Exhibit 10.22


                                     SECURED
               DEBTOR-IN-POSSESSION CREDIT AND SECURITY AGREEMENT

                          Dated as of December 22, 2004

                               ATA AIRLINES INC.,
                        a Debtor and Debtor-in-Possession
            under Chapter 11 of the Bankruptcy Code, as the Borrower,

                        ATA HOLDINGS CORP., as Guarantor

                         CERTAIN OF THE SUBSIDIARIES OF
                        ATA HOLDINGS CORP. PARTY HERETO,
                                 as Guarantors,

                                       and

                             SOUTHWEST AIRLINES CO.,
                                    as Lender


<PAGE>



                                                                  Dec. 22, 2004

                                     SECURED
                      DEBTOR-IN-POSSESSION CREDIT AGREEMENT

     This  SECURED  DEBTOR-IN-POSSESSION  CREDIT AND  SECURITY  AGREEMENT  (this
"Credit  Agreement")  is entered  into as of December  22, 2004 by and among ATA
AIRLINES INC., an Indiana corporation and a debtor and debtor-in-possession in a
case pending under Chapter 11 of the Bankruptcy  Code (as  hereinafter  defined)
(the "Borrower"), ATA HOLDINGS CORP. (the "Parent"), each of the Subsidiaries of
the Parent (as  hereinafter  defined)  of from time to time  party  hereto,  and
SOUTHWEST AIRLINES CO., a Texas corporation (the "Lender").

                             PRELIMINARY STATEMENTS

     1. On October 26, 2004 (the "Petition Date"),  the Borrower and each of the
Guarantors  (as  hereinafter  defined) in existence  on the Petition  Date filed
voluntary  petitions  in the United  States  Bankruptcy  Court for the  Southern
District  of  Indiana  (such  court,   together  with  any  other  court  having
jurisdiction  over the Cases  from time to time,  the  "Bankruptcy  Court")  for
relief,  and  commenced  cases  (the  "Cases"),  under the  Bankruptcy  Code (as
hereinafter defined) and have continued in the possession of their assets and in
the  management  of their  businesses  pursuant to Sections 1107 and 1108 of the
Bankruptcy Code.

     2. The  Borrower  has  requested  that the Lender  enter into a term credit
facility  in an  aggregate  principal  amount not to exceed:  (i) forty  million
dollars  ($40,000,000)  plus (ii) the Closing Fee (as defined in Section  2.05),
and to provide a guaranty  of up to seven  million  eighty  eight  thousand  two
hundred and ten dollars  ($7,088,210) (in addition to the $40,000,000 term loan)
of certain Borrower's obligations, on terms and conditions set forth herein, all
of the  Borrower's  obligations  under  which are to be  jointly  and  severally
guaranteed by the Guarantors.

     3. To provide  guarantees  and security for the  repayment of the Loans (as
hereinafter  defined),  and the payment of the other Obligations (as hereinafter
defined) of the Borrower and the  Guarantors  hereunder and under the other Loan
Documents (as hereinafter defined), the Borrower and the Guarantors will provide
the Lender the following, each as more fully described herein:

     A. a joint and several guaranty from the Guarantors of the due and punctual
payment and  performance  of the  Obligations  of the Borrower  hereunder as set
forth in Section 10 of this Credit Agreement; and

     B. priority Liens (as  hereinafter  defined) on the Primary  Collateral (as
hereinafter  defined) and best priority  Liens on the Secondary  Collateral  (as
hereinafter  defined) as set forth in Section  2.10 and Section 9 of this Credit
Agreement.

     4. On December 21, 2004, the Bankruptcy Court entered the Interim Order (as
hereinafter defined), pursuant to which the Borrower was authorized to borrow up
to  $47,000,000  and pay all fees and  expenses  payable  to or on behalf of the
Lender, pending entry of a final order by the Bankruptcy Court.

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


                                       1
<PAGE>

                                   ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

     1.01 Defined Terms. As used in this Credit  Agreement,  the following terms
shall have the meanings set forth below:

     "Account Collateral" has the meaning specified in Section 9.01(e).

     "Adjusted  EBITDARR"  means,  for  any  period,  for the  Borrower  and its
Subsidiaries,  an amount equal to (i)  Consolidated  EBITDARR  less (ii) Capital
Expenditures.

     "Affiliate"  means,  with  respect  to  any  Person,  another  Person  that
directly,  or  indirectly  through  one or more  intermediaries,  Controls or is
Controlled by or is under common  Control with the Person  specified.  "Control"
means the  possession,  directly or indirectly,  of the power to direct or cause
the  direction of the  management or policies of a Person,  whether  through the
ability to exercise  voting power, by contract or otherwise.  "Controlling"  and
"Controlled" have meanings correlative thereto.  Without limiting the generality
of the foregoing, a Person shall be deemed to be Controlled by another Person if
such other Person possesses,  directly or indirectly,  power to vote 10% or more
of the securities  having  ordinary  voting power for the election of directors,
managing general partners or the equivalent.

     "After-Acquired Intellectual Property" has the meaning specified in Section
9.04(h)(vi).

     "Agent" has the meaning specified in Section 9.06(b).

     "Air Transportation  Stabilization Act" means the Air Transportation Safety
and System  Stabilization  Act, P.L. 107-42, and any regulations issued pursuant
thereto as the same may be amended from time to time.

     "AIR-21  Slots" shall mean those Slots at LGA and DCA which pursuant to the
Wendell  H.  Ford  Aviation  Investment  and  Reform  Act for the  21st  Century
("AIR-21")  and  the  orders  of the  DOT  pursuant  thereto  cannot  be  freely
transferred by the Loan Parties.

     "Asset Acquisition Agreement" shall mean an Asset Acquisition Agreement for
the sale of a portion of the Loan Parties' assets to be entered into between the
Lender and the Borrower on or about December 21, 2004.

     "ATSB" means the Air Transportation  Stabilization  Board, created pursuant
to Section 102(b) of the Air Transportation Stabilization Act.

     "ATSB Cash Use Order" means the "Second Interim and Final Order Authorizing
Debtors' Use of Cash  Collateral  and Use, Sale and Lease of Other  Pre-Petition
Collateral  dated  December 10, 2004" (Docket No. 718) entered by the Bankruptcy
Court  with  respect  to the Cases as such  order may be  extended,  amended  or
modified from time to time.

     "ATSB Collateral" shall have the meaning specified in Section 9.01 hereof.

                                       2
<PAGE>

     "ATSB Loan" means the loan in the aggregate principal amount as of the date
hereof  of  approximately  $139,900,000  under  the Loan  Agreement  dated as of
November 20, 2002 among the Borrower,  American Trans Air, Inc., Citibank, N.A.,
as agent for itself and the lenders named therein and the ATSB,  pursuant to the
Air  Transportation  Stabilization  Act as the  same may be  amended,  restated,
amended and restated, supplemented or modified from time to time.

     "ATSB  Lender  Parties"  has the meaning  assigned to such term in the ATSB
Cash Use Order.

     "Attorney  Costs"  means and  includes all  reasonable  fees,  expenses and
disbursements of any law firm or other external counsel.

     "Attributable  Indebtedness"  means,  on any date,  (a) in  respect  of any
capital lease of any Person, the capitalized amount thereof that would appear on
a balance sheet of such Person prepared as of such date in accordance with GAAP,
(b) in respect of any operating  leases of any Person,  an amount equal to seven
times the rental payments  thereunder  scheduled to be paid during the 12 months
following such date and (c) in respect of any Synthetic  Lease  Obligation,  the
capitalized amount of the remaining lease payments under the relevant lease that
would  appear  on a balance  sheet of such  Person  prepared  as of such date in
accordance with GAAP if such lease were accounted for as a capital lease.

     "Audited Financial Statements" means the audited consolidated balance sheet
of the  Borrower,  the Parent  and its  Subsidiaries  for the fiscal  year ended
December  31,  2003,  and the  related  consolidated  statements  of  income  or
operations,  shareholders'  equity  and cash flows for such  fiscal  year of the
Borrower and its Subsidiaries, including the notes thereto.

     "Authority"  means the Indiana  Transportation  Finance  Authority  and the
Indianapolis Airport Authority.

     "Bankruptcy  Code" means the Bankruptcy  Reform Act of 1978, as codified in
title 11 of the United  States  Code,  11 U.S.C.  Sections  101-1330,  as now in
effect or hereafter amended.

     "Bankruptcy Court" has the meaning specified in Preliminary  Statement 1 to
this Credit Agreement.

     "Base  Rate"  means the higher of: (i) 8% per annum or (ii) LIBOR Rate + 5%
per annum.

     "Bid  Proposal"  means the Bid  Proposal  dated as of  December  15,  2004,
together with all schedules,  annexes and attachments thereto,  submitted by the
Lender to the Bankruptcy  Court,  pursuant to which the Lender agreed to provide
the Commitment, on the terms and conditions described therein and herein, as may
be amended or supplemented prior to the effective time of the Interim Order.

     "Bid  Procedures  Order" means the Order (a)  Establishing  Procedures  for
Approval of one or more  Transactions,  (b) Approving and Authorizing a Break-Up
Fee and Expense  Reimbursement and (c) Approving a Form of Notice dated November
19, 2004.

     "Borrower" has the meaning specified in the introductory paragraph hereto.

                                       3
<PAGE>

     "Borrower's  Projections"  means the financial  projections of the Borrower
dated as of December 22, 2005 and accepted by the Lender.

     "Borrowing" means a Term Borrowing.

     "Business Day" means any day other than a Saturday,  Sunday or day on which
banks  in  Dallas,  Texas,  Indianapolis,  Indiana  or New  York,  New  York are
authorized or required by law to close.

     "Capital  Expenditures"  means,  with respect to any Person for any period,
any expenditure in respect of the purchase or other  acquisition of any fixed or
capital asset (excluding normal  replacements and maintenance which are properly
charged to current  operations).  For purposes of this definition,  the purchase
price of equipment that is purchased simultaneously with, or within three months
after,  the trade-in of existing  equipment or with insurance  proceeds shall be
included in Capital Expenditures only to the extent of the gross amount by which
such purchase  price exceeds the credit  granted by the seller of such equipment
for the equipment  being traded in at such time or the amount of such  insurance
proceeds, as the case may be.

     "Card Receivables" means credit card receivables of any of the Loan Parties
to the extent and for so long as such credit card  receivables  are subject to a
security interest in favor of any credit card receivables processor.

     "Carve-Out" means the following amounts:  (i) quarterly fees required to be
paid to the United States Trustee pursuant to 28 U.S.C.  ss.  1930(a)(6) and any
fees payable to the Clerk of the Bankruptcy  Court, (ii) prior to the occurrence
of an  Event  of  Default  (a) the  reasonable  expenses  of any  member  of the
Creditors  Committee  which are allowed by the  Bankruptcy  Court and (b) unpaid
professional fees and disbursements incurred prior to the occurrence of an Event
of Default by the professionals retained, pursuant to Sections 327 or 1103(a) of
the Bankruptcy Code, the Loan Parties and the Creditors Committee which shall be
allowed by the Bankruptcy Court (before or after the Event of Default), provided
that such fees and  disbursements  payable  after an Event of  Default do not to
exceed,  the amounts included in the Borrower's  Projections for the term of the
Facility,  and  (iii)  following  the  occurrence  of an Event of  Default,  the
reasonable  expenses of any member of the Committee and unpaid professional fees
and  disbursements  by the  professionals  retained  pursuant to Sections 327 or
1103(a) of the Bankruptcy Code, by the Loan Parties and the Creditors  Committee
incurred  after the  occurrence of an Event of Default which shall be allowed by
the Bankruptcy Court not to exceed five hundred  thousand dollars  ($500,000) in
the aggregate;  provided,  however that the Carve-Out shall not include any fees
or  expenses  incurred  by  any  party  in  connection  with  the  investigation
(including  discovery  proceedings),  initiation or  prosecution  of any claims,
causes of action, adversary proceedings or other litigation against the Lender.

     "Cases" has the meaning specified in Preliminary Statement 1 to this Credit
Agreement.

     "Change of Control" means an event or series of events by which  constitute
a "change of control" under the Codeshare Agreement.

     "Chicago  Construction  Loan" means two separate loans made to the Borrower
by the City of Chicago to fund a jet bridge extension at MDA evidenced by a Loan
Agreement,  dated as of March 17,  2003 by and among the City of Chicago and the
Borrower.

                                       4
<PAGE>

     "Chicago Gates" means all of the Loan Parties' right,  title,  and interest
in and to the Chicago Midway  Airport  Lease,  solely with respect to all of the
Loan Parties' right, title and interest thereunder in and to the eight (8) gates
identified at Chicago  Midway Airport as Gates 4a, 4b, 10, 12, 14, 16, 18 and 19
in  Concourse  A,  including  such  gates'  associated  ramp  space and  service
facilities at Chicago Midway Airport.

     "Chicago  Guaranty" means a limited  guaranty of up to seven million eighty
eight  thousand  two hundred and ten dollars  ($7,088,210)  by the Lender of the
Borrower's obligations under the Chicago Construction Loan, such guaranty in the
form (of a guaranty  delivered by the Lender or a letter of credit delivered for
the account of the Lender) and  substance  acceptable to the Lender and the City
of Chicago, as the same may be amended, restated,  supplemented or modified from
time to time.

     "Chicago Guaranty Fee" has the meaning specified in Section 2.05(b).

     "Chicago Midway  Facilities Lease" means the Chicago Midway Airport Amended
and Restated Airport Use Agreement and Facilities Lease, dated with an effective
date of January 1, 1997, as amended and supplemented as of December 10, 2004, as
the same may be amended or supplemented from time to time.

     "Closing" means the closing of the transactions contemplated by this Credit
Agreement.

     "Closing Date" means December 22, 2004 or any other date that may be agreed
to in writing by the  Borrower  and the  Lender.  "Closing  Fee" has the meaning
specified in Section 2.05(a).

     "Code" means the Internal Revenue Code of 1986.

     "Codeshare  Agreement"  the Codeshare  Agreement to be entered into between
the  Borrower,  its  Subsidiaries  and the  Lender,  as the same may be amended,
restated, amended and restated, modified or supplemented from time to time.

     "Collateral" means all of the "Primary Collateral," the "Secondary
Collateral" and the "Collateral" referred to in the Collateral Documents and all
of the other property and assets that are or are intended under the terms of the
Collateral Documents to be subject to Liens in favor of the Lender, which
property and assets shall not include the Excluded Assets and the Section 1110
Assets.

     "Collateral Documents" means, collectively,  the provisions of Article X of
this  Credit  Agreement,  security  agreements,  slot,  gate and route  security
agreements,  aircraft mortgages,  mortgages,  pledge agreements or other similar
agreements  delivered to the Lender  pursuant to Section  6.12,  and each of the
other agreements, instruments, supplements or documents that creates or purports
to create a Lien in favor of the Lender for the benefit of the Lender.

     "Commitment"  means (i) a Term Commitment and/or (ii) the Chicago Guaranty,
as the context may require.

                                       5
<PAGE>

     "Committee" means any statutory committee appointed in the Cases.

     "Compliance  Certificate" means a certificate  substantially in the form of
Exhibit B.

     "Computer  Software"  has the meaning  specified in Section  9.01(f)(iv)  .

     "Consolidated EBITDARR" means, for any period, for the Parent, the Borrower
and  its  Subsidiaries  on  a  consolidated   basis,  an  amount  equal  to  (i)
Consolidated  Net Income for such period  plus,  (ii) without  duplication,  the
following to the extent deducted in calculating  such  Consolidated  Net Income:
(a)  Consolidated  Interest  Charges  for such  period,  (b) the  provision  for
federal,  state,  local and foreign income taxes payable by the Borrower and its
Subsidiaries  for such period,  (c) the amount of depreciation  and amortization
expense, (d) administrative expenses (including  restructuring charges) incurred
in  connection  with  the  Cases  in  the  amount  provided  in  the  Borrower's
Projections, and (e) the aggregate amount of any aircraft rental payments.

     "Consolidated  Interest Charges" means, for any period, for the Parent, the
Borrower  and  its  Subsidiaries  on a  consolidated  basis,  the sum of (a) all
interest expense (net of interest income), premium payments, debt discount, fees
(including, without limitation, amortization of deferred financing costs related
to the Cases),  charges and related expenses of the Borrower, the Parent and its
Subsidiaries in connection with borrowed money (including  capitalized interest)
or in connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance  with GAAP, and (b) the portion of rent
expense of the Borrower,  the Parent and its  Subsidiaries  with respect to such
period under capital leases that is treated as interest in accordance with GAAP,
it being understood that rent expense that is treated as an operating expense in
accordance with GAAP is not included this calculation.

     "Consolidated  Net Income"  means,  for any period,  for the Borrower,  the
Parent  and its  Subsidiaries  on a  consolidated  basis,  the net income of the
Borrower,  the Parent and its Subsidiaries  (excluding  extraordinary  gains and
extraordinary  losses, in each case,  incurred in connection with the Cases) for
that period.

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

     "Control" has the meaning specified in the definition of "Affiliate".

     "Controlled  Account" means a deposit account of any Loan Party  maintained
with a depositary bank acceptable to the Lender.

     "Copyrights" has the meaning specified in Section 9.01(f)(iii).

     "Credit Extension" means each of the following: (a) a Borrowing and (b) the
issuance of the Chicago Guaranty and any drawing thereunder.

     "Creditors  Committee" means the official committee of unsecured  creditors
of the Loan Parties  appointed in the Cases by the United  States  Trustee on or
about November 1, 2004.

                                       6
<PAGE>

     "DCA" shall mean Ronald Reagan Washington National Airport. ---

     "Debtor Relief Laws" means the Bankruptcy Code, and all other  liquidation,
conservatorship,   bankruptcy,   assignment   for  the  benefit  of   creditors,
moratorium, rearrangement,  receivership, insolvency, reorganization, or similar
debtor relief Laws of the United States or other applicable  jurisdictions  from
time to time in effect and affecting the rights of creditors generally.

     "Default" means any event or condition that constitutes an Event of Default
or that, with the giving of any notice,  the passage of time, or both,  would be
an Event of Default.

     "Default  Rate"  means an  interest  rate  equal to Base Rate plus 3.0% per
annum.

     "DIP Financing  Orders" means the Interim Order or the Final Order or both,
as the context may require.

     "Disposition"  or "Dispose"  means the sale,  transfer,  license,  lease or
other disposition (including any sale and leaseback transaction) of any property
by any Person, including any sale, assignment,  transfer or other disposal, with
or  without  recourse,  of any notes or  accounts  receivable  or any rights and
claims  associated  therewith;  provided,  however,  that a Slot trade shall not
constitute a Disposition if accomplished in a transaction  where the traded Slot
is intended to be returned  to the  applicable  Loan Party  within 30 days after
such trade is consummated (a "Temporary Slot Disposition").

     "Dollar" and "$" mean lawful money of the United States.

     "DOT"  means  the  United  States  Department  of  Transportation,  or  any
successor authority established in replacement thereof.

     "Environmental  Action"  means any action,  suit,  demand,  demand  letter,
claim,  notice of non-compliance or violation,  notice of liability or potential
liability,  investigation,   proceeding,  consent  order  or  consent  agreement
relating in any way to any Environmental Law,  Environmental Permit or Hazardous
Materials or arising from alleged  injury or threat of injury to health,  safety
or the environment,  including,  without limitation,  (a) by any governmental or
regulatory authority for enforcement,  cleanup, removal,  response,  remedial or
other actions or damages and (b) by any governmental or regulatory  authority or
any third  party for  damages,  contribution,  indemnification,  cost  recovery,
compensation or injunctive relief.

     "Environmental  Laws" means any and all Federal,  state, local, and foreign
statutes,  laws, regulations,  ordinances,  rules,  judgments,  orders, decrees,
permits, concessions,  grants, franchises,  licenses, agreements or governmental
restrictions  relating to pollution and the protection of the environment or the
release  of any  materials  into the  environment,  including  those  related to
hazardous substances or wastes,  noise, air emissions and discharges to waste or
public systems.

     "Environmental  Liability"  means any  liability,  contingent  or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower, any other Loan Party or any of their
respective  Subsidiaries directly or indirectly resulting from or based upon (a)
violation  of  any  Environmental  Law,  (b)  the  generation,   use,  handling,
transportation,  storage,  treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous  Materials,  (d) the release or threatened  release of
any Hazardous  Materials into the environment or (e) any contract,  agreement or
other consensual  arrangement  pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

                                       7
<PAGE>

     "Environmental Permit" means any permit,  approval,  identification number,
license or other authorization required under any Environmental Law.

     "Equipment" has the meaning specified in Section 9.01(B)(a).

     "Equity  Interests" means, with respect to any Person, all of the shares of
capital stock of (or other ownership or profit interests in) such Person, all of
the warrants,  options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests in)
such Person,  all of the securities  convertible into or exchangeable for shares
of capital stock of (or other  ownership or profit  interests in) such Person or
warrants,  rights or options for the purchase or acquisition from such Person of
such shares (or such other interests),  and all of the other ownership or profit
interests in such Person (including, without limitation,  partnership, member or
trust interests therein),  whether voting or nonvoting,  and whether or not such
shares, warrants, options, rights or other interests are outstanding on any date
of determination.

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

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with any Loan Party within the meaning of Section 414(b) or
(c) of the  Code  (and  Sections  414(m)  and (o) of the Code  for  purposes  of
provisions relating to Section 412 of the Code).

     "ERISA Event" means (a) a Reportable  Event with respect to a Pension Plan;
(b) a withdrawal  by any Loan Party or any ERISA  Affiliate  from a Pension Plan
subject  to  Section  4063  of  ERISA  during  a plan  year  in  which  it was a
substantial  employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of  operations  that is treated as such a withdrawal  under  Section  4062(e) of
ERISA;  (c) a  complete  or  partial  withdrawal  by any Loan Party or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in  reorganization;  (d) the  filing of a notice of  intent  to  terminate,  the
treatment of a Plan  amendment as a  termination  under Section 4041 or 4041A of
ERISA,  or the  commencement  of  proceedings by the PBGC to terminate a Pension
Plan or Multiemployer  Plan; (e) an event or condition which constitutes grounds
under  Section 4042 of ERISA for the  termination  of, or the  appointment  of a
trustee to  administer,  any  Pension  Plan or  Multiemployer  Plan;  or (f) the
imposition  of any  liability  under  Title  IV of  ERISA,  other  than for PBGC
premiums due but not delinquent  under Section 4007 of ERISA,  upon the Borrower
or any ERISA Affiliate.

     "Eurocurrency  Reserve Requirements" for any day as applied to a LIBOR Loan
shall mean the  aggregate  (without  duplication)  of the rates  (expressed as a
decimal rounded upward to the nearest 1/100th of (%)) of reserve requirements in
effect on such day (including, without limitation, basic, supplemental, marginal
and emergency  reserves  under any  regulations of the Board of Governors of the
Federal Reserve System of the United States or other Governmental  Authority, or
any successor thereto,  having jurisdiction with respect thereto) prescribed for
eurocurrency  funding  (currently  referred to as "Eurocurrency  Liabilities" in
Regulation D of such Board)  maintained by a member bank of the Federal  Reserve
System.

                                       8
<PAGE>

     "Event of Default" has the meaning specified in Section 8.01.

     "Excluded  Assets"  means (i) any  retainers  paid or deposited  before the
Petition  Date  by  the  Loan  Parties  to  or  with  their   professionals  for
professional  services and expense  reimbursement  in connection with the Cases;
provided,  however,  that the security  interests  attach  automatically  to any
reversionary or residual interest any Loan Party may have in such retainer; (ii)
any Trust Funds;  (iii) Loan  Parties'  avoidance  actions and proceeds  thereof
under Sections 544-550 of the Bankruptcy Court or similar  applicable State law,
and (iv) Card Receivables (but only to the extent the ATSB Lender Parties do not
hold a security interest therein).

     "Existing  Indebtedness"  means Indebtedness of each Loan Party existing on
the Petition Date.

     "Exit Facility" means the Exit Facility described in the Exit Facility Term
Sheet.

     "Exit Facility Term Sheet" means the Exit Facility Term Sheet in form
of Annex A hereto.

     "FAA" means the Federal Aviation Administration.

     "Facility" means the Term Loan.

     "Federal  Funds Rate"  means,  for any day, the rate per annum equal to the
weighted  average of the rates on  overnight  Federal  funds  transactions  with
members of the Board of  Governors of the Federal  Reserve  System of the United
States  arranged  by Federal  funds  brokers on such day,  as  published  by the
Federal Reserve Bank on the Business Day next succeeding such day; provided that
(a) if such day is not a Business Day, the Federal Funds Rate for such day shall
be such  rate on such  transactions  on the next  preceding  Business  Day as so
published  on the next  succeeding  Business  Day, and (b) if no such rate is so
published on such next succeeding  Business Day, the Federal Funds Rate for such
day shall be the average rate (rounded upward, if necessary, to a whole multiple
of 1/100 of 1%) charged to Bank of America on such day on such  transactions  as
determined by the Lender.

     "Final  Order" means a final order of the  Bankruptcy  Court  approving the
terms and  conditions  of the Loan  Documents  substantially  in the form of and
containing,  among other  things,  the  provisions  present in the Interim Order
(including,  without  limitation,  the  granting of Liens and the  superpriority
status  referred to in the Loan  Documents),  which final order shall be in form
and substance  satisfactory  to the Lender in its sole  discretion and shall not
have been reversed, amended, supplemented, modified, stayed or vacated.

     "First  Day  Orders"  means all  orders  entered  by the  Bankruptcy  Court
granting the relief  requested in the motions filed with the Bankruptcy Court on
the Petition Date or within two Business Days thereafter.

                                       9
<PAGE>

     "GAAP" means generally accepted accounting  principles in the United States
in  effect  from  time  to time  as  applied  by a  significant  segment  of the
accounting profession in the United States.

     "Gate Leaseholds" means all of the right, title,  privilege,  interest, and
authority now or hereafter acquired or held by the Borrower or, if applicable, a
Guarantor in connection  with the right to use or occupy space in any airport or
terminal at which the Borrower conducts scheduled operations.

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

     "Guarantee"  means,  as to any Person,  (a) any  obligation,  contingent or
otherwise,  of such  Person  guaranteeing  or  having  the  economic  effect  of
guaranteeing  any  Indebtedness  payable or  performable  by another Person (the
"primary obligor") in any manner, whether directly or indirectly,  and including
any  obligation of such Person,  direct or indirect,  (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness,  (ii)
to  purchase  or lease  property,  securities  or  services  for the  purpose of
assuring  the  obligee  in  respect  of  such  Indebtedness  of the  payment  or
performance of such  Indebtedness,  (iii) to maintain  working  capital,  equity
capital or any other  financial  statement  condition  or  liquidity or level of
income or cash flow of the primary  obligor so as to enable the primary  obligor
to pay such  Indebtedness,  or (iv)  entered into for the purpose of assuring in
any other manner the obligee in respect of such  Indebtedness  of the payment or
performance  thereof or to protect such obligee  against loss in respect thereof
(in whole or in part), or (b) any Lien on any assets of such Person securing any
Indebtedness of any other Person, whether or not such Indebtedness is assumed by
such  Person  (or any  right,  contingent  or  otherwise,  of any holder of such
Indebtedness  to obtain any such  Lien).  The amount of any  Guarantee  shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary  obligation,  or portion thereof,  in respect of which such Guarantee is
made or, if not  stated or  determinable,  the  maximum  reasonably  anticipated
liability in respect  thereof as determined by the  guaranteeing  Person in good
faith. The term "Guarantee" as a verb has a corresponding meaning.

     "Guaranty" has the meaning specified in Section 10.01.

     "Guaranteed Obligations" has the meaning specified in Section 10.01.

     "Guarantor"  means the Parent,  Ambassadair  Travel Club, Inc., ATA Leisure
Corp.,  Amber Travel,  Inc.,  ---------  American Trans Air Execujet,  Inc., ATA
Cargo, Inc., and Chicago Express Airlines,  Inc. and any other Subsidiary of the
Parent.

     "Hazardous  Materials"  means all  explosive or  radioactive  substances or
wastes  and all  hazardous  or toxic  substances,  wastes  or other  pollutants,
including petroleum or petroleum  distillates,  asbestos or  asbestos-containing
materials,  polychlorinated  biphenyls,  radon gas, infectious or medical wastes
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

                                       10
<PAGE>

     "Indebtedness"  means,  as to any  Person  at a  particular  time,  without
duplication,  all of the following,  whether or not included as  indebtedness or
liabilities in accordance with GAAP:

     (a) all  obligations of such Person for borrowed money and all  obligations
of such Person evidenced by bonds,  debentures,  notes, loan agreements or other
similar instruments;

     (b) all direct or  contingent  obligations  of such  Person  arising  under
letters of credit (including standby and commercial), bankers' acceptances, bank
guaranties, surety bonds and similar instruments;

     (c) net obligations of such Person under any Swap Contract;

     (d) all  obligations  of such Person to pay the deferred  purchase price of
property or services  (other than trade accounts  payable in the ordinary course
of business  and not past due for more than 60 days after the date on which each
such trade payable or account payable was created);

     (e) indebtedness  (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including indebtedness arising
under  conditional  sales or other title retention  agreements),  whether or not
such  indebtedness  shall  have been  assumed  by such  Person or is  limited in
recourse;

     (f) capital leases, operating leases and Synthetic Lease Obligations;

     (g) all obligations of such Person to purchase,  redeem, retire, defease or
otherwise make any payment in respect of any Equity  Interests in such Person or
any other  Person or any  warrants,  rights or options to  acquire  such  Equity
Interests, valued, in the case of redeemable preferred interests, at the greater
of its voluntary or involuntary  liquidation  preference plus accrued and unpaid
dividends;

     (h) as to any Loan Party,  the  obligation  to purchase  Property  from the
Authority under the Indiana DIP Orders; and

     (i) all Guarantees of such Person in respect of any of the foregoing.

     For all purposes  hereof,  the Indebtedness of any Person shall include the
Indebtedness  of any  partnership  or joint venture  (other than a joint venture
that is itself a corporation or limited liability  company) in which such Person
is a general partner or a joint venturer,  unless such Indebtedness is expressly
made  non-recourse  to such Person.  The amount of any net obligation  under any
Swap  Contract  on any date  shall be  deemed to be the Swap  Termination  Value
thereof as of such date.  The amount of any capital  lease,  operating  lease or
Synthetic  Lease  Obligation  as of any date shall be deemed to be the amount of
Attributable  Indebtedness  in respect  thereof  as of such date.  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 the  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.

                                       11
<PAGE>

     "Indemnitees" has the meaning set forth in Section 11.05.

     "Indiana Collateral" means the property of the loan parties in which a Lien
is granted to the Authority under the Indiana DIP Orders.

     "Indiana DIP Orders" means the Interim Order Granting  Emergency Motion For
Order (I) Authorizing  Debtors To Obtain  Postpetition  Financing Pursuant To 11
U.S.C.  ss.ss.  105, 362 364(c)(1),  364(c)(2),  364(c)(3) And 507; And To Sell,
Lease And Purchase  Assets  Pursuant To 11 U.S.C.  ss.ss.  105 And 363; and (II)
Scheduling  Interim And Final Hearings Pursuant To Fed. R. Bankr. P. 4001(c) and
(d) And  6004(a)(2)  dated  November  16, 2004 and the Final Order  Granting DIP
Finance/Sale  Motion dated  December  17, 2004,  as such orders may be extended,
modified  or  amended  and  which  shall  not  have  been   reversed,   amended,
supplemented, modified, stayed or vacated.

     "Intellectual  Property  Collateral"  has the meaning  specified in Section
9.01(f).

     "Interest  Payment  Date" means the last Business Day of each month and the
Maturity Date.

     "Interest Rate  Determination  Date" shall mean the date for  determining a
LIBOR Rate.

     "Interim Order" has the meaning specified in Section 4.02(i).

     "Inventory" has the meaning specified in Section 9.01(b).

     "Investment" means, as to any Person, any direct or indirect acquisition or
investment  by such  Person,  whether  by  means  of (a) the  purchase  or other
acquisition of capital stock or other securities of another Person,  (b) a loan,
advance or capital  contribution  to,  Guarantee  or  assumption  of debt of, or
purchase  or other  acquisition  of any other  debt or equity  participation  or
interest in, another Person, including any partnership or joint venture interest
in such other Person and any  arrangement  pursuant to which the investor incurs
debt of the type referred to in clause (h) of the  definition of  "Indebtedness"
set forth in this Section 1.01 in respect of such Person, or (c) the purchase or
other  acquisition (in one transaction or a series of transactions) of assets of
another Person that  constitute a business unit or all or a substantial  part of
the business of, such Person; provided,  however, that deposits made by any Loan
Party in the ordinary  course of business in connection  with the acquisition of
aircraft,  airframes  or  engines  or the entry into  contracts  (but  excluding
deposits to secure  Indebtedness)  shall not be considered an "Investment".  For
purposes  of  covenant  compliance,  the amount of any  Investment  shall be the
amount  actually  invested,  without  adjustment  for  subsequent  increases  or
decreases in the value of such Investment.

     "Investment  Agreement"  means the  Investment  Agreement  described in the
Investment Agreement Term Sheet.

     "Investment  Agreement Term Sheet" means that certain Investment  Agreement
Term Sheet enclosed hereto as Annex B.



                                       12
<PAGE>

     "IP Agreements" has the meaning specified in Section 9.02(f)(viii).

     "IRS" means the United States Internal Revenue Service.

     "Laws" means, collectively, all international,  foreign, Federal, state and
local statutes, treaties, rules, guidelines, regulations,  ordinances, codes and
administrative   or  judicial   precedents   or   authorities,   including   the
interpretation or administration  thereof by any Governmental  Authority charged
with  the  enforcement,   interpretation  or  administration  thereof,  and  all
applicable   administrative  orders,   directed  duties,   requests,   licenses,
authorizations and permits of, any Governmental  Authority, in each case whether
or not having the force of law.

     "LGA" shall mean New York's LaGuardia Airport.

     "LIBOR Rate" shall mean a rate of interest  equal to (i) the rate per annum
(rounded  upwards to the nearest  1/100th of 1%) equal to the  offered  rate for
deposits of Dollars  for a three  month  period as  displayed  in the  Bloomberg
Financial Markets system (or other  authoritative  source selected by the Lender
in its  sole  discretion)  as of 11:00  A.M.  (London  time)  on the  applicable
Interest Rate  Determination  Date,  divided by (ii) 1.00 minus the Eurocurrency
Reserve  Requirements  in effect on the applicable  Interest Rate  Determination
Date.  The  LIBOR  Rate  shall  be  adjusted  with  respect  to any  LIBOR  Loan
outstanding  on the  effective  date of any change in the  Eurocurrency  Reserve
Requirements as of such effective date.

     "Lien"  means any  mortgage,  pledge,  hypothecation,  assignment,  deposit
arrangement,  encumbrance,  lien  (statutory or other),  charge,  or preference,
priority,  privilege or other security  interest or preferential  arrangement of
any kind or nature whatsoever  intended for security  (including any conditional
sale or other title  retention  agreement,  any easement,  right of way or other
encumbrance  on  title  to  real  property,   and  any  financing  lease  having
substantially the same economic effect as any of the foregoing).

     "Liquidity"  means,  on any given date with  respect to the  Borrower,  the
Parent  and its  Subsidiaries,  the  aggregate  amount  of all cash  held by the
Borrower, the Parent and its Subsidiaries.

     "Loan" means an  extension  of credit by the Lender to the  Borrower  under
Article  II in the  form of a Term  Loan or the  issuance  and  delivery  of the
Chicago Guaranty and any reimbursement obligations thereunder.

     "Loan Documents" means,  collectively,  (a) this Credit Agreement,  (b) the
Term Note, and (c) the Collateral Documents.

     "Loan Parties" means, collectively, the Borrower and each Guarantor.

     "Material  Adverse Change" means a material adverse change in the business,
condition  (financial  or  otherwise),  operations,  performance,  properties or
prospects of the Borrower, the Parent and its Subsidiaries taken as a whole from
and after  the  Petition  Date,  other  than any  change  (a) of the type  which
customarily  occurs  as a result  of  events  leading  up to and  following  the
commencement  of a  case  under  Chapter  11 of  the  Bankruptcy  Code  and  the
commencement of the Cases or (b) disclosed in (i) the annual report on Form 10-K
for the year ended  December 31, 2003



                                       13
<PAGE>

filed by the Borrower or the Parent,  (ii) in the quarterly reports on Form 10-Q
for the  quarters  ended  June 30,  2003 and  September  30,  2003  filed by the
Borrower or the Parent or (iii) in any report on Form 8-K filed by the  Borrower
or the Parent after  December 31, 2003 and are listed and available on the SEC's
"EDGAR"  website;  provided  that  deferrals  of  payments to aircraft or engine
lessors with respect to grounded  aircraft and other  aircraft or engines in the
Borrower's  fleet (and any  associated  ratings  downgrade)  shall not in and of
themselves constitute a Material Adverse Change.

     "Material  Adverse  Effect"  means (a) a material  adverse  effect upon the
business,   condition   (financial  or  otherwise),   operations,   performance,
properties or prospects of the Borrower,  the Parent and its Subsidiaries  taken
as a whole,  other  than any effect of the type  which  customarily  occurs as a
result of events  leading up to and following the  commencement  of a case under
chapter 11 of the  Bankruptcy  Code and the  commencement  of the  Cases;  (b) a
material  impairment  of the rights and  remedies  of the Lender  under any Loan
Document,  or of the ability of any Loan Party to perform its obligations  under
any Loan Document to which it is a party; (c) a material adverse effect upon the
legality,  validity,  binding effect or enforceability against any Loan Party of
any Loan  Document to which it is a party;  or (d) a material  impairment of the
Collateral taken as a whole.

     "Maturity  Date" means the earliest of (a) September 30, 2005, (b) the date
of termination in whole of the Commitments, pursuant to Section 2.06 or 8.02(b),
and (c) the effective date of a Reorganization Plan.

     "Maximum Rate" has the meaning specified in Section 11.10.

     "MDW" shall mean Chicago's Midway Airport.

     "Midway Hangar Property" has the meaning specified in the Asset Acquisition
Agreement.

     "Monthly  Payment  Date"  has the  meaning  specified  in  Section  2.05(b)

     "Multiemployer  Plan" means any employee benefit plan of the type described
in Section  4001(a)(3)  of ERISA,  to which the Borrower or any ERISA  Affiliate
makes or is obligated to make  contributions,  or during the preceding five plan
years, has made or been obligated to make contributions.

     "Net Cash Proceeds" means: (a) with respect to the sale of any asset by any
Loan  Party,  the excess,  if any,  of (i) the sum of cash and Cash  Equivalents
received in connection  with such sale  (including any cash or Cash  Equivalents
received by way of deferred  payment  pursuant to, or by monetization of, a note
receivable or otherwise,  but only as and when so received) over (ii) the sum of
(A) the principal amount of any  Indebtedness  that is secured by such asset and
that is required to be repaid in  connection  with the sale thereof  (other than
Indebtedness  under  the  Loan  Documents),  (B) the  reasonable  and  customary
out-of-pocket fees and expenses  (including  reasonable and customary  brokerage
and legal counsel fees) incurred by such Loan Party in connection with such sale
and (C) taxes reasonably estimated by the Borrower to be actually payable within
two  years  of the  date of the  relevant  asset  sale as a  result  of any gain
recognized in connection  therewith  documented in form and substance reasonably
satisfactory to the Lender; and

                                       14
<PAGE>

     (b) with  respect to the  issuance  of any  capital  stock or other  Equity
Interest by Loan Party or the  issuance of any  Indebtedness  by any Loan Party,
the  excess  of (i)  the  sum of the  cash  and  Cash  Equivalents  received  in
connection with such sale or issuance over (ii) the  underwriting  discounts and
commissions,  and other out-of-pocket  expenses,  incurred by such Loan Party in
connection with such sale or issuance.

     "Obligations" means all advances to, and debts,  liabilities,  obligations,
covenants  and  duties of, any Loan Party  arising  under any Loan  Document  or
otherwise with respect to any Loan, whether direct or indirect  (including those
acquired by  assumption),  absolute  or  contingent,  due or to become due,  now
existing or hereafter arising and including  interest and fees that accrue after
the  commencement  by or against any Loan Party or any Affiliate  thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in such
proceeding,  regardless of whether such interest and fees are allowed  claims in
such  proceeding.   Without  limiting  the  generality  of  the  foregoing,  the
Obligations  of the Loan  Parties  under  the  Loan  Documents  include  (a) the
obligation to pay principal,  interest, charges, expenses, fees, attorneys' fees
and disbursements, indemnities and other amounts payable by any Loan Party under
any Loan Document,  (b) the obligation of any Loan Party to reimburse any amount
in respect of any of the foregoing obligations under the Loan Documents that the
Lender,  in its sole  discretion,  may elect to pay or advance on behalf of such
Loan Party,  and (c) the obligation to reimburse any amount in respect of any of
the foregoing obligations resulting from any draw under the Chicago Guaranty.

     "Orders" means the DIP Financing Orders,  the Procedures Order or any other
order of the Bankruptcy Court in connection with the Cases.

     "Organization  Documents"  means (a) with respect to any  corporation,  the
certificate  or  articles  of  incorporation  and the bylaws (or  equivalent  or
comparable  constitutive  documents with respect to any non-U.S.  jurisdiction);
(b) with respect to any limited liability  company,  the certificate or articles
of formation or organization  and operating  agreement;  and (c) with respect to
any  partnership,  joint venture,  trust or other form of business  entity,  the
partnership,  joint  venture  or other  applicable  agreement  of  formation  or
organization  and any  agreement,  instrument,  filing  or notice  with  respect
thereto  filed  in  connection  with  its  formation  or  organization  with the
applicable  Governmental  Authority  in the  jurisdiction  of its  formation  or
organization  and, if  applicable,  any  certificate or articles of formation or
organization of such entity.

     "Other Taxes" has the meaning specified in Section 3.01(b).

     "Outstanding Amount" means on any date, the aggregate outstanding principal
amount  thereof  after  giving  effect  to any  borrowings  and  prepayments  or
repayments of the Term Loan, occurring on such date.

     "Patents" has the meaning set forth in Section 9.01(f)(i).

     "Pension Plan" means any "employee  pension  benefit plan" (as such term is
defined in Section  3(2) of ERISA),  other than a  Multiemployer  Plan,  that is
subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or
any  ERISA  Affiliate  or to  which  any  Loan  Party  or  any  ERISA  Affiliate
contributes  or has an  obligation to  contribute,  or in the case of a multiple
employer  or  other  plan  described  in  Section  4064(a)  of  ERISA,  has made
contributions at any time during the immediately preceding five plan years.

                                       15
<PAGE>

     "Permitted  Sale/Leaseback"  means any transaction pursuant to which a Loan
Party sells "equipment"  described in Section  1110(a)(3) of the Bankruptcy Code
(as in effect on the date  hereof)  that is subject to a  mortgage,  conditional
sale or security  interest  on the date hereof  (such  equipment,  the  "Subject
Equipment")  and  leases  the  Subject  Equipment  back  from  the  buyer or its
designee.

     "Permitted Senior Liens" means (a) Liens permitted under Section 7.01 which
have  priority by operation of law or as provided  herein over the Liens granted
to the Lender and (b) Liens permitted under Section 7.01(i), (p) or (q).

     "Person" means any natural person, corporation,  limited liability company,
trust, joint venture, association, company, partnership,  Governmental Authority
or other entity.

     "Petition Date" has the meaning specified in Preliminary Statement 1 to
this Credit Agreement.

     "Plan"  means any  "employee  benefit  plan" (as such  term is  defined  in
Section  3(3) of ERISA)  established  by any Loan Party or, with  respect to any
such plan that is subject to Section  412 of the Code or Title IV of ERISA,  any
ERISA Affiliate.

     "Pledged Debt" has the meaning specified in Section 9.01(d)(ii).

     "Pledged Equity" has the meaning specified in Section 9.01(d)(i).

     "Post-Petition", when used with respect to any agreement or instrument, any
claim  or  proceeding  or any  other  matter,  shall  refer to an  agreement  or
instrument that was entered into or became effective, a claim or proceeding that
first arose or was first  instituted,  or another  matter  that first  occurred,
after the commencement of the Cases.

     "Pre-Petition",  when used with respect to any agreement or instrument, any
claim  or  proceeding  or any  other  matter,  shall  refer to an  agreement  or
instrument that was entered into or became effective, a claim or proceeding that
arose or was instituted,  or another matter that occurred, prior to the Petition
Date.

     "Pre-Petition  Payment"  means a payment (by way of adequate  protection or
otherwise) of principal or interest or otherwise on account of any  Pre-Petition
Indebtedness or trade payables or other Pre-Petition claims against the Borrower
or any Guarantor.

     "Primary Collateral" has the meaning specified in Section 9.01(B).

     "Principal  Balance" shall mean the  outstanding  principal  balance of the
Loans or any specified portion thereof.

     "Receivables" has the meaning specified in Section 9.01(c).

                                       16
<PAGE>

     "Regulations"  means the  regulations  for the Air Carrier  Guarantee  Loan
Program issued pursuant to the Air  Transportation  Stabilization Act, 14 C.F.R.
Part 1300, as the same may be amended from time to time.

     "Released Parties" has the meaning specified in Section 2.11.

     "Releasing Parties" has the meaning specified in Section 2.11.

     "Related Contracts" has the meaning specified in Section 9.01(c).

         "Relevant Labor Unions" means the Association of Flight Attendants,
Airline Pilots Association, International, International Association of
Machinists and Aerospace Workers and the Communications Workers of America.

     "Reorganization  Plan" means a chapter 11 plan of  reorganization  filed in
any Case by the Borrower and/or any of the Guarantors.

     "Reportable  Event" means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

     "Responsible  Officer" means, (i) the chief executive  officer,  president,
chief  financial  officer,  executive  vice  president,  treasurer  or assistant
treasurer of a Loan Party,  and (ii) with respect to each Loan Party (other than
the Borrower),  any person  authorized by the Board of Directors or shareholders
of such Loan Party to execute documents in connection with the Loan Documents on
behalf of such Loan Party. Any document delivered  hereunder that is signed by a
Responsible Officer of a Loan Party shall be conclusively  presumed to have been
authorized by all necessary  corporate,  partnership  and/or other action on the
part of such  Loan  Party and such  Responsible  Officer  shall be  conclusively
presumed to have acted on behalf of such Loan Party.

     "Restricted  Payment" means any dividend or other distribution  (whether in
cash,  securities or other  property) with respect to any capital stock or other
Equity Interest of any Loan Party, or any payment  (whether in cash,  securities
or other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, defeasance,  acquisition,  cancellation or
termination of any such capital stock or other Equity Interest, or on account of
any return of capital to the  Borrower's  stockholders,  partners or members (or
the equivalent Persons thereof).

     "S&P"  means  Standard  &  Poor's  Ratings  Services,  a  division  of  The
McGraw-Hill Companies, Inc. and any successor thereto.

     "SEC" means the Securities  and Exchange  Commission,  or any  Governmental
Authority succeeding to any of its principal functions.

     "Secondary Collateral" has the meaning specified in Section 9.01(B).

     "Section 1110 Agreement" shall mean any agreement of any Loan Party related
to Section 1110 Assets,  including,  without  limitation,  security  agreements,
mortgages,  trusts,  leases,  conditional  sale agreements or other  instruments
applicable to such Section 1110 Assets.



                                       17
<PAGE>

     "Section  1110  Assets"  means,  (i)  any  "aircraft",  "aircraft  engine",
"propeller",  "appliance"  or  "spare  part" of any Loan  Party (as  defined  in
Section  40102 of Title 49) as those terms are used in Section  1110(a)(3)(A)(i)
of the Bankruptcy Code, (ii) all parts substitutions,  renewals and replacements
of, improvements,  accessions and accumulations  incident to each such aircraft,
aircraft engine, appliance or spare part and all documents related to any of the
foregoing to the extent any such asset constitutes equipment within the scope of
section 1110(a) of the Bankruptcy  Code;  (iii) any other assets with respect to
which  the  granting  of any such  security  interests  would  cause a  default,
directly or  indirectly,  of any Section  1110  Agreement,  other than a default
arising  from a negative  pledge or similar  provision  in any such Section 1110
Agreement with respect to otherwise  unencumbered property, and (iv) any deposit
or reserve  delivered by a Loan Party to a Section 1110  Beneficiary (as defined
below) in  connection  with the  purchase,  financing or lease of a Section 1110
Asset; or reserve upon the satisfaction of the obligations secured thereby.

     "Section 1110 Beneficiary"  shall mean all  counterparties  with any of the
Loan Parties to any such Section 1110 Agreements.

     "Secured Obligations" has the meaning specified in Section 9.01.

     "Security Collateral" has the meaning specified in Section 9.01(d).

     "Slot" means the right and operational authority of a Loan Party to conduct
one Instrument  Flight Rules (as defined under the FAA  regulations)  landing or
takeoff  operation  during a specific  hour or other periods at LGA, MDW and DCA
pursuant to FAA regulations.

     "Subsidiary" of a Person means a corporation,  partnership,  joint venture,
limited  liability  company or other business  entity of which a majority of the
shares of securities or other  interests  having  ordinary  voting power for the
election  of  directors  or other  governing  body  (other  than  securities  or
interests  having such power only by reason of the  happening of a  contingency)
are at the time  beneficially  owned,  or the  management  of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by  such  Person.  Unless  otherwise  specified,  all  references  herein  to  a
"Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of
the Borrower.

     "Superpriority  Claim"  shall  mean a claim  against  the  Borrower  or any
Guarantor in any of the Cases  pursuant to Section  364(c) (1) of the Bankruptcy
Code having  priority over any or all  administrative  expenses and other claims
(other than  allowed  expenses  and claims  granted to the  Authority  under the
Indiana DIP Orders) of the kind  specified  in, or otherwise  arising or ordered
under,  any Sections of the  Bankruptcy  Code  (including,  without  limitation,
Sections  105, 326, 328,  330,  331,  503(b),  507,  546(c) and/or 726 thereof),
whether or not such claim or expenses may become  secured by a judgment  lien or
other non-consensual lien, levy or attachment.

     "Swap Contract" means (a) any and all rate swap transactions,  basis swaps,
credit  derivative  transactions,  forward rate  transactions,  commodity swaps,
commodity options, forward commodity contracts,  equity or equity index swaps or
options,  bond or bond price or bond index  swaps or options or forward  bond or
forward bond price or forward bond index  transactions,  interest  rate options,
forward foreign exchange  transactions,  cap transactions,  floor  transactions,
collar  transactions,  currency  swap  transactions,  cross-currency  rate  swap
transactions,   currency

                                       18
<PAGE>

options, spot contracts, or any other similar transactions or any combination of
any of the foregoing (including any options to enter into any of the foregoing),
whether  or not any such  transaction  is  governed  by or subject to any master
agreement,  and (b)  any  and all  transactions  of any  kind,  and the  related
confirmations, which are subject to the terms and conditions of, or governed by,
any  form  of  master  agreement   published  by  the  International  Swaps  and
Derivatives  Association,   Inc.,  any  International  Foreign  Exchange  Master
Agreement,  or any other master agreement (any such master  agreement,  together
with  any  related  schedules,   a  "Master  Agreement"),   including  any  such
obligations or liabilities under any Master Agreement.


    "Swap  Termination  Value"  means,  in  respect  of any  one or  more  Swap
Contracts,  after  taking into  account  the effect of any  legally  enforceable
netting agreement relating to such Swap Contracts,  (a) for any date on or after
the date such Swap  Contracts  have been  closed  out and  termination  value(s)
determined in accordance therewith,  such termination value(s),  and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts.

     "Synthetic  Lease  Obligation"  means the monetary  obligation  of a Person
under (a) a so-called synthetic,  off-balance sheet or lease in which the lessee
is contractually entitled to the tax benefits of ownership of the leased assets,
or (b) an agreement for the use or possession of property  creating  obligations
that do not appear on the  balance  sheet of such  Person  but  which,  upon the
insolvency  or  bankruptcy  of  such  Person,  would  be  characterized  as  the
indebtedness of such Person (without  regard to accounting  treatment).  "Taxes"
has the meaning specified in Section 3.01(a).

     "Temporary Slot Disposition" has the meaning set forth in the definition of
"Disposition" set forth in this Section 1.01.

     "Term Borrowing" means a borrowing consisting of the Term Loan.

     "Term Commitment"  means, the Lender's  obligation to make the Term Loan to
the Borrower pursuant to Section 2.01.

     "Term Loan" means an advance made by the Lender under the Term Note.

     "Term Note" means a promissory note of the Borrower payable to the order of
the Lender,  in  substantially  the form of Exhibit A,  evidencing the aggregate
indebtedness of the Borrower to the Lender  resulting from the Term Loan and the
Closing Fee accrued to the Principal Balance.

     "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.

     "Trademarks" has the meaning specified in Section 9.02(f)(ii).

     "Transactions"  means,  collectively,  (a) the consummation of transactions
contemplated by the Asset Acquisition Agreement, the Codeshare Agreement and the
Loan  Documents  and (b) the  payment  of the  fees  and  expenses  incurred  in
connection with the consummation of the foregoing.


                                       19
<PAGE>

     "Trust Funds" has the meaning specified in the ATSB Cash Use Order.

     "Unfunded  Pension  Liability" means the excess of a Pension Plan's benefit
liabilities  under Section  4001(a)(16) of ERISA, over the current value of that
Pension  Plan's  assets,  determined  as of the most  recent  valuation  date in
accordance  with the  assumptions  used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.

     "United States" and "U.S." mean the United States of America.

     "United States Citizen" has the meaning specified in Section 5.01.

     "Use or Lose Rule" means with respect to the Slots,  the terms of 14 C.F.R.
      ss. 93.227.
     "UST/Clerk Fees" has the meaning set forth in the Interim Order.

     1.02 Other Interpretive Provisions. With reference to this Credit Agreement
and each other Loan Document, unless otherwise specified herein or in such other
Loan Document:

          (a) The  meanings  of  defined  terms are  equally  applicable  to the
     singular and plural forms of the defined terms.

          (b) (i) The words  "herein,"  "hereto,"  "hereof" and  "hereunder" and
     words of similar  import when used in any Loan Document shall refer to such
     Loan Document as a whole and not to any particular provision thereof.

          (ii) Article, Section, Exhibit and Schedule references are to the Loan
     Document in which such reference appears.

          (iii) The term "including" is by way of example and not limitation.

          (iv) The term "documents" includes any and all instruments, documents,
     agreements,  certificates, notices, reports, financial statements and other
     writings, however evidenced, whether in physical or electronic form.

          (c) In the  computation  of periods of time from a specified date to a
     later specified date, the word "from" means "from and including," the words
     "to" and "until" each mean "to but excluding," and the word "through" means
     "to and including."

          (d)  Section  headings  herein  and in the other  Loan  Documents  are
     included  for  convenience  of  reference  only and  shall not  affect  the
     interpretation of this Credit Agreement or any other Loan Document.

     1.03 Accounting Terms.

          (a) All accounting terms not specifically or completely defined herein
     shall be construed in conformity  with, and all financial  data  (including
     financial ratios and other financial calculations) required to be submitted
     pursuant to this Credit  Agreement  shall be prepared in  conformity  with,
     GAAP, as in effect from time to time,  applied in a manner  consistent with
     that  used  in  preparing  the  Audited  Financial  Statements,  except  as
     otherwise specifically prescribed herein.


                                       20
<PAGE>

          (b) If at any time any change in GAAP or the application thereof would
     affect the  computation of any financial  ratio or requirement set forth in
     any Loan Document,  and either the Borrower or the Lender shall so request,
     the Lender and the  Borrower  shall  negotiate  in good faith to amend such
     ratio or  requirement  to preserve the original  intent thereof in light of
     such change in GAAP (subject to the approval of the Lender); provided that,
     until so  amended,  (i) such  ratio or  requirement  shall  continue  to be
     computed in accordance  with GAAP prior to such change therein and (ii) the
     Borrower  shall  provide  to the  Lender  financial  statements  and  other
     documents  required under this Credit Agreement or as reasonably  requested
     hereunder setting forth a reconciliation between calculations of such ratio
     or requirement made before and after giving effect to such change in GAAP.

     1.04 Rounding. Any financial ratios required to be maintained by the
     Borrower  pursuant to this Credit Agreement shall be calculated by dividing
     the appropriate  component by the other  component,  carrying the result to
     one place more than the  number of places by which such ratio is  expressed
     herein and  rounding  the result up or down to the nearest  number  (with a
     rounding-up if there is no nearest number).

     1.05 References to Agreements and Laws. Unless otherwise expressly provided
herein, (a) references to Organization Documents, agreements (including the Loan
Documents)  and other  contractual  instruments  shall be deemed to include  all
subsequent   amendments,   restatements,   extensions,   supplements  and  other
modifications   thereto,   but  only  to  the  extent   that  such   amendments,
restatements, extensions, supplements and other modifications are not prohibited
by any Loan Document;  and (b) references to any Law shall include all statutory
and regulatory provisions consolidating,  amending, replacing,  supplementing or
interpreting such Law.

     1.06 Times of Day. Unless  otherwise  specified,  all references  herein to
times of day shall be  references  to Central time  (daylight  or  standard,  as
applicable).

                                   ARTICLE II

                      THE COMMITMENT AND CREDIT EXTENSIONS

     2.01 The Loans.

          (a)  Subject  to the terms and  conditions  set forth in Article IV of
     this Credit  Agreement  the Lender shall make the Term Loan to the Borrower
     in the amount equal to forty million dollars ($40,000,000).  Amounts repaid
     with respect to the Term Loan may not be reborrowed.

          (b)  Subject  to the terms and  conditions  set forth in Article IV of
     this Credit  Agreement,  the Lender  shall issue and deliver to the City of
     Chicago the Chicago Guaranty.

     2.02 Prepayments.

          (a) Optional. The Borrower may, upon notice to the Lender, at any time
     or from  time to time  voluntarily  prepay  the  Loans  in whole or in part
     without premium or penalty;  provided that

                                       21
<PAGE>

     (i) such notice must be received
     by the Lender not later than 11:00 a.m.  (A) three  Business  Days prior to
     any date of prepayment of any portion of the Loans;  (ii) any prepayment of
     the Loans shall be in a principal amount of $500,000 or a whole multiple of
     $50,000 in excess thereof; and if less, the entire principal amount thereof
     then  outstanding.  Each such notice  shall  specify the date and amount of
     such  prepayment  and the type of Loans to be  prepaid.  If such  notice is
     given by the  Borrower,  the Borrower  shall make such  prepayment  and the
     payment  amount  specified  in such notice  shall be due and payable on the
     date specified therein.

          (b)  Mandatory.  (i) If any Loan Party  Disposes of any Chicago Gates,
     the Borrower  shall prepay an aggregate  principal  amount of the Term Loan
     equal to: (A) 100% of all Net Cash Proceeds received therefrom  immediately
     upon receipt thereof by any Loan Party, less (B) any required repayments of
     the Indebtedness under the ATSB Loan or the Indiana DIP Orders.

               (ii) Upon the  issuance  by any Loan Party of any of its  capital
          stock or other Equity  Interests to any Person other than another Loan
          Party or the Lender pursuant to the terms of the Investment  Agreement
          (or the receipt of any capital contribution by any Loan Party from any
          Person other than another  Loan Party),  the Borrower  shall prepay an
          aggregate  principal  amount  of  Loans  equal to 100% of all Net Cash
          Proceeds  received  therefrom  immediately upon receipt thereof by any
          Loan Party.

         (iii) Upon the incurrence or issuance by any Loan Party of any
         Indebtedness to any Person other than another Loan Party (other than
         Indebtedness expressly permitted to be incurred or issued pursuant to
         Section 7.03(c)), the Borrower shall prepay an aggregate principal
         amount of Loans equal to 100% of all Net Cash Proceeds received
         therefrom immediately upon receipt thereof by any Loan Party.

          (c)  Prepayments to Include  Accrued  Interest,  Etc. All  prepayments
     under this  Section  2.02 shall be made  together  with  accrued and unpaid
     interest to the date of such prepayment on the principal amount so prepaid.

     2.03 Repayment of Loans.

          (a) Term Loan.  The Borrower shall repay to the Lender on the Maturity
     Date the aggregate  principal  amount of the Term Loan  outstanding on such
     date.

          (b) Chicago  Guaranty.  On  Maturity  Date,  if the  Chicago  Guaranty
     remains  outstanding,  and if the Lender is not  required  to  provide  any
     replacement  thereof in  connection  with the Exit  Facility,  the Borrower
     shall provide to the Lender a letter of credit issued by a bank approved by
     the  Lender  to secure in full all of the  Lender's  obligations  under the
     Chicago Guaranty.

     2.04 Interest.

          (a) Interest Rate.  Subject to the  provisions of subsections  (b) and
     (c) below,  the Term Loan and the amounts drawn under the Chicago  Guaranty
     shall bear interest on the  outstanding  principal  amount thereof from the
     applicable borrowing date at a rate per annum equal to the Base Rate.

                                       22
<PAGE>

          (b) Default Rate. Upon the occurrence and during the continuance of an
     Event of  Default,  the  Borrower  shall  pay  interest  on (i) the  unpaid
     principal  amount of each Loan owing to the  Lender,  payable in arrears on
     the dates  referred  to in clause  (a) above and on  demand,  at a rate per
     annum equal at all times to the Default Rate and (ii) to the fullest extent
     permitted by law, the amount of any interest,  fee or other amount  payable
     under the Loan  Documents  that is not paid  when  due,  from the date such
     amount  shall be due until such  amount  shall be paid in full,  payable in
     arrears on the date such amount  shall be paid in full and on demand,  at a
     rate per annum equal at all times to the Default Rate required to be paid.

          (c) In the event  that the Loan shall  bear a LIBOR  Rate,  the Lender
     shall  determine  (which  determination  shall,  absent  manifest error, be
     presumptively  correct) the LIBOR Rate applicable to the Principal  Balance
     on the applicable Interest Rate Determination Date.

          (d) Payment  Dates.  Interest on each Loan shall be due and payable in
     arrears on each Interest Payment Date applicable  thereto and at such other
     times  as may be  specified  herein.  Interest  hereunder  shall be due and
     payable in accordance with the terms hereof before and after judgment.

     2.05 Fees.

          (a) Closing Fee. The Borrower  shall pay to the Lender,  a closing fee
     equal to two and a half percent  (2.50%) of the  Commitment  on the Closing
     Date (the "Closing Fee").  The Closing Fee shall be deemed fully earned and
     payable on the date of  disbursement  of any Loan and shall be added to the
     Principal Balance.

          (b) Guaranty  Fee. The Borrower  shall pay to Lender a guaranty fee in
     the amount of three  percent  (3.00%) of the amounts  guarantied  under the
     Chicago  Guaranty (the "Chicago  Guaranty Fee").  The Chicago  Guaranty Fee
     shall be deemed  fully  earned and  payable on the date of  delivery of the
     Chicago Guaranty and shall be paid monthly in arrears on the first Business
     Day of each calendar month (the "Monthly  Payment Date") for so long as the
     Chicago Guaranty shall remain in effect.

          (c) Payment of Fees. All fees to be paid by any Loan Party pursuant to
     this Credit  Agreement and any other Loan  Document  shall be paid upon the
     funding pursuant to the Investment Agreement.

     2.06  Computation  of  Interest  and  Fees.  All  computations  of fees and
interest  shall be made on the basis of a 360-day  year and actual days  elapsed
(which  results  in more fees or  interest,  as  applicable,  being paid than if
computed on the basis of a 365-day year). Interest shall accrue on each Loan for
the day on which  the Loan is made,  and  shall  not  accrue  on a Loan,  or any
portion  thereof,  for the day on which the Loan or such  portion is paid.  Each
determination  by the  Lender  of an  interest  rate or fee  hereunder  shall be
conclusive and binding for all purposes, absent manifest error.

     2.07 Evidence of Indebtedness.

          (a) The Loans shall be  evidenced  by one or more  accounts or records
     maintained by the Lender in the ordinary  course of business.  The accounts
     or records  maintained  by the Lender shall

                                       23
<PAGE>

     be conclusive  absent  manifest
     error of the  amount of the Credit  Extensions  made by the Lender to or on
     behalf of the Borrower and the interest and payments  thereon.  Any failure
     to so  record  or any  error  in  doing so  shall  not,  however,  limit or
     otherwise affect the obligation of the Borrower hereunder to pay any amount
     owing with respect to the Obligations.

     2.08 Payments Generally.

          (a) All  payments  to be made by the  Borrower  shall be made  without
     condition or deduction for any counterclaim, defense, recoupment or setoff.
     Except as otherwise expressly provided herein, all payments by the Borrower
     hereunder  shall  be made  to the  Lender  in  Dollars  and in  immediately
     available funds not later than 2:00 p.m. on the date specified herein.

          (b) If any payment to be made by the Borrower  shall come due on a day
     other  than a Business  Day,  payment  shall be made on the next  following
     Business  Day,  and such  extension of time shall be reflected in computing
     interest or fees, as the case may be.

     2.09  Approval  of  Interest.  Approval  of this  Credit  Agreement  by the
Bankruptcy  Court shall  constitute  approval of the rates of interest and other
amounts  payable  hereunder and a ruling that they are exempt from any otherwise
applicable limitation.

     2.10 Superpriority Nature of Obligations; No Priming Lien.

          (a) Except as set forth in this  paragraph,  subject to the Carve-Out,
     the Obligations shall be secured by:

               (i)  an  allowed  superpriority   administrative   expense  claim
          pursuant to Section  364(c)(1) of the  Bankruptcy  Code in each of the
          Cases  having  priority,  subject  only to the allowed  administrative
          expense claims  granted to the Authority  under the Indiana DIP Orders
          and  the  Carve-Out,  over  all  administrative  expense,  claims  and
          unsecured  claims against the Loan Parties,  now existing or hereafter
          arising,  of  any  kind  or  nature  whatsoever,   including,  without
          limitation,  administrative  expenses  of the kinds  specified  in, or
          ordered  pursuant to sections 105, 326,  328, 330, 331,  503(b),  507,
          546(c),  726 or 1114 of the Bankruptcy Code whether or not such claims
          or  expenses  may  become   secured  by  a  judgment   lien  or  other
          non-consensual  lien,  levy or  attachment,  and shall at all times be
          senior to the rights of any Loan Party,  any Loan Party's estate,  and
          any  successor  trustee or estate  representative  in the Cases or any
          subsequent proceeding or case under the Bankruptcy Code.

               (ii) a continuing  first  priority Lien and security  interest in
          and to all Primary Collateral (as herein defined) of the Loan Parties,
          subject  only to (i) valid and  perfected  Liens in  existence  on the
          Petition  Date and  junior to such  valid and  perfected  Liens;  (ii)
          valid,  enforceable and nonavoidable Liens existing as of the Petition
          Date, but perfected after the Petition Date pursuant to section 546(b)
          of  the  Bankruptcy  Code  only  to  the  extent  such   post-petition
          perfection is expressly permitted under the Bankruptcy Code; (iii) the
          Carve-Out;  and (iv) Permitted  Senior Liens  (including liens granted
          pursuant to the ATSB Cash Use Order and the Indiana DIP Orders); and

               (iii) pursuant to section 364(c)(3) of the Bankruptcy Code, Liens
          and security  interests in and to all Secondary  Collateral (as herein
          defined) of the Loan Parties  subject only to (i) valid and  perfected
          Liens in existence  on the Petition  Date and junior to such valid and
          perfected  Liens;  (ii)  valid,  enforceable  and  nonavoidable  Liens
          existing as of the Petition  Date,  but  perfected  after the Petition
          Date  pursuant to section  546(b) of the  Bankruptcy  Code only to the
          extent such post-petition  perfection is expressly permitted under the
          Bankruptcy Code; (iii) the Carve-Out;  and (iv) Permitted Senior Liens
          (including  Liens  granted  under the Indiana DIP Orders and ATSB Cash
          Use Order).

                                       24
<PAGE>

          (b) Notwithstanding the foregoing, the Loan Parties shall be permitted
     to pay, as the same may become due and payable,  subject to the  provisions
     of the Orders and this Section  2.10 the fees and expenses  provided for in
     the  definition of the  Carve-Out.  Except for the  Carve-Out,  no costs or
     expenses  of  administration  shall be imposed  against  the Lenders or the
     Collateral  under Sections 105,  506(c) or 552 of the  Bankruptcy  Code, or
     otherwise.

     2.11  Release.  The  Borrower  and  the  other  Loan  Parties  each  hereby
acknowledge,  effective as of the date of the Interim Order,  that the Borrower,
the  other  Loan  Parties,  or any  of  their  Subsidiaries,  have  no  defense,
counterclaim, offset, recoupment,  cross-complaint,  claim or demand of any kind
or nature whatsoever that can be asserted to reduce or eliminate all or any part
of the Borrower's,  the other Loan Parties', or their Subsidiaries' liability to
repay the Lender as  provided in this Credit  Agreement  or to seek  affirmative
relief or damages of any kind or nature from the Lender.  The  Borrower  and the
other  Loan  Parties,  each in its own right  and on  behalf  of its  bankruptcy
estate,  all its successors,  assigns,  Subsidiaries  and any Affiliates and any
Person acting for and on behalf of, or claiming  through it  (collectively,  the
"Releasing  Parties"),  hereby fully,  finally and forever release and discharge
the  Lender  and all of its  past and  present  officers,  directors,  servants,
agents, attorneys, assigns, heirs, parents, subsidiaries, and each Person acting
for or on behalf of any of them  (collectively,  the "Released  Parties") of and
from any and all past and present  actions,  causes of action,  demands,  suits,
claims,  liabilities,  Liens,  lawsuits,  adverse consequences,  amounts paid in
settlement,   costs,  damages,   debts,   deficiencies,   diminution  in  value,
disbursements,  expenses,  losses  and other  obligations  of any kind or nature
whatsoever,  whether in law, equity or otherwise (including, without limitation,
those arising under Sections 541 through 550 of the Bankruptcy Code and interest
or other carrying costs,  penalties,  legal,  accounting and other  professional
fees and expenses, and incidental, consequential and punitive damages payable to
third parties), whether known or unknown, fixed or contingent, direct, indirect,
or  derivative,  asserted or unasserted,  foreseen or  unforeseen,  suspected or
unsuspected,  now or existing against any of the Released Parties,  whether held
in a personal or representative  capacity, and which are based on any act, fact,
event or omission or other matter,  cause or thing occurring at or from any time
prior to and  including  the date  hereof  in any way,  directly  or  indirectly
arising out of, connected with or relating to this Credit Agreement, the Interim
Order, the Final Order and the debtor in possession  financings  contemplated or
ordered therein, and all other agreements,  certificates,  instruments and other
documents  and  statements  (whether  written or oral)  related to the debtor in
possession financings;  provided,  however, that nothing herein shall affect the
rights of any party to the  agreements  to be  executed in  connection  with the
Closing and the closing of the Transactions,  including, without limitation, the
Asset  Acquisition  Agreement,  the  Codeshare  Agreement  and  the  other  Loan
Documents.

     2.12 Waiver of any Priming Rights.  Upon the Closing Date, and on behalf of
themselves  and  their  estates,  and  for so long as any  Obligation  shall  be
outstanding,  the Borrower and the other Loan Parties hereby  irrevocably  waive
any right,  pursuant  to  Sections  364(c) or 364(d) of the  Bankruptcy  Code or
otherwise,  (a) to grant  any Lien of equal or  greater  priority  than the Lien
securing the Obligations, or (b) to approve or incur a claim of equal or greater
priority than the  Obligations  other than as provided in the Indiana DIP Orders
and the ATSB Cash Use Order.

                                       25
<PAGE>

     2.13  Payment  of   Obligations.   Upon  the  Maturity   Date  (whether  by
acceleration or otherwise) of any of the Obligations under this Credit Agreement
or any of the other  Loan  Documents,  Lender  shall be  entitled  to  immediate
payment  of such  Obligations  without  further  application  to or order of the
Bankruptcy Court.

     2.14 No Discharge;  Survival of Claims. Borrower and each of the other Loan
Parties agrees that (a) the Obligations hereunder shall not be discharged by the
entry of an order confirming a Reorganization Plan (and Borrower and each of the
other Loan  Parties,  pursuant to Section  1141(d)(4)  of the  Bankruptcy  Code,
hereby waives any such discharge) and (b) the superpriority administrative claim
granted  to the  Lender  pursuant  to the  Interim  Order  and  Final  Order and
described  in  Section  2.10 and the Liens  granted  to Lender  pursuant  to the
Interim  Order and Final  Order  and  described  in  Section  9.01  shall not be
affected in any manner by the entry of an order confirming a Reorganization Plan
in any Cases.

                                   ARTICLE III

                     TAXES, YIELD PROTECTION AND ILLEGALITY

          3.01 Taxes.

          (a) Except as  otherwise  provided in this Section  3.01,  any and all
     payments by the Borrower to or for the account of the Lender under any Loan
     Document shall be made free and clear of and without  deduction for any and
     all  present  or  future  taxes,  duties,  levies,   imposts,   deductions,
     assessments,  fees,  withholdings or similar  charges,  and all liabilities
     with respect thereto,  excluding,  in the case of the Lender, taxes imposed
     on or measured by its overall net income, and franchise taxes imposed on it
     (in  lieu of net  income  taxes),  by the  jurisdiction  (or any  political
     subdivision thereof) under the Laws of which the Lender, is organized or is
     otherwise a resident or doing business  (other than a jurisdiction in which
     the Lender is deemed to be doing  business  solely as a result of  entering
     into, or performing its obligations  under,  any Loan Document);  (all such
     non-excluded taxes, duties, levies, imposts, deductions, assessments, fees,
     withholdings or similar charges, and liabilities being hereinafter referred
     to as  ("Taxes").  If the Borrower  shall be required by any Laws to deduct
     any Taxes from or in respect of any sum  payable  under any Loan  Document,
     then,  except as  otherwise  provided  in this  Section  3.01,  (i) the sum
     payable  shall be  increased as necessary so that after making all required
     deductions  with  respect  to Taxes  (including  deductions  applicable  to
     additional sums payable under this Section),  the Lender receives an amount
     equal to the sum it would have received had no such  deductions  been made,
     (ii) the Borrower shall make such deductions,  (iii) the Borrower shall pay
     the full  amount  deducted  to the  relevant  taxation  authority  or other
     authority in accordance with applicable Laws, and (iv) within 30 days after
     the date of such  payment,  the  Borrower  shall  furnish to the Lender the
     original or a certified copy of a receipt  evidencing  payment  .thereof to
     the extent such a receipt is issued  therefor,  or other  written  proof of
     payment thereof that is reasonably satisfactory to the Lender.

                                       26
<PAGE>

          (b) In  addition,  the  Borrower  agrees to pay any and all present or
     future stamp,  court or documentary taxes and any other excise or property,
     intangible,  mortgage  recording taxes or similar charges or similar levies
     which  arise  from any  payment  made under any Loan  Document  or from the
     execution,  delivery,  performance,  enforcement  or  registration  of,  or
     otherwise  with respect to, any Loan Document  (hereinafter  referred to as
     "Other Taxes").

          (c) If the  Borrower  shall be  required to deduct or pay any Taxes or
     Other Taxes from or in respect of any sum payable  under any Loan  Document
     to the  Lender,  the  Borrower  shall  also pay to the  Lender  at the time
     interest  is paid,  such  additional  amount that the Lender  specifies  is
     necessary to preserve the  after-tax  yield (after  factoring in all taxes,
     including taxes imposed on or measured by net income) that the Lender would
     have received if such Taxes or Other Taxes had not been imposed.

          (d) The  Borrower  agrees to  indemnify  the  Lender  for (i) the full
     amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed
     or asserted by any jurisdiction on amounts payable under this Section) paid
     by  the  Lender,   (ii)  amounts  payable  under  Section  3.01(c)  without
     duplication and (iii) any liability (including additions to tax, penalties,
     interest and expenses) arising  therefrom or with respect thereto,  in each
     case  whether or not such Taxes or Other  Taxes were  correctly  or legally
     imposed or asserted by the relevant Governmental  Authority;  but excluding
     amounts  resulting  from the  failure to comply  with the  requirements  of
     Section  11.05.  Payment under this  subsection (d) shall be made within 30
     days after the date the Lender makes a demand therefor.

          (e) If the  Lender  determines,  in its sole  discretion,  that is has
     actually  received  or realized  any refund of tax,  any  reduction  of, or
     credit against,  its withholding or payment of any additional amount by the
     Borrower  pursuant to this Section  3.01,  the Lender shall  reimburse  the
     Borrower in an amount equal to the net  benefit,  after tax, and net of all
     expenses incurred by the Lender in connection with such refund,  reduction,
     credit or recovery;  provided  that nothing in this Section  3.01(e)  shall
     require  the  Lender  to make  available  its  tax  returns  (or any  other
     information  relating  to its taxes  which it deems to be  confidential  or
     interfere  with the  Lender's  right to arrange its tax affairs in whatever
     manner it deems fit or to  obligate  the Lender to claim any  credit).  The
     Borrower  shall  return  such  amount to the  Lender in the event that such
     Person is required  to repay such refund of tax or is not  entitled to such
     reduction of, or credit against its tax liabilities.

     3.02 Matters  Applicable to All Requests for Compensation.  A certificateof
the Lender  claiming  compensation  under this Article III and setting forth the
additional  amount or amounts to be paid to it hereunder and the basis  therefor
shall be  conclusive  in the  absence of manifest  error.  In  determining  such
amount, the Lender may use any reasonable averaging and attribution methods.

         3.03 Survival. All of the Borrower's obligations under this Article III
shall survive termination of the Commitment and repayment of all other
Obligations hereunder.

                                       27
<PAGE>

                                   ARTICLE IV

                    CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

     4.01 Conditions to Closing. This Credit Agreement shall become effective on
and as of the first  date on which  all of the  following  conditions  precedent
shall have been satisfied or waived by the Lender:

          (a) The  Lender's  receipt of the  following,  each of which  shall be
     originals or facsimiles  (followed  promptly by originals) unless otherwise
     specified,  each properly executed by a Responsible  Officer of the signing
     Loan Party, and each in form and substance  reasonably  satisfactory to the
     Lender and its respective legal counsel:

               (i) counterparts of this Credit  Agreement,  sufficient in number
          for distribution to the Lender and the Borrower,  duly executed by the
          appropriate Loan Parties;

               (ii) the Term Note duly executed by the Borrower;

               (iii) a copy of the Interim  Order  certified by the clerk of the
          Bankruptcy Court,  which Interim Order shall be in the form acceptable
          to the Lender and shall not have been reversed, amended, supplemented,
          modified, stayed or vacated;

               (iv) a copy of the Bid Procedures Order certified by the clerk of
          the Bankruptcy  Court,  which Bid Procedures Order shall not have been
          reversed, amended, supplemented, modified, stayed or vacated;

               (v) the Codeshare  Agreement,  duly executed and delivered by the
          parties thereto;

               (vi) the Asset Acquisition Agreement, duly executed and delivered
          by the parties thereto;

               (vii)  such   certificates   of   resolutions  or  other  action,
          incumbency  certificates  and/or  other  certificates  of  Responsible
          Officers  of each Loan  Party as the  Lender  may  reasonably  require
          evidencing  the identity,  authority and capacity of each  Responsible
          Officer  thereof  authorized  to  act  as  a  Responsible  Officer  in
          connection with this Credit  Agreement and the other Loan Documents to
          which such Loan Party is a party or is to be a party;

               (viii) a certificate of a Responsible  Officer of each Loan Party
          either (A) listing all consents,  licenses and  approvals  required in
          connection  with the execution,  delivery and performance by such Loan
          Party and the validity  against such Loan Party of the Loan  Documents
          to which it is a party,  and such  consents,  licenses  and  approvals
          shall  be in  full  force  and  effect,  or (B)  stating  that no such
          consents, licenses or approvals are so required;

               (ix)  such  documents  and   certifications  as  the  Lender  may
          reasonably  require to evidence that each Loan Party is duly organized
          or formed,  and that each of the Loan Parties is validly  existing and
          in good standing in its jurisdiction of organization; and


                                       28
<PAGE>

               (x) a favorable  opinion of Baker & Daniels,  counsel to the Loan
          Parties, addressed to the Lender, in the form and substance acceptable
          to the Lender and its counsel;

     4.02  Conditions to Term Loan and the Chicago  Guaranty.  The obligation of
the Term  Lender  to make the Term  Loan and to issue and  deliver  the  Chicago
Guaranty shall become  effective on the first date on which all of the following
conditions precedent shall have been satisfied:

     (a) The Closing Date shall have occurred.

     (b) [RESERVED].

     (c) [RESERVED].

     (d) The Lender shall have received  satisfactory opinions of counsel to the
Loan Parties  (which  shall  cover,  among other  things,  authority,  legality,
validity,  binding  effect,  unenforceability  of the  Loan  Documents  and  the
granting of a security  interest and perfection of the Lender's  interest in the
Collateral)  as the Lender may  reasonably  request,  in addition to the opinion
identified in Section 4.01(a)(x).

     (e) No material  adverse  change in the business,  condition  (financial or
otherwise),  operations,  performance,  properties or prospects of the Borrower,
the Parent and its Subsidiaries, taken as a whole, since the Petition Date other
than any change (x) of the type which  customarily  occurs as a result of events
leading up to and following the commencement of a proceeding under chapter 11 of
the Bankruptcy  Code and the  commencement  of the Cases or (y) disclosed in (A)
the annual report on Form 10-K for the year ended December 31, 2003 filed by the
Borrower;  (B) in the quarterly report on Form 10-Q for the quarters ended March
31, June 30 and September  30, 2004,  filed by the Borrower or (C) in any report
on Form 8-K filed by the Borrower  after December 31, 2003 and prior to the date
hereof;  provided that  deferrals of payments to aircraft  lessors/lenders  with
respect to grounded aircraft and other aircraft in the Obligated  Parties' fleet
(and any associated ratings downgrade) shall not in and of themselves constitute
a material adverse change.

     (h) The Lender  shall have  received  satisfactory  evidence  that the Loan
Parties  shall have complied in full with the notice and other  requirements  of
the Bankruptcy Code in a manner acceptable to the Lender and its counsel.

     (i) The entry of an enforceable  order of the Court approving the terms and
conditions of the Facility (including without  limitation,  (a) the finding that
the Lender is extending the credit under the Facility in "good faith" within the
meaning of Section  364(e) of the  Bankruptcy  Code,  (b)  pursuant  to Sections
364(c)(2)  and (c)(3) of the  Bankruptcy  Code,  authorizing  and  granting  the
security  interests and liens upon all property of the Borrower's estate defined
under Section 541 of the Bankruptcy Code and otherwise  described above, and (c)
pursuant  to Section  364(c)(1)  of the  Bankruptcy  Code,  the  granting of the
superpriority  status  and  liens  referred  to  herein,  and (d) the  automatic
perfection of all liens referred to herein,  the payment of all fees referred to
herein,  the first  priority  line  referred  to herein and the  approval of the
Escrow Arrangement),  such order to be in the form and substance satisfactory to
the  Lender  in its sole  discretion  and which  shall  not have been  reversed,
modified, amended or stayed without the prior written consent of the Lender (the
"Interim Order").  Such order shall also (a) approve the Loan Parties' waiver of
any and all claims and causes of action  against the Lender (and its  respective
affiliates)  directly  related to the Facility or the  negotiation  of the terms
thereof,  and (b)  prohibit  subsequent  granting  of liens or  priority  status
superior to, or pari passu with, those provided in connection with the Facility.

                                       29
<PAGE>

     (j) Lender's reasonable  determination that all motions,  orders, and other
pleadings or related  documents to be filed or submitted to the Bankruptcy Court
in  connection  with the  Facility  shall be  consistent  with the  terms of the
proposed Facility.

     (k) The Lender's  reasonable  determination  that all other related  orders
entered by the Bankruptcy Court in the Cases,  including without  limitation any
and all cash collateral orders and related orders, are not inconsistent with the
terms of the Facility.

     (k) No material lien shall exist in  connection  with any ERISA plan of the
Loan Parties.

     (l) The  Loan  Parties  shall  have  obtained  all  necessary  third  party
approvals (except for the approval of the City of Chicago Council which shall be
obtained prior to January 31, 2005).

     (m) The  completion  of searches  for existing  liens on the Loan  Parties'
assets and the  Lender  shall have a valid and  perfected  lien on and  security
interest in the Collateral.

     (n) The Borrower hereby  notifies the Lender that the conditions  precedent
to the Term Loan and the issuance of the Chicago  Guaranty have been  satisfied,
and agrees to deliver after the Closing Date such evidence with respect  thereto
as the Lender may reasonably request.

     (o) The  representations and warranties of the Borrower and each other Loan
Party contained in Article V or any other Loan Document,  or which are contained
in any  document  furnished  at any time  under  or in  connection  herewith  or
therewith,  shall be true and correct in all material  respects on and as of the
date of such Credit  Extension,  except to the extent that such  representations
and warranties  specifically  refer to an earlier date, in which case they shall
be true and correct in all material respects as of such earlier date, and except
that for purposes of this  Section  4.02,  the  representations  and  warranties
contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to
the  most  recent  statements   furnished  pursuant  to  clauses  (a)  and  (b),
respectively, of Section 6.01.

     (p) No material  work  disruptions  or stoppages by employees of any of the
Loan Parties shall have occurred and be continuing.

     (q) Other than for the making of the Loans on the Closing Date, the Interim
or Final  Order  shall be in full  force  and  effect,  and  shall not have been
reversed, amended, supplemented, modified, stayed or vacated.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants to the Lender that:

                                       30
<PAGE>

     5.01 Existence, Qualification and Power; Compliance with Laws; "Air Carrier
Status". Each Loan Party (a) is a corporation,  partnership or limited liability
company duly  organized or formed,  validly  existing and (except for ATA Cargo,
Inc.) in good standing under the Laws of the  jurisdiction of its  incorporation
or  organization,  (b) subject to the entry of the DIP Financing  Orders has all
requisite  power  and  authority  and  all  requisite   governmental   licenses,
authorizations,  consents and approvals to (i) own or lease its assets and carry
on its business and (ii) execute,  deliver and perform its obligations under the
Loan Documents and, subject to the entry of the Bid Procedures  Order, the Asset
Acquisition  Agreement and the Codeshare Agreement and (c) is duly qualified and
is licensed and in good standing under the Laws of each  jurisdiction  where its
ownership,  lease or  operation  of  properties  or the conduct of its  business
requires  such  qualification  or  license;  except in each case  referred to in
clause  (b)(i) or to the extent that  failure to do so could not  reasonably  be
expected to have a Material  Adverse  Effect.  The Borrower is an "air  carrier"
within the meaning of Section  40102 of Title 49 and holds a  certificate  under
Section  41102 of Title 49 or a commuter  air carrier  authorization.  Each such
Person holds an air carrier operating certificate issued pursuant to Chapter 447
of Title 49. The Borrower and each  Subsidiary that is an "air carrier" are each
a "citizen of the United States" as defined in Section  40102(a)(15) of Title 49
(a "United States  Citizen").  The Borrower and each  Subsidiary that is an "air
carrier"  possess all necessary  certificates,  franchises,  licenses,  permits,
rights,  authorizations  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.

     5.02  Authorization;  No Contravention.  Following the entry of, and giving
effect to, the DIP Financing  Orders (in the case of the Loan Documents) and the
Bid  Procedures  Order (in the case of the  Asset  Acquisition  Agreement),  the
execution,  delivery and performance by each Loan Party of each Loan Document to
which  such  Person  is or is  to  be a  party  and,  the  consummation  of  the
Transaction,  are within such Loan Party's corporate or other powers,  have been
duly authorized by all necessary corporate or other  organizational  action, and
do  not  and  will  not  (a)  contravene  the  terms  of any  of  such  Person's
Organization   Documents;   (b)  conflict  with  or  result  in  any  breach  or
contravention  of, or the creation of any Lien under,  or require any payment to
be made under (i) any Post-Petition  Contractual Obligation to which such Person
is a party or affecting such Person or the properties of such Person or (ii) any
order, injunction,  writ or decree of any Governmental Authority or any arbitral
award to which such Person or its  property is subject;  or (c) violate any Law.
No Loan  Party is in breach of any such  Contractual  Obligation,  the breach of
which could be reasonably likely to have a Material Adverse Effect.

     5.03 Governmental  Authorization;  Other Consents.  Following the entry of,
and  giving  effect  to,  the DIP  Financing  Orders  (in the  case of the  Loan
Documents)  and the Bid Procedures  Order (in the case of the Asset  Acquisition
Agreement), no approval, consent, exemption,  authorization, or other action by,
or notice to, or filing with, any Governmental  Authority or any other Person is
necessary  or  required  in  connection  with  (i) the  execution,  delivery  or
performance by, or enforcement  against, any Loan Party of this Credit Agreement
or any other Loan Document or for the consummation of the Transaction,  (ii) the
grant by any Loan Party of the Liens  granted by it pursuant  to the  Collateral
Documents or (iii) the  perfection or maintenance of the Liens created under the
Collateral  Documents  (including  the  requisite  priority set forth in the DIP
Financing   Orders)  except  in  each  case  for  such   consents,   exemptions,
authorizations,  approvals, actions, notices and filings listed on Schedule 5.03
hereto,  all of which have been duly obtained,  taken,  given or made and are in
full force and effect.  All applicable  waiting  periods in connection  with the
Transaction  have expired  without any action having been taken by any competent
authority restraining, preventing or imposing materially adverse conditions upon
the  Transaction  or the  rights  of the Loan  Parties  freely  to  transfer  or
otherwise  dispose  of, or to create  any Lien on, any  properties  now owned or
hereafter acquired by any of them.

                                       31
<PAGE>

     5.04 Binding  Effect.  This Credit  Agreement has been, and each other Loan
Document, when delivered hereunder,  will have been, duly executed and delivered
by each Loan Party that is party thereto. This Credit Agreement constitutes, and
each other Loan Document when so delivered will constitute, subject to the entry
of the Interim Order or Final Order by the Bankruptcy  Court,  as applicable,  a
legal, valid and binding obligation of such Loan Party, enforceable against each
Loan Party that is party thereto in accordance with its terms.

     5.05 Financial Statements; No Material Adverse Effect.

     (a) The Audited  Financial  Statements (i) were prepared in accordance with
GAAP  consistently  applied  throughout  the period covered  thereby,  except as
otherwise  expressly noted therein;  (ii) fairly present the financial condition
of the  Borrower,  the Parent and its  Subsidiaries  as of the date  thereof and
their results of operations  for the period covered  thereby in accordance  with
GAAP  consistently  applied  throughout  the period covered  thereby,  except as
otherwise expressly noted therein; and (iii) show all material  indebtedness and
other  liabilities,  direct or contingent,  of the Borrower,  the Parent and its
Subsidiaries as of the date thereof required to be disclosed by GAAP,  including
liabilities for taxes, material commitments and Indebtedness.

     (b) The unaudited  consolidated  financial statements of the Borrower,  the
Parent  and  its  Subsidiaries   dated  September  30,  2004,  and  the  related
consolidated  statements of income or operations,  shareholders' equity and cash
flows for the fiscal  quarter ended on that date (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby,  except as
otherwise  expressly  noted  therein,  and (ii)  fairly  present  the  financial
condition  of the  Borrower,  the  Parent  and its  Subsidiaries  as of the date
thereof and their results of operations for the period covered thereby, subject,
in the case of clauses (i) and (ii),  to the absence of footnotes  and to normal
year-end audit adjustments.

     (c) Except for the filing of the Cases,  since the Closing Date,  there has
been no event or circumstance, either individually or in the aggregate, that has
had or could reasonably be expected to have a Material Adverse Change.

     (d) The consolidated  forecasted  balance sheets,  statements of income and
statements  of cash  flows of the  Borrower,  the  Parent  and its  Subsidiaries
delivered to the Lender in connection  with this Credit  Agreement were prepared
in good faith on the basis of the assumptions stated therein,  which assumptions
were fair in light of the  conditions  existing  at the time of delivery of such
forecasts,  and  represented,  at the  time of  delivery,  the  Borrower's  best
estimate of its future financial performance.

     5.06  Litigation.  Other  than  the  Cases,  except  as has  been  publicly
disclosed  in any filing  made by the  Borrower or any other Loan Party with the
SEC between December 31, 2003 and the date of this Credit  Agreement,  there are
no actions, suits, proceedings,  claims or disputes pending or, to the knowledge
of  the  Borrower   after  due  and  diligent   investigation,   threatened   or

                                       32
<PAGE>


contemplated,  at law,  in equity,  in  arbitration  or before any  Governmental
Authority,  by or against the Borrower, the Parent or any of its Subsidiaries or
against any of their  properties or revenues that either  individually or in the
aggregate could  reasonably be expected to have a Material  Adverse Effect.  The
performance of any action by any Loan Party required or  contemplated  by any of
the Loan Documents,  the Asset Acquisition Agreement, the Codeshare Agreement or
the Transaction is not restrained or enjoined (either  temporarily,  preliminary
or  permanently).  There  are no  actions,  suits or  proceedings  pending  that
challenge   the  validity  of  any  Loan  Document  or  the   applicability   or
enforceability  of any Loan Document or any of the Orders or which seek to void,
avoid,  limit, or otherwise adversely affect the security interest created by or
in any Loan Document or any of the Orders or any payment made pursuant thereto.

     5.07 No  Default.  Neither  the  Borrower  nor any other  Loan  Party is in
default under or with respect to, or a party to, any Post  Petition  Contractual
Obligation that could,  either  individually or in the aggregate,  reasonably be
expected  to have a Material  Adverse  Effect.  No Default has  occurred  and is
continuing or would result from the  execution,  delivery or performance of this
Credit  Agreement or any other Loan  Document or the  transactions  contemplated
hereby or thereby.

     5.08  Ownership  of  Property.   (a)  Each  Loan  Party  and  each  of  its
Subsidiaries  has a  valid  leasehold  or  subleasehold  interests  in all  real
property necessary to or used in the ordinary conduct of its business.

     (b) Set forth on Schedule 5.08(b) hereto is a complete and accurate list of
all Liens on Collateral,  showing as of the date hereof the lienholder  thereof,
the  principal  amount of the  obligations  secured  thereby and the  Collateral
subject  thereto.  The  Collateral is subject to no Liens,  other than Liens set
forth on Schedule 5.08(b), and as otherwise permitted by Section 7.01.

     (c) Set forth on Schedule 5.08(c) hereto is a complete and accurate list of
all Slots held by any Loan Party on the date hereof.

     (d) Set forth on Schedule 5.08(d) hereto is a complete and accurate list of
all Gate Leaseholds  contracted or licensed to any Loan Party on the date hereof
located at the airports at which the Loan Parties conduct operations.

     5.09  Environmental  Compliance.  The Loan Parties  conduct in the ordinary
course of  business a review of the effect of  existing  Environmental  Laws and
claims  alleging  potential  liability or  responsibility  for  violation of any
Environmental Law on their respective businesses, operations and properties, and
as a result thereof the Borrower has reasonably  concluded that, such effects of
Environmental  Laws and claims  could  not,  individually  or in the  aggregate,
reasonably  be  expected  to have a Material  Adverse  Effect on any of the Loan
Parties.

     5.10 Insurance. All policies of insurance of any kind or nature owned by or
issued to the Loan Parties,  including,  without  limitation,  policies of life,
fire,  theft,  product  liability,  public  liability,  property  damage,  other
casualty, employee fidelity, workers' compensation, employee health and welfare,
title,  property  and  liability  insurance,  are in full force and effect,  are
issued by financially sound and reputable  insurance companies not Affiliates of
the Borrower and are of a nature and provide such coverage,  including,  without
limitation,  war risk and terrorism  liability  insurance,  that is in an amount
that is no less than the  greater of (i) the  maximum  amount  available  to the
Borrower and the Loan Parties from the DOT under the Federal Aviation  Insurance

                                       33
<PAGE>


Program,  as amended by the Air  Transportation  Stabilization  Act and  further
amended by the  Homeland  Security  Act of 2002 and the  maximum  (to the extent
requested by the Lender) amount available under programs established pursuant to
the Terrorism  Risk Insurance Act of 2002 and (ii) such amount as is customarily
carried by major  United  States air  carriers  in the  United  States  domestic
airline industry; and the Borrower and the Loan Parties maintain other insurance
that is in their judgment  sufficient and in such amounts as is customary in the
United States domestic airline industry for major United States air carriers.

     5.11 Taxes. Except as otherwise set forth on Schedule 5.11(a), (a) the Loan
Parties have filed all Federal, state and other material tax returns and reports
required to be filed,  and have paid or made  adequate  provision for payment of
all  Federal,  state  and  other  material  taxes,  assessments,  fees and other
governmental charges levied or imposed upon them or their properties,  income or
assets that are due and  payable,  except,  in each case,  those which are being
contested in good faith by appropriate  proceedings diligently conducted and for
which adequate reserves have been provided in accordance with GAAP; (b) there is
no proposed tax assessment  against any Loan Party that would,  if made,  have a
Material  Adverse  Effect;  and (c) no Loan  Party is  party to any tax  sharing
agreement  with any  Person  other  than  another  Loan  Party,  other  than tax
indemnity agreements in leasing transactions.

     5.12 ERISA Compliance.

     (a) Each Plan is in compliance with the applicable provisions of ERISA, the
Code and  other  Federal  or state  Laws,  except  for  events  that  could  not
reasonably be expected to result in a Material Adverse Effect. Each Plan that is
intended to qualify  under  Section 401 (a) of the Code has received a favorable
determination  letter from the IRS or an application  for such a letter has been
filed with the IRS with respect  thereto and, to the best  knowledge of the Loan
Parties,  nothing has occurred which would  prevent,  or cause the loss of, such
qualification. As of the date of this Credit Agreement, each Loan Party and each
ERISA  Affiliate  has made all  required  contributions  to each Plan subject to
Section 412 of the Code, and no application for a funding waiver or an extension
of any  amortization  period  pursuant  to Section 412 of the Code has been made
with respect to any Plan.

     (b) There are no pending  or, to the best  knowledge  of the Loan  Parties,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with  respect to any Plan that could be  reasonably  be  expected to result in a
Material Adverse Change.  There has been no prohibited  transaction or violation
of the fiduciary responsibility rules with respect to any Plan that has resulted
or could reasonably be expected to result in a Material Adverse Change.

     (c) (i) Other  than the  filing of the Cases  and  events  related  to such
filing,  no ERISA Event has occurred or is  reasonably  expected to occur;  (ii)
neither  any Loan Party nor any ERISA  Affiliate  has  incurred,  or  reasonably
expects to incur,  any  liability  (and no event has  occurred  which,  with the
giving of notice under  Section 4219 of ERISA,  would result in such  liability)
under Sections 4201 or 4243 of ERISA with respect to a  Multiemployer  Plan; and
(iii)  neither  any  Loan  Party  nor  any  ERISA  Affiliate  has  engaged  in a
transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

                                       34
<PAGE>

     5.13  Subsidiaries;  Equity  Interests.  As of the Closing Date,  each Loan
Party  has  no  Subsidiaries  other  than  the  other  Loan  Parties  and  those
specifically  disclosed in Part (a) of Schedule 5.13 and all of the  outstanding
Equity Interests in such Subsidiaries  have been validly issued,  are fully paid
and  non-assessable  and are owned by a Loan Party in the amounts  specified  on
Part (a) of Schedule 5.13 free and clear of all Liens except those created under
the Collateral  Documents.  Set forth in Part (b) of Schedule 5.13 is a complete
and accurate list of all Investments  (other than (i) Cash  Equivalents and (ii)
those Investments set forth in Part (a) of Schedule 5.13) held by any Loan Party
on the date hereof,  showing as of the date hereof the amount, obligor or issuer
and maturity,  if any, thereof. Each Loan Party has no equity investments in any
other corporation or entity other than those specifically  disclosed in Part (a)
or Part (b) of Schedule 5.13.

     5.14 Margin  Regulations;  Investment  Company Act;  Public Utility Holding
Company Act.

     (a) The Borrower is not engaged and will not engage,  principally or as one
of its important  activities,  in the business of purchasing or carrying  margin
stock  (within the meaning of  Regulation  U issued by the Board of Governors of
the Federal  Reserve System of the United States),  or extending  credit for the
purpose of purchasing or carrying margin stock and no proceeds of any Borrowings
will be used to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock.

     (b) None of the  Borrower,  any Person  Controlling  the  Borrower,  or any
Subsidiary (i) is a "holding  company," or a "subsidiary  company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary  company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of  1935,  or (ii) is or is  required  to be  registered  as an  "investment
company"  under the  Investment  Company Act of 1940.  Neither the making of any
Loan,  nor the  issuance of the Chicago  Guaranty,  nor the  application  of the
proceeds or repayment thereof by the Borrower, nor the consummation of the other
transactions  contemplated by the Loan Documents,  will violate any provision of
any such Act or any rule, regulation or order of the SEC thereunder.

     5.15 Disclosure.  (a) All written  information that has been made available
to the Lender by the Borrower or any of its  representatives  in connection with
the transactions  contemplated hereby is, taken as a whole, complete and correct
in all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact  necessary in order to make the statements
contained therein not misleading in light of the circumstances  under which such
statements were made and (b) all financial  projections,  if any, that have been
prepared by the Borrower and made  available to the Lender have been prepared in
good faith based upon  assumptions  that were  reasonable  as of the date of the
preparation of such financial projections, it being understood that no assurance
is given that the results forecasted in the projections will in fact be achieved
and that the projections are subject to uncertainties and contingencies, many of
which are beyond the control of the Borrower, the Parent and its Subsidiaries.

     5.16 Compliance with Laws. Each Loan Party is in compliance in all material
respects with the  requirements of all Laws and all orders,  writs,  injunctions
and decrees  applicable to it or to its properties,  except in such instances in
which (a) such requirement of Law or order, writ,  injunction or decree is being
contested in good faith by appropriate  proceedings  diligently conducted or (b)
the failure to comply therewith,  either individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.

                                       35
<PAGE>

     5.17 Intellectual Property Licenses, Etc.

     (a) The Loan  Parties  own all  right,  title  and  interest  in and to, or
possess the right to use, the  Intellectual  Property  Collateral (as defined in
Section  9.01(f))  that are  reasonably  necessary  for the  operation  of their
respective businesses.

     (b) To the best  knowledge  of the Loan  Parties,  the  operation  of their
respective businesses as currently conducted, or as contemplated to be conducted
and the use of the Intellectual  Property Collateral in connection  therewith do
not infringe, misappropriate,  conflict with, or otherwise violate the rights of
any other Person. The Intellectual Property Collateral is subsisting and has not
been  adjudicated  invalid or unenforceable in whole or in part, and to the best
knowledge of the Loan Parties, is valid and enforceable.

     (c) Except as  specifically  disclosed  in  Schedule  5.17(c),  no claim or
litigation has been asserted or is pending or, to the best knowledge of the Loan
Parties,  threatened,  that,  either  individually  or in the  aggregate,  could
reasonably be expected to have a Material Adverse Effect, alleging that the Loan
Parties'  rights  in or use  of  the  Intellectual  Property  Collateral  or the
operation of the  businesses of the Loan Parties  infringe,  misappropriate,  or
otherwise  violate the rights of any other Person.  To the best knowledge of the
Loan  Parties,   no  Person  is  engaging  in  any  activity   that   infringes,
misappropriates, or otherwise violates the Intellectual Property Collateral.

     5.18 Security/Priority.

     (a) The Cases  were  commenced  on the  Petition  Date in  accordance  with
applicable  Law and proper notice  thereof and the proper notice for the hearing
for the approval of the Interim Order and the Final Order has been given.

     (b) On and after the Closing Date and the entry of the DIP Financing Orders
and after giving effect  thereto,  the  provisions of the Loan Documents and the
DIP  Financing  Orders are  effective  to create in favor of the Lender,  legal,
valid  and  perfected  Liens on and  security  interests  (having  the  priority
provided  for herein and in the DIP  Financing  Orders) in all right,  title and
interest in the  Collateral,  enforceable  against  each Loan Party that owns an
interest in such Collateral.

     (c) On and after the entry of the DIP  Financing  Orders  and after  giving
effect thereto,  all Obligations owing by the Borrower under the Facility and by
the Guarantors in respect thereof will be secured by:

     (i) subject to the  Carve-Out and Permitted  Senior Liens,  first  priority
liens granted to the Lender pursuant to Section 364(c)(2) of the Bankruptcy Code
on all Primary  Collateral,  other than Excluded Assets,  that is not subject to
valid and perfected liens on the Petition Date or to valid liens in existence on
the Petition Date that subsequently are perfected  pursuant to Section 546(b) of
the Bankruptcy Code; and

                                       36
<PAGE>

     (ii) subject to the  Carve-Out  and  Permitted  Senior  Liens,  pursuant to
Section  364(c)(3) of the  Bankruptcy  Code,  best priority liens granted to the
Lender on all Secondary  Collateral (other than Excluded Assets and Section 1110
Assets)  that is  subject  to valid  and  perfected  liens in  existence  on the
Petition  Date  or to  valid  liens  in  existence  on the  Petition  Date  that
subsequently  are perfected  pursuant to Section 546(b) of the Bankruptcy  Code,
subject only to such existing or subsequently perfected liens.

     (d) On and after the entry of the DIP  Financing  Orders  and after  giving
effect thereto,  all Obligations owing by the Borrower under the Facility and by
the Guarantors in respect thereof will be, subject to the Carve-Out,  an allowed
administrative  expense claim  pursuant to Section  364(c)(1) of the  Bankruptcy
Code in each of the Cases having  priority over all  administrative  expenses of
the kind  specified in, or arising under,  any sections of the  Bankruptcy  Code
(including,  without limitation,  Sections 105, 326, 328, 330, 331, 503(b), 507,
546(c),  726 or 1114 thereof)  whether or not such claims or expenses may become
secured by a judgment lien or other non-consensual lien, levy or attachment.

     5.19 Entry of the Orders.  The Interim Order was entered by the  Bankruptcy
Court on  December  21,  2004 and has not have been  stayed,  amended,  vacated,
reversed or rescinded in any respect. On the date of the making of any Loan, the
Interim Order or the Final Order, as the case may be, will have been entered and
will not have been amended,  stayed, vacated or rescinded in any respect that is
adverse  to the  Lender.  Upon the  maturity  (whether  by the  acceleration  or
otherwise)  of  any of  the  Obligations  of the  Borrower  and  each  Guarantor
hereunder and under the other Loan Documents,  the Lender shall,  subject to the
provisions  of  Section   8.02,  be  entitled  to  immediate   payment  of  such
Obligations, and to enforce the remedies provided for hereunder, without further
application to or order by the Bankruptcy Court.

     5.20 Slot  Utilization.  The Borrower,  the Parent and its Subsidiaries are
utilizing  their Slots at DCA and LGA, other than the AIR-21 Slots,  in a manner
consistent  with  applicable  regulations and contracts in order to preserve the
value of such Slots,  taking into account any waivers or other relief granted to
the Borrower,  Parent and/or its  Subsidiaries by the FAA. None of the Borrower,
the Parent or any of its  Subsidiaries  has received any notice from the FAA, or
is aware of any other event or circumstance,  that would be reasonably likely to
impair such Slots or the value thereof.

     5.21 Representations and Warranties as to Collateral. (a) Each Loan Party's
exact legal name, as defined in Section 9-503(a) of the Uniform Commercial Code,
is correctly set forth on the signature pages hereto. Each Loan Party is located
(within the meaning of Section 9-307 of the Uniform Commercial Code) and has its
chief executive  office in the state or jurisdiction  set forth on the signature
pages hereto.

     (b) Each Loan Party is the legal and beneficial  owner of the Collateral of
such Loan  Party  free and clear of any Lien of  others,  except  for  Permitted
Liens.

     (c) Except for  possessory  interests of landlords and  warehousemen,  each
Loan Party has exclusive possession and control of the Equipment. In the case of
Equipment located on leased premises or in warehouses, no lessor or warehouseman
of any premises or warehouse  upon or in which such Equipment is located has (i)
issued  any  warehouse  receipt or other  receipt  in the nature of a  warehouse
receipt in  respect of any  Equipment,  (ii) to the best  knowledge  of any Loan
Party,  issued any document for any of any Loan Party's  Equipment  and (iii) to
the best  knowledge  of any Loan  Party,  received  notification  of any secured
party's  interest (other than the security  interest  granted  hereunder) in any
Loan Party's Equipment.

                                       37
<PAGE>

     (d) The Pledged  Equity of any Subsidiary of any Loan Party pledged by each
Loan Party  hereunder has been duly  authorized  and validly issued and is fully
paid and non-assessable.  If any Loan Party is an issuer of Pledged Equity, such
Loan Party confirms that it has received  notice of such security  interest.  To
the best of such Loan Party's  knowledge,  the Pledged Debt pledged by each Loan
Party hereunder has been duly authorized, authenticated or issued and delivered,
is the legal, valid and binding obligation of the issuers thereof,  is evidenced
by one or more promissory notes and is not in default.

     (e) The Pledged  Equity of any Subsidiary of any Loan Party pledged by each
Loan Party  constitutes  the  percentage  of the issued and  outstanding  Equity
Interests of the issuers thereof indicated on Schedule 5.21 hereto.  The Pledged
Debt constitutes all of the outstanding  indebtedness owed to each Loan Party by
the issuers thereof and, as of the Closing Date, is outstanding in the principal
amount indicated on Schedule 5.21 hereto.

                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS

     So long as the Lender  shall  have any  Commitment  hereunder,  any Loan or
other  Obligation  hereunder which is accrued and payable shall remain unpaid or
unsatisfied, the Parent and the Borrower shall, and shall (except in the case of
the covenants set forth in Sections 6.01,  6.02, 6.03, 6.11 and 6.24) cause each
Loan Party to:

     6.01 Financial Statements. Deliver to the Lender, in form and detail
consistent with comparable reports delivered to the Lender or otherwise
reasonably satisfactory to the Lender:

     (a) as soon as available,  but in any event within 90 days after the end of
each fiscal year of the Borrower,  a consolidated balance sheet of the Borrower,
the Parent  and its  Subsidiaries  as at the end of such  fiscal  year,  and the
related  consolidated  statements of income or operations,  shareholders' equity
and cash flows for such fiscal year,  setting forth in each case in  comparative
form the figures for the previous  fiscal  year,  all in  reasonable  detail and
prepared in accordance  with GAAP and  accompanied by a report of an independent
certified  public  accountant  of  nationally   recognized  standing  reasonably
acceptable  to the Lender,  which  report shall be prepared in  accordance  with
generally accepted auditing standards and shall not be qualified in any material
respect  except  with  respect  to  the  Cases  or a  "going  concern"  or  like
qualification or exception;

     (b) as soon as available,  but in any event within 45 days after the end of
each of the first three fiscal  quarters of each fiscal year of the Borrower,  a
consolidated  balance sheet of the Borrower,  the Parent and its Subsidiaries as
at the end of such fiscal quarter,  and the related  consolidated  statements of
income or  operations,  shareholders'  equity  and cash  flows  for such  fiscal
quarter and for the portion of the  Borrower's  fiscal year then ended,  setting
forth in each case in comparative form the figures for the corresponding  fiscal
quarter  of the  previous  fiscal  year  and the  corresponding  portion  of the
previous  fiscal  year,  all in  reasonable  detail and  certified  by the Chief
Executive  Officer  or the Chief  Financial  Officer of the  Borrower  as fairly
presenting the financial condition, results of operations,  shareholders' equity
and cash flows of the Borrower,  the Parent and its  Subsidiaries  in accordance
with GAAP,  subject only to normal year-end audit adjustments and the absence of
footnotes;

                                       38
<PAGE>

     (c) as soon as available,  but in any event within 30 days after the end of
each month,  a  consolidated  balance sheet of the Borrower,  the Parent and its
Subsidiaries as of the end of such month and  consolidated  statements of income
and a consolidated  statement of cash flows of the Borrower,  the Parent and its
Subsidiaries  for the period  commencing  at the end of the  previous  month and
ending with the end of such month and a  consolidated  statement of income and a
consolidated  statement  of cash  flows  of the  Borrower,  the  Parent  and its
Subsidiaries  for the period  commencing at the end of the previous  fiscal year
and ending with the end of such month, setting forth in each case in comparative
form the  corresponding  figures for the  corresponding  month of the  preceding
fiscal year, all in reasonable  detail and duly certified by the Chief Executive
Officer or the Chief Financial Officer of the Borrower;

     (d) as soon as available, but no more than five (5) Business Days after the
end of each  calendar  week (i) the  operating  metrics  for  such  week for the
Borrower,  the Parent and its  Subsidiaries  and (ii) an updated 13 week rolling
cash flow forecast,  together with a reconciliation of such cash flows to actual
results  reporting  against the Borrower's  Projections  within twenty (20) days
against the Borrower's Projections;

     (e) as soon as available, but no more than five (5) Business Days after the
end of each calendar week a cash balance  report for such calendar  week,  which
report shall show,  among other things,  the  aggregate  amount of cash and Cash
Equivalents that any of the Loan Parties has unrestricted  access to on each day
of such calendar  week,  and the aggregate  amount of cash that the Loan Parties
are restricted  from  accessing on each day of such calendar week,  (ii) a flash
cash report as of the day preceding such report;

     (f) as soon as  available,  but in any event within 30 (thirty)  days after
the end of each month, a report that shall  demonstrate the computations used by
the Borrower in determining  compliance  with the covenant  contained in Section
7.11 for such month; and

     (g) as soon as available, but in any event within 30 (thirty) days
after the end of each month, a report, in form and substance acceptable to the
Lender, that contains a detail of the invoiced and unpaid professional fees and
expenses and UST/Clerk Fees.

     6.02 Certificates;  Other  Information.  Deliver to the Lender, in form and
detail consistent with comparable reports previously  delivered to the Lender or
otherwise reasonably satisfactory to the Lender:

     (a) [RESERVED];

     (b) concurrently with the delivery of the financial  statements referred to
in Sections 6.01(a), (b) and (c), a duly completed Compliance Certificate signed
by a Responsible Officer of the Borrower;

                                       39
<PAGE>

     (c) promptly after any request by the Lender,  copies of any detailed audit
reports,  management  letters  or  recommendations  submitted  to the  board  of
directors  (or the audit  committee of the board of directors) of any Loan Party
by independent  accountants in connection with the accounts or books of any Loan
Party, or any audit of any of them;

     (d) promptly  after the same are  available,  copies of each annual report,
proxy or  financial  statement  or other  report  or  communication  sent to the
stockholders of the Borrower,  and copies of all annual,  regular,  periodic and
special reports and  registration  statements  which the Borrower may file or be
required  to file  with the SEC  under  Section  13 or  15(d) of the  Securities
Exchange Act of 1934, or with any Governmental Authority that may be substituted
therefor,  or  with  any  national  securities  exchange,  and in any  case  not
otherwise required to be delivered to the Lender pursuant hereto;

     (e)  promptly  after the  furnishing  thereof,  copies of any  statement or
report  furnished to any holder of debt securities of any Loan Party pursuant to
the  terms  of any  indenture,  loan or  credit  or  similar  agreement  and not
otherwise required to be furnished to the Lender pursuant to any other clause of
this Section 6.02;

     (f) as soon as available and in any event within thirty (30) days after the
end of  each  fiscal  quarter,  a  report  summarizing  the  insurance  coverage
(specifying  type,  amount  and  carrier)  in  effect  for each  Loan  Party and
containing such additional information as the Lender may reasonably specify;

     (g)  promptly  and in any event  within five  Business  Days after  receipt
thereof  by any Loan  Party,  copies  of each  notice  or  other  correspondence
received  from  the  SEC  (or  comparable  agency  in  any  applicable  non-U.S.
jurisdiction)  concerning any  investigation or possible  investigation or other
inquiry by such agency regarding  financial or other operational  results of any
Loan Party;

     (h) promptly upon request of the Lender,  copies of all notices,  requests,
pleadings  and other  documents  received  by any Loan Party (and not  otherwise
distributed to the Lender) under or pursuant to any instrument,  indenture, loan
or credit or  similar  agreement  and,  from  time to time upon  request  by the
Lender, such information and reports regarding such instruments,  indentures and
loan and credit and similar agreements as the Lender may reasonably request;

     (i) promptly  after the  assertion  or  occurrence  thereof,  notice of any
Environmental  Action against or of any noncompliance by any Loan Party with any
Environmental Law or Environmental  Permit that could (i) reasonably be expected
to have a Material  Adverse  Effect or (ii) cause any property  described in the
Mortgages to be subject to any  restrictions  on  ownership,  occupancy,  use or
transferability under any Environmental Law.

     (j) [RESERVED];

     (k) [RESERVED];

     (l) promptly after the same is available, copies of all pleadings, motions,
applications,  judicial  information,  financial information and other documents
filed by or on  behalf  of the Loan  Parties  with the  Bankruptcy  Court in the
Cases,  or  distributed  on behalf of any of the Loan Parties to any  Committee,
providing copies of the same to the Lender;

                                       40
<PAGE>

     (m) promptly, such additional information regarding the business,
financial or corporate affairs of any Loan Party, or compliance with the terms
of the Loan Documents, as the Lender may from time to time reasonably request;
and

     (n) promptly upon receipt thereof, copies of any material correspondence or
orders from the City of Chicago regarding the Chicago Gates.

     6.03 Notices. Promptly notify the Lender:

     (a) of the occurrence of any Default;

     (b) of any matter  that has  resulted  or could  reasonably  be expected to
result in a Material Adverse Effect, including (i) breach or non-performance of,
or any default under,  a material  Post-Petition  Contractual  Obligation of any
Loan  Party;  (ii)  any  dispute,  litigation,   investigation,   proceeding  or
suspension between any Loan Party and any Governmental  Authority;  or (iii) the
commencement  of, or any material  development  in, any litigation or proceeding
affecting any Loan Party,  including  pursuant to any  applicable  Environmental
Laws;

     (c) of the occurrence of any ERISA Event;

     (d) of any material  change in accounting  policies or financial  reporting
practices by any Loan Party or any Subsidiary;

     (e) of the (A)  occurrence  of any  Disposition  of  property or assets for
which the Borrower is required to make a mandatory repayment pursuant to Section
2.03(b),  (B) occurrence of any sale of capital stock or other Equity  Interests
for which the  Borrower is required  to make a mandatory  repayment  pursuant to
Section  2.02(b)(ii),  (C) incurrence or issuance of any  Indebtedness for which
the  Borrower  is required  to make a  mandatory  repayment  pursuant to Section
2.02(b)(iii); and

     (f) of a material breach of the Use or Lose Rule.

     Each notice pursuant to this Section shall be accompanied by a statement of
a Responsible  Officer of the Borrower  setting forth details of the  occurrence
referred to therein and stating  what action the Borrower has taken and proposes
to take with respect  thereto.  Each notice  pursuant to Section  6.03(a)  shall
describe with  particularity any and all provisions of this Credit Agreement and
any other Loan Document that have been breached.

     6.04 Payment of Obligations.  Pay,  discharge or satisfy promptly when due,
but no later than  within 30 days after the same shall  become due and  payable,
all  its   obligations  and  liabilities  of  whatever  nature  that  constitute
administrative  expenses under Section 503(b) of the Bankruptcy Code,  including
(a) all tax liabilities,  assessments and governmental charges or levies upon it
or its properties or assets  attributed to the period after the Petition Date to
the extent  permitted or required by the Bankruptcy Code or the Bankruptcy Court
to be paid, (b) all lawful claims which,  if unpaid,  would by law become a Lien
upon its property; and (c) all Indebtedness, within 30 days after the same shall
become due and payable, but subject to any subordination provisions contained in
any instrument or agreement  evidencing such Indebtedness  unless, in each case,


                                       41
<PAGE>

(i) the Bankruptcy  Code or an order of the Bankruptcy  Court  precludes  making
such payment or (ii) the same are being  contested in good faith by  appropriate
proceedings  diligently  conducted and adequate reserves in accordance with GAAP
are being maintained by the Loan Party.

     6.05  Preservation of Existence,  Etc. (a) Preserve,  renew and maintain in
full force and effect its legal  existence and good  standing  under the Laws of
the  jurisdiction  of its  organization  except in a  transaction  permitted  by
Section  7.05 or 7.06;  (b) take all  reasonable  action to maintain all rights,
privileges,  permits,  licenses  and  franchises  necessary  or desirable in the
normal conduct of its business, except to the extent that failure to do so could
not reasonably be expected to have a Material  Adverse Effect;  and (c) preserve
or renew all of its  registered  patents,  trademarks,  trade  names and service
marks,  the  non-preservation  of which could  reasonably  be expected to have a
Material Adverse Effect.

     6.06 Maintenance of Properties.  (a) Maintain,  preserve and protect all of
its material properties and equipment necessary in the operation of its business
in good working order and condition,  ordinary wear and tear  excepted;  and (b)
make all necessary repairs thereto and renewals and replacements  thereof except
where the failure to do so could not  reasonably  be expected to have a Material
Adverse Effect;  and (c) use the standard of care typical in the industry in the
operation and maintenance of its facilities.

     6.07  Maintenance  of  Insurance.  (a) In addition to the  requirements  of
Section 6.07(b), (i) keep its insurable properties insured at all times, against
such risks, including fire and other risks insured against by extended coverage,
as is  customary  with  companies  of the  same or  similar  size in the same or
similar  businesses  (including,  without  limitation,   casualty  insurance  or
reinsurance  on its  aircraft at the  appraised  value) and which is  reasonably
satisfactory  to the  Lender;  and  maintain  in full  force and  effect  public
liability  insurance  against  claims for  personal  injury or death or property
damage  occurring  upon, in, about or in connection with the use of any Property
(including  aircraft) owned,  occupied or controlled by the Borrower or any Loan
Party, as the case may be, in such amounts (giving effect to self-insurance) and
with such  deductibles  as are  required  pursuant  to  Section  5.10;  and (ii)
maintain such other insurance or self insurance as may be required by law.

     (b) The  Borrower  and each Loan  Party  shall  maintain  in full force and
effect war risk and terrorism insurance on all its property in an amount that is
the greater of (x) the maximum  amount  available  to the  Borrower and the Loan
Parties from the DOT under the Federal Aviation Insurance Program, as amended by
the Air  Transportation  Stabilization  Act and further  amended by the Homeland
Security Act of 2002 and (y)  thereafter,  such amount as is then  customary for
major United States air carriers in the United States domestic airline industry.

     (c) The  Borrower  and each Loan Party  shall  continue to maintain in full
force and effect business  interruption  insurance on the Loan Parties' property
in an amount not less than an amount of such  insurance in effect as of the date
hereof for such property.

     (d) The Borrower and each Loan Party shall  promptly  deliver to the Lender
copies of any notices  received  from its  insurers  with  respect to  insurance
programs  required  by the  Terrorism  Risk  Insurance  Act of 2002  and,  if so
requested  by the Lender,  procure and maintain in force the  insurance  that is
offered in such programs.

                                       42
<PAGE>

     6.08  Compliance  with  Laws.  Comply  in all  material  respects  with the
requirements of all Laws (including,  without limitation, ERISA) and all orders,
writs, injunctions and decrees applicable to it or to its business or property.

     6.09 Books and Records. (a) Maintain proper books of record and account, in
which full, true and correct  entries  consistent with GAAP shall be made of all
financial  transactions  and matters  involving  the assets and  business of the
Borrower or such Subsidiary,  as the case may be; and (b) maintain such books of
record and account in material  conformity  with all applicable  requirements of
any Governmental  Authority having regulatory  jurisdiction over the Borrower or
such Subsidiary, as the case may be.

     6.10  Inspection  Rights.  Permit  representatives,  agents,  advisors  and
independent  contractors of the Lender,  at the expense of the Borrower,  to (a)
visit and inspect any of its properties, to examine its corporate, financial and
operating  records,  and make  copies  thereof or  abstracts  therefrom,  and to
discuss its affairs,  finances and accounts with its  directors,  officers,  and
independent  public  accountants  (with the Borrower  having the right to have a
representative  present at all such communications) and at such reasonable times
during normal  business  hours and as often as may be reasonably  desired,  upon
reasonable advance notice to the Borrower and (b) conduct semi-annual (and, with
respect to parts,  quarterly in the discretion of the Lender) field examinations
of the Collateral;  provided,  however, that when an Event of Default exists the
Lender (or any of their respective  representatives or independent  contractors)
may do any of the  foregoing  at the expense of the  Borrower at any time during
normal business hours and without advance notice.

     6.11 Use of Proceeds.  Use the proceeds of the Credit Extensions to provide
general working capital and to pay ordinary  operating costs and expenses of the
Loan  Parties,  including  payments to third  parties that are necessary to cure
defaults,  to the extent  permitted  by the  Bankruptcy  Code or the  Bankruptcy
Court.

     6.12 Covenant to Give Security;  Governmental Authorizations.  Except where
prohibited  by  Applicable  Laws,  upon the request of the Lender  following the
occurrence  and during  the  continuance  of an Event of  Default,  and  without
further order or application to the Bankruptcy  Court:  (i) within 10 days after
such  request  (and  the  delivery  by the  Lender  of  the  requested  form  of
documentation), duly execute and deliver to the Lender pledges or other security
agreements  covering the stock and assets of each  Subsidiary of the Borrower to
the extent  such stock and assets are not  already  pledged to the Lender and in
all assets  acquired by any of the Loan  Parties  after the Closing  Date to the
extent  such  assets are not already  pledged to the  Lender,  in each case,  as
specified by and in form and substance  reasonably  satisfactory  to the Lender,
securing  payment  of all  the  Obligations  under  the  Loan  Documents  of the
applicable Loan Party executing such pledge or security agreement,  and (ii) use
best  efforts  to  obtain,  and  cooperate  with the  Lender in  obtaining,  all
authorizations,  consents, orders and approvals of any Governmental Authority in
connection  with the exercise by the Lender of any of the Lender's  rights under
this  Credit  Agreement,  including  rights and  remedies to which the Lender is
entitled under this Credit  Agreement and under any applicable Laws following an
Event of Default.

                                       43
<PAGE>

     6.13 Compliance with Environmental  Laws. Comply, and cause all lessees and
other Persons  operating or occupying its properties to comply,  in all material
respects,  with all applicable  Environmental  Laws and  Environmental  Permits;
obtain and renew all  Environmental  Permits  necessary for its  operations  and
properties;  and conduct any  investigation,  study,  sampling and testing,  and
undertake any cleanup, removal, remedial or other action necessary to remove and
clean up all Hazardous Materials from any of its properties,  in accordance with
the requirements of all Environmental Laws; provided,  however, that neither the
Borrower,  the Parent nor any of its Subsidiaries shall be required to undertake
any such  cleanup,  removal,  remedial  or other  action to the extent  that its
obligation to do so is being  contested in good faith and by proper  proceedings
and   appropriate   reserves   are  being   maintained   with  respect  to  such
circumstances.

     6.14  Preparation of  Environmental  Reports.  At the request of the Lender
from time to time,  provide  to the  Lender  within  sixty  (60) days after such
request, at the expense of the Borrower, an environmental site assessment report
for  any  of  its  properties   described  in  such  request,   prepared  by  an
environmental  consulting firm reasonably  acceptable to the Lender,  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 Lender  determines  at any time that a material risk exists that any such
report will not be provided  within the time  referred to above,  the Lender may
retain an environmental consulting firm to prepare such report at the expense of
the Borrower,  and the Borrower hereby grants and agrees to cause any Subsidiary
that owns any  property  described  in such request to grant at the time of such
request to the Lender,  such firm and any agents or  representatives  thereof an
irrevocable  non-exclusive  license,  subject to the rights of tenants, to enter
their respective properties to undertake such an assessment.

     6.15 Further  Assurances.  Promptly upon request,  (a) correct any material
defect or error that may be discovered in any Loan Document or in the execution,
acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge,
deliver, record, re-record,  file, re-file, register and re-register any and all
such further acts, deeds, certificates,  assurances and other instruments as the
Lender may  reasonably  require from time to time in order to (i) carry out more
effectively  the  purposes of the Loan  Documents,  (ii) to the  fullest  extent
permitted  by  applicable  Laws,   subject  any  Loan  Party's  or  any  of  its
Subsidiaries'  properties,  assets,  rights  or  interests  to the  Liens now or
hereafter  intended  to be covered  by any of the  Collateral  Documents  or the
Orders,  (iii) perfect and maintain the validity,  effectiveness and priority of
any of the  Collateral  Documents  and any of the Liens  intended  to be created
thereunder  and  under  the  Orders  and (iv)  assure,  convey,  grant,  assign,
transfer,  preserve,  protect and confirm more  effectively  unto the Lender the
rights  granted or now or  hereafter  intended to be granted to the Lender under
any Loan  Document,  the  Orders  or under  any  other  instrument  executed  in
connection  with  any  Loan  Document  to  which  any  Loan  Party or any of its
Subsidiaries  is or is to be a party,  and cause each of its  Subsidiaries to do
so.

     6.16 Compliance with Terms of Leaseholds.  Make all Post-Petition  payments
and otherwise  perform all obligations in respect of all leases of real property
(including, without limitation,  arrangements with respect to Gate Leaseholds to
which the Borrower,  the Parent or any of its  Subsidiaries is a party),  to the
extent necessary to keep such leases in full force and effect and not allow such
leases  to lapse or be  terminated  or any  rights  to renew  such  leases to be
forfeited  or  cancelled,  notify  the  Lender of any  default by any party with
respect to such leases and cooperate with the Lender in all respects to cure any
such default, and cause each of the Parent's Subsidiaries to do so.

                                       44
<PAGE>

     6.17 Cash Management System;  Controlled Accounts.  Maintain and cause each
of  its  Subsidiaries  to  maintain  (a) a  cash  management  system  reasonably
acceptable to the Lender and (b) from and after the date of the Final Order, all
cash in  Controlled  Accounts;  provided  that  (i) the  Loan  Parties  shall be
permitted to maintain up to an aggregate  amount of  $1,000,000 in accounts that
are not Controlled Accounts but that have been disclosed to the Lender; (ii) the
Loan Parties shall be permitted to maintain  cash in Trust Funds,  to the extent
consistent  with  current  practices;   (iii)  to  the  extent  consistent  with
agreements  with U.S.  Bank N.A.,  the Loan  Parties  shall be permitted to hold
accounts  with such  Persons so long as the amounts on deposit in such  accounts
are  intended  solely  to cash  collateralize  holdback  obligations  and  other
obligations   in  connection   with  payments  of  credit  card   processing  or
clearinghouse  services to U.S.  Bank N.A.;  and (iv) the Loan Parties  shall be
permitted to maintain cash in accounts that are not  Controlled  Accounts to the
extent that such  accounts are subject to a Lien  permitted  by Section  7.01(b)
(but only to the extent any such Lien was cash  collateralized  on the  Petition
Date),  Section  7.01(e),  Section  7.01(f)  (except  with  respect  to any cash
collateralization  in respect of Swap Contracts),  Section 7.01(1),  and Section
7.01(q).

     6.18 FAA and DOT Matters; Citizenship. (a) Maintain at all times its status
at the DOT, as  applicable,  as an "air  carrier"  within the meaning of Section
40102(a) (2) of Title 49, hold a certificate under Section 41102 of Title 49, or
a commuter air carrier authorization,  as applicable; (b) at all times hereunder
be a citizen of the United  States as defined by Section  40102(a)15 of Title 49
and as that statutory  provision has been interpreted by the DOT pursuant to its
policies;  (c) maintain at all times its status at the FAA as an air carrier and
hold air  carrier  operating  certificates  and other  operating  authorizations
issued by the FAA pursuant to 14 C.F.R. Sections 119, 121 or 135 as currently in
effect or as may be amended or recodified from time to time; and (d) possess and
maintain, and cause each other Loan Party to possess and maintain, all necessary
consents, franchises, licenses, permits, rights, concessions, authorizations 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 except in any case
described in this clause (d), where the failure to do so, either individually or
in the  aggregate,  could not be  reasonably  likely to have a Material  Adverse
Effect.

     6.19 Slot Preservation. Each Loan Party shall utilize its Slots, other than
Air-21  Slots,  for each  airport  in a manner  sufficient  to  comply  with the
applicable FAA regulations.

     6.20 ATSB Information Requests. Comply with any reasonable request from the
ATSB for information in connection with the ATSB Loan.

     6.21  Gate  Utilization.  Utilize  all of its Gate  Leaseholds  in a manner
sufficient  to comply  with  applicable  lease  provisions  governing  such Gate
Leaseholds.

     6.22  Disclosure  Statement  and  Plan of  Reorganization.  File  with  the
Bankruptcy  Court  the  disclosure  statement  (with a the  Reorganization  Plan
attached as an exhibit thereto) in substantially  the form described in the term
sheet  delivered  by the Borrower  and  accepted by the Lender  describing  such
Reorganization  Plan for all of the Cases, in each case on terms satisfactory to
the Lender and obtain approval of such disclosure  statement and confirmation of
the Reorganization Plan on or prior to September 30, 2005.

                                       45
<PAGE>

     6.23 Loading of  Schedules.  Complete the loading the Lender's code sharing
schedule into the Loan Parties'  reservation system in accordance with the terms
of the Codeshare Agreement.

     6.24  Management  Search.  By no later than (a)  December 31, 2004 retain a
Co-Chief  Restructuring  Officer whose employment shall be in consultation  with
the  Lender  and (b) July 31,  2005 a Chief  Executive  Officer,  subject to the
approval of the Creditors Committee and the ATSB.

     6.25 [RESERVED]

     6.26 Investment  Agreement and Exit Facility.  On or prior to the effective
date of the Reorganization  Plan, execute and deliver an Exit Facility agreement
and an Investment Agreement containing all of the terms and conditions set forth
in the Exit Facility Term Sheet and the Investment Agreement Term Sheet.

     6.27 Covenant for Post-Closing Deliveries.

     (a)  Deliver  as soon as  available  and in any event  not  later  than the
earlier of (x) the day before the  hearing  for the Final  Order and (y) 45 days
after the Closing Date (or such later date as may be approved by the Lender):

          (i)  acknowledgment   copies  or  stamped  receipt  copies  of  proper
     financing  statements,  duly  filed on or before  the date which is 15 days
     after  the  Closing  Date  under  the  Uniform   Commercial   Code  of  all
     jurisdictions  that the Lender may deem  necessary or desirable in order to
     perfect and protect the first priority liens and security interests created
     hereunder, covering the Collateral described in Article X;

          (ii) evidence that appropriate filings in the United States Patent and
     Trademark  Office and the United States  Copyright Office have been made in
     order to  perfect  and  protect  the  second  priority  liens and  security
     interests in the Intellectual Property Collateral; and

          (iii) evidence that appropriate filings required by the Loan Documents
     have been  made in order to  perfect  and  protect  the liens and  security
     interests described therein, and

          (iv)  deliver  the  Schedules  identified  on the  List  of  Schedules
     attached hereto as "to be provided by the Loan Parties";

     (b) [RESERVED].

     (c) Deliver to the Lender, as soon as available, and in any event not later
than the Maturity Date, the consent of the City of Chicago Council,  in form and
substance  satisfactory  to the Lender,  permitting the Loan Parties to transfer
the Loan Parties' assets at the Chicago Midway Airport to the Lender pursuant to
the terms of the Asset Acquisition Agreement.

                                       46
<PAGE>

                                   ARTICLE VII

                               NEGATIVE COVENANTS

         So long as the Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder which is accrued and payable shall remain unpaid or
unsatisfied the Borrower shall not, nor shall it permit any other Loan Party to,
directly or indirectly:

         7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or hereafter acquired, or
sign or file or suffer to exist under the Uniform Commercial Code of any
jurisdiction a financing statement that names the Borrower, the Parent or any of
its Subsidiaries as debtor, or sign or suffer to exist any security agreement
authorizing any secured party thereunder to file such financing statement, or
assign any accounts or other right to receive income, other than the following:

     (a) Liens pursuant to any Loan Document;

     (b) Liens existing on the Petition Date;

     (c) Liens for  taxes,  assessments  or  governmental  charges or claims not
delinquent  for a period of more than 30 days or which  are being  contested  in
good faith and by  appropriate  proceedings  diligently  conducted,  if adequate
reserves  with respect  thereto are  maintained  on the books of the  applicable
Person in accordance with GAAP;

     (d)   Liens   of   landlords,   carriers',   warehousemen's,    mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business  which are not  overdue  for a period of more than 30 days or which are
being  contested  in  good  faith  and  by  appropriate  proceedings  diligently
conducted, if adequate reserves with respect thereto are maintained on the books
of the applicable Person;

     (e) Liens  incurred  or  pledges  or  deposits  in the  ordinary  course of
business made in connection with workers'  compensation,  unemployment insurance
and other social security legislation, other than any Lien imposed by ERISA;

     (f) Liens  incurred or deposits made to secure the  performance of tenders,
bids,  trade contracts,  leases (real and personal)  (other than  Indebtedness),
statutory  obligations,  surety bonds (other than bonds  related to judgments or
litigation),  performance  and return of money (but not borrowed  money)  bonds,
reimbursement  obligations and chargeback  rights of Persons  performing  credit
card processing services for a Loan Party and other obligations of a like nature
incurred in the ordinary course of business;

     (g) easements, rights-of-way, restrictions, minor defects, encroachments or
irregularities of title and other similar charges or encumbrances affecting real
property which do not materially  detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of the
applicable Person;

     (h) [RESERVED];

                                       47
<PAGE>

     (i) Liens securing  judgments and attachments not  constituting an Event of
Default under Section  8.01(g) or securing  appeal or other surety bonds related
to  such  judgments;   Liens  securing  Indebtedness   permitted  under  Section
7.03(c)(v);  provided  that (i)  such  Liens  do not at any  time  encumber  any
property  other than the property  financed by such  Indebtedness  and (ii) with
respect to capital leases,  such Liens do not at any time extend to or cover any
Collateral or assets other than the assets subject to such capital leases;

     (j) 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;

     (k) operating leases or subleases of real or personal property granted
to others not interfering in any material respect with the business of the Loan
Parties, taken as a whole;

     (1) Liens in favor of collecting or payor banks and credit card  processors
having a right of setoff, revocation, refund or chargeback with respect to money
or instruments of any Loan Party on deposit with or in possession of such bank;

     (m)  any  renewal  of or  substitution  for  any  Lien  on any  "equipment"
described in Section 1110(a)(3) of the Bankruptcy Code (as in effect on the date
hereof)  permitted  by any of the  preceding  clauses;  provided  that  the debt
secured is not increased nor the Lien extended to any additional assets;

     (n) Liens of creditors  of any Person to whom any Loan  Party's  assets are
consigned for sale in the ordinary course of business;

     (o) [RESERVED];

     (p) Liens securing obligations under Permitted Sale/Leasebacks; and

     (q) Liens securing  Indebtedness  permitted under Section 7.03(c) (vii) and
(viii) and Section 7.03(c)(xi).

     7.02 Investments. Make or hold any Investments, except:

     (a) Investments held by any Loan Party in the form of Cash Equivalents;

     (b) [RESERVED];

     (c) equity  Investments  of the Parent in the Borrower and in any Guarantor
and Investments of any Guarantor in the Borrower or in another Guarantor;

     (d)  Investments  in accounts,  contract  rights and chattel paper (each as
defined in the UCC),  notes  receivable and similar items arising or acquired in
the  ordinary  course of business  and  Investments  received in  settlement  of
amounts  due to any Loan  Party  effected  in the  ordinary  course of  business
(including as a result of Dispositions not prohibited by Section 7.06);

     (e) [RESERVED];

                                       48
<PAGE>

     (f) Guarantees permitted by Section 7.04;

     (g) [RESERVED]

     (h) Investments consisting of intercompany debt permitted under Section
7.03; and

     (i)  payments  of fees to any fuel  consortium  in the  ordinary  course of
business, consistent with past practices and consistent with industry standards;
and

     (j) Investments in the Trust Funds.

     7.03  Indebtedness.   Create,   incur,   assume  or  suffer  to  exist  any
Indebtedness, except:

     (a) in the case of the  Parent,  Indebtedness  owed to a  Guarantor,  which
Indebtedness shall constitute Pledged Debt pursuant to the terms of Article X;

     (b) in the case of any Loan Party (other than the  Borrower),  Indebtedness
owed to the Borrower or the Parent,  which Indebtedness shall constitute Pledged
Debt pursuant to the terms of Article X; and

     (c) in the case of the Loan Parties,

          (i) Indebtedness under the Loan Documents;

          (ii)  Existing  Indebtedness  and, in the case of  financings  secured
     directly or indirectly by "equipment" described in Section 1110(a)(3)(A)(i)
     of the Bankruptcy Code (as in effect on the date hereof),  refinancings and
     replacements  thereof,  provided  that  (i) the  principal  amount  of such
     Existing  Indebtedness  shall not be increased  above the principal  amount
     thereof  outstanding  immediately prior to such refinancing or replacement,
     (ii) the maturity of such Existing Indebtedness shall not be shortened as a
     result of such refinancing or replacement,  (iii) the weighted average life
     to maturity of such Existing  Indebtedness shall not be reduced as a result
     of such  refinancing  or  replacement,  and (iv) the direct and  contingent
     obligors  therefor  shall not be changed,  as a result of or in  connection
     with such refinancing or replacement;

          (iii)  Indebtedness  incurred  after the Petition  Date  consisting of
     Guarantees permitted by Section 7.04;

          (iv) Indebtedness under the Chicago Construction Loan in an amount not
     to exceed $6,990,362;

          (v) debt securities, rent deferral notes and capital expenditure notes
     for the  modification  or improvement  of aircraft,  in each case issued to
     existing aircraft lessors and/or Lender in connection with the modification
     of existing lease or financing arrangements;

          (vi) [RESERVED];

                                       49
<PAGE>

          (vii)  Indebtedness  under the ATSB  Loan in an  amount  not to exceed
     $139,900,000 plus interest and fees payable under the ATSB Loan;

          (viii)  Indebtedness  under the Indiana DIP Orders in an amount not to
     exceed  $15,500,000  plus  interest and fees payable  under the Indiana DIP
     Orders;

          (ix)  Indebtedness in connection with retained aircraft and lease cure
     payment related thereto; and

          (x) letters of credit  issued by banks  reasonably  acceptable  to the
     Lender to the extent that (i) the Loan Party requesting the issuance of any
     such  letter of credit  pledges  to and  deposits  with the  issuer of such
     letter of credit  cash  collateral  in an amount  not less than 100% of the
     face  amount of such letter of credit and not in excess of 105% of the face
     amount of such letter of credit,  (ii) in the event of a drawing  under any
     such letter of credit,  the issuer of such letter of credit  looks first to
     the cash  collateral  for  reimbursement  of such  drawing  and (iii) after
     giving effect to the issuance of each such letter of credit, the sum of any
     obligations under such letters of credit shall not exceed $40,000,000.

     7.04  Guarantees and Other  Liabilities.  Purchase or repurchase (or agree,
contingently or otherwise,  so to do) the Indebtedness of, or assume,  guarantee
(directly  or  indirectly  or by an  instrument  having the  effect of  assuring
another's payment or performance of any obligation or capability of so doing, or
otherwise),  endorse or otherwise  become  liable,  directly or  indirectly,  in
connection with the Indebtedness,  stock or dividends of any Person,  except (a)
for any guaranty of  Indebtedness  or other  obligations  of the Borrower or any
Guarantor  if  the  Borrower  or  such   Guarantor   could  have  incurred  such
Indebtedness or obligations under this Credit  Agreement,  (b) by endorsement of
negotiable  instruments  for deposit or  collection  in the  ordinary  course of
business,  (c) Indebtedness or other  obligations of any Loan Party arising from
agreements  of any Loan  Party  providing  for  indemnification,  adjustment  of
purchase price, earn-out or other similar obligations,  in each case incurred or
assumed in  connection  with the  disposition  of any business or assets and (d)
customary indemnities in favor of officers, employees,  directors,  consultants,
attorneys, accountants or other advisors.

     7.05 Fundamental Changes. Merge, dissolve,  liquidate,  consolidate with or
into another Person, or Dispose of (whether in one transaction or in a series of
transactions)  all or  substantially  all of its  assets  (whether  now owned or
hereafter  acquired) to or in favor of any Person,  except  that,  so long as no
Default exists or would result therefrom:

     (a) any  Subsidiary  may merge  with (i) the  Borrower,  provided  that the
Borrower  shall be the continuing or surviving  Person,  or (ii) any one or more
other  Subsidiaries,  provided  that when any  Guarantor is merging with another
Subsidiary, the Guarantor shall be the continuing or surviving Person; and

     (b) any  Subsidiary may Dispose of all or  substantially  all of its assets
(upon  voluntary  liquidation  or  otherwise)  to  the  Borrower  or to  another
Guarantor.

     7.06 Dispositions. Make any Disposition of Collateral, except:

                                       50
<PAGE>

     (a)  Dispositions  of unused,  obsolete  or worn out  property  and surplus
aircraft,  engines and parts  related  thereto,  whether now owned or  hereafter
acquired, in the ordinary course of business;

     (b) Dispositions of inventory in the ordinary course of business;

     (c)  Dispositions of equipment or real property to the extent that (i) such
property  is  exchanged  for  credit  against  the  purchase  price  of  similar
replacement  property or (ii) the proceeds of such  Disposition  are  reasonably
promptly applied to the purchase price of such replacement property;

     (d)  Dispositions  of property by the Borrower to any  Subsidiary or by any
Subsidiary to the Borrower or to a wholly-owned Subsidiary; provided that if the
transferor of such property is a Guarantor,  the transferee  thereof must either
be the Borrower or a Guarantor;

     (e) Dispositions permitted by Section 7.05;

     (f)  Dispositions  by the  Borrower  and  its  Subsidiaries  not  otherwise
permitted  under  this  Section  7.06;  provided  that  (i) at the  time of such
Disposition, no Default shall exist or would result from such Disposition,  (ii)
the aggregate book value of all property  Disposed of in reliance on this clause
(f) in any fiscal year shall not exceed  $15,000,000;  (iii) the purchase  price
for such asset shall be paid to the Borrower or such Subsidiary in cash equal to
not less than 93% of the purchase price; and (iv) such Disposition  shall not be
a Disposition of any Gate Leaseholds.

     (g) abandonment of  Intellectual  Property  Collateral  pursuant to Section
9.04;

     (h)  licensing  and  sublicensing  of  Intellectual   Property   Collateral
consistent  with  the  Borrower's  past  practices  in the  ordinary  course  of
business;

     (i)  Dispositions of cash for purposes not otherwise  prohibited under this
Credit Agreement or under any other Loan Document;

     (j) so long as no Event of Default  shall occur and be  continuing,  to the
extent permitted by applicable law, the Loan Parties may consummate transfers of
Slots having an aggregate  appraised  value of not more than 5% of the aggregate
appraised value of the Slots provided,  however, that in the event any such Slot
is returned to a Loan  Party,  the  transfer of such Slot shall be deemed not to
have occurred for purposes hereof;

     (k) the  termination or rejection of any lease or the return,  surrender or
abandonment of any property subject thereto;

     (l)  Dispositions  permitted by the  Collateral  Documents;

     (m)  Permitted Sale/Leasebacks; and

     provided, however, that any Disposition pursuant to this Section 7.06 shall
be for fair market value.

                                       51
<PAGE>

     Notwithstanding  any  provisions of this Credit  Agreement to the contrary,
(i) the Parent  shall not be  permitted  to dispose  of its Equity  Interest  in
Chicago Express Airlines,  Inc. and Chicago Express Airlines,  Inc. shall not be
permitted to dispose of any of its owned property.

     7.07  Restricted  Payments.  Declare or make,  directly or indirectly,  any
Restricted Payment, or incur any obligation  (contingent or otherwise) to do so,
or issue or sell any  Equity  Interests  or accept  any  capital  contributions,
except that,  so long as no Default shall have occurred and be continuing at the
time of any action described below or would result therefrom:

     (a) each Loan Party may make Restricted Payments to any Loan Party which is
its direct parent;

     (b) each Loan Party may declare and make dividend payments or other
distributions payable solely in the common stock or other common Equity
Interests of such Person; and

     (c)  any  Loan  Party  may  issue   Equity   Interests,   or  make  capital
contributions, to another Loan Party.

     7.08 Change in Nature of Business.  Engage in any material line of business
substantially  different from those lines of business conducted by the Borrower,
the Parent and its Subsidiaries on or prior to the Petition Date or any business
related or incidental thereto.

     7.09 Transactions with Affiliates. Enter into any transaction of any
kind with any Affiliate of the Borrower, whether or not in the ordinary course
of business, other than on fair and reasonable terms substantially as favorable
to the Borrower or such Loan Party as would be obtainable by the Borrower or
such Loan Party at the time in a comparable arm's length transaction with a
Person other than an Affiliate, provided that the foregoing restriction shall
not apply to (a) transactions between or among the Borrower and any of the
Guarantors or between and among any of the Guarantors; (b) reasonable and
customary fees and compensation paid to, and indemnity provided on behalf of,
officers, directors or employees of any Loan Party; (c) any Restricted Payments
not prohibited by Section 7.07; (d) any payments or other distributions by a
Subsidiary to its direct or indirect parent to enable such parent to pay its
liabilities for taxes attributable to such Subsidiary; (e) transactions between
any Loan Party with any employee labor unions or other employee groups of any
Loan Party; and (f) the Loan Documents and the transactions contemplated
thereby.

     7.10 Use of  Proceeds.  Use the proceeds of any Credit  Extension,  whether
directly or indirectly, and whether immediately,  incidentally or ultimately, to
purchase or carry margin stock  (within the meaning of Regulation U of the Board
of Governors of the Federal  Reserve  System of the United  States) or to extend
credit to others for the purpose of  purchasing  or carrying  margin stock or to
refund Indebtedness originally incurred for such purpose.

     7.11 Financial and Performance Covenants.

     (a) Minimum Consolidated EBITDARR. Permit Consolidated EBITDARR for
each calendar month beginning on January 1, 2005 and ending with September 30,
2005 to be less than 75% of the projected EBITDARR for each such month as set
forth the in the Borrower's Projections; nor (ii) permit cumulative Consolidated
EBITDARR for each month beginning on January 1, 2005 and ending on September 30,

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<PAGE>

2005 to be less than 80% of the cumulative Consolidated EBITDARR for each such
calendar month as set forth in the Borrower's Projections (provided that the
first such cumulative EBITDARR of the Borrower, the Parent and its Subsidiaries
shall be tested for the period beginning on January 1, 2005 and ending on March
31, 2005).

     (b) Minimum Adjusted EBITDARR.  (i) Permit Adjusted EBITDARR for each month
beginning on January 1, 2005 and ending with  September 30, 2005 to be less than
75% of the projected  Adjusted  EBITDARR for each such month as set forth the in
the Borrower's  Projections;  nor (ii) permit  cumulative  Adjusted EBITDARR for
each month  beginning on January 1, 2005 and ending on September  30, 2005 to be
less than 80% of the  cumulative  Adjusted  EBITDARR  for each such month as set
forth in the Borrower's  Projections  (provided  that the first such  cumulative
Adjusted  EBITDARR of the  Borrower,  the Parent and its  Subsidiaries  shall be
tested  for the  period  beginning  on  January  1, 2005 and ending on March 31,
2005).

     (c) Liquidity.  (i) Permit  Liquidity on any day during the calendar months
beginning  on January 1, 2005  through  July 30, 2005 to be less than 75% of the
projected  Liquidity for each such calendar month as set forth in the Borrower's
Projections  nor (ii) permit  Liquidity  on any day during the  calendar  months
beginning  on August  1, 2005  through  September  30,  2005 to be less than one
hundred million dollars ($100,000,000).

     7.12 Amendments of Organization  Documents.  Amend any of its  Organization
Documents  other than for  amendments  which in the  aggregate  have no Material
Adverse Effect.

     7.13 Changes in Fiscal Year. Make any change in fiscal year.

     7.14 Prepayments Etc. of Indebtedness. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of, any
Indebtedness, except (a) the prepayment of the Credit Extensions in accordance
with the terms of this Credit Agreement, (b) regularly scheduled or required
repayments or redemptions of Existing Indebtedness, and (c) refinancing or
replacement of Existing Indebtedness permitted by Section 7.03(c) (ii).

     7.15 Partnerships,  Etc. Become a general partner in any general or limited
partnership or joint venture.

     7.16  Speculative   Transactions.   Engage  in  any  transaction  involving
commodity options or futures contracts or any similar speculative transactions.

     7.17 Formation of Subsidiaries. Organize or invest in any new Subsidiary.

     7.18 Chapter 11 Claims.  Incur, create,  assume,  suffer to exist or permit
any  Superpriority  Claim that is pari passu with or senior to any of the claims
of the Lender against the Borrower and the Guarantors except with respect to the
Indiana DIP Orders and the Carve-Out to the extent of any  contingent  indemnity
claims.

     7.19  Limitation on Prepayments  and  Pre-Petition  Obligations.  Except as
otherwise allowed pursuant to the DIP Financing Orders or any other order of the
Bankruptcy  Court,  (a) make any  payment  or  prepayment  on or  redemption  or
acquisition for value (including,  without limitation, by way of depositing with
the trustee with respect thereto money or securities before the due date for the
purpose  of  paying  when  due)  of  any  Pre-Petition   Indebtedness  or  other

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<PAGE>

Pre-Petition  obligations of the Borrower or any Guarantor, (b) pay any interest
on any  Pre-Petition  Indebtedness of the Borrower or any Guarantor  (whether in
cash,  in kind  securities or  otherwise),  or (c) make any payment or create or
permit any Lien pursuant to Section 361 of the  Bankruptcy  Code (or pursuant to
any other provision of the Bankruptcy Code authorizing adequate protection),  or
apply to the  Bankruptcy  Court for the  authority  to do any of the  foregoing;
provided,  however,  that  notwithstanding  the foregoing,  the Borrower and the
Guarantors may (and may file motions seeking to) (i) make payments in respect of
Indebtedness or obligations under any security  agreement,  lease or conditional
sale  contract  relating  to  "equipment"  (as that term is  defined  in Section
1110(a)(3) of the  Bankruptcy  Code as in effect on the date  hereof),  (ii) pay
cure costs with  respect to executory  contracts  or  unexpired  leases that the
Borrower or Guarantors have been allowed by the Bankruptcy Court to assume under
Section  365 of the  Bankruptcy  Code,  (iii) make or pay  accrued  payroll  and
related  expenses and employee  benefits as of the Petition Date, (iv) pay sales
and use taxes,  (v) pay other  Pre-Petition  Payments in an amount not to exceed
the amounts,  if any,  specified in the DIP Financing  Orders in the  aggregate,
(vi) pay all obligations  required to be paid pursuant to Section 6.04 and other
provisions  of this Credit  Agreement,  (vii) make  payments for  administrative
expenses  that  are  allowed  and  payable  under  Sections  330  and 331 of the
Bankruptcy Code,  (viii) make payments  permitted by the First Day Orders,  (ix)
make adequate  protection  payments to the ATSB Lender Parties and other secured
creditors  as may be required by the ATSB Cash Use Order,  make  payments to the
Authority provided for in the Indiana DIP Orders and payments under other orders
of the  Bankruptcy  Court  relating to the Cases,  and (x) make payments to such
other  claimants  and in such  amounts as may be  consented to by the Lender and
approved by the Bankruptcy Court.

     7.20 Change in Capital  Structure.  Make any material  change in its equity
capital structure as in existence on the Petition Date except as provided in the
Investment Agreement.

                                  ARTICLE VIII

                         EVENTS OF DEFAULT AND REMEDIES

     8.01 Events of Default.  Any of the following shall  constitute an Event of
Default:

     (a) Non-Payment. The Borrower or any other Loan Party fails to pay (i) when
and as required to be paid herein,  any amount of principal of any Loan, or (ii)
within three days after the same  becomes due, any interest on any Loan,  or any
commitment or other fee due hereunder,  or (iii) within five days after the same
becomes  due,  any other  amount  payable  hereunder  or under  any  other  Loan
Document; or

     (b) Specific Covenants. (i) The Borrower or any Loan Party fails to perform
or observe any term,  covenant or  agreement  contained  in any of Section  6.03
(Notices), 6.05 (Preservation of Existence), 6.10 (Inspection Rights), 6.11 (Use
of Proceeds),  6.12 (Covenant to Give Security),  6.17 (Cash Management) or 6.20
(FAA Matters), 6.19 (Slot Utilization) and 6.20(Gate Utilization) or Article VII
or (ii) the Borrower fails to perform or observe any term, covenant or agreement
contained  in any of  Section  6.01 or 6.02  (provided,  however,  that the Loan
Parties'  failure to obtain a consent of the City of Chicago to  transfer to the
Lender the Midway Hangar Property  pursuant to the Asset  Acquisition  Agreement

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<PAGE>

shall  not  constitute  a  Default  or an Event of  Default  under  this  Credit
Agreement,  notwithstanding  any other provision of this Credit Agreement to the
contrary)  and such  failure  continues  for ten (10)  Business  Days  after the
earlier of the date on which (A) a  Responsible  Officer  becomes  aware of such
failure or (B) written  notice  thereof shall have been given to the Borrower by
the Lender; or

     (c) Other Defaults. Any Loan Party fails to perform or observe any
other covenant or agreement (not specified in subsection (a) or (b) above or (t)
below) contained in any Loan Document on its part to be performed or observed
and such failure continues unremedied for 60 days (in the case of the Mortgages,
so long as the applicable Loan Party is using commercially reasonable efforts to
cure such default) and ten (10) Business Days (in the case of any other Loan
Document) after the earlier of the date on which (A) a Responsible Officer
becomes aware of such failure or (B) written notice thereof shall have been
given to the Borrower by the Lender; or

     (d)   Representations  and  Warranties.   Any   representation,   warranty,
certification  or  statement  of fact made or deemed made by or on behalf of the
Borrower or any other Loan Party herein,  in any other Loan Document,  or in any
document  delivered in  connection  herewith or therewith  shall be incorrect or
misleading in any material respect when made or deemed made; or

     (e)  Cross-Default.  (i) Any Loan Party or any Subsidiary (A) fails to make
any  payment  when due  (whether by  scheduled  maturity,  required  prepayment,
acceleration, demand, or otherwise) in respect of the facilities pursuant to the
Indiana  DIP  Orders,  the  Chicago  Construction  Loan,  or  any  Post-Petition
Indebtedness or  Post-Petition  Guarantee  (other than  Indebtedness  hereunder)
having an aggregate  principal amount (including  undrawn committed or available
amounts and  including  amounts  owing to all  creditors  under any  combined or
syndicated credit arrangement) of more than $1,000,000,  or (B) fails to observe
or perform any other agreement or condition  relating to the Indiana DIP Orders,
the  Chicago  Construction  Loan,  or any  such  Post-Petition  Indebtedness  or
Post-Petition  Guarantee or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event occurs, in each case the effect
of which default or other event is to cause,  or to permit the holder or holders
of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a
trustee  or  agent on  behalf  of such  holder  or  holders  or  beneficiary  or
beneficiaries)  to  cause,   with  the  giving  of  notice  if  required,   such
Indebtedness  to be  demanded  or to become due or to be  repurchased,  prepaid,
defeased or redeemed  (automatically  or otherwise),  or an offer to repurchase,
prepay,  defease or redeem  such  Indebtedness  to be made,  prior to its stated
maturity,  or such  Guarantee to become  payable or cash  collateral  in respect
thereof to be demanded;  or (ii) there  occurs under any Swap  Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (A) any event
of default under such Swap  Contract as to which the Borrower or any  Subsidiary
is the  Defaulting  Party  (as  defined  in  such  Swap  Contract)  or  (B)  any
Termination  Event (as so  defined)  under  such Swap  Contract  as to which the
Borrower or any  Subsidiary is an Affected  Party (as so defined) and, in either
event, the Swap Termination Value owed by the Loan Party or such Subsidiary as a
result thereof is greater than $1,000,000; or

     (f)  Judgments.  There is entered  against any Loan Party or any Subsidiary
(i) a final  judgment or order for the payment of money in an  aggregate  amount
exceeding  $500,000,  as an  administrative  expense  of the kind  specified  in
Section 503(b) of the Bankruptcy  Code (to the extent not covered by independent
third-party insurance as to which the insurer is rated at least "A" by A.M. Best
Company, has been notified of such claim and does not dispute coverage), or (ii)
any one or more  non-monetary  final judgments that have, or could reasonably be

                                       55
<PAGE>

expected to have,  individually or in the aggregate,  a Material  Adverse Effect
and, in either case,  there is a period of ten (10)  consecutive  Business  Days
during  which a stay of  enforcement  of such  judgment,  by reason of a pending
appeal or otherwise, is not in effect; or

     (g) ERISA.  (i) An ERISA  Event  occurs with  respect to a Pension  Plan or
Multiemployer  Plan which has resulted or could reasonably be expected to result
in  liability  of any Loan Party under  Title IV of ERISA to the  Pension  Plan,
Multiemployer  Plan or the PBGC in an aggregate  amount in excess of $500,000 or
(ii) any Loan  Party or any ERISA  Affiliate  fails to pay when  due,  after the
expiration of any applicable grace period, any installment  payment with respect
to its withdrawal  liability  under Section 4201 of ERISA under a  Multiemployer
Plan where such  withdrawal  liability  is in an  aggregate  amount in excess of
$500,000; or

     (h) Invalidity of Loan  Documents.  Any provision of any Loan Document,  at
any time after its  execution  and  delivery  and for any  reason  other than as
expressly  permitted  hereunder or thereunder or satisfaction in full of all the
Obligations,  ceases to be valid and binding on or enforceable  against any Loan
Party  intended  to be a party to it;  any Loan  Party  files a motion  or other
pleading  seeking  to  challenge  the  validity  of  any  Loan  Document  or the
applicability  or  enforceability  of any Loan  Document or any of the Orders or
which seeks to void,  avoid,  limit, or otherwise  adversely affect the security
interest  created by or in any Loan Document or any of the Orders or any payment
made  pursuant  thereto;  or any Loan  Party  denies  that it has any or further
liability  or  obligation  under  any Loan  Document,  or  purports  to  revoke,
terminate or rescind any Loan Document; or

     (i) Change of Control. There occurs any Change of Control; or

     (j) Collateral Document. Any Collateral Document after delivery thereof
pursuant to Section 4.01 or 6.12 shall for any reason (other than pursuant to
the terms thereof) cease to create a valid and perfected lien on and security
interest in the Collateral purported to be covered thereby having the priority
contemplated by the Loan Documents and the DIP Financing Orders; or

     (k) Conversion of the Cases. Any of the Cases concerning the Borrower
or any Guarantors shall be dismissed or converted to a case under chapter 7 of
the Bankruptcy Code or any Loan Party shall file a motion or other pleading or
support a motion or other pleading filed by any other Person seeking the
dismissal or conversion to chapter 7 of the Bankruptcy Code of any of the Cases
concerning the Borrower or any Guarantors under Section 1112 of the Bankruptcy
Code or otherwise; a trustee appointed pursuant to section 1104 of the
Bankruptcy Code or otherwise under chapter 7 or chapter 11 of the Bankruptcy
Code, a responsible officer or an examiner with enlarged powers relating to the
operation of the business (powers beyond those set forth in Section 1106(a)(3)
and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code
shall be appointed in any of the Cases and the order appointing such trustee,
responsible officer or examiner shall not be reversed or vacated within 30 days
after the entry thereof; or an application shall be filed by the Borrower or any
Guarantor for the approval of any other claim or Superpriority Claim (other than
the Carve-Out) in any of the Cases which is pari passu with or senior to any of
the claims (including, without limitation, the Superpriority Claim) of the
Lender against the Borrower or any Guarantor hereunder, or there shall arise or
be granted any such pari passu or senior to any such claims (including, without
limitation, a Superpriority Claim); or

                                       56
<PAGE>

     (1) Relief from Automatic  Stay. The Bankruptcy  Court shall enter an order
or orders granting  relief from the automatic stay applicable  under Section 362
of the  Bankruptcy  Code to the holder or holders of any  security  interest  to
permit  foreclosure  (or the  granting of a deed in lieu of  foreclosure  or the
like) on any assets of any of the Borrower or the Guarantors (other than Section
1110 Assets or Excluded Assets); or

     (m)  Modification  of Orders.  An order of the  Bankruptcy  Court  shall be
entered reversing, amending,  supplementing or staying for a period in excess of
ten (10)  Business  Days,  vacating or  otherwise  modifying in a manner that is
adverse to the Lender any of the DIP Financing Orders; or

     (n)  Pre-Petition  Payment.  Except as permitted by the Orders or the First
Day Orders, the Borrower, any Guarantor or any of their Subsidiaries  (including
all present and future debtors) shall make any Pre-Petition Payment in violation
of Section 7.19; or

     (o) Material Adverse Change.  (i) Except for the filing of the Cases, there
occurs any event or  circumstance  that  would  give rise to a Material  Adverse
Change  since the Closing Date (ii) there shall be a change or  modification  in
the ATSB Cash Use Order which has a Material  Adverse  Effect on the Borrower or
any other Loan Party; or

     (p) Defaults Under Orders.  The Borrower or any Guarantor  fails to perform
or observe any term or condition contained in the DIP Financing Orders, the ATSB
Cash Use Order and the Indiana DIP Orders; or

     (q)  Final  Order.  The entry of the Final  Order  shall not have  occurred
within 60 days after the entry of the Interim Order; or

     (r) Bankruptcy  Court  Motions.  Any Loan Party shall bring or consent to a
motion in the Cases:  (i) to obtain  working  capital  financing from any Person
other than Lender under Section  364(d) of the  Bankruptcy  Code,  other than in
connection with any Indebtedness permitted under Section 7.03; or (ii) to obtain
financing  from any Person  other than the Lender  under  Section  364(c) of the
Bankruptcy  Code other than (x) with  respect to a financing  used,  in whole or
part,  to  repay  in  full  the  Obligations  or  (y)  in  connection  with  any
Indebtedness  permitted by Section  7.03;  or (iii) to grant any Lien other than
those permitted under Section 7.01 upon or affecting any Collateral;  or (iv) to
recover from any portions of the  Collateral any costs or expenses of preserving
or disposing of such Collateral  under Section 506(c) of the Bankruptcy Code; or
(v) to grant a  Superpriority  Claim pari  passu or senior to the  Superpriority
Claim granted to the Lender other than that granted in the DIP Financing  Orders
and  other  than  with  respect  to  the  Carve-Out;   provided,  however,  that
notwithstanding  the  foregoing,  nothing  shall  preclude  any Loan  Party from
bringing or consenting to any motion that seeks  approval of a payment,  Lien or
other transaction expressly permitted under the Loan Documents; or

     (s) Reorganization  Plan. An order shall be entered by the Bankruptcy Court
confirming a plan of  reorganization  or liquidation in any of the Cases (or any
Loan Party shall propose a plan of  reorganization  or liquidation in any of the
Cases)  that  does  not  contain  a  provision  for  termination  of  all of the
Commitments  and  indefeasible  payment in full in cash of the Obligations on or
before the effective date of such plan; or

                                       57
<PAGE>

     (t) Order for  Termination.  An order  shall be entered  by the  Bankruptcy
Court,  or any Loan Party  shall  make a motion  for an order of the  Bankruptcy
Court,  dismissing  any of the Cases  that  does not  contain  a  provision  for
termination of all of the Commitments and  indefeasible  payment in full in cash
of the Obligations on the date any such order is entered.

     8.02 Remedies upon Event of Default.  If any Event of Default occurs and is
continuing,  the Lender  may take any or all of the  following  actions  without
further order of or application to the Bankruptcy Court:

     (a)  declare  the  Commitment  of  the  Lender  to  make  any  Loans  to be
terminated, whereupon such Commitments shall be terminated;

     (b) declare  the unpaid  principal  amount of all  outstanding  Loans,  all
interest  accrued and unpaid  thereon,  and all other  amounts  owing or payable
hereunder or under any other Loan  Document to be  immediately  due and payable,
without presentment,  demand,  protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower and the Loan Parties; and

     (c)  subject  only to the giving of an  "Enforcement  Notice"  under and as
defined in the Interim Order to the parties  entitled under the Interim Order to
receive  such notice,  (i)  exercise all rights and remedies  available to it in
respect of the collateral; or (ii) exercise all rights and remedies available to
it and the  Lender  under  the  Loan  Documents,  the DIP  Financing  Orders  or
applicable Laws.

     8.03 Application of Funds.  After the exercise of remedies  provided for in
Section 8.02 and subject to the  Carve-Out,  any amounts  received on account of
the Obligations shall be applied by the Lender in the following order:

     First,  to payment of that portion of the  Obligations  constituting  fees,
indemnities, expenses and other amounts;

     Second, to payment of that portion of the Obligations  constituting accrued
and unpaid interest on the Loans;

     Third,  to payment of that portion of the Obligations  constituting  unpaid
principal of the Loans;

     Fourth,  to the payment of all other  Obligations of the Loan Parties owing
under or in  respect  of the Loan  Documents  that  are due and  payable  to the
Lender; and

     Last,  the  balance,  if  any,  after  all of  the  Obligations  have  been
indefeasibly paid in full, to the Borrower or as otherwise required by Law.

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<PAGE>

                                   ARTICLE IX

                                    SECURITY

     9.01 Grant of Security. To induce the Lender to make the Loans to implement
the DIP Financing  Orders without in any way  diminishing or limiting the effect
of the DIP Financing  Orders or the security  interest,  pledge and lien granted
thereunder,  the Borrower, the Parent and each other Loan Party hereby grants to
the  Lender,  as  security  for the  full  and  prompt  payment  when due of the
Obligations   of  such  Loan  Party  under  the  Loan  Documents  (the  "Secured
Obligations"):

     (A) a continuing first priority Lien and security interest in and to
all Primary Collateral (as defined below) of such Loan Party (subject only to
(i) valid and perfected Liens in existence on the Petition Date and junior to
such valid and perfected Liens, (ii) valid, enforceable and nonavoidable Liens
existing as of the Petition Date, but perfected after the Petition Date pursuant
to section 546(b) of the Bankruptcy Code, only to the extent such Post-Petition
perfection is expressly permitted under the Bankruptcy Code, (iii) the Carve-Out
and (iv) Permitted Senior Liens) in accordance with subsection 364(c)(2) of the
Bankruptcy Code; and

     (B)  continuing  second best priority Lien and security  interest in and to
all Secondary  Collateral (as defined below) of such Loan Party (subject only to
(i) valid and  perfected  Liens in existence on the Petition  Date and junior to
such valid and perfected Liens, (ii) valid,  enforceable and nonavoidable  Liens
existing  as of the  Petition  Date,  but  perfected  after the  Petition  Date,
pursuant  to Section  546(b) of the  Bankruptcy  Code,  only to the extent  such
Post-Petition perfection is expressly permitted under the Bankruptcy Code, (iii)
the Carve-Out; (iv) Permitted Senior Liens; and (v) first priority Liens).

     With  respect  to all  real  property  the  title  to  which is held by the
Borrower,  the Parent or any of the Loan Parties,  or the possession of which is
held by the Borrower or any of the Loan Parties pursuant to leasehold  interest,
the Borrower and each Loan Party hereby assigns and conveys as security,  grants
a security interest in, hypothecates,  mortgages, pledges and sets over unto the
Lender  all of the  right,  title and  interest  of the  Borrower  and such Loan
Parties in all of such owned real property and in all such leasehold  interests,
together in each case with all of the right,  title and interest of the Borrower
and such  Loan  Parties  in and to all  buildings,  improvements,  and  fixtures
related thereto, any lease or sublease thereof, all General Intangibles relating
thereto and all proceeds thereof.  The Borrower and each Loan Party acknowledges
that,  pursuant to the  Orders,  the Liens in favor of the Lender in all of such
real property and leasehold instruments,  including any Gate Leasehold (limited,
in the case of Chicago  Gates,  only to the  interests  described  in clause (i)
below) shall be perfected without the recordation of any instruments of mortgage
or assignment.  The Borrower and each Loan Party further  agrees that,  upon the
request  of the  Lender,  the  Borrower  and such Loan  Party  shall  enter into
separate fee or  leasehold  mortgages  in  recordable  form with respect to such
properties on terms reasonably satisfactory to the Lender.

          "Primary  Collateral" means,  except as otherwise specified in the DIP
     Financing  Orders and in the  definition of Collateral set forth in Section
     1.01,

                                       59
<PAGE>

    (i)        (1) all  property  owned or leased  (except as  provided
               below in this clause (i)(1)) by any of the Loan Parties as of the
               date  hereof at the  Chicago  Midway  Airport in which the Lender
               does not already hold a valid,  enforceable and perfected lien or
               security interest and the proceeds therefrom;  provided, however,
               that the Lender shall not receive any Liens,  security  interests
               or  operational  rights in, or any  revisionary  interests or any
               right to  control  or use the  Chicago  Midway  Airport  terminal
               facilities which are the subject of the Chicago Midway Facilities
               Lease  themselves or in the Chicago Midway  Facilities  Lease for
               such airport terminal  facilities,  and (2) any interest the Loan
               Parties have in the right to receive the  proceeds,  if any, from
               any assumption and  assignment,  to any person engaged in the air
               transportation  business,  and no other person, of Chicago Midway
               Facilities   Lease  for  any  Chicago  Midway  Airport   terminal
               facilities,  as approved by the  Bankruptcy  Court and subject to
               any and all City of Chicago  consents as are required;  provided,
               further, that any such City of Chicago consent shall be absolute,
               exclusive and not subject to challenge by the Lender and the Loan
               Parties  regardless  of any  adverse  effect that the lack of, or
               conditions  to,  any such  consent  may have or be claimed on the
               amount of  proceeds  resulting  from lack of  consent  to such an
               assumption and assignment. In connection with such consent of the
               City of Chicago, the Lender waives any and all purported legal or
               equitable claims or causes of action it may have against the Loan
               Parties  and any third  party,  including  but not limited to the
               City of Chicago,  whose consent is required arising from any lack
               of, or conditions to, such a consent,  including any claims based
               upon assignment under 11 U.S.C.  365, and covenants not to sue in
               furtherance thereof;

    (ii)       any assets of the Loan Parties if and to the extent
               constituting the collateral pledged to the Authority
               pursuant to the Indiana DIP Orders, other than assets
               identified in clause (i) above, if such financing by the
               Authority has been repaid at any applicable time and such
               collateral pledged to the Authority has been released;

    (iii)       all of the  rights,  title  and  interest  of the Loan
               Parties under airport  facility leases and any related  contracts
               and agreements at all  out-stations  of the Loan Parties,  except
               for (A) the out-stations at Honolulu  International  Airport, (B)
               out-stations  at  airports  outside of the United  States and (C)
               assets identified in clause (i) above, provided, however, that if
               any such  airport  facility  leases  and  related  contracts  and
               agreements prohibit the granting of security interest in any such
               facilities,  the  Lender's  interest  shall  be  limited  to  the
               proceeds  thereof  until  the Loan  Parties  (using  commercially
               reasonable efforts) shall have obtained  appropriate  consents to
               pledge and assignment from relevant lessors of facilities;

     (iv)      all of the property and assets of each Loan Party, of the
               types identified in this Section 9.01 below under clauses
               (a) through (h), but excluding assets identified in clause
               (i) above, that have not otherwise been pledged or which do
               not constitute the Secondary Collateral; and all proceeds of,
               collateral for, income, royalties and other payments

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               now or hereafter due and payable with respect to, and supporting
               obligations relating to, any and all of the Primary Collateral
               and, to the extent not otherwise included, all (A) payments
               under insurance (whether or not the Lender is the loss payee
               thereof), or any indemnity, warranty or guaranty, payable by
               reason of loss or damage to or otherwise with respect to any of
               the foregoing Primary Collateral, (B) tort claims, including,
               without limitation, all commercial tort claims and (C) cash.

     "Secondary  Collateral"  means,  except as  otherwise  specified in the DIP
Financing  Orders and in the definition of Collateral set forth in Section 1.01,
all of the  property  and  assets of each Loan  Party and its  estate,  real and
personal,  tangible and intangible,  whether now owned or hereafter  acquired or
arising and regardless of where located, including but not limited to:

     (a) all equipment in all of its forms, including,  without limitation,  all
machinery,  tools, motor vehicles, vessels, aircraft, aircraft engines, aircraft
propellers,  furniture  and fixtures,  and all parts thereof and all  accessions
thereto  and  all  software  related  thereto,  including,  without  limitation,
software  that is  embedded  in and is part of the  equipment  (any and all such
property being the "Equipment");

     (b) all inventory in all of its forms, including,  without limitation,  (i)
all raw  materials,  work in  process,  finished  goods  and  materials  used or
consumed in the manufacture,  production,  preparation or shipping thereof, (ii)
goods in which  such  Loan  Party  has an  interest  in mass or a joint or other
interest or right of any kind  (including,  without  limitation,  goods in which
such Loan Party has an interest or right as consignees) and (iii) goods that are
returned to or  repossessed  or stopped in transit by such Loan Party),  and all
accessions  thereto  and  products  thereof  and  documents  therefore,  and all
software  related  thereto,  including,  without  limitation,  software  that is
embedded in and is part of the inventory  (any and all such  property  being the
"Inventory");

     (c) all  accounts  (including,  without  limitation,  health-care-insurance
receivables),  chattel paper (including,  without  limitation,  tangible chattel
paper and electronic chattel paper), instruments (including, without limitation,
promissory   notes),   deposit  accounts,   letter-of-credit   rights,   general
intangibles  (including,  without  limitation,  payment  intangibles)  and other
obligations of any kind, whether or not arising out of or in connection with the
sale or lease of goods or the rendering of services and whether or not earned by
performance,  and all rights now or hereafter  existing in and to all supporting
obligations and in and to all security  agreements,  mortgages,  Liens,  leases,
letters of credit and other  contracts  securing  or  otherwise  relating to the
foregoing  property (any and all of such accounts,  chattel paper,  instruments,
deposit  accounts,   letter-of-credit  rights,  general  intangibles  and  other
obligations, to the extent not referred to in clause(d), (e) or (f) below, being
the  "Receivables",  and any  and  all  such  supporting  obligations,  security
agreements,  mortgages,  Liens, leases, letters of credit and other contracts to
the extent not  referred to in clause (d),  (e) or (f) below being the  "Related
Contracts");

     (d) the following (the "Security Collateral"):

     (i) all  shares  of stock  and  other  Equity  Interests  from time to time
acquired  by such Loan  Party in any  manner  (the  "Pledged  Equity"),  and the
certificates,  if any,  representing  such  additional  shares  or other  Equity
Interests,   and  all  dividends,   distributions,   return  of  capital,  cash,
instruments  and  other  property  from  time to time  received,  receivable  or
otherwise distributed in respect of or in exchange for any or all of such shares
or other  Equity  Interests  and all  subscription  warrants,  rights or options
issued thereon or with respect thereto;

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<PAGE>

     (ii) all  indebtedness  from  time to time owed to such  Loan  Party  (such
indebtedness being the "Pledged Debt") and the instruments,  if any,  evidencing
such indebtedness,  and all interest,  cash, instruments and other property from
time to time received,  receivable or otherwise  distributed in respect of or in
exchange for any or all of such indebtedness; and

     (iii) all other investment property (including, without limitation, all (A)
securities,  whether certificated or uncertificated,  (B) security entitlements,
(C) securities accounts,  (D) commodity contracts and (E) commodity accounts) in
which such Loan Party has now,  or  acquires  from time to time  hereafter,  any
right, title or interest in any manner, and the certificates or instruments,  if
any,  representing or evidencing such  investment  property,  and all dividends,
distributions,   return  of  capital,  interest,  distributions,   value,  cash,
instruments  and  other  property  from  time to time  received,  receivable  or
otherwise  distributed  in  respect  of or in  exchange  for  any or all of such
investment  property and all  subscription  warrants,  rights or options  issued
thereon or with respect thereto;

     (e) the following (collectively, the "Account Collateral"):

     (i) all deposit and other bank accounts and all funds and financial  assets
from time to time credited  thereto  (including,  without  limitation,  all cash
equivalents),  all interest,  dividends,  distributions,  cash,  instruments and
other property from time to time received,  receivable or otherwise  distributed
in respect of or in exchange for any or all of such funds and financial  assets,
and all certificates and instruments,  if any, from time to time representing or
evidencing such accounts;

     (ii) all  promissory  notes,  certificates  of deposit,  deposit  accounts,
checks  and  other  instruments  from  time to time  delivered  to or  otherwise
possessed by the Lender for or on behalf of such Loan Party, including,  without
limitation;  those delivered or possessed in substitution  for or in addition to
any or all of the then existing Account Collateral; and

     (iii) all interest, dividends,  distributions,  cash, instruments and other
property  from time to time  received,  receivable or otherwise  distributed  in
respect  of or in  exchange  for  any  or  all  of  the  then  existing  Account
Collateral;

     (f) the following (collectively, the "Intellectual Property Collateral"):

          (i) all patents,  patent  applications,  utility  models and statutory
     invention  registrations,  all inventions  claimed or disclosed therein and
     all improvements thereto ("Patents");

          (ii) all trademarks,  service marks, domain names, trade dress, logos,
     designs,  slogans,  trade names, business names,  corporate names and other
     source  identifiers,  whether registered or unregistered  (provided that no
     security interest shall be granted in United States intent-to-use trademark
     applications to the extent that, and solely during the period in which, the
     grant  of  a  security  interest  therein  would  impair  the  validity  or
     enforceability  of  such   intent-to-use   trademark   applications   under
     applicable  federal  law),  together,  in  each  case,  with  the  goodwill
     symbolized thereby ("Trademarks");

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<PAGE>

          (iii) all copyrights,  including,  without  limitation,  copyrights in
     Computer  Software,  internet  web sites and the content  thereof,  whether
     registered or unregistered ("Copyrights");

          (iv) all computer software, programs and databases (including, without
     limitation,  source code, object code and all related applications and data
     files), firmware and documentation and materials relating thereto, together
     with any and all maintenance  rights,  service rights,  programming rights,
     hosting  rights,  test  rights,  improvement  rights,  renewal  rights  and
     indemnification rights and any substitutions,  replacements,  improvements,
     error  corrections,  updates  and  new  versions  of any  of the  foregoing
     ("Computer Software");

          (v) all confidential and proprietary information,  including,  without
     limitation, know-how, trade secrets, manufacturing and production processes
     and techniques, inventions, research and development information, databases
     and  data,  including,  without  limitation,   technical  data,  financial,
     marketing and business  data,  pricing and cost  information,  business and
     marketing   plans  and  customer  and   supplier   lists  and   information
     (collectively, "Trade Secrets"), and all other intellectual, industrial and
     intangible property of any type, including, without limitation,  industrial
     designs and mask works;

          (vi) all  registrations  and  applications for registration for any of
     the  foregoing,  executed  by such Loan  Party to the  Lender  from time to
     time),    together   with   all   reissues,    divisions,    continuations,
     continuations-in- part, extensions, renewals and reexaminations thereof;

          (vii) all tangible  embodiments  of the  foregoing,  all rights in the
     foregoing  provided by  international  treaties or conventions,  all rights
     corresponding thereto throughout the world and all other rights of any kind
     whatsoever of such Loan Party accruing thereunder or pertaining thereto;

          (viii)  all  agreements,  permits,  consents,  orders  and  franchises
     relating  to the  license,  development,  use or  disclosure  of any of the
     foregoing  to which  such Loan  Party,  now or  hereafter,  is a party or a
     beneficiary ("IP Agreements"); and

          (ix) any and all claims for  damages and  injunctive  relief for past,
     present and future  infringement,  dilution,  misappropriation,  violation,
     misuse or breach with respect to any of the foregoing,  with the right, but
     not the  obligation,  to sue for and collect,  or otherwise  recover,  such
     damages;

     (g) all books and records (including,  without limitation,  customer lists,
credit files, printouts and other computer output materials and records) of such
Loan Party pertaining to any of the Collateral; and

     (h) all proceeds of, collateral for, income, royalties and other
payments now or hereafter due and payable with respect to, and supporting
obligations relating to, any and all of the Secondary Collateral (including,

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<PAGE>

without limitation, proceeds, collateral and supporting obligations that
constitute property of the types described in clauses (a) through (g) of this
Section 9.01 and this clause (h)) and, to the extent not otherwise included, all
(A) payments under insurance (whether or not the Lender is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral, (B) tort
claims, including, without limitation, all commercial tort claims and (C) cash.

     Notwithstanding  anything to the contrary in this Credit Agreement the Loan
Documents or the DIP Financing Order, the Collateral shall not include:  (i) any
assets or property of the Loan Parties pledged by the Loan Parties  Pre-Petition
to the ATSB Lender  Parties to secure the Loan Parties'  Indebtedness  under the
ATSB Loan and (ii) any assets or  property  of the Loan  Parties  upon which the
Bankruptcy  Court shall have  granted to the ATSB Lender  Parties a  replacement
lien pursuant to the ATSB Cash Use Order to secure the Loan Parties' use of cash
collateral  under section 363 of the  Bankruptcy  Code (the "ATSB  Collateral"),
provided,  however, that in the event that any ATSB Collateral shall be released
by the ATSB Lender Parties,  the Lender shall have the best priority interest in
such released ATSB  Collateral  (subject only to any continuing  Lien granted to
the Authority under the Indiana DIP Orders) and each Loan Party hereby grants to
the  Lender,  as  security  for the  full  and  prompt  payment  when due of the
Obligations  of such Loan  Party  under  the Loan  Documents  the best  priority
interest in such released ATSB  Collateral  (subject only to any continuing Lien
granted to the  Authority  under the Indiana DIP  Orders);  or (iii) the Section
1110 Assets.

     9.02 Further Assurances.

     (a) Each Loan Party  agrees that from time to time,  at the expense of such
Loan Party,  such Loan Party will  promptly  execute and  deliver,  or otherwise
authenticate, all further instruments and documents, and take all further action
that may be necessary or desirable,  or that the Lender may reasonably  request,
in order to perfect  and  protect  any pledge or  security  interest  granted or
purported to be granted by such Loan Party  hereunder or to enable the Lender to
exercise  and  enforce its rights and  remedies  hereunder  with  respect to any
Collateral of such Loan Party. Without limiting the generality of the foregoing,
each Loan Party  will  within a  commercially  reasonable  time with  respect to
Collateral  of  such  Loan  Party:  (i)  at the  request  of  the  Lender,  mark
conspicuously  each document included in Inventory,  each chattel paper included
in Receivables,  each Related  Contract,  and each of its records  pertaining to
such Collateral with a legend, in form and substance reasonably  satisfactory to
the Lender,  indicating that such document,  chattel paper, Related Contract, or
Collateral is subject to the security  interest granted hereby;  (ii) execute or
authenticate and file such financing or continuation  statements,  or amendments
thereto,  and  such  other  instruments  or  notices,  as  may be  necessary  or
desirable,  or as the Lender may  reasonably  request,  in order to perfect  and
preserve the security  interest  granted or purported to be granted by such Loan
Party  hereunder;  (iii) at the  request  of the  Lender,  deliver to the Lender
certificates  representing  Security  Collateral that  constitutes  certificated
securities,  accompanied by undated stock or bond powers executed in blank; (iv)
at the request of the Lender,  take all action  reasonably  necessary  to ensure
within the time  required  hereunder  that the Lender has control of  Collateral
consisting of deposit accounts,  electronic chattel paper,  investment property,
letter-of-credit  rights and transferable records as provided in Sections 9-104,
9-105,  9-106 and 9-107 of the Uniform  Commercial Code and in Section 16 of the
Uniform Electronics Transactions Act, as in effect in the jurisdiction governing
such  transferable  record;  (v) at the request of the  Lender,  take all action
reasonably  necessary to ensure that the Lender's  security interest is noted on
any  certificate  of  ownership  related  to  any  Collateral   evidenced  by  a
certificate of ownership;  (vi) at the reasonable  request of the Lender,  cause
the Lender to be the  beneficiary  under all letters of credit  that  constitute
Collateral,  with the  exclusive  right to make all draws under such  letters of
credit,  and with all  rights of a  transferee  under  Section  5-114(e)  of the

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<PAGE>

Uniform  Commercial  Code;  and (viii)  deliver to the Lender  evidence that all
other action that the Lender may deem reasonably necessary or desirable in order
to perfect and protect the security  interest  created by such Loan Party in the
Collateral under this Credit Agreement has been taken.

     (b) Each  Loan  Party  hereby  authorizes  the  Lender  to file one or more
financing or continuation statements, and amendments thereto, including, without
limitation,  one or more  financing  statements  indicating  that such financing
statements  cover  all  assets or all  personal  property  (or words of  similar
effect) of such Loan  Party,  in each case  without the  signature  of such Loan
Party,  and  regardless  of  whether  any  particular  asset  described  in such
financing  statements  falls within the scope of the Uniform  Commercial Code or
the granting clause of this Credit Agreement.  A photocopy or other reproduction
of this Credit Agreement or any financing  statement  covering the Collateral or
any part thereof shall be sufficient as a financing statement where permitted by
Law.  Each Loan Party  ratifies its  authorization  for the Lender to have filed
such financing statements,  continuation statements or amendments filed prior to
the date hereof.

     (c) Each Loan Party will furnish to the Lender from time to time statements
and schedules  further  identifying  and  describing the Collateral of such Loan
Party and such other  reports in connection  with such  Collateral as the Lender
may reasonably request, all in reasonable detail.

     (d)  Notwithstanding  subsections  (a) and (b) of this Section 9.02, or any
failure on the part of any Loan  Party or the Lender to take any of the  actions
set forth in such subsections,  the Liens and security  interests granted herein
shall be deemed valid,  enforceable  and perfected by entry of the Interim Order
and the Final Order,  as  applicable.  No financing  statement,  notice of lien,
mortgage,  deed of trust or similar  instrument  in any  jurisdiction  or filing
office need be filed or any other  action taken in order to validate and perfect
the  Liens  and  security  interests  granted  by or  pursuant  to  this  Credit
Agreement, the Interim Order or the Final Order.

     9.03 Rights of Lender; Limitations on Lender's Obligations.

     (a) Subject to each Loan  Party's  rights and duties  under the  Bankruptcy
Code (including  Section 365 of the Bankruptcy Code), and anything herein to the
contrary  notwithstanding,  (i) each Loan Party shall  remain  liable  under the
contracts and agreements  included in such Loan Party's Collateral to the extent
set forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Credit Agreement had not been executed  (including paying
cure costs if such  contracts or agreements  are assumed),  (ii) the exercise by
the Lender of any of the rights  hereunder shall not release any Loan Party from
any of its duties or obligations under the contracts and agreements  included in
the  Collateral,  and  (iii) no  Secured  Party  shall  have any  obligation  or
liability  under the  contracts  and  agreements  included in the  Collateral by
reason of this  Credit  Agreement  or any  other  Loan  Document,  nor shall any
Secured  Party be obligated to perform any of the  obligations  or duties of any
Loan Party  thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

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<PAGE>

     (b) Except as otherwise  provided in this  subsection  (b), each Loan Party
will continue to collect,  at its own expense,  all amounts due or to become due
such Loan Party under the Receivables and Related Contracts.  In connection with
such  collections,  such Loan Party may take (and, at Lender's  direction,  will
take) such action as such Loan Party or the Lender may reasonably deem necessary
or advisable to enforce  collection of the  Receivables  and Related  Contracts;
provided,  however,  that,  subject to any requirement of notice provided in the
Orders or in Section 8.02, the Lender shall have the right at any time, upon the
occurrence  and during the  continuance  of an Event of  Default,  to notify the
obligors,  under any Receivables and Related Contracts of the assignment of such
Receivables  and Related  Contracts to the Lender and to direct such obligors to
make  payment of all amounts due or to become due to such Loan Party  thereunder
directly to the Lender and,  upon such  notification  and at the expense of such
Loan Party, to enforce collection of any such Receivables and Related Contracts,
to adjust,  settle or  compromise  the amount or  payment  thereof,  in the same
manner  and to the same  extent as such  Loan  Party  might  have  done,  and to
otherwise  exercise  all rights  with  respect to such  Receivables  and Related
Contracts,  including,  without limitation,  those set forth in Section 9-607 of
the Uniform  Commercial  Code. Upon and during the exercise by the Lender of any
of the remedies described in the proviso of the immediately  preceding sentence,
(i)  any  and  all  amounts  and  proceeds   (including,   without   limitation,
instruments)  received  by such Loan  Party in respect  of the  Receivables  and
Related  Contracts of such Loan Party shall be received in trust for the benefit
of the  hereunder,  shall be segregated  from other funds of such Loan Party and
shall be forthwith paid over to the Lender in the same form as so received (with
any necessary  endorsement) to be deposited in a collateral  account  maintained
with the and  applied as  provided  in Section  9.07(b) and (ii) such Loan Party
will not adjust, settle or compromise the amount or payment of any Receivable or
amount  due on any  Related  Contract,  release  wholly  or partly  any  obligor
thereof,  or allow any credit or discount thereon.  No Loan Party will permit or
consent  to  the  subordination  of  its  right  to  payment  under  any  of the
Receivables  and Related  Contracts to any other  indebtedness or obligations of
the obligor thereof.

     (c) The  Lender  shall  have the  right to make  test  verification  of the
Receivables in any manner and through any medium that it considers  advisable in
its  reasonable  discretion,  and each Loan  Party  agrees to  furnish  all such
assistance and  information  as the Lender may reasonably  require in connection
therewith.

     9.04  Covenants of the Loan Parties with Respect to  Collateral.  Each Loan
Party hereby  covenants  and agrees with the Lender that from and after the date
of  this  Credit  Agreement  and  until  the  Secured  Obligations  (other  than
contingent  indemnification  obligations which are not then due and payable) are
fully satisfied:

     (a) Delivery and Control of Pledged Equity.

          (i) All certificates or instruments representing or evidencing Pledged
     Equity  shall be delivered to the Lender (or, in the event that the Pledged
     Equity  constitutes  Secondary  Collateral  to a  Person  to whom  the Loan
     Parties  have  granted a first lien in the Pledged  Equity,  subject to the
     terms of this  Credit  Agreement)  and held by or on behalf  of the  Lender
     pursuant hereto at the request of the Lender, and shall be in suitable form
     for  transfer  by  delivery,  or  shall  be  accompanied  by duly  executed
     instruments  of transfer or assignment in blank,  all in form and substance
     reasonably satisfactory to the Lender.

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<PAGE>

          (ii) With  respect to any  Pledged  Equity in which any Loan Party has
     any  right,  title or  interest  and  that  constitutes  an  uncertificated
     security,  such Loan  Party will  cause the  issuer  thereof  either (i) to
     register  the Lender as the  registered  owner of such  security or (ii) to
     agree in an  authenticated  record with such Loan Party and the Lender that
     such issuer will comply with  instructions  with  respect to such  security
     originated by the Lender without further  consent of such Loan Party,  such
     authenticated record to be in form and substance reasonably satisfactory to
     the Lender. With respect to any Security Collateral in which any Loan Party
     has any  right,  title,  or  interest  and  that  is not an  uncertificated
     security,  upon the request of the Lender, such Loan Party will notify each
     such issuer of Pledged  Equity that such  Pledged  Equity is subject to the
     security interest granted hereunder.

          (iii)  Except as  provided in Section  9.07,  such Loan Party shall be
     entitled  to receive  all cash  dividends  paid in  respect of the  Pledged
     Equity with respect to the Pledged Equity.

          (iv) Except as provided  in Section  9.07 and subject to Article  VII,
     such Loan Party will be  entitled  to  exercise  all  voting,  consent  and
     corporate rights with respect to the Pledged Equity.

     (b) Maintenance of Records.  Such Loan Party will keep and maintain, at its
own cost and expense,  satisfactory and complete  records of the Collateral,  in
all material respects,  including,  without limitation, a record of all payments
received and all credits  granted with respect to the  Collateral  and all other
dealings  concerning the  Collateral in each case in accordance  with its normal
business practice.

     (c) Indemnification with Respect to Collateral.  In any suit, proceeding or
action  brought  by the  Lender  relating  to any  Collateral  for any sum owing
thereunder or to enforce any provision of any  Collateral in each case,  brought
by the Lender in  accordance  with this Credit  Agreement,  such Loan Party will
save, indemnify and keep the Lender harmless from and against all expense,  loss
or damage suffered by the Lender by reason of any defense, setoff, counterclaim,
recoupment  or  reduction  of liability  whatsoever  of the obligor  thereunder,
arising  out of a breach  by such Loan  Party of any  obligation  thereunder  or
arising out of any other agreement,  indebtedness or liability at any time owing
to, or in favor of, such obligor or its successors from such Loan Party, and all
such obligations of such Loan Party shall be and remain enforceable  against and
only against such Loan Party and shall not be enforceable against the Lender.

     (d)  Limitation  on Liens on  Collateral.  Such Loan Party will  defend the
Collateral  against and take such other action as is  necessary  to remove,  any
Lien on the Collateral except Liens permitted under Section 7.01 and will defend
the right,  title and  interest of the Lender in and to all of such Loan Party's
rights  under the  Collateral  against  the  claims and  demands of all  Persons
whomsoever  other than claims or demands  arising out of Liens  permitted  under
Section 7.01.

     (e) Limitations on  Modifications  of  Receivables.  Except with respect to
intercompany  Receivables  among the Loan  Parties,  such Loan  Party  will not,
without the Lender's prior written  consent,  grant any extension of the time of
payment  under or in respect  of any of the  Receivables  or Related  Contracts,

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<PAGE>

compromise,  compound or settle the same for less than the full amount  thereof,
release,  wholly or partly, any Person liable for the payment thereof,  or allow
any credit or discount  whatsoever thereon other than any of the foregoing which
are done in the ordinary course of business, consistent with past practices, and
trade discounts granted in the ordinary course of business of such Loan Party.

     (f)  Notices.  Such Loan  Party  will  advise  the  Lender,  the  Creditors
Committee  and  the  ATSB  promptly  after  it  obtains  knowledge  thereof,  in
reasonable  detail, (i) of any Lien asserted against any of the Collateral other
than Liens permitted under Section 7.01, and (ii) of the occurrence of any other
event  which  would  result in a material  adverse  change  with  respect to the
aggregate  value  of  the  Collateral  or  on  the  security  interests  created
hereunder.

     (g)  Maintenance  of Equipment.  Such Loan Party will keep and maintain the
Equipment in good operating  condition  sufficient for the  continuation  of the
business conducted by such Loan Party on a basis consistent with past practices,
ordinary wear and tear excepted.

     (h) As to Intellectual Property Collateral.

          (i) With respect to each item of its Intellectual Property Collateral,
     each Loan  Party  agrees to take,  at its  expense,  all  necessary  steps,
     including,  without limitation, in the US. Patent and Trademark Office, the
     U.S. Copyright Office and any other applicable U.S. Governmental Authority,
     to (A)  maintain  the  validity  and  enforceability  of such  Intellectual
     Property  Collateral and maintain such Intellectual  Property Collateral in
     full force and effect,  and (B) pursue the  registration and maintenance of
     each patent,  trademark,  or copyright registration or application,  now or
     hereafter  included in such Intellectual  Property  Collateral of such Loan
     Party,  including,  without  limitation,  the payment of required  fees and
     taxes,  the filing of responses to office actions issued by the U.S. Patent
     and Trademark  Office,  the U.S.  Copyright Office or other applicable U.S.
     Governmental  Authorities,  the  filing  of  applications  for  renewal  or
     extension,  the filing of  affidavits  under  Sections 8 and 15 of the U.S.
     Trademark     Act,    the    filing    of     divisional,     continuation,
     continuation-in-part,  reissue and renewal applications or extensions,  the
     payment  of  maintenance  fees  and  the   participation  in  interference,
     reexamination,  opposition, cancellation, infringement and misappropriation
     proceedings.  No Loan  Party  shall,  without  the  written  consent of the
     Lender,  discontinue use of or otherwise abandon any Intellectual  Property
     Collateral,  or  abandon  any  right  to file an  application  for  patent,
     trademark, or copyright, unless such Loan Party shall have determined prior
     to such  cessation  of use or  abandonment  that such use or the pursuit or
     maintenance of such Intellectual Property Collateral is no longer desirable
     in the  conduct of such Loan  Party's  business  and that the loss  thereof
     would not be reasonably  likely to have a Material Adverse Effect, in which
     case,  such Loan Party will give prompt notice of any such  abandonment  to
     the Lender.

          (ii) Each Loan Party agrees promptly to notify the Lender if such Loan
     Party becomes aware (A) that any material item of the Intellectual Property
     Collateral has become abandoned,  placed in the public domain,  invalid or,
     unenforceable,  or of any adverse  determination  or development  regarding
     such Loan Party's  ownership of any of the material  Intellectual  Property
     Collateral  or its right to register  the same or to keep and  maintain and
     enforce the same, or (B) of any adverse determination or the institution of

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     any  proceeding  (including,  without  limitation,  the  institution of any
     proceeding in the U.S. Patent and Trademark  Office or any court) regarding
     any material item of the Intellectual Property Collateral.

          (iii) In the event that any Loan Party  becomes aware that any item of
     the Intellectual  Property Collateral that is material to such Loan Party's
     business is being infringed or  misappropriated by a third party, such Loan
     Party shall promptly notify the Lender and shall take such actions,  at its
     expense,  as such Loan Party or the Lender deems reasonable and appropriate
     under the  circumstances to protect or enforce such  Intellectual  Property
     Collateral,  including,  without  limitation,  suing  for  infringement  or
     misappropriation  and  for  an  injunction  against  such  infringement  or
     misappropriation.

          (iv)  Each  Loan  Party  shall  use  proper  statutory  notice  (where
     necessary)  in  connection  with its use of each  item of its  Intellectual
     Property Collateral.  No Loan Party shall do or permit any act or knowingly
     omit to do any act whereby any of its Intellectual  Property Collateral may
     lapse or become  invalid or  unenforceable  or placed in the public  domain
     except to the extent that it is commercially reasonable to do so.

          (v) Each Loan Party  shall take all  reasonable  steps which it or the
     Lender deems  appropriate  under the  circumstances to preserve and protect
     each  item of its  Intellectual  Property  Collateral,  including,  without
     limitation,  maintaining  the  quality of any and all  products or services
     used or provided in connection with any of the Trademarks,  consistent with
     the quality of the products and services as of the date hereof,  and taking
     all  steps  necessary  to  ensure  that  all  licensed  users of any of the
     Trademarks use such consistent standards of quality.

          (vi) Each  Loan  Party  agrees  that  should  it  obtain an  ownership
     interest in any item of the type set forth in Section  9.01(f)  that is not
     on  the  date  hereof  a  part  of  the  Intellectual  Property  Collateral
     ("After-Acquired  Intellectual Property") (i) the provisions of this Credit
     Agreement   shall   automatically   apply   thereto,   and  (ii)  any  such
     After-Acquired  Intellectual  Property and, in the case of trademarks,  the
     goodwill  symbolized  thereby,  shall  automatically  become  part  of  the
     Intellectual  Property  Collateral  subject to the terms and  conditions of
     this Credit Agreement with respect thereto.  At the end of each month, each
     Loan Party shall give prompt written notice to the Lender  identifying  the
     After-Acquired  Intellectual  Property acquired during such month (if any),
     and such Loan Party  shall  execute  and  deliver  to the Lender  with such
     written  notice,  or  otherwise  authenticate,  an  IP  Security  Agreement
     Supplement covering such After-Acquired  Intellectual  Property which shall
     be recorded with the U.S. Patent and Trademark Office,  the U.S.  Copyright
     Office  and any other  applicable  Governmental  Authorities  necessary  to
     perfect the security interest hereunder in such After-Acquired Intellectual
     Property.

     9.05 Performance by Lender of the Loan Parties' Obligations.

     (a) Lender Appointed  Attorney-in-Fact.  Each Loan Party hereby irrevocably
appoints the Lender such Loan Party's  attorney-in-fact,  with full authority in
the place and  stead of such  Loan  Party and in the name of such Loan  Party or

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otherwise,  from time to time, in the Lender's  discretion  after the occurrence
and  during the  continuance  of an Event of  Default,  and after the Lender has
complied with the notice  provisions of the Interim Order or the Final Order, to
take any action and to execute any instrument that the Lender may deem necessary
or advisable to  accomplish  the purposes of this Credit  Agreement,  including,
without limitation:

          (i) to obtain and adjust  insurance  required to be paid to the Lender
     pursuant to this Credit Agreement,

          (ii) to ask  for,  demand,  collect,  sue  for,  recover,  compromise,
     receive and give  acquittance and receipts for moneys due and to become due
     under or in respect of any of the Collateral,

          (iii) to receive, indorse and collect any drafts or other instruments,
     documents and chattel paper,  in connection  with clause (i) or (ii) above,
     and

          (iv)  to  file  any  claims  or  take  any  action  or  institute  any
     proceedings  that  the  Lender  may deem  necessary  or  desirable  for the
     collection  of any of the  Collateral or otherwise to enforce the rights of
     the Lender with respect to any of the Collateral;  provided that the Lender
     shall not exercise any such rights under this Section  9.05(a)  except upon
     occurrence  and during  the  continuance  of an Event of Default  and after
     complying  with the notice  provisions  of the  Interim  Order or the Final
     Order.

     (b) Lender May  Perform.  If any Loan Party fails to perform any  agreement
contained  herein,  the Lender may, as the Lender deems necessary to protect the
security  interest  granted  hereunder in the Collateral or to protect the value
thereof, but without any obligation to do so after the occurrence and during the
continuance  of an Event of Default,  and after the Lender has complied with the
notice  provisions of the Interim Order or the Final Order,  itself perform,  or
cause performance of, such agreement, and the expenses of the Lender incurred in
connection therewith shall be payable by such Loan Party under Section 11.04.

     (c) Lender Not Liable.  The Lender shall in no way be  responsible  for the
payment of any costs  incurred in  connection  with  preserving  or disposing of
Collateral  pursuant to Section  506(c) of the  Bankruptcy  Code  (excluding the
Carve-Out)  and the Collateral may not be charged for the incurrence of any such
cost.

     9.06 The Lender's Duties.

     (a) The powers  conferred on the Lender hereunder are solely to protect the
Lender's  interest  in the  Collateral  and shall not impose any duty upon it to
exercise any such powers.  Other than the exercise of reasonable  care to assure
the safe custody of the  Collateral  while being held by the Lender  pursuant to
the terms of the Loan  Documents,  the Lender shall have no duty or liability to
preserve  rights  pertaining  thereto,  it being  understood and agreed that the
grantor of such Collateral  shall be responsible for  preservation of all rights
in the Collateral,  and the Lender shall be relieved of all  responsibility  for
the  Collateral  upon  surrendering  it or tendering the surrender of it to such
grantor.  The Lender shall be deemed to have  exercised  reasonable  care in the
custody and  preservation  of the Collateral in its possession if the Collateral
is accorded treatment  substantially  equal to that which the Lender accords its
own property, which shall be no less than the treatment employed by a reasonable
and prudent agent in the industry, it being understood that the Lender shall not
have  responsibility  for taking any necessary  steps to preserve rights against
any parties with respect to any of the  Collateral.  In the event of a public or
private  sale of  Collateral  pursuant to the terms of the Loan  Documents,  the
Lender shall have no  obligation  to clean-up,  repair or otherwise  prepare the
Collateral for sale.

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     (b) Anything contained herein to the contrary  notwithstanding,  the Lender
may from time to time, when the Lender deems it to be necessary,  appoint one or
more agent (each an "Agent") for the Lender hereunder with respect to all or any
part of the Collateral.  In the event that the Lender so appoints any Agent with
respect to any Collateral,  (i) the assignment and pledge of such Collateral and
the security  interest  granted in such  Collateral by each Loan Party hereunder
shall be deemed for  purposes of this  Security  Agreement  to have been made to
such  Subagent,  in addition to the  Lender,  for the benefit of the Lender,  as
security for the Secured  Obligations of such Loan Party,  (ii) such Agent shall
automatically  be vested,  in addition to the Lender,  with all rights,  powers,
privileges,  interests and remedies of the Lender hereunder with respect to such
Collateral,  and (iii) the term  "Lender"  when used  herein in  relation to any
rights, powers, privileges, interests and remedies of the Lender with respect to
such Collateral, shall include such Agent; provided, however, that no such Agent
shall be  authorized  to take any action  with  respect  to any such  Collateral
unless and except to the extent expressly authorized in writing by the Lender.

     9.07  Remedies.  If  any  Event  of  Default  shall  have  occurred  and be
continuing:

     (a) The Lender may,  subject only to compliance with the notice  provisions
of the Interim Order or the Final Order,  exercise in respect of the Collateral,
in  addition  to other  rights and  remedies  provided  for herein or  otherwise
available  to it, all the rights and  remedies of a secured  party upon  default
under the Uniform  Commercial  Code (whether or not the Uniform  Commercial Code
applies to the  affected  Collateral)  and also may: (i) require each Loan Party
to, and each Loan  Party  hereby  agrees  that it will at its  expense  and upon
request of the  Lender  forthwith,  assemble  all or part of the  Collateral  as
directed by the Lender and make it  available  to the Lender at a place and time
to be designated by the Lender that is reasonably  convenient to such Loan Party
and the Lender;  (ii) without notice except as specified below or in the Orders,
sell the  Collateral  or any part  thereof  in one or more  parcels at public or
private sale, at any of the Lender's  offices or elsewhere,  for cash, on credit
or  for  future  delivery,  and  upon  such  other  terms  as  are  commercially
reasonable; (iii) occupy any premises owned or leased by any of the Loan Parties
where  the  Collateral  or any  part  thereof  is  assembled  or  located  for a
reasonable  period in order to effectuate  its rights and remedies  hereunder or
under law, without  obligation to such Loan Party in respect of such occupation;
and (iv)  exercise  any and all rights and  remedies of any of the Loan  Parties
under or in  connection  with the  Collateral,  or  otherwise  in respect of the
Collateral,  including,  without limitation, (A) any and all rights of such Loan
Party to demand or otherwise require payment of any amount under, or performance
of any  provision  of, the  Receivables,  the  Related  Contracts  and the other
Collateral,  (B) withdraw, or cause or direct the withdrawal,  of all funds with
respect to the Account Collateral and (C) exercise all other rights and remedies
with respect to the Receivables, the Related Contracts and the other Collateral,
including,  without limitation,  those set forth in Section 9-607 of the Uniform
Commercial Code. Each Loan Party agrees that, to the extent notice of sale shall
be required by law, at least 10 days'  notice to such Loan Party of the time and
place of any public sale or the time after which any private  sale is to be made
shall constitute reasonable  notification.  The Lender shall not be obligated to
make any sale of Collateral  regardless of notice of sale having been given. The
Lender may adjourn any public or private sale from time to time by  announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.

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<PAGE>

     (b) Subject to the  Carve-Out,  any cash held by or on behalf of the Lender
and all cash  proceeds  received by or on behalf of the Lender in respect of any
sale  of,  collection  from,  or other  realization  upon all or any part of the
Collateral shall be applied against the Secured  Obligations,  in the manner set
forth in Section  8.03.  Any surplus of such cash or cash  proceeds  held by the
Lender and remaining after payment in full of the Secured  Obligations  shall be
paid over to the applicable Loan Party or to whomever may be lawfully entitle to
receive such surplus.

     (c) Subject to the Carve-Out, all payments received by any Loan Party under
or in connection with the Collateral  shall be received in trust for the benefit
of the Lender, shall be segregated from other funds of such Loan Party and shall
be forthwith  paid over to the Lender in the same form as so received  (with any
necessary endorsement).

     (d) The Lender may,  without notice to any Loan Party except as required by
law,  the Orders or Section  8.02 and at any time or from time to time,  charge,
set off and otherwise apply all or any part of the Secured  Obligations  against
any funds held with respect to the Account  Collateral  or in any other  deposit
account.

     (e)  In  the  event  of  any  sale  or  other  disposition  of  any  of the
Intellectual  Property  Collateral of any Loan Party, the goodwill symbolized by
any  Trademarks  subject  to such sale or other  disposition  shall be  included
therein,  and such Loan Party shall  supply to the Lender or its  designee  such
Loan Party's  know-how and expertise,  and documents and things  relating to any
Intellectual Property Collateral subject to such sale or other disposition,  and
such Loan Party's  customer  lists and other records and  documents  relating to
such  Intellectual  Property  Collateral and to the  manufacture,  distribution,
advertising and sale of products and services of such Loan Party.

     (f) The Lender is authorized,  in connection  with any sale of the Security
Collateral  pursuant to this Section 10.07, to deliver or otherwise  disclose to
any  prospective  purchaser of the Security  Collateral  any  information in its
possession relating to such Security Collateral.

     9.08 Modifications.

     The Liens,  lien priority,  administrative  priorities and other rights and
remedies  granted to the Lender pursuant to this Credit  Agreement,  the Interim
Order and/or the Final Order (specifically,  including,  but not limited to, the
existence,  perfection and priority of the Liens provided herein and therein and
the administrative  priority provided herein and therein) shall not be modified,
altered or impaired in any manner by any other  financing or extension of credit
or incurrence of  Indebtedness  by any of the Loan Parties  (pursuant to Section
364 of the Bankruptcy  Code or otherwise),  or by any dismissal or conversion of
any  of  the  Cases,  or by  any  other  act  or  omission  whatsoever.  Without
limitation,  notwithstanding any such order, financing,  extension,  incurrence,
dismissal, conversion, act or omission:

          (i)  except  for  the  Carve-Out  having  priority  over  the  Secured
     Obligations,  no costs or expenses of administration which have been or may

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<PAGE>

    be  incurred  in any of the Cases or any  conversion  of the same or in any
     other proceedings  related thereto,  and no priority claims, are or will be
     prior to or on a parity with any claim of the Lender or the Lender  against
     the Loan Parties in respect of any Obligation;

          (ii) the liens and security interests granted herein and in the Orders
     shall  constitute  valid and perfected  first  priority  liens and security
     interest  in the Primary  Collateral  and second  best  priority  liens and
     security  interest in the  Secondary  Collateral  (subject  only to (A) the
     Carve-Out,  (B) valid and perfected liens in existence on the Petition Date
     and  junior to such  valid and  perfected  Liens and (C) only to the extent
     such  post-petition  perfection  is expressly  permitted by the  Bankruptcy
     Code, valid, nonavoidable and enforceable Liens existing as of the Petition
     Date, but perfected  after the Petition  Date, in accordance  with sections
     364(c) (2) and (3) of the  Bankruptcy  Code,  and shall be prior (or second
     best with respect to liens in the Secondary  Collateral) to all other Liens
     and security interests,  now existing or hereafter arising, in favor of any
     other creditor or any other Person whatsoever; and

          (iii)  the  liens  and  security  interests  granted  hereunder  shall
     continue valid and perfected  security  interest without the necessity that
     financing  statements  or  Mortgages  be filed or that any other  action be
     taken under applicable nonbankruptcy law.

     9.09 Release; Termination.

     (a) Upon any sale,  lease,  transfer  or other  disposition  of any item of
Collateral of any Loan Party in accordance with the terms of the Loan Documents,
such  Collateral  shall be released from the  assignment  and security  interest
granted  hereby,  and in  connection  therewith,  the Lender will,  at such Loan
Party's  expense,  execute and deliver to such Loan Party such documents as such
Loan Party  shall  reasonably  request to  evidence  the release of such item of
Collateral  (other than Inventory sold in the ordinary  course of business) from
the assignment and security interest granted hereby; provided, however, that (i)
at the time of such request and such release no Default  shall have occurred and
be  continuing,  (ii) the  proceeds of any such sale,  lease,  transfer or other
disposition  required  to be applied,  or any  payment to be made in  connection
therewith, in accordance with Section 2.02, shall, to the extent so required, be
paid or made to, or in accordance with the  instructions of, the Lender when and
as required  under  Section 2.02,  and (iii) in the case of  Collateral  sold or
disposed  of, the release of a Lien created  hereby will not be effective  until
the  receipt by the  Lender of the Net Cash  Proceeds  arising  from the sale or
disposition of such Collateral.

     (b) Upon  the  latest  of (i) the  payment  in full in cash of the  Secured
Obligations  (other than contingent  indemnification  obligations  which are not
then due and  payable),  (ii) the  Maturity  Date and (iii) the  termination  or
expiration of the Chicago  Guaranty,  the pledge and security  interest  granted
hereby  shall  terminate  and all rights to the  Collateral  shall revert to the
applicable  Loan  Party.  Upon any such  termination,  the Lender  will,  at the
applicable  Loan  Party's  expense,  execute and deliver to such Loan Party such
documents  as  such  Loan  Party  shall  reasonably  request  to  evidence  such
termination.

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<PAGE>

                                    ARTICLE X

                                    GUARANTY

     10.01 Guaranty. Each Guarantor, severally,  unconditionally and irrevocably
guarantees  (the  undertaking by each  Guarantor  under this Article X being the
"Guaranty") the punctual payment when due,  whether at scheduled  maturity or on
any date of a required  prepayment or by acceleration,  demand or otherwise,  of
all of the  Obligations  of each of the  other  Loan  Parties  now or  hereafter
existing  under  or  in  respect  of  the  Loan  Documents  (including,  without
limitation, any extensions, modifications, substitutions, amendments or renewals
of any  or  all of the  foregoing  Obligations),  whether  direct  or  indirect,
absolute or contingent,  and whether for  principal,  interest,  premium,  fees,
indemnification  payments,   contract  causes  of  action,  costs,  expenses  or
otherwise (such Obligations being the "Guaranteed  Obligations"),  and agrees to
pay any and all expenses  (including,  without  limitation,  reasonable fees and
expenses of counsel) incurred by the Lender solely in enforcing any rights under
this Guaranty or any other Loan Document.

     10.02  Guaranty  Absolute.  Each Guarantor  guarantees  that the Guaranteed
Obligations  will be paid  strictly  in  accordance  with the  terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the Lender with
respect  thereto.  The  Obligations  of each  Guarantor  under this Guaranty are
independent of the Guaranteed  Obligations or any other  Obligations of any Loan
Party under the Loan Documents,  and a separate action or actions may be brought
and prosecuted against such Guarantor to enforce this Guaranty,  irrespective of
whether any action is brought  against any other Loan Party or whether any other
Loan  Party is  joined in any such  action or  actions.  The  liability  of each
Guarantor under this Guaranty shall be absolute,  unconditional  and irrevocable
irrespective  of, and such Guarantor hereby  irrevocably  waives any defenses it
may now or hereafter have in-any way relating to, any and all of the following:

     (a) any lack of  validity  or  enforceability  of any Loan  Document or any
other agreement or instrument relating thereto;

     (b) any change in the time,  manner or place of payment of, or in any other
term of, all or any of the Guaranteed  Obligations  or any other  Obligations of
any Loan Party under the Loan Documents,  or any other amendment or waiver of or
any consent to departure from any Loan Document,  including, without limitation,
any  increase in the  Guaranteed  Obligations  resulting  from the  extension of
additional credit to any Loan Party or any of its Subsidiaries or otherwise;

     (c) any taking,  exchange,  release or nonperfection of any Collateral,  or
any taking,  release or amendment or waiver of or consent to departure from this
Guaranty or any other guaranty, for all or any of the Guaranteed Obligations;

     (d) any manner of application of Collateral, or proceeds thereof, to all or
any of the Guaranteed Obligations, or any manner of sale or other disposition of
any  Collateral  for  all  or any of the  Guaranteed  Obligations  or any  other
Obligations  of any Loan Party under the Loan  Documents,  or any other property
and assets of any other Loan Party or any of its Subsidiaries;

     (e) any change,  restructuring or termination of the corporate structure or
existence of any other Loan Party or any of its Subsidiaries;

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<PAGE>

     (f) any failure of the Lender to disclose to any Loan Party any information
relating  to the  business,  condition  (financial  or  otherwise),  operations,
performance,  properties  or  prospects of any other Loan Party now or hereafter
known to the Lender,  as the case may be (such Guarantor waiving any duty on the
part of the Lender to disclose such information);

     (g) the failure of any other Person to execute this Credit Agreement or any
other guarantee or agreement of the release or reduction of the liability of any
of the other Loan  Parties or any other  guarantor or surety with respect to the
Guaranteed  Obligations;  or (h)  any  other  circumstance  (including,  without
limitation,  any statute of  limitations  or any existence of or reliance on any
representation  by  the  Lender)  that  might  otherwise  constitute  a  defense
available  to, or a discharge  of, such  Guarantor,  any other Loan Party or any
other guarantor or surety.

     This Guaranty shall continue to be effective or be reinstated,  as the case
may be,  if at any time any  payment  of any of the  Guaranteed  Obligations  is
rescinded  or must  otherwise  be returned by the Lender or by any other  Person
upon the  insolvency,  bankruptcy or  reorganization  of any other Loan Party or
otherwise,  all as though  such  payment  had not been made.  10.03  Waivers and
Acknowledgments.

     (a)  Each  Guarantor   hereby   unconditionally   and  irrevocably   waives
promptness,   diligence,   notice  of   acceptance,   presentment,   demand  for
performance,  notice  of  nonperformance,   default,  acceleration,  protest  or
dishonor and any other notice with respect to any of the Guaranteed  Obligations
and this Guaranty, and any requirement that the Lender protect,  secure, perfect
or insure any Lien or any  property  or assets  subject  thereto or exhaust  any
right or take any action against any other Loan Party or any other Person or any
Collateral.

     (b) Each Guarantor hereby  unconditionally  waives any right to revoke this
Guaranty,  and  acknowledges  that this  Guaranty  is  continuing  in nature and
applies to all Guaranteed obligations, whether existing now or in the future.

     (c) Each Guarantor hereby  unconditionally  and irrevocably  waives (i) any
defense  arising by reason of any claim or defense  based  upon an  election  of
remedies  by the  Lender  which in any  manner  impairs,  reduces,  releases  or
otherwise  adversely  affects  the  subrogation,   reimbursement,   exoneration,
contribution  or  indemnification  rights of such  Guarantor  or other rights to
proceed against any of the other Loan Parties,  any other guarantor or any other
Person or any  Collateral,  and (ii) any defense based on any right of setoff or
counterclaim  against  or in  respect  of  the  Obligations  of  such  Guarantor
hereunder.

     (d) Each Guarantor acknowledges that the Lender may, without notice (except
to the extent  required by the notice  provisions  of the  Interim  Order or the
Final  Order) to or  demand  upon  such  Guarantor  and  without  affecting  the
liability of such Guarantor under this Guaranty, foreclose under any Mortgage by
nonjudicial  sale, and such Guarantor  hereby waives any defense to the recovery
by the Lender against such Guarantor of any  deficiency  after such  nonjudicial
sale and any defense or benefits that may be afforded by applicable Laws.

     (e) Each Guarantor hereby  unconditionally  and irrevocably waives any duty
on the part of Lender to disclose to such  Guarantor  any matter,  fact or thing
relating  to the  business,  condition  (financial  or  otherwise),  operations,
performance,  properties  or  prospects  of any other  Loan  Party or any of its
Subsidiaries now or hereafter known by Lender.

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     (f) Each Guarantor acknowledges that it will receive substantial direct and
indirect  benefits  from the  financing  arrangements  contemplated  by the Loan
Documents and that the waivers set forth in Section 10.02 and this Section 10.03
are knowingly made in contemplation of such benefits.

     10.04 Subrogation.  Each Guarantor hereby  unconditionally  and irrevocably
agrees not to exercise any rights that it may now have or may hereafter  acquire
against any other Loan Party or any other insider  guarantor that arise from the
existence,  payment,  performance or enforcement of its  Obligations  under this
Guaranty or under any other Loan Document,  including,  without limitation,  any
right   of   subrogation,    reimbursement,    exoneration,    contribution   or
indemnification  and any  right to  participate  in any  claim or  remedy of the
Lender  against  such  other Loan Party or any other  insider  guarantor  or any
Collateral, whether or not such claim, remedy or right arises in equity or under
contract,  statute or common law, including,  without  limitation,  the right to
take or  receive  from such other  Loan  Party or any other  insider  guarantor,
directly or indirectly,  in cash or other property or by set-off or in any other
manner,  payment or security on account of such  claim,  remedy or right,  until
such time as all of the  Guaranteed  Obligations  and all other amounts  payable
under  this  Guaranty  shall have been paid in full in cash  terminated  or been
cancelled and the  Commitments  shall have expired or terminated.  If any amount
shall  be  paid to any  Guarantor  in  violation  of the  immediately  preceding
sentence  at any time prior to the latest of (a) the  payment in full in cash of
all of the  Guaranteed  Obligations  and all other  amounts  payable  under this
Guaranty,  and (b) the Maturity Date,  such amount shall be received and held in
trust for the benefit of the Lender (in the same form as so received)  and shall
forthwith  be  paid  to  the  Lender  (without  any  necessary   endorsement  or
assignment)  to be credited and applied to the  Guaranteed  Obligations  and all
other amounts  payable under this  Guaranty,  whether  matured or unmatured,  in
accordance with the terms of the Loan Documents, or to be held as Collateral for
any  Guaranteed  Obligations  or  other  amounts  payable  under  this  Guaranty
thereafter arising. If (i) any Guarantor shall pay to the Lender all or any part
of the Guaranteed  Obligations,  (ii) all of the Guaranteed  Obligations and all
other amounts  payable under this Guaranty shall have been paid in full in cash,
and (iii) the  Maturity  Date shall have  occurred,  the  Lender  will,  at such
Guarantor's  request  and  expense,   execute  and  deliver  to  such  Guarantor
appropriate documents,  without recourse and without representation or warranty,
necessary  to evidence  the  transfer by  subrogation  to such  Guarantor  of an
interest in the Guaranteed  Obligations  resulting from the payment made by such
Guarantor pursuant to this Guaranty.

     10.05  Subordination.  Each  Guarantor  agrees that any and all present and
future  debts and  obligations  of the  Borrower or any other  Guarantor to such
Guarantor  hereby  are  subordinated  to the claims of the Lender and hereby are
assigned  by such  Guarantor  to the  Lender as  security  for the  payment  and
performance of such Guarantor's Guaranteed Obligations.

     10.06  Continuing  Guarantee;  Assignments.  This  Guaranty is a continuing
guaranty  and each  Guarantor  agrees that the  Guaranteed  Obligations  of such
Guarantor  under this Guaranty shall be primary  obligations of such  Guarantor,
shall not be subject  to any  counterclaim,  set-off,  abatement,  deferment  or
defense  based upon any claim that such  Guarantor  may have against the Lender,

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<PAGE>

the  Borrower,  any other  Guarantor or any other Person and shall (a) remain in
full force and effect until the latest of (i) the payment in full in cash of all
of the Guaranteed Obligations and all other amounts payable under this Guaranty,
and  (ii)  the  Maturity  Date,  (b) be  binding  upon  each  Guarantor  and its
successors and assigns and (c) inure to the benefit of, and be  enforceable  by,
the Lender and its  successors,  transferees and assigns.  Without  limiting the
generality of clause (c) of the immediately  preceding sentence,  the Lender may
assign or otherwise  transfer  all or any portion of its rights and  obligations
under this Credit  Agreement  to any other  Person,  and such other Person shall
thereupon  become vested with all the benefits in respect thereof granted to the
Lender under this Article X.

     10.07 No Reliance.  Each Guarantor has,  independently and without reliance
upon the Lender,  and based on such  documents and  information as it has deemed
appropriate,  made its own  credit  analysis  and  decision  to enter  into this
Guaranty  and each other Loan  Document to which it is or is to be a party,  and
such Guarantor has established  adequate means of obtaining from each other Loan
Party on a  continuing  basis  information  pertaining  to,  and is now and on a
continuing  basis will be completely  familiar  with,  the  business,  condition
(financial or otherwise), operations,  performance,  properties and prospects of
such other Loan Party.

                                   ARTICLE XI

                                  MISCELLANEOUS

     11.01  Amendments,  Etc. No  amendment  or waiver of any  provision of this
Credit Agreement or any other Loan Document,  and no consent to any departure by
the Borrower or any other Loan Party  therefrom,  shall be  effective  unless in
writing  signed by the  Lender  and the  Borrower  (and with the  consent of the
Creditors  Committee and the ATSB) or the applicable  Loan Party,  and each such
waiver or consent shall be effective  only in the specific  instance and for the
specific  purpose for which given.  No  amendment or waiver of any  provision of
this Credit Agreement or any other Loan Document  affecting the ATSB or the ATSB
Collateral or the Indiana Collateral and the ranking of the security interest of
the ATSB Lender Parties and the Authority  shall be effective  unless in writing
signed by the Lender,  the Borrower,  the applicable Loan Party, the ATSB Lender
Parties (with respect to any amendments affecting the ATSB Lender Parties or the
ATSB  Collateral),  and the Authority (with respect to any amendments  affecting
the Authority or the Indiana Collateral)and each such waiver or consent shall be
effective only in the specific  instance and for the specific  purpose for which
given.

     11.02 Notices and Other Communications; Facsimile Copies.

     (a)  General.  Unless  otherwise  expressly  provided  in  Section  2.02 or
otherwise,  all notices and other  communications  provided for hereunder or any
other Loan Document shall be in writing  (including by facsimile  transmission).
All such written  notices shall be mailed,  faxed or delivered to the applicable
address,  facsimile number or (subject to subsection (c) below)  electronic mail
address, and all notices and other communications  expressly permitted hereunder
to be given by  telephone  shall be made to the  applicable  address,  facsimile
number, electronic mail address or telephone number specified for such Person on
the signature page hereto or to such other address, facsimile number, electronic
mail  address  or  telephone  number as shall be  designated  by such party in a
notice to the other parties.

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     (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may
be  transmitted  and/or  signed  by  facsimile.  The  effectiveness  of any such
documents and signatures  shall,  subject to applicable Law, have the same force
and  effect  as  manually  signed  originals  and shall be  binding  on all Loan
Parties, and the Lender. The Lender may also require that any such documents and
signatures  be  confirmed  by  a  manually-signed  original  thereof;  provided,
however,  that the  failure to  request or deliver  the same shall not limit the
effectiveness of any facsimile document or signature.

     (c)  Limited Use of  Electronic  Mail.  Electronic  mail and  Internet  and
intranet websites may be used only to distribute routine communications, such as
financial  statements and other  information as provided in Section 6.02, and to
distribute Loan Documents for execution by the parties  thereto,  and may not be
used for any other purpose as effective notice under this Credit Agreement.

     (d)  Reliance by Lender.  The Lender shall be entitled to rely and act upon
any notices  purportedly  given by or on behalf of the Borrower even if (i) such
notices were not made in a manner specified herein,  were incomplete or were not
preceded or followed by any other form of notice specified  herein,  or (ii) the
terms  thereof,  as understood by the  recipient,  varied from any  confirmation
thereof.  The  Borrower  shall  indemnify  the Lender  from all  losses,  costs,
expenses  and  liabilities  resulting  from the  reliance by such Person on each
notice purportedly given by or on behalf of the Borrower.

     (e) Copies of Notices.  Copies of all notices  delivered  under this Credit
Agreement  shall be  provided  to:  (i) the ATSB in  accordance  with the notice
provisions  of the DIP  Financing  Order (with a copy to Curtis  Mallet-Prevost,
Colt & Mosle LLP, 101 Park Avenue, New York, New York 10178, Fax: (212) 696-6065
Attention:  Steven, J. Reisman, Esq., (ii) the Creditors Committee in accordance
with the notice provisions of the DIP Financing Orders,  (iii) the United States
Department of Justice,  Commercial  Litigation Branch, Civil Division,  P.O. Box
875, Ben Franklin Station,  Washington, DC 20044, Attention:  Attention:  Andrea
Horowitz Handel, Esq.

     11.03 No Waiver; Cumulative Remedies. No failure by the Lender to exercise,
and no delay by any such  Person in  exercising,  any  right,  remedy,  power or
privilege  hereunder  or any  other  Loan  Document  shall  operate  as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege  hereunder  preclude  any other or  further  exercise  thereof  or the
exercise of any other right, remedy, power or privilege.  The rights,  remedies,
powers  and  privileges  herein  provided,  and  provided  under each other Loan
Document, are cumulative and not exclusive of any rights,  remedies,  powers and
privileges provided by law.

     11.04 Attorney Costs, Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse  the  Lender  for all  reasonable  out-of-pocket  costs  and  expenses
incurred  in  connection  with the  development,  preparation,  negotiation  and
execution  of  this  Credit  Agreement  and the  other  Loan  Documents  and any
amendment,  waiver,  consent or other  modification of the provisions hereof and
thereof  (whether  or not the  transaction  contemplated  hereby or thereby  are
consummated),  and  the  consummation  and  administration  of the  transactions
contemplated  hereby and  thereby,  including  all  Attorney  Costs  (including,
without  limitation,  specialty  and local  counsel),  in  addition to any other
expenses  described  in  paragraph  3 of the Bid  Proposal,  shall not to exceed
$1,000,000 in the  aggregate and shall be paid upon the funding  pursuant to the
terms of the  Investment  Agreement,  and (b) to pay or reimburse the Lender for
all costs and expenses incurred in connection with the enforcement of any rights

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or remedies under this Credit  Agreement or the other Loan Documents  (including
all such costs and expenses incurred during any legal proceeding,  including any
proceeding  under any Debtor  Relief Law),  including  all Attorney  Costs.  The
foregoing costs and expenses shall include all search, filing, recording,  title
insurance and appraisal  charges and fees and taxes related  thereto,  and other
out-of-pocket expenses incurred by the Lender and the cost of independent public
accountants  and other outside experts  retained by the Lender.  All amounts due
under this Section  11.04(b)  shall be payable  within ten  Business  Days after
demand therefor. The agreements in this Section shall survive the termination of
the Commitments and repayment of all other Obligations.  If any Loan Party fails
to pay when due any costs,  expenses or other amounts payable by it hereunder or
under any Loan  Document,  including,  without  limitation,  Attorney  Costs and
indemnities, such amount may be paid on behalf of such Loan Party by the Lender,
in its sole discretion.

     11.05 Indemnification by the Loan Parties.  Whether or not the transactions
contemplated hereby are consummated,  each Loan Party shall defend (with counsel
satisfactory  to Lender),  protect,  indemnify  and hold harmless  Lender,  each
affiliate or subsidiary of Lender,  and each of their  respective  shareholders,
members,  officers,  directors,  managers,  employees,  attorneys,  advisors and
agents   (collectively,   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  (including,
without limitation,  the disbursements and the Attorney Costs in connection with
any  investigative,  administrative or judicial  proceeding,  whether or not the
Indemnified Party shall be designated a party thereto), which may be imposed on,
incurred  by, or  asserted  against,  any  Indemnified  Party  (whether  direct,
indirect or consequential and whether based on any federal,  state or local laws
or regulations,  including, without limitation, securities laws and regulations,
environmental  laws and commercial laws and regulations,  under common law or in
equity,  or based on contract or otherwise) in any manner relating to or arising
out of this Credit Agreement, the Transaction,  or any act, event or transaction
related or attendant  thereto,  the making or issuance and the management of the
Loan or the use or  intended  use of the  proceeds  of the  Loan;  except to the
extent that direct damages (as opposed to special)  indirect,  consequential  or
punitive damages (including,  without limitation, any loss of products, business
or anticipated savings) are determined in a final  non-appealable  judgment by a
court of competent  jurisdiction to have resulted from the willful misconduct or
gross negligence of such  Indemnified  Party. To the extent that the undertaking
to indemnify set forth in the preceding sentence may be unenforceable because it
is  violative  of  any  law  or  public  policy,  Borrower  shall  satisfy  such
undertaking to the maximum extent  permitted by applicable  Laws. Any liability,
obligation,  loss,  damage,  penalty,  cost or expense covered by this indemnity
shall be paid to each Indemnified Party on demand,  and, failing prompt payment,
shall,  together  with interest  thereon at the highest rate then  applicable to
Loans hereunder from the date incurred by each  Indemnified  Party until paid by
Loan  Parties,  be added to the  Liabilities  of Borrower  and be secured by the
Collateral.  The provisions of this Section 11.05 shall survive the satisfaction
and payment of the  Obligations  and the  termination  of this Credit  Agreement
conclusive agreements.

     11.06 Payments Set Aside. To the extent that any payment by or on behalf of
the Borrower is made to the Lender, or the Lender exercises its right of setoff,
and  such  payment  or the  proceeds  of such  setoff  or any  part  thereof  is
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
or required  (including pursuant to any settlement entered into by the Lender in
its  discretion)  to be repaid to a trustee,  receiver  or any other  party,  in

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connection with any proceeding under any Debtor Relief Law or otherwise, then to
the extent of such recovery,  the obligation or part thereof originally intended
to be  satisfied  shall be revived and  continued in full force and effect as if
such payment had not been made or such setoff had not occurred.

     11.07 Successors and Assigns.

     (a) The provisions of this Credit Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby,  except that the Borrower may not assign or otherwise transfer
any of its rights or obligations  hereunder without the prior written consent of
the Lender.  Nothing in this Credit  Agreement,  expressed or implied,  shall be
construed  to confer  upon any Person  (other  than the  parties  hereto,  their
respective  successors and assigns  permitted  hereby,  to the extent  expressly
contemplated  hereby,  the Indemnitees) any legal or equitable right,  remedy or
claim under or by reason of this Credit Agreement.

     11.08 Confidentiality. The Lender agrees to maintain the confidentiality of
the Information (as defined below), except that Information may be disclosed (a)
to its and its Affiliates' directors,  officers, employees and agents, including
accountants,  legal  counsel and other  advisors (it being  understood  that the
Persons to whom such  disclosure  is made will be informed  of the  confidential
nature  of  such   Information   and   instructed   to  keep  such   Information
confidential);  (b) to the extent requested by any regulatory authority;  (c) to
the extent  required by  applicable  Laws or  regulations  or by any subpoena or
similar legal process;  (d) to any other party to this Credit Agreement;  (e) to
the extent  reasonably  required in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to this Credit Agreement or
the  enforcement  of rights  hereunder;  (f) subject to an agreement  containing
provisions  substantially the same as those of this Section, to (i) any assignee
of, or any prospective  assignee of, any of its rights or obligations under this
Credit  Agreement  or (ii) any direct or indirect  contractual  counterparty  or
prospective  counterparty  (or such  contractual  counterparty's  or prospective
counterparty's  professional  advisor)  to  any  credit  derivative  transaction
relating  to  obligations  of the Loan  Parties;  (g) with  the  consent  of the
Borrower;  (h) to the extent such  Information  (i) becomes  publicly  available
other than as a result of a breach of this Section or (ii) becomes  available to
the lender on a nonconfidential basis from a source other than the Borrower. For
the purposes of this Section,  "Information" means all information received from
any Loan Party  relating to any Loan Party or its business,  other than any such
information that is available to the Lender on a nonconfidential  basis prior to
disclosure by any Loan Party; provided that, in the case of information received
from a Loan Party after the date hereof,  such information is clearly identified
in writing at the time of  delivery  as  confidential.  Any Person  required  to
maintain the confidentiality of Information as provided in this Section shall be
considered  to have  complied  with its  obligation  to do so if such Person has
exercised  the same  degree  of care to  maintain  the  confidentiality  of such
Information as such Person would accord to its own confidential information.

     11.09 Setoff. In addition to any rights and remedies of the Lender provided
by  law,  subject  to any  notice  or  other  requirement  contained  in the DIP
Financing  Orders and after complying with the notice  provisions of the Interim
Order or the Final Order,  upon the occurrence and during the continuance of any

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Event of Default  and the making of the  request or the  granting of the consent
specified by Section  8.02 to authorize  the Lender to declare the Loans due and
payable  pursuant to the  provisions of Section 8.02, the Lender and each of its
Affiliates is authorized at any time and from time to time,  without (i) further
order of or  application  to the  Bankruptcy  Court and (ii) prior notice to the
Borrower or any other Loan Party,  any such notice  being waived by the Borrower
(on its own  behalf  and on  behalf of each Loan  Party) to the  fullest  extent
permitted by law, to set off and apply any and all deposits (general or special,
time  or  demand,  provisional  or  final)  at  any  time  held  by,  and  other
indebtedness  at any time  owing by,  such  Lender  to or for the  credit or the
account of the respective Loan Parties against any and all Obligations  owing to
the  Lender  hereunder  or under  any  other  Loan  Document,  now or  hereafter
existing, irrespective of whether or not the Lender shall have made demand under
this Credit  Agreement or any other Loan Document and although such  Obligations
may be contingent or unmatured or denominated in a currency  different from that
of the applicable deposit or indebtedness.  The Lender agrees promptly to notify
the Borrower after any such setoff and application made by the Lender; provided,
however,  that the failure to give such notice  shall not affect the validity of
such setoff and  application.  The rights of the Lender and its Affiliates under
this Section are in addition to other rights and  remedies  (including,  without
limitation, other rights of setoff) that the Lender and its Affiliates may have.

     11.10 Interest Rate  Limitation.  Notwithstanding  anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan  Documents  shall not  exceed the  maximum  rate of  non-usurious  interest
permitted by applicable  Law (the "Maximum  Rate").  If the Lender shall receive
interest in an amount that exceeds the Maximum Rate,  the excess  interest shall
be  applied  to the  principal  of the  Loans  or,  if it  exceeds  such  unpaid
principal,  refunded  to the  Borrower.  In  determining  whether  the  interest
contracted  for,  charged,  or received by the Lender  exceeds the Maximum Rate,
such Person may, to the extent  permitted by applicable  Laws, (a)  characterize
any payment  that is not  principal as an expense,  fee, or premium  rather than
interest,  (b) exclude  voluntary  prepayments and the effects thereof,  and (c)
amortize,  prorate,  allocate,  and spread in equal or  unequal  parts the total
amount  of  interest   throughout  the  contemplated  term  of  the  Obligations
hereunder.

     11.11 Counterparts.  This Credit Agreement and each other Loan Document may
be  executed  in one or more  counterparts,  each of which  shall be  deemed  an
original,  but  all  of  which  together  shall  constitute  one  and  the  same
instrument.  Delivery by  telecopier of an executed  counterpart  of a signature
page to this Credit Agreement and each other Loan Document shall be effective as
delivery of an original  executed  counterpart of this Credit Agreement and such
other Loan Document.

     11.12 Integration.  This Credit Agreement,  together with the DIP Financing
Orders and the other Loan  Documents,  comprises  the  complete  and  integrated
agreement of the parties on the subject matter hereof and thereof and supersedes
all prior  agreements,  written or oral, on such subject matter. In the event of
any conflict  between the  provisions of this Credit  Agreement and those of any
other Loan  Document,  the  provisions of this Credit  Agreement  shall control;
provided that the inclusion of  supplemental  rights or remedies in favor of the
Lender in any other  Loan  Document  shall  not be deemed a  conflict  with this
Credit Agreement.  In the event of any conflict between this Credit Agreement or
any other Loan Document and the DIP Financing  Orders,  the DIP Financing Orders
shall control.  Each Loan Document was drafted with the joint  participation  of
the respective  parties  thereto and shall be construed  neither  against nor in
favor of any party, but rather in accordance with the fair meaning thereof.

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     11.13 Survival of Representations  and Warranties.  All representations and
warranties  made  hereunder  and in any other Loan  Document  or other  document
delivered  pursuant  hereto or thereto or in  connection  herewith or  therewith
shall   survive  the   execution   and  delivery   hereof  and   thereof.   Such
representations  and warranties  have been or will be relied upon by the Lender,
regardless  of any  investigation  made  by the  Lender  or on  its  behalf  and
notwithstanding  that the Lender may have had notice or knowledge of any Default
at the time of any Credit Extension, and shall continue in full force and effect
as long as any Loan or any other  Obligation  hereunder  shall remain  unpaid or
unsatisfied or the Chicago Guaranty shall remain outstanding.

     11.14 Severability.  If any provision of this Credit Agreement or the other
Loan  Documents  is  held  to be  illegal,  invalid  or  unenforceable,  (a) the
legality, validity and enforceability of the remaining provisions of this Credit
Agreement and the other Loan Documents shall not be affected or impaired thereby
and (b) the parties  shall  endeavor in good faith  negotiations  to replace the
illegal,  invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible  to that of the  illegal,  invalid or
unenforceable  provisions.  The  invalidity  of  a  provision  in  a  particular
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

     11.15 Governing Law.

     (a) THIS CREDIT  AGREEMENT AND EACH OTHER LOAN  DOCUMENT  SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE  WITH,  THE LAW OF THE STATE OF NEW YORK AND, TO
THE EXTENT APPLICABLE, THE BANKRUPTCY CODE.

     (b)  EACH  PARTY  TO  THIS  CREDIT   AGREEMENT   HEREBY   IRREVOCABLY   AND
UNCONDITIONALLY  SUBMITS  FOR ITSELF  AND ITS  PROPERTY  IN ANY LEGAL  ACTION OR
PROCEEDING RELATING TO THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
OR FOR RECOGNITION AND  ENFORCEMENT OF ANY JUDGMENT IN RESPECT  THEREOF,  TO THE
JURISDICTION OF THE BANKRUPTCY  COURT.  THE BORROWER AND THE LENDER  IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON  CONVENIENS,  WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN
DOCUMENT OR OTHER DOCUMENT RELATED  THERETO.  THE BORROWER AND THE LENDER WAIVES
PERSONAL SERVICE OF ANY SUMMONS,  COMPLAINT OR OTHER PROCESS,  WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY APPLICABLE LAW.

     11.16 Waiver of Right to Trial by Jury. EACH PARTY TO THIS CREDIT AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,  ACTION
OR CAUSE OF ACTION  ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR  INCIDENTAL  TO THE DEALINGS OF THE PARTIES  HERETO OR ANY OF THEM

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WITH RESPECT TO ANY LOAN DOCUMENT,  OR THE TRANSACTIONS RELATED THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING,  AND WHETHER FOUNDED IN CONTRACT
OR TORT OR  OTHERWISE;  AND EACH PARTY HEREBY  AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY,  AND  THAT ANY  PARTY  TO THIS  CREDIT  AGREEMENT  MAY FILE AN  ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN  EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     11.17 Binding Effect.  This Credit Agreement shall become effective when it
shall have been executed by the Borrower and the Lender and thereafter  shall be
binding upon and inure to the benefit of the Borrower,  and the Lender and their
respective  successors and assigns,  except that the Borrower shall not have the
right to assign its rights  hereunder or any interest  herein  without the prior
written consent of the Lender.

[signatures on following pages]


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         IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed as of the date first above written.

                            LENDER:

                            SOUTHWEST AIRLINES CO., a Texas corporation

                            By:               /s/ Gary C. Kelly
                            Name:             Gary C. Kelly
                            Title:            Chief Executive Officer
                            Address:          2702 Love Field Drive
                                              Dallas, Texas  75235
                            Facsimile:        (214) 792-5151
                            Attention:        Deborah Ackerman, Esq.

                            BORROWER:

                            ATA AIRLINES, INC., an Indiana corporation

                            By:               /s/ Gilbert F. Viets
                            Name:             Gilbert F. Viets
                            Title:            Executive Vice President and
                                              Chief Restructuring Officer
                            Address:          7337 W. Washington Street
                                              Indianapolis, Indiana  46231-1328
                            Facsimile:        (317) 282-7091
                            Tax ID:           35-1305077
                            Jurisdiction of Incorporation: Indiana


                            GUARANTORS:

                            ATA HOLDINGS CORP., an Indiana corporation

                            By:               /s/ Gilbert F. Viets
                            Name:             Gilbert F. Viets
                            Title:            Executive Vice President and
                                              Chief Restructuring Officer
                            Address:          7337 W. Washington Street
                                              Indianapolis, Indiana  46231-1328
                            Facsimile:        (317) 282-7091
                            Tax ID:           35-1617970
                            Jurisdiction of Incorporation: Indiana

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<PAGE>

                          AMBASSADAIR TRAVEL CLUB, INC., an Indiana corporation

                          By:               /s/ Gilbert F. Viets
                          Name:             Gilbert F. Viets
                          Title:            Executive Vice President and
                                           Chief Restructuring Officer
                           Address:          7337 W. Washington Street
                                              Indianapolis, Indiana  46231-1328
                           Facsimile:        (317) 282-7091
                           Tax ID:           35-1543699
                           Jurisdiction of Incorporation: Indiana

                           ATA LEISURE CORP., an Indiana corporation

                           By:               /s/ Gilbert F. Viets
                           Name:             Gilbert F. Viets
                           Title:            Executive Vice President and
                                             Chief Restructuring Officer
                           Address:          7337 W. Washington Street
                                             Indianapolis, Indiana  46231-1328
                           Facsimile:        (317) 282-7091
                           Tax ID:           35-1707490
                           Jurisdiction of Incorporation: Indiana


                           AMBER TRAVEL, INC., an Indiana corporation

                           By:               /s/ Gilbert F. Viets
                           Name:             Gilbert F. Viets
                           Title:            Executive Vice President and
                                             Chief Restructuring Officer
                           Address:          7337 W. Washington Street
                                             Indianapolis, Indiana  46231-1328
                           Facsimile:        (317) 282-7091
                           Tax ID:           35-1764784
                           Jurisdiction of Incorporation: Indiana

                                       85
<PAGE>

                            AMERICAN TRANS AIR EXECUJET, INC.,
                            an Indiana corporation

                           By:               /s/ Gilbert F. Viets
                           Name:             Gilbert F. Viets
                           Title:            Executive Vice President and
                                             Chief Restructuring Officer
                           Address:          7337 W. Washington Street
                                             Indianapolis, Indiana  46231-1328
                           Facsimile:        (317) 282-7091
                           Tax ID:            35-1768031
                           Jurisdiction of Incorporation: Indiana


                            ATA CARGO, INC., a California corporation

                           By:               /s/ Gilbert F. Viets
                           Name:             Gilbert F. Viets
                           Title:            Executive Vice President and
                                             Chief Restructuring Officer
                           Address:          7337 W. Washington Street
                                             Indianapolis, Indiana  46231-1328
                           Facsimile:        (317) 282-7091
                           Tax ID:            35-1829498
                           Jurisdiction of Incorporation: California


                           CHICAGO EXPRESS AIRLINES, INC., a Georgia corporation

                           By:               /s/ Gilbert F. Viets
                           Name:             Gilbert F. Viets
                           Title:            Executive Vice President and
                                             Chief Restructuring Officer
                           Address:          7337 W. Washington Street
                                             Indianapolis, Indiana  46231-1328
                           Facsimile:        (317) 282-7091
                           Tax ID:            58-2036179
                           Jurisdiction of Incorporation: Georgia


                                       86
<PAGE>

                                    EXHIBIT A

                                FORM OF TERM NOTE




$40,000,000.00
                                                              December 22, 2004


     FOR  VALUE  RECEIVED,  ATA  AIRLINES  INC.,  an  Indiana  corporation  (the
"Borrower")  promises  to pay to the order of  SOUTHWEST  AIRLINES  CO., a Texas
corporation  ("Payee") (i) the  principal  amount of Forty Million AND NO/100THS
DOLLARS  ($40,000,000.00)  plus (ii) the full  amount of the  accrued and unpaid
Closing Fee.

     Borrower  also  promises  to pay  interest on the unpaid  principal  amount
hereof,  from the date hereof until paid in full,  at the rates and at the times
that shall be  determined  in  accordance  with the  provisions  of that certain
Secured Debtor-in  Possession Credit and Security Agreement dated as of the date
hereof,  as the  same  may  be  amended,  supplemented,  restated,  amended  and
restated,  or otherwise modified from time to time (the "Credit Agreement"),  by
and among Borrower,  Borrower's  Parent and its Subsidiaries as Guarantors,  and
Payee, as lender.  Capitalized  terms used but not defined herein shall have the
meanings assigned to such terms in the Credit Agreement.

     Except as provided  below,  Borrower shall make  principal  payment on this
Term Note,  together with all accrued and unpaid interest and fees in the manner
set forth in Section 2.03(a) of the Credit Agreement.

     This Term Note is issued  pursuant to and  entitled to the  benefits of the
Credit  Agreement,  to  which  reference  is  hereby  made  for a more  complete
statement of the terms and conditions under which the Term Loan evidenced hereby
were made and are to be repaid.

     All  payments  of  principal  and  interest  of this Term Note and any fees
hereunder  shall be made in lawful money of the United States of America in same
day funds at the office of the Payee at 2702 Love Field Drive,  Dallas, Texas or
at such  other  place as shall be  designated  in  writing  for such  purpose in
accordance with the terms of the Credit Agreement.

     Whenever  any  payment on this Term Note shall be stated to be due on a day
that is not a Business Day,  such payment  shall be made on the next  succeeding
Business Day and such extension of time shall be included in the  computation of
the payment of interest on this Term Note.

     This Term Note is subject to  mandatory  prepayment  as provided in Section
2.02(b) of the Credit  Agreement and to prepayment at the option of the Borrower
as provided in Section 2.02(a) of the Credit Agreement.

                                       1
<PAGE>


    THIS  TERM  NOTE AND THE  RIGHTS  AND  OBLIGATIONS  OF  BORROWER  AND PAYEE
HEREUNDER  SHALL  BE  GOVERNED  BY,  AND  SHALL BE  CONSTRUED  AND  ENFORCED  IN
ACCORDANCE  WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING  WITHOUT
LIMITATION  SECTIONS  5-1401 AND 5-1402 OF THE  GENERAL  OBLIGATIONS  LAW OF THE
STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS-OF-LAWS PRINCIPLES.

     Upon the occurrence and during the continuation of an Event of Default, the
unpaid  balance of the  principal  amount of this Term Note,  together  with all
accrued and unpaid interest  thereon,  may become, or may be declared to be, due
and payable in the manner, upon the conditions,  and with the effect provided in
the Credit Agreement.

     The terms of this Term Note are  subject  to  amendment  only in the manner
provided in the Credit Agreement.

     This Term Note is  guaranteed  pursuant  to the  provisions  of the  Credit
Agreement and is also secured by the other Collateral  Documents,  as more fully
set forth in the Credit Agreement.

     No reference  herein to the Credit  Agreement and no provision of this Term
Note or the Credit  Agreement shall alter or impair the obligations of Borrower,
which are absolute and  unconditional,  to pay the  principal of and interest on
this Term Note at the place, at the respective times, and in the currency herein
prescribed.

     Borrower  promises  to pay all costs  and  expenses,  including  reasonable
attorneys'  fees,  all as  provided  in Section  11.04 of the Credit  Agreement,
incurred in the collection and  enforcement of this Term Note.  Borrower and any
endorsers of this Term Note hereby consent to renewals and extensions of time at
or after the  maturity  hereof,  without  notice,  and hereby  waive  diligence,
presentment,  protest,  demand and notice of every kind and,  to the full extent
permitted by law, the right to plead any statute of  limitations as a defense to
any demand hereunder.

     Borrower  hereby  waives  presentment  for payment,  protest and demand and
notice of  protest,  demand,  dishonor  and  nonpayment  of this Term Note,  and
expressly agrees that this Term Note, or any payment hereunder,  may be extended
from time to time before, at or after maturity, without in any way affecting the
liability of the Borrower hereunder or any guarantor hereof.

     Time for the performance of the Borrower's obligations under this Term Note
is of the essence.



                  [Remainder of Page Intentionally Left Blank]







                                       2
<PAGE>

     IN WITNESS WHEREOF,  Borrower has caused this Term Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.

                                      BORROWER:

                                      ATA AIRLINES INC., an Indiana corporation
                                      By:
                                      Name:
                                      Title:






                                       3
<PAGE>


                                LIST OF SCHEDULES

     Schedule 5.03 - Required Approvals - No exceptions

     Schedule  5.08(b) - Liens on Collateral [to be provided by the Loan Parties
in  accordance  with  Section  6.27(a)(iv)  - Schedule  will  specify only Liens
permitted  under  Section 7.01 - any other Liens in this  Schedule  5.08(b) will
have to be approved by the Lender in its sole discretion]

     Schedule  5.08(c)  - Slots  [to be  provided  in  accordance  with  Section
6.27(a)(iv)]

     Schedule  5.08(d)  -  Gate  Leaseholds  [to be  provided  Loan  Parties  in
accordance with Section 6.27(a)(iv)]

     Schedule 5.11 - Taxes - No exceptions

     Schedule  5.13(a) - Subsidiaries [to be provided Loan Parties in accordance
with Section  6.27(a)(iv)  - Schedule will list all  Guarantors,  other than the
Parent]

     Schedule  5.13(b) - Investments  [to be provided Loan Parties in accordance
with Section 6.27(a)(iv)]

     Schedule 5.17 - Intellectual Property - No exceptions

     Schedule  5.21 - Pledge  of  Equity;  Pledge of Debt [to be  provided  Loan
Parties in accordance with Section 6.27(a)(iv)]

                                 LIST OF ANNEXES

     Annex A - Exit Facility Term Sheet (appended to the execution copy)

     Annex B- Investment Agreement Term Sheet (appended to the execution copy)