ex10-2.htm


    
      
         


      

      
         


        
          

        

      

      
         


        Exhibit
10.2

      

    


    
      FOIA
CONFIDENTIAL TREATMENT REQUESTED

    

    Execution
Version

    


    


    


    


    


    CREDIT
AGREEMENT

    


    Dated as
of March 31, 2010

    


    among

    


    ALASKA
AIRLINES, INC.,

    


    as
Borrower,

    


    


    CITIBANK,
N.A.,

    


    as
Administrative Agent,

    


    BANK
OF AMERICA, N.A.,

    


    as
Syndication Agent,

    


    and

    


    The Other
Lenders Party Hereto

    


    CITIGROUP
GLOBAL MARKETS INC.,

    


    BANC
OF AMERICA SECURITIES LLC,

    


    as
Joint-Lead Arrangers and Joint-Book Managers

    


     


    
      
        
          


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    TABLE
OF CONTENTS

     

    Section                                                                                                                                                    Page

    

      
        	
                ARTICLE
      I.

              	
                DEFINITIONS
      AND ACCOUNTING TERMS

              	
                1

              
	
                1.01

              	
                Defined
      Terms

              	
                1

              
	
                1.02

              	
                Other
      Interpretive Provisions

              	
                21

              
	
                1.03

              	
                Accounting
      Terms.

              	
                22

              
	
                1.04

              	
                Rounding

              	
                22

              
	
                1.05

              	
                Times
      of Day

              	
                23

              
	
                ARTICLE
      II.

              	
                THE
      COMMITMENTS AND CREDIT EXTENSIONS

              	
                23

              
	
                2.01

              	
                Loans

              	
                23

              
	
                2.02

              	
                Borrowings,
      Conversions and Continuations of Loans.

              	
                23

              
	
                2.03

              	
                Prepayments.

              	
                24

              
	
                2.04

              	
                Termination
      or Reduction of Commitments

              	
                25

              
	
                2.05

              	
                Repayment
      of Loans

              	
                26

              
	
                2.06

              	
                Interest.

              	
                26

              
	
                2.07

              	
                Fees.

              	
                26

              
	
                2.08

              	
                Computation
      of Interest and Fees

              	
                27

              
	
                2.09

              	
                Evidence
      of Debt

              	
                27

              
	
                2.10

              	
                Payments
      Generally; Agent’s Clawback.

              	
                28

              
	
                2.11

              	
                Sharing
      of Payments

              	
                29

              
	
                2.12

              	
                Security

              	
                30

              
	
                2.13

              	
                Defaulting
      Lenders

              	
                30

              
	
                ARTICLE
      III.

              	
                TAXES,
      YIELD PROTECTION AND ILLEGALITY

              	
                31

              
	
                3.01

              	
                Taxes.

              	
                31

              
	
                3.02

              	
                Illegality

              	
                33

              
	
                3.03

              	
                Inability
      to Determine Rates

              	
                34

              
	
                3.04

              	
                Increased
      Costs.

              	
                34

              
	
                3.05

              	
                Compensation
      for Losses

              	
                35

              
	
                3.06

              	
                Mitigation
      of Obligations; Replacement of Lenders

              	
                36

              
	
                3.07

              	
                Survival

              	
                37

              
	
                ARTICLE
      IV.

              	
                CONDITIONS
      PRECEDENT TO CREDIT EXTENSIONS

              	
                37

              
	
                4.01

              	
                Conditions
      to Effectiveness and Initial Borrowing:

              	
                37

              
	
                4.02

              	
                Conditions
      to all Borrowings

              	
                40

              
	
                ARTICLE
      V.

              	
                REPRESENTATIONS
      AND WARRANTIES

              	
                41

              
	
                5.01

              	
                Existence,
      Qualification and Power; Compliance with Laws

              	
                41

              
	
                5.02

              	
                Authorization;
      No Contravention

              	
                41

              
	
                5.03

              	
                Governmental
      Authorization; Other Consents

              	
                41

              


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                5.04

              	
                Binding
      Effect

              	
                42

              
	
                5.05

              	
                Financial
      Statements; No Material Adverse Effect.

              	
                42

              
	
                5.06

              	
                Litigation
      and Judgments

              	
                42

              
	
                5.07

              	
                No
      Default

              	
                42

              
	
                5.08

              	
                Ownership
      of Property; Liens

              	
                43

              
	
                5.09

              	
                Environmental
      Compliance

              	
                43

              
	
                5.10

              	
                Insurance

              	
                43

              
	
                5.11

              	
                Taxes

              	
                43

              
	
                5.12

              	
                ERISA
      Compliance.

              	
                43

              
	
                5.13

              	
                Subsidiaries

              	
                44

              
	
                5.14

              	
                Margin
      Regulations; Investment Company Act.

              	
                44

              
	
                5.15

              	
                Disclosure

              	
                44

              
	
                5.16

              	
                Compliance
      with Laws

              	
                45

              
	
                5.17

              	
                Intellectual
      Property; Licenses, Etc

              	
                45

              
	
                5.18

              	
                Solvency

              	
                45

              
	
                5.19

              	
                Collateral
      and Security Documents.

              	
                45

              
	
                5.20

              	
                Burdensome
      Agreements

              	
                46

              
	
                5.21

              	
                Compliance
      with OFAC Rules and Regulations; Patriot Act.

              	
                46

              
	
                ARTICLE
      VI.

              	
                AFFIRMATIVE
      COVENANTS

              	
                47

              
	
                6.01

              	
                Financial
      Statements

              	
                47

              
	
                6.02

              	
                Certificates;
      Other Information

              	
                48

              
	
                6.03

              	
                Notices

              	
                49

              
	
                6.04

              	
                Payment
      of Obligations

              	
                50

              
	
                6.05

              	
                Preservation
      of Existence, Etc

              	
                50

              
	
                6.06

              	
                Maintenance
      of Properties

              	
                50

              
	
                6.07

              	
                Maintenance
      of Insurance.

              	
                50

              
	
                6.08

              	
                Compliance
      with Laws

              	
                51

              
	
                6.09

              	
                Books
      and Records

              	
                51

              
	
                6.10

              	
                Inspection
      Rights

              	
                52

              
	
                6.11

              	
                Use
      of Proceeds

              	
                52

              
	
                6.12

              	
                Financial
      Covenants; Maintenance of Unrestricted Cash

              	
                52

              
	
                6.13

              	
                Collateral
      Records

              	
                52

              
	
                6.14

              	
                Security
      Interests

              	
                52

              
	
                6.15

              	
                Collateral.

              	
                52

              
	
                6.16

              	
                State
      of Incorporation

              	
                57

              
	
                6.17

              	
                Further
      Assurances

              	
                57

              
	
                6.18

              	
                Patriot
      Act

              	
                57

              
	
                ARTICLE
      VII.

              	
                NEGATIVE
      COVENANTS

              	
                57

              
	
                7.01

              	
                Liens

              	
                58

              
	
                7.02

              	
                Fundamental
      Changes

              	
                59

              
	
                7.03

              	
                Dispositions

              	
                60

              
	
                7.04

              	
                [Intentionally
      Omitted]

              	
                60

              
	
                7.05

              	
                Restricted
      Junior Payments

              	
                60

              


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                7.06

              	
                ERISA

              	
                61

              
	
                7.07

              	
                Air
      Carrier

              	
                62

              
	
                7.08

              	
                Change
      in Nature of Business

              	
                62

              
	
                7.09

              	
                Transactions
      with Affiliates

              	
                62

              
	
                7.10

              	
                Burdensome
      Agreements

              	
                62

              
	
                7.11

              	
                Loans

              	
                62

              
	
                7.12

              	
                Use
      of Proceeds

              	
                62

              
	
                7.13

              	
                Invalidity
      Event

              	
                62

              
	
                7.14

              	
                Indebtedness
      under the ABL Facility

              	
                62

              
	
                7.15

              	
                Prepayments
      and Amendments

              	
                63

              
	
                ARTICLE
      VIII.

              	
                EVENTS
      OF DEFAULT AND REMEDIES

              	
                63

              
	
                8.01

              	
                Events
      of Default

              	
                63

              
	
                8.02

              	
                Remedies
      Upon Event of Default

              	
                65

              
	
                8.03

              	
                Application
      of Funds

              	
                66

              
	
                ARTICLE
      IX.

              	
                ADMINISTRATIVE
      AGENT

              	
                66

              
	
                9.01

              	
                Appointment
      and Authorization of Administrative Agent

              	
                66

              
	
                9.02

              	
                Rights
      as a Lender

              	
                67

              
	
                9.03

              	
                Exculpatory
      Provisions

              	
                67

              
	
                9.04

              	
                Reliance
      by Administrative Agent

              	
                68

              
	
                9.05

              	
                Delegation
      of Duties

              	
                68

              
	
                9.06

              	
                Resignation
      of Agent

              	
                68

              
	
                9.07

              	
                Non-Reliance
      on Agent and Other Lenders

              	
                69

              
	
                9.08

              	
                No
      Other Duties, Etc

              	
                69

              
	
                9.09

              	
                Administrative
      Agent May File Proofs of Claim

              	
                69

              
	
                9.10

              	
                Collateral
      Matters.

              	
                70

              
	
                9.11

              	
                Other
      Agents; Arrangers and Managers

              	
                71

              
	
                9.12

              	
                No
      Advisory or Fiduciary Responsibility

              	
                71

              
	
                ARTICLE
      X.

              	
                MISCELLANEOUS

              	
                72

              
	
                10.01

              	
                Amendments,
      Etc

              	
                72

              
	
                10.02

              	
                Notices;
      Effectiveness; Electronic Communications.

              	
                73

              
	
                10.03

              	
                No
      Waiver; Cumulative Remedies; Enforcement

              	
                75

              
	
                10.04

              	
                Expenses;
      Indemnity; Damage Waiver.

              	
                76

              
	
                10.05

              	
                Payments
      Set Aside

              	
                78

              
	
                10.06

              	
                Successors
      and Assigns.

              	
                78

              
	
                10.07

              	
                Treatment
      of Certain Information; Confidentiality

              	
                82

              
	
                10.08

              	
                Right
      of Setoff

              	
                82

              
	
                10.09

              	
                Interest
      Rate Limitation

              	
                83

              
	
                10.10

              	
                Counterparts;
      Integration; Effectiveness

              	
                83

              
	
                10.11

              	
                Survival
      of Representations and Warranties

              	
                83

              
	
                10.12

              	
                Severability

              	
                83

              
	
                10.13

              	
                Replacement
      of Lenders.

              	
                83

              
	
                10.14

              	
                Governing
      Law; Jurisdiction; Etc.

              	
                84

              
	
                10.15

              	
                Waiver
      of Right to Trial by Jury

              	
                85

              


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                10.16

              	
                USA
      Patriot Act Notice

              	
                85

              
	
                10.17

              	
                Time
      of the Essence

              	
                85

              
	
                10.18

              	
                Oral
      Agreements Not Enforceable

              	
                86

              


      

       

    

    SCHEDULES

    


    1.01           Approved
Appraisers

    2.01           Commitments
and Pro Rata Shares

    5.09           Environmental
Matters

    10.02           Administrative
Agent’s Office, Certain Addresses for Notices

    10.06           Processing
and Recordation Fees

    


    


    EXHIBITS

    


    A           Form
of Loan Notice

    B           Form
of Note

    C           Form
of Compliance Certificate

    D           Form
of Assignment and Assumption

    E           Form
of Security Agreement

    F           Form
of Cash Pledge Agreement

    



    
      
        
           

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    CREDIT
AGREEMENT

     

     

    This
CREDIT AGREEMENT (this “Agreement”) is
entered into as of March 31, 2010 among ALASKA AIRLINES, INC., an Alaska
corporation (“Borrower”), each
lender from time to time party hereto (collectively, “Lenders” and
individually, a “Lender”), and
CITIBANK, N.A., as Administrative Agent.

     

     

    RECITALS

     

    A.           Borrower,
certain lenders identified therein (the “Existing Lenders”),
and Bank of America, N.A., as administrative agent, are parties to that certain
Credit Agreement dated as of March 25, 2005 (as amended, the “Existing Credit
Agreement”), providing for the Existing Lenders to make revolving loans
to Borrower.

     

    B.           Borrower
has requested that Lenders provide a revolving credit facility to replace the
revolving credit facility established pursuant to the Existing Credit Agreement,
and Lenders are willing to do so on the terms and conditions set forth
herein.

     

    C.           In
consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

     

    ARTICLE
I.

     

    DEFINITIONS
AND ACCOUNTING TERMS

     

    1.01Defined Terms

     

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

     

    “ABL Facility” that
certain $100,000,000 loan facility provided by a syndicate of lenders, agented
by Wells Fargo Capital Finance, LLC.

     

    “ABL Facility
Documents” means the loan and security documents related to the ABL
Facility or executed in connection therewith.

     

    “Added Aircraft” has
the meaning set forth in Section
6.15(d) hereof.

     

    “Added Engine” has the
meaning set forth in Section
6.15(c) hereof.

     

    “Administrative Agent” or
“Agent” means Citibank in its capacity as administrative agent under any
of the Loan Documents, or any successor administrative agent.

     

    “Administrative Agent’s
Office” means Agent’s address and, as appropriate, account as set forth
on Schedule 10.02,
or such other address or account as Agent may from time to time notify Borrower
and Lenders.

     

    “Administrative
Questionnaire” means an Administrative Questionnaire in a form supplied
by Agent.

     


    
      
         


      

      
        1

        
          

        

      

      
         


      

    


    “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.

     

    “Aircraft” means
(a) each of the Airframes together with the Engines, whether or not such
Engines are installed on the Airframes or any other airframes; (b) except
for Excluded Equipment, all appliances, equipment, instruments, and accessories
(including radio and radar) from time to time belonging to, installed in,
or appurtenant to such Airframes and Engines; and (c) any and all logs,
manuals and other records relating thereto.

     

    “Aircraft Collateral”
means all of the Aircraft in which the Security Agreement creates, or purports
to create, a security interest.

     

    “Airframe” means
(a) any aircraft as specified by United States Registration Number and
manufacturer’s serial number in the Security Agreement; (b) any replacement
airframe which may from time to time be substituted for such airframe; and
(c) in either case, any and all parts which are from time to time
incorporated or installed in or attached to such airframe or, so long as such
parts are subject to the Security Agreement covering such airframe, after
removal from such airframe.

     

    “Agent Fee Letter” has
the meaning specified in Section
2.07(b).

     

    “Aggregate
Commitments” means the Commitments of all Lenders.

     

    “Agreed Value Amount”
means, with respect to any Event of Loss of any Pledged Aircraft, the amount
(which shall be no less than the Current Market Value of such Pledged Aircraft),
reflected on the then current insurance certificate as the amount that the
insurers have agreed with Borrower to pay to the Administrative Agent for the
benefit of the Lenders in the event that the Aircraft suffering an Event of Loss
suffered such Event of Loss.

     

    “Agreement” means this
Credit Agreement.

     

    “Applicable
Percentage” means with respect to any Lender at any time, (a) while
Commitments are outstanding, the percentage (carried out to the ninth decimal
place) of the Aggregate Commitments represented by such Lender’s Commitment
at such time and (b) at any other time, the percentage (carried out to the ninth
decimal place) of the aggregate amount of all outstanding Loans represented by
the Loans held by such Lender at such time.  The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or
in the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable.

     

    “Applicable Rate”
means the following percentages per annum: (i) with respect to the Commitment
Fee, 0.75%; (ii) with respect to the Eurodollar Rate, 4.00%; and (iii) with
respect to the Base Rate, 3.00%.

     

    “Approved Appraiser”
means any independent appraisal firm set forth on Schedule 1.01
hereto.

     


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    “Approved Fund” means
any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a
Lender or (c) an entity or an Affiliate of an entity that administers or manages
a Lender.

     

    “Arrangement Fee
Letter” has the meaning specified in Section
2.07(c).

     

    “Assignee Group” means
two or more Eligible Assignees that are Affiliates of one another or two or more
Approved Funds managed by the same investment advisor.

     

    “Assignment and
Assumption” means an assignment and assumption entered into by a Lender
and an Eligible Assignee (with the consent of any party whose consent is
required by Section
10.06(b)), and accepted by Agent, in substantially the form of Exhibit D or any
other form approved by Agent.

     

    “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,
and (b) 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 Borrower and
its Subsidiaries for the fiscal year ended December 31, 2009, and the
related consolidated statements of income or operations, shareholders’ equity
and cash flows for such fiscal year of Borrower and its Subsidiaries, including
the notes thereto.

     

    “Availability Period”
means the period from and including the Closing Date to the earliest of
(a) the Maturity Date, (b) the date of termination of the Aggregate
Commitments pursuant to Section 2.04,
and (c) the date of termination of the commitment of each Lender to make
Loans pursuant to Section 8.02.

     

    “Bankruptcy Code”
means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et
seq.).

     

    “Base Rate” means for
any day a fluctuating rate per annum equal to the highest of (a) the
Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for
such day as publicly announced from time to time by Citibank as its “prime rate”
and (c) the sum of Eurodollar Rate for each such day based on an Interest Period
of one month (but for the avoidance of doubt, not less than two percent (2.00%)
per annum) plus 1%.  The “prime rate” is a rate set by Citibank based
upon various factors including Citibank’s costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate.  Any change in such rate announced by Citibank shall take effect
at the opening of business on the day specified in the public announcement of
such change, and any change in the Base Rate due to a change in Federal Funds
Rate or Eurodollar Rate shall be effective on the effective date of such change
in the Federal Funds Rate or Eurodollar Rate for an Interest Period of one
month.

     

    “Base Rate Loan” means
a Loan that bears interest based on the Base Rate.

     


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    “Borrower” has the
meaning specified in the introductory paragraph hereto.

     

    “Borrower Materials”
has the meaning specified in Section 6.02.

     

    “Borrowing” means a
borrowing consisting of simultaneous Loans of the same Type and, in the case of
Eurodollar Rate Loans, having the same Interest Period made by each of the
Lenders pursuant to Section
2.01.

     

    “Borrowing Base”
means, as applicable, as of any date of determination, an amount equal to the
sum of: (a) the lesser of (i) thirty percent (30%) of the Borrowing Base at such
time and (ii) sixty six and two thirds percent (662⁄3%) of the Current Market
Value of the Boeing 737-400 type Aircraft Collateral at such time; (b) eighty
percent (80%) of the Current Market Value of the Boeing 737-700, 737-800 and
737-900 type Aircraft Collateral at such time; (c) one hundred percent (100%) of
the Citibank Cash Collateral at such time; and (d) a Designated Percentage of
Other Cash Collateral at such time.

     

    “Business Day” means
(i) any day other than a Saturday, Sunday or other day on which commercial banks
are authorized to close under the Laws of, or are in fact closed in, the state
of Washington or New York; and (ii) if such day relates to any Eurodollar Rate
Loan, any such day on which dealings in Dollar deposits are conducted by and
between banks in the London interbank eurodollar market.

     

    “Capital Lease” means,
with respect to any Person, a lease (or leases) for real or personal
property required to be capitalized under GAAP or which is treated as an
operating lease under regulations applicable to such Person but which otherwise
would be required to be capitalized under GAAP.

     

    “Cash Collateral”
means the Citibank Cash Collateral and the Other Cash Collateral.

     

    “Cash Pledge
Agreement” means a Cash Pledge Agreement made by the Borrower in favor of
the Administrative Agent in substantially the form of Exhibit
F.

     

    “Change in Law” means
the occurrence, after the date of this Agreement, of any of the
following:  (a) the adoption or taking effect of any law, rule,
regulation or treaty, (b) any change in any law, rule, regulation or treaty
or in the administration, interpretation or application thereof by any
Governmental Authority or (c) the making or issuance of any request,
guideline or directive (whether or not having the force of law) by any
Governmental Authority.

     

    “Change of Control”
means, with respect to Borrower, an event or series of events by
which:

     

    (a)           Parent
shall cease to own, directly or indirectly, 100% of the equity securities of
Borrower entitled to vote for members of the board of directors or equivalent
governing body of Borrower on a fully-diluted basis (and taking into account all
such securities that such person or group has the right to acquire pursuant to
any option right);

     

    (b)           during
any period of 18 consecutive months, a majority of the members of the board of
directors or other equivalent governing body of Borrower cease to be composed
of

     


    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    individuals
(i) who were members of that board or equivalent governing body on the
first day of such period, (ii) whose election or nomination to that board
or equivalent governing body was approved by individuals referred to in clause
(i) above constituting at the time of such election or nomination at least
a majority of that board or equivalent governing body or (iii) whose
election or nomination to that board or other equivalent governing body was
approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority of
that board or equivalent governing body (excluding, in the case of both clause
(ii) and clause (iii), any individual whose initial nomination for, or
assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors); or

     

    (c)           other
than Parent, any individual(s) or entity(s) acting in concert shall
have acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation thereof, will result in its or their
acquisition of the power to exercise, directly or indirectly, a controlling
influence over the management or policies of Borrower, or control over the
equity securities of Borrower entitled to vote for members of the board of
directors or equivalent governing body of Borrower on a fully-diluted basis (and
taking into account all such securities that such individual(s) or
entity(s) or group has the right to acquire pursuant to any option
right) representing 49% or more of the combined voting power of such
securities.

     

    “Citibank” means
Citibank, N.A. and its successors.

     

    “Citibank Cash
Collateral” means cash deposits with Citibank, in its capacity as
Administrative Agent, that are pledged as Cash Collateral pursuant to and in
accordance with Section 6.15(b)(ii).

     

    “Claim Collateral
Period” means, with respect to any Event of Loss of any Pledged Aircraft,
the period beginning on the date when such Event of Loss occurs and continuing
until the earliest of the date when (a) any proceeds from any insurance
claim arising from such Event of Loss have been paid to the Administrative Agent
for the benefit of Lenders; (b) any underwriter of the insurance policy
covering such Aircraft has denied coverage for such Event of Loss; (c) 60
days have elapsed after the Event of Loss and the Administrative Agent has not
received insurance proceeds in respect of such Event of Loss in at least the
Agreed Value Amount; (d) the lead insurance underwriter under such policy
has become insolvent; or (e) the lead insurance underwriter under such
policy has commenced, has had commenced against it, or has otherwise become
subject to, a bankruptcy, receivership or other insolvency
proceeding.

     

    “Closing Date” means
the first date all the conditions precedent in Sections 4.01(a),
4.01(b) and
4.01(c) are
satisfied or waived in accordance with Section
10.01.

     

    “Code” means the
Internal Revenue Code of 1986, as amended, and all regulations promulgated
thereunder.

     


    
      
         


      

      
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    “Collateral” shall
mean any and all assets and rights and interests in or to property of Borrower,
whether real or personal, tangible or intangible, in which a Lien is granted or
purported to be granted pursuant to the Collateral Documents.

     

    “Collateral Documents”
means the Security Agreement, any Cash Pledge Agreement and any other
agreements, instruments and documents now or hereafter executed and delivered in
connection with this Agreement, pursuant to which Liens are granted or purported
to be granted to Agent to secure all or part of the Obligations, each in form
and substance satisfactory to Agent.

     

    “Collateral Review
Date” has the meaning set forth in Section
6.15(a).

     

    “Collateral Shortfall”
means any time when the amount of the Borrowing Base is less than
$50,000,000.

     

    “Commitment” means, as
to each Lender, its obligation to make Loans to Borrower pursuant to Section 2.01, in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender’s name on Schedule 2.01 or in
the Assignment and Assumption pursuant to which such Lender becomes a party
hereto, as applicable, as such amount may be adjusted from time to time in
accordance with this Agreement.

     

    “Compliance
Certificate” means a certificate substantially in the form of Exhibit
C.

     

    “Contractual
Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which
such Person is a party or by which it or any of its property is
bound.

     

    “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.

     

    “Current Market Value”
means the current market value of an Aircraft, as adjusted for maintenance, as
set forth in the applicable Qualified Appraisal; provided that the current
market value shall be deemed to be $0 for each Pledged Aircraft with respect to
which there has been a Failure of Security that has not been cured.

     

    “CTT” means the
Convention on International Interests in Mobile Equipment and the Protocol to
the Convention on International Interests in Mobile Equipment on Matters
Specific to Aircraft Equipment, both signed in Cape Town, South Africa, on
November 16, 2001, together with the regulations for the International Registry,
the International Registry Procedures, and all other rules, amendments,
supplements, and revisions thereto from time to time.

     

    “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.

     


    
      
         


      

      
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    “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 (i) the Base Rate plus (ii) the Applicable
Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum;
provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate
shall be an interest rate equal to the interest rate (including any Applicable
Rate) otherwise applicable to such Loan plus 2% per annum.

     

    “Defaulting Lender”
means, at any time, a Lender as to which the Administrative Agent has notified
the Borrower that (a) such Lender has failed for three Business Days or more to
comply with its obligations under this Agreement to make a Loan (a “funding obligation”),
or (b) such Lender has notified the Administrative Agent, or has stated
publicly, that it will not comply with any such funding obligation, or (c) a
Lender Insolvency Event has occurred and is continuing with respect to such
Lender.  Any determination that a Lender is a Defaulting Lender under
clauses (a) through (c) above shall be made by the Administrative Agent in its
sole discretion acting in good faith.  The Administrative Agent will
promptly send to all parties hereto a copy of any notice to the Borrower
referred to above.

     

    “Designated
Percentage” means the percentage of the value of Other Cash Collateral
designated by Lenders for inclusion in the Borrowing Base.

     

    “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.

     

    “Dollar” and “$” mean lawful money
of the United States.

     

    “Eligible Assignee”
means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved
Fund; and (d) any other Person (other than a natural person) approved by
(i) Agent, and (ii) unless an Event of Default has occurred and is
continuing, Borrower (each such approval not to be unreasonably withheld or
delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall
not include Borrower or any of Borrower’s Affiliates or
Subsidiaries.

     

    “Engine”
means:  (a) any engine listed by manufacturer’s serial numbers in
the Security Agreement, whether or not from time to time installed on an
Airframe or any other airframe; (b) any replacement engine which from time
to time may be substituted for any Engine in accordance with this Agreement; and
(c) in either case, any and all parts which are from time to time
incorporated or installed in or attached to any such engine or, so long as such
parts are subject to the Security Agreement, after removal from any such
engine.

     

    “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, air emissions and discharges to waste or public
systems.

     


    
      
         


      

      
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    “Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of Borrower or any of its 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.

     

    “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 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, and all regulations
promulgated thereunder.

     

    “ERISA Affiliate”
means any trade or business (whether or not incorporated) under common
control with Borrower within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code).

     

    “ERISA Event” means
(a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by Borrower 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 Borrower 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 Sections 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; (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 Borrower or
any ERISA Affiliate, (g) the failure to make any required contribution to any
Pension Plan or Multiemployer Plan when due; (h) the imposition of a lien under
Section 430(k) of the Code or Section 303(k) or 4068 of ERISA on any property
(or rights to property, whether real or personal) of any Borrower or ERISA
Affiliate; (i) the failure of a Pension Plan or any trust thereunder intended to
qualify for tax exempt status under Section 401 and 501 of the Code to qualify
thereunder; or (j) the failure to meet the minimum funding standards under the
Pension Funding Rules with respect to any Pension Plan or the application for a
waiver or modification of the minimum funding standards under the
Code.

     


    
      
         


      

      
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    “Eurodollar Base Rate”
has the meaning specified in the definition of Eurodollar Rate.

     

    “Eurodollar Rate”
means for any Interest Period with respect to a Eurodollar Rate Loan, a rate per
annum equal to the higher of (a) 2.50% and (b) a rate per annum determined by
Agent pursuant to the following formula:

     

    Eurodollar Rate
=                                          Eurodollar
Base
Rate                                                                

     

      1.00 – Eurodollar Reserve
Percentage

     

    Where,

     

    “Eurodollar Base Rate”
means, for such Interest Period the rate per annum equal to the British
Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as designated by Agent from time to time) at
approximately 2:00 p.m., London time, two Business Days prior to the
commencement of such Interest Period, for Dollar deposits (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest
Period.  If such rate is not available at such time for any reason,
then the “Eurodollar
Base Rate” for such Interest Period shall be the rate per annum
determined by Agent to be the rate at which deposits in Dollars for delivery on
the first day of such Interest Period in same day funds in the approximate
amount of the Eurodollar Rate Loan being made, continued or converted by
Citibank and with a term equivalent to such Interest Period would be offered by
Citibank’s London Branch to major banks in the London interbank eurodollar
market at their request at approximately 2:00 p.m. (London time) two
Business Days prior to the commencement of such Interest Period.

     

    “Eurodollar Reserve
Percentage” means, for any day during any Interest Period, the reserve
percentage (expressed as a decimal, carried out to five decimal places) in
effect on such day, whether or not applicable to any Lender, under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
of the United States for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as “Eurocurrency
liabilities”).  The Eurodollar Rate for each outstanding
Eurodollar Rate Loan shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.

     

    “Eurodollar Rate Loan”
means a Loan that bears interest at a rate based on the Eurodollar
Rate.

     

    “Event of Default” has
the meaning specified in Section
8.01.

     

    “Event of Loss” has
the meaning set forth in the Security Agreement.

     


    
      
         


      

      
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    “Excluded Equipment”
means all appliances, equipment, instruments, and accessories the values of
which are not included in the determination of Current Market Value in any
Qualified Appraisal.

     

    “Excluded Taxes”
means, with respect to Agent, any Lender or any other recipient of any payment
to be made by or on account of any obligation of Borrower hereunder,
(a) Taxes imposed on or measured by its overall net income (however
denominated and whether imposed by withholding or otherwise) or its gross
receipts, and doing business, value added and franchise taxes that are imposed
in lieu of a net income tax), by the United States government or any
jurisdiction (or any political subdivision thereof) under the laws of which
such recipient is organized or in which its principal office is located or in
which it conducts or is deemed to conduct business (other than solely as a
result of the transactions contemplated herein) or, in the case of any Lender,
in which its applicable Lending Office is located; (b) any Taxes caused by
activities of such Person unrelated to the transactions contemplated herein; (c)
any Taxes caused by such Person’s gross negligence or willful misconduct or any
breach of such Person’s obligations contained herein; (d) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which Borrower is located; and (e) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 10.13), any withholding tax that is imposed on amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party hereto (or
designates a new Lending Office) or is attributable to such Foreign Lender’s
failure or inability (other than as a result of a Change in Law) to comply with
Section 3.01(e), except to the extent that such Foreign Lender is organized in
and a resident of the same country as the Assignor and the Assignor was
entitled, at the time of designation of a new Lending Office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 3.01(a).

     

    “Existing Credit
Agreement” has the meaning specified in Recital A hereto.

     

    “Existing Lenders” has
the meaning specified in Recital A hereto.

     

    “FAA Registry” has the
meaning set forth in Section
6.15(b)(ii)(B) hereof.

     

    “Failure of Security”
means the occurrence of either of the following: any Collateral Document ceases
to be in full force and effect, or is declared by a court of competent
jurisdiction to be null and void, invalid or unenforceable in any respect; or
the Agent shall not have or shall cease to have a valid and perfected Lien of
first priority (other than Liens expressly permitted to be prior to such Lien
pursuant to Section 7.01) in
the Collateral purported to be covered thereby, in each case for any reason
other than (i) as provided in such Collateral Document, or (ii) the
agreement of all the Lenders or satisfaction in full of all the Obligations
secured by such Collateral Document.

     

    “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 Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York 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

     


    
      
         


      

      
        10

        
          

        

      

      
         


      

    


    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 Citibank on
such day on such transactions as determined by Agent.

     

    “Foreign Lender” means
any Lender that is organized under the laws of a jurisdiction other than that in
which the Borrower is resident for tax purposes.  For purposes of this
definition, the United States, each State thereof and the District of Columbia
shall be deemed to constitute a single jurisdiction.

     

    “FRB” means the Board
of Governors of the Federal Reserve System of the United States.

     

    “Fund” means any
Person (other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its business.

     

    “Funded Debt” means
all Indebtedness that appears on the liability side of Borrower’s balance sheet
in accordance with GAAP.

     

    “GAAP” means generally
accepted accounting principles in the United States set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or such other principles as may be approved
by a significant segment of the accounting profession in the United States, that
are applicable to the circumstances as of the date of determination,
consistently applied.

     

    “Governmental
Authority” means the government of the United States or any other nation,
or of any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central
Bank).

     

    “Granting Lender” has
the meaning specified in Section 10.06(h).

     

    “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 or
other obligation 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
or other obligation, (ii) to purchase or lease property, securities or
services for the purpose of assuring the obligee in respect of such Indebtedness
or other obligation of the payment or performance of such Indebtedness or other
obligation, (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 other obligation, or (iv) entered into for the purpose of assuring in
any other manner the obligee in respect of such Indebtedness or other obligation
of the payment or performance thereof or to

     


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    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 or
other obligation of any other Person, whether or not such Indebtedness or other
obligation 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, except that, in the case of Liens referred to
in clause (b), the amount of such Guarantee shall not exceed the greater of the
book value or the fair market value of the property subject to such Lien unless
such Person has assumed or is otherwise liable for the secured
obligation.  The term “Guarantee” as a verb has a corresponding
meaning.

     

    “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 similar
substances or wastes of any nature regulated pursuant to any Environmental
Law.

     

    “Horizon” means
Horizon Air Industries, Inc., a Washington corporation.

     

    “Indebtedness” means,
as to any Person at a particular time, without duplication, all of the
following:

     

    (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, in each case, not past due for more than 60 days after the date on which
such trade 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 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 Interest in such Person or any other
Person, valued,

     


    
      
         


      

      
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    in the
case of a redeemable preferred interest, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends;
and

     

    (h)           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.  If the Swap Termination Value with respect
to a Swap Contract represents an amount owing to such Person, such amount shall
not constitute a reduction in the amount of “Indebtedness” for purposes of this
definition but, in accordance with GAAP, may constitute an asset of such
Person.  The amount of any Capital 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.

     

    “Indemnified Taxes”
means Taxes other than Excluded Taxes.

     

    “Indemnitees” has the
meaning specified in Section
10.04(b).

     

    “Intangible Assets”
means assets that are considered to be intangible assets as determined in
accordance with GAAP, including customer lists, goodwill, computer software,
copyrights, trade names, trademarks, patents, franchises, licenses, unamortized
deferred charges, unamortized debt discount and capitalized research and
development costs less noncontributory and defined benefit pension amounts
included as intangible assets incurred after
December 31, 2009.

     

    “Interest Payment
Date” means, (a) as to any Loan other than a Base Rate Loan, the
last day of each Interest Period applicable to such Loan and the Maturity Date;
provided, however, that if any Interest Period for a Eurodollar Rate Loan
exceeds three months, the respective dates that fall every three months after
the beginning of such Interest Period shall also be Interest Payment Dates; and
(b) as to any Base Rate Loan, the last Business Day of each month and the
Maturity Date.

     

    “Interest Period”
means, as to each Eurodollar Rate Loan, the period commencing on the date such
Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar
Rate Loan and ending on the date one, two, three or six months thereafter, as
selected by Borrower in its Loan Notice; provided
that:

     

    (i)           any
Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the immediately succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the immediately preceding Business Day;

     

    (ii)           any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the
calendar

     


    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    month at
the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and

     

    (iii)           no
Interest Period shall extend beyond the Maturity Date.

     

    “Internal Control
Event” means a material weakness in, or fraud that involves management or
other employees who have a significant role in, the Borrower’s internal controls
over financial reporting, in each case as described in the Securities
Laws.

     

    “International
Registry” means the Cape Town International Registry established under
the CTT.

     

    “Invalidity Event”
means: (i) any Loan Document or any provision thereof, 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 in full force and effect; or (ii) Borrower or any other Person contests in
any manner the validity or enforceability of any Loan Document or any provision
thereof; or (iii) Borrower 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 any provision thereof.

     

    “IP Rights” has the
meaning specified in Section 5.17.

     

    “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, licenses, authorizations and permits of,
and agreements with, any Governmental Authority, in each case whether or not
having the force of law.

     

    “Lender” has the
meaning specified in the introductory paragraph hereto.

     

    “Lender Insolvency
Event” means that (i) a Lender or its Parent Company is insolvent or (ii)
an event of the kind referred to in clause (f) or clause (g) of Section 8.01
occurs with respect to such Lender or its Parent Company (as if the references
in such provisions to the Borrower or its Subsidiaries referred to such Lender
or Parent Company).

     

    “Lending Office”
means, as to any Lender, the office or offices of such Lender described as such
in such Lender’s Administrative Questionnaire, or such other office or offices
as a Lender may from time to time notify Borrower and Agent.

     

    “Lien” means any
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), charge, or preference, priority or other security
interest or preferential arrangement in the nature of a security interest of any
kind or nature whatsoever (including any conditional sale, equipment trust
agreement, or other title retention agreement,

     


    
      
         


      

      
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    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).

     

    “Loan” means an
extension of credit by a Lender to Borrower under Article II.

     

    “Loan Documents” means
this Agreement, each Note, the Agent Fee Letter, Arrangement Fee Letter, and
each Collateral Document.

     

    “Loan Notice” means a
notice of (a) a Borrowing, (b) a conversion of Loans from one Type to
the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to
Section
2.02(a), which, if in writing, shall be substantially in the form of
Exhibit A.

     

    “Material Adverse
Effect” means (a) a material adverse change
in, or a material adverse effect upon, the business, assets, properties,
liabilities (actual and contingent), operations or financial condition of
Borrower and its Subsidiaries, taken as a whole, (b) a material impairment of the ability of Borrower
to perform its obligations under any Loan Document or (c) a material adverse
effect on the rights and remedies of the Administrative Agent or the Lenders
under any Loan Document.

     

    “Material Failure of
Security” means a Failure of Security with respect to Collateral whose
removal from the Borrowing Base, individually or in the aggregate, causes the
Borrowing Base to be less than $25,000,000.

     

    “Maturity Date” means
March 29, 2013.

     

    “Multiemployer Plan”
means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which 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.

     

    “Non-Defaulting
Lender” means, at any time, a Lender that is not a Defaulting
Lender.

     

    “Note” means a
promissory note made by Borrower in favor of a Lender evidencing Loans made by
such Lender, substantially in the form of Exhibit
B.

     

    “Obligations” means
all advances to, and debts, liabilities, obligations, covenants and duties of,
Borrower 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
Borrower or any Subsidiary 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.

     

    “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

     


    
      
         


      

      
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    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 Cash
Collateral” means U.S. government securities and other cash equivalents
(other than Citibank Cash Collateral) reasonably acceptable to
Lenders.

     

    “Other Taxes” means
all present or future stamp, intangible or documentary taxes or any other excise
or property taxes, charges or similar levies arising from any payment made
hereunder or under any other Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement or any other Loan
Document; provided, however, that “Other Taxes” shall not include any Excluded
Taxes.

     

    “Outstanding Amount”
means with respect to Loans on any date, the aggregate outstanding principal
amount thereof after giving effect to any borrowings and prepayments or
repayments of Loans occurring on such date.

     

    “Over Advance” has the
meaning specified in Section
2.03(b).

     

    “Parent” means Alaska
Air Group, Inc., a Delaware corporation.

     

    “Parent Company”
means, with respect to a Lender, the bank holding company (as defined in Federal
Reserve Board Regulation Y), if any, of such Lender, or any Person owning,
beneficially or of record, directly or indirectly, a majority of the shares of
such Lender.

     

    “Participant” has the
meaning specified in Section
10.06(d).

     

    “Patriot Act” has the
meaning specified in Section
10.16.

     

    “PBGC” means the
Pension Benefit Guaranty Corporation.

     

    “Pension Act” means
the Pension Protection Act of 2006, as amended from time to time, and the rules
and regulations promulgated thereunder from time to time in effect.

     

    “Pension Funding
Rules” means the rules regarding minimum funding standards for a Pension
Plan under Code Section 412 and ERISA Section 302, as in effect before the
Pension Act, applicable to the Pension Plan’s years ending before the effective
date of the Pension Act, and the rules under Code Sections 412 and 430 and ERISA
Sections 302 and 303, as in effect after the Pension Act, applicable to the
Pension Plan’s years ending after the effective date of the Pension
Act.

     

    “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 Borrower or any ERISA
Affiliate or to which Borrower or any ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple

     


    
      
         


      

      
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    employer
or other plan described in Section 4064(a) of ERISA, has made contributions
at any time during the immediately preceding five plan years.

     

    “Permitted Asset
Adjustments” means the write-down in the book value of any flight and
non-flight equipment assets owned by Borrower or its Subsidiaries of up to
$50,000,000 in the aggregate occurring after
January 1, 2010; provided, however, that the maximum
amount of the write-down for non-flight assets included in calculating Permitted
Asset Adjustments will be $5,000,000, all determined in accordance with
GAAP.

     

    “Permitted Progress Payment
Loans” means loans to Borrower from lenders (which may or may not be
Lenders hereunder) in an outstanding principal amount not to exceed at any one
time Two Hundred Fifty Million ($250,000,000) to finance Borrower’s progress
payments for aircraft purchases from The Boeing Company.  Any such
progress payment loan shall constitute a “Permitted Progress Payment Loan” only
if it is due on or before the first day of the calendar month during which the
related aircraft is scheduled and available for delivery (provided that if the
aircraft is scheduled but not available for delivery, a delay in payment will
not cause such loans to cease to be Permitted Progress Payment Loans so long as
such delay is acceptable to the progress payment lenders).

     

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

     

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

     

    “Platform” has the
meaning specified in Section 6.02.

     

    “Pledged Aircraft”
means each Aircraft in which the Security Agreement creates, or purports to
create, a security interest.

     

    “Potential Defaulting
Lender” means, at any time, a Lender (i) as to which the Administrative
Agent has notified the Borrower that an event of the kind referred to in the
definition of “Lender Insolvency Event” has occurred and is continuing in
respect of any financial institution affiliate of such Lender, or (ii) as to
which the Administrative Agent has in good faith determined and notified the
Borrower that such Lender or its Parent Company or a Subsidiary thereof has
defaulted on its funding obligations under any other loan agreement or credit
agreement or other financing agreement or (iii) that has, or whose Parent
Company has, a non-investment grade rating from any nationally recognized rating
agency.  Any determination that a Lender is a Potential Defaulting
Lender under any of clauses (i) through (iii) above shall be made by the
Administrative Agent in its sole discretion acting in good faith.  The
Administrative Agent will promptly send to all parties hereto a copy of any
notice to the Borrower referred to above.

     

    “Preferred Stock”
means, as applied to the Equity Interest of any Person, the Stock of any class
or classes (however designated) that is preferred with respect to the payment of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over shares of Equity Interest of any
other class of such Person.

     


    
      
         


      

      
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    “Prohibited Preferred
Stock” means any Preferred Stock that by its terms is mandatorily
redeemable or subject to any other payment obligation (including any obligation
to pay dividends, other than dividends of shares of Preferred Stock of the same
class and series payable in kind or dividends of shares of common stock) on or
before a date that is less than 1 year after the Maturity Date, or, on or before
the date that is less than 1 year after the Maturity Date, is redeemable at the
option of the holder thereof for cash or assets or securities (other than
distributions in kind of shares of Preferred Stock of the same class and series
or of shares of common stock).

     

    “Qualified Appraisal”
means a desk-top appraisal of the Aircraft Collateral addressed to the
Administrative Agent, Lenders and Borrower by an Approved
Appraiser.  Each such appraisal shall be in a form that is reasonably
acceptable to the Administrative Agent and shall be accompanied by a letter
stating that the purpose of the appraisal is to provide a report, upon which the
Administrative Agent and Lenders may rely, of the value of the Pledged Aircraft
as Aircraft Collateral under the Security Agreement.  Each such
appraisal shall set forth the current  market value of each Pledged
Aircraft (including any Aircraft being added to the Aircraft Collateral and
excluding any Aircraft being removed from the Aircraft
Collateral) determined in accordance with the definition of “current market
value” promulgated by the International Society of Transport Aircraft Trading,
as of the date of such appraisal.

     

    “Public Lender” has
the meaning specified in Section
6.02.

     

    “Refinancing
Indebtedness” means refinancings, renewals, or extensions of Indebtedness
so long as:

     

    (a)           such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of the Indebtedness so refinanced, renewed, or extended, other
than by the amount of premiums paid thereon and the fees and expenses incurred
in connection therewith and by the amount of unfunded commitments with respect
thereto,

     

     (b)           such
refinancings, renewals, or extensions do not result in a shortening of the
average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are or could reasonably be
expected to be materially adverse to the interests of the Lenders,

     

    (c)           if
the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension must include subordination terms and
conditions that are at least as favorable to the Lenders as those that were
applicable to the refinanced, renewed, or extended Indebtedness,
and

     

    (d)           the
Indebtedness that is refinanced, renewed, or extended is not recourse to any
Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended.

     

    “Register” has the
meaning specified in Section
10.06(c).

     


    
      
         


      

      
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    “Registered Public Accounting
Firm” has the meaning specified in the Securities Laws and shall be
independent of the Borrower as prescribed by the Securities Laws.

     

    “Related Parties”
means, with respect to any Person, such Person’s Affiliates and the partners,
directors, officers, employees, agents and advisors of such Person and of such
Person’s Affiliates.

     

    “Removed Aircraft” has
the meaning set forth in Section
6.15(d) hereof.

     

    “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.

     

    “Required Lenders”
means, as of any date of determination, Lenders having more than 50% of the
Aggregate Commitments or, if the commitment of each Lender to make Loans has
been terminated, Lenders holding in the aggregate more than 50% of the
Outstanding Amount; provided that the
Commitment of, and the portion of the Outstanding Amount held or deemed held by,
any Defaulting Lender shall be excluded for purposes of making a determination
of Required Lenders.

     

    “Responsible Officer”
means the chief executive officer, president, chief financial officer, vice
president of finance or treasurer of Borrower.  Any document delivered
hereunder that is signed by a Responsible Officer of Borrower shall be
conclusively presumed to have been authorized by all necessary corporate and/or
other action on the part of Borrower and such Responsible Officer shall be
conclusively presumed to have acted on behalf of Borrower.

     

    “Restricted Junior
Payment” means to (a) declare or pay any dividend or make any other
payment or distribution on account of Equity Interest issued by Borrower
(including any payment in connection with any merger or consolidation involving
Borrower) or to the direct or indirect holders of Equity Interest issued by
Borrower in their capacity as such (other than dividends or distributions
payable in Equity Interest (other than Prohibited Preferred Stock) issued by
Borrower, or (b) purchase, redeem, or otherwise acquire or retire for value
(including in connection with any merger or consolidation involving Borrower)
any Equity Interest issued by Borrower.

     

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

     

    “Sarbanes-Oxley” means
the Sarbanes-Oxley Act of 2002.

     

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

     

    “Securities Laws”
means the Securities Act of 1933, the Securities Exchange Act of 1934,
Sarbanes-Oxley and the applicable accounting and auditing principles, rules,
standards and

     


    
      
         


      

      
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    practices
promulgated, approved or incorporated by the SEC or the Public Company
Accounting Oversight Board, as each of the foregoing may be amended and in
effect on any applicable date hereunder.

     

    “Security Agreement”
means that certain Aircraft Chattel Mortgage Security Agreement dated as of
March 31, 2010 made by Borrower in favor of the Administrative Agent in
substantially the form of Exhibit E, including
any Security Agreement Supplements.

     

    “Security Agreement
Supplement” has the meaning specified in Section
6.15(b)(ii).

     

    “Subordinated
Liabilities” means liabilities subordinated to the Obligations in a
manner acceptable to Agent in its reasonable discretion.

     

    “SPC” has the meaning
specified in Section 10.06(h).

     

    “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 Borrower.

     

    “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 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

     


    
      
         


      

      
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    other
readily available quotations provided by any recognized dealer in such Swap
Contracts (which may include a Lender or any Affiliate of a
Lender).

     

    “Synthetic Lease
Obligation” means the monetary obligation of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, 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” means all
present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any Governmental Authority,
including any interest, additions to tax or penalties applicable
thereto.

     

    “Threshold Amount”
means $10,000,000.

     

    “Total Liabilities”
means the sum of current liabilities plus long term liabilities.

     

    “Type” means, with
respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate
Loan.

     

    “UCC” has
the meaning set forth in the Security Agreement.

     

    “United States” and
“U.S.” mean the
United States of America.

     

    “U.S. Air Carrier”
means any United States air carrier engaged in scheduled air transportation and
in all material respects duly qualified and licensed under all applicable Laws
to carry on its business as a scheduled airline currently subject to regulation
by the Federal Aviation Administration and the Department of Transportation as
to which there is in force a certificate issued pursuant to Section 401 of
the Federal Aviation Act, 49 U.S.C. § 41101 et seq., and as to which
there is in force an air carrier operating certificate issued under
Part 121 of the Federal Aviation Regulations, or which may operate as an
air carrier by certificate or otherwise under any successor or substitute
provisions therefor or in the absence thereof.

     

    “Valuation Date”
means, with respect to any Qualified Appraisal, the date as of which the Current
Market Value of the Aircraft Collateral is determined according to such
appraisal.

     

    1.02Other Interpretive
Provisions

     

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

     

    (a)           The
definitions of terms herein shall apply equally to the singular and plural forms
of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter
forms.  The words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without
limitation.”  The word “will” shall be
construed to have the same meaning and effect as the word “shall.”  Unless
the context requires otherwise, (i) any definition of or reference to any
agreement, instrument or other document (including any Organization
Document) shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or

     


    
      
         


      

      
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    modifications
set forth herein or in any other Loan Document), (ii) any reference herein
to any Person shall be construed to include such Person’s successors and
assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words
of similar import when used in any Loan Document, shall be construed to refer to
such Loan Document in its entirety and not to any particular provision thereof,
(iv) all references in a Loan Document to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, the Loan Document in which such references appear,
(v) any reference to any law shall include all statutory and regulatory
provisions consolidating, amending, replacing or interpreting such law and any
reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time,
and (vi) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

     

    (b)           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.”

     

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

     

    1.03Accounting Terms.

     

    (a)           Generally.  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
Agreement shall be prepared in conformity with, GAAP applied on a consistent
basis, 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.

     

    (b)           Changes in
GAAP.  If, at any time, any change in GAAP or in practices or
estimates which are in accordance with GAAP (each, a “Change”) would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and either Borrower or the Required Lenders shall so request, then
Agent, Lenders and Borrower shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such Change
(subject to the approval of the Required Lenders); provided that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP and such practices and estimates prior to such Change and
(ii) Borrower shall provide to Agent and Lenders financial statements and
other documents required under this 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.

     

    1.04Rounding

     

    .  Any financial
ratios required to be maintained by Borrower pursuant to this 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

     


    
      
         


      

      
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    is
expressed herein and rounding the result up or down to the nearest number (with
a rounding-up if there is no nearest number).

     

    1.05Times of Day

     

    .  Unless otherwise
specified, all references herein to times of day shall be references to New York
City time (daylight or standard, as applicable).

     

    ARTICLE
II.

     

    THE
COMMITMENTS AND CREDIT EXTENSIONS

     

    2.01Loans

     

    .  Subject to the
terms and conditions and relying upon the representations and warranties set
forth herein, each Lender, severally and not jointly, agrees to make loans (each
such loan, a “Loan”) to
Borrower from time to time, on any Business Day during the Availability Period,
in an aggregate amount not to exceed at any time outstanding the amount of such
Lender’s Commitment; provided, however, that after giving effect to any
Borrowing, (i) the Outstanding Amount shall not exceed the Aggregate
Commitments, (ii) the Outstanding Amount of the Loans of any Lender shall
not exceed such Lender’s Commitment, and (iii) the Outstanding Amount shall not
exceed the Borrowing Base.  Within the limits of each Lender’s
Commitment, and subject to the other terms and conditions hereof, Borrower may
borrow under this Section 2.01, prepay
under Section
2.03, and reborrow under this Section
2.01.  Loans may be Base Rate Loans or Eurodollar Rate Loans,
as further provided herein.

     

    2.02Borrowings, Conversions and
Continuations of Loans.

     

    (a)           Each
Borrowing, each conversion of Loans from one Type to the other, and each
continuation of Eurodollar Rate Loans shall be made upon Borrower’s irrevocable
notice to Agent, which may be given by telephone.  Each such notice
must be received by Agent not later than 1:00 p.m. (i) three Business Days
prior to the requested date of any Borrowing of, conversion to or continuation
of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base
Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate
Loans.  Each telephonic notice by Borrower pursuant to this Section
2.02(a) must be confirmed promptly by delivery to Agent of a written
Loan Notice, appropriately completed and signed by a Responsible Officer of
Borrower.  Each Borrowing of, conversion to or continuation of
Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof.  Each Borrowing of or
conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a
whole multiple of $500,000 in excess thereof.  Each Loan Notice
(whether telephonic or written) shall specify (i) whether Borrower is
requesting a Borrowing, a conversion of Loans from one Type to the other, or a
continuation of Eurodollar Rate Loans, (ii) the requested date of the
Borrowing, conversion or continuation, as the case may be (which shall be a
Business Day), (iii) the principal amount of Loans to be borrowed,
converted or continued, (iv) the Type of Loans to be borrowed or to which
existing Loans are to be converted, and (v) if applicable, the duration of
the Interest Period with respect thereto.  If Borrower fails to
specify a Type of Loan in a Loan Notice or if Borrower fails to give a timely
notice requesting a conversion or continuation, then the applicable Loans shall
be made as, or converted to, Base Rate Loans.  Any such automatic
conversion to Base Rate Loans shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable Eurodollar Rate
Loans.  If Borrower requests a Borrowing of, conversion to, or
continuation of

     


    
      
         


      

      
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    Eurodollar
Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it
will be deemed to have specified an Interest Period of one month.

     

    (b)           Each
Loan Notice submitted by Borrower shall be deemed to be a representation and
warranty that (i) since the Closing Date no event or circumstance has had or
could be reasonably expected to have, either individually or in the aggregate, a
Material Adverse Effect; (ii) no Default or Collateral Shortfall exists or will
exist upon giving effect to the requested Borrowing, conversion or continuation,
and (iii) the conditions specified in Section 4.02(a) have
been satisfied, on and as of the date of the applicable Borrowing, conversion of
Loans from one Type to the other, or continuation of Eurodollar Rate
Loans.

     

    (c)           Following
receipt of a Loan Notice, Agent shall promptly notify each Lender of the amount
of its Applicable Percentage of the applicable Loans, and if no timely notice of
a conversion or continuation is provided by Borrower, Agent shall notify each
Lender of the details of any automatic conversion to Base Rate Loans described
in the preceding subsection.  In the case of a Borrowing, each Lender
shall make the amount of its Loan available to Agent in immediately available
funds at Administrative Agent’s Office not later than 2:00 p.m. on the Business
Day specified in the applicable Loan Notice.  Upon satisfaction of the
applicable conditions set forth in Section 4.02
(and, if such Borrowing is the initial Borrowing, Section 4.01), Agent
shall make all funds so received available to Borrower in like funds as received
by Agent either by (i) crediting the account of Borrower on the books of
Citibank with the amount of such funds or (ii) wire transfer of such funds,
in each case in accordance with instructions provided to (and reasonably
acceptable to) Agent by Borrower.

     

    (d)           Except
as otherwise provided herein, a Eurodollar Rate Loan may be continued or
converted only on the last day of an Interest Period for such Eurodollar Rate
Loan.  During the existence of a Default, no Loans may be requested
as, converted to or continued as Eurodollar Rate Loans without the consent of
the Required Lenders.  During the existence of an Event
of  Default, if Agent declares all amounts owing under this Agreement
to be immediately due and payable pursuant to Section 8.02, then the Required
Lenders may also demand that any or all of the then outstanding Eurodollar Rate
Loans be converted immediately to Base Rate Loans and Borrower agrees to pay all
amounts due under Section 3.05 in
accordance with the terms thereof due to any such conversion.

     

    (e)           Agent shall promptly notify Borrower and Lenders of the
interest rate applicable to any Interest Period for Eurodollar Rate Loans upon
determination of such interest rate.  At any time that Base
Rate Loans are outstanding, the Administrative Agent shall notify the Borrower
and the Lenders of any change in Citibank’s prime rate used in determining the
Base Rate promptly following the public announcement of such
change.

     

    (f)           After
giving effect to all Borrowings, all conversions of Loans from one Type to the
other, and all continuations of Loans as the same Type, there shall not be more
than 5 Interest Periods in effect at any one time with respect to
Loans.

     


    
      
         


      

      
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    2.03Prepayments.

     

     (a)           Borrower
may, upon notice to Agent, at any time or from time to time voluntarily prepay
Loans in whole or in part without premium or penalty; provided that
(i) such notice must be received by Agent not later than 1:00 p.m.
(A) three Business Days prior to any date of prepayment of Eurodollar Rate
Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any
prepayment of Eurodollar Rate Loans shall be in a principal amount of at least
$5,000,000 or a whole multiple of $1,000,000 in excess thereof; and
(iii) any prepayment of Base Rate Loans shall be in a principal amount of
at least $1,000,000 or a whole multiple of $500,000 in excess thereof or, in
each case, if less, the entire principal amount thereof then
outstanding.  Each such notice shall specify the date and amount of
such prepayment and the Type(s) of Loans to be prepaid.  Agent
will promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s Applicable Percentage of such prepayment.  If
such notice is given by Borrower, Borrower shall make such prepayment and the
payment amount specified in such notice shall be due and payable on the date
specified therein.  Any prepayment of a Eurodollar Rate Loan shall be
accompanied by all accrued interest on the amount prepaid, together with any
additional amounts required pursuant to Section 3.05.  Each such
prepayment shall be applied to the Loans of Lenders in accordance with their
respective Applicable Percentages.

     

    (b)           If
for any reason the Outstanding Amount at any time exceeds the Aggregate
Commitments then in effect, Borrower shall immediately prepay Loans in an
aggregate amount equal to such excess.  If for any reason the
Outstanding Amount at any time exceeds the Borrowing Base (an “Over Advance”) then
in effect, Borrower shall either: (i) immediately prepay Loans in an
aggregate amount equal to such Over Advance or (ii) cure such Over Advance
by pledging additional Collateral in accordance with Section 6.15(b) within
five Business Days.

     

    (c)           Upon
the occurrence of a Change of Control, Borrower shall, on the date of occurrence
of such Change of Control, immediately repay all Loans, together with all
accrued but unpaid interest thereon, and all other obligations of the Borrower
hereunder, in full, and all Commitments shall be terminated in their entirety on
the date of occurrence of such Change of Control.

     

    2.04Termination or Reduction of
Commitments

     

    .  Borrower may,
upon notice to Agent, terminate the Aggregate Commitments, or from time to time
permanently reduce the Aggregate Commitments; provided that
(i) any such notice shall be received by Agent not later than 1:00 p.m.
five Business Days prior to the date of termination or reduction, (ii) any
such partial reduction shall be in an aggregate amount of $5,000,000 or any
whole multiple of $1,000,000 in excess thereof, and (iii) Borrower shall
not terminate or reduce the Aggregate Commitments if, after giving effect
thereto and to any concurrent prepayments hereunder, the Outstanding Amount
would exceed the Aggregate Commitments.  Agent will promptly notify
the Lenders of any such notice of termination or reduction of the Aggregate
Commitments.  Any reduction of the Aggregate Commitments shall be
applied to the Commitment of each Lender according to its Applicable
Percentage.  All fees accrued until the effective date of any
termination of the Aggregate Commitments shall be paid on the effective date of
such termination.

     


    
      
         


      

      
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    2.05           Repayment
of Loans

     

    .

     

    Borrower
shall repay to Lenders on the Maturity Date the aggregate principal amount of
Loans outstanding on such date.

     

    2.06Interest.

     

    (a)           Subject
to the provisions of subsection (b) below, (i) each Eurodollar
Rate Loan shall bear interest on the outstanding principal amount thereof for
each Interest Period at a rate per annum equal to the Eurodollar Rate for such
Interest Period plus the Applicable Rate; and (ii) each Base Rate Loan
shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Base Rate plus the
Applicable Rate.

     

    (b)           (i)           If
any amount of principal of any Loan is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.

     

    (ii)           If
any amount (other than principal of any Loan) payable by Borrower under any
Loan Document is not paid when due (without regard to any applicable grace
periods), whether at stated maturity, by acceleration or otherwise, then upon
the request of the Required Lenders, such amount shall thereafter bear interest
at a fluctuating interest rate per annum at all times equal to the Default Rate
to the fullest extent permitted by applicable Laws.

     

    (iii)           Upon
the request of the Required Lenders (or automatically while any Event of Default
under clause (f) or clause (g) of Section  8.01
exists), while any Event of Default exists, Borrower shall pay interest on the
principal amount of all outstanding Obligations hereunder at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable Laws.

     

    (iv)           Accrued
and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.

     

    (c)           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, and before and after the
commencement of any proceeding under any Debtor Relief Law.

     

    2.07Fees.

     

    (a)           Commitment
Fee.  Borrower shall pay to Agent for the account of each
Lender in accordance with its Applicable Percentage, a commitment fee equal to
[***].  The commitment fee shall accrue at all times during the
Availability Period, including at any time during which one or more of the
conditions in Article IV is
not met, and shall be due and payable quarterly in

     


    
      
         

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

        

      

      
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    arrears
on the last Business Day of each March, June, September and December, commencing
with the first such date to occur after the Closing Date, and on the Maturity
Date.  The commitment fee shall be calculated quarterly in arrears,
and if there is any change in the Applicable Rate during any quarter, the actual
daily amount shall be computed and multiplied by the Applicable Rate separately
for each period during such quarter that such Applicable Rate was in
effect.

     

    (b)           Agent’s
Fees.  Borrower shall pay to Agent for Agent’s own account,
fees in the amounts and at the times specified in the letter agreement, dated
February 19, 2010 (the “Agent Fee Letter”),
between Borrower and Agent.  Such fees shall be fully earned when paid
and shall be nonrefundable for any reason whatsoever.

     

    (c)           Arrangement
Fees.  Immediately upon the execution and delivery of this
Agreement, Borrower shall pay the arrangement fees set forth in, and in
accordance with, the letter agreement, dated February 19, 2010 (the “Arrangement Fee
Letter”), among Borrower, Citigroup Global Markets Inc. and Banc of
America Securities LLC.  Such fees shall be fully earned when paid and
shall be nonrefundable for any reason whatsoever.

     

    (d)           Upfront
Fees.  Immediately upon the execution and delivery of this
Agreement, Borrower shall pay to the Administrative Agent, for the account of
each Lender party to this Agreement on the Closing Date, an upfront fee in an
amount equal to [***] of each such Lender’s Commitment.  Such fees
shall be fully earned when paid and shall be nonrefundable for any reason
whatsoever.

     

    2.08Computation of Interest and
Fees

     

    All
computations of interest for Base Rate Loans when the Base Rate is determined by
Citibank’s “prime rate” shall be made on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed.  All other 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, provided that any Loan that is repaid on the same day on which it is
made shall, subject to Section 2.10(a),
bear interest for one day.  Each determination by Agent of an interest
rate or fee hereunder shall be conclusive and binding for all purposes, absent
manifest error.

     

    2.09Evidence of Debt

     

    The
Borrowings made by each Lender shall be evidenced by one or more accounts or
records maintained by such Lender and by Agent in the ordinary course of
business.  The accounts or records maintained by Agent and each Lender
shall be conclusive absent manifest error of the amount of the Borrowings made
by Lenders to 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 Borrower hereunder to pay any amount owing
with respect to the Obligations.  In the event of any conflict between
the accounts and records maintained by any Lender and the accounts and records
of Agent in respect of such

     


    
      
         

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

        

      

      
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    matters,
the accounts and records of Agent shall control in the absence of manifest
error.  Upon the request of any Lender made through Agent, Borrower
shall execute and deliver to such Lender (through Agent) a Note, which
shall evidence such Lender’s Loans in addition to such accounts or
records.  Each Lender may attach schedules to its Note and endorse
thereon the date, Type (if applicable), amount and maturity of its Loans and
payments with respect thereto.

     

    2.10Payments Generally; Agent’s
Clawback.

     

    (a)           General.  All
payments to be made by Borrower shall be made without condition or deduction for
any counterclaim, defense, recoupment or setoff.  Except as otherwise
expressly provided herein, all payments by Borrower hereunder shall be made to
Agent, for the account of the respective Lenders to which such payment is owed,
at the Administrative Agent’s Office in Dollars and in immediately available
funds not later than 2:00 p.m. on the date specified herein.  Agent
will promptly distribute to each Lender its Applicable Percentage (or other
applicable share as provided herein) of such payment in like funds as
received by wire transfer to such Lender’s Lending Office.  All
payments received by Agent after 2.00 p.m. shall be deemed received on the next
succeeding Business Day and any applicable interest or fee shall continue to
accrue.  If any payment to be made by 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.

     

    (b)           (i)           Funding by Lenders;
Presumption by Agent.  Unless Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to Agent such Lender’s share of such Borrowing, Agent may
assume that such Lender has made such share available on such date in accordance
with Section 2.02 and
may, in reliance upon such assumption, make available to Borrower a
corresponding amount.  In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to Agent, then the applicable
Lender and Borrower severally agree to pay to Agent forthwith on demand such
corresponding amount in immediately available funds with interest thereon, for
each day from and including the date such amount is made available to Borrower
to but excluding the date of payment to Agent, at (A) in the case of a
payment to be made by such Lender, the greater of the Federal Funds Rate and a
rate determined by Agent in accordance with banking industry rules on interbank
compensation, plus any administrative, processing or similar fees customarily
charged by Agent in connection with the foregoing and (B) in the case of a
payment to be made by Borrower, the interest rate applicable to Base Rate
Loans.  If Borrower and such Lender shall pay such interest to Agent
for the same or an overlapping period, Agent shall promptly remit to Borrower
the amount of such interest paid by Borrower for such period.  If such
Lender pays its share of the applicable Borrowing to Agent, then the amount so
paid shall constitute such Lender’s Loan included in such
Borrowing.  Any payment by Borrower shall be without prejudice to any
claim Borrower may have against a Lender that shall have failed to make such
payment to Agent.

     

    (ii)           Payments by Borrower;
Presumptions by Agent.  Unless Agent shall have received notice
from Borrower prior to the date on which any payment is due to Agent for the
account of the Lenders that Borrower will not make such payment, Agent may
assume that Borrower has made such payment on such date in accordance herewith
and may, in reliance upon such assumption, distribute to Lenders the amount
due.  In such event, if Borrower has not in fact

     


    
      
         


      

      
        28

        
          

        

      

      
         


      

    


    made such
payment, then each of Lenders severally agrees to repay to Agent forthwith on
demand the amount so distributed to such Lender, in immediately available funds
with interest thereon, for each day from and including the date such amount is
distributed to it but excluding the date of payment to Agent, at the greater of
the Federal Funds Rate and a rate determined by Agent in accordance with banking
industry rules on interbank compensation.  A notice of Agent to any
Lender or Borrower with respect to any amount owing under this subsection
(b) shall be conclusive, absent manifest error.

     

    (c)           Failure to Satisfy
Conditions Precedent.  If any Lender makes available to Agent
funds for any Loan to be made by such Lender as provided in the foregoing
provisions of this Article II, and
such funds are not made available to Borrower by Agent because the conditions to
the applicable Borrowing set forth in Article IV are
not satisfied or waived in accordance with the terms hereof, Agent shall return
such funds (in like funds as received from such Lender) to such Lender, and
Borrower shall pay to each Lender on demand interest on such funds that has
accrued until the date such funds are returned to such Lender at the interest
rate that would be applicable to such funds had those funds been made available
to Borrower.

     

    (d)           Obligations of Lenders
Several.  The obligations of Lenders hereunder to make Loans
and to make payments under Section 10.04(c)
are several and not joint.  The failure of any Lender to make any
Loan, to fund any such participation or to make any payment under Section 10.04(c)
on any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be
responsible for the failure of any other Lender to so make its Loan, purchase
its participation or to make its payment under Section 10.04(c):

     

    (e)           Funding
Source.  Nothing herein shall be deemed to obligate any Lender
to obtain the funds for any Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.

     

    2.11Sharing of Payments

     

    If any
Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of the Loans
made by it resulting in such Lender’s receiving payment of a proportion of the
aggregate amount of such Loans or participations and accrued interest thereon
greater than its pro rata share thereof as provided herein, then the Lender
receiving such greater proportion shall (a) notify Agent of such fact, and
(b) purchase (for cash at face value) participations in the Loans of
the other Lenders, or make such other adjustments as shall be equitable, so that
the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and other amounts owing them, provided
that:

     

    (i)           if
any such participations or subparticipations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and

     


    
      
         


      

      
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    (ii)           the
provisions of this Section shall not be construed to apply to (x) any
payment made by Borrower pursuant to and in accordance with the express terms of
this Agreement or (y) any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or participant, other than to Borrower or any Subsidiary thereof (as to which
the provisions of this Section shall apply).

     

    Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of Borrower in the amount of such participation.

     

    2.12Security

     

    All
obligations of Borrower under this Agreement, the Notes and the other Loan
Documents shall be secured in accordance with the Collateral
Documents.

     

    2.13Defaulting Lenders

     

    (a)           Payments.  Any
amount paid by Borrower for the account of a Defaulting Lender under this
Agreement (whether on account of principal, interest, fees, indemnity payments
or other amounts) will not be paid or distributed to such Defaulting Lender, but
shall instead be retained by the Administrative Agent in a segregated
non-interest bearing escrow account until (subject to Section 2.13(d)) the
termination of the Aggregate Commitments and payment in full of all obligations
of the Borrower hereunder and will be applied by the Administrative Agent, to
the fullest extent permitted by law, to the making of payments from time to time
in the following order of priority:  first to the payment
of any amounts owing by such Defaulting Lender to the Administrative Agent under
this Agreement, second to the payment
of post-default interest and then current interest due and payable to the
Non-Defaulting Lenders hereunder, ratably among them in accordance with the
amounts of such interest then due and payable to them, fourth to the payment
of fees then due and payable to the Non-Defaulting Lenders hereunder, ratably
among them in accordance with the amounts of such fees then due and payable to
them, fifth to
pay principal then due and payable to the Non-Defaulting Lenders hereunder
ratably in accordance with the amounts thereof then due and payable to them,
sixth to the
ratable payment of other amounts then due and payable to the Non-Defaulting
Lenders, and seventh after the
termination of the Aggregate Commitments and payment in full of all obligations
of the Borrower hereunder, to pay amounts owing under this Agreement to such
Defaulting Lender or as a court of competent jurisdiction may otherwise
direct.

     

    (b)           Fees.  Anything
herein to the contrary notwithstanding, during such period as a Lender is a
Defaulting Lender, such Defaulting Lender shall not be entitled to any fees
accruing during such period pursuant to Section 2.07(a)
(without prejudice to the rights of the Non-Defaulting Lenders in respect of
such fees).

     

    (c)           Termination of Defaulting
Lender.  The Borrower may terminate the unused amount of the
Commitment of any Lender that is a Defaulting Lender upon not less than 10
Business Days’ prior notice to the Administrative Agent (which shall promptly
notify the Lenders thereof), and in such event the provisions of Section 2.13(a) will
apply to all amounts

     


    
      
         


      

      
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    thereafter
paid by the Borrower for the account of such Defaulting Lender under this
Agreement (whether on account of principal, interest, fees, indemnity or other
amounts), provided that (i) no Event of Default shall have occurred and be
continuing and (ii) such termination shall not be deemed to be a waiver or
release of any claim the Borrower, the Administrative Agent or any Lender may
have against such Defaulting Lender.

     

    (d)           Cure.  If
the Borrower and the Administrative Agent agree in writing that a Lender that is
a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the
Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth
therein (which may include arrangements with respect to any amounts then held in
the segregated escrow account referred to in Section 2.13(a)),
such Lender shall purchase such portions outstanding Loans of the other Lenders,
and/or make such other adjustments, as the Administrative Agent may determine to
be necessary to cause the Lenders to hold Loans on a pro rata basis in
accordance with their respective Commitments, whereupon such Lender shall cease
to be a Defaulting Lender and will be a Non-Defaulting Lender; provided that no
adjustments shall be made retroactively with respect to fees accrued while such
Lender was a Defaulting Lender; and provided, further, that except to the extent
otherwise expressly agreed by the affected parties, no change hereunder from
Defaulting Lender to Non-Defaulting Lender shall constitute a waiver or release
of any claim of any party hereunder arising from such Lender’s having been a
Defaulting Lender.

     

    (e)           Waiver.  Provided
that Borrower makes all payments required by this Agreement (other than the
Defaulting Lender’s share of fees as provided in Section 2.13(b)),
each Defaulting Lender waives its rights to seek compensation from Borrower for
any sums retained by Agent or distributed by Agent as provided in Section
2.13(a).

     

    ARTICLE
III.

     

    TAXES,
YIELD PROTECTION AND ILLEGALITY

     

    3.01Taxes. 

     

    (a)           Payments Free of
Taxes.  Any and all payments by Borrower to or on account of
any obligation of Borrower hereunder or under any other Loan Document shall be
made free and clear of and without reduction or withholding for any Indemnified
Taxes, provided that if Borrower shall be required by any applicable law to
deduct any Indemnified Taxes from such payments, then, (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section),
Agent or Lender, as the case may be, receives an amount equal to the sum it
would have received had no such deductions been made, (ii) Borrower shall
make such deductions, and (iii) Borrower shall timely pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.

     

    (b)           Payment of Other Taxes by
Borrower.  Without limiting the provisions of subsection
(a) above, Borrower shall timely pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

     


    
      
         


      

      
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    (c)           Indemnification by
Borrower.  Borrower shall indemnify Agent and each Lender,
within 30 days after demand therefor, for the full amount of any Indemnified
Taxes (including Indemnified Taxes imposed or asserted on or attributable to
amounts payable under this Section) paid or incurred by Agent or such
Lender, as the case may be, and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the amount of such payment or
liability delivered to Borrower by a Lender (with a copy to Agent), or by Agent
on its own behalf or on behalf of a Lender, shall be conclusive absent manifest
error.

     

    (d)           Evidence of
Payments.  As soon as practicable after any payment of
Indemnified Taxes by Borrower to a Governmental Authority, Borrower shall
deliver to Agent the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of the return reporting
such payment or other evidence of such payment reasonably satisfactory to
Agent.

     

    (e)           Status of
Lenders.  Any Foreign
Lender that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which the Borrower is resident for tax
purposes, or any treaty to which such jurisdiction is a party, with respect to
payments hereunder or under any other Loan Document shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower or the
Administrative Agent, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate of withholding.  In addition, any
Lender, if requested by the Borrower or the Administrative Agent, shall deliver
such other documentation prescribed by applicable law or reasonably requested by
the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements.

     

    Without
limiting the generality of the foregoing, any Foreign Lender shall deliver to
the Borrower and the Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
request of the Borrower or the Administrative Agent, but only if such Foreign
Lender is legally entitled to do so), whichever of the following is
applicable:

    


    (i)           duly
completed copies of Internal Revenue Service Form W-8BEN claiming eligibility
for benefits of an income tax treaty to which the United States is a
party,

    


    (ii)           duly
completed copies of Internal Revenue Service Form W-8ECI,

    


    (iii)           in
the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (A) a “bank” within the meaning of
section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower
within the meaning of section


    
      
         


      

      
        32

        
          

        

      

      
         


      

    


    881(c)(3)(B)
of the Code, or (C) a “controlled foreign corporation” described in section
881(c)(3)(C) of the Code or (D) is otherwise entitled to an exemption from U.S.
tax under Section 88(c) on the date it acquires its interest herein, and (y)
duly completed copies of  Internal Revenue Service Form W-8BEN,
or

    


    (iv)           any
other form prescribed by applicable law as a basis for claiming exemption from
or a reduction in United States Federal withholding tax duly completed together
with such supplementary documentation as may be prescribed by applicable law to
permit the Borrower to determine the withholding or deduction required to be
made.

     

    If the
IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Borrower did not properly withhold tax from
amounts paid to or for the account of any Foreign Lender due to a failure on the
part of the Foreign Lender (because the appropriate certification form was not
delivered, was not properly executed, or fails to establish an exemption from,
or reduction of, withholding tax with respect to a particular type of payment,
or because such Lender failed to notify Borrower or any other Person of a change
in circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason), such Foreign Lender shall indemnify
and hold Borrower harmless for all amounts paid, directly or indirectly, by
Borrower as tax or otherwise, as a result of such failure, including penalties
and interest, any taxes imposed by any jurisdiction on the amounts payable to
Borrower under this paragraph, and all related costs and expenses (including
attorneys fees and expenses).  The obligation of the Foreign Lenders
under this paragraph shall survive the payment of all Obligations.

     

    (f)           Treatment of Certain
Refunds.  If Agent or any Lender determines, in its sole
discretion, that it has received a refund of any Taxes as to which it has been
indemnified by Borrower or with respect to which Borrower has paid additional
amounts pursuant to this Section, it shall pay to Borrower an amount equal to
such refund (but only to the extent of indemnity payments made, or additional
amounts paid, by Borrower under this Section with respect to the Taxes giving
rise to such refund), net of all out-of-pocket expenses of Agent or such Lender,
as the case may be, and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund), provided that
Borrower, upon the request of Agent or such Lender, agrees to repay the amount
paid over to Borrower (plus any penalties, interest or other charges imposed by
the relevant Governmental Authority) to Agent or such Lender in the event
Agent or such Lender is required to repay such refund to such Governmental
Authority.  This subsection shall not be construed to require Agent or
any Lender to make available its tax returns (or any other information relating
to its taxes that it deems confidential) to the Borrower or any other
Person.

     

    3.02Illegality

     

    If any
Lender determines that any Law has made it unlawful, or that any Governmental
Authority has asserted that it is unlawful, for any Lender or its applicable
Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine
or charge interest rates based upon the Eurodollar Rate, or any Governmental
Authority has imposed material restrictions on the authority of such Lender to
purchase or sell, or to take deposits of, Dollars in the London interbank
market, then, on notice thereof by such Lender to Borrower through Agent, any
obligation of such Lender to make or continue Eurodollar Rate Loans or to
convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such
Lender notifies

     


    
      
         


      

      
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    Agent and
Borrower that the circumstances giving rise to such determination no longer
exist.  Upon receipt of such notice, Borrower shall, upon demand from
such Lender (with a copy to Agent), prepay or, if applicable, convert all
Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day
of the Interest Period therefor, if such Lender may lawfully continue to
maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender
may not lawfully continue to maintain such Eurodollar Rate
Loans.  Upon any such prepayment or conversion, Borrower shall also
pay accrued interest on the amount so prepaid or converted and all amounts due
under Section
3.05 in accordance with the terms thereof due to such prepayment or
conversion.

     

    3.03Inability to Determine
Rates

     

    If the
Required Lenders determine, in connection with any request for a Eurodollar Rate
Loan or a conversion to or continuation thereof, that (a) Dollar deposits
are not being offered to banks in the London interbank eurodollar market for the
applicable amount and Interest Period of such Eurodollar Rate Loan,
(b) adequate and reasonable means do not exist for determining the
Eurodollar Base Rate for any requested Interest Period with respect to a
proposed Eurodollar Rate Loan, or (c) an unusual or extraordinary event or
circumstance occurs or exists affecting the applicable offshore Dollar market
such that the Eurodollar Base Rate for any requested Interest Period with
respect to a proposed Eurodollar Rate Loan does not adequately and fairly
reflect the cost to such Lenders of funding such Loan, Agent will promptly so
notify Borrower and each Lender.  Thereafter, the obligation of
Lenders to make or maintain Eurodollar Rate Loans shall be suspended until Agent
(upon the instruction of the Required Lenders) revokes such
notice.  Upon receipt of such notice, Borrower may revoke any pending
request for a Borrowing of, conversion to or continuation of Eurodollar Rate
Loans or, failing that, will be deemed to have converted such request into a
request for a Borrowing of Base Rate Loans in the amount specified
therein.

     

    3.04Increased Costs.

     

    (a)           Increased Costs
Generally.  If any Change in Law shall:

     

    (i)           impose,
modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except any
reserve requirement reflected in the Eurodollar Rate); or

     

    (ii)           impose
on any Lender or the London interbank market any other condition, cost or
expense affecting this Agreement or Eurodollar Loans made by such Lender or
participation therein;

     

    and the
result of any of the foregoing shall be to increase the cost to such Lender of
making or maintaining any Eurodollar Loan (or of maintaining its obligation to
make any such Loan), or to reduce the amount of any sum received or receivable
by such Lender (whether of principal, interest or any other amount) then,
upon request of such Lender, Borrower will pay to such Lender such additional
amount or amounts as will compensate such Lender for such additional costs
incurred or reduction suffered.

     


    
      
         


      

      
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    (b)           Capital
Requirements.  If any Lender reasonably determines that any
Change in Law affecting such Lender or any Lending Office of such Lender or such
Lender’s holding company, if any, regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s capital or on
the capital of such Lender’s holding company, if any, as a consequence of this
Agreement, the Commitment of such Lender or the Loans made by such Lender to a
level below that which such Lender or such Lender’s holding company could have
achieved but for such Change in Law (taking into consideration such Lender’s
policies and the policies of such Lender’s holding company with respect to
capital adequacy), then from time to time Borrower will pay to such Lender such
additional amount or amounts as will compensate such Lender or such Lender’s
holding company for any such reduction suffered.

     

    (c)           Certificates for
Reimbursement.  A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in subsection (a) or (b) of this Section
and, in reasonable detail, the basis for such calculation and delivered to
Borrower shall be conclusive absent manifest error.  Borrower shall
pay such Lender the amount shown as due on any such certificate within 10 days
after receipt thereof. Such certificate shall also include a statement to the
effect that such compensation for additional costs incurred or reduction
suffered reflects a good faith and non-discriminatory allocation to this
Agreement.

     

    (d)           Delay in
Requests.  Failure or delay on the part of any Lender to demand
compensation pursuant to the foregoing provisions of this Section shall not
constitute a waiver of such Lender’s right to demand such compensation, provided that
Borrower shall not be required to compensate a Lender pursuant to the foregoing
provisions of this Section for any increased costs incurred or reductions
suffered more than 30 days prior to the date that such Lender notifies Borrower
of the Change in Law giving rise to such increased costs or reductions and of
such Lender’s intention to claim compensation therefor (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the 30-day period referred to above shall be extended to include the period
of retroactive effect thereof).

     

    3.05Compensation for Losses

     

    Upon
demand of any Lender (with a copy to Agent) from time to time, Borrower
shall promptly compensate such Lender for and hold such Lender harmless from any
loss, cost or expense incurred by it as a result of:

     

    (a)           any
continuation, conversion, payment or prepayment of any Loan other than a Base
Rate Loan on a day other than the last day of the Interest Period for such Loan
(whether voluntary, mandatory, automatic, by reason of acceleration, or
otherwise);

     

    (b)           any
failure by Borrower (for a reason other than the failure of such Lender to make
a Loan) to prepay, borrow, continue or convert any Loan other than a Base
Rate Loan on the date or in the amount notified by Borrower; or

     

    (c)           any
assignment of a Eurodollar Rate Loan on a day other than the last day of the
Interest Period thereof as a result of a request by the Borrower pursuant to
Section 10.13.

     

    Borrower’s
compensation to any Lender under this Section 3.05 is intended to put such
Lender in the same financial position it would have been in had the event
referred to in clauses (a), (b) or

     


    
      
         


      

      
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    (c) not
occurred, including any loss of anticipated profits.  Borrower’s
compensation to any such Lender will include any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were
obtained.  Borrower shall also pay any customary administrative fees
charged by such Lender in connection with the foregoing.  For purposes
of calculating amounts payable by Borrower to Lenders under this Section 3.05,
each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it
at the Eurodollar Base Rate used in determining the Eurodollar Rate for such
Loan by a matching deposit or other borrowing in the London interbank eurodollar
market for a comparable amount and for a comparable period, whether or not such
Eurodollar Rate Loan was in fact so funded.

     

    3.06 Mitigation of Obligations; Replacement of
Lenders 

     

    (a)  Designation of Different
Lending Office.  If any Lender requests compensation under
Section 3.04, or
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01, or
if any Lender gives a notice pursuant to Section 3.02, then
such Lender shall use reasonable efforts to designate a different Lending Office
for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 3.01 or
3.04, as the
case may be, in the future, or eliminate the need for the notice pursuant to
Section 3.02, as
applicable, and (ii) in each case, would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender.  Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or
assignment.

     

    (b)           Replacement of
Lenders.  If any Lender requests compensation under Section
3.04, or if the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
3.01, the Borrower may replace such Lender in accordance with Section
10.13.

     

    (c)           Removal of Tax
Lenders.

     

    (i)           If
the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01
(such Lender being a “Tax Lender”), a
replacement Lender under clause (b) above is
not available and the last sentence of Section 10.13 does
not apply, then, subject to the condition specified in clause (iv) below,
Borrower, upon at least 5 Business Days prior irrevocable notice, may pay an
amount equal to the outstanding principal of such Tax Lender’s Loans, accrued
interest thereon, accrued fees and all other amounts payable to such Tax Lender
hereunder and under the other Loan Documents (including any amounts under
Section 3.05) and thereupon permanently terminate the Commitments of such Lender
and remove such Tax Lender hereunder.  Such notice to remove the Tax
Lender, as applicable, shall specify an effective date for such termination and
removal, which date shall not be later than 15 Business Days after the date such
notice is given.

     


    
      
         


      

      
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    (ii)
Prior to the effective date of such termination and removal, the Tax Lender and
Borrower shall execute and deliver a mutually satisfactory removal agreement,
subject only to the Tax Lender being repaid in full as provided in the above
clause (i) by Borrower.  If the Tax Lender shall refuse or fail to
execute and deliver any such removal agreement prior to the effective date of
such removal, the termination of the Commitments of such Tax Lender and the
removal of such Tax Lender shall nonetheless occur on the effective date
originally specified by Borrower upon payment by Borrower to such Tax Lender of
all of  the amounts referred to in clause (i)
above.

     

    (iii)
Anything contained in this Agreement to the contrary notwithstanding, including
any requirement that payments to Lenders be made on a pro-rata basis or that the
Commitments of Lenders be reduced on a pro-rata basis, Borrower may make
payments under this clause (c) to a
Tax Lender that is being removed, the Commitments of such Tax Lender may be
terminated under this clause (c) and the
Obligations due to such Tax Lender may be satisfied under this clause (c) while
leaving remaining Obligations outstanding.

     

    (iv)           Borrower
shall only be entitled to terminate the Commitments of a Tax Lender and remove
such Tax Lender under this clause (c) if and
only if no Event of Default has occurred and is continuing.

     

    (v)           Once
a termination and removal of a Tax Lender is effectuated under this clause (c), the
Aggregate Commitments shall automatically be deemed reduced by the amount of the
terminated Commitment of such removed Tax Lender and all of the provisions of
this Agreement (other than Section 10.04) and
the other Loan Documents, including the determination of Required Lenders and
Applicable Percentage, shall be interpreted and determined without regard to
such terminated Commitment and without regard to the removed Tax
Lender.

     

    (vi)           The
termination of the Commitment of a Tax Lender and the removal of such Tax Lender
pursuant to this clause (c) shall not
eliminate or affect such Tax Lender’s rights under Section 10.04, which
rights shall survive any such termination and removal.

     

    3.07Survival

     

    All of
Borrower’s obligations under this Article III shall
survive termination of the Aggregate Commitments and repayment of all other
Obligations hereunder.

     

    ARTICLE
IV.

     

    CONDITIONS
PRECEDENT TO CREDIT EXTENSIONS

     

    4.01Conditions to Effectiveness and Initial
Borrowing:

     

    The
effectiveness of this Agreement is subject to satisfaction of the conditions
precedent set forth in clauses (a), (b) and (c) below and, in addition to the
satisfaction of such conditions, the obligation of each Lender to make its
initial Loan hereunder is subject to satisfaction of the conditions precedent
set forth in clause (d) below :

     

    (a)           Agent’s
receipt of the following, each of which shall be originals or telecopies
(followed promptly by originals) unless otherwise specified, each properly
executed by a Responsible
Officer of the Borrower, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing
Date) and each in form and substance satisfactory to Agent and each of the
Lenders:

     


    
      
         


      

      
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    (i)           executed
counterparts of this Agreement and all Collateral Documents, sufficient in
number for distribution to Agent, each Lender and Borrower;

     

    (ii)           a
Note executed by Borrower in favor of each Lender requesting a
Note;

     

    (iii)           such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of Borrower as Agent may require
evidencing the identity, authority and capacity of each Responsible Officer
thereof authorized to act as a Responsible Officer in connection with this
Agreement and the other Loan Documents;

     

    (iv)           such
documents and certifications as Agent may reasonably require to evidence that
Borrower is duly organized or formed, and that Borrower is validly existing, in
good standing and qualified to engage in business in each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification, except to the extent that failure to do so would
not reasonably be expected to have a Material Adverse Effect;

     

    (v)           a
favorable opinion(s) of counsel to Borrower acceptable to Agent addressed to
Agent and each Lender, as to the matters concerning Borrower, the Loan Documents
and the Collateral, including the enforceability of all Loan Documents,
compliance with all Laws, the perfection and priority of all security interests
purported to be granted and no conflicts with material agreements, in form and
substance satisfactory to Agent;

     

    (vi)           a
certificate of a Responsible Officer of Borrower either (A) attaching
copies of all consents, licenses and approvals required in connection with the
execution, delivery and performance by Borrower and the validity against
Borrower of the Loan Documents (other than certificates, consents and licenses
related to operating individual aircraft or its business as a common carrier),
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;

     

    (vii)           a
certificate signed by a Responsible Officer of Borrower certifying (A) that
the conditions specified in Sections 4.02(a) and (b) have been
satisfied, and (B) that there has been no event or circumstance since the
date of the Audited Financial Statements that has had or would be reasonably
expected to have, either individually or in the aggregate, a Material Adverse
Effect;

     

    (viii)           evidence
that all insurance required to be maintained pursuant to the Loan Documents has
been obtained and is in effect and that Administrative Agent and Lenders have
been named as loss payees (subject to the last paragraph of Section 3.5(a) of the
Security Agreement) to the extent of their interest (the lower of (x) the
Current Market Value as reflected on the last Qualified Appraisal or (y) the
Obligations outstanding at the

     


    
      
         


      

      
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    time of
payment of insurance proceeds) and additional insured under all policies of
casualty insurance and as additional insured under all policies of liability
insurance, and certificates of insurance from nationally recognized independent
aviation insurance brokers certifying to such insurance coverage (including
insurance coverage over all Aircraft Collateral);

     

    (ix)           a
duly completed Compliance Certificate as of the last day of the fiscal quarter
of Borrower most recently ended prior to the Closing Date, signed by a
Responsible Officer of Borrower;

     

    (x)           acknowledgments
of all filings or recordations necessary to perfect its Liens in the Collateral
(other than filings and recordations with International Registry), as well as
UCC and FAA searches and other evidence satisfactory to Agent that (i) the
Security Agreement has created a valid and effective security interest in the
Aircraft Collateral, (ii) such security interests have been duly perfected,
and (iii) the Aircraft Collateral is free and clear of Liens or options
other than such security interests and any Liens permitted pursuant to Section
7.01.  Without limiting the generality of the foregoing, the
Administrative Agent shall have received evidence that the Security Agreement
has been duly filed for record with the Aircraft Registry of United States
Department of Transportation, Federal Aviation Administration in Oklahoma City
and the UCC Financing Statement has been duly filed in the appropriate UCC
filing office in Alaska;

     

    (xi)           Qualified
Appraisals showing the Current Market Value of the Aircraft Collateral as
of the date no earlier than December 31, 2009;

     

    (xii)           evidence
that (i) any Collateral Documents (other than the Security Agreement) have
created a valid and effective security interest in any Collateral (other than
the Aircraft Collateral), (ii) such security interests have been duly
perfected, and (iii) any Collateral (other than the Aircraft Collateral) is
free and clear of Liens or options other than such security interests and any
Liens permitted pursuant to Section
7.01;

     

    (xiii)           the
Agent Fee Letter and Arrangement Fee Letter;

     

    (xiv)           conformed
copies of the Wells Fargo Credit Agreement, together with all agreements (other
than the related fee letter), instruments and other documents delivered in
connection therewith as the Administrative Agent shall reasonably
request;

     

    (xv)           evidence
that the Existing Credit Agreement has been, or concurrently with the Closing
Date is being, terminated and all Liens securing obligations under the Existing
Credit Agreement have been, or concurrently with the Closing Date are being,
released; and

     

    (xvi)           such
other assurances, certificates, documents, consents or opinions as Agent or the
Required Lenders reasonably may require, including all documentation and other
information that the Agent or such Lender requests in order to comply with its
ongoing obligations under applicable “know your customer” and anti-money
laundering rules and regulations, including the Patriot Act.

     


    
      
         


      

      
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    (b)           Any
fees required to be paid on or before the Closing Date shall have been
paid.

     

    (c)           Unless
waived by Agent, Borrower shall have paid all fees, charges and disbursements of
counsel to Agent to the extent invoiced prior to or on the Closing
Date.

     

    (d)           Agent’s
receipt of:

     

    (i)           an
opinion from aviation counsel acceptable to Agent as to the FAA and CTT matters
relating to perfection and priority of the security interest created by the
Security Agreement;

     

    (ii)           acknowledgments
of all filings and recordations with International Registry and evidence that
the Security Agreement has been duly filed for record with the International
Registry and International Registry searches showing that (i) the Security
Agreement has created a valid and effective security interest in the Aircraft
Collateral, (ii) such security interests have been duly perfected, and
(iii) the Aircraft Collateral is free and clear of Liens or options other
than such security interests and any Liens permitted pursuant to Section
7.01;

     

    Without
limiting the generality of the provisions of Section 9.04,
for purposes of determining compliance with the conditions specified in this
Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection
thereto.

     

    4.02Conditions to all
Borrowings

     

    The
obligation of each Lender to honor any Loan Notice is subject to the following
conditions precedent:

     

    (a)           The
representations and warranties of Borrower 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 on
and as of the date of such Borrowing, except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they shall be true and correct 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.

     

    (b)           No
Change of Control, Invalidity Event or Material Failure of Security shall have
occurred and no Default, Collateral Shortfall or Over Advance shall exist or
would result from such proposed Borrowing or from the application of the
proceeds thereof.

     

    (c)           Agent
shall have received a Loan Notice in accordance with the requirements
hereof.

     

    (d)           Neither
the Administrative Agent nor any Lender shall have received from any Person any
notice that any Collateral Document will no longer secure on a first priority
basis (subject
to Liens permitted under the applicable Collateral Document) future
Borrowings under this Agreement.

     


    
      
         


      

      
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    (e)           Agent
shall have received, in form and substance satisfactory to it: (i) such other
assurances, certificates, documents or consents related to the foregoing as
Agent or the Required Lenders reasonably may require; and (ii) any information
requested more than five Business Days prior to such Loan Notice by the Agent or
any Lender in accordance with Section 6.02(d).

     

    Each Loan
Notice submitted by Borrower shall be deemed to be a representation and warranty
that the conditions specified in Sections 4.02(a) and
(b) have
been satisfied on and as of the date of the applicable Borrowing.

     

    ARTICLE
V.

     

    REPRESENTATIONS
AND WARRANTIES

     

    Borrower
represents and warrants to Agent and the Lenders that:

     

    5.01Existence, Qualification and Power;
Compliance with Laws

     

    Borrower
and each Subsidiary thereof (a) is duly organized or formed, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority
and all requisite governmental licenses, authorizations, consents and approvals
to (i) own its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Loan Documents, (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, and (d) is
in compliance with all Laws; except in each case referred to in clause (b)(i),
(c) or (d), to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.

     

    5.02Authorization; No
Contravention

     

    The
execution, delivery and performance by Borrower of each Loan Document, have been
duly authorized by all necessary corporate or other organizational action, and
do not and will not (a) contravene the terms of Borrower’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 Contractual Obligation (other than the Loan Documents) to which
Borrower is a party or affecting Borrower or the properties of Borrower or any
of its Subsidiaries or (ii) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which Borrower or its property
is subject; or (c) violate any Law.  Borrower and each Subsidiary
thereof is in compliance with all Contractual Obligations referred to in clause
(b)(i), except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.

     

    5.03Governmental Authorization; Other
Consents

     

    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 the execution, delivery or performance by, or
enforcement against, Borrower of this Agreement or any other Loan Document,
except for recordings or filings in connection with the Liens granted to the
Agent under the Collateral Documents or filing of a redacted copy of the Loan
Documents with the SEC.

     


    
      
         


      

      
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    5.04           Binding
Effect

     

     

    This
Agreement has been, and each other Loan Document, when delivered hereunder, will
have been, duly executed and delivered by Borrower.  This Agreement
constitutes, and each other Loan Document when so delivered will constitute, a
legal, valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms.

     

    5.05Financial 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
Borrower as of the date thereof and its 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 Borrower as of the date thereof, including liabilities for taxes
and material commitments.

     

    (b)           The
unaudited consolidated balance sheet of Borrower and its Subsidiaries dated
September 30, 2009, 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 Borrower 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)           Since
the Closing Date and since the date of the Audited Financial Statements, 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
Effect.

     

    (d)           Since
the date of the Audited Financial Statements, no material Internal Control Event
has occurred to the knowledge of Borrower’s Chief Executive Officer, Chief
Financial Officer, Vice President-Finance, Treasurer or Controller.

     

    5.06Litigation and Judgments

     

    There are
no actions, suits, proceedings, claims or disputes pending or, to the knowledge
of Borrower after due and diligent investigation, threatened or contemplated, at
law, in equity, in arbitration or before any Governmental Authority, by or
against Borrower or any of its Subsidiaries or against any of their properties
or revenues that (a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby, or
(b) are reasonably likely to have a Material Adverse Effect.  To
the knowledge of Borrower after due and diligent investigation, there is no
outstanding unsatisfied money judgment against Borrower or any of its
Subsidiaries in an amount in excess of the Threshold Amount, and there are no
outstanding unsatisfied money judgments against Borrower or any of its
Subsidiaries which individually or in the aggregate have or would have a
Material Adverse Effect.

     

    5.07No Default

     

    .  Neither Borrower
nor any Subsidiary is in default under or with respect to any Contractual
Obligation that would, 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 consummation of the transactions
contemplated by this Agreement or any other Loan Document.

     


    
      
         


      

      
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    5.08Ownership of Property;
Liens

     

    Each of
Borrower and each Subsidiary has good record and marketable title in fee simple
to, or valid leasehold interests in, all real property necessary or used in the
ordinary conduct of its business, except for such defects in title as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  The property of Borrower and its Subsidiaries is
subject to no Liens, other than Liens permitted by Section 7.01.

     

    5.09Environmental Compliance

     

    Borrower
and its Subsidiaries 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 Borrower has
reasonably concluded that, except as specifically disclosed in Schedule 5.09,
such Environmental Laws and claims would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

     

    5.10Insurance

     

    The
properties and businesses of Borrower and its Subsidiaries are insured with
financially sound and reputable insurance companies (including Lloyds of London
syndicates) not Affiliates of Borrower (unless fully reinsured by financially
sound and reputable insurance companies), in such amounts (after giving effect
to any self-insurance, provided that any
self-insurance may not exceed $5,000,000 per occurrence), with such deductibles
and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where Borrower or
the applicable Subsidiary operates.

     

    5.11Taxes

     

    Borrower
and its Subsidiaries have filed all Federal, state and other material tax
returns and reports required to be filed, and have paid all Federal, state and
other material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except 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.  To Borrower’s knowledge, there is
no proposed tax assessment against Borrower or any Subsidiary that would, if
made, have a Material Adverse Effect.

     

    5.12ERISA Compliance.

     

    (a)           Each
Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state Laws.  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
is currently being processed by the IRS with respect thereto and, to the best
knowledge of Borrower, nothing has occurred which would prevent, or cause the
loss of, such qualification.  Borrower and each ERISA Affiliate have
made all required contributions to each Plan subject to the Pension Funding
Rules, and no application for a funding waiver or an extension of any
amortization period pursuant to the Pension Funding Rules has been made with
respect to any Plan.

     


    
      
         


      

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

     

    (c)           (i)
No ERISA Event has occurred or is reasonably expected to occur;
(ii) neither Borrower nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA), which would reasonably be expected to have a Material Adverse Effect;
(iii) neither Borrower 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 (iv) neither Borrower nor any ERISA Affiliate has
engaged in a transaction that could be subject to Sections 4069 or
4212(c) of ERISA.

     

    5.13Subsidiaries

     

    As of the
Closing Date, Borrower has no Subsidiaries.  As of the Closing Date,
Parent has no operating Subsidiaries other than Borrower and
Horizon.  All of the outstanding Equity Interests in Borrower have
been validly issued and are fully paid and nonassessable and are owned by Parent
free and clear of all Liens.

     

    5.14Margin Regulations; Investment Company
Act.

     

    (a)           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 FRB), or extending credit for the purpose
of purchasing or carrying margin stock.

     

    (b)           None
of Borrower, any Person Controlling Borrower, or any Subsidiary is or is
required to be registered as an “investment company” under the Investment
Company Act of 1940.

     

    5.15Disclosure

     

    Borrower
has disclosed to Agent and Lenders all agreements, instruments and corporate or
other restrictions to which it or any of its Subsidiaries is subject, and all
other matters known to it, that, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect.  No
report, financial statement, certificate or other information furnished (whether
in writing or orally) by or on behalf of Borrower to Agent or any Lender in
connection with the transactions contemplated hereby and the negotiation of this
Agreement or delivered hereunder or under any other Loan Document (in each case,
as modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, Borrower represents only that such information was prepared in good
faith based upon assumptions believed to be reasonable at the time.

     


    
      
         


      

      
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    5.16           Compliance
with Laws

     

    Each of Borrower and each Subsidiary
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, would not reasonably be
expected to have a Material Adverse Effect.

     

    5.17Intellectual Property; Licenses,
Etc

     

    Borrower
and its Subsidiaries own, or possess the right to use, all of the trademarks,
service marks, trade names, copyrights, patents, patent rights, franchises,
licenses and other intellectual property rights (“IP Rights”) that are
reasonably necessary for the operation of their respective businesses, without
conflict with the rights of any other Person.  To the best knowledge
of Borrower, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by Borrower or any Subsidiary infringes upon any rights held by any
other Person.  No claim or litigation regarding any of the foregoing
is pending or, to the best knowledge of Borrower, threatened, which, either
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

     

    5.18Solvency

     

    The
Borrower is Solvent and shall be Solvent immediately after the consummation of
the transactions contemplated by this Agreement.  As used herein, a
Person is “Solvent” on a
particular date, if, on such date both (a) (i) the then fair saleable
value of the property of such Person on a going concern basis is
(A) greater than the total amount of liabilities (including contingent
liabilities) of such Person as they mature in the ordinary course and
(B) not less than the amount that will be required to pay the probable
liabilities on such Person’s then-existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
reasonably available to such Person; (ii) such Person’s capital is not
unreasonably small in relation to its business or any contemplated or undertaken
transaction; and (iii) such Person does not intend to incur, or
believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (b) such
Person is “solvent” within the meaning given that term and similar terms under
applicable laws relating to fraudulent transfers and conveyances.  For
purposes of this definition, the debts and liabilities of a Person, contingent
or otherwise, shall include the amount of all debts and liabilities that are
relevant under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the “Fraudulent Transfer
Laws”), and the assets of a Person shall give effect to the value (as
determined under the applicable provisions of the Fraudulent Transfer
Laws) of any rights to subrogation, reimbursement, indemnification or
contribution of such Person pursuant to applicable Law or pursuant to the terms
of any agreement.

     

    5.19Collateral and Security
Documents.

     

    (a)           Borrower
owns all right, title and interest in and to the Aircraft Collateral (and any
other Collateral) free and clear of all Liens other than (i) the security
interests in favor of the Administrative Agent securing the Obligations, or
(ii) Liens permitted by Section 7.01 that are
junior and subordinate to the security interests created by the Collateral
Documents, or (iii) Liens on the Aircraft Collateral permitted under
subsections (e) and (f) of Section
7.01.

     


    
      
         


      

      
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    (b)           The
Security Agreement (and any of other Collateral Documents) create, in favor of
the Administrative Agent for the benefit of itself and the Lenders, a legal,
valid and enforceable security interest in all of Borrower’s right, title and
interest in all of the Aircraft Collateral (and any other Collateral), which
security interest has been duly perfected and has priority over any other Liens
on the Collateral (other than Liens on the Aircraft Collateral described in
subsections (e) and (f) of Section
7.01).

     

    (c)           Borrower
is a citizen of the United States for purposes of the U.S. Federal Aviation
Act.

     

    (d)           Borrower
is, and continuously during the five years immediately preceding the date of
this Agreement has been, an Alaska corporation.  Borrower’s chief
executive office is, and continuously during the five years immediately
preceding the date of this Agreement has been, located in Seattle,
Washington.

     

    (e)           No
Aircraft, at the time Agent’s security interest in such Aircraft attaches, will
be subject to any interest, other than an interest held by Borrower, that is
recorded in the FAA Registry.

     

    (f)           The
Engines pledged pursuant to the Security Agreement as part of an applicable
Aircraft are of the same series, model and make, and the Engines, taken as a
group, have approximately the same aggregate value as the engines upon which the
determination of Current Market Value in each Qualified Appraisal was
based.

     

    (g)           The
representations and warranties in this Section 5.19
(other than Section 5.19(e)) are
made on and as of the date of this Agreement and, with respect to the
representations and warranties in subsections (a), (b) and (c) hereof,
on and as of each date thereafter.

     

    5.20Burdensome Agreements

     

    Neither
Borrower nor any Subsidiary has any Contractual Obligation (other than this
Agreement or any other Loan Document) that (a) limits the ability
(i) of any Subsidiary to make Restricted Payments to Borrower or to
otherwise transfer property to Borrower, (ii) of any Subsidiary to
Guarantee any obligations of Borrower under any of the Loan Documents or
(iii) of Borrower or any Subsidiary to create, incur, assume or suffer to
exist Liens on property of such Person (other than the negative pledge set forth
in the ABL Facility Documents as in effect on the Closing Date or as the same
may be amended, modified or changed thereafter in accordance with Section 7.15(b)(i)); provided, however, that this
clause (iii) shall not prohibit any negative pledge incurred or provided in
favor of any holder of Indebtedness permitted under this Agreement solely to the
extent any such negative pledge relates to the property financed by such
Indebtedness or the property subject to a Lien permitted under this Agreement
securing such Indebtedness.

     

    5.21Compliance with OFAC Rules and
Regulations; Patriot Act.

     

    (a)           None
of Borrower, any Subsidiary of Borrower or any Affiliate of Borrower (a) is a
Sanctioned Person, (b) has more than 15% of its assets in Sanctioned Countries,
or (c) derives more than 15% of its operating income from investments in, or
transactions with, Sanctioned Persons or Sanctioned Countries.  No
part of the proceeds of any extension of credit hereunder

     


    
      
         


      

      
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    will be
used directly or indirectly to fund any operations in, finance any investments
or activities in or make any payments to, a Sanctioned Person or a Sanctioned
Country.  “OFAC” means the U.S. Department of the Treasury’s Office of
Foreign Asset Control.  “Sanctioned Countries” means a country subject
to a sanctions program identified on the list maintained by OFAC and available
at http://www.treas.gov/offices/enforcement/ofac/sanctions/index.html, or
otherwise published from time to time.  “Sanctioned Person” means (a)
a Person named on the list of “Specially Designated Nationals and Blocked
Persons” maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sanctions/index.html or otherwise
published from time to time, or (b)(i) an agency of the government of a
Sanctioned Country, (ii) an organization controlled by a Sanctioned Country, to
the extent subject to a sanctions program administered by OFAC.

     

    (b)           The
Borrower, any Subsidiary of Borrower or any Affiliate of Borrower are in
compliance in all material respects, to the extent applicable, with the Patriot
Act and other federal or state laws relating to “know your customer” and
anti-money laundering rules and regulations.

     

    ARTICLE
VI.

     

    AFFIRMATIVE
COVENANTS

     

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

     

    6.01Financial Statements

     

    Deliver
to Agent a sufficient number of copies for delivery by Agent to each Lender, in
form and detail satisfactory to Agent and the Required Lenders:

     

    (a)           as soon as available, but in any event no later than the
earlier of five days after the deadline for filing imposed by the SEC or 95 days
after the end of each fiscal year of Borrower, a consolidated balance sheet of
Borrower 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, audited and accompanied by: (i) a report and opinion of
a Registered Public Accounting Firm of nationally recognized standing not
reasonably objected to by the Required Lenders, which report and opinion shall
be prepared in accordance with generally accepted auditing standards and
applicable Securities Laws and shall not be subject to any “going concern” or
like qualification or exception or any qualification or exception as to the
scope of such audit and (ii) beginning with the report for December 31, 2010, a
report of such Registered Public Accounting Firm as to the Borrower’s internal
controls pursuant to Section 404 of Sarbanes-Oxley that: (A) expresses a
conclusion that would not reasonably be expected to have a Material Adverse
Effect and (B) identifies no issues related to Borrower’s or its Subsidiaries’
internal controls that would reasonably be expected to have a Material Adverse
Effect; and

     

    (b)           as
soon as available, but in any event within 50 days after the end of each of the
first three fiscal quarters of each fiscal year of Borrower, a consolidated
balance sheet of

     


    
      
         


      

      
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    Borrower
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 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, certified by a
Responsible Officer of Borrower as fairly presenting the financial condition,
results of operations, shareholders’ equity and cash flows of Borrower and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes.

     

    6.02Certificates; Other
Information

     

    Deliver
to Agent a sufficient number of copies for delivery by Agent to each Lender, in
form and detail satisfactory to Agent and the Required Lenders:

     

    (a)           concurrently
with the delivery of the financial statements referred to in Section 6.01(a),
a certificate of its independent certified public accountants certifying such
financial statements;

     

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

     

    (c)           within
five Business Days after the same are available, copies of each annual report,
proxy or financial statement or other report or communication sent to the
stockholders of Parent, and copies of all annual, regular, periodic and special
reports and registration statements which Parent may file or be required to file
with the Securities and Exchange Commission under Section 13 or
15(d) of the Securities Exchange Act of 1934, and not otherwise required to
be delivered to Agent pursuant hereto; and

     

    (d)           promptly, such additional information regarding the
business, financial or corporate affairs of Borrower or any Subsidiary, or
compliance with the terms of the Loan Documents, as Agent or any Lender
may from time to time reasonably request.

     

    Documents
required to be delivered pursuant to Section 6.01(a) or
(b) or Section 6.02(c) (to
the extent any such documents are included in materials otherwise filed with the
SEC) may be delivered electronically and if so delivered, shall be deemed to
have been delivered on the date (i) on which the Borrower posts such documents,
or provides a link thereto on the Borrower’s website on the Internet at the
website address listed on Schedule 10.02; or
(ii) on which such documents are posted on the Borrower’s behalf on an Internet
or intranet website, if any, (or website maintained by the SEC) to which each
Lender and the Administrative Agent have access (whether a commercial,
third-party website or whether sponsored by the Administrative Agent); provided that: (i)
the Borrower shall deliver paper copies of such documents to the Administrative
Agent or any Lender that specifically requests the Borrower to deliver such
paper copies and (ii) the Borrower shall notify the Administrative Agent and
each Lender (by telecopier or electronic mail) of the posting of any such
documents and provide to the Administrative Agent by electronic mail electronic
versions (i.e.,
soft copies) of such documents.  Notwithstanding anything contained
herein, in every instance the Borrower shall be required to provide paper copies
of the Compliance Certificates required by Section 6.02(b) to
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    Administrative
Agent.  Except for such Compliance Certificates, the Administrative
Agent shall have no obligation to request the delivery or to maintain copies of
the documents referred to above, and in any event shall have no responsibility
to monitor compliance by the Borrower with any such request for delivery, and
each Lender shall be solely responsible for requesting delivery to it or
maintaining its copies of such documents.

     

    Borrower
hereby acknowledges that (a) Agent will make available to Lenders materials
and/or information provided by or on behalf of Borrower hereunder (collectively,
“Borrower
Materials”) by posting Borrower Materials on Debtdomain or another
similar electronic system (the “Platform”) and
(b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that
do not wish to receive material non-public information with respect to Borrower
or its securities) (each, a “Public
Lender”).  Borrower hereby agrees that (w) all Borrower
Materials that are to be made available to Public Lenders shall be clearly and
conspicuously marked “PUBLIC” which, at a
minimum, shall mean that the word “PUBLIC” shall appear
prominently on the first page thereof, provided, however, that no document
available on the website of the SEC need contain any legend; (x) by marking
Borrower Materials “PUBLIC,” Borrower shall be deemed to have authorized Agent
and the Lenders to treat such Borrower Materials as either publicly available
information or not material information (although it may be sensitive and
proprietary) with respect to Borrower or its securities for purposes of
United States Federal and state securities laws; (y) all Borrower Materials
marked “PUBLIC” are permitted to be made available through a portion of the
Platform designated “Public Investor;” and (z) Agent shall be entitled to
treat any Borrower Materials that are not marked “PUBLIC” (other than documents
available on the SEC website) as being suitable only for posting on a portion of
the Platform not designated “Public
Investor.”

     

    6.03Notices

     

    Not later
than five Business Days after Borrower obtains knowledge thereof, notify Agent
and each Lender:

     

    (a)           of
the occurrence of any Default to the knowledge of Borrower’s chief financial
officer or other Responsible Officer who is responsible for communicating with
Administrative Agent or Lenders regarding this Agreement or any of the matters
contemplated by this Agreement;

     

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

     

    (c)           of
the occurrence of (i) any ERISA Event, (ii) that Borrower or ERISA Affiliate has
filed or anticipates filing any request for a receipt of a minimum funding
waiver under Section 412 of the Code, (iii) any Multiemployer Plan has notified
the Borrower or ERISA Affiliate that it is or is expected to be in critical or
endangered status under Title IV of ERISA, or (iii) that any Pension Plan is or
is expected to be in at-risk status under Title IV of ERISA, setting forth the
full details as to such occurrence and the action, if any, that, Borrower or
such ERISA Affiliate is required or proposes to take, together with any notices
required or proposed

     


    
      
         


      

      
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    to be
given or filed by Borrower, the Plan administrator or such ERISA Affiliate to or
with the PBGC or any other Governmental Authority, or a Plan, or Multiemployer
Plan or participant and any notices received by Borrower or ERISA Affiliate from
the PBGC or any other Governmental Authority, or a Plan, Multiemployer Plan or
Plan participant with respect thereto; and

     

    (d)           of
any material change in accounting policies or financial reporting practices by
Borrower or any Subsidiary.

     

    Each
notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of Borrower setting forth details of the occurrence referred
to therein and stating what action 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 Agreement and any
other Loan Document that have been breached.

     

    6.04Payment of Obligations

     

    Pay and
discharge as the same shall become due and payable, all its obligations and
liabilities, including (a) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless the
same are being contested in good faith by appropriate proceedings diligently
conducted and adequate reserves in accordance with GAAP are being maintained by
Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would
by law become a Lien upon its property; and (c) all Indebtedness, as and
when due and payable, but subject to any subordination provisions contained in
any instrument or agreement evidencing such Indebtedness.

     

    6.05Preservation 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 7.02;
(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 would 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 would reasonably be expected to have a Material
Adverse Effect.

     

    6.06Maintenance of Properties

     

    (a) Maintain,
preserve and protect or replace 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; (b) make all necessary repairs thereto and
renewals and replacements thereof except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect; and (c) use not
less than the standard of care typical in the industry in the operation and
maintenance of its facilities.

     

    6.07Maintenance of Insurance.

     

    (a)           In
addition to insurance requirements set forth in the Collateral Documents,
maintain with financially sound and reputable insurance companies (including
Lloyds of London syndicates) not Affiliates of Borrower (unless fully reinsured
by financially sound and reputable insurance companies), insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar

     


    
      
         


      

      
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    business
(operating similar aircraft in similar markets), of such types and in such
amounts (after giving effect to any self-insurance (that may not exceed
$5,000,000 per occurrence) and/or deductible compatible with the following
standards) as are customarily carried under similar circumstances by such
other Persons and providing for not less than 30 days’ prior notice to Agent of
termination or cancellation of such insurance.  Without limiting the
generality of the foregoing, except as provided in paragraph (b) of this
Section 6.07,
Borrower will at all times carry or cause to be carried at its expense (or at
the expense of the lessee of such Aircraft), aircraft liability insurance
including passenger, third party, bodily injury and property damage, baggage,
cargo and mail liability and, subject to an aggregate limit, products legal
liability (exclusive of manufacturer’s product liability insurance) with respect
to each Aircraft owned by Borrower (A) for a combined single limit of at least
$600,000,000 per occurrence, (B) of the type and covering the risks as from
time to time determined by Borrower to be prudent, including insurance covering
war risk and allied perils and (C) which is maintained in effect with
insurers of recognized responsibility and reputation (or in the case of war risk
and allied perils cover, may be placed with an agency of the United States
Government).  In the event that Borrower chooses to self-insure,
Borrower shall notify the Agent and Lenders of the amount of such self insurance
and relevant details, if any, concerning the interaction of the self-insurance
and the insurance in place.  In addition, in the event of renewal or
replacement of any insurance policy providing for insurance coverage over the
Aircraft Collateral, Borrower shall reasonably promptly following such renewal
or replacement furnish to the Agent and Lenders certificates of insurance from
nationally recognized independent aviation insurance brokers certifying
insurance coverage over the Aircraft Collateral under the renewed or replacement
insurance policies.

     

    (b)           During
any period that an Aircraft is on the ground and not in operation, Borrower may
carry or cause to be carried, in lieu of the insurance required by Section 6.07(a)
above, insurance with respect to such Aircraft otherwise conforming with the
provisions of such Section 6.07(a)
except that (A) the amounts of coverage shall not be required to exceed the
amounts of public liability and property damage insurance from time to time
applicable to Aircraft owned or leased by Borrower of the same type as the
Aircraft which comprise Borrower’s fleet and which are on the same ground and
not in operation; and (B) the scope of the risks covered and the type of
insurance shall be the same as from time to time shall be applicable to Aircraft
owned or leased by Borrower of the same type which comprise Borrower’s fleet and
which are on the ground and not in operation; provided that if
Borrower then has no other similarly situated Aircraft, the terms of such
insurance during such period shall conform to prudent industry
standards.

     

    6.08Compliance with Laws

     

    Comply in
all material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its business or property, except
in such instances in which (a) such requirement of Law or order, write,
injunction or decree is being contested in good faith by appropriate proceedings
diligently conducted; or (b) the failure to comply therewith would not
reasonably be expected to have a Material Adverse Effect.

     

    6.09Books and Records

     

    (a) Maintain
proper books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of Borrower or such
Subsidiary, as the case may be; and (b) maintain such books of record and
account in material

     


    
      
         


      

      
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    conformity
with all applicable requirements of any Governmental Authority having regulatory
jurisdiction over Borrower or such Subsidiary, as the case may be.

     

    6.10Inspection Rights

     

    Permit
representatives and independent contractors of Agent and each Lender to visit
and inspect any of its properties, to examine its corporate, financial and
operating records, and to discuss its affairs, finances and accounts with its
directors, officers, and independent public accountants, at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to Borrower; provided, however, that when an
Event of Default exists Agent or any Lender (or any of their respective
representatives or independent contractors) may do any of the foregoing at
the expense of Borrower at any time during normal business hours.

     

    6.11Use of Proceeds

     

    Use the
proceeds of the Borrowings for capital expenditures, working capital and
other general corporate purposes not in contravention of any Law or of any Loan
Document.

     

    6.12Financial Covenants; Maintenance of
Unrestricted Cash

     

    Maintain
at all times total unrestricted cash and cash equivalents and marketable
securities (as determined in accordance with GAAP) of not less than Five Hundred
Million Dollars ($500,000,000.00).

     

    6.13Collateral Records

     

    To
execute and deliver promptly to Agent, from time to time, solely for Agent’s
convenience in maintaining a record of the Collateral, such written statements
and schedules as Agent may reasonably require designating, identifying or
describing the Collateral.  The failure by Borrower, however, to
promptly give Agent such statements or schedules shall not affect, diminish,
modify or otherwise limit the Liens on the Collateral granted pursuant to the
Collateral Documents.

     

    6.14Security Interests

     

    To
(a) defend the Collateral against all claims and demands of all Persons at
any time claiming the same or any interest therein, (b) comply with the
requirements of all state and federal laws in order to grant to Agent and
Lenders valid and perfected first priority security interests in the Collateral,
with perfection, in the case of any investment property, deposit account or
letter of credit, being effected by giving Agent control of such investment
property or deposit account or letter of credit, rather than by the filing of a
Uniform Commercial Code (“UCC”) financing
statement with respect to such investment property, and (c) do whatever
Agent may reasonably request, from time to time, to effect the purposes of this
Agreement and the other Loan Documents, including filing notices of liens, UCC
financing statements, and amendments, renewals and continuations thereof;
cooperating with Agent’s representatives; keeping stock records; obtaining
waivers from landlords and mortgagees and from warehousemen and their landlords
and mortgages; and, paying claims which might, if unpaid, become a Lien on the
Collateral.  Agent is hereby authorized by Borrower to file any UCC
financing statements covering the Collateral whether or not Borrower’s
signatures appear thereon, and Agent agrees to provide a copy thereof to
Borrower prior to any such filing.

     


    
      
         


      

      
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    6.15Collateral.

     

     (a)           Collateral Review
Date.  On or before the last Business Day of each July and
January (each a “Collateral Review
Date”), Borrower shall provide to the Administrative Agent (which shall
provide to each Lender) a Qualified Appraisal showing the Current Market Value
of each Pledged Aircraft as of a Valuation Date that is no earlier than 30 days
prior to the applicable Collateral Review Date.

     

    (b)           Cure of Collateral Shortfall
or Over Advance.  If a Collateral Shortfall exists or Borrower
elects to cure an Over Advance pursuant to Section 2.03(b) in whole or in part
by pledging addition Collateral, then Borrower shall cure such Collateral
Shortfall or Over Advance by, at Borrower’s option, either or any combination of
the following:

     

    (i)           within 15 Business Days after the date of such
Collateral Shortfall or five Business Days after the date of an Over Advance, executing and delivering to the
Administrative Agent a supplement to the Security Agreement in substantially the
form of Schedule I to the Security Agreement (a “Security Agreement
Supplement”) and providing the
Administrative Agent with evidence satisfactory to it that:

     

    (A)           the
Security Agreement, as supplemented by such Security Agreement Supplement, has
granted a security interest to the Administrative Agent in one or more Aircraft
owned by Borrower (the “Added Pledged
Aircraft”) that was not or were not already Pledged Aircraft as
security for the Obligations;

     

    (B)           such
security interest is a perfected first-priority security interest and each Added
Pledged Aircraft is free and clear of: (i) any Liens other than Liens
permitted by Section 7.01;
and (ii) any other interest that has been recorded in the records the
Aircraft Registry of United States Department of Transportation, Federal
Aviation Administration (the “FAA
Registry”);

     

    (C)           the
Current Market Value of the Added Pledged Aircraft is sufficient, in combination
with any Cash Collateral pledged in accordance with Section 6.15(b)(ii), to cure
the Collateral Shortfall or the Over Advance, as applicable;

     

    (D)           all
insurance policies required by this Agreement or the Security Agreement with
respect to the Added Pledged Aircraft have been duly issued and remain in force
in accordance therewith and that Administrative Agent and Lenders have been
named as loss payees (subject to the last paragraph of Section 3.5(a) of the
Security Agreement) to the extent of their interest (the lower of (x) the
Current Market Value as reflected on the last Qualified Appraisal or (y) the
Obligations outstanding at the time of payment of insurance proceeds) and
additional insured under all policies of casualty insurance and as additional
insured under all policies of liability insurance; and

     

    (E)           the
execution, delivery and performance of the Security Agreement Supplement have
been duly authorized by all necessary corporate

     


    
      
         


      

      
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    action of
Borrower and the Security Agreement, as amended by such supplement, constitutes
the legal, valid and binding obligation of Borrower; or

     

    (ii)           within
15 Business Days after such Collateral Shortfall or five Business Days after the
date of Over Advance, executing and delivering to the Administrative Agent, a
Cash Pledge Agreement or an amendment thereto pledging Cash Collateral that
qualifies in all respects for inclusion in the Borrowing Base.  Such
additional Cash Collateral shall be in an amount sufficient, in combination with
any Aircraft Collateral pledged in accordance with Section 6.15(b)(i), to cure
the Collateral Shortfall or the Over Advance, as applicable.

     

    If
Borrower elects to cure a Collateral Shortfall or an Over Advance pursuant to
clause (i) above, the Administrative Agent may also require that Borrower
provide a legal opinion issued by aviation counsel for Borrower acceptable to
the Administrative Agent covering some or all of the FAA and CTT matters covered
by the legal opinion delivered on the Closing Date.

     

    (c)           Substitution of
Engines.  Provided that no Event of Default has occurred and is
continuing, Borrower may, from time to time, send the Administrative Agent a
written request (which shall be received by the Administrative Agent no later
than the fifth Business Day prior the Administrative Agent is to release its
security agreement described below) to substitute an Engine that is not covered
by the Security Agreement (an “Added
Engine”) for an Engine that is covered by the Security Agreement
which may include an Engine that has been subject to an Event of Loss (a “Removed
Engine”).  The Administrative Agent shall release its security
interest in the Removed Engine within three Business Days after the date when
Borrower has executed and delivered to the Administrative Agent a Security
Agreement Supplement covering the Added Engine and provided the Administrative
Agent with evidence satisfactory to it that:

     

    (i)           the
Security Agreement, as supplemented by such Security Agreement Supplement, has
granted a security interest to the Administrative Agent in the Added Engine as
security for the Obligations;

     

    (ii)           such
security interest is a perfected first-priority security interest and the Added
Engine is free and clear of:  (A) any Liens other than Liens
permitted by Section 7.01;
and (B) any other interest that has been recorded in the FAA Registry or
International Registry;

     

    (iii)           the
Added Engine is of the same or improved make and model and of at least the same
utility as the Removed Engine;

     

    (iv)           all
insurance policies and/or endorsements required by this Agreement or the
Security Agreement with respect to the Added Engine have been duly issued and
remain in force in accordance therewith and that Administrative Agent and
Lenders have been named as additional insured and under all policies of casualty
insurance and as additional insured under all policies of liability
insurance;

     

    (v)           if
requested by the Administrative Agent, the execution, delivery and performance
of the Security Agreement Supplement has been duly authorized by
all

     


    
      
         


      

      
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    necessary
corporate action of Borrower and the Security Agreement, as amended by such
supplement, constitutes the legal, valid and binding obligation of Borrower;
and

     

    (vi)           if
requested by the Administrative Agent, a legal opinion issued by counsel for
Borrower acceptable to the Administrative Agent covering some or all of the
matters covered by the legal opinions delivered on the Closing Date as they
apply to the Added Engine.

     

    (d)           Substitution of
Aircraft.  Provided that no Event of Default has occurred and
is continuing, Borrower may, from time to time, send the Administrative Agent a
written request to substitute an Aircraft that is not covered by the Security
Agreement (an “Added
Aircraft”) for an Aircraft that is covered by the Security Agreement
which may include an Aircraft that has been subject to an Event of Loss (a
“Removed
Aircraft”).  The Administrative Agent shall release its
security interest in the Removed Aircraft within five Business Days after the
Aircraft Substitution Request Date.  “Aircraft Substitution
Request Date” means the date when Borrower has executed and delivered to
the Administrative Agent a Security Agreement Supplement covering the Added
Aircraft and provided the Administrative Agent with evidence satisfactory to it
of each of the following:

     

    (i)           the
Security Agreement, as supplemented by such Security Agreement Supplement, has
granted a security interest to the Administrative Agent in the Added Aircraft as
security for the Obligations;

     

    (ii)           such
security interest is a perfected first-priority security interest and the Added
Aircraft is free and clear of any Liens or option other than Liens permitted by
Section
7.01;

     

    (iii)           the
Current Market Value of the Added Aircraft is equal to or greater than the
Current Market Value of the Removed Aircraft, each as set forth in a Qualified
Appraisal with a Valuation Date no earlier than 30 days prior to the Aircraft
Substitution Request Date;

     

    (iv)           all
insurance policies and/or endorsements required by this Agreement or the
Security Agreement with respect to the Added Engine have been duly issued and
remain in force in accordance therewith and that Administrative Agent and
Lenders have been named as loss payees (subject to the last paragraph of Section 3.5(a) of the
Security Agreement) to the extent of their interest (the lower of (x) the
Current Market Value as reflected on the last Qualified Appraisal or (y) the
Obligations outstanding at the time of payment of insurance proceeds) and
additional insured under all policies of casualty insurance and as additional
insured under all policies of liability insurance;

     

    (v)           if
requested by the Administrative Agent, the execution, delivery and performance
of the Security Agreement Supplement has been duly authorized by all necessary
corporate action of Borrower and the Security Agreement, as amended by such
supplement, constitutes the legal, valid and binding obligation of
Borrower;

     

    (vi)           the
Added Aircraft is a Boeing 737 type Aircraft; and

     


    
      
         


      

      
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    (vii)           if
requested by the Administrative Agent, a legal opinion issued by counsel for
Borrower acceptable to the Administrative Agent covering some or all of the
matters covered by the legal opinions delivered on the Closing Date as they
apply to the Added Aircraft.

     

    (e)           Release of
Collateral.  If (i) Borrower reduces the Aggregate
Commitments in accordance with Section 2.04 or
has, through Qualified Appraisals, demonstrated that an Aircraft can be removed
from the Aircraft Collateral and still leave the Aircraft Collateral equal to or
greater than 150% of the Aggregate Commitments, (ii) Borrower provides to
the Administrative Agent a Qualified Appraisal with a Valuation Date no earlier
than 30 days prior to Borrower’s Release Request, and (iii) no Default
under Sections
8.01(a) or 8.01(f) and no
Event of Default has occurred and is continuing, then Borrower may send the
Administrative Agent a written request (a “Release
Request”) to release one or more Aircraft from the security interest
created by the Security Agreement.  Each such Release Request shall
identify the specific Aircraft to be released and shall state the Current Market
Value of each Aircraft to be released and of the Aircraft Collateral after
giving effect to such release.  If the Qualified Appraisal confirms
that, after giving effect to such release, the Current Market Value of the
Aircraft Collateral would be greater than or equal to 150% of the Aggregate
Commitments as so reduced, then the Administrative Agent will, within five
Business Days after its receipt of the Release Request, release the security
interest in such Aircraft and/or Engines.

     

    (f)           Substitution of Cash
Collateral.  Borrower may request the release of the
Administrative Agent’s security interest in the Aircraft Collateral in exchange
for a security interest in Cash Collateral acceptable to the Administrative
Agent and Requisite Lenders or a release of Cash Collateral in exchange for a
security interest in Aircraft Collateral.  Borrower’s right to obtain
such release, in the case of Aircraft Collateral, shall be subject to Borrower
executing and delivering to Administrative Agent a Cash Pledge Agreement
covering the Cash Collateral and Borrower, the Administrative Agent and
Requisite Lenders reaching agreement regarding (i) the perfection, priority and
valuation of the Cash Collateral; and (iii) the amendments to this
Agreement necessary or appropriate in light of such substitution of
collateral.  Borrower’s right to obtain such release of Cash
Collateral shall be subject to Borrower executing and delivering to
Administrative Agent a Security Agreement Supplement covering additional
Aircraft Collateral that meets all the requirements of (b) above for curing any
Collateral Shortfall (assuming that the Agent has released the Cash Collateral
that Borrower has requested be released).

     

    (g)           Duration of
Valuation.  Except as otherwise provided in Section 6.15(h),
the Current Market Value of a Pledged Aircraft as set forth in the Qualified
Appraisal associated with a Collateral Review Date or a substitution of Pledged
Aircraft shall remain in effect until the Qualified Appraisal associated with
the earlier of the next Collateral Review Date or the next request for a
substitution of Pledged Aircraft.

     

    (h)           Event of
Loss.  Within ten (10) days after the occurrence of an
Event of Loss with respect to a Pledged Aircraft, Borrower shall notify the
Administrative Agent and Lenders in writing of such Event of Loss, which notice
shall state the Current Market Value of the affected Pledged Aircraft and
certify that Borrower has filed a casualty insurance claim with respect to such
Event of Loss.  Immediately upon the occurrence of an Event of Loss
with respect to any

     


    
      
         


      

      
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    Pledged
Aircraft, the Current Market Value of the Aircraft Collateral shall immediately
be reduced by the Current Market Value of the Pledged Aircraft that was subject
to such Event of Loss.  During the Claim Collateral Period, the
Current Market Value of the Aircraft Collateral shall be increased by the Agreed
Value Amount less the amount, if any, attributable to any underwriter of such
insurance that has become insolvent or that has commenced, had commenced against
it, or has otherwise become subject to, a bankruptcy, receivership or other
insolvency proceeding.  Immediately at the end of such Claim
Collateral Period, the Current Market Value of the Aircraft Collateral shall no
longer include such Agreed Value Amount and any proceeds that exceed the Current
Market Value of the Aircraft received by the Agent shall either be used to
reduce the Outstanding Amount or remitted to Borrower (a) at the option
of  Borrower if, at such time, no Default or Event of Default has
occurred and is continuing or would occur if such proceeds were remitted to
Borrower and Borrower would otherwise be entitled to re-borrow the amount of
such proceeds in accordance with the terms of this Agreement; and (b) otherwise,
at the option of the Agent.

     

    6.16State of Incorporation

     

    Borrower
shall give the Administrative Agent at least 30 days’ prior written notice
thereof before changing its state of incorporation or otherwise ceasing to be an
Alaska corporation.

     

    6.17Further Assurances

     

    Promptly
upon request by the Administrative Agent or the Required Lenders, do, execute,
acknowledge, authorize, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, aircraft mortgages, assignments, estoppel certificates, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments the
Administrative Agent or such Lenders, as the case may be, may reasonably require
from time to time in order (i) to carry out more effectively the purposes
of any Collateral Document, (ii) to subject to the Liens created by any of
the Collateral Documents any of the properties, rights or interests covered by
any of the Collateral Documents, (iii) to perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents and the
Liens intended to be created thereby, and (iv) to better assure, convey,
grant, assign, transfer, preserve, protect and confirm to the Agent and the
Lenders the rights granted or now or hereafter intended to be granted to the
Agent and/or the Lenders under the Collateral Documents or under any other
document, instrument or agreement from time to time executed by Borrower in
connection therewith.

     

    6.18Patriot Act

     

    Borrower
shall, promptly following a request by the Administrative Agent or any Lender,
provide all documentation and other information that the Administrative Agent or
such Lender requests in order to comply with its ongoing obligations under
applicable “know your customer” and anti-money laundering rules and regulations,
including the Patriot Act.

     

    ARTICLE
VII.

     

    NEGATIVE
COVENANTS

     

    So long
as any Lender shall have any Commitment hereunder, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, Borrower shall not, nor shall it
permit any Subsidiary to, directly or indirectly:

     


    
      
         


      

      
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    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, other than the
following:

     

    (a)           Liens
pursuant to any Collateral Document or any other Loan Document, if
any;

     

    (b)           Liens
on Collateral purported to be covered by a Collateral Document if and to the
extent permitted under such Collateral Document;

     

    (c)           Liens
on (i) aircraft and aircraft equipment, including airframes, engines,
appliances, equipment, instruments, and accessories from time to time belonging
to, installed in, or appurtenant to such airframes and engines; (ii) aircraft
spare parts; and (iii) logs, manuals and other records relating to
aircraft; provided, however, that in no event shall any of the Liens permitted
by this Section 7.01(c) include Liens on any Collateral;

     

    (d)           Liens
(other than (x) those permitted by Section 7.01(c) and (y) any Liens on other
property of Borrower or any Subsidiary (other than Aircraft Collateral) that
secure Indebtedness not exceeding $10,000,000 in the aggregate) existing on the
date hereof and listed on Schedule 7.01 and any
renewals or extensions thereof, provided that (i) the property covered
thereby is not changed, (ii) the amount secured or benefited thereby is not
increased, (iii) the direct or any contingent obligor with respect thereto
is not changed, and (iv) any renewal or extension of the obligations secured or
benefited thereby is permitted by this Agreement, provided, however, that in no
event shall any of the Liens permitted by this Section 7.01(d) include Liens on
any Collateral;

     

    (e)           Liens
for taxes not yet due or which are being contested in good faith and by
appropriate proceedings diligently conducted, if (i) adequate reserves with
respect thereto are maintained on the books of the applicable Person in
accordance with GAAP, and (ii) in the case of a Lien against any of the
Collateral, such contest proceedings operate to stay the sale of any portion of
the Collateral to satisfy such Taxes;

     

    (f)           carriers’,
warehousemen’s, mechanics’, material supplier’s, repairer’s or other like Liens
arising in the ordinary course of business for services or supplies, the payment
for which is not overdue for a period of more than 30 days or which are being
contested in good faith and by appropriate proceedings diligently conducted,
(i) if adequate reserves with respect thereto are maintained on the books
of the applicable Person in accordance with GAAP, and (ii) in the case of a
Lien against any of the Collateral, such contest proceedings operate to stay the
sale of any portion of the Collateral to satisfy such Liens;

     

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

     

    (h)           deposits
to secure the performance of bids, trade contracts and leases (other than
Indebtedness), statutory obligations, surety bonds (other than bonds related to
judgments or litigation), performance bonds, payment bonds, standby letters of
credit, Swap Contracts and other obligations of a like nature, in each case,
incurred in the ordinary course of business; provided, however, that in no event
shall any of the Liens permitted by this Section 7.01(h) include Liens on any
Collateral;

     


    
      
         


      

      
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    (i)           newly
created easements, rights-of-way, restrictions and other similar encumbrances
affecting real property which, in the aggregate, are not substantial in amount,
and which do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the applicable Person, or now existing easements, rights-of-way,
restrictions or other encumbrances;

     

    (j)           Liens
securing judgments for the payment of money not constituting an Event of Default
under Section 8.01(h) or
securing appeal or other surety bonds related to such judgments, provided,
however, that in no event shall any of the Liens permitted by this Section
7.01(j) include Liens on any Collateral;

     

    (k)           Liens
on Borrower’s rights under an aircraft purchase agreement with respect to an
aircraft securing any Permitted Progress Payment Loan made with respect to such
aircraft, provided, however, that in no event shall any of the Liens permitted
by this Section 7.01(k) include Liens on any Aircraft Collateral;

     

    (l)           Liens
securing Indebtedness permitted pursuant to Section 7.14; provided, however, that such
Liens shall only extend to pledges of cash and cash equivalents granted by
Borrower and the collateral described in the security agreements entered into in
connection with the original closing of such facility (including any
replacements or proceeds thereof); provided, further, however, that in no
event shall any of the Liens permitted by this Section 7.01(l)
include Liens on any Collateral;

     

    (m)           Liens
on Borrower’s real property to secure Indebtedness that is underwritten based
upon the value of the real property that is security for such
Indebtedness;

     

    (n)           Liens,
other than Liens permitted under clauses (a)-(m) of this Section 7.01, that do
not secure Indebtedness for borrowed money (including bonds or debentures),
letters of credit or an item of Indebtedness that expressly identified as being
unsecured so long as the aggregate amount of obligations secured by all such
Liens does not exceed $25,000,000 at any time; provided, however, that in no
event shall any of the Liens permitted by this Section 7.01(n)
include Liens on any Collateral.

     

    7.02Fundamental 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) Borrower, provided that
Borrower shall be the continuing or surviving Person, or (ii) any one or
more other Subsidiaries, provided that when
any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned
Subsidiary 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 Borrower or to another Subsidiary; provided
that if the transferor in such a transaction is a wholly-owned Subsidiary, then
the transferee must either be Borrower or a wholly-owned
Subsidiary.

     


    
      
         


      

      
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    7.03           Dispositions

     

    Make any
Disposition or enter into any agreement to make any Disposition,
except:

     

    (a)           Dispositions
of obsolete, no longer useful or worn out property (other than Collateral),
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 (other than Collateral) 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)           Disposition
of equipment (other than Collateral) in an arms’ length transaction
for  fair market value provided that: (i) such equipment is no longer
necessary for the successful operation of Borrower’s business or the generation
of revenue sufficient to service Borrower’s Obligations, and (ii) the aggregate
amount of Dispositions under this clause (d) from the date of this Agreement
through the Maturity Date does not exceed ten percent (10%) of the book value
net of depreciation of all Borrower’s equipment (other than Collateral) on the
date of this Agreement;

     

    (e)           Dispositions
of property by any Subsidiary to Borrower or to a wholly-owned Subsidiary;
and

     

    (f)           Non-exclusive
licenses of IP Rights in the ordinary course of business and substantially
consistent with past practice for terms not exceeding five years;

     

    (g)           Dispositions
permitted by Section 7.02;

     

    (h)           Dispositions
of Collateral expressly permitted under the Security Agreement;

     

    (i)           Dispositions
of aircraft and aircraft equipment that is not Collateral if such Dispositions
are of a type expressly permitted under the Security Agreement with respect to
Aircraft Collateral; and

     

    (j)           Dispositions
of aircraft or aircraft equipment that is not Collateral in sale-and-lease-back
transactions under which Borrower remains in possession and control of such
aircraft or aircraft equipment as the lessee thereof.

     

    provided, however, that any
Disposition pursuant to clauses (a) through (e) and clauses (h)
through (j) shall be for fair market value.

     

    7.04[Intentionally Omitted]

     

     

    7.05Restricted Junior Payments

     

    .Make any
Restricted Junior Payment; provided, however, that, so
long as it is permitted by law, and so long as no Default or Event of Default
shall have occurred and be continuing or would result therefrom,

     


    
      
         


      

      
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    (a)           Borrower
may make distributions to former employees, officers, or directors of Borrower
(or any spouses, ex-spouses, or estates of any of the foregoing) on account of
redemptions of Equity Interest of Parent held by such Persons, provided, however, that the
aggregate amount of such redemptions made by Borrower during the term of this
Agreement plus the amount of unsecured Indebtedness of Borrower owing to former
employees, officers, or directors (or any spouses, ex-spouses, or estates of any
of the foregoing) incurred in connection with the repurchase by Borrower of the
Equity Interest of Parent that has been issued to such Persons, does not exceed
[***] in the aggregate,

     

    (b)           Borrower
may make distributions to former employees, officers, or directors of Borrower
(or any spouses, ex-spouses, or estates of any of the foregoing), solely in the
form of forgiveness of Indebtedness of such Persons owing to Borrower on account
of repurchases of the Equity Interest of Parent held by such Persons; provided that such
Indebtedness was incurred by such Persons solely to acquire Equity Interest of
Parent,

     

    (c)           Borrower
may declare and pay dividends or make distributions to Parent, the proceeds of
which shall be used by Parent solely to pay (i) (y) franchise taxes (other than
income taxes) and other fees, taxes and expenses required to maintain its
corporate existence or arising as a result of its ownership of Borrower, and (z)
federal, state and local income taxes, to the extent such income taxes are
attributable to the income of Borrower; provided that the amount of such
payments in any fiscal year does not exceed the amount that Borrower would be
required to pay in respect of federal, state and local taxes for such fiscal
year were Borrower to pay such taxes separately from Parent, and (ii) ordinary
course operating and corporate overhead expenses and administrative and similar
expenses related to its existence and ownership of Borrower, and

     

    (d)           Borrower
may declare and pay dividends or make distributions to Parent so long as (i) no
Event of Default has occurred and is continuing or would result therefrom and
(i) Borrower’s total unrestricted cash and cash equivalents and marketable
securities (as determined in accordance with GAAP) is equal to $600,000,000, or
greater, before and immediately after giving effect thereto.

     

    7.06ERISA

     

    At any
time (a) engage in a transaction which could be subject to Sections 4069 or
4212(c) of ERISA and would have a Material Adverse Effect, (b) permit any
Pension Plan to (i) engage in any non-exempt “prohibited transaction” (as
defined in Section 4975 of the Code) that would have a Material Adverse Effect;
(ii) fail to comply with ERISA or any other applicable Laws and the failure
would have a Material Adverse Effect; or (iii)  incur any material “unpaid
minimum required contribution” (as defined in the Pension Rules), which would
have a Material Adverse Effect; (c) permit an ERISA Event to occur with
respect to a Pension Plan or Multiemployer Plan which has resulted or could
reasonably be expected to result in liability of Borrower under Title IV of
ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount
in excess of [***]; (d) permit no Multiemployer Plan to be in critical or
endangered status under Section 432 of the Code; or (e) fail to pay, or
permit any

     

    
       

    

    


     


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

      

      
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    ERISA
Affiliate to fail 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 in an aggregate amount in
excess of [***].

     

    7.07Air Carrier

     

    Cease to
be a U.S. Air Carrier or receive notice that it will lose or have revoked
any license, certificate, qualification or other requirement to be a U.S. Air
Carrier.

     

    7.08Change in Nature of
Business

     

    Engage in
any material line of business substantially different from, and not in support
of, those lines of business conducted by Borrower and its Subsidiaries on the
date hereof or any business substantially related or incidental
thereto.

     

    7.09Transactions with
Affiliates

     

    Enter
into transactions of any kind with Affiliates of Borrower unless such
transactions, taken as a whole, are substantially as favorable to Borrower and
its Subsidiaries as would be obtainable by Borrower or its Subsidiaries in a
comparable arm’s length transaction with a Person other than an
Affiliate.

     

    7.10Burdensome Agreements

     

    Enter
into any material Contractual Obligation (other than this Agreement or any other
Loan Document) that (a) limits the ability (i) of any Subsidiary
to make Restricted Payments to Borrower or to otherwise transfer property to
Borrower, (ii) of any Subsidiary to Guarantee any of Borrower’s obligations
under any of the Loan Documents or (iii) of Borrower or any Subsidiary to
create, incur, assume or suffer to exist Liens on property of such Person (other
than the negative pledge set forth in the ABL Facility Documents as in effect on
the Closing Date or as the same may be amended, modified or changed thereafter
in accordance with Section 7.15(b)(i)); provided, however, that this
clause (iii) shall not prohibit any negative pledge incurred or provided in
favor of any holder of Indebtedness permitted under this Agreement solely
to the extent any such negative pledge relates to the property financed by or
the subject of such Indebtedness; or (b) requires the grant of a Lien to
secure an obligation of such Person if a Lien is granted to secure another
obligation of such Person.

     

    7.11Loans

     

    In the
case of Borrower, make any loans to its Subsidiaries or Affiliates in an
aggregate amount exceeding [***] or incur any obligations to Parent for borrowed
money that are not Subordinated Liabilities, and in the case of Borrower’s
Subsidiaries or Affiliates, make any loans to Borrower that are not Subordinated
Liabilities.

     

    7.12Use of Proceeds

     

    Use the
proceeds of any Borrowing, whether directly or indirectly, and whether
immediately, incidentally or ultimately, to purchase or carry margin stock
(within the meaning of Regulation U of the FRB) or to extend credit to
others for the purpose of purchasing or carrying margin stock or to refund
indebtedness originally incurred for such purpose.

     

    7.13Invalidity Event

     

    Cause,
permit, or suffer to exist, directly or indirectly, any Invalidity
Event.

     

    7.14Indebtedness under the ABL
Facility

     

         Create, incur, assume,
suffer to exist,

     


    
      
         

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

        

      

      
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    guarantee,
or otherwise become or remain, directly or indirectly, liable with respect to
Indebtedness under the ABL Facility in an aggregate outstanding principal amount
that exceeds $100,000,000 or refinance, renew, or extend Indebtedness under the
ABL Facility other than Refinancing Indebtedness of such
Indebtedness.

     

    7.15Prepayments and Amendments

     

    (a)           Except
in connection with Refinancing Indebtedness,

     

    (i)           if
by doing so Borrower’s total unrestricted cash and cash equivalents and
marketable securities (as determined in accordance with GAAP) would drop below
that required by Section 6.12,
optionally prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of Borrower, other than the Obligations in accordance with this
Agreement,

     

    (ii)           make
any payment on account of Indebtedness that has been contractually subordinated
in right of payment if such payment is not permitted at such time under the
subordination terms and conditions, or

     

    (b)           Directly
or indirectly, amend, modify, or change any of the terms or provisions
of

     

    (i)           the
ABL Facility Documents except so long as such amendment, modification, or change
(x) could not, individually or in the aggregate, reasonably be expected to be
materially adverse to the interests of the Lenders, and (y) would not otherwise
cause Borrower to breach any of the provisions of this Agreement,
or

     

    (ii)           the
Organization Documents of Borrower if the effect thereof, either individually or
in the aggregate, could reasonably be expected to be materially adverse to the
interests of the Lenders.

     

    ARTICLE
VIII.

     

    EVENTS
OF DEFAULT AND REMEDIES

     

    8.01Events of Default

     

    Any of
the following shall constitute an Event of Default:

     

    (a)           Non-Payment.  Borrower
fails to pay (i) when and as required to be paid herein any amount of
principal of any Loan (including, without limitation, pursuant to Section
2.03(c)), or (ii) within five Business Days after the same becomes due, any
interest on any Loan, or any fee due hereunder, or (iii) within five
Business Days after the same becomes due, any other amount payable hereunder or
under any other Loan Document; or

     

    (b)           Specific
Covenants.  Borrower fails to perform or observe (i) any term,
covenant or agreement contained in Section 7.13 of this Agreement and such
failure continues for five (5) Business Days after the occurrence of the
applicable event, (ii) any term, covenant or agreement contained in Section 7.14
or 7.15 of this Agreement and such failure continues for ten (10) Business Days
after the occurrence of the applicable event or (iii) any term, covenant or
agreement contained in this Agreement a (other than those covered by Section
8.01(a) and in the preceding
clause (i) or clause (ii)) and such failure continues for fifteen (15) Business
Days after the occurrence of the applicable event; or

     


    
      
         


      

      
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    (c)           Other
Defaults.  Borrower fails to perform or observe any other
covenant or agreement (not specified in subsection (a) or
(b) above) contained in any Loan Document on its part to be performed
or observed and such failure continues for 30 days or any Event of Default
occurs under any other Loan Document; or

     

    (d)           Representations and
Warranties.  Any representation, warranty, certification or
statement of fact made or deemed made by or on behalf of Borrower herein, in any
other Loan Document, or in any document delivered in connection herewith or
therewith shall be incorrect or misleading when made or deemed made and, in the
case of a misrepresentation that is capable of being cured, such
misrepresentation shall not have been cured within 30 days after a Responsible
Officer of Borrower either has knowledge thereof or has received written notice
thereof from the Administrative Agent; or

     

    (e)           Cross-Default.  (i) Borrower
or any Subsidiary: (A) fails to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Indebtedness or Guarantee (other than
Indebtedness hereunder and Indebtedness under Swap Contracts) 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 the Threshold Amount for any such individual
agreement or $30,000,000 for any combination of such agreements, or
(B) fails to observe or perform any other agreement or condition relating
to any such Indebtedness or Guarantee or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event occurs,
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 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 Borrower or any Subsidiary is
an Affected Party (as so defined) and, in either event, the Swap
Termination Value owed by Borrower or such Subsidiary as a result thereof is
greater than the Threshold Amount for any such individual agreement or
$30,000,000 for any combination of such agreements; or

     

    (f)           Insolvency Proceedings,
Etc.  Borrower, any Subsidiary or Parent institutes or consents
to the institution of any proceeding under any Debtor Relief Law, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the application or consent
of such Person and

     


    
      
         


      

      
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    the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or
any material part of its property is instituted without the consent of such
Person and continues undismissed or unstayed for 60 calendar days, or an order
for relief is entered in any such proceeding; or

     

    (g)           Inability to Pay Debts;
Attachment.  (i) Borrower, any Subsidiary or Parent
becomes unable or admits in writing its inability or fails generally to pay its
debts as they become due, or (ii) any writ or warrant of attachment or
execution or similar process is issued or levied against all or any material
part of the property having a value, in the aggregate, in excess of $5,000,000
of any such Person and is not released, vacated or fully bonded within 30 days
after its issue or levy; or

     

    (h)           Judgments.  There
is entered against Borrower or any Subsidiary: (i) a final judgment or
order for the payment of money in an aggregate amount exceeding the Threshold
Amount (to the extent not covered by independent third-party insurance as to
which the insurer does not dispute coverage), or (ii) any one or more
non-monetary final judgments that have, or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect and, in either case,
(A) enforcement proceedings are commenced by any creditor upon such
judgment or order, or (B) there is a period of 10 consecutive days during
which a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect; or

     

    (i)           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 (including
the imposition of a lien under Code Section 430(k) and/or ERISA Section 303(k))
of Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan
or the PBGC in an aggregate amount in excess of the Threshold Amount, or
(ii) Borrower 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 in an aggregate amount in excess of the Threshold Amount;
and, in either case, such ERISA Event or failure to pay would reasonably be
expected to have a Material Adverse Effect; or

     

    (j)           Material Failure of
Security.  A Material Failure of Security occurs and is not
cured within five (5) Business Days after its occurrence.  Without
limiting other possible cure methods, Borrower may cure a Material Failure of
Security by pledging Cash Collateral so long as such cash collateral qualifies
in all respects to be included in the Borrowing Base and results in the
Borrowing Base being returned to the amount thereof immediately prior to the
occurrence of such Material Failure of Security.

     

    8.02Remedies Upon Event of
Default

     

    If any
Event of Default occurs and is continuing, Agent may, and shall at the request
of the Required Lenders, take any or all of the following actions:

     

    (a)           declare
the commitment of each Lender to make Loans to be terminated, whereupon such
commitments and obligation shall be terminated;

     


    
      
         


      

      
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    (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 Borrower; and

     

    (c)           exercise
on behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents;

     

    provided, however, that upon
the occurrence of an actual or deemed entry of an order for relief with respect
to Borrower under the Bankruptcy Code, the obligation of each Lender to make
Loans shall automatically terminate, and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, in each case without further act of Agent
or any Lender.

     

    8.03Application of Funds

     

    After the
exercise of remedies provided for in Section 8.02 (or
after the Loans have automatically become immediately due and payable as set
forth in the proviso to Section 8.02,
any amounts received on account of the Obligations shall be applied by Agent in
the following order:

     

    First, to payment of
that portion of the Obligations constituting fees, indemnities, expenses and
other amounts (including fees, charges and disbursements of counsel to Agent and
amounts payable under Article III) payable
to Agent in its capacity as such;

     

    Second, to payment of
that portion of the Obligations constituting fees, indemnities and other amounts
(other than principal and interest) payable to Lenders (including fees,
charges and disbursements of counsel to the respective Lenders and amounts
payable under Article III),
ratably among them in proportion to the amounts described in this clause Second
payable to them;

     

    Third, to payment of
that portion of the Obligations constituting accrued and unpaid interest on the
Loans and other Obligations, ratably among Lenders in proportion to the
respective amounts described in this clause Third payable to them;

     

    Fourth, to payment of
that portion of the Obligations constituting unpaid principal of the Loans,
ratably among Lenders in proportion to the respective amounts described in this
clause Fourth held by them; and

     

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

     

    ARTICLE
IX.

     

    ADMINISTRATIVE
AGENT

     

    9.01Appointment and Authorization of
Administrative Agent

     

    Each of
the Lenders hereby irrevocably appoints Citibank to act on its behalf as
Administrative Agent hereunder and under the other Loan Documents and authorizes
Agent to take such actions on its behalf and to exercise such powers as are
delegated to Agent by the terms hereof and thereof, together with such actions
and powers as are reasonably incidental thereto.  The provisions
of

     


    
      
         


      

      
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    this
Article are solely for the benefit of Agent and the Lenders, and Borrower shall
not have rights as a third party beneficiary of any of such
provisions.

     

    9.02Rights as a Lender

     

    The
Person serving as Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not Agent and the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated or unless the context otherwise requires,
include the Person serving as Agent hereunder in its individual
capacity.  Such Person and its Affiliates may accept deposits from,
lend money to, act as the financial advisor or in any other advisory capacity
for and generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if such Person were not Agent hereunder
and without any duty to account therefor to  Lenders.

     

    9.03Exculpatory Provisions

     

    Agent
shall not have any duties or obligations except those expressly set forth herein
and in the other Loan Documents.  Without limiting the generality of
the foregoing, Agent:

     

    (a)           shall
not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;

     

    (b)           shall
not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that Agent is required to exercise as directed in
writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be expressly provided for herein or in the other Loan
Documents), provided that Agent shall not be required to take any action that,
in its opinion or the opinion of its counsel, may expose Agent to liability or
that is contrary to any Loan Document or applicable Law; and

     

    (c)           shall
not, except as expressly set forth herein and in the other Loan Documents, have
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to Borrower or any of its Affiliates that is communicated
to or obtained by the Person serving as Agent or any of its Affiliates in any
capacity.

     

    (d)           Agent
shall not be liable for any action taken or not taken by it (i) with the
consent or at the request of the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary, or as Agent shall believe in
good faith shall be necessary, under the circumstances as provided in Sections 8.02
and 10.01 or
(ii) in the absence of its own gross negligence or willful
misconduct.  Agent shall be deemed not to have knowledge of any
Default unless and until written notice describing such Default is given to
Agent by Borrower or a Lender.  Agent shall not be responsible for or
have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or thereunder or in connection herewith or therewith,
(iii) the performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein or therein or the occurrence of any
Default, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, or the creation, perfection or priority of any Lien purported to be
created by the Collateral Documents, (v) the value or the sufficiency of any
Collateral or (vi) the satisfaction of any condition set forth

     


    
      
         


      

      
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    in Article IV or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to Agent.

     

    9.04Reliance by Administrative
Agent

     

    Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing (including any electronic message, Internet or intranet website
posting or other distribution) believed by it to be genuine and to have
been signed, sent or otherwise authenticated by the proper
Person.  Agent also may rely upon any statement made to it orally or
by telephone and believed by it to have been made by the proper Person, and
shall not incur any liability for relying thereon.  In determining
compliance with any condition hereunder to the making of a Loan that by its
terms must be fulfilled to the satisfaction of a Lender, Agent may presume that
such condition is satisfactory to such Lender unless Agent shall have received
notice to the contrary from such Lender prior to the making of such
Loan.  Agent may consult with legal counsel (who may be counsel for
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

     

    9.05Delegation of Duties

     

    Agent may
perform any and all of its duties and exercise its rights and powers hereunder
or under any other Loan Document by or through any one or more sub agents
appointed by Agent.  Agent and any such sub agent may perform any and
all of its duties and exercise its rights and powers by or through their
respective Related Parties.  The exculpatory provisions of this
Article shall apply to any such sub agent and to the Related Parties of Agent
and any such sub agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as
well as activities as Agent.

     

    9.06Resignation of Agent

     

    Agent may
at any time give notice of its resignation to Lenders and
Borrower.  Upon receipt of any such notice of resignation, the
Required Lenders shall have the right, in consultation with Borrower, to appoint
a successor, which shall be a bank with an office in the United States, or an
Affiliate of any such bank with an office in the United States.  If no
such successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Agent gives
notice of its resignation, then the retiring Agent may on behalf of Lenders,
appoint a successor Agent meeting the qualifications set forth above; provided
that if Agent shall notify the Borrower and the Lenders that no qualifying
Person has accepted such appointment, then such resignation shall nonetheless
become effective in accordance with such notice and (1) the retiring Agent
shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any collateral security held by
Agent on behalf of the Lenders under any of the Loan Documents, the
retiring  Agent shall continue to hold such collateral security until
such time as a successor Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through Agent
shall instead be made by or to each Lender directly, until such time as the
Required Lenders appoint a successor Agent as provided for above in this
Section.  Upon the acceptance of a successor’s appointment as Agent
hereunder, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent,
and the retiring Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already
discharged therefrom as provided above in this Section).  The fees
payable by Borrower to a successor Agent shall be the same as those payable to
its predecessor unless otherwise agreed between

     


    
      
         


      

      
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    Borrower
and such successor.  After the retiring Agent’s resignation hereunder
and under the other Loan Documents, the provisions of this Article and Section 10.04 shall
continue in effect for the benefit of such retiring Agent, its sub agents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while the retiring Administrative Agent was acting as
Administrative Agent.

     

    9.07Non-Reliance on Agent and Other
Lenders

     

    Each
Lender acknowledges that it has, independently and without reliance upon Agent
or any other Lender or any of their Related Parties and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.  Each Lender also acknowledges
that it will, independently and without reliance upon Agent or any other Lender
or any of their Related Parties and based on such documents and information as
it shall from time to time deem appropriate, continue to make its own decisions
in taking or not taking action under or based upon this Agreement, any other
Loan Document or any related agreement or any document furnished hereunder or
thereunder.

     

    9.08No Other Duties, Etc

     

    Anything
herein to the contrary notwithstanding, none of the Bookrunners, Arrangers or
any Lender holding a title listed on the cover page hereof, shall have any
powers, duties or responsibilities under this Agreement or any of the other Loan
Documents, except in its capacity, as applicable, as Agent or a Lender
hereunder.

     

    9.09Administrative Agent May File Proofs of
Claim

     

    In case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to Borrower, Agent (irrespective of whether the principal of
any Loan shall then be due and payable as herein expressed or by declaration or
otherwise and irrespective of whether Agent shall have made any demand on
Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

     

    (a)           to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans and all other Obligations that are owing and
unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of Lenders and Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of Lenders and
Agent and their respective agents and counsel and all other amounts due to
Lenders and Agent under Sections 2.03(i) and
2.07 and 10.04 allowed in
such judicial proceeding; and

     

    (b)           to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Lender to make such payments to Agent and, in the event that Agent shall consent
to the making of such payments directly to Lenders, to pay to Agent any amount
due for the reasonable compensation, expenses, disbursements and advances of
Agent and its agents and counsel, and any other amounts due Agent under Sections 2.07
and 10.04.  Nothing
contained herein shall be deemed to authorize Agent to authorize or consent to
or accept or adopt on behalf of any Lender any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations or the rights
of

     


    
      
         


      

      
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    any
Lender or to authorize Agent to vote in respect of the claim of any Lender in
any such proceeding.

     

    9.10Collateral Matters.

     

    (a)           Each
Lender hereby irrevocably authorizes and directs Agent to enter into the
Collateral Documents for the benefit of such Lender and to act as the agent of
such Lender for purposes of acquiring, holding and enforcing any and all Liens
on Collateral to secure any of the Obligations, together with such powers and
discretion as are reasonably incidental thereto.  In this connection,
the Administrative Agent, as such “collateral agent” and any co-agents,
sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant
to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral
(or any portion thereof) granted under the Collateral Documents, or for
exercising any rights and remedies thereunder at the direction of the
Administrative Agent), shall be entitled to the benefits of all provisions of
this Article IX and Article X (including Section 10.04, as though such
co-agents, sub-agents and attorneys-in-fact were such “collateral agent” under
the Loan Documents) as if set forth in full herein with respect
thereto..  Each Lender hereby agrees, and each holder of any Note by
the acceptance thereof will be deemed to agree, that, except as otherwise set
forth in Section 10.01,
any action taken by the Required Lenders, in accordance with the provisions of
this Agreement or the Collateral Documents, and the exercise by the Required
Lenders of the powers set forth herein or therein, together with such other
powers as are reasonably incidental thereto, shall be authorized and binding
upon all of Lenders.  Agent is hereby authorized (but not
obligated) on behalf of all of Lenders, without the necessity of any notice
to or further consent from any Lender from time to time prior to, an Event of
Default, to take any action with respect to any Collateral or Collateral
Documents which may be necessary to perfect and maintain perfected the Liens
upon the Collateral granted pursuant to the Collateral Documents.

     

    (b)           Each
Lender hereby irrevocably authorize Agent, at its option and in its
discretion,

     

    (i)           to
release any Lien on any property granted to or held by Agent under any Loan
Document (A) upon termination of the Aggregate Commitments and payment in
full of all Obligations (other than contingent indemnification obligations),
(B) that is sold or to be sold as part of or in connection with any sale
permitted hereunder or under any other Loan Document, (C) as permitted or
required hereunder or under any other Loan Document (including, without
limitation, as contemplated by Section 6.14), (D) subject to Section 10.01,
if approved, authorized or ratified in writing by the Required Lenders, or
(E) in connection with any foreclosure sale or other disposition of
Collateral after the occurrence of an Event of Default to which the Required
Lenders consent; and

     

    (ii)           to
subordinate any Lien on any property granted to or held by Agent under any Loan
Document to the holder of any Lien on such property that is permitted by this
Agreement or any other Loan Document.

     

    Upon
request by Agent at any time, each Lender will confirm in writing Agent’s
authority to release or subordinate its interest in particular types or items of
Collateral pursuant to this Section 9.10.

     


    
      
         


      

      
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    (c)           Subject
to (b) above, Agent shall (and is hereby irrevocably authorized by each
Lender to) execute such documents as may be necessary to evidence the release or
subordination of the Liens granted to Agent for the benefit of Agent and Lenders
herein or pursuant hereto upon the applicable Collateral; provided that
(i) Agent shall not be required to execute any such document on terms
which, in Agent’s opinion, would expose Agent to or create any liability or
entail any consequence other than the release or subordination of such Liens
without recourse or warranty and (ii) such release or subordination shall
not in any manner discharge, affect or impair the Obligations or any Liens upon
(or obligations of Borrower in respect of) all interests retained by
Borrower, including the proceeds of the sale, all of which shall continue to
constitute part of the Collateral.  In the event of any sale or
transfer of Collateral, or any foreclosure with respect to any of the
Collateral, Agent shall be authorized to deduct all expenses reasonably incurred
by Agent from the proceeds of any such sale, transfer or
foreclosure.

     

    (d)           Agent
shall have no obligation whatsoever to any Lender or any other Person to assure
that the Collateral exists or is owned by Borrower or is cared for, protected or
insured or that the Liens granted to Agent herein or in any of the Collateral
Documents or pursuant hereto or thereto have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise or to continue exercising at all or in any
manner or under any duty of care, disclosure or fidelity any of the rights,
authorities and powers granted or available to Agent in this Section 9.10 or
in any of the Collateral Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, Agent
may act in any manner it may deem appropriate, in its sole discretion, given
Agent’s own interest in the Collateral as one of the Lenders and that Agent
shall have no duty or liability whatsoever to Lenders.

     

    (e)           Each
Lender hereby appoints each other Lender as agent for the purpose of perfecting
Lenders’ security interest in assets which, in accordance with Article 9 of
the UCC can be perfected only by possession.  Should any Lender (other
than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver
such Collateral to Agent or in accordance with Agent’s
instructions.

     

    9.11 Other Agents; Arrangers and Managers 

     

    None of
the Lenders or other Persons identified on the facing page or signature pages of
this Agreement as a “syndication agent,” “documentation agent,” “co-agent,”
“book manager,” “lead manager,” “arranger,” “lead arranger” or “co-arranger”
shall have any right, power, obligation, liability, responsibility or duty under
this Agreement other than, in the case of such Lenders, those applicable to all
Lenders as such.  Without limiting the foregoing, none of the Lenders
or other Persons so identified shall have or be deemed to have any fiduciary
relationship with any Lender.  Each Lender acknowledges that it has
not relied, and will not rely, on any of the Lenders or other Persons so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.

     

    9.12 No Advisory or Fiduciary Responsibility 

     

    In
connection with all aspects of each transaction contemplated hereby (including
in connection with any amendment, waiver or other modification hereof or of any
other Loan Document), the Borrower and each other Loan Party acknowledges and
agrees that and acknowledges its Affiliates understanding that:  (i)
(A) the arranging and other services regarding this Agreement provided by the
Administrative Agent and the Joint-Lead Arrangers are arm’s-length commercial
transactions between the Borrower,

     


    
      
         


      

      
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    each
other Loan Party and their respective Affiliates, on the one hand, and the
Administrative Agent and the Joint-Lead Arrangers, on the other hand, (B) each
of the Borrower and the other Loan Parties has consulted its own legal,
accounting, regulatory and tax advisors to the extent it has deemed appropriate,
and (C) the Borrower and each other Loan Party is capable of evaluating, and
understands and accepts, the terms, risks and conditions of the transactions
contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative
Agent and each Joint-Lead Arranger is and has been acting solely as a principal
and, except as expressly agreed in writing by the relevant parties, has not
been, is not, and will not be acting as an advisor, agent or fiduciary for the
Borrower, any other Loan Party or any of their respective Affiliates, or any
other Person and (B) neither the Administrative Agent nor the Joint-Lead
Arrangers has any obligation to the Borrower, any other Loan Party or any of
their respective Affiliates with respect to the transactions contemplated hereby
except those obligations expressly set forth herein and in the other Loan
Documents; and (iii) the Administrative Agent and the Joint-Lead Arrangers and
their respective Affiliates may be engaged in a broad range of transactions that
involve interests that differ from those of the Borrower, the other Loan Parties
and their respective Affiliates, and neither the Administrative Agent nor the
Joint-Lead Arrangers has any obligation to disclose any of such interests to the
Borrower, any other Loan Party or any of their respective
Affiliates.  To the fullest extent permitted by law, each of the
Borrower and the other Loan Parties hereby waives and releases any claims that
it may have against the Administrative Agent and the Joint-Lead Arrangers with
respect to any breach or alleged breach of agency or fiduciary duty in
connection with any aspect of any transaction contemplated hereby.

     

    ARTICLE
X.

     

    MISCELLANEOUS

     

    10.01Amendments, Etc

     

    No
amendment or waiver of any provision of this Agreement or any other Loan
Document, and no consent to any departure by Borrower therefrom, shall be
effective unless in writing signed by the Required Lenders and Borrower and
acknowledged by Agent, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided, however, that no such
amendment, waiver or consent shall:

     

    (a)           waive
any condition set forth in Section 4.01 or
Section
5.21(b) without the written consent of each Lender;

     

    (b)           extend
or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 8.02) without
the written consent of such Lender;

     

    (c)           postpone
any date fixed by this Agreement or any other Loan Document for any payment
(excluding mandatory prepayments) of principal, interest, fees or other
amounts due to Lenders (or any of them) hereunder or under any other Loan
Document without the written consent of each Lender directly affected
thereby;

     

    (d)           reduce
the principal of, or the rate of interest specified herein on, any Loan, or
(subject to clause (iii) of the second proviso to this Section 10.01) any
fees or other amounts payable hereunder or under any other Loan Document,
without the written consent of each

     


    
      
         


      

      
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    Lender
directly affected thereby; provided, however, that only
the consent of the Required Lenders shall be necessary (i) to amend the
definition of “Default
Rate” or to waive any obligation of Borrower to pay interest at the
Default Rate or (ii) to amend any financial covenant hereunder (or any
defined term used therein) even if the effect of such amendment would be to
reduce the rate of interest on any Loan or to reduce any fee payable
hereunder;

     

    (e)           change
Section 2.11 or
Section 8.03 in
a manner that would alter the pro rata sharing of payments required thereby
without the written consent of each Lender; or

     

    (f)           change
any provision of this Section or the definition of “Required Lenders” or
any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; or

     

    (g)           release
or subordinate the Agent’s security interest in all or substantially all of the
Collateral, without the written consent of each Lender; or

     

    (h)           reduce
the frequency with which Borrower must provide Qualified Appraisals, without the
written consent of each Lender; or

     

    (i)           change
to definition of “Borrowing Base” or of the components thereof, without the
written consent of each Lender.

     

    and,
provided further, that
(i) no amendment, waiver or consent shall, unless in writing and signed by
Agent in addition to the Lenders required above, affect the rights or duties of
Agent under this Agreement or any other Loan Document; and (ii) Section
10.06(i) may not be amended, waived or otherwise modified without the consent of
each Granting Lender all or any part of whose Loans are being funded by an SPC
at the time of such amendment, waiver or other modification; and (iii) the Agent
Fee Letter and the Arrangement Fee Letter may be amended, or rights or
privileges thereunder waived, in a writing executed only by the parties
thereto.  Anything herein to the contrary notwithstanding, during such
period as a Lender is a Defaulting Lender, to the fullest extent permitted by
applicable law such Lender shall not be entitled to vote in respect of
amendments and waivers hereunder and the Commitment and the outstanding Loans or
other extensions of credit of such Lender hereunder shall not be taken into
account in determining whether the Required Lenders or all of the Lenders, as
the case may be, have approved any such amendment or waiver; provided, that any
such amendment or waiver that would increase or extend the term of the
Commitment of such Defaulting Lender or alter the terms of this proviso shall
require the consent of such Defaulting Lender.

     

    If any
Lender does not consent to a proposed amendment, waiver, consent or release with
respect to any Loan Document that requires the consent of each Lender and that
has been approved by the Required Lenders, the Borrower may replace such
non-consenting Lender in accordance with Section 11.13; provided that such
amendment, waiver, consent or release can be effected as a result of the
assignment contemplated by such Section (together with all other such
assignments required by the Borrower to be made pursuant to this
paragraph).

     


    
      
         


      

      
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    10.02Notices; Effectiveness; Electronic
Communications.

     

     (a)           Notices
Generally.  Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
subsection (b) below), all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder
to be given by telephone shall be made to the applicable telephone number, as
follows:

     

    (i)           if
to Borrower or Agent, to the address, telecopier number, electronic mail address
or telephone number specified for such Person on Schedule 10.02;
and

     

    (ii)           if
to any other Lender, to the address, telecopier number, electronic mail address
or telephone number specified in its Administrative Questionnaire.

     

    Notices
and other communications sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received;
notices and other communications sent by telecopier shall be deemed to have been
given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the
next business day for the recipient).  Notices and other
communications delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).

     

    (b)           Electronic
Communications.  Notices and other communications to Lenders
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved
by Agent, provided that the foregoing shall not apply to notices to any Lender
pursuant to Article II if
such Lender has notified the Agent that it is incapable of receiving notices
under such Article by electronic communication.  Agent or Borrower
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it,
provided that approval of such procedures may be limited to particular notices
or communications.  Unless Agent otherwise prescribes,
(i) notices and other communications sent to an e-mail address shall be
deemed received upon the sender’s receipt of an acknowledgement from the
intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgement), provided that if
such notice or other communication is not sent during the normal business hours
of the recipient, such notice or communication shall be deemed to have been sent
at the opening of business on the next business day for the recipient, and
(ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at
its e-mail address as described in the foregoing clause (i) of notification
that such notice or communication is available and identifying the website
address therefor.

     

    (c)           The
Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE
ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE
PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE
BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY

     


    
      
         


      

      
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    OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT
PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In
no event shall the Administrative Agent or any of its Related Parties
(collectively, the “Agent Parties”) have any liability to the Borrower, any
Lender or any other Person for losses, claims, damages, liabilities or expenses
of any kind (whether in tort, contract or otherwise) arising out of the
Borrower’s or the Administrative Agent’s transmission of Borrower Materials
through the Internet, except to the extent that such losses, claims, damages,
liabilities or expenses are determined by a court of competent jurisdiction by a
final and nonappealable judgment to have resulted from the gross negligence or
willful misconduct of such Agent Party; provided, however, that in no event
shall any Agent Party have any liability to the Borrower, any Lender or any
other Person for indirect, special, incidental, consequential or punitive
damages (as opposed to direct or actual damages).

     

    (d)           Change of Address,
Etc.  Each of the Borrower and
Agent may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the other parties
hereto.  Each other Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to
Borrower and Agent. In
addition, each Lender agrees to notify the Administrative Agent from time to
time to ensure that the Administrative Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail
address to which notices and other communications may be sent and (ii) accurate
wire instructions for such Lender.  Furthermore, each Public Lender agrees to cause at least
one individual at or on behalf of such Public Lender to at all times have
selected the “Private Side Information” or similar designation on the content
declaration screen of the Platform in order to enable such Public Lender or its
delegate, in accordance with such Public Lender’s compliance procedures and
applicable Law, including United States Federal and state securities Laws, to
make reference to Borrower Materials that are not made available through the
“Public Side Information” portion of the Platform and that may contain material
non-public information with respect to the Borrower or its securities for
purposes of United States Federal or state securities laws.

     

    (e)           Reliance by Agent and
Lenders.  Agent and Lenders shall be entitled to rely and act
upon any notices (including telephonic Loan Notices) purportedly given by
or on behalf of 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.  Borrower
shall indemnify Agent, each Lender and the Related Parties of each of them from
all losses, costs, expenses and liabilities resulting from the reliance by such
Person on each notice purportedly given by or on behalf of
Borrower.  All telephonic notices to and other telephonic
communications with Agent may be recorded by Agent, and each of the parties
hereto hereby consents to such recording.

     

    10.03No Waiver; Cumulative Remedies;
Enforcement

     

    (a)           No
failure by any Lender or Agent to exercise, and no delay by any such Person in
exercising, any right, remedy, power or privilege under any Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege

     


    
      
         


      

      
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    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 provided in any Loan Documents are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.

     

    (b)           Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
authority to enforce rights and remedies hereunder and under the other Loan
Documents against Borrower shall be vested exclusively in, and all actions and
proceedings at law in connection with such enforcement shall be instituted and
maintained exclusively by, the Administrative Agent in accordance with Section
8.02 for the benefit of all the Lenders; provided, however, that the foregoing
shall not prohibit (a) the Administrative Agent from exercising on its own
behalf the rights and remedies that inure to its benefit (solely in its capacity
as Administrative Agent) hereunder and under the other Loan Documents, (b) any
Lender from exercising setoff rights in accordance with Section 10.08 (subject
to the terms of Section 2.11), or (c) any Lender from filing proofs of claim or
appearing and filing pleadings on its own behalf during the pendency of a
proceeding relative to Borrower under any Debtor Relief Law; and provided,
further, that if at any time there is no Person acting as Administrative Agent
hereunder and under the other Loan Documents, then (i) the Required Lenders
shall have the rights otherwise ascribed to the Administrative Agent pursuant to
Section 8.02 and (ii) in addition to the matters set forth in clauses (b) and
(c) of the preceding proviso and subject to Section 2.11, any Lender may, with
the consent of the Required Lenders, enforce any rights and remedies available
to it and as authorized by the Required Lenders.

     

    10.04Expenses; Indemnity; Damage
Waiver.

     

    (a)           Costs and
Expenses.  Borrower shall pay (i) all reasonable out of
pocket expenses incurred by Agent and its Affiliates (including the reasonable
fees, charges and disbursements of counsel for Agent), in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated) and (ii) all out of pocket
expenses incurred by Agent or any Lender (including the fees, charges and
disbursements of any counsel for Agent or any Lender) in connection with the
enforcement or protection of its rights (A) in connection with this
Agreement and the other Loan Documents, including its rights under this Section,
or (B) in connection with the Loans made hereunder, including all such out
of pocket expenses incurred during any workout, restructuring or negotiations in
respect of such Loans.

     

    (b)           Indemnification by the
Borrower.  Borrower shall indemnify Agent (and any sub-agent
thereof), each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an “Indemnitee”) against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (including the fees, charges and disbursements
of any counsel for any Indemnitee), incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by Borrower arising out of, in
connection with, or as a result of (i) the execution or delivery of this
Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto of their respective
obligations hereunder or thereunder or the consummation of the
transactions

     


    
      
         


      

      
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    contemplated hereby or thereby, or, in the case of the Administrative Agent
(and any sub-agent thereof) and its Related Parties only, the administration of
this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom,
(iii) any actual or alleged presence or release of Hazardous Materials on
or from any property owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by the Borrower, and regardless of whether any Indemnitee is a party
thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses have resulted from the gross negligence or willful misconduct
of such Indemnitee.

     

    (c)           Reimbursement and Indemnity
by Lenders.

     

    (i)           To
the extent that Borrower for any reason fails to indefeasibly pay any amount
required under subsection (a) or
(b) of
this Section to be paid by it to Agent (or any sub-agent thereof) or any
Related Party of any of the foregoing, each Lender severally agrees to pay to
Agent (or any such sub-agent) or such Related Party, as the case may be,
such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against Agent (or any such sub-agent) or against any Related
Party of any of the foregoing acting for Agent (or any such
sub-agent).  The obligations of the Lenders under this subsection
(c) are subject to the provisions of Section 2.10(d).

     

    (ii)           To
the extent required by any applicable law, Agent may withhold from any payment
to any Lender under a Loan Document an amount equal to any applicable
withholding tax.  If the IRS or any other Governmental Authority
asserts a claim that Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate certification form was
not delivered, was not properly executed, or fails to establish an exemption
from, or reduction of, withholding tax with respect to a particular type of
payment, or because such Lender failed to notify Agent or any other Person of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason), or Agent reasonably
determines that it was required to withhold taxes from a prior payment but
failed to do so, such Lender shall promptly indemnify Agent fully for all
amounts paid, directly or indirectly, by such Agent as tax or otherwise,
including penalties and interest, and together with all expenses incurred by
Agent, including legal expenses, allocated internal costs and out-of-pocket
expenses.  Agent may offset against any payment to any Lender under a
Loan Document, any applicable withholding tax that was required to be withheld
from any prior payment to such Lender but which was not so withheld, as well as
any other amounts for which Agent is entitled to indemnification from such
Lender under this cluase (ii) of this Section 10.04(c).

     

    (d)           Waiver of Consequential
Damages, Etc.  To the fullest extent permitted by applicable
law, Borrower shall not assert, and hereby waives, any claim against any
Indemnitee,

     


    
      
         


      

      
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    on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby, any Loan or the use of the proceeds thereof.  No
Indemnitee referred to in subsection (b) above shall be liable for any
damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or the
other Loan Documents or the transactions contemplated hereby or
thereby.

     

    (e)           Payments.  All
amounts due under this Section shall be payable not later than 30 Business Days
after demand therefor, provided that such demand is supported by a statement
showing. in reasonable detail, the basis for the amount demanded including the
method of calculating such amount, if applicable.

     

    (f)           Survival.  The
agreements in this Section shall survive the resignation of Agent, the
replacement of any Lender, the termination of the Aggregate Commitments and the
repayment, satisfaction or discharge of all the other Obligations.

     

    10.05Payments Set Aside

     

    To the
extent that any payment by or on behalf of Borrower is made to Agent or any
Lender, or Agent or any 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 Agent or such Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any Debtor Relief Law or otherwise, then
(a) 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,
and (b) each Lender severally agrees to pay to Agent upon demand its
applicable share (without duplication) of any amount so recovered from or
repaid by Agent, plus interest thereon from the date of such demand to the date
such payment is made at a rate per annum equal to the Federal Funds Rate from
time to time in effect.  The obligations of the Lenders under clause
(b) of the preceding sentence shall survive the payment in full of the
Obligations and the termination of this Agreement.

     

    10.06Successors and Assigns.

     

    (a)           Successors and Assigns
Generally.  The provisions of
this Agreement and each other Loan Document shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that Borrower may not assign or otherwise transfer any
of its rights or obligations hereunder without the prior written consent of
Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an Eligible Assignee in
accordance with the provisions of subsection (b) of this Section,
(ii) by way of participation in accordance with the provisions of
subsection (d) of this Section, or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of subsection
(f)  of this Section (and any other attempted assignment or transfer by any
party hereto shall be null and void); or (iv) to an SPC in
accordance with the provisions of subsection (h) of this Section.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective

     


    
      
         


      

      
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    successors
and assigns permitted hereby, Participants to the extent provided in subsection
(d) of this Section and, to the extent expressly contemplated hereby, the
Related Parties of each of Agent and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

     

    (b)           Assignments by
Lenders.  Any Lender may at any
time assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it); provided that (i) except in the case of an assignment of
the entire remaining amount of the assigning Lender’s Commitment and the Loans
at the time owing to it or in the case of an assignment to a Lender or an
Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this
purpose includes Loans outstanding thereunder) or, if the Commitment is not
then in effect, the principal outstanding balance of the Loans of the assigning
Lender subject to each such assignment, determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to Agent or, if
“Trade
Date” is specified in the Assignment and
Assumption, as of the Trade Date, shall not be less than $1,000,000 unless each
of Agent and, so long as no Event of Default has occurred and is continuing,
Borrower otherwise consents (each such consent not to be unreasonably withheld
or delayed); provided, however,
that concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or
to an Eligible Assignee and members of its Assignee Group) will be treated as a
single assignment for purposes of determining whether such minimum amount has
been met; (ii) each partial assignment shall
be made as an assignment of a proportionate part of all the assigning Lender’s
rights and obligations under this Agreement with respect to the Loans or the
Commitment assigned; (iii) any assignment of a Commitment must be approved
by Agent unless the Person that is the proposed assignee is itself a Lender, an
Affiliate of a Lender, or an Approved Fund
(whether or not the proposed assignee would otherwise qualify as an Eligible
Assignee); and (iv) the parties to each assignment shall execute and
deliver to Agent an Assignment and Assumption, together with a processing and
recordation fee in the amount, if any, required as set forth in Schedule
10.06, payable by the assigning Lender and the
Eligible Assignee, if it shall not be a Lender, shall deliver to Agent an
Administrative Questionnaire.  Subject to acceptance and recording
thereof by Agent pursuant to subsection (c) of this Section, from and after
the effective date specified in each Assignment and Assumption, the Eligible
Assignee thereunder shall be a party to this Agreement and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto) but shall continue to be entitled to the benefits of
Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior
to the effective date of such assignment.  Upon request, Borrower (at
its expense) shall execute and deliver a Note to the assignee
Lender.  Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this subsection shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with subsection (d) of this Section.

     


    
      
         


      

      
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    (c)           Register.  Agent,
acting solely for this purpose as an agent of Borrower, shall maintain at
Administrative Agent’s Office a copy of each Assignment and Assumption delivered
to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the Loans owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”).  The
entries in the Register shall be conclusive, and Borrower, Agent and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary.  The Register shall be
available for inspection by Borrower and any Lender (with respect to any entry
relating to such Lender) at any reasonable time and from time to time upon
reasonable prior notice.

     

    (d)           Participations.  Any
Lender may at any time, without the consent of, or notice to, Borrower or Agent,
sell participations to any Person (other than a natural person or Borrower or
any of Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in
all or a portion of such Lender’s rights and/or obligations under this Agreement
(including all or a portion of its Commitment and/or the Loans owing to it);
provided that (i) such Lender’s obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and
(iii) Borrower, Agent and the Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.  Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any  provision of this Agreement;
provided that such agreement or instrument may provide that such Lender will
not, without the consent of the Participant, agree to any amendment, waiver or
other modification described in the first proviso to Section 10.01 that
affects such Participant.  Subject to subsection (e) of this
Section, Borrower agrees that each Participant shall be entitled to the benefits
of Sections 3.01,
3.04 and 3.05 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to subsection (b) of this Section.  To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 10.08 as
though it were a Lender, provided such Participant agrees to be subject to Section 2.11 as
though it were a Lender.

     

    (e)           Limitations upon Participant
Rights.  A Participant shall not
be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with Borrower’s prior
written consent.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 3.01
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with
Section 3.01(e) as though it were a Lender.

     

    (f)           Certain
Pledges.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.

     


    
      
         


      

      
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    (g)           Electronic Execution of
Assignments.  The words “execution,” “signed,” “signature,” and words
of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of
which shall be of the same legal effect, validity or enforceability as a
manually executed signature or the use of a paper-based recordkeeping system, as
the case may be, to the extent and as provided for in any applicable law,
including the Federal Electronic Signatures in Global and National Commerce Act,
the New York State Electronic Signatures and Records Act, or any other similar
state laws based on the Uniform Electronic Transactions Act.

     

    (h)           Deemed Consent of
Borrower.  If the consent of Borrower to an assignment to an
Eligible Assignee is required hereunder (including a consent to an assignment
which does not meet the minimum assignment threshold specified in clause
(i) of the proviso to the first sentence of Section 10.06(b)),
Borrower shall be deemed to have given its consent ten Business Days after the
date notice thereof has been delivered to Borrower by the assigning Lender
(through Agent) unless such consent is expressly refused by Borrower prior
to such tenth Business Day.

     

    (i)           Special Purpose Funding
Vehicles.  Notwithstanding anything to the contrary contained
herein, any Lender (a “Granting Lender”) may grant to a special purpose funding
vehicle identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrower (an “SPC”) the option to provide
all or any part of any Committed Loan that such Granting Lender would otherwise
be obligated to make pursuant to this Agreement; provided that (i) nothing
herein shall constitute a commitment by any SPC to fund any Committed Loan, and
(ii) if an SPC elects not to exercise such option or otherwise fails to make all
or any part of such Committed Loan, the Granting Lender shall be obligated to
make such Committed Loan pursuant to the terms hereof or, if it fails to do so,
to make such payment to the Administrative Agent as is required under Section
2.12(b)(ii).  Each party hereto hereby agrees that (i) neither the
grant to any SPC nor the exercise by any SPC of such option shall increase the
costs or expenses or otherwise increase or change the obligations of the
Borrower under this Agreement (including its obligations under Section 3.04),
(ii) no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement for which a Lender would be liable, and (iii) the Granting
Lender shall for all purposes, including the approval of any amendment, waiver
or other modification of any provision of any Loan Document, remain the lender
of record hereunder.  The making of a Committed Loan by an SPC
hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Committed Loan were made by such Granting
Lender.  In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior debt of any SPC, it will not
institute against, or join any other Person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding
under the laws of the United States or any State
thereof.  Notwithstanding anything to the contrary contained herein,
any SPC may (i) with notice to, but without prior consent of the Borrower and
the Administrative Agent and with the payment of a processing fee in the amount
of $2,500 (which processing fee may be waived by the Administrative Agent in its
sole discretion), assign all or any portion of its right to receive payment with
respect to any Committed Loan to the Granting Lender and (ii) disclose on a
confidential basis any non-public information relating to its funding of
Committed Loans to any rating agency, commercial paper dealer or provider of any
surety or guarantee or credit or liquidity enhancement to such SPC.

     


    
      
         


      

      
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    10.07           Treatment
of Certain Information; Confidentiality

     

    Each of
Agent and Lenders agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its
Affiliates and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, advisors and representatives (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,
purporting to have jurisdiction over it  (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process (but in the case of a subpoena or similar legal process,
only to the extent responsive thereto), (d) to any other party
hereto, (e) in connection with the exercise of any remedies hereunder or
under any other Loan Document or any action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially
the same as those of this Section, to (i) any assignee of or Participant
in, or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction
relating to Borrower and its obligations, (g) with the consent of Borrower
or (h) to the extent such Information (x) becomes publicly available
other than as a result of a breach of this Section or (y) becomes available
to Agent or any Lender or any of their respective Affiliates on a
nonconfidential basis from a source other than Borrower.  For purposes
of this Section, “Information” means
all information received from Borrower or any Subsidiary relating to Borrower or
any Subsidiary or any of their respective businesses, other than any such
information that is available to Agent or any Lender on a nonconfidential basis
prior to disclosure by Borrower or any Subsidiary, provided that, in the case of
information received from Borrower or any Subsidiary after the date hereof, such
information is clearly identified 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.

     

    10.08Right of Setoff

     

    If an
Event of Default shall have occurred and be continuing, each Lender and each of
their respective Affiliates is hereby authorized at any time and from time to
time, to the fullest extent permitted by applicable law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final,
in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender or any such Affiliate to or for
the credit or the account of Borrower against any and all of the obligations of
Borrower now or hereafter existing under this Agreement or any other Loan
Document to such Lender or any such Affiliate, irrespective of whether or not
such Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations of Borrower may be contingent or
unmatured or are owed to a branch or office of such Lender different from the
branch or office holding such deposit or obligated on such
indebtedness.  The rights of each Lender and their respective
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Lender or their respective
Affiliates may have.  Each Lender agrees to notify Borrower and Agent
promptly after any such setoff and application, provided that the failure to
give such notice shall not affect the validity of such setoff and
application.

     


    
      
         


      

      
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    10.09           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 Agent or any 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
Borrower.  In determining whether the interest contracted for,
charged, or received by Agent or a Lender exceeds the Maximum Rate, such Person
may, to the extent permitted by applicable Law, (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.

     

    10.10Counterparts; Integration;
Effectiveness

     

    This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  This
Agreement and the other Loan Documents constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by Agent
and when Agent shall have received counterparts hereof that, when taken
together, bear the signatures of each of the other parties
hereto.  Delivery of an executed counterpart of a signature page of
this Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.

     

    10.11Survival 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 Agent and each Lender, regardless of any investigation made by
Agent or any Lender or on their behalf and notwithstanding that Agent or any
Lender may have had notice or knowledge of any Default at the time of any
Borrowing, and shall continue in full force and effect as long as any Loan or
any other Obligation hereunder shall remain unpaid or unsatisfied.

     

    10.12Severability

     

    If any
provision of this 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 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.

     

    10.13 Replacement of
Lenders.  

     

          
If any Lender requests compensation under Section 3.04, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 3.01, if any Lender
is a Defaulting Lender or if any other circumstance exists hereunder that gives
the Borrower the right to replace a Lender as a party hereto, then the Borrower
may, at its sole expense and effort,


    
      
         


      

      
        83

        
          

        

      

      
         


      

    


    upon
notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in, and consents required by, Section 10.06), all of its
interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided
that:

    


    (a)           the
Borrower shall have paid to the Administrative Agent the assignment fee
specified in Section 10.06(b);

    


    (b)           such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder and under the other Loan Documents (including
any amounts under Section 3.05) from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts);

    


    (c)           in
the case of any such assignment resulting from a claim for compensation under
Section 3.04 or payments required to be made pursuant to Section 3.01, such
assignment will result in a reduction in such compensation or payments
thereafter; and

    


    (d)           such
assignment does not conflict with applicable Laws.

    


    A Lender
shall not be required to make any such assignment or delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to
apply.

     

    10.14Governing Law; Jurisdiction;
Etc.

     

    (a)           GOVERNING
LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF WASHINGTON.

     

    (b)           SUBMISSION TO
JURISDICTION.  THE BORROWER IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF WASHINGTON SITTING IN KING COUNTY AND OF THE UNITED
STATES DISTRICT COURT OF THE WESTERN DISTRICT OF WASHINGTON, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH WASHINGTON STATE COURT OR, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT AGENT OR ANY
LENDER MAY OTHERWISE HAVE TO BRING ANY

     


    
      
         


      

      
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    ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE
BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

     

    (c)           WAIVER OF
VENUE.  THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED
TO IN PARAGRAPH (B) OF THIS SECTION.  EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

     

    (d)           SERVICE OF
PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

     

    10.15Waiver of Right to Trial by
Jury

     

    EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     

    10.16USA Patriot Act Notice

     

    Each
Lender that is subject to the Patriot Act (as hereinafter defined) and
Agent (for itself and not on behalf of any Lender) hereby notifies Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub.
L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is
required to obtain, verify and record information that identifies Borrower,
which information includes the name and address of Borrower and other
information that will allow such Lender or Agent, as applicable, to identify
Borrower in accordance with the Patriot Act.

     

    10.17Time of the Essence

     

    Time is
of the essence of the Loan Documents.

     


    
      
         


      

      
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    10.18           Oral
Agreements Not Enforceable

     

    ORAL
AGREEMENTS AND ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR FORBEAR FROM
COLLECTION OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

     

    


     


    
      
         


      

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

     

    
      	 
      	
              ALASKA
      AIRLINES, INC.

               

               

              By:
      /s/ John F.
      Schaefer, Jr.

              Name:
      John F. Schaefer, Jr.

              Title:   Vice
      President – Finance

              and Treasurer

               

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	 
      	
              CITIBANK, N.A., as Administrative
      Agent

               

              By: /s/
      Timothy P. Dilworth

              Name:           Timothy
      P. Dilworth

              Title:           Vice
      President

               

            	 
      
	 
      	
              CITIBANK, N.A., as a
      Lender

               

              By: /s/
      Timothy P. Dilworth

              Name:           Timothy
      P. Dilworth

              Title:           Vice
      President

               

            	 
      


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	 
      	 
      	
              BANK OF AMERICA, N.A.,
      as a Lender

              By: /s/
      James J. Teichman

              Name:           James
      J. Teichman

              Title:           Senior
      Vice President

               

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	 
      	
              SOCIETE GENERALE, as a
      Lender

               

              By: /s/ A.
      Drapeau

              Name:                      A.
      Drapeau

              Title:           Managing
      Director

               

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
1.01

     

    APPROVED
APPRAISERS

     

    


    [***]

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


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

    

    



    
      
        
          Schedule 1.01

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
2.01

     

    COMMITMENTS

     

     

    AND APPLICABLE
PERCENTAGES

     

    


    
      	
              Lender

               

            	
              Commitment

            	
              Applicable
      Percentage

            
	
              Citibank,
      N.A

            	
              [***]

            	
              [***]

            
	
              Bank
      of America, N.A.

            	
              [***]

            	
              [***]

            
	
              Societe
      Generale

            	
              [***]

            	
              [***]

            
	
              Total

            	
              $100,000,000.00

            	
              100.000000000%

            


    

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


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

    

    


    



    
      
        
          Schedule 2.01

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
5.06

    LITIGATION

    


    


    [***]

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


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

    

    



    
      
        
          Schedule 5.06

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
5.09

    ENVIRONMENTAL
MATTERS

    


    


    
      	
              LOCATION

            	
              ACCRUAL
      BALANCE AS OF 12/31/09

            	
              DETAILS

            
	
              1.
      Anchorage

            	
              [***]

            	
              Currently
      monitoring contamination levels.  No active plan currently
      required.

            
	
              2.
      Juneau

            	
              [***]

            	
              Cleanup
      began in 2004.  Project to continue for additional three – five
      years

            
	
              3.
      Fairbanks

            	
              [***]

            	
              Two
      sites of contamination.  Both locations required long-term
      monitoring per Alaska Dept. of Environmental
  Conservation.

            
	
              4.
      Oakland

            	
              [***]

            	
              In
      negotiations with the Port of Oakland to determine cleanup
      requirements.

            


    

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


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

    

    



    
      
        
          Schedule 5.09

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
7.01

    


    EXISTING
LIENS

    


    


    None.


    
      
        
          Schedule 7.01

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
10.02

     

    ADMINISTRATIVE
AGENT’S OFFICE,

     

     

    CERTAIN
ADDRESSES FOR NOTICES

     

    


     

    ALASKA
AIRLINES, INC.

     

    


     

    19300
International Boulevard

    Seattle,
WA 98188

     

    Attention:                      Treasurer

     

    Telephone:                      [***]

     

    Telecopier:                      [***]

     

    Electronic
Mail: [***]

     

    Website
Address:                                www.alaskaair.com

     

    ADMINISTRATIVE
AGENT:

    (for
payments and Requests for Borrowings):

    


    For
Borrower Inquiries:

    


    Citibank,
N.A.

    1615
Brett Road

    Building
III

    New
Castle, DE 19720

    Attention:
[***]

    Telephone:
[***]

    Telecopier:
[***]

    Electronic
Mail: [***]

    


    Account
No.: [***]

    Account
Name: [***]

    Ref:
Alaska Airlines, Inc.

    ABA#
[***]

    


    For
Lender Inquiries:

    


    


    


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

    

    


    


    


    



    
      
        
          Schedule 10.02

        

         


      

      
         


        
          

        

      

      
         


      

    


    Citibank,
N.A.

    1615
Brett Road

    Building
III

    New
Castle, DE 19720

    Attention:  Investor
Relations Team

    


    Telephone:
[***]

    Telecopier:
[***]

    Electronic
Mail: [***]

    


    Other
Notices to Administrative Agent:

    


    Citibank,
N.A.

    388
Greenwich Street, 34th Floor

    New York,
NY 10013

    Attn:
[***]

    Telephone
No.: [***]

    Facsimile
No.:  [***]

    Electronic
Mail: [***]

    and

    Attn:
[***]

    Telephone
No.: [***]

    Facsimile
No.:  [***]

    Electronic
Mail: [***]

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


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

    

    



    
      
        
          Schedule 10.02

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
10.06

    


    PROCESSING
AND RECORDATION FEES

    


    


    The
Administrative Agent will charge a processing and recordation fee (an
“Assignment Fee”) in the amount of [***] for each assignment; provided, however,
that in the event two or more concurrent assignments to members of the same
Assignee Group (which may be effected by a suballocation of an assigned amount
among members of such Assignee Group) or two or more concurrent assignments by
members of the same Assignee Group to a single Eligible Assignee (or to an
Eligible Assignee and members of its Assignee Group), the Assignment Fee will be
[***] plus the amount set forth below:

    


    
      	
              Transaction

            	
              Assignment
      Fee

            
	
              First
      four concurrent assignments or suballocations to members of an Assignee
      Group (or from members of an Assignee Group, as
applicable)

            	
              [***]

            
	
              Each
      additional concurrent assignment or suballocation to a member of such
      Assignee Group (or from a member of such Assignee Group, as
      applicable)

            	
              [***]

            


    

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


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

    

    


    



    
      
        
          Schedule 10.06

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
A

     

    FORM
OF LOAN NOTICE

     

    


    Date:  ___________,
_____

    To:           Citibank,
N.A., as Administrative Agent

    


    Ladies
and Gentlemen:

    


    Reference
is made to that certain Credit Agreement, dated as of [_____ ], 2010 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to
time, the “Agreement”; the terms
defined therein being used herein as therein defined), among Alaska Airlines,
Inc., an Alaska corporation, the Lenders from time to time party thereto, and
Citibank, N.A., as Administrative Agent.

    


    The
undersigned hereby requests (select one):

    


     A
Borrowing
Loans                                           
A conversion or continuation of Loans

    1.           On                                           
(a Business Day).

    2.           In
the amount of
$                                                                           .

    3.           Comprised
of                                                                                     .

    [Type of Loan requested]

    4.           For
Eurodollar Rate Loans:  with an Interest Period
of                                                                                                
months.

    


    The
Borrowing, if any, requested herein complies with the provisos to the first
sentence of Section 2.01 of
the Agreement.

    


    ALASKA
AIRLINES, INC.

    


    


    By:                                                                

    Name:                                                                

    Title:                                                                


    
      
        
          EXHIBIT
A

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
B

     

    FORM
OF NOTE

     

    


    $_______________________

    


    FOR VALUE RECEIVED, the undersigned
(“Borrower”),
hereby promises to pay to _____________________ or registered assigns (“Lender”), in
accordance with the provisions of the Agreement (as hereinafter defined), the
principal amount of each Loan from time to time made by the Lender to Borrower
under that certain Credit Agreement, dated as of [_____ __], 2010 (as amended, restated,
extended, supplemented or otherwise modified in writing from time to time, the
“Agreement”;
the terms defined therein being used herein as therein defined), among Borrower,
the Lenders from time to time party thereto, and Citibank, N.A., as
Administrative Agent.

    


    Borrower promises to pay interest on
the unpaid principal amount of each Loan from the date of such Loan until such
principal amount is paid in full, at such interest rates and at such times as
provided in the Agreement.  All payments of principal and interest
shall be made to Administrative Agent for the account of the Lender in Dollars
in immediately available funds at the Administrative Agent’s
Office.  If any amount is not paid in full when due hereunder, such
unpaid amount shall bear interest, to be paid upon demand, from the due date
thereof until the date of actual payment (and before as well as after
judgment) computed at the per annum rate set forth in the
Agreement.

    


    This Note is one of the Notes referred
to in the Agreement, is entitled to the benefits thereof and may be prepaid in
whole or in part subject to the terms and conditions provided
therein.  This Note is also secured by the Collateral.  Upon
the occurrence and continuation of one or more of the Events of Default
specified in the Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided in
the Agreement.  Loans made by the Lender shall be evidenced by one or
more loan accounts or records maintained by the Lender in the ordinary course of
business.  The Lender may also attach schedules to this Note and
endorse thereon the date, amount and maturity of its Loans and payments with
respect thereto.

    


    Borrower, for itself, its successors
and assigns, hereby waives diligence, presentment, protest and demand and notice
of protest, demand, dishonor and non-payment of this Note.

    


    THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
WASHINGTON.


    
      
        
          EXHIBIT B
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, TO EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.

    


    ALASKA
AIRLINES, INC.

    


    


    By:                                                                

    Name:                                                                

    Title:                                                                

    



    
      
        
          EXHIBIT B
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    


     

    LOANS
AND PAYMENTS WITH RESPECT THERETO

     

    


     

    
      	
              Date

            	
              Type
      of Loan Made

            	
              Amount
      of Loan Made

            	
              End
      of Interest Period

            	
              Amount
      of Principal or Interest Paid This Date

            	
              Outstanding
      Principal Balance This Date

            	
              Notation
      Made By

            
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      


    

    



    
      
        
          EXHIBIT B
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
C

    


    


    FORM
OF COMPLIANCE CERTIFICATE

    FOR
THE PERIOD ENDING _____________, 20__

    


    


    
      	
              To:

            	
              Citibank,
      N.A., as Administrative Agent

            


    

     

    
      	
               
      

            	
              Ladies
      and Gentlemen:

            


    

    


    Reference
is made to that certain Credit Agreement dated as of [_____ __], 2010 between
Alaska Airlines, Inc., an Alaska corporation (“Borrower”), the
Lenders from time to time party thereto, and Citibank, N.A., as Administrative
Agent (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement”; the terms
defined therein being used herein as therein defined).

    


    The undersigned Responsible Officer
hereby certifies as of the date hereof that he is the

     of Borrower, and that, as such,
he is authorized to execute and deliver this Compliance Certificate to
Administrative Agent on the behalf of Borrower, and that:

    


    (A)           The
attached financial statements of Borrower are complete and correct, and fairly
present the financial condition of Borrower as of [_____ __, 20__], and the
results of the operations of Borrower for the period ended [_____ __, 20__], all in
accordance with generally accepted accounting principles applied on a consistent
basis;

    


    (B)           Exhibit
A hereto is a correct calculation of the financial covenant contained in Section
6.12 of the Agreement; and

    


    (C)           No
event has occurred which constitutes an Event of Default as defined in the
Agreement or which, with giving of notice or lapse of time, or both, would
constitute an Event of Default.

     

    IN WITNESS WHEREOF, the
undersigned has executed this Compliance Certificate as

     

    of [_____ __, 20__].

     

    ALASKA
AIRLINES, INC.

     

    By:                                                                           

    Name:                                                                           

    Title:                                                                           

    



    
      
        
          EXHIBIT C
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
A

    


    


    
      	 
      	 
      	
              Period
      Ending

            
	 
      	 
      	
              __/__/20__

            
	 
      	 
      	 
      
	
              (i)

            	
              Unrestricted Cash - 6.12

            	
              ______

            
	 
      	 
      	 
      


    

    


    


    


     


    
      
        
          EXHIBIT C
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    


     

    EXHIBIT
D

    


     

    FORM
OF ASSIGNMENT AND ASSUMPTION

     

    This
Assignment and Assumption (this “Assignment and
Assumption”) is dated as of the Effective Date set forth below (the
“Effective
Date”) and is entered into by and between [Insert name of Assignor] (the
“Assignor”) and
[Insert name of
Assignee] (the “Assignee”).  Capitalized
terms used but not defined herein shall have the meanings given to them in the
Credit Agreement identified below (the “Credit Agreement”),
receipt of a copy of which is hereby acknowledged by the
Assignee.  The Standard Terms and Conditions set forth in Annex 1
attached hereto are hereby agreed to and incorporated herein by reference and
made a part of this Assignment and Assumption as if set forth herein in
full.

     

    For an
agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the
Assignor, subject to, and in accordance with, the Standard Terms and Conditions
and the Credit Agreement, as of the Effective Date (i) all of the
Assignor’s rights and obligations as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto to the extent related
to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below and (ii) to the extent permitted to be assigned
under applicable law, all claims, suits, causes of action and any other right of
the Assignor (in its capacity as a Lender) against any Person, whether
known or unknown, arising under or in connection with the Credit Agreement, any
other documents or instruments delivered pursuant thereto, or the loan
transactions governed thereby or in any way based on or related to any of the
foregoing, including, but not limited to, contract claims, tort claims,
malpractice claims, statutory claims and all other claims at law or in equity
related to the rights and obligations sold and assigned pursuant to clause
(i) above (the rights and obligations sold and assigned pursuant to clauses
(i) and (ii) above being referred to herein collectively as, the
“Assigned
Interest”).  Such sale and assignment is without recourse to
the Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by the Assignor.

     

    1.           Assignor:                      ______________________________

    


    2.           Assignee:                      ______________________________
[, an Affiliate of [identify
Lender]]

    


    3.           Borrower:                      Alaska
Airlines, Inc.

    


    4.           Administrative
Agent: Citibank, N. A., as Administrative Agent

    


    5.           Credit
Agreement:                                Credit
Agreement, dated as of [_____
__], 2010, among Borrower, the Lenders from time to time party thereto
and Administrative Agent


    
      
        
          EXHIBIT D
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    6.           Assigned
Interest:

    


    
      	
              Facility
      Assigned

            	
              Aggregate
      Amount of Commitment/Loans for all Lenders

            	
              Amount
      of Commitment/

              Loans
      Assigned

            	
              Percentage
      Assigned of Commitment/

              Loans

            	
              CUSIP
      No.

            
	 
      	
              $                               

            	
              $                      

            	 
      	 
      
	 
      	
              $                               

            	
              $                      

            	 
      	 
      
	 
      	
              $                               

            	
              $                      

            	 
      	 
      


    

    


    Effective
Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE
REGISTER THEREFOR.]

     

    The terms
set forth in this Assignment and Assumption are hereby agreed to:

     

    


    ASSIGNOR

    [NAME
OF ASSIGNOR]

    


    By:
_____________________________

             Title :

    


    ASSIGNEE

    [NAME
OF ASSIGNEE]

    


    By:
_____________________________

              Title :

    [Consented to and]
Accepted:

    


    Citibank,
N. A., as

      Administrative
Agent

    


    By:
_________________________________

          Title :

    


    b. [Consented
to:]

    


    By:
_________________________________

          Title :


    
      
        
          EXHIBIT D
– 

        

         


      

      
         


        
          

        

      

      
         


        
          ANNEX
1 TO ASSIGNMENT AND ASSUMPTION

          


        

      

    


    


    STANDARD
TERMS AND CONDITIONS FOR

    ASSIGNMENT
AND ASSUMPTION

    


    1.           Representations and
Warranties.

     

    1.1.           Assignor.  The
Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim, and
(iii) it has full power and authority, and has taken all action necessary,
to execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with
respect to (i) any statements, warranties or representations made in or in
connection with the Credit Agreement or any other Loan Document, (ii) the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Loan Documents or any collateral thereunder, (iii) the financial
condition of Borrower, any of its Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document, or (iv) the performance or
observance by Borrower, any of its Subsidiaries or Affiliates or any other
Person or any of their respective obligations under any Loan
Document.

     

    1.2.           Assignee.  The
Assignee (a) represents and warrants that (i) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment and Assumption and to consummate the transactions contemplated hereby
and to become a Lender under the Credit Agreement, (ii) it meets all
requirements of an Eligible Assignee under the Credit Agreement (subject to
receipt of such consents as may be required under the Credit Agreement),
(iii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement as a Lender thereunder and, to the extent of
the Assigned Interest, shall have the obligations of a Lender thereunder, and
(iv) it has received a copy of the Credit Agreement, together with copies
of the most recent financial statements delivered pursuant to Section 6.01
thereof, and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on
Administrative Agent or any Lender; and (b) agrees that (i) it will,
independently and without reliance on Administrative Agent, the Assignor or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform, in
accordance with their terms, all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

     

    2.           Payments.  From
and after the Effective Date, Administrative Agent shall make all payments in
respect of the Assigned Interest (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to
but excluding the Effective Date and to the Assignee for amounts which have
accrued from and after the Effective Date.

     

    3.           General
Provisions.  This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.  This Assignment and Assumption may be
executed in any number of counterparts, which together


    
      
        
          EXHIBIT D
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    shall
constitute one instrument.  Delivery of an executed counterpart of a
signature page of this Assignment and Assumption by telecopy shall be effective
as delivery of a manually executed counterpart of this Assignment and
Assumption.  This Assignment and Assumption shall be governed by, and
construed in accordance with, the law of the State of Washington.

     
 


    
      
        
          EXHIBIT D
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
E

    


    FORM
OF SECURITY AGREEMENT

    


    [See
attached.]


    
      
        
          EXHIBIT E
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    


    


    


    


    


    


    


    


    AIRCRAFT

    CHATTEL
MORTGAGE AND

    SECURITY
AGREEMENT

    


    Dated as
of March 31, 2010

    


    Between

    


    


    ALASKA
AIRLINES, INC.

    Mortgagor

    


    And

    


    CITIBANK,
N.A., as Administrative Agent

    Mortgagee

    


    Concerning

    


    Certain
Boeing 737-400 and 737-800 series aircraft

    


    


    


    


    


    



    
      
        
          EXHIBIT E
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    AIRCRAFT
CHATTEL

    MORTGAGE
AND SECURITY AGREEMENT

    


    


    This
AIRCRAFT CHATTEL MORTGAGE AND SECURITY AGREEMENT is entered into on March 31,
2010 (as amended from time to time, this “Security Agreement”),
between, ALASKA AIRLINES, INC., a corporation organized and existing under the
laws of the state of Alaska, having the address 19300 International Blvd.,
Seattle, WA 98188 (the “Mortgagor”), and
CITIBANK, N.A, a national banking association, having an office at 388 Greenwich
Street, 34th Floor, New York, NY 10013, as Administrative Agent (together with
its successors and assigns, the “Mortgagee”).  Capitalized
terms used herein and not otherwise defined shall have the meaning given in the
Credit Agreement and shall be construed in accordance with the rules of
construction set forth therein.

     

    RECITALS

    


    (1)           Mortgagor,
certain financial institutions (collectively, the “Lenders”), and
Mortgagee, as administrative agent, entered into that certain Credit Agreement
dated as of even date herewith (as supplemented, amended, amended and restated,
or otherwise modified from time to time, the “Credit Agreement”)
providing for the Lenders to make revolving loans to Mortgagor.

     

    (2)           This
Security Agreement secures amounts owing under the Credit Agreement and the Lien
of this Security Agreement shall continue to attach to the Mortgage Property
without release or interruption notwithstanding the modification of the
Obligations secured by this Security Agreement.

     

    NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound and to secure the payment and performance of the
Obligations and the performance of the covenants contained in this Security
Agreement, the Mortgagor does hereby grant, convey and mortgage unto the
Mortgagee, its successors and assigns, and gives to the Mortgagee a first
priority security interest in the Flight Equipment and in all of the other
following described property (collectively, the “Mortgaged
Property”).

     

    GRANTING
CLAUSE I

    


    Each
Aircraft, consisting of an airframe listed by type, U.S. Registration Mark and
serial number (each, an “Airframe”), and two engines listed by type and
manufacturer’s serial number (each, an “Engine”), together with all Parts
thereto installed in or attached to such airframe or engine, listed in Schedule
I hereto (the “Flight
Equipment”), as such Schedule I may be changed from time to time by a
Security Agreement Supplement.

     

    GRANTING CLAUSE
II

    


    All
property which shall from time to time be subjected to the Lien of this Security
Agreement by a Security Agreement Supplement or by delivery or by a writing of
any kind.

     


    
      
        
          EXHIBIT E
– 

        

         


      

      
         


        
          

        

      

      
         


      

    


    GRANTING CLAUSE
III

     

    


    All
right, title and interest of the Mortgagor in, to and under all warranties,
service contracts and product agreements, if any, of any manufacturer of the
Flight Equipment, all maintenance and overhaul agency agreements relating to the
Flight Equipment, and all agreements of any subcontractor, supplier or vendor of
any part of the Flight Equipment, to the extent assignable or enforceable, and
any and all other warranties, service contracts and product agreements in
respect of any of the Flight Equipment, whether now existing or hereafter
acquired.

     

    GRANTING CLAUSE
IV

    


    All
substitutions, replacements and renewals of all property subjected or required
to be subjected to the Lien of this Security Agreement and all property that
hereafter becomes physically attached to or incorporated in all property
subjected or required to be subjected to the Lien of this Security Agreement, in
each case to the extent the same is now owned by the Mortgagor or shall
hereafter be owned by it.

     

    GRANTING CLAUSE
V

    


    All
monies deposited from time to time with the Mortgagee pursuant to
Section 2.1 until released from the Lien of this Security
Agreement.

     

    GRANTING CLAUSE
VI

    


    All
certificates, registrations, records, manuals, books, logs and technical
information relating to the Flight Equipment now or hereafter in the control or
possession of the Mortgagor (the “Aircraft
Documentation”).

     

    GRANTING CLAUSE
VII

    


    All
Proceeds.

     


    
      
        
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    GRANTING
CLAUSE VIII

     

    


    All
right, title and interest of the Mortgagor in, to and under any lease or
arrangement for the operation of all or any part of the Flight Equipment, and
the chattel paper of the lease or other arrangement, including the Mortgagor’s
right, title and interest in and to all monies due and to become due to
Mortgagor under any lease or other arrangement, the Mortgagor’s right to compel
performance of all of the lessee’s obligations under any lease and all of the
Mortgagor’s rights as lessor but excluding all of Mortgagor’s obligations under
any lease or other arrangement, and together with all general intangibles and
contract right, (including all rents, issues, insurance proceeds, other
proceeds, awards, revenues and other income) of the Flight Equipment and all the
estate, right, title and interest of every nature whatsoever of the Mortgagor,
at law or in equity, in and to such Flight Equipment and every part and parcel
thereof.

     

    All
property mortgaged or intended to be mortgaged by these granting clauses and
which is hereafter acquired by the Mortgagor or to which it may at any time
hereafter be, in any manner, entitled, at law or in equity, and required to be
subjected hereto or intended so to be, shall vest in the Mortgagee, under the
terms and conditions of this Security Agreement, forthwith upon acquisition
thereof by the Mortgagor, and such property shall be as fully embraced within
the provisions of this Security Agreement and subject to the Lien of this
Security Agreement as if such property were now owned by the Mortgagor and were
specifically described in and mortgaged by this Security Agreement.

     

    TO HAVE
AND TO HOLD, all and singular said property unto the Mortgagee, its successors
and assigns, as security as aforesaid.

     

    All of
the Mortgaged Property shall secure all of the Obligations.

     

    Notwithstanding
anything to the contrary in the Granting Clauses or the other preceding
paragraphs, the Mortgagee hereby acknowledges and confirms that unless an Event
of Default shall have occurred and then be continuing, the Mortgagor shall be
entitled to use and enjoy the Mortgaged Property, subject to the provisions of
this Security Agreement and the other Loan Documents.

     

    IT IS
HEREBY COVENANTED AND DECLARED by and between the parties to this Security
Agreement and their respective successors and assigns that the terms upon which
the Mortgaged Property shall be held, used and operated are as
follows:

     

    SECTION
1.                      DEFINITIONS;
INTERPRETATION

     

    1.1           Definitions.  The
following words and expressions shall have the following meanings:

     

    “Aircraft” means the
Airframe and Engines.

     

    “Aircraft
Documentation” means all certificates, registrations, records, manuals,
books, logs and technical information relating to the Flight Equipment now or
hereafter in the control or possession of the Mortgagor.

     


    
      
        
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    “Airframe” means each
Boeing 737 series airframe bearing the manufacturer’s serial number and United
States registration mark specified in a Schedule hereto.

     

    “Authorized Maintenance
Performer” means Mortgagor or any authorized mechanic or any authorized
repair station having the authority pursuant to the Maintenance Program to
perform maintenance and repairs to aircraft of the same type as the Aircraft or
engines of the same type as the Engines that are authorized under the
Maintenance Program.

     

    “Cape Town Treaty” has
the meaning provided in 49 U.S.C. §44113(1).

     

    “CRAF” or “Civil Reserve Air Fleet
Program” means the Civil Reserve Air Fleet Program administered by the
United States Government or any substantially similar program.

     

    “Engine” means each of
the CFM International, Inc. CFM56 series engines, bearing the manufacturer’s
serial numbers specified in Schedule I hereto, whether or not installed upon the
applicable Airframe and any substitutions or replacements for each such Engine
in accordance with this Security Agreement.

     

    “Event of Default”
means any event listed as an “Event of Default” as provided in Section 4.1 of
this Security Agreement.

     

    “Event of Loss” with
respect to an Airframe or any Engine shall mean any of the following events
(a) loss of the Airframe or Engine or loss of the use thereof due to
destruction or damage beyond repair or the rendering of the Airframe or Engine
permanently unfit for use in the normal course of the Mortgagor’s business for
any reason whatsoever; (b) any damage to the Airframe or Engine which
results in an insurance settlement with respect to the Airframe or Engine on the
basis of an actual, constructive or compromised total loss; (c) the theft
or disappearance of the Airframe or Engine for a period in excess of one hundred
twenty (120) consecutive days; (d) any taking, seizure, confiscation or
requisition of the title to such property by condemnation or otherwise that
continues unstayed, undismissed or unvacated for a period of 30 consecutive days
or more (or such shorter period provided for in any insurance insuring such
risks and, in this regard, Mortgagor shall use its reasonable efforts to have
insurance proceeds payable in such event in less than 30 days); (e) any
taking, seizure, confiscation or requisition of the use of such property, by
condemnation or otherwise, by any governmental body (other than a requisition of
use by the government of the United States of America or any agency or
instrumentality thereof which bears the full faith and credit of the government
of the United States of America) for a period stated to be or in fact continuing
for a period of one hundred eighty (180) consecutive days (or such shorter
period provided for in any insurance insuring such risks and, in this regard,
Mortgagor shall use its reasonable efforts to have insurance proceeds payable in
such event in less than one hundred eighty (180) days); or (f) as a result
of any rule, regulation, order or other action by any governmental body having
jurisdiction or any court of competent jurisdiction, the prohibition of the use
of such property in the normal course of air transportation of individuals for a
period stated to be or in fact continuing for a period of twelve months, unless
Mortgagor, prior to the expiration of such twelve month period, shall have
undertaken and shall be diligently carrying forward all steps which are
necessary and desireable to permit the normal use of such property by Mortgagor,
but in any event if such use shall have been prohibited for a period of eighteen
months.  An Event of Loss with respect to an Airframe

     


    
      
        
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    shall be
deemed to constitute an Event of Loss with respect to the Aircraft of which the
Airframe was a part.

     

    “FAA” shall mean the
Federal Aviation Administration provided for in the Department of Transportation
Act of 1966 or any successor or substituted governmental authority that at the
time has jurisdiction over the Mortgaged Property.

     

    “Federal Aviation Act”
shall mean Subtitle VII of Title 49 of the United States Code and the rules and
regulations promulgated thereunder.

     

    “Flight Equipment”
means the Airframes and Engines as covered by Granting Clause I and any
replacement airframes and engines subjected to the lien of this Security
Agreement by a Security Agreement Supplement as provided in Granting
Clause II.

     

    “IDERA” means an
Irrevocable De-Registration and Export Request Authorization as contemplated by
the Cape Town Treaty.

     

    “International
Interest” shall have the meaning provided thereto in the Cape Town
Treaty.

     

    “International
Registry” has the meaning provided in 49 U.S.C. §44113(3).

     

    “Lease” shall mean any
lease permitted by the terms of Section 3.10 of this Security
Agreement.

     

    “Lessee” shall mean
the lessee under a Lease.

     

    “Credit Agreement” has
the meaning described in the Recitals.

     

    “Maintenance Program”
means the FAA approved maintenance program of Mortgagor (or, during the term of
a Lease permitted by Section 3.10, the FAA approved maintenance program of
Lessee) for each type of Aircraft.

     

    “Manufacturer” means
The Boeing Company in its capacity as manufacturer of the applicable Airframe,
and its successors and assigns.

     

    “Mortgagor Order” and
“Mortgagor
Request” mean, respectively, a written order or request signed in the
name of the Mortgagor and delivered to the Mortgagee in accordance with the
terms of this Security Agreement.

     

    “Mortgagor’s
Certificate” means a certificate signed by the Mortgagor and delivered to
the Mortgagee.

     

    “Parts” means all
appliances, parts, instruments, avionics, appurtenances, accessories,
furnishings and other equipment or components, of whatever nature (excluding
Engines or engines installed on an Airframe or any replacement engines
substituted therefore), which are, from time to time, incorporated in the
Airframe or any Engine.

     


    
      
        
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    “Permitted Liens”
means:

     

    (i)           the
Lien of this Security Agreement; and

     

    (ii)           any
other lien on the Mortgaged Property which is permitted by subsection (e) or
(f) of Section 7.01 of the
Credit Agreement.

     

    “Person” shall mean
and include any individual, corporation, partnership, firm, joint venture,
trust, unincorporated organization, association, or any organization or
association of which any of the foregoing is a member or
participant.

     

    “Proceeds” shall mean
whatever is receivable or received when the Airframe or any Engine is sold,
exchanged, collected, leased (except pursuant to a Lease prior to an Event of
Default) or otherwise disposed of, including, without limitation, all amounts
payable or paid under insurance, requisition or other payments as the result of
any loss or damage to the Airframe or Engine.

     

    “Security Agreement
Supplement” means a supplemental first priority security agreement in
substantially the form attached as Schedule II or such other form as is
reasonably acceptable to Mortgagee.

     

    “UCC” means the
Uniform Commercial Code as adopted and in effect in the State of Washington and
codified in the Revised Code of Washington as Title RCW 62A (Article 9
of the UCC accordingly means Article 9 of the UCC as adopted and in effect
in the State of Washington and codified in the Revised Code of Washington as
Chapter RCW 62A.9A), provided that if perfection
or the effect of perfection or non-perfection or the priority of any security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of Washington, “UCC” means the
Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.

     

    1.2           Interpretation.

     

    (a)           All
terms used in Article 9 of the UCC and not specifically defined in this
Security Agreement are used in this Security Agreement as defined in
Article 9 of the UCC.

     

    (b)           Unless
otherwise indicated, any law, statute, treaty or ordinance defined or referred
to in this Security Agreement is intended to mean or refer to such law, statute,
treaty or ordinance as amended from time to time, any successor or replacement
law, statute, treaty or ordinance as amended from time to time, and the rules
and regulations promulgated from time to time under such law, statute, treaty or
ordinance.

     

    (c)           Unless
otherwise indicated, any agreement defined or referred to in this Security
Agreement means or refers to such agreement as amended or supplemented from time
to time or as the terms of such agreement are waived or modified, in each case
in accordance with its terms.

     


    
      
        
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    (d)           Terms
defined in this Security Agreement in the singular include the plural of such
terms, and terms defined in this Security Agreement in the plural include the
singular of such terms.

     

    (e)           The
term “including”, when used in this Security Agreement, means “including without
limitation” and “including but not limited to”.

     

    (f)           Unless
otherwise indicated, any reference to a specified “article,” “section”
“subsection,” “clause,” “granting clause”, “exhibit” or “schedule” shall refer
to such article, section, subsection, clause, exhibit or schedule of this
Security Agreement.

     

    SECTION
2.                      CASH
COLLATERAL

     

    2.1           Cash
Collateral.  All monies received by the Mortgagee as proceeds
of insurance upon any part of the Mortgaged Property and all monies elsewhere
herein provided to be held and applied under this Section 2, so long as no
Event of Default shall have occurred and is continuing, and all monies, if any,
required to be paid to the Mortgagor hereunder, whose disposition is not
elsewhere herein otherwise specifically provided for (all such monies being
hereinafter called the “Cash Collateral”),
shall be held by the Mortgagee and applied by the Mortgagee from time to time as
provided in Section 4.2.6 hereof; provided, however, that any proceeds of
insurance on the Mortgaged Property not constituting an Event of Loss of the
Aircraft shall be applied as provided in Section 2.2.  All Cash
Collateral shall be held by Mortgagee in an interest bearing account with
interest accruing for the benefit of the Mortgagor and the funds on deposit in
such account may be invested for the benefit of the Mortgagor in investments
that are mutually acceptable to the Mortgagor and Mortgagee.

     

    2.2           Insurance Proceeds Used for
Repair.  (a) Provided that an Event of
Default shall not have occurred and be continuing, to the extent that any Cash
Collateral is the proceeds of insurance upon any part of the Mortgaged Property,
the same may be withdrawn by the Mortgagor and shall be paid by the Mortgagee,
upon Mortgagor Order, to reimburse the Mortgagor for, and up to an amount not
exceeding, expenditures made to repair or restore the property damaged as
required hereunder, and with respect to an Event of Loss of any Engine
expenditures made to replace such Engine, but only upon receipt by the Mortgagee
of (1) a Mortgagor Request for the withdrawal and payment of specified
proceeds of insurance then included in the Cash Collateral, and (2) a
Mortgagor’s Certificate, dated not more than five (5) days prior to the
application for such withdrawal, stating that expenditures have been made by the
Mortgagor in a specified amount for one or more of the purposes aforesaid, which
shall be briefly described, and also stating that no part of such expenditures
has been or is then being used in any other previous or then pending
application, as the basis for the withdrawal of any Cash Collateral from the
Mortgagee hereunder.  Each such Mortgagor’s Certificate shall have
attached thereto photocopies of any work-sheets, invoices, vouchers and/or
receipts with respect to the repair, restoration or replacement in
question.  Notwithstanding the foregoing and provided, that an Event of
Default shall not have occurred and be continuing, if Mortgagor provides
Mortgagee with a written estimate (together with a Mortgagor’s Certificate
certifying such estimate is genuine and complete) of any repairs or restoration
to be made with respect to such property damaged, Mortgagor may direct that the
Cash Collateral be withdrawn and paid directly to the entity performing the
repairs and be applied towards payment for such repairs or
restoration.

     


    
      
        
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    (b)           Provided an Event of Default
shall not have occurred and be continuing, Mortgagee shall, promptly upon
request of the Mortgagor, repay to the Mortgagor any insurance proceeds
previously paid to Mortgagee which shall exceed the amount actually spent by the
Mortgagor to effect repairs or to replace an Engine as required under
Section 2.2(a), or, in the case of an Event of Loss of an Aircraft, such
insurance proceeds which shall exceed the Current Market Value of the Aircraft
that suffered an Event of Loss, provided, that, in the case
of an Event of Loss with respect to any Engine, Mortgagor shall have performed
all obligations required of it under Section 3.4(c) hereof.

     

    SECTION
3.                      REPRESENTATIONS,
WARRANTIES AND COVENANTS

     

    The
Mortgagor covenants, agrees, represents and warrants in particular as
follows:

     

    3.1           Warranty of
Title.

     

    (a)           At
the time of the execution and delivery of this Security Agreement, the Mortgagor
owns and has the right to possess the Flight Equipment subject to no Lien except
Permitted Liens, and has full power and authority to grant, bargain, sell,
transfer, convey and mortgage, and give a security interest in, the Flight
Equipment in the manner and form as set forth in this Security
Agreement.

     

    (b)           The
Mortgagor is and shall remain the legal and beneficial owner of the Flight
Equipment, free and clear of all Liens except for Permitted Liens.

     

    (c)           The
Mortgagor hereby does and will forever warrant and defend the title to and
possession of the Mortgaged Property against the claims and demands of all
persons whomsoever except claims and demands under the Permitted Liens, and at
all times keep the Lien granted herein with respect to the Mortgaged Property,
at the Mortgagor’s expense, a first priority Lien upon the Flight Equipment and
on all of the other Mortgaged Property as constituted from time to time,
superior to the rights of all third parties to the extent permitted by
applicable law, and shall obtain any authorization, approval, license, or
consent of any competent governmental or judicial authority (including
registration of the Aircraft with the FAA Registry and of International Interest
with the International Registry) which may be or become necessary in order to
obtain the full benefits of this Security Agreement and all rights and powers
granted or to be granted in this Security Agreement.  The Mortgagee
will use commercially reasonable efforts to consent in a timely manner to any
such registrations by the Mortgagor, but the Mortgagee’s failure to do so shall
not relieve the Mortgagor of its obligation to effect such registration with the
Mortgagee’s subsequent timely consent.  The Mortgagor will discharge
or cause to be discharged any International Interest or prospective
International Interest in or relating to the Aircraft (including the Airframe
and the Engine) not consented to in writing by the
Mortgagee.  Notwithstanding the preceding sentence, in the case of
International Interest or prospective International Interest filed in the
International Registry without the Mortgagor’s consent, the Mortgagor need not
cause such registered interests to be discharged to the extent they are
automatically discharged within 36 hours (or such period as is then provided by
the International Registry for removal of interests to which no consent has been
given) of after initially being registered.  Further, the Mortgagor
will not consent to any International Interest or prospective International
Interest in or relating to the Aircraft unless prior approval is obtained from
the Mortgagee in writing.

     


    
      
        
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    3.2           Recording.  The
Mortgagor will bear all out-of-pocket expenses of the Mortgagee for, and be
responsible for, recording and re-recording, registering and re-registering and
filing and re-filing this Security Agreement and each and every Security
Agreement Supplement and such other instruments from time to time as may be
reasonably requested by the Mortgagee in all such jurisdictions and offices as
the Mortgagee shall from time to time reasonably require, in order that
(i) the Lien hereof as a first priority Lien on the Flight Equipment and on
all of the Mortgaged Property, (ii) the security for all of the
Obligations, and (iii) the rights and remedies of the Mortgagee, may be
established, confirmed, maintained and protected.  The Mortgagor will
furnish to the Mortgagee evidence reasonably satisfactory to the Mortgagee of
every such recording, registering and filing which is not recorded, registered
and filed by Mortgagee.

     

    3.3           Maintain Priority of Lien;
Pay Taxes.  This Security Agreement will be kept always a first
priority Lien upon the Flight Equipment and on all the other Mortgaged Property
as from time to time constituted and the Mortgagor will obtain and maintain in
full force and effect any authorization, approval, license, or consent of any
governmental or judicial authority, (including registration of the Aircraft with
the FAA Registry) that may be or become necessary in order to obtain the full
benefits of this Security Agreement and all rights and remedies granted or to be
granted in this Security Agreement and will not create or suffer to exist any
Lien upon the Mortgaged Property or any part thereof or upon the income
therefrom, other than Permitted Liens.  The Mortgagor shall from time
to time pay or cause to be paid as they become due and payable, all taxes,
assessments and governmental charges lawfully levied or assessed or imposed upon
the Lien of the Mortgagee so that the Lien created by this Security Agreement
shall at all times be wholly preserved at the cost of the Mortgagor and without
expense to the Mortgagee, and the Mortgagor will not suffer any other matter or
thing whatsoever whereby the Lien created by this Security Agreement will be
impaired.

     

    3.4           Maintain Flight
Equipment.

     

    (a)           The
Mortgagor shall, at all such times, maintain, preserve and keep, at its own cost
and expense, the Flight Equipment in good order and repair in accordance with
the Maintenance Program or cause the Flight Equipment to be so maintained,
preserved and kept without cost or expense under this Security Agreement to the
Mortgagee, except when (i) the Flight Equipment is being temporarily stored
in accordance with the Maintenance Program, (ii) the Flight Equipment is
being serviced, repaired, maintained, overhauled, tested or modified as
permitted or required by the terms of this Security Agreement or the Credit
Agreement, (iii) all similar aircraft of comparable vintage and/or
configuration have been grounded by the FAA or under the applicable laws of any
other jurisdiction in which an Aircraft is registered, or (iv) laws or
regulations affecting airworthiness are being contested in good faith and by
appropriate proceedings so long as such proceedings could not adversely affect
the Mortgagee or its interest in the affected Aircraft.  Subject to
the forgoing exceptions, Mortgagor shall:

     

    (i)           service,
repair, maintain, overhaul, test, or cause the same to be done to the Aircraft
so as to keep the Aircraft in as good operating condition as when this Security
Agreement was executed, ordinary wear and tear excepted, in accordance with the
Maintenance Program and as may be necessary to enable the United States
airworthiness certification of the Aircraft to be maintained in good standing at
all times under FAA regulations and the applicable laws of the United States
Government;

     


    
      
        
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    (ii)           perform
all routine and non-routine services, checks, inspections, including any
structural inspection required by the Maintenance Program or the
FAA;

     

    (iii)           maintain
all records, logs, and other materials required by applicable law of any
governmental entity to be maintained in respect to the Aircraft, including, but
not limited to, serviceable component tags required by the FAA;

     

    (iv)           upon
request, for so long as any part of the Flight Equipment is subject to the Lien
of this Security Agreement, provide Mortgagee with such information as it shall
reasonably request with respect to the scheduled commencement date of each
annual check (if applicable) or “C” check (or the equivalent) to be performed on
the Aircraft and the location where such checks will be performed;

     

    (v)           comply
with all applicable airworthiness directives issued by the FAA;

     

    (vi)           incorporate
in the Aircraft corrosion prevention and control and correct any discrepancies
in accordance with the Maintenance Program;

     

    (vii)           properly
document all repairs, modifications and alterations and the addition, removal or
replacement of equipment, systems or components in accordance with the rules and
regulations of the FAA and reflect such items in the Aircraft
Documentation.

     

    All
maintenance of the Aircraft and Engines shall be performed by an Authorized
Maintenance Performer.

     

    (b)           For
so long as any part of the Flight Equipment is subject to the Lien of this
Security Agreement, the Mortgager shall maintain or cause the Flight Equipment
to be maintained in accordance with the Maintenance Program.

     

    (c)           The
Mortgagor shall promptly notify the Mortgagee or cause the Mortgagee to be
notified of any Engine becoming expropriated, worn out, lost, destroyed or
rendered unfit for use or of any other maintenance or repair of the Flight
Equipment having a projected replacement or repair cost of more than Five
Million Dollars ($5,000,000), and the Mortgagor shall furnish or cause to be
furnished to the Mortgagee a report describing in reasonable detail such items
and the items replaced by such work.  In the case of an Event of Loss
to an Engine not involving an Event of Loss to the Aircraft, the Mortgagor
shall, within ninety (90) days following the occurrence of the Event of Loss to
such Engine, cause the Engine to be replaced and subjected to the Lien of this
Security Agreement.  Any such replacement Engine shall be owned by the
Mortgagor free and clear of any liens and shall be of the same make and model
and have the same value and utility as the replaced Engine, assuming that such
replaced Engine was maintained in the condition required by this Security
Agreement.

     

    (d)           All
Parts at any time removed from the Aircraft, Airframe or any Engine shall remain
subject to the Lien hereof, no matter where located, until such time as such
Parts shall be replaced by Parts which have been incorporated in the Aircraft,
Airframe or Engine which are owned by Mortgagor.  All replacement
Parts shall be free and clear of all Liens (except for Permitted Liens) and
shall have a value and utility at least equal to the Parts
replaced,

     


    
      
        
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    assuming
such replaced Parts were in the condition and repair required to be maintained
by the terms hereof.  Notwithstanding the foregoing, the Mortgagor or
any Lessee may use temporary parts or pooled parts on the Aircraft as temporary
replacements for Parts, provided, that the Mortgagor
or Lessee, at its expense, as promptly thereafter as practicable, either
(1) causes such pooled or replacement part to become the property of the
Mortgagor free and clear of all Liens other than Permitted Liens, or
(2) replaces such replacement part with a further replacement part owned by
the Mortgagor or Lessee which meets the requirements of this Section 3.4,
free and clear of all Liens other than Permitted Liens.  Immediately
upon any replacement Part becoming incorporated in the Aircraft, Airframe or
such Engine as above provided, without further act, (i) such replacement
Part shall become subject to the Lien hereof, and the replaced Part shall no
longer be subject to the Lien hereof, and (ii) such replacement Part shall
be deemed part of the Aircraft, Airframe or such Engine for all purposes hereof
to the same extent as the Parts originally incorporated in such Aircraft,
Airframe or Engine.  The Mortgagor (or any Lessee), at its own
expense, may from time to time make such alterations’ and modifications in and
additions to the Airframe or any Engine as the Mortgagor (or any Lessee) may
deem desirable in the proper conduct of its business, including removal of Parts
which the Mortgagor (or any Lessee) deems to be obsolete or no longer suitable
or appropriate for use on the Airframe or Engine (such removed Parts are
hereinafter referred to as “Obsolete Parts”);
provided, that no such
alteration, modification, removal or addition impairs the condition or
airworthiness of the Airframe or Engine, or diminishes the value and utility of
the Airframe or Engine below the value or utility thereof immediately prior to
such alteration, modification, removal or addition, assuming the Airframe or
Engine was then in the condition required to be maintained by the terms of this
Security Agreement absent such alteration, modification, removal or addition,
except that the value (but not the utility) of the Airframe or any Engine may be
reduced by the value of Obsolete Parts which shall have been removed so long as
the aggregate original value of all Obsolete Parts which shall have been removed
and not replaced shall not exceed $400,000; provided, further, that no such removal
shall be permitted if an Event of Default shall have occurred and be
continuing.

     

    (e)           Notwithstanding
any other provision of this Security Agreement, the Mortgagor may install or
permit to be installed in any Aircraft audio-visual, entertainment, telephonic
or other equipment owned by third parties (or owned jointly by the Mortgagor and
others) and leased or otherwise furnished to the Mortgagor in the ordinary
course of business, and the Lien of this Security Agreement shall not attach
thereto and the rights of the owners therein shall not constitute a default
hereunder or under the Credit Agreement.

     

    (f)           In
the case of an Event of Loss of an Airframe, the rights and obligations of the
parties hereto shall be governed by Section 6.15 of the Credit
Agreement.  Following Mortgagee’s release of a Removed Aircraft
pursuant to Section 6.15(d) of the Credit Agreement, and provided, that no Default or
Event of Default has occurred and is continuing, Mortgagee shall promptly
transfer to Mortgagor all proceeds which the Mortgagee had received from the
Mortgagor’s insurers pursuant to Section 3.5 herein and any investment
earnings thereon.

     

    (g)           The
Mortgagor shall not, when in possession of any portion of the Flight Equipment,
use or permit such portion of the Flight Equipment to be operated except by
pilots currently certified by the FAA to use and operate the Flight
Equipment.

     


    
      
        
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    (h)           Any
part or item of property may be removed from the Flight Equipment in order that
the same may be inspected, repaired, reconditioned or otherwise serviced without
affecting or impairing the lien hereof with respect to such part or item of
property, provided,
that whenever any such part or item is in the possession of the Mortgagor, any
such part or item shall be at all such times covered by insurance against such
risks and in such amounts as is reasonably satisfactory to Mortgagor and provided, that, other than in
the case of Obsolete Parts, any such part or item shall be replaced promptly
after its removal by that same or an equivalent part in as good working order as
the part or item removed, assuming such part or item was maintained and used as
required by the provisions hereof and shall be subject to the lien and security
interest created pursuant to this Security Agreement.

     

    3.5           Insurance.

     

    (a)           The
Mortgagor shall carry and maintain in effect, at its own expense, with
financially sound and reputable insurers, the following insurance which will
name as an additional insured party the Mortgagee:

     

    (i)           Comprehensive Airline
Liability Insurance.  Comprehensive airline liability insurance
(including, without limitation, contractual liability, passenger legal liability
and liability for property damage), in amounts per occurrence of not less than
Six Hundred Million Dollars ($600,000,000.00), or such greater amounts as the
Mortgagor may carry. Each and any policy of insurance carried in accordance with
this subclause (i), and each and any policy obtained in substitution or
replacement for any of such policies, (1) shall designate the Mortgagee as
an additional insured (but without any obligation imposed upon the additional
insured, including, without limitation, the liability to pay any premiums for
any such policies, but the Mortgagee shall have the right to pay such premiums
if it shall so elect), (2) shall expressly provide that, in respect of the
interest of the Mortgagee (or any holder from time to time of a Note) in such
policies, the insurance shall not be invalidated by any action or inaction of
any Person (other than the Mortgagee for their respective interests), and shall
insure, regardless of any breach or violation by Mortgagor or any other Person
(other than the Mortgagee) of any warranty, declaration or condition contained
in such policies, (3) shall provide that if such insurance is canceled for
any reason whatsoever, or is adversely changed in any way with respect to the
interest of the Mortgagee (or any holder from time to time of a Note) or if such
insurance is allowed to lapse for nonpayment of premium, such cancellation,
change or lapse shall not be effective as to the Mortgagee (or any holder from
time to time of a Note) for thirty (30) days (or such lesser time which may be
standard in the insurance industry and ten (10) days in the event of nonpayment
of premium), in each instance after receipt by the Mortgagee (or any holder from
time to time of a Note) of written notice by such insurer or insurers sent to
the Mortgagee (or any holder from time to time of a Note) of such prospective
cancellation, change or lapse, (4) shall include coverage for any country
in which the Flight Equipment is located, and (5) shall provide that, as
against the Mortgagee (or any holder from time to time of a Note), the insurer
shall waive any rights of set-off, counterclaim or any other deduction, whether
by attachment or otherwise, and waives any rights it may have to be subrogated
to any right of any insured against the Mortgagee (or any holder from time to
time of a Note) with respect to the Flight Equipment. Each liability policy
shall be primary without right of contribution from any other insurance which
may be carried by the Mortgagee (or any holder from time to time of a Note) and
shall expressly provide that all of the provisions thereof (except the limits of
liability)

     


    
      
        
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    shall
operate in the same manner as if there were a separate policy covering each
insured. No liability policy shall permit any deductible or self-insurance
provision in excess of Five Million Dollars ($5,000,000). Such policy may be
subject to the standard terms and conditions contained in comprehensive airline
liability policies.

     

    (ii)           Aircraft Hull War Risks and
Allied Perils Insurance.  Hull war risk and allied perils
insurance on the Flight Equipment (which shall include, but not be limited to,
coverage for hijacking, declared or undeclared war, insurrections, strikes,
riots, civil commotions or labor disturbances, malicious acts or acts of
sabotage, unlawful seizure or wrongful exercise of control of the Flight
Equipment in flight by a person on board such Flight Equipment acting without
the consent of the Mortgagor) in an amount not less than the Current Market
Value of the Aircraft in question, or such greater amounts as the Mortgagor may
carry.

     

    (iii)           All Risks Hull
Insurance.  “All risks” ground and flight aircraft hull
insurance covering the Flight Equipment, and fire, transit, extended coverage,
spares and all risks insurance with respect to the Engines and Parts while not
installed on the Aircraft.  At all times while any part of the Flight
Equipment is subject to the Lien of Security Agreement, such insurance shall be
for an amount not less than the Current Market Value of the Aircraft in
question.

     

    Notwithstanding
anything above, each and any policy of insurance obtained and maintained
pursuant to subclause (ii) and this subclause (iii), and each and any
policy obtained in substitution or replacement for any such policies,
(1) shall designate the Mortgagee as additional insured and as sole loss
payee (subject to clauses (7) and (8) below) up to the Current Market Value of
the Aircraft in question (but without imposing upon the Mortgagee any obligation
imposed upon the insured, including, without limitation, the liability to pay
any premiums for any such policies, but the Mortgagee shall have the right to
pay such premiums if it shall so elect), (2) shall expressly provide that,
in respect of the interests of the Mortgagee in such policies, the insurance
shall not be invalidated by any action or inaction of the Mortgagor or any other
Person (other than the Mortgagee for its interest), shall insure the Mortgagee,
regardless of any breach or violation of any warranty, declaration of condition
contained in such policies by the Mortgagor or any other Person (other than the
Mortgagee for its interest), (3) shall provide that if such insurance is
canceled for any reason whatsoever, or is adversely changed in any way with
respect to the interest of the Mortgagee, or if such insurance is allowed to
lapse for nonpayment of premium, such cancellation change or lapse shall not be
effective as to the Mortgagee, for thirty (30) days (or such lesser time which
may be standard in the insurance industry and ten (10) days in the event of
nonpayment of premium) after receipt by the Mortgagee of written notice (or in
the case of War Risk insurance, seven (7) days or such lesser time which may be
standard in the war risk insurance market after delivery of written notice) by
such insurer or insurers to the Mortgagee, as the case may be, of such
prospective cancellation, change or lapse, (4) shall include coverage for
the territorial limits or any country in which the Flight Equipment may at any
time be located, but may include geographic exclusions, (5) shall provide
that, as against the Mortgagee, the insurer shall waive any rights of set-off,
counterclaim or any other deduction, whether by attachment or otherwise, and
waive any rights it may have to be subrogated to any right of any insured
against the Mortgagee, with respect to the Flight Equipment, (6) shall provide
that in the event of any damage or loss which is an Event of Loss hereunder and
which results in a payment, such payment of up to the Current Market Value
of

     


    
      
        
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    the
Flight Equipment suffering the Event of Loss shall be payable solely and
directly to the Mortgagee for the account of all interests, (7) shall provide
that in the event of any damage or loss which is not an Event of Loss hereunder
and which results in a payment for any one occurrence in excess of Five Million
Dollars ($5,000,000), such payment shall be payable solely and directly to the
Mortgagee for the account of all interests, and (8) shall provide that payments
for any one occurrence not in excess of Five Million Dollars ($5,000,000) shall
be payable directly to the Mortgagor provided there exists no
Event of Default. Except during a period when an Event of Default has occurred
and is continuing, all losses will be adjusted with the insurers by the
Mortgagor (giving due regard to the interests of the Mortgagee and the
Lenders).

     

    (b)           The
Mortgagor shall have the right to carry insurance in excess of the amounts
required hereunder and the proceeds of such excess insurance shall be payable to
the Mortgagor.  Similarly, the Mortgagee shall have the right to carry
additional and separate insurance for its own benefit at its own expense,
without, however, thereby limiting the Mortgagor’s obligations under this
Section 3.5.

     

    (c)           The
Mortgagor may maintain self-insurance and standard industry deductibles in its
“all risks” hull insurance policies, provided that no such self-insurance is for
more than Five Million Dollars ($5,000,000), and Mortgagor notifies Agent and
Lenders of the amount of any such self-insurance when Mortgagor elects to have a
deductible.

     

    (d)           The
Mortgagor shall promptly notify the Mortgagee of, to the knowledge of the
Mortgagor, any material adverse change in the insurance coverage required by
this Section 3.5.

     

    (e)           Prior
to the date of this Security Agreement, the Mortgagor shall furnish, or cause to
be furnished, to the Mortgagee from nationally recognized independent aviation
insurance brokers, certificates of insurance certifying to such insurance
coverage, indicating the underwriters that are part of the insurance, and
providing the portion of the cover that each underwriter has
undertaken.

     

    All
proceeds of insurance paid to the Mortgagee in accordance with this
Section 3.5 shall be held and paid over or applied by the Mortgagee as
provided in Section 2.1 or 2.2.

     

    3.6           Inspection by Mortgagee;
Information.

     

    The Mortgagor shall, at all such times,
maintain and store, or cause to be maintained and stored, records in accordance
with the FAA regulations and adequate to identify such Flight Equipment and to
disclose its location, use and maintenance, and upon reasonable notice and
request of the Mortgagee, permit the Mortgagee, its representatives and agents
(or cause the Mortgagee, its representatives and agents to be permitted if the
following items are not in the possession or control of Mortgagor) to inspect
such Flight Equipment (including all logs, maintenance cards, manuals and
records with respect thereto) and, at the expense of Mortgagee, to take copies
and extracts therefrom, and shall afford and procure a reasonable opportunity to
make any such inspection, and the Mortgagor shall furnish or cause to be
furnished to the Mortgagee any and all such other information and, at the
expense of Mortgagee, copies of documents and print-outs of data stored on any
electronic or data processing medium, as are reasonably available to the
Mortgagor and the Mortgagee may reasonably request, with respect

     


    
      
        
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    to any
Mortgaged Property, provided, that any such
inspection shall be upon reasonable notice, shall be limited, in the absence of
the continuation of an Event of Default, to once a year at a mutually agreed
time, and by a group consisting of no more than two individuals.

     

    3.7           Registration.  For
so long as any part of the Flight Equipment is subject to the Lien of this
Security Agreement, the Mortgagor shall cause the Aircraft to be registered at
all times with (i) the FAA and (ii) the International Registry, in its name as
owner thereof.  The Mortgagor shall not provide an IDERA in favor of
any Person with respect to any of the Aircraft.

     

    3.8           Insignia.  The
Mortgagor will plainly, distinctly and conspicuously place or cause to be placed
and leave in the cockpit of the Aircraft and upon such other places as may
reasonably be designated by the Mortgagee from time to time, an insignia or
other identification bearing words which indicate Mortgagee’s interest in the
Aircraft, in letters of a size reasonable under the circumstances and acceptable
to the Mortgagee.

     

    3.9           Operation and
Location.  Mortgagor agrees that (a) it will not fly the
Aircraft or suffer the Aircraft to be flown in violation of any provision of any
insurance policy in effect with respect to the Aircraft or in violation of any
law, rule, regulation or order of the United States or any agency,
instrumentality or state or political subdivision thereof (including agencies
and instrumentalities of such state or political subdivision) or of any other
nation having jurisdiction over the use and operation of the Aircraft, except
(1) unanticipated minor violations not involving any material risk of the
sale, forfeiture or loss of an Aircraft, an Airframe, any Engine, or the
Mortgagee’s interest therein, if such violation ceases promptly after discovery
thereof by the Mortgagor, or only requires the Mortgagor’s payment of a fine
levied only against the Mortgagor, and (2) the Mortgagor or any Lessee may
contest in good faith the validity or application of any such law, rule,
regulation, treaty, order, certificate, license or registration, so long as
there is no material risk of the sale, forfeiture or loss of an Aircraft, an
Airframe or any Engine, or the Mortgagee’s interest therein, (b) it shall not
knowingly use or allow the Aircraft to be used for the carriage of drugs or
other illegal goods or any other goods for which the Mortgagor or operator of
the Aircraft is not licensed to transport; and (c) it will not operate the
Aircraft, or permit any Lessee to operate the Aircraft: (i) in or to any
area excluded from coverage by any insurance required to be maintained by the
terms of Section 3.5 hereof; (ii) in countries with which the United
States does not maintain full diplomatic relations other than the Republic of
China (Taiwan); and (iii) in or to any areas of actual or threatened armed
hostilities, provided,
that the failure of Mortgagor to comply with the provisions of this sentence
shall not give rise to an Event of Default where such failure is an isolated
extraordinary occurrence attributable to a hijacking, medical emergency,
equipment malfunction, weather condition, or navigational error.  The
Mortgagor shall also have the right to operate any Aircraft without having on
board the original registration certificate or airworthiness certificate in the
event that either or both such certificates disappear from the Aircraft, but
only to the extent permitted by Exemption No. 5318 of the Federal Aviation
Act or other similar exemption.

     

    3.10             Possession and
Leases.  The Mortgagor will not, without the prior written
consent of the Mortgagee, lease or otherwise in any manner deliver, transfer or
relinquish possession of the Airframe or any Engine or install or permit any
Engine to be installed on any airframe other than the Airframe; provided that so long as no
Event of Default shall have occurred and be continuing at the time of such
Lease, delivery, transfer or relinquishment of

     


    
      
        
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    possession
or installation and the Mortgagor and/or any Lessee shall continue to comply
with the provisions of Section 3.3 and  Section 3.4, the Mortgagor
may, without the prior written consent of the Mortgagee:

     

    (a)           subject
the Engine(s) or engines to normal interchange agreements or any Engine to
normal pooling or similar arrangements, in each case customary in the airline
industry and entered into by the Mortgagor (or any Lessee) in the ordinary
course of its business with a U.S. Air Carrier or any other air carrier approved
in writing by the Mortgagee (which approval will not be unreasonably withheld or
delayed); provided,
that (i) no such agreement or arrangement contemplates or requires the
transfer of title to any Engine and
(ii) if the Mortgagor’s title to any Engine shall be divested under any
such agreement or arrangement, such divestiture shall be deemed to be an Event
of Loss with respect to such Engine and the Mortgagor shall (or shall cause any
Lessee to) comply with Section 3.4 (c) hereof in respect
thereof;

     

    (b)           deliver
possession of the Airframe or any Engine to the Airframe manufacturer or the
Engine manufacturer, or to any Person for testing, service, repair, maintenance
or overhaul work on the Airframe or any Engine or for alterations or
modifications in or additions to the Airframe or Engine(s) to the extent
required or otherwise not prohibited by the terms hereof or of the Credit
Agreement;

     

    (c)           install
an Engine on an airframe owned by the Mortgagor (or any Lessee), leased to the
Mortgagor (or any Lessee), or owned or purchased by the Mortgagor (or any
Lessee) subject to a conditional sale or other security agreement, provided, that (A) such
airframe is free and clear of all Liens, except (i) in the case of
airframes leased to the Mortgagor (or any Lessee) or owned or purchased by the
Mortgagor (or any Lessee) subject to a conditional sale or other security
agreement, the rights of the parties to the Lease or conditional sale agreement
or other security agreement covering such airframe, or their assignee,
(ii) Permitted Liens, and (iii) the rights of other air carriers under
normal interchange agreements which are customary in the airline industry and do
not contemplate, permit or require the transfer of title to the airframe or
engines installed thereon, and (B) any such lease, conditional sale or
other security agreement provides that such Engine shall not become subject to
the lien of such lease, conditional sale or other security agreement,
notwithstanding the installation thereof on such airframe, and the inclusion in
such agreement of a provision similar to Section 3.10(i) shall satisfy such
requirement;

     

    (d)           install
an Engine on an airframe owned by the Mortgagor (or any Lessee), leased to the
Mortgagor (or any Lessee) or purchased by the Mortgagor (or any Lessee) subject
to a conditional sale or other security agreement under circumstances where
Section 3.10(c) above is inapplicable, provided, that such
installation shall be deemed an Event of Loss with respect to such Engine and
the Mortgagor shall (or shall cause any Lessee to) comply with
Section 3.4(c) hereof in respect thereof, the Mortgagee not intending
hereby to waive any right or interest it may have to or in such Engine under
applicable law until compliance by the Mortgagor with such
Section 3.4(c);

     

    (e)           transfer
(or permit any Lessee to transfer) possession of the Airframe or any Engine to
the United States of America or any instrumentality or agency thereof pursuant
to

     


    
      
        
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    CRAF so
long as the Mortgagor (or such Lessee) shall promptly notify the Mortgagee upon
transferring possession of the Airframe or any Engine to the United States of
America or any agency or instrumentality thereof pursuant to such program and
provide the Mortgagee with the name and address of the Contracting Office
Representative for the Military Aircraft Command of the United States Air Force
to whom notice must be given in the event the Mortgagee desires to give notice
as provided in Section 4.2 hereof;

     

    (f)           provided that no Event of
Default has occurred and is continuing, enter into a lease
with:  (A) any certificated U.S. Air Carrier not then subject to
bankruptcy, reorganization or insolvency proceedings; (B)  any other
non-U.S. air carrier if at the time of such lease the United States of America
maintains normal diplomatic relations with the country in which such air carrier
is based and the Mortgagee shall have received (A) evidence
that:  (1) all necessary governmental approvals required for the
leased equipment, the Airframe or any Engine, as the case may be, to be imported
and, if requested by the Mortgagee (and such request is reasonable in light of
the circumstances) and if and to the extent obtainable with reasonable effort
and if it is otherwise customary to obtain the same in such jurisdiction,
exported from the applicable country of domicile upon repossession of such
leased equipment by the Mortgagee (and the Mortgagor as lessor) shall have been
obtained prior to commencement of any such lease; and (2) the insurance
requirements of Section 3.5 are satisfied and that War Risk Insurance shall be
carried and maintained of such scope and coverage, and subject to such
exclusions and exceptions, as is standard for air carriers flying similar
equipment on routes comparable to those flown by the Aircraft and (B) an
opinion of counsel (which counsel and opinion are reasonably satisfactory to the
Mortgagee) that: (1) it is not necessary for the Mortgagee to register or
qualify to do business in such jurisdiction solely as a result of the proposed
lease, unless the only result of such registration or qualification is a Tax or
cost that the Mortgagor is indemnifying such party against; (2) that the
Mortgagee’s Lien on the leased equipment will be recognized; (3) the laws
of such jurisdiction of domicile require fair compensation by the government of
such jurisdiction payable in a currency freely convertible into Dollars for the
loss of the title to the leased equipment in the event of the requisition by
such government of title (unless the Mortgagor shall provide insurance covering
the risk of requisition of title to the leased equipment by the government of
such jurisdiction so long as the leased equipment is subject to such lease);
(4) the required agreement of such non-U.S. air carrier that its rights
under the Lease are subject and subordinate to all of the terms of this Security
Agreement is enforceable against such non-U.S. air carrier under applicable law
(subject only to customary exceptions to enforceability); (5) there exist
no possessory rights in favor of such Lessee under the laws of such jurisdiction
which would, upon bankruptcy of the Mortgagor or other default by the Mortgagor
or Lessee and assuming that at such time such Lessee is not insolvent or
bankrupt, prevent the return of the Aircraft to the Mortgagor or the Mortgagee
in accordance with and when permitted by the terms of Section 4.2 hereof upon
the exercise by the Mortgagee of remedies under Section 4.2 hereof; and
(6) the terms (including, without limitation, the governing-law and
jurisdictional-submission provisions hereof) of this Security Agreement are
legal, valid, binding and enforceable in such jurisdiction against third parties
to substantially the same extent as in the United States; or (C) any Person
approved in writing by the Mortgagee, which approval shall not be unreasonably
withheld.  The currency of payments under such Lease must be freely
convertible into Dollars.

     

    (g)           The
rights of any Lessee or other transferee who receives possession by reason of a
transfer permitted by this Section 3.10 (other than the transfer of an
Engine deemed

     


    
      
        
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    an Event
of Loss) shall be subject and subordinate to, and any Lease permitted by this
Section 3.10, shall expressly provide that it is subject and subordinate
to, all the terms of this Security Agreement; provided, that in the case of
the use of the Aircraft in CRAF the subject and subordinate requirements herein
shall be subject to the notice specified in Section 4.2 and other requirements
of the CRAF program.  In the case of any Lease, the Mortgagor shall
remain primarily liable hereunder for the performance of all of the terms of
this Security Agreement, and the terms of any such Lease shall not permit any
Lessee to take any action not permitted to be taken by the Mortgagor hereunder
with respect to the Aircraft and may permit the Mortgagor to cure any default by
Lessee and to terminate the Lease upon such default; provided, however, that the Mortgagor
may procure such performance from any Lessee pursuant to the relevant Lease, and
the Mortgagee hereby agrees to accept such performance by such Lessee in
satisfaction of the Mortgagor’s obligations hereunder; and provided, further, that all rights
accruing hereunder to the Mortgagor shall likewise accrue to such Lessee to the
extent Mortgagor so permits.  Subject to the Mortgagor’s obligations
in this paragraph (g) above, the Mortgagor shall promptly notify the
Mortgagee after entering into any Lease.

     

    (h)           Any
Wet Lease or similar arrangement under which the Mortgagor maintains operational
control of the Aircraft shall not constitute a delivery, transfer or
relinquishment of possession for purposes of this
Section 3.10.  Any consolidation or merger of the Mortgagor or
conveyance, transfer or lease of all or substantially all of the Mortgagor’s
assets permitted by the Credit Agreement shall not be prohibited by this
Section 3.10.  As used herein, “Wet Lease” shall mean any
arrangement whereby the Mortgagor or a Lessee agrees to furnish the Airframe and
Engines or engines installed thereon to a third party pursuant to which the
Airframe and Engines or engines (i) shall be operated solely by regular
employees of the Mortgagor, or Lessee possessing all current certificates and
licenses required under the Federal Aviation Act, and (ii) shall be
maintained by the Mortgagor or Lessee in accordance with the Maintenance Program
or an FAA approved maintenance program.

     

    (i)           The
Mortgagee agrees, for the benefit of the Mortgagor (and any Lessee) and for the
benefit of any mortgagee or other holder of a security interest in any engine
owned by the Mortgagor (or any Lessee), any lessor of any engine leased to the
Mortgagor (or any Lessee) and any conditional vendor of any engine purchased by
the Mortgagor (or any Lessee) subject to a conditional sale agreement or any
other security agreement, that no interest shall be created hereunder in any
engine so owned, leased or purchased and that neither the Mortgagee nor its
successors or assigns will acquire or claim hereunder, as against the Mortgagor
(or any Lessee) or any such mortgagee, lessor or conditional vendor or other
holder of a security interest or interest in such engine as the result of such
engine being installed on the Airframe; provided, however, that such agreement
of the Mortgagee shall not be for the benefit of any lessor or secured party of
any airframe leased to the Mortgagor (or any Lessee) or purchased by the
Mortgagor (or any Lessee) subject to a conditional sale or other security
agreement or for the benefit of any mortgagee of or any other holder of a
security interest in an airframe owned by the Mortgagor (or any Lessee), unless
such lessor, conditional vendor, other secured party or mortgagee has agreed
(which agreement may be contained in such lease, conditional sale or other
security agreement or mortgage and may consist of a paragraph similar to this
paragraph) that neither it nor its successors or assigns will acquire, as
against the Mortgagee, any right, title or interest in an Engine as a result of
such Engine being installed on such airframe.

     


    
      
        
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    3.11.           Substitution of
Engines.  So long as no Event of Default shall have occurred
and be continuing, Mortgagor shall have the right at its option at any time in
accordance with Section 6.15(c) of the Credit Agreement, to terminate the
Lien of this Security Agreement with respect to any Engine.  Subject
to Section 6.15(c) of the Credit Agreement, at the time of any such
termination, Mortgagor shall replace such engine hereunder by complying with the
terms of Section 3.4(c) hereof to the same extent as if an Event of Loss had
occurred with respect to such Engine (other than the time periods allowed for
such replacement), and the Mortgagee shall release the replaced Engine from the
Lien of this Security Agreement by entering into a Security Agreement Supplement
in the form of Schedule II and by promptly consenting to the request from the
Mortgagor to the release of the International Interest in such Engine at the
International Registry.

     

    3.12           Section 1110 of the
Bankruptcy Code.  With respect to the Aircraft and Engines that
constitute Collateral first placed into service after October 22, 1994,
Mortgagee is entitled to the benefits of Section 1110 of the Bankruptcy Code in
connection with the exercise of its remedies under this Security Agreement in
respect of each Aircraft and each Engine.  Except as specifically
designated in Schedule I or in any Security Agreement Supplement, each Aircraft
and Engine that constitute Collateral was first placed in service after October
22, 1994.

     

    3.13           Cape Town Treaty.  Mortgagor is a
“transacting user entity” for purposes of the Cape Town Treaty and is “situated”
for purposes of the Cape Town Treaty in the United States of
America.

     

    SECTION
4.                      
EVENTS OF DEFAULT AND REMEDIES

     

    4.1.           Events of
Default.

     

    (a)           Each
Event of Default set forth in Section 8.01 of the Credit Agreement is
incorporated herein as if fully set forth as a separate Event of Default in this
Section 4.1.

     

    (b)           The
Mortgagor shall fail to procure and maintain (or cause to be procured and
maintained), with respect to the Aircraft, insurance required to be maintained
in accordance with the provisions of Section 3.5 hereof or such insurance shall
lapse or be canceled, provided, that no such lapse
or cancellation shall constitute an Event of Default until the earlier of
thirty (30) days (or if 30 days is unavailable pursuant to Section 3.5
hereof, such shorter period as is available pursuant to such Section) after
receipt by the Mortgagor of written notice of such lapse or cancellation (or
seven (7) days or such shorter time as may be standard in the industry with
respect to War Risk Insurance provided, that if the
Aircraft is grounded or if War Risk Insurance or indemnification is provided by
the FAA, no such failure to carry War Risk Insurance shall be an Event of
Default) or the date that such lapse or cancellation is effective as to
Mortgagee; or

     

    (c)           The
Mortgagor shall have failed to perform or observe, or caused to be performed and
observed, any other covenant or agreement contained in this Security Agreement,
and such failure shall continue unremedied for a period of thirty (30) days
after the Mortgagor’s receipt of written notice thereof from the Mortgagee;
provided, however, that if such failure
is curable, and if the Mortgagor shall have undertaken to cure any such failure
and, notwithstanding

     


    
      
        
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    the
reasonable diligence of the Mortgagor in attempting to cure such failure, such
failure is not cured within said thirty (30) day period but is curable with
future due diligence, there shall exist no Event of Default under this Section
4.1 for such further time not to exceed 180 days as may reasonably be required
to effect such cure, so long  as the Mortgagor is proceeding with due
diligence to cure such failure.

     

    4.2.           Remedies.  Upon
the occurrence of an Event of Default, the Mortgagee may accelerate the entire
balance then due and owing under the Credit Agreement and this Security
Agreement, whereupon all such sums shall become immediately due and payable, and
thereafter the Mortgagee may, at its option, do one, several or all of the
following as the Mortgagee in its sole discretion shall then elect:

     

    (a)           
exercise all the rights and remedies granted to secured parties by: (i) the
provisions of the UCC, (ii) the Cape Town Treaty not inconsistent with
applicable law or (iii) under the provisions of any applicable law;

     

    (b)           
personally, or by agents or attorneys, take possession of all or any part of the
Mortgaged Property, and demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for, or
make any compromise or settlement deemed desirable with respect to, any of the
Mortgaged Property or any sum payable in connection therewith;

     

    (c)           
personally, or by agents or attorneys, take possession of any part or all of the
Mortgaged Property without being responsible for loss or damage caused thereby,
and sell or dispose of all or any part of the same, free from any and all claims
of the Mortgagor or of any other party claiming by, through or under the
Mortgagor, at law or in equity, at one or more public or private sales on such
commercially reasonable terms as the Mortgagee may in good faith fix, with or
without any previous demand or notice to the Mortgagor or advertisement of any
such sale or other disposal except as is commercially reasonable under the
circumstances, and any notice or demand and right of equity or redemption
otherwise required by or available to the Mortgagor under applicable law is
hereby waived by the Mortgagor to the fullest extent permitted by applicable
law;

     

    (d)           
institute legal proceedings for the sale or otherwise for the enforcement of any
right, under the judgment of any court of competent jurisdiction, of or
concerning any of the Mortgaged Property;

     

    (e)           
institute legal proceedings to foreclose upon and against the security interest
granted in and by this Security Agreement or to recover judgment for the amounts
then due from Mortgagee under this Security Agreement or under the Credit
Agreement.

     

    (f)           
institute legal proceedings for the specific performance of any covenant or
agreement contained in this Security Agreement or in aid of the execution of any
power granted in this Security Agreement, and the Mortgagee shall be entitled as
of right to the appointment of a receiver of all or any part of the Mortgaged
Property; and

     

    (g)           
exercise all of the rights and remedies of the Mortgagee against the Mortgagor
under the Credit Agreement.

     


    
      
        
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    provided that during any period the
Aircraft is activated under CRAF in accordance with the provisions of Section
3.10 hereof and in the possession of the government of the United States of
America or an instrumentality or agency thereof, the Mortgagee shall not, on
account of any Event of Default, be entitled to do any of the foregoing or
require Mortgagor to do anything as permitted in Section 4 in such manner as to
limit the Mortgagor’s control under this Security Agreement of any Airframe or
any Engines installed thereon, unless at least sixty (60) days’ (or such lesser
period as may then be applicable under the Military Airlift Command program of
the government of the United States of America) prior written notice of default
hereunder shall have been given by the Mortgagee by registered or certified mail
to the Mortgagor with a copy addressed to the Contracting Office Representative
for the Military Airlift Command of the United States Air Force under the
contract with the Mortgagor relating to any Airframe.

     

    4.2.1.              Multiple
Sales.  The power of sale under this Security Agreement shall
not be exhausted by one or more sales, and the Mortgagee may from time to time
adjourn any sale to be made pursuant to this Security Agreement.  The
Mortgaged Property need not be present at the time and place of
sale.

     

    4.2.2.              Delivery of Mortgaged
Property.  If the Mortgagee shall demand possession of the
Mortgaged Property or any part thereof pursuant to this Security Agreement, the
Mortgagor shall, at its own expense, forthwith cause such Mortgaged Property or
any part thereof designated by the Mortgagee to be assembled and made available
and delivered to the Mortgagee at any place reasonably designated by the
Mortgagee.

     

    4.2.3.              Mandatory
Notices.  In addition to any other notices required by
applicable law, the Mortgagee shall give to the Mortgagor at least 15 days prior
written notice of each public sale or any date after which a private sale or
other intended disposition hereunder shall occur, and the Mortgagor hereby
covenants and agrees that a notice which shall be given, in accordance with the
provisions of Section 6.1 below, at least 15 calendar days before the date
of any such act shall be deemed to be reasonable notice for such act and
specifically, reasonable notification of the time and place of any public sale
hereunder and of reasonable notification of the time after which any private
sale or other intended disposition of the Mortgaged Property (or any part
thereof) to be made hereunder is to be made.

     

    4.2.4.    Mortgagee Repairing
Mortgaged Property.  Upon every such taking of possession until
the Mortgaged Property is foreclosed upon, the Mortgagee may, but shall have no
obligation to, from time to time at the expense of the Mortgagor, make all such
repairs, replacements, alterations, modifications, additions and improvements to
and of the Mortgaged Property as the Mortgagee may reasonably determine to be
commercially reasonable.  In each such case, the Mortgagee shall have
the right to manage and control the Mortgaged Property and to exercise all
rights and powers of the Mortgagor in respect thereof as the Mortgagee shall
deem best, including the right to enter into any and all such agreements with
respect to the leasing or operation of the Mortgaged Property or any part
thereof as the Mortgagee may see fit.  The Mortgagee shall be entitled
to collect and receive all rents, issues, profits, revenues and other income of
the same and every part of the Mortgaged Property.  Such rents,
issues, profits, revenues and other income shall be applied to pay the expenses
of holding and operating the Mortgaged Property, and of all maintenance,
repairs, replacements, alterations, additions and improvements, and to make all
payments which the Mortgagee may be required or may elect to

     


    
      
        
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    make, if
any, for taxes, assessments, insurance and other charges upon the Mortgaged
Property or any part thereof, and all other payments which the Mortgagee may be
required or authorized to make under any provision of this Security
Agreement.  The remainder of such rents, issues, profits, revenues and
other income shall be applied only in accordance with
Section 4.2.6.

     

    4.2.5.             Delivery to
Purchaser.  Upon the completion of any sale under this
Section 4, the Mortgagor shall deliver or; cause to be delivered all of the
property, sold to the purchaser or purchasers at such sale on the date of sale,
or within a reasonable time thereafter if it shall be impractical to make
immediate delivery, but in any event full title and right of possession to such
property shall pass to such purchaser or purchasers forthwith upon the
completion of such sale.  Nevertheless, if so requested by the
Mortgagee or by any purchaser, the Mortgagor shall confirm any such sale or
transfer by executing and delivering to such purchaser all proper instruments of
conveyance and transfer and releases as may be designated in any such
request.  Every such sale shall operate to divest all right, title,
interest, claim and demand whatsoever of the Mortgagor in and to the property so
sold, and shall be a perpetual bar, both at law and in equity, against the
Mortgagor and all persons claiming the property sold, or any part thereof,
through the Mortgagor and its successors or assigns.

     

    4.2.6.           Application of
Proceeds.  The proceeds of any sale of the Mortgaged Property,
or any part thereof, under this Section 4, together with any other sums
then held by the Mortgagee as part of the Mortgaged Property, shall be applied
as follows:

     

    (a)           first,
to the payment of the cost and expenses of such sale, including brokers’ fees or
sales commissions, a reasonable compensation to the Mortgagee’s agents,
attorneys and counsel, all charges, expenses, liabilities and advances incurred
or made by the Mortgagee, and the payment of all taxes, assessments or liens, if
any, prior to the lien of this Security Agreement, except any taxes, assessments
or liens subject to which such sale shall have been made;

     

    (b)           second,
to the payment of all amounts owing in respect of the Obligations;
and

     

    (c)           third,
the surplus, if any, shall be paid to the Mortgagor or to anyone entitled to
payment thereof by operation of law or pursuant to an order of a court of
competent jurisdiction.

     

    4.2.7.              Mortgagee May
Purchase.  At any sale under this Section 4, to the extent
permitted by applicable law, the Mortgagee may bid for and purchase the property
offered for sale and, upon compliance with the terms of sale, may bid, retain
and dispose of such property without further accountability
therefor.  The Mortgagee may apply against the purchase price for the
Mortgaged Property or any part thereof the amount then due under the Credit
Agreement secured hereby.  The Mortgagee need not be present at such
sale.

     

    4.2.8.             Right to
Possession.  In the event Mortgagor becomes subject to the
jurisdiction of any United States Bankruptcy Court in a proceeding for the
reorganization of Mortgagor, the Mortgagor hereby waives, to the fullest extent
permitted by applicable law, any right to contest any motion, petition or
application filed by the Mortgagee with such bankruptcy

     


    
      
        
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    court
having jurisdiction over the Mortgagor, whereby Mortgagee seeks to enforce any
of its remedies under this Security Agreement or the Credit Agreement
(including, in connection with the enforcement of such remedies, any motion or
application made by Mortgagee for relief from any stay to which Mortgagee is
subject).

     

    4.2.9.              Remedies
Cumulative.  Each right, power and remedy specifically given to
the Mortgagee in this Security Agreement or otherwise existing shall be
cumulative and shall be in addition to every other right, power and remedy
specifically given in this Security Agreement, in any other Loan Documents, or
now or hereafter existing at law, in equity or otherwise.  Each such
right, power and remedy, whether specifically given in the Credit Agreement or
otherwise existing, may be exercised from time to time and as often and in such
order as may be deemed expedient by the Mortgagee.  The exercise of
any such right, power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy.  No delay or omission by the Mortgagee in the exercise of any
right or power, or in the pursuance of any remedy, shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of the
Mortgagor or to be an a quiescence therein.  No waiver by the
Mortgagee of any breach, Default or Event of Default by the Mortgagor shall be
deemed a waiver of any other previous breach, Default or Event of Default or any
thereafter occurring.  The invalidity of any remedy in any
jurisdiction shall not invalidate such remedy in any other
jurisdiction.  The invalidity or unenforceability of any of the
remedies herein provided in any jurisdiction shall not in any way affect the
right to the enforcement in such jurisdiction or elsewhere of any of the other
remedies herein provided.

     

    4.2.10.                         Except
as otherwise provided in this Security Agreement, the Mortgagor hereby waives,
to the extent permitted by applicable law, notice and judicial hearing in
connection with the Mortgagee’s taking possession or the Mortgagee’s disposition
of the aircraft, including, without limitation any and all prior notice and
hearing for any prejudgment remedy or remedies and any such right which the
Mortgagor would otherwise have under the constitution or any statute of the
United States or of any state, and the Mortgagor hereby further waives, to the
extent permitted by applicable law:

     

    (a)           all
damages occasioned by such taking of possession except any damages which are the
direct result of the Mortgagee’s gross negligence or willful
misconduct;

     

    (b)           all
other requirements as to the time, place and terms of sale or other requirements
with respect to the enforcement of the Mortgagee’ s rights hereunder;
and

     

    (c)           all
rights of redemption, appraisement, valuation, stay, extension or moratorium now
or hereafter in force under any applicable law in order to prevent or delay the
enforcement of this Security Agreement or the absolute sale of the Aircraft or
any part thereof, and the Mortgagor for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waives the benefit
of all such laws.

     

    Any sale
of or the grant of options to purchase, or any other realization upon the
Aircraft or any part thereof shall operate to divest all right, title, interest,
claim and demand, either at law or in equity, of the Mortgagor therein and
thereto, and shall be a perpetual bar both at law and in equity against the
Mortgagor and against any and all Persons claiming or attempting to claim
the

     


    
      
        
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    Aircraft
so sold, optioned or realized upon, or any part thereof, from, through and under
the Mortgagor.

     

    4.2.11.                         Right to Perform and Incur
Expenses.

     

    (a)           At
any time and from time to time after an Event of Default, if the Mortgagor fails
to perform or fulfill any of its undertakings or obligations contained herein,
Mortgagee shall have the right, but shall not be obligated, (i) to effect such
performance or compliance, and (ii) to incur such reasonable expenses relative
to such performance or compliance, to the enforcement of Mortgagee’s rights or
to the preservation, protection, reconditioning, storage or sale of the
Mortgaged Property, including such sums as are specified in Section 4.2.4.
and 4.2.6(a).  The amount of any such expenses and other reasonable
costs shall become payable by the Mortgagor to the Mortgagee as of the date on
which Mortgagee shall pay the same, together with interest thereon from said
date of payment up to and including the date of actual payment by the Mortgagor
at an interest rate equal, to the default rate of interest set forth in the
Credit Agreement (but in no event higher than the highest rate permitted by
applicable law).

     

    (b)           All
such costs and expenses incurred shall become part of the Mortgagor’s
Obligations and shall become part of the indebtedness secured by this Security
Agreement.  The Mortgagee shall have the right (but shall not be
obligated) to use and apply any Cash Collateral at any time held by it for the
repayment of all such advances, costs or expenses.  However, no such
use of any Cash Collateral, nor the making by Mortgagee of any advance in
payment of any such expense, shall relieve the Mortgagor from any Event of
Default.

     

    4.2.12.                         Power of
Attorney.

     

    THE MORTGAGOR HEREBY CONSTITUTES AND
APPOINTS THE MORTGAGEE ITS TRUE AND LAWFUL ATTORNEY, IRREVOCABLY, WITH FULL
POWER AFTER THE OCCURRENCE OF AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT
(IN THE NAME OF THE MORTGAGOR OR OTHERWISE) TO ACT, REQUIRE, DEMAND, RECEIVE,
COMPOUND AND GIVE ACQUITTANCE FOR ANY AND ALL MONIES AND CLAIMS FOR MONIES DUE
OR TO BECOME DUE TO THE MORTGAGOR UNDER OR ARISING OUT OF THE COLLATERAL, TO
ENDORSE ANY CHECKS OR OTHER INSTRUMENTS OR ORDERS IN CONNECTION THEREWITH AND TO
FILE ANY CLAIMS OR TAKE ANY ACTION OR INSTITUTE ANY PROCEEDINGS WITH THE
MORTGAGEE MAY DEEM TO BE NECESSARY OR ADVISABLE IN THE PREMISES, WHICH
APPOINTMENT AS ATTORNEY IS COUPLED WITH AN INTEREST.

     

    SECTION
5.                        DEFEASANCE

     

    If the
Mortgagor shall pay and discharge all of its respective Obligations, then upon
Mortgagor Request this Security Agreement and the lien, rights and interests
granted by this Security Agreement shall cease, terminate and become null and
void and, at the expense of the Mortgagor, the Mortgagee shall execute and
deliver to the Mortgagor satisfaction and discharge of this Security Agreement
by such instruments of satisfaction as may be necessary, including promptly
consenting to the termination of all International Interests in favor of
the

     


    
      
        
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    Mortgagee
at the International Registry and pay and deliver upon Mortgagor Order all
monies and other personal property then held by the Mortgagee under this
Security Agreement.

     

    SECTION
6.                        MISCELLANEOUS
PROVISIONS

     

    6.1.           Notices.  Except
as otherwise specifically provided to the contrary in this Security
Agreement:

     

    (a)           Every
notice or demand under this Security Agreement shall be in writing and may be
given or made by telefax or by nationally recognized overnight courier
service.

     

    (b)           Every
notice or demand shall be sent, in the case of overnight courier, to the
Mortgagor or Mortgagee at their respective addresses and, in the case of a
telefax message, to their respective facsimile numbers as follows:

     

    (i)           To
Mortgagor:

     

    Alaska
Airlines, Inc.

     

    19300
International Blvd.

     

    Seattle,
WA 98188

     

    Attn:
Vice President Finance & Treasurer

     

    Telephone
No.:  [***]

     

    Facsimile
No.:  [***]

     

    and

     

    (ii)           To
Mortgagee:

     

    Citibank,
N.A.

    388
Greenwich Street, 34th Floor

    New York,
NY 10013

    Attn:
[***]

    Telephone
No.: [***]

    Facsimile
No.:  [***]

    and

    Attn:
[***]

    Telephone
No.: [***]

    Facsimile
No.:  [***]

    


    (c)           Every
notice or demand shall be deemed to have been received, in the case of a notice
sent by nationally recognized overnight courier, when actually delivered to
Mortgagee or the Mortgagor at their respective address as provided in
Section 6.1(b) or on the date on which receipt of such notice is refused or
the courier advises that such notice is not deliverable at the address provided
in Section 6.1 (b) and, in the case of a telefax, at the time of actual
receipt thereof.

     

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

    

    


     


    
      
        
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    (d)           Subject
to the terms hereof, Mortgagee or the Mortgagor may change its address or
telefax number or the address or party to whom copies of notices shall be sent
by giving notice in accordance with this Section 6.1.

     

    6.2.           Counterparts.  This
Security Agreement may be executed in any number of counterparts, and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute one and the same Security
Agreement.

     

    6.3.           Governing
Law.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON.

     

    6.4.           Waiver of Jury
Trial.  THE MORTGAGOR AND THE MORTGAGEE EACH IRREVOCABLY WAIVE
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY
PROVISION OF THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT IN WHICH THEY
ARE PARTIES.

     

    6.5.           Expenses.  The
Mortgagor agrees to pay the reasonable ongoing fees and expenses of the
Mortgagee for the services rendered by it in capacity as mortgagee
hereunder.

     

    6.6.           Consent to
Jurisdiction.  Mortgagor and Mortgagee consent and submit to
the non-exclusive jurisdiction and venue shall be in the State of Washington in
the State courts for the county of King, or the United States District Court for
the Western District of Washington and agree that venue is proper in those
courts and waive any right to object based upon jurisdiction (either personal or
subject matter) or venue or inconvenient forum therein in connection with any
action arising out of, or connected in any way with, this Security
Agreement.  Mortgagor further agrees that service of process or any
other papers upon it by registered air mail at its address set forth herein
shall be deemed good, proper and effective service upon it.  Mortgagor
further agrees that the service of process or any other papers upon the agent
designated by Mortgagor in the immediately preceding sentence shall be deemed
good, proper and effective service upon it.  Nothing set forth herein
shall be deemed to preclude the service of process or any other papers upon
Mortgagor by any other method permitted by applicable law.  The
Mortgagee and the Mortgagor agree that such state and Federal courts of and
within the State of Washington have non-exclusive jurisdiction in respect of any
claims brought under the Cape Town Treaty relating to the Aircraft.

     

    6.7.           Delivery.  This
Security Agreement is intended to and shall be deemed to be delivered by the
Mortgagor to the Mortgagee and accepted by the Mortgagee in Washington
State.

     

    SECTION
7                      THE
MORTGAGEE

     

    The
Mortgagee may execute any of its duties or powers hereunder by or through agents
or employees, and shall be entitled to retain counsel and the advice of such
counsel concerning all matters pertaining to the performance of its functions
hereunder.  The Mortgagor agrees to reimburse the Mortgagee for all
reasonable out-of-pocket expenses incurred by the Mortgagee and the counsel,
attorneys, agents and the employees of the Mortgagee in acting hereunder,
including any reasonable counsel fees and compensation paid for services
rendered to the

     


    
      
        
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    Mortgagee
in connection with the performance of its functions hereunder if and to the
extent reasonably engaged by Mortgagee.  The Mortgagor agrees to
indemnify and save harmless the Mortgagee against and from any liability or
damages which the Mortgagee may incur or sustain in the exercise and performance
of any of the Mortgagee’s powers and duties hereunder, not including, however,
the Mortgagee’s gross negligence or willful misconduct.  For such
reimbursement and indemnity, the Mortgagee shall be secured under this Security
Agreement and, to effect such reimbursement and indemnity, the Mortgagee shall
have the right to use and apply any cash constituting Mortgaged Property at any
time held by it.  The Mortgagee shall give notice to the Mortgagor of
any actions or claims to be brought against the Mortgagor under this
Section 7; provided, however, that any failure by
the Mortgagee to provide such notice shall not limit the obligations of the
Mortgagor hereunder, except to the extent that the Mortgagor is prejudiced by
the Mortgagee’s failure to deliver such notice.  Neither the Mortgagee
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them hereunder except for its or
their own gross negligence or willful misconduct.

     

    *   *   *

     

    


     


    
      
        
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    IN
WITNESS WHEREOF, Mortgagor and Mortgagee have caused this Aircraft Chattel
Mortgage and Security Agreement to be duly executed as of the day and year first
above written.

     

    
      	
              Mortgagor:

              ALASKA
      AIRLINES, INC.

               

               

               

              By:                                                                  

              Name:
      John F. Schaefer, Jr.

              Title:   Vice
      President – Finance

              and Treasurer

            	 
      


    


    
      
        
          [Signature
Page to Aircraft Chattel Mortgage and Security Agreement]

        

         


      

      
         


        
          

        

      

      
         


      

    


    


    
      	 
      	 
      
	
              Mortgagee:

              CITIBANK, N.A., as
      Administrative Agent

               

               

              By:
      ____________________________

              Name:
      __________________________

              Its:  ____________________________

               

               

            	 
      


    


    
      
        
          [Signature
Page to Aircraft Chattel Mortgage and Security Agreement]

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
I—FLIGHT EQUIPMENT

     

    1.  Boeing
737-4Q8 Aircraft bearing U.S. Registration Mark N762AS and manufacturer’s serial
number 25099, equipped with two CFM International, Inc. CFM56-3C engines bearing
manufacturer’s serial numbers 856271 and 856288, which engines each have 550 or
more rated take-off horsepower,  or the equivalent of such
horsepower.  Such Aircraft, including engines, was placed in service
prior to October 22, 1994.

     

    2.  Boeing
737-4Q8 Aircraft bearing U.S. Registration Mark N763AS and manufacturer’s serial
number 25100, equipped with two CFM International, Inc. CFM56-3C engines bearing
manufacturer’s serial numbers 857280 and 857282, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower.  Such Aircraft, including engines, was placed in service
prior to October 22, 1994.

     

    3.  Boeing
737-4Q8 Aircraft bearing U.S. Registration Mark N764AS and manufacturer’s serial
number 25101, equipped with two CFM International, Inc. CFM56-3C engines bearing
manufacturer’s serial numbers 856303 and 856304, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower.  Such Aircraft, including engines, was placed in service
prior to October 22, 1994.

     

    4.  Boeing
737-490 Aircraft bearing U.S. Registration Mark N767AS and manufacturer’s serial
number 27081, equipped with two CFM International, Inc. CFM56-3C engines bearing
manufacturer’s serial numbers 856337 and  856338, which engines each
have 550 or more rated take-off horsepower, or the equivalent of such
horsepower.  Such Aircraft, including engines, was placed in service
prior to October 22, 1994.

     

    5.  Boeing 737-890
Aircraft bearing U.S. Registration Mark N546AS and manufacturer’s serial number
30022, equipped with two CFM International, Inc. CFM56-7B engines bearing
manufacturer’s serial numbers 892251 and 892252, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower.

     

    6.  Boeing
737-890 Aircraft bearing U.S. Registration Mark N565AS and manufacturer’s serial
number 35181, equipped with two CFM International, Inc. CFM56-7B engines bearing
manufacturer’s serial numbers 894361 and 894362, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower.

     

    7.  Boeing
737-890 Aircraft bearing U.S. Registration Mark N579AS and manufacturer’s serial
number 35187, equipped with two CFM International, Inc. CFM56-7B engines bearing
manufacturer’s serial numbers 894547 and 894549, which engines each have 550 or
more rated take-off horsepower, or the equivalent of such
horsepower.

     

    8.  Boeing 737-490 Aircraft bearing U.S. Registration Mark
N768AS and manufacturer’s serial number 27082, equipped with two CFM
International, Inc. CFM56-3C engines bearing manufacturer’s serial numbers
856333 and 856336, which engines each have 550 or more rated take-off
horsepower, or the equivalent of such horsepower.  Such
Aircraft, including engines, was placed in service prior to October 22,
1994.

     

    


     


    
      
        
          Schedule
I

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE II—SECURITY AGREEMENT
SUPPLEMENT

     

    This
SUPPLEMENTAL FIRST PRIORITY SECURITY AGREEMENT, dated the  day
of____________, 200_ (this “Supplement”), is from Alaska Airlines, Inc., a
corporation organized and existing under the laws of the state of Alaska, having
the address 19300 International Blvd., Seattle, WA 98188  (the
“Mortgagor”), and CITIBANK, N.A, a national banking association, having an
office at 388 Greenwich Street, 34th Floor, New York, NY 10013, as
Administrative Agent (the “Mortgagee”).

     

    RECITALS

     

    A.           Mortgagor
has heretofore executed and delivered an Aircraft Chattel Mortgage and Security
Agreement, dated as of March 31, 2010 (as heretofore supplemented or amended,
the “Security Agreement”), to cover certain Flight Equipment of the Mortgagor to
secure Mortgagor’s obligations to Mortgagee under a Credit Agreement, dated as
of March 31, 2010 (as heretofore amended, the “Credit Agreement”), which Flight
Equipment was identified in Schedule I—Security Agreement (“Schedule
I”).

     

    B.           The
Security Agreement, with Schedule I attached, was recorded by the FAA on _____
and assigned Conveyance Number ________.

     

    C.           Mortgagor
is the legal and beneficial owner, free and clear of all mortgages, security
interests, liens, charges and encumbrances, other than liens and encumbrances
permitted by the Security Agreement, of the flight equipment herein below
described which the parties intend to be added as additional Collateral, and
desires to execute and deliver this Security Agreement Supplement to Mortgagee
in return for which Mortgagee agrees to release from the Lien of the Security
Agreement the flight equipment listed below which is to be
released.

     

    NOW,
THEREFORE, THIS SUPPLEMENT WITNESSETH, that to secure the payment of all of the
Obligations, as at any time amended or supplemented, and for the purpose of
specifically subjecting such property to and of confirming the lien of the
Security Agreement, the Mortgagor does hereby grant, bargain, sell, transfer,
convey and mortgage unto the Mortgagee, its successors and assigns, and gives to
the Mortgagee a security interest in, the property (the “Collateral”) described in sections 1 and 2 of Attachment 1
hereto.  Attachment 1 consists of three parts.  The first
section lists the property currently subject to the Aircraft Chattel Mortgage
and Security Agreement dated March 31, 2010, which is to remain Collateral
subject to the Security Agreement.  The second section lists property
not heretofore subject to the Security Agreement that is added to the
Collateral.  The third section lists property that was Collateral and
is now being released and will no longer be subject to the Security
Agreement.

     

    The Collateral listed in sections 1 and 2 of Attachment
1, together with all substitutions, replacements and renewals of the
Collateral and all property that hereafter becomes physically attached to or
incorporated in the Collateral, whether the same are now owned by the Mortgagor
or shall hereafter be acquired by it.

     

    Together
with all rents, issues, profits, proceeds (including insurance proceeds),
revenues and other income of the Collateral and all of the estate, right, title
and interest of every nature

     


    
      
        
          Schedule  II -


        

         


      

      
         


        
          

        

      

      
         


      

    


    whatsoever
of the Mortgagor, at law or in equity, in and to the Collateral and every part
and parcel thereof.

     

    TO HAVE
AND TO HOLD all and singular the Collateral unto the Mortgagee, its successors
and assigns, as security as aforesaid and for the uses and purposes and subject
to the covenants, agreements, provisions and conditions set forth in the
Security Agreement.

     

    This
Supplement shall be construed as supplemental to the Security Agreement and
shall form a part thereof, and the Security Agreement and each Security
Agreement Supplement heretofore executed and delivered are, by this reference,
incorporated in this Supplement and ratified, approved and
confirmed.

     

    This
Supplement may be simultaneously executed in several counterparts, each of which
shall be deemed to be an original, and all such counterparts shall together
constitute but one and the same agreement.

     

    THIS
SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF WASHINGTON APPLICABLE TO CONTRACTS ENTERED INTO IN AND BY RESIDENTS OF
THE STATE OF WASHINGTON AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF
WASHINGTON.

     

    


     


    
      
        
          Schedule  II -


        

         


      

      
         


        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the Mortgagor and Mortgagee have caused this Security Agreement
Supplement to be duly executed as of the date first written above.

     

    


     

    
      	
              Mortgagor:

              Alaska
      Airlines, Inc

               

               

               

              By:                                                                  

              Its:
      __________________________________

            	
              Mortgagee:

              Citibank,
      N.A., as Administrative Agent

               

               

              By:                                                                  

              Its:

               

            


    

    



    
      
        
          [Signature
Page to Aircraft Chattel Mortgage and Security Agreement
Supplement]

        

         


      

      
         


        
          

        

      

      
         


      

    


    ATTACHMENT
1 TO SCHEDULE II—SECURITY AGREEMENT SUPPLEMENT

     

    Section
1.  The following property consists of Collateral already
pledged under the Security Agreement that is to remain as
Collateral.

     

    


     

    Section
2.  Boeing 737-__ Aircraft bearing U.S. Registration Mark
N   AS and manufacturer’s serial
number      , equipped with two CFM International,
Inc. CFM56-   engines bearing manufacturer’s serial
numbers       and      ,
which engines each have 550 or more rated take-off horsepower, or the equivalent
of such horsepower, are hereby added as additional Collateral (Mortgaged
Property) to the Security Agreement and such aircraft and each such engine shall
be subject to the Lien of the Security Agreement as an Aircraft or an Engine, as
applicable, for all purposes .

     

    Section
3.  Boeing
737-    Aircraft bearing U.S. Registration Mark
N   AS and manufacturer’s serial
number      , equipped with two CFM International,
Inc. CFM56-   engines bearing manufacturer’s serial
numbers       and      ,
which engines each have 550 or more rated take-off horsepower, or the equivalent
of such horsepower, are hereby removed and released from the Lien of the
Security Agreement and each such aircraft and each such engine shall cease to be
an Aircraft or an Engine, as applicable, thereunder.

    


    



    
      
        
          Attachment
1

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
F

    


    FORM
OF CASH PLEDGE AGREEMENT

    


    THIS CASH
PLEDGE AGREEMENT (“Agreement”) is made
as of [_____ __], 2010
by ALASKA AIRLINES, INC., an Alaska corporation (“Debtor”), in favor of
CITIBANK, N.A., a national banking association, as Administrative Agent
(including its successors and assigns, “Agent”).

     

    RECITALS

     

    A.           Debtor
and Agent are parties to that certain Credit Agreement dated as of [_____ __], 2010 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to
time, the “Credit
Agreement”).

     

    B.           It
is contemplated in the Credit Agreement that, from time to time, Debtor may
request Agent to release its security interest in certain pledged Collateral in
exchange for the grant of a security interest in Cash Collateral and/or Other
Cash Collateral.  It is a condition precedent to such release that
Debtor enter into this Agreement in favor of Agent.

     

    NOW,
THEREFORE, in consideration of the foregoing, Debtor agrees for the benefit of
Agent as follows:

     

    AGREEMENT

     

    1.           Defined
Terms.  Capitalized terms not otherwise defined herein shall
have the meanings given in the Credit Agreement.

     

    2.           Grant of Security
Interest.  As security for the payment or performance, as the
case may be, in full of the Obligations (defined below), Debtor hereby pledges
and assigns, and hereby grants to Agent a security interest in, all of Debtor’s
right, title and interest in and to the following (collectively, the “New
Collateral”):

     

    (a)           Certificate
of Deposit Account Number [_____] and any replacement or
other account numbers (collectively, the “Account”) maintained
by Debtor at [Agent]
together with

     

    (i)           all
interest now or hereafter accruing on the Account,

     

    (ii)           all
additional deposits hereafter made to the Account,

     

    (iii)           any
and all proceeds from the Account,

     

    
      	
               
      

            	
              (iv)

            	
              all
      renewals, replacements and substitutions for any of the foregoing,
      and

            


    

     

    
      	
               
      

            	
              (v)

            	
              any
      and all general intangibles and choses in action arising from or related
      to any of the foregoing; and

            


    

     

    (b)           Other
Cash Collateral (including any and all proceeds thereof) as set forth on Schedule
2(b).

     


    
      
        
          EXHIBIT F
- 

        

         


      

      
         


        
          

        

      

      
         


      

    


    As used
herein, “Obligations” means,
collectively, all liabilities, obligations, covenants and duties of Borrower
arising under the Credit Agreement or any other Loan Document, in each case
whether direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter
arising.

     

    3.           Financing
Statements, Etc.

     

    (a)           Financing
Statement.                                           Debtor
hereby irrevocably authorizes Agent, at any time and from time to time, to file
in any relevant jurisdiction any initial financing statements and amendments
thereto that contain the information required by Article 9 of the UCC of each
applicable jurisdiction for the filing of any financing statement or amendment
in order to perfect and protect the security interest of Agent in the New
Collateral.

     

    (b)           Continuing Security
Interest.                                                      Debtor
acknowledges and agrees that the security of Agent in the New Collateral
constitutes continuing collateral security for all of the Obligations which
shall remain in effect until all of the Obligations have been finally and
indefeasibly paid in full, subject to the Collateral release and substitution
provisions in Section 6.15 of the Credit Agreement.

     

    4.           Representations and
Warranties.  Debtor represents and promises to Agent and the
Lenders that: (a) Debtor is the lawful owner of the New Collateral free and
clear of all Liens except as disclosed to Agent in writing prior to the date
hereof; (b) Debtor has not previously granted a security interest in the
New Collateral to any other person; (c) there are no defaults relating to
the New Collateral, and there are no offsets or counterclaims to same; (d)
Debtor has delivered or otherwise caused the transfer to Agent, as applicable,
all certificates, instruments and other writings representing, evidencing or
constituting the Other Cash Collateral as set forth on Schedule 2(b); (e)
the Other Cash Collateral identified on Schedule 2(b) is not
and shall not be represented or evidenced by any certificates, instruments or
other writing other than those delivered pursuant to this Agreement; and
(f) this Agreement creates a valid security interest in favor of Agent in
all of the New Collateral, is binding upon Debtor and Debtor’s successors and
assigns and is legally enforceable in accordance with its terms.

     

    5.           Agreements of
Debtor.  Debtor agrees with Agent that: (a) Debtor shall
not sell, assign, encumber, or otherwise dispose of any of Debtor’s rights in
the New Collateral; (b) Debtor shall not withdraw funds from the Account
without Agent’s prior written consent; (c) Debtor shall strictly and
promptly do everything required of Debtor under the terms, conditions, promises,
and agreements contained in or relating to the New Collateral; (d) Debtor shall
deliver to Agent, upon Agent’s request, all certificates, instruments or other
writings representing or evidencing the Other Cash Collateral as set forth on
Schedule 2(b);
and (e) any and all replacement or renewal certificates, instruments, or other
benefits or proceeds related to the New Collateral that are received by Debtor
shall be held by Debtor in trust for Agent and immediately shall be delivered by
Debtor to Agent to be held as part of the New Collateral.  In
addition, Debtor agrees, at its own expense, to execute, acknowledge, deliver
and cause to be duly filed all such further instruments and documents and take
all such actions as Agent may from time to time request to better assure,
preserve, protect and perfect the security interest of Agent in the New
Collateral and the rights and remedies of Agent hereunder.

     


    
      
        
          EXHIBIT F
- 

        

         


      

      
         


        
          

        

      

      
         


      

    


    6.           Possession of New
Collateral.  While this Agreement is in effect, Agent may
retain the rights to possession of the New Collateral, together with any and all
evidence of the New Collateral, such as certificates and
passbooks.  Agent shall use ordinary reasonable care in the physical
preservation and custody of any such evidence of the New Collateral, but shall
have no other obligation to protect the New Collateral or its
value.

     

    7.           Events of
Default.  Each of the following shall constitute an Event of
Default under this Agreement:  (a) an “Event of Default” shall
have occurred under the Credit Agreement or any other Loan Document;
(b) commencement of foreclosure or forfeiture proceedings, whether by
judicial proceeding, self-help, repossession or any other method, by any
creditor of Debtor or by any governmental agency against the New Collateral,
including, without limitation, a garnishment of any of Debtor’s accounts with
[Agent]; or (c) any
involuntary Lien (other than a lien permitted by subsection (e) of Section 7.01
of the Credit Agreement) attaches to any New Collateral.

     

    8.           Remedies;
Set-Off.  If an Event of Default shall occur, or Debtor shall
otherwise default in the full and timely payment or performance any of the
Obligations secured hereby, Agent shall have, and may exercise, any or all the
rights and remedies of a secured creditor under the provisions of the UCC as in effect in the State of Washington at law,
in equity, or otherwise.  Agent shall have all the rights of a secured
party under the UCC, even if, for example, the Account is not otherwise subject
to the UCC concerning security interests, and the parties to this Agreement
agree that the provisions of the UCC giving rights to a secured party shall
nonetheless be a part of this Agreement.  Without limited the
generality of the foregoing, Debtor agrees that Agent may, subject to the
requirements of Laws including, without limitation, those affecting the offering
and sale of securities, sell, resell, assign, transfer, or otherwise dispose of
any or all of the Other Cash Collateral set forth on Schedule
2(b).  Debtor expressly authorizes Agent, at any time and from
time to time, without prior notice to Debtor, any such notice being waived by
Debtor to the fullest extent permitted by law, to set-off and apply any and all
deposits (including, without limitation, the Account) at any time held by Agent
against the Obligations, irrespective of whether or not Agent shall have made
demand therefor.

     

    9.           Release of New
Collateral.  Upon the payment in full in cash of all the
Obligations and termination of this Agreement, the Credit Agreement, and each
other Loan Document, Agent shall, upon request of Debtor, promptly release the
Account from the lien, pledge and security interest created under this
Agreement.  Release of such lien, pledge and security interest shall
also be subject to the Collateral release and substitution provisions in Section
6.15 of the Credit Agreement.

     


    
      
        
          EXHIBIT F
- 

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXECUTED
AND DELIVERED by the duly authorized officers of the parties as of the date
first above written.

     

    DEBTOR:

     

    ALASKA
AIRLINES, INC.

     

    By:                                                                           

         Its:


    
      
        
          EXHIBIT F
- 

        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
2(b)

    to

    Cash
Pledge Agreement

    


    Other Cash
Collateral

    


    [None]

    


    


    



    
      
        
          EXHIBIT F
-