, seek (1) the FAA’s acknowledgement that Tenant’s proposed uses of the Leased Premises are aeronautical businesses and (2) FAA consent to the Lease.
     (d) The Governmental Incentive Commitments are a material inducement to the Company to enter into this Agreement, the Construction Agency Agreement, the Lease and the Escrow Agreement. In the event any party that has committed to make, grant or give a Governmental Incentive Commitment to or for the benefit of the Company defaults in such obligations or commitments in any material respect, the Company shall have the right to, among other rights and remedies it may have at law or in equity, to (i) terminate this Agreement, the Construction Agency Agreement and its right to possession of the Leased Premises under the Lease (as well as all of its liabilities and obligations to Landlord thereunder) without liability or obligation to the GTPA under this Agreement (including liability for any Clawback Payments or

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Termination Fees) other than the Company’s indemnification obligations contained in the Lease, or (ii) if the Company elects not to terminate the Lease and this Agreement, to offset any cost, expense, loss or damage resulting to the Company against any Clawback Payments, if any, that may become due pursuant to the terms of this Agreement.
     5.  Termination .
     (a) In the event that, during the Initial Term of the Lease, either (i) the GTPA terminates the Lease or the Company’s right to possession of the Leased Premises under the Lease as a result of an Event of Default by the Company thereunder or (ii) the Company ceases all operations at the Leased Premises on a permanent basis for reasons unrelated to an express right to terminate the Lease as therein provided or unrelated to a casualty, condemnation, governmental action or any other event of Force Majeure (either termination, an “ At-Fault Termination Event ”), then the Company shall pay a fee to GTPA equal to the net present value (using a discount rate equal to the rate on the ten year Treasury bill as of the date of termination) of all remaining unpaid Clawback Payments due or that would become due pursuant to the terms of this Agreement through the end of the Initial Term of the Lease calculated based on performance as of the date of termination and assuming no further Performance Targets would be achieved. Upon payment in full of the Termination Fee, the Company shall have no further liability or obligation to the GTPA pursuant to this Agreement, the Lease or any other document or instrument other than indemnity obligations expressly contained in the Lease. The GTPA and the Company agree that it would be extremely difficult to determine precisely the amount of actual damages that would be suffered by the GTPA as a result of an At-Fault Termination Event but that the amount of the Termination Fee, as liquidated damages, is a fair and reasonable determination of the amount of actual damages that would be suffered by GTPA for an At-Fault Termination Event. The Parties agree that the Termination Fee does not constitute a penalty. Upon payment in full of the Termination Fee, the GTPA hereby releases and waives any and all other rights or remedies it may have against the Company as a result of the applicable At-Fault Termination Event. An example of the calculation of the Termination Fee pursuant to this Section 5(a) is set forth on Schedule 8 .
     (b) At any time after December 31, 2020, in the event the Company loses its initial, primary OEM Contract in a circumstance where another OEM Contract of equal or greater value is not in place with respect to the Facility, then the Company shall have the right to terminate this Agreement and the Lease upon payment of a fee (the “ OEM Termination Fee ”) equal to $2,000,000, plus fifty percent (50%) of the amount calculated pursuant to Section 5(a) above as a result of such termination. Upon payment in full of the OEM Termination Fee, the GTPA hereby releases and waives any and all other rights or remedies it may have against the Company as a result of the termination pursuant to this Section 5(b) . An example of the calculation of the OEM Termination Fee is set forth on Schedule 9 .
     (c) The Company may terminate this Agreement without any liability or obligation to the GTPA (other than its indemnification obligations set forth in the Lease) pursuant to an express right to do so as set forth in the Lease, the Construction Agency Agreement or Section 4(d) of this Agreement

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     6.  Protection and Release of Information .
     (a) The Company acknowledges that this Agreement, and all records or documents pertaining thereto, are subject to the provisions of G.S. § 143B-437.54(e), Chapter 132 of the General Statutes (the “ Public Records Act ”), and other applicable provisions of the General Statutes protecting confidential information from disclosure. Payroll and tax information submitted by the Company under this Agreement is tax information and is subject to the confidentiality provisions of G.S. §§ 105-259 and 143B-437.58(a).
     (b) The Company shall clearly identify on their face all records or documents which it deems to contain confidential information and/or trade secrets.
     (c) The Company shall be responsible for any and all costs, expenses, fees or losses it or the GTPA may incur as a result of responding to or resisting any request, subpoena, legal complaint, court order or other demand seeking to compel such party to release or disclose records, documents or information pertaining to the Company or the Facility, and, to the extent that the Company notified the GTPA that it objects to such disclosure or release and the GTPA defends against such release, the Company shall indemnify the GTPA and its members, officers, directors, employees, agents and attorneys for all costs associated therewith, provided that, no such indemnified party shall be obligated to take any such action.
     7.  Miscellaneous .
     (a) Each Party acknowledges that, in executing this Agreement, such Party has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any Party by reason of the drafting or preparation thereof.
     (b) THE VALIDITY OF THIS AGREEMENT AND ANY OF ITS TERMS OR PROVISIONS, AS WELL AS THE RIGHTS AND DUTIES OF THE PARTIES, ARE GOVERNED BY THE LAWS OF NORTH CAROLINA. Subject to the provisions of Section 7(a) , the Company agrees and submits, solely for matters concerning this Agreement, to the exclusive jurisdiction of the courts of North Carolina and agrees, solely for such purposes, that the only venue for any legal proceedings shall be Wake County, North Carolina. Subject to the provisions of Section 7(a) , the place of this Agreement, and all transactions and agreements relating to it, and their situs and forum, shall be Wake County, North Carolina, where all matters, whether sounding in contract or tort, relating to its validity, construction, interpretation, and enforcement, shall be determined.
     (c) The Company shall comply with all laws, ordinances, codes, rules, regulations, and licensing requirements that are applicable to the conduct of its business, including those of Federal, state and local agencies having jurisdiction and/or authority.

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     (d) If any provision or part of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this Agreement will not in any way be affected or impaired, unless the invalidity, illegality or unenforceability completely nullifies this Agreement.
     (e) This Agreement, in accordance with its terms, shall inure to the benefit of, be binding upon, enforceable by and against, and a continuing contractual obligation of, the GTPA and the Company, and their respective successors and assigns, subject to any amendment or termination hereof.
     (f) The Company shall promptly notify the GTPA in writing no less than thirty (30) days in advance of the closing of any transaction in which the Company intends to:
     (i) consolidate with or merge into another entity;
     (ii) sell, lease, or convey all or substantially all of its assets; or
     (iii) sell, assign or otherwise transfer the whole or any part of its interest in this Agreement.
     (g) The Company may not assign or otherwise transfer its interest in this Agreement without the GTPA’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. The GTPA may, as a condition to its consent, require that the assignee, transferee or surviving entity in the consolidation or merger:
     (i) assume in writing the obligations of the Company under this Agreement;
     (ii) provide evidence reasonably satisfactory to the GTPA that it is solvent and that it will be able to pay its debts as they come due; and
     (iii) represent and warrant to the GTPA that it is, and covenant that it will remain, in compliance with the terms of this Agreement.
     (h) Except as provided in the Construction Agency Agreement, the Company and its employees, officers and executives are not employees or agents of the State or any agency thereof; nor are the State, its employees, officers and executives, agents or employees of the Company. This Agreement shall not operate as a joint venture, partnership, trust, agency or any other business relationship.
     (i) Except as herein specifically provided otherwise, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. It is expressly understood and agreed that the enforcement of the terms and conditions of this Agreement, and all rights of action relating to such enforcement, shall be strictly reserved to the GTPA and the Company and their respective successors and assigns. It is the express intention of the GTPA and the Company and their respective successors and assigns that any such person

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or entity, other than the GTPA, and the Company, receiving services or benefits under this Agreement shall be deemed an incidental beneficiary only.
     (j) All notices hereunder shall be in writing and shall be given by delivery in person, by placing the notice in the U.S. mail, postage prepaid, and mailing the same by certified mail, return receipt requested, or by mailing through a recognized national overnight courier (e.g., FedEx), postage prepaid, in either addressed to the party to receive notice as follows:
If to the Authority:
Executive Director
North Carolina Global TransPark Authority
2780 Jetport Road, Suite A
Kinston, North Carolina 28504-7346
With a copy to (which shall not constitute notice):
Assistant Attorney General for
Global TransPark Authority
North Carolina Department of Justice
P.O. Box 629
Raleigh, North Carolina 27602
If to the Company:
Jeffrey Turner, President and CEO
3801 S. Oliver Street
P.O. Box 78008
Wichita, Kansas 67278-0008
With a copy to (which shall not constitute notice):
Spirit AeroSystems, Inc.
3801 S. Oliver Street
P.O. Box 78008
Wichita, Kansas 67278-0008
Attn: Jonathan Greenberg, General Counsel
Notices shall be deemed given and received on the date when delivered in person, three days after being placed in the U.S. mails and one day after being placed in the custody of an overnight courier. Any party may give notice of the change of address by giving such notice in accordance with the terms hereof.

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     (k) This Agreement may not be amended orally or by performance. Any amendment must be made in written form and executed by duly authorized representatives of the Parties.
[Signature Page Follows]

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     IN WITNESS WHEREOF, the parties have hereunto affixed their hands and seals to multiple counterpart originals which collectively shall constitute a single instrument effective as of the day and year first written above.
             
    THE NORTH CAROLINA GLOBAL TRANSPARK AUTHORITY    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:  
 
   
 
     
 
   
    SPIRIT AEROSYSTEMS, INC.    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:  
 
   
 
     
 
   

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Schedule 1
List of Fixtures constituting Capital Improvements
  Overhead Cranes
 
  Overhead Specialized Material Handling Equipment
 
  Autoclave
 
  Cold Storage Facility
 
  Nitrogen Generation and Storage Equipment

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Schedule 2
List of Governmental Incentive Commitments
A.   North Carolina Department of Commerce Letter — Secretary James Fain, III dated May, 09, 2008.
 
B.   North Carolina Department of Commerce Permitting Letter — Environmental Consultant Paul Jordan dated May 06, 2008.
 
C.   North Carolina Workforce Selection & Training Letter — Community College System President, Scott Ralls, Workforce Division Director, Roger Shackelford, Employment Services Director, Manfred Emmrich, dated May 06, 2008.
 
D.   Temporary Rail Staging Yard Letter — North Carolina Railroad President, Scott Saylor, dated May 06, 2008.
 
E.   North Carolina Department of Transportation — Secretary, Lyndo Tippett dated May 09 and May 13, 2008.
 
F.   On-Site Stormwater Management Letter — Mike Jarman and Scott Stevens dated May 08, 2008.
 
G.   RESERVED.
 
H.   FTZ Sub-Zone Letter — Darlene Waddell dated March 08, 2008.
 
I.   Local Construction Permits and Inspectors’ Letter — Mike Jarman dated May 09, 2008.
 
J.   City Water and Sewer Services Letter — Incentive Agreement from Scott Stevens dated May 12, 2008.
 
K.   No Applicable City Building Codes and No Annexation of GTP by the City Letter — Scott Stevens dated May 08, 2008.
 
L.   County Economic Development Agreements (5).

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Schedule 3
Response Capacities
  Fire Response for hazardous material incidents and fires — within 3 to 5 minutes
 
  Emergency Medical Response — within 3 to 5 minutes
 
  Police/Sheriff Response — current City and County standard

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Schedule 4
Annual Job Creation Clawback Calculation
The Lease begins on July 1, 2008 and the Facility is occupied on June 30, 2010. As of the end of 2015, the Company has created a total of 500 jobs. The Annual Job Creation Clawback is calculated as follows:
The applicable Aggregate Eligible Positions Target is 750, and eighty percent (80%) of 750 = 600.
                 
(600-500)
               
 
               
600
  x $50MM   =   $8,333,333     
As of December 31, 2015 there are 414 months remaining in the 20-year Initial Term plus one Renewal Term. Therefore, the monthly amount of the Annual Job Creation Clawback would equal, for the twelve-month period beginning as soon as job numbers for December 31, 2015 are known, $20,128.82 per month ($8,333,333 divided by 414 months).

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Schedule 5
Final Job Creation Clawback Calculation
The following Eligible Positions existed as of the dates indicated:
         
March 31, 2016 — 600 jobs
  March 31, 2017 — 660 jobs   March 31, 2018 — 730 jobs
 
       
June 30, 2016 — 610 jobs
  June 30, 2017 — 680 jobs   June 30, 2018 — 750 jobs
 
       
September 30, 2016 — 620 jobs
  September 30, 2017 — 700 jobs   September 30, 2018 — 800 jobs
 
       
December 31, 2016 — 640 jobs
  December 31, 2017 — 710 jobs   December 31, 2018 — 810 jobs
 
       
March 31, 2019 — 830 jobs
  March 31, 2020 — 870 jobs    
 
       
June 30, 2019 — 840 jobs
  June 30, 2020 — 1000 jobs    
 
       
September 30, 2019 — 870 jobs
  September 30, 2020 — 1000 jobs    
 
       
December 31, 2019 — 870 jobs
  December 31, 2020 — 1000 jobs    
The average Sustained Eligible Positions over the twelve-quarter period ending December 31, 2018 was 692.50 Sustained Eligible Positions (8,310 divided by 12). The Final Job Creation Clawback is calculated as follows:
                 
(800 — 692.5)
               
 
               
800
  x $50MM   =   $6,718,750.00     
Subtract out all Annual Job Creation Clawback payments made for 2016 and 2017:
     The Annual Job Creation Clawback for 2016 equals:
                 
(800 — 640)
               
 
               
800
  x $50MM   =   $10,000,000.00     
$10,000,000.00 ÷ 402 remaining months = $24,875.62 per month
Therefore, the total amount of the Annual Job Creation Clawback on account of the 2016 Aggregate Eligible Positions Target is $298,507.00.

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     The Annual Job Creation Clawback for 2017 equals:
                 
(800-710)
               
 
               
800
  x $50MM   =   $5,625,000.00     
$5,625,000.00 ÷ 390 remaining months = $14,423.08 per month
Therefore, the total amount of the Annual Job Creation Clawback on account of the 2017 Aggregate Eligible Positions Target is $173,077.00.
$6,718,750.00 — 298,507.00 — 173,077.00 = $6,247,166.00
As of December 31, 2018 there are 390 months remaining in the 20-year Initial Term plus one Renewal Term. Therefore, the monthly amount of the Final Job Creation Clawback would equal, for the remaining Initial Term, $16,018.37 ($6,247,166 divided by 390 months).
However, for the twelve-quarter period beginning on October 1, 2017 and ending on September 30, 2020, the average Sustained Eligible Positions (calculated as provided above for such twelve-quarter period) is 840 jobs (10,080 divided by 12). The applicable Aggregate Eligible Positions Target has been met. The Company will have made twenty-one (21) monthly payments of $17,227.56 each for the period from January 1, 2019 through September 30, 2020, and no further monthly Clawback Payments are due or owing after September 30, 2020.

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Schedule 6
Annual Capital Improvements Clawback Calculation
The Lease begins on July 1, 2008 and the Facility is occupied on June 30, 2010. As of the end of 2010, the Company has made cumulative Capital Improvements of $10 Million. The Annual Capital Improvements Clawback is calculated as follows:
The applicable Aggregate Capital Investment Target is $41.5MM, and fifty percent (50%) of $41.5MM = $20.75MM
                 
($20.75MM — $10MM)
               
 
               
$20.75MM
  x $50MM   =   $25,903,361     
As of December 31, 2010, there are 474 months remaining in the 20-year Initial Term plus one Renewal Term. Therefore, the monthly amount of the Annual Capital Improvements Clawback would equal, for the period beginning on January 1, 2011 and ending on December 31, 2011, $54,648.44 per month ($25,903,361 divided by 474 months).

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Schedule 7
Final Capital Improvements Clawback Calculation
As of the end of 2014, the Company has made Capital Improvements equal to $30 Million. The Final Capital Improvements Clawback will equal the following:
                 
($80MM — $30MM)
               
 
               
$80MM
  x $50MM   =   $31,250,000     
As of December 31, 2014, 426 months are remaining in the 20-Year Initial Term plus one Renewal Term. Therefore, the monthly amount of the Final Capital Improvements Clawback would equal, beginning on January 1, 2015, $73,356.81 per month ($31,250,000 divided by 426 months). However, on July 15, 2016, the Company has made cumulative Capital Improvements equal to $85 Million. The applicable Aggregate Capital Investment Target has been met. The Company would have made 19 monthly payments of $73,356.81 each (January 1, 2015 through July 1, 2016) and no further monthly Clawback Payments on account of the Capital Investment Target would be due after July 15, 2016.

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Schedule 8
Section 5(a) Termination Fee
Termination Fee for a Termination as of December 31, 2012
If the Company walks away from the Lease as of December 31, 2012, assuming the Company met its Performance Targets for 2010 and 2011, has created 300 eligible jobs and invested $30MM in Capital Improvements, the amount of the Termination Fee payable by the Company is calculated as follows:
Annual Job Creation Clawback =
For each year through December 31, 2015:
{[[(0.8(Target) — 0) ÷ 0.8(Target)] x $50MM] ÷ Remaining Initial/Renewal Months} x 12 months
                         
            Remaining    
            Months   Monthly Rent
Year   Target   as of 12/31   Escalation
2012
    375       450     $ 0.00  
 
2013
    500       438     $ 114,155.25  
 
2014
    625       426     $ 117,370.89  
 
2015
    750       414     $ 120,772.95  
 
2016
    1000       402     $ 124,378.11  
 
2017
    1000       390     $ 128,205.13  
The net present value of these monthly payments, calculated at a discount rate of 3.875% (the 10 year t-bill rate as of December 31, 2012), is $5,853,883.00.
Final Job Creation Clawback =
{{[[(0.8(1,000) — 0) ÷ 0.8(1,000)] x $50MM] — [($124,378.11 per month* 12 months) + ($128,205.13 per month * 12 months)]} ÷ 450} = $ 104,375.56 per month from January 1, 2013 through June 1, 2030.
The net present value of these monthly payments, calculated at a discount rate of 3.875% (the 10 year t-bill rate as of December 31, 2012), is $14,156,627.00.

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Annual Capital Improvements Clawback =
{[[(0.5(Target) — $30MM) ÷ 0.5(Target)] x $50MM] ÷ Remaining Initial/Renewal Months] x 12 months
                         
            Remaining    
            Months   Monthly Rent
Year   Target   as of 12/31   Escalation
2012
  $60 MM     450     $ 0.00  
 
2013
  $75 MM     438     $ 22,831.05  
The net present value of these monthly payments, calculated at a discount rate of 3.875% (the 10 year t-bill rate as of December 31, 2012), is $238,906.00.
Final Capital Improvements Clawback for 2014 =
{[[(0.8($100 MM) — $30 MM) ÷ 0.8($100MM)] x $50MM] ÷ 450} = $ 69,444.44 per month from January 1, 2013 through June 1, 2030.
The net present value of these monthly payments, calculated at a discount rate of 3.875% (the 10 year t-bill rate as of December 31, 2012), is $9,418,863.00.
Therefore, the total Termination Fee for a December 31, 2012 termination of the Lease is (1) $5,853,883, the net present value of the aggregate of each of the Annual Job Creation Clawbacks for each year from 2012 to 2015 since the Company would not have met each of the Aggregate Eligible Positions Targets during such period, plus (2) $14,156,627, the net present value of the Final Job Creation Clawback, plus (3) $238,906, the net present value of the aggregate of each of the Annual Capital Improvements Clawbacks for each year from 2012 to 2013 since the Company would not have met each of the Aggregate Capital Investment Targets during such period, plus (4) $9,418,863, the net present value of the Final Capital Improvements Clawback, for a total Termination Fee of $29,668,279.

29


 

Schedule 9
OEM Termination Fee
OEM Termination Fee for Termination as of December 31, 2024
If the Company walks away from the Lease as of December 31, 2024, assuming the Company had created 700 jobs and invested $70MM in capital by the end of the applicable ramp-up period, and the primary OEM contract has been terminated and the Company has provided the appropriate 180 day notice, the Company would be subject to the following penalty, as calculated below:
Final Job Creation Clawback (calculated as of 12/31/18) =
{[[[(0.8(1,000)) — 700) ÷ 0.8(1,000)] x $50MM] ÷ 378} = $16,534.39 per month from January 1, 2025 through June 1, 2030
     The net present value of those monthly payments, calculated at a discount rate of 3.875% (the ten year t-bill rate on December 31, 2024), is $549,312
Final Capital Improvements Clawback (calculated as of 12/31/14) =
{[[((0.8($100 MM)) — $70 MM) ÷ 0.8($100MM)] x $50 MM] ÷ 426} = $14,671.36 per month from January 1, 2025 through June 1, 2030
     The net present value of those monthly payments, calculated at a discount rate of 3.875% (the ten year t-bill rate on December 31, 2024), is $487,418
Aggregate OEM Termination Fee =
     $2MM + 0.5($549,312.00 + $487,418.00) = $2,518,365.00

30


 

Exhibit A
Form of GTPA-3 Facility Lease
     To be entered into by the Company and the GTPA written 30 days from the date of this agreement.

31


 

Exhibit B
Employment Profile: [Spirit AeroSystems, Inc.]
                                             
                            (8)                
    (2)                       Termination       (10)        
    Eligible or       (4)           (7)   Date at   (9)   Gross   (11)   (12)
(1)   Non-       Social           Hire Date at   [Project   Termination   Earnings   NC State   NC
Position   Eligible   (3)   Security   (5)   (6)   [Project   Location] (if   Date (if   (Mdcr-Tot.   Taxable   Withholding
Number   Position   Name   Number   Job Title   Hire Date   Location]   applicable)   applicable)   Cmp.)   Wage   Paid
 
  (“E” or “N”)   (“Last Name, First Name”)           (mm/dd/yyyy)   (mm/dd/yyyy)   (mm/dd/yyyy)   (mm/dd/yyyy)   W-2 Box 5   W-2 Box 16   W-2 Box 17

32


 

Exhibit C
[Reporting Requirements]
         
Grantee Name:
       
                     FEIN:
 
   
DOC Grant Number:
CERTIFICATIONS:
Acknowledge that you have read and understand the certification, and that the certification applies by placing a check to the right of each statement. Attach a detailed explanation for each certification that does not apply.
         
1.
  The Company has met all requirements, terms and conditions of the Inducement Agreement applicable to the [                      Grant Year].   ___
 
       
2.
  The Company has achieved its minimum Aggregate Eligible Positions Target and Aggregate Capital Investments Target, each as set forth in the Inducement Agreement, and all other performance criteria specified in the Inducement Agreement, for the applicable Annual Period.   ___
 
       
3.
  Eligible Positions have not been created by transferring or shifting ineligible positions that existed in North Carolina prior to the effect date of the Inducement Agreement at other projects or locations of the Company or any of its affiliates.   ___
 
       
4.
  The Company makes available health insurance to all permanent full-time employees at the Facility in the amount required for eligibility for tax credits under the William S. Lee Act in N.C. Gen. Stat. § 105-129.4(b2).   ___
 
       
5.
  The Company has not manipulated or attempted to manipulate Eligible Positions withholdings for the purpose of meeting the Aggregate Eligible Positions Target.   ___
 
       
6.
  All statements and representations made by the Company, or on its behalf to the GTPA in connection with this annual report, and any reports, data and other materials furnished by the Company, or on its behalf, to the GTPA are true, accurate and complete in all material respects and do not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained herein or therein not materially misleading, to its best knowledge and belief. The information contained in this annual report has been assembled following diligent inquiry.   ___
 
       
7.
  The Company has not voluntarily filed a petition for bankruptcy, nor has any petition been filed against it under applicable bankruptcy laws.   ___

33


 

         
8.
  No covenant made by the Company under Section 3 of the Inducement Agreement has been materially breached.   ___
 
       
9.
  No event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become a default under the Inducement Agreement.   ___
ATTACHMENTS TO THE REPORT:
      Verification of Capital Expenditures:
Attached a Company-generated fixed asset report, listing each fixed asset that was placed in service at the Leased Premises after the effective date of the [JDIG Grant], and that continued to be in service as of the end of the applicable Annual Period. The report should include an asset description, asset classification, cost and the in-service date for each asset.
Notes: Assets placed in service prior to the effective date of the JDIG Grant Agreement or assets transferred to the Facility from within North Carolina should NOT be included in the report, unless specifically permitted by the Agreement. When listing assets transferred to the Facility from outside of North Carolina, provide the book vaule at the time of transfer rather than the original cost.

34


 

SIGNATURES:
The information contained in this report has been assembled following diligent inquiry and is true and accurate to the best of my knowledge and that of the Company.
OFFICER OF THE COMPANY
(Signature of Officer)                           (Date)
NOTARY PUBLIC
I,                                           , a notary public of                                            County in the State of                                           do certify that                                            personally appeared before me this day, and first being duly sworn, acknowledged that he/she is                                           of the Company and that he/she is authorized to execute the foregoing instrument on behalf of the Company and executed the foregoing instrument in my presence.
Witness my hand and official seal, this the                      day of                      , 20       .
(Official Seal)
     
    My commission expires on _______, 20
 
   
(Signature of Notary Public)    
Payroll and tax information submitted under this subsection are subject to confidentiality provisions for tax information found in N.C. Gen. Stat. § 105-259 and will be maintained as confidential.
Other information in this report and accompanying attachments may become a public record following its submission unless otherwise protected by the confidentiality provisions of the State public records act, which include protections for confidentiality and proprietary information that constitutes a trade secret (N.C. Gen. Stat. § 132-1). Any such information should be clearly marked as “confidential” and an explanation of the reasons why the information should not be disclosed should be provided.

35


 

Exhibit D
Form of Escrow Agreement

36

Exhibit 10.3
Execution Copy
LEASE AGREEMENT
between
THE NORTH CAROLINA GLOBAL TRANSPARK AUTHORITY
and
SPIRIT AEROSYSTEMS, INC.
Dated: As of May 14, 2008

 


 

TABLE OF CONTENTS
         
    Page
1. Certain Definitions
    1  
2. Demise of Premises
    1  
3. Title and Condition
    1  
4. Landlord’s Alterations; Use of Leased Premises; Quiet Enjoyment
    3  
5. Term
    4  
6. Rent
    5  
7. Net Lease
    6  
8. Payment of Impositions; Compliance with Legal Requirements and Insurance Requirements
    6  
9. Liens; Recording and Title
    7  
10. Indemnification
    8  
11. Maintenance and Repair
    9  
12. Alterations
    10  
13. Condemnation
    10  
14. Insurance
    11  
15. Restoration
    14  
16. [Reserved]
    15  
17. Assignment, Subleasing
    15  
18. Permitted Contests
    17  
19. Conditional Limitations; Default Provisions
    18  
20. Additional Rights of Landlord and Tenant
    19  
21. Notices
    20  
22. Estoppel Certificates
    21  
23. Surrender and Holding Over
    21  
24. No Merger of Title
    22  
25. Compliance with Security Regulations
    22  
26. Hazardous Substances
    23  
27. Entry by Landlord
    24  
28. Cancellation by Tenant
    24  
29. Removal of Tenant’s Trade Fixtures and Personal Property
    25  
30. Affirmative Action
    26  
31. Non-Discrimination
    26  
32. Services to the Public
    26  
33. Accessibility to Disabled
    27  
34. Separability
    27  
35. Miscellaneous
    27  

-ii-


 

Exhibits
             
A
  -   Legal Description    
 
B
  -   Permitted Encumbrances    
 
C
  -   Form of Construction Agency Agreement    
 
D
  -   Form of Inducement Agreement    
 
E
  -   Form of Memorandum of Lease    
 
           
Appendices        
 
           
A
  -   Definitions    

iii


 

LEASE AGREEMENT
      THIS LEASE AGREEMENT (this “ Lease ”) made as of the 14th of May, 2008 between THE NORTH CAROLINA GLOBAL TRANSPARK AUTHORITY , a body politic and corporate of the State of North Carolina, as landlord, having an office at 2780 Jetport Road, Suite A, Kinston, North Carolina 28504, and SPIRIT AEROSYSTEMS, INC. , a Delaware corporation, as tenant, having an office at 3801 South Oliver Street, P.O. Box 780008, Wichita, Kansas 67278-0008.
     In consideration of the rents and provisions herein stipulated to be paid and performed, Landlord and Tenant, intending to be legally bound, hereby covenant and agree as follows:
     1.  Certain Definitions . All capitalized terms, unless otherwise defined herein, shall have the respective meanings ascribed to such terms in Appendix A annexed hereto and by this reference incorporated herein.
     2.  Demise of Premises .
     (a) Landlord hereby demises and lets to Tenant and Tenant hereby takes and leases from Landlord, for the term and upon the provisions hereinafter specified, the Leased Premises.
     (b) During the Construction Period, possession of the Leased Premises shall be non-exclusive between Landlord and Tenant, and Tenant shall have such non-exclusive use of the Leased Premises as is necessary for (i) conducting the evaluation of the Leased Premises as contemplated by Section 3(b) below and (ii) in Tenant’s capacity as Construction Agent, permitting Construction Agent to perform its duties and obligations under the Construction Agency Agreement. If this Lease has not been earlier terminated pursuant to its terms, exclusive use and possession of the Leased Premises shall be delivered to Tenant upon substantial completion of Landlord’s Alterations as contemplated by Section 4.4 of the Construction Agency Agreement.
     (c) During the Construction Period, Landlord shall have non-exclusive use of the Leased Premises as is necessary for (i) conducting any supervisory activities related to the construction of Landlord’s Alterations as may be contemplated by the Construction Agency Agreement and (ii) performing and completing Landlord’s obligations as set forth in the Inducement Agreement.. In no event shall Landlord interfere with or adversely effect, or permit any party acting by on behalf of Landlord to interfere with or adversely effect, Tenant’s performance of its duties under the Construction Agency Agreement.
     3.  Title and Condition .
     (a) The Leased Premises are demised and let subject to (i) the Permitted Encumbrances, and (ii) the condition of the Leased Premises as of the commencement of the Term, it being understood and agreed, however, that the recital of the Permitted Encumbrances herein shall not be construed as a revival of any thereof which for any reason may have expired.

 


 

     (b) From the Commencement Date through and including the date that is the later of (x) one hundred and twenty (120) days following the Commencement Date and (y) the date on which Landlord has received the FAA consent, approval and/or acknowledgement contemplated by Section 4(c)(ix) of the Inducement Agreement (the “Due Diligence Period”), Tenant shall have the right to enter the Leased Premises in order to make such investigation of the Leased Premises as Tenant deems necessary, at Tenant’s cost and expense, including, without limitation, title review, survey, zoning studies, Phase I and Phase II environmental studies, soils conditions analysis, engineering analysis and such other tests, inspections and studies as determined by Tenant in its sole discretion. Landlord agrees to cooperate with any such investigations, tests, inspections or studies made by Tenant or at Tenant’s direction. Tenant shall repair any damage to the Leased Premises caused by Tenant’s tests and investigations (including damage to the Existing Crops) and shall restore the Leased Premises to its original condition, to the extent possible, if damaged or changed due to the tests or inspections preformed by Tenant. Tenant shall not permit any mechanics or materialmans liens or other encumbrances to attach to the Leased Premises as a result of any such tests, inspections or studies. Tenant shall indemnify and hold Landlord harmless from any and all damage, expense, liens or claims (including reasonable attorneys fees) arising out of damage to the Leased Premises by Tenant (or its agents, contractors or other persons authorized by Tenant), or injury to any person or property, related to the performance of such tests, studies and investigations. This indemnity shall not extend to any claims arising out of the discovery of any existing conditions at the Leased Premises (other than with respect to the Existing Crops) or to any matter caused by the acts or omissions of Landlord, its employees, agents or contractors. The provisions of this indemnity shall survive the termination of this Lease. In the event Tenant determines, in its sole and absolute discretion, that the Leased Premises are not suitable for Tenants needs for any reason, Tenant shall have the right, by delivering a Tenant Termination Notice to Landlord prior to the expiration of the Due Diligence Period, to terminate this Lease, the Construction Agency Agreement and the Inducement Agreement, in which case Tenant shall have no further liability or obligation under this Lease, the Construction Agency Agreement or the Inducement Agreement (other than for indemnity obligations set forth in this Lease). Prior to the end of the Due Diligence Period, Landlord agrees to obtain a full and complete release or subordination of any and all existing monetary liens presently encumbering all or any part of the Land to this Lease.
     (c) Landlord hereby assigns, without recourse or warranty whatsoever, to Tenant, all Guaranties. To the extent cash proceeds are ever paid on account of any Guaranties, such proceeds shall be used by Tenant to repair, replace or improve the Improvements on the Leased Premises. Such assignment shall remain in effect until the termination of this Lease. Landlord shall also retain the right to enforce any Guaranties assigned in the name of Tenant upon the occurrence of an Event of Default. Landlord hereby agrees to execute and deliver at Tenant’s expense such further documents, including powers of attorney, as Tenant may reasonably request in order that Tenant may have the full benefit of the assignment effected or intended to be effected by this Paragraph 3(c). Upon the termination of this Lease, the Guaranties shall automatically revert to Landlord. The foregoing provision of reversion shall be self-operative, and no further instrument of reassignment shall be required. In confirmation of such reassignment Tenant shall execute and deliver promptly any certificate or other instrument which

2


 

Landlord may request. Any monies collected by Tenant under any of the Guaranties after the occurrence of and during the continuation of an Event of Default shall be held in trust by Tenant and promptly paid over to Landlord.
     (d) Landlord agrees to enter into, at Tenant’s expense, such Easements as reasonably requested by Tenant, subject to Landlord’s approval of the form thereof, not to be unreasonably withheld or delayed; provided , that , no such Easement shall result in any material diminution in the value or utility of the Leased Premises for use in accordance with the Permitted Use (as defined in Paragraph 4(b) below) and further provided that no such Easement shall render the use of the Leased Premises dependent upon any other property or condition the use of the Leased Premises upon the use of any other property, each of which Tenant shall certify to Landlord in writing delivered with Tenant’s request with respect to such Easement. Tenant’s request shall also include Tenant’s written undertaking acknowledging that Tenant shall remain liable hereunder as principal and not merely as a surety or guarantor notwithstanding the establishment of any Easement.
     4.  Landlord’s Alterations; Use of Leased Premises; Quiet Enjoyment .
     (a) Landlord agrees, at Landlord’s sole cost and expense, but only to the extent of funds available within the Construction Allowance, and in conformance with, and subject to the terms of, the Construction Agency Agreement, to provide and install Landlord’s Alterations; provided , however , that prior to commencing Landlord’s Alterations, Tenant and Landlord enter into a Construction Agency Agreement in the form of Exhibit “C” attached hereto which shall provide that no disbursement shall be made for costs of construction if an Event of Default has occurred and is continuing under this Lease.
     (b) Tenant may use the Leased Premises as contemplated by the Construction Agency Agreement during the Construction Period and upon substantial completion thereof, Tenant may use the Leased Premises as an aerospace manufacturing facility (including ancillary administrative and office uses) or for any other manufacturing or distribution use (including ancillary administrative and office uses) so long as such other use is lawful and would not constitute a public or private nuisance or constitute a Prohibited Use (the “ Permitted Use ”). Tenant agrees to notify Landlord in advance writing upon any material permitted change in use of the Leased Premises. In no event shall the Leased Premises be used for any purpose which shall violate any of the provisions of any Permitted Encumbrance or any covenants, restrictions or agreements hereafter created by or consented to by Tenant applicable to the Leased Premises. Tenant agrees that with respect to the Permitted Encumbrances and any covenants, restrictions or agreements hereafter consented to by Tenant, Tenant shall observe, perform and comply with and carry out the provisions thereof required therein to be observed and performed by Landlord. Furthermore, Tenant shall comply with all rules and regulations reasonably imposed by Landlord generally at the Airport, including, without limitation, the Kinston Regional Jetport Rules and Regulations (which incorporates the current Airport Security Program and the Airport Certification Manual), the NCGTPA Exclusive Development Ordinance, and applicable FAA regulations.

3


 

     (c) Subject to Tenant’s rights under Paragraph 18, Tenant shall not use, occupy or permit any of the Leased Premises to be used or occupied, nor do or permit anything to be done in or on any of the Leased Premises, in a manner which would (i) make void or voidable any insurance which Tenant is required hereunder to maintain then in force with respect to any of the Leased Premises, (ii) with the exception of increases in insurance premiums with respect to the Leased Premises after the Expiration Date, affect the ability of Tenant to obtain any insurance which Tenant is required to furnish hereunder, or (iii) cause any injury or damage to any of the Improvements unless pursuant to Alterations permitted under Paragraph 12 hereof or the responsibility of Landlord under Paragraph 4(a) hereof.
     (d) Subject to all of the provisions of this Lease, so long as no Event of Default exists hereunder, Landlord covenants to do no act to disturb the peaceful and quiet occupation and enjoyment of the Leased Premises by Tenant.
     (e) Landlord covenants and agrees that during the Term, it will operate and maintain the Airport and its public airport facilities as a public airport consistent with and pursuant to its undertaking to do so in the Sponsor’s Assurances given by Landlord to the United States Government under the Federal Airport Act of 1946, the Airport and Airway Improvement Act of 1970 and the Airport and Airway Improvement Act of 1982.
     (f) Landlord shall grant to Tenant, its directors, officers, employees, agents, contractors, suppliers of materials, furnishers of services and invitees (in common with others having the right), the non-exclusive right of ingress to and egress from the Leased Premises and such other public portions of the Airport to or from which Tenant and such other Persons shall reasonably require ingress or egress; provided , that , such right of ingress and egress shall be subject to the reasonable rules, regulations and requirements of general applicability of Landlord regarding the Airport as the same may be in effect from time to time.
     (g) During any time of war or national emergency, Landlord shall have the right to lease the landing area or any part of the Airport to the United States Government if required for United States Government use. In the event Landlord shall enter into any such lease and the Leased Premises (or a portion thereof) are included as a part thereof, Tenant shall be entitled to a just and proportionate compensation (but if such compensation is paid by Landlord, not in excess of what Landlord receives from the United States Government). This Lease and all provisions hereof is further subject to whatever right the United Sates Government now has or in the future may have or acquire affecting the control, operation, regulation and taking over of the Airport (or the exclusive or non-exclusive use of the Airport by the United States during the time of war or national emergency).
     (h) Subject to the terms of this Lease, Landlord reserves the right to develop further or improve the landing area and portions of the Airport other than the Leased Premises as Landlord determines without interference or hindrances from Tenant.

4


 

     5.  Term .
     (a) Subject to the provisions hereof, Tenant shall have and hold the Leased Premises for the Initial Term and any applicable Renewal Terms.
     (b) Provided (i) this Lease shall not have been terminated pursuant to its terms, and (ii) an Event of Default has not occurred and remains uncured, in each case on the applicable date of its Renewal Option Notice and on the Expiration Date (or the expiration date of the then expiring Renewal Term, as applicable), Tenant shall have four (4) consecutive options to extend the term of this Lease for a Renewal Term, commencing upon the day after the Expiration Date (or the expiration date of the then expiring Renewal Term, as applicable). If Tenant elects to exercise any one or more of such renewal options, it shall do so by giving a Renewal Option Notice to Landlord at any time during the Initial Term (or the then Renewal Term, as applicable) but, in any event, on or before that date which is twelve (12) months prior to the commencement of the Renewal Term for which such election is exercised. If Tenant shall elect to exercise any such renewal option, the term of this Lease shall be automatically extended for a Renewal Term without the execution of an extension or renewal lease. Any Renewal Term shall be subject to all of the provisions of this Lease, and all such provisions shall continue in full force and effect. Within ten (10) days after request by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an instrument confirming that such option has been effectively exercised and confirming the extended expiration date of this Lease. Notwithstanding the foregoing, neither the Initial Term, nor any Renewal Term, shall expire unless and until Landlord shall have given Tenant written notice that either the Initial Term or any applicable Renewal Term will expire and given the Tenant thirty (30) days within which to elect to exercise any option to renew that it may have remaining under this Section 5(b); provided , that , in no event shall the effect of this sentence extend the expiration date of any applicable Renewal Term.
     6.  Rent .
     (a) Tenant shall pay to Landlord, as minimum annual rent for the Leased Premises from the Basic Rent Commencement Date and during the balance of the Term, the Basic Rent in arrears, on the Basic Rent Payment Dates. In each case, Tenant shall pay the same, at Tenant’s option, by check to the order of Landlord, drawn on a bank that is a member of the New York Clearing House Association, or ACH or wire transfer in immediately available federal funds to such account in such bank as Landlord shall designate, from time to time.
     (b) Tenant shall pay and discharge before the imposition of any fine, lien, interest or penalty may be added thereto for late payment thereof, as Additional Rent, all other amounts and obligations which Tenant assumes or agrees to pay or discharge pursuant to this Lease and any Clawback Payments required pursuant to Section 6(c) , together with every fine, penalty, interest and cost which may be added by the party to whom such payment is due for nonpayment or late payment thereof. In the event of any failure by Tenant to pay or discharge any of the foregoing, Landlord shall have all rights, powers and remedies provided herein, by law or otherwise, in the event of nonpayment of Basic Rent. All payments of Additional Rent that are payable to Landlord shall be paid by Tenant in the manner set forth in Paragraph 6(a) hereof, within ten (10) days of notice from Landlord detailing the amount.

5


 

     (c) Tenant shall pay on each Clawback Payment Date as additional rent under this Lease, each Clawback Payment that becomes due under and pursuant to the Inducement Agreement.
     (d) If any installment of Basic Rent is not paid within five (5) days after the same is due, Tenant shall pay to Landlord, on demand, as Additional Rent, a Late Charge.
     7.  Net Lease .
     (a) This is a net lease (other than with respect to Real Property Taxes), and Basic Rent, Additional Rent, Clawback Payments and all other sums payable hereunder by Tenant shall be paid, except as otherwise expressly set forth in this Lease, without notice, demand, setoff, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction, reduction or defense.
     (b) Except as otherwise expressly provided in this Lease, this Lease shall not terminate and Tenant shall not have any right to terminate this Lease during the Term. Except as otherwise expressly provided in this Lease or in the Inducement Agreement, Tenant shall not be entitled to any setoff, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction or reduction of or to Basic Rent, Additional Rent, any Clawback Payment or any other sums payable under this Lease.
     8.  Payment of Impositions; Compliance with Legal Requirements and Insurance Requirements .
     (a) (i) Subject to the provisions of Paragraph 18 hereof relating to contests, Tenant shall, before interest or penalties are due thereon, pay and discharge all Impositions. If received by Landlord, Landlord shall promptly deliver to Tenant any bill or invoice with respect to any Imposition.
     (i) In the event that any Imposition assessed against any of the Leased Premises may be paid in installments, Tenant shall have the option to pay such assessment in installments. Tenant shall prepare and file all personal property tax reports required by governmental authorities which relate to the Impositions. Tenant shall deliver to Landlord, within thirty (30) days after Landlord’s written request therefor, copies of all settlements and notices pertaining to the Impositions which may be issued by any governmental authority and receipts for payments of all Impositions made during each calendar year of the Term, within thirty (30) days after payment.
     (b) Subject to the provisions of Paragraph 18 hereof, Tenant shall promptly comply with and conform to all of the Legal Requirements and Insurance Requirements.
     (c) Any payments required to be made by Tenant pursuant to this Paragraph 8 that are not allowed to be paid directly to the appropriate Governmental Authority shall be made directly to Landlord. Any amount payable to Landlord pursuant to this Paragraph 8 shall be paid (i)

6


 

within twenty (20) days after receipt of a written demand therefor from Landlord accompanied by a written statement describing in reasonable detail the amount so payable and (ii) at the location and in the manner specified by Landlord pursuant to Paragraph 6 hereof for the payment of Basic Rent. Any amount payable by Tenant under this Paragraph 8 that is not paid when due shall bear interest at the Default Rate.
     (d) Landlord acknowledges that (i) its status as a governmental entity, under currently existing Applicable Laws, means that the Leased Premises, to the extent they constitute real property interests, is exempt from Real Property Taxes and (ii) a material inducement to Tenant to enter into this Lease and the Inducement Agreement is that Tenant’s use of the Land and the Improvements for the Term of the Lease are exempt from any obligation to pay Real Property Taxes. Therefore, in the event fee title to the Land and any of the Improvements is ever conveyed to or acquired by any entity or person that is not an exempt entity under then existing Applicable Laws, then such person or entity shall be required to pay all Real Property Taxes as part of the Landlord’s obligations under this Lease. In the event, due to a change in laws in the future, the Leased Premises are no longer exempt from Real Property Taxes, then Landlord agrees to pay the Real Property Taxes prior to the same becoming past due. In the event Landlord does not pay these Real Estate Taxes prior to the same becoming past due, Tenant shall have the right to do so and shall have the right to offset such amounts paid against any amount then owing from Tenant to Landlord and shall have the right to be reimbursed by the amount of Real Estate Taxes (including penalties and interest) that Tenant has paid.
     9.  Liens; Recording and Title .
     (a) Subject to the provisions of Paragraph 17 and Paragraph 18 hereof, Tenant shall not, directly or indirectly, create or permit to be created or to remain, and shall promptly discharge, any lien on the Leased Premises, on the Basic Rent, Additional Rent or on any other sums payable by Tenant under this Lease, other than the Permitted Encumbrances and any mortgage, lien, encumbrance or other charge created by or resulting from any act or omission by Landlord or those claiming by, through or under Landlord (except Tenant). Notice is hereby given that, except for Landlord’s Alterations and as contemplated by the Construction Agency Agreement, Landlord shall not be liable for any labor, services or materials furnished or to be furnished to Tenant, or to anyone holding any of the Leased Premises through or under Tenant, and that no mechanic’s or other liens for any such labor, services or materials shall attach to or affect the interest of Landlord in and to any of the Leased Premises.
     (b) Prior to the end of the Due Diligence Period, each of Landlord and Tenant shall execute, acknowledge and deliver to the other a written Memorandum of this Lease in the form attached hereto as Exhibit “E” , to be recorded with the Register of Deeds of Lenoir County, North Carolina in order to give public notice and protect the validity of this Lease. In the event of any discrepancy between the provisions of the recorded Memorandum of this Lease and the provisions of this Lease, the provisions of this Lease shall prevail.

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     (c) Nothing in this Lease and no action or inaction by Landlord shall be deemed or construed to mean that Landlord has granted to Tenant any right, power or permission to do any act or to make any agreement which may create, give rise to, or be the foundation for, any right, title, interest or lien in or upon the estate of Landlord in any of the Leased Premises.
     10.  Indemnification .
     (a) Tenant agrees to assume liability for, and to indemnify, protect, defend, save and keep harmless each Indemnitee from and against any and all Claims that may be suffered, imposed on or asserted against any Indemnitee, arising out of (i) any Claims arising, directly or indirectly, out of a breach of Section 26 of this Lease by Tenant or any Tenant Party, (ii) any Claims relating to all or any part of Tenant’s or any Tenant Parties’ operation of the Leased Premises and the business and activities of Tenant or the Tenant Parties at the Leased Premises, (iii) the business and activities of any other Person on or about the Leased Premises (whether as an invitee, subtenant, licensee or otherwise), (iv) any Claims arising out of Tenant’s or any Tenant Parties’ negligence or willful misconduct and (v) any personal injury, death or property damage which occurs on or about the Leased Premises during the Term of this Lease. Notwithstanding the foregoing, nothing herein shall be construed to obligate Tenant to indemnify, defend and hold harmless any Indemnitee from and against any Claims to the extent that such Claims are imposed on or incurred by such Indemnitee by reason of such Indemnitee’s willful or reckless acts or misconduct or negligent acts or omissions.
     (b) In case any Claim shall be made or brought against any Indemnitee under Paragraph 10(a) hereof, such Indemnitee shall give prompt notice thereof to Tenant; provided , that , failure to so notify Tenant shall not reduce Tenant’s obligations to indemnify any Indemnitee hereunder unless and only to the extent such failure results in additional liability on Tenant’s part. Tenant shall be entitled, at its expense, acting through counsel selected by Tenant (and reasonably satisfactory to such Indemnitee), to participate in, or, except as otherwise provided, to assume and control (if it promptly so elects upon notice of the Claim), and, to the extent that Tenant desires to assume and control, in consultation with Indemnitee, the negotiation, litigation and/or settlement of any such Claim (subject to the provisions of subparagraph (c) of this Paragraph 10). Subject to the provisions of Paragraph 10(d), such Indemnitee may (but shall not be obligated to) participate at its own expense and with its own counsel in any proceeding conducted by Tenant in accordance with the foregoing, in which case Tenant shall keep such Indemnitee and its counsel fully informed of all proceedings and filings and afford such Indemnitee and counsel reasonable opportunity for comment. Notwithstanding the foregoing, Tenant shall not be entitled to assume and control the defense of any Claim if (i) an Event of Default has occurred and is continuing, (ii) the proceeding involves possible imposition of any criminal liability or penalty or unindemnified civil penalty on such Indemnitee, (iii) the proceeding involves the granting of injunctive relief against the Indemnitee not related to this Lease, (iv) a significant counterclaim is available to the Indemnitee that would not be available to and cannot be asserted by Tenant, (v) a conflict of interest exists between the Indemnitee and Tenant with respect to the Claim, or (vi) the defense of such Claim would require the delivery of material confidential and proprietary information of such Indemnitee that

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would otherwise not be available to Tenant or its counsel. In addition, with respect to any Claim to which Landlord is a party that arises, directly or indirectly, out of (x) the actual or alleged presence, use, storage, generation, release, assessment, containment, response, removal or remediation of any Hazardous Materials, (y) any actual or alleged violation or non-compliance, now or hereafter existing, of or with any Environmental Laws or (z) any other matter relating to Environmental Laws and/or compliance therewith, Landlord shall be entitled to assume and control its own defense of such Claim at Tenant’s cost and expense, and, to the extent Tenant is named as a party to any proceeding involving such Claim, Tenant shall be entitled, at its cost and expense, to control its own defense.
     (c) Upon payment in full of the entire amount of any Claim by Tenant pursuant to this Paragraph 10 to or on behalf of an Indemnitee, Tenant, without any further action, shall be subrogated to applicable claims that such Indemnitee may have relating to such Claim (other than claims in respect of insurance policies maintained by such Indemnitee at its own expense or claims against another Indemnitee for which Tenant would have indemnity obligations hereunder), and such Indemnitee shall execute such instruments of assignment and conveyance, evidence of such claim and payment and such other documents, instruments and agreements as may be necessary to preserve such claim and otherwise reasonably cooperate with Tenant to enable Tenant to pursue such claim.
     (d) Notwithstanding anything to the contrary contained herein, Tenant shall not be required to indemnify any Indemnitee under this Paragraph 10 for any Claim to the extent resulting from the material misrepresentation, negligence, recklessness or willful misconduct of such Indemnitee.
     11.  Maintenance and Repair .
     (a) Except for any Alterations that Tenant is permitted to make pursuant to this Lease, Tenant shall at all times, except during any Requisition period, put, keep and maintain the Leased Premises (including, without limitation, storm water basins located on the Leased Premises, the roof, landscaping, walls, footings, foundations and structural components of the Leased Premises) in a good condition and order of repair, ordinary wear and tear and damage by Landlord or any party in possession during a Requisition excepted, and shall promptly make all repairs and replacements of every kind and nature, whether foreseen or unforeseen, which may be required to be made upon or in connection with the Leased Premises in order to keep and maintain the Leased Premises in the order and condition required by this Paragraph 11(a). Nothing in the preceding sentence shall be deemed to preclude Tenant from being entitled to insurance proceeds or condemnation awards for Restoration pursuant to Paragraphs 13 and 14 of this Lease. Tenant shall, in all events, make all repairs for which it is responsible hereunder promptly, and all repairs shall be in a good, proper and workmanlike manner in accordance with all Applicable Laws.
     (b) In the event that any Improvement shall violate any Legal Requirements or Insurance Requirements and as a result of such violation enforcement action is threatened or

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commenced against Tenant or Landlord or with respect to the Leased Premises, then Tenant, at the request of Landlord, shall either (i) obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting from each such violation, whether the same shall affect Landlord, Tenant or both, or (ii) take such action as shall be necessary to remove such violation, including, if necessary, any Alteration. Any such repair or Alteration shall be made in conformity with the provisions of Paragraph 12.
     (c) Landlord shall be responsible for any damage to the Leased Premises or any Improvements located thereon caused by Landlord or any of its employees or agents. In the event Landlord or any of its employees or agents, causes any such damage, then the Tenant shall notify Landlord of the amount of the cost to repair such damage, as determined by an independent third party contractor of reasonable reputation and with reasonable expertise, and Landlord shall remit such amount to Tenant within thirty (30) days of receipt of notice, whereupon Tenant shall repair the Leased Premises as contemplated by Section 11(a) above.
     12.  Alterations .
     (a) Upon prior written notice to Landlord, Tenant shall have the right to make any Alteration(s) to the Leased Premises (whether in satisfaction of any Tenant obligations under the Inducement Agreement or otherwise); provided , that , (x) no Event of Default under this Lease has occurred and is then continuing, (y) Tenant complies with clause (b) of this Paragraph 12, and (z) prior to making any such Alteration(s), Tenant shall provide Landlord with the plans and specifications, estimated budgets and proposed schedule of construction with respect thereto.
     (b) Tenant agrees that in connection with any Alteration: (i) the fair market value of the Leased Premises shall not be lessened after the completion of any such Alteration, or its structural integrity impaired; (ii) all such Alterations shall be performed in a good and workmanlike manner, and shall be expeditiously completed in compliance with all Legal Requirements; (iii) no such Alteration shall change the permitted use of the Leased Premises (as described in Paragraph 4 hereof); (iv) all work done in connection with any such Alteration shall comply with all Insurance Requirements; (v) other than Landlord’s Alterations, which are the responsibility of Landlord, Tenant shall promptly pay all costs and expenses of any such Alteration, and shall (subject to and in compliance with the provisions of Paragraph 18 hereof) discharge all liens filed against any of the Leased Premises arising out of the same; (vi) Tenant shall procure and pay for all permits and licenses required in connection with any such Alteration; (vii) legal title to all such Alterations shall be vested in Landlord and shall be subject to this Lease (with title to any such Alterations for accounting and federal income tax purposes being vested in Tenant); and (viii) no such Alteration shall create any debt or other encumbrance(s) on the Leased Premises.
     13.  Condemnation .
     (a) Tenant, promptly upon obtaining knowledge of the institution of any proceeding for Condemnation, shall notify Landlord thereof, and Landlord shall be entitled to participate in any Condemnation proceeding. Landlord, promptly after obtaining knowledge of the institution

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of any proceeding for Condemnation, shall notify Tenant thereof and Tenant shall have the right to participate in such proceedings at Tenant’s sole cost and expense. Subject to the provisions of this Paragraph 13 and Paragraph 15, Tenant hereby irrevocably assigns to Landlord, any award or payment in respect of any Condemnation of Landlord’s interest in the Leased Premises, except that (except as hereinafter provided) nothing in this Lease shall be deemed to assign to Landlord, any award for Alterations made at Tenant’s cost and expense or any award or payment on account of the Trade Fixtures, moving expenses and out-of-pocket expenses incidental to the move, if available, to the extent Tenant shall have a right to make a separate claim therefor against the condemnor.
     (b) If (i) the entire Leased Premises, (ii) a material portion of the Land or any of the Improvements or any means of ingress, egress or access to the Leased Premises, the loss of which even after restoration would, in Tenant’s reasonable business judgment, be substantially and materially adverse to the business operations of Tenant at the Leased Premises, or (iii) any means of ingress, egress or access to the Leased Premises which does not result in at least one method of ingress and egress to and from the Leased Premises remaining, provided the same is permitted under then existing Legal Requirements, shall be subject of a Taking or a Requisition by a duly constituted authority or agency having jurisdiction, then Tenant may, not later than ninety (90) days after such Taking or Requisition has occurred, serve a Tenant’s Termination Notice upon Landlord, whereupon Tenant shall have no further liability or obligation to Landlord under this Lease or the Inducement Agreement (other than Tenant’s indemnification obligations under this Lease).
     (c) (i) In the event of a Condemnation of any part of the Leased Premises which does not result in a termination of this Lease, subject to the requirements of Paragraph 15, the Net Award of such Condemnation shall be retained by Tenant, and promptly after such Condemnation, Tenant shall commence and diligently continue to completion the Restoration of the Leased Premises.
     (i) All Basic Rent, Additional Rent and other sums payable hereunder shall continue unabated and unreduced.
     (ii) In the event of a Requisition of the Leased Premises, Landlord shall apply the Net Award of such Requisition, to the extent available, to the installments of Basic Rent, Additional Rent or other sums then or thereafter payable by Tenant hereunder, and Tenant shall pay when due any balance remaining thereafter. Any remaining portion of such Net Award which shall not have been previously credited to Tenant on account of the Basic Rent and Additional Rent shall be paid to Tenant.
     14.  Insurance .
     (a) At all times following the Completion Date, Tenant shall maintain or cause to be maintained at its sole cost and expense the following insurance on the Leased Premises:

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     (i) Insurance against loss or damage to the Improvements under a fire and broad form of all risk extended coverage insurance policy (which shall be endorsed to include insurance against loss or damage caused by flood if the Leased Premises is located within a flood hazard area, earthquake if the Leased Premises is located in an area where earthquake insurance is customarily maintained for similar commercial properties, building ordinances and laws, power failure and governmental action and which shall also be endorsed to provide “inflation guard” coverage). Such insurance shall be in amounts not less than the actual replacement cost of the Improvements (excluding footings and foundations and other parts of the Improvements which are not insurable) as determined from time to time at Landlord’s request but not more frequently than once in any 36-month period, by agreement of Landlord and Tenant, or if not so agreed, at Tenant’s expense, by the insurer or insurers or by an appraiser approved by Landlord. Such insurance policies may contain reasonable exclusions and deductible amounts, all in accordance with industry standards with deductibles not to exceed $1,000,000.00.
     (ii) Contractual and comprehensive general liability insurance against claims for bodily injury, death or property damage occurring on, in or about the Leased Premises, which insurance shall be written on a so-called “Occurrence Basis”, and shall provide minimum protection with a combined single limit in an amount not less than Five Million Dollars ($5,000,000).
     (iii) Worker’s compensation insurance (or state-approved self-insurance) covering all persons employed by Tenant on the Leased Premises in connection with any work done on or about any of the Leased Premises for which claims for death or bodily injury could be asserted against Landlord, Tenant or the Leased Premises.
     (iv) Insurance against loss or damage from explosion of any steam or pressure boilers or similar apparatus located in or about the Improvements in an amount not less than the actual replacement cost of the Improvements (excluding footings and foundations and other parts of the Improvements which are not insurable).
     (v) Such additional and/or other insurance with respect to the Improvements located on the Leased Premises and in such amounts as at the time is customarily carried by prudent owners or tenants with respect to improvements similar in character, location and use and occupancy to the Improvements located on the Leased Premises.
     (b) So long as (i) no Event of Default has occurred and is continuing, and (ii) Tenant’s debt has an investment grade rating by either Moody’s, Fitch or S&P, Tenant may coinsure or self-insure all or any portion of the coverage referred to in Paragraph 14(a) above on terms that are reasonably acceptable to Landlord.
     (c) The insurance policies required by Paragraph 14(a) shall be written by companies having an A.M. Best’s Key Rating Guide rating of A or better and a financial size category of VIII or higher, and all such companies shall be authorized to do an insurance business in the State and in full compliance with Applicable Laws relating to insurance companies, or otherwise

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agreed to by Landlord. The insurance policies shall (except for the worker’s compensation insurance referred to in Paragraph 14(a) (iii) hereof) name Landlord and Tenant as additional insured parties, as their respective interests may appear. If said insurance or any part thereof shall expire, be withdrawn, become void by breach of any condition thereof by Tenant or become void or unsafe by reason of the failure or impairment of the capital of any insurer, Tenant shall immediately obtain new or additional insurance reasonably satisfactory to Landlord.
     (d) Each certificate of insurance or insurance policy shall provide that the policies referenced therein may not be canceled or modified except after thirty (30) days’ prior written notice to Landlord designated on the certificate. Each policy of insurance shall contain a waiver of subrogation or consent to a waiver of right of recovery against the Landlord. Each policy shall also provide that any losses otherwise payable thereunder shall be payable notwithstanding (i) any unintentional act or omission of Landlord or Tenant which might, absent such provision, result in a forfeiture of all or a part of such insurance payment, or (ii) the occupation or use of any of the Leased Premises for purposes more hazardous than permitted by the provisions of such policy. Each policy shall also provide evidence of such insurance to Landlord on an ACORD 28 form for property and ACORD 25 form for liability, or equivalent; provided, that in the event that such form is no longer available, such evidence of insurance is in a form reasonably satisfactory to Landlord.
     (e) Tenant shall pay as they become due all premiums for the insurance required by this Paragraph 14, shall renew or replace each policy, and shall deliver to Landlord a certificate evidencing the existing policy and such renewal or replacement policy at least thirty (30) days prior to the Insurance Expiration Date of each policy. Each such certificate or policy shall provide that it shall not expire until the Landlord shall receive a written notice from the insurer to the effect that such policy will expire on the Insurance Expiration Date, as set forth in such notice, which shall be thirty (30) days following the date of the receipt by Landlord of such notice. In the event of Tenant’s failure to comply with any of the foregoing requirements of this Paragraph 14 within ten (10) days of the giving of written notice by Landlord to Tenant, Landlord shall be entitled to procure such insurance. Any sums expended by Landlord in procuring such insurance shall be Additional Rent and shall be repaid by Tenant, together with interest thereon at the Default Rate, from the time of payment by Landlord until fully paid by Tenant immediately upon written demand therefor by Landlord.
     (f) Anything in this Paragraph 14 to the contrary notwithstanding, any insurance which Tenant is required to obtain pursuant to Paragraph 14(a) may be carried under a “blanket” policy or policies covering other properties or liabilities of Tenant, provided that such “blanket” policy or policies otherwise comply with the provisions of this Paragraph 14. In the event any such insurance is carried under a blanket policy, Tenant shall deliver to Landlord evidence of the issuance and effectiveness of the policy, the amount and character of the coverage with respect to the Leased Premises and the presence in the policy of provisions of the character required in the above Paragraphs of this Paragraph 14. For purposes of this Paragraph 14(f), a certificate from Tenant’s insurer containing the policy information required under this paragraph shall be deemed satisfaction of the requirements hereof.

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     (g) In the event of any casualty loss of less than $1,000,000.00, Tenant shall proceed to repair or replace the damage resulting in such loss. In the event of any casualty loss exceeding $1,000,000.00 Tenant shall give Landlord immediate notice thereof. Tenant shall adjust, collect and compromise any and all claims, with the consent of Landlord, not to be unreasonably withheld, conditioned or delayed, and Landlord shall have the right to join with Tenant therein. All proceeds of any insurance required under clauses (i) and (iv) of Paragraph 14(a) shall be payable to Tenant, provided that Tenant at such time shall have a tangible net worth of not less than One Billion Dollars ($1,000,000,000.00) as determined in accordance with generally accepted accounting principles, consistently applied, and in all other events to a Trustee. If Tenant doesn’t satisfy the tangible net worth requirement at forth in the preceding sentence, each insurer will be authorized and directed to make payment under said policies directly to such Trustee instead of to Tenant, and Tenant and Landlord each hereby appoints such Trustee as its attorney-in-fact to endorse any draft therefor for the purposes set forth in this Lease after approval by Tenant of such Trustee. In the event of any casualty (whether or not insured against) resulting in damage to the Leased Premises or any part thereof, the Term shall nevertheless continue and there shall be no abatement or reduction of Basic Rent, Additional Rent or any other sums payable by Tenant hereunder. The Net Proceeds of such insurance payment shall be retained by the Trustee or Tenant, as the case may be, pursuant to the terms of this Lease, and, promptly after such casualty, Tenant, as required in Paragraphs 11(a) and 12, shall commence and diligently continue to perform the Restoration to the Leased Premises. In the event such Net Proceeds have been paid to Trustee, Trustee shall, to the extent available, make the Net Proceeds available to Tenant for Restoration, in accordance with the provisions of Paragraph 15. Subject to Paragraph 14(h), Tenant shall, whether or not the Net Proceeds are sufficient for the purpose, promptly repair or replace the Improvements in accordance with the provisions of Paragraph 11(a) and the Net Proceeds of such loss shall thereupon be payable to Tenant, subject to the provisions of Paragraph 15 hereof; provided, however, that any Net Proceeds in excess of the cost of such repair, replacement and/or other Restoration shall be paid to Landlord.
     (h) If the cost of Restoration exceeds seventy-five percent (75%) or more of the replacement value of the buildings then located on the Leased Premises, then Tenant shall have the option (but not the obligation), not later than ninety (90) days after such casualty has occurred, serve a Tenant’s Termination Notice upon Landlord, whereupon Tenant shall have no further liability or obligation to Landlord under this Lease or the Inducement Agreement (other than Tenant’s indemnification obligations under this Lease).
     15.  Restoration . The Restoration Fund shall be disbursed by Tenant or the Trustee, as applicable, in accordance with the following conditions:
     (a) Prior to commencement of the Restoration the architects, general contractor(s), and plans and specifications for the Restoration shall be approved by Landlord, which approval shall not be unreasonably conditioned, withheld or delayed; and which approval shall be granted to the extent that the plans and specifications depict a Restoration which is substantially similar to the Improvements which existed prior to the occurrence of the casualty or Taking, whichever is applicable.

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     (b) At the time of any disbursement, no Event of Default shall exist and no mechanics’ or materialmen’s liens shall have been filed and remain undischarged or unbonded.
     (c) Disbursements shall be made from time to time in an amount not exceeding the hard and soft cost of the work and costs incurred since the last disbursement upon receipt of (1) satisfactory evidence, including architects’ certificates of the stage of completion, of the estimated cost of completion and of performance of the work to date in a good and workmanlike manner in accordance with the contracts, plans and specifications, (2) partial releases of liens, and (3) other reasonable evidence of cost and payment so that Landlord can verify that the amounts disbursed from time to time are represented by work that is completed in place or delivered to the site and free and clear of mechanics’ lien claims.
     (d) Each request for disbursement shall be accompanied by a certificate of Tenant describing the work, materials or other costs or expenses, for which payment is requested, stating the cost incurred in connection therewith and stating that Tenant has not previously received payment for such work or expense and the certificate to be delivered by Tenant upon completion of the work shall, in addition, state that the work has been substantially completed and complies with the applicable requirements of this Lease.
     (e) Tenant or the Trustee may, as retainage, retain ten percent (10%) of the Restoration Fund until the Restoration is at least fifty percent (50%) complete, and thereafter five percent (5%) until the Restoration is substantially complete.
     (f) The Restoration Fund shall be kept in a separate interest-bearing federally insured account by the Tenant or the Trustee, as applicable. All interest shall become part of the Restoration Fund.
     (g) Any sum in the Restoration Fund which remains in the Restoration Fund upon the completion of Restoration shall be paid to Landlord.
     16. [Reserved]
     17.  Assignment, Subleasing .
     (a) Tenant may assign its interest in this Lease and/or may sublet the Leased Premises in whole or in part, from time to time, (i) without the consent of Landlord, to an Affiliate of Tenant, (ii) with the consent of Landlord, to a non-Affiliate of Tenant, which consent shall not be unreasonably conditioned, withheld or delayed; provided , that , Landlord may withhold consent if the assignee’s use of the Leased Premises would violate Section 4(b) of this Lease, and (iii) as provided in Paragraph 17(d) below. With respect to any assignment or sublease, Tenant shall provide Landlord with a written summary of the material terms of such assignment or sublease prior to the commencement date thereof.
     (b) Each sublease of the Leased Premises or any part thereof shall be subject and subordinate to the provisions of this Lease. No assignment or sublease shall affect or reduce any

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of the obligations of Tenant hereunder, and all such obligations shall continue in full force and effect as obligations of a principal and not as obligations of a guarantor, as if no assignment or sublease had been made. Notwithstanding any assignment or subletting, Tenant shall continue to remain primarily liable and responsible for the payment of the Basic Rent, Additional Rent and Clawback Payments and the performance of all its other obligations under this Lease. No assignment or sublease shall impose any obligations on Landlord under this Lease except as otherwise provided in this Lease. Tenant agrees that in the case of an assignment of this Lease, Tenant shall, within fifteen (15) days after the execution and delivery of any such assignment, deliver to Landlord (i) a duplicate original of such assignment in recordable form and (ii) an agreement executed and acknowledged by the assignee in recordable form wherein the assignee shall agree to assume and agree to observe and perform all of the terms and provisions of this Lease on the part of the Tenant to be observed and performed from and after the date of such assignment. In the case of a sublease, Tenant shall, within fifteen (15) days after the execution and delivery of such sublease, deliver to Landlord a duplicate original of such sublease.
     (c) Upon the occurrence of an Event of Default under this Lease, Landlord shall have the right to collect and enjoy all rents and other sums of money payable under any sublease of any of the Leased Premises, and Tenant hereby irrevocably and unconditionally assigns such rents and money to Landlord, which assignment may be exercised upon and after (but not before) the occurrence of an Event of Default.
     (d) Tenant shall have the right at any time during the Term, without needing the consent of Landlord, to encumber its leasehold estate in the Leased Premises by a leasehold mortgage, deed of trust lien or other encumbrance or lien (such mortgage, encumbrance or lien being hereinafter referred to as a “Leasehold Mortgage”) to secure financing from existing and future lending institutions for general corporate purposes, for construction of any Alterations or for any other purpose in connection with the operation of Tenant’s business upon the Leased Premises. Any Leasehold Mortgagee, subject to the terms of this Paragraph 17(a)(ii) of this Lease, may exercise its remedies under a Leasehold Mortgage or accept a transfer in lieu thereof. Tenant shall promptly notify Landlord of any such Leasehold Mortgage executed by Tenant. In the event Tenant’s possession of the Leased Premises is terminated as a result of an Event of Default as contemplated by Section 19(a)(iii) and assuming Landlord has complied with the terms of Section 17(e) below, then the Leasehold Mortgagee shall have no rights in or to the Leased Premises or this Lease.
     (e) If Tenant or the party secured by a Leasehold Mortgage (the “Leasehold Mortgagee”) shall have delivered to the Landlord prior written notice of the address of the Leasehold Mortgagee, Landlord shall mail to the Leasehold Mortgagee at such address a copy of any notice of default that Landlord gives to Tenant under this Lease, and a copy of any notice that Landlord gives to Tenant that Landlord is terminating this Lease or terminating Tenant’s right to possession of the Leased Premises under this Lease, and no such notice of default or notice of termination shall be effective unless Landlord mails the Leasehold Mortgagee a copy of such notice of default or termination, as the case may be. In the event of any default by Tenant under any of the provisions of this Lease, the Leasehold Mortgagee, without prejudice to its

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rights against the Tenant, shall have the right to cure such default (whether the same consists of the failure to pay rent or the failure to perform any other matter or thing that Tenant is hereby required to do or perform) within the same periods as are given to Tenant for remedying such default. Landlord shall accept such performance on the part of the Leasehold Mortgagee as though the same had been done or performed by Tenant. If Tenant defaults under the provisions of this Lease, and, if prior to the expiration of the applicable grace period provided above, the Leasehold Mortgagee notifies Landlord in writing that the Leasehold Mortgagee is undertaking to acquire the leasehold interest of Tenant by foreclosure or otherwise and immediately commences and proceeds with all due diligence to do so, then Landlord will not terminate or take any action to effect a termination of this Lease or reenter, take possession of, or re-let the Leased Premises or similarly enforce performance of this Lease as long as the Leasehold Mortgagee (i) pays with such notice all sums then owed by Tenant hereunder (including any Clawback Payments) and timely pays thereafter all sums coming due under this Lease, (ii) proceeds with all due diligence and in good faith to cure all defaults by Tenant, and (iii) completes the curing of all such defaults as soon as it is reasonably practicable for the Leasehold Mortgagee to do so whether before or after the Leasehold Mortgagee gains possession of the Leased Premises from Tenant.
     (f) No Leasehold Mortgagee shall have any liability for the performance of any of the covenants, conditions, or obligations of Tenant under this Lease unless and until such time as the Leasehold Mortgagee acquires title to the leasehold estate created by this Lease.
     18.  Permitted Contests .
     (a) So long as no Event of Default has occurred and is continuing, after prior written notice to Landlord, Tenant shall not be required to (i) pay any Imposition, (ii) comply with any Legal Requirement, (iii) discharge or remove any lien referred to in Paragraphs 9 or 12, or (iv) take any action with respect to any violation referred to in Paragraph 11(b) so long as Tenant shall contest, in good faith and at its expense, the existence, the amount or the validity thereof, the amount of the damages caused thereby, or the extent of its or Landlord’s liability therefor, by appropriate proceedings which shall operate during the pendency thereof to prevent (A) the collection of, or other realization upon, the Imposition or lien so contested, (B) the sale, forfeiture or loss of any of the Leased Premises, any Basic Rent or any Additional Rent to satisfy the same or to pay any damages caused by the violation of any such Legal Requirement or by any such violation, (C) any interference with the use or occupancy of any of the Leased Premises, (D) any interference with the payment of any Basic Rent, any Additional Rent or any Clawback Payments, and (E) the cancellation of any fire or other insurance policy.
     (b) In no event shall Tenant pursue any contest with respect to any Imposition, Legal Requirement, lien, or violation referred to above in such manner that exposes Landlord to (i) criminal liability, penalty or sanction or (ii) any civil liability, penalty or sanction for which Tenant has not made provisions reasonably acceptable to Landlord.

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     (c) Tenant agrees that each such contest shall be promptly and diligently prosecuted to a final conclusion, except that Tenant shall have the right to attempt to settle or compromise such contest through negotiations. Tenant shall pay and save Landlord harmless against any and all losses, judgments, decrees and costs (including all attorneys’ fees and expenses) in connection with any such contest and shall, promptly after the final determination of such contest, fully pay and discharge the amounts which shall be levied, assessed, charged or imposed or be determined to be payable therein or in connection therewith, together with all penalties, fines, interest, costs and expenses thereof or in connection therewith, and perform all acts the performance of which shall be ordered or decreed as a result thereof.
     19.  Conditional Limitations; Default Provisions .
     (a) If any Event of Default shall have occurred and be continuing, except as expressly provided for herein, Landlord shall have the right at its option, then or at any time thereafter, to do any one or more of the following without demand upon or notice to Tenant:
     (i) Landlord may give Tenant notice of Landlord’s intention to terminate this Lease on a date specified in such notice (which date shall be no sooner than ten (10) days after the date of the notice). Upon the date therein specified, the Term and the estate hereby granted and all rights of Tenant hereunder shall expire and terminate, and (A) if such termination occurs during the Initial Term, Tenant shall be liable for the applicable Termination Fee to the extent provided for in, and pursuant to the terms and conditions of, the Inducement Agreement, and (B) if such termination occurs during a Renewal Term, Tenant shall obligated to Landlord as provided in Paragraph 19(b) below. Notwithstanding the foregoing, prior to the exercise of Landlord’s rights and remedies hereunder with respect to any Event of Default for the nonpayment of Basic Rent and Additional Rent when due, Landlord shall send a Non-Payment Notice to Tenant, which shall provide that Tenant shall have thirty (30) business days from the date such Non-Payment Notice shall be deemed received under Paragraph 21 to cure such Event of Default.
     (ii) In the event this Lease was terminated pursuant to Section 19(a)(i) above during the Initial Term, then Landlord’s remedy set forth in Section 19(a)(i)(A) above shall be its sole and exclusive remedy for such default, all such other rights and remedies being hereby expressly released and waived. Landlord and Tenant agree that it would be extremely difficult to determine precisely the amount of actual damages that would be suffered by Landlord upon the occurrence of an Event of Default during the Initial Term, but that the Termination Fee is a fair and reasonable determination of the amount of actual damages that would be suffered by Landlord for an Event of Default that occurs during the Initial Term, and that the Termination Fee does not constitute a penalty.
     (iii) Landlord, in lieu of terminating the Lease, may elect instead to terminate Tenant’s possession of the Leased Premises and continue this Lease and the estates created pursuant to this Lease. In the event Landlord makes such election, (x) Tenant’s

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liability under this Lease shall not be affected and is determined as set forth in clauses 19(a)(i) and (ii) above, and (y) Landlord shall have the right to assign or sublet all or any part of the Land and Improvements covered by this Lease at any rent Landlord deems appropriate and retain any proceeds resulting therefrom.
     (iv) If Tenant shall fail to make payment of any installment of Basic Rent, any Additional Rent or Clawback Payment after the date when each such payment is due, Tenant shall pay to Landlord, as Additional Rent, interest on the unpaid amount of Basic Rent or Additional Rent, at the Default Rate, such interest to accrue from the date such item of unpaid Basic Rent or Additional Rent was due until the date paid.
     (v) Subject to the limitations set forth in Section 19(a)(ii) above and Section 19(b), Landlord may exercise any other right or remedy now or hereafter existing by law or in equity.
     (b) In the event this Lease is terminated as a result of an Event of Default during any Renewal Term, Landlord shall have the obligation to use commercially reasonable efforts to mitigate Tenant’s damage and may relet the Leased Premises or any part thereof to such tenant or tenants for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term) for such rent, on such conditions (which may include concessions or free rent) and for such uses as Landlord, in its reasonable discretion, may determine; and Landlord shall collect and receive any rents payable by reason of such reletting. The rents received on such reletting shall be applied (A) first to the reasonable and actual expenses of such reletting and collection, including without limitation reasonable and actual attorneys’ fees and any reasonable and actual real estate commissions paid, and (B) thereafter toward payment of all sums due or to become due Landlord pursuant to this Paragraph 19(b) below. In the event of any expiration or termination of this Lease by reason of the occurrence of an Event of Default during a Renewal Term, Tenant shall pay to Landlord (i) when due Basic Rent, Additional Rent and all other sums required to be paid by Tenant to and including the date of such expiration or termination and (ii) as liquidated and agreed current damages: (x) Basic Rent, Additional Rent and all other sums which would be payable under this Lease by Tenant for two (y) full calendar years, in the absence of such expiration or termination plus, (ii) $500,000.00, less (z) the net proceeds, if any, of any reletting pursuant to this Paragraph 19, after deducting from such proceeds all of Landlord’s reasonable and documented expenses in connection with such reletting (including all reasonable repossession costs, reasonable brokerage commissions, and reasonable attorneys’ fees). Landlord and Tenant agree that it would be extremely difficult to determine precisely the amount of actual damages that would be suffered by Landlord upon the occurrence of Event of Default during a Renewal Term, but that the amount set forth in this Paragraph 19(b) above as liquidated damages is a fair and reasonable determination of the amount of actual damages that would be suffered by Landlord for an Event of Default that occurs during a Renewal Term and that such liquidated damages do not constitute a penalty.
     20.  Additional Rights of Landlord and Tenant .

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     (a) Subject to the limitations set forth in Section 19, no right or remedy conferred upon or reserved to Landlord or Tenant in this Lease is intended to be exclusive of any other right or remedy; and each and every right and remedy shall be cumulative and in addition to any other right or remedy contained in this Lease. No delay or failure by Landlord or Tenant to enforce its rights under this Lease shall be construed as a waiver, modification or relinquishment thereof. Subject to the limitations set forth in Section 19, in addition to the other remedies provided in this Lease, Landlord and Tenant shall be entitled, to the extent permitted by applicable Law, to injunctive relief in case of the violation or attempted or threatened violation of any of the provisions of this Lease, or to specific performance of any of the provisions of this Lease.
     (b) Landlord hereby waives any landlord’s lien (or similar lien securing the payment of rent) resulting from an failure to makes payments under this Lease, regardless of whether such lien is created by contract, by law, by statute or otherwise. Landlord agrees at the request of Tenant, to execute a waiver of any Landlord’s or similar lien for the benefit of any present or future holder of a security interest in or landlord of any asset of Tenant.
     (c) Landlord acknowledges and agrees in the future to acknowledge (in a written form reasonably satisfactory to Landlord and Tenant) to such persons and entities at such times and for such purposes as Tenant may reasonably request that the Trade Fixtures are Tenant’s property and not part of the Improvements (regardless of whether or to what extent such Trade Fixtures are affixed to the Improvements) or otherwise subject to the terms of this Lease.
     (d) Subject to the limitations set forth in Section 19, Tenant agrees to pay to Landlord any and all reasonable costs and expenses incurred by Landlord in connection with any litigation or other action instituted by Landlord to enforce the obligations of Tenant under this Lease, if Landlord has prevailed in any such litigation or other action. Any amount payable by Tenant to Landlord pursuant to this Paragraph 20(d) shall be due and payable by Tenant to Landlord as Additional Rent.
     21.  Notices . All Notices shall be in writing and shall be deemed to have been given for all purposes (i) three (3) business days after having been sent by United States mail, by registered or certified mail, return receipt requested, postage prepaid, addressed to the other party at its address as stated below, or (ii) one (1) day after having been sent for overnight delivery by Federal Express, United Parcel Service or other nationally recognized air courier service
     To the Addresses stated below:
If to Landlord:
Executive Director
North Carolina Global TransPark Authority
2780 Jetport Road, Suite A
Kinston, North Carolina 28504-7346

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With a copy to (which shall not constitute notice):
Assistant Attorney General for
Global TransPark Authority
North Carolina Department of Justice
P.O. Box 629
Raleigh, North Carolina 27602
If to Tenant:
Mr. Jeffrey Turner, President and CEO
Spirit AeroSystems, Inc.
3801 S. Oliver Street
P.O. Box 780008
Wichita, Kansas 67278-0008
With a copy to (which shall not constitute notice):
Spirit AeroSystems, Inc.
3801 S. Oliver Street
P.O. Box 780008
Wichita, Kansas 67278-0008
Attn: Jonathan Greenberg, General Counsel
     For the purposes of this Paragraph 21, any party may substitute its address by giving fifteen (15) days’ notice to the other party in the manner provided above. Any Notice may be given on behalf of any party by its counsel.
     22.  Estoppel Certificates . Tenant shall on the Commencement Date, and Landlord and Tenant shall at any time and from time to time, upon not less than twenty (20) days’ prior written request by the other, execute, acknowledge and deliver to the other a statement in writing, certifying (i) that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, setting forth such modifications), (ii) the dates to which Basic Rent, payable hereunder has been paid, (iii) that to the knowledge of the signer of such certificate no default by either Landlord or Tenant exists hereunder or specifying each such default of which the signer may have knowledge, (iv) the remaining Term hereof, (v) with respect to a certificate signed on behalf of Tenant, that to the knowledge of the signer of such certificate, there are no proceedings pending or threatened against Tenant before or by any court or administrative agency which if adversely decided would materially and adversely affect the financial condition and operations of Tenant or if any such proceedings are pending or threatened to said signer’s knowledge, specifying and describing the same , and (vi) such other matters as may reasonably be requested by the party requesting the certificate.
     23.  Surrender and Holding Over .

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     (a) Upon the expiration or earlier termination of this Lease, Tenant shall peaceably leave and surrender the Leased Premises (except as to any portion thereof with respect to which this Lease has previously terminated) to Landlord. Tenant shall remove from the Leased Premises on or prior to such expiration or earlier termination all Trade Fixtures and personal property which are owned by Tenant or third parties other than Landlord, and Tenant at its expense shall, on or prior to such expiration or earlier termination, repair any damage caused by such removal, all as contemplated by Section 29 of this Lease. The cost of removing and disposing of such property and repairing any damage to any of the Leased Premises caused by such removal shall be borne by Tenant.
     (b) Any holding over by Tenant of the Leased Premises after the expiration or earlier termination of the Term of this Lease or any extensions thereof, with the consent of Landlord, shall operate and be construed as tenancy from month to month only and upon the same terms and conditions as contained in this Lease. Notwithstanding the foregoing, any holding over without Landlord’s consent shall entitle Landlord to exercise all rights and remedies provided by law or in equity, including the remedies of Paragraph 19(b).
     24.  No Merger of Title . There shall be no merger of this Lease nor of the leasehold estate created by this Lease with the fee estate in or ownership of any of the Leased Premises by reason of the fact that the same person, corporation, firm or other entity may acquire or hold or own, directly or indirectly, (a) this Lease or the leasehold estate created by this Lease or any interest in this Lease or in such leasehold estate and (b) the fee estate or ownership of any of the Leased Premises or any interest in such fee estate or ownership. No such merger shall occur unless and until all Persons, corporations, firms and other entities having any interest in (i) this Lease or the leasehold estate created by this Lease and (ii) the fee estate in or ownership of the Leased Premises or any part thereof sought to be merged shall join in a written instrument effecting such merger and shall duly record the same.
     25.  Compliance with Security Regulations .
     (a) Tenant shall comply with the applicable requirements of all laws, rules or regulations concerning airport security, as the same may be adopted or amended from time to time, and with all rules and regulations of the Landlord concerning security procedures, including the Airport’s approved security program.
     (b) This Lease is expressly subject to the Aviation Security Improvement Act of 1990, P.L. 101-604, the provisions of which are hereby incorporated by reference, including without limitation Sections 105, 109 and 110 thereof, to the Aviation and Transportation Security Act (P.L. 107-71), the provisions of which are hereby incorporated by reference, and to the rules and regulations promulgated under each of these Acts. In the event that Tenant or any individual employed by Tenant, or any of Tenant’s contractors, subcontractors, suppliers of materials or providers of services has (i) unescorted access to aircraft located on or at the Airport; (ii) unescorted access to secured areas; or (iii) capability to allow others to have unescorted access to such aircraft or secured area, Tenant shall be subject to, and further shall

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conduct with respect to its employees and its contractors, subcontractors, suppliers or materials, or providers of services, and their respective employees, such employment investigations, including criminal history record checks, as the Administrator of the FAA, the TSA or Landlord may deem reasonably necessary. Further, in the event of any threat to civil aviation, as defined in the Aviation Security Improvement Act of 1990, Tenant shall report any information in accordance with those regulations promulgated by the Secretary of the United States Department of Transportation, the TSA and Landlord. Tenant shall, notwithstanding anything contained herein, at no cost to Landlord, perform all obligations hereunder in compliance with those guidelines developed by the FAA, the TSA and Landlord, and all drawings, plans, and specifications to be provided by Tenant under this Lease shall comply with all relevant provisions of those guidelines.
     (c) Tenant shall supply all necessary information to Landlord for compliance with the notification and review requirements covered in Part 77 of the Federal Aviation Regulations with respect to the construction of the Improvements and Landlord shall, following receipt of such information, submit such information to the FAA in accordance with such requirements. Tenant shall not proceed with any of the Improvements except in accordance with the procedures set forth in Part 77.
     (d) Tenant, by accepting this Lease, agrees for itself, its successors and assigns that it will not make use of the Leased Premises in any manner which might interfere with the landing an taking off of aircraft from the Airport or otherwise constitute a hazard to flight operations at the Airport. In the event the aforesaid covenant is breached, Landlord reserves the right to enter upon the Leased Premises and cause the abatement of such interference at the expense of Tenant. Landlord will provide reasonable notice to Tenant prior to taking any such action, except in emergency circumstances.
     26.  Hazardous Substances .
     (a) Tenant agrees that it will not on, about, or under the Leased Premises, make, release, treat or dispose of any Hazardous Materials; provided , that , the foregoing shall not prevent the use of any Hazardous Materials in accordance with applicable laws and regulations and at levels that do not impose any clean up liability or obligation. Tenant represents and warrants that it will at all times comply with CERCLA and any other Environmental Laws.
     (b) To the extent required by CERCLA and/or any other Environmental Laws, Tenant shall remove, respond to or clean up any “hazardous substances” (as defined in CERCLA) and “Hazardous Materials” (as defined in Appendix A) that were or are released on, in or under the Leased Premises by Tenant or any Tenant Party or that arise out of Tenant’s or any Tenant Parties’ use or occupancy of the Leased Premises during the Term.
     (c) The Tenant agrees that it will not install any underground storage tank at the Leased Premises without specific, prior written approval from the Landlord. The Tenant agrees that it will not store combustible or flammable materials on the Leased Premises in violation of CERCLA or any other Environmental Laws. Tenant shall also be liable for any loss of value of

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the Land resulting from the release of any “hazardous substances” or “Hazardous Materials” by Tenant or Tenant Parties during the Lease Term in violation of any applicable Environmental Laws. Upon the termination of the Lease at the end of the Initial Term or any Renewal Term, Tenant shall provide, at Tenant’s expense, a Phase I environmental report with respect to the Leased Premises, and shall take such action as may be reasonably recommended in such report to remove, respond or clean up such hazardous substances or Hazardous Materials found on the Leased Premises that are in violation of applicable Environmental Laws.
     (d) Tenant agrees to pay any fines, assessments or penalties lawfully assessed by any governmental entity pursuant to CERCLA or other Environmental Laws due to release by Tenant of any “hazardous substances” and “Hazardous Materials” on, in or under the Leased Premises in violation of applicable Environmental Laws and that arise out of Tenant’s use or occupancy of the Leased Premises during the Term.
     27.  Entry by Landlord . Landlord and its authorized representatives shall have the right upon reasonable notice (which shall be not less than one (1) business day except in the case of emergency) to enter the Leased Premises at all reasonable business hours (and at all other times in the event of an emergency): (a) for the purpose of inspecting the same or for the purpose of doing any work under Paragraph 11(c), and may take all such action thereon as may be necessary or appropriate for any such purpose (but nothing contained in this Lease or otherwise shall create or imply any duty upon the part of Landlord to make any such inspection or do any such work), and (b) at any time within twelve (12) months prior to the expiration of the Term of this Lease for the purpose of showing the same to prospective tenants. No such entry shall constitute an eviction of Tenant but any such entry shall be done by Landlord in such reasonable manner as to minimize any disruption of Tenant’s business operation.
     28.  Cancellation by Tenant . This Lease shall be subject to cancellation by Tenant, at its option after the happening of one or more of the following events:
     (a) The permanent closure of the Airport or the transfer of the Airport (or control thereof) to an entity that is not a Governmental Authority;
     (b) The lawful assumption by the United States Government, or any authorized agency thereof, of the operation, control, or use of the Leased Premises or of the Airport, or any substantial part or parts thereof, in such a manner as to materially and adversely restrict Tenant’s use and operation of the Leased Premises for a period of more than 90 consecutive days;
     (c) Issuance by a court of competent jurisdiction of any injunction preventing or restraining the use of the Airport in a way that materially and adversely affects Tenant’s ability to use and operate the Leased Premises, and the remaining in force of such injunction for a period of more than 90 consecutive days;
     (d) The default by the Landlord in the performance of any covenant or agreement herein required to be performed by the Landlord in a way that materially and adversely affects Tenant’s ability to use and operate the Leased Premises, and the failure of the Landlord to

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remedy such default within a period of ninety (90) days after the Landlord’s receipt from Tenant of written notice specifying the respects in which Tenant contends that the Landlord is in default in sufficient detail for the Landlord to identify the particular default alleged by Tenant; provided, that, if such default is not capable of being cured within such 90-day period, and the Landlord is diligently attempting to cure such default, such period shall be extended for so long as is reasonably required to effect such cure;
     (e) Pursuant to the terms and provisions of Paragraph 3(b) of this Lease or pursuant to the express terms of the Inducement Agreement; or
     (f) after December 31, 2020, upon 180 days prior written notice to Landlord, termination of the primary original equipment manufacturer (an “OEM”) contract supporting Tenant’s use of Landlord’s Alterations in a circumstance where there does not then remain in force and effect one or more OEM contracts of equal or greater value to Tenant than is represented by the value of the original OEM contract.
     Tenant may exercise its right to cancellation by written notice to the Landlord at any time after the occurrence of any such event (which, in the case of the events described in Subsections (b) through (d) hereof, shall not be deemed to have occurred until the lapse of the applicable period of time specified therein) and before the Landlord has cured or removed the same, and this Lease shall terminate upon such cancellation. In the event of cancellation by Tenant under this Section 28, rentals due hereunder shall be payable only to the date of commencement of the event which is the cause of such termination; provided , that , in the event this Lease is terminated pursuant to the Inducement Agreement or clause (f) above, Tenant shall tender the applicable Termination Fee required by Section 5 of the Inducement Agreement to Landlord contemporaneously with the date of termination of the Lease and Tenant’s vacancy of the Leased Premises. Nothing in this paragraph 28 shall be deemed to limit the Tenant’s rights or remedies, either at law or in equity, in the event any one or more of the events described in Sections 28(a)-(d) above occur subsequent to Tenant’s performance of its obligations under the Inducement Agreement with respect to the Performance Targets as therein described. Tenant shall have any and all rights and remedies that may be available to it at law or in equity to insure that Tenant has the uninterrupted right of use of the Improvements that are now or hereafter located on the Land pursuant to the terms of this Lease through the entire Term. Any claim that Tenant may have for damages shall be subject to the terms of North Carolina General Statutes Section 63A-4(a)(9). Landlord acknowledges that for any action by Federal, State or local Governmental Authorities that terminates, frustrates or materially interferes with the Tenant’s continuous and uninterrupted use and enjoyment of the Improvements, Tenant may claim a “Taking” or other appropriation of private property for governmental or public use for which full and fair compensation shall be due.
     29.  Removal of Tenant’s Trade Fixtures and Personal Property . Tenant shall have the right at any time during the Term, and for 120 days after the termination thereof, to remove any of Tenant’s personal property (inclusive of Trade Fixtures) from the Leased Premises; subject however, to any unpaid rents or fees and subject to the repair by Tenant of damages resulting

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from such removal and subject to the terms and conditions of the Inducement Agreement. If any of such personal property remains upon the Leased Premises after the expiration of said 120-day period, the Landlord may remove the same, and Tenant agrees to pay all expenses of restoring the Leased Premises. The Landlord may, at its option, elect to treat any one or more items of such personal property which have not been removed by Tenant within such 120-day period as having been abandoned by Tenant and to have become the property of the Landlord. In addition, if this Lease is terminated during the Initial Term as a result of an Event of Default by Tenant, Landlord shall have the option of requiring Tenant to remove from the Landlord’s Alterations all of those fixtures which are of the type described on Schedule 1 to the Inducement Agreement and Tenant agrees to so remove such fixtures if requested by Landlord and to repair any damage to Landlord’s Alterations resulting from such removal.
     30.  Affirmative Action . Tenant assures that it will undertake an affirmative action program as required by 14 CFR Part 152, Subpart E, to the extent the same may be applicable to Tenant or to the use of the Leased Premises, to insure that no person shall on the grounds of race, color, creed, national origin or sex be excluded on these grounds from participating in or receiving the services or benefits of any program or activity covered by such Subpart; that it will require that its covered subtenants, if any, provide assurances to Tenant that they similarly will undertake affirmative action programs and that they will require assurance from their sub-organizations, as required by 14 CFR Part 152, Subpart E, to the same effect.
     31.  Non-Discrimination . Tenant covenants and agrees: (1) that no person on the grounds of race, color or national origin shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of the Leased Premises or the improvements thereon; (2) that in the construction by Tenant of any improvement on, over or under the Lease Premises and the furnishings of services thereon, no person on the grounds of race, color, or national origin shall be excluded from participation in, denied the benefits of, or otherwise be subject to discrimination; (3) that Tenant shall use the Leased Premises in compliance with all other requirements imposed by or pursuant to the Airport and Airway Improvement Act of 1982, as amended or superseded, and any regulations issued thereunder, as well as in compliance with Title VI of the Civil Rights Act of 1964 and Title 49, code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, Non-Discrimination in Federally-Assisted Programs of the Department of Transportation-Effectuation of Title VII of the Civil Rights Act 1964, and as said statutes and regulations may be amended. Tenant does hereby further covenant and agree that in the event facilities are constructed, maintained or otherwise operated on the Leased Premises for a purpose for which a Department of Transportation program or activity is extended or for another purpose involving the provision of similar services or benefits, Tenant shall maintain and operate such facilities and services in compliance with all other requirements imposed pursuant to 49 CFR Part 21, Non-Discrimination in Federally Assisted Programs of the Department of Transportation-Effectuation of Title VI of the Civil Rights Act of 1964, and as said statutes or regulations may be amended.
     32.  Services to the Public . Tenant agrees that, to the extent that it offers services to the public, it will offer such services on a fair, equal, and not unjustly discriminatory basis to all

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users thereof and that it will charge fair, reasonable, and not unjustly discriminatory prices for each unit or service, provided, that Tenant may make reasonable and non-discriminatory discounts, rebates, or other similar types of price reductions to volume purchasers. It is hereby specifically understood and agreed that nothing herein contained shall be construed to grant or authorize the granting of an exclusive right to provide aeronautical services to the public as prohibited by 49 U.S.C. § 40103(e) (Section 308a of the Federal Aviation Act of 1958, as amended), and Landlord reserves the right to grant to others the privilege and right of conducting any one or all activities of an aeronautical nature.
     33.  Accessibility to Disabled . Tenant shall comply in full with all federal and state laws, rules and regulations relating to non-discrimination against disabled persons, and the accessibility of Tenant’s facilities and services to disabled persons, insofar as such laws, rules and regulations shall be applicable to Tenant, to any construction undertaken by Tenant hereunder, or to any Tenant’s operations at the Airport, including, but not limited to, Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. §794), the Americans with Disabilities Act of 1990 (42 U.S.C. §§12101-12213) and regulations issued pursuant thereto, the Uniform Federal Accessibility Standards, and 49 CFR Part 27, as any of the foregoing may be amended from time to time.
     34.  Separability . If any term or provision of this Lease or the application thereof to any provision of this Lease or the application thereof to any person or circumstances shall to any extent be invalid and unenforceable, the remainder of this Lease, or the application of such term or provision to person or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and shall be enforced to the extent permitted by law.
     35.  Miscellaneous .
     (a) The paragraph headings in this Lease are used only for convenience in finding the subject matters and are not part of this Lease or to be used in determining the intent of the parties or otherwise interpreting this Lease.
     (b) As used in this Lease the singular shall include the plural as the context requires and the following words and phrases shall have the following meanings: (i) “including” shall mean “including but not limited to”; (ii) “provisions” shall mean “provisions, terms, agreements, covenants and/or conditions”; and (iii) “obligation” shall mean “obligation, duty, agreement, liability, covenant or condition”.
     (c) Any act which Landlord is permitted to perform under this Lease may be performed at any time and from time to time by Landlord or any person or entity designated by Landlord. Any act which Tenant is required to perform under this Lease shall be performed at Tenant’s sole cost and expense.

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     (d) This Lease may be modified, amended, discharged or waived only by an agreement in writing signed by the party against whom enforcement of any such modification, amendment, discharge or waiver is sought.
     (e) The covenants of this Lease shall run with the Land and bind Tenant, the successors and assigns of Tenant and all present and subsequent assignees and subtenants of any of the Leased Premises, and shall inure to the benefit of and bind Landlord, its successors and assigns.
     (f) This Lease will be simultaneously executed in several counterparts, each of which when so executed and delivered shall constitute an original, fully enforceable counterpart for all purposes.
     (g) This Lease shall be governed by and construed according to the laws of the State of North Carolina.
     (h) Tenant or Landlord and their employees, representatives or agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of this Lease and the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to Tenant or Landlord relating to such tax treatment and tax structure.
     (i) Wherever either party to this Lease requests the consent or approval of the other party, such consent shall not be unreasonably withheld or delayed.
     (j) References in this Lease to any sections of the Code, Treasury Regulations, Revenue Procedures and/or any other issuance by the Internal Revenue Service shall include any amendments, restatements, replacements, substitutions and/or other modifications thereof or thereto.
[Signature page follows.]

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     IN WITNESS WHEREOF, Landlord and Tenant have caused this instrument to be executed under seal as of the day and year first above written.
             
    Landlord:    
 
           
    THE NORTH CAROLINA GLOBAL TRANSPARK AUTHORITY ,
    a body politic and corporate of the State of North Carolina    
 
           
 
  By:        
 
     
 
Name:
   
 
      Title:    
 
           
    Tenant:    
 
           
    SPIRIT AEROSYSTEMS, INC.,    
    a Delaware corporation    
 
           
 
  By:        
 
     
 
Name:
   
 
      Title:    

S - 1


 

EXHIBIT A
LEGAL DESCRIPTION
Exhibit A

-1-


 

EXHIBIT B
PERMITTED ENCUMBRANCES
     To be added by separate Addendum to Lease between Landlord and Tenant prior to the expiration of the Due Diligence Period.
Exhibit B

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EXHIBIT C
FORM OF CONSTRUCTION AGENCY AGREEMENT
Attached hereto.
Exhibit C

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EXHIBIT D
FORM OF INDUCEMENT AGREEMENT
Attached hereto.
Exhibit D

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EXHIBIT E
FORM OF MEMORANDUM OF LEASE
MEMORANDUM OF LEASE AGREEMENT
Prepared by and return to:
Marvin L. Rogers
McGuireWoods LLP
Bank of America Corporate Ctr.
100 North Tryon Street, Suite 2900
Charlotte, NC 28202-4011
      THIS MEMORANDUM OF LEASE AGREEMENT (the “Memorandum”) is made by and between THE NORTH CAROLINA GLOBAL TRANSPARK AUTHORITY , a body politic and corporate of the State of North Carolina (the “Landlord”) and SPIRIT AEROSYSTEMS, INC. , a Delaware corporation (the “Tenant”).
W I T N E S S E T H:
     Landlord and Tenant entered into a Lease Agreement dated as of May ___, 2008, (the “Lease”), in connection with which this Memorandum is executed, to wit:
     1.  Premises . The premises leased by Landlord to Tenant under the Lease consist of that certain tract of land containing approximately 307 acres (together with the easements, rights and appurtenances thereunto belonging or appertaining) and improvements thereon as described on Exhibit A attached hereto (the “Land”).
     2.  Term; Extension Options . The initial term of the Lease (“Lease Term”) commence on May ___, 2008, and shall continue until [June 30, 2030]. Tenant has the option to extend the Lease Term for four (4) consecutive periods of twenty (20) years each, subject to the terms of the Lease, with the final termination of the Lease, assuming all renewal periods are exercised being [June 30, 2108].
     3.  Incorporation . The terms and provisions set forth in the Lease are hereby incorporated into this Memorandum by this reference. All capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Lease.

 


 

      IN WITNESS WHEREOF , the parties have executed this Memorandum as of the date first above written.
             
    LANDLORD :
 
           
    THE NORTH CAROLINA GLOBAL TRANSPARK AUTHORITY,
 
           
    a body politic and corporate of the State of North Carolina
 
           
 
  By:        
 
     
 
   
 
           
 
  Name:        
 
     
 
   
 
           
 
  Title:        
 
     
 
   
STATE of                     
COUNTY of                     
     I certify that the following person(s) personally appeared before me this day, and
(check one of the following)
                           I have personal knowledge of the identity of the principal(s); or
                           I have seen satisfactory evidence of the principal’s identity, by a current state or federal identification with the principal’s photograph in the form of
(check one of the following)
                           a driver’s license, or
                           in the form of                                           ; or
                           a credible witness (i) personally known to me, (ii) unaffected by this instrument and the transaction to which it relates and (iii) who personally knows such principal(s), has sworn to the identity of the principal(s).
Exhibit E

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     Each acknowledging to me that he or she voluntarily signed the foregoing document for the purpose stated therein and in the capacity indicated: insert principal(s) names(s) and title(s) below:
                                          as                                                                 of The North Carolina Global Transpark Authority
                 
Date:
               
 
               
 
               
 
      Notary Public        
 
         
 
 
   
(Official Seal)
  Printed Name:        
 
         
 
   
 
               
My commission expires:                                                               

-2-


 

      IN WITNESS WHEREOF , the parties have executed this Memorandum as of the date first above written.
             
    TENANT :    
 
           
    SPIRIT AEROSYSTEMS, INC.,    
    a Delaware corporation    
 
           
 
  By:        
 
     
 
   
 
           
 
  Name:        
 
     
 
   
 
           
 
  Title:        
 
     
 
   
STATE of                                          
COUNTY of                                          
     I certify that the following person(s) personally appeared before me this day, and
(check one of the following)
                           I have personal knowledge of the identity of the principal(s); or
                           I have seen satisfactory evidence of the principal’s identity, by a current state or federal identification with the principal’s photograph in the form of
(check one of the following)
                           a driver’s license, or
                           in the form of                                           ; or
                           a credible witness (i) personally known to me, (ii) unaffected by this instrument and the transaction to which it relates and (iii) who personally knows such principal(s), has sworn to the identity of the principal(s).

-3-


 

     Each acknowledging to me that he or she voluntarily signed the foregoing document for the purpose stated therein and in the capacity indicated: insert principal(s) names(s) and title(s) below:
                                          as                                            of Spirit AeroSystems, Inc.
             
Date:
           
 
           
 
 
      Notary Public    
 
           
 
           
(Official Seal)
  Printed Name:    
 
           
 
           
        My commission expires:

-4-


 

Exhibit A
Legal Description of Land
[to be attached]

 


 

APPENDIX A
     “ Additional Rent ” shall mean all amounts, costs, expenses, liabilities and obligations (including Tenant’s obligation to pay any Net Awards, Additional Payments, Default Rate interest or Late Charges hereunder) which Tenant is required to pay pursuant to the terms of this Lease other than Basic Rent.
     “ Additional Payments ” shall mean all amounts that are due and owing to Landlord by reason of any default by Tenant in complying with its obligations under this Lease.
     “ Affiliate ” of any Person shall mean any other Person directly or indirectly controlling, controlled by or under common control with, such Person. For the purposes of this definition, the term “ control ” (including the correlative meanings of the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities or by contract or otherwise.
     “ Airfield ” shall mean the aeronautical operating areas of the Airport not under lease and not subject to preferential use under an agreement between the Landlord and any other party.
     “ Airport ” shall mean the Global TransPark Authority Airport located in Lenoir County, N.C.
     “ Alteration ” or “ Alterations ” shall mean any or all changes, additions (whether or not adjacent to or abutting any then existing buildings), expansions (whether or not adjacent to or abutting any then existing buildings), improvements, new buildings, reconstructions, removals or replacements of any of the Improvements, both interior or exterior, and ordinary and extraordinary.
     “ Applicable Laws ” shall mean all existing and future applicable laws (including common laws), rules, regulations, statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of any Governmental Authorities, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to the environment and those pertaining to the construction, use or occupancy of the Leased Premises). Applicable Laws shall include Environmental Laws.
     “ Basic Rent ” shall mean an amount equal to $100.00 per calendar year.
     “ Basic Rent Commencement Date ” shall mean the Completion Date.
     “ Basic Rent Payment Dates” shall mean January 15 of each calendar year during the Term.
Appendix A

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     “ CERCLA ” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§9601-9657.
     “ Claims ” shall mean Liens (including, without limitation, lien removal and bonding costs) liabilities, obligations, damages, losses, demands, penalties, assessments, payments, fines, claims, actions, suits, judgments, settlements, costs, expenses and disbursements (including, without limitation, reasonable legal fees and expenses and costs of investigation) of any kind and nature whatsoever.
     “ Clawback Payment ” shall have the meaning assigned to that term in the Inducement Agreement.
     “ Clawback Payment Date ” shall have the meaning assigned to that term in the Inducement Agreement.
     “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time.
     “ Commencement Date ” shall mean the date of this Lease.
     “ Completion Date ” shall have the meaning set forth in Section 4.4 of the Construction Agency Agreement.
     “ Condemnation” shall mean a Taking and/or a Requisition.
     “ Construction Allowance ” shall mean an amount not to exceed $100,000,000.00 funded in accordance with the Construction Agency Agreement, including all interest earned thereon.
     “ Construction Agency Agreement ” shall mean the form of agreement set forth on Exhibit “C” annexed to this Lease.
     “ Construction Agent ” shall have the meaning set forth in the Construction Agency Agreement.
     “ Construction Deadline ” June 30, 2010.
     “ Construction Period ” shall mean the period beginning with the date of the Lease through and including the earlier to occur of (i) the Outside Completion Date and (ii) substantion completion of Landlord’s Alterations as contemplated by Section 4.4 of the Construction Agency Agreement.
     “ Default Rate ” shall mean a rate of interest equal to four (4%) percent per annum above the then current Prime Rate.
Appendix A

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     “ Easements ” shall mean easements, covenants, waivers, approvals or restrictions for utilities, parking or other matters as desirable for operation of the Leased Premises or properties adjacent thereto.
     “ Environmental Laws ” shall mean and include the Resource Conservation and Recovery Act of 1976 (RCRA), 42 U.S.C. §§ 6901-6987, as amended by the Hazardous and Solid Waste Amendments of 1984, CERCLA, the Hazardous Materials Transportation Act of 1975, 49 U.S.C. §§ 1801-1812, the Toxic Substances Control Act, 15 U.S.C. §§ 2601-2671, the Clean Air Act, 42 U.S.C. §§ 7401 et seq ., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq and all other federal, state and local laws, ordinances, rules, orders, statutes, codes and regulations applicable to the Leased Premises and (i) relating to the environment, human health or natural resources, (ii) regulating, controlling or imposing liability or standards of conduct concerning Hazardous Materials, or (iii) regulating the clean-up or other remediation of the Leased Premises or any portion thereof, as any of the foregoing may have been amended, supplemented or supplanted from time to time.
     “ Event of Default ” shall mean the occurrence of any one or more of the following events under this Lease: (i) a failure by Tenant to make (regardless of the pendency of any bankruptcy, reorganization, receivership, insolvency or other proceedings, in law, in equity or before any administrative tribunal which had or might have the effect of preventing Tenant from complying with the provisions of this Lease): (x) any payment of Basic Rent or Additional Rent for twenty (20) business days following written notice from Landlord that the same is past due, (y) any payment of any other sum herein required to be paid by Tenant which continues unremedied for a period of thirty (30) business days following written notice from Landlord that the same is past due; (ii) failure by Tenant to perform and observe, or a violation or breach of, any other provision in this Lease and such default shall continue for a period of sixty (60) days after written notice thereof is given by Landlord to Tenant, or if such default is of such a nature that it cannot reasonably be cured within such period of sixty (60) days, such period shall be extended for such longer time as is reasonably necessary to permit such cure provided that Tenant has commenced to cure such default within said period of sixty (60) days and is actively, diligently and in good faith proceeding with continuity to remedy such default; (iii) any representation or warranty made in or in connection with this Lease was false or misleading in any material respect at the time made; (iv) Tenant shall (A) voluntarily be adjudicated a bankrupt or insolvent, (B) or voluntarily consent to the appointment of a receiver or trustee for itself or for any of the Leased Premises, (C) voluntarily file a petition seeking relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, or (D) voluntarily file a general assignment for the benefit of creditors; (v) a court shall enter an order, judgment or decree appointing, with the voluntary consent of Tenant, a receiver or trustee for Tenant or for the Leased Premises or approving a petition filed against Tenant which seeks relief under the bankruptcy or other similar laws of the United States or any State, and such order, judgment or decree shall remain in force, undischarged or unstayed, ninety (90) days after it is entered; (vi) Tenant shall in any insolvency proceedings be liquidated or dissolved or shall voluntarily commence proceedings towards its liquidation or dissolution; and (vii) any Event of Default (as
Appendix A

-3-


 

therein defined) of Tenant under the Inducement Agreement or the Construction Agency Agreement.
     “ Existing Crop Lease ” shall mean the existing lease between the Landlord and Alonzo C. Gray expiring on December 31, 2008.
     “ Existing Crops ” shall mean all agricultural crops located on the Land as of the Commencement Date pursuant to the Existing Crops Lease.
     “ Expiration Date ” shall mean June 30, 2030.
     “ FAA ” shall mean the Federal Aviation Administration or any successor thereto.
     “ Fixtures ” shall mean, collectively, all fixtures (except Trade Fixtures), machinery (including back-up generators that will stay with the Improvements upon a termination of the Lease), personal property and equipment which are permanently attached to any part of the Leased Premises in such a manner as to become fixtures under applicable law, including any parts or components thereof, on and in respect to the Improvements.
     “ GAAP ” shall mean generally accepted accounting principles, consistently applied.
     “ GLF ” shall mean Golden L.E.A.F. (Long-Term Economic Advancement Foundation), Inc. and its successors in interest.
     “ GLF Grant Agreement ” shall mean the Grant Agreement dated as of May 14, 2008 by and between GLF and Landlord.
     “ Governmental Authority ” shall mean any federal, state, county, municipal, foreign or other governmental or regulatory authority, agency, board, body, instrumentality, court or quasi governmental authority (or private entity in lieu thereof).
     “ Guaranties ” shall mean all warranties, guaranties and indemnities, express or implied, and similar rights which Landlord may have against any manufacturer, seller, engineer, contractor or builder in respect of any of the Leased Premises, including, but not limited to, any rights and remedies existing under contract or pursuant to the applicable Law.
     “ Hazardous Materials ” shall mean all chemicals, petroleum, crude oil or any fraction thereof, hydrocarbons, polychlorinated biphenyls (PCBs), asbestos, asbestos-containing materials and/or products, urea formaldehyde, or any substances which are classified as “hazardous” or “toxic” under CERCLA; hazardous waste as defined under the Solid Waste Disposal Act, as amended 42 U.S.C. § 6901; air pollutants regulated under the Clean Air Act, as amended, 42 U.S.C. § 7401, et seq .; pollutants as defined under the Clean Water Act, as amended, 33 U.S.C. § 1251, et seq ., any pesticide as defined by Federal Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. § 136, et seq ., any hazardous chemical substance or mixture or imminently hazardous substance or mixture regulated by the Toxic Substances
Appendix A

-4-


 

Control Act, as amended, 15 U.S.C. § 2601, et Seq., any substance listed in the United States Department of Transportation Table at 45 CFR 172.101; any pollutants, contaminants, chemicals included in regulations promulgated under the above listed statutes; any explosives, radioactive material, and any chemical regulated by state statutes similar to the federal statutes listed above and regulations promulgated under such state statutes.
     “ Impositions ” shall mean, collectively, personal property taxes, gross income taxes, franchise taxes, withholding taxes, profits and gross receipts taxes on or with respect to the use or operation of the Leased Premises (but expressly excluding all Real Property Taxes; all charges for any easement or agreement maintained for the benefit of the Leased Premises; all permits, inspection and license fees on or with respect to the Leased Premises that are not Real Property Taxes; and all water and sewer rents and other utility charges on or with respect to the Leased Premises.
     “ Improvements ” shall mean, collectively, Landlord’s Alterations, all other Alterations and all other the buildings, structures and other improvements located on the Land, including all Fixtures, from time to time. Improvements does not include personal property, equipment or Trade Fixtures.
     “ Indemnitee ” shall mean Landlord, or any of its Affiliates and their respective officers, directors, or employees.
     “ Inducement Agreement ” shall mean the Inducement Agreement dated as of May 14, 2008 between Landlord and Tenant, a true and correct copy of which is attached to this Lease as Exhibit “D” .
     “ Initial Term ” shall mean the period of time commencing on the Commencement Date and terminating on the Expiration Date (as such Expiration Date may be extended pursuant to the Inducement Agreement).
     “ Insurance Expiration Date ” shall mean, with respect to an insurance policy, the date that such insurance policy will expire.
     “ Insurance Requirement ” or “ Insurance Requirements ” shall mean, as the case may be, any one or more of the terms of each insurance policy required to be carried by Tenant under this Lease and the requirements of the issuer of such policy, and whenever Tenant shall be engaged in making any Alteration or Alterations, repairs or construction work of any kind (collectively, “ Work ”), the term “Insurance Requirement” or “Insurance Requirements” shall be deemed to include a requirement that Tenant obtain or cause its contractor to obtain builder’s risk insurance in the amount of the completed value of such Work when the estimated cost of the Work in any one instance exceeds the sum of Three Hundred Fifty Thousand Dollars ($350,000.00) and that Tenant or its contractor shall obtain worker’s compensation insurance or other adequate insurance coverage covering all persons employed in connection with the Work, whether by
Appendix A

-5-


 

Tenant, its contractors or subcontractors and with respect to whom death or bodily injury claims could be asserted against Landlord.
     “ Land ” shall mean the land shown on the aerial photographs attached to this Lease as containing approximately 307 acres, together with the easements, rights and appurtenances thereunto belonging or appertaining. The Parties agree that Exhibit “A” shall be replaced during the Due Diligence Period upon completion of the survey using the surveyed legal description.
     “ Landlord ” shall mean The North Carolina Global TransPark Authority, a body politic and corporate of the State of North Carolina.
     “ Landlord’s Alterations ” shall mean the alterations required under the Construction Agency Agreement.
     “ Late Charge ” shall mean, with respect to an overdue installment of Basic Rent or a Clawback Payment, an amount equal to four percent (4%) of such overdue installment of Basic Rent or Clawback Payment, as applicable.
     “ Law ” shall mean any constitution, statute or rule of law or regulations thereunder.
     “ Leased Premises ” shall mean, collectively, the Land and the Improvements.
     “ Legal Requirement ” or “ Legal Requirements ” shall mean, as the case may be, any one or more of all present and future laws, codes, ordinances, orders, judgments, decrees, injunctions, rules, regulations and requirements, even if unforeseen or extraordinary, of every duly constituted governmental authority or agency (but excluding those which by their terms are not applicable to and do not impose any obligation on Tenant, Landlord or the Leased Premises) and all covenants, restrictions and conditions now of record which may be applicable to Tenant, Landlord (with respect to the Leased Premises) or to all or any part of or interest in the Leased Premises, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction of the Leased Premises, even if compliance therewith (i) necessitates structural changes or improvements (including changes required to comply with the “ Americans with Disabilities Act ”) or results in interference with the use or enjoyment of the Leased Premises or (ii) requires Tenant to carry insurance other than as required by the provisions of this Lease.
     “ Lien ” shall mean any lien, mortgage, deed of trust, deed to secure debt, pledge, charge, security interest or encumbrance of any kind, or any type of preferential arrangement that has the practical effect of creating a security interest, including, without limitation, any thereof arising under any conditional sale agreement, capital lease or other title retention agreement.
     “ Net Award ” shall mean the entire award payable to Landlord by reason of a Condemnation, less any reasonable expenses incurred by Landlord in collecting such award.
Appendix A

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     “ Net Proceeds ” shall mean the entire proceeds of any insurance required under clauses (i), (iv), (v) or (vi) of Paragraph 14 (a) of this Lease, less any actual and reasonable expenses incurred by Landlord in collecting such proceeds.
     “ Non-Payment Notice ” shall mean a written notice from Landlord to Tenant of Tenant’s failure to make a payment required hereunder when due.
     “ Notice ” or “ Notices ” shall mean all notices, demands, requests, consents, approvals, offers, statements and other instruments or communications required or permitted to be given pursuant to the provisions of this Lease.
     “ OEM Termination Payment ” shall mean Termination Fee described in Section 5(b) of the Inducement Agreement.
     “ Outside Completion Date ” shall mean 365 days after the Construction Deadline.
     “ Performance Targets ” shall have the meaning assigned to that term in the Inducement Agreement.
     “ Permitted Encumbrances ” shall mean those covenants, restrictions, reservations, liens, conditions, encroachments, easements and other matters of title that affect the Leased Premises that are agreed to and accepted by Tenant during the Due Diligence Period, it being understood and agreed that to the extent any monetary lien or encumbrance exists on the Land such monetary lien or encumbrance must be either released or fully subordinated to this Lease prior to the end of the Due Diligence Period. Landlord and Tenant agree to attach to this Lease as Exhibit B hereto the list of permitted encumbrances agreed to by Tenant during the Due Diligence Period.
     “ Person ” shall mean an individual, corporation, partnership, joint venture, association, joint-stock company, trust, limited liability company, non-incorporated organization or government or any agency or political subdivision thereof.
     “ Prime Rate ” shall mean the prime rate of interest published in the Wall Street Journal or its successor, from time to time.
     “ Prohibited Use ” shall mean any use that (i) permits the manufacture, distribution, sale or display of pornography, nudity, graphic violence, drug paraphernalia or any similar goods or services, (ii) is a massage parlor, adult bookstore, tattoo parlor or body piercing establishment, adult entertainment establishment, gambling facility, on-site dry cleaning establishment, laundromat, funeral home, embalming facility or crematory, locksmith, gunsmith, donation drop-off facility or surplus or second-hand surplus store, to conduct an auction, distress, fire, bankruptcy or going out of business sale or similar store, (iii) operates as a fun or amusement park or (iv) involves keeping or processing animals of any kind.
Appendix A

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     “ Real Property Taxes ” shall mean any present or future real estate taxes, and ad valorem taxes all taxes or other impositions that are in the nature of or in substitution for real estate taxes or ad valorem taxes, vault and/or public space rentals, business district or arena taxes, business or occupation, single business, transaction, special assessments, privilege taxes, as well as special user fees, license fees, permits, improvement bonds, levies, improvement district charges, governmental charges, rates, and assessments, general, special, ordinary or extraordinary, foreseen and unforeseen.
     “ Renewal Option Notice ” shall mean a written notice from Tenant to Landlord of its election to extend the Term (or any then Renewal Term) of this Lease pursuant to Paragraph 5 of this Lease.
     “ Renewal Term ” shall mean an additional Lease term of twenty (20) years.
     “ Requisition ” shall mean any temporary condemnation or confiscation of the use or occupancy of the Leased Premises by any governmental authority, civil or military, whether pursuant to an agreement with such governmental authority in settlement of or under threat of any such requisition or confiscation, or otherwise.
     “ Restoration ” shall mean, following a casualty or Condemnation, the restoration of the Leased Premises to as nearly as possible its value, condition and character immediately prior to such casualty or Condemnation, in accordance with the provisions of this Lease, including but not limited to the provisions of Paragraphs 13, 14 and 15. Notwithstanding the foregoing, such Restoration may depart from the exact condition of the Leased Premises immediately prior to the casualty or Condemnation, provided that (i) neither the fair market value nor the useful life of the Leased Premises shall be lessened after the completion of the Restoration, (ii) the use of the Leased Premises shall not be changed as a result of any such Restoration, (iii) all such Restoration shall be performed in a good and workmanlike manner, and shall be expeditiously completed in compliance with all Legal Requirements, and (iv) Tenant shall (subject to the provisions of Paragraph 18 hereof) discharge all liens filed against any of the Leased Premises arising out of the same.
     “ Restoration Award ” shall mean that portion of the Net Award equal to the cost of Restoration.
     “ Restoration Fund ” shall mean, collectively, the Net Proceeds, Restoration Award and Tenant Insurance Payment.
     “ State ” shall mean the State of North Carolina.
     “ Taking ” shall mean any taking of the Leased Premises in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of any agreement with any condemnor in settlement of or under threat of any such condemnation or other eminent domain proceedings or by any other means, or any de facto condemnation.
Appendix A

-8-


 

     “ Tenant ” shall mean Spirit AeroSystems, Inc., a Delaware corporation.
     “ Tenant Parties ” means Tenant’s employees, agents, invitees, contractors or subtenants.
     “ Tenant’s Termination Notice ” shall mean a written notice from Tenant to Landlord after a Condemnation or casualty given pursuant to Paragraph 3(b), 13, 14, 16 or 28 of this Lease.
     “ Term ” shall mean the Initial Term, together with any Renewal Term exercised by Tenant pursuant to the terms of this Lease.
     “ Termination Fees ” shall have the meaning assigned to that term in the Inducement Agreement.
     “ Trade Fixtures ” shall mean all equipment and other items of personal property (whether or not attached to the Improvements) which are owned by Tenant and used by Tenant in its business conducted on the Leased Premises, which can be removed upon expiration of the Lease and which are not necessary for the functional use of the Leased Premises by Landlord or other occupant of the Leased Premises.
     “ TSA ” shall mean the Transportation Security Administration or any successor thereto.
     “ Trustee ” shall mean a federally insured bank or other financial institution, reasonably acceptable to Landlord and Tenant.
Appendix A

-9-

Exhibit 10.4
Execution Copy
 
CONSTRUCTION AGENCY AGREEMENT
Dated as of May 14, 2008
between
Spirit AeroSystems, Inc.,
as Construction Agent
and
The North Carolina Global TransPark Authority,
as Landlord
 

 


 

TABLE OF CONTENTS
         
      Page  
ARTICLE I DEFINITIONS; RULES OF USAGE
    1  
 
       
1.1. Definitions
    1  
1.2. Interpretation
    1  
 
       
ARTICLE II APPOINTMENT OF THE CONSTRUCTION AGENT
    1  
 
       
2.1. Appointment
    1  
2.2. Construction Contracts and Plans and Specifications
    2  
2.3. Acceptance and Undertaking
    3  
2.4. Term
    4  
2.5. Scope of Authority
    4  
2.6. Delegation of Duties
    5  
2.7. Covenants of Construction Agent
    5  
2.8. Appointment of Construction Consultant
    6  
 
       
ARTICLE III INSURANCE
    6  
 
       
3.1. General Contractor’s Insurance
    6  
3.2. General Liability Insurance
    7  
3.3. Automobile Liability Insurance
    7  
3.4. Workers Compensation
    7  
3.5. Umbrella or Excess Liability Insurance; Errors and Omissions Insurance
    7  
3.6. Builder’s Risk Insurance
    8  
3.7. Bonding
    9  
3.8. Endorsements
    9  
3.9. Waiver of Subrogation
    9  
3.10. Conditions
    10  
3.11. Insurance Premiums and Deductibles
    11  
3.12. Contractors’ Equipment Insurance
    11  
 
       
ARTICLE IV THE CONSTRUCTION
    12  
 
       
4.1. Construction
    12  
4.2. Amendments; Modifications
    12  
4.3. Payment of Construction Costs
    12  
4.4. Completion Date
    13  
4.5. Final Plans and Specifications
    13  
 
       
ARTICLE V PAYMENT OF FUNDS
    14  
 
       
5.1. Release of Construction Allowance
    14  
5.2. Applications for Advances
    14  
5.3. Payment of Vendors
    15  

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      Page  
5.4. Procedures for Applications for Payment
    15  
5.5. Construction Dispute Resolution
    15  
 
       
ARTICLE VI CONSTRUCTION PERIOD EVENTS OF DEFAULT
    16  
 
       
6.1. Construction Period Events of Default
    16  
6.2. Actions on Termination
    17  
 
       
ARTICLE VII CONSTRUCTION FORCE MAJEURE EVENTS
    17  
 
       
7.1. Construction Force Majeure Events
    17  
 
       
ARTICLE VIII MISCELLANEOUS
    18  
 
       
8.1. Notices
    18  
8.2. Successors and Assigns
    18  
8.3. GOVERNING LAW
    18  
8.4. Remedies of Construction Agent
    18  
8.5. Amendments and Waivers
    18  
8.6. Counterparts
    18  
8.7. Severability
    19  
8.8. Headings and Table of Contents
    19  
8.9. Approvals By Landlord
    19  
8.10. Termination of Agreement
    19  
8.11. Additional Definitions
    19  

-ii-


 

CONSTRUCTION AGENCY AGREEMENT
     THIS CONSTRUCTION AGENCY AGREEMENT (this “ Agreement ”), dated as of May 14, 2008 (the “ Effective Date ”), between The North Carolina Global TransPark Authority, a body politic and corporate of the State of North Carolina (the “ Landlord ”) and Spirit AeroSystems, Inc., a Delaware corporation (the “ Construction Agent ”).
PRELIMINARY STATEMENT
     A. Landlord and Construction Agent are parties to that certain Lease Agreement dated as of May 14, 2008 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the “ Lease ”), pursuant to which Construction Agent, as tenant (in such capacity, the “ Tenant ”) has agreed to lease that certain Land and Improvements (collectively, the “ Leased Premises ”) located at the Global TransPark, in Lenoir County, North Carolina.
     B. In connection with the Lease and subject to the terms and conditions hereof, (i) Landlord desires to appoint Construction Agent as its sole and exclusive agent in connection with the construction of the Improvements and (ii) Construction Agent desires to accept such appointment in accordance with the terms and conditions hereof.
     NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS; RULES OF USAGE
      1.1. Definitions.
     For purposes of this Agreement, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Lease. Unless otherwise indicated, references in this Agreement to articles, sections, paragraphs, clauses, appendices, schedules and exhibits are to the same contained in this Agreement.
      1.2. Interpretation.
     The rules of usage set forth in Section 35 of the Lease shall apply to this Agreement.
ARTICLE II
APPOINTMENT OF THE CONSTRUCTION AGENT
      2.1. Appointment.
     Subject to the terms and conditions hereof, Landlord hereby designates and appoints Construction Agent as its exclusive agent, and Construction Agent accepts such appointment, in

 


 

connection with the construction of Landlord’s Alterations more particularly described in the preliminary drawings for Project Alpha, an aerospace manufacturing facility, copies of which are attached hereto as Exhibit “A” (collectively, the “ Initial Plans and Specifications ”). For purposes hereof, the “Work” means all construction services, work of all trades, all labor materials, equipment and services provided or to be provided by the GC under the Construction Agreement and as is otherwise necessary to complete the improvements described in the Plans and Specifications.
      2.2. Construction Contracts and Plans and Specifications.
     (a) In connection with the prosecution of the Work, Construction Agent, acting as agent for the benefit of Landlord, agrees to retain The Haskell Company (the “ GC ”) to prepare the plans and specifications for the Work and to act as the general contractor for the prosecution of the Work. The Work will be performed pursuant to a design-build, guaranteed maximum price agreement (the “ Construction Agreement ”) with the GC in form and substance reasonably acceptable to Landlord and Construction Agent. The Construction Agreement will include a covenant that GC will use commercially reasonable efforts to comply with Section 63A-19 of the North Carolina General Statutes concerning goals for participation by minorities, women and the disabled.
     (b) Upon execution of this Agreement, Construction Agent shall cause the GC to prepare (i) detailed schematic architectural drawings and specifications for the Work (together with the Initial Plans and Specifications, the “ Schematic Plans and Specifications ”), (ii) a detailed budget based on the Schematic Plans and Specifications (the “ Schematic Budget ”) and (iii) an estimate for a guaranteed maximum price (the “ Estimated GMP ”). Upon completion of a draft Construction Agreement that Construction Agent and the GC are prepared to execute, the Schematic Plans and Specifications, the Schematic Budget and the Estimated GMP (collectively, “ Construction Deliverables ”), Construction Agent shall forward such Construction Deliverables to Landlord for its review and approval. Landlord shall have a right to object to only those matters set forth in the Construction Deliverables which would (i) violate any material term of this Agreement or any of the other Operative Documents, (ii) violate applicable federal, state or county law, (iii) violate the terms and conditions of the agreements between Landlord and Lenoir County, North Carolina that are listed on Exhibit “B” to this Agreement (collectively, the “ County Agreements ”), or (iv) violate the terms of the GLF Grant Agreement. The Construction Agent acknowledges that Landlord’s approvals of the Construction Deliverables under Section 2.2(b) above are subject to obtaining the approval of GLF. If Landlord or GLF fail to object within fifteen (15) business days of receipt of the Contract Deliverables, Landlord and GLF shall be deemed to have approved the Construction Deliverables.
     (c) Anything herein to the contrary notwithstanding, upon Landlord’s and GLF’s approval of the Construction Deliverables, Landlord will authorize Construction Agent in writing to execute, acting as the agent for the benefit of Landlord, (i) the Construction Agreement and (ii) such other construction agreements necessary for the prosecution and completion of the Work (collectively, the “ Work Agreements ”), solely as agent for Landlord up to the amount of the Construction Allowance and for its own account for any amount in excess thereof. The

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Work Agreements may provide that Landlord shall be solely responsible for performance by Landlord as “owner” thereunder; provided , however , the GC and all other applicable contractors shall agree that any claim for breach and/or damages under each Work Agreement shall be limited to a liquidated amount not to exceed the Construction Allowance. Construction Agent will agree to be obligated for all Additional Costs. Copies of all Work Agreements shall be provided to Landlord promptly following execution thereof.
     (d) Within 120 days of approval of the Construction Deliverables and Construction Agent’s execution of the Construction Agreement, Construction Agent, acting as agent for the benefit of Landlord, shall (i) cause the GC to complete and finalize the bidding of the Work, (ii) develop the Schematic Plans and Specifications into design, plans and drawings and construction plans and drawings (the approved plans, drawings and specifications for Landlord’s Alterations being referred to herein as the “ Plans and Specifications ”), (iii) develop and refine the Schematic Budget until a final guaranteed maximum price (the “ GMP ”) and a final budget (the “ Budget ”) is agreed between Construction Agent and the GC and (iv) provide evidence that the insurance required hereunder is being maintained by the GC in the form required hereunder.
     (e) As long as the Plans and Specifications do not constitute a Material Modification of the Schematic Plans and Specifications, and as long as the final GMP is within ten percent (10%) of the Estimated GMP, then the Construction Agent shall not need to obtain further consents or approvals from the Landlord or the GLF in respect of the Plans and Specifications, the GMP and the Budget; provided , that , Construction Agent shall provide copies of final Plans and Specifications and the final Budget to the Landlord when complete. Otherwise, if the final Plans and Specifications constitute a Material Modification from the approved Schematic Plans and Specifications or if the final GMP is greater or less than the Estimated GMP by more than ten percent (10%), then final Plans and Specifications, final Budget and final GMP shall be subject to the approval of the Landlord (and the GLF), which approval shall not be unreasonably withheld, conditioned or delayed. Thereafter, prior to making any material changes or amendments to the Construction Agreement, the Plans and Specifications or the Budget, Construction Agent shall forward the proposed change or amendment to Landlord for its review and approval. Landlord shall have a right to object to only those changes or amendments to the Construction Agreement, the Plans and Specifications or the Budget which would (i) violate any material term of this Agreement or any of the other Operative Documents, (ii) violate applicable federal, state or county law, (iii) violate the terms and conditions of any of the County Agreements, (iv) violate the terms of the GLF Grant Agreement or (v) result in a Material Modification of the Work as described in the Plans and Specifications. The failure of Landlord to object within ten (10) business days of receipt of the proposed change or amendment shall be deemed acceptance thereof.
      2.3. Acceptance and Undertaking.
     Construction Agent hereby unconditionally accepts the agency appointment and undertakes, for the benefit of Landlord, to cause to be completed the Work in accordance with this Agreement, the Lease and the Work Agreements (collectively, the “ Operative Documents ”). To the extent of Escrow Funds available, Landlord agrees to cooperate with all of Construction

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Agent’s reasonable requests for information and to sign any applications reasonably required for the prosecution of the Work.
      2.4. Term.
     This Agreement shall commence on the Effective Date and shall expire on the Completion Date (the “ Construction Period ”), except with respect to those obligations which by their terms survive termination or expiration hereunder.
      2.5. Scope of Authority.
     (a) Upon authorizing the Construction Agent to execute and deliver the Construction Agreement as provided in Section 2.2(e) above, Landlord hereby expressly authorizes Construction Agent, or any authorized agent of Construction Agent, and Construction Agent unconditionally agrees for the benefit of Landlord, subject to Section 2.5(b) , to take all action necessary or desirable for the performance and satisfaction of any and all of Landlord’s obligations under any Work Agreement and to fulfill all of the obligations of Construction Agent including:
     (i) all design and supervisory functions relating to the Work;
     (ii) negotiating, executing, performing and enforcing all contracts and arrangements to develop, install, construct and test the Work;
     (iii) obtaining all necessary permits, licenses, consents, approvals, entitlements and other authorizations from all Governmental Authorities in connection with the development, acquisition, installation, construction and testing of the Work; and
     (iv) maintaining all books and records with respect to the Leased Premises, the Work and the construction, operation and management thereof.
     (b) No such Work Agreement executed by Construction Agent, as agent for Landlord hereunder, will increase the obligations of Landlord beyond the obligations of Landlord as are expressly set forth in Section 4(a) of the Lease. All Work Agreements shall comply with the provisions of this Agreement.
     (c) Subject to the terms and conditions of the Operative Documents and this Agreement, Construction Agent shall have sole management, responsibility and control over the installation, construction and testing means, methods, sequences and procedures with respect to the Work.

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      2.6. Delegation of Duties.
     Construction Agent may execute any of its duties under this Agreement by or through agents, contractors, employees or attorneys-in-fact; provided, however, that no such delegation shall limit or reduce in any way Construction Agent’s duties and obligations under this Agreement.
      2.7. Covenants of Construction Agent.
     Subject to Landlord’s deposit of the Construction Allowance with the Escrow Agent (as hereinafter defined) and approval of the payment of the Advances (as hereinafter defined) but only to the extent of the Escrow Funds (as hereinafter defined) available, Construction Agent hereby covenants and agrees that it will:
     (a) following the Effective Date, cause the Work to be diligently prosecuted in a good and workmanlike manner, in accordance with the Operative Documents and otherwise in accordance with Section 4.1 hereof;
     (b) use commercially reasonable efforts to cause the Completion Date (as hereinafter defined) to occur on or before the Construction Deadline (as hereinafter defined);
     (c) use commercially reasonable efforts to cause the completion of the Work to occur on or before the Outside Completion Date, free and clear (by removal or bonding) of Liens or claims for materials supplied or labor or services performed in connection with the development, acquisition, installation, construction or testing thereof;
     (d) notify Landlord in writing not more than ten (10) business days after Construction Agent obtains knowledge of, or its receipt of oral or written notification of, the occurrence of any event which, in the reasonable judgment of Construction Agent is reasonably likely to (i) prevent completion of the Work prior to the Outside Completion Date, (ii) cause the costs for the Work to exceed the Construction Allowance or (iii) any abandonment of the Work by the GC;
     (e) include in the Budget all deductible amounts, less any deductibles that are paid directly by the GC, if any, regarding insurance policies related to the Work in place from time to time pursuant to the Work Agreements (including, without limitation, all insurance required to be maintained pursuant to Article III of this Agreement);
     (f) cause all outstanding punch list items with respect to Work to be completed by the earlier of the Outside Completion Date or the date any such items are required to be complete by any applicable Legal Requirements;
     (g) take all commercially reasonable and lawful measures in its role as Construction Agent necessary to defend against any Taking regarding the Leased Premises prior to the Completion Date;

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     (h) subject to receipt of a portion of the Escrow Funds in reimbursement thereof, prior to and as a condition of commencing and continuing the Work, as agent for Landlord, to the fullest extent commercially available, procure insurance for the Leased Premises during the Construction Period (i) in accordance with the provisions of Article III hereof and (ii) as Landlord shall otherwise reasonably request from time to time, for such other insurable risks which Landlord determines are not otherwise sufficiently covered.
      2.8. Appointment of Construction Consultant
     Landlord shall appoint a construction consultant reasonably acceptable to Construction Agent and the GLF (the “ Construction Consultant ”) to consult with Landlord with respect to the construction, development and equipping of the Leased Premises, to perform inspections of the Work to determine the percentage of completion of construction in accordance with the Plans and Specifications, to review the Plans and Specifications to determine if there has been any Material Modification of the Work as described in the Plans and Specifications, to review any proposed amendments or modifications to the Plans and Specifications to determine if such amendments or modifications would result in a Material Modification of the Work as described in the Plans and Specifications and to review each Application for Payment. At Landlord’s request, Construction Agent shall promptly deliver to Construction Consultant copies of all documents, instruments, notices, Applications for Payment and other communications to be delivered to Landlord under this Agreement and/or the Work Agreements. All fees and expenses of the Construction Consultant in performing such services shall be provided for in the Budget based on information provided by Landlord.
ARTICLE III
INSURANCE
      3.1. General Contractor’s Insurance
     To the fullest extent commercially available, Construction Agent shall cause the GC to maintain and to cause Subcontractors to maintain regarding the Leased Premises in full force and effect at all times during the Construction Period, insurance policies with (i) responsible insurance companies authorized to do business in the State of North Carolina (if so required by law or regulation) and that are in compliance with the insurance laws of the State of North Carolina, with an A.M. Best’s Key Rating Guide rating of A or better and a financial size category of X or higher, unless otherwise approved by Construction Agent and Landlord or (ii) other companies acceptable to Construction Agent and Landlord, in all cases with regard to subsection (i) or (ii) above with limits and coverage provisions sufficient to satisfy the requirements set forth in Section 3.2 through 3.12 below. With the exception of deductible amounts covered and paid by the GC pursuant to the Construction Agreement, all loss payments due under any deductible shall be included by Construction Agent in the Budget and made from the Escrow Funds. Any liability insurance policy shall name the Construction Agent and Landlord as an “Additional Insured” and any property policy shall name the Construction Agent and Landlord as a “Loss Payee” as their interests may appear.

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      3.2. General Liability Insurance
     Throughout the period when work is performed and until final acceptance by Construction Agent and Landlord, GC shall carry and maintain General Liability insurance with available limits of not less than Two Million Dollars ($2,000,000) per occurrence for bodily injury, including death, and property damage combined for Claims against Construction Agent, each contractor and each subcontractor. GC shall ensure that all Subcontractors carry and maintain General Liability insurance with available limits of not less than One Million Dollars ($1,000,000) per occurrence for bodily injury, including death, and property damage combined for Claims against Construction Agent and Landlord, each contractor and each subcontractor. Such insurance shall be in an occurrence form, with insurers reasonably acceptable to the Construction Agent and Landlord, and contain coverage for all premises and operations (which coverage shall remain in effect for a period of at least five (5) years following the Completion Date), broad form property damage, blanket contractual liability and products and completed operations with limits of not less than One Million Dollars ($1,000,000) per occurrence. Such insurance shall also provide coverage for personal injury insurance and independent contractors with a $1,000,000 minimum limit per occurrence for combined bodily injury and property damage provided that policy aggregates, if any, shall apply separately to claims occurring with respect to the Improvements and shall cover any loss sustained due to the accidental interruption or failure of supplies of electricity, gas, sewers, water or telecommunication up to the terminal point of the utility supplier with the Leased Premises.
      3.3. Automobile Liability Insurance
     Automobile liability insurance for any liability arising out of claims for bodily injury and property damage covering all owned (if any), leased (if any) and hired vehicles used in the performance of GC’s obligations under the Construction Agreement with a $1,000,000 minimum limit per accident for combined bodily injury and property damage and containing appropriate no-fault insurance provisions wherever applicable.
      3.4. Workers Compensation
     Providing statutory coverage required by the workers compensation laws of the state in which the Work is located and including “employers liability” with limits of: $1,000,000 “bodily injury each accident”, $1,000,000 “bodily injury by disease”, each employee; $1,000,000 “bodily injury by disease” policy limit. Such policies shall include “stop gap” and “voluntary coverage”.
      3.5. Umbrella or Excess Liability Insurance; Errors and Omissions Insurance
     (a) Umbrella or excess liability insurance on an occurrence basis covering claims in excess of the underlying insurance described above, with a $5,000,000 minimum limit per occurrence. Such insurance shall contain a provision that it will not be more restrictive than the primary insurance, provided that aggregate limits of liability, if any, shall apply separately to claims occurring with respect to the Improvements.

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     (b) Construction Agent shall cause the GC to procure, maintain and pay for errors and omissions insurance with limits of no less than Two Million Dollars ($2,000,000) per occurrence.
      3.6. Builder’s Risk Insurance
     During the Construction Period with respect to the Leased Premises, property damage insurance in the amount of not less than 100% of the guaranteed maximum price set forth in the Construction Agreement on an “all risk” basis insuring Construction Agent and Landlord, as their interests may appear, including coverage for the perils of earth movement (including but not limited to earthquake, landslide, subsidence and volcanic eruption), wind, flood, terrorist acts, if commercially available for similar operations in the Southeast region of the United States, at commercially reasonable cost, and boiler and machinery accidents.
     (a)  Generally . The builder’s risk policy shall provide coverage for (i) the buildings, all fixtures, materials, supplies, and machinery of every kind to be used in, or incidental to, the Work if the acquisition of any such item was funded with one or more Advances, (ii) the Improvements, (iii) property of others in the care, custody or control of GC or of a contractor to the extent GC is under obligation to insure for physical loss or damage, (iv) all preliminary works and temporary works, and (v) electronic equipment and media.
     (b)  Additional Coverages . The builder’s risk policy shall insure (i) inland transit with sub-limits sufficient to insure the largest single shipment to or from the Leased Premises from anywhere within the United States, Canada or other anticipated point of shipment, (ii) attorney’s fees, architect’s fees and other consulting costs, and permit fees directly incurred in order to repair or replace damaged insured property in an aggregate amount up to Two Million Dollars ($2,000,000), (iii) expediting expenses, (iv) off-site storage within one hundred (100) feet of the Leased Premises with sub-limits sufficient to insure the full replacement value of any property or equipment not stored on the Leased Premises, (v) the removal of debris, and (vi) demolition and increased costs of construction due to the operation of building laws or ordinances.
     (c)  Special Clauses . The builder’s risk policy shall include (i) a storm/earthquake clause, (ii) a requirement that the insurer pay losses within thirty (30) days after receipt of an acceptable proof or loss or partial proof of loss, (iii) a clause making this insurance primary over any other insurance (except any such builder’s risk policy placed and maintained by Construction Agent or Landlord or an Affiliate of Landlord which covers the Leased Premises) and (iv) a clause stating that the policy shall not be subject to cancellation by the insurer except after thirty (30) days prior written notice for non-payment of premium or for fraud or material misrepresentation by Construction Agent or Landlord.
     (d)  Access and Equipment Coverages . The builder’s risk policy shall (i) include an interim payments (or partial payment) clause allowing for the monthly payment of a claim pending final determination of the full claim amount, (ii) cover loss sustained when access to the Leased Premises is prevented due to an insured peril at premises in the vicinity of the Leased Premises, (iii) cover loss sustained due to the action of a public authority preventing access to the

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Leased Premises due to imminent or actual loss or destruction arising from an insured peril at premises in the vicinity of the Leased Premises and (iv) not contain any form of a coinsurance provision or include a waiver of such provision.
     (e)  Prohibited Exclusions . The builder’s risk policy shall not contain any (i) coinsurance provisions, or (ii) exclusion for loss or damage resulting from freezing or mechanical breakdown.
     (f)  Sum Insured . The builder’s risk policy shall (i) be on a completed value form, with no periodic reporting requirements, (ii) insure 100% of the replacement value of the Improvements, and (iii) value losses at replacement cost, without deduction for physical depreciation or obsolescence including custom duties, taxes and fees (if rebuilt or repaired).
      3.7. Bonding
     Landlord and Construction Agent have had the opportunity to review financial statements of the GC and have each made independent decisions to not require payment and performance bonds for the GC; provided, that, the GC shall be required pursuant to the terms of the Construction Contract to maintain a sub-guard insurance program (which program must comply with all applicable North Carolina insurance laws) with respect to all of its subcontractor, materialmen and other vendors in form, term and amount reasonably acceptable to Landlord and Construction Agent.
      3.8. Endorsements
     All policies of liability insurance required to be maintained by GC shall be endorsed as follows:
     (a) With the exception of insurance maintained in accordance with Section 3.4 hereof, if not already named, to name Construction Agent and Landlord as an additional insured and loss payee as specified by Construction Agent and Landlord;
     (b) To provide a severability of interests and cross liability clause; and
     (c) That the insurance shall be primary and not excess to or contributing with any insurance or self-insurance maintained by Landlord, Construction Agent or any other person or entity.
      3.9. Waiver of Subrogation.
     Construction Agent shall cause the GC to waive and shall cause its subcontractors and its or their insurers to waive any and every claim for recovery from Construction Agent or Landlord for any and all loss or damage covered by any of the insurance policies to be maintained under this Agreement to the extent that such loss or damage is recovered under any such policy. Inasmuch as the foregoing waiver will preclude the assignment of any such claim to the extent of such recovery, by subrogation (or otherwise), to an insurance company (or other person), GC and

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all contractors and subcontractors shall give written notice of the terms of such waiver to each insurance company which has issued, or which may issue in the future, any such policy of insurance (if such notice is required by the insurance policy) and shall cause each such insurance policy to be properly endorsed by the issuer thereof to, or to otherwise contain one or more provisions that, prevent the invalidation of the insurance coverage provided thereby by reason of such waiver.
      3.10. Conditions.
     (a)  Loss Notification . GC shall promptly notify Construction Agent and Landlord of any single loss or event likely to give rise to a claim against an insurer for an amount in excess of $5,000,000 covered by any insurance maintained pursuant to this Agreement.
     (b)  Loss Adjustment and Settlement . A loss under any insurance required to be carried pursuant to this Agreement shall be adjusted with the insurance companies, including the filing in a timely manner of appropriate proceedings, by GC, subject to the approval of Construction Agent and Landlord if such loss is in excess of $5,000,000. In addition Construction Agent may in its reasonable judgment consent to the settlement of any loss, provided that in the event that the amount of the loss exceeds $5,000,000 the terms of such settlement is concurred with by Landlord.
     (c)  Policy Cancellation and Change . All policies of insurance required to be maintained pursuant to this Agreement shall be endorsed so that if at any time should they be canceled, or coverage be reduced (by any party including the insured) which affects the interests of Construction Agent and Landlord, if applicable, such cancellation or reduction shall not be effective as to such parties for 30 days, except for non-payment of premium which shall be for 10 days, after receipt by Construction Agent and Landlord of written notice from such insurer of such cancellation or reduction. Any party required to carry insurance pursuant to this Agreement must obtain insurance coverage, within 15 days of such notice to Construction Agent and Landlord of the insurance reduction or cancellation which is equal to the amount of insurance coverage which that party carried prior to the cancellation or reduction. Each policy shall also provide evidence of such insurance to Construction Agent and Landlord on an ACORD 28 form or equivalent; provided, that in the event that such form is no longer available, such evidence of insurance is in a form reasonably satisfactory to Construction Agent and Landlord.
     (d)  Miscellaneous Policy Provisions . All policies of insurance required to be maintained pursuant to this Agreement shall (i) not include any annual or term aggregate limits of liability except as regards the insurance applicable to the perils of flood and earth movement and pollutant clean up of land and water at the Leased Premises (project site), (ii) with the exception of insurance maintained in accordance with Section 3.4 hereof, shall include Construction Agent and Landlord as either a loss payee or an additional insured, as applicable and as their respective interest may appear, and (iii) include a clause requiring the insurer to make final payment on any claim within 30 days after the submission of proof of loss and its acceptance by the insurer.

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     (e)  Separation of Interests . All policies (other than in respect to liability or workers compensation insurance) shall insure the interests of Construction Agent and Landlord regardless of any breach or violation by GC or any other party of warranties, declarations or conditions contained in such policies, any action or inaction of GC or any subcontractors.
     (f)  Acceptable Policy Terms and Conditions . All policies of insurance required to be maintained pursuant to this Agreement shall contain terms and conditions reasonably acceptable to Construction Agent and Landlord.
     (g)  Waiver of Subrogation . All policies of insurance to be maintained by the provisions of this Agreement shall provide for waivers of subrogation in favor of Construction Agent and Landlord.
     (h)  No Duty of Agent to Verify or Review . No provision of this Agreement shall impose on Landlord any duty or obligation to verify the existence or adequacy of the insurance coverage maintained by GC, nor shall Landlord be responsible for any representations or warranties made by or on behalf of GC to any insurance company or underwriter. Any failure on the part of Construction Agent and Landlord to pursue or obtain the evidence of insurance required by this Agreement from GC and/or failure of Construction Agent or Landlord to point out any non-compliance of such evidence of insurance shall not constitute a waiver of any of the insurance requirements in this Agreement.
      3.11. Insurance Premiums and Deductibles.
     Subject to the prior approval of Landlord prior to any payment by Construction Agent, Construction Agent shall be permitted to submit requisitions for reimbursement from the Escrow Funds of all amounts expended by Construction Agent or General Contractor for insurance premiums and deductibles for the insurance policies required pursuant to this Agreement. Landlord shall deliver written authorization to Escrow Agent to disburse all such amounts to Construction Agent within ten (10) days of Landlord’s receipt of such requisition and supporting documentation.
      3.12. Contractors’ Equipment Insurance.
     Construction Agent shall cause GC to maintain and GC shall ensure that all subcontractors maintain all risks contractors’ equipment insurance covering construction machinery and equipment owned and/or leased by the GC and used for the performance of the Work.

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ARTICLE IV
THE CONSTRUCTION
      4.1. Construction.
     Construction Agent shall use commercially reasonably efforts to cause the Work to be completed in compliance with the Plans and Specifications, the Operative Documents, all Legal Requirements and all Insurance Requirements, and Construction Agent shall use reasonable commercial efforts to enforce all warranties and guaranties of the Work.
      4.2. Amendments; Modifications.
     Construction Agent may at any time revise, amend or modify the Plans and Specifications or the Budget without the consent of Landlord; provided , that any such amendment or modification to the Plans and Specifications or the Budget: (i) does not result in the delay of the Outside Completion Date, and (ii) is not otherwise a Material Modification of the Work as described in the Plans and Specifications.
      4.3. Payment of Construction Costs.
     (a) Prior to commencement of construction, the Construction Agent, Landlord, GLF and a mutually acceptable escrow agent shall enter into a Construction Escrow Agreement in substantially the form set forth on Exhibit C attached hereto and incorporated herein (the “ Escrow Agreement ”) pursuant to which GLF shall deposit, at Landlord’s direction, with the Escrow Agent (as defined in the Escrow Agreement) the entire amount of the Construction Allowance (the “ Escrow Funds ”). The Escrow Funds shall be disbursed by the Escrow Agent in accordance with the Escrow Agreement to pay the costs of the Work as provided in the Budget, until all of the Escrow Funds have been disbursed. Thereafter, Construction Agent shall pay for any costs of the Work that are Additional Costs. Landlord shall have no obligation to pay for any costs or expenses that exceed the Construction Allowance. As used herein, “Additional Costs” shall mean (i) any amount in excess of the Construction Allowance that Construction Agent determines during the prosecution of the Work is necessary to complete the Work and (ii) any amount paid or cost incurred by Spirit in connection with the acquisition and installation of the fixtures listed on Exhibit “E” to this Agreement. In the event either party receives notice of a potential Additional Cost, such party shall send the other notice thereof setting forth the amount of such Additional Cost, such notice to be given in the manner provided for in Paragraph 21 of the Lease. All Additional Costs shall be considered eligible “Capital Improvements” as contemplated by the Inducement Agreement.
     (b) In the event requested by the Construction Agent, Landlord agrees to (i) issue requested purchase orders directly to first-tier subcontractors of the GC and (ii) thereafter pursue applicable statutory sales tax refunds. Upon receipt of any such refunds, Landlord will deposit all such refunds with the Escrow Agent to be held and delivered as Escrow Funds. All invoices resulting from such purchase orders will be paid with an Advance as provided in Article V.

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      4.4. Completion Date.
     The Work shall be deemed substantially complete at such time as either a temporary or permanent certificate of occupancy has been issued for the Leased Premises (the “ Completion Date ”). Within one hundred one-hundred twenty (120) days after the Completion Date, Construction Agent shall deliver to Landlord, (i) a copy of the final, unconditional certificate of occupancy for the Improvements (the “ Final C/O ”), which shall evidence Tenant’s right to occupy the Improvements and allow Tenant to operate the business prescribed in the Lease, (ii) originals or true and complete photocopies of all other final and unconditional certificates of occupancy, governmental licenses, regulatory approvals, permits, consents, certificates of compliance with zoning and other land use (if required), health and safety and/or other requirements that are applicable and/or required in connection with the construction, use and/or occupation of the Leased Premises (collectively, the “ Other Permits ” and, together with the Final C/O, the “ Final Permits ”), (iii) all final lien waivers from all contractors and subcontractors, and copies of all warranties and guaranties, (iv) an as-built survey reasonably acceptable to Landlord (hard copy as well as on a cd with Auto-Cad software), (v) if requested by Landlord, a date-down endorsement to Landlord’s title insurance policy acceptable in form and substance to Landlord, and (vi) written certifications from the GC stating that the Improvements have been completed in substantial accordance with the Plans and Specifications. In the event on the Completion Date (x) the Final C/O has not been issued, (y) any other Final Permits have not been issued, and/or (z) any punchlist items remain uncompleted or uncorrected, Construction Agent shall, and shall cause the GC to, diligently prosecute completion of all Work necessary to obtain all Final Permits and shall obtain all Final Permits and complete and correct all punchlist items as soon as possible after the Completion Date and in any event prior to the earlier of (i) the Outside Completion Date or (ii) such earlier date as may be required in order to comply with any applicable Legal Requirements. The requirement to deliver all items to Landlord and complete and correct all punchlist items and other work pursuant to this Section 4.4 shall survive the expiration of this Agreement and be deemed an obligation of Tenant under the Lease.
      4.5. Final Plans and Specifications.
     As soon as is reasonably practicable after completion of the Improvements, Construction Agent shall furnish Landlord with two (2) full sets of the final construction plans and specifications for the Improvements (together with a statement from the GC of material changes, if any, from the Plans and Specifications). The approval by Landlord of the Plans and Specifications and/or the final construction plans and specifications for the Improvements or any other action taken by Landlord with respect thereto under the provisions of this Lease shall not constitute an opinion or representation by Landlord as to the sufficiency of such plans and specifications nor impose any present or future liability or responsibility upon Landlord. The requirement to deliver the final construction plans and specifications to Landlord shall survive the expiration of this Agreement and be deemed an obligation of Tenant under the Lease.

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      4.6. Escrow Agent Fees.
     All Escrow Agent fees payable pursuant to the Escrow Agreement shall be payable as part of the Budget annually and in advance.
ARTICLE V
PAYMENT OF FUNDS
      5.1. Release of Construction Allowance.
     Provided that Construction Agent has complied with Section 5.2 of this Agreement, Landlord shall provide instruction to the Escrow Agent for the release of the Escrow Funds as hereinafter provided in this Agreement.
      5.2. Applications for Advances.
     Construction Agent shall make applications for Advances from the Escrow Funds (each, an “ Application for Payment ”) for the Work performed by the GC and any other contractors, subcontractors or materialmen (collectively, the “ Vendors ”) engaged by Construction Agent, acting as agent for the benefit of Landlord or Construction Agent, on a basis to be agreed between the GC and the Construction Agent in the Construction Agreement, subject to a ten percent (10%) retainage as provided in the Construction Agreement and other applicable Work Agreements. Construction Agent shall provide the following, in form and substance reasonably acceptable to Landlord and the Construction Consultant, twenty (20) days prior to the date requested by Construction Agent for approval of each disbursement by the Escrow Agent of each progress payment (“ Advance ”) to the Vendors, which Advance request shall be in the form attached hereto as Exhibit “D ” and shall be provided to Landlord on the same date as the following submittals:
     (a) A certificate of Construction Agent certifying (i) that all construction prior to the date of such draw request has been done substantially in accordance with the Plans and Specifications; and (ii) the amount requested will be utilized for the Work;
     (b) Copies of all bills or statements for expenses for which the disbursement is requested, initialed and approved by Construction Agent, including the application for payment from the GC, made by the GC in accordance with the requirements and schedule under the Construction Agreement;
     (c) Partial and/or final mechanics’ lien waivers, as applicable, for all amounts previously paid to the GC, or any other Vendors, including any subcontractors and suppliers of the GC; and
     (d) A Disbursement Authorization to be executed and delivered to Escrow Agent for release and disbursement of the Advance from the Escrow Funds, in substantially the form set forth as Exhibit A to the Escrow Agreement (the “ Disbursement Authorization ”).

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      5.3. Payment of Vendors.
     Within twenty (20) days of the receipt of an Application for Payment and all submittals specified in Section 5.2 , all in the form and substance as required hereunder and under the other Operative Documents and to the extent of available Escrow Funds, Landlord shall execute and deliver to the Escrow Agent the Disbursement Authorization.
      5.4. Procedures for Applications for Payment.
     Construction Agent shall periodically submit Applications for Payment for costs incurred by Landlord in connection with the Work in accordance with the Budget, including but not limited to, expenses associated with insurance required under this Agreement. No more than one Application for Payment shall be submitted each month for disbursements of the Escrow Funds under the Escrow Agreement.
      5.5. Construction Dispute Resolution.
     (a) In the event Landlord or the Construction Consultant fails to approve the Application for Payment, Landlord, within twenty (20) days following receipt of such Application for Payment, shall provide written notice to Construction Agent, specifying in reasonable detail Landlord’s reason(s) for rejection of all or any portion of the requested Advance. Upon receipt of such notice, Construction Agent shall have five (5) business days to either (x) accept the recommendation of Landlord and the Construction Consultant or (y) provide Landlord with a written request for the matter to be resolved by the Construction Consultant and Construction Agent’s construction inspector. In the event Construction Agent gives Landlord notice pursuant to clause (y) above, such disagreement shall be referred to the Construction Consultant and Construction Agent’s construction inspector within five (5) business days after Landlord’s receipt of such notice for resolution by the Construction Consultant and such construction inspector. In the event that the Construction Consultant and Construction Agent’s construction inspector are unable to resolve the matter within five (5) business days after both have received written notice of such disagreement, the matter shall be referred to a third party construction consultant acceptable to Landlord and Construction Agent, and the decision of such third party consultant shall be binding on Landlord and Construction Agent absent manifest error. Pending resolution of any such dispute, the portion of any Advance requested by Construction Agent that is not in dispute will be authorized by Landlord and Construction Agent for payment by Escrow Agent in accordance with the provisions of this Article V. Upon resolution of any such dispute, the portion of any requested Advance which was in dispute or the agreed upon portion thereof, as appropriate, Landlord and Construction Agent shall authorize the Escrow Agent to make such payment from the Escrow Funds in accordance with the provisions of this Article V.
     (b) Upon resolution of any dispute pursuant to subparagraph (a) above, if it is determined that there was no reasonable basis for Landlord to withhold approval of the disbursement of any portion of an Advance requested by Construction Agent and that the

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withholding of such approval caused an actual delay in the construction of the Work, the Outside Completion Date shall automatically be extended for the period of any such delay.
ARTICLE VI
CONSTRUCTION PERIOD EVENTS OF DEFAULT
      6.1. Construction Period Events of Default.
     If any one (1) or more of the following events (each a “ Construction Period Event of Default ”) shall occur:
     (a) subject to Section 7.1 , the Completion Date does not occur on or before the Construction Deadline;
     (b) subject to Section 7.1 , Construction Agent fails to complete the Work by the Outside Completion Date;
     (c) any Event of Default shall have occurred under the Lease and not be cured within any cure period expressly permitted under the terms of the Lease; and
     (d) subject to Section 7.1 , Construction Agent shall fail to observe or perform any term, covenant or condition of this Agreement or the Work Agreements in any material respect and such failure to observe or perform any such term, covenant or condition shall continue uncured for more than sixty (60) days after Construction Agent has received written notice thereof (or such longer period as is necessary to effect a cure if Construction Agent is diligently pursuing such cure during such extended period);
then, in any such event, Landlord may, as its sole and exclusive remedy, all other rights and remedies being hereby released and waived, terminate this Agreement by giving Construction Agent written notice of such termination (and upon the expiration of the time fixed in such notice, this Agreement shall terminate) and demand payment of the Liquidated Damages Amount as contemplated by the Inducement Agreement. In the event Landlord terminates this Agreement and the Lease upon the occurrence of a Construction Period Event of Default, the parties acknowledge that it would be extremely difficult to determine precisely the amount of actual damage that would be suffered by Landlord due to such Event of Default but that the Liquidated Damages Amount is a fair and reasonable determination of the amount of actual damages that would be suffered by Landlord for such event of default and that these liquidated damages do not constitute a penalty. The remedies set forth in this Section 6.1 are the sole and exclusive remedy of the Landlord for a Construction Period Event of Default (other than Landlord’s rights under the indemnities contained in the Lease which, by the express terms thereof, are to survive the termination of the Lease).

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      6.2. Actions on Termination.
     In the event Landlord terminates this Agreement as provided in Section 6.1 , Construction Agent shall, (i) surrender and return the Leased Premises to Landlord, (ii) take such action as Landlord may reasonably request in order to transfer, assign and deliver to Landlord (or its designee) all of Construction Agent’s and Tenant’s rights and claims in and to all construction contracts, architect contracts, plans and specifications, warranties, guaranties, bonds, permits, entitlements and other rights and agreements with respect to the Improvements and/or the construction thereof, including, without limitation, all Work Agreements, and (iii) instruct Escrow Agent in writing to disburse any remaining Escrow Funds to Landlord.
ARTICLE VII
CONSTRUCTION FORCE MAJEURE EVENTS
      7.1. Construction Force Majeure Events.
     (a) If a Construction Force Majeure Event prevents, or could reasonably be expected to prevent, Construction Agent from completing the Improvements prior to the Outside Completion Date, Construction Agent shall promptly provide Landlord with written notice thereof within fifteen (15) days of Construction Agent’s knowledge of the occurrence thereof (the “ Construction Force Majeure Declaration ”). Upon receipt of the Construction Force Majeure Declaration, Landlord and Construction Agent shall consult with each other as to what steps, if any, are to be taken to remediate such Construction Force Majeure Event, including consulting as to the appropriateness of an extension of the Outside Completion Date to the extent reasonably necessary to address such Construction Force Majeure Event. Construction Agent shall take all commercially reasonable and lawful measures in its role as Construction Agent necessary to minimize the disruption of the construction process and to prevent further damage arising from such Construction Force Majeure Event. Construction Agent shall be entitled to reimbursement for any costs directly related to minimizing the disruption and to preventing further damage of such Construction Force Majeure Event, and Landlord shall authorize Escrow Agent to fund such reimbursement from the Escrow Funds. Construction Agent shall, within twenty (20) days of the delivery of the Construction Force Majeure Declaration, submit to Landlord a budget detailing the costs that would be incurred in remediating such Construction Force Majeure Event and a schedule for effecting the same. Landlord may object to the Construction Agent’s remediation plan only for the reasons Landlord could object to the Plans and Specification as set forth in Section 2.2 . Construction Agent will commence such remediation upon Landlord’s approval of the remediation plan.
     (b) When Landlord authorizes Construction Agent’s remediation plan, Landlord shall make available to Construction Agent the Net Award or Net Proceeds payable to Landlord with respect to such event to the extent necessary to remediate such event upon presentation of evidence reasonably satisfactory to Landlord and the Construction Consultant that the work contemplated by the remediation plan has been performed.

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     (c) The Outside Completion Date and the Basic Rent Commencement Date shall be automatically extended until such date that the Improvements are completed in accordance with the Plans and Specifications (as modified by, as necessary, to implement the remediation plan).
ARTICLE VIII
MISCELLANEOUS
      8.1. Notices.
     All notices required or permitted to be given under this Agreement shall be in writing and delivered as provided in Paragraph 21 of the Lease.
      8.2. Successors and Assigns.
     This Agreement shall be binding upon and inure to the benefit of Landlord, Construction Agent and the respective successors and the permitted assigns of either party. Construction Agent may not assign this Agreement or any of its rights or obligations hereunder or with respect to the Leased Premises in whole or in part to any Person other than an Affiliate, without the prior written consent of Landlord.
      8.3. GOVERNING LAW.
     THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE WHERE THE LEASED PREMISES ARE LOCATED (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
      8.4. Remedies of Construction Agent.
     In the event of any breach by Landlord of the terms hereof, Construction Agent shall have all rights and remedies afforded it at law or equity; provided, however, that any such claim is expressly limited to the amount of undisbursed Escrow Funds, and Landlord shall not have any responsibility or liability for any punitive, incidental or consequential damages (including strict liability in tort) related to such breach.
      8.5. Amendments and Waivers.
     This Agreement may not be terminated, amended, supplemented, waived or modified except in accordance with the provisions of Paragraph 35(d) of the Lease.
      8.6. Counterparts.
     This Agreement may be executed in any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one (1) and the same instrument.

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      8.7. Severability.
     Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
      8.8. Headings and Table of Contents.
     The headings and table of contents contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
      8.9. Approvals By Landlord.
     Any approval by Landlord of or consent by Landlord to any plans, specifications or other items to be submitted to and/or reviewed by Landlord pursuant to this Agreement shall be deemed to be strictly limited to an acknowledgment of approval or consent by Landlord thereto and such approval or consent shall not constitute the assumption by Landlord of any responsibility for the accuracy, sufficiency or feasibility of any plans, specifications or other such items and shall not imply any acknowledgment, representation, warranty or covenant by Landlord that the design is safe, feasible, structurally sound or will comply with any legal or governmental requirements, and the GC shall be responsible for all of the same.
      8.10. Termination of Agreement.
     Upon any return of the Leased Premises to Landlord pursuant to the terms of this Agreement, in addition to all other obligations of Construction Agent provided for or contemplated herein, Construction Agent shall take such action as Landlord may reasonably request in order to transfer, assign and deliver to Landlord (or its designee) all of Construction Agent’s and Tenant’s rights and claims in and to all Work Agreements and all plans and specifications, warranties, guaranties, bonds, permits, entitlements and other rights and agreements with respect to the Improvements and/or the construction thereof (collectively, “ Contracts ”).
      8.11. Additional Definitions.
     “ Construction Force Majeure Event ” means, with respect to the Leased Premises:
     (A) a flood, earthquake, hurricane, cyclone, tornado or other act of God arising during the Construction Period; or
     (B) any change in any state or local law, regulation or other legal requirement arising during the Construction Period and relating to the use of the Site or the construction of the Improvements; or

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     (C) strikes, lockouts, labor troubles, unavailability of materials (including delays in delivery), riots, civil unrest or insurrections or other similar causes beyond Construction Agent’s control that occur during the Construction Period; or
     (D) the occurrence of a casualty loss or Taking during the Construction Period; or
     (E) any other event not caused by or the result of any act(s) or omissions either directly or indirectly, and is beyond the control of, Construction Agent, which causes damage to the Leased Premises or which prevents Construction Agent from completing the Improvements prior to the Outside Completion Date and which could not have been avoided or which cannot be remedied by Construction Agent through the exercise of commercially reasonable efforts, including, without limitations, acts of Landlord and the GC.
     “ Liquidated Damages Amount ” shall have the meaning assigned to that term in the Inducement Agreement.
     “ Material Modification ” means any revision, amendment or modification that (i) is reasonably likely to result in (w) completion of any of the Work after the Outside Completion Date, (x) a violation of applicable State law, (y) a violation of any County Agreement or the GLF Grant Agreement or (z) any material adverse change in the fair market value, utility or useful life of the Landlord Alterations, or (ii) is reasonably likely to have a material adverse effect on the ability of the Construction Agent to perform its collective obligations under, or the validity and enforceability of the Operative Documents.
[Signature page follows.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
             
    Spirit AeroSystems, Inc.,
as Construction Agent
   
 
           
 
  By:        
 
           
 
           
 
  Name:        
 
           
 
           
 
  Title:        
 
           
 
           
    The North Carolina Global TransPark
Authority,
as Landlord
   
 
           
 
  By:        
 
           
 
           
 
  Name:        
 
           
 
           
 
  Title:        
 
           

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SPIRIT ALPHA   May 12, 2008
EXHIBIT “A”
INITIAL PLANS AND SPECIFICATIONS
SUMMARY — SCOPE OF WORK
The work shall be as stated in the Contract Documents of the request for proposal for the Spirit AeroSystems, ALPHA project.
The scope of work shall include but not be limited to:
  *   Design/Construct building and site development meeting LEED Silver Certification
 
  *   Provisions for customer provided Enhanced Commissioning — LEED Certification
 
  *   Architectural renderings
 
  *   Partial design releases for fast track design/build construction
 
  *   Final construction documents
 
  *   Shop drawing submittals
 
  *   Construction
 
  *   Testing and Reports
 
  *   As-built drawings and O&M Manuals
The site shall provided with all infrastructure support for the people and processes required for the program. The building shall be of a size, height and configuration to meet manufacturing needs for the program requirements. It is expected that the design/build firm will specify materials and systems which are locally supported by trades and suppliers. The requirements for design, materials and construction that is illustrated will not be inclusive for all elements required for completion of the project. Drawing layout attachments are provided to graphically illustrate the physical space required, physical relationships, and anticipated location on property. Specific project requirements will be established as a separate document.
A. DESIGN
1.   Completion of all discipline’s (architectural, civil, structural, mechanical, electrical, fire protection) construction documents including drawings and specifications shall be supervised and sealed by licensed Architects/Engineers (A/E). Documents shall include but not be limited to structural calculations, surveys, construction plans/details and material specifications.
 
2.   The Design/Build Contractor is encouraged to propose, at any time, innovations which may result in early occupancy or lower; construction, operations, and maintenance costs. Particular emphasis shall be placed on green strategies for

A - 1


 

     
SPIRIT ALPHA   May 12, 2008
    our intent to LEED Certify for New Construction. Such strategies shall be submitted, in writing, to Spirit AeroSystems for consideration and approval prior to proceeding.
 
3.   The Design/Build Contractor shall resolve any conflicts involving design with local, state and federal jurisdictions in obtaining all required permits and certificates of occupancy. Any changes in design shall be submitted to Spirit AeroSystems in writing for our written approval.
 
4.   The Design/Build Contractor shall be responsible for any additional required information for:
  a.   Soils testing as required for the foundation design, from an independent testing laboratory.
 
  b.   Surveys for topographical information.
 
  c.   Site inspection for utility location verification.
 
  d.   Construction testing program.
 
  e.   Training for building equipment and systems.
    Spirit Aerosystems shall receive five (5) copies of all tests results and audiovisual recordings made for training.
 
5.   Submission of design development drawings for Spirit AeroSystems review and approval for each discipline with meetings at 30%, 60%, 90%, 100%. All revisions, comments and required information shall be resolved for incorporation into the drawings and/or specifications prior to the next review meeting. Final post 100% submittal for construction shall be complete with all comment incorporations.
 
6.   Color presentation renderings depicting multiple aerial views will be required for the 30% and 60% and 100% design review periods.
B.  CONSTRUCTION
1.   Vendor certified shop drawings (SD) and data sheets shall be provided for all materials, assemblies and equipment. Contractor approval and Spirit review is required before start of fabrication. They shall provide all pertinent data and information necessary to evaluate each item. Irrelevant information on drawings and data sheets shall be completely marked out, leaving only data that pertains to the items submitted for Spirit review. Contractor approved submittals shall include six (6) hard copies and one (1) reproducible (if larger than 11” x 17”)
 
2.   Before shop drawings or brochures are submitted for Spirit review, the contractor shall certify that each separate drawing or each item of equipment complies with the specifications and will fit the physical operational/maintenance clearances for the area. Certification may be in the form of a stamp which states:

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SPIRIT ALPHA   May 12, 2008
“This shop drawing has been checked prior to submittal and complies in all respects, except as noted, with requirements of the plans, specifications, and physical space limitations of the area.”
Other Certifications/Reports from a testing laboratory shall be provided to the Spirit representative for the following:
  a.   Mill analysis, tensile and bending tests for reinforcing steel in concrete.
 
  b.   Concrete compressive tests for every 50 cubic yards.
  *   Beam tests for concrete flatwork.
 
  *   Cylinder method for foundations.
  c.   Masonry units meet required ACI Standards.
 
  d.   Wood preservative treatment
 
  e.   Finish materials requiring a Flame spread rating of 25 or less.
 
  f.   Insulation ‘U’ values and permability values for vapor transmission.
 
  g.   Roofing membrane conformance to manufacturers claims for strength and thickness.
 
  h.   Skylight impact resistance and UV resistance to color change
 
  i.   Sealants and caulking for conformance to manufacturers requirements and application.
 
  j.   Glazing for strength, fire assembly rating, safety glazing, etc.
 
  k.   Sound rated door assemblies for conformance to door manufacturer’s stated properties.
3.   Control shop drawings shall be submitted as hardware and exact electrical conditions become known. The documents initial release of the 500 series control drawings shall be identified as preliminary. The documents shall be revised by the vendor at the shop drawing review and reissued by the A/E. This process is repeated after all hardware arrives and electrical connections are verified.
C. PROJECT CLOSEOUT SUBMITTALS
Project closeout submittal information shall include but not be limited to the following:
Spare Parts List
Installation Manual
Operations/Maintenance Manual

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SPIRIT ALPHA   May 12, 2008
Systems Manual
Trouble Shooting
As-Built Engineering Drawings
Wiring Diagrams
Manufactures Contacts Directory
Warranties
Test Reports
Certifications
Training Videos
1.   Record drawings (redlines) shall be one complete set of prints kept at the job site showing all approved field changes and deviations from the contract drawings and specifications as they occur. This record must be accurate, complete with sufficient detail to be intelligible.
 
    A complete set of “As-built” (AB) drawings shall be provided by the design build firm’s A/E firm within 30 working days of project completion. As-builts shall be based on the record set of drawings and revisions made by approved shop drawing submittals and field/change orders. All revisions shall receive a mark w/ description in title block. Drafting standards of the original drawings shall be maintained for delivery to Spirit. Completed submittal to Spirit shall consist of one (1) hard copy, one (1) full size mylar reproducible copy and one CDROM copy meeting the Spirit CAD requirements.
 
2.   Validation of performance from manufacturers representative shall be provided to the Spirit representative for acceptance of installation:
  a.   Drop or operational tests for fire rated doors.
 
  b.   Motorized door operation including but not limited to controls, speed, and safety features.
 
  c.   Elevator operation including but not limited to controls, speed, and safety features.
 
  d.   Pedestrian door hardware.
 
  e.   Roofing (uplift and mil thickness)
 
  f.   Secondary containment coating systems
 
  g.   Waterproofing
 
  h.   Access flooring

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SPIRIT ALPHA   May 12, 2008
  i.   Operable partitions
 
  j.   Fire suppression systems
 
  k.   Access flooring
3.   Certifications/Reports from a testing laboratory shall be provided to the Spirit representative for the following:
  a.   Lighting level conformance
 
  b.   Motor full load amperes and housepower, efficiency and power factor.
 
  c.   Electrical — Starter line to line voltage on all phases.
 
  d.   Completion of Electrical UL Master Label and LPI Systems Certification Forms 175A and 175B.
 
  e.   Test Electrical Cables (megger test)
 
  f.   Balancing of hydraulics
 
  g.   Water balancing
 
  h.   Water analysis
 
  i.   Balancing of air flow
 
  j.   Exhaust conformance to specification for fumes/smoke
    Additional tests shall be provided at no additional costs to Spirit for re-testing after necessary adjustments to an installation. This will provide maintenance operational baselines.
 
4.   Four (4) copies of completed manuals for “Operation and Maintenance” along with Systems Manuals shall be provided to Spirit thirty (30) days before project completion for “Instructional Period for Spirit Personnel”. Each manual shall be identified by project description, project number(s). The manuals shall include:
  a.   Manufacturers certified technical product data including rated capacities, pressure drops, operative parameters, material specifications, weights (shipping, installed, & operative), and dimensioned drawings.
 
  b.   Shop drawings shall indicate asemblies including dimensions, weight loadings, required clearances, wiring diagrams and methods of assembly of components. The following electrical items shall be included as a minimum:
             
 
  Transformers   5KV switchgear   15KV switchgear
 
  Motor Control Centers   Distribution Panels   Branch Circuit Panels
 
  Disconnects   Starters   Light Fixtures
 
  Fire Alarm System   P.A. System   Lighting Control System
 
  Lightning Protection System        

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SPIRIT ALPHA   May 12, 2008
      Wiring diagrams shall indicate power supply wiring and ladder type diagrams for interlock and control wiring. Field installed and factory wiring shall be clearly differentiated.
 
  c.   Maintenance data shall include operating and maintenance instructions for each piece of mechanical equipment. Include spare parts list for each unit, control, and accessory. Include anticipated man-hour labor maintenance requirements.
 
  d.   Equipment shall be identified as to location by general narative or column I.D.
Indicate in technical specifications the following: “Instructional Period for Spirit Personnel”: Prior to final acceptance of the mechanical systems, an instructional period shall be provided for the Spirit personnel. Items to be covered and responsibilities are as follows:
    Demonstration of operation of each piece of equipment by Contractor.
 
    Maintenance procedures for each piece of mechanical equipment by the Contractor and/or manufacturer.
 
    Operation and maintenance of entire temperature control system by Controls Subcontractor.
    Spirit representative to coordinate training with Spirit zone maintenance supervisor.
 
5.   Manufacturer warranty/guarantees shall be provided by the Contractor within thirty (30) days of project completion and/or installed product acceptance for any products warranted longer than the general construction guarantee. They shall include but not be limited to the following:
  a.   Roofing
 
  b.   Door Equipment
 
  c.   Mechanical Equipment
 
  d.   Electronic Equipment
 
  e.   Coatings/Paint
    Warranty/guarantees and service agreements shall clearly stated exclusions and start/end dates.
 
6.   Non-standard tools required in the normal maintenance, adjustment and operation of the equipment shall be provided to Spirit by the Contractor at project completion.
D. ALTERNATES

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SPIRIT ALPHA   May 12, 2008
None at this time.
E. ALLOWANCES
1.   Landscaping — $50,000 including all plantings.
F. SPECIAL PROJECT REQUIREMENTS
1.   Full coverage underhung 35’H hook height crane bridges.
END

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SPIRIT ALPHA   May 12, 2008
(MAP)

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EXHIBIT “B”
COUNTY AGREEMENTS
     1. Agreement dated April 6, 2006 by and between Lenior County, North Carolina and the GTPA.
     2. Agreement for Fire Protection Services dated September, 2007, by and between the City of Kinston and the GTPA.
     3. Airport Joint Use Agreement between Lenoir County/City of Kinston Airport Commission, Lenoir County, City of Kinston, the GTPA and the Air Force Reserve.

B - 1


 

EXHIBIT “C”
FORM ESCROW AGREEMENT

C - 1


 

EXHIBIT “D”
FORM OF APPLICATION FOR PAYMENT
North Carolina Global TransPark Authority
   
 
 
 
 
 
 
North Carolina        
 
     
 
   
Attention:
 
 
Date:
 
 
Project:
 
REQUEST FOR AN ADVANCE
     This Request For An Advance (this “Request ”) is made under that certain Construction Agency Agreement, dated as                      , 200_, by and between Spirit AeroSystems, Inc., as Construction Agent (the “ Construction Agent ”), and Global TransPark Authority, as Landlord (the “ Landlord ”)
     The total amount of the costs incurred in connection with the Work for which an Advance from the Construction Allowance is hereby requested is specified below as the “Total Amount of Requested Advance.” The Construction Agent hereby requests that Landlord execute and deliver the enclosed Disbursement Authorization to Escrow Agent on the date as specified below as the “Requested Date for Approval” at least twenty (20) days after the date of receipt of this Request.
     The costs incurred in connection with the Work that are included within this Request are listed below and are attached to this Request:
             
VENDOR (Scope)   DRAW/INVOICE NO.   DATE   AMOUNT
 
 
 
Total Amount of Requested Approval
     $                     

D - 1


 

     Requested Date for Advance (i.e. 20 days after receipt by Landlord)
                               

D - 2


 

     The Construction Agent, pursuant to Section 5.2 of the Construction Agency Agreement, submits this Request and certifies the following (all capitalized terms used in this Request but not defined herein shall have the meanings given to such terms in the Construction Agency Agreement):
     1. All conditions precedent to the requested Advance contained in the Construction Agency Agreement have been satisfied.
     2. The proceeds of the Advance requested herein shall be used solely to pay costs incurred in connection with the Work.
     3. No part of the costs incurred in connection with the Work paid with the funds advanced under any previous Request for an Advance is a basis for this Request.
     4. Attached to this Request is a copy of AIA Application for Payment Form that the Construction Agent received from the GC for the portion of Work for which the Construction Agent is seeking payment pursuant to this Request. If no AIA Application for Payment Form is attached, then either no costs were incurred on the part of the GC since the last the date of the last Request For An Advance, or the GC did not submit for payment in a timely manner.
     5. Construction of all Improvements to date has been performed in a good and workmanlike manner and in accordance with the requirements set forth in the Construction Agency Agreement.
     6. The Disbursement Authorization attached hereto sets for the name, address and wire instructions for the disbursement of the requested Advance, and the Landlord is hereby requested to execute and deliver the Disbursement Authorization to the Escrow Agent on or before the date set forth above.
             
    Very truly yours,    
 
           
    Spirit AeroSystems, Inc ., in its capacity
as Construction Agent
   
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           

D - 3


 

EXHIBIT “E”
    Overhead Cranes
 
    Overhead Specialized Material Handling Equipment
 
    Autoclave
 
    Cold Storage Facility
 
    Nitrogen Generation and Storage Equipment

E - 1

EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey L. Turner, certify that:
     1. I have reviewed this Quarterly Report on Form 10-Q of Spirit AeroSystems Holdings, Inc. (“registrant”);
     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
 
  /s/ Jeffrey L. Turner
 
Jeffrey L. Turner
President and Chief Executive Officer
   
Date: August 1, 2008

EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ulrich Schmidt, certify that:
     1. I have reviewed this Quarterly Report on Form 10-Q of Spirit AeroSystems Holdings, Inc. (“registrant”);
     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
         
 
  /s/ Ulrich Schmidt
 
Ulrich Schmidt
Executive Vice President and Chief Financial Officer
   
Date: August 1, 2008

EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
     In connection with the Quarterly Report of Spirit AeroSystems Holdings, Inc. (the “Company”) on Form 10-Q for the period ending June 26, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey L. Turner, as President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
 
  /s/ Jeffrey L. Turner
 
Jeffrey L. Turner
President and Chief Executive Officer
   
Date: August 1, 2008

EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
     In connection with the Quarterly Report of Spirit AeroSystems Holdings, Inc. (the “Company”) on Form 10-Q for the period ending June 26, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ulrich Schmidt, as Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
         
 
  /s/ Ulrich Schmidt
 
Ulrich Schmidt
Executive Vice President and Chief Financial Officer
   
Date: August 1, 2008