Exhibit 10.11

                              ***Text Omitted and Filed Separately
                                  Confidential Treatment Requested
                            Under 17 C.F.R. Sections 200.80(b)(4),
                                              200.83 and 240.24b-2

                                                         EXECUTION

                                  $168,000,000

                                 LOAN AGREEMENT


                          Dated as of November 20, 2002

                                      among


                            AMERICAN TRANS AIR, INC.,
                                  as Borrower,

                               ATA HOLDINGS CORP.,
                                   as Parent,

                               GOVCO INCORPORATED,
                          as Primary Tranche A Lender,

                                 CITIBANK, N.A.,
                         as Alternate Tranche A Lender,

                          CITICORP NORTH AMERICA, INC.,
                         as Govco Administrative Agent,

                                 CITIBANK, N.A.,
                              as Tranche B Lender,

                               BEARINGPOINT, INC.
                        (formerly KPMG Consulting, Inc.),
                             as Loan Administrator,

                                 CITIBANK, N.A.,
                              as Collateral Agent,

                                 CITIBANK, N.A.,
                                    as Agent,

                                       and

                     AIR TRANSPORTATION STABILIZATION BOARD

<PAGE>


                              TABLE OF CONTENTS

                                                                            Page

Article I Definitions, Interpretation And Accounting Terms.....................1

      Section 1.1.      Defined Terms..........................................1
      Section 1.2.      Computation of Time Periods...........................26
      Section 1.3.      Accounting Terms and Principles.......................26
      Section 1.4.      Certain Terms.........................................27

Article II THE LOAN...........................................................27

      Section 2.1.      The Loan..............................................27
      Section 2.2.      Borrowing Procedures..................................28
      Section 2.3.      Scheduled Repayment of the Loan.......................29
      Section 2.4.      Evidence of Debt; Use of Proceeds.....................29
      Section 2.5.      Optional Prepayments..................................31
      Section 2.6.      Mandatory Prepayments.................................32
      Section 2.7.      Interest..............................................33
      Section 2.8.      Fees..................................................34
      Section 2.9.      Payments and Computations.............................36
      Section 2.10.     Certain Provisions Governing the Notes................38
      Section 2.11.     Capital Adequacy......................................41
      Section 2.12.     Taxes.................................................41

Article III Conditions To Loan................................................44

      Section 3.1.      Conditions Precedent to the Loan......................44


Article IV Representations and Warranties.....................................49


      Section 4.1.      Organization, Powers, Qualification, Good Standing,
                        Business, Subsidiaries, the Act and the
                        Regulations ..........................................49
      Section 4.2.      Authorization of Borrowing, Etc.......................51
      Section 4.3.      Financial Condition...................................51
      Section 4.4.      No Material Adverse Change; No Restricted Payments or
                        Defaults..............................................53
      Section 4.5.      Title To Properties; Liens............................53
      Section 4.6.      Perfected Security Interest...........................53
      Section 4.7.      Litigation; Adverse Facts.............................53
      Section 4.8.      Payment of Taxes......................................54
      Section 4.9.      Performance of Agreements; Materially Adverse
                        Agreements............................................54
      Section 4.10.     Governmental Regulation...............................55
      Section 4.11.     Securities Activities.................................55
      Section 4.12.     Employee Benefit Plans................................55
      Section 4.13.     Environmental Protection..............................56
      Section 4.14.     Solvency..............................................56
      Section 4.15.     Disclosure............................................56
      Section 4.16.     Compliance With Laws..................................57
      Section 4.17.     Indebtedness; Off Balance Sheet Transactions..........57

<PAGE>

      Section 4.18.     Insurance.............................................57
      Section 4.19.     Section 1110..........................................57
      Section 4.20.     Absence of Labor Disputes.............................57
      Section 4.21.     Gates and Slots.......................................58
      Section 4.22.     Non-Guarantor Subsidiaries............................58

Article V Covenants...........................................................58

      Section 5.1.      Financial Statements and Other Reports................58
      Section 5.2.      Corporate Existence...................................65
      Section 5.3.      Payment of Taxes and Claims; Tax Consolidation........65
      Section 5.4.      Maintenance of Properties; Insurance..................66
      Section 5.5.      Inspection............................................66
      Section 5.6.      Compliance With Laws, Etc.............................67
      Section 5.7.      Hazardous Materials...................................67
      Section 5.8.      Contractual Obligations...............................68
      Section 5.9.      Employee Benefit Plans................................68
      Section 5.10.     FAA Matters; Citizenship..............................68
      Section 5.11.     Board Guarantee.......................................68
      Section 5.12.     Lower-Tier Covered Transaction........................69
      Section 5.13.     Comptroller General Audits and Reviews................69
      Section 5.14.     Appraisal Reports; Additional Collateral..............69
      Section 5.15.     Additional Subsidiaries...............................71
      Section 5.16.     Chief Executive Officer...............................71
      Section 5.17.     Further Assurances....................................71

Article VI NEGATIVE COVENANTS.................................................72

      Section 6.1.      Liens and Related Matters.............................72
      Section 6.2.      Investments...........................................73
      Section 6.3.      Restricted Payments...................................74
      Section 6.4.      Financial Covenants...................................74
      Section 6.5.      Restriction on Acquisitions; New Subsidiaries.........76
      Section 6.6.      Sales and Lease-Backs.................................77
      Section 6.7.      Transactions with Affiliates..........................78
      Section 6.8.      Conduct of Business...................................78
      Section 6.9.      Merger or Consolidation...............................79
      Section 6.10.     Limitation on Asset Sales.............................79
      Section 6.11.     Limitations with Respect to Subsidiaries..............80
      Section 6.12.     Partnerships and Joint Ventures; Speculative
                        Transactions..........................................80
      Section 6.13.     Limitations on Amendments.............................80
      Section 6.14.     Going Private Transactions............................81
      Section 6.15.     No Further Negative Pledges...........................81

<PAGE>

      Section 6.16.     Incentive Equity Plan and Other Incentive
                        Compensation..........................................82

Article VII Events of Default.................................................82

      Section 7.1.      Events of Default.....................................82
      Section 7.2.      Remedies..............................................86


Article VIII THE LOAN ADMINISTRATOR...........................................86

      Section 8.1.      Acceptance of Appointment and Services................86
      Section 8.2.      Loan Administrator's Reliance.........................89
      Section 8.3.      Indemnification.......................................91
      Section 8.4.      Successor Loan Administrator..........................91
      Section 8.5.      Conflict of Interest..................................92
      Section 8.6.      Representations, Warranties and Covenants of the Loan
                        Administrator.........................................92

Article IX THE FACILITY AGENTS................................................93

      Section 9.1.      Authorization and Action..............................93
      Section 9.2.      Facility Agents' Reliance, Etc........................94
      Section 9.3.      Facility Agents and Affiliates........................95
      Section 9.4.      Representations of the Lenders and of the Board.......95
      Section 9.5.      Events of Default; Termination of Board Guarantee.....96
      Section 9.6.      Facility Agents' Right to Indemnity...................96
      Section 9.7.      Indemnification of Facility Agents....................97
      Section 9.8.      Successor Facility Agents.............................97
      Section 9.9.      Collateral Agent's Further Protections................98


Article X MISCELLANEOUS......................................................101

      Section 10.1.     Amendments, Waivers, Etc.............................101
      Section 10.2.     Assignments and Participations.......................103
      Section 10.3.     Costs and Expenses...................................105
      Section 10.4.     Indemnities..........................................106
      Section 10.5.     Right of Set-off.....................................107
      Section 10.6.     Sharing of Payments, Etc.............................107
      Section 10.7.     Notices, Etc.........................................108
      Section 10.8.     No Waiver; Remedies..................................108
      Section 10.9.     Independence of Representations, Warranties and
                        Covenants............................................108
      Section 10.10.    Governing Law........................................109
      Section 10.11.    Submission to Jurisdiction; Service of Process.......109
      Section 10.12.    Waiver of Jury Trial.................................109
      Section 10.13.    Marshaling; Payments Set Aside.......................109
      Section 10.14.    Section Titles.......................................110

<PAGE>

      Section 10.15.    Execution in Counterparts............................110
      Section 10.16.    Third Party Beneficiary..............................110
      Section 10.17.    Severability.........................................110
      Section 10.18.    Confidentiality......................................110
      Section 10.19.    No Proceedings.......................................111
      Section 10.20.    Govco Administrative Agent...........................111
      Section 10.21.    Acknowledgement Regarding Federal Authority..........112
      Section 10.22.    Cumulative Rights and Remedies.......................113



Annexes

Annex A  -        Notice Addresses
Annex B  -        Lending Office


Schedules

Schedule 2.8(g)   Loan Administrator Hourly Fee Rate Schedule
Schedule 4.1      Subsidiaries
Schedule 4.2      Consents and Approvals
Schedule 4.8      Tax Sharing Agreements
Schedule 4.9(c)   Material Agreements
Schedule 4.9(d)   Concessions
Schedule 4.17     Indebtedness
Schedule 4.22     Non-Guarantor Subsidiaries
Schedule 6.1      Liens and Payment Restrictions
Schedule 6.2      Investments
Schedule 6.6      Sale-Leasebacks
Schedule 6.7      Transactions with Affiliates


Exhibits

Exhibit A        - Form of Assignment and Acceptance
Exhibit B1       - Form of Tranche A Note
Exhibit B2       - Form of Tranche B Note
Exhibit C        - Form of Notice of Borrowing
Exhibit D        - Form of Board Guarantee
Exhibit E        - Form of Participation Agreement
Exhibit F        - Form of Warrant Agreement

<PAGE>

Exhibit G        - Form of Security Agreement
Exhibit H        - Form of Collateral Value Certificate
Exhibit I        - Form of Subsidiary Guarantee
Exhibit J        - Form of Parent Guarantee
Exhibit K        - Certain Economic Terms

<PAGE>

     LOAN  AGREEMENT,  dated as of November 20, 2002,  among AMERICAN TRANS AIR,
INC., an Indiana  corporation (the  "Borrower");  ATA HOLDINGS CORP., an Indiana
corporation  (the "Parent");  GOVCO  INCORPORATED,  a Delaware  corporation (the
"Primary  Tranche A Lender");  CITIBANK,  N.A.,  in its capacity as an alternate
lender to the  Primary  Tranche A Lender (in such  capacity,  together  with its
successors  and  permitted  assigns,   the  "Alternate  Tranche  A  Lender"  and
collectively,  together with the Primary Tranche A Lender and its successors and
permitted  assigns,  the "Tranche A Lenders");  CITICORP NORTH AMERICA,  INC., a
Delaware  corporation,  as administrative agent for the Primary Tranche A Lender
and the commercial  paper holders of the Primary Tranche A Lender (together with
its  successors  and  permitted  assigns,  the  "Govco  Administrative  Agent");
CITIBANK,  N.A., in its capacity as a lender in respect of Tranche B (as defined
herein) (in such capacity,  together with its successors and permitted  assigns,
the "Tranche B Lender"); BEARINGPOINT, INC. (formerly KPMG Consulting, Inc.), in
its capacity as loan administrator  hereunder  (together with its successors and
permitted assigns, the "Loan Administrator"); CITIBANK, N.A., in its capacity as
collateral agent hereunder  (together with its successors and permitted assigns,
the  "Collateral  Agent");  CITIBANK,  N.A.,  as agent for the  Lenders (in such
capacity,  together with its successors and permitted assigns, the "Agent"); and
AIR TRANSPORTATION  STABILIZATION  BOARD, created pursuant to Section 102 of the
Act referred to below (the "Board").

                              W i t n e s s e t h:

     WHEREAS,  the Borrower has requested that the Lenders make available to the
Borrower a Loan for such general corporate purposes as are permissible under the
Air Transportation Safety and System Stabilization Act, P.L. 107-42, as the same
may be amended from time to time (the "Act") and the regulations for Air Carrier
Guarantee Loan Program issued  pursuant to the Act, 14 C.F.R.  Part 1300, as the
same may be amended from time to time (the "Regulations"); and

     WHEREAS,  the Primary  Tranche A Lender (or if the Primary Tranche A Lender
chooses not to make its portion of the Loan available,  the Alternate  Tranche A
Lender) and the Tranche B Lender are willing  severally to make available to the
Borrower the Loan upon the terms and subject to the conditions set forth herein;

     NOW,  THEREFORE,  in  consideration  of the premises and the  covenants and
agreements contained herein, the parties hereto hereby agree as follows:

Article I

                Definitions, Interpretation And Accounting Terms

     Section 1.1. Defined Terms. As used in this Agreement,  the following terms
have the following  meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

          "Act"  has  the  meaning  specified  in  the  first  recital  to  this
          Agreement.
<PAGE>

          "Affiliate" means, with respect to any Person, any other Person which,
          directly or indirectly,  controls, is controlled by or is under common
          control  with  such  Person.  For the  purposes  of  this  definition,
          "control" means the possession,  directly or indirectly,  of the power
          to direct or cause the  direction of  management  and policies of such
          Person,  whether  through  the  ownership  of  voting  securities,  by
          contract or otherwise.

          "Affiliate Transaction" has the meaning specified in Section 6.7(a).

          "Agent" has the meaning specified in the preamble to this Agreement.

          "Aggregate Amounts Due" has the meaning specified in Section 10.6

          "Agreement" means this Loan Agreement.

          "Aircraft  Related  Equipment"  means  aircraft   (including  aircraft
          engines  installed  thereon)  in the fleet of the  Borrower  (or other
          Wholly-Owned  Subsidiary  of  the  Parent),  spare  aircraft  engines,
          aircraft  parts,  simulators  and passenger  loading  bridges or other
          flight or ground equipment.

          "Alliance  Agreements" means business alliance agreements entered into
          by the Borrower  from time to time that  include,  but are not limited
          to,  code-sharing,  frequent  flyer,  ground  handling  and  marketing
          agreements that are entered into in the ordinary course of business.

          "Alternate Tranche A Lender" has the meaning specified in the preamble
          to this Agreement.

          "Applicable  Tranche A Interest Rate" means,  for any Interest Period,
          the sum of (1) the Primary  Tranche A Lender's  weighted  average cost
          (as defined below) for such Interest Period related to the issuance of
          commercial paper notes and other short-term  borrowings or the sale of
          participation interests  (collectively,  "Commercial Paper"), which in
          each case  have  been  allocated  by the  Primary  Tranche A Lender to
          Tranche A, which rate includes  related issuance costs incurred by the
          Primary Tranche A Lender and (2) 0.35% per annum, as calculated by the
          Govco Administrative Agent for such Interest Period and specified in a
          notice sent to the Borrower, with a copy to the Loan Administrator and
          the Agent, at least five Business Days prior to each Interest  Payment
          Date on which the interest so calculated  is payable.  For purposes of
          the foregoing,  the Primary Tranche A Lender's "weighted average cost"
          of Commercial Paper shall consist of (i) the actual interest rate paid
          to purchasers of Commercial  Paper, (ii) the costs associated with the
          issuance  of the  Commercial  Paper and  (iii)  other  borrowings  the
          Primary Tranche A Lender may incur, including the amount to fund small
          or  odd  dollar  amounts  that  are  not  easily  accommodated  in the
          commercial paper market. Notwithstanding the forgoing, if Tranche A is
          funded by or assigned to any other entity  pursuant to the  provisions
          of this  Agreement  (including  without  limitation,  to the Alternate
          Tranche A Lender), "Applicable Tranche A Interest Rate" means, for any

                                       2
<PAGE>

          Interest  Period,  a rate per annum  equal to LIBOR for such  Interest
          Period plus 0.40% per annum.

          "Applicable Tranche B Interest Rate" means, for any Interest Period, a
          rate per annum  equal to the  greater  of (i) LIBOR for such  Interest
          Period plus 5.75% and (ii) the Applicable  Tranche A Interest Rate for
          such Interest  Period plus the Guarantee Fee percentage  applicable to
          such Interest Period set forth in Section 2.6 of the Board Guarantee.

          "Application"  means the  Application of the Borrower to the Board for
          the  issuance  of a federal  credit  instrument  under the Act and the
          Regulations dated June 28, 2002, as supplemented to the Closing Date.

          "Appraisal  Report"  means a desktop  appraisal  (or,  if  applicable,
          pursuant to Section 5.14, an inspection  report) in form and substance
          satisfactory  to the Board (or if the Board  Guarantee is no longer in
          effect,  the Requisite  Lenders) and prepared by an  Appraiser,  which
          certifies,  at the  time of  determination,  the  market  value of the
          applicable  appraised property and the value of such property that can
          be obtained in a sale conducted as part of an orderly liquidation.

          "Appraised  Collateral"  means all Collateral that is Aircraft Related
          Equipment,  which shall  include all  Collateral  (other than  Pledged
          Accounts (as defined in the Security Agreement)) of the type the value
          of which is reflected on the Collateral  Value  Certificate  delivered
          pursuant to Section 3.1(a)(ix).

          "Appraised Value" means, in the case of any Appraised Collateral,  the
          liquidation  value of such  Collateral as reflected in the most recent
          Appraisal Report in respect of such Collateral.

          "Appraiser" means Aviation  Specialists  Group, Inc. or any other firm
          of nationally  recognized,  independent appraisers as may be agreed by
          the Borrower, the Board and the Lenders.

          "ASM" means the "available seat miles" of the Borrower.

          "Asset Sale" means any sale, transfer or other disposition  (including
          by way of merger, consolidation,  exchange of assets or sale-leaseback
          transactions), in one transaction or a series of related transactions,
          by either Obligor or any of its  Subsidiaries to any Person of (i) all
          or any of the Capital Stock of any Subsidiary of either Obligor,  (ii)
          all or  substantially  all of the  property and assets of an operating
          unit or business of either Obligor or any of its Subsidiaries or (iii)
          any  other  property  and  assets  of  either  Obligor  or  any of its
          Subsidiaries  outside  of the  ordinary  course  of  business  of such
          Obligor or such  Subsidiary;  provided,  that no (i) sales of Aircraft
          Related   Equipment  as  part  of  a  sale-leaseback   transaction  in
          connection with the acquisition of such Aircraft Related  Equipment by
          the  Borrower  or another  Wholly-Owned  Subsidiary  of the Parent and
          entered into within  eighteen  months after such  acquisition  or (ii)
          other  sale-leasebacks  described  on  Schedule  6.6 shall be included


                                       3
<PAGE>

          within the meaning of "Asset Sale" (except that if a sale described in
          clause  (i) of this  proviso  is  consummated  while  there is a Value
          Differential, such sale shall be included within the meaning of "Asset
          Sale").

          "Assignment and Acceptance" means an assignment and acceptance entered
          into by a Lender and an Eligible Lender, consented to by the Board and
          accepted  by  the  Agent  (unless  consummated   pursuant  to  Section
          10.2(d)), in substantially the form of Exhibit A.

          "Bankruptcy  Code" means Title 11 of the United States Code as now and
          hereafter in effect, or any successor statute.

          "BATA Joint Venture"  means the joint venture  pursuant to the limited
          liability  company  agreement of BATA Leasing,  LLC, dated as of March
          13, 2001, between MDFC Equipment Leasing  Corporation,  American Trans
          Air, Inc. and the other parties from time to time a party thereto, and
          documents executed in connection therewith.

          [...***...]

          "Board" has the meaning specified in the preamble to this Agreement.

          "Board  Guarantee" means the Guarantee  Agreement dated as of the date
          hereof and executed by the Board, the Tranche A Lenders and the Agent,
          in substantially the form of Exhibit D.

          "Borrower"  has  the  meaning   specified  in  the  preamble  to  this
          Agreement.

          "Borrowing" means the borrowing of the Loan.

          "Business Day" means a day of the year on which banks are not required
          or authorized to close in New York, New York or Indianapolis,  Indiana
          and,   if  the   applicable   Business   Day   relates   to   notices,
          determinations,  fundings and payments in connection with LIBOR, a day
          on which dealings in Dollar deposits are also carried on in the London
          interbank market.

          "Capital  Lease,"  as applied  to any  Person,  means any lease of any
          property  (whether  real,  personal or mixed) by that Person as lessee
          that,  in  conformity  with GAAP, is required to be accounted for as a
          capital lease on the balance  sheet of that Person,  and the amount of
          Indebtedness represented by such lease shall be the capitalized amount
          of the  obligations  evidenced  thereby  determined in accordance with
          GAAP.

          "Capital Stock" means, with respect to any Person, any and all shares,
          interests,  participations or other equivalents  (however  designated,
          whether voting or non-voting) of such Person's capital stock,  whether
          now outstanding or issued after the date of this Agreement, including,
          without limitation, all Common Stock.

                                             ***Confidential Treatment Requested

                                       4
<PAGE>

          "Cash" means money, currency or a credit balance.

          "Cash  Equivalents"  means,  as at  any  date  of  determination,  (i)
          marketable  securities  (a)  issued or  directly  and  unconditionally
          guaranteed   as  to  interest  and  principal  by  the  United  States
          Government  or (b)  issued  by any  agency or  instrumentality  of the
          United  States the  obligations  of which are backed by the full faith
          and credit of the United States, in each case maturing within one year
          after such date;  (ii)  marketable  direct  obligations  issued by any
          state of the United States of America or any political  subdivision of
          any such state or any  instrumentality  thereof, in each case maturing
          within  one  year  after  such  date  and  having,  at the time of the
          acquisition  thereof, the highest rating obtainable from either S&P or
          Moody's; (iii) commercial paper not issued by either Obligor or any of
          its  Subsidiaries  maturing  no more than one year after such date and
          having, at the time of the acquisition  thereof,  a rating of at least
          A-2 from  S&P or at  least  P-2 from  Moody's;  (iv)  certificates  of
          deposit or bankers'  acceptances  maturing  within one year after such
          date and issued or  accepted by any Lender or by any  commercial  bank
          organized  under the laws of the United States of America or any state
          thereof or the District of Columbia  that (a) is at least  "adequately
          capitalized"  (as defined in the  regulations  of its primary  Federal
          banking  regulator)  and (b) has Tier 1 capital  (as  defined  in such
          regulations)  of not less  than  $100,000,000;  and (v)  shares of any
          money  market  mutual  fund  that (a) has at least  95% of its  assets
          invested  continuously  in the  types of  investments  referred  to in
          clauses  (i) and (ii)  above,  (b) has net  assets  of not  less  than
          $500,000,000,  and (c) has the highest rating  obtainable  from either
          S&P or Moody's.

          "Cash Proceeds" means, with respect to any Asset Sale, the proceeds of
          such  Asset Sale in the form of Cash and Cash  Equivalents,  including
          payments of deferred payment  obligations when received in the form of
          Cash or Cash  Equivalents  and proceeds  from the  conversion of other
          property received when converted to Cash or Cash Equivalents.

          "Change  in  Control"  means  (i) the  acquisition  at any time by any
          Person or two or more Persons acting in concert (other than the Parent
          or the Existing  Stockholder)  of "beneficial  ownership"  (within the
          meaning  of Section  13(d)  under the  Exchange  Act and the rules and
          regulations  promulgated  thereunder)  in  excess  of 35% of the total
          voting power of the Voting  Stock of the  Borrower or the Parent,  and
          the Parent or the Existing  Stockholder shall fail to own at least 51%
          of such  Voting  Stock;  (ii)  the  sale,  lease,  transfer  or  other
          disposition, of all or substantially all of the assets of the Borrower
          or the Parent to any Person or two or more  Persons  acting in concert
          as an entirety or substantially as an entirety in one transaction or a
          series of related  transactions;  (iii) the merger or consolidation of
          the Borrower or the Parent, with or into another  corporation,  or the
          merger of another  corporation into the Borrower or the Parent, or any
          other  transaction,  with the  effect  that a Person  (other  than the
          Parent or the Existing  Stockholder)  or two or more Persons acting in
          concert  (other  than the Parent  and the  Existing  Stockholder)  has
          "beneficial  ownership"  (within the  meaning of Section  13(d) of the
          Exchange Act and the rules and regulations  promulgated thereunder) in
          excess of 35% of the Voting  Stock of the  Borrower or the Parent,  or
          (if the  Borrower or the Parent is not the  surviving  corporation  in
          such transaction) such other corporation (including, in any such case,
          indirect  ownership  through  another  Person),  and the Parent or the
          Existing  Stockholder  shall  fail to own at least 51% of such  Voting
          Stock;  (iv) the  liquidation  or  dissolution  of the Borrower or the
          Parent; or (v) if a majority of the board of directors of the Borrower
          or the Parent shall no longer be composed of individuals  (a) who were

                                       5
<PAGE>

          members  of said  board on the date  hereof,  (b)  whose  election  or
          nomination  to said board was approved by  individuals  referred to in
          clause  (a)  above  constituting  at the  time  of  such  election  or
          nomination at least a majority of said board or (c) whose  election or
          nomination  to said board was approved by  individuals  referred to in
          clauses (a) and (b) above constituting at the time of such election or
          nomination  at least a majority  of said board.  For  purposes of this
          definition,  the term Person includes a "person" or "group" within the
          meaning of Rule 13d-3 under the Exchange Act.

          "Closing Date" means the date on which the Loan is made.

          "Collateral" has the meaning set forth in the Security Agreement.

          "Collateral  Agent" has the meaning set forth in the  preamble to this
          Agreement.

          "Collateral  Value"  means,  as of  any  date  of  determination,  the
          aggregate value of the following Collateral,  determined by taking the
          sum of: (a) the Appraised Value of all Appraised Collateral, as stated
          in the then most current  Appraisal  Report(s)  therefor  (except that
          with respect to the Collateral Value Certificate delivered pursuant to
          Section 3.1(a)(ix),  the Collateral Value of the Appraised  Collateral
          shall be determined as set forth therein), and (b) eighty-five percent
          (85%) of the Eligible Accounts as of such date; provided, that none of
          the following  Ineligible  Assets shall be included in the computation
          of Collateral  Value  (collectively,  the  "Ineligible  Assets"):  (A)
          property or assets not subject to a first  priority  perfected Lien in
          favor of the Collateral Agent under the Security Agreement,  including
          any  property or assets that may no longer be owned by an Obligor as a
          result  of an Asset  Sale or  otherwise;  and (B)  property  or assets
          subject  to any  event of loss,  damage  or  other  casualty  that has
          materially  and  adversely  affected  the  value  of such  Collateral,
          whether  insured or not, and in the event that any  Ineligible  Assets
          are excluded from the  computation  of the  Collateral  Value based on
          this proviso,  the Collateral  Value  computed in accordance  with the
          foregoing method shall be adjusted to exclude such Ineligible Assets.

          "Collateral  Value  Certificate"  means a  certificate  executed  by a
          Responsible Officer of Borrower in substantially the form of Exhibit H
          annexed hereto.

          "Commitment" has the meaning specified in Section 2.1(a).

          "Commodity  Agreement" means any agreement or arrangement the value of
          which fluctuates based on the value of a commodity.

          "Common Stock" means, with respect to any Person,  any and all shares,
          interests,  participations or other equivalents  (however  designated,
          whether voting or non-voting) of such Person's  common stock,  whether
          now outstanding or issued after the date of this Agreement, including,
          without limitation, all series and classes of such common stock.

                                       6
<PAGE>

          "Concessions"  means the  concessionary  agreements  and  arrangements
          referred to in the Application and which are listed on Schedule 4.9(d)
          hereto.

          "Consolidated  EBITDAR"  means,  with  respect to any Person,  for any
          period,  the  sum of (i) the  consolidated  operating  income  of such
          Person for such period,  (ii) consolidated  aircraft  operating rental
          expenses  of  such  Person  for  such  period,   (iii)   amortization,
          depreciation,   non-cash  stock  compensation  expenses  and  non-cash
          extraordinary  charges that were deducted in arriving at the amount of
          such  consolidated  operating  income for such period,  (iv)  non-cash
          impairment  charges,  (v) consolidated  rental expenses of such Person
          for such period  under each  synthetic  lease that would appear on the
          balance  sheet of such Person if such lease were  treated as a Capital
          Lease, and (vi) interest income of such Person during such period, all
          as determined on a consolidated basis in accordance with GAAP.

          "Consolidated  Fixed Charges" means,  with respect to any Person,  for
          any period,  the sum of (a) aggregate  gross interest  expense of such
          Person for such period  (calculated  without regard to any limitations
          on the  payment  thereof),  including  that  portion of Capital  Lease
          obligations of such Person  representing  the interest factor for such
          period,  and (b) the actual  amount of rental  expenses of such Person
          for  such  period  under  any  Operating  Lease  of real  or  personal
          property, all determined on a consolidated basis.

          "Contractual Obligation" as applied to any Person, means any provision
          of any  equity  security  issued by that  Person or of any  indenture,
          mortgage,  deed of trust,  contract,  undertaking,  agreement or other
          instrument  to which  that  Person is a party or by which it or any of
          its  properties  is bound or to which it or any of its  properties  is
          subject.

          "Currency  Agreement"  means any foreign exchange  contract,  currency
          swap agreement,  futures contract,  option contract,  synthetic cap or
          other similar agreement or arrangement.

          "Current  Credit  Facility"  means the  Credit  Agreement  dated as of
          January 28, 1999,  as amended,  among the  Borrower,  the Parent,  the
          lenders from time to time party thereto and Bank One, N.A.

          "Default"  means any condition or event which with the passing of time
          or the giving of notice or both would become an Event of Default.

          "Dollars" and the sign "$" each mean the lawful money of the United
          Statesof America.

          "Eligible  Accounts" as of any date of  determination  means  accounts
          receivable shown on the consolidated  balance sheet of the Borrower as
          of the end of the then most  recently  ended fiscal  quarter,  net of,
          without  duplication,  all reserves against such accounts  receivables
          and any account:

          (i) either with respect to which more than 90 days have elapsed  since
          the date of the  original  invoice  therefor  or which is more than 60
          days past due;
                                       7
<PAGE>

          (ii) with respect to which,  in whole or in part, a check,  promissory
          note,  draft,  trade acceptance or other instrument for the payment of
          money  has  been   received,   presented   for  payment  and  returned
          uncollected for any reason;

          (iii) which represents an invoice for goods sold or leased or services
          rendered  under a contract or agreement  pursuant to which the account
          debtor's  obligation  to pay  such  invoice  is  conditioned  upon the
          Borrower's completion of any further performance under the contract or
          agreement  or as to which the goods or services  giving  rise  thereto
          have not been delivered or performed,  and if applicable,  accepted by
          the account debtor, or the account debtor revokes its acceptance;

          (iv) as to which any one or more of the  following  events is known to
          the Borrower to have  occurred  with respect to the account  debtor on
          such account:  death or judicial  declaration  of  incompetency  of an
          account  debtor who is an  individual;  the filing of a case by, or an
          involuntary case shall be commenced  against,  an account debtor under
          the  Bankruptcy  Code  or  under  any  other  applicable   bankruptcy,
          insolvency  or  similar  law;  or a decree or order of a court for the
          appointment  of  a  receiver,   liquidator,   sequestrator,   trustee,
          custodian or other  officer  having  similar  powers over such account
          debtor, or over all or a substantial part of its property,  shall have
          been entered; or there shall have occurred the involuntary appointment
          of an interim  receiver,  trustee or other  custodian  of such account
          debtor for all or a substantial part of its property;  or a warrant of
          attachment,  execution  or  similar  process  shall  have been  issued
          against any  substantial  part of the property of such account debtor;
          the  institution by or against the account debtor of any other type of
          insolvency  proceeding  (under the Bankruptcy Code or otherwise) or of
          any formal or informal  proceeding for the  dissolution or liquidation
          of,  settlement  of claims  against,  or winding up of affairs of, the
          account  debtor;  the  sale,   assignment,   or  transfer  of  all  or
          substantially  all of the assets of the  account  debtor;  the account
          debtor shall fail  generally,  or shall admit in writing its inability
          to pay its debts as such debts  become  due; or the  cessation  of the
          business of the account debtor as a going concern;

          (v) if fifty percent  (50%) or more of the aggregate  dollar amount of
          outstanding  accounts owed at such time by the account  debtor thereon
          is classified as ineligible under the other criteria set forth herein;

          (vi)  which is owed by an account  debtor and is in an amount  greater
          than $25,000 to which the Borrower is indebted in any way, or which is
          subject to any right of setoff or  recoupment  by the account  debtor,
          unless the  account  debtor has  entered  into an  agreement  to waive
          setoff rights; or if the account debtor thereon has disputed liability
          or made any claim  with  respect  to any other  account  due from such
          account  debtor;  but in each  such  case  only to the  extent of such
          indebtedness, setoff, recoupment, dispute, or claim;

                                       8
<PAGE>

          (vii) which  represents a sale on a  bill-and-hold,  guaranteed  sale,
          sale and return, sale on approval, consignment, or other repurchase or
          return basis;

          (viii)  with  respect  to which the  account  debtor is located in any
          jurisdiction  requiring the filing of a notice of business  activities
          report  or  similar  report in order to permit  the  Borrower  to seek
          judicial  enforcement in such jurisdiction of payment of such account,
          unless the Borrower has qualified to do business in such  jurisdiction
          or has  filed a notice of  business  activities  report or  equivalent
          report for the then current year;

          (ix) which is owed by an account  debtor  which is an Affiliate of the
          Borrower;

          (x) which is owed by the  Government  of the United States of America,
          or any department, agency, public corporation or other instrumentality
          thereof,  unless the  Assignment of Claims Act of 1940, as amended (31
          U.S.C. Sec. 3727 et seq.) has been complied with; or

          (xi)  which is not  subject  to a first  priority  perfected  security
          interest  in  favor  of  the  Collateral   Agent  under  the  Security
          Agreement.

          "Eligible Affiliate" means with respect to any Lender, an Affiliate of
          such Lender which is an Eligible Lender.

          "Eligible  Collateral"  means  property  of the same  nature  and type
          pledged as of the Closing Date pursuant to the Security Agreement.

          "Eligible  Lender" means any "lender"  under and as defined in the Act
          and the Regulations.

          "Eligible   Participant"   means  any  entity  that   qualifies  as  a
          participant under Section  1300.23(b) of the Regulations and meets all
          of the other  requirements  applicable to it as a  participant  as set
          forth in the Act, the  Regulations and any  supplemental  requirements
          issued by the Board.

          "Employee Compensation Agreement" has the meaning specified in Section
          3.1(d).

          "Environmental  Claim" means any  investigation,  written  request for
          information,  notice, claim, suit, proceeding, demand or order, by any
          Governmental  Authority or any Person  arising in connection  with any

                                       9
<PAGE>

          alleged  or  actual  violation  of  Environmental  Laws  or  with  any
          liability related to Hazardous  Materials  Activity,  or any actual or
          alleged  property  damage  or  harm to  human  health,  safety  or the
          environment.

          "Environmental   Laws"   means  any  and  all   applicable   statutes,
          ordinances,  orders,  rules,  regulations,  guidance documents (to the
          extent   compliance   therewith   is  required  by  any   Governmental
          Authority),  judgments,  Governmental  Authorizations,  or  any  other
          requirement  of  any  Governmental   Authority  relating  to  (a)  the
          prevention or control of pollution or  protection of the  environment,
          (b) the presence, generation,  handling, treatment, storage, disposal,
          discharge, Release, emission or transportation of Hazardous Materials,
          or (c) exposure to  Hazardous  Materials.  "Environmental  Laws" shall
          include,  but  not be  limited  to,  the  Comprehensive  Environmental
          Response,  Compensation,  and Liability Act (42 U.S.C.  9601 et seq.),
          the Resource  Conservation and Recovery Act (42 U.S.C.  6901 et seq.),
          the National  Environmental  Policy Act (42 U.S.C.  4321 et seq.), the
          Hazardous  Materials  Transportation Act (49 U.S.C. 1801 et seq.), the
          Toxic Substances  Control Act (49 U.S.C.  2601 et seq.), the Clean Air
          Act (42 U.S.C.  7401 et seq.), the Federal Water Pollution Control Act
          (33 U.S.C.  1251 et seq.), the Safe Drinking Water Act (42 U.S.C. 3007
          et seq.), the Emergency  Planning and Community  Right-to-Know Act (42
          U.S.C.  11001 et seq.),  the  Occupational  Safety  and Health Act (29
          U.S.C.  641 et seq.),  and the  equivalent  statutes  in effect in the
          State of Indiana.


          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
          amended from time to time, and any successor statute.

          "ERISA  Affiliate"  means,  as  applied  to  either  Obligor,  (i) any
          corporation  which is, or was at any  time,  a member of a  controlled
          group of  corporations  within the  meaning  of Section  414(b) of the
          Internal  Revenue  Code of which such  Obligor  is a member;  (ii) any
          trade or business (whether or not incorporated) which is a member of a
          group of trades or businesses  under common control within the meaning
          of Section  414(c) of the Internal  Revenue Code of which such Obligor
          is a member; and (iii) solely for purposes of Section 302 of ERISA and
          Section 412 of the Internal  Revenue Code any member of an  affiliated
          service  group  within the  meaning  of  Section  414(m) or (o) of the
          Internal Revenue Code of which such Obligor, any corporation described
          in clause (i) above or any trade or business  described in clause (ii)
          above is a member.

          "ERISA Event" means (a) any "reportable  event", as defined in Section
          4043 of ERISA or the regulations  issued  thereunder with respect to a
          Plan  (other  than an event  for  which the  30-day  notice  period is
          waived); (b) the existence with respect to any Plan of an "accumulated
          funding deficiency" (as defined in Section 412 of the Internal Revenue
          Code or Section 302 of ERISA),  whether or not waived;  (c) the filing
          pursuant to Section  412(d) of the  Internal  Revenue  Code or Section
          303(d) of ERISA of an application  for a waiver of the minimum funding
          standard  with  respect  to any  Plan;  (d) the  incurrence  by either
          Obligor or any ERISA  Affiliate  of any  liability  under  Title IV of
          ERISA with respect to the  termination of any Plan; (e) the incurrence
          by either Obligor or any ERISA Affiliate of any liability with respect
          to the withdrawal or partial withdrawal from any Plan or Multiemployer
          Plan;  (f) the receipt by either  Obligor or any ERISA  Affiliate from
          the  PBGC  or a  plan  administrator  of  any  notice  relating  to an
          intention  to  terminate  any Plan or Plans or to appoint a trustee to
          administer any Plan; or (g) the receipt by either Obligor or any ERISA
          Affiliate of any notice, or the receipt by any Multiemployer Plan from
          either  Obligor or any ERISA  Affiliate of any notice,  concerning the
          imposition  of  Withdrawal   Liability  or  a  determination   that  a
          Multiemployer  Plan  is,  or  is  expected  to  be,  insolvent  or  in
          reorganization, within the meaning of Title IV of ERISA.

                                       10
<PAGE>

          "Event of Default" has the meaning specified in Section 7.1.

          "Excess Cash Flow" means, with respect to any Person,  for any period,
          (i)  Consolidated  EBITDAR of such Person for such period,  minus (ii)
          the sum of the following,  all determined on a consolidated basis: (A)
          any change  (positive or  negative) in Working  Capital of such Person
          from the first day of such period to the last day of such period,  (B)
          payments of principal  and interest  with respect to the  consolidated
          Indebtedness for borrowed money of such Person during such period,  to
          the extent such payments are not prohibited under this Agreement,  (C)
          income  taxes paid by such Person  during such  period,  (D)  aircraft
          rentals paid by such Person during such period under Operating Leases,
          (E) subject to compliance with the second proviso of Section  5.14(b),
          cash used during such period to purchase  Aircraft Related  Equipment,
          and (F) $10,000,000.

          "Excess Proceeds" has the meaning specified in Section 2.6(b).

          "Exchange Act" means the  Securities  Exchange Act of 1934, as amended
          from time to time, and any successor statute.

          "Existing  Letters of Credit" means the letters of credit  existing on
          the date hereof pursuant to the Current Credit Facility.

          "Existing  Stockholder" means J. George Mikelsons,  his spouse and his
          heirs, and his estate and any trust established for him, his spouse or
          his heirs.

          "Existing  Stockholder  Undertaking"  has  the  meaning  specified  in
          Section 3.1(d)(ii).

          "Facilities"  means  any and  all  real  property  now,  hereafter  or
          heretofore  owned,  leased or operated by either Obligor or any of its
          Subsidiaries and any of their respective predecessors.

          "Facility Agent" has the meaning specified in Section 9.1.

          "Fair  Market  Value"  of any  asset,  as  used in the  definition  of
          Indebtedness  or with  respect to any asset  subject to an Asset Sale,
          means the price that could be  obtained  for such asset by a seller at
          the time of  determination in an arm's-length  transaction  between an
          informed  and  willing  seller  under  no  compulsion  to sell  and an
          informed and willing  buyer,  as determined in good faith by the board
          of  directors  of the Obligor or the  Subsidiary  thereof  making such
          determination, taking into consideration market conditions at the time
          of determination.

          "Federal  Reserve  Board"  means the Board of Governors of the Federal
          Reserve System, or any successor thereto.

          "Fiscal Year" means the fiscal year of the Obligors  referenced in the
          financial statements to be delivered by them pursuant to Section 5.1.

                                       11
<PAGE>

          "Fitch"  means  Fitch,  Inc.,  and  any  successor  thereto  that is a
          nationally recognized rating agency.

          "Future  Issuance"  means  each (i)  borrowing  by the  Parent  or the
          Borrower  or any of their  Subsidiaries  from any source  (other  than
          Trade Payables and accrued  expenses arising in the ordinary course of
          business or  borrowings  from the Parent or any of its  Subsidiaries),
          including in the debt capital  markets or from commercial bank lenders
          after the date of this  Agreement,  and (ii)  issuance  of any Capital
          Stock or any  warrants,  options or other rights that are  convertible
          into or exercisable  for Capital Stock by the Parent,  the Borrower or
          any of their respective Subsidiaries after the date of this Agreement,
          except for issuances of Capital Stock of the Parent in connection with
          the exercise of stock options or similar rights issued as compensation
          by existing or former officers,  directors or employees of the Parent,
          the Borrower or any of their Subsidiaries.

          "GAAP" means,  subject to the limitations on the  application  thereof
          set forth in Section 1.3, generally accepted accounting principles set
          forth in opinions  and  pronouncements  of the  Accounting  Principles
          Board of the American  Institute of Certified  Public  Accountants and
          statements and  pronouncements of the Financial  Accounting  Standards
          Board or in such  other  statements  by such  other  entity  as may be
          approved by a significant  segment of the accounting  profession or as
          may be mandated by applicable law.

          [...***...]

          "Governmental Authority" means any nation or government,  any state or
          other  political  subdivision  thereof  and  any  agency,   authority,
          instrumentality,  regulatory body, court, central bank or other entity
          exercising executive,  legislative,  judicial,  taxing,  regulatory or
          administrative powers or functions of or pertaining to government.

          "Governmental  Authorization" means any permit, license,  certificate,
          authorization,  plan,  directive,  consent  order  or  consent  decree
          issued,  promulgated  or  entered  into  by or with  any  Governmental
          Authority pursuant to any Environmental Law.

          "Guarantee"  means any  obligation,  contingent or  otherwise,  of any
          Person directly or indirectly  guaranteeing  any Indebtedness or other
          obligation of any other Person and, without limiting the generality of
          the  foregoing,  any  obligation,  direct or indirect,  contingent  or
          otherwise,  of such first Person (i) to purchase or pay (or advance or
          supply  funds for the  purchase  or payment of) such  Indebtedness  or
          other  obligation of such other Person  (whether  arising by virtue of
          partnership  arrangements,  or by agreement to keep-well,  to purchase
          assets, goods, securities or services, to take-or-pay,  or to maintain
          financial  statement  conditions or otherwise);  (ii) entered into for
          purposes  of  assuring  in  any  other  manner  the  obligee  of  such
          Indebtedness or other obligation of

                                             ***Confidential Treatment Requested

                                       12
<PAGE>

          the payment thereof or to protect such obligee against loss in respect
          thereof (in whole or in part); or (iii) to maintain  working  capital,
          equity capital or any other financial statement condition or liquidity
          or level of income or cash flow of such  other  Person so as to enable
          such Person to pay such  Indebtedness.  The term "Guarantee" used as a
          verb has a corresponding meaning.

          "Guarantee Fee" has the meaning specified in Section 2.06 of the Board
          Guarantee.

          "Hazardous  Materials"  means (y) any petroleum or petroleum  products
          (including,  without limitation,  gasoline, crude oil, or any fraction
          thereof),  radioactive  materials  or wastes,  radon,  asbestos in any
          form, urea formaldehyde foam insulation and polychlorinated  biphenyls
          and (z) any  other  chemical,  material,  substance  or waste  that in
          relevant form or concentration is prohibited, limited or regulated, or
          is defined,  listed or classified  as a hazardous or toxic  substance,
          under any Environmental Law.

          "Hazardous Materials Activity" means any past or current use, storage,
          Release,  threatened  Release,  generation,   treatment,  remediation,
          proposed  remediation  or  transportation  of any  Hazardous  Material
          caused by, or undertaken by or on behalf of,  either  Obligor,  any of
          its   Subsidiaries  or  any  of  their   respective   predecessors  or
          Affiliates.

          [...***...]

          "Indebtedness"  means,  with  respect  to any  Person  at any  date of
          determination  (without  duplication),  (i) all  indebtedness  of such
          Person  for  borrowed  money;  (ii)  all  obligations  of such  Person
          evidenced by bonds,  debentures,  notes or other similar  instruments;
          (iii) all  obligations  of such Person in respect of letters of credit
          (except, with respect to determining compliance with the provisions in
          Section  6.4(b),  to the  extent  such  letters  of  credit  are  cash
          collateralized  by  the  Parent  or the  Borrower)  or  other  similar
          instruments   (including   reimbursement   obligations   with  respect
          thereto);  (iv) all obligations of such Person to pay the deferred and
          unpaid purchase price of property or services, which purchase price is
          due more than six months  after the date of placing  such  property in
          service or taking delivery and title thereto or the completion of such
          services; (v) all Capital Lease obligations of such Person (the amount
          of the  Indebtedness  in respect of Capital  Lease  obligations  to be
          determined  as provided  in the  definition  of Capital  Lease in this
          Section 1.1); (vi) all Indebtedness of other Persons secured by a Lien
          on any  asset of such  Person,  whether  or not such  Indebtedness  is
          assumed by such Person; provided, that the amount of such Indebtedness
          shall be the lesser of (A) the Fair Market Value of such asset at such
          date of  determination  and (B) the  stated  principal  amount of such
          Indebtedness;  (vii) all  Indebtedness of other Persons  Guaranteed by
          such  Person to the extent such  Indebtedness  is  Guaranteed  by such
          Person,  including Indebtedness described in the preceding clause (vi)
          which  is  recourse  to  such  guarantor;  (viii)  to the  extent  not
          otherwise  included in this  definition and to the extent treated as a
          liability under GAAP, obligations under Currency Agreements,  Interest
          Rate Agreements and Commodity Agreements;  (ix) the capitalized amount
          of remaining lease payments

                                             ***Confidential Treatment Requested

                                       13
<PAGE>

          owing by such Person under  synthetic  leases that would appear on the
          balance  sheet of such Person if such lease were  treated as a Capital
          Lease; (x) the aggregate amount of uncollected  accounts receivable of
          such Person subject at such time to a sale of receivables  (or similar
          transaction) to the extent such  transaction is effected with recourse
          to such Person (whether or not such transaction  would be reflected on
          the balance sheet of such Person in accordance with GAAP); (xi) solely
          for  purposes of  determining  compliance  with  Section  6.4(b),  all
          Operating  Lease  obligations  of such Person with respect to Aircraft
          Related  Equipment (the amount of Indebtedness in respect of Operating
          Lease  obligations  to be determined as provided in the  definition of
          Operating  Lease in this Section 1.1); and (xii) the  Indebtedness  of
          any partnership or  unincorporated  joint venture in which such Person
          is  a  general  partner  or  a  joint  venturer  to  the  extent  such
          Indebtedness  is  recourse  to such  Person;  provided  that  the term
          "Indebtedness"  shall not  include  (A)  Trade  Payables  and  accrued
          expenses  arising in the ordinary  course of business,  (B) solely for
          purposes of determining  compliance with Section  6.4(b),  obligations
          incurred to finance purchase deposits on Aircraft Related Equipment in
          an outstanding  amount no greater than  $50,000,000 at any time or (C)
          agreements providing for  indemnification,  purchase price adjustments
          or similar  obligations  incurred  or assumed in  connection  with the
          acquisition or  disposition of assets or Capital Stock.  The amount of
          Indebtedness  of any  Person  at any  date  shall  be the  outstanding
          balance at such date of all  unconditional  obligations  as  described
          above  and  the  maximum   liability,   upon  the  occurrence  of  the
          contingency   giving  rise  to  the  obligation,   of  any  contingent
          obligations at such date;  provided that the amount outstanding at any
          time of any  Indebtedness  issued with original  issue discount is the
          face  amount  of such  Indebtedness  less  the  remaining  unamortized
          portion of the original  issue discount of such  Indebtedness  at such
          time as determined in conformity with GAAP.

          "Indemnified Liabilities" has the meaning specified in Section 10.4.

          "Indemnified Taxes" has the meaning specified in Section 2.12(a).

          "Indemnitees" has the meaning specified in Section 10.4.

          "Ineligible  Assets" has the meaning  specified in the  definition  of
          Collateral Value.

          "Insured Amount" means the amount specified therefor on Exhibit K.

          "Interest  Payment Date" means each February 25, May 25, August 25 and
          November 25; provided, however, that:

          (i) the Loan Maturity Date shall be an Interest Payment Date;

          (ii) if any Interest  Payment Date would otherwise fall on a day which
          is not a Business Day,  such  Interest  Payment Date shall fall on the
          next succeeding Business Day, unless such next succeeding Business Day
          shall fall in another  calendar  month,  in which event such  Interest
          Payment Date shall fall on the immediately preceding Business Day; and

                                       14
<PAGE>

          (iii)  following  a Default  or an Event of  Default,  each  "Interest
          Payment Date" shall be the last day of each Interest Period  occurring
          during such period in which such Default or Event of Default exists.

          "Interest  Period" means (a) initially,  the period  commencing on the
          Closing Date and ending on but excluding the next succeeding  Interest
          Payment Date and (b) thereafter,  each successive period commencing on
          and  including the  immediately  preceding  Interest  Payment Date and
          ending on but excluding  the next  succeeding  Interest  Payment Date;
          provided,  that following a Default or Event of Default, each Interest
          Period  shall be for such  duration  of one  month or less as shall be
          selected by the Agent by notice to the  Borrower,  each  Lender,  each
          Participant,  the  Loan  Administrator  and the  Board  on or prior to
          restart of such Interest Period (and in the absence of any such notice
          or selection,  the applicable  Interest  Period shall be determined as
          provided above without regard to this  proviso).  Notwithstanding  the
          foregoing, if Tranche A of the Loan is assigned by the Primary Tranche
          A Lender to any other  Person  (including,  but not  limited  to,  the
          Alternate  Tranche A Lender)  pursuant to Section  10.2,  the relevant
          Interest Period for Tranche A of the Loan during which such assignment
          occurs shall be divided into two Interest  Periods,  with the first of
          such periods ending on the date on which such assignment  occurs,  and
          the  second  of such  periods  commencing  on the date on  which  such
          assignment occurs.

          "Interest Rate  Agreement"  means any interest rate future  agreement,
          interest rate option agreement, interest rate swap agreement, interest
          rate cap  agreement,  interest  rate collar  agreement,  interest rate
          hedge agreement or other similar agreement or arrangement.

          "Internal  Revenue  Code" means the Internal  Revenue Code of 1986, as
          amended to the date hereof and from time to time hereafter.

          "Investment"  means with respect to any Person, any direct or indirect
          advance, loan (other than advances to customers in the ordinary course
          of  business  consistent  with past  practices  that are  recorded  as
          accounts  receivable  on the  balance  sheet  of  such  Person  or its
          Subsidiaries) or other extension of credit or capital  contribution or
          other equity investment by such Person to any other Person,  including
          by means of any  transfer  of cash or other  property to others or any
          payment for  property or services  for the account or use of others or
          any  purchase  or  acquisition  by such  Person of  Capital  Stock (or
          warrants,  options or any other rights convertible into or exercisable
          for  Capital  Stock),  bonds,  notes,   debentures  or  other  similar
          instruments issued by any other Person.

          "IRS" means the Internal  Revenue  Service of the United States or any
          successor thereto.

          "Lender" means the Primary Tranche A Lender,  the Alternate  Tranche A
          Lender  and/or  the  Tranche  B  Lender  (including  their  respective
          successors and permitted assigns), as the context may require, and the
          term  "Lenders"  means the  Primary  Tranche A Lender,  the  Alternate

                                       15
<PAGE>

          Tranche A Lender and the Tranche B Lender  (including their respective
          successors and permitted assigns) collectively; provided, that (x) the
          terms  "Lender" and  "Lenders"  shall include the Board if it acquires
          any  interest  in  Tranche A of the Loan as  contemplated  by  Section
          2.9(f)  and the  Board  Guarantee,  and (y) if the  Primary  Tranche A
          Lender  assigns  its rights  under  this  Agreement  to the  Alternate
          Tranche A  Lender,  the term  "Lender"  shall no  longer  include  the
          Primary Tranche A Lender.

          "Lending Office" means, with respect to any Lender, the office of such
          Lender  specified as its "Lending Office" opposite its name on Annex B
          or on the  Assignment  and  Acceptance  by which it became a Lender or
          such other  office of such Lender as such Lender may from time to time
          specify to the Borrower and the Agent.

          "LIBOR" means,  with respect to any Interest Period,  the offered rate
          in the London  interbank  market for deposits in United States dollars
          of amounts equal or comparable to the unpaid  principal  amount of the
          applicable  Tranche of the Loan offered for a term  comparable to such
          Interest Period, as currently shown on the  Bridge/Telerate  page 3750
          as of 11:00 a.m.,  London time,  two Business  Days prior to the first
          day of such Interest Period; provided,  however, that (A) if more than
          one offered rate as described  above  appears on such  Bridge/Telerate
          page, the rate used to determine LIBOR will be the arithmetic  average
          (rounded upward, if necessary, to the next higher 1/100 of 1%) of such
          offered rates, (B) if no such offered rates appear,  the rate used for
          such Interest Period will be the arithmetic  average  (rounded upward,
          if  necessary,  to the next higher 1/100 of 1%) of rates quoted by the
          Reference  Banks at  approximately  10:00  a.m.,  New York  time,  two
          Business  Days  prior to the first  day of such  Interest  Period  for
          deposits in United States  dollars  offered to leading  European banks
          for  a  period  comparable  to  such  Interest  Period  in  an  amount
          comparable to the unpaid principal amount of the applicable Tranche of
          the Loan and (C) in the case of an Interest Period commencing after an
          assignment of Tranche A of the Loan from the Primary  Tranche A Lender
          to the Alternate Tranche A Lender,  all  determinations of LIBOR shall
          be made on the  first day of such  Interest  Period  (rather  than two
          Business Days prior to the first day of such Interest Period).  If the
          Agent  ceases   generally  to  use  such   Bridge/Telerate   page  for
          determining  interest  rates  based on  eurodollar  deposit  rates,  a
          comparable  internationally recognized interest rate reporting service
          shall be used to determine such offered rates.

          "LIBOR  Lenders"  means Lenders  holding Notes that bear interest at a
          rate determined by reference to LIBOR.

          "Lien"  means  any  lien,  mortgage,  pledge,   assignment,   security
          interest,  charge,  hypothecation,  preference,  priority,  privilege,
          lease or encumbrance of any kind  (including any  conditional  sale or
          other title retention agreement,  any lease in the nature thereof, any
          easement, right-of-way or other encumbrance on title to real property,
          and any agreement to give any security interest).

          "Liquidation Period" has the meaning specified in Section 2.10(e).

          "Liquidity   Certificate"   has  the  meaning   specified  in  Section
          5.1(b)(x).

                                       16
<PAGE>

          "Loan" has the meaning specified in Section 2.1.

          "Loan Administrator" has the meaning specified in the preamble to this
          Agreement.

          "Loan Administrator Relationship" has the meaning specified in Section
          8.5.

          "Loan Documents" means,  collectively,  this Agreement, the Notes, the
          Warrants, the Employee Compensation  Agreement,  the Parent Guarantee,
          the Subsidiary Guarantee, the Participation  Agreements,  the Security
          Documents,   the  Existing  Stockholder  Undertaking  and  each  other
          certificate,  agreement or document  executed by either Obligor or any
          of its Subsidiaries and delivered to the Agent, the Collateral  Agent,
          the  Lenders  or the  Board in  connection  with or  pursuant  to this
          Agreement.

          "Loan Maturity Date" means November 25, 2008, except that if such date
          is not a  Business  Day,  then the  Loan  Maturity  Date  shall be the
          immediately succeeding Business Day.

          "Loss Payee Amount" means the amount specified therefor on Exhibit K.

          "Margin Stock" has the meaning  assigned to that term in Regulation T,
          U or X of the Board of Governors of the Federal  Reserve  System as in
          effect from time to time.

          "Material  Adverse Effect" means (a) a material  adverse effect on (i)
          the  business   condition   (financial  or   otherwise),   operations,
          performance, prospects, assets or properties of the Obligors and their
          Subsidiaries, taken as a whole or (ii) the legality, validity, binding
          effect or  enforceability  against any Obligor or its  Subsidiaries of
          any  Loan  Document,  the  rights  and  remedies  of  the  Agent,  the
          Collateral Agent, the Board or any Lender under any Loan Document,  or
          (b) any material  adverse effect on or material  impairment of (i) the
          ability of either Obligor or its  Subsidiaries  to perform its payment
          or other obligations under the Loan Documents or (ii) the value of, or
          the validity and  priority of the Liens on, the  Collateral.

          "Minimum  Liability  Insurance  Amount"  means  the  amount  specified
          therefor on Exhibit K.

          "Moody's"  means Moody's  Investors  Service,  Inc., and any successor
          thereto that is a nationally recognized rating agency.

          "Multiemployer  Plan" means a multiemployer plan as defined in Section
          4001(a)(3) of ERISA.

          "NASDAQ"  means The Nasdaq  Stock  Market,  an  electronic  securities
          market  operated by The Nasdaq  Stock  Market,  Inc.,  a wholly  owned
          subsidiary of the National Association of Securities Dealers, Inc.

                                       17
<PAGE>

          "Net Cash  Proceeds"  means,  with respect to any Asset Sale, the Cash
          Proceeds  of such Asset  Sale,  net of (i)  reasonable  and  customary
          brokerage  commissions  and other  reasonable  and customary  fees and
          expenses  (including  reasonable  fees and  expenses  of  counsel  and
          investment  bankers)  related to such Asset Sale,  (ii) provisions for
          all taxes  payable as a result of such Asset Sale taking into  account
          the  consolidated   results  of  operations  of  the  Parent  and  its
          Subsidiaries,  taken as a whole  (as  estimated  in good  faith by the
          Chief Financial  Officer of the Parent),  (iii) payments made to repay
          Indebtedness or any other  obligation  outstanding at the time of such
          Asset  Sale that (A) is secured  by a Lien on the  property  or assets
          sold and (B) is  required  by its terms to be paid as a result of such
          Asset Sale, and (iv) appropriate  amounts to be provided by the Parent
          or  any of its  Subsidiaries  as a  reserve  against  any  liabilities
          associated  with  such  Asset  Sale,  including,  without  limitation,
          pension and other  post-employment  benefit  liabilities,  liabilities
          related  to   environmental   matters   and   liabilities   under  any
          indemnification  obligations  associated  with such Asset Sale, all as
          determined in conformity  with GAAP,  but limited to the period of the
          required reserve.

          "Net  Condemnation  Proceeds"  means an amount  equal to: (i) any cash
          payments  or  proceeds  received  by  either  Obligor  or  any  of its
          Subsidiaries  as a  result  of any  condemnation  or other  taking  or
          temporary  or  permanent  requisition  of any  property,  any interest
          therein or right appurtenant thereto, or any change of grade affecting
          any  property,  as  the  result  of  the  exercise  of  any  right  of
          condemnation or eminent domain by a Governmental  Authority (including
          a transfer to a Governmental  Authority in lieu or  anticipation  of a
          condemnation), minus (ii) (a) any actual and reasonable costs incurred
          by either Obligor or any of its  Subsidiaries  in connection  with any
          such  condemnation  or taking,  (b) any taxes  payable  in  connection
          therewith,  taking into account the consolidated results of operations
          of the Parent and its Subsidiaries,  taken as a whole (as estimated in
          good  faith by the Chief  Financial  Officer  or the Chief  Accounting
          Officer of the Parent),  (c) the amount of any Indebtedness secured by
          a Lien on any property subject to such  condemnation or taking and any
          related  expenses  of third  parties,  in each  case  required  by the
          documentation  related to such Lien to be  discharged or paid from the
          proceeds thereof and (d) any amounts required to be paid to any Person
          (other than an Obligor or any of the Obligors'  Subsidiaries) owning a
          beneficial  interest in the property  subject to such  condemnation or
          taking.

          "Net  Insurance  Proceeds"  means an  amount  equal  to:  (i) any Cash
          payments or proceeds received by the Parent or any of its Subsidiaries
          under any  casualty  insurance  policy in  respect  of a covered  loss
          thereunder with respect to tangible, real or personal property,  minus
          (ii) (a) any actual and reasonable costs incurred by the Parent or any
          of its Subsidiaries in connection with the adjustment or settlement of
          any claims in respect  thereof,  (b) any taxes  payable in  connection
          therewith,  taking into account the consolidated results of operations
          of the Parent and its Subsidiaries,  taken as a whole (as estimated in
          good  faith by the Chief  Financial  Officer of the  Parent),  (c) the
          amount of any  Indebtedness  secured by a Lien on any property subject
          to such covered loss and required to be  discharged  from the proceeds
          thereof and (d) any amounts  required to be paid to any Person  (other
          than  the  Parent  or any of its  Subsidiaries)  owning  a  beneficial
          interest in the property subject to such loss.

                                       18
<PAGE>

          "9 5/8% Senior  Notes"  means the 9 5/8% senior  notes due 2005 of the
          Parent.

          "9 5/8% Senior Notes Indenture" means the indenture  relating to the 9
          5/8% Senior Notes, as supplemented or amended.

          "Non-Guarantor  Subsidiary" means any Subsidiary of the Parent that is
          not a  "Guarantor"  as defined in and  pursuant  to the 10 1/2% Senior
          Notes Indenture or 9 5/8% Senior Notes Indenture.

          "Non-U.S. Person" means a Person that is not a United States person as
          defined in section 7701(a)(30) of the Internal Revenue Code.

          "Notes" has the meaning specified in Section 2.4(d).

          "Notice of Borrowing" has the meaning specified in Section 2.2(a).

          "Obligations"  means all payment and performance  obligations of every
          nature of the  Borrower  and the Parent  from time to time owed to the
          Agent,  the Collateral  Agent,  the Govco  Administrative  Agent,  the
          Lenders, the Loan Administrator,  the Participants or the Board or any
          of their respective Affiliates, officers, directors, employees, agents
          and advisors  in,  under or in respect of this  Agreement or any Note,
          whether for principal,  interest,  fees, expenses,  indemnification or
          otherwise.

          "Obligor" means each of the Parent and/or the Borrower,  together with
          their respective successors and permitted assigns.

          "Obsolete Parts Cap" means the amount specified therefor on Exhibit K.

          "Officer"  means,  as applied  to any  corporation,  each  Responsible
          Officer,  the  Chairman  of  the  Board  (if an  officer),  President,
          Controller, Assistant Treasurer, Secretary or Assistant Secretary.

          "Officer's  Certificate"  means,  as  applied  to any  corporation,  a
          certificate  executed on behalf of such corporation by its chairman of
          the  board (if an  officer),  president,  one of its vice  presidents,
          chief financial officer, controller,  treasurer or assistant treasurer
          or an assistant secretary;  provided, that every Officer's Certificate
          shall include (i) a statement that the officer acting in such capacity
          making or giving such  Officer's  Certificate  has read such condition
          and any  definitions or other  provisions  contained in this Agreement
          relating thereto, (ii) a statement that, in the opinion of the signer,
          s/he  has  made  or  has  caused  to  be  made  such   examination  or
          investigation as is necessary to enable her/him to express an informed
          opinion as to whether or not such  condition has been  complied  with,
          and (iii) a  statement  as to  whether,  in the opinion of the signer,
          such condition has been complied with.

          "Operating  Lease"  means,  as  applied  to  any  Person,   any  lease
          (including,  without limitation,  leases that may be terminated by the
          lessee at any time) of any property (whether real,  personal or mixed)

                                       19
<PAGE>

          under which such Person is lessee,  that is not a Capital  Lease.  For
          purposes of determining  compliance with Section 6.4(b), the amount of
          Indebtedness  in  respect  of any  Operating  Lease  at the end of any
          fiscal  quarter shall be an amount equal to the product of (x) six (6)
          and (y) the total  amount of all lease  payments  in  respect  of such
          Operating Lease for the four most recently ended fiscal quarters.

          "Other Taxes" has the meaning specified in Section 2.12(b).

          "Overdue Rate" means the rate specified therefor on Exhibit K.

          "Parent" has the meaning specified in the preamble to this Agreement.

          "Parent  Guarantee" means the Parent  Guarantee  Agreement dated as of
          the date hereof and made by the Parent,  in substantially  the form of
          Exhibit J.

          [...***...]

          "Participations"   means   the   participations   purchased   by   the
          Participants  on  the  date  hereof  pursuant  to  the   Participation
          Agreements.

          [...***...]

          "Payment  Restriction"  means,  with  respect to a  Subsidiary  of any
          Person,  any  encumbrance,   restriction  or  limitation,  whether  by
          operation of the terms of its charter or by reason of any agreement or
          instrument, on the ability of (i) such Subsidiary to (a) pay dividends
          or make other  distributions  on its Capital Stock or make payments on
          any obligation,  liability or Indebtedness  owed to such Person or any
          other  Subsidiary  of such Person,  (b) make loans or advances to such
          Person or any other Subsidiary of such Person,  or (c) transfer any of
          its property or assets to such Person or any other  Subsidiary of such
          Person,  or (ii) such Person or any other Subsidiary of such Person to
          receive or retain any such (a)  dividend,  distributions  or payments,
          (b) loans or advances, or (c) property or assets.

          "Permitted  Encumbrances"  means the  following  types of Liens (other
          than any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of
          the Internal Revenue Code or by ERISA) as applied to property:

          (i) Liens for taxes, assessments or governmental charges or claims the
          payment  of which is either  (a) not  delinquent  for a period of more
          than 30 days or (b)  being  contested  in good  faith  by  appropriate
          proceedings,  if such reserve or other appropriate provision,  if any,
          as shall be required by GAAP shall have been made therefor;
                                             ***Confidential Treatment Requested

                                       20
<PAGE>

          (ii)  statutory  Liens of landlords  and Liens of  carriers,  vendors,
          warehousemen,  repairmen,  mechanics and  materialmen  and other Liens
          imposed by law  incurred in the  ordinary  course of business for sums
          either  (a) not  delinquent  for a period  of more than 30 days or (b)
          being  contested  in good faith by  appropriate  proceedings,  if such
          reserve or other  appropriate  provision,  if any, as required by GAAP
          shall have been made therefor;

          (iii)  Liens  incurred  or  deposits  made in the  ordinary  course of
          business  in  connection  with  workers'  compensation,   unemployment
          insurance  and  other  types of  social  security,  or to  secure  the
          performance  of  tenders,  statutory  obligations,  surety  and appeal
          bonds,   bids,   leases,   government   contracts,   trade  contracts,
          performance  and  return-of-money  bonds (other than bonds  related to
          judgments and litigations),  reimbursement  obligations and chargeback
          rights of Persons performing services for either Obligor or any of its
          Subsidiaries and other similar  obligations  (exclusive of obligations
          for the payment of borrowed money);

          (iv)   easements,   rights-of-way,    restrictions,   minor   defects,
          encroachments or  irregularities in title and other similar charges or
          encumbrances not interfering in any material respect with the ordinary
          conduct of the business of either Obligor or any of its Subsidiaries;

          (v) Liens in favor of customs  and  revenue  authorities  arising as a
          matter of law to secure payment of customs  duties in connection  with
          the importation of goods in the ordinary course of business;

          (vi)  any  interest  or title of a lessor  in  property  leased  by an
          Obligor under any Capital Lease  obligation or Operating  Lease which,
          in each case, is not prohibited under this Agreement (disregarding for
          this purpose Section 6.1);

          (vii) Liens in favor of  collecting  or payor banks  having a right of
          setoff,  revocation,  refund or  chargeback  with  respect to money or
          instruments  of either Obligor or any of its  Subsidiaries  on deposit
          with or in possession of such bank;

          (viii) any renewal of or substitution for any Lien permitted by any of
          the preceding clauses; provided that the debt secured is not increased
          nor the Lien extended to any additional assets; and

          (ix)  Liens of  creditors  of any  Person to whom the assets of either
          Obligor  or any of its  Subsidiaries  are  consigned  for  sale in the
          ordinary course of business.

          "Person" means an individual,  partnership,  corporation  (including a
          business trust), joint stock company, estate, trust, limited liability
          company, unincorporated association, joint venture or other entity, or
          a Governmental Authority.

          "Plan" means any "employee pension benefit plan" as defined in section
          3(2) of  ERISA  in  respect  of  which  either  Obligor  or any  ERISA


                                       21
<PAGE>

          Affiliate  is (or if such plan were  terminated,  would under  Section
          4069 of ERISA be deemed to be) an  "employer"  as  defined  in Section
          3(5) of ERISA, other than a Multiemployer Plan.

          "Primary  Tranche A Lender" has the meaning  specified in the preamble
          to this Agreement.

          "Proceedings" has the meaning specified in Section 5.1(b)(vi).

          "Pro Forma Basis" means,  with respect to compliance with any covenant
          hereunder,  compliance  with such covenant  after giving effect to any
          proposed  incurrence of  Indebtedness  by either Obligor or any of its
          Subsidiaries  and  the  application  of  the  proceeds  thereof,   the
          acquisition (whether by purchase,  merger or otherwise) or disposition
          (whether  by sale,  merger or  otherwise)  of any  company,  entity or
          business or any asset by either Obligor or any of its  Subsidiaries or
          any other action which  requires  compliance on a Pro Forma Basis.  In
          making any  determination  of  compliance  on a Pro Forma Basis,  such
          determination  shall be performed after good faith  consultation  with
          the Agent using the consolidated  financial statements of such Obligor
          or  such  Subsidiary  which  shall  be  reformulated  as if  any  such
          incurrence  of   Indebtedness   and  the   application   of  proceeds,
          acquisition,  disposition or other action had been  consummated at the
          beginning  of the period  specified  in the  covenant  with respect to
          which Pro Forma Basis compliance is required.

          "Redeemable  Stock" means any class or series of Capital  Stock of any
          Person that by its terms or  otherwise  (i) is required to be redeemed
          prior to the Loan Maturity  Date,  (ii) may be required to be redeemed
          at the option of the  holder of such class or series of Capital  Stock
          at any time prior to the Loan Maturity  Date, or (iii) is  convertible
          into or  exchangeable  for Capital Stock  referred to in clause (i) or
          (ii) above or  Indebtedness  having a scheduled  maturity prior to the
          Loan  Maturity  Date;  provided  that any  Capital  Stock  that  would
          constitute  Redeemable  Stock solely  because of  provisions  offering
          holders  thereof the right to require the issuer thereof to repurchase
          or redeem such Capital  Stock upon the  occurrence  of an "asset sale"
          occurring  prior  to the  Loan  Maturity  Date  shall  not  constitute
          Redeemable  Stock  if the  asset  sale  provisions  contained  in such
          Capital Stock  specifically  provide that in respect of any particular
          asset sale proceeds,  the issuer thereof will not repurchase or redeem
          any  such  Capital  Stock  pursuant  to such  provisions  prior to the
          Borrower's permanent reduction of the aggregate  outstanding principal
          amount  of the  Loan by an  amount  at  least  equal  to the Net  Cash
          Proceeds from such asset sale.

          "Reference Banks" means Citibank,  N.A.,  JPMorgan Chase Bank and Bank
          of America, N.A., and each of their respective successors.

          "Register" has the meaning specified in Section 2.4(e).

          "Regulations"  has the meaning  specified in the first recital to this
          Agreement.

                                       22
<PAGE>

          "Release"  means  any  release,  spill,  emission,  leaking,  pumping,
          pouring, injection, escaping, deposit, disposal, discharge, dispersal,
          dumping,  leaching or migration of Hazardous Materials into the indoor
          or outdoor environment (including, without limitation, the abandonment
          or disposal of any barrels,  containers  or other  closed  receptacles
          containing  any  Hazardous  Materials),  including the movement of any
          Hazardous Material through the air, soil,  surface water,  groundwater
          or property.

          "Requesting Party" has the meaning specified in Section 8.1(b).

          "Requisite Lenders" means, collectively,  Lenders holding in excess of
          fifty  percent  (50%)  of  the  principal  amount  of  the  Loan  then
          outstanding or, prior to the making of the Loan, the Alternate Tranche
          A Lender and the Tranche B Lender.

          "Requisite  LIBOR Lenders"  means,  collectively,  Lenders  holding in
          excess of fifty percent  (50%) of the principal  amount of the portion
          of the Loan  bearing  interest at a rate  determined  by  reference to
          LIBOR or,  prior to the making of the Loan,  the  Alternate  Tranche A
          Lender and the Tranche B Lender.

          "Responsible  Officer" means,  with respect to any Person,  any of the
          Chief Executive Officer, Executive Vice Presidents and Chief Financial
          Officer of such  Person,  but in any event,  with respect to financial
          matters, the Chief Financial Officer,  Treasurer or Controller of such
          Person.

          "Restricted  Payment"  means  with  respect  to  any  Person  (i)  any
          declaration or payment of dividends on or making of any  distributions
          in respect of the Capital Stock of such Person  (other than  dividends
          or distributions payable solely in shares of Capital Stock (other than
          Redeemable Stock) or in options, warrants, or other rights to purchase
          Capital  Stock  (other than  Redeemable  Stock)) to holders of Capital
          Stock  of  such  Person,  (ii)  any  purchase,   redemption  or  other
          acquisition or retirement for value by such Person (other than through
          the issuance solely of Capital Stock (other than Redeemable  Stock) or
          options,  warrants or other  rights to purchase  Capital  Stock (other
          than  Redeemable  Stock)) of any  Capital  Stock or  warrants,  rights
          (other than  exchangeable  or convertible  Indebtedness of such Person
          not prohibited under clause (iii) below) or options to acquire Capital
          Stock of such Person,  (iii) any  redemption,  repurchase,  defeasance
          (including, but not limited to, in substance or legal defeasance),  or
          other  acquisition  or retirement for value by such Person (other than
          through the issuance  solely of Capital  Stock (other than  Redeemable
          Stock) or warrants,  rights or options to acquire Capital Stock (other
          than Redeemable Stock))  (collectively,  a "prepayment"),  directly or
          indirectly (including by way of setoff or of amendment of the terms of
          any  Indebtedness  in connection with any retirement or acquisition of
          such Indebtedness), other than at any scheduled maturity thereof or by
          any  scheduled  repayment or scheduled  sinking fund  payment,  of any
          Indebtedness  of such Person or any  Subsidiary  of such Person (other
          than (a) repayment of the Loan, (b) repayment of Indebtedness incurred
          to finance the  acquisition  of Aircraft  Related  Equipment  with the
          proceeds from a sale of such Aircraft  Related  Equipment as part of a
          sale-leaseback transaction of the type excepted from the definition of
          Asset Sales in this  Agreement,  (c) prepayments of the Current Credit
          Facility  as  contemplated  by Section  2.4(f) and (d)  repayments  of

                                       23
<PAGE>

          Indebtedness by any Non-Guarantor Subsidiaries to the Parent or any of
          its  Subsidiaries  that  are  Restricted  Subsidiaries  as of the date
          hereof)  and (iv) any  advances,  loans  or other  Investments  by the
          Borrower or any of its Subsidiaries to or in the Parent.

          "Restricted Subsidiary" has the meaning set forth in the 9 5/8% Senior
          Notes Indenture and the 10 1/2% Senior Notes Indenture.

          "SEC"  means the  Securities  and  Exchange  Commission  of the United
          States of America.

          "Security Agreement" means the Mortgage and Security Agreement,  dated
          as of the date hereof made by the Borrower in favor of the  Collateral
          Agent, as the same may be amended,  supplemented or otherwise modified
          from time to time, including by any Security Agreement Supplement.

          "Security  Agreement  Supplement"  means a supplement  to the Security
          Agreement  that  subjects  additional  Collateral  to the  Lien of the
          Security Agreement.

          "Security   Documents"   means  the   Security   Agreement   and  each
          certificate,  agreement or document  executed by either Obligor or any
          of its Subsidiaries pursuant to the Security Agreement.

          "Solvent"  means,  with respect to any Person,  that as of the date of
          determination  both  (A) (i)  the  then  fair  saleable  value  of the
          property  of such  Person  is (y)  greater  than the  total  amount of
          liabilities (including contingent  liabilities) of such Person and (z)
          not less than the amount  that will be  required  to pay the  probable
          liabilities  on such  Person's  then  existing  debts  as they  become
          absolute  and  matured  considering  all  financing  alternatives  and
          potential asset sales reasonably  available to such Person;  (ii) such
          Person's capital is not unreasonably small in relation to its business
          or any contemplated or undertaken  transaction;  and (iii) such Person
          does not intend to incur,  or believes  that it will not incur,  debts
          beyond its ability to pay such debts as they become due;  and (B) such
          Person is  "solvent"  within the  meaning  given that term and similar
          terms under  applicable  laws  relating to  fraudulent  transfers  and
          conveyances.  For  purposes  of this  definition,  the  amount  of any
          contingent liability at any time shall be computed as the amount that,
          in light of all of the facts and circumstances  existing at such time,
          represents  the amount  that can  reasonably  be expected to become an
          actual or matured liability.

          "Standard & Poor's" or "S&P" means Standard & Poor's Group, a division
          of The McGraw Hill Companies,  Inc., and any successor thereto that is
          a nationally recognized rating agency.

          "Subsidiary"  means,  with  respect to any  Person,  any  corporation,
          partnership,  association, limited liability company, trust or estate,
          joint venture or other  business  entity of which more than 50% of the
          issued  and  outstanding  shares  of  Voting  Stock  at  the  time  of


                                       24
<PAGE>

          determination are owned or controlled, directly or indirectly, by that
          Person or one or more of the other  Subsidiaries  of that  Person or a
          combination thereof.

          "Subsidiary Guarantee" means the Subsidiary Guarantee Agreement, dated
          as of the date hereof made by Amber  Travel,  Inc.,  ATA Cargo,  Inc.,
          American  Trans Air  Training  Corporation,  Ambassadair  Travel Club,
          Inc., ATA Leisure Corp.,  American Trans Air ExecuJet,  Inc.,  Chicago
          Express Airlines,  Inc., Washington Street Aviation, LLC and West 63rd
          Street Land Holding, LLC, in substantially the form of Exhibit I.

          "Substitute Basis" has the meaning specified in Section 2.10(b).

          "Taxes"  means any and all  present  or future  taxes,  levies,  fees,
          duties,  imposts,  deductions,  charges or withholdings of any nature,
          and all interest,  penalties and other liabilities thereon or computed
          by reference thereto imposed by any Governmental Authority.

          "10 1/2% Senior  Notes" means the 10 1/2% senior notes due 2004 of the
          Parent.

          "10 1/2% Senior Notes Indenture"  means the indenture  relating to the
          10 1/2% Senior Notes as supplemented or amended.

          "Title 49" means Title 49 of the United States Code, as amended and in
          effect from time to time,  and the  regulations  promulgated  pursuant
          thereto.

          "Trade  Payables"  means,  with  respect to any Person,  any  accounts
          payable or any other  indebtedness  or  monetary  obligation  to trade
          creditors created,  assumed or Guaranteed by such Person or any of its
          Subsidiaries  and  arising  in the  ordinary  course  of  business  in
          connection  with the  acquisition  of goods or services but limited to
          current liabilities in accordance with GAAP.

          "Tranche" has the meaning specified in Section 2.1(a)(ii).

          "Tranche A" has the meaning specified in Section 2.1(a)(i).

          "Tranche A Lender" has the meaning  specified  in the preamble to this
          Agreement; provided that the term "Tranche A Lender" shall include the
          Board  if it  acquires  any  interest  in  Tranche  A of the  Loan  as
          contemplated by Section 2.9(f) and the Board Guarantee.

          "Tranche A Note" has the meaning specified in Section 2.4(d)(i).

          "Tranche B" has the meaning specified in Section 2.1(a)(ii).

          "Tranche B Lender" has the meaning  specified  in the preamble to this
          Agreement.

          "Tranche B Note" has the meaning specified in Section 2.4(d)(ii).

          "United States Citizen" has the meaning specified in Section 4.1(b).

                                       25
<PAGE>

          "Value Differential" has the meaning specified in Section 5.14(b).

          "Voting Stock" means any class or classes of Capital Stock pursuant to
          which the holders thereof have the general voting power under ordinary
          circumstances  to vote for the  election  of  directors,  managers  or
          trustees  of any  Person (or  Persons  performing  similar  functions)
          irrespective  of whether or not at the time stock of any such class or
          classes will have or might have such voting power by the reason of the
          happening of any contingency.

          "Warrants"  means  collectively  (i) the Warrant to purchase shares of
          the Parent's Common Stock issued by the Parent to the Board,  (ii) the
          Warrant to purchase  shares of the Parent's Common Stock issued by the
          Parent to the [...***...], (iii) the Warrant to purchase shares of the
          Parent's  Common Stock issued by the Parent to the  [...***...],  (iv)
          the Warrant to purchase  shares of the Parent's Common Stock issued by
          the Parent to the [...***...],  and (v) the Warrant to purchase shares
          of the  Parent's  Common  Stock  issued by the Parent to the Tranche B
          Lender, in each case substantially in the form of Exhibit F.

          "Wholly-Owned"  denotes a Subsidiary  all of the Voting Stock of which
          (other than any director's qualifying shares or Investments by foreign
          nationals  mandated by applicable law) is owned directly or indirectly
          by a single holder.

          "Working  Capital" means,  with respect to any Person, as of any date,
          (i) the current assets  (excluding cash and Cash  Equivalents) of such
          Person minus (ii) the current  liabilities  of such Person (other than
          the current portion of long-term debt), in each case,  determined on a
          consolidated  basis and otherwise in  accordance  with GAAP as of such
          date.

          "Withdrawal  Liability"  means liability to a Multiemployer  Plan as a
          result of a complete  or partial  withdrawal  from such  Multiemployer
          Plan, as such terms are defined in Part I of Subtitle E of Title IV of
          ERISA.

     Section  1.2.  Computation  of  Time  Periods.  In this  Agreement,  in the
computation of periods of time from a specified date to a later  specified date,
the word "from" means "from and  including"  and the words "to" and "until" each
mean "to but excluding" and the word "through" means "to and including."

     Section 1.3. Accounting Terms and Principles.

     (a) All accounting terms not specifically defined herein shall be construed
in conformity  with GAAP and all accounting  determinations  required to be made
pursuant hereto shall,  unless expressly  otherwise  provided herein, be made in
conformity with GAAP.

     (b) If any change in accounting  principles  used in the preparation of the
most  recent  financial  statements  referred  to in  Section  5.1 is  hereafter
required or permitted by the rules, regulations,  pronouncements and opinions of
the Financial
                                             ***Confidential Treatment Requested

                                       26
<PAGE>

Accounting  Standards Board or the Accounting  Principles  Board of the American
Institute of Certified  Public  Accountants (or any successor  thereto) and such
change is adopted by an Obligor  with the  agreement of its  independent  public
accountants  and  results  in a change in any of the  calculations  required  by
Article VI had such accounting change not occurred,  the parties hereto agree to
enter into  negotiations  in order to amend such  provisions  so as to equitably
reflect such change with the desired  result that the  criteria  for  evaluating
compliance  with such  covenants  by such  Obligor  shall be the same after such
change as if such change had not been made; provided, however, that no change in
GAAP that would affect a calculation that measures  compliance with any covenant
contained in Article VI shall be given effect until such  provisions are amended
to reflect such changes in GAAP.

     (c) Financial  statements and other information required to be delivered by
the Obligors to the Agent, the Lenders, the Participants,  the Board or the Loan
Administrator  pursuant to Section 5.1 shall be prepared in accordance with GAAP
in effect at the time of such preparation.

     Section 1.4. Certain Terms.

     (a) The words "herein," "hereof" and "hereunder" and similar words refer to
this  Agreement  as a  whole,  and  not  to  any  particular  Article,  Section,
subsection or clause in this Agreement.


     (b) References in this Agreement to an Exhibit,  Annex, Schedule,  Article,
Section,  subsection  or clause  refer to the  appropriate  Exhibit,  Annex,  or
Schedule to, or Article, Section, subsection or clause in this Agreement.


     (c) Each agreement  defined in this Article I shall include all appendices,
annexes,  exhibits and schedules  thereto.  If the prior written  consent of any
Person is required hereunder for an amendment, restatement,  supplement or other
modification  to any such  agreement  and the  consent  of each  such  Person is
obtained,  references  in this  Agreement  to such  agreement  shall  be to such
agreement as so amended, restated, supplemented or modified.


     (d) References in this Agreement to any statute shall be to such statute as
amended or modified and in effect at the time any such reference is operative.


     (e) The term  "including"  when used in any Loan Document means  "including
without limitation" except when used in the computation of time periods.

                                   Article II

                                    THE LOAN

     Section 2.1. The Loan.


     (a) On the terms and subject to the conditions  contained in this Agreement
and in reliance  upon the  representations  and  warranties  of the Obligors set
forth herein, the Lenders severally agree to make on or before November 20, 2002
a single term loan (the  "Loan") to the  Borrower in a single  Borrowing  not to


                                       27
<PAGE>

exceed the principal amount of $168,000,000 as follows:

     (i) the Primary  Tranche A Lender,  subject to clause (b) below,  agrees to
participate  in the making of the Loan in an amount  not to exceed  $148,500,000
(such portion of the Loan being herein  referred to as "Tranche A" of the Loan);
and

     (ii) the Tranche B Lender agrees to  participate  in the making of the Loan
in an amount not to exceed  $19,500,000  (such  portion of the Loan being herein
referred to as "Tranche B" of the Loan, and collectively,  together with Tranche
A, the "Tranches" and each a "Tranche").

     Any  amount  of the Loan  repaid  or  prepaid  may not be  reborrowed.  The
obligation  of each  Lender to  participate  in the making of the Loan up to its
respective  amount  specified  above  on the  terms  and  conditions  hereof  is
hereinafter called its "Commitment".

     (b) The  Primary  Tranche A Lender  intends  but is not  obligated  to fund
Tranche A of the Loan  through the issuance and sale of  commercial  paper.  The
Primary  Tranche  A Lender  may,  at its  option,  elect at any time not to fund
Tranche A of the  Loan,  in which  case the  Alternate  Tranche  A Lender  will,
subject  to the terms and  conditions  provided  herein,  be  obligated  to fund
Tranche A of the Loan (it being understood and agreed that Tranche A of the Loan
shall be funded by either the Primary Tranche A Lender or the Alternate  Tranche
A Lender,  as the case may be,  but not  both).  In the event that more than one
Alternate Tranche A Lender is party hereto, in accordance with Section 10.2, the
rights and  obligations  of each such Alternate  Tranche A Lender  hereunder are
several.

     Section 2.2. Borrowing Procedures.

     (a) The  Borrowing  shall be made on notice  given by the  Borrower  to the
Agent not later  than 9:00 a.m.  (New York City  time) on the  proposed  Closing
Date. Such notice shall be in substantially  the form of Exhibit C (a "Notice of
Borrowing"), specifying (A) the Closing Date and (B) the aggregate amount of the
proposed  Borrowing.  The Notice of  Borrowing  shall be  irrevocable,  and duly
executed and delivered on behalf of the Borrower by its Chief Financial  Officer
or President/Chief Executive Officer.

     (b) Each of the Lenders  shall,  before 11:00 a.m.  (New York City time) on
the date of the proposed Borrowing,  make available [...***...],  in immediately
available funds, an amount equal to its Commitment. After the Agent's receipt of
such

                                             ***Confidential Treatment Requested

                                       28
<PAGE>

funds and upon  fulfillment or waiver of the applicable  conditions set forth in
Section 3.1, the Agent will make such funds available to the Borrower.

     Section 2.3. Scheduled  Repayment of the Loan. The Borrower shall repay the
Loan on the dates and in the  principal  amounts  set forth  below  (along  with
accrued and unpaid interest thereon pursuant to Section 2.7(c));  provided that,
the Borrower shall repay the entire unpaid principal amount of the Loan together
with accrued and unpaid  interest  thereon and all other amounts owing hereunder
in respect thereof on the Loan Maturity Date:

--------------------------------------------------------------------------------
  Interest Payment Date falling on or about:          Principal Amount
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              November 25, 2003                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              February 25, 2004                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
                 May 25, 2004                             $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
               August 25, 2004                            $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              November 25, 2004                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              February 25, 2005                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
                 May 25, 2005                             $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
               August 25, 2005                            $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              November 25, 2005                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              February 25, 2006                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
                 May 25, 2006                             $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
               August 25, 2006                            $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              November 25, 2006                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              February 25, 2007                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
                 May 25, 2007                             $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
               August 25, 2007                            $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              November 25, 2007                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              February 25, 2008                           $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
                 May 25, 2008                             $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
               August 25, 2008                            $7,000,000
-------------------------------------------    ---------------------------------
-------------------------------------------    ---------------------------------
              November 25, 2008                          $28,000,000
-------------------------------------------   ----------------------------------


     Section 2.4. Evidence of Debt; Use of Proceeds.

     (a) Each Lender shall  maintain in  accordance  with its usual  practice an
account or accounts  evidencing  such Lender's  portion of the Loan  outstanding
from time to time,  including the amounts of principal and interest  payable and
paid to such Lender from time to time under this Agreement.

     (b) The Agent shall  establish and maintain a register for  recording  with
respect to the Loan (i) the date and amount of each  payment on the Loan made by
or on behalf of, or collected  from, the Borrower,  (ii) the amount of each such
payment  applied in  accordance  with each  clause of Section  2.9(d) and (e) or
other applicable terms hereof to scheduled  principal of or interest on the Loan
and to each of the fees  identified  in clauses  (c),  (d),  (e), (g) and (h) of
Section 2.8 hereof,  and (iii) the date and amount of each  payment  made by the
Board under the Board Guarantee.

                                       29
<PAGE>

     (c) The entries made in the accounts maintained pursuant to clauses (a) and
(b) of this Section 2.4 shall,  to the extent  permitted by  applicable  law, be
prima facie  evidence of the existence and amounts of the  obligations  recorded
therein;  provided,  however,  that the  failure  of any  Lender or the Agent to
maintain  such  accounts or any error therein shall not in any manner affect the
obligations of the Borrower to repay the Loan in accordance with its terms.

     (d) The Borrower shall execute and deliver to the Agent on the Closing Date
(i) a promissory note  substantially  in the form of Exhibit B1 in the principal
amount  of  Tranche  A of  the  Loan,  dated  the  Closing  Date  and  otherwise
appropriately  completed  (such note,  including any  replacement  note therefor
issued in accordance with the provisions of this Section 2.4(d),  the "Tranche A
Note") and (ii) a promissory note substantially in the form of Exhibit B2 in the
principal  amount of Tranche B of the Loan, dated the Closing Date and otherwise
appropriately  completed  (such note,  including any  replacement  note therefor
issued in accordance with the provisions of this Section 2.4(d),  the "Tranche B
Note" and,  collectively,  together with the Tranche A Note,  the "Notes").  The
Notes shall be made payable to the Agent at the office of the Agent. If any Note
is mutilated,  lost, stolen or destroyed, the Borrower shall issue a new Note in
the same principal  amount and having the same interest rate,  date and maturity
as the Note so  mutilated,  lost,  stolen or destroyed  endorsed to indicate all
payments thereon. In the case of any lost, stolen or destroyed Note, there shall
first be furnished to the Borrower and the Board an instrument of indemnity from
the  Agent  and  evidence  of  such  loss,   theft  or  destruction   reasonably
satisfactory  to each of them,  together  with an officer's  certificate  of the
Borrower  certifying and warranting as to the due  authorization,  execution and
delivery of the new Note.

     (e) This  Agreement and the Notes are  registered  instruments.  A manually
signed copy of this  Agreement  and the  original of a Note shall be evidence of
(i) the rights of each Lender  under this  Agreement  and such Note and (ii) the
rights of the Agent under this Agreement. Neither this Agreement nor any Note is
a bearer instrument. The Agent will establish and maintain a record of ownership
(the "Register") in which the Agent agrees to register by book entry the Agent's
and each Lender's interest in the Loan, the Notes and this Agreement, and in the
right to receive any payments  hereunder or thereunder and any assignment of any
such interest or rights.  In connection with any assignment  pursuant to Section
10.2,  the  Agent  shall  maintain  a copy of  each  Assignment  and  Acceptance
delivered to and accepted by it and shall record the names and  addresses of the
Lenders and  principal  amount of each  Tranche of the Loan owing to each Lender
from time to time.  The entries in the Register  shall be conclusive and binding
for all purposes,  absent manifest error, and the Borrower, the Board, the Agent
and the Lenders may treat each Person  whose name is recorded in the Register as
a Lender for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower, the Agent, the Collateral Agent, the Board, the Loan
Administrator  or any Lender or Participant at any reasonable time and from time
to time upon reasonable prior notice.

     (f) The  Borrower  may use the  proceeds  from the  Loan  for such  general
corporate  purposes as are permissible under the Act and Regulations but not for


                                       30
<PAGE>

the prepayment or refinancing of any  Indebtedness  of the Borrower for borrowed
money nor for the acquisition of the stock, or of all or any substantial part of
the assets, of any Person;  provided,  however,  that the Borrower may use up to
$60,000,000  of the  proceeds  from the Loan for the  prepayment  of the Current
Credit Facility and for the cash  collateralization  of the Existing  Letters of
Credit.  No  portion of the  proceeds  from the  Borrowing  shall be used by the
Borrower or any of its Subsidiaries in any manner that might cause the borrowing
or the  application  of such proceeds to violate  Regulation U,  Regulation T or
Regulation  X of the Board of  Governors  of the Federal  Reserve  System or any
other  regulation  of such Board of Governors or to violate  Section 7(c) of the
Exchange  Act, in each case as in effect on the date or dates of such  borrowing
and such use of proceeds.

     Section 2.5. Optional Prepayments.

     (a) The Borrower may, upon at least fifteen days' prior  revocable  written
notice to the Board, the Loan  Administrator  and the Agent stating the proposed
date and  aggregate  principal  amount of the  prepayment,  elect to prepay  the
outstanding  principal amount of the Loan, ratably as to each Tranche,  in whole
or in part (but not less than a minimum  amount of the lesser of $5,000,000  and
five percent of the then  outstanding  principal  amount of the Loan),  together
with accrued  interest to the date of such  prepayment on the  principal  amount
prepaid;  provided,  however,  that if any prepayment of all or a portion of the
Loan is made by the  Borrower  other than on an Interest  Payment Date or if the
Borrower  revokes such notice at any time within such fifteen days, the Borrower
shall also pay any  amounts  owing  pursuant  to Section  2.10(e)  and (f).  The
Borrower shall  establish to the  satisfaction  of the Board and the Agent three
Business  Days in advance of any  prepayment  of the Loan its ability to pay the
amount to be prepaid.

     (b) Upon the giving of any notice of  prepayment  under  clause (a) of this
Section 2.5, the principal  amount of the Loan specified to be prepaid  together
with  accrued and unpaid  interest  thereon  shall become due and payable on the
date specified for such prepayment;  provided, however, that any failure to make
any such  prepayment  in full on such date  shall be  deemed to be an  automatic
revocation  of the notice of  prepayment  given  under  Section  2.5(a) and such
failure  shall  not  constitute  a  Default  or an Event of  Default  hereunder;
provided,  further, however, that the Borrower shall be obligated to pay on such
date any amounts  owing  under  Section  2.10(e) and (f) due to such  failure to
prepay.


     (c) Any such  prepayment  shall be paid to the  Agent  for  application  as
provided in Section 2.9, and any partial  prepayment of the Loan  resulting from
such  application  shall be applied to the then  remaining  installments  of the
outstanding  principal  amount of the Loan  (ratably as to each  Tranche) in the
inverse  order  of  maturity  thereof.  The  Borrower  shall  have no  right  to
optionally  prepay the  principal  amount of the Loan other than as  provided in
this Section 2.5, Section 2.10(b) or Section 2.10(d).

                                       31
<PAGE>

     Section 2.6. Mandatory Prepayments.

     (a) Future Issuances.  The Borrower shall give the Agent, the Lenders,  the
Participants,  the Loan Administrator and the Board not less than eight Business
Days' prior written notice of any  anticipated  Future Issuance and upon receipt
by either  Obligor or any of its  Subsidiaries  of the  proceeds  of such Future
Issuance,  the Borrower shall prepay the Loan in the manner provided below in an
amount  equal to 100% of the amount of such  proceeds  in excess of  $25,000,000
during any  Fiscal  Year,  net of any  reasonable  and  customary  brokers'  and
advisors'  fees,  any  underwriting  discounts and  commissions  and other costs
incurred in connection  with such  transaction  (provided  that evidence of such
fees, discounts,  commissions and costs is provided to the Board and the Agent);
provided,  that,  the Borrower shall not be obligated to so prepay the Loan (and
such  amounts  shall  not be  included  in the  calculation  of the  $25,000,000
threshold) if and to the extent that (x) the Borrower  applies such proceeds (i)
from an  issue  or  incurrence  of  Indebtedness  to  finance  Aircraft  Related
Equipment in a transaction  of the type  excepted  from the  definition of Asset
Sale in this Agreement,  (ii) to purchase Aircraft Related Equipment or (iii) to
refinance Indebtedness upon maturity of the refinanced  Indebtedness or (y) such
Future Issuance consists of borrowings used to refinance  Indebtedness  existing
on the date hereof on terms, in the reasonable  judgment of the Board,  that are
no less favorable  (including with respect to the repayment schedule or maturity
and the interest  rate and other fees) to the Borrower,  the Board,  the Lenders
and (solely in respect of their  interest in the  transactions  contemplated  by
this Agreement and their respective  Participations)  the Participants  than the
Indebtedness  so  refinanced;  provided,  however,  to the extent  the  Borrower
receives  any  proceeds  in  connection  with the  refinancing  of any  existing
Indebtedness  in  excess of the  amount  required  to  refinance  such  existing
Indebtedness   plus  reasonable   expenses  incurred  in  connection  with  such
refinancing, such excess proceeds shall constitute proceeds of a Future Issuance
and the Borrower  shall prepay the Loan in the manner  contemplated  above.  Any
such prepayment of the Loan shall be made on the date of receipt of the proceeds
of the applicable Future Issuance.

     (b) Asset Sales.

     (i) In the event and to the extent that on any date after the Closing  Date
either Obligor or any of its  Subsidiaries  shall receive Net Cash Proceeds from
one  or  more  Asset  Sales  (other  than  Asset  Sales  by  the  Parent  or any
Wholly-Owned  Subsidiary  of the Parent to the  Parent or  another  Wholly-Owned
Subsidiary of the Parent) in excess of $2,500,000  during any Fiscal Year,  then
the  Parent or the  Borrower,  as the case may be,  shall,  or shall  cause such
Subsidiary  to,  promptly  apply  such  excess  amount as  required  by  Section
2.6(b)(ii)  below.  The amount of such Net Cash Proceeds  required to be applied
(or to be committed  to be applied)  during such Fiscal Year as set forth in the
preceding sentence shall constitute "Excess Proceeds".

     (ii) No later than six Business Days following the date on which any Excess
Proceeds are received as contemplated in Section  2.6(b)(i)  above, the Borrower
shall prepay the Loan in an aggregate amount equal to such Excess Proceeds.

                                       32
<PAGE>

     (c) Insurance/Condemnation  Proceeds. The Borrower shall prepay the Loan in
an amount equal to the amount by which the aggregate amount of all Net Insurance
Proceeds and Net Condemnation Proceeds received by either of the Obligors or any
of their Subsidiaries in any Fiscal Year exceeds $2,500,000; provided, that, the
Borrower  shall not be obligated to so prepay the Loan if and to the extent that
the  Borrower  certifies  to the Board  that the  recipient  intends  to repair,
restore or replace  the assets  from which such Net  Insurance  Proceeds  or Net
Condemnation  Proceeds  derived,  and  does  so (or  enters  into  a  definitive
agreement  committing  to do so)  within  6  months  after  receipt  of such Net
Insurance  Proceeds  or Net  Condemnation  Proceeds  (or in the case of proceeds
derived from Collateral,  the Borrower repairs,  restores or replaces the assets
from which such proceeds derived in accordance with the applicable provisions of
the Security Agreement). Any prepayment pursuant to this Section 2.6(c) shall be
made no later than six Business  Days  following  the date of receipt of the Net
Insurance  Proceeds or Net  Condemnation  Proceeds  by either  Obligor or any of
their Subsidiaries,  or if later, the six-month period referenced above (or such
later  date as it is  determined  that  the  proceeds  will  not be  applied  in
accordance with an agreement entered into within such six-month  period),  or in
the case of  proceeds  derived  from  Collateral  and for  which  the  timing of
prepayment is otherwise provided for in Section 3.01 of the Security  Agreement,
at such time as determined in accordance with the applicable provisions thereof.

     (d) Change in  Control.  Upon the  occurrence  of a Change in Control  with
respect to either the Parent or the Borrower,  the Borrower  shall promptly give
the Agent,  the Lenders,  the Loan  Administrator  and the Board written  notice
thereof,  and the Board shall have the right,  by written notice to the Borrower
(with a copy to the Agent,  each Participant and each Lender) delivered not more
than 30 days  following  delivery  of the  notice of the Change in  Control,  to
require  the  Borrower  to prepay the Loan in full,  together  with  accrued and
unpaid interest thereon to the date of such prepayment, on the date specified in
such notice  (which date shall be a Business Day not less than ten nor more than
twenty  Business  Days' after the date of such  notice),  and upon the specified
payment date, the Borrower shall so prepay the then outstanding principal amount
of the Loan together with such accrued and unpaid interest thereon.

     (e) Application.  If any such prepayment is made by the Borrower other than
on an Interest  Payment  Date,  the  Borrower  shall also pay any amounts  owing
pursuant to Section  2.10(e) and (f). Any such  prepayment  of the Loan shall be
paid to the Agent for  application  as provided in Section  2.9, and any partial
prepayment of the Loan resulting from such  application  shall be applied to the
then remaining  installments  of the outstanding  principal  balance of the Loan
(ratably as to each Tranche) in the inverse order of maturity thereof.

     Section 2.7. Interest.

     (a) Tranche A Rate of  Interest.  Except as  otherwise  provided in Section
2.7(d) and Section 2.10, Tranche A of the Loan shall bear interest on the unpaid
principal  amount  thereof  from  the  Closing  Date  until  paid in full at the
Applicable Tranche A Interest Rate.

                                       33
<PAGE>

     (b) Tranche B Rate of  Interest.  Except as  otherwise  provided in Section
2.7(e) and Section 2.10, Tranche B of the Loan shall bear interest on the unpaid
principal  amount  thereof  from  the  Closing  Date  until  paid in full at the
Applicable Tranche B Interest Rate.

     (c)  Interest  Payments.  Interest  accrued on each Tranche of the Loan and
each Note shall be payable in arrears on each Interest  Payment Date  commencing
February 25, 2003,  upon the payment or prepayment  thereof in whole or in part,
and, if not previously  paid in full, at maturity  (whether by  acceleration  or
otherwise).  Interest  on each  Tranche of the Loan shall be  calculated  on the
basis of a year of 360 days and actual number of days elapsed.

     (d)  Tranche  A  Default  Interest.  Notwithstanding  the rate of  interest
specified in Section 2.7(a) or elsewhere herein, if any principal of or interest
on Tranche A of the Loan is not paid when due, whether at stated maturity,  upon
acceleration, by mandatory prepayment or otherwise (but other than any voluntary
prepayment),  such  overdue  amount  shall bear  interest at a rate which is two
percent  per annum in excess of the  Applicable  Tranche A  Interest  Rate as in
effect from time to time.

     (e)  Default  Interest on Tranche B;  Interest  on Fees and Other  Amounts.
Notwithstanding  the rate of interest  specified in Section  2.7(b) or elsewhere
herein,  if any  principal of or interest on Tranche B of the Loan or any fee or
other amount payable by the Borrower  hereunder  (except for any amounts payable
under Section  2.7(d)) is not paid when due,  whether at stated  maturity,  upon
acceleration, by mandatory prepayment or otherwise (but other than any voluntary
prepayment),  such  overdue  amount  shall bear  interest at a rate which is two
percent  per annum in excess of the  Applicable  Tranche B  Interest  Rate as in
effect from time to time.

     Section 2.8. Fees.

     (a) Closing Fee. The Borrower  agrees to pay to the Agent,  for the account
of the Agent, on the Closing Date a closing fee in the amount of [...***...]

     (b) Facility Fee. The Borrower agrees to pay to the Agent,  for the account
of the  Agent,  on the  Closing  Date a facility  fee in an amount  equal to the
greater of [...***...]

     (c) Agency Fee. The Borrower agrees to pay to the Agent, for the account of
the Agent,  on the  Closing  Date and  annually  thereafter  an agency fee in an
amount  equal to  [...***...]  per  annum for so long as the Loan  shall  remain
outstanding.

     (d) Tranche B Fee. The Borrower agrees to pay [...***...] to the Agent, for
the  account  of the  Agent,  on  the  Closing  Date  and  [...***...]  annually
thereafter for so long as the Loan shall remain outstanding.

                                            ***Confidential Treatment Requested

                                       34
<PAGE>

     (e) Collateral  Agent Fee. The Borrower agrees to pay to the Agent, for the
account  of the  Collateral  Agent,  a fee in the amount of  [...***...]  on the
Closing Date and  [...***...]  annually in advance  thereafter  (or  [...***...]
annually in advance  during the  continuance of an Event of Default) for so long
as the Loan  shall  remain  outstanding.  In  addition,  each time the  Borrower
requests the consent of the Collateral Agent in connection with a reregistration
of an Aircraft pursuant to Section  2.01(a)(iii) of the Security Agreement,  the
Borrower agrees to pay to the Agent, for the account of the Collateral  Agent, a
fee  in  the  amount  of   [...***...]   incurred   in   connection   with  such
reregistration.

     (f) [Reserved].

     (g) Loan Administrator Fee.

     (i) Basic Fee. The Borrower agrees to pay to the Loan Administrator a fixed
annual fee of  [...***...]  for the  standard  services  described  in  Sections
8.1(b)(i) through  8.1(b)(vi) and 8.1(b)(x) through  8.1(b)(xiii) for so long as
the Loan shall remain  outstanding.  On the Closing Date and on each  subsequent
Interest Payment Date, the Borrower agrees to pay to the Loan  Administrator one
quarter of the annual fee amount.

     (ii) Fee for  Additional  Services.  In the event that a  Requesting  Party
requests that the Loan  Administrator  provide any of the services  described in
Sections   8.1(b)(vii)   through   (ix),   8.1(b)(xiv)   and   (xv),   the  Loan
Administrator's  fee for each of such services  shall be equal to the product of
(A) the total number of hours actually worked  performing such services,  as set
forth in a statement to be delivered by the Loan  Administrator  to the party at
whose  expense such service was  performed,  and (B) the agreed upon hourly rate
charged  for such  services in  accordance  with the rate  schedule  attached as
Schedule 2.8(g) (increased annually effective on each anniversary of the Closing
Date by 4.0 percent).


     (h) Guarantee Fees. The Borrower agrees to pay to the Agent for the account
of the Board on the Closing Date and quarterly in advance thereafter for so long
as the Board  Guarantee  shall remain in effect the  Guarantee  Fee set forth in
Section 2.06 of the Board Guarantee.

     (i)  Liquidity  Fee. The Borrower  agrees that if (i) at any time after the
Closing Date the Regulations are amended, modified or supplemented such that the
Board's  consent  shall  be  necessary  in  order  for  any  Lender  to  sell  a
participation  in  its  portion  of  the  Loan  to  any  Person  the  sale  of a
participation  to which would not require the Board's consent if the Regulations
were then as in effect on the Closing  Date and (ii) any such  Lender  seeks the
Board's  consent to sell such a  participation  and such consent is not granted,
then such Lender  shall so notify the  Borrower  and the Agent and the  Borrower
shall thereafter (until such consent may be granted) pay to the Agent for the

                                             ***Confidential Treatment Requested

                                       35
<PAGE>

account of such Lender a liquidity  fee equal to  [...***...]  of the  principal
amount  of the Loan  outstanding  from time to time  held by such  Lender,  such
liquidity  fee to accrue from the date of such notice from such Lender and to be
payable on each Interest Payment Date.

     (j)  Distribution  of Fees.  On the  Closing  Date,  and  upon its  receipt
thereof,  the Agent shall  distribute to the Person entitled thereto each of the
fees referred to in this Section 2.8 payable on such date. Thereafter, the Agent
will  distribute  any and all fees payable  under this Section 2.8 in accordance
with Section 2.9(d) or (e) hereof, as applicable.


     (k) Fees  Non-Refundable.  All fees payable under this Section 2.8 shall be
non-refundable.

     Section 2.9. Payments and Computations.

     (a) The Borrower  shall make each  payment  hereunder  (including  fees and
expenses) not later than 12:00 noon (New York City time) on the day when due, in
Dollars, to the Agent at [...***...]. All payments in respect of any Obligations
shall at all times be made to the Agent, whether or not a demand shall have been
made or paid under the Board  Guarantee.  The Agent will promptly cause all such
payments  received by it to be  distributed  to the Person  entitled  thereto in
accordance  with the  priorities of payment set forth below in clause (d) or (e)
of this Section 2.9 or both, as applicable. Payments received by the Agent after
12:00  noon (New  York City  time)  shall be deemed to be  received  on the next
Business Day.

     (b) Each determination by the Agent or the Govco  Administrative  Agent, as
applicable,  of an interest rate  hereunder  shall be conclusive and binding for
all purposes, absent manifest error.

     (c) Whenever any payment hereunder shall be stated to be due on a day other
than a Business Day, except as may be required otherwise pursuant to clause (ii)
of the  definition of Interest  Payment Date,  such payment shall be made on the
next  succeeding  Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be.

     (d) So long as no Event of Default under any of Sections 7.1(a)  (including
any failure to pay all amounts  hereunder upon  acceleration  as a result of any
other Event of Default),  (f) and (g) has occurred  and is  continuing  or would
result  therefrom,  the  Agent  shall  apply  all  payments  in  respect  of any
Obligations in the following order:

     (i) first, to pay any fees then due and payable under Section 2.8(c),  (d),
(e)  and  (g)  hereof  to  the  Agent,   the  Collateral   Agent  and  the  Loan
Administrator, as the case may be, on a pro rata basis;

                                             ***Confidential Treatment Requested

                                       36
<PAGE>

     (ii) second, to pay interest then due and payable in respect of the Loan to
the Lenders, on a pro rata basis;

     (iii)  third,  to pay  principal  then due and  payable  on the Loan to the
Lenders, on a pro rata basis;

     (iv) fourth,  to pay any fees then due and payable under Section 2.8(h) and
(i)  hereof  to the  Board  and the  Lenders,  as the case may be, on a pro rata
basis; and

     (v) fifth, to pay any other  Obligations then due and payable to the Agent,
the  Collateral  Agent,  the Loan  Administrator,  the Board,  the Lenders,  the
Participants and the Govco Administrative Agent, on a pro rata basis.

     Notwithstanding  the foregoing,  to the extent that any amount  received by
the Agent  constitutes  interest accrued on any overdue principal of or interest
on  Tranche A of the Loan in excess of the  interest  that  would  have  accrued
thereon at the Applicable  Tranche A Interest  Rate, so much of such amount,  if
any,  as exceeds  the  interest  that  would  have so accrued at the  Applicable
Tranche A Interest  Rate shall be  distributed  to the Board  under  clause (ii)
above as if it were a Lender and the balance shall be distributed to the Tranche
A Lenders under clause (ii) above.

     (e) After the occurrence and during the  continuance of an Event of Default
under any of Sections 7.1(a) (including any failure to pay all amounts hereunder
upon  acceleration as a result of any other Event of Default),  (f) and (g), the
Agent shall apply all payments in respect of any  Obligations  in the  following
order:


     (i) first, to pay Obligations in respect of any expenses,  fees (other than
any fees  payable  under  clause  (v)  below),  indemnities  or other sums owing
hereunder  not  referred to in clauses  (ii)  through (iv) below then due to the
Agent,  the  Collateral  Agent,  the  Lenders or the Board (to the extent of any
out-of-pocket  costs and expenses  incurred  pursuant to Section 9.7(b)) and the
Loan Administrator, on a pro rata basis;

     (ii) second,  to pay  Obligations  in respect of any expenses,  fees (other
than any fees payable under clause (v) below),  indemnities  or other sums owing
hereunder not referred to in clauses (iii) and (iv) below then due to the Board,
the Lenders, the Participants and the Govco Administrative  Agent, on a pro rata
basis;

     (iii) third, to pay on a pro rata basis,  (A) interest then due and payable
in respect of the Loan to the Lenders, on a pro rata basis, and (B) in the event
that any fees payable to the Board under  Section  2.8(h) were not paid when due
under  Section  2.8(h),  the  portion of such  unpaid fees which is equal to the
amount which the Board would have been entitled to receive  through such date if
the fee payable under Section  2.8(h) were payable daily in arrears  (instead of
quarterly in advance);

                                       37
<PAGE>

     (iv)  fourth,  to pay or  prepay  principal  payments  on the  Loan  to the
Lenders, on a pro rata basis; and

     (v) fifth,  to pay any additional fees payable under Section 2.8(h) and (i)
hereof to the Board and the Lenders, respectively, on a pro rata basis.

     Notwithstanding  the foregoing,  to the extent that any amount  received by
the Agent  constitutes  interest accrued on any overdue principal of or interest
on  Tranche A of the Loan in excess of the  interest  that  would  have  accrued
thereon at the Applicable  Tranche A Interest  Rate, so much of such amount,  if
any,  as exceeds  the  interest  that  would  have so accrued at the  Applicable
Tranche A Interest  Rate shall be  distributed  to the Board under  clause (iii)
above as if it were a Lender and the balance shall be distributed to the Tranche
A Lenders under clause (iii) above.

     (f) Upon the assignment to the Board of any Tranche A Lender's right, title
and interest in and to its pro rata portion of the  principal of and interest on
Tranche A of the Loan in accordance  with the Board  Guarantee,  the Board shall
have the rights and  privileges of a Lender with respect to such payment (to the
extent of the interests in Tranche A of the Loan so assigned to the Board).  Any
statute or judicial decision to the contrary notwithstanding,  no payment by the
Board to the Agent or any  Tranche A Lender  under  the Board  Guarantee,  shall
reduce, discharge, satisfy, modify or terminate the corresponding payment or any
other obligation of Borrower under this Agreement or Tranche A Note, which shall
remain in full force and effect.

     Section     2.10.     Certain     Provisions     Governing    the    Notes.


     (a) Determination of Interest Rate. The Applicable  Tranche A Interest Rate
and  Applicable  Tranche B Interest  Rate for each  Interest  Period of the Loan
shall be determined by the Govco  Administrative Agent and/or the Agent pursuant
to the procedures set forth in the definition of "Applicable  Tranche A Interest
Rate",  "Applicable  Tranche B Interest Rate" and "LIBOR",  as  applicable,  and
shall promptly  thereafter be notified to the Borrower,  the Board,  each Lender
and each Participant.

     (b) Interest Rate Unascertainable, Inadequate or Unfair. In the event that:
(i) the  Agent  determines  that  adequate  and  fair  means  do not  exist  for
ascertaining the applicable  interest rates by reference to which the LIBOR then
being  determined is to be fixed; or (ii) the Requisite LIBOR Lenders notify the
Agent that the LIBOR for any  Interest  Period will not  adequately  reflect the
cost to the LIBOR  Lenders of making or  maintaining  the Loan for such Interest
Period,  the Agent  shall  forthwith  so notify the  Borrower,  the  Board,  the
Participants and the Lenders, whereupon during the 30 days following the date of
any such notice the LIBOR Lenders,  the Agent, the Participants and the Borrower
shall  negotiate in good faith (subject to the consent of the Board) in order to
arrive at a mutually  acceptable  alternative basis for determining the interest
rate from time to time  applicable  to the  relevant  Tranche or Tranches of the
Loan (the "Substitute  Basis").  If within the 20 days following the date of any
such notice from the Agent, the LIBOR Lenders,  the Participants,  the Agent and

                                       38
<PAGE>

the  Borrower  shall agree upon,  and the Board shall  consent to, a  Substitute
Basis,  such  Substitute  Basis shall be  retroactive  to and effective from the
first day of the then current  Interest  Period until and including the last day
of such  Interest  Period.  If after 20 days from the date of such  notice,  the
LIBOR Lenders, the Participants, the Agent and the Borrower shall have failed to
agree upon,  or the Board shall have failed to consent to, a  Substitute  Basis,
then the Agent  (upon  instructions  from the  Requisite  LIBOR  Lenders)  shall
certify in writing to the Borrower  (such  certification  to be  conclusive  and
binding on all LIBOR Lenders and all other parties hereto absent manifest error)
the  interest  rate at which the LIBOR  Lenders are  prepared to maintain  their
portion of the Loan for such  Interest  Period,  it being  understood  that such
Lenders'  interest  rate  shall be at a rate  per  annum  equal to a rate  which
adequately and fairly reflects the cost to such Lenders and the  Participants of
obtaining  the funds  necessary to maintain  their  portion of the Loan for such
Interest Period.  If no Substitute Basis is established,  upon receipt of notice
of the  interest  rates at which the  Requisite  LIBOR  Lenders are  prepared to
maintain their respective portion of the Loan, the Borrower shall have the right
exercisable   upon  ten  Business  Days'  prior  notice  to  the  Lenders,   the
Participants  and the Board through the Agent (i) to continue to borrow the Loan
at the interest rate so advised by the Agent (as such rate may be modified, from
time to time,  at the  outset of each  subsequent  Interest  Period)  or (ii) to
prepay in full the Loan together with accrued but unpaid interest thereon at the
interest rate  certified in writing by the  Requisite  LIBOR Lenders as provided
above and all other  amounts due under the Loan  Documents,  whereupon  the Loan
shall  become due and  payable on the date  specified  by the  Borrower  in such
notice.


     (c)  Increased  Costs.  If at any  time any  Lender  or  Participant  shall
determine  that as a result of the  introduction  of or any  change in or in the
interpretation by any Governmental  Authority of any law, treaty or governmental
rule, regulation or order after the date hereof or the compliance by such Lender
or Participant,  with any guideline,  request or directive after the date hereof
from any central bank or other Governmental Authority (whether or not having the
force of  law),  there  shall be any  increase  in the  cost to such  Lender  or
Participant of agreeing to make or making, funding or maintaining any portion of
the Loan or its Participation (except in respect of Taxes, payments with respect
to which are addressed in Section  2.12),  then the Borrower  shall from time to
time,  upon demand (which  demand shall be  accompanied  by a statement  setting
forth the basis for such  demand  and a  calculation  of the  amount  thereof in
reasonable  detail) by such  Lender or  Participant,  as the case may be (with a
copy of such  demand to the  Agent),  pay to the Agent for the  account  of such
Lender or  Participant,  as the case may be,  additional  amounts  sufficient to
compensate  such Lender or  Participant,  as the case may be, for such increased
cost. A certificate  as to the amount of such increased  cost,  submitted to the
Borrower and the Agent by such Lender or Participant,  as the case may be, shall
be conclusive and binding for all purposes, absent manifest error.


     (d) Illegality.  Notwithstanding any other provision of this Agreement,  if
any Lender or Participant  determines that the  introduction of or any change in
or in the  interpretation  by any  Governmental  Authority of any law, treaty or
governmental  rule,  regulation or order after the date of this Agreement  shall
make it unlawful,  or any central  bank or other  Governmental  Authority  shall
assert that it is unlawful,  for such Lender or  Participant to continue to fund
or maintain its portion of the Loan or  Participation,  as applicable,  then, on


                                       39
<PAGE>

notice thereof by such Lender or Participant, to the Borrower through the Agent,
the obligation of such Lender or Participant to continue to fund or maintain its
portion of the Loan or Participation, as applicable, shall be terminated and the
Borrower  shall prepay such affected  portion of the Loan to such Lender,  or in
the case of a  Participant,  to the Tranche B Lender,  together with accrued but
unpaid  interest  thereon  and all other sums  payable  hereunder  with  respect
thereto  on the last day of the then  current  Interest  Period  or  earlier  if
necessary to avoid such  illegality.  Any such  prepayment  of the Loan shall be
paid to the Agent for  application  as  provided  in Section  2.9,  and any such
partial  prepayment  resulting from such application shall be applied ratably to
the then unpaid installments  thereof in accordance with the amount of each such
unpaid installment.

     (e)  Prepayment  Compensation.  In connection  with all  prepayments  under
Section 2.5,  2.6,  2.10(b) or 2.10(d),  if the Primary  Tranche A Lender is the
Tranche A Lender,  the Borrower  shall pay to such  Primary  Tranche A Lender an
amount  equal to (A) the  amount of yield that the  Primary  Tranche A Lender is
required to pay to holders of its Commercial Paper during the Liquidation Period
on an amount of  Commercial  Paper having an aggregate  issue price equal to the
amount  of the  Borrower's  prepayment  less  (B) the  amount  of the  estimated
investment earnings, as reasonably determined by the Govco Administrative Agent,
on the prepayment amount during the Liquidation Period.


     "Liquidation  Period"  means the period from the date on which a prepayment
is made to the  earliest  date on which the  Primary  Tranche A  Lender's  total
amount of  Commercial  Paper related to the funding of Tranche A of the Loan can
be reduced (without  prepayment thereof) by an amount equal to the amount of the
Borrower's prepayment.


     (f) Breakage Costs.  In addition to all amounts  required to be paid by the
Borrower pursuant to Section 2.7 but without  duplication of any amounts payable
under  Section  2.10(e),  the  Borrower  shall  compensate  each Lender and each
Participant,  upon demand, for all losses,  expenses and liabilities  (including
any loss or expense  incurred by reason of the  liquidation or  reemployment  of
deposits  or  other  funds  acquired  by  such  Lender  or  Participant  or  the
termination of any other financial  arrangement it may have entered into to fund
or  maintain  or support  such  Lender's  portion  of the Loan or  Participant's
Participation,  as  applicable,  but excluding  Taxes,  payments with respect to
which are  addressed in Section 2.12) which that Lender or  Participant,  as the
case may be, may sustain (i) if for any reason the proposed  Borrowing  does not
occur  on a date  specified  therefor  in the  Notice  of  Borrowing  given by a
Borrower,  (ii) if for any reason any portion of the Loan is prepaid  (including
mandatorily pursuant to Section 2.6 or this Section 2.10) or as a result of such
a prepayment, payment is made with respect to a Participation on a date which is
not the last day of the applicable Interest Period, or (iii) as a consequence of
any failure by a Borrower to repay any portion of the Loan or make  payment with
respect to a  Participation  when  required by the terms  hereof.  The Lender or
Participant  making demand for such  compensation  shall deliver to the Borrower
(with a copy to the Agent)  concurrently with such demand a written statement as

                                       40
<PAGE>

to such losses, expenses and liabilities, and this statement shall be conclusive
as to the amount of compensation due to that Lender or Participant,  as the case
may be, absent manifest error, and such compensation  shall be paid to the Agent
for the account of such Lender or Participant, as the case may be.

     Section 2.11.  Capital  Adequacy.  If at any time any Lender or Participant
determines that (a) the adoption of or any change in or in the interpretation by
any Governmental  Authority of any law, treaty or governmental rule,  regulation
or order  after  the date of this  Agreement  regarding  capital  adequacy,  (b)
compliance  with any such  law,  treaty,  rule,  regulation,  or  order,  or (c)
compliance  with any guideline or request or directive  from any central bank or
other Governmental Authority (whether or not having the force of law) shall have
the effect of reducing the rate of return on such Lender's or Participant's  (or
any  corporation  controlling  such  Lender's  or  Participant's)  capital  as a
consequence of its obligations  hereunder  (other than as a result of changes in
Taxes,  payments with respect to which are addressed in Section 2.12) to a level
below  that  which  such  Lender  or  Participant,  as the case may be,  or such
corporation  could have achieved but for such  adoption,  change,  compliance or
interpretation,  then,  upon  demand  from  time  to  time  by  such  Lender  or
Participant,  as the case may be (with a copy of such demand to the Agent),  the
Borrower  shall pay to the Agent for the account of such Lender or  Participant,
as the  case  may  be,  from  time  to  time as  specified  by  such  Lender  or
Participant,  as the case may be,  additional  amounts  sufficient to compensate
such Lender or Participant for such reduction.  A certificate as to such amounts
submitted to the Borrower  and the Agent by such Lender or  Participant,  as the
case may be, shall be conclusive  and binding for all purposes  absent  manifest
error.

     Section 2.12. Taxes.


     (a) Except as otherwise  provided in Section 10.2,  any and all payments by
the  Borrower  under  each  Loan  Document  (including  payments  made  under  a
Participation  Agreement to a  Participant,  but excluding such payments made to
participants  other than  Participants,  except as expressly provided in Section
2.12(j))  shall be made free and clear of and without  deduction for any and all
Taxes,  excluding (i) in the case of each Lender, the Loan Administrator and the
Agent, taxes measured by its net income or net profits (or branch profits),  and
franchise taxes imposed on it, by the United States of America (or any political
subdivision thereof) or by any jurisdiction under the laws of which such Lender,
the Loan  Administrator or the Agent (as the case may be) is organized,  (ii) in
the case of each  Lender,  taxes  measured  by its net income or net profits (or
branch profits), and franchise taxes imposed on it, by the jurisdiction in which
such Lender's Lending Office is located,  (iii) in the case of each Lender,  the
Loan  Administrator  and the Agent,  Taxes  imposed  as a result of such  Person
failing to comply with its obligations under Section 2.12(g) or 2.12(h) and (iv)
in the case of each  Lender,  the Loan  Administrator,  and the Agent  that is a
party hereto,  as the case may be, any  withholding  taxes imposed by the United
States of America (or any political  subdivision  thereof)  unless  imposed as a
result of a change in applicable law,  including income tax  conventions,  after
the latest of (x) the Closing  Date,  (y) the date on which it becomes a Lender,
the Loan  Administrator or the Agent, as the case may be, and (z) in the case of
a Lender,  the date on which it  designates  a new Lending  Office,  unless such
designation is pursuant to Section  2.12(h) (all such  non-excluded  Taxes being

                                       41
<PAGE>

hereinafter referred to as "Indemnified  Taxes"). If any Indemnified Taxes shall
be required by law to be  deducted  from or in respect of any sum payable  under
any Loan Document to any Lender,  the Loan  Administrator,  or the Agent (i) the
sum payable  shall be  increased  as may be  necessary  so that after making all
required deductions  (including deductions applicable to additional sums payable
under this Section 2.12) such Lender,  the Loan  Administrator  or the Agent (as
the case may be) receives an amount equal to the sum it would have  received had
no such deductions been made, (ii) the Borrower shall make such deductions,  and
(iii) the Borrower  shall pay the full amount  deducted to the  relevant  taxing
authority or other authority in accordance with applicable law.

     (b) In addition,  the Borrower agrees to pay any present or future stamp or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies  of  the  United  States  or any  political  subdivision  thereof  or any
applicable foreign jurisdiction, and all liabilities with respect thereto, which
arise from any payment made under any Loan Document or Participation or from the
execution,  delivery or registration  of, or otherwise with respect to, any Loan
Document  (collectively,  "Other  Taxes")  to the Agent for the  account  of the
affected party.


     (c) The  Borrower  will  indemnify  each  Lender,  the  Agent  and the Loan
Administrator for the full amount of Indemnified Taxes or Other Taxes (including
any Taxes  imposed by any  jurisdiction  on amounts  payable  under this Section
2.12) paid by such Lender,  the Loan Administrator or the Agent (as the case may
be) and any liability  (including for penalties,  interest and expenses) arising
therefrom or with respect  thereto.  This  indemnification  shall be made to the
Agent for account of the relevant Lender,  the Loan  Administrator or the Agent,
as the  case  may be,  within  30 days  from  the  date  such  Lender,  the Loan
Administrator  or the Agent (as the case may be) makes written  demand  therefor
(with a copy to the  Agent if made by a Lender  or the  Loan  Administrator  and
accompanied  by a statement  setting  forth the basis for such  taxation and the
calculation of the amount thereof in reasonable detail).

     (d) Within 30 days after the date of any  payment of  Indemnified  Taxes or
Other Taxes,  the Borrower will furnish to the Agent the original or a certified
copy of a receipt evidencing payment thereof or other  documentation  reasonably
satisfactory to the Agent.

     (e) If a Lender,  the Loan  Administrator or the Agent receives a refund in
respect  of any  Indemnified  Taxes  or  Other  Taxes  as to  which  it has been
indemnified  by the Borrower  pursuant to this Section  2.12, it shall within 30
days  from the  date of such  receipt  pay  over  such  refund  to the  Borrower
hereunder,  net  of  any  additional  Taxes  incurred  due  to  such  refund  or
out-of-pocket  expenses of such Lender, the Loan Administrator or the Agent as a
result of such  refund or payment  hereunder  and without  interest  (other than
interest  paid by the  relevant  Governmental  Authority  with  respect  to such
refund);  provided,  that no  Default or Event of  Default  is  continuing,  and
provided further,  that the Borrower hereunder,  upon the request of such Lender
or the  Agent,  agrees  to repay the  amount  paid  over to the  Borrower  (plus
penalties,  interest or other  charges) to such Lender or the Agent in the event
such Lender or the Agent is  required to repay such refund to such  Governmental
Authority.

                                       42
<PAGE>

     (f)  Without  prejudice  to the  survival  of any  other  agreement  of the
Borrower  hereunder,  the agreements and obligations of the parties contained in
this  Section  2.12  shall  survive  the  payment  in full  of the  Obligations;
provided,  however,  that no such  agreements or  obligations  shall survive the
statute of  limitations  applicable  to the  relevant  Taxes  unless a claim was
properly made prior to the expiration of such statute.

     (g) Each of the  Lenders,  the Loan  Administrator  and the Agent that is a
Non-U.S.  Person and that is entitled at such time to an  exemption  from United
States  withholding  tax, or that is subject to such tax at a reduced rate under
an applicable tax treaty,  shall, on or prior to the Closing Date or on or prior
to the date of the  Assignment  and  Acceptance  pursuant  to which it becomes a
Lender  or on or prior  to the date it  becomes  the Loan  Administrator  or the
Agent, as applicable, and from time to time thereafter if requested by the Agent
or the Borrower or if necessary to keep the provided forms from lapsing, provide
the Agent and the  Borrower,  and,  in the case of each of the  Lenders  and the
Agent,  provide each  Participant,  with two completed copies of either IRS Form
W-8BEN or W-8ECI or other applicable form, certificate or document prescribed by
the IRS  certifying as to such Non-U.S.  Person's  entitlement to such exemption
from United States  withholding tax or reduced rate with respect to all payments
to be made to such Non-U.S.  Person under the Loan Documents.  In addition, each
of the Lenders, each Participant, the Loan Administrator and the Agent that is a
Non-U.S.  Person,  as the case may be,  shall  deliver to the  Borrower  and the
Agent, and, in the case of each of the Lenders,  each Participant and the Agent,
deliver  to each  Participant,  notice  of any  event  (other  than a change  in
applicable law, including income tax conventions) requiring a change in the most
recent form previously delivered by such Person to the Borrower and the Agent or
the  Participants,  as the case may be.  Unless the Agent and the Borrower  have
received forms or other documents  satisfactory to them indicating that payments
under the Loan Documents or  Participation  to or for a Non-U.S.  Person are not
subject to United  States  withholding  tax or are subject to such tax at a rate
reduced  by  an  applicable  tax  treaty,  the  Agent  or  the  Borrower  shall,
notwithstanding  the  provisions  of Section  2.12(a),  (b) and (d) and  without
impairing any obligation of the Borrower under this Section 2.12 with respect to
such tax,  withhold such United States  withholding  taxes from such payments at
the appropriate rate.


     (h) Any Lender  claiming any additional  amounts  payable  pursuant to this
Section  2.12 shall use its  reasonable  efforts  (consistent  with its internal
policy and legal and regulatory  restrictions) to change the jurisdiction of its
Lending  Office if the  making  of such a change  would  avoid the need for,  or
reduce the amount of, any such additional  amounts which would be payable or may
thereafter  accrue and would not, in the sole  determination of such Lender,  be
otherwise disadvantageous to such Lender.

     (i) Each  participant  in the Loan will be  entitled  to the  benefits  and
subject to the  requirements  of this Section 2.12 to the same extent as if such
Person were a Lender;  provided,  however,  that a  participant  (including  all
Participants)  shall not be entitled to indemnification or payment of additional
amounts  under this  Section  2.12 with respect to any Taxes which are in effect
and  would  apply to  amounts  payable  to such  participant  on the  date  such
participant acquires its participation (except that such date shall be deemed to

                                       43
<PAGE>

be the Closing Date in the case of [...***...]

     (j)  Each   direct   subparticipant   of  a   Participant   who  becomes  a
subparticipant  pursuant to Section 10.2(f) will be entitled to the benefits and
subject to the  requirements  of this Section 2.12 to the same extent as if such
Person were a Participant and as if the subparticipation  agreement entered into
by such subparticipant were a Participation Agreement;  provided,  however, that
whenever  both  such a  subparticipant  and  its  applicable  Participant  would
otherwise be entitled to payment of additional  amounts or to an indemnity under
this Section  2.12,  the Borrower  shall only be obliged to pay such  additional
amounts  or make  such an  indemnity  with  respect  to no more than one of such
subparticipant  and such  applicable  Participant,  whichever  would require the
greater payment of such additional amount and provision of such indemnity by the
Borrower.  Except as provided in the foregoing  sentence,  no subparticipants of
any participant or subparticipant shall be entitled to any payment of additional
amounts or indemnification under this Section 2.12.



                                  Article III

                               Conditions To Loan

     Section  3.1.  Conditions  Precedent  to the Loan.  The  obligation  of the
Lenders to make the Loan (or,  in the case of the Primary  Tranche A Lender,  to
agree to  participate  in the  making of the Loan  subject  to  Section  2.1(b))
requested  to be made by the  Lenders  on the  Closing  Date is  subject  to the
satisfaction (in the judgment of the Agent, the Board,  each Participant and the
Lenders (except as otherwise  provided below in this Section 3.1)) of all of the
following conditions precedent before or concurrently with such Borrowing:

     (a) Certain Documents.  The Agent, the Lenders, each Participant (except as
to clauses (iv),  (x)(G) through (L), (xiii) and (xiv),  for opinions of counsel
to and documents  relating to the other  Participants)  and the Board shall have
received on the Closing Date each of the following, each dated as of the Closing
Date, in form and substance  satisfactory to the Agent,  the Board,  the Lenders
and each  Participant  (except  as  otherwise  provided  below  in this  Section
3.1(a)):

     (i) this Agreement, duly executed and delivered by the parties hereto;

     (ii)  the  Notes  duly  executed  by the  Borrower  and  conforming  to the
requirements set forth in Section 2.4(d) hereof;

                                             ***Confidential Treatment Requested

                                       44
<PAGE>

     (iii) the Security  Agreement,  duly  executed and delivered by the parties
thereto;

     (iv) the Board  Guarantee,  duly  executed  and  delivered  by the  parties
thereto;

     (v) the Parent  Guarantee,  duly  executed  and  delivered  by the  parties
thereto;

     (vi) the Subsidiary  Guarantee,  duly executed and delivered by the parties
thereto;

     (vii) each  Participation  Agreement,  duly  executed and  delivered by the
parties thereto;

     (viii) the Warrants  (which need to be in form and  substance  satisfactory
only to the holders thereof), duly executed and delivered by the Parent;

     (ix) a Collateral Value Certificate with respect to the Collateral, setting
forth the  Collateral  Value as of the Closing  Date,  together  with  insurance
certificates  and insurance  brokers' reports as are required under the Security
Agreement;

     (x) the favorable opinions of (A) Cravath, Swaine & Moore, special New York
counsel to the Borrower  and the Parent,  (B) Baker & Daniels,  special  Indiana
counsel to the  Borrower  and the Parent,  (C) Brian Hunt,  Vice  President  and
General  Counsel to the  Borrower  and the Parent,  (D) James R.  Levine,  Legal
Counsel to the Board (which need be addressed  and  delivered  only to the Agent
and the  Tranche A  Lenders),  (E)  Curtis,  Mallet-Prevost,  Colt & Mosle  LLP,
special New York  counsel to the Board (which need be  addressed  and  delivered
only to the Agent and the Tranche A  Lenders),  (F)  Domingo  Maradiegue,  Esq.,
Associate  General Counsel of the Loan  Administrator,  [...***...](M)  Milbank,
Tweed,  Hadley & McCloy  LLP,  special  New York  counsel to the Lenders and the
Agent (which need be addressed and delivered only to the Lenders and the Agent);

     (xi) a copy of the articles or certificate of  incorporation of each of the
Borrower,  the Parent and each of their  Subsidiaries,  certified as of a recent
date by the  Secretary  of State of the state of  organization  of such  Person,
together with a "long-form"  certificate of such official  attesting to the good
standing of such Person;

     (xii) a certificate  of each of the Borrower,  the Parent and each of their
Subsidiaries  signed on behalf of such Person by its  Secretary  or an Assistant
Secretary certifying (A) the names and true signatures of each officer of such

                                             ***Confidential Treatment Requested

                                       45
<PAGE>

     Person who has been  authorized  to execute and deliver each Loan  Document
required to be executed and  delivered by or on behalf of such Person  hereunder
or  thereunder,  (B) the by-laws of such Person as in effect on the date of such
certification, (C) the resolutions of such Person's board of directors approving
and authorizing the execution, delivery and performance of each Loan Document to
which it is a party and (D) that there  have been no changes in the  certificate
of incorporation of such Person from the certificate of incorporation  delivered
pursuant to the immediately preceding clause;

     (xiii) a copy of the articles or certificate of  organization or comparable
document of each of the [...***...]certified,  if available, as of a recent date
by an appropriate  official of the  jurisdiction  of  organization  of each such
Person,  together with, if available,  a certificate  or comparable  document of
such official attesting to the good standing of such Person;

     (xiv) a certificate of each of the  [...***...]on  behalf of such Person by
an  authorized  official  of such  Person  certifying  (A) the  names  and  true
signatures of each officer of such Person who has been authorized to execute and
deliver the applicable  Participation  Agreement, (B) the by-laws of such Person
as in  effect on the date of such  certification,  (C) the  resolutions  of such
Person's board of directors  approving and authorizing  the execution,  delivery
and performance of the applicable  Participation  Agreement,  and (D) that there
have been no changes in the  certificate of organization of such Person from the
certificate of  organization  delivered  pursuant to the  immediately  preceding
clause;


     (xv) a  certificate  of each of the Borrower and the Parent  signed by such
Person's  Chief  Financial  Officer,  stating that such Person is Solvent  after
giving effect to the Loan, the application of the proceeds thereof in accordance
with Section 2.4(f) and the payment of all estimated legal, accounting and other
fees related hereto and thereto;

     (xvi) a certificate of each of the Borrower and the Parent signed by a duly
authorized  officer  of such  Person  certifying  (A) that all  representations,
warranties and certifications  made by it in the Loan Agreement,  the other Loan
Documents,  the  Application  and any other  document,  certificate  or  written
statement  delivered in  connection  therewith are true and correct on and as of
the Closing  Date,  before and after giving  effect to the  Borrowing and to the
application  of the proceeds  therefrom,  as though made on and as of such date,
and (B) that no Event of  Default or event  which,  with the giving of notice or
passage  of time or both,  would be an Event of  Default,  has  occurred  and is
continuing, or would result from the Borrowing;

     (xvii) a true and correct copy of the Borrower's  Application,  as approved
by the Board,  together with a certificate  signed by a duly authorized  officer
certifying that there are no written materials amending, varying,  supplementing
or

                                             ***Confidential Treatment Requested

                                       46
<PAGE>

otherwise  modifying any of the terms of the Application other than as set forth
in such certificate;

     (xviii) a  certificate  of each of the Borrower and the Parent  signed by a
duly  authorized  officer of such Person  certifying  that since June 28,  2002,
there  has  been no  material  adverse  change  (A) in the  business,  condition
(financial  or  otherwise),   operations,   performance  prospects,   assets  or
properties  of such  Person  and its  Subsidiaries  taken  as a whole  or in the
Borrower's  ability to repay the Loan or (B) with  respect to any of the matters
covered by the representations and warranties of the Borrower in its Application
to the Board; provided, however, that with respect to clause (A) of this Section
3.1(a)(xviii),  no event or  circumstance  disclosed in the  Parent's  quarterly
reports on Form 10-Q filed with the SEC  between  June 28,  2002 and the Closing
Date shall be considered a material adverse change;


     (xix) a certificate  of the Borrower  signed by a duly  authorized  officer
certifying  that (i) it will use the proceeds  from the  Borrowing in compliance
with  Section  2.4(f)  of this  Agreement,  (ii) the  Borrower  qualifies  as an
"eligible  borrower" under the Act and the  Regulations,  and (iii) the Borrower
does  not  have  any   outstanding   delinquent   Federal  debt  (including  tax
liabilities);

     (xx) the most recent publicly available financial statements of the Parent;
and

     (xxi) such other certificates,  documents,  agreements and information from
the Borrower,  the Parent and their Subsidiaries as the Agent, the Lenders,  any
Participant or the Board may reasonably request.

     (b) Collateral.  (i) Evidence of the completion of all notices,  recordings
and filings of or with  respect to the  Security  Agreement  and the  Collateral
covered thereby, that are necessary or desirable in order to perfect and protect
the security  interest  created by the Security  Agreement or that  arrangements
therefor satisfactory to the Collateral Agent have been made, including, without
limitation,  the  filing  of the  Security  Agreement  and  any  other  required
instruments and documents with the Federal Aviation  Administration,  the filing
of Uniform Commercial Code financing statements in all applicable jurisdictions,
the delivery of favorable legal opinions from counsel in  Indianapolis,  Indiana
and  Oklahoma  City,  Oklahoma  with respect to such filings and the delivery of
required  notices and other documents and instruments to applicable  contracting
officers or other government officials in connection with the pledge of military
or  other  government  contracts  or  rights  or  interests  therein;  and  (ii)
completion  by the  Borrower of all other  actions  necessary  or  desirable  to
perfect and protect the security interest in the Collateral or that satisfactory
arrangements therefor have been made.

                                       47
<PAGE>

     (c) Purchase of  Participations.  The Tranche B Lender shall have  received
payment  in  full  of  the  Purchase   Price  (as  defined  in  the   applicable
Participation Agreement) from each of the Participants.

     (d)  Other  Agreements.   The  Agent,  the  Board,  each  Lender  and  each
Participant shall have received evidence reasonably satisfactory to each of them
that (i) the Borrower has agreed on terms  satisfactory  to the Board  regarding
certain employee  compensation  matters as required by Section 104(a) of the Act
(the "Employee Compensation  Agreement");  and (ii) the Existing Stockholder and
the Obligors have agreed on terms  satisfactory to the Board  regarding  certain
restrictions  relating to ownership by the Existing Stockholder of Capital Stock
of  the  Obligors  and  certain   other  matters  (the   "Existing   Stockholder
Undertaking").

     (e) Fees and Expenses  Paid.  The Borrower shall have paid all fees due and
payable on the Closing Date (including,  without limitation, the fees referenced
in Section 2.8 hereof), and all expenses of the Agent, the Collateral Agent, the
Lenders,  the Loan  Administrator  and each  Participant  due and  payable on or
before the Closing Date.

     (f) Consents,  Etc. The Borrower, the Parent and each of their Subsidiaries
shall have  received all consents and  authorizations  required  pursuant to any
Contractual  Obligation  with any other  Person  and  shall  have  obtained  all
consents, waivers and authorizations of, and effected all notices to and filings
with, the Nasdaq, the SEC or any other Governmental  Authority, in each case, as
may be  necessary  to allow each of the  Borrower,  the Parent and each of their
Subsidiaries lawfully to execute, deliver and perform, in all material respects,
its  obligations  under the Loan  Documents to which it is, or shall be, a party
and each other  agreement  or  instrument  to be executed  and  delivered by it,
pursuant thereto or in connection therewith.

     (g) No Illegality. No law or regulation shall be applicable in the judgment
of any  Lender or the Board  that  restrains,  prevents  or  imposes  materially
adverse conditions upon the transactions contemplated hereby.

     (h)  Representations  and Warranties of Borrower.  All  representations and
warranties  of the Borrower and the Parent set forth herein are true and correct
on and as of the Closing  Date,  before and after giving effect to the Borrowing
and to the  application of the proceeds  therefrom,  as though made on and as of
such date.

     (i) Representation and Warranties of Participants.  All representations and
warranties of each of [...***...]in the Participation Agreement to which it is a
party,  are true and  correct on and as of the  Closing  Date,  before and after
giving effect to the Borrowing and to the application of the proceeds therefrom,
as though made on and as of such date,  in the  judgment of the Tranche B Lender
and the Board.

     (j) No Event of Default. No Event of Default or Default has occurred and is
continuing,  or would  result  from the  Borrowing  after  giving  effect to the
Borrowing and to the application of the proceeds therefrom.

     (k) Corporate and other  proceedings.  All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the

                                             ***Confidential Treatment Requested

                                       48
<PAGE>

transactions contemplated hereby shall be satisfactory in form and substance to
the Agent, the Board, each Lender and each Participant.

     (l) Projections. The Lenders and the Board shall have received satisfactory
projections  and pro forma  financial  information  for the  fiscal  years  2002
through and including 2008,  which  projections  shall be certified by the Chief
Executive  Officer or the Chief Financial  Officer of each of the Parent and the
Borrower, as being based on assumptions stated therein and that such assumptions
are believed by the Obligors to be reasonable as of the Closing Date.

     (m) No Material  Adverse Change.  Since June 28, 2002, no material  adverse
change  shall  have  occurred  (i)  in the  business,  condition  (financial  or
otherwise),  operations,  performance,  prospects,  assets or  properties of the
Obligors and their Subsidiaries taken as a whole or in the Borrower's ability to
repay  the  Loan or (ii)  with  respect  to any of the  matters  covered  by the
representations and warranties made in the Application;  provided, however, that
with  respect to clause (i) of this  Section  3.1(m),  no event or  circumstance
disclosed  in the  Parent's  quarterly  reports  on Form 10-Q filed with the SEC
between  June 28,  2002 and the  Closing  Date  shall be  considered  a material
adverse change.

     (n) Repayment of Current Credit Facility. The Current Credit Facility shall
be fully repaid in cash, and  terminated,  and all actions  necessary to release
all  collateral  pledged to secure the Current  Credit  Facility shall have been
taken.

     (o) Filing Memoranda;  Post Recordation  Opinions.  The Borrower shall have
submitted to the Federal Aviation  Administration the Security Agreement and all
other  instruments  or documents that are required to be recorded by the Federal
Aviation  Administration in order to perfect the Lien on the Collateral in favor
of the  Collateral  Agent,  and promptly upon the  recordation of such documents
with the  Federal  Aviation  Administration,  the  Borrower  will cause  Crowe &
Dunlevy  to deliver to the  Collateral  Agent a  favorable  legal  opinion  with
respect to the perfection of the security interest in the Collateral  covered by
such recordation.

                                   Article IV

                         Representations and Warranties

     To induce the other  parties to enter  into this  Agreement,  to induce the
Board to enter into the Board Guarantee and to induce the  Participants to enter
into their respective  Participations,  each Obligor  represents and warrants to
each other party hereto and to each  Participant  that, on and as of the Closing
Date:

                                       49
<PAGE>

     Section 4.1. Organization,  Powers, Qualification, Good Standing, Business,
Subsidiaries, the Act and the Regulations.

     (a) Each Obligor is a corporation  duly organized,  validly existing and in
good  standing  under the laws of the State of  Indiana.  Each  Obligor  has all
requisite  corporate  and  other  power and  authority  to own and  operate  its
properties,  to carry on its  business  as now  conducted  and as proposed to be
conducted,  to enter into the Loan Documents to which it is a party and to carry
out the transactions contemplated hereby and thereby.

     (b) Each Obligor and each of their Subsidiaries is qualified to do business
and in good  standing  in every  jurisdiction  where its assets are  located and
wherever  necessary  to  carry  out  its  business  and  operations,  except  in
jurisdictions where the failure to be so qualified or in good standing could not
reasonably  be expected to have a Material  Adverse  Effect.  The Borrower is an
"air  carrier"  within  the  meaning  of the Act and holds a  certificate  under
Sections  41102(a)(1) and 41103 of Title 49. Each of the Borrower and each other
Subsidiary of the Parent engaged in operations as an "air carrier" is a "citizen
of the United States" as defined in Section  40102(a)(15) of Title 49 (a "United
States Citizen") and holds an air carrier operating  certificate issued pursuant
to  Chapter  447 of  Title  49 for  aircraft  capable  of  carrying  10 or  more
individuals  or 6,000  pounds or more of cargo.  Each  Obligor and each of their
Subsidiaries  possesses  all  necessary  certificates,   franchises,   licenses,
permits, rights and concessions and consents which are material to the operation
of the routes  flown by it and the conduct of its  business  and  operations  as
currently conducted.

     (c) All of the  Subsidiaries  of the  Obligors as of the  Closing  Date are
identified on Schedule 4.1, as said Schedule 4.1 may be  supplemented  from time
to time pursuant to the  provisions of Section  5.15.  Each of the  Subsidiaries
identified  in  Schedule  4.1  annexed  hereto  (as  so  supplemented)  is  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
respective  jurisdiction  of  formation  set forth  therein,  has all  requisite
corporate,  partnership  or limited  liability  power and  authority  to own and
operate its  properties  and to carry on its  business as now  conducted  and as
proposed to be  conducted,  and is qualified to do business and in good standing
in every  jurisdiction  where its assets are located and  wherever  necessary to
carry out its business and  operations,  in each case except where failure to be
so qualified or in good  standing or a lack of such  corporate,  partnership  or
limited liability power and authority could not reasonably be expected to have a
Material Adverse Effect.  Schedule 4.1 (as so supplemented) correctly sets forth
the ownership interest of the Obligors and each of their Subsidiaries in each of
the Subsidiaries  identified  therein.  There are no limitations on the right of
any Obligor to vote the Capital Stock it owns of any Subsidiary of such Obligor.

     (d) The  Borrower is an "eligible  borrower"  within the meaning of the Act
and the Regulations,  it does not have any outstanding  delinquent  Federal debt
(including  tax  liabilities),  and the  Application  (together with any written
materials set forth in the certificate referred to in Section 3.1(a)(xvii)), the
Loan, the Participations and the transactions contemplated hereby (assuming each
Lender is an Eligible  Lender and each  Participant  qualifies as a  participant

                                       50
<PAGE>

under Section 1300.23(b) of the Regulations) comply with the requirements of the
Act and the Regulations. Section 4.2. Authorization of Borrowing, Etc.


     (a) Each Obligor and its  Subsidiaries has duly authorized by all necessary
corporate  action the execution,  delivery and performance of the Loan Documents
to which it is a party.

     (b) The execution, delivery and performance by each Obligor and each of its
Subsidiaries  of the Loan Documents to which it is a party and the  consummation
of the transactions contemplated by the Loan Documents to which it is a party do
not and will not (i) violate any provision of any law or any  governmental  rule
or  regulation  applicable  to either  Obligor or any of its  Subsidiaries,  the
Certificate or Articles of  Incorporation  or Bylaws of either Obligor or any of
its  Subsidiaries or any order,  judgment or decree of any court or other agency
of government binding on either Obligor or any of either Obligor's Subsidiaries,
(ii)  conflict  with,  result in a breach of or  constitute  (with due notice or
lapse of time or both) a default  or  require  any  payment  under any  material
Contractual  Obligation  (including the Concessions) of either Obligor or any of
its  Subsidiaries,  (iii) result in or require the creation or imposition of any
Lien upon any of the  properties  or assets of either  Obligor  or any of either
Obligor's  Subsidiaries  (other than  pursuant to the Loan  Documents),  or (iv)
require any  approval of  stockholders  or any approval or consent of any Person
under any material  Contractual  Obligation  of either  Obligor or any of either
Obligor's  Subsidiaries,  except for such  approvals or consents which will have
been obtained on or before the Closing Date.

     (c) The execution, delivery and performance by each Obligor and each of its
Subsidiaries  of the Loan Documents to which it is a party and the  consummation
of the transactions contemplated by the Loan Documents to which it is a party do
not and will not  require any  registration  with,  consent or  approval  of, or
notice  to,  or  other  action  to,  with or by,  any  federal,  state  or other
Governmental  Authority or regulatory  body or any other  Person,  except as set
forth on Schedule  4.2, and each of the actions  listed on Schedule 4.2 which is
required to be obtained or made on or prior to the Closing  Date has  previously
been obtained or made.

     (d)  Each  Obligor  and each of its  Subsidiaries  has  duly  executed  and
delivered  each of the Loan  Documents  to which it is party  and each such Loan
Document is the legally  valid and binding  obligation  of such  Obligor or such
Subsidiary,  as applicable,  enforceable against such Obligor or such Subsidiary
in  accordance  with  its  terms,  except  as  may  be  limited  by  bankruptcy,
insolvency,  reorganization,  moratorium,  fraudulent  transfer or other similar
laws relating to or affecting the  enforcement of creditors'  rights  generally,
and by general  principles  of equity  (regardless  of whether  considered  in a
proceeding in equity or at law).

                                       51
<PAGE>

     Section 4.3. Financial Condition.


     (a) The Obligors have  heretofore  delivered to the Agent,  the Board,  the
Loan  Administrator,  the Lenders and the Participants  the following  financial
statements and information:  (i) the audited  consolidated balance sheets of the
Parent as at December  31,  2001,  and the related  consolidated  statements  of
income,  stockholders' equity and cash flows of such Obligor for the Fiscal Year
then ended and (ii) the unaudited  consolidated balance sheet of each Obligor as
at  September  30,  2002  and  the  related  unaudited   statements  of  income,
stockholders'  equity and cash flows of such  Obligor  for the nine  months then
ended.  All such  consolidated  statements  and any other  financial  statements
delivered  pursuant to Section  3.1(a)(xx) were prepared in conformity with GAAP
consistently  applied and fairly present the consolidated  financial position of
such Obligor as at the respective dates thereof and the consolidated  results of
operations  and cash flows of such  Obligor for each of the  periods  then ended
subject, in the case of the unaudited consolidated statements, to year-end audit
and adjustments. Except as disclosed in writing to the Agent and the Board prior
to the date of this Agreement, neither Obligor nor any of their Subsidiaries has
any material  contingent  liability or liability for taxes,  long-term  lease or
unusual  forward or long-term  commitment that is not reflected in the foregoing
consolidated financial statements or in the most recently delivered consolidated
financial  statements  delivered  pursuant to Section  5.1(i)(a)  or (ii) or the
notes  thereto  and  which in any  such  case is  material  in  relation  to the
business,  operations,  properties, assets or condition (financial or otherwise)
of such Obligor or, with respect to the initial  borrowing  hereunder  only, the
prospects of such Obligor.

     (b) Any projections and pro forma  financial  information  contained in the
Application and the projections and pro forma financial information delivered to
the Lenders and the Board pursuant to Section 3.1(l) are based upon  assumptions
stated therein, which assumptions were believed by the Obligors to be reasonable
at the time made (or as of the Closing Date in the case of the  projections  and
pro forma financial  information delivered pursuant to Section 3.1(l)), it being
recognized  by the Board and the  Lenders  that  such  projections  as to future
events are not to be viewed as facts and that actual  results  during the period
or  periods  covered  by any such  projections  may  differ  from the  projected
results.

     (c) The  Obligors  and their  Subsidiaries  maintain  a system of  internal
accounting  controls  sufficient  to  provide  reasonable  assurances  that  (i)
transactions  are executed in accordance with  management's  general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial  statements in conformity with GAAP and to maintain  accountability
for  assets;  (iii)  access to  assets  is  permitted  only in  accordance  with
management's   general  or  specific   authorization;   and  (iv)  the  recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate action is taken with respect to any differences.

     (d) After giving effect to the transactions contemplated by this Agreement,
including the pledge of the Collateral  under the Security  Agreement,  the book
value of the assets of the Parent not  subject to any Lien (as  defined in the 9
5/8% Senior Notes Indenture,  and subject to the exceptions contained in Section
10.05(a) of the First  Supplemental  Indenture  dated  December 11, 1998 to such

                                       52
<PAGE>

Indenture and the 10 1/2% Senior Notes  Indenture and subject to the  exceptions
contained therein) is not less than $125 million.

     Section  4.4.  No  Material  Adverse  Change;  No  Restricted  Payments  or
Defaults.

     (a) Since June 28, 2002, no material adverse change has occurred (i) in the
business,   condition   (financial  or  otherwise),   operations,   performance,
prospects,  assets or properties of the Obligors and their Subsidiaries taken as
a whole or in the  Borrower's  ability to repay the Loan or (ii) with respect to
any of the matters  covered by the  representations  and warranties  made in the
Application;  provided, however, that with respect to clause (i) of this Section
4.4(a), no event or circumstance  disclosed in the Parent's quarterly reports on
Form 10-Q filed with the SEC between June 28, 2002 and the Closing Date shall be
considered a material adverse change.

     (b) Since June 28, 2002,  neither Obligor nor any of their Subsidiaries has
directly or indirectly declared,  ordered, paid or made, or set apart any sum of
property for any Restricted Payment or agreed to do so except as would have been
permitted  by Section  6.3, as if such Section were in effect at all times since
such date (but without  regard to whether or not any Default or Event of Default
would have existed during such time).

     (c) No event has occurred and no  conditions  exist which would on or after
the Closing Date constitute a Default or Event of Default,  and no such event or
condition will result from the Borrowing.

     Section 4.5. Title To Properties;  Liens. Each Obligor and its Subsidiaries
has (i) good record, legal and marketable title to (in the case of fee interests
in real property),  (ii) valid leasehold  interests in (in the case of leasehold
interests in real or personal property) or other valid and enforceable rights to
use property owned by others, or (iii) good and marketable title to (in the case
of all other personal property),  all properties and assets necessary to or used
in the  conduct  of  its  business  including:  (x)  all  Collateral  and  other
properties  and assets  reflected  in the  financial  statements  referred to in
Section 4.3 or in the most recent  financial  statements  delivered  pursuant to
Section  5.1 (other than  assets  disposed  of since the date of such  financial
statements  in  the  ordinary  course  of  business),  and  (y)  all  additional
Collateral  reflected  in the  Collateral  Value  Certificate  delivered  on the
Closing  Date.  Except  as  otherwise  permitted  by this  Agreement,  all  such
properties and assets are free and clear of Liens.

     Section 4.6. Perfected  Security Interest.  The Collateral Agent, on behalf
of the Lenders and the Board, has a first-priority  perfected  security interest
in the Collateral.

     Section  4.7.  Litigation;  Adverse  Facts.  There are no  actions,  suits,
proceedings,   arbitrations  or  governmental  investigations  (whether  or  not
purportedly on behalf of either Obligor or any of its Subsidiaries) at law or in
equity or before or by any Governmental  Authority  pending or, to the knowledge


                                       53
<PAGE>

of either Obligor,  threatened against or affecting either Obligor or any of its
Subsidiaries or any property of either Obligor or any of its Subsidiaries  that,
individually or in the aggregate,  if adversely determined,  could reasonably be
expected to have a Material  Adverse  Effect or which  challenges  the legality,
validity or binding  effect of, or restricts  any Obligor from  entering into or
performing  under,  any  Loan  Document  including,   without  limitation,  this
Agreement and the Security  Agreement nor does either  Obligor have knowledge of
any basis  for any  Person  to  institute  any such  action,  suit,  proceeding,
arbitration or  investigation.  Neither  Obligor nor any of its  Subsidiaries is
subject  to  or  in  default  with  respect  to  any  final  judgments,   writs,
injunctions, decrees of any court or any Governmental Authority.

     Section  4.8.  Payment of Taxes.  All federal  income tax returns and other
material tax returns and reports of each Obligor and its  Subsidiaries  required
to be filed by any of them have been  timely  filed (or timely  extensions  have
been obtained with respect thereto). All federal income taxes and material Taxes
imposed  upon  each  Obligor  and its  Subsidiaries  and upon  their  respective
properties,  assets, income, businesses and franchises which are due and payable
have been paid before any  penalty,  fine or interest  accrues  thereon,  or are
being  contested in good faith through  appropriate  proceedings and an adequate
reserve has been  established  by the  Obligors  and their  Subsidiaries  to the
extent  required by GAAP.  Except as  disclosed  in Schedule  4.8,  there are no
closing,  settlement  or similar  agreements  with respect to Taxes  between any
Obligor or any of its Subsidiaries and any taxing agency or authority. Except as
set forth on Schedule 4.8,  neither Obligor nor any of its Subsidiaries is party
to any tax sharing  agreements with any Person other than another Obligor or any
of its Subsidiaries.

     Section 4.9. Performance of Agreements; Material Agreements.

     (a)  Neither  Obligor  nor any of its  Subsidiaries  is in  default  in the
performance,  observance or fulfillment of (i) any of the material  obligations,
covenants  or   conditions   contained  in  any  of  its  material   Contractual
Obligations,  or (ii) of any other  obligation,  covenant or  condition  thereof
which could  reasonably be expected to have a Material  Adverse  Effect,  and no
condition  exists that,  with the giving of notice or the lapse of time or both,
would  constitute  such a default  after giving  effect to the Borrowing and the
application of the proceeds therefrom.

     (b)  Neither  Obligor  nor  any of its  Subsidiaries  is a  party  to or is
otherwise  subject to any  agreements  or  instruments  or any  charter or other
internal restrictions which, individually or in the aggregate,  could reasonably
be expected to have a Material Adverse Effect.

     (c) Except as set forth on Schedule 4.9(c),  neither Obligor nor any of its
Subsidiaries is a party to or is otherwise subject to any material  agreement or
arrangement, including, but not limited to, agreements relating to Indebtedness,
lease  agreements  or  Guarantees,  that provide for early  payment,  additional
collateral  support,  changes  in  terms or  acceleration  of  maturity,  or the
creation of an  additional  financial  obligation,  as a result of any of (i) an


                                       54
<PAGE>

adverse   change  in  the  credit  rating  of  either  Obligor  or  any  of  its
Subsidiaries,  (ii) an adverse change in the financial  ratios,  earnings,  cash
flow or stock  price of  either  Obligor  or any of its  Subsidiaries,  or (iii)
changes in the value of underlying, linked or indexed assets.

     (d)  The  Concessions  listed  on  Schedule  4.9(d)  hereto  are all of the
concessionary  agreements or arrangements referred to in the Application and are
reasonably  expected  by Borrower  and the Parent to result in the  cost-savings
described in the Application. The Borrower has heretofore delivered to the Board
and the Agent true and correct copies or descriptions  of the Concessions  which
Concessions have not been amended,  supplemented or otherwise  modified prior to
the date  hereof  or the  Closing  Date.  After  giving  effect  to the Loan and
application of the proceeds  therefrom,  the  Concessions  are in full force and
effect and constitute the legal, valid and binding  obligations of the Obligors,
their Subsidiaries and the counter-parties thereto (as applicable),  enforceable
against each in accordance with their respective terms, except as may be limited
by bankruptcy,  insolvency,  reorganization,  moratorium, fraudulent transfer or
other similar laws relating to or affecting the enforcement of creditors' rights
generally, and by general principles of equity (regardless of whether considered
in a proceeding in equity or at law).

     Section  4.10.  Governmental  Regulation.  Neither  Obligor  nor any of its
Subsidiaries  is subject to regulation  under the Public Utility Holding Company
Act  of  1935,  the  Federal  Power  Act,  the  Interstate  Commerce  Act or the
Investment  Company Act of 1940 or under any other  federal or state  statute or
regulation  which may  limit  its  ability  to incur  Indebtedness  or which may
otherwise render all or any portion of the Obligations unenforceable.

     Section  4.11.  Securities  Activities.  Neither  Obligor  nor  any  of its
Subsidiaries  owns  or is  engaged  principally,  or as  one  of  its  important
activities, in the business of extending credit for the purpose of purchasing or
carrying  any  Margin  Stock,  nor  shall  any  proceeds  of the Loan be used to
purchase or carry Margin Stock or to extend credit to any Person for the purpose
of purchasing or carrying any Margin Stock in a manner that violates or causes a
violation  of  Regulations  T, U or X of the Board of  Governors  of the Federal
Reserve System or any other regulation of such Board.

     Section  4.12.  Employee  Benefit  Plans.  Each Plan has been  operated and
administered  in compliance with all applicable  requirements of ERISA,  and, if
intended to qualify under Section 401(a) or 403(a) of the Internal Revenue Code,
in compliance with all applicable requirements of such provisions,  except where
the  failure  to do so could not  reasonably  be  expected  to have,  taking all
instances in the aggregate,  a Material Adverse Effect.  Neither Obligor nor any
ERISA Affiliate has any contingent liability with respect to any post-retirement
benefits under a welfare benefit plan as defined in ERISA other than a liability
for continuation  coverage described in Part 6 of Title I of ERISA, except where
such liability could not reasonably be expected to have, taking all instances in
the  aggregate,  a  Material  Adverse  Effect.  Neither  Obligor  nor any  ERISA
Affiliate  has  maintained,  contributed  to or been  obligated  to  maintain or
contribute to, or has any actual or contingent liability under any Multiemployer
Plan or any Plan that is subject to Title IV of ERISA.

                                       55
<PAGE>

     Section 4.13. Environmental Protection.

     (a) All Facilities and operations of each Obligor and its Subsidiaries are,
and have been to the Obligors'  knowledge,  in compliance with all Environmental
Laws except for any noncompliance which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.

     (b)  There is no,  and has been no,  condition,  occurrence,  or  Hazardous
Materials  Activity arising (a) at any Facilities or, to the knowledge of either
Obligor,  at any other  location or (b) in  connection  with the  operations  of
either Obligor or its Subsidiaries  (including the  transportation  of Hazardous
Materials  in  accordance  with  applicable   regulations),   which   condition,
occurrence or Hazardous  Materials Activity could reasonably be expected to form
the  basis  of an  Environmental  Claim  against  either  Obligor  or any of its
Subsidiaries  and which,  individually or in the aggregate,  could reasonably be
expected to have a Material Adverse Effect.

     (c) There are no  pending  or, to either  Obligor's  knowledge,  threatened
Environmental  Claims against either  Obligor or its  Subsidiaries,  and neither
Obligor nor its Subsidiaries  have received any written notices,  inquiries,  or
requests  for  information  with  respect to any  Environmental  Claims which if
adversely  determined  could,  individually  or in the aggregate,  reasonably be
expected to have a Material Adverse Effect.

     (d) Except as disclosed to the Agent,  the Board,  the Participants and the
Lenders in writing on or prior to the Closing Date,  neither  Obligor nor any of
its  Subsidiaries  is currently  operating or required to be operating under any
compliance order,  schedule,  decree or agreement,  any consent decree, order or
agreement,  and/or any corrective  action decree,  order or agreement  issued or
entered  into under any  Environmental  Law,  the  failure to comply  with which
could,  individually  or in the  aggregate,  reasonably  be  expected  to have a
Material Adverse Effect.

     Section  4.14.  Solvency.  After giving  effect to the Borrowing and to the
application of the proceeds therefrom,  each Obligor is and, upon the incurrence
of any Obligations by the Borrower on any date on which this  representation  is
made or deemed made, will be, Solvent.

     Section  4.15.  Disclosure.  No  representation  or warranty of any Obligor
contained in this Agreement,  any other Loan Document, the Application or in any
other  document,   certificate  or  written  statement,  or  any  other  written
information,  furnished to the Board, the Agent, the Lenders or the Participants
by or on  behalf  of  either  Obligor  or  any of its  Subsidiaries  for  use in
connection with the negotiation and closing of the transactions  contemplated by
this  Agreement  contains any untrue  statement of a material  fact or omits any
information necessary to make the statements therein not materially  misleading,
in  each  case,  as and  when  made or  furnished,  or in the  case of any  such
representations and warranties,  as any of them may be made from time to time in
accordance with this Agreement and the other Loan Documents.  There are no facts
known to any  Responsible  Officer of either  Obligor  (other than  matters of a
general  economic  nature)  that,  individually  or  in  the  aggregate,   could
reasonably be expected to have a Material Adverse Effect.

                                       56
<PAGE>

     Section  4.16.   Compliance  With  Laws.  Each  Obligor  and  each  of  its
Subsidiaries is in compliance with all laws,  statutes,  rules,  regulations and
orders  binding on or applicable to such Obligor,  its  Subsidiaries  and all of
their respective properties, except to the extent failure so to comply could not
(either  individually  or in the  aggregate)  reasonably  be  expected to have a
Material Adverse Effect.

     Section 4.17. Indebtedness; Off Balance Sheet Transactions.


     (a) Schedule 4.17 correctly sets forth the consolidated Indebtedness of the
Obligors and their Subsidiaries as of September 30, 2002.

     (b) Other than as disclosed in the Parent's or Borrower's  filings with the
SEC with reasonable  sufficiency and specificity (as contemplated in SEC Release
No. 33-8056  (January 22, 2002)),  there are no  transactions,  arrangements  or
other relationships between and/or among the Parent or any of its Affiliates (as
such term is described in Rule 405 under the Securities Act of 1933, as amended)
and any  unconsolidated  entity,  including  but not limited to, any  structured
finance,  special purpose or limited purpose entity, of the type contemplated in
SEC Release No. 33-8056.

     Section 4.18.  Insurance.  The  properties,  business and operations of the
Obligors and their Subsidiaries are insured with reputable  insurance  companies
reasonably  believed to be  financially  sound (none of which are  Affiliates of
either  Obligor) or by the United States of America in such  amounts,  with such
deductibles and covering such risks as are insured against  (including,  but not
limited to, war risk and third party  liability) and carried in accordance  with
applicable  law and  prudent  industry  practice  by major U.S.  commercial  air
carriers  similarly  situated with the Obligors and owning or operating  similar
properties,  aircraft and engines.

     Section 4.19.  Section 1110. The Collateral  Agent shall be entitled to the
benefits of Section  1110 of the  Bankruptcy  Code with  respect to the right to
repossess the Aircraft, Spare Engines and Pledged Spare Parts (as such terms are
defined in the Security Agreement), in each case to the extent first placed into
service  after  October 22,  1994,  and to enforce its other rights and remedies
with respect  thereto under the Security  Documents in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Borrower is debtor.

     Section  4.20.Absence  of  Labor  Disputes.  No  strikes,   boycotts,  work
stoppages  or labor  disputes  with  employees  of any of the  Obligors or their
Subsidiaries  exist or, to the  knowledge of the  Officers of any  Obligor,  are
imminent  or would  reasonably  be expected  to occur that would  reasonably  be
expected to have a Material Adverse Effect.

                                       57
<PAGE>

     Section 4.21. Gates and Slots.

     (a) Each Obligor and each of its  Subsidiaries  is in  compliance  with all
leases,  licenses or other agreements necessary in connection with such Person's
use, operation or occupancy of gates at airport terminals.

     (b)  Each  Obligor  and each of its  Subsidiaries  having  any  operational
authority  granted  under  49  U.S.C.  ss.  40103  and  14  C.F.R.  Sec.  ss.ss.
93.211-93.227  to  conduct   aircraft  landing  or  take-off   operations  (such
operational authority,  "Slots") maintains a system for monitoring and utilizing
such Slots in compliance  with the  regulations  governing Slot use and loss set
forth in 14 C.F.R. ss. 93.227, as amended from time to time.

     Section 4.22. Non-Guarantor Subsidiaries.  Except as otherwise described on
Schedule 4.22, the Subsidiaries listed on Schedule 4.22 hereto have no assets or
liabilities  and have  undertaken no operations  except in connection with their
organization.


                                    Article V

                                    Covenants

     To induce the other parties to enter into this  Agreement and to induce the
Participants to enter into their respective  Participations,  the Obligors agree
with each other party  hereto  that,  so long as any of the  Obligations  remain
outstanding:

     Section 5.1. Financial Statements and Other Reports

     (a) Each of the Obligors will  establish and maintain,  and will cause each
of its Subsidiaries to establish and maintain, in accordance with sound business
practices  and  applicable  law  and  rules  and   regulations   issued  by  any
Governmental  Authority  (i)  a  system  of  accounting,   which  shall  include
maintenance  of proper books and  records,  to permit  preparation  of financial
statements in conformity with GAAP and to provide reasonable assurances that (A)
transactions  are executed in accordance with  management's  general or specific
authorization;  (B) transactions are recorded as necessary to permit preparation
of financial  statements in conformity with GAAP and to maintain  accountability
for  assets;  (C)  access  to  assets  is  permitted  only  in  accordance  with
management's   general  or  specific   authorization;   and  (D)  the   recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate  action is taken with respect to any differences;  and
(ii)  disclosure  controls  and  procedures  designed  to ensure  that  material
information  relating  to such  Obligor  and its  Subsidiaries  is made known to
Responsible Officers of such Obligor in a timely manner.

     (b) The Obligors will deliver to the Agent, the Lenders,  the Participants,
the Board,  the Loan  Administrator  and the  Collateral  Agent (but only to the


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extent information is to be delivered pursuant to clauses (v), (xii) and, in the
case of information requested by the Collateral Agent, (xx) below):

     (i) (A) Quarterly Financials:  as soon as available and in any event within
two (2) days after the date on which such  company is  required to file its Form
10-Q under the  Exchange  Act (or would be so required if it were subject to the
periodic reporting obligations of Section 13 or 15 of the Exchange Act), (x) the
consolidated  balance sheets of each of the Borrower and Parent as at the end of
each  fiscal  quarter  and the  related  consolidated  statements  of income and
stockholders'   equity  of  each  such  company  for  such  fiscal  quarter  and
consolidated  cash flows of each such company for the period from the  beginning
of the then current Fiscal Year to the end of such fiscal quarter, setting forth
in  each  case  in  comparative   form  the   corresponding   figures  from  the
corresponding  periods  of the  previous  Fiscal  Year  and,  in the case of the
Parent,  the  corresponding  figures from the  quarterly  projections  delivered
pursuant  to clause  (viii)(B)  of this  Section  5.1(b) for such  quarter,  all
prepared in accordance  with GAAP and in reasonable  detail and certified by the
Chief Financial Officer or the Chief Executive Officer of such company that they
fairly present the  consolidated  financial  condition of such company as at the
dates  indicated  and the results of its  operations  and its cash flows for the
periods indicated,  and (y) a narrative report describing the operations of each
such company in the form prepared for presentation to senior management for such
fiscal quarter and for the period from the beginning of then current Fiscal Year
to the end of such fiscal quarter; provided that delivery of the Form 10-Q filed
by the Parent with the SEC for such fiscal  quarter,  if any, shall be deemed to
satisfy all of the requirements of this Section  5.1(b)(i)(A)with respect to the
Parent;

     (B) Monthly Reporting: as soon as available and in any event within 30 days
after the end of each calendar month,  the  consolidated  balance sheets of each
Obligor as at the end of such month and the related  consolidated  statements of
income and  consolidated  cash flows of such Obligor for such calendar month and
for the period from the beginning of the then current  Fiscal Year to the end of
such month,  setting forth in each case with respect to the year-to-date period,
in comparative form, the corresponding figures from the corresponding periods of
the previous Fiscal Year, together with, in the case of the Parent, a unit-basis
income statement (with per-ASM revenues and expenses (line by line)),  variances
from the monthly  operating plan delivered  pursuant to clause (viii)(B) of this
Section  5.1(b) for such month for each  income  statement  line item;  all such
financial  statements  to be in the  form  prepared  for the  management  of the
Obligors and certified by the Chief Financial Officer or Chief Executive Officer
of such company as fairly presenting, in all material respects, the consolidated
financial condition of such Obligor as at the dates indicated and the results of
its operations and its cash flows for the periods  indicated  (subject to normal
year-end audit adjustments);

     (ii) Year-End Financials:  as soon as available and in any event within two
(2) days after the date on which such  company is required to file its Form 10-K


                                       59
<PAGE>

under  the  Exchange  Act (or would be so  required  if it were  subject  to the
periodic reporting obligations of Section 13 or 15 of the Exchange Act), (A) the
consolidated balance sheets of each of the Borrower and the Parent as at the end
of each  Fiscal  Year and the  related  consolidated  statements  of income  and
stockholders'  equity of each such company for such Fiscal Year and consolidated
cash flows of each such company for such Fiscal Year, setting forth in each case
in comparative form the corresponding  figures for the previous Fiscal Year and,
in the case of the Parent,  the corresponding  figures from the annual financial
plan delivered  pursuant to Section  5.1(b)(viii) for the Fiscal Year covered by
such financial  statements of the Parent, all in reasonable detail and certified
by the Chief Financial  Officer or the Chief  Executive  Officer of such Obligor
that they fairly present the consolidated financial condition of such Obligor as
at the date  indicated and the results of its  operations and its cash flows for
the periods indicated,  (B) a narrative report describing the operations of such
company in the form  prepared for  presentation  to senior  management  for such
Fiscal Year, and (C) an accountant's  report on the financial  statements of the
Parent of Ernst & Young LLP or other independent certified public accountants of
recognized  national standing  selected by such company,  which report (1) shall
express no doubts  about the  ability of such  company  to  continue  as a going
concern and shall be otherwise unqualified in all respects, (2) shall state that
in making its  examination  no  knowledge of any Default or Event of Default was
obtained  or, if any such  Default or Event of Default  exists,  shall state the
nature and  status of such  Default  or Event of  Default  (to the  extent  such
statement is not  prohibited by, or  inconsistent  with,  applicable  accounting
literature),  and (3) shall state that such  consolidated  financial  statements
fairly present in all material respects the consolidated  financial  position of
such company as at the dates  indicated and the results of their  operations and
their cash flows for the periods  indicated in conformity with GAAP applied on a
basis  consistent with prior years and that the examination by such  accountants
in  connection  with such  consolidated  financial  statements  has been made in
accordance  with  generally  accepted  auditing  standards;  provided,  that (x)
references in such report to changes in GAAP,  changes in accounting  standards,
highlighting  contents of  footnotes,  limitations  in the scope of the audit or
exclusions  from the audit  information  not  required by GAAP that are, in each
case,  customary in industry  practice and not prejudicial to the opinion stated
therein shall not be deemed to be "qualifications" for the purpose of clause (C)
of this  subsection  5.1(b)(ii),  and (y) delivery of the Form 10-K filed by the
Parent  with the SEC for such  Fiscal  Year,  if any,  and which  satisfies  the
requirements  of  clauses  (C)(1) and (3) above  shall be deemed to satisfy  the
requirements of such clauses of this  subsection  5.1(b)(ii) with respect to the
Parent;

     (iii)  Officer's  Certificates:  together  with each  delivery of financial
statements  of each Obligor  pursuant to  subsections  5.1(b)(i)  and (ii) above
after the Closing Date, (A) an Officer's  Certificate from a Responsible Officer
of such Obligor (1) stating the signer has reviewed the terms of this  Agreement
and has made,  or caused to be made  under his or her  supervision,  a review in
reasonable  detail of the  transactions and condition of such Obligor during the

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accounting period covered by such financial  statements and that such review has
not disclosed the existence during or at the end of such accounting  period, and
that the signer does not have  knowledge of the existence as at the date of such
Officer's  Certificate,  of any condition or event that  constitutes an Event of
Default or  Default,  or, if any such  condition  or event so existed or exists,
specifying  the nature and period of  existence  thereof  and what  action  such
Obligor has taken,  is taking and  proposes to take with  respect  thereto,  (2)
demonstrating  in  reasonable  detail  compliance  (or  noncompliance)  with the
restrictions  contained  in  Section  6.4(c) for the  period  specified  in such
Section  that ends on the last day of, and with the  restrictions  contained  in
Sections 6.3,  6.4(a) and 6.4(b) as of the end of, the applicable  quarterly and
annual accounting periods specified in such Sections and (3) stating whether any
change in GAAP or in the  application  thereof  has  occurred  since the date of
delivery of the most recent financial statements under subsections 5.1(b)(i) and
(ii),  and (B) with respect to the financial  statements  delivered  pursuant to
clauses (i)(A) and (ii) above of this Section 5.1(b),  an Officer's  Certificate
from a Responsible Officer of such Obligor stating that there are no significant
deficiencies in the design or operation of internal controls of such Obligor and
its Subsidiaries  which could adversely affect such Obligor's ability to record,
process,  summarize  and report  financial  data,  or, if any such  deficiencies
exist,  describing  them and what  action such  Obligor has taken,  is taking or
proposes to take with respect thereto;

     (iv)  SEC  Filings  and  Press  Releases:   promptly  upon  their  becoming
available,  copies of (A) all financial statements,  reports,  notices and proxy
statements sent or made available generally by the Borrower or the Parent to its
security  holders,  (B) all regular and  periodic  reports and all  registration
statements and prospectuses, if any, filed by the Parent, the Borrower or any of
their  Subsidiaries  with  any  securities  exchange  or  with  the  SEC  or any
Governmental  Authority or private  regulatory  authority,  and (C) all material
press releases and other statements made available  generally by the Parent, the
Borrower  or any  of  their  Subsidiaries,  to the  public  concerning  material
developments in the business of the Obligors or any of their Subsidiaries;

     (v) Events of Default,  etc.:  promptly upon any Officer of either  Obligor
obtaining  knowledge (A) of any condition or event that  constitutes an Event of
Default or Default, (B) that any creditor has given any notice to either Obligor
or any its  Subsidiaries  or taken any other  action  with  respect to a claimed
default or event or condition of the type referred to in Section 7.1(b),  (C) of
any  condition  or event that would be  required  to be  disclosed  in a current
report  filed by the  Borrower  or the  Parent  with the SEC on Form 8-K if such
Person were  required to file such reports  under the  Exchange  Act, (D) of the
occurrence of any event or change that has had, or would  reasonably be expected
to have,  a  Material  Adverse  Effect,  or (E) of any  condition  or event that
constitutes  a default or an event of default (or any  condition  with which the
passing of time or the giving of notice or both would,  unless  cured or waived,
become a default or event of default) under any Concession or any other material
Contractual  Obligation,  an  Officer's  Certificate  specifying  the nature and
period of  existence  of such  Default,  Event of Default,  condition,  event or

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<PAGE>

change  (including  with  respect to notices  under  clause (A) of this  Section
5.1(b)(v),  specific  references to all provisions of the Loan  Documents  under
which the Default or Event of Default has  occurred)  or  specifying  the notice
given or action taken by any such Person and the nature of such claimed Event of
Default,  Default, default, event or condition, and what action the Borrower has
taken, is taking and proposes to take with respect thereto;

     (vi) Litigation or Other Proceedings: to the extent not otherwise disclosed
pursuant to this Section 5.1(b), (A) promptly upon any Officer of either Obligor
or any of its Subsidiaries obtaining knowledge of

     (x) the institution of, or threat of, any action, suit, proceeding (whether
administrative,  judicial  or  otherwise),  arbitration,  governmental  or other
public agency or  quasi-governmental  investigation  against or affecting either
Obligor or any of its  Subsidiaries  or any property of either Obligor or any of
its Subsidiaries (collectively, "Proceedings"), or

     (y) any material development in any Proceeding that, in any case:

     (1) if adversely determined could reasonably be expected to have a Material
Adverse Effect;

     (2) seeks to enjoin or otherwise prevent the consummation of, or to recover
any  damages  or  obtain  relief as a result  of the  transactions  contemplated
hereby;

     (3)  relates to  financial  or other  operational  condition  or results of
Borrower or the Parent; or

     (4) could cause any of the property comprising the Collateral to be subject
to any restriction on ownership, occupancy, use or transferability;

written notice thereof together with such other information as may be reasonably
available to the Obligors to enable each Lender,  each  Participant,  the Agent,
the Loan  Administrator and the Board, and their respective  counsel to evaluate
such matters, and (B) no later than the date the annual financial statements are
delivered  under  Section  5.1(b)(ii)  for each Fiscal  Year,  a schedule of all
Proceedings  involving an alleged  liability of, or claims against or affecting,
either  Obligor  or any of its  Subsidiaries  the  uninsured  portion  of  which
(treating  as  uninsured  deductibles  and any  amounts  which  are  insured  by
Affiliates  or covered by  self-insurance)  is equal to or greater than $500,000
and promptly  after request by the Agent,  the Loan  Administrator  or the Board
such other  information  as may be reasonably  requested by the Agent,  the Loan
Administrator  or the Board to enable the Agent,  the Loan  Administrator or the
Board and their respective counsel to evaluate any of such Proceedings;

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<PAGE>

     (vii)  ERISA  Reports:  promptly  after the  receipt by the  Borrower  of a
request therefor by the Agent, the Loan Administrator,  the Board, any Lender or
any Participant,  the Borrower shall provide the Agent, the Loan  Administrator,
the  Board,  such  Lender  and such  Participant  copies of any annual and other
reports  (including  Schedule B thereto)  with respect to a Plan filed by either
Obligor or any ERISA Affiliate with the United States  Department of Labor,  the
IRS or the Pension Benefit Guaranty Corporation;

     (viii)  Financial  Plans  and  Projections:   (A)  annually,   as  soon  as
practicable  after  preparation  thereof by the Parent in the ordinary course of
business  but in no event  later  than March 1 of each  year,  the Parent  shall
provide  the Agent,  the Loan  Administrator,  the Board,  each  Lender and each
Participant  copies of the Parent's  annual  financial  and  operating  plan and
projections  for such  year,  and (B) as soon as  available  but in any event at
least ten (10) days prior to the beginning of each fiscal quarter of each Fiscal
Year,  the Parent shall provide the Agent,  the Loan  Administrator,  the Board,
each Lender and each Participant  copies of the Parent's financial and operating
plan and projections for such quarter,  and for each month in such quarter,  all
of which plans and  projections  shall be in  sufficient  detail to facilitate a
determination  of  the  Borrower's  budgeted  contribution  to  such  plans  and
projections;

     (ix)  Environmental  Audits and Reports:  as soon as practicable  following
receipt thereof,  the Borrower shall provide the Agent, the Loan  Administrator,
the Board, each Lender and each Participant  copies of all environmental  audits
and  reports,  whether  prepared  by  personnel  of an  Obligor  or  any  of its
Subsidiaries  or  by  independent  consultants,   with  respect  to  significant
environmental  matters at any Facility or which relate to an Environmental Claim
which could be expected to have a Material Adverse Effect;

     (x) Ratings  Change;  Liquidity  Certificates:  (A) within one Business Day
after any public  release by S&P or Moody's  raising,  lowering,  suspending  or
placing under review for possible  downgrade or suspension  its credit rating or
changing  its outlook on any debt  obligations  of either  Obligor or any of its
Subsidiaries,  and (B) at such additional  times as the Borrower may elect,  the
Borrower shall provide the Agent, the Board,  each Lender and each Participant a
certificate  setting  forth the credit  ratings on the debt  obligations  of the
Obligors and their Subsidiaries (each, a "Liquidity Certificate");

     (xi) Reserved:

     (xii) Insurance/Condemnation Proceeds: in addition to any similar reporting
obligations under the Security Documents but without the duplication of any such
obligation,  promptly notify the Agent, the Collateral Agent, each Lender,  each
Participant,  the Loan  Administrator  and the Board  upon an  Officer of either
Obligor  or  any of its  Subsidiaries  obtaining  actual  knowledge  of (A)  the
occurrence  of  an  event  of  loss  or  material  damage  to,  or  any  taking,
condemnation  or requisition by any  Governmental  Authority of, any property of
either  Obligor  or  any of its  Subsidiaries  having  fair  market  value  or a


                                       63
<PAGE>

replacement value in excess of $2,500,000  whether or not such loss or damage is
expected to result in receipt of  insurance or  condemnation  proceeds or of any
other event of loss or damage that the Borrower  reasonably expects to result in
proceeds  reasonably  estimated by the Borrower to exceed $2,500,000 and (B) the
receipt of insurance proceeds or condemnation  proceeds from an event of loss or
material  damage  to,  or  any  taking,   condemnation  or  requisition  by  any
Governmental  Authority  of,  any  property  of  either  Obligor  or  any of its
Subsidiaries;

     (xiii) Future Issuance and Asset Sales:  as soon as reasonably  practicable
but in no event less than five (5) days prior to the Borrower, the Parent or any
of their  Subsidiaries  consummating  any Future  Issuance  or Asset  Sale,  the
Borrower shall (A) notify the Agent,  each Lender,  each  Participant,  the Loan
Administrator  and the Board of such  event and what  action the  Borrower,  the
Parent or such Subsidiary has taken, is taking and proposes to take with respect
thereto,  including the use of proceeds,  and (B) in  connection  with each such
Asset  Sale,  deliver to the Agent,  each  Lender,  each  Participant,  the Loan
Administrator and the Board an Officer's  Certificate from a Responsible Officer
of the Borrower and the Parent  certifying  that the  provisions of Section 6.10
will be satisfied;

     (xiv) Plan Audits and  Liabilities:  promptly  after either  Obligor or any
ERISA  Affiliate  (A)  contacts  the IRS for the purpose of  participating  in a
closing  agreement or any  voluntary  resolution  program with respect to a Plan
which could  reasonably be expected to have a Material  Adverse  Effect,  or (B)
knows or has  reason to know that any event with  respect  to any Plan  occurred
that could reasonably be expected to have a Material  Adverse Effect,  notice of
such contact or occurrence of such event;

     (xv) Funding  Changes and New Plan  Benefits:  promptly  after a change,  a
notification  of any material  increases in the benefits,  or material change in
funding method,  with respect to which either Obligor or any of its Subsidiaries
may have any  liability,  or the  establishment  of any  material  new Plan with
respect  to  which  either  Obligor  or any of its  Subsidiaries  may  have  any
liability  or the  commencement  of  contributions  to any Plan to which  either
Obligor or any ERISA  Affiliate was not previously  contributing,  except to the
extent  that such an event would not  reasonably  be expected to have a Material
Adverse Effect;

     (xvi) Claims and  Proceedings:  promptly after receipt of written notice of
commencement  thereof,  notification  of all (A) claims made by  participants or
beneficiaries  with  respect to any Plan,  and (B) actions,  suits,  proceedings
before any court or governmental department,  commission,  board, bureau, agency
or instrumentality,  domestic or foreign,  affecting either Obligor or any ERISA
Affiliate with respect to any Plan,  except those which,  in the  aggregate,  if
adversely  determined,  could not  reasonably  be  expected  to have a  Material
Adverse Effect;

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<PAGE>

     (xvii) ERISA Events:  promptly after the occurrence of any ERISA Event that
would reasonably be expected to have a Material Adverse Effect, notice thereof;

     (xviii) Labor Disputes:  promptly upon any Officer of either Obligor or any
of its  Subsidiaries  obtaining  knowledge of the  institution  or threat of any
strike, boycott, work stoppage or labor dispute relating to an Obligor or any of
its  Subsidiaries  that would  reasonably be expected to have a Material Adverse
Effect, notice thereof;

     (xix) Collateral Value Certificates:  (A) no later than the date upon which
the annual financial  statements are delivered under clause (ii) of this Section
5.1(b)  for the  Fiscal  Year  ended  December  31,  2002,  a  Collateral  Value
Certificate  certifying the  Collateral  Value as of September 30, 2002 based on
the Appraisal  Report  delivered  under Section  5.14(a)(i)(A)  and reflecting a
value for the Eligible  Receivables  that is no less than the value reflected on
the Collateral Value Certificate  delivered  pursuant to Section  3.1(a)(ix) and
(B) no later than the date upon which the  quarterly  financial  statements  are
delivered  under clause (i)(A) of this Section 5.1(b) for each fiscal quarter of
each Fiscal  Year and the date upon which the annual  financial  statements  are
delivered  under  clause  (ii) of this  Section  5.1(b)  for  each  Fiscal  Year
beginning  December  31, 2003, a Collateral  Value  Certificate  certifying  the
Collateral  Value,  in each  case as of a date no  earlier  than  the end of the
fiscal  quarter  or the  Fiscal  Year with  respect  to which the  corresponding
financial statements  referenced above in this clause (xix) are being delivered;
and

     (xx) Other Information:  with reasonable promptness, such other information
and data with respect to the Obligors or any of their  Subsidiaries as from time
to time may be reasonably  requested by the Agent,  the  Collateral  Agent,  any
Lender, any Participant, the Board or the Loan Administrator.

     Section  5.2.  Corporate  Existence.  Except as  permitted  under  Sections
6.5(a)(i) and 6.9, each Obligor will do or cause to be done all things necessary
to preserve and keep in full force and effect its  corporate  existence  and the
corporate, partnership or other existence of each Subsidiary of such Obligor and
the permits,  licenses,  rights,  (charter and statutory) and franchises of such
Obligor and its Subsidiaries;  provided, that the Obligors shall not be required
to preserve any right,  franchise,  or the  existence of any  Subsidiary  if the
maintenance or preservation thereof is no longer desirable in the conduct of the
business  of  such  Obligor  and  its  Subsidiaries  taken  as a  whole  and the
non-preservation  thereof  could not  reasonably  be expected to have a Material
Adverse Effect.

     Section 5.3. Payment of Taxes and Claims; Tax Consolidation.

     (a) The  Obligors  will,  and will  cause  their  Subsidiaries  to,  pay or
discharge  or cause to be paid or  discharged,  before  the  same  shall  become
delinquent,  (i) all  taxes,  assessments  and  governmental  charges  levied or
imposed  upon the  Obligors  or any of their  Subsidiaries  or upon the  income,

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<PAGE>

profits or property of the Obligors or any of their  Subsidiaries,  and (ii) all
lawful claims for labor,  materials and supplies  that, if unpaid,  might by law
become a Lien on the  property of either  Obligor or any of their  Subsidiaries;
provided,  however, that no such Person shall be required to pay or discharge or
cause to be paid or  discharged  any such tax,  assessment,  charge or claim the
amount,  applicability  or validity of which is being contested in good faith by
appropriate  proceedings and with respect to which an adequate  reserve has been
established by it to the extent required by GAAP.

     (b) The Obligors  will not,  and will not permit any of their  Subsidiaries
to, file or consent to the filing of any consolidated income tax return with any
Person (other than the Borrower,  the Parent and any  Subsidiary of the Borrower
or the Parent).

     Section 5.4. Maintenance of Properties;  Insurance.  (a) The Obligors will,
and will cause each of their  Subsidiaries  to,  maintain all properties used or
useful in the conduct of their  business in good  condition,  repair and working
order and supply  such  properties  with all  necessary  equipment  and make all
necessary repairs, renewals, replacements, betterments and improvements thereto,
all as in the  judgment of the  Obligors  may be  necessary so that the business
carried on in connection therewith may be properly and advantageously  conducted
at all times; provided,  however, that nothing in this Section shall prevent the
Borrower or any of their  Subsidiaries  from  discontinuing  the  operation  and
maintenance of any such properties if such  discontinuance is, in the good faith
judgment of the Obligors,  desirable in the conduct of their  business and could
not  reasonably be expected to have a Material  Adverse  Effect,  but subject in
each case to all applicable provisions of the Security Documents.

     (b) The Obligors will insure and keep insured, and will cause each of their
Subsidiaries  to insure and keep insured,  with  reputable  insurance  companies
reasonably  believed  to be  financially  sound that are not  Affiliates  of the
Borrower,  the Parent or any of their Subsidiaries,  their properties,  business
and operations,  in such amounts,  with such deductibles and covering such risks
as are insured against (including,  but not limited to, war risk and third party
liability) and carried in accordance  with  applicable law and prudent  industry
practice by major U.S.  commercial  air  carriers  similarly  situated  with the
Obligors  and owning or  operating  similar  properties,  aircraft  and engines,
including  such  insurance  coverage as is required to be  maintained  under the
Security  Documents,  and  providing  for not less than  thirty (30) days' prior
notice to the Agent, the Board and the Collateral Agent of termination, lapse or
cancellation of such insurance.

     Section  5.5.   Inspection.   The  Obligors  will,  and  will  cause  their
Subsidiaries to, permit any authorized  representatives designated by the Agent,
any Lender,  any Participant,  the Loan  Administrator or the Board to visit and
inspect any of the  properties  of the  Obligors  or any of their  Subsidiaries,
including  their financial and accounting  records,  and to make copies and take
extracts therefrom, and to discuss their affairs, finances and accounts with its
and  their  officers  and  independent  public  accountants,  at the  Borrower's
expense,  during  normal  business  hours  and as  often  as  may be  reasonably
requested;  provided,  that so long as no Default or Event of Default shall have

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occurred and be continuing,  such inspection shall be upon reasonable notice and
at reasonable times, and shall not be disruptive to the business of the Obligors
and their Subsidiaries, as reasonably determined by the Borrower.

     Section 5.6.  Compliance  With Laws, Etc. The Obligors will, and will cause
each of  their  Subsidiaries  to,  comply  in all  material  respects  with  all
applicable  material  statutes,  rules,  regulations,  orders,  restrictions and
Governmental  Authorizations of any applicable Governmental Authority, or of any
department,   commission,   board,  regulatory  authority,  bureau,  agency  and
instrumentality of the foregoing,  in respect of the conduct of their respective
businesses and the ownership of their respective properties,  except such as are
being contested in good faith by appropriate proceedings. The Borrower shall not
conduct  any  Hazardous  Materials  Activity  at any  Facility  or at any  other
location in a manner that does not materially  comply with  Environmental  Laws.
The Obligors and their  Subsidiaries  shall use reasonable best efforts to cause
all other Persons  operating or occupying any of their properties to comply with
Environmental Laws.

     Section 5.7. Hazardous Materials.


     (a) To the extent the following are required by Environmental Laws, each of
the Borrower and the Parent will  conduct any and all  investigations,  studies,
sampling and testing and will take, and will cause each of its  Subsidiaries  to
take,  any and all necessary  remedial  action in connection  with the presence,
storage, use, disposal, transportation or Release of any Hazardous Materials for

                                       67
<PAGE>

which the Borrower is, or could be,  liable.  The foregoing  shall not apply if,
and  only  to  the  extent  that  (i)  the  Borrower's,  the  Parent's  or  such
Subsidiary's liability for such presence, storage, use, disposal, transportation
or Release of any  Hazardous  Materials is being  contested in good faith and by
appropriate proceedings diligently conducted by the Borrower, the Parent or such
Subsidiary,  (ii) such remedial action is taken by other Persons responsible for
such remedial action through an indemnification of the Borrower or the Parent or
(iii) such non-compliance  would not in any case or in the aggregate  reasonably
be expected to have a Material  Adverse Effect.  In the event the Borrower,  the
Parent or any of their Subsidiaries  undertakes any such  investigation,  study,
sampling,  testing or remedial  action with respect to any Hazardous  Materials,
the  Borrower,  the Parent or such  Subsidiary  will conduct and  complete  such
action in compliance with all applicable  Environmental  Laws, and in accordance
with the  policies,  orders  and  directives  of all  federal,  state  and local
Governmental Authorities except for such non-compliance as would not in any case
or in the aggregate reasonably be expected to have a Material Adverse Effect.

     (b) At the request of the Requisite Lenders or the Board from time to time,
the  Borrower  will  provide to the  Lenders  within  sixty (60) days after such
request, at the expense of the Borrower, an environmental site assessment report
for any of its, the Parent's or their Subsidiaries' properties described in such
request,  prepared by an environmental  consulting firm reasonably acceptable to
the Agent,  indicating  the presence or absence of Hazardous  Materials  and the
estimated cost of any compliance,  removal or remedial action in connection with
any Hazardous  Materials on such properties;  without limiting the generality of
the foregoing,  if the Agent  determines at any time that a material risk exists
that any such report will not be  provided  in the time  referred to above,  the
Agent may retain an environmental  consulting firm to prepare such report at the
expense of the  Borrower,  and each of the Obligors  hereby grants and agrees to
cause any Subsidiary that owns property  described in such a request to grant at
the time of such request to the Agent, the Lenders, the Board, such firm and any
agents or representatives thereof an irrevocable  non-exclusive license, subject
to the rights of tenants, to enter into their respective properties to undertake
such an assessment.

     Section 5.8. Contractual  Obligations.  The Borrower,  the Parent and their
Subsidiaries  will  perform,   observe  or  fulfill  all  material  obligations,
covenants and  conditions  contained in their material  Contractual  Obligations
(including,  but not limited to, the Concessions).  The Obligors shall use their
best efforts to cause the "Vendor  Concessions"  described on Schedule 4.9(d) to
be documented in written agreements promptly and in any event within thirty (30)
days  following  the Closing  Date,  and shall  deliver  copies of such  written
agreements to the Board.

     Section 5.9.  Employee Benefit Plans.  The Obligors and their  Subsidiaries
shall take such actions as are  reasonably  practicable to ensure that the Plans
with respect to which they may have any  liability  are  operated in  compliance
with all  applicable  laws  except to the extent that the failure to do so could
not reasonably be expected to have a Material  Adverse  Effect.  Neither Obligor
nor any of their  Subsidiaries  shall amend,  adopt or terminate any Plan unless
such action would not reasonably be expected to have a Material Adverse Effect.

     Section  5.10.  FAA Matters;  Citizenship.  The Borrower  will at all times
hereunder  be an  "air  carrier"  within  the  meaning  of the  Act  and  hold a
certificate under 49 U.S.C. Section 41102(a)(1) as currently in effect or as may
be amended or recodified  from time to time. The Borrower and each Subsidiary of
either  Obligor  engaged in  operations  as an "air  carrier"  will at all times
hereunder  be  a  United  States  Citizen  holding  an  air  carrier   operating
certificate  issued pursuant to Chapter 447 of Title 49 for aircraft  capable of
carrying 10 or more  individuals or 6,000 pounds or more of cargo.  Each Obligor
and each of their Subsidiaries will possess and maintain all necessary consents,
franchises,  licenses,  permits,  rights and  concessions and consents which are
material  to the  operation  of the  routes  flown by it and the  conduct of its
business and operations from time to time.

     Section 5.11. Board Guarantee.  Each Obligor and each of their Subsidiaries
shall comply with all of the terms, requirements and conditions applicable to it
under the Act and the Regulations,  or as may otherwise be imposed by, or agreed
with,  the Board in  connection  with the issuance of the Board  Guarantee,  and
shall promptly  furnish to the Board, the Loan  Administrator  and the Agent all
such information as may be requested by the Board, the Loan Administrator or the
Agent in  connection  with the Board  Guarantee.  Each Obligor and each of their
Subsidiaries  shall execute such  documents and take such actions in furtherance
of its  obligations  under the Act and the  Regulations  as the Board,  the Loan
Administrator or the Agent may request.

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<PAGE>

     Section 5.12.  Lower-Tier Covered Transaction.  The Borrower agrees that in
the event that it enters into any "lower-tier covered transaction" (as such term
is defined in 31 C.F.R. Section 19.110, as amended or modified from time to time
and not excepted  therefrom by 31 C.F.R.  Section  19.200(c))  in respect of the
transactions  contemplated  hereunder,  it  will  include  the  clause  entitled
"Certificate  Regarding  Debarment,  Suspension,   Ineligibility  and  Voluntary
Exclusion - Lower Tier Covered  Transactions" as set forth in Appendix B to Part
19 of title 31 of the C.F.R. in such "lower-tier covered transaction",  and that
it will obtain a  certification  from the other Person or Persons  party to such
"lower-tier covered  transaction" to the effect that each such other Person (and
each "principal"  thereof, as such term is defined in 31 C.F.R.  Section 19.105,
as amended or modified from time to time) is not presently debarred,  suspended,
proposed for  debarment,  declared  ineligible,  or  voluntarily  excluded  from
participation  in such  transaction by any Federal  department or agency,  or an
explanation  why such  Person is unable to so  certify.  Further,  the  Borrower
agrees that it will not enter into a  "lower-tier  covered  transaction"  with a
Person who has been proposed for debarment under 48 C.F.R. Section 9.4, debarred
or  suspended  unless  granted  an  exception  for  such   "lower-tier   covered
transaction" pursuant to 31 C.F.R. Section 19.215.

     Section 5.13.  Comptroller General Audits and Reviews. Each of the Obligors
agrees to permit,  and to  cooperate  in the conduct of, such audits and reviews
during the period the Loan is outstanding and for three years thereafter, as the
Board may deem appropriate, by an independent auditor acceptable to the Board or
the United States Comptroller  General.  To the extent requested by the Board or
the Loan  Administrator,  the Obligors  shall provide access to the officers and
employees,  books,  records,  accounts,  documents,  correspondence,  and  other
information of the Obligors, their Subsidiaries, Affiliates, financial advisors,
consultants and independent  certified  accountants that the Board or the United
States Comptroller General considers necessary.

     Section 5.14. Appraisal Reports; Additional Collateral.

     (a) The Borrower  shall obtain one or more Appraisal  Reports  establishing
the value of the Appraised  Collateral  as of (i)(A)  September 30, 2002 and (B)
the last day of each Fiscal Year beginning December 31, 2003, (ii) the date upon
which any additional property or assets that constitutes Appraised Collateral is
pledged as Collateral to the  Collateral  Agent to secure the  Obligations,  but
only with  respect to such  additional  Collateral  and (iii) a date which is no
later  than 60 days  after  the  Board (or if the  Board  Guarantee  shall  have
terminated,  the Requisite  Lenders) has requested that the Borrowers  obtain an
Appraisal Report; provided,  however, that the Borrower shall not be required to
obtain an Appraisal Report,  other than (x) pursuant to subsections (i) and (ii)
hereof,  or (y) if requested  by the Board under  clause (iii) hereof  following
delivery of a Collateral Value  Certificate that discloses that the value of the
Collateral  has or may have been, or may be materially  and adversely  affected,
more than once per Fiscal Year (it being  understood that the obligation  herein
of the Borrower to periodically obtain Appraisal Reports shall be in addition to
any rights or obligations under the Security Agreement).  Such Appraisal Reports
may be based on desktop  appraisals  unless the Board (or if the Board Guarantee
shall have  terminated,  the Requisite  Lenders)  shall have  requested  that an
Appraisal Report be based on physical inspection.

                                       69
<PAGE>

     (b) The Borrower shall maintain the value of the Collateral. In furtherance
thereof,  if at any  time  after  December  31,  2002  (x)  the  then  aggregate
Collateral  Value  shall be less than (y) an amount  equal to (i) the  aggregate
Collateral  Value as of September 30, 2002 (as reflected in the Collateral Value
Certificate  delivered  pursuant  to  Section  5.1(b)(xix)(A)),   less  (ii)  an
aggregate amount equal to the amounts  previously  prepaid from Excess Cash Flow
pursuant to this  paragraph  and  amounts  prepaid  pursuant to Section  2.6(c),
including with respect to assets  constituting  Collateral (any difference under
clause (A) and/or the difference between (x) and (y), the "Value Differential"),
the Obligors  shall  promptly do one of the following to the extent (but only to
the extent) necessary to eliminate such Value Differential:  (i) prepay the Loan
from the Parent's  Excess Cash Flow for the fiscal quarter during which or as of
the end of which the Value  Differential is established,  in accordance with the
provisions of Section 2.5 hereof,  (ii) pledge pursuant to a Security  Agreement
Supplement  delivered  to the  Collateral  Agent,  and  subject to the terms and
conditions of the Security Agreement,  additional Eligible Collateral  available
to be pledged to the Collateral  Agent,  or (iii) prepay the Loan as provided in
clause  (i)  above  and  pledge  pursuant  to a  Security  Agreement  Supplement
delivered to the  Collateral  Agent,  and subject to the terms and conditions of
the Security Agreement,  additional Eligible Collateral;  provided,  that if the
Parent's  Excess Cash Flow for such fiscal  quarter,  together with all Eligible
Collateral  that is  available  to be  pledged  to the  Collateral  Agent is not
sufficient to eliminate such Value Differential,  the Obligors shall continue to
prepay the Loan from the Parent's  Excess Cash Flow for each  subsequent  fiscal
quarter and pledge all additional  Eligible  Collateral as it becomes  available
until the Value  Differential no longer exists (it being  understood that assets
subject to a Lien permitted under Section 6.1 other than a Permitted Encumbrance
are not available to be pledged to the Collateral Agent), and provided, further,
that if any  cash  which  is used to  purchase  Aircraft  Related  Equipment  is
deducted from  Consolidated  EBITDAR in computing the amount of Excess Cash Flow
for any  fiscal  quarter  during  the  existence  of a Value  Differential,  the
Aircraft  Related  Equipment  purchased  with such cash  shall be pledged to the
Collateral Agent pursuant to clause (ii) above.

     (c) If additional  Eligible  Collateral is being pledged in accordance with
Section 5.14(b),  such additional Eligible Collateral shall be free and clear of
any Liens and the Borrower shall execute and deliver to the Collateral Agent the
applicable Security Agreement Supplements and take all other action necessary or
desirable  to cause the Liens  created  thereby to be perfected  first  priority
Liens protected under applicable law, shall furnish  favorable legal opinions to
the  Collateral  Agent with  respect  to such  additional  Eligible  Collateral,
including the perfection and priority of the Collateral Agent's Lien thereon and
evidence of applicable  filings to the Loan  Administrator,  and shall otherwise
comply with the  provisions of the Security  Agreement that apply to a pledge of
such Collateral.

     (d) In connection  with each  prepayment  or pledge of additional  Eligible
Collateral  pursuant to Section 5.14(b) above, the Borrower shall deliver to the
Collateral  Agent, the Loan  Administrator and the Board either (i) a Collateral
Value Certificate  which  establishes that the applicable Value  Differential no
longer exists, or (ii) a certificate from a Responsible  Officer of the Borrower
that  certifies (A) the amount of Excess Cash Flow for the most  recently  ended


                                       70
<PAGE>

fiscal  quarter,  and (B) that the  Borrower  has  pledged  pursuant  to Section
5.14(b) all available Eligible Collateral.

     Section 5.15.  Additional  Subsidiaries.  With reasonable promptness and in
any event within 30 days  following the formation or acquisition of a Subsidiary
by either  Obligor or upon the  commencement  of  operations  by any  Subsidiary
listed  on  Schedule  4.22  (other  than  Washington   Assurance  Limited),   as
applicable,  the Obligors (a) shall provide the Agent,  the Loan  Administrator,
the Board and each Lender the name, corporate structure and allocation of Voting
Stock of such  Subsidiary  and shall  supplement  Schedule 4.1 with all relevant
information  with respect to any such new  Subsidiary,  and (b) shall (i) (A) in
the case of any such  Subsidiary  (other than any Subsidiary to which clause (B)
below  applies),  cause such  Subsidiary to execute and deliver to the Agent and
the Board a Subsidiary Guarantee in the form of Exhibit I dated no later than 30
days  following  such  formation or  acquisition  or upon such  commencement  of
operations,  as applicable, or (B) in the case of any foreign Subsidiary that is
a controlled  foreign  corporation,  if  compliance  with clause (A) above could
increase  its  current or future  investment  in United  States  property  under
Section 956 of the Internal Revenue Code and the regulations thereunder, deliver
to the Agent and the Board a pledge of 65% of such Subsidiary's  stock to secure
payment of the Obligations  dated no later than 30 days following such formation
or acquisition or upon such commencement of operations, as applicable,  and (ii)
deliver to the Agent and the Board (A)  documents  of the types  referred  to in
Section  3.1(a)(xi) with respect to such Subsidiary and (B) a certificate signed
by the Secretary or Assistant  Secretary of such Subsidiary of the type referred
to in Section 3.1(a)(xii).

     Section 5.16.  Chief  Executive  Officer.  Subject to  compliance  with the
fiduciary duties of the directors of the Parent and the Borrower, the Parent and
the Borrower  shall take all reasonable  action to cause J. George  Mikelsons to
remain  their chief  executive  officer for at least three years  following  the
Closing Date.

     Section 5.17. Further Assurances. At any time or from time to time upon the
request of the Board, any Lender,  any Participant  (with respect to Obligations
owing directly to it hereunder), the Loan Administrator, the Collateral Agent or
the Agent,  the  Obligors  will,  and will cause their  Subsidiaries  to, at the
Borrower's  expense,  promptly  execute,  acknowledge  and deliver  such further
documents  and do such other acts and things as the  Board,  such  Lender,  such
Participant,  the Loan  Administrator,  the  Collateral  Agent or the  Agent may
reasonably  request in order to correct  material  defects or errors in the Loan
Documents or the execution,  acknowledgement,  filing or recordation thereof, to
maintain and ensure the validity, effectiveness,  priority and perfection of the
Collateral  Agent's  Liens  intended  to be  created  pursuant  to the  Security
Agreement,  to provide for payment of the  Obligations  in  accordance  with the
terms of this Agreement, the Notes and the other Loan Documents and otherwise to
effect fully the purposes of the Loan Documents.

                                       71
<PAGE>

                                   Article VI

                               NEGATIVE COVENANTS

     To induce the other parties to enter into this  Agreement and to induce the
Participants to enter into their respective  Participations,  the Obligors agree
with  each  other  party  hereto,  as long as any of the  Commitments  remain in
existence or the Obligations remain outstanding:

     Section 6.1. Liens and Related Matters.

     (a) Prohibition on Liens.  The Obligors shall not, and shall not permit any
of their Subsidiaries to, directly or indirectly create, incur, assume or permit
to  exist  any  Lien on or with  respect  to any  property  or asset of any kind
(including any document or instrument in respect of goods or accounts receivable
or the  Collateral)  of the Obligors or any of their  Subsidiaries,  whether now
owned or  hereafter  acquired,  or any income or profits  therefrom,  or file or
permit the filing of, or permit to remain in effect, any financing  statement or
other  similar  notice of any Lien with  respect  to any such  property,  asset,
income or profits  under the Uniform  Commercial  Code of any state or under any
similar recording or notice statute, except:

     (i) Permitted Encumbrances;

     (ii) purchase money Liens securing  Indebtedness  used to acquire  Aircraft
Related Equipment or liens created or incurred in connection with refinancing of
any Aircraft Related Equipment acquired by the Borrower or another  Wholly-Owned
Subsidiary of the Parent which  refinancing  occurs within eighteen months after
the date of such acquisition;

     (iii) other Liens securing or relating to Indebtedness  permitted  pursuant
to this Agreement and other  liabilities and obligations  permitted  pursuant to
this  Agreement in an  aggregate  amount not to exceed  $10,000,000  at any time
outstanding;

     (iv) Liens securing Indebtedness used to refinance the Loan;

     (v) Liens described in Schedule 6.1 annexed hereto;

     (vi) judgment and  attachment  Liens not giving rise to an Event of Default
or relating to an action or judgment that is a Default or Event of Default;

     (vii)  Liens on the  assets of any entity or on any asset  existing  at the
time such  entity or asset is  acquired  by an Obligor or any  Subsidiary  of an
Obligor,  whether by merger,  consolidation,  purchase  of assets or  otherwise;
provided,  that such  Liens (i) are not  created,  incurred  or  assumed by such
entity in  contemplation of or in connection with the financing of such entity's
being  acquired by such  Obligor or such  Subsidiary;  (ii) do not extend to any
other  assets of such  Obligor or such  Subsidiary;  and (iii) the  Indebtedness
secured by such Lien is permitted pursuant to this Agreement;

                                       72
<PAGE>

     (viii)  leases or  subleases  granted  to  others  not  interfering  in any
material  respect with the ordinary conduct of business of either Obligor or any
of its Subsidiaries; and

     (ix) Liens on the Borrower's membership interests in the BATA Joint Venture
to secure the  obligations in respect of loans made to the Borrower by the other
members  thereof  (or any  Affiliate  of  such  member)  in  order  to fund  the
Borrower's  obligation  to make  investments  of Cash or  otherwise to make Cash
available to the BATA Joint Venture  pursuant to the terms thereof as such terms
exist on the Closing Date.

     (b) No  Restrictions  on  Subsidiary  Distributions  to  Borrower  or Other
Subsidiaries.  Except (i) as provided  herein and in the other Loan Documents or
(ii) as  described on Schedule 6.1 annexed  hereto,  the Obligors  will not, and
will not permit  any of their  Subsidiaries  to,  create or  otherwise  cause or
suffer to exist or become effective any Payment Restriction.

     Section 6.2. Investments.

     Neither Obligor shall,  nor shall it permit any of its Subsidiaries to make
any Investment other than (a) Investments  consisting of Cash  Equivalents;  (b)
accounts  receivable if credited or acquired in the ordinary  course of business
and payable or  dischargeable  in accordance  with  customary  trade terms;  (c)
payroll  advances and advances for business and travel  expenses in the ordinary
course  of  business;  (d)  Investments  by the  Borrower  in  its  Wholly-Owned
Subsidiaries in the ordinary course of business and Investments by the Parent in
its  Wholly-Owned  Subsidiaries  in the  ordinary  course of  business;  (e) (i)
Investments  by any  Subsidiary  of the Parent in the  Borrower  or in any other
Wholly-Owned  Subsidiary of the Borrower and (ii)  Investments by any Subsidiary
of the Parent (but with respect to the Borrower  and its  Subsidiaries,  only to
the extent such  Investment  is  otherwise  permitted  under this Section 6.2 or
Section  6.3) in the  Parent  or in any  other  Wholly-Owned  Subsidiary  of the
Parent,  in each  case,  in the  ordinary  course of  business  or as  otherwise
permitted under Section 6.3; (f)  Investments  made by way of any endorsement of
negotiable  instruments  received  by the Parent,  the  Borrower or any of their
Subsidiaries  in the ordinary  course of its business and presented by it to any
bank for collection or deposit; (g) stock, obligations or securities received in
settlement  of debts  created in the  ordinary  course of business  owing to the
Parent,  the Borrower or any Subsidiary;  (h) in addition to any other permitted
investments, any other Investments by the Parent or the Borrower in an aggregate
outstanding amount not exceeding $10,000,000 at any time; (i) Investments by any
Non-Guarantor Subsidiary in the Parent or any Subsidiary of the Parent that is a
Restricted  Subsidiary as of the date hereof;  (j)  Investments  existing on the
Closing Date and  reflected on Schedule 6.2; (k)  Investments  in the BATA Joint
Venture pursuant to the terms thereof as they exist on the Closing Date; and (l)

                                       73
<PAGE>

Investments  in travel or airline  related  businesses  made in connection  with
marketing   and  promotion   agreements,   Alliance   Agreements,   distribution
agreements,  agreements relating to flight training and other similar agreements
under which a portion of the consideration to the Parent, the Borrower or one or
more of their Subsidiaries includes an opportunity for Investment in the Capital
Stock of other Persons, which Investments under this clause (l) shall not exceed
$20,000,000 in the aggregate.

     Section  6.3.  Restricted  Payments.  Neither  the Parent nor the  Borrower
shall,  and neither of them shall permit any of their  Subsidiaries to, directly
or indirectly, declare, order, pay, make or set apart any sum for any Restricted
Payment  (which  shall  include  payments  by the  Borrower in  satisfaction  of
obligations  under the 9 5/8% Senior Notes Indenture or the 10 1/2% Senior Notes
Indenture or any note issued under  either of them,  pursuant to the  Borrower's
guarantee of such obligations or otherwise,  at any time when the Borrower would
be  prohibited  from  making a  Restricted  Payment  to the  Parent to fund such
obligations);  provided,  however,  that (a) so long as no  Default  or Event of
Default  shall  have  occurred  and be  continuing,  (i) the Parent may (A) make
required  dividend  payments in respect of the Series A  preferred  stock of the
Parent  outstanding on the date hereof,  (B) make required  dividend payments in
respect of the Series B preferred  stock of the Parent  outstanding  on the date
hereof,  (C) pay cash in lieu of fractional  shares or scrip upon  conversion of
the Series B  preferred  stock of the  Parent to common  shares of the Parent or
upon exercise of the Warrants, and (D) repurchase its common stock in any fiscal
year in an aggregate  amount not to exceed  $500,000;  and (ii) the Borrower may
make  Restricted  Payments  to the  Parent  (A) to enable the Parent to make the
payments  permitted  under clause (i) above,  (B) to fund scheduled  payments of
principal,  interest  and fees on the 9 5/8% Senior Notes and the 10 1/2% Senior
Notes and to fund  scheduled  payments of principal,  interest and fees on other
Indebtedness  not  otherwise  prohibited  by this  Agreement  or any other  Loan
Document,  and (C) to enable the Parent or any of its Subsidiaries to enter into
transactions  outside  of the  ordinary  course  of  business  and which are not
otherwise  prohibited by this Agreement or any of the other Loan Documents;  (b)
the Borrower may make Restricted  Payments to the Parent to (i) pay or reimburse
the Borrower's share of the Parent's business expenses and overhead or otherwise
in the ordinary course of business consistent with past practice, (ii) to pay or
reimburse  the Parent for Capital Stock  (including  options on any such Capital
Stock or related stock appreciation rights or similar  securities)  purchases or
redemptions from officers,  directors or employees of the Borrower or the Parent
(or their estates or beneficiaries under their estates) upon death,  disability,
retirement,  termination  of  employment or pursuant to the terms of any plan or
any other  agreement  under  which such  Capital  Stock or related  rights  were
issued,  in an amount not to exceed  $5,000,000 per Fiscal Year and (iii) to pay
or reimburse the Parent for withholding taxes arising from cashless exercises of
options or warrants by officers, directors or employees for the Parent's Capital
Stock; and (c) any Wholly-Owned Subsidiary of the Parent (but in the case of the
Borrower,  only to the extent  otherwise  permitted  under this Section 6.3) may
make dividend payments to the Parent.

     Section 6.4. Financial Covenants.

     (a) The Parent shall not permit the reserve of  unrestricted  Cash and Cash
Equivalents  (that in either case are free from all Liens  other than  Permitted
Encumbrances  of the  type  described  in  clause  (vii)  of the  definition  of
Permitted Encumbrances) of the Borrower and its Wholly-Owned  Subsidiaries to be

                                       74
<PAGE>

less than  $40,000,000,  it being understood that to the extent that obligations
in respect of cash collateralized letters of credit or other similar instruments
are excluded from the definition of Indebtedness  for the purpose of determining
compliance with either of Sections  6.4(b) or (c), the Cash or Cash  Equivalents
that secures such obligations  shall be excluded from unrestricted Cash and Cash
Equivalents.

     (b) The Parent shall not permit its ratio of  consolidated  Indebtedness as
of the dates specified below, or at any time during the fiscal quarter ending on
such dates,  to  Consolidated  EBITDAR  (calculated for the four fiscal quarters
ending on such dates) to be greater than the applicable ratio set forth below:



-------------------------------------- -----------------------------------------
                                        Applicable Consolidated Indebtedness to
       Fiscal Quarter Ending:                        EBITDAR Ratio
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
March 31, 2005                                         7.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
June 30, 2005                                          7.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
September 30, 2005                                     7.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2005                                      7.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
March 31, 2006                                         7.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
June 30, 2006                                          7.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
September 30, 2006                                     7.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2006                                      7.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
March 31, 2007                                         6.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
June 30, 2007                                          6.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
September 30, 2007                                     6.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2007                                      6.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
March 31, 2008                                         6.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
June 30, 2008                                          6.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
September 30, 2008                                     6.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2008                                      6.00:1.00
-------------------------------------- -----------------------------------------

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

     (c)  The  Parent  shall  not  permit  its  ratio  of  Consolidated  EBITDAR
(calculated for the four fiscal quarters ending on the dates specified below) to
Consolidated  Fixed  Charges for such four  fiscal  quarters to be less than the
applicable ratio specified below:



-------------------------------------- -----------------------------------------
                                           Applicable Consolidated EBITDAR to
                                            Consolidated Fixed Charges Ratio
       Fiscal Quarter Ending:
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
September 30, 2004                                     1.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2004                                      1.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
March 31, 2005                                         1.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
June 30, 2005                                          1.00:1.00
-------------------------------------- -----------------------------------------

                                       75
<PAGE>

-------------------------------------- -----------------------------------------
September 30, 2005                                     1.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2005                                      1.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
March 31, 2006                                         1.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
June 30, 2006                                          1.00:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
September 30, 2006                                     1.15:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2006                                      1.15:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
March 31, 2007                                         1.15:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
June 30, 2007                                          1.15:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
September 30, 2007                                     1.15:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2007                                      1.15:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
March 31, 2008                                         1.25:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
June 30, 2008                                          1.25:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
September 30, 2008                                     1.25:1.00
-------------------------------------- -----------------------------------------
-------------------------------------- -----------------------------------------
December 31, 2008                                      1.25:1.00
-------------------------------------- -----------------------------------------

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

     Section 6.5. Restriction on Acquisitions; New Subsidiaries.

     (a) Neither  Obligor shall,  nor shall permit any of its  Subsidiaries  to,
liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution)
or acquire by purchase or otherwise,  including in a transaction structured as a
merger,  all or any  portion  of the  business,  property  or assets  (excluding
therefrom  purchases and  acquisitions in the ordinary course of business by the
Parent,  the Borrower  and their  Subsidiaries  of property  from any Person not
constituting  all or  substantially  all of the  property  of such  Person),  or
Capital Stock or other  evidence of  beneficial  ownership of, any Person or any
division or line of business of any Person, except that:

     (i) (A) any  Wholly-Owned  Subsidiary of the Borrower may be merged with or
into  the  Borrower  or  any  Wholly-Owned  Subsidiary  of  the  Borrower  or be
liquidated,  wound up or dissolved, or all or any part of its business, property
or assets may be conveyed,  sold, leased,  transferred or otherwise disposed of,
in  one  transaction  or a  series  of  transactions,  to  the  Borrower  or any
Wholly-Owned  Subsidiary of the Borrower,  and (B) any  Subsidiary of the Parent
(other than the Borrower and any of its Subsidiaries) may be merged with or into
the Parent or any Wholly-Owned Subsidiary of the Parent or be liquidated,  wound
up or dissolved,  or all or any part of its business,  property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one transaction
or a series of transactions,  to the Parent or any such Wholly-Owned  Subsidiary
of the Parent  (or,  with  respect to  clauses  (A) and (B),  in the case of any
Non-Guarantor  Subsidiary, to the Parent or any Subsidiary of the Parent that is
a Restricted Subsidiary as of the date hereof); and

                                       76
<PAGE>

     (ii) the  Obligors may make (A)  Investments  permitted  under  Section 6.2
above at any time,  and (B) after  the date on which the  outstanding  principal
amount  of the Loan is  equal  to or less  than  $100,000,000,  acquisitions  of
Capital Stock,  the assets and/or the business of another Person  (including any
division  or  line  of  business  of  such  Person);  provided,  that,  (A)  the
acquisition  primarily  involves  the  acquisition  of  assets to be used in the
business  of the  Obligors,  (B) with  respect  to such  acquisition  any  newly
acquired Subsidiary of the Borrower shall be a Wholly-Owned Subsidiary,  and any
newly acquired Subsidiary of the Parent shall be, a Wholly-Owned Subsidiary, (C)
immediately  before  and after  giving  effect  thereto,  no Default or Event of
Default  shall have occurred and be  continuing,  (D)  immediately  after giving
effect to the  acquisition,  the Borrower  shall be in compliance on a Pro Forma
Basis with Section 6.4 (in the case of Section 6.4(b), as of the end of the most
recently  ended  fiscal  quarter) and such  compliance  shall be evidenced by an
Officer's  Certificate from a Responsible Officer demonstrating such compliance,
(E) immediately  following such acquisition,  the Borrower's credit rating is no
lower than  immediately  prior  thereto,  (F) the  aggregate  purchase  price in
connection  with all such  acquisitions  (excluding  therefrom any  Indebtedness
assumed in  connection  with such  acquisitions  and any portion of the purchase
price  thereof  paid  with  the   Borrower's   Common  Stock)  does  not  exceed
$20,000,000,  and (G)  neither  Obligor  nor any  Subsidiary  shall  assume  any
Indebtedness  that  was  incurred  or  issued  by any  Person  to  finance  such
acquisition; and

     (iii) the Obligors may enter into a  consolidation  or merger that complies
with Section 6.9 hereof.

     (b) Neither  Obligor  will change its Fiscal Year if such change will cause
an unreasonable delay in the production of the financial  statements required by
Section 5.1(b)(ii).

     Section 6.6. Sales and  Lease-Backs.  The Obligors shall not, and shall not
permit any of their  Subsidiaries  to, directly or indirectly,  become or remain
liable as lessee or as a guarantor  or other  surety with  respect to any lease,
whether an Operating  Lease or a Capital Lease,  of any property  (whether real,
personal or mixed),  whether now owned or hereafter  acquired (other than leases
of  Aircraft  Related  Equipment)  which  (a)  the  Obligors  or  any  of  their
Subsidiaries  has sold or  transferred  or is to sell or  transfer  to any other
Person  (other  than  the  Obligors  or any of  their  Subsidiaries)  or (b) the
Obligors or any of their Subsidiaries  intends to use for substantially the same
purpose as any other  property which has been or is to be sold or transferred by
the Obligors or any of their Subsidiaries to any Person (other than the Obligors
or any of their Subsidiaries) in connection with such lease; provided,  that the
Obligors may consummate the transactions on Schedule 6.6 hereto,  but subject to
Section  2.6(c)  to  the  extent  of  all  proceeds  of  a  sale  as  part  of a
sale-leaseback transaction described on Schedule 6.6 that exceeds the book value
(as of the date of such  sale) of the  assets so sold,  and  subject  to Section
2.6(b),  either Obligor and their  Subsidiaries  may become and remain liable as
lessee,  guarantor  or other surety with respect to any such lease if and to the

                                       77
<PAGE>

extent that the annual  aggregate  rentals under all such leases does not exceed
$10,000,000.

     Section 6.7. Transactions with Affiliates.

     (a)  Neither  Obligor  nor  any  of its  Subsidiaries  shall,  directly  or
indirectly  (i)  sell,  lease,  transfer  or  otherwise  dispose  of  any of its
properties or assets, or issue securities to, (ii) purchase any property, assets
or securities  from,  (iii) make any Investment in, or (iv) enter into or suffer
to exist any contract or agreement  with or for the benefit of, any Affiliate or
holder of 5% or more of any class of Capital  Stock (and any  Affiliate  of such
holder) of the Borrower (an "Affiliate  Transaction"),  other than (x) Affiliate
Transactions   permitted   under   Section   6.7(b)  hereof  and  (y)  Affiliate
Transactions  (including  lease  transactions)  which are on fair and reasonable
terms no less favorable to such Obligor or such Subsidiary,  as the case may be,
than those  that  might  reasonably  have been  obtainable  at such time from an
unaffiliated  party;  provided,  that if an Affiliate  Transaction  or series of
Affiliate  Transactions  involves or has a value in excess of  $1,000,000,  such
Obligor  or such  Subsidiary,  as the case may be,  shall  not  enter  into such
Affiliate  Transaction or series of Affiliate  Transactions unless a majority of
the  disinterested  members  of the  board  of  directors  of the  Parent  shall
reasonably and in good faith  determine that such Affiliate  Transaction is fair
and reasonable to such Obligor or such Subsidiary,  as the case may be, or is on
terms no less favorable to such Obligor or such Subsidiary,  as the case may be,
than  those  that  might  reasonably  have  been  obtained  at such time from an
unaffiliated party.

     (b) The  provisions of Section 6.7(a) shall not apply to (i) the agreements
listed  on  Schedule  6.7 as in effect on the  Closing  Date or any  transaction
contemplated  thereby  so long  as any  such  agreement  or  transaction  is not
disadvantageous  to the Board, the Lenders or (solely in respect of its interest
in the transactions  contemplated by this Agreement and its  Participation)  any
Participant in any material respect; (ii) any transaction between the Parent and
any of its Wholly-Owned Subsidiaries or between such Wholly-Owned  Subsidiaries,
provided such transactions are not otherwise prohibited by this Agreement; (iii)
reasonable and customary fees and compensation  paid to, and indemnity  provided
on behalf of,  officers,  directors or employees of either Obligor or any of its
Subsidiaries,  as determined by the board of directors of such Obligor or any of
its  Subsidiaries  or the  senior  management  thereof in good  faith;  (iv) any
Restricted  Payments  permitted  by  Section  6.3;  (v) any  payments  or  other
transactions  pursuant to any tax sharing  agreement  between either Obligor and
its  Subsidiaries;  (vi)  transactions  contemplated by any Alliance  Agreements
permitted hereunder;  (vii) the Loan Documents and the transactions contemplated
thereby;  and  (viii)  repayment  of  Indebtedness  owed by,  making of loans or
advances  by  or   transfers   of  property  or  assets  by  any   Non-Guarantor
Subsidiaries,  in each case, to the Parent or any  Subsidiary of the Parent that
is a Restricted Subsidiary as of the date hereof.

     Section 6.8. Conduct of Business.  From and after the date hereof,  neither
Obligor  shall,  nor shall  permit  any of its  Subsidiaries  to,  engage in any
business  other than (a) the  businesses  engaged in by the  Obligors  and their

                                       78
<PAGE>

Subsidiaries on the date hereof and related  businesses and (b) such other lines
of business as may be consented to by the Board and the Requisite Lenders.

     Section 6.9. Merger or  Consolidation.  Neither  Obligor shall  consolidate
with or merge  with any other  Person or  convey,  lease,  sub-lease,  otherwise
dispose  of,  or  transfer  all or  substantially  all  its or  their  business,
properties and assets  substantially as an entirety to any Person,  unless:  (a)
(i) in the  case of a  consolidation  or  merger  involving  the  Borrower,  the
Borrower is the surviving entity or if the Borrower is not the surviving entity,
such  surviving  entity or the Person  that  acquires  by  conveyance,  lease or
transfer the properties and assets of the Borrower substantially as an entirety,
shall be a  corporation  organized  and  existing  under the laws of the  United
States of  America or any State or the  District  of  Columbia  and can make the
representations  contained in Section 4.1(b),  and shall expressly assume, by an
agreement  executed and delivered to the Agent,  for the benefit of the Lenders,
the  Participants (as third-party  beneficiaries  hereof) and the Board, in form
satisfactory to the Agent,  the Obligations and all of the other  obligations of
the Borrower  hereunder and under the other Loan Documents,  or (ii) in the case
of a consolidation or merger  involving the Parent,  the Parent is the surviving
entity or if the Parent is not the surviving  entity,  such surviving entity, or
the Person that acquires by  conveyance,  lease or transfer the  properties  and
assets  of the  Parent  substantially  as an  entirety,  shall be a  corporation
organized  and  existing  under the laws of the United  States of America or any
State or the District of Columbia and can make the representations  contained in
Section  4.1(b)  and  shall  expressly  assume,  by an  agreement  executed  and
delivered  to the Agent and  Board,  in form  satisfactory  to the Agent and the
Board, all of the Parent's  obligations  hereunder and under the Loan Documents;
(b) immediately before and after giving effect to such transaction,  no Event of
Default or Default shall have occurred and be continuing and  immediately  after
giving effect to such  transaction the Obligors shall be in Pro Forma compliance
with  Section  6.4 (in the  case of  Section  6.4(b),  as of the end of the most
recently ended fiscal quarter); (c) immediately following such acquisition,  the
Borrower's credit rating is no lower than immediately prior thereto; (d) neither
Obligor  nor any of its  Subsidiaries  shall  assume any  Indebtedness  that was
incurred or issued by any Person to finance such  transaction;  (e) the Borrower
has  delivered  to the  Agent  and the  Board an  Officer's  Certificate  from a
Responsible  Officer and an opinion of counsel from counsel  satisfactory to the
Agent, in form and substance  satisfactory  to the Agent and the Board,  stating
that such  transaction and such agreement  comply with this Section and that all
conditions  precedent herein provided for relating to such transaction have been
complied with and addressing  such other matters as may be reasonably  requested
by the  Board  and  the  Agent;  provided,  however,  that  notwithstanding  the
foregoing  provisions  of this  Section  6.9,  prior to the  date on  which  the
outstanding  principal amount of the Loan is equal to or less than  $75,000,000,
neither Obligor shall consolidate with or merge with any other Person or convey,
lease or transfer its properties and assets  substantially as an entirety to any
Person.

     Section 6.10.  Limitation  on Asset Sales.  Neither  Obligor will,  and the
Obligors  shall  cause  their  Subsidiaries  not  to,  directly  or  indirectly,
consummate  any Asset Sale unless (a) the  consideration  received in respect of
such Asset Sale is at least equal to the Fair Market Value of the assets subject
to such Asset Sale, (b) at least 85% of the value of the consideration therefrom

                                       79
<PAGE>

received by such Obligor or Subsidiary  is in the form of a  combination  of the
following:  (i) cash or Cash  Equivalents,  (ii) Aircraft  Related  Equipment or
other  assets to be owned by and used in the business of an Obligor or (iii) the
assumption by the Person acquiring the assets in such Asset Sale of Indebtedness
or Trade  Payables of such Obligor or such  Subsidiary  with the effect that the
Obligors and their  Subsidiaries will no longer have any obligation with respect
to such Indebtedness or Trade Payables,  (c) immediately before and after giving
effect to such Asset Sale,  no Default or Event of Default  shall have  occurred
and be continuing,  and (d)  immediately  after giving effect to such Asset Sale
and the  application  of the proceeds  thereof,  there shall not exist any Value
Differential;  provided,  however, that this Section 6.10 shall not apply to (x)
any  transfer  of property of a  Non-Guarantor  Subsidiary  to the Parent or any
Subsidiary  of the Parent that is a Restricted  Subsidiary as of the date hereof
or, (y) Asset Sales to the BATA Joint  Venture  pursuant to the terms thereof as
such terms exist on the Closing Date.

     Section 6.11. Limitations with Respect to Subsidiaries.

     (a) Each  Subsidiary of each Obligor  shall at all times be a  Wholly-Owned
Subsidiary  of such  Obligor and there shall not exist any  restrictions  on the
right of either Obligor to vote any Capital Stock of its Subsidiaries.

     (b)  Neither  Obligor  may  create  or  acquire  new  Subsidiaries,  except
Wholly-Owned  Subsidiaries,  and if (i) in the  case of the  Parent,  the  total
assets  of  such  Subsidiaries  in the  aggregate  (other  than  single  purpose
Subsidiaries created solely for the purpose of financing aircraft for use by the
Borrower) do not at any time exceed five percent (5%) of the consolidated  total
assets of the Parent,  in each case  determined in accordance with GAAP and (ii)
the Obligors comply with the provisions of Section 5.15 hereof, but the Obligors
may make Investments permitted under Section 6.2.

     (c) From and after the date hereof,  Washington Assurance Limited shall not
engage in any  business  other  than the  business  it is engaged in on the date
hereof.

     Section 6.12.  Partnerships and Joint Ventures;  Speculative  Transactions.
Neither of the  Obligors,  nor any  Subsidiary  thereof,  shall become a general
partner in any  general  or  limited  partnership  or joint  venture  engaged or
involved in, nor shall either of the Obligors nor any Subsidiary  thereof engage
in any  transaction  involving,  commodity  options or future  contracts  or any
similar  speculative  transactions;  provided,  however,  that  entry into those
transactions  designed to hedge against  fluctuations  in fuel costs incurred in
the ordinary  course of business,  consistent  with past  business  practice and
industry standards,  and not entered into for speculative  purposes shall not be
prohibited by this Section 6.12.

     Section 6.13. Limitations on Amendments.

     (a) Neither Obligor,  nor any of its  Subsidiaries,  shall amend,  waive or
modify,   nor  shall  it  consent  to  or  request  any  amendment,   waiver  or

                                       80
<PAGE>

modification,  of any of the material  terms,  conditions,  representations  and
covenants contained in any Indebtedness for borrowed money that (i) shortens the
final  maturity  date  of  such  Indebtedness  (without  giving  effect  to  any
amendment, waiver or modification, the "Initial Indebtedness",  and after giving
effect  to  any  such   amendment,   waiver  or   modification,   the   "Amended
Indebtedness"),  (ii) requires the acceleration of the final scheduled  maturity
date and/or any  principal  payments,  including  but not  limited to  scheduled
payments and  mandatory  prepayments,  and/or  increases  the  principal  amount
payable  on any date  (including,  without  limitation,  pursuant  to  mandatory
prepayments)   prior  to  the  dates  of  analogous  payments  of  such  Initial
Indebtedness,  or (iii) provides for an interest rate applicable to such Amended
Indebtedness,  plus the interest rate equivalent of all remaining fees and costs
associated with closing and servicing such Amended  Indebtedness higher than the
average remaining interest rate applicable to such Initial Indebtedness plus the
interest rate equivalent of the average remaining fees and costs associated with
servicing such Initial Indebtedness.

     (b) Neither Obligor shall,  nor shall it permit any of its Subsidiaries to,
agree to any  amendment,  waiver  or  modification  of the  Concessions  if such
amendment,  waiver or modification  would result in a material  reduction in the
aggregate  value that the Obligors  realize or are scheduled to realize from all
of the Concessions during the period that is the shorter of the term of the Loan
and the  term of the  Concession  that is  proposed  to be  amended,  waived  or
modified.

     Section 6.14. Going Private Transactions. Neither Obligor, nor any of their
Subsidiaries,  shall redeem,  purchase or otherwise acquire any Capital Stock of
the Parent,  or otherwise engage or participate in any "Rule 13e-3  transaction"
(as defined in Rule 13e-3 under the  Exchange  Act) or similar  transaction,  or
agree to engage in or commence any such transaction; provided, that this Section
6.14 shall not apply to any  involuntary  delisting  of the Common  Stock of the
Parent from NASDAQ or any other national  securities exchange (as defined in the
Securities Exchange Act of 1934, as amended), other than any such delisting that
occurs in  connection  with a transaction  otherwise  prohibited by this Section
6.14.

     Section  6.15.  No Further  Negative  Pledges.  Except with  respect to (a)
specific property encumbered to secure payment of particular Indebtedness (or to
be sold  pursuant to an executed  agreement  with  respect to a permitted  asset
sale),  and (b)  restrictions  by reason  of  customary  provisions  restricting
assignments,  subletting or other  transfers  contained in leases,  licenses and
similar  agreements  entered into in the ordinary  course of business  (provided
that such  restrictions  are limited to the  property or assets  secured by such
Liens or the  property  or assets  subject to such  leases,  licenses or similar
agreements,  as the case may be), after the date hereof neither  Obligor nor any
of its Subsidiaries  shall enter into any agreement  prohibiting the creation or
assumption of any Lien upon any of their properties or assets, whether now owned
or hereafter acquired.

                                       81
<PAGE>

     Section 6.16. Incentive Equity Plan and Other Incentive Compensation.

     (a) Any employee stock options  granted under any incentive  stock or stock
option plan  maintained by the Parent or any of its  Subsidiaries on or prior to
the Closing  Date shall not have been,  and shall not be,  repriced  (within the
meaning of Item 402(i) of Regulation  S-K under the  Securities  Act of 1933, as
amended) from the initial date of the Borrower's  Application for so long as any
of the Obligations shall remain outstanding.  Neither Obligor shall award or pay
any compensation to any officer, director or employee who holds options that are
subject to the restriction in this Section 6.16 which is intended to off-set the
effect of such repricing restriction.

     (b) Neither of the Obligors or any of their Subsidiaries shall award or pay
any equity-based compensation, including any restrictive stock, stock options or
phantom stock, to or for the benefit of J. George Mikelsons.

                                  Article VII

                                Events of Default

     Section 7.1.  Events of Default.  Each of the following  events shall be an
Event of Default (whatever the reason for such Event of Default and whether such
event  shall  be  voluntary  or  involuntary  or come  about or be  effected  by
operation of law or pursuant to or in compliance  with any  judgment,  decree or
order of any court or any order,  rule or  regulation of any  administration  or
governmental body):

     (a) (i) Failure by the Borrower to pay any  installment of principal of the
Loan when due,  whether  at  stated  maturity,  by  acceleration,  by  mandatory
prepayment or otherwise;  or (ii) failure by the Borrower to pay any interest on
the Loan or any fee or any other  amount due under this  Agreement  or any other
Loan Document within five Business Days after the date due; or

     (b) Either Obligor or any of its Subsidiaries (i) fails to make (whether as
primary obligor or as guarantor or other surety) any payment in respect of rent,
or  principal,  interest or premium,  if any,  with respect to any  Indebtedness
(other than Indebtedness referred to in Section 7.1(a)) and the aggregate amount
of all  Indebtedness  as to which such a payment  default relates is equal to or
exceeds  $5,000,000 or otherwise  defaults in the performance of any one or more
obligations relating to any Indebtedness in an aggregate amount of $5,000,000 or
more beyond any  applicable  grace  periods if the effect of such  default is to
accelerate  such  Indebtedness  or permit the holders thereof to accelerate such
Indebtedness  (it being  acknowledged  that the aggregate amount of Indebtedness
with  respect  to any  Capital  Lease  shall be  determined  as set forth in the
definition thereof in Section 1.1); (ii) fails to make any payment under any one
or  more  Operating  Leases  with  respect  to  aircraft,  aircraft  engines  or
aircraft-related  spare parts,  beyond any period of grace provided with respect
thereto and the aggregate defaulted payments under all Operating Leases relating
to  aircraft,  aircraft  engines  and  aircraft  spare  parts as to which such a
payment  default shall occur and be continuing is equal to or exceeds  $500,000;
(iii)  defaults  with  respect  to any lease or  license  obligation  that would
materially  and  adversely  affect,  or preclude,  continued  operations  by the
Borrower at Chicago-Midway  Airport,  New  York-LaGuardia  Airport,  Los Angeles

                                       82
<PAGE>

International Airport or Indianapolis  International Airport (and is not capable
of  being  cured  within  30 days in a  manner  which  would  permit  continuous
operations in a manner  substantially as if such defaults had not occurred);  or
(iv) defaults in payment  obligations that exceed $5,000,000 in the aggregate in
respect of any lease  obligations  (other  than those  obligations  included  in
clauses (i), (ii) and (iii) above) beyond any grace period provided with respect
thereto; or

     (c) Failure of either Obligor to perform or comply in any material  respect
with any term or condition  contained in Section  2.4(f),  5.2,  5.10 or 6.14 of
this Agreement; or

     (d) Any representation,  warranty, certification or other statement made by
either  Obligor in any Loan Document or in any statement or  certificate  at any
time  given by either  Obligor  in  writing  pursuant  hereto or  thereto  or in
connection  herewith or therewith shall be false in any material  respect on the
date as of which made; or

     (e) Any default in the performance of or compliance with any term contained
in this Agreement or any of the other Loan  Documents  (other than any such term
referred to in any other  subsection  of this Section 7.1),  including,  without
limitation,  any failure by any  Subsidiary of either Obligor to comply with any
of such terms as if it were a party hereto and such default  shall not have been
remedied  or waived (i) within 30 days  after the  earlier of (A) a  Responsible
Officer of the  Borrower  becoming  aware of such  default or (B) receipt by the
Borrower  of notice  from the Agent or the  Board of such  default  or (ii) with
respect to a default  under  Section 6.4 by the earlier of (A) an officer of the
Borrower becoming aware of the default after the applicable measurement date and
(B) the delivery of financial  statements pursuant to Section 5.1 for the end of
the accounting period as of which or during which such default exists; or

     (f) (i) A court  shall  enter a decree or order for  relief in  respect  of
either  Obligor in an involuntary  case under the  Bankruptcy  Code or under any
other  applicable  bankruptcy,  insolvency  or similar law now or  hereafter  in
effect or any other  relief  described  in clause (ii) below,  or other  similar
relief shall be granted  under any  applicable  federal or state law; or (ii) an
involuntary  case shall be commenced  against either Obligor  seeking (A) relief
under the Bankruptcy Code or under any other applicable  bankruptcy,  insolvency
or similar law now or hereafter in effect,  (B) the  appointment  of a receiver,
liquidator,  sequestrator,  trustee,  custodian or other officer  having similar
powers over either Obligor,  or over all or a substantial  part of its property,
or (C) the  appointment of an interim  receiver,  trustee or other  custodian of
either Obligor for all or a substantial part of its property; and any such event
described in this clause (ii) shall continue for 60 days without being dismissed
or discharged;  or (iii) a warrant of attachment,  execution or similar  process
shall have been issued  against any  substantial  part of the property of either
Obligor; or

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     (g) (i) (A) Either  Obligor  shall have an order for  relief  entered  with
respect to it or commence a voluntary  case under the  Bankruptcy  Code or under
any other applicable  bankruptcy,  insolvency or similar law now or hereafter in
effect,  or shall consent to the entry of an order for relief in an  involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law,  or shall  consent to the  appointment  of or taking  possession  by a
receiver,  trustee  or  other  custodian  of all or a  substantial  part  of its
property;  or (B) either Obligor shall make a general assignment for the benefit
of creditors; or (ii) the board of directors of either Obligor (or any committee
thereof) shall adopt any resolution or otherwise authorize any action to approve
any of the actions referred to in clause (i) above; or

     (h) There shall be any period of 60 consecutive  days following  entry of a
final judgment or order that causes the aggregate amount for all final judgments
or orders  outstanding  against  the  Obligors  and their  Subsidiaries  and not
covered by insurance  (treating any deductibles,  self-insurance or retention as
not so covered) to exceed  $2,500,000 during which a stay of enforcement of such
final judgments or orders, by reason of a pending appeal or otherwise, shall not
be in effect; or

     (i) Any order,  judgment or decree shall be entered  against either Obligor
decreeing the  dissolution or split up of such Obligor and such order,  judgment
or decree  shall  remain  undischarged  or unstayed for a period in excess of 30
days; or

     (j) The Parent  Guarantee or any Subsidiary  Guarantee shall for any reason
cease to be in full force and effect or the Parent or any Subsidiary  shall,  in
writing, repudiate the Parent Guarantee or any Subsidiary Guarantee or deny that
its obligations thereunder are valid, binding and enforceable; or

     (k) The Board  Guarantee  shall  for any  reason  (other  than by reason of
Section 2.03, 2.04 or 2.05 of the Board Guarantee) cease to be in full force and
effect or the Board shall  assert  that any of its  obligations  thereunder  are
invalid or unenforceable; or

     (l) The  invalidity  or  failure to obtain  and  maintain a first  priority
perfected  Lien on Collateral  having a value in excess of $300,000,  except for
such invalidity or failure  attributable to (i) the sale or other disposition of
the applicable Collateral in a transaction permitted under the Loan Documents or
(ii) the Collateral Agent's failure to maintain any possession (through no fault
of the  Obligors)  that may be necessary  for  perfection  and provided that the
Borrower is taking all  reasonably  required  action to ensure the perfection of
such Collateral in accordance with Section 5.17; or

     (m) The Security  Agreement  shall for any reason cease to be in full force
and effect or the Borrower shall assert that any of its  obligations  thereunder
are invalid or unenforceable; or

     (n) Any  failure by the  Existing  Shareholder,  the Parent or  Borrower to
comply with any terms of the Existing Shareholder Undertaking; or

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     (o) (i) The  Borrower  shall  fail to carry  and  maintain,  or cause to be
carried and maintained,  insurance on and in respect of the Aircraft, Airframes,
Engines, Propellers and Spare Engines (as such terms are defined in the Security
Agreement) in accordance  with the provisions of the Security  Agreement or (ii)
any of the other insurance  coverages  required to be maintained by the Obligors
and their Subsidiaries pursuant hereto or to the Security Agreement shall lapse,
terminate or otherwise cease to be in full force and effect, other than coverage
of losses and liabilities  that are in the aggregate  reasonably  expected to be
immaterial; or

     (p) (i)(A) A court  shall  enter a decree or order for relief in respect of
any  Subsidiary  of the Parent or the Borrower  (other than the  Borrower) in an
involuntary  case  under  the  Bankruptcy  Code or under  any  other  applicable
bankruptcy,  insolvency or similar law now or hereafter in effect,  or any other
similar  relief shall be granted under any  applicable  federal or state law; or
(B) an involuntary case shall be commenced  against any Subsidiary of the Parent
or the Borrower (other than the Borrower) under the Bankruptcy Code or under any
other  applicable  bankruptcy,  insolvency  or similar law now or  hereafter  in
effect;  or a decree  or order of a court  for the  appointment  of a  receiver,
liquidator,  sequestrator,  trustee,  custodian or other officer  having similar
powers  over any  Subsidiary  of the  Parent  or the  Borrower  (other  than the
Borrower),  or over all or a substantial  part of its property,  shall have been
entered;  or (C) there shall have  occurred the  involuntary  appointment  of an
interim receiver,  trustee or other custodian of any Subsidiary of the Parent or
the Borrower  (other than the  Borrower)  for all or a  substantial  part of its
property;  or (D) a warrant of  attachment,  execution or similar  process shall
have been issued against any substantial  part of the property of any Subsidiary
of the Parent or the Borrower (other than the Borrower); and (ii) any such event
described  in clause (i) above  which  could  reasonably  be  expected to have a
Material Adverse Effect and shall continue  without being  dismissed,  bonded or
discharged for sixty (60) consecutive days; or

     (q) (i)(A) Any  Subsidiary  of the Parent or the  Borrower  (other than the
Borrower)  shall have an order for relief entered with respect to it or commence
a  voluntary  case  under the  Bankruptcy  Code or under  any  other  applicable
bankruptcy,  insolvency  or similar  law now or  hereafter  in effect,  or shall
consent to the entry of an order for relief in an  involuntary  case,  or to the
conversion of an involuntary  case to a voluntary  case,  under any such law, or
shall consent to the appointment of or taking possession by a receiver,  trustee
or other  custodian of all or a  substantial  part of its  property,  or (B) any
Subsidiary of the Parent or the Borrower  (other than the  Borrower)  shall make
any assignment for the benefit of creditors, or (C) any Subsidiary of the Parent
or the Borrower (other than the Borrower)  shall fail generally,  or shall admit
in writing its  inability,  to pay its debts as such debts  become due, and such
event  described  in this  clause (i) could  reasonably  be  expected  to have a
Material Adverse Effect; or (ii) the board of directors of any Subsidiary of the
Parent or the Borrower  (other than the  Borrower)  (or any  committee  thereof)
shall adopt any  resolution to approve any of the actions  referred to in clause
(i) above; or

     (r) Either the Parent or the Borrower shall fail generally,  or shall admit
in writing its inability, to pay its debts as such debts become due.

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     Section 7.2. Remedies.  During the continuance of any Event of Default, the
Agent shall, solely at the request of the Board or, if the Board Guarantee is no
longer  in full  force  and  effect,  the  Requisite  Lenders,  by notice to the
Borrower,  declare the Loan,  all  interest  thereon  and all other  amounts and
Obligations  payable  under this  Agreement to be  immediately  due and payable,
whereupon the Loan, all such interest and all such amounts and Obligations shall
become and be immediately due and payable, without presentment,  demand, protest
or further notice of any kind, all of which are hereby  expressly  waived by the
Borrower;  provided,  however,  that upon the occurrence of the Event of Default
specified in Section 7.1(f) or 7.1(g),  the Loan, all such interest and all such
amounts and Obligations  shall  automatically  become and be immediately due and
payable, without presentment,  demand, protest or any notice of any kind, all of
which are  hereby  expressly  waived by the  Borrower.  For so long as the Board
Guarantee shall remain in effect, remedies exercisable by the Agent hereunder or
the Collateral Agent under the Security Agreement shall be exercised solely upon
instructions  received in writing by the Agent or the Collateral  Agent,  as the
case may be, from the Board or, if the Board  Guarantee  is no longer in effect,
the Requisite Lenders. If an Event of Default shall occur and be continuing, the
Collateral  Agent  may upon  the  instructions  of the  Board,  or if the  Board
Guarantee is no longer in effect, the Requisite Lenders,  exercise any or all of
the rights and powers and pursue any and all of the  remedies  available  to the
Collateral  Agent under the Security  Agreement  and shall have and may upon the
written  request of the Board or, if the Board Guarantee is no longer in effect,
the  Requisite  Lenders,  exercise  any and all of the rights and  remedies of a
secured party under the Uniform  Commercial Code of any applicable  jurisdiction
and under any other applicable law.

                                  Article VIII

                             THE LOAN ADMINISTRATOR

     Section 8.1. Acceptance of Appointment and Services. (a) The Lenders hereby
appoint the Loan  Administrator  to provide the  services  described in Sections
8.1(b) and (c) below for the  benefit of the Lenders and the Board in respect of
the Loan and the Loan  Documents.  The Loan  Administrator  hereby  accepts such
appointment and agrees to perform such services in a professional,  diligent and

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<PAGE>

workmanlike  manner for the benefit of the Lenders and the Board, on and subject
to the terms and conditions set forth in this Agreement, but shall have no other
obligations  to the Lenders,  the Board or any other Person  except as expressly
provided herein.

     (b) The Loan  Administrator  hereby  agrees to perform at any time and from
time to time, at the request of the Board,  any Participant or any Lender (other
than the Primary Tranche A Lender, which shall not make any requests of the Loan
Administrator) (any such person so requesting,  a "Requesting Party") all of the
following services:

               (i) monitor and promptly  distribute to the Requesting  Party any
financial  information,  compliance  certificates  and other  reports or written
communications provided by or on behalf of the Borrower, the Parent or the Agent
to the Loan Administrator hereunder or under any other Loan Document, and report
to the  Requesting  Party  whether such  documents on their face comply with the
requirements of the Loan Documents;

               (ii) based on the public  reports of the Borrower and the Parent,
monitor the  performance  of the Borrower and of the Parent under this Agreement
and the  other  Loan  Documents,  as  applicable,  and  promptly  report  to the
Requesting  Party any  failure  by  Borrower  or the  Parent to comply  with its
respective obligations hereunder and thereunder;

               (iii) promptly  notify the Requesting  Party of (A) any downgrade
in the senior  unsecured credit rating of the Borrower by either S&P, Moody's or
Fitch,  (B) any  receipt by the Loan  Administrator  of a notice of a Default or
Event of Default,  or (C) any receipt by the Loan Administrator of notice of any
prepayment of the Loan under Section 2.5 or Section 2.6 hereof;

               (iv) for each  fiscal  quarter  of the  Borrower,  provide  (A) a
quarterly  financial  report,  within four weeks of the  Borrower's  delivery of
financial  statements for such quarter to the Loan Administrator,  analyzing the
Borrower's and the Parent's financial  statements and operations for such fiscal
quarter,  including  a  review  of  variances  from  targets  identified  in the
operating plans of the Borrower and the Parent, revenue and expense performance,
operating cash flow results, quarterly investment cash flows, net changes in the
Borrower's  and the Parent's cash  position,  debt covenant  compliance and such
other  financial  matters  as shall be  reasonably  requested  in  writing  by a
Requesting  Party and (B) an  indicative  credit  rating of the Borrower and the
Parent; it being  acknowledged and agreed that the Loan Administrator may retain
a sub-servicer  reasonably  acceptable to the Requesting  Party to provide these
services,  in which event, the Loan Administrator shall not be in default of its
obligations  hereunder  (x)  if  the  sub-servicer  fails  to  comply  with  its
obligations  to provide the quarterly  financial  reports or  indicative  credit
rating  of the  Borrower  and the  Parent  described  herein so long as the Loan
Administrator  had  exercised  reasonable  care and good faith in providing  the
financial statements to the sub-servicer and attempting to procure the report or
indicative  credit rating on behalf of the Requesting  Party, or (y) if the Loan
Administrator  is unable,  after  exercising  reasonable care and good faith, to
retain a sub-servicer to provide an indicative credit rating of the Borrower and
the Parent;

               (v) review  the  periodic  reports  and other  reports  which the
Obligors are obligated to provide to the Loan Administrator,  the Lenders or the
Board  hereunder or under any other Loan Document,  and report to the Requesting
Party regarding such matters as are  specifically  identified in writing by such
Requesting Party with respect to such reports;

               (vi) at the written direction of a Requesting Party, give notices
or provide  instructions  on behalf of the Requesting  Party to any Person under
this Agreement or any of the other Loan  Documents in accordance  with the terms
and conditions hereof and thereof;

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<PAGE>

               (vii) at the  written  request of a  Requesting  Party and at the
expense of the  Borrower,  report to the  Requesting  Party on the  business and
financial  substance  of any  proposed  amendment  to, or  assignment  of,  this
Agreement or any other Loan Document;

               (viii) at the written  request of a  Requesting  Party and at the
expense of the Borrower,  visit the Borrower or the Parent, or both, and inspect
the  financial  and  accounting  records and take  extracts  therefrom  and make
relevant  inquiries  of each such Person so as to respond to specific  questions
from the  Requesting  Party  regarding  such  Person's  financial  condition and
ability to perform its respective obligations under the other Loan Documents;

               (ix)  at the  direction  and  expense  of the  Requesting  Party,
procure and coordinate the advice of  professional  advisers  necessary for such
Requesting  Party to perform its  obligations  and enforce its rights  under the
Loan Documents;

               (x) analyze the Appraisal Reports submitted by the Borrower under
the Loan Documents and report to the Board  regarding the Appraised Value of the
collateral reflected in such reports;

               (xi)  promptly  notify the Board of any  material  changes in the
value of  Collateral  of which it becomes  aware  through the  Borrower's or the
Parent's  public  reports  or   certificates,   notices,   appraisals  or  other
communications  delivered  by or  on  behalf  of  the  Borrower  or  the  Parent
hereunder;

               (xii)  based  on  the  public   reports  of  the   Borrower   and
certificates,  notices,  appraisals or other  communications  delivered by or on
behalf of the Borrower and the Parent  hereunder,  monitor their compliance with
covenants and agreements relating to Collateral including Borrower's obligations
to prepay the Loan in the amount of the Value Differential;

               (xiii) monitor  Collateral-related  regulatory and UCC filings to
ensure that continuation statements,  extensions or renewals, as applicable, are
timely filed;

               (xiv)  following an Event of Default,  at the written request and
expense of the  Requesting  Party,  assist and advise such  Requesting  Party in
connection  with  the  liquidation  of  the  Collateral,   including   selecting
specialists to assist in appraisal and  liquidation of collateral,  recommending
liquidation strategies, identifying potential buyers of the assets and analyzing
bids; and

               (xv)  subject  to  subsection  (c) below,  at the  expense of the
Requesting  Party,  take such other  actions as may be  reasonably  requested in
writing by the Requesting  Party in respect of the Loan and the Loan  Documents,
such actions to be upon such terms and conditions as shall be mutually agreed to
by the Requesting Party and the Loan Administrator.
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<PAGE>

     (c) With respect to the Loan Administrator's responsibilities under Section
8.1(b) above,  the Loan  Administrator  shall not be required to take any action
which exposes the Loan  Administrator  to liability or which is contrary to this
Agreement,  any other Loan Document,  the Board Guarantee or applicable law. The
execution  and delivery of this  Agreement by the Loan  Administrator  shall not
give  rise  to  any  implied  duties  or  fiduciary   obligations  of  the  Loan
Administrator  to any  Requesting  Party or any other  Person.  The Board hereby
acknowledges  and agrees that the failure of the Loan  Administrator  to perform
any of its obligations  hereunder  shall not invalidate or otherwise  affect the
Board Guarantee.

     (d) Except as permitted in subsection (b)(iv) above, the Loan Administrator
shall not be permitted to assign any of its  obligations  hereunder,  enter into
sub-servicing  agreements  or  otherwise  delegate  any of its duties under this
Agreement  without the prior written  consent of the  Requisite  Lenders and the
Board. The Loan Administrator  hereby  acknowledges and agrees that the fees and
expenses  payable to any  sub-servicer  retained by it in  accordance  with this
Agreement  shall be paid out of the fees  payable  by the  Borrower  to the Loan
Administrator under Section 2.8(g).

     (e) The Loan  Administrator may retain legal counsel (including counsel for
the Loan  Administrator),  independent  public  accountants and other experts or
advisers as desirable to provide the services set forth in Section  8.1(b),  and
shall be reimbursed by the Borrower for the reasonable associated costs and such
other  reasonable  expenses as the Loan  Administrator  shall incur in providing
such services.  The Borrower  shall be  responsible  for such costs and expenses
with respect to the services set forth in Section  8.1(b)(vii) and (viii) hereof
(calculated in the manner set forth in Section  2.8(g)),  and a Requesting Party
shall be responsible for the costs and expenses with respect to the services set
forth in Section  8.1(b)(ix),  (xiv) and (xv) if  requested  by such  Requesting
Party (calculated in the manner set forth in Section 2.8(g)).

     (f) In the event that any of the  Lenders,  the  Participants  or the Board
shall  request that the Loan  Administrator  provide  additional  services to it
under Section  8.1(b)(xiv) and (xv) or which are otherwise  outside the scope of
the  services  to be  provided  by the Loan  Administrator  hereunder,  the Loan
Administrator shall, to the extent it agrees to provide such additional services
to such party,  be entitled to charge such party such  additional  fees.  Unless
otherwise  agreed to by such  Person and the Loan  Administrator,  the terms and
conditions  of this  Article  VIII  shall  apply  to the  provision  by the Loan
Administrator of such additional services to such party.

     Section 8.2. Loan Administrator's Reliance.

     (a) The Loan Administrator shall be entitled to rely upon any note, notice,
consent,  certificate,  affidavit, letter, telegram, teletype message, facsimile
transmission, statement, order or other document in good faith believed by it to
be genuine and  correct and to have been signed or sent by the proper  person or
persons and, in respect of legal matters,  upon the opinion of counsel  selected
by the Loan Administrator.

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<PAGE>

     (b)  Neither the Loan  Administrator  nor any of its  directors,  officers,
agents,  employees or its sub-servicer  shall be liable to any Lender, the Board
or any  Participant for any action taken or omitted to be taken by it or by such
directors,  officers,  agents  or  employees  under or in  connection  with this
Agreement  or any  other  Loan  Document,  except  for its or  their  own  gross
negligence or willful  misconduct.  Without  limitation of the generality of the
foregoing,  the  Loan  Administrator:   (i)  may  consult  with  legal  counsel,
independent public accountants and other experts selected by it and shall not be
liable to any  Lender,  any  Participant  or the Board for any  action  taken or
omitted  to be taken in good faith by it in  accordance  with the advice of such
experts;  (ii) except as provided in Section  8.1(b)  above,  shall not have any
duty to ascertain or to inquire as to the  performance  or  observance of any of
the terms,  covenants or  conditions of this  Agreement,  the Notes or any other
Loan  Document  on the part of the  Parent or the  Borrower  or to  inspect  the
property (including the books and records) of the Parent, the Borrower or any of
their  Subsidiaries;  (iii) except as otherwise  provided in this Article  VIII,
shall not be responsible to any Lender, any Participant or the Board for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement, the Notes or any other Loan Document, or any other instrument
or document furnished pursuant thereto;  and (iv) shall incur no liability under
or in respect to this Agreement,  the Notes or any other Loan Document by acting
upon any notice, consent,  certificate or other instrument or writing (which may
be by telegram,  facsimile transmission,  cable or telex) in good faith believed
by it to be genuine and signed or sent by the proper party or parties.

     (c) IN NO EVENT  SHALL THE LOAN  ADMINISTRATOR,  ITS  EMPLOYEES,  OFFICERS,
DIRECTORS,  AGENTS OR ITS  SUB-SERVICER  BE LIABLE FOR  CONSEQUENTIAL,  SPECIAL,
INDIRECT, INCIDENTAL,  PUNITIVE OR EXEMPLARY DAMAGES, COSTS, EXPENSES, OR LOSSES
(INCLUDING,  WITHOUT  LIMITATION,  LOST  PROFITS  AND  OPPORTUNITY  COSTS).  THE
LENDERS,  THE PARTICIPANTS AND THE BOARD AGREE THAT THE LOAN ADMINISTRATOR,  ITS
EMPLOYEES,  OFFICERS, DIRECTORS, AGENTS AND ITS SUB-SERVICER SHALL NOT BE LIABLE
TO THE LENDERS, THE PARTICIPANTS AND THE BOARD FOR ANY ACTIONS, DAMAGES, CLAIMS,
LIABILITIES,  COSTS, EXPENSES OR LOSSES IN ANY WAY ARISING OUT OF OR RELATING TO
THE PERFORMANCE OR NONPERFORMANCE OF SERVICES  HEREUNDER OR UNDER ANY OTHER LOAN
DOCUMENT FOR AN AGGREGATE AMOUNT IN EXCESS OF THE FEES PAID BY THE LENDERS,  THE
PARTICIPANTS AND THE BOARD TO THE LOAN  ADMINISTRATOR IN PERFORMING THE SERVICES
DESCRIBED HEREIN.  NO TERMS OF THIS AGREEMENT,  OR ANY OTHER LOAN DOCUMENT SHALL
BENEFIT  OR CREATE ANY RIGHT OR CAUSE OF ACTION IN OR ON BEHALF OF ANY PERSON OR
ENTITY OTHER THAN THE LENDERS, THE PARTICIPANTS AND THE BOARD. THE PROVISIONS OF
THIS SUBSECTION  SHALL APPLY  REGARDLESS OF THE FORM OF ACTION,  DAMAGE,  CLAIM,
LIABILITY,   COST,  EXPENSE,  OR  LOSS,  WHETHER  IN  CONTRACT,   STATUTE,  TORT
(INCLUDING, WITHOUT LIMITATION, NEGLIGENCE), OR OTHERWISE.

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<PAGE>

     Section 8.3. Indemnification.  The Borrower, the Parent and each Requesting
Party (other than the Board) agrees to indemnify the Loan  Administrator and its
directors, officers, employees, advisors,  sub-servicer and representatives from
and against any and all costs, losses, liabilities,  claims, damages or expenses
(excluding  Taxes)  which may be incurred by or asserted or awarded  against the
Loan  Administrator  in any  way  relating  to or  arising  out of the  services
provided  by the Loan  Administrator  on  behalf of and at the  request  of such
Requesting  Party in  connection  with this  Agreement  or any  action  taken or
omitted  by the Loan  Administrator  under  this  Agreement  or any  other  Loan
Document  or both on  behalf of and at the  request  of such  Requesting  Party;
provided,  that none of the Borrower,  the Parent,  any Requesting  Party or the
Govco  Administrative Agent shall be liable for any portion of such liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses  or  disbursements   resulting  from  the  Loan  Administrator's  gross
negligence or willful  misconduct.  Without limitation of the foregoing,  and to
the  extent  that the  Loan  Administrator  is not  reimbursed  therefor  by the
Borrower  under any Loan  Document,  any  Requesting  Party  requesting the Loan
Administrator to take any action hereunder on its behalf agrees to reimburse the
Loan Administrator  promptly upon demand (but in all events within 30 days after
written  request)  for any and all  fees of the Loan  Administrator,  reasonable
out-of-pocket  costs and expenses  (including counsel fees) incurred by the Loan
Administrator  in connection  with the  performance  of the  requested  services
requested  by such  Requesting  Party  hereunder  and under the Loan  Documents.
Except as provided in the  preceding  sentence  regarding  reimbursement,  in no
event shall the Board be obligated to indemnify the Loan Administrator or any of
its directors, officers, employees, advisors, representatives or any other party
under any circumstances.

     Section 8.4.  Successor  Loan  Administrator.  The Loan  Administrator  may
resign at any time by giving 30 days prior written  notice thereof to the Agent,
the Lenders,  the Participants and the Board and may be removed at any time with
or without cause by the Requisite Lenders and the Board; provided, however, that
the  Loan  Administrator  shall  continue  to  perform  all  Loan  Administrator
functions  hereunder  until a  successor  Loan  Administrator  shall  have  been
appointed.  Upon any such  resignation or removal,  the Requisite  Lenders shall
have  the  right  to  appoint  a  successor  Loan   Administrator,   subject  to
confirmation  by the  Board.  If no  successor  Loan  Administrator  shall  have
accepted   such   appointment   within   120  days  after  the   retiring   Loan
Administrator's  giving of  notice of  resignation  or the  removal  of the Loan
Administrator, the Loan Administrator may appoint a successor Loan Administrator
who shall be willing to accept  such  appointment.  Upon the  acceptance  of any
appointment as Loan Administrator  hereunder by a successor Loan  Administrator,
such successor Loan  Administrator  shall thereupon succeed to and become vested
with all the rights,  powers,  privileges  and duties of the retiring or removed
Loan  Administrator,  and the  retiring or removed Loan  Administrator  shall be
discharged  from its duties and  obligations  as Loan  Administrator  under this
Agreement.  After any Loan  Administrator's  resignation or removal hereunder as
Loan  Administrator  the  provisions  of this  Article  VIII shall  inure to its
benefit as to any  actions  taken or omitted to be taken by it while it was Loan
Administrator under this Agreement.

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     Section 8.5. Conflict of Interest.

     (a) The  parties  hereto  acknowledge  and agree  that (i) in  addition  to
serving as Loan Administrator  under this Agreement,  the Loan Administrator may
at any time and from time to time service, manage or enter into other commercial
arrangements with respect to other property,  loans and assets of the Agent, any
Lender or any participant (each a "Loan  Administrator  Relationship");  (ii) in
the course of  conducting  such  activities or the services to be provided by it
hereunder,  or both, the Loan Administrator may from time to time have conflicts
of  interest  by  virtue  of a Loan  Administrator  Relationship;  and (iii) the
parties hereto expressly recognize that such conflicts of interest may arise, do
hereby waive such conflicts and agree that when such conflicts of interest arise
the Loan Administrator shall perform the services to be provided by it hereunder
in a professional,  diligent and workmanlike fashion. The parties hereto and the
Participants  further acknowledge and agree that the Loan Administrator,  in its
capacity  as Loan  Administrator,  is not acting as an  Affiliate  of any of the
parties  hereto,  and the  performance of the Loan  Administrator's  obligations
hereunder  shall not affect any right or remedy  which the Agent,  any Lender or
any participant may have under any Loan Document, any participation or the Board
Guarantee.  Each Requesting Party expressly  acknowledges and agrees that at all
times it shall take such action or omit to take such action  hereunder  based on
its own independent analysis of the relevant transaction and attendant facts and
circumstances.

     (b) Notwithstanding any provision herein to the contrary,  if in connection
with the provision of services,  a conflict of interest shall exist that, in the
good  faith  opinion  of  the  Loan  Administrator,   requires  an  arm's-length
negotiation between the Loan Administrator, on the one hand, and any Person with
a Loan Administrator Relationship, on the other hand, and the Loan Administrator
believes it would not be appropriate for the Loan Administrator to act on behalf
of  the  Requesting  Party  in  connection  with  such  matter,  then  the  Loan
Administrator  shall  withdraw from acting as Loan  Administrator  in connection
with the matter  giving rise to such  conflict  of  interest  by giving  written
notice to the Requesting Party not more than ten (10) Business Days after it has
made such  determination.  In such event, the Requesting Party shall be entitled
to appoint an independent representative to act on its behalf and at its expense
for purposes of the matter  giving rise to such  conflict of  interest,  and the
Loan  Administrator  shall have no responsibility or liability to the Requesting
Party  with  respect  to such  matter.  During  the  period of such  independent
representative's  appointment,  the Loan Administrator shall continue to perform
its ordinary  functions as Loan Administrator to the extent that the performance
of the Loan  Administrator does not, in the reasonable opinion of the Requesting
Party,  directly or indirectly  affect the matter giving rise to the conflict of
interest.

     Section  8.6.  Representations,   Warranties  and  Covenants  of  the  Loan
Administrator.  The Loan Administrator hereby represents, warrants and covenants
with the Lenders and the Board as follows:

     (a) it is duly  incorporated  and  validly  existing  under the laws of its
jurisdiction of incorporation;

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     (b) it has the  corporate  power and  authority  to  execute,  deliver  and
perform its obligations  under this Agreement,  and this Agreement has been duly
authorized by it by all necessary corporate action;

     (c) no  authorization,  consent or approval of any Governmental  Authority,
regulatory  body  or  other  Person  is  required  for  the  due  authorization,
execution, delivery or performance by it of this Agreement;

     (d)  this  Agreement  has  been  duly  executed  and  delivered  by it  and
constitutes  a legal and binding  obligation  of it,  enforceable  against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,  moratorium or other similar laws now or
hereinafter  in effect,  relating to the  enforcement  of  creditors'  rights in
general and except as such  enforceability  may be limited by general principles
of equity (whether considered in a proceeding at law or in equity);

     (e) the  execution,  delivery and  performance by it of this Agreement does
not violate any  provision  of any existing  law or  regulation  or any material
agreement  to which it is  subject  or to which it is a party or  result  in the
creation of any Lien;

     (f) it has all corporate power and governmental  licenses,  authorizations,
and consents and approvals  required to carry on its business as now  conducted,
except where the failure to have such licenses, authorizations, and consents and
approvals would not have a material adverse effect on its ability to perform its
duties under this Agreement; and

     (g) it will maintain and implement administrative and operating procedures,
and  keep  and  maintain  all  documents,  books,  computer  records  and  other
information  reasonably  necessary  or  advisable  for  the  performance  of the
services to be provided by it hereunder.

                                   Article IX

                               THE FACILITY AGENTS

     Section 9.1. Authorization and Action. Each Lender and the Board (and, with
respect to clause (ii) only,  each  Participant)  hereby appoints and authorizes
(i) the Agent to take such action as  administrative  agent on its behalf and to
exercise  such  powers  under  this  Agreement,  the Notes  and the  other  Loan
Documents  as are  delegated  by such Lender and the Board to it as Agent by the
terms  hereof and thereof and (ii) the  Collateral  Agent to take such action as
collateral  agent on its behalf and to exercise  such powers  under the Security
Agreement as are delegated by such Lender,  such Participant and the Board to it
as  Collateral  Agent by the terms hereof and thereof,  together,  in each case,
with  such  powers  as are  reasonably  incidental  thereto  (the  Agent and the
Collateral  Agent are referred to in this Article IX individually as a "Facility
Agent" and  collectively,  as the "Facility  Agents"),  and each Facility  Agent

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hereby  accepts  such  authorization  and  appointment.  As to any  matters  not
expressly  provided for by this Agreement,  the Notes, the Security Agreement or
any other Loan Document or provided for with specific  reference to this Section
9.1  (including,  without  limitation,  enforcement or collection of the Notes),
neither  Facility Agent shall be required to exercise any discretion or take any
action,  but shall be  required  to act or to refrain  from acting (and shall be
fully protected in so acting or refraining from action) upon the instructions of
the Board or, if the Board Guarantee is no longer in full force and effect,  the
Requisite  Lenders  and such  instructions  shall be binding  upon all  Lenders;
provided,  however,  that neither  Facility  Agent shall be required to take any
action which  exposes such  Facility  Agent to liability or which is contrary to
this Agreement,  the Board Guarantee,  the Security Documents, any Participation
Agreement,  any Note or applicable  law. As to any provision of this  Agreement,
the  Security  Agreement  or any other Loan  Document  under which action may be
taken or approval  given by the  Requisite  Lenders or the Board or both, as the
case may be, the action taken or approval given by the Requisite  Lenders or the
Board  or both,  as the case may be,  shall  be  binding  upon all  Lenders  and
Participants  to the same  extent and with the same effect as if each Lender and
each  Participant had joined  therein.  Each Facility Agent shall be entitled to
rely upon any note, notice, consent,  certificate,  affidavit, letter, telegram,
teletype message,  facsimile transmission,  statement,  order, other document or
other instrument or writing believed by it to be genuine and correct and to have
been  signed or sent by the proper  person or persons  and,  in respect of legal
matters,  upon the opinion of counsel selected by such Facility Agent. The Agent
may deem and treat the payee of each Note as the owner  thereof for all purposes
hereof unless and until a written notice of the  assignment or transfer  thereof
shall have been filed with the Agent.  Any request,  authority or consent of any
Person  who at the time of making  such  request  or giving  such  authority  or
consent  is  the  holder  of a Note  shall  be  conclusive  and  binding  on any
subsequent  holder,  transferee or assignee of such Note. Subject to the proviso
contained in Section 9.7(b),  neither Facility Agent shall be required to expend
or risk any of its own funds or otherwise incur any financial or other liability
in the performance of any of its duties hereunder.

     Upon  any  delivery  of any  instructions  to the  Collateral  Agent by the
Requisite  Lenders  pursuant to this  Agreement,  the Agent shall certify to the
Collateral Agent that the Lenders  delivering such  instructions  constitute the
Requisite Lenders under this Agreement.

     Section 9.2. Facility Agents' Reliance, Etc. Neither Facility Agent nor any
of its directors,  officers,  agents or employees shall be liable to any Lender,
any  Participant,  the Loan  Administrator  or the Board for any action taken or
omitted to be taken by it or by such  directors,  officers,  agents or employees
under or in connection with this Agreement, any Note or any other Loan Document,
except for its or their own gross  negligence or willful  misconduct as actually
and  finally  determined  by a  final,  non-appealable  judgment  of a court  of
competent  jurisdiction and only to the extent of direct (as opposed to special,
indirect,   consequential  or  punitive)  damages.  Without  limitation  of  the
generality of the  foregoing,  each Facility  Agent:  (a) may consult with legal
counsel,  independent  public  accountants and other experts  selected by it and
shall not be liable to any Lender,  any Participant,  the Loan  Administrator or
the Board for any  action  taken or  omitted  to be taken in good faith by it in

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accordance  with  the  advice  of  such  experts;   (b)  makes  no  warranty  or
representation to any Lender, any Participant, the Loan Administrator or, except
as  expressly  provided  in the  Board  Guarantee,  the  Board  and shall not be
responsible to any Lender, any Participant, the Loan Administrator or, except as
expressly  provided  in the  Board  Guarantee,  the  Board  for any  statements,
warranties or representations (whether oral or written) made in or in connection
with this Agreement, any Note or any other Loan Document; (c) shall not have any
duty,  and shall incur no liability for its failure,  to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of this Agreement, any Note or any other Loan Document on the part of the Parent
or the Borrower or to inspect the property  (including the books and records) of
the Parent, the Borrower or any of their respective Subsidiaries;  (d) shall not
be responsible to any Lender,  any  Participant,  the Loan  Administrator or the
Board for the due execution,  legality, validity,  enforceability,  genuineness,
sufficiency or value of this Agreement,  any Note or any other Loan Document, or
any other instrument or document furnished pursuant thereto;  (e) shall incur no
liability  under or in  respect  to this  Agreement,  any Note or any other Loan
Document  by acting  upon any note,  notice,  consent,  certificate,  affidavit,
letter, telegram, teletype message, facsimile transmission,  statement, order or
other instrument or writing (which may be by telegram,  facsimile  transmission,
cable or telex)  believed  by it to be genuine  and signed or sent by the proper
party or  parties;  and (f) may deem and treat each  Lender  which  makes a loan
hereunder as the holder of the indebtedness resulting therefrom for all purposes
hereof  until the Agent  receives  and  accepts  an  Assignment  and  Acceptance
Agreement entered into by such Lender, as assignor,  and an eligible assignee as
provided in Section 10.2 hereof.

     Section  9.3.  Facility  Agents  and  Affiliates.  If and so long as either
Facility  Agent shall remain a Lender,  such Facility  Agent shall have the same
rights and powers under this  Agreement as any other Lender and may exercise the
same rights and powers under this Agreement as any other Lender and may exercise
the same as  though  it were not a  Facility  Agent;  and the term  "Lender"  or
"Lenders" shall,  unless otherwise  expressly  indicated,  include such Facility
Agent in its individual  capacity.  Unrelated to its role as a Facility Agent as
set forth herein,  each Facility Agent and its  affiliates  may accept  deposits
from, lend money to, act as trustee under indentures of, and generally engage in
any kind of business with,  the Borrower,  the Parent,  any of their  respective
Subsidiaries  and any Person who may do business  with or own  securities of the
Borrower,  all as if it were not a Facility Agent hereunder and without any duty
to account therefor to the Lenders.

     Section 9.4.  Representations of the Lenders and of the Board. Each Lender,
each Participant,  the Loan  Administrator and the Board has actively engaged in
the  negotiation of all of the terms of this  Agreement.  The Board has met with
the  Borrower  and the  Parent  to  discuss  the  business,  affairs,  financial
condition and prospects of the Borrower.  Neither Facility Agent has any duty or
responsibility,  either  initially  or on a  continuing  basis,  to provide  any
Lender, any Participant,  the Loan Administrator or the Board with any credit or
other  information  with  respect  to  the  Borrower  whether  coming  into  its
possession  as of the date of this  Agreement or at any time  thereafter,  or to
notify any Lender,  any Participant,  the Loan Administrator or the Board of any
Event of Default  except as provided in Section 9.5 hereof.  This  Agreement and
all  instruments or documents  delivered in connection  with this Agreement have

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<PAGE>

been  reviewed  and  approved  by  each  Lender,  each  Participant,   the  Loan
Administrator and the Board and none of the Lenders, the Participants,  the Loan
Administrator nor the Board have relied on any Facility Agent as to any legal or
factual matter in connection  therewith or in connection  with the  transactions
contemplated thereunder.

     Section 9.5. Events of Default; Termination of Board Guarantee.

     (a) In the event of the occurrence of any Default or Event of Default,  any
Lender,  any  Participant or the Board knowing of such event may (but shall have
no duty to), or the Borrower  pursuant to Section  5.1(b)(v) hereof shall,  give
the Agent  written  notice  specifying  such Event of Default or other event and
expressly stating that such notice is a "notice of default". The Agent shall not
be deemed to have  knowledge of such events  unless the Agent has received  such
notice,  or unless  the Event of  Default  consists  of a failure  of payment of
principal or interest on the Notes.  In the event that the Agent receives such a
notice of the  occurrence  of an Event of Default,  the Agent shall give written
notice thereof to the Collateral Agent, the Lenders, the Participants,  the Loan
Administrator  and the Board.  Each  Facility  Agent shall take such action with
respect to such Default or Event of Default as shall be  reasonably  directed in
writing by the Board or, if the Board  Guarantee  is no longer in full force and
effect,  the  Requisite  Lenders,  subject to the  provisions  of  Section  9.6;
provided,  however,  that,  unless  and until  such  Facility  Agent  shall have
received such  directions,  such Facility  Agent may (but shall not be obligated
to) take such action,  or refrain from taking such action,  with respect to such
Event of Default  as it shall deem  advisable  and in the best  interest  of the
Lenders and of the Board and shall incur no liability  for acting or  refraining
to act in such manner  except for such  Facility  Agent's  gross  negligence  or
willful  misconduct  as actually and finally  determined by a court of competent
jurisdiction and only to the extent of direct (as opposed to special,  indirect,
consequential or punitive) damages.

     (b) In the event the Agent  shall  receive any notice from the Board to the
effect that (i) the Board has the right to terminate the Board  Guarantee  under
Section 2.05 thereof,  (ii) any portion of the Board  Guarantee  has  terminated
under Section 2.04 thereof or otherwise,  or (iii) the Board Guarantee shall for
any reason  have  ceased to be in full force and effect or the Board  shall have
asserted that any of its obligations thereunder is invalid or unenforceable, the
Agent shall promptly give written notice thereof to the Collateral Agent and the
Lenders.  The Agent  shall not be deemed  to have  knowledge  of any such  event
unless the Agent has received such notice (except if any such event results from
the  failure  of the Agent to  perform  any of its  obligations  under the Board
Guarantee).

     Section  9.6.  Facility  Agents'  Right to  Indemnity.  Except  for  action
expressly  required of a Facility Agent hereunder without  instructions from any
Person,  each Facility Agent shall be fully  justified in failing or refusing to
take any action  hereunder  on behalf of any Lender or the Board unless it shall
first be  indemnified  to its  satisfaction  by such  Person  (or any  affiliate
thereof) or the Board,  as the case may be,  against any and all  liability  and
expense  which may be incurred by it by reason of taking or  continuing  to take
any such action.

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     Section 9.7. Indemnification of Facility Agents.

     (a)  The  Lenders  (other  than  the  Primary  Tranche  A  Lender)  and the
Participants  hereby agree to indemnify each Facility Agent and all  affiliates,
directors,  officers,  employees,  advisors and representatives  thereof (to the
extent  not  reimbursed  by  the  Borrower),  ratably  in  accordance  with  the
Obligations  owed  thereto  as  most  recently  in  effect  prior  to  the  date
indemnification  is  sought,  from  and  against  any  and  all  costs,  losses,
liabilities, claims, damages or expenses which may be incurred by or asserted or
awarded  against  such  Facility  Agent in any way relating to or arising out of
this  Agreement,  the Notes or the other Loan  Documents  or any action taken or
omitted by such Facility Agent under this Agreement, the Notes or the other Loan
Documents;  provided,  that the Lenders and the Participants shall not be liable
for any portion of such liabilities,  obligations,  losses, damages,  penalties,
actions,  judgments,  suits, costs, expenses or disbursements resulting from any
Facility Agent's gross negligence or willful  misconduct as actually and finally
determined  by  a  final,  non-appealable  judgment  of  a  court  of  competent
jurisdiction and only to the extent of direct (as opposed to special,  indirect,
consequential or punitive) damages.  Without  limitation of the foregoing,  each
Lender (other than the Primary Tranche A Lender) and each Participant  agrees to
reimburse  each Facility Agent promptly upon demand for its ratable share of any
out-of-pocket  expenses (including counsel fees) incurred by such Facility Agent
in connection with the administration, or enforcement of, or the preservation of
any rights under, this Agreement,  the Notes or the other Loan Documents, to the
extent  that such  Facility  Agent is not  reimbursed  for such  expenses by the
Borrower.

     (b) In addition,  in the event that the Board or the Requisite  Lenders (as
the case may be)  instructs the  Collateral  Agent to take any action under this
Agreement or the Security Documents which requires the payment or advancement of
funds in  connection  with  the  fulfillment  of its  obligations  hereunder  or
thereunder,  the Requisite Lenders or the Board (as the case may be) shall, upon
demand,  advance to the  Collateral  Agent the  necessary  funds to satisfy  the
Collateral Agent's obligations hereunder and thereunder and the Collateral Agent
shall have no  obligation,  and shall incur no  liability  for its  failure,  to
execute such  instruction(s)  prior to the  Collateral  Agent's  receipt of such
funds;  provided,  however, that prior to the occurrence of an Event of Default,
the Collateral  Agent shall not seek the  advancement of funds from the Board or
the Requisite  Lenders prior to the  performance of the requested  action if the
amount required to perform such action is less than $10,000.


     Section 9.8. Successor Facility Agents.

     (a) Each  Facility  Agent may resign at any time by giving  written  notice
thereof to the  Lenders,  the Board and the  Borrower  and may be removed at any
time with cause (or,  following the Board's  honoring of a demand for payment in
accordance with the Board Guarantee,  without cause) by the Board. Upon any such
resignation or removal, the Borrower shall have the right with the prior written
consent of the Board and the Requisite  Lenders to appoint a successor  Facility
Agent.  If no successor  Facility  Agent shall have  accepted  such  appointment
within  30 days  after  the  retiring  Facility  Agent's  giving  of  notice  of
resignation  or the Board's  removal of such Facility  Agent,  the Board and the

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Requisite Lenders shall have the right to appoint a successor Facility Agent who
shall be  willing  to  accept  such  appointment.  In any event  such  successor
Facility Agent shall be a commercial bank organized under the laws of the United
States of America or of any State thereof and shall have a combined  capital and
surplus of at least $1,000,000,000.  Upon the acceptance of any appointment as a
Facility Agent hereunder by a successor  Facility Agent, such successor Facility
Agent shall thereupon succeed to and become vested with all the rights,  powers,
privileges  and  duties of the  retiring  or  removed  Facility  Agent,  and the
retiring  or removed  Facility  Agent  shall be  discharged  from its duties and
obligations  as agent  under this  Agreement  or as  collateral  agent under the
Security  Agreement,  as the case may be. After any Facility Agent's resignation
or removal hereunder as a Facility Agent the provisions of this Article IX shall
inure to its benefit as to any actions  taken or omitted to be taken by it while
it was a Facility Agent under this Agreement or the Security  Agreement,  as the
case may be.

     (b) Any  corporation  into  which  either  Facility  Agent may be merged or
converted or with which it may be  consolidated,  or any  corporation  resulting
from any merger,  conversion or  consolidation  to which either  Facility  Agent
shall be a party,  or any  corporation  succeeding  to the  business  of  either
Facility  Agent,  provided that such  corporation is a commercial bank organized
under the laws of the United  States of America or any State  thereof  and has a
combined capital and surplus of at least $1,000,000,000,  shall be the successor
of such Facility  Agent  hereunder  without the execution or filing of any paper
with any  party  hereto  or any  further  act on the part of any of the  parties
hereto  except where an  instrument of transfer or assignment is required by law
to effect such succession.


     Section 9.9. Collateral Agent's Further Protections

     (a) Neither this  Agreement nor the Security  Agreement  shall be deemed to
give, either express or implied,  any legal or equitable right, remedy, or claim
to any other  entity or person  whatsoever  except as  provided  in Section  9.8
hereof with respect to the resignation of either Facility Agent.

     (b) If at any time the  Collateral  Agent is served  with any  judicial  or
administrative  order,  judgment,  decree,  writ or other  form of  judicial  or
administrative  process which in any way affects the  Collateral  (including but
not limited to orders of attachment or  garnishment  or other forms of levies or
injunctions or stays relating to the transfer of the Collateral), the Collateral
Agent is  authorized  to comply  therewith in any manner the  Collateral  Agent,
acting in a commercially  reasonable  manner or in accordance with the advice of
legal counsel of the Collateral Agent's own choosing deems  appropriate;  and if
the Collateral  Agent complies with any such judicial or  administrative  order,
judgment,  decree, writ or other form of judicial or administrative process, the
Collateral  Agent  shall not be liable  to any of the  parties  hereto or to any
other person or entity even though such order, judgment, decree, writ or process
may be  subsequently  modified or vacated or otherwise  determined  to have been
without  legal  force or  effect.  The  Collateral  Agent  shall have no duty to
solicit the Collateral.

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     (c) In no event  shall the  Collateral  Agent be liable  (i) for  acting in
accordance with or relying upon any instruction,  notice, demand, certificate or
document  from the Board,  the Requisite  Lenders or the Borrower,  (ii) for the
acts or omissions of its nominees, correspondents,  designees, agents, subagents
or  subcustodians,  (iii) for the investment or reinvestment of any cash held by
it hereunder,  in each case in good faith,  in accordance with the terms hereof,
including  without  limitation any liability for any delays in the investment or
reinvestment  of the  Collateral,  or any loss of interest  incident to any such
delays and (iv) for any action taken or omitted or any loss or injury  resulting
from  its  actions  or its  performance  or lack of  performance  of its  duties
hereunder,  in  each  case,  in the  absence  of  gross  negligence  or  willful
misconduct on its part.

     (d) The  Collateral  Agent shall not incur any liability for not performing
any act or fulfilling any duty, obligation or responsibility hereunder by reason
of any occurrence  beyond the control of the Collateral Agent (including but not
limited to any act or  provision of any present or future law or  regulation  or
governmental authority,  any act of God, terrorism or war, or the unavailability
of the Federal  Reserve Bank wire or  facsimile  or other wire or  communication
facility).

     (e) The  Collateral  Agent shall not be  responsible in any respect for the
form,  execution,  validity,  value or  genuineness  of documents or  securities
deposited  hereunder,  or for any  description  therein,  or for  the  identity,
authority or rights of persons  executing or delivering or purporting to execute
or deliver any such document,  security or  endorsement.  The  Collateral  Agent
shall not be called  upon to advise  any party as to the  wisdom in  selling  or
retaining or taking or refraining from any action with respect to any securities
or other property deposited hereunder.

     (f) In the  event  of any  ambiguity  or  uncertainty  hereunder  or in any
notice,  instruction or other  communication  received by the  Collateral  Agent
hereunder, the Collateral Agent may, in its sole discretion, refrain from taking
any  action  other  than to retain  possession  of the  Collateral,  unless  the
Collateral Agent receives written  instructions,  signed by the Borrower and the
Board (or if the Board Guarantee is no longer in effect, the Requisite Lenders),
which eliminates such ambiguity or uncertainty.

     (g) The  Collateral  Agent  does not have any  interest  in the  Collateral
deposited  hereunder  but is serving as  Collateral  holder only and having only
possession  thereof.  The Borrower shall pay or reimburse the  Collateral  Agent
upon request for any transfer  taxes or other taxes  relating to the  Collateral
incurred in connection  with its duties as Collateral  Agent hereunder and shall
indemnify  and hold  harmless the  Collateral  Agent from any amounts that it is
obligated  to pay in the way of such  taxes.  Any  payments  of income  from any
Collateral  account shall be subject to  withholding  regulations  then in force
with respect to United  States taxes.  The Obligors will provide the  Collateral
Agent with  appropriate W-9 forms for tax I.D.,  number  certifications,  or W-8
forms for  non-resident  alien  certifications.  This  paragraph  shall  survive
notwithstanding  any termination of this Agreement or the Security  Agreement or
the resignation or removal of the Collateral Agent.

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     (h)  Notwithstanding  anything  contained  herein to the contrary,  (i) the
Collateral Agent does not assume any  responsibility  and shall not be deemed to
have  assumed any  responsibility,  either  express or  implied,  to monitor the
compliance  by  the  Borrower  with  any  statement,  representation,  covenant,
agreement,  or  undertaking  provided for in the Loan  Documents,  including the
Security  Documents,  or to  monitor or verify the  accuracy  of any  statement,
representation,  covenant, agreement, or undertaking made by the Borrower in any
documents,  certificates,  or instruments  delivered by the Borrower pursuant to
the  terms  of  this  Agreement  or any  of the  Security  Documents,  (ii)  the
Collateral  Agent shall be authorized  to rely upon,  and to act or refrain from
acting, in accordance with the terms of the Security  Documents in reliance upon
any certificate or instrument submitted to it and certified by an officer of the
Borrower  in  circumstances  in  which  the  delivery  or  such  certificate  or
instrument  is  contemplated  by the  terms of this  Agreement  or the  Security
Documents,  (iii) the Collateral  Agent does not assume any  responsibility  and
shall  not be deemed to have  assumed  any  responsibility,  either  express  or
implied, to inspect any of the Collateral, to observe any maintenance or repairs
in respect  thereof,  or to pay any  expenses  incurred in  connection  with any
inspection  of the  Collateral  or  observation  of the  maintenance  or repairs
and(iv) the  Collateral  Agent may assume  without  inquiry,  and shall incur no
liability  with such  assumption,  that the Borrower has performed and fulfilled
its  obligations  under this  Agreement  and the  Collateral  Agent shall not be
charged with notice or knowledge of any Default or any Event of Default,  unless
written  notice  of any  such  event  is  received  by the  Collateral  Agent in
accordance with the terms of this Agreement.

     (i)  Notwithstanding  anything contained herein or in any of the other Loan
Documents to the contrary, the parties hereto acknowledge and agree that (i) any
of  the  acknowledgements,  consents,  agreements  and  statements  made  by the
Collateral  Agent in respect of the  Collateral  in the  exercise  of its duties
under the Security Documents are being made as directed agent for, and on behalf
and at the request of, the Lenders and the Board and that such acknowledgements,
consents,  or agreements are being made without  independent  investigation  and
without  liability  as a  principal,  (ii) the  Collateral  Agent  shall have no
obligation,  and shall incur no liability for its failure,  to monitor or verify
the  filing  of  UCC  financing  statements  (or  amendments  thereto)  and  the
information  contained  therein and (iii) the  provisions of the Loan  Documents
which empower  and/or entitle the  Collateral  Agent to take action,  to refrain
from taking action,  or to request the taking or refraining  from taking action,
with  respect to the  Collateral  shall not  impose,  and shall not be deemed to
impose,  on the  Collateral  Agent an obligation to act  independently  from the
instructions  of the Lenders  and/or the Board or to monitor  the  contingencies
that may give rise to the exercise of such power or entitlement.

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                                   Article X

                                  MISCELLANEOUS

     Section 10.1. Amendments, Waivers, Etc.

     (a) No amendment, modification or waiver of any provision of this Agreement
or any  other  Loan  Document  nor  consent  to any  departure  by the  Obligors
therefrom  shall in any event be  effective  unless the same shall be in writing
and, with respect to any such amendment or modification, signed by the Obligors,
and with respect to any such amendment,  modification,  waiver or consent (i) so
long as the Board Guarantee is in full force and effect,  signed by the Board or
(ii) if the Board  Guarantee  is no longer in  effect,  signed by the  Requisite
Lenders,  and then any such  waiver or consent  shall be  effective  only in the
specific  instance  and for the  specific  purpose  for which  given;  provided,
however, that

     (i) no amendment,  modification, waiver or consent shall, unless in writing
and signed by each Lender, do any of the following:

     (A) subject the Lenders or the Participants to any additional obligations;

     (B) change the scheduled  final  maturity of the Loan, or change the amount
or date for payment of any date fixed for the payment or reduction of principal;

     (C) change the  principal  amount of the Loan (other than by the payment or
prepayment thereof);

     (D) change the rate of interest on the Loan or any fee,  indemnity or other
amount payable to such Person;

     (E) change any date fixed for payment of such interest,  indemnity or other
amount or fees;

     (F) release all or any portion of the Collateral with a material Collateral
Value (other than upon any sale or other  disposition  thereof  permitted  under
this Agreement or the Security Agreement);

     (G) amend the definition of "Requisite Lenders" or this Section 10.1(a);

     (H) modify the application of payments to the Loan under Section 2.9; and

     (I) amend or modify any  provision  of  Articles II and IX,  Sections  5.1,
5.10, 5.11,  5.12, 5.14, 5.17, 6.14, 10.1, 10.2, 10.3, 10.4, 10.6, 10.7,  10.10,
10.11,  10.12, 10.13, 10.16, 10.18, 10.19 and 10.20 or any of the definitions as
relevant thereto; and

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     (ii) no amendment or  modification  of any  provision of Article VII (other
than  amendments to add Events of Default) shall be effective  unless in writing
and signed by the Requisite Lenders;

and provided, further, that no amendment, modification, waiver or consent shall,
unless in writing and signed by the affected  Facility  Agent in addition to the
Persons  required  above to take such  action,  affect  the  rights or duties of
either  Facility  Agent  under this  Agreement,  the other Loan  Documents,  any
Participation Agreement or the Board Guarantee.

     (b) The Agent  may,  but shall  have no  obligation  to,  with the  written
concurrence  of  any  Lender,  execute  amendments,  modifications,  waivers  or
consents on behalf of that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on the  Obligors in any case shall  entitle the  Obligors to
any other or further notice or demand in similar or other circumstances.

     (c) Notwithstanding  anything herein to the contrary, in the event that the
Obligors shall have requested  each of the Lenders,  in writing,  to agree to an
amendment,  modification,  waiver or  consent  with  respect  to any  particular
provision or provisions  hereof, and any such Lender shall have failed to state,
in writing,  that it either  agrees or disagrees  (in full or in part) with such
request (in the case of its  statement  of  agreement,  subject to  satisfactory
documentation  and such other  conditions it may specify) within 30 days of such
request,  then such Lender hereby  irrevocably  authorizes the Agent to agree or
disagree,  in full or in  part,  and in the  Agent's  sole  discretion,  to such
requests  on behalf  of such  Lender as such  Lender's  attorney-in-fact  and to
execute  and deliver any  writing  approved  by the Agent which  evidences  such
agreement as such Lender's duly authorized agent for such purposes.

     (d) In  connection  with any proposed  amendment,  modification,  waiver or
termination (a "Proposed Change") requiring the consent of all affected Lenders,
if the consent of the  Requisite  Lenders is obtained,  but the consent of other
Lenders whose consent is required is not obtained (any such Lender whose consent
is not  obtained  as  described  in this  Section  10.1 being  referred  to as a
"Non-Consenting  Lender"),  then,  so long as the  Lender  that is acting as the
Agent is not a Non-Consenting Lender, at the Borrower's request, the Agent or an
Eligible  Lender  that is  acceptable  to the Agent and the Board shall have the
right with the Agent's  consent and in the Agent's  sole  discretion  (but shall
have no  obligation)  to  purchase  from such  Non-Consenting  Lender,  and such
Non-Consenting  Lender agrees that it shall, upon the Agent's request,  sell and
assign to the Lender that is acting as the Agent or such Eligible Lender, all of
the portion of the Loan of such Non-Consenting Lender for an amount equal to the
principal balance of such portion of the Loan held by the Non-Consenting  Lender
and all accrued interest and fees with respect thereto through the date of sale,
such purchase and sale to be consummated  pursuant to an executed Assignment and
Acceptance.

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     Section 10.2. Assignments and Participations.

     (a) Each Lender may sell, transfer,  negotiate or assign either in whole or
in part to one or more Eligible Lenders its rights and obligations hereunder and
under the Notes and the other Loan  Documents  without the prior  consent of the
Obligors but, except as otherwise provided in Section 10.2(d), with the consent,
not to be unreasonably withheld, of the Agent, and the prior written approval of
the Board (such  consent,  in the case of an  assignment  to an Affiliate of any
Lender that is an Eligible Lender, not to be unreasonably  withheld);  provided,
that (i) the assigning  Lender shall give prompt written notice to the Agent and
the  Board of the  terms of and the  parties  to any such  assignment,  (ii) the
proposed assignee shall provide to the Agent and the Board all documentation and
certificates  as  required  by the Agent and the Board to confirm to the Agent's
and the Board's  satisfaction that such proposed assignee is an Eligible Lender,
and (iii) the Borrower  will not be  obligated  to pay any greater  amount under
Section 2.10(c) or Section 2.12(a) (in respect of increased costs or Indemnified
Taxes  imposed  pursuant  to  applicable  law in  effect  on the  date  of  such
assignment)  to the assignee  than the Borrower is then  obligated to pay to the
assigning Lender under such Sections; provided, however, that the consent of the
Board shall not be required for any assignment  which occurs after the Board has
been  reimbursed in full for all payments under the Board Guarantee or the Board
Guarantee  shall have  terminated.  Notwithstanding  the  foregoing  the Primary
Tranche A Lender may assign its rights and  obligations  hereunder and under the
Tranche A Note to the  Alternate  Tranche A Lender  without the prior consent of
any party to this Agreement or any other Loan Document.


     Without  prejudice to any restrictions or limitations in the  Participation
Agreements or any other Loan Document,  each  Participant may sell,  transfer or
assign  either  in whole  or in part to one or more  Eligible  Participants  its
rights and obligations  hereunder and the other Loan Documents without the prior
consent of the Obligors but with the consent,  not to be unreasonably  withheld,
of the Agent, and the prior written approval of the Board (such consent,  in the
case of an  assignment  to an Affiliate of any  Participant  that is an Eligible
Participant, not to be unreasonably withheld);  provided, that (i) the assigning
Participant  shall give prompt  written notice to the Agent and the Board of the
terms of and the  parties to any such  assignment,  (ii) the  proposed  assignee
shall provide to the Agent and the Board all  documentation  and certificates as
required  by the Agent and the Board to confirm to the  Agent's  and the Board's
satisfaction that such proposed assignee is an Eligible  Participant,  and (iii)
the  Borrower  will not be obligated  to pay any greater  amount  under  Section
2.10(c) or Section 2.12(a) (in respect of increased  costs or Indemnified  Taxes
imposed  pursuant to applicable law in effect on the date of such assignment) to
the  assignee  than  the  Borrower  is then  obligated  to pay to the  assigning
Participant  under such  Sections;  provided,  however,  that the consent of the
Board shall not be required for any assignment  which occurs after the Board has
been  reimbursed in full for all payments under the Board Guarantee or the Board
Guarantee shall have terminated.

     (b) The parties to each assignment  shall execute and deliver to the Agent,
for  its  acceptance  and  recording,  an  Assignment  and  Acceptance,  and the
assignee,  if a Non-U.S.  Person, shall deliver to the Borrower and the Agent on
or prior to the date of the assignment,  two completed copies of either IRS Form


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W-8BEN or W-8ECI or other applicable form,  certificate or document  required to
satisfy the  requirements  of Section 2.12.  Upon such  execution,  delivery and
acceptance  and the receipt by the Agent of an  assignment  fee in the amount of
$10,000  (except  that so long as Citibank,  N.A. is the Agent,  no fee shall be
payable in connection  with any assignment to any affiliate of Citibank,  N.A.),
the Agent shall record such  Assignment  and  Acceptance  and from and after the
effective  date  specified in such  Assignment  and  Acceptance (i) the assignee
thereunder of all or any portion of the Loan shall become a party hereto and, to
the  extent  that  rights and  obligations  under the Loan  Documents  have been
assigned to such assignee  pursuant to such Assignment and Acceptance,  have the
rights and  obligations of a Lender and (ii) the assignor  thereunder  shall, to
the extent that rights and  obligations  under this Agreement have been assigned
by it pursuant to such Assignment and Acceptance,  relinquish its rights (except
those which survive the payment in full of the Obligations) and be released from
its obligations under the Loan Documents, other than those relating to events or
circumstances  occurring  prior  to  such  assignment  (and,  in the  case of an
Assignment and Acceptance  covering all or the remaining portion of an assigning
Lender's  rights and  obligations  under the Loan  Documents,  such Lender shall
cease to be a party hereto).

     (c) Upon  its  receipt  of an  Assignment  and  Acceptance  executed  by an
assigning  Lender and an  assignee,  the Agent  shall,  if such  Assignment  and
Acceptance has been completed,  (i) accept such Assignment and Acceptance,  (ii)
record the  information  contained  therein in the  Register,  (iii) give prompt
notice  thereof to the Borrower and (iv) give prompt written notice of the terms
of and parties to any such assignment to the Board.

     (d) In addition to the other  assignment  rights  provided in this  Section
10.2,  each Lender may assign,  without the prior consent of the  Obligors,  the
Agent or the Board,  as collateral  or  otherwise,  any of its rights under this
Agreement to any Federal  Reserve Bank  pursuant to  Regulation A of the Federal
Reserve Board,  provided,  however,  that no such  assignment  shall release the
assigning Lender from any of its obligations hereunder.

     (e) Each Lender may, without the prior consent of the Obligors or any other
Person,  sell  participations in addition to the  Participations,  to the extent
permitted by the  Regulations  and except as provided in Section  5.04(b) of the
Board  Guarantee,  in or to  all or a  portion  of its  rights  and  obligations
hereunder and under any Note and the other Loan  Documents;  provided,  that (i)
neither  any  Note  nor the  Board  Guarantee  is  assigned,  conveyed,  sold or
transferred in whole or in part in connection with any  participation,  (ii) the
Board's  ability to assert any and all defenses  available to it under the Board
Guarantee and the law is not adversely  affected and (iii) the Borrower will not
be obligated to pay any greater amount under Section  2.10(c) or Section 2.12(a)
(in  respect  of  increased  costs or  Indemnified  Taxes  imposed  pursuant  to
applicable law in effect on the date of such  participation) to such participant
than the  Borrower is then  obligated  to pay to any selling  Lender  under such
Sections. In the event of the sale of any participation by any Lender, except as
otherwise  expressly  provided herein,  (A) such Lender's  obligations under the
Loan  Documents  shall remain  unchanged,  (B) such Lender  shall remain  solely

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responsible to the other parties for the  performance of such  obligations,  (C)
such Lender shall remain the holder of such Obligations for all purposes of this
Agreement, (D) the Agent, the Board and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations  under this Agreement,  and (E) each holder of such a participation,
if a Non-U.S.  Person, shall deliver to the Borrower, the Agent and such Lender,
on or prior to the date of the sale of the  participation,  two completed copies
of either IRS Form W-8BEN or W-8ECI or other  applicable  form,  certificate  or
document  required to satisfy the  requirements  of Section 2.12.  Any holder of
such a  participation  will be  entitled to the  benefits  of Sections  2.10(c),
2.10(f),  2.11 and 2.12 to the same  extent as if such Person were a Lender (but
subject to the restrictions of Section 2.12(i)).

     (f)  Without   prejudice  to  any   restrictions   or  limitations  in  the
Participation  Agreements  or any other Loan  Document,  each  Participant  may,
without  the  prior  consent  of the  Obligors,  the  Agent or the  Board,  sell
subparticipations  in respect of the Participations,  to the extent permitted by
the Regulations;  provided, that (i) neither any Note nor the Board Guarantee is
assigned,  conveyed,  sold or transferred in whole or in part in connection with
any  subparticipation,  (ii) the Board's  ability to assert any and all defenses
available to it under the Board Guarantee and the law is not adversely  affected
and (iii) the Borrower  will not be  obligated  to pay any greater  amount under
Section 2.10(c) or Section 2.12(a) (in respect of increased costs or Indemnified
Taxes  imposed  pursuant  to  applicable  law in  effect  on the  date  of  such
subparticipation)  to such subparticipant than the Borrower is then obligated to
pay to any selling Participant under such Sections.  In the event of the sale of
any subparticipation by any Participant,  except as otherwise expressly provided
herein, (A) such Participant's obligations under the Loan Documents shall remain
unchanged,  (B) such  Participant  shall remain solely  responsible to the other
parties for the  performance of such  obligations,  (C) such  Participant  shall
remain the  holder of the  applicable  Participation  for all  purposes  of this
Agreement,  (D) the Agent,  the Board and the  Lenders  shall  continue  to deal
solely and directly with such Participant in connection with such  Participant's
rights and  obligations  under  this  Agreement,  and (E) each  holder of such a
subparticipation, if a Non-U.S. Person, shall deliver to the Borrower, the Agent
and   such   Participant,   on  or  prior  to  the  date  of  the  sale  of  the
subparticipation,  two  completed  copies of either IRS Form W-8BEN or W-8ECI or
other  applicable  form,   certificate  or  document  required  to  satisfy  the
requirements of Section 2.12.

     Section  10.3.  Costs  and  Expenses.   Whether  or  not  the  transactions
contemplated hereby shall be consummated, the Obligors agree to pay promptly (i)
all costs and expenses  incurred by the Loan  Administrator,  the Lenders,  each
Participant,  the  Collateral  Agent  and  the  Agent  in  connection  with  the
negotiation,  preparation,  execution  and delivery of the Loan  Documents,  the
Board  Guarantee and all documents  (including,  without  limitation,  documents
required to be delivered  after the Closing Date under any provision of the Loan
Documents,   including,  without  limitation,  under  Section  2(b)(ii)  of  the
Participation  Agreements)  relating  thereto  (including,  without  limitation,
reasonable legal fees and expenses), (ii) all costs and expenses incurred by the
Loan Administrator,  the Lenders, the Participants,  any other participant,  the
Collateral  Agent and the Agent in  connection  with any  consents,  amendments,
waivers or other modifications hereto or thereto (including, without limitation,

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reasonable  legal fees and expenses),  (iii) all costs and expenses  incurred by
the Agent in connection  with the syndication of the Loan (if any), and (iv) all
costs and  expenses,  including,  without  limitation,  legal fees and  expenses
incurred  by  the  Agent,   the  Collateral   Agent,   the  Lenders,   the  Loan
Administrator,  each  Participant  and any other  participant  in enforcing  any
Obligations  of, or in collecting any payments due from, the Obligors  hereunder
or under the other Loan Documents  (including  without  limitation the costs and
expenses  contemplated  under  Section  4.02 of the  Security  Agreement)  or in
connection with the  administration,  or enforcement of, or the  preservation of
any rights under any Loan Document.

     Section 10.4.  Indemnities.  Whether or not the  transactions  contemplated
hereby shall be  consummated,  the Obligors  agree,  jointly and  severally,  to
defend,  indemnify,  pay and hold harmless the Board,  the Agent, the Collateral
Agent, the Lenders, the Participants,  the Govco Administrative  Agent, the Loan
Administrator and their respective Affiliates,  officers, directors,  employees,
agents and advisors (collectively called the "Indemnitees") from and against any
and  all  liabilities,   obligations,   losses,  damages,  penalties,   actions,
judgments,  suits,  claims,  costs,  expenses and  disbursements  of any kind or
nature  whatsoever   (including  without  limitation  the  reasonable  fees  and
disbursements of counsel for such  Indemnitees,  but excluding  Taxes),  whether
direct,  indirect or  consequential  and whether based on any federal,  state or
foreign laws,  statutes,  rules or  regulations  (including  without  limitation
securities and commercial laws,  statutes and rules or  regulations),  on common
law or  equitable  cause or on  contract or  otherwise,  that may be imposed on,
incurred by, or asserted against any such Indemnitee,  in any manner arising out
of this  Agreement,  the other Loan Documents or the  transactions  contemplated
hereby or thereby (including, without limitation, the use or intended use of the
proceeds of the Loan) or the syndication of the Loan or any statement  contained
in the  Application  or otherwise  made by or on behalf of either Obligor to the
Board or any breach or default by either  Obligor of any  provision  of the Loan
Documents  (collectively called the "Indemnified  Liabilities");  provided, that
neither  Obligor shall have any  obligation  to any  Indemnitee  hereunder  with
respect  to  any  Indemnified   Liabilities  to  the  extent  such   Indemnified
Liabilities  arise (i) from the gross  negligence or willful  misconduct of that
Indemnitee  (as  actually  and  finally  determined  by a final,  non-appealable
judgment  of a court of  competent  jurisdiction)  and only to the  extent  such
Indemnified  Liabilities  constitute  direct (as opposed to  special,  indirect,
consequential  or  punitive)  damages  or (ii)  constitute  ordinary  and  usual
operating or overhead expenses of an Indemnitee (excluding,  without limitation,
costs and expenses of any outside counsel,  consultant or agent).  To the extent
that the  undertaking to defend,  indemnify,  pay and hold harmless set forth in
the preceding  sentence may be unenforceable  because it is violative of any law
or public policy,  the Obligors shall  contribute the maximum  portion that they
are  permitted  to pay and  satisfy  under  applicable  law to the  payment  and
satisfaction of all Indemnified  Liabilities  incurred by the Indemnitees or any
of them. No Indemnitee shall have any liability (whether direct or indirect,  in
contract,  tort or otherwise) to either of the Obligors or any of their security
holders or creditors for or in  connection  with the  transactions  contemplated
hereby,  except  to  the  extent  such  liability  is  determined  by  a  final,
non-appealable  judgment of a court of competent  jurisdiction  to have resulted
primarily from such Indemnitee's gross negligence or willful  misconduct.  In no
event,  however,  shall any  Indemnitee be liable on any theory of liability for

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any special,  indirect,  consequential or punitive damages  (including,  without
limitation, any loss of profits, business or anticipated savings).

     Section 10.5. Right of Set-off.

     (a) In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights,  upon the occurrence and during
the continuance of any Event of Default, to the fullest extent permitted by law,
each  Lender is hereby  authorized  by the  Borrower at any time or from time to
time,  without  notice to the Borrower or to any other  Person,  any such notice
being hereby  expressly  waived,  to set off and to appropriate and to apply any
and  all  deposits  (general  or  special,   including,   but  not  limited  to,
Indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other  Indebtedness  at any time held or owing by that  Lender to or for
the  credit  or the  account  of the  Borrower  against  and on  account  of the
obligations and liabilities of the Borrower to that Lender under this Agreement,
the Notes,  and the other Loan  Documents,  including,  but not  limited to, all
claims of any  nature  or  description  arising  out of or  connected  with this
Agreement, the Notes, or any other Loan Document, irrespective of whether or not
(i) that Lender shall have made any demand hereunder or (ii) the principal of or
the interest on the Loan or any other  amounts due  hereunder  shall have become
due and payable  pursuant  to Section  7.2 and  although  said  obligations  and
liabilities, or any of them, may be contingent or unmatured.

     (b) If any fees, expenses or costs incurred by, or any obligations owed to,
the  Collateral  Agent or its counsel  hereunder are not promptly paid when due,
the Collateral  Agent may reimburse itself therefor from any cash held by it and
may sell,  convey or  otherwise  dispose of any  securities  held by it for such
purpose.  The  Collateral  Agent may in its sole  discretion  withhold  from any
distribution of Collateral an amount of Collateral it believes would,  upon sale
or  liquidation,  produce  proceeds  equal to any  unpaid  amounts  to which the
Collateral Agent is entitled to hereunder.

     Section 10.6.  Sharing of Payments,  Etc. The Lenders and the  Participants
(collectively  the  "Recipients")  hereby agree among  themselves that if any of
them shall, whether by voluntary payment, by realization upon security,  through
the exercise of any right of set-off or banker's lien, by  counterclaim or cross
action or by the enforcement of any right under the Loan Documents or otherwise,
or as adequate  protection  of a deposit  treated as cash  collateral  under the
Bankruptcy  Code,  receive payment or reduction of a proportion of the aggregate
amount of principal, interest, fees and other amounts then due and owing to that
Recipient  hereunder  or under  the  other  Loan  Documents  (collectively,  the
"Aggregate  Amounts Due" to each Recipient) which is greater than the proportion
received by any other Recipient in respect of the Aggregate  Amounts Due to such
other  Recipient,  then the Recipient  receiving  such  proportionately  greater
payment  shall (i) notify the Agent and each other  Recipient  of the receipt of
such payment and (ii) apply a portion of such payment to purchase participations
(which it shall be deemed to have purchased from each seller of a  participation
simultaneously  upon the receipt by such seller of its portion of such  payment)
in the Aggregate Amounts Due to the other Recipients so that all such recoveries
of Aggregate  Amounts Due shall be shared by all Recipients in proportion to the
Aggregate  Amounts  Due  to  them;  provided,  that  if  all  or  part  of  such

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proportionately  greater  payment  received  by  such  purchasing  Recipient  is
thereafter  recovered from such Recipient upon the bankruptcy or  reorganization
of either  Obligor or  otherwise,  those  purchases  shall be rescinded  and the
purchase  prices  paid  for  such  participations  shall  be  returned  to  such
purchasing  Recipient  ratably  to the  extent  of such  recovery,  but  without
interest.  The Obligors expressly consent to the foregoing arrangement and agree
that any holder of a participation  so purchased may exercise any and all rights
of banker's  lien,  set-off or  counterclaim  with respect to any and all monies
owing by the  Obligors to that holder with  respect  thereto as fully as if that
holder were owed the amount of the participation held by that holder.

     Section 10.7. Notices, Etc. Unless otherwise  specifically provided herein,
any notice,  request or other  communication  herein required or permitted to be
given shall be in writing and may be personally  served or sent by telefacsimile
or United States mail or courier  service and shall be deemed to have been given
when   delivered  in  person  or  by  courier   service,   or  upon  receipt  of
telefacsimile,  or five (5)  Business  Days  after  depositing  it in the United
States mail with postage prepaid and properly addressed;  provided, that notices
shall not be effective until received.  For the purposes hereof,  the address of
each party hereto and each Participant  shall be as set forth under such party's
name on Annex A, or (i) as to either of the Obligors  and the Agent,  such other
address as shall be designated by such Person in a written  notice  delivered to
the other  parties  hereto and (ii) as to each other  party  hereto,  such other
address as shall be  designated by such party in a written  notice  delivered to
the Agent.  A copy of any and all notices,  requests,  communications,  demands,
reports, documents or other materials (including, without limitation, any of the
materials  delivered by the Obligors under Section 5.1(b))  delivered or sent by
any party  pursuant to the terms of this  Agreement or any other Loan  Document,
shall be given to the Loan Administrator.

     Section 10.8. No Waiver; Remedies. No failure on the part of the Board, any
Lender,  the  Collateral  Agent  or the  Agent  to  exercise,  and no  delay  in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or  partial  exercise  of any such  right  preclude  any other or further
exercise  thereof  or the  exercise  of any other  right.  The  remedies  herein
provided are cumulative and not exclusive of any remedies provided by law.

     Section 10.9.  Independence of  Representations,  Warranties and Covenants.
All  representations  and warranties  made in and covenants under this Agreement
shall be given independent effect so that (a) if a particular representation and
warranty is unqualified,  the fact that another  representation  and warranty is
qualified shall not affect the operation of the former  provision;  and (b) if a
particular  action or condition is not permitted by any of such  covenants,  the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another  covenant shall not avoid the occurrence of an Event
of Default or Default if such action is taken or condition exists.

     Section 10.10. Governing Law. This Agreement and the rights and obligations
of the parties  hereto shall be governed by, and construed in  accordance  with,

                                      108
<PAGE>

the law of the State of New York; provided,  that in the event the Board becomes
a Lender  pursuant to the Board  Guarantee,  the rights and  obligations  of the
Board  hereunder  shall be governed by, and  construed in accordance  with,  the
Federal law of the United  States of America,  if and to the extent such Federal
law is applicable,  and otherwise in accordance with the law of the State of New
York.

     Section 10.11. Submission to Jurisdiction; Service of Process.

     (a) Any legal action or  proceeding  with respect to this  Agreement or any
other Loan  Document may be brought in the courts of the State of New York or of
the United  States of America for the  Southern  District  of New York,  and, by
execution and delivery of this  Agreement,  each of the Obligors  hereby accepts
for itself and in respect of its property,  generally and  unconditionally,  the
jurisdiction  of the aforesaid  courts.  The parties  hereto hereby  irrevocably
waive any objection,  including any objection to the laying of venue or based on
the grounds of forum non conveniens, which any of them may now or hereafter have
to  the  bringing  of  any  such  action  or  proceeding   in  such   respective
jurisdictions.

     (b) Each of the Obligors hereby irrevocably  consents to the service of any
and all legal  process,  summons,  notices and documents in any suit,  action or
proceeding  brought  in  the  United  States  of  America  arising  out of or in
connection with this Agreement or any of the other Loan Documents by the mailing
(by registered or certified  mail,  postage  prepaid) or delivering of a copy of
such process to such Obligor in accordance  with the provisions of Section 10.7.
Each of the  Obligors  agrees  that a  final  judgment  in any  such  action  or
proceeding  shall be conclusive  and may be enforced in other  jurisdictions  by
suit on the judgment or in any other manner provided by law.

     (c) Nothing  contained in this Section  10.11 shall affect the right of the
Agent  or any  Lender  or  other  party to serve  process  in any  other  manner
permitted by law or commence  legal  proceedings  or otherwise  proceed  against
either Obligor in any other jurisdiction.

     Section 10.12. Waiver of Jury Trial. Each of the parties hereto irrevocably
waives trial by jury in any action or proceeding  with respect to this Agreement
or any other Loan Document.

     Section 10.13.  Marshaling;  Payments Set Aside.  Neither the Agent nor any
Lender  shall be under any  obligation  to  marshal  any  assets in favor of the
Obligors  or any  other  party or  against  or in  payment  of any or all of the
Obligations.  To the  extent  that  either of the  Obligors  make a  payment  or
payments to the Agent for the account of the Board, the Loan Administrator,  any
Lender or any Participant  (each, a "Payee") or any Payee receives  payment from
exercise of their rights of setoff, and such payment or payments or the proceeds
of such setoff or any part thereof are subsequently invalidated,  declared to be
fraudulent  or  preferential,  set aside or  required to be repaid to a trustee,
receiver  or any  other  party,  then (i) to the  extent of such  recovery,  the
obligation or part thereof originally  intended to be satisfied,  and all rights
and remedies  therefor,  shall be revived and continued in full force and effect

                                      109
<PAGE>

as if such  payment  had not been made or such  enforcement  or  setoff  had not
occurred,  and (ii) each Payee  shall pay and return such amount to the Agent as
the Agent may be required to disgorge or otherwise pay to a trustee, receiver or
any other  party in respect  of the  portion of the  payment  from the  Obligors
distributed by the Agent to such Payee hereunder.

     Section  10.14.  Section  Titles.  The  Section  titles  contained  in this
Agreement  are and shall be without  substantive  meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

     Section 10.15. Execution in Counterparts. This Agreement may be executed in
any number of counterparts  and by different  parties in separate  counterparts,
each of which  when so  executed  shall be deemed to be an  original  and all of
which taken together  shall  constitute  one and the same  agreement.  Signature
pages may be detached  from  multiple  separate  counterparts  and attached to a
single  counterpart  so that  all  signature  pages  are  attached  to the  same
document.  Delivery of an executed signature page of this Agreement by facsimile
transmission   shall  be  as  effective  as  delivery  of  a  manually  executed
counterpart  hereof. A set of the copies of this Agreement signed by all parties
shall be lodged with the Borrower and the Agent.

     Section  10.16.  Third  Party  Beneficiary.  Each  Participant  shall be an
express third party  beneficiary  of this Agreement to the extent the provisions
of this  Agreement  by their  terms  confer upon such  Participant  any right or
remedy and shall be entitled to rely on each  representation and warranty of the
Obligors hereunder and the covenants of the Obligors contained in Articles V and
VI hereof as fully and with the same  force and effect as if made  expressly  to
such Participant,  and the execution and delivery of its Participation Agreement
to the  Agent and the  Tranche  B Lender  shall  constitute  such  Participant's
agreement  to the  provisions  of this  Agreement,  the  Parent  Guarantee,  the
Subsidiary Guarantee and the Security Agreement and to be bound by the terms and
conditions hereof and thereof applicable to the Participants (including, without
limitation,  Article IX and Sections 2.8, 2.9,  10.6,  10.13,  10.18,  10.19 and
10.20 hereof) in asserting any right or remedy hereunder.

     Section 10.17.  Severability.  In case any provision in or obligation under
this Agreement,  any Note or the other Loan Documents shall be invalid,  illegal
or unenforceable in any jurisdiction the validity,  legality and  enforceability
of the remaining  provisions or obligations,  or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired thereby.

     Section  10.18.  Confidentiality.  Each party hereto (other than the Board)
and each  Participant  shall,  and shall procure that its  respective  officers,
employees and agents shall,  keep  confidential and shall not, without the prior
written  consent  of the  other  parties,  disclose  to  any  third  party  this
Agreement,  any  other  Loan  Document  or any of the  information,  reports  or
documents  supplied by or on behalf of such other party not  otherwise  publicly
available, except that a party shall be entitled to disclose this Agreement, any
other Loan Document, and any such information, reports or documents:

                                      110
<PAGE>

     (i) in connection with any proceeding  arising out of or in connection with
this  Agreement,  any of the other Loan  Documents,  the Board  Guarantee or any
Participation  Agreement to the extent that such party may  reasonably  consider
necessary to protect its interest; or

     (ii) to any potential  assignee or  transferee of any party's  rights under
this  Agreement or any of the Loan Documents or any  Participant's  rights under
its  Participation  Agreement  or any  other  Person  proposing  to  enter  into
contractual  arrangements  with any party in relation to this Agreement,  any of
the other Loan  Documents,  the Board Guarantee or any  Participation  Agreement
subject to the relevant  party  obtaining  an  undertaking  from such  potential
assignee or  transferee or other person in  corresponding  terms to this Section
10.18; or

     (iii)  pursuant to any applicable  laws,  ordinances,  judgments,  decrees,
injunctions,  writs,  rules,  regulations,  orders,  interpretations,  licenses,
permits and orders of any competent court,  arbitrator or governmental agency or
authority in any relevant jurisdiction; or

     (iv) to bank examiners or any other regulatory authority or rating agencies
or similar entities, if requested to do so; or

     (v) to its auditors, legal, tax or to other professional advisers; or

     (vi) to its Affiliates and their respective directors,  officers, employees
and agents.

     The provisions of this Section 10.18 shall survive any  termination of this
Agreement,  any  Participation  Agreement  or any  other  Loan  Document  or any
assignment,  transfer, participation or subparticipation under this Agreement or
any Participation Agreement.

     Section 10.19. No Proceedings.  Each of the Obligors,  the Board,  the Loan
Administrator, the Agent, the Collateral Agent, each Participant and each Lender
(other  than the  Primary  Tranche  A  Lender)  hereby  agrees  that it will not
institute against, or join any other person in instituting  against, the Primary
Tranche A Lender any  bankruptcy,  reorganization,  arrangement,  insolvency  or
liquidation  proceeding,  or any other  proceeding  under any  federal  or state
bankruptcy or similar law, so long as any commercial paper issued by the Primary
Tranche A Lender shall be  outstanding  or there shall not have elapsed one year
plus one day since the last day on which any such  commercial  paper  shall have
been outstanding.

     Section 10.20. Govco Administrative Agent. Each of the Obligors, the Board,
the Loan  Administrator,  the Agent, the Collateral  Agent, each Participant and
each Lender acknowledges that the Govco  Administrative  Agent is a party hereto
only in its capacity as administrative agent of the Primary Tranche A Lender and
the Primary  Tranche A Lender's  commercial  paper  holders.  The parties hereto
agree that none of the provisions  hereof shall at any time apply to or restrict

                                      111
<PAGE>

the ability of the Govco  Administrative  Agent to resign its  position of Govco
Administrative Agent.

     Section 10.21. Acknowledgement Regarding Federal Authority.

     (a) Each of the parties  hereto and each of the  Participants  acknowledges
and agrees that:

     (i) the  operations  and  assets of the  Obligors  and  their  Subsidiaries
(including, without limitation, Aircraft Related Equipment and other assets that
constitute  Collateral) are subject,  directly and  indirectly,  to the actions,
inaction  and  policies  of  various  Governmental  Authorities,  including,  in
particular   but  without   limitation,   the  United   States   Department   of
Transportation (of which the Federal Aviation Administration is a component) and
the United States Department of Justice;

     (ii)  Governmental  Authorities,  in  discharging  their current and future
statutory  or  regulatory  responsibilities,  may act,  decline to act, or adopt
policies  resulting in material  adverse effects on (A) the business,  condition
(financial  or  otherwise),  operations,   performance,   prospects,  assets  or
properties  of the  Obligors  and their  Subsidiaries,  (B) the  ability  of the
Obligors  and their  Subsidiaries  to perform  their  payment or other  material
obligations under the Loan Documents, and (C) the value of the Collateral or the
practical  ability of the Collateral Agent to realize such value in the event of
a  Default  or  an  Event  of  Default;

     (iii) no Governmental Authority, in discharging its statutory or regulatory
responsibilities,  has or shall have any obligation  whatsoever to either of the
Obligors,  any of their Subsidiaries,  or to any secured party by reason of such
Governmental  Authority's  representation  on the Board, the Board's issuance of
the Board Guarantee,  or the Board's  participation as a party to the other Loan
Documents,  to consider the potential that any of the material  adverse  effects
referred to in clause (ii) above may result from such  Governmental  Authority's
discharge of its statutory or regulatory responsibilities; and

     (iv) neither the Board, in discharging its rights and responsibilities,  or
in  exercising  its  discretion,  under  the Act,  the  Regulations,  the  Board
Guarantee or the other Loan Documents, nor any of the Board's members, acting in
their capacities as such, has or shall have any obligation  whatsoever to either
of the Obligors,  any of their  Subsidiaries or to any of the secured parties to
take any action in connection with a Governmental  Authority's  discharge of its
statutory  or  regulatory  responsibilities  which may have any of the  material
adverse effects referred to in clause (ii) above, and the Board may not take any
action depriving a Governmental  Authority of its rights and powers to discharge
its statutory and regulatory responsibilities in any manner that may have any of
the material adverse effects referred to in clause (ii) above.

     (b) Without  limiting the generality of the foregoing,  the parties and the
Participants  acknowledge  and agree that (i) the Department of  Transportation,
through the Federal Aviation Administration,  has broad authority under Title 49

                                      112
<PAGE>

of the United States Code to regulate the use of the  navigable  airspace of the
United  States  so as to ensure  its safe and  efficient  utilization,  (ii) the
exercise of such authority may substantially  impair or eliminate altogether the
utility to the Obligors and their  Subsidiaries and value to the secured parties
of Aircraft  Related  Equipment  pledged as  Collateral  and other assets of the
Obligors and their  Subsidiaries  such as gates and slots  utilized at airports,
and (iii) no assurance,  express or implied,  has been given by any Governmental
Authority, including the Board, to the Obligors or to any secured party, nor has
either of the Obligors or any secured party relied upon any such assurance, with
respect  to any  future  action,  inaction  or  policy of the  Federal  Aviation
Administration  or  any  other  Governmental  Authority  relating  to  any  such
Collateral or other assets.

     (c) Nothing in this Section  10.21 shall be construed to limit or otherwise
affect the Board's obligations under the Board Guarantee.

     Section  10.22.  Cumulative  Rights and  Remedies.  The rights and remedies
conferred  upon the parties  hereto  shall be  cumulative,  and the  exercise or
waiver of any such right or remedy shall not preclude or inhibit the exercise of
any additional  rights or remedies.  The waiver of any right or remedy hereunder
shall not preclude the subsequent exercise of such right or remedy.

                                      113
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by respective officers thereunto duly authorized,  as of the date first
above written.

                            AMERICAN TRANS AIR, INC.

                       By:   /s/ Kenneth K. Wolff
                          Name:  Kenneth K. Wolff
                          Title: Executive Vice President & CFO


                       ATA HOLDINGS corp.

                       By:   /s/ Kenneth K. Wolff
                          Name:  Kenneth K. Wolff
                          Title: Executive Vice President & CFO


                       GOVCO INCORPORATED,
                       as Primary Tranche A Lender

                       By:  Citicorp North America, Inc., as its
                       attorney-in-fact and administrative
                       agent

                       By:   /s/ P.A. Botticelli
                          Name:  Patrick Botticelli
                          Title: Managing Director


                       CITIBANK, N.A.,
                       as Alternate Tranche A Lender

                       By:   /s/ AE Kyong Chung
                          Name:  AE Kyong Chung
                          Title: Director


                       CITICORP NORTH AMERICA, INC.,
                       as Govco Administrative Agent

                       By:    /s/Patrick Botticelli
                          Name:  Patrick Botticelli
                          Title: Managing Director


                       CITIBANK, N.A.,
                       as Tranche B Lender

                       By:   /s/ Gaylord C. Holmes
                          Name:  Gaylord C. Holmes
                          Title: Director
<PAGE>

                       CITIBANK, N.A.,
                       as Collateral Agent

                       By:   /s/ Edward Morelli
                          Name:  Edward C. Morelli
                          Title: Vice President


                       BEARINGPOINT, INC.,
                       as Loan Administrator

                       By:   /s/ Timothy F. Kenny
                          Name:  Timothy F. Kenny
                          Title: Financial Services Consultant


                       CITIBANK, N.A.,
                       as Agent

                       By:   /s/ AE Kyong Chung
                          Name:  AE Kyong Chung
                          Title: Director


                       AIR TRANSPORTATION STABILIZATION BOARD

                       By:   /s/ Daniel G. Montgomery
                          Name:  Daniel G. Montgomery
                          Title: Executive Director

<PAGE>

                                    Exhibit A

                        FORM OF ASSIGNMENT AND ACCEPTANCE

     Assignment   and   Acceptance   dated  as  of   _________,   ____   between
______________ (the "Assignor") and ______________ (the "Assignee").

     Reference is made to the Loan Agreement,  dated as of November 20, 2002 (as
the same may be amended, restated,  supplemented or otherwise modified from time
to  time,  the  "Loan  Agreement"),   among  the  Borrower,  the  Parent,  Govco
Incorporated,  as Primary Tranche A Lender, Citibank, N.A., as Alternate Tranche
A Lender,  Tranche B Lender and as Agent, Citicorp North America, Inc., as Govco
Administrative Agent, BearingPoint,  Inc., as the Loan Administrator,  Citibank,
N.A.,  as the  Collateral  Agent  and Air  Transportation  Stabilization  Board.
Capitalized  terms used herein and not otherwise  defined herein are used herein
as defined in the Loan Agreement.

                  The Assignor and the Assignee hereby agree as follows:

     1. The Assignor hereby sells and assigns to the Assignee,  and the Assignee
hereby purchases and assumes from the Assignor, [all of] [a __% interest in] the
Assignor's  rights and  obligations  under the Loan  Agreement  and the [Tranche
A/Tranche B] Note. The principal amount of the portion of [Tranche  A/Tranche B]
of the Loan and the [Tranche  A/Tranche B] Note assigned to the Assignee are set
forth in Section 1 of Schedule I [and the principal amount of [Tranche A/Tranche
B] of the Loan and the [Tranche A/Tranche B] Note retained by the Assignor after
giving effect to such sale and assignment are set forth in Section 2 of Schedule
I.].

     2. The Assignor (i) represents and warrants that[, subject to the rights of
any  participant,]  it is the legal and  beneficial  owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim;  (ii) makes no  representation  or warranty and assumes no responsibility
with respect to any  statements,  warranties  or  representations  made in or in
connection  with the Loan  Agreement  or any other  Loan  Document  or any other
instrument or document  furnished  pursuant thereto or the execution,  legality,
validity,  enforceability,   genuineness,  sufficiency  or  value  of  the  Loan
Agreement  or any other  Loan  Document  or any  other  instrument  or  document
furnished  pursuant  thereto;  and (iii) makes no representation or warranty and
assumes  no  responsibility  with  respect  to the  financial  condition  of the
Borrower  or  the  performance  or  observance  by  the  Borrower  of any of its
obligations  under the Loan  Agreement  or any other Loan  Document or any other
instrument or document furnished pursuant thereto.

     3. The Assignee (i) agrees that it will, independently and without reliance
upon the Agent, the Assignor or any other Lender and based on such documents and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking action under the Loan Agreement;  (ii)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Loan Agreement and the other Loan Documents as
are  delegated to the Agent by the terms  thereof,  together with such powers as

<PAGE>

are  reasonably  incidental  thereto;  (iii)  agrees  that  it will  perform  in
accordance  with their  terms all of the  obligations  which by the terms of the
Loan Agreement are required to be performed by it as a Lender;  (iv)  represents
and warrants  that it is an Eligible  Lender;  (v) confirms it has received such
documents and  information  as it has deemed  appropriate to make its own credit
analysis and decision to enter into this  Assignment  and  Acceptance;  and (vi)
specifies  as its Lending  Office (and address for notices) the office set forth
beneath its name on the signature pages hereof.

     4.  Following  the  execution  of this  Assignment  and  Acceptance  by the
Assignor  and the  Assignee,  it will be delivered to the Agent [(with a copy to
the  Board)]1  for  acceptance  and  recording  by the Agent,  together  with an
assignment  fee of  [...***...].  The  effective  date  of this  Assignment  and
Acceptance  shall be __________  [or such later date as of which the Board shall
have  consented to the sale and  assignment  of [all of] [a __% interest in] the
Assignor's  rights and  obligations  under the Loan  Agreement and the Tranche A
Note  to the  Assignee  as  provided  herein  and  as  evidenced  by its  signed
confirmation  thereof set forth on the  signature  pages hereof (the  "Effective
Date")]2.

     5. Upon  such  acceptance  and  recording  by the  Agent,  then,  as of the
Effective  Date, (i) the Assignee shall be a party to the Loan Agreement and, to
the extent  provided  in this  Assignment  and  Acceptance,  have the rights and
obligations under the Loan Agreement of a Lender and (ii) the Assignor shall, to
the extent  provided in this  Assignment and  Acceptance,  relinquish its rights
(except those which survive the payment in full of the  Obligations)  other than
those relating to events or circumstances  occurring prior to the Effective Date
and be released from its obligations under the Loan Documents.

     6. Upon such  acceptance  and  recording  by the Agent,  from and after the
Effective  Date,  the Agent shall make all payments  under the Loan Documents in
respect  of the  interest  assigned  hereby  (i) to or for  the  account  of the
Assignee,  in the case of amounts accrued with respect to any period on or after
the Effective Date, and (ii) to or for the account of the Assignor,  in the case
of amounts accrued with respect to any period prior to the Effective Date.

     7. This Assignment and Acceptance shall be governed by, and be construed in
accordance with, the law of the State of New York.

     8.  This  Assignment  and  Acceptance  may be  executed  in any  number  of
counterparts and by different  parties on separate  counterparts,  each of which
when so executed shall be

                                             ***Confidential Treatment Requested
<PAGE>

deemed to be an original and all of which taken  together  shall  constitute but
one  and  the  same  agreement.  Delivery  of an  executed  counterpart  of this
Assignment  and  Acceptance  by  telecopier  shall be effective as delivery of a
manually executed counterpart of this Assignment and Acceptance.

<PAGE>
     In Witness  Whereof,  the parties  hereto have caused this  Assignment  and
Acceptance  to  be  executed  by  their  respective   officers   thereunto  duly
authorized, as of the date first above written.

                                                     [Assignor]



                         By:___________________________
                            Name:
                            Title:


                            [Assignee]

                         By:___________________________
                             Name:
                             Title:

                             Lending  Office (and
                               address for
                                notices):


                                                     [Address]


Accepted this               day
              -------------
of                         , ____
   ------------------------

[               ],
as Agent


By: ____________________
     Name:
     Title:


[The Board hereby confirms its consent to this Assignment and Acceptance in
accordance with the provisions of Section 10.2 of the Loan Agreement]3

Air Transportation Stabilization Board

<PAGE>

By: ______________________
     Name:
     Title:
<PAGE>

                                   Schedule I
                                       to
                            Assignment and Acceptance

Section 1.

Aggregate Outstanding Principal Amount of
[Tranche A/Tranche B] of the Loan and of the
[Tranche A/Tranche B] Note Assigned to Assignee:     $
                                                      --------------------


Section 2.

Aggregate Outstanding Principal Amount of
[Tranche A/Tranche B] of the Loan and of the
[Tranche A/Tranche B] Note retained by Assignor:     $
                                                      --------------------
<PAGE>
                                   EXHIBIT B1

                             FORM OF TRANCHE A NOTE


                                                New York, New York
$_____________                                  November [_], 2002

     FOR VALUE RECEIVED,  the  undersigned  AMERICAN TRANS AIR, INC., an Indiana
corporation (the "Borrower"), hereby promises to pay to CITIBANK, N.A. as Agent,
for the account of the Tranche A Lenders,  the principal amount set forth above,
or, if less,  the aggregate  unpaid  principal  amount of Tranche A of the Loan,
payable  at such  times,  and in such  amounts,  as are  specified  in the  Loan
Agreement.  The Borrower hereby promises to pay interest on the unpaid principal
amount of Tranche A of the Loan from the date hereof until such principal amount
is paid in  full,  at the  rate or  rates,  and  payable  at such  times  as are
specified in the Loan Agreement.

     This Tranche A Note shall be payable at the  principal  office of the Agent
presently located at 399 Park Avenue in New York City.

     This  Tranche A Note is the  "Tranche A Note"  referred to in that  certain
Loan  Agreement,  dated as of  November  20,  2002 (as the same may be  amended,
restated,  supplemented  or  otherwise  modified  from  time to time,  the "Loan
Agreement"),  among the Borrower,  the Parent,  Govco  Incorporated,  as Primary
Tranche A Lender,  Citibank,  N.A.,  as  Alternate  Tranche A Lender,  Tranche B
Lender and as Agent,  Citicorp  North  America,  Inc.,  as Govco  Administrative
Agent,  BearingPoint,  Inc., as the Loan Administrator,  Citibank,  N.A., as the
Collateral Agent and Air Transportation  Stabilization Board and entitled to the
benefits thereof and of the Security  Agreement.  Capitalized  terms used herein
and not defined herein are used herein as defined in the Loan Agreement.

     Demand,  diligence,  presentment,  protest  and notice of  non-payment  and
protest are hereby  waived by the  Borrower.  This Tranche A Note may be prepaid
solely as provided in the Loan  Agreement and may be  accelerated in whole or in
part as provided in the Loan Agreement.

     This Tranche A Note shall be governed by, and construed in accordance with,
the law of the State of New York; provided,  that in the event the Board becomes
a Tranche A Lender pursuant to the Board  Guarantee,  the rights and obligations
of the Board hereunder  shall be governed by, and construed in accordance  with,
the  Federal  law of the United  States of  America,  if and to the extent  such
Federal law is applicable, and otherwise in accordance with the law of the State
of New York.
<PAGE>
     IN WITNESS  WHEREOF,  the  Borrower  has caused  this  Tranche A Note to be
executed and delivered by its duly authorized  officer as of the date and at the
place set forth above.


                                      AMERICAN TRANS AIR, INC.

                                      By:  ____________________________
                                      Name:
                                      Title:

<PAGE>

THIS TRANCHE B NOTE CONTAINS ORIGINAL ISSUE DISCOUNT AS DEFINED IN SECTION 1273
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. YOU MAY CONTACT THE CHIEF
FINANCIAL OFFICER OF ATA HOLDINGS CORP. AT 7337 WEST WASHINGTON STREET,
INDIANAPOLIS, INDIANA 46251 IN ORDER TO OBTAIN THE ISSUE PRICE, THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY OF THIS NOTE.

                                   EXHIBIT B2

                             FORM OF TRANCHE B NOTE


                                                              New York, New York
$_______________                                              November [_], 2002

     FOR VALUE RECEIVED,  the  undersigned  AMERICAN TRANS AIR, INC., an Indiana
corporation (the "Borrower"), hereby promises to pay to CITIBANK, N.A. as Agent,
for the account of the Tranche B Lender,  the principal  amount set forth above,
or, if less,  the aggregate  unpaid  principal  amount of Tranche B of the Loan,
payable  at such  times,  and in such  amounts,  as are  specified  in the  Loan
Agreement.  The Borrower hereby promises to pay interest on the unpaid principal
amount of Tranche B of the Loan from the date hereof until such principal amount
is paid in  full,  at the  rate or  rates,  and  payable  at such  times  as are
specified in the Loan Agreement.

     This Tranche B Note shall be payable at the  principal  office of the Agent
presently located at 399 Park Avenue in New York City.

     This  Tranche B Note is the  "Tranche B Note"  referred to in that  certain
Loan  Agreement,  dated as of  November  20,  2002 (as the same may be  amended,
restated,  supplemented  or  otherwise  modified  from  time to time,  the "Loan
Agreement"),  among the Borrower,  the Parent,  Govco  Incorporated,  as Primary
Tranche A Lender,  Citibank,  N.A.,  as  Alternate  Tranche A Lender,  Tranche B
Lender and as Agent,  Citicorp  North  America,  Inc.,  as Govco  Administrative
Agent,  BearingPoint,  Inc., as the Loan  Administrator,  Citibank,  N.A. as the
Collateral Agent and Air Transportation  Stabilization Board and entitled to the
benefits thereof and of the Security  Agreement.  Capitalized  terms used herein
and not defined herein are used herein as defined in the Loan Agreement.

     Demand,  diligence,  presentment,  protest  and notice of  non-payment  and
protest are hereby  waived by the  Borrower.  This Tranche B Note may be prepaid
solely as provided in the Loan  Agreement and may be  accelerated in whole or in
part as provided in the Loan Agreement.

     This Tranche B Note shall be governed by, and construed in accordance with,
the law of the State of New York.

<PAGE>


     IN WITNESS  WHEREOF,  the  Borrower  has caused  this  Tranche B Note to be
executed and delivered by its duly authorized  officer as of the date and at the
place set forth above.


                                       AMERICAN TRANS AIR, INC.

                                       By:  ______________________
                                      Name:
                                      Title:


<PAGE>

                                    EXHIBIT C

                           FORM OF NOTICE OF BORROWING

Citibank, N.A.,
    as Agent under the Loan Agreement
    referred to below
399 Park Avenue,
New York, New York 10043
                                                              November [_], 2002

     Re: AMERICAN TRANS AIR, INC. (the "Borrower")

     Reference is made to the Loan Agreement,  dated as of November 20, 2002 (as
the same may be amended, restated,  supplemented or otherwise modified from time
to  time,  the  "Loan  Agreement"),   among  the  Borrower,  the  Parent,  Govco
Incorporated,  as Primary Tranche A Lender, Citibank, N.A., as Alternate Tranche
A Lender,  Tranche B Lender and as Agent, Citicorp North America, Inc., as Govco
Administrative Agent, BearingPoint,  Inc., as the Loan Administrator,  Citibank,
N.A.,  as the  Collateral  Agent  and Air  Transportation  Stabilization  Board.
Capitalized  terms used herein and not otherwise  defined herein are used herein
as therein defined.

     The Borrower hereby gives you irrevocable  notice,  pursuant to Section 2.2
of the Loan Agreement,  that the  undersigned  hereby requests a Borrowing under
the Loan Agreement  and, in that  connection,  sets forth below the  information
relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.2
of the Loan Agreement:

     (i) The date of the Proposed Borrowing is November [__], 2002 (the "Closing
Date").

     (ii) The aggregate amount of the Proposed Borrowing is $--------.

     The undersigned hereby certifies that the following  statements are true on
the date  hereof  and shall be true on the  Closing  Date both  before and after
giving effect to the Proposed  Borrowing and to the  application of the proceeds
therefrom:

     (i) the representations, warranties and certifications set forth in Article
IV of the Loan  Agreement,  in the other Loan Documents and the  Application and
any other  document,  certificate or written  statement  delivered in connection
therewith  are true and correct on and as of the  Closing  Date before and after
giving effect to the Borrowing and to the application of the proceeds therefrom,
with the same effect as though made on and as of such date, except to the extent
such representations and warranties expressly relate to an earlier date; and
<PAGE>

     (ii) no Event of  Default  or event  which,  with the  giving  of notice or
passage  of time or both,  would be an Event of  Default,  has  occurred  and is
continuing on the Closing Date, or would result from the Borrowing  after giving
effect to the Borrowing and the application of the proceeds therefrom.

                            AMERICAN TRANS AIR, INC.


                           By: _______________________
                           Name:
                           Title:    [Chief Financial Officer/President/
                                      Chief Executive Officer]

<PAGE>

                                    EXHIBIT D

                             FORM OF BOARD GUARANTEE

<PAGE>

                                    EXHIBIT E

                         FORM OF PARTICIPATION AGREEMENT

<PAGE>

                                    EXHIBIT F

                            FORM OF WARRANT AGREEMENT

<PAGE>

                                    EXHIBIT G

                           FORM OF SECURITY AGREEMENT

<PAGE>

                                    EXHIBIT H

                      FORM OF COLLATERAL VALUE CERTIFICATE

     Reference is made to the Loan Agreement dated as of November 20, 2002 among
American  Trans  Air,  Inc.  (the   "Borrower"),   ATA  Holdings  Corp.,   Govco
Incorporated,  as Primary Tranche A Lender, Citibank, N.A., as Alternate Tranche
A Lender,  Tranche B Lender and Agent,  Citicorp North  America,  Inc., as Govco
Administrative Agent, BearingPoint, Inc., as Loan Administrator, Citibank, N.A.,
as the Collateral Agent and the Air Transportation  Stabilization  Board (as the
same may be amended, restated or supplemented or otherwise modified from time to
time,  the "Loan  Agreement").  Capitalized  terms used herein and not otherwise
defined  herein  shall  have the  meanings  assigned  to such  terms in the Loan
Agreement.

     The  undersigned,  being the  _________________  of  Borrower,  does hereby
certify as of the date hereof, that the Collateral Value is as follows:

-------------------------------------       -----------------------------------
1. Appraised Collateral [(other than        Appraised Value [market value (in
Pledged Spare Parts) for the Collateral     the case of the Collateral Value
ValueCertificate delivered on the           Certificate delivered on the Closing
Closing Date]                               Date)] less Ineligible Assets
                                            identified on Schedule I
                                            hereto (as shown on the
                                            Appraisal Report(s) attached
                                            hereto):



2.  Eligible Accounts                      Value of Eligible Accounts
                                           (computed in accordance with
                                           the definition of Eligible
                                           Accounts, as further reflected
                                           on the attachment hereto) x
                                           85%:

3.  Pledged Spare Parts [for the           Book Value of Pledged Spare Parts as
Collateral Value Certificate delivered     of September 30,  2002 [for the
on the Closing Date]                       Collateral Value Certificate
                                           delivered on the Closing Date]:



Total Collateral Value:



     In  addition,  the  undersigned  hereby  certifies as of the date hereof as
follows:

     1. [None of the  Collateral  included in the  calculation of the Collateral
Value is subject to any event of loss,  damage or other  casualty,  and,  to the
knowledge of the undersigned, no other event has occurred and no other condition
exists,  that has, or would  reasonably  be expected  to,  materially  adversely
affect the value of such Collateral,  in any such case, whether insured or not.]
or
<PAGE>

     [The Collateral identified on Schedule I hereto which is included in the
     calculation of the Collateral Value has suffered an event of loss, damage
     or other casualty (as described on such Schedule I) such that the value of
     such Collateral has been materially adversely affected.] or

     [An event has occurred or condition now exists that could reasonably be
     expected to materially adversely effect (as described on such Schedule I)
     the value of the Collateral identified on Schedule I hereto which is
     included in the calculation of the Collateral Value.]

     2. [No Value  Differential  exists] or [A Value  Differential  of  $_______
exists.].



<PAGE>


                  The undersigned hereby certifies that all statements made in
this Collateral Value Certificate are true and correct as of the date hereof.

                                     AMERICAN TRANS AIR, INC.



                                     By:  _____________________
                                     Name:
                                     Title:

<PAGE>

                                    EXHIBIT I

                          FORM OF SUBSIDIARY GUARANTEE

<PAGE>

                                    EXHIBIT J

                            FORM OF PARENT GUARANTEE

<PAGE>

                                    EXHIBIT K


                             CERTAIN ECONOMIC TERMS


---------------------------------------------- ---------------------------------
Insured Amount for each                        The fair market value of
        aircraft:                              such aircraft as reflected in the
                                               then most recent Appraisal Report
                                               delivered pursuant to the Loan
                                                Agreement.

Obsolete Parts Cap:                            $550,000


Minimum Liability Insurance Amount:            $750,000,000


Loss Payee Amount:                             $2,500,000


Overdue Rate:                                  Two percent per annum in excess
                                               of the Applicable
                                               Tranche B Interest Rate as in
                                               effect from time to time