Exhibit 10.1

 

FOIA CONFIDENTIAL

TREATMENT REQUESTED

 

SUPPLEMENT NO. PA-0436-5

TO

 

MASTER PURCHASE AGREEMENT NO. PA-0436

 

BETWEEN

 

BOMBARDIER INC.

 

AND

 

HORIZON AIR INDUSTRIES, INC.

 

This Supplement is part of the Master Purchase Agreement No. PA-436 entered into
between BOMBARDIER INC., a Canadian corporation represented by Bombardier
Aerospace, Regional Aircraft having offices at 123 Garratt Boulevard, Downsview,
Ontario, Canada (“Bombardier”) and Horizon Air Industries, Inc. (“Buyer”) dated
the 21st day of December, 1998 (the “Agreement”) and evidences our further
agreement with respect to the matters set forth below.

 

The provisions of the Agreement shall apply to the Bombardier products purchased
and sold in accordance with this Supplement PA 0436-5. All capitalized terms
herein, unless defined herein, shall have the same respective meanings as in the
Agreement. This Supplement PA 0436-5 is subject to the provisions of the
Agreement, all of which are incorporated herein, provided that in the event of
any inconsistency between the provision of the Agreement and the provisions of
this Supplement PA 0436-5, the latter shall take precedence.

 

Article 1 below supplements Article 2 of the Agreement.

 

ARTICLE 1 SUBJECT MATTER OF SALE

 

1.1 Subject to the provisions of the Agreement and this Supplement PA 0436-5,
Bombardier will sell and Buyer will purchase twelve (12) additional Bombardier
DHC-8Q Series 400 model DHC-8-402 aircraft manufactured pursuant to Detail
Specification number DS8-400 Rev. 1 Amend NC, Detail Specification for the
DHC-8-402 dated April 2002, listed in Schedule 1 attached hereto, as same may be
modified from time to time in accordance with the Agreement and this Supplement
PA 0436-5 (the “Specification”) as supplemented to reflect the incorporation of
the Buyer selected optional features (“Buyer Selected Optional Features”) set
forth in Schedule 2 hereto (individually or collectively the “Aircraft”).

 

Supplement No. PA-0436-5    -1-                Initials           Buyer
             Bombardier             

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Article 2 below supplements Article 4 of the Agreement.

 

ARTICLE 2.0 PRICE

 

2.1

   (a )   The base price for each of the Aircraft (excluding the Buyer Selected
Optional Features) for delivery in accordance with Article 4 hereof Ex Works
(Incoterms 1990) Bombardier’s facilities in Downsview, Ontario is [***]*
expressed in [***] US Dollars; and      (b )  

The base price of the Buyer Selected Optional Features (Schedule 2) for the
Aircraft is [***] expressed in November 1, 2006 US Dollars.

 

The Aircraft base price shall be the base price for the Aircraft as stated in
paragraph (a), plus the base price of the Buyer Selected Optional Features as
stated in paragraph (b) (the “Base Price”). The price of the Aircraft shall be
adjusted to the Delivery Date to reflect economic fluctuations during the period
from November 1, 2006 to the Delivery Date of each Aircraft (“Aircraft Purchase
Price”). Such adjustments shall be based on the economic adjustment formula
attached hereto as Schedule 3 (“Economic Adjustment Formula”) but when adjusted,
the Aircraft Purchase Price shall in no case be lower than the Aircraft Purchase
Price, as stipulated in Article 2.1 herein, and starting from the [***] base
year, escalated [***].

 

Article 3.0 below supplements Article 5.0 of the Agreement.

 

ARTICLE 3.0 PAYMENT

 

3.1 Bombardier has previously received a deposit for certain of the Aircraft, as
set forth in Article 3.2.2 to this Supplement.

 

3.2 Payment Terms:

 

3.2.1 Buyer shall make payment or cause payment to be made for each of the
Aircraft as follows:

 

  (a) [***] of the net Aircraft Purchase Price upon execution of this Supplement
PA 0436-5;

 

  (b) [***] of the net Aircraft Purchase Price fifteen (15) months prior to its
Scheduled Delivery Date;

 

  (c) [***] of the net Aircraft Purchase Price twelve (12) months prior to its
Scheduled Delivery Date;

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -2-                Initials           Buyer
             Bombardier             

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  (d) [***]* of the net Aircraft Purchase Price nine (9) months prior to its
Scheduled Delivery Date;

 

  (e) [***] of the net Aircraft Purchase Price six (6) months prior to its
Scheduled Delivery Date; and

 

  (f) the balance of the Aircraft Purchase Price shall be received on or before
the Delivery Date of such Aircraft to Buyer.

 

All payments referred to in paragraphs (c) through (f) above are to be made on
the first day of the applicable month.

 

3.2.2 The sum of [***] United States Dollars paid by Buyer pursuant to
Supplement No. PA 0436-1, as amended, and currently held by Bombardier against
the current [***] in Supplement No. MPA0436-1 and [***] in Supplement No.
MPA0436-3 thereunder, (the “Transfer Deposit”), shall be transferred and
retained by Bombardier against the Aircraft purchased pursuant to this
Supplement No. MPA 0436-5. The Transfer Deposit shall be applied against Buyer’s
obligations as they become due under this Agreement.

 

3.3 For the sole purpose of the calculations set forth in Article 3.2.1
(a) through (f) above, the Aircraft Purchase Price shall be the Aircraft
Purchase Price [***].

 

3.4 Buyer shall make all payments due under this Agreement in electronic funds
transfer by deposit on or before the due date to Bombardier’s account in the
following manner:

 

(a)

   Transfer to:   [***]     

Account Name:

 

[***]

    

Account #:

 

[***]

    

Bank Name:

 

[***]

    

ABA#:

 

[***]

    

Please reference:

 

Invoice # and/or Aircraft Serial #

 

Article 4.0 below supplements Article 6.0 of the Agreement.

 

ARTICLE 4.0 DELIVERY PROGRAM

 

4.1 The Aircraft shall be offered for inspection and acceptance to Buyer at
Bombardier’s facility in Downsview, Ontario during the months set forth below:
(the “Scheduled Delivery Dates”).

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -3-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

DELIVERY SCHEDULE

 

First Aircraft    December 2006 Second Aircraft    December 2006 Third Aircraft
   January 2007 Fourth Aircraft    February 2007 Fifth Aircraft    February 2007
Sixth Aircraft    March 2007 Seventh Aircraft    April 2007 Eighth Aircraft   
April 2007 Ninth Aircraft    May 2007 Tenth Aircraft    June 2007 Eleventh
Aircraft    June 2007 Twelfth Aircraft    July 2007

 

Article 5.0 below supplements Article 7.0 of the Agreement.

 

ARTICLE 5.0 BUYER INFORMATION

 

5.1 Pursuant to Article 7.1 of the Agreement, Buyer will provide the information
set forth in Article 7.1 of the Agreement as soon as practicable following
execution of this Supplement PA 0436-5.

 

ARTICLE 6.0 NON-EXCUSABLE DELAY

 

Article 6.1 below supplements Article 14.1 of the Agreement.

 

6.1 If delivery of the Aircraft is delayed by causes not excused under Article
13.1 of the Agreement (a “Non-Excusable Delay”), Bombardier shall pay Buyer
[***] for any such delayed Aircraft.

 

Article 6.2 below supplements Article 14.3 of the Agreement.

 

6.2 The period of days referred to in Article 14.3 of the Agreement is sixty
(60) days.

 

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

 

Supplement No. PA-0436-5    -4-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

Article 8.0 below supplements Annex A, Article 4 of the Agreement.

 

ARTICLE 8.0 - TECHNICAL DATA

 

8.1 Technical Data Provided

 

With each additional Aircraft purchased hereunder, Bombardier will provide, at
no additional charge, one (1) copy of the Airplane Flight Manual, Quick
Reference Handbook, Airplane Operating Manual (“AOM”) and Weight and Balance
Manual. Such technical manuals/documents will be prepared generally in
accordance with revision 34 of ATA Specification 100 and 2100.

 

The Technical Data and the additional manuals provided with each Aircraft shall
be in the English language and shall provide information on items manufactured
according to Bombardier’s detailed design and in those units of measure used in
the Specification or as may otherwise be required to reflect Aircraft
instrumentation, as may be mutually agreed.

 

8.2 List Of Technical Data

 

ITEM

--------------------------------------------------------------------------------

  

DOC

--------------------------------------------------------------------------------

   CONF

--------------------------------------------------------------------------------

   MEDIUM

--------------------------------------------------------------------------------

   QTY

--------------------------------------------------------------------------------

  REV

--------------------------------------------------------------------------------

   DEL

--------------------------------------------------------------------------------

   ATA

--------------------------------------------------------------------------------

   REMARKS

--------------------------------------------------------------------------------

1   

Airplane Flight Manual

PSM 1-84-1A

   G    1   

[***]*

  N    ATD    N      2   

Quick Reference Handbook

PSM 1-84-1B

   G    1    [***]   N    ATD    N      3   

Weight and Balance Manual

PSM 1-84-8

   G    1    [***]   Y    ATD    Y      4   

Airplane Operating Manual (AOM)

PSM 1-84-1

   C    1    [***]   N    ATD    N      5   

*Aircraft Illustrated Parts Catalog

PSM 1-84-4

   G    1    [***]   Y    PTD    Y      6   

*Aircraft Maintenance Manual

PSM 1-84-2

   G    1    [***]   Y    PTD    Y      7   

*Wiring Diagrams Manual

PSM 1-84-2W

   G    1    [***]   Y    PTD    Y     

 

* Note: for items 5, 6, and 7, Bombardier may provide in electronic format, if
available at the time of delivery.

 

Legend:

 

CONF

   G = Generic manual (contains information for all aircraft configurations).  
   C = Contains information to for the operator fleet configuration.

MED

   1 = Paper, printed 2-sides.      2 = Dynaweb on DVD.      3 = CD ROM.      4
= Laminated Card.      Optional ATA specification 2100 (where applicable).

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -5-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

QTY   (number) = Quantity per contract.     (number) PER = Quantity per
delivered aircraft.     A/R = As Required. REV   Y = Quarterly Revision service
(if purchased).     N = Revisions as required (if purchased). DEL   ATD =
Document delivered at time of first aircraft delivery or subsequent aircraft
delivery (when (number) PER).     PTD = Document delivered 90 days prior to
first aircraft delivery. ATA   Y = Generally in compliance with ATA 100 Revision
34.     N = Bombardier Standard.

 

8.3 Shipment

 

Except for the Airplane Flight Manual, Quick Reference Handbook, Flight Crew
Operating Manual, and Weight and Balance Manual, which will be provided with
each Aircraft at time of delivery, all Technical Data provided hereunder shall
be shipped to Buyer Free Carrier (Incoterms) Bombardier’s designated facilities.

 

8.4 Revision Service

 

Bombardier will provide Buyer with a revision service, [***]* following the
Delivery Date of Buyer’s first Aircraft under this Supplement PA 0436-5. This
revision service shall apply to the Technical Data for the Aircraft only.
Subsequent to this [***] period, Buyer shall be responsible for any revision
services provided by Bombardier, at Bombardier’s then current list prices.

 

Revisions to the Technical Data to reflect the Aircraft configuration at
delivery shall be provided to Buyer within six (6) months following the Delivery
Date of each respective Aircraft.

 

Provided the revision service is being supplied under the terms of this
Agreement and applicable Supplement or by subsequent purchase order, Bombardier
shall incorporate all applicable Bombardier originated Service Bulletins into
the appropriate Technical Data documents (in a regular revision cycle),
following formal notification by Buyer that such Service Bulletins have been or
shall be incorporated on Buyer’s Aircraft. The Technical Data shall then contain
both the original and revised Aircraft configuration until Buyer advises
Bombardier in writing that one configuration is no longer required.

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -6-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

8.5 Vendor Manuals

 

Bombardier will, at no additional charge, arrange to have one (1) set of the
following manuals shipped directly to Buyer from the applicable vendor:

 

(a) Engine Maintenance Manual;

 

(b) Engine Illustrated Parts Catalogue; and

 

(c) Propeller Maintenance Manual.

 

In addition, Bombardier will ensure that vendors ship directly to Buyer, all
applicable vendor Component Maintenance Manual information not contained in the
Bombardier issued Component Maintenance Manual.

 

The supply of revisions and amendments to vendor manuals will be the subject of
separate agreements directly between Buyer and Bombardier’s vendors.

 

Article 9.0 below supplements Annex B, Article 1.0 of the Agreement.

 

ARTICLE 9.0  WARRANTY

 

9.1 The period of months referred to in Annex B, Article 1.2.1 (a) of the
Agreement is forty-eight (48) months.

 

9.2 The period of months referred to in Annex B, Article 1.2.1 (b) of the
Agreement is forty-eight (48) months.

 

9.3 The period of months referred to in Annex B, Article 1.2.1 (c) of the
Agreement is forty-eight (48) months.

 

9.4 The period of months referred to in Annex B, Article 1.2.1 (d) of the
Agreement is forty-eight (48) months.

 

Supplement No. PA-0436-5    -7-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

Article 10.0 below supplements Annex B, Article 3.7 of the Agreement.

 

ARTICLE 10.0  COVERED COMPONENTS

 

10.1 WING

 

  (a) Upper and lower wing skins and stringers between front to rear spars;

 

  (b) Wing spar caps, webs and uprights;

 

  (c) Main box (front spar to rear spar) wing ribs;

 

  (d) Main box splice plates, fittings;

 

  (e) Wing to nacelle structural attachments;

 

  (f) Wing to fuselage structural attachments;

 

  (g) Support structure in the wing to spoilers, spoiler actuators and ailerons;

 

  (h) Main gear support structure; and

 

  (i) Engine support fittings.

 

10.2 FUSELAGE

 

  (a) External surface skins and doublers, stringers, circumferential frames
between forward pressure bulkhead and aft pressure dome, excluding all systems,
insulation, lining and decorative clips and brackets;

 

  (b) Window and windshield structure but excluding the windows and windshields;

 

  (c) Primary structure frames around body openings for passenger doors,
cargo/baggage doors and emergency exits;

 

  (d) Nose gear support structure;

 

  (e) Floor beams and supporting structure in the flight compartment and cabin
including the lavatory, excluding seat tracks in both areas;

 

  (f) Forward pressure bulkhead and aft pressure dome; and

 

  (g) Floor beams and supporting structure in the baggage compartment providing
same is not damaged through abusive handling of baggage or cargo.

 

10.3 VERTICAL TAIL (including fuselage aft of aft pressure dome)

 

  (a) Fuselage external surface skins, stringers and frames between aft pressure
dome and rear fin spar frame;

 

  (b) Fin skins and stiffeners between front and rear spars;

 

  (c) Fin front, centre and rear spar caps, webs and uprights;

 

  (d) Main box (front spar to rear spar) fin ribs;

 

  (e) Fin hinge and actuator support structure for rudder and elevator;

 

  (f) Fore rudder structure and hinge and actuator brackets; and

 

  (g) Aft rudder forward cell structure and hinge and radius rod brackets.

 

Supplement No. PA-0436-5    -8-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

10.4 HORIZONTAL TAIL

 

  (a) Tailplane skins and stringers;

 

  (b) Tailplane spar caps, webs and uprights;

 

  (c) Tailplane main box (front spar to rear spar) ribs;

 

  (d) Tailplane hinge support structure for elevator;

 

  (e) Elevator forward cell structure and hinge and actuator brackets; and

 

  (f) Horizontal tail structure attachments.

 

In witness whereof this Supplement PA 0436-5 is signed on the date written
below:

 

For and on behalf of       For and on behalf of HORIZON AIR INDUSTRIES, INC.    
  BOMBARDIER INC.        

Bombardier Aerospace

         

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

        Regional Aircraft

Date:___________________

     

Date__________________

                 

Ross Gray

       

Director, Contracts

        Regional Aircraft        

Date:_______________

 

Supplement No. PA-0436-5    -9-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 1 TO SUPPLEMENT NO. PA-0436-5

 

DETAIL SPECIFICATION

 

DS8-400 Rev. 1. Amend NC,

for the DHC-8-402

 

April 16, 2002

 

Supplement No. PA-0436-5    -10-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 2 TO SUPPLEMENT NO. PA-0436-5

 

BUYER SELECTED OPTIONAL FEATURES

PRICES AND DESCRIPTIONS

CS: HRZ842207504

 

CR Ref.#

--------------------------------------------------------------------------------

  

Option Descriptions

--------------------------------------------------------------------------------

  

Price in

Nov-06 U.S.

--------------------------------------------------------------------------------

803SO90021

   Increased Tailwind Operation to 20 Knots (AFM Supplement #3)    [***]*

803SO90027

   High Gross Weight (64,500 lb / 29,257 kg MTOW)    [***]

803SO90030

   Reduced Propeller RPM Landing (AFM Supplement #39)    [***]

803SO90036

   2 X Max.Take-Off Power (AFM Supplement #46)    [***]

803SO90037

   AFM Supplement - Cat 1 Coupled Flap 35 Approach (#75)    [***]

803SO90038

   AFM Supplement Take-off with bleed on - All flap settings (#61)    [***]

811CH00628

   Exterior Paint Scheme - S400 - Horizon Air    [***]

811CH00657

   Max Load Labels for Galleys, Baggage compartment and wardrobe inset - Horizon
   [***]

811CH00717

   Exterior Paint Scheme - Aluminized Paint Applied To Belly Of Aircraft   
[***]

821SO90061

   Ground Air Conditioning Cart Connection    [***]

822SO90387

   AFCS - Heading Knobs Coupled Left & Right    [***]

823SO90100

   Datalink - UNILINK (UASC UL-701) with integral VHF comm and Half-size Printer
(Honeywell)    [***]

824CH00091

   Batteries - Three 40 Amp Configuration - Forward Fuse    [***]

825CH01366

   Detail Specification G2 Galley - Left Hand Aft Facing Galley - S400    [***]

825CH01461

   PAX Seats - Deletion Of Ashtrays (Includes ‘No Smoking’ On)    [***]

825CH01596

   G1 Galley - Stowage Compartments and Two Driessen Hot Jugs - Horizon    [***]

825CH01624

   Cabin - Soft Materials Spec - Horizon    [***]

825CH01639

   FWD Baggage Compartment - Removable Shelf in Upper Aft Portion    [***]

825CH01644

   PAX Seats - Improved Seat Pan Cushions - Horizon    [***]

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* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -11-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

825CH01829

   Cockpit - Removal Of The Cockpit Door From Production Definition    [***]*

825CH02299

   LOPA - Horizon Air (74 PAX, 3 F/A, G1 modified, G2,91 CU FT and 411 CU FT
baggage compartments)   

[***]

825CH02336

   AFT Staggered bulkhead with 2 F/A seats and without AFT stairs- Q400    [***]

825SO90115-03

   Flight Attendant Seats - Leather Dress Covers    [***]

825SO90150-74

   Passenger Seats - Leather Dress Covers    [***]

825SO90157

   Flight Attendant - 3rd Seat Installation    [***]

825SO90290

   Passenger Seats - In-Arm Meal Trays    [***]

825SO90302-74

   Passenger Seats - Additional Economy Passenger Seating (B/E Aero Model 925)
   [***]

825SO90389

   Galley - Wardrobe Insert (Provisions for 1 Half Trolley and 1 S.U.)    [***]

831SO70185

   FAR 121.344 Requirement - Q400 - 88 Parameter Installation    [***]

831SO90180

   Enhanced GPWS (Honeywell)    [***]

832CH00028

   Cockpit - Nose Gear Lock Indicator    [***]

833SO90188

   Tail Logo Lights    [***]

834CH00441

   Single Cue Command on EADI    [***]

834CH00559

   VHF Comm - Provisions for 3rd VHF Radio (With Level “A” Certified Software)
   [***]

834SO70216

   Radio Altimeter – Dual Collins ALT-4000    [***]

834SO90209

   HGS - CAT IIIa Partial Provisions For RCFDI STC    [***]

834SO90926

   FMS - Dual with GPS and TCAS II (Universal UNS-1E, SCN 802.2))    [***]

835CH00937

   Emergency Equipment - Increased Capacity Crew Fixed O2 Cylinder With Onboard
Charging    [***]

839SO90316

   Alternate Symbology Indication, Imperial (PFD & MFD Displays)    [***]

849SO90266

   APU (Hamilton Sundstrand APS-1000)    [***]

853CH00128

   Cockpit - Center Console Extension    [***]     

Total Buyer Selected Optional Features

   [***]      Discounts and Allowances    [***]

[***]

   [***]    [***]

[***]

   [***]    [***]     

Total including Discounts and Allowances

   [***]

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

ANAC - At No Additional Cost

 

STD - Standard

(Buyer may amend the Buyer Selected Optional Features List via contract change
order, subject to Bombardier required lead times.)

 

Supplement No. PA-0436-5    -12-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 3 TO SUPPLEMENT NO. PA-0436-5

 

AIRCRAFT

ECONOMIC ADJUSTMENT FORMULA

 

1. Economic adjustment will be calculated using the following Economic
Adjustment Formula:

 

Pp = [***]*

 

Where:

 

  Pp = Aircraft Purchase Price;

PO

  =   

Base Price;

LD

  =   

the Canadian labour index based upon arithmetic the average of the indices for
the fourth, fifth and sixth months prior to the month of delivery of the
relevant Aircraft;

LO

  =   

Being the arithmetic average of the Canadian labour index for the months of May,
June and July 2006;

ED

  =   

the U.S. labour index based upon the average of the indices for the fourth,
fifth and sixth months prior to the month of delivery of the relevant Aircraft;

EO

  =   

Being the arithmetic average of the U.S. labor index for the months of May, June
and July 2006;

MD

  =   

the Material index based upon the average of the arithmetic indices for the
fourth, fifth and sixth months prior to the month of delivery of the relevant
Aircraft; and

MO

  =   

Being the arithmetic average of the Material index which for the months of May,
June and July 2006;

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -13-                Initials           Buyer
             Bombardier             

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2. For the purpose of the Economic Adjustment Formula and the calculation of the
economic adjustment:

 

  (a) the Canadian labour index shall be the North American Industrial
Classification System (N.A.I.C.S.) Code 3364 for Average Hourly Earnings
(including overtime) for Aerospace Products and Parts manufacturing (Canada)
published by Statistics Canada in Catalogue 72-002 “Employment Earnings and
Hours”, Table 6;

 

  (b) the U.S. labour index shall be the index published by the U.S. Department
of Labor, Bureau of Labor Statistics in the North American Industrial
Classification System (N.A.I.C.S.) Code 3364 for Average Hourly Earnings of
Production Workers for Manufacturing, Aerospace products and parts (US).; (The
U.S. labour index provided in the Bureau of Labor Statistics (B.L.S.) Code 372
for Average Hourly Earnings for Aircraft and Parts as published by the U.S.
Department of Labor, Bureau of Labor Statistics in “Employment and Earnings”
Table B-15, has been discontinued)

 

  (c) the material index shall be the index provided in the Producer Price Index
for Code 10 Metals and Metals Products as published by the U.S. Department of
Labor, Bureau of Labor Statistics in “Producer Prices and Price Indexes” Table
6;

 

  (d) the indices used for the calculation of the Aircraft Purchase Price of
each Aircraft shall be the last indices received by Bombardier in the month
prior to the delivery of the relevant Aircraft; and

 

  (e) in the event that Bombardier shall be prevented from calculating the
Aircraft Purchase Price of each Aircraft due to any delay in the publication of
the required indices, Bombardier shall use the last provisionally published
indices, and in the event that provisional indices are not available, Bombardier
shall extrapolate from the last three (3) months of published indices.

 

3. In the calculation of the Aircraft Purchase Price the following guidelines in
respect of decimal places shall apply:

 

  (a) All average indices in the Economic Adjustment Formula shall be calculated
to the applicable one or two decimal places;

 

  (b) The Economic Adjustment Formula shall be calculated to four decimal
places; and

 

  (c) The Aircraft Purchase Price resulting from the Economic Adjustment Formula
shall be corrected to the nearest dollar.

 

4. In the event that any index referred to be discontinued or restated, or if
the methodology employed by the relevant authority in determining the index is
substantially revised, then a mutually agreed to index will be substituted prior
to delivery of the Aircraft.

 

Supplement No. PA-0436-5    -14-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

5. Pursuant to Article 4.2 of the Agreement, the Base Price of each Aircraft
shall be adjusted for economic fluctuations. Such adjustment shall be based on
the Economic Adjustment Formula (the “Formula”) as defined in Article 4.2, and
more particularly set forth in this Schedule above.

 

Supplement No. PA-0436-5    -15-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 4 TO SUPPLEMENT NO. PA-0436-5

 

CREDIT MEMORANDUM

 

1.0 Upon delivery of and payment in full for each Aircraft, Bombardier will
issue to Buyer a credit memorandum in the amount of [***]*. Each credit
memorandum shall be subject to escalation to the date of delivery in accordance
with the Economic Adjustment Formula provided in Schedule 3 to this supplement
[***] and shall be used by Buyer to reduce the balance of the Aircraft Purchase
Price payable on delivery of each such Aircraft.

 

2.0 Buyer acknowledges that the amount of the credit memorandum referenced in
Article 1.0 above has been offered to Buyer [***].

 

3.0 In the event of the termination of the Agreement, this Schedule shall become
automatically null and void.

 

4.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

5.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

HORIZON AIR INDUSTRIES, INC.       BOMBARDIER INC.        

Bombardier Aerospace

           

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

        Regional Aircraft

Date: October     , 2005

     

Date: October     , 2005

                   

Ross Gray

       

Director, Contracts, Americas

        Regional Aircraft         Date: October     , 2005

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -16-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 5 TO SUPPLEMENT NO. PA-0436-5

 

PERFORMANCE GUARANTEE

 

1.0 AIRCRAFT CONFIGURATION

 

The guarantees contained in this document are applicable to the DHC-8-402
aircraft to Detail Specification No. DS8-400 Rev. 1, Amend. NC, dated April 16,
2002, equipped with 34-inch tires per ECR no. 4Q24060, with an optional Maximum
Take-off Weight of 64,500 pounds (29,257 kg) and equipped with Pratt and Whitney
Canada PW150A engines with sea level static rating of 4580 SHP (Normal Take-off
Power) and 5071 SHP (Maximum Take-off Power).

 

2.0 PERFORMANCE GUARANTEES

 

2.1 Airfield Performance at [***]*

 

The take-off weight shall not be less than the guarantee value of [***] pounds
([***] kg) at the start of ground roll. The guarantee is based on the following
conditions and operating conditions listed below:

 

Operational procedure:

  

Approved Aircraft Flight Manual

[***]

    

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -17-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

Table 1:

 

[***]*

   [***]    [***]

[***]

   [***]    [***] Published Special Procedure: Right turn at 5600 ft to heading
160 deg

 

2.2 Landing Performance at Destination Airport [***]

 

The landing weight shall not be less than the guarantee values of [***] pounds
([***] kg) based on the following conditions and operating conditions listed
below:

 

Operational procedure:

   Approved Aircraft Flight Manual

[***]

    

 

2.3 Mission Payload from [***]

 

With an assumed Operational Weight Empty (OWE) of [***] pounds ([***] kg.), the
resulting payload shall not be less than the guarantee value of [***] pounds
([***]kg.) The above guarantee is based on the following conditions and
operating rules:

 

Operational Procedures:

   Approved Aircraft Flight Manual [***]

[***]

    

 

*** Note: ref. CS HRZ842207504, Issue 4, Sept.15, 2005.

 

Fixed Time Allowances:

   [***]      Start & Taxi out [***]      [***]

Fuel Allowances:

   Consistent with the fixed time allowances.

Reserve Fuel:

   (a) Flight to Diversion, plus      [***]*

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -18-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

3.0 GUARANTEE CONDITIONS

 

3.1 All guaranteed performance data are based on the ICAO International Standard
Atmosphere (ISA) and specified variations therefrom. Altitudes are pressure
altitudes.

 

3.2 In the event a change is made to any law, governmental regulation,
requirement or in the interpretation of any such law, regulation or requirement
that affects the certification basis for the aircraft as described and as a
result thereof a change is made to the configuration and/or performance of the
aircraft in order to obtain TC/FAA/JAA certification, the guarantees set forth
in this document shall be appropriately modified to reflect the effect of any
such change.

 

3.3 The take-off and landing guarantees are based on a paved, dry runway
surface, and with automatic anti-skid operative. The take-off performance is
based on use of the automatic take-off power control system, engine bleed
selected off and a nominal line up allowance. All guarantee performance data are
based on an aerodynamically clean wing, with REF SPEEDS switch selected OFF.

 

3.4 The mission payload guarantee is based on a new aircraft and engines, at the
time of delivery, on cruise for optimum range and the optimum propeller speed
and includes allowances for normal engine bleed and power extraction. Normal
engine bleed shall be defined as that amount required to maintain a cabin
pressure altitude not exceeding 8,000 feet during cruise at altitudes up to
25,000 feet, with a nominal aircraft ventilation rate including re- circulation
of 40% and a cabin temperature of 75 degrees Fahrenheit.

 

4.0 GUARANTEE COMPLIANCE

 

41 Compliance with the guarantees of 2.0 shall be based on the conditions
specified in those sections and the guarantee conditions of 3.0 unless otherwise
noted.

 

4.2 Compliance with the take-off and landing guarantees shall be established by
the approved AFM for the aircraft defined in 1.0 of this document.

 

4.3 Compliance with the mission payload guarantees shall be established by
aircraft industry standard methodology calculations, based on flight test data
obtained for aircraft configurations similar to that defined by the Detail
Specification of 1.0, and an assumed Operational Weight Empty (OWE) of
[***]pounds ([***] kg).

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -19-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

4.4 The data derived from tests shall be adjusted as required by conventional
methods of correction, interpolation or extrapolation in accordance with
established aeronautical practices to show compliance with provisions of 2.0.

 

5.0 REMEDIES

 

In the event of a shortfall in the guarantees contained in this Schedule,
Bombardier shall endeavor and shall use its reasonable efforts to develop
corrective measures. Such measures shall be developed within a period of [***]*
from the delivery of the first Aircraft under the Agreement (or such other
longer period as is required in view of the corrective measures involved. [***]

 

6.0 LIMITATION OF LIABILITY

 

[***]

 

7.0 In the event of the termination of the Agreement, this Schedule shall become
automatically null and void.

 

8.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

9.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

HORIZON AIR INDUSTRIES, INC.       BOMBARDIER INC.        

Bombardier Aerospace

           

Rudi Schmidt

Vice President and Treasurer

 

Date: October     , 2005

     

David MacNeil

Senior Account Executive, Contracts

Regional Aircraft

Date: October     , 2005

                 

Ross Gray

Director, Contracts, Americas

Regional Aircraft

Date: October     , 2005

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -20-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 6 TO SUPPLEMENT NO. PA-0436-5

 

DELAYS, LOSS OR DAMAGE AND TERMINATION

 

1.0 In the event an Aircraft is not delivered on its respective Scheduled
Delivery Date as a result of a Non-Excusable Delay, [***]*.

 

2.0 In the event of loss or damage to any Aircraft, pursuant to Article 15 of
the Agreement, [***].

 

3.0 In the event of termination of the Agreement by Bombardier in accordance
with Article 16, of the Agreement, Bombardier [***].

 

4.0 In the event of termination of the Agreement by Buyer in accordance with
Article 16, of the Agreement Bombardier shall pay Buyer [***].

 

5.0 In the event of any other termination of the Agreement, this Schedule shall
become automatically null and void.

 

6.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

7.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

HORIZON AIR INDUSTRIES, INC.       BOMBARDIER INC.        

Bombardier Aerospace

           

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

       

Regional Aircraft

Date: October     , 2005

     

Date: October     , 2005

                 

Ross Gray

Director, Contracts, Americas

Regional Aircraft

       

Date: October     , 2005

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -21-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 7 TO SUPPLEMENT NO. PA-0436-5

 

AIRFRAME DIRECT MAINTENANCE COST GUARANTEE

 

1.0 Intent

 

  1.1 The intent of the Airframe direct maintenance cost guarantee is to achieve
the full potential of the maintainability of the Aircraft through the joint
efforts of Bombardier and Buyer. To that end, Bombardier agrees to provide
credits under the terms and conditions hereof and Buyer agrees to provide data
defined below.

 

  1.2 The “Airframe” shall mean the Aircraft excluding Power Plant Parts,
related maintenance activities (such as overhaul, hot section inspection, basic
unscheduled repair, LCF components, scheduled and unscheduled line replaceable
unit repair and overhaul), Buyer Furnished Equipment (BFE), Ground Support
Equipment (GSE) and Auxiliary Power Unit (APU).

 

2.0 Airframe Direct Maintenance Cost Guarantee

 

  2.1 Bombardier guarantees that for the fleet of Aircraft operated by Buyer
during the term of this Schedule 7 the cumulative average Airframe direct
maintenance cost per flight hour shall not exceed a constant cumulative dollar
value average of [***]* (“ADMCG”) expressed in January 1st, 2005 dollars
(subject to escalation) subject to escalation in accordance with the Attachment
No. 2 of this Schedule 7 and subject to the following terms and conditions:

 

  2.1.1 The term of this Schedule 7 shall commence on the expiration of the
Warranty Period of the first Aircraft and expire [***] thereafter.

 

  2.1.2 Appropriate reductions shall be made in labour man-hours per flight hour
and material costs per flight hour for the following:

 

  a) Labour and material costs resulting from maintenance not performed in
accordance with approved written procedures or from configuration changes made
by Buyer without Bombardier’s written agreement, or because recommended Service
Bulletins which cause a reduction in direct maintenance cost have not been
incorporated, provided Buyer has had sufficient time to incorporate said Service
Bulletins consistent with Buyer’s maintenance program. Bombardier shall not make
reductions when Buyer has demonstrated that such change is not cost effective
for Buyer. In the event of a

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -22-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

disagreement between Bombardier and Buyer as to the cost-effectiveness of a
recommended Service Bulletin change proposed by Bombardier, Buyer will explain
its financial analysis used to evaluate the implementation of such Service
Bulletin change;

 

  b) Labour and material costs incurred to repair damages resulting from
accidents or negligence in maintaining the Aircraft, or for modification of the
Aircraft, which may be capitalized by Buyer (except for actions on Airworthiness
Directives);

 

  c) Credits, warranty payments, guarantee payments or other payments such as
parts or services at reduced cost that Bombardier or vendors have made that
compensate Buyer for or reduce Buyer’s direct maintenance cost;

 

  d) Aircraft that have not been maintained in accordance with Buyer’s
regulatory agency approved initial maintenance program unless mutually agreed to
by Buyer and Bombardier; and

 

  e) Scheduled maintenance checks which are not accomplished consistent with
Buyer’s standard maintenance practices.

 

3.0 Calculation of Cost

 

  3.1 Airframe Direct Maintenance Labour Cost (“ADML”)

 

The ADML man-hours shall be defined as the annual man-hours in Buyer cost
allocation system assigned to collect direct labour charges, without burden,
expended in direct maintenance of the Aircraft. Notwithstanding Buyer’s internal
cost allocation system all elements of indirect labour such as shop cleaning,
workplace maintenance, material handling, overtime premium, idle time, access
time and inventory control shall be excluded from the calculation of Airframe
direct maintenance man-hours.

 

Supplement No. PA-0436-5    -23-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

3.2 Airframe Direct Maintenance Material Cost (“ADMMC”)

 

The ADMMC is defined as the annual cost of material consumed, which excludes
initial provisioning purchases, for the direct airframe maintenance of the
aircraft, less any transportation, duties, taxes or license fees.
Notwithstanding Buyer’s internal cost allocation system all elements of indirect
material such as cleaning supplies, consumable tools, hydraulic fluids, oils and
greases, welding supplies and adhesives are excluded from the calculation of
ADMMC.

 

3.3 Airframe Direct Outside Service Cost (“ADOSC”)

 

The ADOSC is defined as the annual cost expended in outside services for direct
airframe maintenance of the aircraft. The ADOSC shall include the total outside
service charges of both labour and material costs, but excluding transportation
and taxes.

 

3.4 Hourly Airframe Direct Maintenance Cost (“ADMC”)

 

The following formula shall be used to calculate the annual hourly ADMC:

 

ADMC    =    [***]* Where:           ADML    =    Airframe Direct Maintenance
Labour in man-hours, LC    =    Labour cost from Attachment A, item 4, ADMMC   
=    Airframe Direct Maintenance Material Service Cost, ADOSC    =    Airframe
Direct Outside Service Cost, T    =    Total flight hours for the Aircraft
recorded for the applicable year.

 

4.0 Credit Calculation

 

  4.1 The actual hourly Airframe Direct Maintenance Cost (ADMC) shall be
compared by Bombardier against the ADMCG on an annual basis.

 

  4.2 [***]

 

  4.3 [***]

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -24-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

5.0 Credit Payment

 

  5.1 [***]*

 

  5.2 [***]

 

  5.3 If the credit due to Buyer is negative, Buyer will be under no obligation
to compensate Bombardier, nor shall Bombardier owe any compensation to Buyer.

 

6.0 Audit

 

Upon five (5) business days prior written notification by Bombardier to Buyer
and at Bombardier’s expense, Bombardier shall have the right during normal
business hours to audit all charges reported under this Schedule 7, Buyer’s
applicable maintenance practices and procedures, and applicable Aircraft
records, where normally and customarily maintained, relative to maintenance,
Service Bulletin incorporation and modification of the Aircraft. Such audit
shall not interfere with the conduct of business by Buyer nor shall Buyer be
required to undertake or incur additional liability or obligations with respect
to the audit. Where a material disagreement exists between Bombardier and Buyer,
a mutually agreed upon third party auditor will be engaged to resolve the
discrepancy.

 

7.0 Reporting

 

  7.1 Bombardier shall provide a quarterly report to Buyer on the status of the
Airframe direct maintenance cost based on data submitted by Buyer and approved
by Bombardier. Failure of Buyer to provide the required data, in spite of
Bombardier’s notice and within thirty (30) days thereof, shall void this
Airframe direct maintenance cost guarantee.

 

  7.2 The ADMCG was based upon the assumption outline in Attachment 1 to this
Schedule 7. Any deviation from the assumptions outlined in Attachment shall
cause a modification in the ADMCG by Bombardier.

 

8.0 Limitation of Liability

 

[***]

 

9.0 In the event of the termination of the Agreement, this Schedule shall become
automatically null and void.

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -25-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

10.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

11.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

HORIZON AIR INDUSTRIES, INC.      

BOMBARDIER INC.

Bombardier Aerospace

           

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

        Regional Aircraft

Date: October     , 2005

     

Date: October     , 2005

                   

Ross Gray

       

Director, Contracts, Americas

        Regional Aircraft        

Date: October    , 2005

 

Supplement No. PA-0436-5    -26-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

Attachment 1 to Schedule 7 of

Supplement No. PA-0436-5

 

ADMCG

 

Guarantee Value Assumptions

 

The following is a listing of all assumptions used to determine the ADMCG per
flight hour. It is understood by the parties that these assumptions may change
in which case the parties, with mutual agreement, will adjust the ADMCG.

 

1. All costs are based upon Specification.

 

2. All costs are based on the maintenance inspection intervals in the Buyer’s
regulatory agency approved initial maintenance program.

 

3. All costs expressed in January 1, 2005 United States Dollars and are rounded
to the nearest whole dollar subject to escalation as per the ADMCG Economic
Adjustment Formula.

 

4. Buyer’s in-house airframe labour rate per man-hour is [***]*.

 

5. Buyer’s subcontract airframe labour rate per man-hour is [***].

 

6. Annual average Aircraft utilization is [***].

 

7. Buyer’s average annual flight duration for the Aircraft will be [***] per
departure.

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -27-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

Attachment 2 to Schedule 7 of

Supplement No. PA-0436-5

 

ADMCG ECONOMIC ADJUSTMENT FORMULA

 

The ADMCG economic adjustment will be calculated using the following Guarantee
Adjustment (GA) Formula. The ADMCG term is specified in Section 2.1.1 of
Schedule 7.

 

GA   =   G1 - G0 [***]*     GA   =   ADMCG Value Adjustment G0   =   ADMCG Value
G1   =   ADMCG Value adjusted to the final year L1   =   the current year index
for labour obtained by calculating the arithmetic average of the labour indexes
published by the United States Department of Labour Statistics - Employer and
Earnings Index for the fourth, fifth and sixth months prior to the month in the
current year which defines the ADMCG term. L0   =   TBD which equals the January
1, 2005 index for labour obtained by calculating the arithmetic average of the
labour indexes published by the United States Department of Labour Statistics -
Employment Cost Index (Series ID: ECU28122I), for the fourth, fifth and sixth
months prior to the date specified in Attachment 1, Article 3 of this Schedule
7. M1   =   the current year index for material obtained by calculating the
arithmetic average of the material indexes published by the United States
Department of Labour - Material Industrial Commodities, Producer Price Index,
for the fourth, fifth and sixth months prior to the month in the current year
which defines the ADMCG term. M0   =   TBD which equals the January 1, 2005
index for material obtained by calculating the arithmetic average of the
material indexes published by the United States Department of Labour - Material
Industrial Commodities, Producer Price Index (Series ID: WPU142), for the
fourth, fifth and sixth months prior to the date specified in Attachment 1,
Article 3 of this Schedule 7.

 

If, during any economic adjustment period, L1 is less than L0, L1 will be deemed
to equal L0 and if M1 is less than M0, M1 will be deemed to equal M0.

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -28-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 8 TO SUPPLEMENT NO. PA-0436-5

 

CREDIT MEMORANDUM RECONCILIATION

 

1.0 In consideration of Buyer having entered into the above referenced
Agreement, Buyer and Bombardier hereby agree to review the Credit Memorandum
[***] between Bombardier and Buyer, [***]* commencing [***] after the delivery
of the first Aircraft.

 

2.0 [***]

 

3.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

4.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

5.0 In the event of termination of the Agreement or Supplement PA 0436-5 with
respect to any undelivered Aircraft, this Schedule shall automatically become
null and void with respect to such undelivered Aircraft.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -29-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

HORIZON AIR INDUSTRIES, INC.       BOMBARDIER INC.         Bombardier Aerospace
           

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

        Regional Aircraft

Date: October     , 2005

     

Date: October     , 2005

                   

Ross Gray

       

Director, Contracts, Americas

       

Regional Aircraft

       

Date: October     , 2005

 

Supplement No. PA-0436-5    -30-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 9 TO SUPPLEMENT NO. PA-0436-5

 

NEW Q400 OPTION AIRCRAFT

 

1.0 Bombardier hereby agrees to grant Buyer an option to purchase up to twenty
(20) additional Aircraft (the “New Q400 Option Aircraft”) under the following
general conditions:

 

  a. The base price (subject to escalation from [***]*) for each of the New Q400
Option Aircraft (including Buyer Selected Optional Features) for delivery Ex
Works (Incoterms 1990) Bombardier facilities in Downsview Ontario shall be the
combined total of the prices listed Article 2.1 (a) and (b) to this Supplement
No. MPA0436-5.

 

  b. Buyer shall exercise its right to purchase the New Q400 Option Aircraft by
providing to Bombardier a written notice together with the New Q400 Option
Deposit no later than fifteen (15) months prior to the Scheduled Delivery Date
of each New Q400 Option Aircraft (“Exercise Date”);

 

  c. Buyer shall make or cause to be made a payment to Bombardier of a deposit
of [***] for each New Q400 Option Aircraft totaling [***] (the “New Q400 Option
Deposit”) on signing of this Schedule 9 to Supplement PA 0436-5:

 

[***]

 

  d. Buyer shall make payment or cause payment to be made for each New Q400
Option Aircraft as follows:

 

  (i) [***], as set forth in Article 1 (c) to this Schedule 9 to Supplement No.
MPA0436-5;

 

  (ii) [***] of the net Aircraft Purchase Price upon Buyer’s notice to exercise
their option to purchase the new Q400 Option Aircraft;

 

  (iii) [***] of the net Aircraft Purchase Price fifteen (15) months prior to
its Scheduled Delivery Date;

 

  (iv) [***] of the net Aircraft Purchase Price twelve (12) months prior to its
Scheduled Delivery Date;

 

  (v) [***] of the net Aircraft Purchase Price nine (9) months prior to its
Scheduled Delivery Date;

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -31-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

  (vi) [***]* of the net Aircraft Purchase Price six (6) months prior to its
Scheduled Delivery Date; and

 

  (vii) the balance of the Aircraft Purchase Price shall be received on or
before the Delivery Date of such Aircraft to Buyer.

 

All payments referred to in paragraphs (i) through (vii) above are to be made on
the first day of the applicable month.

 

  f. New Q400 Option Aircraft Pricing:

 

  (i) For the sole purpose of the calculations set forth in Article 1.0
(a) above the estimated net Option Aircraft Purchase Price shall be the
estimated Option Aircraft Purchase Price [***] to this Supplement No. PA 0436-5;

 

  (ii) Once a New Q400 Option Aircraft has been exercised in accordance with
Article 1.0 (b) above, the price of the New Q400 Option Aircraft shall be the
Base Price adjusted for changes made pursuant to Article 11 of Section I of the
Agreement and any Regulatory Changes pursuant to Article 8. 5 of Section I of
the Agreement, and further adjusted to the Delivery Date to reflect economic
fluctuations during the period from [***] to the Delivery Date of each Aircraft
(“Aircraft Purchase Price”). Such adjustments shall be based on the economic
adjustment formula attached hereto as Schedule 3 (“Economic Adjustment Formula”)
but when adjusted, [***].

 

  g. The Scheduled Delivery Dates of the Option Aircraft are as follows:

 

[***]

 

Twentieth Option Aircraft                 May 2010

 

  h. The exercise of one or more of the options under this Schedule shall not
create an obligation of Bombardier, nor grant a right to Buyer, for any
additional options.

 

2.0 Upon exercise of Buyer’s right to purchase a New Q400 Option Aircraft, the
terms and conditions of the Agreement and of this Supplement No. PA 0436-5 shall
[***] to the purchase of such New Q400 Option Aircraft. In consideration of
Buyer purchasing a New Q400 Option Aircraft, the terms set forth in [***] will
be amended to include the additional firm Aircraft on a one–for-one basis.
Notwithstanding the foregoing, [***]. Furthermore, [***] shall be amended to
reflect the increased number of Aircraft in Buyer’s fleet unless expressly noted
otherwise.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -32-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

3.0 In the event of the termination of the Agreement, this Schedule shall become
automatically null and void.

 

4.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

5.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

HORIZON AIR INDUSTRIES, INC.       BOMBARDIER INC.        

Bombardier Aerospace

           

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

        Regional Aircraft

Date: October     , 2005

     

Date: October     , 2005

                   

Ross Gray

       

Director, Contracts, Americas

        Regional Aircraft        

Date: October     ,2005

 

Supplement No. PA-0436-5    -33-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 10 TO SUPPLEMENT NO. PA-0436-5

 

Q200 JOINT REMARKETING ASSISTANCE

 

1.0 As a special consideration to Buyer, Bombardier agrees to provide
remarketing support to Buyer (“Remarketing Support”) for [***]*, in accordance
with the terms hereof:

 

[***]

 

2.0 [***]

 

3.0 [***]

 

4.0 [***]

 

5.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

6.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

HORIZON AIR INDUSTRIES, INC.       BOMBARDIER INC.        

Bombardier Aerospace

           

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

        Regional Aircraft

Date: October     , 2005

     

Date: October     , 2005

                   

Ross Gray

       

Director, Contracts, Americas

        Regional Aircraft        

Date: October     ,2005

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -34-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 11 TO SUPPLEMENT NO. PA-0436-5

 

DISPATCH RELIABILITY GUARANTEE

 

1.0 Intent

 

The intent of the Dispatch Reliability Guarantee (“DRG”) is to achieve the full
potential of the inherent technical reliability of the Aircraft [***]*, through
the joint efforts of Bombardier and Buyer. To that end, Bombardier agrees to
take action as specified below and Buyer agrees to set its Aircraft fleet
dispatch reliability target [***] above the Guarantee Value so that both Buyer
and Bombardier’s technical staff can pursue attainment of the Guarantee Value.

 

2.0 Definition

 

A chargeable dispatch interruption shall be defined as; any delay caused by
malfunction of equipment in which the actual departure time exceeds the
scheduled departure time by [***] (“Chargeable Dispatch Interruption”) [***].

 

3.0 Guarantee Value

 

Bombardier guarantees that the Aircraft dispatch reliability after taking into
account Chargeable Aircraft Dispatch Interruptions shall, at the end of the
period indicated below calculated from the beginning of the Guarantee Term, meet
the guarantee value percentages specified below (“Guarantee Value”):

 

Period

--------------------------------------------------------------------------------

   Guarantee Value (%)

--------------------------------------------------------------------------------

[***]

   [***]

 

4.0 Term of Guarantee

 

The term of this DRG shall commence on the first day of the month following the
first revenue service flight of Buyer’s first Aircraft and shall expire [***]
thereafter (the “Guarantee Term”).

 

5.0 Formula

 

The dispatch reliability shall be compiled as a [***] moving average of
numerical value (expressed as a percentage) which shall be calculated by
application of the following formula:

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -35-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

DR

   =   [***]*

Where:

   

DR

   =  

Dispatch Reliability (expressed as percentage)

CD

   =  

Total Chargeable Aircraft Dispatch Interruptions

SD

   =  

Total Scheduled Revenue Departures

 

6.0 Assumptions

 

6.1 The Guarantee Value is predicated on an average yearly fleet utilization of
[***]. Bombardier reserves the right to re-calculate the Guarantee Value in the
event of deviation of [***] in the aforementioned assumptions.

 

7.0 Conditions and Limitations

 

7.1 A Dispatch Interruption due to any one or more of the following causes shall
not be considered a Chargeable Aircraft Dispatch Interruption:

 

  (a) Dispatch Interruption due to operation or maintenance of equipment in the
Aircraft not being in accordance with the approved Technical Data;

 

  (b) Dispatch Interruption due to acts or omissions of Buyer including but not
limited to unavailability of serviceable spare parts (provided that availability
of spares is not restricted by inability of Bombardier or its suppliers or
subcontractors to supply such spares), ground support equipment or personnel,
and not dispatching in accordance with the approved Minimum Equipment List;

 

  (c) Dispatch Interruption caused by problems that have had relevant
recommended Service Bulletins or Airworthiness Directives issued against them,
if Buyer has not incorporated the bulletin on the Aircraft in question, provided
that Buyer has had reasonable time to incorporate said bulletin or directive and
seventy (70%) percent of the world wide fleet has committed to incorporate the
bulletin or directive;

 

  (d) Dispatch Interruption caused by BFE of Buyer or Buyer designated equipment
(equipment designated by Buyer and purchased by Bombardier on behalf of Buyer);

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -36-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

  (e) Dispatch Interruption due to any modifications to the Aircraft made by
Buyer without Bombardier’s written approval unless Buyer furnishes reasonable
evidence that such modification was not a prime cause of the Dispatch
Interruption ; or

 

  (f) Any Dispatch Interruption due to acts of God or foreign object damage or
acts of third parties or force majeure.

 

7.2 Reporting

 

Buyer shall provide to Bombardier not later than (30) days after the last day of
each month the following datasets as a minimum as defined in the latest
revisions of (Electronic Data Standard Exchange) EDSE Service Letter
DH8-400-SL-00-001and Out-Of-Service Data Collection Service Letter
DH8-400-SL-00-013:

 

  •   Aircraft Utilization

 

  •   Flight Interruptions

 

  •   Component Removals

 

  •   Pireps / Mareps

 

  •   Performed Tasks

 

  •   Service Bulletins / Airworthiness Directives

 

  •   Out-of-Service Data

 

Bombardier will assist Buyer in establishing a data exchange mechanism to allow
a more streamlined electronic exchange from Buyer’s internal reliability data
system.

 

7.3 Master Record

 

The master record of dispatch reliability will be maintained by Bombardier based
upon information provided by Buyer’s maintenance control program as requested
herein.

 

Bombardier shall format the data into Bombardier’s format.

 

8.0 Corrective Action

 

8.1 In the event the achieved dispatch reliability, as reported to Buyer by
Bombardier and reconciled in six (6) month increments, fails to equal the
Guarantee Value for the applicable period, Bombardier and Buyer will jointly
review the performance for that period to identify improvement changes required.
Bombardier shall also provide, at no charge unless otherwise indicated, if
requested by Buyer:

 

  (a)

Bombardier’s Technical Service Support to analyze Buyer’s operating procedures,
maintenance practices, training programs, manuals and publications and related
procedures, practices, policies and programs that can have an adverse effect on
dispatch reliability and recommend any changes in such procedures, practices,

 

Supplement No. PA-0436-5    -37-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

 

policies and programs reasonably indicated to improve the dispatch reliability.
Bombardier will send the audit report to Buyer and Buyer will take the
appropriate reasonable corrective action with:

 

  (i) its own internal resources; or

 

  (ii) an external contracted consulting organization at is own cost or

 

  (iii) a Bombardier recognized consulting organization at its own cost;

 

  (b) Review of data related to parts, material, components, accessories and
equipment incorporated in, and used in connection with, the Aircraft and furnish
technical advice and information to Buyer for the purpose of improving the
dispatch reliability of the Aircraft;

 

  (c) Corrective Bombardier engineering design changes and modification kits of
Bombardier Parts and material for the Aircraft, which will, in the joint opinion
of Buyer and Bombardier, cause the performance of the Aircraft upon Buyer’s
installation, to meet or exceed the Guarantee Value. The modification kits and
design changes supplied by Bombardier which provide added value to Buyer beyond
that required to reach the specified Guarantee Value will be negotiated by
Bombardier and Buyer to define the cost allocation of the “Added Value”.
Bombardier will pay for [***]*, whichever is less, for the percentage as
determined above of the installation cost necessary to meet the Guarantee Value.
Buyer and Bombardier agree that Buyer’s obligations to install such modification
kits shall be consistent with Buyer’s maintenance program. Thereafter, failure
by Buyer to install a Bombardier change shall result in the exclusion of the
associated malfunction from the dispatch reliability computation, unless Buyer
can demonstrate to Bombardier’s reasonable satisfaction that the change would
not have eliminated the malfunction; and

 

  (d) Bombardier shall use its reasonable efforts to require its suppliers to
provide corrective action at no charge to Buyer to the extent required when
Chargeable Aircraft Dispatch Interruptions exceed the Guarantee Value as a
direct result of failure of equipment designed by such suppliers.

 

8.2 [***]

 

8.3 Bombardier’s liability to investigate and provide corrective action under
the terms of this DRG shall be dependent upon the quality, extent and regularity
of information and data reported to Bombardier by Buyer. However, should
Bombardier recommend reasonable corrective actions and Buyer fails to act upon
said recommendations and as a result the Aircraft dispatch reliability exceeds
the Guarantee Value, then Bombardier shall not have any obligation under Article
8.2 above while the situation persists.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -38-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

9.0 Implementation of Changes

 

Buyer may, at its option, decline to implement any change proposed by Bombardier
under Article 8.0 above. If Buyer so declines, Bombardier may adjust the number
of Chargeable Aircraft Dispatch Interruptions by an amount consistent with the
expected reduction in Chargeable Aircraft Dispatch Interruptions based on
reasonable substantiation to Buyer and on other operator experience, if any, as
if such change has been incorporated. Bombardier shall not make adjustments when
Buyer has demonstrated to Bombardier’s reasonable satisfaction that such change
is not cost effective to Buyer.

 

10.0 Duplicate Remedies

 

It is agreed that Bombardier shall not be obligated to provide to Buyer any
remedy which is a duplicate of any other remedy which has been provided to Buyer
elsewhere under the Agreement, by the Power Plant manufacturer or by any vendor.

 

11.0 Limitation of Liability

 

[***]*

 

12.0 In the event of the termination of the Agreement, this Schedule shall
become automatically null and void.

 

13.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

14.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

HORIZON AIR INDUSTRIES, INC.       BOMBARDIER INC.        

Bombardier Aerospace

           

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

       

Regional Aircraft

Date: October     , 2005

     

Date: October     , 2005

                   

Ross Gray

       

Director, Contracts, Americas

       

Regional Aircraft

       

Date: October     , 2005

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -39-                Initials           Buyer
             Bombardier             

--------------------------------------------------------------------------------

SCHEDULE 12 TO SUPPLEMENT NO. PA-0436-5

 

[***]*

 

1.0 [***]

 

2.0 [***]

 

3.0 [***]

 

4.0 Confidentiality

 

Each of Buyer and Bombardier (including its employees, agents and professional
advisors) agrees to keep the terms and conditions of the [***] strictly
confidential. Any information related to the form and amount of the [***] which
may be provided by any third party support provider(s) is to be treated as
confidential and, except as may be required by law or legal process, is not to
be provided to any third party without the express written consent of the other
party and then only subject to the third party agreeing to the third party
support provider(s), or Buyer’s, as appropriate, confidentiality agreement. It
is the disclosing party’s responsibility to have such agreement executed with
any third party prior to disclosure of any such information and to provide such
to the other party for approval.

 

5.0 In the event of the termination of the Agreement, this Schedule shall become
automatically null and void.

 

6.0 The provisions of this Schedule are personal to Buyer and shall not be
assigned or otherwise disposed of by Buyer without the prior written consent of
Bombardier.

 

7.0 This Schedule constitutes an integral part of the Agreement and subject to
the terms and conditions contained therein.

 

HORIZON AIR INDUSTRIES, INC.       BOMBARDIER INC.        

Bombardier Aerospace

           

Rudi Schmidt

     

David MacNeil

Vice President and Treasurer

     

Senior Account Executive, Contracts

       

Regional Aircraft

Date: October     , 2005

     

Date: October     , 2005

                   

Ross Gray

       

Director, Contracts, Americas

       

Regional Aircraft

       

Date: October     , 2005

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

Supplement No. PA-0436-5    -40-                Initials           Buyer
             Bombardier