**Exhibit 10.5**

 

 

**[CONFIDENTIAL TREATMENT REQUESTED.  CONFIDENTIAL PORTIONS OF THIS DOCUMENTHAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION]**

 

**AIRLINE SERVICES AGREEMENT**

 

**by and between**

 

**MESABA AVIATION, INC.**

 

**and**

 

**NORTHWEST AIRLINES, INC.**

 

**Dated as of August 29, 2005**

 

 

*** Denotes portions omitted pursuant to a request for confidentiality under Rule 24b-2 of the Securities Exchange Act of 1934. A copy of this agreement with the omitted information intact has been filed separately with the Securities and Exchange Commission

 

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**TABLE OF CONTENTS**

 
| AIRLINE SERVICES AGREEMENT |                                                      |
|----------------------------|-----------------------------------------------------------|
|                       |                                                      |   |
| ARTICLE I             | DEFINITIONS                                               |   |
|                       |                                                      |   |
| Section 1.01          | Definitions                                               |   |
|                       |                                                      |   |
| ARTICLE II            | PROVISION OF REGIONAL AIRLINE SERVICES                    |   |
|                       |                                                      |   |
| Section 2.01          | Operation of Scheduled Flights                            |   |
| Section 2.02          | Use of Designator, NW Identification and  Related Matters |   |
| Section 2.03          | Use of Other Designators                                  |   |
| Section 2.04          | Personnel and Dispatch Control                            |   |
| Section 2.05          | Inventory Management                                      |   |
| Section 2.06          | Passenger Fares                                           |   |
| Section 2.07          | DOT Certification                                         |   |
| Section 2.08          | Compliance with Governmental Regulations                  |   |
| Section 2.09          | Quality of Service                                        |   |
| Section 2.10          | Service Standards                                         |   |
| Section 2.11          | Service Recovery                                          |   |
| Section 2.12          | Annual Operating Plan                                     |   |
| Section 2.13          | Inflight Food, Beverages and Supplies                     |   |
| Section 2.14          | Exclusivity Arrangements                                  |   |
|                       |                                                      |   |
| ARTICLE III           | EQUIPMENT                                                 |   |
|                       |                                                      |   |
| Section 3.01          | Use of the Equipment                                      |   |
| Section 3.02          | Fleet Size and Related Matters                            |   |
| Section 3.03          | Lease of the Equipment                                    |   |
| Section 3.04          | Terms of the CRJ Leases                                   |   |
| Section 3.05          | Manufacturer Benefits Agreement                           |   |
| Section 3.06          | Equipment Maintenance, Servicing and  Cleaning            |   |
| Section 3.07          | CRJ-200/440 Aircraft Maintenance Agreements               |   |
| Section 3.08          | CRJ-200/440 FAA Airworthiness Directives                  |   |
| Section 3.09          | CRJ-200/440 Aircraft and Engine/APU  Configuration        |   |
| Section 3.10          | Third Party Guarantees and Warranties                     |   |
| Section 3.11          | Related Transfer Arrangements                             |   |
| Section 3.12          | Equipment Financing Coordination                          |   |
| Section 3.13          | Spare Parts Inventory; Application of  Credits            |   |
|                       |                                                      |   |
| ARTICLE IV            | ANCILLARY ARRANGEMENTS                                    |   |

 

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| Section 4.01 | Coordination with Mesaba                                                                          |   |
|-------------------|---------------------------------------------------------------------------------------------------|--------|
| Section 4.02 | Ground Handling and Dangerous Goods  Handling; Technological Improvements; Weather-event Recovery |   |
| Section 4.03 | Facilities                                                                                        |   |
| Section 4.04 | Data Communications                                                                               |   |
| Section 4.05 | Security                                                                                          |   |
| Section 4.06 | Reservation Services                                                                              |   |
| Section 4.07 | Ticketing Services and Ticketing Procedures                                                       |   |
| Section 4.08 | Baggage Handling Procedures                                                                       |   |
| Section 4.09 | Air Cargo Handling Services                                                                       |   |
| Section 4.10 | Use of COMAT                                                                                      |   |
| Section 4.11 | Slots and Route Authorities                                                                       |   |
| Section 4.12 | Emergency Response and Family Assistance                                                          |   |
| Section 4.13 | Technology Improvements                                                                           |   |
|              |                                                                                              |   |
| ARTICLE V    | REVENUES, PAYMENTS AND SETOFF                                                                     |   |
|              |                                                                                              |   |
| Section 5.01 | Revenues                                                                                          |   |
| Section 5.02 | Payments to Mesaba                                                                                |   |
| Section 5.03 | Billing                                                                                           |   |
| Section 5.04 | Credit Card Chargebacks                                                                           |   |
| Section 5.05 | Returned Checks                                                                                   |   |
|              |                                                                                              |   |
| ARTICLE VI   | REPORTING OBLIGATIONS, AUDITING,  INSPECTIONS AND CONFIDENTIALITY/PUBLICITY                       |   |
|              |                                                                                              |   |
| Section 6.01 | Reporting Obligations                                                                             |   |
| Section 6.02 | Audits                                                                                            |   |
| Section 6.03 | Inspections                                                                                       |   |
| Section 6.04 | Confidentiality/Publicity                                                                         |   |
|              |                                                                                              |   |
| ARTICLE VII  | NORTHWEST IDENTIFICATION                                                                          |   |
|              |                                                                                              |   |
| Section 7.01 | Identification License                                                                            |   |
| Section 7.02 | Designator License                                                                                |   |
| Section 7.03 | New Identifications                                                                               |   |
| Section 7.04 | Use of Identification                                                                             |   |
| Section 7.05 | Quality Control                                                                                   |   |
| Section 7.06 | Reservation of Rights                                                                             |   |
| Section 7.07 | Ownership                                                                                         |   |
| Section 7.08 | Termination                                                                                       |   |
| Section 7.09 | Bankruptcy                                                                                        |   |
|              |                                                                                              |   |
| ARTICLE VIII | TAXES AND FEES                                                                                    |   |
|              |                                                                                              |   |
| Section 8.01 | Taxes and Fees                                                                                    |   |
| Section 8.02 | Ticket Taxes and Fees                                                                             |   |
| Section 8.03 | Property Tax, Fuel Tax, and Sales and Use  Tax Compliance.                                        |   |

 

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| Section 8.04  | Refunds of Tax.                                                     |   |
|--------------------|---------------------------------------------------------------------|--------|
|               |                                                                |   |
| ARTICLE IX    | LIABILITY, INDEMNIFICATION AND INSURANCE                            |   |
|               |                                                                |   |
| Section 9.01  | Independent Contractor                                              |   |
| Section 9.02  | Indemnification                                                     |   |
| Section 9.03  | Insurance                                                           |   |
|               |                                                                |   |
| ARTICLE X     | TERM AND TERMINATION                                                |   |
|               |                                                                |   |
| Section 10.01 | Term                                                                |   |
| Section 10.02 | Termination by Either Party                                         |   |
| Section 10.03 | Termination by Northwest                                            |   |
|               |                                                                |   |
| ARTICLE XI    | MISCELLANEOUS                                                       |   |
|               |                                                                |   |
| Section 11.01 | Limitation on Performance                                           |   |
| Section 11.02 | Mutual Cooperation                                                  |   |
| Section 11.03 | Representations and Warranties                                      |   |
| Section 11.04 | Assignment                                                          |   |
| Section 11.05 | Governing Law                                                       |   |
| Section 11.06 | Interline and Other Agreements                                      |   |
| Section 11.07 | Notices                                                             |   |
| Section 11.08 | Parties                                                             |   |
| Section 11.09 | Counterparts                                                        |   |
| Section 11.10 | Severability                                                        |   |
| Section 11.11 | Captions, Section Headings and Table  of Contents              |   |
| Section 11.12 | Dispute Resolution; Availability of  Equitable Remedies; Procedures |   |
| Section 11.13 | Exhibits                                                            |   |
| Section 11.14 | Integration and Entire Agreement                                    |   |
| Section 11.15 | Relationship of Parties                                             |   |
| Section 11.16 | Termination of Prior Agreements                                     |   |

 

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**EXHIBITS**

 
| Exhibit A-1 | CRJ-200/440 Aircraft Lease Form |   |
|------------------|---------------------------------|--------|
| Exhibit A-2 | CRJ Spare Engine Lease Form     |   |
| Exhibit B   | CRJ-200/440 Delivery Schedule   |   |
| Exhibit C   | ARJ Payment Terms               |   |
| Exhibit D   | Saab Payment Terms              |   |
| Exhibit E   | CRJ Payment Terms               |   |
| Exhibit F   | Pass Travel Privileges          |   |
| Exhibit G   | Northwest Service Cities        |   |
| Exhibit H   | Facilities Use Agreement        |   |
| Exhibit I   | Cancellation Codes              |   |

 

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**AIRLINE SERVICES AGREEMENT**

 

**THISAIRLINE SERVICES AGREEMENT** (the “Agreement”) is dated asof the 29th day of August, 2005 by and between MESABA AVIATION, INC., aMinnesota corporation (“Mesaba”), and NORTHWEST AIRLINES, INC., a Minnesotacorporation (“Northwest”).

 

**WITNESSETH:**

 

**WHEREAS**,Mesaba and Northwest are parties to (i) a Regional Jet Services Agreement,dated October 25, 1996, as amended (the “RJ Agreement”), and (ii) anAirline Services Agreement, dated July 1, 1997, as amended (the “SaabAgreement”), and Mesaba and Northwest desire to replace the RJ Agreement andthe Saab Agreement with this Agreement;

 

**WHEREAS**, Mesaba, Northwest and MAIR Holdings, Inc.executed a Term Sheet Proposal for New Omnibus Airline Services Agreement datedApril 20, 2005 (the “Term Sheet Proposal”), pursuant to which, among otherthings, Mesaba agreed to fly additional regional jet aircraft for Northwest;

 

**WHEREAS,**Mesaba and Northwest desire to make certain arrangements between them which willenable Mesaba to continue to provide Northwest with turboprop airtransportation services and to provide Northwest with additional regional jetair transportation services;

 

**WHEREAS,**Mesaba and Northwest are each willing to perform in the manner and upon theconditions and terms hereinafter set forth;

 

**NOW,THEREFORE,** in consideration of the premises and othergood and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, Northwest and Mesaba do hereby agree as follows:

 

**ARTICLE I    DEFINITIONS**

 

**Section 1.01     Definitions.  For all purposes of this Agreement, exceptas otherwise expressly provided or unless the context otherwise requires:**

 

(1)                                  theterms as defined in this Article have the meanings assigned to them in thisArticle and include the plural as well as the singular;

 

(2)                                  allaccounting terms not otherwise defined herein have the meanings assigned tothem in accordance with generally accepted accounting principles; and

 

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(3)                                  thewords “herein,” “hereof” and “hereunder” and other words of similar importrefer to this Agreement as a whole and not to any particular Article orother subdivision; and

 

(4)                                  ExhibitsC, D and E each include defined terms that have meanings assigned to them insuch Exhibits.

 

**“ACARS”**means the Aircraft Communications Addressing and Reporting System whichprovides datalink communications between the Aircraft and Mesaba with respectto operational matters.

 

**“Affiliate”**means, as applied to a Person, any other Person directly or indirectlycontrolling, controlled by, or under common control with, that Person.  For purposes of this definition “control”(including, with correlative meanings, the terms “controlling”, “controlled by”and “under common control with”), as applied to any Person, means thepossession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of that Person, whether through theownership of voting securities, by contract or otherwise.

 

**“AirCargo”** means air freight, United States mail andsmall package services appropriate for the Aircraft.

 

**“AirCargo Handling Services”** means the Air Cargohandling services to be performed pursuant to Section 4.09.

 

**“Aircraft”**means, the Avro Regional Jet Aircraft, the CRJ-200/440 Aircraft and the Saab340 Aircraft.

 

**“AircraftRental Expense”** means the Basic Rent charged inthe Leases between Northwest and Mesaba with respect to the CRJ-200/440Aircraft.

 

**“AirlinkCarrier”** means an airline operating regional jetand/or turboprop air transportation services as a Northwest Airlink carrierpursuant to an airline services agreement between such airline and Northwest.

 

**“AirportLanding Fees”** shall include all landing fees, airport user fees and assessments to theextent such fees and assessments are attributable to or result from RegionalAirline Services.

 

**“AnnualOperating Plan”** shall have the meaning ascribed tosuch term in Section 2.12.

 

**“AvroRegional Jet Aircraft”**means the thirty-five (35)Avro Regional Jet aircraft in Mesaba’s fleet as of the Effective Date.

 

**“BaggageHandling Services”** means the baggage handlingservices to be performed pursuant to Section 4.08.

 

**“BasicRent”** shall have the meaning ascribed to such termin the Leases.

 

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**“BeneficialOwnership”** has the meaning given such term asdefined as of the date hereof in Rules 13d-3 and 13d-5 under theSecurities Exchange Act of 1934, as amended.

 

**“BlockHour”** means the period of time (in minutes)beginning when an Aircraft first moves from the ramp blocks in connection witha Scheduled Flight, a Non-Scheduled Flight or a Charter Flight and ending whenthe Aircraft next comes to a stop at the ramp blocks at any station or otherpoint of termination as recorded by ACARS or another mutually agreed system,divided by sixty (60).

 

**“CapitalStock”** ofany Person means any and all shares, interests, rights to purchase, options,warrants, participation or other equivalents of or interests in (howeverdesignated) the equity of such Person, including any preferred stock.

 

**“CharterFlights”**means revenue passenger flights using the Aircraft (other than ScheduledFlights).

 

**“COMAT”**means company material, including but not limited to priority aircraftmaintenance parts.

 

**“CRJ-200/440Aircraft”**means(i) up to *** CRJ-200 or CRJ-440 Canadair Regional Jet aircraft when andas such aircraft are added to Mesaba’s fleet pursuant to Section 3.02, and(ii) up to *** additional CRJ-200 or CRJ-440 Canadair Regional Jetaircraft when and if such aircraft are added to Mesaba’s fleet pursuant to Section 3.02.

 

**“CRJSpare Engine Rental Expense”**means the Basic Rentcharged in the Leases between Northwest and Mesaba for the CRJ Spare Engines.

 

**“CRJSpare Engines”** means the General Electric CF34-3B1spare engines to be added to Mesaba’s fleet pursuant to Section 3.02, whenand as such spare engines are added to Mesaba’s fleet pursuant to Section 3.02.  Any CRJ Spare Engine removed from Mesaba’sfleet ceases to be a “CRJ Spare Engine” hereunder upon the date of suchremoval.

 

**“DangerousGoods”**shallhave the meaning ascribed to such term in Section 1.0 of the DangerousGoods Regulations of the International Air Transport Association (“IATA”), assuch term may be amended from time to time by IATA.

 

**“DataCommunication Equipment”** shall have the meaningascribed to such term in Section 4.04.

 

**“Default”**means the occurrence of an event set forth in Section 10.02 or Section 10.03,and the expiration of any cure period provided therein without cure or otherremedial action having occurred, permitting termination of this Agreement.

 

**“Designator”**means “NW” or such other designator code selected by Northwest from time totime in its sole discretion to identify Northwest’s own flights.

 

**“DirectCosts”** means Northwest’s or Mesaba’s, asapplicable, actual cost for goods and services without any surcharge foradministrative or general overhead expenses.

 

3

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**“DOT”**means the United States Department of Transportation or any successor to itsfunctions with respect to the regulation of air transportation.

 

**“DOTCertification”** means any and all certificationsand approvals by the DOT, the FAA and other regulatory agencies required forMesaba to operate the Aircraft and to perform pursuant to the terms of thisAgreement and all Governmental Regulations.

 

**“EffectiveDate”** means the date specified in Section 10.01of this Agreement.

 

**“Equipment”**means the Aircraft and the CRJ Spare Engines.

 

**“FAA”**means the Federal Aviation Administration or any successor organization.

 

**“FacilitiesLeases”** shall have the meaning ascribed to suchterm in Section 4.03(g).

 

**“GovernmentalRegulations”** means the rules and regulationsprescribed by an airport authority at a Service City or by any local, state orfederal unit of government having authority and jurisdiction to regulate thebusiness and affairs of an air carrier having DOT Certification, includingwithout limitation, the DOT and the FAA.

 

**“GroundHandling Functions”** shall have the meaningascribed to such term in Section 4.02.

 

**“HubCities”** means Memphis, Tennessee (“MEM”),Minneapolis/St. Paul, Minnesota (“MSP”), Detroit, Michigan (“DTW”) and anyother city in the United States where Northwest, together with its subsidiariesand Airlink Carriers operating under Northwest’s Designator, operate an averageof more than fifty (50) departuresper day during any Northwest Schedule Period.

 

**“Identification”**means a trade name, trademark, service mark, graphic, logo, distinctive colorscheme or other trade dress, domain name and/or other identification orindication of source or origin.

 

**“Lease”**means (i) the leases, subleases and/or sub-subleases entered into withrespect to the Avro Regional Jet Aircraft, (ii) the leases, subleasesand/or sub-subleases entered into or to be entered into pursuant to Section 3.03in respect of the CRJ-200/440 Aircraft substantially in the form of Exhibit A-1,  (iii) the leases, subleases and/orsub-subleases entered into or to be entered into pursuant to Section 3.03in respect of CRJ Spare Engines substantially in the form of Exhibit A-2,and (iv) the leases, subleases and/or sub-subleases with respect to theSaab 340 Aircraft.

 

**“MaintenanceFacilities”** shall have the meaning ascribed tosuch term in Section 4.03(c).

 

**“MaintenanceProgram”** shall have the meaning ascribed to suchterm in the Leases.

 

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**“MAIRHoldings, Inc.”** means Mesaba’s parent companyMAIR Holdings, Inc., a Minnesota corporation, and any successor.

 

**“MarginPayment”** shall have the meaning ascribed to suchterm in Attachment A of Exhibit E.

 

**“MesabaChange of Control”** means**:**

 

### (a)                                  Theacquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”) (a “Person”))(other than Northwest) of Beneficial Ownership of 20% or more of either (i) thethen outstanding shares of Capital Stock of MAIR Holdings, Inc. (the “OutstandingHoldings Capital Stock”) or (ii) the combined Voting Power of the thenoutstanding voting securities of MAIR Holdings, Inc. entitled to votegenerally in the election of directors (the “Outstanding Holdings VotingSecurities”); provided, however, the term “Person” as used in this definitionshall not include Northwest, any Northwest assignee or transferee, or Carl R.Pohlad and his family or any Affiliate of Carl R. Pohlad which beneficiallyowns directly or indirectly shares of MAIR Holdings, Inc. common stock asof the date hereof;

###  

### (b)                                 Approvalby the Board of Directors of Mesaba or MAIR Holdings, Inc. of areorganization, merger or consolidation (a “Business Combination”), in eachcase, unless, following such Business Combination, all or substantially all ofthe individuals and entities who were the beneficial owners, respectively, ofthe Outstanding Holdings Capital Stock and Outstanding Holdings VotingSecurities immediately prior to such Business Combination beneficially own,directly or indirectly, more than 75% of, respectively, the then outstandingshares of Capital Stock and the combined Voting Power of the then outstandingvoting securities entitled to vote generally in the election of directors, asthe case may be, of the corporation resulting from such Business Combination(including, without limitation, a corporation which as a result of suchtransaction owns MAIR Holdings, Inc. or Mesaba through one or moresubsidiaries) in substantially the same proportions as their ownershipimmediately prior to such Business Combination of the Outstanding Holdings CapitalStock and Outstanding Holdings Voting Securities, as the case may be; or

###  

### (c)                                  Approvalby the Board of Directors of Mesaba or MAIR Holdings, Inc. of (i) acomplete liquidation or dissolution, or (ii) the sale or other dispositionof all or substantially all of the assets of Mesaba or MAIR Holdings, Inc.,other than to a corporation with respect to which following such sale or otherdisposition, more than 75% of, respectively, the then outstanding shares of CapitalStock of such corporation and the combined Voting Power of the then outstandingvoting securities of such corporation entitled to vote generally in theelection of directors is then beneficially owned, directly or indirectly, byall or substantially all of the individuals and entities who were thebeneficial owners, respectively, of the Outstanding Holdings Capital Stock andOutstanding Holdings Voting Securities immediately prior to such sale or otherdisposition in substantially the same proportion as their ownership immediatelyprior to such sale or other disposition of the Outstanding Holdings CapitalStock and Outstanding Holdings Voting Securities, as the case may be.

 

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**“MesabaIdentification”** means any Identification selectedby Mesaba from time to time for use in connection with the business of Mesaba,including without limitation “Mesaba,” “Mesaba Airlines,” “XJ” or any similarname.

 

**“MesabaService Cities”** means those Service Cities atwhich Mesaba operates Saab 340 Aircraft and which are not Northwest ServiceCities or Hub Cities (as determined by Northwest and Mesaba from time to time).

 

**“NorthwestSchedule Period”** means the planned durationof various time periods for which Northwest’s flight schedule is for salein computer reservation systems.

 

**“NorthwestService Cities”** means those Service Cities atwhich Mesaba operates Regional Airline Services and Northwest’s employees orcontract agents perform the Ground Handling Functions and which are listed in Exhibit Ghereto (as amended by Northwest in its sole discretion from time to time).

 

**“NorthwestTickets”** shall have the meaning ascribed to suchterm in Section 4.07(a).

 

**“NWIdentification”** means any Identificationspecifically selected by Northwest from time to time in its sole discretion foruse by Mesaba in connection with the Regional Airline Services (includingwithout limitation “Northwest Airlink” or any similar name).

 

**“PerformancePeriod”**meanseach six (6) month period ending on a June 30 or December 31occurring during the Term of this Agreement.

 

**“Person”**means an individual, partnership, corporation, business trust, joint stockcompany, limited liability company, unincorporated association, joint ventureor other entity of whatever nature.

 

**“PPI”**means Producer Price Index for Commodities, Item Finished Goods – notseasonally adjusted, published by the United States Department of Labor, Bureauof Labor Statistics, and, if no longer published, any comparable successorindex agreed to by both Northwest and Mesaba.

 

**“RegionalAirline Services”** means the provisioning by Mesabato Northwest of Scheduled Flights and Charter Flights using the Aircraft inaccordance with this Agreement.

 

**“RevenuePassenger”** means a revenue passenger flown on aScheduled Flight or a Charter Flight.

 

**“Saab340 Aircraft”** means the sixty-three (63) turbopropaircraft leased by Mesaba as of the Effective Date (forty-nine (49) Saab 340B+turboprop aircraft leased from Northwest, eleven (11) Saab 340B turbopropaircraft leased from Pinnacle Airlines, Inc. and three (3) Saab 340Aturboprop aircraft leased by Mesaba directly from third parties).

 

**“ScheduledFlights”**meansrevenue passenger flights (other than Charter Flights) using the Aircraftwhich, regardless of frequency, are held out to the public and

 

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published in the customary and applicable schedule distributionsystems, such as the Official Airline Guide (“OAG”), or published by Northwestin its own system timetables.  Inaddition, Scheduled Flights shall include all regularly scheduled flights whichare not revenue passenger flights as determined by Northwest in its solediscretion.

 

**“ServiceCities”** means those cities identified from time totime by Northwest to which Mesaba shall provide Regional Airline Services.

 

**“SupportAgreements”** shall have the meaning ascribed tosuch term in Section 3.11.

 

**“Term”** means the term of this Agreement asdetermined by the length of time between the Effective Date and TerminationDate as set forth in Article X herein (unless otherwise terminated earlierpursuant to the terms of this Agreement).

 

**“TerminationDate”** means the date on which this Agreementterminates pursuant to Article X.

 

**“TicketTaxes and Fees”**means any taxes pursuant toSections 4261 or 4271 of the U.S. Internal Revenue Code of 1986, as amended orsucceeded, on any amounts paid by customers for transportation of persons orpackages by air, and any passenger facility charges, airport improvement fees,security fees or charges, stamp taxes, excise taxes, value-added taxes (in thenature of a sales or use tax), gross receipts taxes (in the nature of a salesor use tax), U.S. APHIS user fees, U.S. Customs user fees, U.S. Immigrationuser fees, and any other taxes and/or user fees imposed by any domestic orforeign governmental entity, airport or taxing authority on a per-passengerbasis on any amounts paid by customers for transportation of persons orpackages by air.

 

**“TicketingServices”** means the ticketing services to beperformed pursuant to Section 4.07.

 

**“TrafficReferral”** shall have the meaning ascribed to suchterm in Section 4.07(e).

 

**“TransferManifest”** shall have the meaning ascribed to suchterm in Section 4.09(a).

 

**“TSA”**means theUnited States Transportation Security Administration or any successor governmentalorganization.

 

**“VotingPower”** means, as of the date of determination, thevoting power in the general election of directors, managers or trustees, asapplicable.

 

7

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**ARTICLE II    PROVISION OF REGIONAL AIRLINE SERVICES**

 

**Section 2.01     Operationof Scheduled Flights**.  Subject to the terms and conditions of thisAgreement, Mesaba shall use the Aircraft to operate Scheduled Flights andCharter Flights as shall be designated by Northwest from time to time inNorthwest’s sole discretion, provided that (a) Northwest will not schedule theCRJ-200/440 Aircraft operated by Mesaba pursuant to this Agreement to operateScheduled Flights to/from a Hub City other than Minneapolis/St. Paul, Minnesotauntil after the date on which Mesaba is operating at least *** such Aircraft pursuant to thisAgreement, and (b) if Northwest schedules CRJ-200/440 Aircraft operated byMesaba pursuant to this Agreement to operate Scheduled Flights to/from a HubCity other than Minneapolis/St. Paul, Minnesota pursuant to this Section 2.01(a),Northwest will nonetheless continue to schedule at least *** such Aircraft to operate ScheduledFlights to/from Minneapolis/St. Paul, Minnesota.  All schedules and aircraft routing for suchScheduled Flights and all utilization of the Aircraft shall be determined byNorthwest from time to time, in its sole discretion, subject to the reasonableoperating constraints of Mesaba taking into consideration airport gateconstraints, Aircraft maintenance, crew training and Aircraft rotationrequirements.  Scheduled block timesshall be set in accordance with Northwest’s standards unless otherwise mutuallyagreed by Northwest and Mesaba.  Minimumturn times shall be mutually agreed to by Mesaba and Northwest and set inconformity with standard industry practices and Aircraft type.

 

**Section 2.02     Useof Designator, NW Identification and Related Matters.**  Subject to the applicable provisions of Article VIIbelow, Mesaba shall operate the Scheduled Flights and Charter Flights providedunder this Agreement using the Designator. The Scheduled Flights and Charter Flights shall be identified by Mesabasolely with flight numbers assigned by Northwest.  Subject to the applicable provisions of Article VIIbelow, Mesaba shall use only the NW Identification for the Aircraft (except asotherwise required by Governmental Regulations), and for all airport terminalfacilities (such as gates, passenger waiting areas and jetways), signage,equipment, uniforms and advertising, promotional and business materials in anyform or media that are used in connection with the Regional Airline Services;provided, however, all Mesaba uniforms shall be determined by Mesaba, providedthat such uniforms shall at all times be consistent with Mesaba’s existinguniform standards and subject to the approval of Northwest (including approvalof any use of the NW Identification thereon) which shall not be unreasonablywithheld.  Mesaba shall not use theMesaba Identification for the Aircraft (except as required by GovernmentalRegulation), airport terminal facilities (such as gates, passenger waitingareas and jetways), signage or advertising, promotional or business materialsin any form or media that are used in connection with the Regional AirlineServices; provided, however, nothing in the foregoing prohibition shallpreclude Mesaba from using the Mesaba Identification for general corporatepurposes, investor relations, responding to customer inquiries, on crew wingsand employee service pins, and for purposes that are not covered by theforegoing prohibition.

 

**Section 2.03     Useof Other Designators**.  Mesaba shall not use on the Aircraft theairline designator, Identification, or any other identifying feature of aforeign or United States airline other than Northwest (except as otherwiserequired by Governmental Regulations), without the express prior writtenconsent of Northwest, or unless Northwest directs Mesaba to

 

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use such other designator, Identification, or identifying feature.  Notwithstanding the foregoing, Northwestacknowledges the existence of the following current letter agreements betweenNorthwest and Mesaba:  Delta LetterNumber 1 side letter agreement dated June 19, 2003; Delta Letter Number 2side letter agreement dated June 19, 2003; Continental Letter Number 1side letter agreement dated January 4, 1999; and Continental Letter Number2 side letter agreement dated January 4, 1999, all pursuant to whichNorthwest has provided its written consent to Mesaba’s use of Delta’s and/orContinental’s designator code on specified Mesaba flights pursuant to separateImplementation Agreements between Mesaba and such airlines.

 

**Section 2.04     Personneland Dispatch Control**.  Mesaba shall be responsible for providing allcrews (flight and cabin) to operate the Scheduled Flights and any CharterFlights and for all aspects (personnel and other) of dispatch control,including but not limited to load control.

 

**Section 2.05     InventoryManagement**. Northwest shall have  completecontrol over all inventory management functions for all Scheduled Flights andCharter Flights operated pursuant to this Agreement, including, withoutlimitation, overbooking levels, discount seat levels, and allocation of seatsamong the various fare buckets.   Inperforming Mesaba’s inventory management, Northwest shall conform in allmaterial respects to its own procedures and standards, taking into account thetype of Aircraft operated by Mesaba.

 

**Section 2.06     PassengerFares**.  Northwestshall be the sole authority for filing tariffs for Scheduled Flights operatedpursuant to this Agreement, and Northwest shall establish all passenger faresfor Scheduled Flights and Charter Flights operated pursuant to thisAgreement.  All charges for filing offares or tariffs for Scheduled Flights operated pursuant to this Agreementshall be paid by Northwest.

 

**Section 2.07     DOTCertification**. Mesaba has and shall maintain DOT Certification and all other permits,licenses, certificates and insurance required by governmental authorities and Article IXhereof to enable Mesaba to perform the services required by this Agreement.

 

**Section 2.08     Compliancewith Governmental Regulations**.  All flight operations, dispatch operationsand all other operations undertaken by Mesaba pursuant to this Agreement shallbe conducted and operated by Mesaba in strict compliance with all GovernmentalRegulations, including, without limitation, those relating to airport security,the use and transportation of hazardous materials, flight crew and mechanicqualifications and licensing requirements, crew training and hours.  All Equipment shall be operated andmaintained by Mesaba in strict compliance with all Governmental Regulations,Mesaba’s own operations manuals and maintenance manuals and procedures, and allapplicable equipment manufacturer’s instructions.  At all times, Mesaba shall operate with thehighest standards of care.

 

**Section 2.09     Qualityof Service**. Northwest policies, procedures, performance standards (including but notlimited to Northwest’s “Customers First” customer service plan) and means ofmeasurement thereof concerning the provision of air passenger and air cargoservices shall be applicable to all services provided by Mesaba under thisAgreement.  Mesaba shall

 

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achieve at least the same quality of airline service provided byNorthwest, subject to limitations imposed by the type of Aircraft used byMesaba, its route network, the availability of equipment and facilities at theService Cities and the performance by Northwest of its obligations under thisAgreement.  Mesaba shall maintainadequate staffing levels to ensure at least the same level of customer serviceand operational efficiency that Northwest achieves; Mesaba shall cooperate withNorthwest in any way necessary or desirable to provide such comparable level ofcustomer service in connection with the operation of Regional Airline Services;and Mesaba shall maintain new hire and recurrent training programs for all jobdescriptions, and such programs shall be reasonably acceptable to Northwest.

 

**Section 2.10     ServiceStandards**.  Withoutlimiting Section 2.09, Mesaba shall achieve the following specific performancestandards.

 

#### (a)                                  ForScheduled Flights operated with CRJ-200/440 Aircraft:

####  

##### (i)                                     MinimumCompletion Factor.  Mesaba shallachieve not less than *** pointsless than the mutually agreed completion factor percentage goal for the currentcalendar year for all Scheduled Flights which are scheduled to be operated byMesaba during each Performance Period. Scheduled Flights which are cancelled at Northwest’s request (asdetermined by Northwest’s System Operations Control (“SOC”) operationsreporting group) and/or due to Northwest controllable events will not beincluded in calculating Mesaba’s completion factor.  The excluded cancellation codes are listed inExhibit I.

#####  

##### (ii)                                  Minimum On-TimeReliability.  Mesaba shall achievenot less than *** points lessthan the mutually agreed arrival within zero minutes factor goal for thecurrent calendar year and not less than ***points less than the mutually agreed departure within zero minutes factor goalfor the current calendar year for all Scheduled Flights which are scheduled tobe operated and are actually completed by Mesaba during each Performance Period(collectively, the “On-Time Reliability Factors”).  All Scheduled Flights actually completed willbe included in this calculation, except for those operated on days whenNorthwest and Mesaba mutually agree that Mesaba’s on-time performance wassignificantly degraded by Northwest’s implementation of its Irregular OperatingProcedures Program.  Upon mutualagreement between Northwest’s Vice President of System Operations Control andMesaba, all Scheduled Flights operated on days with such extraordinary eventswill be excluded from the calculation of Mesaba’s On-Time ReliabilityFactors.  If Northwest and Mesaba areunable to reach agreement on the exclusion of certain days, then all ScheduledFlights completed on such days will be included in the calculation of Mesaba’sOn-Time Reliability Factors.

#####  

##### In conjunction with Mesaba’s arrival within zero minutes (“A0”)performance, Mesaba’s block within zero minutes (“B0”) performance “cap” willequal ***.  If Mesaba’s actual B0 exceedsthe cap, Mesaba’s actual A0 will be *** for every ***.  The cap and *** amountwill be predetermined in the fourth quarter of the prior year based on the mostrecent five-year monthly regression (the “Regression”) for D0, B0 and A0 forAvro Regional Jet Aircraft and CRJ-200/440 Aircraft.

 

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Example:  If the agreed upon goals are as follows:  ***and the agreed upon *** is ***  (based on regression analysis), then:

1.                                       DOPenalty high point is *** (see Exhibit E,section 1.08);

 

2.                                       B0regression analysis to achieve ***is ***; and

 

3.                                       IfB0 is greater than ***, then A0 ***will be *** for each ***.

 

##### Subsequent to a Performance Period, Northwest and Mesaba agree to meetand confer if passenger/luggage holding delays (LXS/LTS) materially differ fromhistorical norms.

#####  

##### (iii)                               Establishment ofGoals.  In the fourth quarter of theeach year, Northwest and Mesaba will mutually agree on the operating goals forthe upcoming year regarding completion factor, arrival within zero minutes anddeparture within zero minutes.  Failureto reach an agreement on the goals will result in the completion factorpercentage goal defaulting to Northwest’s North American completion factorgoal, and the on-time reliability goals defaulting to Northwest’s NorthAmerican arrival within zero minutes and departure within zero minutes goals,as adjusted below.

#####  

##### Mesaba default on-time reliability goals (rounded to half-point): XJ D0 goal = ***

#####  

##### XJ A0 goal = Regression (assuming calculatedD0 and current year B0 goals).

#####  

Northwest andMesaba shall mutually agree on seasonalized goals for each Performance Period.

 

### (b)                                 ForScheduled Flights operated with Avro Regional Jet Aircraft:

###  

##### (i)                                     CompletionFactor.  Mesaba shall achieve notless than a *** percent (***%) completion factor for allScheduled Flights which are scheduled to be operated by Mesaba during eachPerformance Period.  For purposes of thisAgreement, all cancellations due to airport closure and weather minima at theService Cities or the Hub Cities, or Northwest controllable events, will beexcluded from this calculation.

#####  

##### (ii)                                  Minimum On-TimeReliability.  Mesaba shall achieve a *** percent (***%) on-time arrival factor (“On-Time Factor”) for all ScheduledFlights actually completed by Mesaba during each Performance Period.  An arrival will be considered on-time if itarrives not later than *** afterits published, scheduled arrival time. All Scheduled Flights that arrive *** later than their published, scheduled arrival time will not beconsidered on-time, regardless of the reason for the delay.  All Scheduled Flights that are actuallycompleted by Mesaba will be included in this calculation, except for thoseScheduled Flights operated on days when Northwest and Mesaba mutually agreethat Mesaba’s on-time performance was significantly degraded by Northwest’simplementation of an Irregular Operating Procedures Program.  Upon mutual agreement between Northwest’sVice President of System Operations Control and Mesaba, all Scheduled Flightsoperated on days with such extraordinary events will be excluded from

 

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##### the calculation of Mesaba’s On-Time Factor.  If Northwest and Mesaba are unable to reachagreement on the exclusion of certain days, then all Scheduled Flights actuallycompleted by Mesaba on such days will be included in the calculation of Mesaba’sOn-Time Factor.

#####  

### (c)                                  ForScheduled Flights operated with Saab 340 Aircraft:

###  

##### (i)                                     CompletionFactor.  Mesaba shall achieve notless than a *** percent (***%) completion factor for allScheduled Flights which are scheduled to be operated by Mesaba during eachPerformance Period.  ***   

#####  

##### (ii)                                  Minimum On-TimeReliability.  Mesaba shall achieve a *** percent (***%) On-Time Factor for all Scheduled Flights actually completedby Mesaba during each Performance Period. An arrival will be considered on-time if it arrives not later than *** after its published, scheduledarrival time.  All Scheduled Flights thatarrive *** later than theirpublished, scheduled arrival time will not be considered on-time, regardless ofthe reason for the delay.  ***

#####  

##### (iii)                               Mishandled LuggageFactor.  The number of incidences ofmishandled luggage by Mesaba shall not exceed *** enplaned Revenue Passengers during any PerformancePeriod.  The number of incidences ofmishandled luggage shall be determined by Northwest by dividing (i) thetotal number of Mesaba caused claims at Primary Service Cities, ComplementaryService Cities and the Hub Cities during the applicable Performance Period, by (ii) thetotal number of enplaned Revenue Passengers during such Performance Period.

#####  

##### (iv)                              Customer ComplaintsFactor.  The number of customercomplaints received by Northwest in respect of Regional Airline Services shallnot exceed *** enplaned RevenuePassengers during any Performance Period.

#####  

**Section 2.11     ServiceRecovery**.  Mesabashall provide service recovery for passengers affected by service disruptionsinvolving the Saab 340 Aircraft in accordance with Sections 1.01(c) and1.01(d) of Exhibit D hereto and the terms of any separate groundhandling agreement(s) between the parties. With respect to all flights utilizing Avro Regional Jet Aircraft and CRJ-200/440Aircraft and for which Mesaba provides ground handling services for passengersaffected by service disruptions, Mesaba shall provide service recovery inaccordance with Northwest’s standard policies and procedures, but Northwestshall, pursuant to a separate agreement between the parties, reimburse Mesabafor all Direct Costs incurred as a result of providing such service recovery,provided that Mesaba provides Northwest with sufficient detail and supportingdocumentation to allow Northwest to verify the invoiced amount.

 

**Section 2.12     AnnualOperating Plan**. At least 90 days prior to January 1 of each year during the term ofthis Agreement, Mesaba and Northwest shall confer and prepare an operating planfor the succeeding calendar year, which plan shall include (i) Northwest’sforecast with respect to the schedule and routing for all ScheduledFlights for such year, (ii) Northwest’s forecast of the Service Cities towhich Mesaba shall operate Regional Airline Services, (iii) Northwest’sforecast of specific dates for the commencement of service to new ServiceCities, if

 

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any, (iv) Northwest’s forecast of the number of Aircraft to beadded to or removed from Mesaba’s fleet (subject to Section 3.02), and (v) suchother matters as Northwest and Mesaba shall determine (as amended in accordancewith this Section 2.12, the “Annual Operating Plan”).  Northwest and Mesaba shall meet and confer ona quarterly basis (or more frequently if requested by either Northwest or Mesaba)to review the implementation of the Annual Operating Plan and to discuss anychanges to the Annual Operating Plan.  Inthe event Northwest elects to alter the Annual Operating Plan during the courseof a year, Northwest shall use its reasonable best efforts to provide at leastsixty (60) days prior notice to Mesaba. Notwithstanding the foregoing provisions of Section 2.12, Northwestshall promptly notify Mesaba of any determination by Northwest to increase ordecrease Mesaba’s fleet size, and, except as provided in Section 3.02 (a)(iii) below,Northwest shall give Mesaba no less than ninety (90) days prior notice.  Northwest agrees that any substantialincreases in Mesaba’s fleet size pursuant to the preceding sentence are subjectto Mesaba’s reasonable operating constraints.

 

**Section 2.13     Inflight Food, Beverages and Supplies**.

 

(a)                                  CRJAircraft.  For all Scheduled Flightsutilizing CRJ-200/440 Aircraft, Mesaba shall, at its sole cost, providecatering services and beverages for passengers and crews, in accordance withNorthwest’s specifications and directions. To the extent food is provided by Northwest, it shall be at Northwest’ssole cost, and any revenue associated with on-board sales of the food productshall be handled pursuant to Section 5.01.  In the event Mesaba is responsible and incursexpenses associated with the provision of food, the parties agree to revise therates in Exhibit E, Section 1.02, to account for the incremental foodcost incurred by Mesaba.  Mesaba shall besolely responsible for maintaining all licenses necessary for the serving ofinflight food and beverages on Scheduled Flights.  Northwest shall furnish Mesaba, at Northwest’ssole cost, adequate supplies of its customary inflight supplies including, butnot limited to, the Northwest inflight magazine, cups, napkins, pillows,blankets, trash bags, sick sacks, lavatory supplies, creamers, swizzle sticksand sugar in a form similar or identical to that used by Northwest.  Notwithstanding anything to the contrary inthis Agreement, Northwest may, at its option, require Mesaba upon ninety (90)days prior written notice to utilize Northwest or a Northwest-designatedcontract agent to provide catering services, food and beverages for passengersand crews on Scheduled Flights utilizing CRJ-200/440 Aircraft, provided that (i) anymodifications to the provision of catering services, food and beverages thatresult in the addition or removal of costs to Mesaba shall result in anadjustment to the rates in Section 1.02 of Exhibit E, and (ii) theservice standards applicable to any such Northwest-designated contract agentare either reasonably satisfactory to Mesaba or no less stringent than thestandards applicable to Northwest’s own operations.

 

(b)                                 AvroRegional Jet Aircraft.  For all ScheduledFlights utilizing Avro Regional Jet Aircraft, Northwest shall provide cateringservices, food and beverages for passengers and crews, all at Northwest’s solecost.  Northwest shall furnish Mesaba, atNorthwest’s sole cost, adequate supplies of its customary inflight suppliesincluding, but not limited to, the Northwest inflight magazine, cups, napkins,pillows, blankets, trash bags, sick sacks, lavatory supplies, creamers, swizzlesticks and sugar in a form similar or identical to that used by Northwest.  Any modifications to the provision ofcatering services, food and beverages that result in additional costs to Mesabashall be reimbursed by Northwest.

 

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(c)                                  Saab340 Aircraft.  For all Scheduled Flightsutilizing Saab 340 Aircraft, Mesaba shall, at its sole cost, provide beveragesfor passengers and crews, in accordance with Northwest’s specifications anddirections.  Northwest shall furnishMesaba, at Northwest’s sole cost, adequate supplies of its customary inflightsupplies including, but not limited to, the Northwest inflight magazine, cups,napkins, pillows, blankets, trash bags, sick sacks, lavatory supplies,creamers, swizzle sticks and sugar in a form similar or identical to that usedby Northwest.  Notwithstanding anythingto the contrary in this Agreement, Northwest may, at its option, require Mesabaupon ninety (90) days prior written notice to utilize Northwest or aNorthwest-designated contract agent to provide beverages for passengers andcrews on Scheduled Flights utilizing Saab 340 Aircraft, provided that (i) anymodifications to the provision of catering services, food and beverages thatresult in additional costs to Mesaba shall be reimbursed by Northwest, and (ii) theservice standards applicable to any such Northwest-designated contract agentare either reasonably satisfactory to Mesaba or no less stringent than thestandards applicable to Northwest’s own operations. 

 

**Section 2.14     ExclusivityArrangements**. During the term of this Agreement, Mesaba shall not operate any flightsto or from the Hub Cities using its own airline code or the airline code, logo,or any other identifying feature of a foreign or United States airline (otherthan Northwest) without the express prior written consent of Northwest.

 

Nothing in this Agreement shall preclude Northwest from (i) enteringinto code share, alliance or other commercial cooperation arrangements with anyother airline, or (ii) subject to Northwest’s obligations pursuant to Section 3.02below, entering into similar or other arrangements with other carriers for theprovisioning of regional airline services using Avro Regional Jet Aircraft, CRJ-200/440Aircraft or any other aircraft to or from the Hub Cities, the same ServiceCities or elsewhere; subject to the following condition:  Mesaba shall have the exclusive right to operateScheduled Flights which (i) use the Identification and Designator, (ii) originateor terminate at Minneapolis/St. Paul, Minnesota (“MSP”), Detroit, Michigan (“DTW”)and Memphis, Tennessee (“MEM”) and (iii) use turboprop aircraft with fifty(50) or fewer seats, provided that with respect to Scheduled Flights which (a) usethe Identification and Designator, (b) originate or terminate at MSP, DTWor MEM and (c) use turboprop aircraft with nineteen (19) or fewer seats,Northwest may solicit bids from other airlines for operation of such ScheduledFlights and Northwest may enter into an agreement with another airline tooperate such Scheduled Flights unless, after notification by Northwest of theterms of the bid Northwest intends to accept, Mesaba submits an economicallyequivalent bid to operate such Scheduled Flights and is willing to enter intoan agreement with Northwest to operate such Scheduled Flights on such terms.  Northwest further acknowledges and agreesthat, with respect to Scheduled Flights operated with turboprop aircraft withmore than fifty (50) seats, Northwest will give Mesaba the right to submit abid for operation of such Scheduled Flights.

 

**ARTICLE III    EQUIPMENT**

 

**Section 3.01     Useof the Equipment**. Mesaba agrees (a) that the Equipment shall be used only to provideand/or support the Regional Airline Services contemplated by this

 

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Agreement, (b) that the Equipment shall not be used by Mesaba forany other purpose without the prior written consent of Northwest, and (c) thatMesaba shall not acquire, lease or operate any aircraft other than the Aircraft,and with respect to the engines utilized by the CRJ-200/440 Aircraft, Mesabashall not acquire, lease or operate any spare engines other than the CRJ SpareEngines.  Mesaba shall use its bestefforts to achieve Category II status for CRJ-200/440 Aircraft and CategoryIIIa status for Avro Regional Jet Aircraft as soon as reasonably practicable.

 

**Section 3.02     Fleet Size and Related Matters**.

 

### (a)                                  Determinationof Fleet Size.  As of the EffectiveDate, Mesaba’s fleet consisted of thirty-five (35) Avro Regional Jet Aircraft andsixty-three (63) Saab 340 Aircraft.

###  

##### (i)                                     AdditionalAircraft

#####  

##### (aa)            CRJ Aircraft.

#####  

(1) Northwest and Mesaba agree that (A) subjectto Bombardier (x) continuing to provide or cause to be provided to Northwestfinancing for the Equipment on a basis no less favorable to Northwest than the termsof such financing in effect as of the Effective Date, and (y) deliveringCanadair Regional Jet Aircraft to Northwest as scheduled as of the EffectiveDate, fifteen (15) CRJ-200/440 Aircraft shall be added to Mesaba’s fleet on orbefore March 31, 2006 and in accordance with the delivery schedule setforth in Exhibit B, one (1) CRJ Spare Engine shall be added to Mesaba’sfleet on or before January 31, 2006, and if the parties mutually agreethat it is necessary, a second CRJ Spare Engine shall be added to Mesaba’sfleet on a mutually agreed date, and Mesaba shall accept such CRJ-200/440Aircraft and CRJ Spare Engines into its fleet, (B) after fifteen (15) CRJ-200/440Aircraft and one (1) CRJ Spare Engine are added to Mesaba’s fleet pursuantto Section 3.02(a)(i) (aa)(A), Mesaba shall have the exclusive rightto operate the next twenty (20) new or used CRJ-200/440 Aircraft operated forthe benefit of Northwest, and (C) Northwest shall have the right to causefrom time to time up to an additional ***CRJ-200/440 Aircraft and *** CRJSpare Engines to be added to Mesaba’s fleet, or such number of CRJ SpareEngines as are mutually determined by the parties pursuant to Section 3.02(a)(v).

 

##### (2)  Northwest and Mesaba agree that if Northwest becomes awarethat Bombardier will not meet the financing and aircraft delivery conditionsfor any of the fifteen (15) CRJ-200/440 Aircraft (set forth in Section 3.02(a)(i)(aa)(1)(A) above),(i) Northwest shall use commercially reasonable efforts to ***, and (y) if Mesaba is operatingsuch Aircraft pursuant to this Agreement when this Agreement terminates orexpires with respect to such Aircraft, ***at the termination date or expiration date of the Agreement on the same termsand conditions as apply to ***,and Northwest shall *** providedthat in connection with any ***.

 

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##### (3)  Northwest and Mesaba agree that if Northwest becomes awarethat Bombardier will not meet the financing and aircraft delivery conditionsfor any of the fifteen (15) CRJ-200/440 Aircraft (set forth in Section 3.02(a)(i)(aa)(1)(A) above)and *** pursuant to Section 3.02(a)(i)(aa)(2)(i) above,then (i) Northwest will cooperate with Mesaba or MAIR Holdings, Inc. ingood faith with respect to Mesaba’s or MAIR Holdings, Inc.’s efforts toobtain replacement CRJ-200/440 Aircraft from another source at the thenprevailing market terms and conditions, and (ii) the parties willnegotiate in good faith with respect to any modifications to this Agreementthat may be necessary as a result of Mesaba or MAIR Holdings, Inc. obtainingreplacement CRJ-200/440 Aircraft from a source other than Bombardier.  However, under no circumstances willNorthwest be obligated to accept economic terms deemed by Northwest to be materiallyworse than those contemplated if Northwest had provided such CRJ-200/440Aircraft to Mesaba pursuant to Section 3.02(a)(i)(aa)(1) above.  For the avoidance of doubt, nothing in this Section 3.02(a)(i)(aa)(3) shallobligate Northwest to source such replacement CRJ-200/440 Aircraft or procurethe financing for such replacement CRJ-200/440 Aircraft for Mesaba.

#####  

(4)  Notwithstanding anything to the contrary in Sections3.02(a)(i)(aa)(1) and (2) above, if Northwest determines in its solediscretion that the terms and conditions on which Bombardier will provideNorthwest with financing for one or more of the fifteen (15) CRJ-200/440Aircraft (as referenced in Section 3.02(a)(i)(aa)(1) above) are consideredabove market and Northwest therefore does not take delivery of such Aircraft,or if Bombardier *** (pursuantto Section 3.02(a)(i)(aa)(2) above) and Northwest *** because such terms and conditionsare considered above market, then Northwest shall obtain replacement CRJ-200/440Aircraft from another source at market rates and provide such Aircraft toMesaba.

 

##### (bb)          ARJ Aircraft.  If Northwest requires the removal of AvroRegional Jet Aircraft from Mesaba’s fleet pursuant to Section 3.02(a)(ii)(bb)below, Northwest and Mesaba agree that subject to (x) Northwest obtainingfinancing for the Equipment on a commercially reasonable basis, and (y) Bombardierdelivering Canadair Regional Jet Aircraft to Northwest as ordered by Northwestfrom time to time, after *** CRJ-200/440Aircraft are added to Mesaba’s fleet pursuant to Section 3.02(a)(i)(aa)above, the next ***  and up to *** ordered by and delivered to Northwest shall be added to Mesaba’sfleet; provided, however, that if Northwest determines, in its sole discretion,to utilize aircraft other than ***to replace the Avro Regional Jet Aircraft, and if Mesaba is awarded the rightto operate such ***, Northwest’sobligation to provide Mesaba with ***pursuant to this Section 3.02(a)(i)(bb) shall be *** delivered to Mesaba. For the avoidance of doubt, if more than *** are added to Mesaba’s fleet pursuant to Section 3.02(a)(i)(aa)(B) above,Northwest’s obligation to provide Mesaba with *** pursuant to this Section 3.02(a)(i)(bb) shall be reducedby ***.

 

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##### (cc)            Saab 340 Aircraft.  Northwest shall have the right to cause fromtime to time additional Saab 340 Aircraft to be added to Mesaba’s fleet.

#####  

##### (ii)                                  Equipment RemovalRights.

#####  

### (aa)              CRJ Aircraft.  Northwest and Mesaba agree that from andafter that time when Mesaba has more than *** CRJ-200/440 Aircraft pursuant to Section 3.02(a)(i)(aa)above, Northwest shall have the right upon at least ninety (90) days priorwritten notice to require the removal of such CRJ-200/440 Aircraft and relatedSpare Engines selected by Northwest from Mesaba’s fleet provided that at notime shall the number of such Aircraft and Spare Engines removed pursuant tothis Section 3.02(a)(ii)(aa) cause the number of such Aircraft in Mesaba’sfleet to be less than *** orcause the number of Spare Engines in Mesaba’s fleet to be less than ***; and further provided that if Mesabahas received CRJ-200/440 Aircraft and Spare Engines pursuant to Section 3.02(a)(i)(bb)above, at no time shall the number of CRJ-200/440 Aircraft and Spare Enginesremoved pursuant to this Section 3.02(a)(ii)(aa) cause the number of suchAircraft in Mesaba’s fleet to be less than *** plus the number of CRJ-200/440 Aircraft added to Mesaba’sfleet pursuant to Section 3.02(a)(i)(bb) or cause the number of SpareEngines in Mesaba’s fleet to be less than *** plus the number of Spare Engines added to Mesaba’s fleetpursuant to Section 3.02(a)(i)(bb).

###  

### (bb)            ARJ Aircraft.  Northwest and Mesaba agree that Northwestshall have the right (i) upon at least ninety (90) days prior written noticeto require the removal of any one or more of the Avro Regional Jet Aircraftfrom Mesaba’s fleet upon early termination of the applicable Lease betweenNorthwest and Mesaba or termination of the debt obligation related to Northwest’sownership of such Avro Regional Jet Aircraft, or (ii) to require theremoval of any one or more of the Avro Regional Jet Aircraft from Mesaba’sfleet upon the final expiration date of the applicable Lease.  Northwest’s removal right in the previoussentence shall apply up to and including removal of all thirty-five (35) AvroRegional Jet Aircraft from Mesaba’s fleet. If Avro Regional Jet Aircraft are removed from Mesaba’s fleet pursuantto this Section 3.02(a)(ii)(bb), (x) Northwest’s obligation to provideMesaba with replacement aircraft shall be governed by Section 3.02(a)(i)(bb)above, and (y) Northwest may sell, lease or otherwise transfer the AvroRegional Jet Aircraft which are removed from Mesaba’s fleet to any other entityin Northwest’s sole discretion; provided, however, that Northwest shall notsell, lease, or otherwise transfer such Avro Regional Jet Aircraft to any otherentity which will operate such Avro Regional Jet Aircraft for the benefit ofNorthwest.

###  

### (cc)              Saab 340 Aircraft.  Northwest and Mesaba agree that Northwestshall have the right (I) upon at least ninety (90) days prior written notice torequire the removal of any one or more of the Saab 340A Aircraft from Mesaba’sfleet,

 

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### up to and including removal of ***Saab 340A Aircraft from Mesaba’s fleet, provided that such Saab 340A Aircraftshall not be removed from Mesaba’s fleet before January 1, 2006, (II) uponexpiration of the Lease or upon the occurrence of an early termination event asset forth in the Lease with respect to ***Saab 340B Aircraft in Mesaba’s fleet, to require the removal of such Saab 340BAircraft from Mesaba’s fleet, up to and including removal of *** Saab 340B Aircraft from Mesaba’sfleet, provided that such Saab 340B Aircraft shall not be removed from Mesaba’sfleet before November 15, 2006 except upon the occurrence of an earlytermination event as set forth in the Lease, and (III) upon expiration of theLease or upon the occurrence of an early termination event as set forth in theLease with respect to *** Saab340B+ Aircraft in Mesaba’s fleet, to require the removal of such Saab 340B+Aircraft from Mesaba’s fleet, provided that such Saab 340B+ Aircraft shall notbe removed from Mesaba’s fleet before January 1, 2014, except upon theoccurrence of an early termination event as set forth in the Lease.

###  

(dd)            Forthe avoidance of doubt, during the Term of this Agreement, if any Aircraft are lostfrom Mesaba’s fleet and are replaced with other aircraft, the replacementaircraft will be flown by Mesaba as long as Mesaba operates the aircraft type.

 

(ee)              Inthe event Mesaba ceases operating a specific Aircraft type during the Term ofthis Agreement or will cease operating a specific Aircraft type upon theTermination Date, the parties will cooperate in good faith to develop andimplement an orderly wind-down/termination plan including but not limited toresponsibility for wind-down costs (other than aircraft return costs which are governedby this Agreement), and such plan will be implemented over a period not toexceed nine (9) months.

 

##### (iii)                               Additional EquipmentRemoval Rights.  Notwithstanding Section 3.02(a)(ii),in the event of (aa) an event giving rise to Northwest’s right to terminatethis Agreement pursuant to Section 10.03(e) and (bb) Northwest hasnot yet exercised its termination rights, (1) if the event is not resolvedwithin ***, Northwest shall havethe right to terminate Leases for, and take immediate possession of, up to *** CRJ-200/440 Aircraft and related CRJSpare Engines selected by Northwest, (2) if the event is not resolved within***, Northwest shall have theright to terminate Leases for, and take immediate possession of, up to anadditional *** CRJ-200/440Aircraft and related CRJ Spare Engines selected by Northwest, and (3) ifthe event is not resolved within ***,Northwest shall have the right to terminate Leases for, and take immediate possessionof, up to an additional *** CRJ-200/440Aircraft and related CRJ Spare Engines selected by Northwest, and (4) ifthe event continues for a period in excess of ***, Northwest shall have the right to select and terminate Leasesfor, and take immediate possession of, ***CRJ-200/440 Aircraft and the related CRJ Spare Engines in Mesaba’s fleet.

 

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##### (iv)                              Unscheduled Aircraft.  Northwest and Mesaba shall mutually determinethe appropriate level of unscheduled Aircraft to be included in Mesaba’s fleetfrom time to time.

#####  

##### (v)                                 Spare EngineRequirements.  Subject to Section 3.02(a)(i) above,Northwest and Mesaba shall mutually determine the appropriate quantity of CRJ SpareEngines to be included in Mesaba’s fleet from time to time.

#####  

##### (vi)                              Other RJ Operations.  The parties agree that notwithstandinganything to the contrary in this Agreement, Northwest has a one-time right toenter an airline services agreement with an airline other than Mesaba orPinnacle Airlines, Inc. (“Pinnacle”) for such airline to finance and operatebetween *** and *** CRJ-200/440 Aircraft as an AirlinkCarrier, provided that (aa) such CRJ-200/440 Aircraft shall not operateregularly scheduled flights which originate or terminate at MSP, DTW or MEM,and (bb) substantially all of such CRJ-200/440 Aircraft are placed in servicefor the benefit of Northwest within a period of sixty (60) days of implementationof the arrangement with such other airline.

#####  

### (b)                                 InductionCosts.  All one-time expenses whichare associated with inducting CRJ-200/440 Aircraft into Mesaba’s fleet shall bepaid one hundred percent (100%) by Mesaba; provided, however, that (i) ifNorthwest removes the Avro Regional Jet Aircraft from Mesaba’s fleet pursuantto Section 3.02(a)(ii)(bb)(i) above and replaces the Avro RegionalJet Aircraft with new CRJ-200/440 Aircraft or new 70-seat aircraft, Northwest willbe responsible for all one-time expenses associated with inducting such CRJ-200/440Aircraft or 70-seat aircraft up to an amount of $*** per replacement aircraft, and further provided that Northwest mayutilize manufacturer credits to pay such amounts per Aircraft as and to theextent Northwest has available and Mesaba can utilize such manufacturer creditsto pay for such induction expenses, and (ii) if Northwest provides Mesaba withused CRJ-200/440 Aircraft, Northwest will be responsible for the costs ofconforming such used aircraft to Northwest’s specifications used for the *** CRJ-200/440 Aircraft delivered toMesaba pursuant to Section 3.02(a)(i)(aa) above, including such items asaircraft livery, interior modifications and maintenance induction.

###  

### (c)                                  TerminationCosts.  All return costs and expensesassociated with the return of Saab 340 Aircraft shall be paid ***; provided, however, that (i) tothe extent *** has previouslypaid *** for part or all of suchreturn costs and expenses through ***,*** rather than *** shall be responsible to pay suchportion of the return costs and expenses for such Saab 340 Aircraft, and (ii) returncosts and expenses with respect to the eleven Saab 340B turboprop aircraft inMesaba’s fleet shall be governed by the letter agreement dated March 25,2003 among Northwest, Mesaba and Mesaba Holdings, Inc.  All return costs and expenses associated withthe return of CRJ-200/440 Aircraft shall be paid *** (and *** shallhave no obligation to reimburse ***for such costs and expenses) and ***;provided, however, in the event Northwest exercises its Equipment removalrights pursuant to Section 3.02(a)(ii)(aa) above, *** share of return costs and expenses or meet the returnconditions in the Leases for the Aircraft and CRJ Spare Engines that are thusremoved from Mesaba’s fleet unless (i) Northwest intends to return suchEquipment to the lessor under the Leases and (ii) Mesaba has operated theEquipment for more than ***years.  If the Avro Regional Jet Aircraftare returned to Northwest at the final expiration date of the applicable Lease,all return costs and expenses associated with the return of the Avro

 

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### Regional Jet Aircraft shall bepaid ***; provided, however,that with respect to such Avro Regional Jet Aircraft which are leased byNorthwest from third parties, ***shall not be obligated to pay an amount for such return costs and expenses thatexceeds the amount *** forreturn costs and expenses if ***is then obligated to return such Aircraft to such ***.  If the Avro RegionalJet Aircraft are returned to Northwest prior to the final expiration date ofthe applicable Lease, all return costs and expenses associated with the returnof the Avro Regional Jet Aircraft shall be paid ***; provided, however, that (i)  *** shall not be obligated to pay an amount for such return costsand expenses that exceeds the amount ***may be obligated to pay (x) the holders of any debt financing or (y) in orderto exercise any rights it may have under any residual value or deficiencyagreement, in either case in connection with the return of such Avro RegionalJet Aircraft, (ii) with respect to such Avro Regional Jet Aircraft whichare leased by Northwest from third parties, *** shall not be obligated to pay an amount for such return costsand expenses that exceeds the amount ***for return costs and expenses if ***is then returning such Aircraft to such ***(or such amount as *** isotherwise then obligated to pay the ***),(iii) the return costs and expenses associated with the Avro Regional JetAircraft engine leases and simulator agreements shall be paid *** and ***, and (iv) ***total payment obligation for return costs and expenses for such Avro RegionalJet Aircraft engine leases and simulator agreements shall not exceed ***. In all cases of returned aircraft Mesaba shall use its reasonablecommercial efforts to minimize such return costs and expenses.

###  

### (d)                                 AircraftRe-certification.  Northwest may, atits sole option, direct Mesaba to take such actions as are necessary to cause 44-seatAircraft to be re-certificated as 50-seat Aircraft or to take such actions asare necessary to cause 50-seat Aircraft to be re-certificated as 44-seatAircraft and all Direct Costs which are associated with such Aircraftre-certifications shall be paid ***.  Any such Aircraft re-certifications will beaccomplished within a mutually agreed time frame, but in any event within sixty(60) days unless otherwise directed by Northwest.

###  

**Section 3.03     Leaseof the Equipment**. As of the Effective Date, Mesaba and Northwest (and/or an Affiliate ofNorthwest) have entered into Leases with respect to the thirty-five (35) AvroRegional Jet Aircraft in Mesaba’s fleet and agree to enter into (or, as toNorthwest, Northwest agrees to cause such Affiliate as Northwest may designateto enter into) a Lease with respect to each CRJ-200/440 Aircraft and each CRJ SpareEngine added to Mesaba’s fleet when and as Northwest takes delivery of suchadditional Equipment if Northwest has determined to use such Equipment forRegional Airline Services pursuant to this Agreement.  As of the Effective Date, Mesaba and Northwest(and/or an Affiliate of Northwest) have entered into Leases with respect to theforty-nine (49) Saab 340B+ Aircraft in Mesaba’s fleet, Mesaba and Pinnacle haveentered into Leases with respect to the eleven (11) Saab 340B Aircraft inMesaba’s fleet, and Mesaba and third parties have entered into Leases withrespect to the three (3) Saab 340A Aircraft in Mesaba’s fleet.  Mesaba and Northwest hereby agree to amendany of the Leases for the Saab 340B+ Aircraft and the Avro Regional JetAircraft as may be necessary to take into account the terms and conditions ofthis Agreement.

 

**Section 3.04     Termsof the CRJ Leases**. Each Lease for the CRJ-200/440 Aircraft and the CRJ Spare Engines shallbe substantially in the forms of Exhibit A-1 and Exhibit A-2,respectively, and shall include the following terms:

 

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#### (a)                                  theterm of each Lease shall be for a period ending on the Termination Date;provided, however, no Lease shall be for a term longer than the term of therelated head lease, if any;

####  

#### (b)                                 therent for CRJ-200/440 Aircraft shall equal the applicable CRJ 200/440 Aircraft RentalExpense and shall be payable monthly in advance;

####  

(c)                                  the rent for the CRJ SpareEngines shall equal the CRJ Spare Engine Rental Expense and shall be payablemonthly in advance; and

 

#### (d)                                 theLeases shall include such terms as are necessary to conform provisions of theLeases to the head lease and to any ancillary documents actually entered intoby Northwest or any of its Affiliates in connection with such Equipment (to theextent Northwest requests conformation).

####  

**Section 3.05     ManufacturerBenefits Agreement**.  Pursuant to a letter dated June 27, 2005(the “Letter Agreement”) from Northwest to Bombardier Aerospace (“Bombardier”),and pursuant to a Manufacturer Benefits Agreement, dated as of the date hereof,between Northwest and Mesaba, Northwest has made available to Mesaba certainbenefits under the Purchase Agreements between Northwest and Bombardier, whichbenefits relate to, among other things, manufacturer credits, inventory servicerepresentatives, field service representatives and technical manuals.

 

**Section 3.06     EquipmentMaintenance, Servicing and Cleaning**.  Mesaba shall be responsible for all aspectsof the maintenance in accordance with the Maintenance Program (including anymaintenance or modifications required by FAA airworthiness directives and allroutine and non-routine maintenance), servicing and cleaning (includingpainting of aircraft exteriors and replacement of worn interior items) of theEquipment (except for ground handling as specified in Section 4.02).  With respect to the CRJ-200/440 Aircraft andCRJ Spare Engines, Mesaba’s responsibility with respect to the Maintenance Programincludes, but is not limited to, incorporating the latest revision of theOriginal Equipment Manufacturer (OEM) Maintenance Program, collecting log page,non-routine, equipment check findings and Service Difficulty Reports (SDR).

###  

### Any Maintenance Program changeson the CRJ-200/440 Aircraft and CRJ Spare Engines that involve expensespursuant to Exhibit E, Section 1.03 Direct Expenses shall be reviewedby Northwest prior to implementation and will include financialjustification/support provided by Mesaba consistent with internal Northwestreview requirements (e.g. net present value financial analysis).  Mesaba, however, may on its own authority andcost (with no reimbursement from Northwest) make maintenance program changes onthe CRJ-200/440 Aircraft and CRJ Spare Engines.

###  

### On a quarterly basis during theTerm of this Agreement, Mesaba will provide to Northwest a list of MaintenanceProgram changes on the CRJ-200/440 Aircraft and CRJ Spare Engines, includingrequired labor, estimated costs to implement, any expenses that are deemed Exhibit E,Section 1.03 expenses and implementation status.  The list shall include:

 

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###### (a)                                  Deletionor escalation of a routine task (this does not include a complete “check” suchas “A” check),

######  

###### (b)                                 Deletionof steps to a routine task or procedure that may result in a change to the taskintent or task scope,

######  

###### (c)                                  De-escalationof a task,

######  

###### (d)                                 Escalationor de-escalation of a “check” such as an “A” check,

######  

###### (e)                                  Additionof a routine task (adding a function not currently being performed), and

######  

###### (f)                                    Additionof steps to a routine task or procedure that may result in change to the intentor work scope (a change of access or area for inspection, and/or change ofmethod for inspection).

######  

**Section 3.07     CRJ-200/440 Aircraft MaintenanceAgreements.**

 

### (a)                                  Mesabashall utilize the Northwest selected vendor(s) for all major shop-level enginemaintenance and heavy airframe maintenance in accordance with terms andconditions negotiated by Northwest after review and concurrence by Mesaba thatsuch agreements contain reasonably satisfactory arrangements in respect ofMesaba’s operational requirements.

###  

### (b)                                 Inthe event Northwest enters into agreements for auxiliary power unit (APU) andassociated component maintenance, avionics maintenance and/or landing gearoverhauls with respect to the Aircraft, Mesaba shall utilize the vendors insuch agreements for such services; provided, however, Mesaba’s utilization of suchvendors shall be subject to (i) termination of Mesaba’s existing vendorcontracts, if any, and Northwest’s payment of any early termination penaltiesimposed pursuant to Mesaba’s contracts and (ii) reasonably satisfactoryarrangements in respect of Mesaba’s operational requirements.

###  

### (c)                                  Inthe event spare engine and/or spare parts pooling agreements are establishedfor Airlink Carriers, Mesaba will participate in such agreements so long assuch agreements reasonably address Mesaba’s inventory needs, logisticsrequirements and configuration concerns and are not contrary to any FAAregulation.

###  

### (d)                                 Inthe event Mesaba is or becomes a party to such agreements as outlined in thisSection, Mesaba shall not execute any amendment or side letter to any of thoseagreements without Northwest’s prior written consent.

###  

### (e)                                  Theuse of such vendors and related agreements by Mesaba as provided for in this Section 3.07,shall be subject to Mesaba formally approving such vendors as part of its FAAapproved Maintenance Program, with such approvals not unreasonably withheld.  Pursuant to Mesaba’s FAA approved MaintenanceProgram the use of such vendors and related agreements may be terminated byMesaba, with the consent of Northwest, with such consent not being unreasonablywithheld, as a remedy for quality control related issues associated withnon-compliance

 

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### with the Mesaba FAA approvedMaintenance Program or FAA regulatory requirements.

###  

**Section 3.08     CRJ-200/440FAA Airworthiness Directives**.  Pursuant to Section 3.06, Mesaba shallbe financially responsible for maintenance or modifications required by FAAAirworthiness Directives (ADs) with respect to the CRJ-200/440 Aircraft and CRJSpare Engines.  Expenses associated withsuch ADs are not Direct Expenses as defined per Exhibit E, Section 1.03below.  However,  if during the course of a normally scheduledmaintenance visit or an accelerated heavy maintenance visit agreed to byNorthwest the maintenance work that is performed also accomplishes therequirements of the AD, Northwest will pay for the AD costs as a Direct Expenseunder Exhibit E, Section 1.03; provided, however, if the work/costsincurred to accomplish the requirements of the AD are incremental to the otherrequired maintenance performed during the visit, then Mesaba will remainfinancially responsible for the costs of compliance with the AD.

 

**Section 3.09     CRJ-200/440Aircraft and Engine/APU Configuration**. Mesabashall be responsible for review, justification and implementation of OEM safetyand reliability service bulletins with respect to the CRJ-200/440 Aircraft, theCRJ Spare Engines and the CRJ APUs.  Inorder to maintain consistency in engine and APU configuration, Northwest willwork with the respective Airlink Carriers to create and maintain one EngineConfiguration Specification Manual (CSM) and one APU CSM.  Mesaba agrees to participate in the CSMprocess, and Northwest shall obtain the concurrence of Mesaba prior to anychanges being made to the CSMs, including incorporation of any servicebulletins, and Mesaba shall not unreasonably withhold such concurrence.  If concurrence between the parties cannot beachieved, then Mesaba may, on its own authority and cost (with no reimbursementby Northwest) incorporate revisions to the CSM. Upon completion of this Agreement and if requested by Northwest, Mesabashall restore any engine or APU to CSM configuration at Mesaba’s sole cost.

 

Northwest shall have responsibility foroversight of Aircraft modifications and/or projects for incorporation on theMesaba CRJ fleet subject to the following criteria:

 

(a)                                  All Aircraftmodifications/projects that involve expenses deemed Exhibit E, Section 1.03Direct Expenses, shall, prior to implementation, be treated in a mannerconsistent with internal Northwest standards and procedures for approval byNorthwest.  Mesaba shall request fundingfor modifications/projects involving Exhibit E, Section 1.03 DirectExpenses, through the Northwest required process, including use of Northwestforms.  Should Northwest not approve suchmodifications or projects, Mesaba may elect to perform such activity solely at itsexpense and shall perform such actions in accordance with terms of its AircraftLease,

 

(b)                                 All Engine/APU costsinvolving work outside the scope of a third-party contract shall requireNorthwest workscope approval prior to shop induction,

 

(c)                                  A listing of allin-production and pending ADs, Notice of Proposed Rule Making (NPRM),safety-related, reliability, operator-designed and Supplemental TypeCertificate (STC) Aircraft projects shall be provided to Northwest on aquarterly basis.  The listing shallinclude Aircraft/Engine/APU effectivity and implementation status.  Such

 

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informationshall be treated as confidential in nature in accordance with Section 6.04of this Agreement.

 

The CRJ-200/440Aircraftshall be included in the Northwest Reliability Control Board (RCB) FleetBriefing twice per year.  The fleetbriefing content will be similar to Northwest operated aircraft.  Mesaba agrees to provide the followinginformation, at the minimum, subject to mutual agreement of the parties as tospecific details:

 

##### (i)                                     Fleet performance(i.e. On-Time, On-Time within 30 minutes, Completion Factor and OperationalDifficult Index) vs. mutually agreed goals and vs. other CRJ-200/440 operatorsas applicable,

#####  

##### (ii)                                  AD and safety-relatedmodifications/projects,

#####  

##### (iii)                               Top five (5) reliabilitydrivers with root cause and corrective action,

#####  

##### (iv)                              Engine performance (i.e.removal rate, low-time engine removal rate), and

#####  

##### (v)                                 Routine and PeriodicMaintenance Intervals and Maintenance Program status with differences that existagainst mutually agreed comparative programs, and in comparison to other CRJ-200/440operators as applicable.

#####  

**Section 3.10     ThirdParty Guarantees and Warranties**.  Mesaba shall administer, track and pursuewarranty and guaranty claims under the purchase, support and service agreementsfor the Equipment, so as to minimize operating costs for the Equipment.  Such efforts shall include establishment ofall systems and procedures necessary to track and submit warranty and guarantyclaims, including providing reports and information required to be providedunder the purchase, support or services agreement.  Mesaba shall not operate or maintain theEquipment in a manner that could result in any warranty or guaranty beingterminated or voided, without the prior written consent of Northwest.

 

**Section 3.11     RelatedTransfer Arrangements**.  All leases and subleases of simulators,tooling and spare parts inventory agreements and vendor and/or maintenanceagreements with respect to the Equipment (collectively “Support Agreements”)entered into by Mesaba after the Effective Date shall be assignable toNorthwest without the consent of the other party to such Support Agreement ontermination of this Agreement.  Ontermination of this Agreement, Mesaba shall, at Northwest’s option, assign toNorthwest such Support Agreements as Northwest shall designate.  Mesaba shall use its best efforts to obtainthe consent of the other party to any such Support Agreements in effect as ofthe Effective Date and, subject to obtaining such consents, if necessary,shall, at Northwest’s option, assign such Support Agreements as Northwest shalldesignate to Northwest on termination of this Agreement.  On termination of this Agreement, Northwestshall have the option to purchase from Mesaba all simulators, tooling and spareparts inventory then owned by Mesaba which are used with or related to theEquipment for an amount equal to such assets’ then fair market value.  In the event Northwest invokes its Equipmentremoval rights under Section 3.02 above, on the Equipment removal date andfor a period of thirty (30) days thereafter, Northwest shall have the option topurchase from Mesaba all

 

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simulators, tooling and spare parts inventory then owned by Mesabawhich are used with or related to the returning Equipment for an amount equalto such assets’ then fair market value. Upon termination of this Agreement or upon removal of Equipment fromMesaba’s fleet pursuant to Section 3.02 above, Mesaba shall make availableto Northwest at no cost all aircraft records required in order to operate andmaintain the Equipment.

 

**Section 3.12     EquipmentFinancing Coordination**.  Mesaba shall coordinate and cooperate withNorthwest with respect to Equipment sale, purchase and lease transactions.  Such coordination and cooperation shallinclude, but is not limited to, cooperating with Northwest in structuring theclosing of Equipment sale, purchase or lease transactions in a manner that willminimize the imposition of any local, city, county, state, provincial, federalor foreign taxes or other governmental transfer charges related to suchtransactions, providing Northwest with financial information (audited andunaudited) that Northwest may then provide to third parties, assisting Northwestin raising capital through the sale of either debt and/or equity in connectionwith the financing or leasing of the Equipment where and as requested byNorthwest (including but not limited to participating in meeting with themanufacturer, potential investors and sources of financing or lease equity todiscuss Mesaba’s financial and operational performance and outlook), and fullcooperation in meeting appropriate return conditions of the Equipment uponexpiration of the Equipment’s Lease.

 

**Section 3.13     SpareParts Inventory; Application of Credits**.  If Mesaba acquires spare parts or inventoryfrom Bombardier, Mesaba shall purchase from Northwest manufacturer, supplier orservicer credits obtained from third parties at the face value of the creditsin an amount equal to the amount to be purchased from Bombardier (but only tothe extent Bombardier will accept such credits).  In addition, Mesaba shall purchase fromNorthwest credits in amount equal to any service provided by Bombardier wherecredits are accepted by Bombardier, provided that if Mesaba receives creditsfrom Bombardier in connection with Mesaba’s purchase of CRJ-200/440 Aircraftpursuant to Section 3.02(a)(i)(aa) above, Mesaba may utilize such creditsprior to purchasing credits from Northwest. Following notification by Mesaba to Northwest of Mesaba’s intent toutilize credits, Northwest shall deduct the amount of such credits from thenext payment due to Mesaba hereunder, and on such date, Northwest shall deliverto Mesaba a credit memorandum equal to the amount of such credits purchased by Mesaba.

 

**ARTICLE IV    ANCILLARY ARRANGEMENTS**

 

**Section 4.01     Coordination with Mesaba**.

 

### (a)                                  Schedulesand Timetables.  Northwest shall fileand maintain schedules with all applicable schedule distribution systemsfor all Scheduled Flights, and such schedules shall be filed and maintained byNorthwest together with the schedules for its flights.  Northwest shall include and list allScheduled Flights providing Regional Airline Services in the schedule publicationprogram of Northwest.  Northwest shallinclude Scheduled Flights operated by Mesaba in all appropriate flightinformation systems on which Northwest flights are listed.

 

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### (b)                                 TravelPrivileges.  Northwest and Mesabashall each be entitled to make available for their respective employees andmembers of their respective Boards of Directors, the travel privileges setforth on Exhibit F attached hereto in accordance with the terms andconditions set forth therein.

###  

### (c)                                  UnitedStates Weather Bureau Information. Upon request of Mesaba or its flight crews, Northwest shall, pursuant toa separate Agreement, dated December 18, 1997, by and between Northwestand Mesaba, or any amendment thereto or successor agreement, furnish Mesabasuch weather information or data as may be produced by or available toNorthwest (subject to any restrictions imposed by third party data providers);provided, however, that neither Northwest nor its employees will be responsibleor liable for the accuracy thereof.

###  

**Section 4.02     Ground Handling and Dangerous GoodsHandling; Technological Improvements; Weather-event Recovery**

 

### (a)                                  GroundHandling.  The ground handlingfunctions for Regional Airline Services operated pursuant to this Agreementshall consist of the following functions: (i) all gate check-in activities, (ii) passengerenplaning/deplaning activities, (iii) sky cap and wheelchair services, (iv) aircraftloading/unloading services, included but not limited to airside busing, (v) passengerticketing, (vi) jetbridge maintenance, (vii) janitorial services, (viii) deicingservices, (ix) pushback, tow or taxi, (x) airstarts, and (xi) aircraftcleaning, including but not limited to overnight cleaning, lavatory service andwater service (collectively, the “Ground Handling Functions”).

###  

### With respect to ScheduledFlights or Charter Flights operated by Mesaba with Saab 340 Aircraft, (i) atMesaba Service Cities, Mesaba shall be responsible for performing all theGround Handling Functions, including but not limited to providing passengerswith the services specified in Exhibit D, Sections 1.01(c) and 1.01(d) hereto,(ii) at Northwest Service Cities, Northwest shall be responsible forperforming all the Ground Handling Functions, including but not limited toproviding passengers with amenities, denied boarding compensation andtransportation to their destinations by other means in accordance with Northwest’spolicies and procedures; Northwest agrees to provide such Ground HandlingFunctions to Mesaba at Northwest Service Cities at the rate of $*** per turn for aircraft with 20 to39 passenger seats; such rates shall be adjusted each April 1 byincreasing such rates by the CPPI, but in no event shall an annual adjustmentresult in an increase of more than ***percent (***%); Mesaba shall atits sole expense provide to Northwest any specialized equipment necessary tohandle the Saab 340 Aircraft at Northwest Service Cities; and (iii) atDTW, MEM and MSP, Mesaba shall be responsible for performing the GroundHandling Functions listed in sub-sections (i), (ii), (iv), (viii), (ix) and(xi) of the definition of Ground Handling Functions, and Northwest shall beresponsible for performing all other Ground Handling Functions.

###  

### With respect to ScheduledFlights or Charter Flights operated by Mesaba with Avro Regional Jet Aircraftor CRJ-200/440 Aircraft, Northwest shall be responsible for performing all of theGround Handling Functions.

###  

### Notwithstanding anything to thecontrary in this Agreement, Northwest may, at its option, require Mesaba uponninety (90) days prior written notice to utilize Northwest, aNorthwest-designated

 

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contract agent, or Mesaba’s own personnel and equipment to perform theGround Handling Functions at a Mesaba Service City, a Northwest Service City ora Hub City.

###  

### (b)                                 DangerousGoods Handling.  At Mesaba ServiceCities and at Hub Cities where Mesaba is responsible for performing gatecheck-in and aircraft loading/unloading services, Mesaba shall comply withNorthwest’s policies and procedures with respect to the handling of DangerousGoods; provided, however, that Northwest acknowledges that Mesaba has not inthe past, and will not in the future, carry Dangerous Goods on any flightoperated with Saab 340 Aircraft.

###  

### (c)                                  Weather-eventRecovery.  With respect to recoveryfrom weather events that disrupt the Regional Airline Services operated byMesaba, Mesaba’s System Operations Control shall coordinate with Northwest’sSystem Operations Control for returning to normal operations.

###  

**Section 4.03     Facilities**.

 

### (a)                                  HubCities and Northwest Service Cities. During the term hereof, Northwest will provide Mesaba, at no cost toMesaba, with access to a portion of the premises and facilities leased byNorthwest pursuant to Northwest’s lease with the applicable airport authorityat the Hub Cities and Northwest Service Cities on the terms and conditions setforth in the form of Facilities Use Agreement attached hereto as Exhibit H(the “Facilities Use Agreement”). Northwest, in its sole discretion, shall designate from time to time theportion of such premises and facilities to be used by Mesaba solely for theperformance of Regional Airline Services hereunder.  In the event Northwest determines that Mesabarequires additional facilities at any of the Hub Cities or Northwest ServiceCities for the performance of Regional Airline Services, Northwest shall useits reasonable efforts to obtain such facilities and provide them to Mesaba atno additional charge to Mesaba. Northwest and Mesaba agree that Northwest may relocate Mesaba tocomparable facilities at the Hub Cities and Northwest Service Cities, providedthat Northwest pays Mesaba’s reasonable relocation expenses in connection withany such relocation.  Upon request byNorthwest, Mesaba agrees to use its best efforts to obtain signatory carrierstatus at any Hub City or Northwest Service City and shall perform all conditionsrequired by the applicable airport authority to obtain such status, includingwithout limitation the posting of a bond or letter of credit to the airportauthority, provided that, if Mesaba becomes a signatory carrier at any Hub Cityor Northwest Service City, Mesaba shall vote as directed by Northwest on anymatters submitted to the signatory carriers for a vote.  Northwest shall cooperate with Mesaba inobtaining such signatory status at any such airport.

###  

### (b)                                 MesabaService Cities.  During the termhereof, at all Mesaba Service Cities and at any other location where Mesabahandles flights operated by Mesaba hereunder or by Northwest pursuant to aground handling agreement, Mesaba shall be responsible for obtaining,constructing and maintaining, at no cost to Northwest (other than amountspayable by Northwest pursuant to the next sentence), adequate airportfacilities and equipment consistent with Northwest’s standards to provide suchground handling services.  With respectto (i) flights operated by Mesaba with Avro Regional Jet Aircraft or CRJ-200/440Aircraft which are handled by Mesaba, or (ii) flights operated byNorthwest which are handled by Mesaba, Mesaba will allocate amounts payable orassessed by the airport in connection with such flights for joint or

 

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### common use facilities andNorthwest will reimburse Mesaba for such expenses in accordance with Section 5.03below (for Northwest-operated flights), in accordance with Section 1.09 ofExhibit C (for flights operated by Mesaba with Avro Regional Jet Aircraft)and pursuant to such separate ground handling agreement (for flights operatedby Mesaba with CRJ-200/440 Aircraft).

###  

### (c)                                  MaintenanceFacilities.  During the term hereof,Mesaba shall be responsible for obtaining and maintaining adequate maintenancefacilities required for the maintenance of all Equipment operated or utilizedin connection with the performance of Regional Airlines Services hereunder (the“Maintenance Facilities”).   In the eventNorthwest elects to provide any Maintenance Facilities to Mesaba, suchfacilities will be provided on the terms and conditions set forth in the FacilitiesUse Agreement or such other mutually agreeable terms and conditions.

###  

### (d)                                 AirportLanding Fees.

###  

##### (i)                                     Mesaba shall beresponsible for all Airport Landing Fees (as defined in Article I of thisAgreement) with respect to flights operated with Saab 340 Aircraft at allairports to which it provides Regional Airline Services pursuant to thisAgreement and at all airports to which a Saab 340 Aircraft Scheduled Flight,Non-Scheduled Flight or Charter Flight is diverted.

#####  

##### (ii)                                  Subject to theconsent of the applicable airport authority and Northwest’s receipt of a copyof any report submitted by Mesaba to any airport authority for purposes ofcalculation of Airport Landing Fees (as defined in Exhibit C below), withrespect to flights operated hereunder with Avro Regional Jet Aircraft, (aa)Northwest shall be invoiced for and shall pay all applicable Airport Landing Feesat Hub Cities and Northwest Service Cities and at all airports to which aScheduled Flight, Non-Scheduled Flight or Charter Flight is diverted, or Mesabashall be invoiced for and shall pay all applicable Airport Landing Fees at HubCities and Northwest Service Cities and at all airports to which a ScheduledFlight, Non-Scheduled Flight or Charter Flight is diverted, and followingNorthwest’s receipt of a report by Mesaba detailing payment of such AirportLanding Fees, Northwest shall reimburse Mesaba for such amounts in accordancewith Section 1.09 of Exhibit C, (bb) Mesaba shall be invoiced for andshall pay all applicable Airport Landing Fees at Mesaba Service Cities and atall airports to which a Scheduled Flight, Non-Scheduled Flight or CharterFlight is diverted, and following Northwest’s receipt of a report by Mesabadetailing payment of such Airport Landing Fees, Northwest shall reimburseMesaba for such amounts in accordance with Section 1.09 of Exhibit C.

#####  

##### (iii)                               Subject to the consentof the applicable airport authority and Northwest’s receipt of a copy of anyreport submitted by Mesaba to any airport authority for purposes of calculationof Airport Landing Fees (as defined in Article I of this Agreement), withrespect to flights operated hereunder with CRJ-200/440 Aircraft, Mesaba shallbe invoiced for and shall pay all applicable Airport Landing Fees at HubCities, Northwest Service Cities, Mesaba Service Cities and at all airports towhich a Scheduled Flight, Non-Scheduled Flight or Charter Flight is diverted,and following Northwest’s receipt of

 

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##### a report by Mesaba detailing payment of such Airport Landing Fees,Northwest shall reimburse Mesaba for such amounts in accordance with Section 1.03of Exhibit E.

#####  

### (e)                                  PassengerFacility Charges.  Northwest shall beresponsible for the collection and remittance of all passenger facilitycharges, if any, at all Service Cities and the Hub Cities.

###  

### (f)                                    Signage.  Subject to Governmental Regulations, Mesabashall display at all ticketing and check-in locations such signage or otherforms of advertisement to identify and promote Northwest’s service as Northwestmay specify and as approved by the applicable airport authority.  All signage utilizing the NW Identificationshall be provided by Northwest at its sole cost, shall be the property ofNorthwest and shall be subject to the applicable provisions of Article VIIbelow.  Mesaba shall not use the MesabaIdentification on any signage or other forms of advertisement used to identifyor promote the Regional Airline Services (except as otherwise required byGovernmental Regulations).

###  

### (g)                                 RelatedTransfer Arrangements.  All leasesand subleases of airport facilities used in connection with Regional AirlineServices (collectively, “Facilities Leases”) entered into by Mesaba after theEffective Date shall be assignable to Northwest without the consent of theother party to such Facility Lease upon termination of this Agreement, thewithdrawal of Scheduled Flights from such airport or upon written notice fromNorthwest to Mesaba, provided that if the consent of the facility lessor isrequired by contract or Governmental Regulations, Mesaba will use its bestefforts to obtain such consent at the time the Facility Lease is entered intoand to incorporate such consent in the terms of the Facility Lease.  Upon termination of this Agreement, thewithdrawal of Scheduled Flights from such airport or upon receipt of writtennotice from Northwest, upon Northwest’s option, Mesaba shall assign all of itsright, title and interest in and to such Facilities Leases, together with allimprovements and fixtures located on such facilities as Northwest shalldesignate and Mesaba shall use its best efforts to obtain the consent of theother party to any such assignment.

###  

### (h)                                 FacilitiesLease Option.  Notwithstandinganything to the contrary in this Agreement, Northwest may, at its option, electto hold the leasehold interest in any facilities to be used by Mesaba at anynew or existing Service City, and in the event Northwest exercises this option (i) Northwestshall enter into a Facilities Lease with the lessor of such facilities, (ii) Mesabashall utilize such facilities pursuant to a Facilities Use Agreement withNorthwest, (iii) the rent/facilities charges payable by Mesaba in suchFacilities Use Agreement shall be the same as Northwest’s Direct Cost under theFacilities Lease for the facilities used by Mesaba, (iv) the FacilitiesUse Agreement shall terminate when Mesaba ceases to operate Regional AirlineServices at the airport, and (v) Northwest shall lease facilities whichare reasonably suitable for Mesaba’s operational needs and, with respect to newService Cities, Northwest shall complete the leasing arrangements in a mannerthat will allow Mesaba adequate time to prepare to commence Regional AirlineServices at the Service City in accordance with the Annual Operating Plan or asotherwise scheduled by Northwest.

###  

**Section 4.04     DataCommunications**. Northwest shall provide to Mesabaat all Service Cities and Hub Cities, ***data circuit lines, any required data networking equipment, the use of computerreservation terminals, printers and modems, including hardware, software

 

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and maintenance support for such equipment (the “Data CommunicationEquipment”).  Such Data CommunicationEquipment shall be of the same type and quality as that used by Northwest inits airline operations.  In connectionwith the commencement of Regional Airline Services at a new Service City, Northwestwill provide Mesaba with Northwest’s standard Data Communications Equipment ***.

 

**Section 4.05     Security**.  Airport security and passenger screening isconducted by the TSA as of the Effective Date. To the extent airlines have responsibility for airport security and/orpassenger screening (i) at all Northwest Service Cities and the Hub Cities,Northwest is solely responsible for Mesaba’s allocated share of all maintenanceexpenses associated with all security equipment and Mesaba’s allocated share ofall personnel expenses (including overtime) associated with the operation ofthe equipment and all airport security-related functions, including, withoutlimitation, passenger screening and activities related to security directivesimposed by Governmental Regulations, and (ii) at Mesaba Service Cities,Mesaba is solely responsible for all or its allocated share of all maintenanceexpenses associated with all security equipment and all or its allocated shareof all personnel expenses (including overtime) associated with the operation ofthe equipment and all airport security related functions, including, withoutlimitation, passenger screening and activities related to security directivesimposed by Governmental Regulations; provided that, Northwest shall, pursuantto a separate agreement, reimburse Mesaba for all such expenses at MesabaService Cities related to passengers and flights utilizing the CRJ 200/440Aircraft and Avro Regional Jet Aircraft. Notwithstanding the foregoing, the parties acknowledge and agree that shouldthe U.S. government augment or change the directives, requirements, processes,procedures or the activities related to passenger screening as may be imposedby future Governmental Regulations, then the parties will negotiate in goodfaith regarding any changes to this Agreement that may be necessary as aresult.

 

**Section 4.06     ReservationServices**.  Duringthe term of this Agreement, Northwest shall handle, at its sole expense,reservations for all passenger air transportation on Scheduled Flights operatedpursuant to this Agreement.  Reservationsshall be handled in the same manner and subject to the same standards utilizedby Northwest for its own reservations. All reservations shall be made in the name of Northwest unless otherwiserequired by Governmental Regulations. Northwest shall be sole owner of any customer or passenger data relatingto the Scheduled Flights and related reservation services.  However, upon the reasonable request ofMesaba, Northwest will share such customer or passenger data relating to theScheduled Flights and related reservation services when reasonably necessary toresolve Customer/Passenger complaints or claims, or if Mesaba is required toproduce such customer or passenger data relating to the Scheduled Flights andrelated reservation services in response to a valid subpoena, order of a courtor other governmental body of the United States or any political subdivisionthereof (provided, however, that Mesaba shall have given notice to Northwest andshall allow Northwest to make a reasonable effort to obtain a protective orderrequiring that such information so disclosed shall be used only for thepurposes for which the order was issued) or if otherwise required by law, or ifnecessary to establish rights or enforce obligations under this Agreement.

 

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**Section 4.07     Ticketing Services and TicketingProcedures**.

 

### (a)                                  TicketingServices.  At all of its ticketinglocations, Northwest shall, ***, sell, issue and exchange tickets for passengerair transportation on all Scheduled Flights to be operated pursuant to thisAgreement utilizing Northwest ticket stock and all related accounting formsprinted with the Northwest logo, name and format (“Northwest Tickets”).  Northwest hereby appoints Mesaba as itsagent, and Mesaba hereby agrees to act as Northwest’s agent, at all Mesabaticketing locations in connection with the sale and issuance of all passengertickets by Mesaba and with the same duties owed to Northwest in that capacityas is customary in the industry between airlines.  At all of its ticketing locations, Mesabashall sell, issue and exchange Northwest Tickets for passenger airtransportation on all Scheduled Flights to be operated pursuant to this Agreementand to be provided by and over the routes of Northwest (collectively, “TicketingServices”).  Nothing in this Section 4.07(a) shallbe deemed to alter or conflict with the provisions of Section 9.01hereof.  Air carriers and other agenciesother than Northwest may also issue tickets for travel to be performed byMesaba.

###  

### (b)                                 Bookingand Ticketing Procedures.  Theprocedures followed and standards applied by Mesaba in booking flights andperforming the Ticketing Services shall conform in all material respects toNorthwest’s own tariffs, procedures and standards applicable to the booking ofNorthwest flights and the issuance of Northwest Tickets and to the collectionand remittance of the proceeds of such sales. Mesaba employees booking flights and performing Ticketing Services shalladhere to Northwest’s procedures and standards as shall be provided to Mesabain writing.  In accordance with Section 8.02below, Mesaba shall be responsible for collecting and shall pay to Northwestany Ticket Taxes and Fees required to be collected under applicable law onTickets sold by Mesaba utilizing Northwest ticket stock.

###  

### (c)                                  FrequentFlyer Program.  Mesaba agrees toaccept Northwest frequent flyer tickets and to provide transportation servicespursuant to such tickets at no charge to Northwest.  All travel under the frequent flyer programsolely on Mesaba shall entitle a passenger to such credit as shall beequivalent to the credit offered on Northwest for comparable mileagesegments.  Northwest will provide such creditto members of its frequent flyer program who travel on Mesaba at no charge toMesaba.

###  

### (d)                                 Supplies.  Northwest shall, ***, provide an adequatesupply of ticket office forms and specialized supplies (such as baggage tags,but excluding normal office supplies such as paper, stationery, envelopes, memopads and the like) bearing the NW Identification for use by Mesaba subject tothe applicable provisions of Article VII below.

###  

### (e)                                  TicketingCosts.  All travel agency commissionsattributable to Scheduled Flights shall be ***. *** shall pay all computer reservation system fees attributable topassengers on Scheduled Flights.  ***.

###  

**Section 4.08     BaggageHandling Procedures**.  For Regional Airline Services utilizing theSaab 340 Aircraft, “Baggage Handling Procedures” shall consist of thefollowing:

 

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#### (a)                                  Atall Northwest Service Cities and Hub Cities, Mesaba and Northwest shallexchange and transfer baggage in accordance with procedures to be mutually agreedupon and generally utilized by the parties.

####  

#### (b)                                 Subjectto Section 4.02(c) above with respect to technological improvements,the procedures utilized by Mesaba in performing such Baggage Handling Servicesshall conform in all respects to Northwest’s own standards and procedures asadapted to Mesaba’s Aircraft and operations.

####  

(c)                                  With respect tobaggage claims, Mesaba shall be responsible for all baggage claim expenses atMesaba Service Cities, and Northwest shall be responsible for all baggage claimexpenses at Hub Cities and at Northwest Service Cities.  Mesaba will make available at the request ofany passenger excess valuation insurance, if any, offered by Northwest to theextent such insurance covers Mesaba’s flights and Northwest’s flights.

 

**Section 4.09     AirCargo Handling Services**.  “Air Cargo Handling Services” shall consistof the following:

 

### (a)                                  Ateach location at which Northwest operates Ticketing Services, Northwest shall ***accept Air Cargo for shipment on flights to be operated by and over the routesof Mesaba or Northwest. Northwest shall issue air waybills covering Air Cargoand shall prepare a “Transfer Manifest” for each Mesaba flight on which thereshall be an Air Cargo shipment which transfer manifest shall set forth all AirCargo to be carried on the flight.

###  

### (b)                                 Northwesthereby appoints Mesaba as its agent, and Mesaba hereby agrees to act asNorthwest’s agent, at all Mesaba ticketing locations in connection with thesale and issuance of all air waybills by Mesaba and with the same duties owedto Northwest in that capacity as is customary in the industry betweenairlines.  Mesaba agrees to observe allNorthwest procedures and standards applicable to the issuance of air waybillsand to the collection and remittance of the proceeds of such sales.  Mesaba employees performing such duties shalladhere to Northwest’s procedures and standards as shall be provided to Mesabain writing.  In accordance with Section 8.02below, Mesaba shall be responsible for collecting and shall pay to Northwestany applicable Ticket Taxes and Fees required to be collected under applicablelaw on air waybills sold by Mesaba utilizing Northwest air waybills.  Nothing in this Section 4.09(b) shallbe deemed to alter or conflict with the provisions of Section 9.01hereof.  Air carriers other thanNorthwest may also issue air waybills for cargo transportation to be performedby Mesaba.

###  

### (c)                                  AtMesaba’s ticketing locations, Mesaba shall provide Air Cargo handling services inconnection with the Regional Airline Services for and on behalf of Northwestfor Air Cargo carried solely on Mesaba or on both a Mesaba flight and aNorthwest flight.  Such handling servicesshall be performed in accordance with Northwest’s procedures and standards asprovided to Mesaba in writing, including but not limited to (1) acceptingall Air Cargo in accordance with Northwest’s procedures with the followingexceptions (items that will not be accepted):

 

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##### (i)                                     RestrictedArticles (dry ice will be accepted at a maximum of 5 pounds per container forrefrigeration only),

#####  

##### (ii)                                  Articles having adeclared value exceeding $***USD or more,

#####  

##### (iii)                               Adult human remainsother than cremated,

#####  

##### (iv)                              Air Cargo shipmentshaving pieces weighing more than ***pounds.  VIP express cargo having piecesweighing more than *** pounds,

#####  

### unless otherwise mutuallyagreed, and (2) keeping facilities open at least *** hours before and ***after each Scheduled Flight for customers to deliver and pick up Air Cargo.  Air Cargo will be accepted until *** prior to departure.

###  

### (d)                                 ForAir Cargo carried solely on Mesaba or on both a Mesaba flight and a Northwestflight, Mesaba and Northwest shall charge rates in accordance with Northwest’sapplicable rates and tariffs; such revenues shall be allocated between theparties in accordance with Section 5.01 below.

###  

### (e)                                  Forpurposes of Air Cargo claims, Mesaba will be treated as if it were a party tostandard industry ticketing and baggage agreements with Northwest and other aircarriers, provided that all damage claims involving routing on both Northwestand Mesaba will be determined and managed by Northwest’s cargo claimsdepartment.  If Northwest determinesMesaba is liable for the loss, the claim will be forwarded to Mesaba for reviewand reimbursement to Northwest.

###  

### (f)                                    Northwestshall, at its sole expense, supply Mesaba with all necessary Air Cargo formsand supplies in an agreed upon form with the NW Identification, subject to theapplicable provisions of Article VII below.  Northwest and Mesaba shall utilize such formsand supplies when accepting Air Cargo for transport on Mesaba’s flights.

###  

### (g)                                 Mesabaagrees that it shall provide necessary training to its employees to satisfyNorthwest’s requirements for training of employees with respect to Air Cargo;provided that if Northwest makes any material changes in its training programfollowing the Effective Date, Northwest shall reimburse Mesaba for anyincremental costs Mesaba incurs as a result of its compliance with such changesto the training program.

###  

**Section 4.10     Useof COMAT**.  Northwestand Mesaba shall each provide to the other, at no cost to the other and on anon-discriminatory basis, access to its respective COMAT system for themovement and acquisition of priority aircraft maintenance parts and othercompany material.  Northwest’s failure todeliver timely a maintenance component via COMAT, whether timely or at all,shall not cause an affected Scheduled Flight to be excluded in calculatingMesaba’s on-time performance and completion factors.  All access shall be consistent with Northwest’sand Mesaba’s respective published COMAT procedures and policies, as amendedfrom time to time.  Northwest shallprovide to Mesaba on a non-discriminatory basis, access to Northwest’s VIPexpress cargo service at a cost of $***USD per piece.

 

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**Section 4.11     Slotsand Route Authorities**.  During the Term of this Agreement or upon theexpiration or termination of this Agreement, Northwest may, in its solediscretion, require Mesaba to transfer to Northwest or its designee at nocharge any airport takeoff or landing slots, route authorities or otherregulatory authorities as Northwest shall designate which have been or arebeing used for Regional Airlines Services under this Agreement, provided thatif Mesaba is operating Regional Airline Services at a Service City pursuant tothe DOT’s Essential Air Service (“EAS”) program on behalf of Northwest, uponthe expiration or termination of this Agreement, Northwest will obtain anotheroperator to provide air service to such city and the parties will cooperate ingood faith to transfer the EAS designation and air service responsibility tothe new operator.

 

**Section 4.12     EmergencyResponse and Family Assistance**.  Northwest and Mesaba have entered into a FamilyAssistance Services Agreement, dated March 1, 2005, and retroactivelyeffective as of April 1, 2004, with respect to emergency response andfamily assistance services to be provided to Mesaba by Northwest in connectionwith the Regional Airlines Services operated under this Agreement.

 

**Section 4.13     TechnologyImprovements**. In the event Northwest begins utilizing new technology, tools, systemsor procedures for the provision of Regional Airline Services, Mesaba will alsoutilize such new technology, tools, systems or procedures for performing RegionalAirline Services, provided that the net present value of any required capitalinvestment by Mesaba is zero or positive at Mesaba’s cost of capital.

 

**ARTICLE V    REVENUES,PAYMENTS AND SETOFF**

 

**Section 5.01     Revenues**.  Mesaba acknowledges and agrees thatall revenues resulting from the sale and issuance of passenger tickets andcargo air waybills associated with the operation of the Aircraft and all othersources of revenue associated with the operation of the Aircraft are the soleproperty of Northwest, including without limitation ticket change fees andother fees or charges which are applicable pursuant to Northwest’s tariffs, fuelsurcharges, governmental subsidies, revenue guarantees, unaccompanied minorfees, snack/beverage services, luggage fees, advertising revenue, excessbaggage fees and nonrevenue pass travel charges; provided, however, thatthrough June 30, 2007 (i) revenues from cargo air waybills associatedsolely with the operation of the Saab 340 Aircraft are the sole property ofMesaba, and (ii) revenues from cargo air waybills associated with cargocarried on both a Mesaba-operated flight and a Northwest-operated flight willbe divided in accordance with the Bilateral Prorate Cargo Agreement, dated December 21,1998, between Mesaba and Northwest, as amended from time to time.

 

In addition, Mesaba shall pay Northwest aone-time payment of $*** on the datethis Agreement is executed as additional consideration for placing the CRJ-200/440Aircraft at Mesaba.

 

**Section 5.02     Paymentsto Mesaba**.  Northwest will pay Mesaba for theRegional Airline Services in accordance with Exhibits C, D and E hereto.  The parties will negotiate in good faith withrespect to modifying Exhibits C and D to utilize the same payment methodologyas is used in Exhibit E.  Theparties intend to conclude these negotiations on or

 

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before December 31,2005.  In this regard, the parties agreethat (i) the transition of the Avro Regional Jet Aircraft and Saab 340Aircraft payment methodologies to the same methodology as used in Exhibit Ewill not change the financial outcome for either party with respect to the AvroRegional Jet Aircraft and the Saab 340 Aircraft through March 31, 2007, (ii) Mesaba’soperating expenses used to calculate the payment from Northwest for the AvroRegional Jet Aircraft and the Saab 340 Aircraft shall be *** through March 31, 2007 at theexpenses incurred for the twelve-month period ending March 31, 2005adjusted for average annual PPI percentage increases and adjusted for changesin fleet size, (iii) from the Effective Date until March 31, 2007 themargin with respect to the Avro Regional Jet Aircraft and the Saab 340 Aircraftshall remain unchanged from the margin for such Aircraft for the twelve-monthperiod ending March 31, 2005, (iv) after March 31, 2007, theMargin with respect to each Aircraft type shall be set at the Market MarginRate, as defined in Exhibit E, (v) after March 31, 2007,Northwest and Mesaba will share any Margin exceeding *** above the base target Margin on a *** basis, Mesaba’s Margin will be *** Margin and such Margin sharing and *** will be calculated on Mesaba’s totaloperating Margin, not per Aircraft type, (vi) in the event the AvroRegional Jet Aircraft are removed from Mesaba’s fleet, the parties shall resetthe then applicable overhead reimbursement rate, and (vii) the partieswill negotiate in good faith regarding system-wide service standards forcompletion factor and minimum on-time reliability to be effective after March 31,2007 with respect to Regional Airline Services operated by Mesaba, providedthat after December 31, 2006 incentive/penalty payments will not exceed *** of Margin.

 

**Section 5.03     Billing**.  Northwest and Mesaba shall bill each other ona monthly basis (or as otherwise agreed) in respect of amounts owed to eachother under this Agreement not contemplated under Exhibits C, D or E.  If such billed items are not paid by theparty within sixty (60) days of the statement date, the aggregate amount ofundisputed items may be offset against or included in the next scheduled wiretransfer pursuant to Exhibits C, D or E. Disputed amounts must be paid when the dispute is resolved, providedthat such amount may be set off against or included in the next scheduled wiretransfer pursuant to Exhibits C, D or E if the formerly disputed amount is notpaid within seven (7) days of resolution. Northwest may also offset against the next scheduled wire transferpursuant to Exhibits C, D or E the amount of any payment (including those underany Lease) with respect to which Mesaba shall have defaulted and shall havefailed to cure before the expiration of any applicable grace period.

 

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**Section 5.04     Credit Card Chargebacks**.

 

### (a)           Mesaba shall be billed for creditcard chargebacks resulting from Mesaba’s noncompliance with Northwest’s creditcard acceptance procedures.  Northwestshall apply the same card acceptance procedures and standards to Mesaba asapplied to Northwest by Northwest’s credit card contractors.  Northwest will inform Mesaba in writingregarding any material changes in Northwest’s agreements with its credit cardcontractors to the extent such changes will impact the procedures and standardsto be applied by Mesaba.

###  

### (b)           Withrespect to all credit card charge forms returned to Mesaba by Northwest,Northwest will furnish Mesaba with a complete written explanation of the reasontherefore accompanied by relevant documentation received from the credit cardissuer or credit card holder.

###  

### (c)           Upon receipt of a chargeback, Mesabashall have a reasonable period of time, but not to exceed 60 days, to reviewthe validity of the chargeback notice. If the chargeback is valid (within the scope of the circumstances forthe chargeback), Mesaba shall remit to Northwest a gross amount equal to suchcredit card charge form.  If, in Mesaba’sgood faith opinion, the chargeback is not valid, Mesaba will so notifyNorthwest and provide Northwest with a complete written explanation of thetransaction together with any necessary supporting documentation within the 60-dayperiod.

###  

### (d)           All revisions to Northwest’s creditcard acceptance procedures must be in writing and must be submitted to Mesabaat least 30 days in advance of the effective date of such procedures or suchshorter notification period as Northwest may utilize in notifying its ownpersonnel.  All warning notices must becurrent and stored in Northwest’s computerized reservation credit card checksystem and accessible to Mesaba on the transaction date.

###  

**Section 5.05     Returned Checks**.

 

### (a)           Mesaba shall be billed pursuant to Section 5.04above for all returned checks resulting from Mesaba’s non-compliance withNorthwest’s check acceptance procedures.

###  

### (b)           Northwest will furnish Mesaba with acomplete written explanation of the reason therefore, accompanied with therelevant documentation.

###  

### (c)           Mesaba shall refund Northwest thefull amount of the dishonored check within 30 days.  If, in Mesaba’s reasonable opinion, thecharge is not valid, Mesaba will so notify Northwest and provide Northwest witha complete written explanation of the transaction together with any necessarysupporting documentation within the 30-day period.

###  

### (d)           All revisions to Northwest’s checkacceptance procedures will be in writing and will be submitted to Mesaba atleast 30 days in advance of the effective date of such procedures or suchshorter notification period as Northwest may utilize in notifying its ownpersonnel.

 

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**ARTICLE VI    REPORTING OBLIGATIONS, AUDITING, INSPECTIONS AND CONFIDENTIALITY/PUBLICITY**

 

**Section 6.01     Reporting Obligations**.

 

### (a)                                  CertainNotices to Northwest.  Mesaba shallgive prompt written notice to Northwest of (i) any litigation involving anuninsured claim of more than $***against Mesaba, (ii) any proceeding before any governmental agency which,if adversely determined, would materially and adversely affect Mesaba’sfinancial condition, affairs, operations or prospects, including but notlimited to any significant FAA enforcement or civil penalty action, and (iii) anyother matter which would materially and adversely affect the financialcondition, affairs, operations or prospects of Mesaba or its ability to performits obligations under this Agreement.

###  

### (b)                                 Financialand Reporting Covenants.  Mesabashall provide to Northwest promptly following the filing or providing thereofcopies of all financial statements, reports, notices and proxy statements filedwith or provided to the Securities and Exchange Commission or the United StatesDepartment of Transportation.  Mesabashall also promptly provide to Northwest notice of and adequate informationregarding any material weaknesses noted in any management letters received by Mesabaor its Affiliates from its independent auditors and the company’s responsesthereto.  Mesaba shall also provideNorthwest with monthly financial statements, annual expense budgets andperiodic business plans and related projections.  Mesaba shall not be required to provide anyof the foregoing information to Northwest if such information is publiclyavailable and accessible by Northwest.

###  

### (c)                                  CertainNotices to Mesaba.  Northwest shallreport to Mesaba not later than the last day of each month the number ofcustomer complaints, the completion factor and on-time factor for the previousmonth related to the Regional Airline Services provided hereunder.  Upon the reasonable prior written request byMesaba, Northwest shall make available its books and records related tocustomer complaints in connection with the Regional Airline Services providedhereunder.

###  

**Section 6.02     Audits**.

 

### (a)                                  ComplianceAudits.  Upon the reasonable priorwritten request by Northwest, Mesaba shall make available its books and records,including but not limited to general ledger backup (monthly) for financialstatements and records for operations with respect to this Agreement.  Northwest shall also be entitled to makecopies and notes of such information as it deems necessary and to discuss suchrecords and the finances and accounts of Mesaba with the Chief FinancialOfficer or other employee or agent of Mesaba knowledgeable about suchrecords.  Any audit completed incompliance with this Section 6.02(a) shall be conducted asfollows:  (i) Northwest shall givenot less than thirty (30) days written notice to Mesaba of its intention toaudit Mesaba’s books and records, including a request list of the books andrecords that are to be made available; (ii) Northwest shall have the rightto audit the first nine (9) months of Mesaba’s fiscal year at any timeafter December 31; and (iii) Northwest shall have the right to auditthe last three (3) months of Mesaba’s fiscal year at any time, providedthat all issues

 

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### identified in the audit for afiscal year be finally completed by May 15 of the following fiscalyear.  If the audit has not beencompleted within the time period described above, Northwest forever waives itsaudit rights for the relevant fiscal year.   Northwest and Mesaba agree that all payments or reimbursements from oneparty to the other resulting from any audit conducted under this Agreementshall relate only to services, goods or payments to be performed, provided, ormade during the period under audit.  Forthe avoidance of doubt and notwithstanding the foregoing, nothing in this Section 6.02(a) shallpreclude Northwest from bringing a breach of contract claim against Mesaba withrespect to matters discovered in an audit or otherwise (even if such matter(s)relates to a period previously audited or no longer subject to audit).

###  

### (b)                                 InventoryAudits.  At Northwest’s request, duringthe term of this Agreement Mesaba and Northwest shall conduct an annualinventory audit of all spare parts, tooling and ground support equipment ownedby Northwest and leased to Mesaba or owned by Northwest and supplied to Mesaba.  Such audit shall not be requested more thanone time per calendar year.  Inconducting such audit, the parties shall tabulate the quantity and type of allspare parts and ground support equipment including recognition of spare partsand ground support equipment which were scrapped in the preceding year(s). Suchaudit, when completed and agreed to by both parties, shall be final.

###  

**Section 6.03     Inspections**.  Northwest shall be entitled to conducton-site observations of Mesaba’s in-flight service, flight, maintenance,technical operations, gate-check in service, ground operations, Aircraftcleaning and any and all other services and operations performed under thisAgreement to monitor Mesaba’s operations in the same manner as similarfunctions are evaluated at Northwest. The purpose of such inspections shall be to determine Mesaba’scompliance with applicable Governmental Regulations, state and local laws,equipment manufacturer’s instructions and the standards established by thisAgreement.  Mesaba’s operation will beevaluated according to the same standard as Northwest taking into account thedifferences in size and operational capabilities between the two airlines.  Such inspections may be announced or unannounced,but under no circumstances shall they interfere with the operation of Mesaba’sbusiness.  Northwest shall report thefindings of any such inspection to Mesaba in writing.  Mesaba shall provide a timely writtenresponse detailing a plan of corrective action to remedy any deficiencies notedin an inspection.  If any deficiencycomes to the attention of Mesaba through audits or any other means, Mesabashall take immediate corrective action.

 

**Section 6.04     Confidentiality/Publicity**.  Each of Northwest and Mesaba agrees that,except as otherwise required by Governmental Regulations or any otherapplicable law, it shall not disclose to others and shall keep confidential theterms of this Agreement and any confidential, non-public information concerningthe other that it obtains as a result of or pursuant to this Agreement.  The Parties agree, however, that each Partymay share this Agreement, and the terms and details herein, with its respectiveoutside financial auditors or attorneys without the consent of the other Party,and without breach or violation of this Section 6.04 or thisAgreement.  Mesaba shall not issue anypress release or public announcement relating to new Scheduled Flights, thecessation of Scheduled Flights in any Service City, schedule changes,customer initiatives, marketing programs or promotions, without Northwest’sprior written approval of the press release or public announcement.  In any such press release or publicannouncement, Mesaba shall identify itself as a Northwest Airlink carrier.

 

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**ARTICLE VII    NORTHWEST IDENTIFICATION**

 

**Section 7.01     IdentificationLicense**.  Northwesthereby grants to Mesaba a non-exclusive, non-transferable, non-sublicensablelicense to use the NW Identification in connection with its operation of theRegional Airline Services as authorized hereunder.

 

**Section 7.02     DesignatorLicense**.  Northwesthereby grants to Mesaba a non-exclusive, non-transferable, non-sublicensablelicense to use the Designator in connection with its operation of the ScheduledFlights as authorized hereunder.

 

**Section 7.03     NewIdentifications**. From time to time in its sole discretion, Northwest may change any NWIdentifications and/or Designators upon notice to Mesaba.  After receipt of such notice, Mesaba shall,as soon as practicable, but no later than thirty (30) days thereafter, commenceuse solely of the new NW Identifications and/or Designators and cease all useof any superseded ones.  Northwest shallreimburse Mesaba for the reasonable out-of-pocket expenses incurred by Mesabain making such changes.

 

**Section 7.04     Useof Identification**. Northwest shall have exclusive control over the use and display of allNW Identifications and Designators, and Mesaba shall comply with all policiesand guidelines of Northwest in this regard.  Mesaba shall use the NW Identifications and Designators in good faith,in a dignified manner and in compliance with good trademark practice.  Mesaba shall use the NW Identifications andDesignators exactly as prescribed by Northwest, and shall not use (i) anystylization, abbreviation or variation thereof or (ii) the NWIdentifications and Designators in connection or combination with any otherIdentification, in each case, without Northwest’s prior written consent, whichmay be withheld in its sole discretion.

 

**Section 7.05     QualityControl**.  Mesabashall use the NW Identifications and Designators only in connection withproducts and services that comply with the high standards of quality associatedwith Northwest. At Northwest’s request, Mesaba shall submit representativesamples to Northwest of all uses by Mesaba of the NW Identifications andDesignators pursuant to this Agreement, including Sections 2.02, 4.03(f), 4.07(d) and4.09(e).  Mesaba shall receive the priorwritten approval of Northwest for any new uses of the NW Identifications andDesignators, including on any advertising and promotional materials.  Once such approval is received, Mesaba neednot resubmit such materials for approval unless they contain non-trivialmodifications.

 

**Section 7.06     Reservation of Rights**.  All rights not expressly granted to Mesabahereunder are expressly reserved by Northwest, including without limitation theright to use or license others to use any NW Identifications or Designators.  Mesaba shall not use the NW Identification orDesignator except as expressly authorized herein, and has no right to use anyother Identification of Northwest other than the specific NW Identification inthe exact form prescribed by Northwest from time to time.

 

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**Section 7.07     Ownership**.  Mesaba hereby acknowledges that, as betweenthe parties, Northwest is the sole owner of the names “Northwest” and “NorthwestAirlink,” the initials “NW,” and any Designators or NW Identifications relatedthereto or otherwise licensed to Mesaba hereunder.  Mesaba agrees not to directly or indirectlyquestion attack, contest or impugn the validity and/or Northwest’s rights inthe Designators and NW Identifications, including without limitation byattempting to register title to or any intellectual property rights in same orby participating in any action or proceeding adverse to Northwest in thisregard.  Mesaba agrees to cooperate fullywith Northwest in all actions to enforce, police and defend Northwest’s rightsin the Designators and NW Identifications, subject to reimbursement for itsout-of-pocket expenses.

 

**Section 7.08     Termination**.  Should this Agreement expire or terminate forany reason, the licenses in Sections 7.01 and 7.02 shall immediately terminate(although Sections 7.07 and 7.08 shall survive), and Mesaba shall promptly, butin any event within ninety (90) days (one hundred twenty (120) days withrespect to any distinctive color scheme), take all such actions as may benecessary to change its facilities, equipment, uniforms, supplies and othermaterials to cease all use of any Designators and NW Identifications and toavoid any customer confusion or the suggestion or appearance that Mesabacontinues to have an operating relationship with Northwest.

 

**Section 7.09     Bankruptcy**.  The parties intend that the identity ofMesaba as the licensee hereunder is a material condition to Northwest’sgranting of the licenses in 7.01 and 7.02, and that this Agreement should beconstrued overall as a contract for the personal services of Mesaba.  Therefore, in the event Mesaba becomessubject to a bankruptcy proceeding, the parties intend that this Agreementshall not be assumed and/or assigned by Mesaba or its representative withoutNorthwest’s consent.

 

**ARTICLE VIII    TAXES AND FEES**

 

**Section 8.01     Taxes and Fees**.

 

### (a)                                  Mesabashall be liable for and pay the amount of any taxes (other than Ticket Taxesand Fees which are addressed separately in Section 8.02 below), duties,license fees, assessments, and other charges, together with any interest andpenalties thereon, levied, assessed, or imposed by any federal, foreign, stateor local taxing or airport authority related or attributable to (i) theproperty owned or used by Mesaba, and (ii) the performance of RegionalAirline Services pursuant to this Agreement.

###  

### (b)                                 Excludedfrom the coverage of Section 8.01(a) are any taxes based on the netincome of Northwest.

 

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**Section 8.02     Ticket Taxes and Fees**.

 

### (a)                                  Forall sales by Mesaba using Northwest ticket stock or air waybills, Mesaba shallbe responsible for (1) collecting all Ticket Taxes and Fees, and (2) remittingsuch Ticket Taxes and Fees to Northwest at the same time as the revenues towhich the Ticket Taxes and Fees relate are received by Northwest.  Northwest then shall be responsible forremitting to the appropriate governmental entities and taxing authoritiesTicket Taxes and Fees remitted by Mesaba to Northwest.

###  

### (b)                                 Mesabashall indemnify, defend, and hold harmless Northwest and its current or formerofficers, directors, employees, agents, and its Affiliates (the “NW Indemnitees”)from and against all assessments or payments for Ticket Taxes and Fees relatedto all sales by Mesaba using Northwest ticket stock or air waybills, and anyinterest and/or penalties related thereto. This indemnification specifically includes, but is not limited to,assessments or payments under Sections 4261, 4263, 4271, 4291, 6662, 6672, 6861or 7275 of the Internal Revenue Code of 1986, as amended, and any successorprovisions.  Mesaba further agrees aspart of this indemnification to reimburse the NW Indemnitees for any reasonableout-of-pocket expenses, including attorneys’ fees and expenses, the NWIndemnitees have incurred in connection with any such assessment orpayment.  The obligations of Mesaba underthis Section 8.02(b) shall remain in effect and shall survive withoutlimitation the termination of this Agreement.

###  

**Section 8.03     Property Tax, Fuel Tax, and Sales and UseTax Compliance.**

 

(a)                                  With respect to fueltaxes, Northwest and Mesaba shall cooperate to ensure that Mesaba is filingappropriate fuel tax returns and refund claims to minimize Mesaba’s taxes.  Northwest shall determine which entity,Northwest or Mesaba, shall be responsible for preparing and filing appropriatefuel tax returns and refund claims. Unless Northwest determines otherwise and notifies Mesaba in writing,Mesaba shall be responsible for all Mesaba fuel tax filings and payments. Uponthe request of Northwest, Northwest shall be entitled to review any actual orproposed Mesaba fuel tax filings.  Mesabashall notify Northwest of the commencement of any fuel tax audit. Prior toresolving any fuel tax audit, Mesaba shall receive approval from Northwest toresolve any such audit.

 

(b)                                 With respect to salesand use taxes, Northwest and Mesaba shall cooperate to ensure that Mesaba isfiling appropriate sales and use tax returns and refund claims to minimizeMesaba’s taxes.  Northwest shalldetermine which entity, Northwest or Mesaba, shall be responsible for preparingand filing appropriate sales and use tax returns and refund claims.  Unless Northwest determines otherwise andnotifies Mesaba in writing, Mesaba shall be responsible for all Mesaba salesand use tax filings and payments.  Uponthe request of Northwest, Northwest shall be entitled to review any actual orproposed Mesaba sales and use tax filings. Mesaba shall notify Northwest of thecommencement of any sales or use tax audit. Prior to resolving any sales or usetax audit, Mesaba shall receive approval from Northwest to resolve any suchaudit.

 

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(c)                                  Tothe extent requested by Northwest, Mesaba shall cooperate with Northwest tominimize Mesaba’s property, fuel, excise, sales, use, value-added, or similartransactional taxes.  Mesaba shall ingood faith and using reasonable best efforts supply Northwest with suchinformation and documents reasonably requested by Northwest to minimize Mesaba’sproperty, fuel, excise, sales, use, value-added, or similar transactionaltaxes.  Unless Northwest determinesotherwise, Mesaba shall use its reasonable best efforts to seek any and allapplicable refunds or credits of excise, sales, use, value-added, or similartransactional taxes paid by Mesaba.

 

**Section 8.04     Refundsof Tax**.  Tothe extent Northwest prepares and/or is responsible for pursuing any refunds orrefund claims related to Mesaba’s aviation fuel, excise, sales, use,value-added or similar transactional taxes, Northwest shall be entitled toretain *** of the amount of anysuch refund, credit or other benefit.  Tothe extent Mesaba prepares or is responsible for pursuing any such refunds orrefund claims, Mesaba shall retain ***of the amount of any such refund, credit or other benefit (inclusive ofinterest) it receives, and the remaining *** (inclusive of interest) shall be paid to Northwest within ten (10) daysof its receipt or recognition of benefit by Mesaba.  Any refunds, credits or other benefitsreceived related to Mesaba’s property taxes on Avro Regional Jet Aircraft andaircraft parts will be remitted to Northwest within ten (10) days of itsreceipt or recognition of benefit by Mesaba. All other refunds, credits or other benefits received related to Mesaba’sproperty taxes will be retained by Mesaba.

 

**ARTICLE IX    LIABILITY, INDEMNIFICATION AND INSURANCE**

 

**Section 9.01     IndependentContractor**.

 

(a)                                  Exceptfor the limited purpose described in Section 5.01 hereof, Mesaba shall actas an independent contractor.  Theemployees, agents and/or independent contractors of Mesaba engaged inperforming any of the services Mesaba is obligated to perform pursuant to thisAgreement shall be employees, agents and independent contractors of Mesaba forall purposes and under no circumstances shall employees, agents or independentcontractors of Mesaba be deemed to be employees, agents or independentcontractors of Northwest.  Except for thelimited purpose described in Section 5.01 hereof, in its performance ofobligations under this Agreement, Mesaba shall act, for all purposes, as anindependent contractor and not as an agent for Northwest.  Northwest shall have no supervisory power orcontrol over any employees, agents or independent contractors engaged by Mesabain connection with Mesaba’s performance of its obligations hereunder, and allcomplaints or requested changes in procedure shall, in all events, betransmitted by Northwest to a designated representative of Mesaba.  Nothing contained in this Agreement isintended to limit or condition Mesaba’s control over its operation or theconduct of its business as an air carrier, and Mesaba assumes all risks offinancial losses which may result from the operation of the air services to beprovided by Mesaba hereunder.

 

### (b)                                 Northwestshall act as an independent contractor. The employees, agents and/orindependent contractors of Northwest engaged in performing any of the servicesNorthwest is to perform pursuant to this Agreement shall be employees, agentsand independent

 

42

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### contractors of Northwest forall purposes and under no circumstances shall employees, agents and independentcontractors of Northwest be deemed to be employees, agents or independentcontractors of Mesaba.  In performing itsobligations under this Agreement, Northwest shall act, for all purposes, as anindependent contractor and not as an agent for Mesaba.  Mesaba shall have no supervisory power orcontrol over any employees, agents or independent contractors engaged byNorthwest in connection with the performance of its obligations hereunder, andall complaints or requested changes in procedure shall, in all events, betransmitted by Mesaba to a designated representative of Northwest.  Nothing contained in this Agreement isintended to limit or condition Northwest’s control over its operation or theconduct of its business as an air carrier.

###  

**Section 9.02     Indemnification**.

 

### (a)                                  Eachparty assumes full responsibility for any and all liability to its ownofficers, employees or agents on account of injury or death resulting from orsustained in the performance of their respective services under this Agreement.  Each party shall indemnify, defend, protect,save and hold harmless the other party, its officers, employees, and agentsfrom and against any and all liabilities, claims, demands, suits, judgments,damages and losses (including the costs, fees and expenses in connectiontherewith and incident thereto) brought against the other party, its officers,employees or agents by or on behalf of any other person, by reason of damage toor destruction of property of any such person, or injury to or death of suchperson, caused by or arising out of any act or omission by the indemnifyingparty occurring while this Agreement is in effect.  Notwithstanding the foregoing, neither partyshall be liable for indemnifying the other for claims of third parties if causedby the gross negligence or willful misconduct of the other.  Each party shall give the other party promptand timely notice if it has actual knowledge of any claim made or suitinstituted against the other party which in any way results in indemnificationhereunder, and the other party shall have the right to compromise orparticipate in the defense of such claim or suit to the extent of its owninterest.

###  

(b)                                 Eachparty (“Party A”) agrees that it will not seek damages from the other party (“PartyB”) or make a claim against Party B if Party B causes damage to an aircraftoperated by Party A; provided, however, that if Northwest subcontracts itsresponsibility to perform part or all of the Ground Handling Functions to athird party vendor, Northwest shall indemnify Mesaba against any physical lossof or damage to the Aircraft caused by the negligent act or omission of suchvendor in performing such ground handling functions, and further provided thatNorthwest’s liability pursuant to this provision shall be limited to an amountnot exceeding the amount of the deductible with respect to such Aircraft underMesaba’s hull risk insurance policy, except that loss or damage in respect ofany incident below $*** shallnot be indemnified.  Neither party shallbe liable to the other for any consequential loss or damage arising fromphysical loss of or damage to aircraft, and neither party shall make any claimagainst the other regarding any liability in respect of any and all suchconsequential loss or damage arising from physical loss of or damage to aircraft.

 

(c)                                  IfMesaba joins a fuel consortium at a Service City at the request of Northwest, (i) Mesabashall indemnify Northwest against any liabilities, claims, demands, suits,judgments, fines, penalties, damages and losses (including the costs, fees andexpenses in connection therewith and incident thereto) brought againstNorthwest, its officers, employees or agents by or on behalf of any otherperson, by reason of fuel spills, fuel leaks or other fuel-related

 

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environmental damage, including but not limited to assessment, cleanup,remediation and natural resource damages, caused by or arising out of any actor omission by Mesaba occurring while this Agreement is in effect, and (ii) Northwestshall indemnify Mesaba against any liabilities, claims, demands, suits,judgments, fines, penalties, damages and losses (including the costs, fees andexpenses in connection therewith and incident thereto) brought against Mesaba,its officers, employees or agents by or on behalf of any other person, byreason of fuel spills, fuel leaks or other fuel-related environmental damage,including but not limited to assessment, cleanup, remediation and naturalresource damages, caused by or arising out of any act or omission by Northwestor by any other party to such fuel consortium occurring while this Agreement isin effect.

 

(d)                                 Theobligations of Mesaba and Northwest under the indemnity and insuranceprovisions contained herein shall remain in effect and shall survive withoutlimitation the termination of this Agreement with respect to any occurrence orclaims arising during the term of or in connection with this Agreement.

 

**Section 9.03     Insurance**.

 

(a)                                  Mesabaagrees, at its sole expense, to maintain in full force and effect the followinginsurance coverage with respect to Regional Airline Services:

 

(1)                                  Workers’compensation and occupational disease insurance, subject to the laws of thestates wherein this Agreement is being performed.  Such coverage shall include employersliability insurance with a minimum limit of $***.

 

(2)                                  Comprehensiveaviation bodily injury and property damage liability insurance with limits ofnot less than $*** (but limitsnot greater than the amount of Northwest’s coverage) combined single limit peroccurrence (or such other minimum amount as may be reasonably requested byNorthwest from time to time and as Mesaba may obtain on a commerciallyreasonable basis in the event Mesaba no longer obtains airline liabilityinsurance coverage as part of the Northwest’s aviation insurance placement),including, but not limited to, aircraft liability, passenger legal liability,premises and property damage liability, hangar keepers liability and baggageand cargo liability.  Such insuranceshall include personal injury and contractual liability, and shall also includewar risk and allied perils, hijack and confiscation coverage with a limit ofnot less than $*** (but limitsnot greater than the amount of Northwest’s coverage) per incident (or suchother minimum amount as may be reasonably requested by Northwest from time totime and as Mesaba may obtain on a commercially reasonable basis in the eventMesaba no longer obtains airline liability insurance coverage as part of theNorthwest’s aviation insurance placement). In the event Northwest requires Mesaba to increase its insurance limits,Northwest agrees that any incremental costs incurred by Mesaba as a result ofincreasing such limits (other than incremental costs associated with Mesabaunilaterally changing deductibles) will be reimbursed by Northwest.

 

(3)                                  Allrisk hull insurance on the Aircraft, including hull war risk coverage asrequired by Northwest.

 

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### (b)                                 Priorto the commencement of Regional Airline Services under this Agreement and atleast annually thereafter, certificates of insurance in a form satisfactory toNorthwest shall be delivered to Northwest evidencing compliance with theinsurance terms of this Agreement.  Allof the above insurance shall be written through an insurance company orcompanies reasonably satisfactory to Northwest, and the certificates ofinsurance shall be of a type that unconditionally obligates the insurer tonotify Northwest in writing at least thirty (30) days (or such lesser period asmay be available for war peril coverage) in advance of the effective date inthe event of any material change in or cancellation of such insurance.  The policies of insurance required byparagraphs (2) and (3) of Section 9.03(a) shall providecoverage for events which occur during the policy period, are continuing innature and not on a claims made basis, and shall include endorsements thatprovide:

###  

(1)                                  Thatthe Underwriters acknowledge that the indemnification and hold harmlessprovisions of this Agreement are insured under Mesaba’s blanket contractualliability coverage.

 

(2)                                  ThatNorthwest, its officers, agents and employees are named as additional insuredsthereunder.

 

(3)                                  Thatthe insurance is primary with respect to the matters within such coverage,irrespective of any insurance carried by Northwest.

 

(4)                                  Thatwith respect to the interest of Northwest, the insurance shall not beinvalidated by any breach of warranty by Mesaba.

 

(5)                                  Thatprovide a severability of interest/cross liability endorsement.

 

(6)                                  Thatthe insurer shall waive its subrogation rights against Northwest, its officers,agents and employees.

 

(7)                                  Thatany waiver of rights of subrogation against other parties by Mesaba will notaffect the coverage provided with respect to Northwest.

 

The partiesacknowledge and agree that endorsements (2) through (7) above areonly applicable in the event Mesaba obtains liability insurance coverage thatis not part of Northwest’s aviation insurance placement.

 

### (c)                                  Inthe event the United States government reimburses Mesaba or its Affiliates forexcess insurance costs incurred as a result of the September 11, 2001terrorist attacks or other such occurrences, Mesaba will promptly remit toNorthwest any such reimbursement (including any applicable Margin Payment) thatis in excess of Mesaba’s actual additional insurance costs incurred as a resultof such event.  Northwest acknowledgesthat Mesaba’s obligation to remit such reimbursement is not triggered untilMesaba has achieved a cost-neutral position with respect to excess insurancecosts.

###  

### (d)                                 Northwestacknowledges that, to the extent Northwest has the ability to do so, Northwest willuse commercially reasonable efforts to allow Mesaba to continue to participatein Northwest’s insurance plan.

 

45

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**ARTICLE X    TERM AND TERMINATION**

 

**Section 10.01     Term**.  This Agreement shall commence on and shall beeffective as of August 29, 2005 (the “Effective Date”) and, unless earlierterminated as provided herein, shall continue in effect until May 1, 2015.

 

**Section 10.02     Termination by Either Party**.

 

(a)                                  Inthe event that Mesaba or Northwest (i) makes a general assignment for thebenefit of creditors or becomes insolvent, (ii) files a voluntary petitionin bankruptcy, (iii) petitions for or acquiesces in the appointment of anyreceiver, trustee or similar officer to liquidate or conserve its business orany substantial part of its assets, (iv) commences under the laws of anycompetent jurisdiction any proceeding involving its insolvency, bankruptcy,reorganization, readjustment of debt, dissolution, liquidation or any othersimilar proceeding for the relief of financially distressed debtors, (v) becomesthe object of any proceeding or action of the type described in (iii) or (iv) aboveand such proceeding or action remains undismissed or unstayed for a period ofat least thirty (30) days, or (vi) is divested of a substantial part ofits assets for a period of at least thirty (30) days, then Mesaba (in the eventthe foregoing occurs with respect to Northwest) or Northwest (in the event theforegoing occurs with respect to Mesaba) may by written notice terminate thisAgreement immediately.

 

### (b)                                 Exceptas otherwise provided in Section 10.03, in the event of a breach of anonmonetary provision of this Agreement by either party remaining uncured formore than thirty (30) days after the later of (i) receipt of writtennotification of such Default by the nondefaulting party, or in the case of abreach requiring more than thirty (30) days notice to cure, the defaultingparty does not begin and pursue with due diligence a method of cure withinthirty (30) days after receipt of written notification specifying in reasonabledetail the nature of such Default from the nondefaulting party, or (ii) ifthere is a Dispute (as such term is defined in Section 11.12 below) as towhether a breach has occurred, resolution (in accordance with Section 11.12below) of such Dispute finding a breach to have occurred, then the nondefaultingparty may terminate this Agreement at its sole option.

###  

### (c)                                  Inthe event of a breach of a monetary provision of this Agreement by either partyand such Default remaining uncured for more than seven (7) days after thelater of (i) receipt of written notification specifying in reasonabledetail the nature of such Default from the nondefaulting party, or (ii) ifthere is a Dispute (as such term is defined in Section 11.12 below) as towhether a breach has occurred, resolution (in accordance with Section 11.12below) of such Dispute finding a breach to have occurred, then thenondefaulting party may terminate this Agreement at its sole option.

###  

**Section 10.03     Terminationby Northwest**. Notwithstanding the provisions of Section 10.02(b), Northwest shallhave the right to terminate this Agreement immediately and at its sole optionif:

 

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#### (a)                                  Mesabashall default in the payment of any amount due under any Lease and such defaultshall continue for more than the period of grace, if any, specified therein andshall not have been waived.

####  

#### (b)                                 Mesabashall default with respect to any other terms of any Lease, such default shallcontinue for more than the period of grace, if any, specified therein and shallnot have been waived.

####  

#### (c)                                  Mesabashall fail to comply with the provisions of Section 9.03 and, as a resultthereof, the insurance required thereunder is not in effect.

####  

#### (d)                                 Mesabashall fail to comply with the provisions of Section 6.03.

####  

#### (e)                                  Morethan *** of the Aircraft do notoperate any Scheduled Flights for more than *** or *** of theAircraft do not operate any Scheduled Flights for more than ***, other than as a result of (1) anFAA order which grounds all commercial flights of all air carriers or grounds aspecific Aircraft type of all air carriers, (2) a scheduling action byNorthwest, or (3) Northwest’s inability to perform its obligations underthis Agreement as a result of a strike by Northwest employees.

####  

#### (f)                                    Mesaba’sFAA or DOT Certification is for any reason suspended or revoked or otherwisenot in full force and effect so as to permit Mesaba to perform the RegionalAirline Services required under this Agreement.

####  

#### (g)                                 A Mesaba Change ofControl shall have occurred.

####  

#### (h)                                 Mesabaor its Affiliate shall commence operating an aircraft type which causesNorthwest to be in violation of its collective bargaining agreement with itspilots.

####  

#### (i)                                     Theperson selected to replace John Spanjers as President of Mesaba and anysuccessor President of Mesaba, or the person selected to replace Paul Foley as Presidentand Chief Executive Officer of MAIR Holdings, Inc. and any successor ChiefExecutive Officer and President of MAIR Holdings, Inc., shall not bereasonably acceptable to Northwest.

####  

#### (j)                                     Withrespect to any Aircraft, such Aircraft shall have been removed from Mesaba’sfleet pursuant to the terms of Section 3.02(a)(ii) or (iii) hereof.  In such case, this Agreement shall beterminable by Northwest at its sole option only with respect to such Aircraft.

####  

(k)                                  MAIR Holdings, Inc.breaches the Agreement entered into by Northwest and MAIR Holdings, Inc.as of August 29, 2005 as amended from time to time.

 

**ARTICLE XI   **

 

**MISCELLANEOUS**

 

**Section 11.01     Limitationon Performance**. The obligation of either Northwest or Mesaba to perform under the termsof this Agreement shall be limited or modified

 

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by, and neither carrier shall be deemed to be in default hereunder as aresult of any of the following causes:

 

#### Acts of God orthe public enemy, civil war, insurrections or riots; fires, floods, explosions,embargoes, earthquakes or serious accidents, epidemics, or quarantinerestrictions; any act of government, governmental priorities, allocations,orders or Governmental Regulations affecting materials or facilities, inabilityafter due and timely diligence to procure materials, accessories, equipment orparts; or due to any other cause to the extent it is beyond that carrier’spractical control or not occasioned by that carrier’s fault or negligence.

####  

#### A labor strikeinvolving Northwest’s employees, or a cessation, slow-down or interruption ofwork, or any other labor disturbance that materially impacts Mesaba’s abilityto operate Regional Airline Services.

####  

**Section 11.02     MutualCooperation**. Northwest and Mesaba shall use their reasonable best efforts tocooperate with each other in performing their respective obligations under thisAgreement.

 

**Section 11.03     Representationsand Warranties**. Except as expressly set forth herein, neither Northwest nor Mesaba shallmake any representations or warranties, expressed or implied, under or inconnection with this Agreement.

 

**Section 11.04     Assignment**.  This Agreement may not be assigned by anyparty without the prior written consent of the other party.

 

**Section 11.05     GoverningLaw**.  ThisAgreement shall be governed in accordance with the laws of the State ofMinnesota, notwithstanding the choice of law provisions thereof.

 

**Section 11.06     Interlineand Other Agreements**.  Northwest agrees, to the extent it has theright to do so, to permit Mesaba to avail itself of all its rights, privilegesand amenities pursuant to its interline agreements and all industry trade orother agreements between Northwest and any other air carriers. Northwest shalltake all action and execute such documents as may be necessary to enable Mesabato avail itself of the maximum benefits afforded by such agreements.  Subject to Northwest’s prior writtenapproval, Mesaba may enter interline agreements with air carriers other thanthose air carriers covered by the two preceding sentences.

 

**Section 11.07     Notices**.  All notices given hereunder shall be given inwriting and shall be delivered in person or deposited in the United Statesmail, certified or registered mail, return receipt requested, with adequatepostage prepaid, or given by Mesaba courier, telex, facsimile, or otherexpedient written means, addressed as follows:

 
| If to Northwest: |   | Northwest Airlines, Inc.               |
|------------------|--------|---------------------------------------------|
|             |   | Department A6100                            |
|             |   | 2700 Lone Oak Parkway                       |
|             |   | Eagan, Minnesota 55121                      |
|             |   | Attn: Vice President – Market Planning |
|             |   | Facsimile No: (612) 727-7113                |

 

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| With copies to: |   | Northwest Airlines, Inc.               |
|-----------------|--------|---------------------------------------------|
|            |   | Department A1180                            |
|            |   | 2700 Lone Oak Parkway                       |
|            |   | Eagan, Minnesota 55121                      |
|            |   | Attn: General Counsel                       |
|            |   | Facsimile No: (612) 727-7123                |
|            |   |                                        |
|            |   | Northwest Airlines, Inc.               |
|            |   | Department A6030                            |
|            |   | 2700 Lone Oak Parkway                       |
|            |   | Eagan, Minnesota 55121                      |
|            |   | Attn: Managing Director of Airlink Planning |
|            |   | Facsimile No: (612) 727-7110                |
|            |   |                                        |
| If to Mesaba :  |   | Mesaba Aviation, Inc.                  |
|            |   | 1000 Blue Gentian Road, Suite 200      |
|            |   | Eagan, Minnesota 55121                      |
|            |   | Attn: President                             |
|            |   | Facsimile No: (651) 367-5360                |
|            |   |                                        |
| With a copy to: |   | MAIR Holdings, Inc.                    |
|            |   | 150 South Fifth Street, Suite 1360     |
|            |   | Minneapolis, MN 55402                       |
|            |   | Attn: Chief Executive Officer               |
|            |   | Facsimile No. (612) 333-0590           |

 

or to suchother address as the respective parties hereto shall designate by notice inwriting to the other party.  Noticesshall be deemed received and given on the date of delivery or the date ofrefusal of delivery as shown by the return receipt.

 

**Section 11.08     Parties**.  Except as provided to the contrary herein,this Agreement, and the rights and obligations created hereunder, shall bebinding upon and inure to the benefit of the respective parties hereto andtheir respective successors and permitted assigns.

 

**Section 11.09     Counterparts**.  This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original but all of which shall constituteone agreement.

 

**Section 11.10     Severability**.  If any term of this Agreement shall bejudicially determined to be illegal, invalid or unenforceable at law or inequity, it shall be deemed to be void and of no force and effect to the extentnecessary to bring such term within the provisions of any such applicable lawor laws, and such terms as so modified and the balance of the terms of thisAgreement shall remain enforceable.

 

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**Section 11.11     Captions,Section Headings and Table of Contents**.  Captions, section headings and the Tableof Contents used herein are for convenience only and are not a part of thisAgreement and shall not be used in construing it.

 

**Section 11.12     Dispute Resolution; Availability ofEquitable Remedies; Procedures**.

 

### (a)                                  Representatives.  Except as otherwise provided herein, if anydispute arises under or relates to this Agreement (a “Dispute”), at the writtenrequest of any party, each party will appoint a designated representative (the “Representative”)to meet for the purpose of resolving the dispute.  The Representatives will meet at a mutuallyagreeable place within ten (10) days after a party makes a written requestto the other for such a meeting.  TheRepresentatives will honor reasonable requests to exchange information relatedto the Dispute and will make a good faith effort to negotiate a resolution tothe Dispute.  Negotiations shall continueuntil the Dispute is resolved or until a party informs the others in writingthat negotiations will not result in a mutually acceptable resolution and anarbitrator should be appointed.

###  

### (b)                                 Arbitration.  If the Dispute is not resolved pursuant to Section 11.12(a),the Dispute (including any question arising as to whether or not any Disputefalls within the terms of this Section 11.12 or the selection ofarbitrators) shall be settled by arbitration in Minneapolis, Minnesota inaccordance with the CPR Rules for Non-Administrative Arbitration ofBusiness Disputes by one arbitrator.  Thearbitrator shall be appointed by the parties as provided by CPR Rule 5,Selection of Arbitrators.  Thearbitration procedure shall be governed by the United States Arbitration Act, 9U.S.C. §§ 1-16, and the award rendered by the arbitrator shall be finaland binding on the parties and may be entered in any court having jurisdictionthereof. Notwithstanding the foregoing, no party shall be required to submit toarbitration unless all parties necessary for complete relief have been joinedor consent to participate.

###  

### (c)                                  Discovery.  Each party shall have discovery rights asprovided by the Federal Rules of Civil Procedure; provided, however, thatall such discovery shall be commenced and concluded within ninety (90) days ofthe initiation of arbitration.

###  

### (d)                                 ExpeditiousProceedings.  It is the intent of theparties that any arbitration shall be concluded as quickly as reasonablypracticable.  Unless the partiesotherwise agree, once commenced, the hearing on the disputed matters shall beheld four (4) days a week until concluded, with each hearing date to beginat 9:00 a.m. and to conclude at 5:00 p.m.  The arbitrator shall use all reasonableefforts to issue the final award or awards within a period of fifteen (15)business days after closure of the proceedings. Failure of the arbitrator to meet the time limits of this Section 11.12(d) shallnot be a basis for challenging the award.

###  

### (e)                                  ArbitrationCosts.  If the party asserting aclaim is awarded 50% or more of the claimed amount, then that party shall bethe prevailing party and shall be entitled to receive all of its reasonablelegal fees and costs associated with the dispute.  If the asserting party receives less than 50%of the claimed amount, then the other party shall be the prevailing party andshall be entitled to receive all of its reasonable legal fees and costsassociated with the Dispute.  In theevent the parties cross-claim against one another, the arbitrator shallallocate

 

50

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### costs amongst the parties basedupon amounts paid pursuant to the final awards (i.e., those paying 30% of allawards shall pay 30% of all costs).

###  

### (f)                                    Enforcementof Awards.  Each party agrees thatany legal proceeding instituted to enforce an arbitration award hereunder willbe brought in a court of competent jurisdiction (either state or federal) inthe venue of the arbitration set forth in Section 11.12(b) and herebysubmits to personal jurisdiction therein and irrevocably waives any objectionas to venue therein, and further agrees not to plead or claim in any such courtthat any such proceeding has been brought in an inconvenient forum.

###  

### (g)                                 EquitableRelief.  Nothing herein shall beconstrued to prevent any party from seeking and, assuming appropriate legal standardsare met, obtaining equitable relief in any court of competent jurisdiction torestrain or prohibit any breach or threatened breach of any covenant of theparties set forth in this Agreement or any document executed in connectionherewith, whether or not the parties have first sought to resolve the disputethrough negotiation, mediation or arbitration pursuant to this Section 11.12.

###  

**Section 11.13     Exhibits**.  The Exhibits attached hereto are intended tobe an integral part of this Agreement and are incorporated into the Agreement byreference for all purposes.

 

**Section 11.14     Integrationand Entire Agreement**.  This Agreement (including the Exhibits), theAgreement entered into by Northwest and MAIR Holdings, Inc. as of August 29,2005 and the ancillary documents entered into in connection therewith areintended by the parties as a complete statement of the entire agreement andunderstanding of the parties with respect to the subject matter hereof and allmatters between the parties related to the subject matter herein and thereinset forth.  This Agreement may only beamended or modified by a written agreement between Mesaba, on the one hand, andNorthwest, on the other, which specifically references this Agreement andexpressly provides for such amendment.

 

**Section 11.15     Relationshipof Parties**. Nothing in this Agreement shall be interpreted or construed asestablishing between the parties a partnership, joint venture or other similararrangement.

 

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**Section 11.16     Terminationof Prior Agreements**.  The parties agree that the RJ Agreement andthe Saab Agreement are terminated as of the Effective Date; provided, however,the parties agree that their respective indemnification and payment obligationsarising under the RJ Agreement and the Saab Agreement with respect to servicesperformed prior to the Effective Date shall continue in effect in accordancewith the terms of such Agreements, and either party may exercise its rightsunder the respective indemnification and payment provisions of the RJ Agreementor the Saab Agreement, as the case may be, in order to cause the other party tocomply with the terms of such agreements.

 

IN WITNESSWHEREOF, Northwest and Mesaba have executed this Agreement as of the date firstset forth above.

 
| MESABA AVIATION, INC. | NORTHWEST AIRLINES, INC.              |
|-----------------------|---------------------------------------|
|                  |                                  |
| /s/ John G. Spanjers  |                                  | /s/ J. Timothy Griffin |   |
|                  |                                  |
| By:                   | John G. Spanjers                      | By: | J. Timothy Griffin |
|                  | President and Chief Operating Officer |   | Executive Vice President,  Marketing and Distribution |
|                       |                                       |  |  |  |  |

 

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**EXHIBIT A-1**

 

**AIRCRAFT LEASE FORM**

 

**SUBLEASE AGREEMENT[NW 2005        ]**

 

**Dated as of**

 

**[        ],2005**

 

**Between**

 

**NORTHWEST AIRLINES, INC.,**                     *Sublessor*

 

**AND**

 

**MESABA AVIATION, INC.,***                      Sublessee*

 

**One Bombardier Inc. Canadair Regional JetModel CL-600-2B19 Aircraft**

 

A1-1

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TABLE OF CONTENTS TO SUBLEASEAGREEMENT [NW 2005         ]

 
| SECTION 1.  | *Definitions.*                                                               |   |
|------------------|------------------------------------------------------------------------------|--------|
| SECTION 2.  | *Acceptance and Sublease.*                                                   |   |
| SECTION 3.  | *Term and Rent.*                                                             |   |
| SECTION 4.  | Sublessor’s Representations and Warranties.                             |   |
| SECTION 5.  | *Return of the Aircraft.*                                                    |   |
| SECTION 6.  | *Liens.*                                                                     |   |
| SECTION 7.  | Registration, Maintenance and Operation;  Possession; Insignia.              |   |
| SECTION 8.  | Replacement and Pooling of Parts;  Alterations, Modifications and Additions. |   |
| SECTION 9.  | *Voluntary Termination.*                                                     |   |
| SECTION 10. | *Loss, Destruction, Requisition, etc.*                                       |   |
| SECTION 11. | *Insurance.*                                                                 |   |
| SECTION 12. | *Inspection.*                                                                |   |
| SECTION 13. | *Assignment.*                                                                |   |
| SECTION 14. | *Events of Default.*                                                         |   |
| SECTION 15. | *Remedies; Automatic Termination.*                                           |   |
| SECTION 16. | Sublessee’s Cooperation Concerning Certain  Matters.                    |   |
| SECTION 17. | *Notices.*                                                                   |   |
| SECTION 18. | *No Set-Off, Counterclaim, etc.*                                             |   |
| SECTION 19. | *No Renewal.*                                                                |   |
| SECTION 20. | *Maintenance Program.*                                                       |   |
| SECTION 21. | *Sublessor’s Right to Perform for Sublessee.*                      |   |
| SECTION 22. | *[Intentionally Omitted]*                                                    |   |
| SECTION 23. | *Service of Process.*                                                        |   |
| SECTION 24. | *Miscellaneous.*                                                             |   |
| SECTION 25. | *Subordination.*                                                             |   |
| SECTION 26. | *Covenant of Quiet Enjoyment.*                                               |   |
| SECTION 27. | *Federal Bankruptcy Code.*                                                   |   |
| SECTION 28. | *Use of Funds.*                                                              |   |
| SECTION 29. | Sublessee’s Representations, Warranties and  Indemnities.               |   |
| SECTION 30. | Certain Representations, Warranties and  Covenants.                          |   |
| SECTION 31. | *Covenants of Sublessee.*                                                    |   |
| SECTION 32. | *Consent to Jurisdiction.*                                                   |   |
| SECTION 33. | *Owner for Federal Tax Purposes.*                                            |   |

 

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EXHIBITS

 
| EXHIBIT A | - | Form of Sublease Supplement |
|----------------|---|----------------------------------|
| EXHIBIT B | - | Basic Rent                       |
| EXHIBIT C | - | Stipulated Loss Value Schedule   |
| EXHIBIT D | - | Return Conditions                |
| EXHIBIT E | - | Minimum Liability Amount         |

 

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**SUBLEASE AGREEMENT[NW 2005       ]**

 

This SUBLEASE AGREEMENT [NW 2005         ],dated as of [        ], 2005, betweenNORTHWEST AIRLINES, INC., a corporation organized and existing pursuant to thelaws of the State of Minnesota (“**Sublessor**”),and MESABA AVIATION, INC., a corporation organized and existing pursuant to thelaws of the State of Minnesota (“**Sublessee**”);

 

**W I T N E SS E T H:**

 

WHEREAS, Sublessor has agreed to sublease the Aircraftto Sublessee, Sublessee has agreed to enter into this Sublease for use bySublessee in its operations in accordance with the Airline Services Agreementand for no other purpose, and the parties hereto intend this Sublease to be anoperating lease; and

 

WHEREAS, Sublessor is providing a valuable financialaccommodation to Sublessee by making the Aircraft available to Sublesseepursuant to this Sublease Agreement, and Sublessor is entering into thisSublease solely to provide the Aircraft to Sublessee for use in its operationsin accordance with the Airline Services Agreement; and

 

NOW, THEREFORE, in consideration of the mutualagreements contained herein and for other good and valuable consideration, thereceipt and legal sufficiency of which is hereby acknowledged, Sublessee andSublessor intending to be legally bound agree as follows:

 

**SECTION 1.  Definitions.** Unless thecontext otherwise requires, the following terms shall have the followingmeanings for all purposes of this Sublease Agreement [NW 2005         ]and shall be equally applicable to both the singular and the plural forms ofthe terms herein defined:

 

*“Acceptance Certificate”*has the meaning specified in the Participation Agreement.*“Affiliate”*means, with respect to any Person, any other Person directly or indirectlycontrolling, controlled by or under common control with such Person.  For the purposes of this definition, “control”(including “controlled by” and “under common control with”) shall mean thepower, directly or indirectly, to direct or cause the direction of themanagement and policies of such person whether through the ownership of votingsecurities or by contract or otherwise. For the avoidance of doubt, Sublessor and its Affiliates are notAffiliates of Sublessee.

 

*“After-Tax Basis”*means anamount, which, after deduction of all Federal, state, local and foreign taxesrequired to be paid by or on behalf of the recipient in respect of the receipt orrealization of such amount, is equal to the payment

 

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required under theprovisions of the Sublessee Documents that requires payments to be made on anAfter-Tax Basis*.*

 

*“Aircraft”*means the Airframe to be delivered and subleased hereunder together with thetwo Engines initially subleased hereunder (or any engine substituted for any ofsuch Engines pursuant to the terms hereof), whether or not any of such initialor substituted Engines may from time to time be installed on such Airframe ormay be installed on any other airframe or on any other aircraft, and when thecontext permits the Aircraft Documentation.

 

*“Aircraft Documentation”* has themeaning specified in Exhibit D hereto.

 

*“Airframe”*means: (i) the Bombardier Inc. Canadair Regional Jet Model CL-600-2B19aircraft (except Engines or engines from time to time installed thereon)specified in the initial Sublease Supplement, which aircraft shall be subleasedby Sublessor to Sublessee hereunder and under such Sublease Supplement; and (ii) anyand all Parts (A) so long as the same shall be incorporated or installedin or attached to such aircraft (except Engines or engines from time to timeinstalled thereon), or (B) so long as title thereto shall remain vested inthe Owner in accordance with the terms of Section 8 after removal fromsuch aircraft (except Engines or engines from time to time installed thereon).

 

*“Airline Services Agreement”*means the Airline Services Agreement dated as of August 29, 2005 betweenSublessor and Sublessee, as modified, amended or supplemented from time to timepursuant to the terms thereof.

 

*“APU”* has themeaning specified in Exhibit D hereto.

 

*“APU Manufacturer”*means Honeywell Corporation.

 

*“Bankruptcy Code”*means the Bankruptcy Reform Act of 1978, as amended, or any subsequentlegislation that amends, supplements or supersedes such provisions.

 

*“Base Rate”*means the rate of interest announced publicly by Citibank, N.A. in New York,New York from time to time as its base rate.

 

*“Basic Rent”*means,for the Term, the rent payable for the Aircraft pursuant to Section 3(b).

 

*“Basic Shop Visit”*means, with respect to any Engine or the APU, any shop visit, as defined by theEngine Manufacturer or the APU Manufacturer, as the case may be, that is basedon an approved program of condition monitoring and trend monitoring ofperformance deterioration that results in an Engine or the APU, as the case maybe, being restored to full performance standard.

 

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*“Business Day”*means any day other than a Saturday or Sunday or a day on which commercialbanks are required or authorized to close in the City of New York, New York;Salt Lake City, Utah or Minneapolis, Minnesota.

 

*“‘C’ Check”* means a “C” Check, assuch term is defined in the Maintenance Program relating to the Aircraft thatmeets the requirements of a “C” Check as defined in the Bombardier Inc.Maintenance Requirement Manual.

 

*“Certificate Holder”*meansCertificate Holder as defined in the Trust Indenture.  *“Certificated Air Carrier”*means a Citizen of the United States holding a carrier operating certificateissued by the Secretary of Transportation pursuant to Chapter 447 of Title 49,United States Code, for aircraft capable of carrying ten or more individuals or6,000 pounds or more of cargo or that otherwise is certified or registered tothe extent required to fall within the purview of 11 U.S.C. Section 1110or any analogous successor provision of the Bankruptcy Code.

 

*“Citizen of the United States”*has the meaning specified in Section 40102(a)(15) of Title 49 of theUnited States Code or any similar legislation of the United States of Americaenacted in substitution or replacement therefor.

 

*“Code”* meansthe Internal Revenue Code of 1986, as amended.

 

*“Commencement Date”*has the meaning specified in Sublease Supplement No. 1.

 

*“Consent and Agreement”*has the meaning specified in the Head Lease.

 

*“Default”* meansany event which with the giving of notice or the lapse of time or both wouldbecome an Event of Default.

 

*“Delivery Date”*has the meaning specified in the Head Lease.

 

*“Dollars”* and *“$”* means the lawful currency of the United States ofAmerica.

 

*“Engine”* means (i) eachof the two General Electric Model CF34-3B1 type engines listed by manufacturer’sserial number in the initial Sublease Supplement, whether or not from time totime thereafter installed on the Airframe or installed on any other airframe oron any other aircraft; and (ii) any engine which may from time to time besubstituted, pursuant to the terms hereof, for any of such two engines,together in each case with the applicable Aircraft Documentation and any andall Parts normally incorporated or installed in or attached thereto includingany and all Parts removed therefrom so long as title thereto shall remainvested in the Owner in accordance with the terms of Section 8 afterremoval from such Engine; *provided, however,*that at such time as an engine shall be deemed part of the property subleasedhereunder in substitution

 

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for an Engine pursuant to the applicable provisionshereof, the replaced Engine shall cease to be an Engine hereunder.  The term *“Engines”*means, as of any date of determination, all Engines then subleased hereunder.

 

*“Engine Manufacturer”* meansGeneral Electric Aircraft Engines, a division of General Electric Corporation.

 

*“Equity Tax Indemnitee”* means anyTax Indemnitee which is the Owner Participant, the Owner Trustee or the TrustEstate, or a successor, assign or Affiliate thereof.

 

*“ERISA”* meansthe Employee Retirement Income Security Act of 1974, as amended from time totime, and the regulations promulgated and rulings issued thereunder.  Section references to ERISA are toERISA, as in effect at the date of the Participation Agreement and anysubsequent provisions of ERISA, amendatory thereof, supplemental thereto orsubstituted therefor.

 

*“Event of Default”*has the meaning specified in Section 14 hereof.

 

*“Event of Loss”*with respect to the Aircraft, Airframe or any Engine means any of the followingevents with respect to such property: (i) the loss of such property or ofthe use thereof due to the destruction of or damage to such property whichrenders repair uneconomic or which renders such property permanently unfit fornormal use by Sublessee for any reason whatsoever; (ii) any damage to suchproperty which results in an insurance settlement with respect to such propertyon the basis of a total loss, or a constructive or compromised total loss; (iii) thetheft or disappearance of such property, or the confiscation, condemnation, orseizure of, or requisition of title to, or use of, such property (other than arequisition for use by the United States Government or any agency orinstrumentality of any thereof) which in the case of any event referred to inthis clause (iii) (other than a requisition of title) shall have resultedin the loss of possession of such property by Sublessee for a period in excessof 180 consecutive days or, in the case of a requisition of title, therequisition of title shall not have been reversed within 90 days from the dateof such requisition of title; (iv) as a result of any law, rule,regulation, order or other action by the Federal Aviation Administration, theuse of such property in the normal course of the business of air transportationshall have been prohibited for a period of 180 consecutive days, unlessSublessee, prior to the expiration of such 180 day period, shall haveundertaken and shall be diligently carrying forward all steps which arenecessary or desirable to permit the normal use of such property by Sublessee,but in any event if such use shall have been prohibited for a period of twoconsecutive years, *provided* thatno Event of Loss shall be deemed to have occurred if such prohibition has beenapplicable to the entire U.S. registered fleet of Bombardier Inc. CanadairRegional Jet Series [200][440] aircraft of Sublessee and Sublessee, priorto the expiration of such two-year period, shall have conformed at least onesuch aircraft in its fleet to the requirements of any such law, rule,regulation, order or other action and commenced regular commercial use of thesame in such

 

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jurisdiction and shall be diligently carrying forward,in a manner which does not discriminate against the Aircraft in so conformingthe Aircraft, all steps which are necessary or desirable to permit the normaluse of the Aircraft by Sublessee, *provided*, *further*, that, notwithstanding any of the foregoing, suchprohibition shall constitute an Event of Loss if such use shall have beenprohibited for a period of three consecutive years, if such use shall beprohibited at the expiration of the Term; (v) any divestiture of title toor interest in an Engine treated as an Event of Loss pursuant to Section 7(b) hereof.  An Event of Loss with respect to the Aircraftshall be deemed to have occurred if an Event of Loss occurs with respect to theAirframe.

 

*“Expenses”* hasthe meaning specified in Section 29(c) hereof.

 

*“Expiration Date”*means May 1, 2015, or such later date to which the effectiveness of theAirline Services Agreement shall be extended in accordance with its terms, suchthat this Sublease and the Airline Services Agreement shall be coterminous,provided, however, that in no event shall the “Expiration Date” be a date laterthan the date of expiration of the term of the Head Lease.

 

*“FAR”* means the regulationspromulgated under the Federal Aviation Act.

 

*“Federal Aviation Act”*means that portion of the United States Code comprising those provisionsformerly referred to as the Federal Aviation Act of 1958, as amended, or anysubsequent legislation that amends, supplements or supersedes such provisions.

 

*“Federal Aviation Administration”*and *“FAA”* mean the United States FederalAviation Administration and any agency or instrumentality of the United Statesgovernment succeeding to their functions.

 

*“Flight Hour”* means:  (i) with respect to the Airframe, eachhour or part thereof which elapses from the time the wheels of the Airframeleave the ground on take-off and the time when the wheels of the Airframe touchthe ground on landing, and (ii) with respect to an Engine or other engineor any Part, including the APU, each hour or part thereof which elapses fromthe time the wheels of the airframe, whether or not the Airframe leasedhereunder, on which such Engine or other engine or Part is installed,leave the ground on take-off and the time when the wheels of such airframetouch the ground on landing.

 

*“Guarantee”*****hasthe meaning specified in the Head Lease.

 

*“Guarantor”* means NorthwestAirlines Corporation, a Delaware corporation.

 

*“Head Lease”*means the Lease Agreement [NW 2005         ],dated as of [        ] 2005, betweenHead Lessor and Sublessor, as lessee thereunder, as the same may be modified,amended or supplemented from time to time. The term

 

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“Head Lease” shall also include each Head LeaseSupplement entered into pursuant to the applicable terms of such Head LeaseAgreement.

 

*“Head Lessor”*means the Owner Trustee designated in the Head Lease as the lessor thereunder.

 

*“Head Lessor Liens”*means any Lien or disposition of title or interest arising as a result of (i) claimsagainst Head Lessor, Wells Fargo in its individual capacity, or the OwnerParticipant not related to the transactions contemplated by the OperativeDocuments, (ii) any act or omission of the Owner Participant, Head Lessor,or Wells Fargo, in its individual capacity, which is not related to thetransactions contemplated by the Operative Documents or is in violation of anyof the terms of the Operative Documents, (iii) claims against the OwnerParticipant, Head Lessor, or Wells Fargo, in its individual capacity, withrespect to Taxes or Expenses against which Sublessor is not required toindemnify the Owner Participant, Head Lessor or Wells Fargo in its individualcapacity, pursuant to the Participation Agreement or the Tax IndemnityAgreement or (iv) claims against Head Lessor or the Owner Participantarising out of any transfer by Head Lessor or the Owner Participant of all orany portion of the respective interests of Head Lessor or the Owner Participantin the Aircraft, the Trust Estate or the Operative Documents other than thetransfer of possession of the Aircraft by Head Lessor pursuant to the HeadLease, the transfer pursuant to the Trust Indenture or a transfer of theAircraft pursuant to Section 9, 10 or 19 of the Head Lease or pursuant tothe exercise of remedies set forth in Section 15 of the Head Lease; *provided, however,* that any Lien which is attributablesolely to Wells Fargo or the Owner Participant and would otherwise constitute aHead Lessor Lien shall not constitute a Head Lessor Lien so long as (1) theexistence of such Lien poses no material risk of the sale, forfeiture or lossof the Aircraft, (2) the existence of such Lien does not interfere in anyway with the use, possession or operation of the Aircraft by Sublessee, (3) WellsFargo or the Owner Participant, as appropriate, is diligently contesting suchLien, and (4) the existence of such Lien does not pose a material threatof interference with the payment of Rent in favor of Wells Fargo or the OwnerParticipant, as appropriate).

 

*“Indemnitee”*means (i) Sublessor, (ii) the Owner Trustee, in its individualcapacity and as trustee under the Trust Agreement, (iii) the OwnerParticipant, (iv) the Trust Estate, (v) each Affiliate of the Personsdescribed in clauses (i) through (iv), inclusive, and (vi) therespective directors, officers, employees, agents and servants, successors andpermitted assigns of each of the Persons described in clauses (i) through(iv), inclusive.

 

*“Landing Gear”*means the landing gear installed on the Airframe on the Delivery Date (or suchlanding gear as may be substituted therefor after the Delivery Date inaccordance with this Lease.

 

*“Landing Gear Overhaul”*means any full overhaul of any Landing Gear to full manufacturer specificationand operating condition.

 

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*“Lien”* meansany mortgage, pledge, lien, charge, claim, encumbrance, lease, sublease,sub-sublease or security interest.

 

*“Life Limited Parts”* means thoseparts which have a specific hour, cycle and/or calendar life limit as specifiedby the Manufacturer.

 

*“Loss Payment Date”*has the meaning specified in Section 10(a) hereof.

 

*“Maintenance Program”*has the meaning specified in Exhibit D hereto.

 

*“Major Modifications”*include, but shall not be limited to (i) changes that alter thefundamental nature of the Aircraft as a passenger and cargo carrying aircraft,or cabin modifications that materially change the interior layout of theAircraft, (ii) changes to the Aircraft structure or performance of theAircraft, (iii) changes that adversely affect interchangeability orreplaceability of Parts, (iv) substitution of different types of equipmentor accessories which are not equivalent in cost, value and/or operationalcapability to the equipment or accessories being replaced, (v) changesthat invalidate or impair any warranty with respect to the Aircraft or anyEngine or Part, (vi) changes that adversely affect the eligibility of theAircraft to obtain an airworthiness certificate from the FAA or (vii) anychanges that result in a variation from the original type certificate for theAircraft, but shall exclude changes pursuant to airworthiness directives.

 

*“Manufacturer”*means with respect to the Airframe, and where the context permits, theAircraft, Bombardier Inc., a Canadian Corporation, and its successors andassigns and, with respect to the Engines, General Electric Company, a New Yorkcorporation, and its successors and assigns.

 

*“Minimum Liability Amount*”has the meaning specified in Exhibit E hereto.

 

*“Operative Documents”*and *“Operative Document”* means each of theParticipation Agreement, the Tax Indemnity Agreement, the Trust Agreement, theHead Lease, this Sublease, the Sublease Supplement covering the Aircraft, theAcceptance Certificate, the Trust Supplement covering the Aircraft, thePurchase Agreement (insofar as it relates to the Aircraft), the ResidualAgreement, the Guarantee, the Purchase Agreement Assignment, the Consent andAgreement and the Letter Agreement dated as of [          ],2005 between Sublessor and Owner Trustee delivered pursuant to Section 4(a)(v)(12)of the Participation Agreement.

 

*“Owner”* means (i) HeadLessor (or any permitted assignee or successor thereof) for so long as the HeadLease remains in effect and title to the Aircraft remains vested in Head Lessorpursuant to the terms thereof and (ii) Sublessor (or any permittedassignee or successor thereof) for so long as this Sublease remains in effectand title to the Aircraft remains vested in Sublessor pursuant to the termshereof.

 

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*“Owner Participant”*means the entity executing the Participation Agreement as the OwnerParticipant, and thereafter any Person to which such entity transfers all ofits right, title and interest in and to the Trust Agreement, the Trust Estateand the Participation Agreement, to the extent permitted by Section 8.01of the Trust Agreement and Section 8 of the Participation Agreement.

 

*“Owner Trustee”*meansWells Fargo Bank Northwest, National Association, a national bankingassociation, and any entity appointed as successor Owner Trustee pursuant to Section 9.01of the Trust Agreement, and references to a predecessor Owner Trustee in itsindividual capacity by name in the Operative Documents shall include suchsuccessor Owner Trustee in its individual capacity from and after suchsuccession.

 

*“Participants”*means and includes the Owner Participant.

 

*“Participation Agreement”*means that certain Participation Agreement [NW 2005         ],dated as of [        ], 2005, amongSublessor, the Guarantor, the Owner Participant and Owner Trustee, as suchParticipation Agreement may be amended or supplemented from time to timepursuant to the applicable provisions thereof.

 

*“Parts”* meansall appliances, parts, instruments, appurtenances, accessories, furnishings andother equipment of whatever nature (other than (a) complete Engines orengines and (b) cargo containers) which may from time to time beincorporated or installed in or attached to the Airframe or any Engine or solong as title thereto shall remain vested in the Owner in accordance with Section 8after removal therefrom.

 

*“Past Due Rate”*means a rate per annum equal to the greater of (a) 5% over the Base Rateand (b) 15%.

 

*“PBH Agreement”* means a maintenance agreement which (i) providesshop repair/overhaul of Engines or Parts (including APU and Landing Gear) on acontinuous basis at an agreed upon Flight Hour or cycle based rate, (ii) providesunrestricted assignment rights to Sublessor and Sublessor’s future operators ofthe Aircraft, and (iii) has been approved in writing by Sublessor(including but not limited to specific Sublessor approval of the maintenanceprovider, rates, payment terms, scope, term, maintenance standard, assignmentrights and financial adjustments that are made when an Engine or Part exitssuch program at termination or expiration of the PBH Agreement relative to suchEngine or Part).

 

*“Permitted Lien”*means any Lien referred to in clauses (i) through (iii) of Section 6hereof.

 

*“Person”* meansany individual, corporation, partnership, limited liability company, jointventure, association, joint-stock company, trust, unincorporated organizationor government or any agency or political subdivision thereof.

 

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*“Purchase Agreement”*meansthat certain Purchase Agreement No. PA-0498, dated July 6, 2001,between the Manufacturer and Sublessor relating to the purchase by Sublessor ofthe Aircraft, as originally executed or as modified, amended or supplemented inaccordance with the terms thereof, but only insofar as the foregoing relates tothe Aircraft.

 

*“Purchase Agreement Assignment”*means that certain Purchase Agreement Assignment [NW 2005         ],dated as of [        ], 2005, betweenSublessor and Head Lessor, as the same may be amended, supplemented or modifiedfrom time to time, with a form of Consent and Agreement to be executed by theManufacturer attached thereto.

 

*“Rent”* meansBasic Rent and Supplemental Rent, collectively.

 

*“Stipulated Loss Value”*with respect to the Aircraft, as of any date through and including theExpiration Date, means, the amount specified in Exhibit C heretoopposite the Stipulated Loss Value Date with respect to which the amount isdetermined.

 

*“Stipulated Loss Value Date”*means the 1st calendar day of each calendar month during the Term.

 

*“Structural Inspection”*means a Structural Inspection as such term is defined in the MaintenanceProgram that meets the requirements of a Structural Inspection as defined inthe Bombardier Inc. Maintenance Requirement Manual.

 

*“Sublease Agreement”, “thisSublease Agreement”, “this Sublease”, “this Agreement”, “herein”, “hereof”, “hereunder”,“hereby”*or other like words mean this Sublease Agreement [NW2005         ], as originally executedor as modified, amended or supplemented pursuant to the applicable provisionshereof, including, without limitation, supplementation hereof by one or moreSublease Supplements entered into pursuant to the applicable provisions hereof.

 

*“Sublease Period”* means each ofthe consecutive monthly periods throughout the Term beginning on a SubleasePeriod Date, the first such period commencing on the first Sublease Period Dateafter the Commencement Date.

 

*“Sublease Period Date”*means the 1st calendar day of each month during the Term.

 

*“Sublease Supplement”*means a Sublease Supplement, substantially in the form of Exhibit Ahereto, to be entered into between Sublessor and Sublessee on the CommencementDate for the purpose of subleasing the Aircraft under and pursuant to the termsof this Sublease Agreement, and any subsequent Sublease Supplement entered intoin accordance with the terms hereof.

 

*“Sublessee”*means Mesaba Aviation, Inc. a Minnesota corporation, and its successorsand permitted assigns, as sublessee under the Sublease.

 

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*“Sublessee Documents”*means the Sublease, the Sublease Supplement covering the Aircraft, theacceptance certificate covering the Aircraft in the form agreed to by Sublessorand Sublessee (herein called the “**Sublease AcceptanceCertificate**”) and the Airline Services Agreement.

 

*“Sublessor Liens”*meansany Lien affecting or disposition of title or interest affecting or in respectof the Trust Estate, the Aircraft, the Airframe or any Engine arising as aresult of (i) claims against or affecting Sublessor not arising from thetransactions contemplated by the Participation Agreement, Head Lease and thisSublease, (ii) any act or omission of Sublessor not related to the transactionscontemplated by the Participation Agreement, Head Lease and this Sublease, (iii) Taxesimposed against Sublessor which Sublessee has not agreed to indemnify againstpursuant to this Sublease, (iv) Taxes imposed against Head Lessor or theOwner Participant which Sublessor has not agreed to indemnify against pursuantto the Participation Agreement or (v) claims against Sublessor arising outof the voluntary transfer of all or any portion of Sublessor’s interest in theAircraft or in any of the Sublessee Documents other than a transfer pursuant toSections 5, 8, 10 or 15 hereof, *provided, however,*that any Lien which is attributable solely to Sublessor and would otherwiseconstitute a Sublessor Lien hereunder shall not constitute a Sublessor Lienhereunder so long as (1) the existence of such Lien poses no material riskof the sale, forfeiture or loss of the Aircraft, (2) the existence of suchLien does not interfere in any way with the use, possession or operation of theAircraft by Sublessee, (3) the existence of such Lien does not affect thepriority of perfection of, or otherwise jeopardize, the Lien of the TrustIndenture, and (4) Sublessor is diligently contesting such Lien.

 

*“Supplemental Rent”*means, without duplication, all amounts, liabilities, indemnities andobligations (other than Basic Rent) which Sublessee assumes or agrees to payunder any Sublessee Document to or on behalf of Sublessor or any other Personhereunder or under any other Sublessee Document.  The parties acknowledge that SupplementalRent is a general category and, accordingly, agree that any provision of anySublessee Document which calls for the payment of Supplemental Rent and alsocalls for the payment of specific items which are includable in SupplementalRent is not to be interpreted as requiring any double payment.

 

*“Tax Indemnitee”*means (i) Sublessor, the Owner Participant, the Owner Trustee, in itsindividual capacity and as trustee under the Trust Agreement and the TrustEstate, and (ii) the respective directors, officers, employees, agents andservants of each Person described in clause (i), and (iii) the respectiveAffiliates, successors and permitted assigns of each of the entities describedin the preceding clause (i).

 

*“Tax Indemnity Agreement”*means that certain Tax Indemnity Agreement [NW 2005         ],dated as of [        ], 2005, betweenthe Owner Participant and Sublessor, as originally executed or as modified,amended or supplemented pursuant to the applicable provisions thereof.

 

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*“Taxes”* meansany and all fees (including, without limitation, license, recording,documentation and registration fees), taxes (including, without limitation,income, gross receipts, sales, rental, use, turnover, value added, property(tangible and intangible), excise and stamp taxes), license, levies, imposts,duties, charges, assessments or withholdings of any nature whatsoever, togetherwith any and all penalties, fines, additions to tax and interest thereon (each,individually a “**Tax**”).

 

*“Term”*meansthe term for which the Aircraft is subleased hereunder pursuant to Section 3(a) hereofcommencing on the Commencement Date and ending on the Expiration Date, or suchearlier date as this Sublease may be terminated in accordance with theprovisions hereof.

 

*“Trust Agreement”*means that certain Trust Agreement [NW 2005         ],dated as of [        ], 2005, betweenthe Owner Participant and Wells Fargo Bank Northwest, National Association, inits individual capacity, as originally executed or as modified, amended orsupplemented pursuant to the applicable provisions thereof, including, withoutlimitation, supplementation thereof by one or more Trust Supplements enteredinto pursuant to the applicable provisions thereof.

 

*“Trust Estate”*means the Trust Estate as that term is defined in the Trust Agreement.

 

*“Wells Fargo”* means Wells FargoBank Northwest, National Association, a national banking association.

 

**SECTION 2.  Acceptance and Sublease.**  (a) *Generally.*  Sublessor hereby agrees to sublease toSublessee hereunder, and Sublessee hereby agrees to sublease from Sublessorhereunder, the Aircraft as evidenced by the execution by Sublessor andSublessee of a Sublease Supplement leasing the Aircraft hereunder.  Sublessee hereby agrees that such acceptanceof the Aircraft by Sublessor shall, without further act, irrevocably constituteacceptance by Sublessee of such Aircraft for all purposes of thisSublease.  As provided in Section 25hereof, the rights of Sublessee hereunder are subject and subordinate to allthe terms of the Head Lease, including any amendments or restatements theretoas may occur from time to time, and the parties intend this Sublease toconstitute a true lease.

 

### (b) *Airline Services Agreement*. Sublessee acknowledges that Sublessor is providing a valuable financialaccommodation to Sublessee by entering into the Operative Documents to which itis a party and this Sublease to allow Sublessee to obtain the use of theAircraft pursuant to the terms of this Sublease.  As a condition to their rights hereunder,Sublessee and Sublessor hereby confirm and ratify the Airline ServicesAgreement, which is incorporated herein by reference for all purposes, andagree, as a material term of this Sublease and as a material inducement toSublessor to enter into this Sublease, to fully perform all of their respectiveobligations under the Airline Services Agreement as a part of this SubleaseAgreement as though the same were set forth herein.

###  

**SECTION 3.  Term and Rent.**(a) *Term.*  The Term shall commence on the CommencementDate and end on the Expiration Date or such earlier date as this Sublease maybe terminated in accordance with the provisions hereof.

 

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### (b) *Basic Rent.*  Sublessee shall pay Basic Rent with respectto each Sublease Period during the Term on each****SubleasePeriod Date during the Term, in consecutive monthly installments in the amountsas provided in the next sentence.  Eachsuch installment of Basic Rent shall be payable in advance,  shall be equal to the amount specified foreach Sublease Period Date specified in Exhibit B hereto, and shallbe allocated to the Sublease Period commencing on such Sublease PeriodDate.  In addition, Sublessee shall payBasic Rent on the Commencement Date in the amount specified in Exhibit Bhereto, which shall be allocated to the period from the Commencement Date tothe day prior to the first Sublease Period Date.  If Sublessee shall for any reason whatsoeverfail to return the Aircraft on the Expiration Date in the condition specifiedherein, or return of the Aircraft is not accepted by Sublessor because ofSublessee’s failure to meet the requirements of this Sublease, the obligationsof Sublessee provided in this Sublease and in each other Operative Document towhich Sublessee is a party, including the obligation to pay Basic Rent, which,after the Expiration Date, shall be on a per diem basis based on a pro rataapplication of ***% of the BasicRent due during the last Sublease Period of the Term, shall continue in effectwith respect to the Aircraft, and the Term shall be deemed to be extended untilreturn of the Aircraft to Sublessor in accordance with the requirements of thisSublease; *provided* that nothing in this Section shallbe construed as permitting or authorizing Sublessee to fail to meet, orconsenting to or waiving any failure by Sublessee to perform, Sublessee’sobligation to return the Aircraft in accordance with the requirements of thisSublease and Sublessor shall be entitled to all of the benefits of, and all ofits rights and remedies set forth in, Sections 14 and 15 hereof.

###  

### (c) [IntentionallyOmitted]

###  

### (d) *Supplemental Rent.*  Sublessee shall pay (or cause to be paid)promptly to Sublessor, or to whomsoever shall be entitled thereto, any and allSupplemental Rent constituting Stipulated Loss Value as the same shall becomedue and owing and all other amounts of Supplemental Rent within five days afterdemand or within such other relevant period as may be provided in any SublesseeDocument, and in the event of any failure on the part of Sublessee to pay anySupplemental Rent when due, Sublessor shall have all rights, powers andremedies provided for herein or in any other Sublessee Document or by law orequity or otherwise in the case of nonpayment of Basic Rent. Sublessee alsowill pay to Sublessor, or to whomsoever shall be entitled thereto, on demand,as Supplemental Rent, to the extent permitted by applicable law, interest atthe Past Due Rate on any part of any installment of Basic Rent not paid whendue for any period for which the same shall be overdue and on any payment ofSupplemental Rent not paid when due for the period until the same shall bepaid.

###  

### (e) *Payments in General. *All payments of Rent shall be madedirectly by Sublessee by wire transfer of immediately available funds prior to10:30 A.M., New York time, on the date of payment, to Sublessor at itsaccount at USBank, Minneapolis, ABA No. 091000022, for the account ofNorthwest Airlines, Inc., Account No. *** (or such other account of Sublessor in the continental UnitedStates as Sublessor shall direct in a notice to Sublessee at least 10 BusinessDays prior to the date such payment of Rent is due).  All payments of Supplemental Rent shall bemade in Dollars in immediately available funds prior to 10:30 A.M., NewYork time, on the due date thereof at such office of such other financialinstitution located

 

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### in the continental United States as the partyentitled thereto may so direct at least ten (10) Business Days prior tothe due date thereof.

###  

Notwithstanding anything to the contrary containedherein, if any date on which a payment of Rent becomes due and payable is not aBusiness Day, then such payment shall not be made on such scheduled date butshall be made on the next succeeding Business Day with the same force andeffect as if made on such scheduled date and (*provided*such payment is made on such next succeeding Business Day) no interest shallaccrue on the amount of such payment from and after such scheduled date.

 

**SECTION 4.  Sublessor’s Representations and Warranties.**  SUBLESSOR SUBLEASES AND SUBLESSEE TAKES THEAIRCRAFT AND EACH PART THEREOF “AS-IS,” “WHERE-IS.”  NONE OF HEAD LESSOR, SUBLESSOR, NOR ANY PARTICIPANTMAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLYDISCLAIMS AND WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATIONOR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP,CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR APARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCEOF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OFANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OFOBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION ORWARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF,except that Sublessor (i) represents and warrants that on the CommencementDate the Aircraft shall be free of Sublessor Liens (including for this purposeLiens which would be Sublessor Liens but for the proviso in the definition ofSublessor Liens) and (ii) agrees that it will not directly or indirectlycreate, incur, assume or suffer to exist any Sublessor Lien attributable to iton or with respect to the Airframe or any Engine, and it agrees that it willpromptly, at its own expense, take such action as may be necessary duly todischarge such Sublessor Lien.  None ofthe provisions of this Sublease shall be deemed to amend, modify or otherwiseaffect the representations, warranties or other obligations (express orimplied) of the Manufacturer, any subcontractor or supplier of the Manufacturerwith respect to the Airframe, the Engines or any Parts, or to release theManufacturer, or any such subcontractor or supplier, from any suchrepresentation, warranty or obligation, or to diminish any right that Sublesseemay have with respect to the Airframe, Engines or Parts against theManufacturer or any such subcontractor or supplier under the Purchase Agreementor otherwise.

 

**SECTION 5.  Return of the Aircraft.**  (a)  *Condition Upon Return.*Uponthe termination of this Sublease at the end of the Term or pursuant to Section 15,Sublessee, at its own expense, will return the Aircraft to or at the directionof Sublessor at either Minneapolis/St. Paul International Airport, St. Paul,Minnesota, or Wayne County Metropolitan Airport, Detroit, Michigan, asdesignated by Sublessor or at such other location in the 48 contiguous statesof the United States as may be specified by Sublessor.  At the time of such return, the Aircraft willbe registered under the laws of the United States in the name of the Owner orits designee; the Airframe will be fully equipped with the Engines (or otherGeneral Electric Model CF34-3B1 type engines satisfactory to Sublessor) dulyinstalled thereon and properly functioning. Also, at the time of such return, such Airframe and Engines or engines (i) shallbe certified as an airworthy aircraft by the Federal Aviation Administration, (ii) shallbe free and clear of all Liens

 

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(other than SublessorLiens (including for this purpose Liens which would be Sublessor Liens but forthe proviso in the definition of Sublessor Liens), Head Lessor Liens (includingfor this purpose Liens which would be Head Lessor Liens but for the proviso inthe definition of Head Lessor Liens) and rights of third parties under pooling,interchange, overhaul, repair or other similar agreements or arrangements, (iii) shallbe in as good an operating condition as when delivered by the Manufacturer toSublessor, ordinary wear and tear excepted, or, in the case of any such enginesowned by Sublessee, shall have been approved for substitution by Sublessor, and(iv) shall be in compliance with the return conditions set forth in Exhibit D.

 

During the last twelve (12) months of the Term, withreasonable notice, Sublessee will cooperate in all reasonable respects with theefforts of Sublessor or Head Lessor to sublease the Aircraft, including,without limitation, permitting prospective sublessees to inspect fully theAircraft and the records relating thereto, *provided,* thatsuch cooperation shall not interfere with the operation or maintenance of theAircraft by Sublessee.  In addition,Sublessee shall notify Sublessor in writing of its plans for meeting the returnconditions contained herein prior to commencing the C-Check immediately prior tothe C-Check required to be provided by Sublessee upon the return of theAircraft, and again approximately six months prior to the Expiration Date, andSublessee shall notify Sublessor in writing at any time within the last twelve(12) months of the Term prior to initiating any significant maintenance orrepairs designed to cause the Aircraft to meet the return conditions containedherein.  Sublessor shall have the rightto approve or reject Sublessee’s proposed plans for meeting the returnconditions contained herein, with such approval not to be unreasonablywithheld.

 

### (b) *Return of theEngines. *In the event thatany engine not owned by Sublessor shall be delivered with the returned Airframeas set forth in paragraph (a) of this Section 5, Sublessee, concurrentlywith such delivery, will, at no cost to Sublessor or Head Lessor, furnish, orcause to be furnished, to or at the direction of the Owner a full warranty (asto title) bill of sale including as to the absence of Liens other thanSublessor Liens (including for this purpose Liens which would be SublessorLiens but for the proviso in the definition of Sublessor Liens), and HeadLessor Liens (including for this purpose Liens which would be Head Lessor Liensbut for the proviso in the definition of Head Lessor Liens) with respect toeach such engine, in form and substance satisfactory to the Owner (togetherwith an opinion of counsel to the effect that such full warranty bill of salehas been duly authorized and delivered and is enforceable in accordance withits terms and that such engines are free and clear of Liens other thanSublessor Liens (including for this purpose Liens which would be SublessorLiens but for the proviso in the definition of Sublessor Liens), and HeadLessor Liens (including for this purpose Liens which would be Head Lessor Liensbut for the proviso in the definition of Head Lessor Liens)), against receiptfrom the Owner of a bill of sale or other instrument evidencing the transfer,without recourse or warranty (except, if the Owner is Head Lessor, as to theabsence of Head Lessor Liens, including for this purpose Liens which would beHead Lessor Liens but for the proviso in the definition of Head Lessor Liens,and if the Owner is Sublessor, as to the absence of Sublessor Liens, includingfor this purpose Liens which would be Sublessor Liens but for the proviso inthe definition of Sublessor Liens) by the Owner, to Sublessee or its designeeof all of the Owner’s right, title and interest in and to any Engineconstituting part of the Aircraft but not installed on the Airframe at the timeof the return of the Airframe.

 

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### (c) *Aircraft Documentation.*  Uponthe return of the Airframe upon any termination of this Sublease in accordancewith paragraph (a) of this Section 5, Sublessee shall deliver orcause to be delivered to Sublessor or its designee, in English, current andcomplete Aircraft Documentation.

###  

### (d) *Storage Upon Return. *If, at least ten (10) daysprior to termination of this Sublease at the end of the Term, Sublesseereceives from Sublessor a written request for storage of the Aircraft upon itsreturn hereunder, Sublessee will provide Sublessor, or cause Sublessor to beprovided, with free parking facilities for, and unrestricted access to, theAircraft (maintenance costs and other out-of-pocket costs other than parkingfees to be for the account of Sublessor) for a period not exceeding sixty (60)days commencing on the date of such termination, at a location in thecontinental United States selected by Sublessee used as a location for theparking or storage of aircraft. Sublessee will maintain insurance for the Aircraft during such periodnot exceeding sixty (60) days and be reimbursed by Sublessor or its designeefor the premiums thereon.

###  

### (e) *PBH Agreements.*If at return of the Aircraft, an Engine or Part (includingLanding Gear and APU) is being maintained under a PBH Agreement, Sublesseeshall not be required to satisfy minimum maintenance time remainingrequirements specified in Exhibit D that are directly and fully covered bysuch PBH Agreement.

###  

**SECTION 6.  Liens.**  Sublessee will not directly or indirectlycreate, incur, assume or suffer to exist any Lien on or with respect to theAircraft, title thereto or any interest therein or in this Sublease, except (i) therespective rights of Sublessor and Sublessee as herein provided, the respectiverights of Sublessor and Head Lessor as provided in the Head Lease, the rightsof Head Lessor as owner of the Aircraft, the Lien of the Trust Indenture, andany other rights existing pursuant to the Operative Documents, (ii) therights of others under agreements or arrangements to the extent permitted bythe terms of Sections 7(b) and 8(b) hereof, (iii) Head LessorLiens (including for this purpose Liens which would be Head Lessor Liens butfor the proviso in the definition of Head Lessor Liens) and Sublessor Liens(including for this purpose Liens which would be Sublessor Liens but for theproviso in the definition of Sublessor Liens) (iv) Liens for taxes ofSublessee either not yet due or being contested in good faith by appropriateproceedings so long as such proceedings do not involve any risk of the sale,forfeiture or loss of the Airframe or any Engine or any interest therein or, solong as any Secured Certificates shall be outstanding, adversely affect theLien of the Trust Indenture, (v) materialmen’s, mechanics’, workmen’s,repairmen’s, employees’ or other like Liens arising in the ordinary course ofSublessee’s business (including those arising under maintenance agreementsentered into in the ordinary course of business) securing obligations that arenot overdue for a period of more than thirty (30) days or are being contestedin good faith by appropriate proceedings so long as such proceedings do notinvolve any risk of the sale, forfeiture or loss of the Airframe or any Engineor any interest therein or, so long as any Secured Certificates shall beoutstanding, adversely affect the Lien of the Trust Indenture, (vi) Liensarising out of any judgment or award against Sublessee, unless the judgmentsecured shall not, within thirty (30) days after the entry thereof, have beendischarged, vacated, reversed or execution thereof stayed pending appeal orshall not have been discharged, vacated or reversed within thirty (30) daysafter the expiration of such stay, and (vii) any other Lien with respectto which Sublessee shall have provided a bond, cash collateral or othersecurity adequate in the sole discretion of Sublessor.  Sublessee will promptly, at its own expense,take (or cause to be taken)

 

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such actions as may benecessary duly to discharge any such Lien not excepted above if the same shallarise at any time.

 

**SECTION 7.  Registration, Maintenance and Operation;Possession; Insignia.** (a)(I)  *Registration andMaintenance. *Sublessee, atits own cost and expense, shall: (i) forthwith upon the delivery thereofhereunder, cause the Aircraft to be duly registered in the name of the Ownerand to remain duly registered in the name of Owner under the Federal AviationAct, *provided* that Sublessor shall executeand deliver all such documents as Sublessee may reasonably request for thepurpose of effecting and continuing such registration, and shall not registerthe Aircraft or permit the Aircraft to be registered under any laws other thanthe Federal Aviation Act at any time; (ii) continuously operate, maintain,service, repair and overhaul (or cause to be maintained, serviced, repaired andoverhauled) the Aircraft (including, without limitation, the Airframe, Enginesand Parts) in compliance with the Maintenance Program and in compliance withall FAA requirements for FAR Part 121 operation and the Manufacturers’recommended maintenance program so as to keep the Aircraft in as good anoperating condition as when delivered by the Manufacturer to Sublessor,ordinary wear and tear excepted, so as to maintain in effect all materialManufacturers’ warranties and guaranties and as may be necessary to enable theairworthiness certification for the Aircraft to be maintained in good standingat all times under the Federal Aviation Act, except when all Bombardier Inc.Canadair Regional Jet Model Series [200][440] aircraft powered by enginesof the same type as those with which the Airframe shall be equipped at the timeof such grounding and registered in the United States have been grounded by theFAA, and utilizing the same manner and standard of maintenance, service, repairand overhaul used by Sublessee with respect to similar aircraft operated bySublessee in similar circumstances and without in any case discriminatingagainst the Aircraft by reason of its leased status; *provided,however,* that in all circumstances the Aircraft shall be maintainedby Sublessee in accordance with maintenance standards required by the FAA forFAR Part 121 operation; (iii) maintain or cause to be maintained inEnglish all Aircraft Documentation and all other records, logs and othermaterials maintained in respect of the Aircraft; and (iv) promptly furnishor cause to be furnished to Sublessor, Head Lessor and the Owner Participantsuch information as may be required to enable Sublessor, Head Lessor or theOwner Participant to monitor the maintenance status and condition of theAircraft and to file any reports required to be filed by Sublessor, Head Lessoror the Owner Participant with any governmental authority because of Sublessor’sor the Owner Participant’s interest in or Head Lessor’s ownership of theAircraft. (II) *Operation*.  Sublessee will continuously operate theAircraft in accordance with its FAA approved flight manual which shall complywith all Manufacturer recommendations and requirements for the Aircraft andEngine type.  Sublessee will notmaintain, use, service, repair, overhaul or operate the Aircraft in violationof any law or any rule, regulation, order or certificate of any government orgovernmental authority (domestic or foreign) having jurisdiction, or inviolation of any airworthiness certificate, license or registration relating tothe Aircraft issued by any such authority, except to the extent Sublessee iscontesting in good faith the validity or application of any such law, rule,regulation or order in any reasonable manner which does not adversely affectSublessor, Head Lessor or the Owner Participant or their respective right,title or interest in the Aircraft and does not involve any risk of sale,forfeiture or loss of the Aircraft or any risk of civil liability or criminalliability being imposed on Sublessor, Head Lessor or the OwnerParticipant.  Sublessee will not operatethe Aircraft (a) in any area excluded from coverage by any insurancerequired by the terms of Section 11; *provided, however,*that the failure of Sublessee to comply

 

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with the provisions ofthis clause (a) shall not give rise to an Event of Default hereunder wheresuch failure is attributable to causes beyond the reasonable control ofSublessee or to Sublessee’s response to extraordinary circumstances involvingan isolated occurrence or isolated series of incidents not in the ordinarycourse of the regular operations of Sublessee and in each such case Sublesseeis taking all reasonable steps to remedy such failure as soon as is reasonablypracticable or (b) other than in operations in accordance with the AirlineServices Agreement.  Sublessee furtheragrees not to operate the Aircraft or any Engine outside the United States inany taxable year in a manner that would cause more than 20% of the Basic Rentpayable under the Sublease to be treated as derived from sources outside theUnited States.

 

### (b) *Possession.*  Sublesseewill not, without the prior written consent of Sublessor, in any mannerdeliver, transfer or relinquish possession of the Airframe or any Engine orinstall or permit any Engine to be installed on any airframe other than theAirframe or enter into any wet lease; *provided* that,so long as no Default or Event of Default shall have occurred and be continuingat the time of such delivery, transfer or relinquishment of possession orinstallation, and so long as Sublessee shall comply with the provisions ofSections 7(a) and 11 hereof, Sublessee may, without the prior writtenconsent of Sublessor:

###  

#### (i)                                     deliver possessionof the Airframe or any Engine to the manufacturer thereof (or for deliverythereto) or to any FAA approved organization (or for delivery thereto) fortesting, service, repair, maintenance or overhaul work on the Airframe orEngine or any part of any thereof or for alterations or modifications in oradditions to such Airframe or Engine to the extent required or permitted by theterms of Section 8(c) hereof; or

####  

#### (ii)                                  install an Engine onan airframe leased to Sublessee by Sublessor or any of its Affiliates, *provided* that (x) such airframe is free and clear of allLiens, except the rights of the parties to the lease covering such airframe, ortheir assignees, and (y) such lease effectively provides that such Engine shallnot become subject to the lien of such lease notwithstanding the installationthereof on such airframe; or

####  

#### (ii)                                  to the extentpermitted by Section 8(b) hereof, subject any appliances, Parts orother equipment owned by Sublessor and removed from the Airframe or any Engineto any pooling arrangement referred to in Section 8(b) hereof.

####  

The rights of any transferee who receives possessionby reason of a transfer permitted by this paragraph (b) shall beeffectively subject and subordinate to all the terms of this Sublease and theHead Lease, including, without limitation, the covenants contained in Section 7(a) hereofand Sublessor’s rights to repossession pursuant to Section 15 hereof, andSublessee shall remain primarily liable hereunder for the performance of all ofthe terms of this Sublease to the same extent as if such transfer had notoccurred.  No pooling agreement or otherrelinquishment of possession of the Airframe or any Engine shall in any waydischarge or diminish any of Sublessee’s obligations to Sublessor hereunder orconstitute a waiver of Sublessor’s rights or remedies hereunder.  Notwithstanding anything to the contrarycontained herein, Sublessee under any and all circumstances may not sublease orsub-sublease, and is

 

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prohibited from enteringinto any sublease or sub-sublease with respect to, the Aircraft, the Airframeor any Engine.  Sublessor agrees, subjectto the rights of Head Lessor under the Head Lease, for the benefit of Sublesseeand for the benefit of any mortgagee or other holder of a security interest inany engine (other than an Engine) owned by Sublessee, any lessor of any engine(other than an Engine) leased to Sublessee and any conditional vendor of anyengine (other than an Engine) purchased by Sublessee subject to a conditionalsale agreement or any other security agreement, that no interest shall becreated hereunder in any engine so owned, leased or purchased and that none ofSublessor, its successors or assigns will acquire or claim, as againstSublessee or any such mortgagee, lessor or conditional vendor or other holderof a security interest or any successor or assignee of any thereof, any right,title or interest in such engine as the result of such engine being installedon the Airframe; *provided, however,* that suchagreement of Sublessor shall not be for the benefit of any lessor or securedparty of any airframe (other than the Airframe) leased to Sublessee orpurchased by Sublessee subject to a conditional sale or other securityagreement or for the benefit of any mortgagee of or any other holder of asecurity interest in an airframe owned by Sublessee, unless such lessor,conditional vendor, other secured party or mortgagee has expressly agreed(which agreement may be contained in such lease, conditional sale or othersecurity agreement or mortgage) that neither it nor its successors or assignswill acquire, as against Sublessor, any right, title or interest in an Engineas a result of such Engine being installed on such airframe.

 

### (c) *Insignia.*  On or prior to the Commencement Date, or assoon as practicable thereafter (but in no event later than ten (10) daysthereafter), Sublessee agrees to affix and maintain (or cause to be affixed andmaintained), at its expense, in the cockpit of the Airframe adjacent to theairworthiness certificate therein and on each Engine a nameplate bearing theinscription:

###  

Leased fromWells Fargo Bank Northwest, National Association, *as Owner Trustee, Lessor*Subleased FromNorthwest Airlines Inc.,*Sublessor*

 

and, for so long as the Airframe and each Engine shall be subject tothe Lien of the Trust Indenture, bearing the following additional inscription:

 

(such nameplate to be replaced, if necessary, with anameplate reflecting the name of any Head Lessor or successor Sublessor, ineach case as permitted under the Operative Documents and this Sublease).  Except as above provided, Sublessee will notallow the name of any Person to be placed on the Airframe or on any Engine as adesignation that might be interpreted as a claim of

 

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ownership; *provided* thatnothing contained in this paragraph shall prohibit Sublessee from placing itscustomary colors and insignia on the Airframe or any Engine.

 

**SECTION 8.  Replacement and Pooling of Parts;Alterations, Modifications and Additions.**   (a) *Replacement of Parts.* Sublessee, at its own cost and expense, will promptly replace or causeto be replaced all Parts which may from time to time become worn out, lost,stolen, destroyed, seized, confiscated, damaged beyond repair or permanentlyrendered unfit for use for any reason whatsoever, except as otherwise providedin paragraph (c) of this Section 8 or if the Airframe or an Engine towhich a Part relates has suffered an Event of Loss.  In addition, Sublessee may, at its own costand expense, remove in the ordinary course of maintenance, service, repair,overhaul or testing, any Parts, whether or not worn out, lost, stolen,destroyed, seized, confiscated, damaged beyond repair or permanently renderedunfit for use, *provided* that Sublessee, exceptas otherwise provided in paragraph (c) of this Section 8, will, atits own cost and expense, promptly replace such Parts.  All replacement Parts shall be free and clearof all Liens (except for Permitted Liens and pooling arrangements to the extentpermitted by paragraph (b) of this Section 8 and except in the caseof replacement property temporarily installed on an emergency basis) and shallbe serviceable in accordance with the Maintenance Program and FAA requirementsfor FAR Part 121 operation and shall be in as good operating condition as,and shall have a maintenance status, modification status, value and utility atleast equal to, the Parts replaced assuming such replaced Parts were in thecondition and repair required to be maintained by the terms hereof.  Except as otherwise provided in paragraph (c) ofthis Section 8, all Parts at any time removed from the Airframe or anyEngine shall remain the property of the Owner, no matter where located, untilsuch time as such Parts shall be replaced by Parts which have been incorporatedor installed in or attached to the Airframe or such Engine and which meet therequirements for replacement Parts specified above.  Immediately upon any replacement part becomingincorporated or installed in or attached to the Airframe or any Engine as aboveprovided, without further act (subject only to Permitted Liens and any poolingarrangement to the extent permitted by paragraph (b) of this Section 8and except in the case of replacement property temporarily installed on anemergency basis), (i) title to such replacement Part shall thereuponvest in the Owner, (ii) such replacement Part shall become subject tothe Head Lease and this Sublease and be deemed part of the Airframe or suchEngine for all purposes hereof to the same extent as the Parts originallyincorporated or installed in or attached to the Airframe or such Engine, and (iii) titleto the replaced Part shall thereupon vest in Sublessee free and clear ofall rights of the Owner and Sublessor, and shall no longer be deemed a Part hereunder.

 

### (b) *Pooling of Parts.*  Only after receiving Sublessor’s writtenconsent thereto, which shall not be unreasonably withheld, any Part removedfrom the Airframe or any Engine as provided in paragraph (a) of this Section 8may be subjected by Sublessee to a normal pooling arrangement customary in theairline industry of which Sublessee is a party entered into in the ordinarycourse of Sublessee’s business; *provided* thatthe Part replacing such removed Part shall be incorporated orinstalled in or attached to such Airframe or Engine in accordance with suchparagraph (a) as promptly as practicable after the removal of such removedPart.  In addition, only after receivingSublessor’s written consent thereto, which shall not be unreasonably withheld,any replacement Part when incorporated or installed in or attached to theAirframe or any Engine in accordance with such paragraph (a) may be ownedby any third party subject to such a normal pooling arrangement, *provided* that Sublessee, at its expense, as promptly

 

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### thereafter as practicable, either (i) causestitle to such replacement Part to vest in the Owner in accordance withsuch paragraph (a) by Sublessee acquiring title thereto for the benefitof, and transferring such title to, the Owner free and clear of all Liensexcept Permitted Liens (other than pooling arrangements), at which time suchtemporary replacement part shall become a Part or (ii) replaces suchreplacement Part by incorporating or installing in or attaching to theAirframe or Engine a further replacement Part owned by Sublessee free andclear of all Liens except Permitted Liens (other than permitted poolingarrangements) and by causing title to such further replacement Part tovest in the Owner in accordance with such paragraph (a).

###  

### (c) *Alterations, Modificationsand Additions.*  Sublessee, atits own expense, will make (or cause to be made) such alterations and modificationsin and additions to the Airframe and Engines as may be required from time totime to meet the applicable standards of the FAA or any other governmentalauthority having jurisdiction regardless of upon whom nominally imposed; *provided, however,* that Sublessee may, in good faith,contest the validity or application of any such law, rule, regulation or orderin any reasonable manner which does not adversely affect Head Lessor, the OwnerParticipant, Sublessor, or their respective right, title and interest in theAircraft and does not involve any risk of sale, forfeiture or loss of theAircraft or any risk of civil liability or criminal liability being imposed onthe Owner Participant, Head Lessor, or Sublessor; *provided,further*, that no appliance, part, instrument, appurtenance,accessory, furnishing or other equipment of whatever nature relating to suchalteration, modification or addition may be leased from any Person other thanSublessor.  In addition, Sublessee, atits own expense, may from time to time add further parts or accessories andmake such alterations and modifications in and additions to the Airframe or anyEngine as Sublessee may deem desirable in the proper conduct of its business,including, without limitation, removal of Parts which Sublessee has determinedin its reasonable judgment to be obsolete or no longer suitable or appropriatefor use on the Airframe or such Engine (such parts, “**ObsoleteParts**”); *provided* thatno such alteration, modification or addition shall diminish the value, utilityor remaining useful life of the Airframe or such Engine below the value,utility or remaining useful life thereof immediately prior to such alteration,modification or addition, assuming the Airframe or such Engine was then in thecondition required to be maintained by the terms of this Sublease, except thatthe value (but not the utility or remaining useful life) of the Airframe or anyEngine may be reduced by the value of Obsolete Parts which shall have beenremoved so long as the aggregate original cost of all Obsolete Parts whichshall have been removed and not replaced pursuant to this Sublease or any otherlease between Sublessee and Sublessor (or any affiliate thereof) shall notexceed $***.  Title to all Parts incorporated or installedin or attached or added to the Airframe or an Engine as the result of suchalteration, modification or addition (the “**Additional Parts**”)shall, without further act, vest in the Owner, and the Owner shall not berequired under any circumstances under this Sublease to pay directly for anyalteration, modification or addition. Notwithstanding the foregoing sentence, Sublessee may remove or sufferto be removed any Additional Part, *provided* thatsuch Additional Part (i) is in addition to, and not in replacement ofor substitution for, any Part originally incorporated or installed in orattached to the Airframe or any Engine at the time of delivery thereofhereunder or any Part in replacement of, or substitution for, any suchPart, (ii) is not required to be incorporated or installed in or attachedor added to the Airframe or any Engine pursuant to the terms of Section 7hereof or the first sentence of this paragraph (c) and (iii) can beremoved from the Airframe or such Engine without diminishing or impairing the value,utility or remaining useful life of the Airframe or such Engine.  Upon the removal by Sublessee of any Part asprovided above, title

 

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### thereto shall, without further act, vest inSublessee and such Part shall no longer be deemed part of the Airframe orEngine from which it was removed.  Any Part notremoved by Sublessee as above provided prior to the return of the Airframe orEngine to Sublessor hereunder shall remain the property of the Owner.

###  

Sublessee shall not, without Sublessor’s prior writtenconsent, make any Major Modifications, including, without limitation,modifications as to type or manufacture of the avionics, or cabin modificationswhich change the interior layout, to the Aircraft.

 

**SECTION 9.  Voluntary Termination.**  (a)  *Terminationby Sublessor.*  In the eventthe Head Lease is being terminated, Sublessor shall have the right to elect toterminate this Sublease on any date upon at least two (2) days advancewritten notice to Sublessee specifying the date on which Sublessor intends toterminate this Sublease in accordance with this Section 9 (the “**Voluntary Termination Date**”).  On or before the Voluntary Termination Date,Sublessee shall simultaneously pay or cause to be paid to or at the directionof Sublessor in funds of the type specified in Section 3(e) hereof,an amount equal to the sum of all unpaid Basic Rent with respect to theAircraft due prior to such Voluntary Termination Date, and all unpaidSupplemental Rent due on or prior to the Voluntary Termination Date.

 

### (b) [IntentionallyOmitted].

###  

### (c) [IntentionallyOmitted].

###  

### (d) *Termination as to Engines.*  So long as no Event of Default shall haveoccurred and be continuing and with the prior written consent of Sublessor,Sublessee shall have the right during the Term, on at least sixty (60) daysprior written notice, to terminate this Sublease with respect to anyEngine.  In such event, and prior to thedate of such termination, Sublessee shall replace such Engine hereunder by complyingwith the terms of Section 10(b) to the same extent as if an Event ofLoss had occurred with respect to such Engine and shall indemnify Sublessor,Head Lessor and the Owner Participant for any adverse tax consequencesresulting from such substitution, and Sublessor shall transfer, and shallexercise any such rights as it may have to cause Head Lessor to transfer, suchright, title, and interest as Sublessor or Head Lessor, as the case may be, mayhave to the replaced Engine as provided in Section 5(b).  No termination of this Sublease with respectto any Engine as contemplated by this Section 9(d) shall result inany reduction of Basic Rent.

###  

**SECTION 10.  Loss, Destruction, Requisition, etc.**  (a) *Event of Loss with Respect to the Aircraft.*  Upon the occurrence of an Event of Loss withrespect to the Airframe or the Airframe and the Engines and/or engines theninstalled thereon, Sublessee shall forthwith (and in any event, within five (5) daysafter such occurrence) give Sublessor and Head Lessor written notice of suchEvent of Loss.  Not later than theearlier of (x) the Business Day next succeeding the 90th day following theoccurrence of such Event of Loss or (y) an earlier Business Day irrevocablyspecified fifteen (15) days in advance by notice from Sublessee to Sublessor(the “**Loss Payment Date**”), Sublessee shallpay or cause to be paid to Sublessor (or its designee) in funds of the typespecified in Section 3(d) hereof, an amount equal to the StipulatedLoss Value corresponding to the Stipulated Loss Value Date occurring on orimmediately following the Loss Payment Date; *provided,however,*that if a Sublease Period Date shall occur on or prior tothe Loss Payment Date with respect to which Stipulated Loss Value isdetermined, Sublessee shall pay on such Sublease Period Date an amount equal tothe Basic Rent

 

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that would have been dueon or prior to such Sublease Period Date if such Event of Loss had notoccurred.  At such time as Sublessorshall have received the amounts specified in the preceding sentence, togetherwith all other amounts that then may be due hereunder (including, withoutlimitation, all Basic Rent due before the Stipulated Loss Value Date byreference to which the Stipulated Loss Value is calculated for the Loss PaymentDate and all Supplemental Rent then due) (1) the obligation of Sublesseeto pay the installments of Basic Rent, Supplemental Rent, Stipulated Loss Valueor any other amount shall cease to accrue (but without affecting the provisionsof Section 29(b) or 29(c) hereof), (2) except for theprovisions of Sections 29(b) and 29(c) of this Sublease (which shallsurvive), this Sublease shall terminate, (3) Sublessor will transfer, andexercise such rights as it may have to cause Head Lessor to transfer, to or atthe direction of Sublessee, without recourse or warranty (except, with respectto Head Lessor, as to the absence of Head Lessor Liens, including for thispurpose Liens which would be Head Lessor Liens but for the proviso in thedefinition of Head Lessor Liens, and, with respect to Sublessor, as to theabsence of Sublessor Liens, including for this purpose Liens which would beSublessor Liens but for the proviso in the definition of Sublessor Liens), allof Head Lessor’s and Sublessor’s, as the case may be, right, title and interestin and to the Airframe and any Engines subject to such Event of Loss, as wellas any Engines not subject to such Event of Loss, and will exercise such rightsas it may have to cause the Owner to furnish to or at the direction ofSublessee a bill of sale in form and substance reasonably satisfactory toSublessee, evidencing such transfer, and (4) Sublessee will be subrogatedto all claims of Sublessor and Head Lessor, if any, against third parties, fordamage to or loss of the Airframe and any Engines which were subject to suchEvent of Loss to the extent of the then insured value of the Aircraft.

 

If at any time Sublessor shall be permitted tosubstitute an airframe for the Airframe pursuant to Section 10 of the HeadLease, Sublessor shall have the right, in its sole discretion, to substitute anairframe for the Airframe under this Sublease.

 

### (b) *Event of Loss with Respectto an Engine*.  Upon theoccurrence of an Event of Loss with respect to an Engine under circumstances inwhich there has not occurred an Event of Loss with respect to the Airframe,Sublessee shall forthwith (and in any event, within five (5) days aftersuch occurrence) give Sublessor and Head Lessor written notice thereof and shall,use its best efforts within forty-five (45) days (and in any event within sixty(60) days) after the occurrence of such Event of Loss, convey or cause to beconveyed to the Owner, as replacement for any Engine with respect to which suchEvent of Loss occurred, title to another General Electric Model CF34-3B1 typeengine satisfactory to Sublessor, free and clear of all Liens (other thanPermitted Liens, which engine may upon its transfer to the Owner become subjectto any and all Permitted Liens) and having a value, utility and remaininguseful life (including taking into account its cycle and life-limited parts andits maintenance condition and modification status) at least equal to the Enginesubject to such Event of Loss assuming no Event of Loss had occurred and thatsuch Engine had been maintained in accordance with this Sublease.

###  

Prior to or at the time of any such conveyance,Sublessee, at its own expense, will:

 

(1)                                  furnishthe Owner with a full warranty (as to title) bill of sale, in form and substancereasonably satisfactory to the Owner, with respect to such replacement engine,

 

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(2)                                  causea Sublease Supplement to be duly executed by Sublessee and to be filed forrecording pursuant to the Federal Aviation Act,

 

(3)                                  furnishSublessor and Head Lessor with such evidence of compliance with the insuranceprovisions of Section 11 hereof with respect to such replacement engine asSublessor may reasonably request,

 

(4)                                  furnishSublessor and Head Lessor with an opinion of qualified FAA counsel, as to thedue recordation of the Sublease Supplement and the Head Lease Supplement andthe Trust Supplement and all other documents or instruments the recordation ofwhich is necessary to perfect and protect the rights of Sublessor and HeadLessor in the replacement engine,

 

(5)                                  furnishSublessor and Head Lessor with an opinion of counsel (which shall be chosen bySublessee and satisfactory to Sublessor and Head Lessor) reasonablysatisfactory to Sublessor, Head Lessor and the Owner Trustee to the effect that(A) the certificates, opinions and other instruments and/or property whichhave been or are therewith delivered to and deposited in connection with suchsubstitution conform to the requirements of the Head Lease and this Sublease, (B) thereplacement property covered by the Head Lease and this Sublease, theinstruments subjecting such replacement engine to the Head Lease and thisSublease, as the case may be, have been duly filed for recordation pursuant tothe Federal Aviation Act, and no further action, filing or recording of anydocument is necessary or advisable in order to establish and perfect the right,title, estate and interest of the Owner to such replacement engine, and (C) thefull warranty bill of sale referred to in clause (1) constitutes aneffective instrument for the conveyance of title to the replacement engine,

 

(6)                                  causea financing statement or statements with respect to such substituted propertyto be filed in such place or places as are deemed necessary or advisable bySublessor or Head Lessor, or their respective counsel, to perfect theirrespective interests in the replacement engine,

 

(7)                                  furnishSublessor and Head Lessor with an opinion of counsel (which shall be counselchosen by Sublessee and acceptable to Sublessor and Head Lessor) reasonablysatisfactory to Sublessor, Head Lessor to the effect that Sublessor and HeadLessor will be entitled to the benefits of Section 1110 of the U.S.Bankruptcy Code with respect to the substitute engine, *provided*that such opinion need not be delivered to the extent that immediately prior tosuch substitution the benefits of Section 1110 of the U.S. Bankruptcy Codewere not, solely by reason of a change in law or governmental interpretationthereof, available to Sublessor under the Head Lease with respect to theAircraft,

 

(8)                                  furnishSublessor, Head Lessor with an officer’s certificate duly executed by thechairman, vice chairman, president, any execute vice president, any senior vicepresident, or any vice president of Sublessee stating (A) that thereplacement engine has at least an equal maintenance status, modificationstatus,

 

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value, utility andremaining useful life as the Engine it replaces assuming no Event of Loss hadoccurred and such Engine had been maintained in the condition requiredhereunder, (B) each of the conditions specified in this Section 10(b) withrespect to such replacement engine have been satisfied and that Sublessee willnot be in default, by the making and granting of the request for release andthe addition of the replacement engine, in the performance of any of the termsand covenants of this Sublease, (C) a description of the Engine whichshall be identified by manufacturer’s serial number, (D) a description ofthe replacement engine (including the manufacturer’s name and serial number) asconsideration for the Engine to be released, (E) that on the date of theSublease Supplement relating to the replacement engine the Owner will be thelegal owner of such replacement engine free and clear of all Liens exceptPermitted Liens, that such replacement engine will on such date be in goodworking order and condition and that such replacement engine is substantiallythe same as or better than the Engine to be released, (F) the maintenancestatus, modification status, value, utility and remaining useful life of thereplacement engine as of the date of such certificate (which shall not be lessthan the maintenance status, modification status, value, utility and remaininguseful life of the Engine to be released (assuming no Event of Loss and thatsuch Engine was in the condition and repair required to be maintainedhereunder), (G) that, with respect to the replacement of an Engine pursuantto Section 9(d) hereof, no Event of Default or no Default hasoccurred which has not been remedied or waived, and (H) that the releaseof the Engine to be released will not be in contravention of any of theprovisions hereof, and

 

(9)                                  assign(or cause to be assigned) to the Owner the benefit of all manufacturer’s andvendor’s warranties generally available with respect to the substitutedproperty in substantially the same manner and to substantially the same extentas pursuant to the Purchase Agreement Assignment,

 

Sublessor and will transfer and exercise such rightsas it may have to cause the Owner to transfer, to or at the direction ofSublessee without recourse or warranty (except, with respect to Head Lessor, asto absence of Head Lessor Liens, including for this purpose Liens which wouldbe Head Lessor Liens but for the proviso in the definition of Head Lessor Liensor, with respect to Sublessor, as to absence of Sublessor Liens, including forthis purpose Liens which would be Sublessor Liens but for the proviso in thedefinition of Sublessor Liens) all of Sublessor’s and Head Lessor’s respectiveright, title and interest, if any, in and to (I) the Engine with respect towhich such Event of Loss occurred and furnish or exercise such rights it mayhave to cause the Owner to furnish to or at the direction of Sublessee a billof sale in form and substance reasonably satisfactory to Sublessee, evidencingsuch transfer and (II) all claims, if any, against third parties, for damage toor loss of the Engine subject to such Event of Loss, and such Engine shallthereupon cease to be the Engine subleased hereunder.  For all purposes hereof, each suchreplacement engine shall, after such conveyance, be deemed part of the propertysubleased hereunder, and shall be deemed an “Engine”, as the case may be.  No Event of Loss with respect to an Engineunder the circumstances contemplated by the terms of this paragraph (b) shallresult in any reduction in Basic Rent.

 

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### (c) *Application of Paymentsfrom Governmental Authorities for Requisition of Title, etc. *Any payments (other than insuranceproceeds the application of which is provided for in Section 11) receivedat any time by Sublessor or by Sublessee from any governmental authority orother Person with respect to an Event of Loss will be applied as follows:

###  

(1)                                  ifpayments are received with respect to the Airframe (or the Airframe and anyEngine or engines then installed thereon), (A) unless the same are replacedpursuant to the last paragraph of Section 10(a), after reimbursement ofSublessor and Head Lessor for reasonable costs and expenses, so much of suchpayments remaining as shall not exceed the Stipulated Loss Value required to bepaid by Sublessee pursuant to Section 10(a), shall be applied in reductionof Sublessee’s obligation to pay Stipulated Loss Value, if not already paid bySublessee, or, if already paid by Sublessee, shall be applied to reimburseSublessee for its payment of Stipulated Loss Value, and following the foregoingapplication, the balance, if any, of such payments will be paid over to, orretained by Sublessee, *provided* thatSublessor (or Head Lessor) shall be entitled to so much of the excess, if any,of such payment over Stipulated Loss Value as is attributable to compensationfor loss of Sublessor’s (or Head Lessor’s) interest in the Aircraft asdistinguished from the loss of use of the Aircraft; or (B) if suchproperty is replaced pursuant to the last paragraph of Section 10(a), suchpayments shall be paid over to, or retained by, Sublessee; *provided*that Sublessee shall have fully performed or, concurrently therewith, willfully perform the terms of the last paragraph of Section 10(a) withrespect to the Event of Loss for which such payments are made; and

 

(2)                                  ifsuch payments are received with respect to an Engine under circumstancescontemplated by Section 10(b) hereof, so much of such paymentsremaining after reimbursement of Sublessor and Head Lessor for reasonable costsand expenses shall be paid over to, or retained by, Sublessee, *provided* that Sublessee shall have fully performed, orconcurrently therewith will perform, the terms of Section 10(b) withrespect to the Event of Loss for which such payments are made.

 

### (d) *Requisition for Use of theAircraft by the United States Government.* In the event of the requisition for use of theAirframe and the Engines or engines installed on the Airframe during the Termby the United States Government or any instrumentality or agency thereof,Sublessee shall promptly notify Sublessor and Head Lessor of such requisition,and all of Sublessee’s obligations under this Sublease Agreement with respectto the Aircraft shall continue to the same extent as if such requisition hadnot occurred, *provided*that if such Airframeand Engines or engines installed thereon are not returned by such government(or instrumentality or agency) prior to the end of the Term, Sublessee shall beobligated to return the Airframe and such Engines or engines to or at the directionof Sublessor pursuant to, and in all other respects in compliance with theprovisions of, Section 5 promptly on the date of such return by suchgovernment (or instrumentality or agency). All payments received by Sublessor, Head Lessor or Sublessee from suchgovernment (or instrumentality or agency) for the use of such Airframe andEngines or engines during the Term shall be paid over to, or retained by,Sublessee; and all payments received by Sublessor, Head Lessor or Sublesseefrom such 

 

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### government (or instrumentality or agency) forthe use of such Airframe and Engines or engines after the end of the Term shallbe paid over to, or retained by, Sublessor or Head Lessor.

###  

### (e) *Requisition for Use of anEngine by the United States Government.*  In the event of the requisition for use of anEngine by the United States Government or any agency or instrumentality thereof(other than in the circumstances contemplated by subsection (d)),Sublessee shall replace such Engine hereunder by complying with the terms of Section 10(b) tothe same extent as if an Event of Loss had occurred with respect thereto, and,upon compliance with Section 10(b) hereof, any payments received bySublessor or Sublessee from such government (or instrumentality or agency) withrespect to such requisition shall be paid over to, or retained by, Sublessee.

###  

### (f) *Application of PaymentsDuring Existence of Default*.

###  

#### (i)                                     Any amountreferred to in this Section 10 which is payable to or retainable bySublessee shall not be paid to or retained by Sublessee if at the time of suchpayment or retention a Default or an Event of Default shall have occurred andbe continuing or if the Airline Services Agreement shall have been terminatedor canceled or shall have been terminated in accordance with its terms, butshall be held by Sublessor and applied in accordance with Section 28hereof.  At such time as there shall notbe continuing any such Default or Event of Default and the Airline Services Agreementshall not have been terminated or canceled or shall not have terminated inaccordance with its terms, such amount shall be paid to Sublessee to the extentnot previously applied in accordance with the preceding sentence.

####  

#### (ii)                                  Any amount referredto in this Section 10 which is payable to or retainable by Sublessee shallnot be paid to or retained by Sublessee if at the time of such payment orretention an Event of Default (as such term is defined in the Head Lease) shallhave occurred and be continuing, but shall be held by or paid over to or at thedirection of Head Lessor as security for the obligations of Sublessor under theHead Lease and, if Head Lessor declares the Head Lease to be in defaultpursuant to Section 15 of the Head Lease, applied against Sublessor’sobligations thereunder as and when due. At such time as there shall not be continuing any such Event of Default(as such term is defined in the Head Lease), such amount shall be paid toSublessee to the extent not previously applied in accordance with the precedingsentence.

####  

**SECTION 11.  Insurance.**  (a)  *Public Liability andProperty Damage Insurance.* Sublessee will carry at its expense (i) comprehensive airline thirdparty legal liability insurance or the equivalent (including, withoutlimitation, passenger legal liability) (and including aircraft war risk andhijacking insurance, unless otherwise agreed by Sublessor) insurance andproperty damage insurance (exclusive of manufacturer’s product liabilityinsurance) with respect to the Aircraft, in an amount, with respect to thirdparty legal liability insurance (including passenger legal liability) otherthan aircraft war risk and hijacking insurance, not less than the greater of(x) the amount of public liability and property damage insurance from time totime applicable to aircraft owned or operated by Sublessee of the same type asthe Aircraft and (y) the Minimum Liability Amount, and with respect to aircraftwar risk and hijacking insurance, in an amount not

 

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less than $*** per occurrence and (ii) cargoliability insurance, in the case of both clause (i) and clause (ii), (A) ofthe type and covering the same risks as from time to time applicable toaircraft operated by Sublessee of the same type as the Aircraft and (B) whichis maintained in effect with insurers of recognized responsibility reasonablyacceptable to Sublessor.  Any policies ofinsurance carried in accordance with this paragraph (a) and any policiestaken out in substitution or replacement for any of such policies (A) shallbe amended to name Sublessor, Head Lessor in its individual capacity and asowner trustee, and the Owner Participant (but without imposing on any suchparties liability to pay the premiums for such insurance) as additionalinsureds as their respective interests may appear, (B) shall provide thatin respect of the respective interests of Sublessor, the Head Lessor and theOwner Participant in such policies the insurance shall not be invalidated by anyaction or inaction of Sublessee or any other Person and shall insure each ofSublessor, Head Lessor and the Owner Participant regardless of any breach orviolation of any warranty, declaration or condition contained in such policiesby Sublessee, and (C) shall provide that if the insurers cancel suchinsurance for any reason whatever or if any change is made in such insurancewhich adversely affects the interest of Sublessor, Head Lessor or the OwnerParticipant, or such insurance shall lapse for non-payment of premium, suchcancellation, lapse or change shall not be effective as to Sublessor, HeadLessor or the Owner Participant for thirty (30) days (seven (7) days inthe case of war risk and allied perils coverage) after issuance to Sublessor,Head Lessor or the Owner Participant, respectively, of written notice by suchinsurers of such cancellation, lapse or change; *provided,however,* that if any notice period specified above is not reasonablyobtainable, such policies shall provide for as long a period of prior notice asshall then be reasonably obtainable. Each liability policy (1) shall be primary without right ofcontribution from any other insurance which is carried by Sublessor, HeadLessor or the Owner Participant, (2) shall expressly provide that all ofthe provisions thereof, except the limits of liability, shall operate in thesame manner as if there were a separate policy covering each insured, and (3) shallwaive any right of the insurers to any set-off or counterclaim or any otherdeduction, whether by attachment or otherwise, in respect of any liability ofSublessor, Head Lessor, in its individual capacity or as owner trustee or theOwner Participant to the extent of any moneys due to Sublessor, Head Lessor orthe Owner Participant.

 

### (b) *Insurance Against Loss orDamage to the Aircraft.* Sublessee shall maintain in effect at its expense, with insurers ofrecognized responsibility, all-risk ground and flight aircraft hull insurancecovering the Aircraft and all-risk ground and flight coverage of Engines andParts while temporarily removed from the Aircraft and not replaced by similarcomponents (including, without limitation, war risk and governmentalconfiscation and expropriation (other than by the government of registry of theAircraft) and hijacking insurance, unless otherwise agreed by Sublessor); *provided* that such insurance shall at all times while theAircraft is subject to this Sublease be for an amount not less than theStipulated Loss Value for the Aircraft. Any policies carried in accordance with this paragraph (b) coveringthe Aircraft and any policies taken out in substitution or replacement for anysuch policies (i) shall name Sublessor, Head Lessor, in its individualcapacity and as owner trustee and the Owner Participant as additional insureds,as their respective interests may appear (but without imposing on any suchparty liability to pay premiums with respect to such insurance), (ii) shallprovide that (A) in the event of a loss involving proceeds in excess of $***, the proceeds in respect of suchloss up to an amount equal to the Stipulated Loss Value for the Aircraft shallbe payable to or at the direction of Sublessor (except in the case of a losswith respect to an Engine installed on an airframe other than the Airframe, in whichcase Sublessee shall arrange for any payment of insurance proceeds

 

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### in respect of such loss to be held for theaccount of Sublessor whether such payment is made to Sublessee or any thirdparty), it being understood and agreed that in the case of any payment toSublessor or its designee otherwise than in respect of an Event of Loss,Sublessor shall, upon receipt of evidence satisfactory to it that the damagegiving rise to such payment shall have been repaired or that such payment shallthen be required to pay for repairs then being made, pay, or exercise suchrights as it may have to cause to be paid, the amount of such payment toSublessee or its order and (B) the entire amount of any loss involvingproceeds of $*** or less or theamount of any proceeds of any loss in excess of the Stipulated Loss Value forthe Aircraft shall be paid to Sublessee or its order unless (x) a Default or anEvent of Default shall have occurred and be continuing and the insurers havebeen notified thereof by Sublessor, Head Lessor or (y) an Event of Default (assuch term is defined in the Head Lease) shall have occurred and be continuingand the insurers have been notified thereof by Sublessor, Head Lessor, (iii) shallprovide that if the insurers cancel such insurance for any reason whatever, orsuch insurance lapses for non-payment of premium or if any change is made inthe insurance which adversely affects the interest of Sublessor, Head Lessor,or the Owner Participant, such cancellation, lapse or change shall not beeffective as to Sublessor, Head Lessor, or the Owner Participant for thirty(30) days (seven (7) days in the case of hull war risk and allied perilscoverage) after issuance to Sublessor, Head Lessor or the Owner Participant,respectively, of written notice by such insurers of such cancellation, lapse orchange, *provided, however,* that if any noticeperiod specified above is not reasonably obtainable, such policies shallprovide for as long a period of prior notice as shall then be reasonablyobtainable, (iv) shall provide that in respect of the respective interestsof Sublessor, Head Lessor and the Owner Participant in such policies theinsurance shall not be invalidated by any action or inaction of Sublessee orany other Person and shall insure the respective interests of Sublessor, HeadLessor and the Owner Participant, as they appear, regardless of any breach orviolation of any warranty, declaration or condition contained in such policiesby Sublessee, (v) shall be primary without any right of contribution fromany other insurance which is carried by Sublessor, Head Lessor or the OwnerParticipant, (vi) shall waive any right of subrogation of the insurersagainst Sublessor, Head Lessor and the Owner Participant, and (vii) shallwaive any right of the insurers to set-off or counterclaim or any otherdeduction, whether by attachment or otherwise, in respect of any liability ofSublessor, Head Lessor, the Owner Participant or Sublessee to the extent of anymoneys due to Sublessor or the Owner Participant.  In the case of a loss with respect to anengine (other than an Engine) installed on the Airframe, Sublessor or itsdesignee shall hold any payment to it of any insurance proceeds in respect ofsuch loss for the account of Sublessee or any other third party that isentitled to receive such proceeds.

###  

As between Sublessor and Sublessee, it is agreed thatall insurance payments received as the result of the occurrence of an Event ofLoss will be applied as follows:

 

(x)                                   if such payments arereceived with respect to the Airframe (or the Airframe and the Enginesinstalled thereon), so much of such payments remaining, after reimbursement ofSublessor for reasonable costs and expenses, as shall not exceed the StipulatedLoss Value required to be paid by Sublessee pursuant to Section 10(a) hereofshall be applied in reduction of Sublessee’s obligation to pay such StipulatedLoss Value, if not already paid by Sublessee, or, if already paid by Sublessee,shall be applied to reimburse Sublessee for its payment of such Stipulated LossValue, and the balance, if any, of such payments

 

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remaining thereafter will be paid over to, or retained by, Sublessee;and

 

(y)                                 if such payments arereceived with respect to an Engine under the circumstances contemplated by Section 10(b) hereof,so much of such payments remaining, after reimbursement of Sublessor and HeadLessor for reasonable costs and expenses, shall be paid over to, or retainedby, Sublessee, *provided* that Sublessee shallhave fully performed, or concurrently therewith will fully perform, the termsof Section 10(b) with respect to the Event of Loss for which suchpayments are made.

 

As between Sublessor and Sublessee, the insurancepayments for any property damage loss to the Airframe or any Engine notconstituting an Event of Loss with respect thereto will be applied in paymentfor repairs or for replacement property in accordance with the terms ofSections 7 and 8, if not already paid for by Sublessee, and anybalance (or if already paid for by Sublessee, all such insurance proceeds)remaining after compliance with such Sections with respect to such loss shallbe paid to Sublessee.

 

### (c) *Reports, etc.*  Sublessee will furnish, or cause to befurnished, to Sublessor, Head Lessor and the Owner Participant, on or beforethe Commencement Date and on or before July 1 in each year thereafterduring the Term commencing July, 2006, a report, signed by Aon Risk Services, Inc.or any other independent firm of insurance brokers reasonably acceptable toSublessor and Head Lessor (the “**Insurance Brokers**”),describing in reasonable detail the insurance and reinsurance then carried andmaintained with respect to the Aircraft and stating the opinion of such firmthat the insurance then carried and maintained with respect to the Aircraftcomplies with the terms hereof; *provided, however,*that all information contained in the foregoing report shall not be madeavailable by Sublessor, Head Lessor or the Owner Participant to anyone except (A) toprospective and permitted transferees of Sublessor’s, Head Lessor’s, or theOwner Participant’s interest who**agree to holdsuch information confidential, (B) to Sublessor’s, Head Lessor’s, or theOwner Participant’s counsel or independent certified public accountants orindependent insurance advisors who agree to hold such information confidential,(C) as may be required by any statute, court or administrative order ordecree or governmental ruling or regulation or as may be requested by anyregulatory agency or body having authority or (D) as may be necessary forpurposes of protecting the interests of any such Person or for the enforcementof this Sublease by Sublessor or the Head Lease by Head Lessor.  Sublessee will cause such Insurance Brokersto agree to advise Sublessor, Head Lessor, and the Owner Participant in writingof any default in the payment of any premium and of any other act or omissionon the part of Sublessee of which it has knowledge and which might invalidateor render unenforceable, in whole or in part, any insurance on theAircraft.  To the extent such agreementis reasonably obtainable, Sublessee will also cause such Insurance Brokers toagree to advise Sublessor, the Head Lessor and the Owner Participant in writingat least thirty (30) days (seven (7) days in the case of war risk andallied perils coverage), prior to the expiration or termination date of anyinsurance carried and maintained on the Aircraft pursuant to this Section 11.  In addition, Sublessee will also cause suchInsurance Brokers to deliver to Sublessor, Head Lessor and the OwnerParticipant, on or prior to the date of expiration of any insurance policyreferenced in a previously delivered certificate of insurance, a newcertificate of insurance, substantially in the same form as delivered bySublessee to such parties on the Commencement Date.  In the event that Sublessee shall fail tomaintain or cause to be

 

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### maintained insurance as herein provided,Sublessor or its designee may at its sole option provide such insurance and, insuch event, Sublessee shall, upon demand, reimburse Sublessor, as SupplementalRent, for the cost thereof to Sublessor or such designee, as the case may be,without waiver of any other rights Sublessor or such designee may have; *provided, however,* that no exercise by Sublessor or suchdesignee of said option shall affect the provisions of this Sublease, includingthe provisions of Section 14(g) hereof.

###  

### (d) *Self-Insurance.*  Sublessee may not self-insure the risksrequired to be insured against pursuant to this Section 11; *provided*, *however*, thatSublessee may self-insure the risks required to be insured against pursuant to Section 11(a) and(b) hereof solely to the extent of any applicable mandatory minimum peraircraft (or, if applicable, per annum or other period) hull or liabilityinsurance deductible imposed by the aircraft hull or liability insurers.

###  

### (e) *Additional Insurance byHead Lessor and Sublessor.* Sublessee may at its own expense carry insurance with respect to itsinterest in the Aircraft in amounts in excess of that required to be maintainedby this Section 11; the Owner Participant (either directly or through HeadLessor) or Sublessor may carry for its own account at its sole cost and expenseinsurance with respect to its interest in the Aircraft, *provided*that such insurance does not prevent Sublessee from carrying the insurancerequired or permitted by this Section 11 or adversely affect suchinsurance or the cost thereof.

###  

### (f) *Indemnification byGovernment in Lieu of Insurance.*  With Sublessor’s writtenconsent which may be given or withheld in its sole discretion, notwithstandingany provisions of this Section 11 requiring insurance, Sublessee mayprovide, in lieu of insurance against any risk with respect to the Aircraft,indemnification from, or insurance provided by, the United States Government orany agency or instrumentality thereof the obligations of which are backed by thefull faith and credit of the United States against such risk in an amountwhich, when added to the amount of insurance against such risk maintained bySublessee with respect to the Aircraft (including permitted self-insurance)shall be at least equal to the amount of insurance against such risk otherwiserequired by this Section 11.

###  

### (g) *Application of PaymentsDuring Existence of Default*.

###  

#### (i)                                     Any amountreferred to in paragraph (b) of this Section 11 which is payable toor retainable by Sublessee shall not be paid to or retained by Sublessee if atthe time of such payment or retention a Default or an Event of Default shallhave occurred and be continuing or if the Airline Services Agreement shall havebeen terminated or canceled  or shallhave terminated in accordance with its terms, but shall be held by Sublessorand applied in accordance with Section 28 hereof.  At such time as there shall not be continuingany such Default or Event of Default and the Airline Services Agreement shallnot have been terminated or canceled or shall not have terminated in accordancewith its terms, such amount shall be paid to Sublessee to the extent notpreviously applied in accordance with the preceding sentence.

####  

#### (ii)                                  Any amount referredto in paragraph (b) of this Section 11 which is payable to orretainable by Sublessee shall not be paid to or retained by Sublessee 

 

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#### if at the time of such payment or retention an Event of Default (assuch term is defined in the Head Lease) shall have occurred and be continuing,but shall be held by or paid over to or at the direction of Head Lessor assecurity for the obligations of Sublessor under the Head Lease and, if HeadLessor declares the Head Lease to be in default pursuant to Section 15 ofthe Head Lease, may be applied against Sublessor’s obligations thereunder asand when due.  At such time as thereshall not be continuing any such Event of Default (as such term is defined inthe Head Lease), such amount shall be paid to Sublessee to the extent notpreviously applied in accordance with the preceding sentence.

####  

**SECTION 12.  Inspection.**  At all reasonable times and upon reasonablenotice to Sublessee, Head Lessor, the Owner Participant or their respectiveauthorized representatives may each inspect the Aircraft and inspect and makecopies (at Head Lessor’s or the Owner Participant’s expense, as the case maybe) of the Aircraft Documentation and other manuals, logs, books and records ofSublessee relating to the maintenance of the Aircraft; any such inspection ofthe Aircraft shall be limited to a visual, walk-around inspection and mayinclude opening any panels, bays or the like; *provided*that no exercise of such inspection right shall unreasonably interfere with thescheduled operation or maintenance of the Aircraft by, or the business of,Sublessee unless deemed critical by Sublessor. At all times upon notice to Sublessee, Sublessor or its authorizedrepresentative may inspect the Aircraft and inspect and make copies (at its expense)of the Aircraft Documentation and other manuals, logs, books and records ofSublessee relating to the maintenance of the Aircraft; any such inspection may,at Sublessor’s election, include a visual, walk-around inspection, opening anypanels, bays or the like, Engine borescope inspections, Engine power assuranceruns, ground operation and function checks; *provided* thatno exercise of such inspection right shall unreasonably interfere with thescheduled operation or maintenance of the Aircraft by, or the business of,Sublessee unless deemed critical by Sublessor. In addition, upon receipt by Sublessee of a written request from theOwner Participant or Sublessor specifying that the Owner Participant orSublessor desires to have an authorized representative observe the nextscheduled “C” Check or, if Sublessee is then maintaining the Aircraft under afully equalized maintenance program, the next scheduled maintenance visit undersuch equalized maintenance program to be performed on the Aircraft (or substituteequivalent successor type of maintenance work), Sublessee shall cooperate withthe Owner Participant or Sublessor, as the case may be, to enable the OwnerParticipant’s or Sublessor’s authorized representative to each observe the nextscheduled maintenance visit to be performed on the Aircraft, includingreasonable advance notification to the Owner Participant, and Sublessor of thetime and place of such scheduled maintenance visit; *provided*that the authorized representative of the Owner Participant shall merelyobserve such scheduled maintenance visit, shall not interfere with or extend inany manner the conduct or duration of the maintenance visit and shall not beentitled to direct any of the work performed in connection with such visit.  None of Sublessor, Head Lessor or the OwnerParticipant shall have any duty to make any such inspection nor shall any ofthem incur any liability or obligation by reason of not making such inspection.

 

**SECTION 13.  Assignment.**  Sublessee will not, without the prior expresswritten consent of Sublessor, assign in whole or in part this Sublease or anyof its rights or obligations hereunder. Sublessor may assign in whole or in part, or convey all or any part ofits right, title and interest in and to, this Sublease after giving Sublesseeten (10) days notice thereof. Subject

 

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to the foregoing, theterms and provisions of this Sublease shall be binding upon and inure to thebenefit of Sublessor and Sublessee and their respective successors andpermitted assigns.

 

**SECTION 14.  Events of Default.**  Each of the following events shall constitutean Event of Default (whether any such event shall be voluntary or involuntaryor come about or be effected by operation of law or pursuant to or incompliance with any judgment, decree or order of any court or any order, rule orregulation of any administrative or governmental body) and each such Event ofDefault shall continue so long as, but only as long as, it shall not have beenremedied:

 

(a)                                  Sublessee shall nothave made a payment of Basic Rent or Stipulated Loss Value when the same shallhave become due; or

 

(b)                                 Sublessee shall havefailed to make a payment of Supplemental Rent (other than Stipulated LossValue) after the same shall have become due and such failure shall continue forfive (5) days; or

 

(c)                                  Sublessee shall havefailed to perform or observe (or caused to be performed and observed) anycovenant or agreement to be performed or observed by it under any Sublessee Documentother than the Airline Services Agreement and such failure shall continueunremedied for a period of twenty (20) days after the earlier of (x) receipt bySublessee of written notice thereof from Sublessor, or (y) insofar as thefailure to perform or observe (or caused to be performed and observed) anycovenant or agreement relates to any material covenant or agreement, an officerof Sublessee, whose functions and duties would make him familiar with the termsof this Sublease has knowledge; or

 

(d)                                 any representation orwarranty made by Sublessee herein or any document or certificate furnished bySublessee in connection herewith or therewith or pursuant hereto or thereto,shall prove to have been incorrect in any material respect at the time made andsuch incorrectness shall not have been cured (to the extent of the adverseimpact of such incorrectness on the interests of Sublessor) within ten (10) daysafter the receipt by Sublessee of a written notice from Sublessor advisingSublessee of the existence of such incorrectness; or

 

(e)                                  the commencement ofan involuntary case or other proceeding in respect of Sublessee in aninvoluntary case under the federal bankruptcy laws, as now or hereafterconstituted, or any other applicable federal or state bankruptcy, insolvency orother similar law in the United States or seeking the appointment of areceiver, liquidator, assignee, custodian, trustee, sequestrator (or similarofficial) of Sublessee or for all or substantially all of its property, orseeking the winding-up or liquidation of its affairs and the continuation ofany such case or other proceeding undismissed and unstayed for a period ofthirty (30) consecutive days or an order, judgment or decree shall be enteredin any proceeding by any court of competent jurisdiction appointing, withoutthe consent of Sublessee a receiver, trustee or liquidator of Sublessee or ofany substantial part of its property, or sequestering or attaching anysubstantial part of the property of Sublessee and any such order, judgment ordecree or appointment or sequestration shall be final or

 

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shall remain in force undismissed, unstayed or unvacated for a periodof thirty (30) days after the date of entry thereof; or

 

(f)                                    the commencement bySublessee of a voluntary case under the federal bankruptcy laws, as nowconstituted or hereafter amended, or any other applicable federal or statebankruptcy, insolvency or other similar law in the United States, or theconsent by Sublessee to the appointment of or taking possession by a receiver,liquidator, assignee, trustee, custodian, sequestrator (or other similarofficial) of Sublessee or for all or substantially all of its property, or themaking by Sublessee of any assignment for the benefit of creditors, orSublessee shall enter into any agreement, composition, extension or adjustmentwith creditors or shall take any corporate action to authorize any of theforegoing; or

 

(g)                                 Sublessee shall failto carry and maintain on or with respect to the Aircraft insurance required tobe maintained in accordance with the provisions of Section 11 hereof; or

 

(h)                                 Sublessee shall ceaseto be a Certificated Air Carrier; or

 

(i)                                     the attachment ortaking possession by a creditor of a material part of, or the levy orenforcement of a distress, execution, sequestration or other process upon anyassets, rights or revenues of Sublessee and such attachment or order is notdischarged within thirty (30) days; or

 

(j)                                     any eventdescribed in Section 10.02 of the Airline Services Agreement givingSublessor the ability to terminate the Airline Services Agreement shall haveoccurred; or

 

(k)                                  any event describedin Section 10.03 of the Airline Services Agreement shall have occurred; or

 

(l)                                     Sublessee shallhave materially breached or shall be in default under any material purchaseagreement, service agreement, maintenance agreement or other material agreementwith any vendor relating to the Airframe or Engines, including components.

 

**SECTION 15.  Remedies; Automatic Termination.**  (a) *Remedies.* Uponthe occurrence of any Event of Default and at any time thereafter so long asthe same shall be continuing, Sublessor may, at its option, declare by writtennotice to Sublessee this Sublease Agreement to be in default (*provided* that this Sublease shall be deemed to be declaredin default without the necessity of such written declaration upon theoccurrence of any Event of Default described in Section 14(e) or Section 14(f));and at any time thereafter, Sublessor may do one or more of the following withrespect to all or any part of the Airframe and any or all of the Engines asSublessor in its sole discretion shall elect, to the extent permitted by, andsubject to compliance with any mandatory requirements of, applicable law thenin effect:

 

#### (i)                                     upon the writtendemand of Sublessor and at Sublessee’s expense, cause Sublessee to immediatelyreturn the Airframe or any Engine as Sublessor

 

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#### may so demand to Sublessor or its order in the manner and conditionrequired by, and otherwise in accordance with all the provisions of, Section 5as if such Aircraft, Airframe or Engine were being returned at the end of theTerm, or Sublessor, acting in its individual capacity or as attorney forSublessee, at its option, may enter upon the premises where all or any part ofthe Aircraft, Airframe or any Engine or Part is located and take immediatepossession of and remove the same (together with any engine which is not anEngine but which is installed on the Airframe, subject to all the rights of theowner, lessor, lien holder or secured party of such engine, and such engineshall be held for the account of any such owner, lessor, lien holder or securedparty or, if owned by Sublessee, may at the option of Sublessor, be exchangedwith Sublessee for an Engine in accordance with the provisions of Section 9(d)),without the necessity of first instituting proceedings, or by summaryproceedings or otherwise, and Sublessee waives any right it may have underapplicable law to a hearing prior to repossession of the Aircraft, Airframe,Engine or Part (and/or, at Sublessor’s option, store the same at Sublessee’spremises until disposal thereof by Sublessor), all without liability accruingto Sublessor for or by reason of such entry or taking of possession or removingwhether for the restoration of damage to property caused by such action orotherwise.  Sublessee acknowledges andagrees that its obligations to return the Aircraft in those instances isincontrovertible without prejudice to its right to dispute any amounts,damages, interests or other amounts claimed by Sublessor upon termination ofthis Sublease and as such this Sublease will be incontrovertible writtenevidence of such obligation of Sublessee to return the Aircraft which Sublessorwill be entitled to enforce via injunctive orders.  Without limiting any other provision of thisSublease or of any other Operative Document, if an Event of Default hasoccurred and is continuing, Sublessor shall have the right to withhold orset-off against all amounts otherwise payable to Sublessee hereunder or underthe Airline Services Agreement or under any other aircraft, engine, spare partsor facility lease or sublease between Sublessor or any Affiliate thereof andSublessee, all as security for Sublessee’s obligations and liabilities underthis Sublease and the other Operative Documents, and to use and apply in wholeor in part any or all of such amounts and set-offs to and against suchobligations and liabilities of Sublessee, and any such use, application orsetoff shall be absolute, final and irrevocable;

####  

#### (ii)                                  sell the Aircraft,Airframe and/or any Engine at public or private sale, as Sublessor maydetermine, or otherwise dispose of, hold, use, operate, lease to others or keepidle the Aircraft as Sublessor, in its sole discretion, may determine, all freeand clear of any rights of Sublessee and without any duty to account toSublessee with respect to such action or inaction or for any proceeds withrespect thereto, except as hereinafter set forth in this Section 15;

####  

#### (iii)                               whether or not Sublessorshall have exercised, or shall thereafter at any time exercise, any of itsrights under paragraph (a) or paragraph (b) above with respect to theAirframe and/or any Engine, Sublessor, by written notice to Sublesseespecifying a payment date which shall be a Sublease Period Date not earlierthan ten (10) days from the date of such notice (such specified date, the

 

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#### “**Termination Date**”), may demand thatSublessee pay to Sublessor, and Sublessee shall pay Sublessor, on theTermination Date, as liquidated damages for loss of a bargain and not as apenalty (in lieu of the installments of Basic Rent for the Aircraft due forSublease Periods commencing on or after the Termination Date), any unpaid BasicRent due on or prior to the Termination Date *plus*whichever of the following amounts Sublessor, in its sole discretion, shallspecify in such notice (together with interest, if any, on such amount at thePast Due Rate from the Termination Date until the date of actual payment ofsuch amount): (A) an amount equal to the excess, if any, of (I) theStipulated Loss Value for the Aircraft, computed as of the Termination Date,over (II) the aggregate fair market rental value (computed as hereafter in thisSection 15 provided) of such Aircraft for the remainder of the Term, afterdiscounting such aggregate fair market rental value to the present valuethereof as of the Termination Date at an annual rate equal to the Base Rate; or(B) an amount equal to the excess, if any, of the Stipulated Loss Valuefor such Aircraft, computed as of the Termination Date, over (II) the fairmarket sales value of such Aircraft (computed as hereafter in Section 15provided) as of the Termination Date;

####  

#### (iv)                              in the event Sublessor,pursuant to paragraph (b) above, shall have sold or caused a sale of theAirframe and/or any Engine, Sublessor, in lieu of exercising its rights underparagraph (c) above with respect to such Aircraft, may, if it shall soelect, demand that Sublessee pay Sublessor, and Sublessee shall pay toSublessor, on the date of such sale, as liquidated damages for loss of abargain and not as a penalty (in lieu of the installments of Basic Rent for theAircraft due on or after such date), any unpaid Basic Rent with respect to theAircraft due on or prior to such date *plus* the amountof any deficiency between (I) the net proceeds of such sale (after deduction ofall reasonable costs of sale) and (II) the Stipulated Loss Value of suchAircraft, computed as of the Stipulated Loss Value Date on or immediatelypreceding the date of such sale together with interest, if any, on the amountof such deficiency, at the Past Due Rate, from the date of such sale to thedate of actual payment of such amount; and/or

####  

#### (v)                                 Sublessor may rescind,terminate or cancel this Sublease Agreement as to the Aircraft, and/or mayexercise any other right or remedy which may be available to it underapplicable law or proceed by appropriate court action to enforce the termshereof or to recover damages for breach hereof.

####  

For the purposes of paragraph (iii) above, the “fairmarket rental value” or the “fair market sales value” of the Aircraft shall bethe rental value or sales value, as the case may be, which would be obtained inan arm’s-length transaction between an informed and willing Sublessee orpurchaser, as the case may be, under no compulsion to lease or purchase, as thecase may be, and an informed and willing Sublessor or seller in possessionunder no compulsion to lease or sell, as the case may be, in each case basedupon the actual condition and location of the Aircraft, which value shall bedetermined pursuant to an appraisal prepared and delivered by a nationallyrecognized firm of independent aircraft appraisers chosen by Sublessor. Thecost of such appraisal or appointment shall be borne by Sublessee.

 

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In addition, Sublessee shall be liable, except asotherwise provided above and without duplication of amounts payable hereunder,for any and all unpaid Rent due hereunder before, after or during the exerciseof any of the foregoing remedies and for all reasonable legal fees and othercosts and expenses (including fees of the appraisers hereinabove referred to)incurred by Sublessor, Head Lessor and the Owner Participant by reason of theoccurrence of any Event of Default or the exercise of Sublessor’s remedies withrespect thereto, including all costs and expenses incurred in connection withthe return of the Airframe or any Engine in accordance with the terms of Section 5or in placing such Airframe or Engine in the condition and airworthinessrequired by such Section.

 

At any sale of the Aircraft or any part thereofpursuant to this Section 15(a), Sublessor (or Head Lessor or the OwnerParticipant) may bid for and purchase such property.  Sublessor agrees to give Sublessee at leastten (10) days prior written notice of the date fixed for any public saleof the Airframe or any Engine or of the date on or after which will occur theexecution of any contract providing for any private sale.  Except as otherwise expressly provided above,no remedy referred to in this Section 15(a) is intended to beexclusive, but each shall be cumulative and in addition to any other remedyreferred to above or otherwise available to Sublessor at law or in equity; andthe exercise or beginning of exercise by Sublessor of any one or more of suchremedies shall not preclude the simultaneous or later exercise by Sublessor ofany or all of such other remedies.  Nowaiver by Sublessor of any Event of Default shall in any way be, or beconstrued to be, a waiver of any future or subsequent Event of Default.

 

### (b)                                 *AutomaticTermination*.  If the AirlineServices Agreement shall be terminated or canceled or shall terminate inaccordance with its terms, except for the provisions of Sections 29(b) and29(c) of this Sublease (which shall survive) this Sublease shall thereuponterminate forthwith and without notice. Upon the termination of this Sublease as aforesaid and at any timethereafter, Sublessor may, to the extent permitted by, and subject to compliancewith any mandatory requirements of, applicable law then in effect, and atSublessee’s expense, cause Sublessee to immediately return, and Sublessee shallimmediately return, the Aircraft, Airframe or any Engine as Sublessor may sodemand to Sublessor or its order in the manner and condition required by, andotherwise in accordance with all the provisions of Section 5 as if suchAircraft, Airframe or Engine were being returned at the end of the Term, orSublessor, at its option, may enter upon the premises where all or any part ofthe Aircraft, Airframe or any Engine is located and take immediate possessionof and remove the same (together with any engine which is not an Engine butwhich is installed on the Airframe, subject to all the rights of the owner,lessor, lien holder or secured party of such engine, and such engine shall beheld for the account of any such owner, lessor, lien holder or secured partyor, if owned by Sublessee, may at the option of Sublessor, be exchanged withSublessee for an Engine in accordance with the provisions of Section 9(d)),without the necessity of first instituting proceedings, or by summaryproceedings or otherwise, and Sublessee waives any right it may have underapplicable law to a hearing prior to repossession of the Aircraft, Airframe,Engine or Part (and/or, at Sublessor’s option, store the same inaccordance with the provisions of Section 5(d)), all without liabilityaccruing to Sublessor for or by reason of such entry or taking of possession orremoving whether for the restoration of damage to property caused by suchaction or otherwise.  Sublesseeacknowledges and agrees that its obligations to return the Aircraft in thoseinstances is incontrovertible without prejudice to its right to dispute anyamounts, damages, interests or other amounts claimed by Sublessor upontermination of this Sublease and as such this Sublease will be incontrovertible

 

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### written evidence of such obligation ofSublessee to return the Aircraft which Sublessor will be entitled to enforcevia injunctive orders.

###  

In addition, Sublessee shall be liable for any and allunpaid Rent due hereunder before or during the occurrence of the eventsreferred to in the preceding paragraph, and all costs and expenses incurred inconnection with the return of the Airframe or any Engine in accordance with theterms of Section 5 or in placing such Airframe or Engine in the conditionand airworthiness required by such Section.

 

**SECTION 16.  Sublessee’s Cooperation Concerning CertainMatters.**  Forthwithupon the execution and delivery of each Sublease Supplement from time to timerequired by the terms hereof and upon the execution and delivery of anyamendment to this Sublease, Sublessee will cause such Sublease Supplement oramendment to be duly filed and recorded, and maintained of record, inaccordance with the applicable laws of the government of registry of theAircraft.  In addition, Sublessee willpromptly and duly execute and deliver to Sublessor such further documents(including the filing of Uniform Commercial Code continuation statements withrespect to previously filed financing statements) and assurances and take suchfurther action as may be identified in the annual opinion of counsel requiredto be furnished pursuant to Section 30(c) and/or as Sublessor mayfrom time to time reasonably request in order more effectively to carry out theintent and purpose of this Sublease and to establish and protect the rights andremedies created or intended to be created in favor of Sublessor, hereunder orin respect thereof, including, without limitation, if requested by Sublessor,at the expense of Sublessee, the execution and delivery of supplements oramendments hereto, each in recordable form, subjecting to this Sublease, anyairframe or engine substituted for the Airframe or any Engine pursuant to theterms thereof and the recording or filing of counterparts thereof, inaccordance with the laws of such jurisdictions as Sublessor may from time totime deem advisable.  Sublessee agrees tofurnish to Sublessor, promptly after execution and delivery of any supplementand amendment hereto, an opinion of counsel reasonably satisfactory toSublessor as to the due recording or filing of such supplement oramendment.  Commencing in 2006 on orbefore April 30 of each year during the Term, Sublessee will deliver toSublessor a certificate of Sublessee, signed by the President, a Vice Presidentor the Chief Financial Officer of Sublessee to the effect that the signer isfamiliar with or has reviewed the relevant terms of this Sublease and thesigner does not have actual knowledge of the existence, as of the date of suchcertificate, of any condition or event which constitutes a Default or an Eventof Default.  Sublessee agrees that if anofficer of Sublessee has actual knowledge of the existence of a Default or anEvent of Default, then Sublessee shall promptly give to Sublessor noticethereof and such other information relating thereto as Sublessor may reasonablyrequest.  Sublessee will deliver toSublessor (i) within forty-five (45) days after the end of the first threequarterly periods of each fiscal year of Sublessee, a balance sheet ofSublessee as of the close of such period, together with related statements offinancial performance and cash flows for such period and, upon filing with theSecurities and Exchange Commission (and in any event no later than sixty (60)days after the end of the first three quarterly periods of each fiscal year ofMAIR Holdings, Inc.), the form 10-Q of MAIR Holdings, Inc. for suchperiod; (ii) within one hundred and twenty (120) days after the close ofsuch fiscal year, a balance sheet of Sublessee as of the close of such fiscalyear, together with the related statements of financial performance and cashflows for such fiscal year and the form 10-K of MAIR Holdings, Inc. forsuch period, prepared in the case of clause (i) and (ii) inaccordance with generally accepted accounting principles, consistently applied;(iii) within thirty (30) days

 

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after the end of eachcalendar quarter, if not previously provided to Sublessor, any Securities andExchange Commission filings of Sublessee and MAIR Holdings, Inc. duringthe preceding calendar quarter; (iv) upon filing with the Securities andExchange Commission (and in any event no later than ninety (90) days after theclose of MAIR Holdings, Inc.’s fiscal year), the annual report of MAIRHoldings, Inc. for such fiscal year; and (v) from time to time, suchfinancial statements and other information relating to Sublessee and MAIRHoldings, Inc. as Sublessor may reasonably request.

 

**SECTION 17.  Notices.**  All notices required under the terms andprovisions hereof shall be by telecopy or other telecommunication means (withsuch telecopy or other telecommunication means to be confirmed in writing), orif such notice is impracticable, by registered, first-class airmail, withpostage prepaid, or by nationally recognized overnight courier service, or bypersonal delivery of written notice and any such notice shall become effectivewhen received, addressed:

 

#### (i)                                     if to Sublessor,at 2700 Lone Oak Parkway (A4010), Eagan, Minnesota 55121-1534, Attention:Treasurer (Telecopy No. (612) 726-2221), or to such other address ortelecopy number as Sublessor shall from time to time designate in writing toSublessee,

####  

#### (ii)                                  if to Sublessee, at1000 Blue Gentian Road, Suite 200, Eagan, Minnesota  55121, Attention: President (Telecopy No. (651)367-5360), or to such other address or telecopy number as Sublessee shall fromtime to time designate in writing to Sublessor, and

####  

#### (iii)                               if to Head Lessor or theOwner Participant, addressed to Head Lessor or the Owner Participant at suchaddress or telecopy number as Head Lessor or the Owner Participant shall havefurnished by notice to Sublessor and to Sublessee, and, until an address is sofurnished, addressed to Head Lessor or the Owner Participant at its address ortelecopy number set forth in Schedule I to the Participation Agreement.

####  

**SECTION 18.  No Set-Off, Counterclaim, etc.**  This Sublease is a net lease.  All Rent shall be paid by Sublessee toSublessor in funds of the type specified in Section 3(d).  Sublessee’s obligation to pay all Rentpayable hereunder shall be absolute and unconditional and shall not be affectedby any circumstance, including, without limitation, (i) any set-off,counterclaim, recoupment, defense or other right which Sublessee may haveagainst Sublessor, Head Lessor (in its individual capacity or as Owner Trusteeunder the Trust Agreement), the Owner Participant, or anyone else for anyreason whatsoever (whether in connection with the transactions contemplatedhereby or any other transactions), including, without limitation, any breach bySublessor, Head Lessor, or the Owner Participant of their respectivewarranties, agreements or covenants contained in any of the Operative Documentsor Sublessee Documents, each of which rights Sublessee expressly waives, (ii) anydefect in the title, registration, airworthiness, condition, design, operation,or fitness for use of, or any damage to or loss or destruction of, theAircraft, or any interruption or cessation in or prohibition of the use orpossession thereof by Sublessee for any reason whatsoever, including, withoutlimitation, any such interruption, cessation or prohibition resulting from theact of any government authority, (iii) any insolvency, bankruptcy,reorganization or similar case or proceedings by or against Sublessee or anyother person, or (iv) any other circumstance, happening, or eventwhatsoever,

 

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whether or not unforeseenor similar to any of the foregoing.  Iffor any reason whatsoever this Sublease shall be terminated in whole or in partby operation of law or otherwise except as specifically provided herein,Sublessee nonetheless agrees without limitation of the other rights or remediesof Sublessor hereunder, to pay to Sublessor an amount equal to each Rentpayment at the time such payment would have become due and payable in accordancewith the terms hereof had this Sublease not been terminated in whole or inpart.  Sublessee hereby waives, to theextent permitted by applicable law, any and all rights which it may now have orwhich at any time hereafter may be conferred upon it, by statute or otherwise,to terminate, cancel, quit or surrender this Sublease except in accordance withthe express terms hereof.

 

**SECTION 19.  No Renewal.**  Sublessee shall not have the right to renewthis Sublease.

 

**SECTION 20.  Maintenance Program.**  Sublessor shall have the right in its solediscretion upon and after return of the Aircraft to utilize the MaintenanceProgram at no cost to Sublessor and Sublessee hereby agrees that is shallpermit Sublessor to utilize the Maintenance Program upon and after return ofthe Aircraft at no cost to Sublessor.

 

**SECTION 21.  Sublessor’s Right to Perform for Sublessee.**  If Sublessee fails to make any payment ofRent required to be made by it hereunder or fails to perform or comply with anyof its agreements contained herein, then Sublessor or Head Lessor may itselfmake such payment or perform or comply with such agreement but shall not beobligated hereunder to do so, and the amount of such payment and the amount ofthe reasonable expenses of Sublessor or Head Lessor, as the case may be,incurred in connection with such payment or the performance of or compliancewith such agreement, as the case may be, together with interest thereon at thePast Due Rate, shall be deemed Supplemental Rent, payable by Sublessee upondemand.

 

## **SECTION 22.  [Intentionally Omitted]**

 

**SECTION 23.  Service of Process.**  Sublessor and Sublessee each herebyirrevocably submits itself to the non-exclusive jurisdiction of the UnitedStates District Court for the Southern District of New York and to thenon-exclusive jurisdiction of the Supreme Court of the State of New York, NewYork County, for the purposes of any suit, action or other proceeding arisingout of this Sublease, the subject matter hereof or any of the transactionscontemplated hereby brought by Sublessor, Head Lessor or the Owner Participantor their successors or assigns.

 

**SECTION 24.  Miscellaneous.**  Subject to Section 15(b), any provisionof this Sublease which is prohibited or unenforceable in any jurisdictionshall, as to such jurisdiction, be ineffective to the extent of suchprohibition or unenforceability without invalidating the remaining provisionshereof, and any such prohibition or unenforceability in any jurisdiction shallnot invalidate or render unenforceable such provision in any otherjurisdiction.  No term or provision ofthis Sublease may be changed, waived, discharged or terminated orally, but onlyby an instrument in writing signed by Sublessor and Sublessee.  Sublessor, however, shall have the right toamend, supplement or otherwise modify the terms of this Sublease without theconsent of Sublessee in the event of any amendment, supplement or othermodification of the terms of the Head Lease. This Sublease shall constitute an agreement of sublease, and nothing containedherein shall be construed as conveying to Sublessee any right, title orinterest in the Aircraft except as a sublessee only.  Neither Sublessee nor any Affiliate ofSublessee will file any tax returns in a manner inconsistent with the foregoingfact or with the Owner’s ownership of the Aircraft.  The section and paragraph headings inthis Sublease and the table of contents are for convenience of reference onlyand shall not modify, define, expand or limit any of the terms or

 

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provisions hereof and allreferences herein to numbered sections, unless otherwise indicated, are tosections of this Sublease.  The Exhibitsattached hereto are intended to be an integral part of this Sublease and areincorporated into this Sublease by reference for all purposes.  **THIS SUBLEASE HAS BEENDELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY,AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDINGALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.**  This Sublease may be executed by the partieshereto in separate counterparts, each of which when so executed and deliveredshall be an original, but all such counterparts shall together constitute butone and the same instrument.  ThisSublease, the Airline Services Agreement, and the Sublease Supplement containthe complete and exclusive statement of the terms and conditions of the entireAircraft sublease agreement between Sublessor and Sublessee for the Term.  Nothing in this Sublease shall be interpretedor construed as establishing between the parties a partnership, joint ventureor other similar arrangement.

 

**SECTION 25.  Subordination.**  Notwithstanding any other provision hereof,this Sublease and Sublessee’s rights hereunder shall be subject and subordinateto all the terms of the Head Lease, including, without limitation, thecovenants contained in Section 7(a) of the Head Lease and Head Lessor’srights to repossession of the Aircraft pursuant to Section 15 of the HeadLease and to avoid this Sublease for any reason upon such repossession, andSublessee shall not be permitted to take any action hereunder not permitted tobe taken by Sublessor as “lessee” in the Head Lease.  Sublessee agrees to execute such furtherdocuments confirming such subordination of this Sublease as may be reasonablyrequested by Sublessor.  Sublesseeacknowledges receipt of an executed copy of each of the Head Lease, theParticipation Agreement, the Tax Indemnity Agreement and the Head LeaseSupplement.

 

**SECTION 26.  Covenant of Quiet Enjoyment.**  So long as (a) no Event of Default shallhave occurred and be continuing and (b) the Airline Services Agreementshall not have been terminated or canceled or shall not have terminated inaccordance with its terms, Sublessor shall not interfere with Sublessee’scontinued use and operation of, and quiet enjoyment of, the Aircraft.

 

**SECTION 27.  Federal Bankruptcy Code.**  It is the intention of the parties that theprovisions of 11 U.S.C. Section 1110, or any analogous section of theFederal bankruptcy laws, as amended from time to time, shall be applicable tothe interest of Sublessor in the Aircraft and to any right of Sublessor to takepossession of the Aircraft in compliance with the provisions of this Sublease,as the same may be amended, modified or supplemented from time to time.

 

**SECTION 28.  Use of Funds.**  If a Default or an Event of Default shallhave occurred and is continuing, or if a default or an event of default underany other aircraft, engine, spare parts or facility lease or sublease or anyother agreement, instrument or document between Sublessor or any Affiliatethereof and Sublessee or any Affiliate thereof shall have occurred and iscontinuing, Sublessor shall have the right in its sole discretion to apply anyfunds of Sublessee that it holds including, without limitation, those which arepart of Basic Rent and those which are held pursuant to Sections 10(f)(i) and11(g)(i) hereof, to cure any Default or Event of Default or any default orevent of default under any agreement, instrument or document between Sublessoror any Affiliate thereof and Sublessee or any Affiliate thereof; *provided*, *however*, thatSublessor shall have no obligation hereunder to apply any such funds. Theamount of any such funds so applied and the amount of the reasonable expensesof Sublessor incurred in connection with such

 

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application, togetherwith interest thereon at the Past Due Rate shall be deemed Supplemental Rent,payable by Sublessee upon demand.

 

**SECTION 29.  Sublessee’s Representations, Warranties andIndemnities.**  (c) *In General.*  Sublessee represents, warrants and covenantsto Sublessor that as of the Commencement Date:

 

#### (i)                                     Sublessee is aCertificated Air Carrier and corporation duly organized and validly existingpursuant to the laws of the State of Minnesota; is duly qualified to dobusiness as a foreign corporation in each jurisdiction in which its operationsor the nature of its business requires, other than failures to qualify whichwould not have a material adverse effect on the consolidated business, assets,properties or condition (financial or otherwise) of Sublessee and itssubsidiaries taken as a whole or on the ability of Sublessee to perform itsobligations under the Sublessee Documents; has its jurisdiction of organization(as such term is used in Article 9 of the Uniform Commercial Code) inMinnesota; holds all licenses, certificates, permits and franchises from theappropriate agencies of the United States and/or all other governmentalauthorities having jurisdiction necessary to conduct its business as presentlyconducted (other than those licenses, certificates, permits and franchiseswhich, if not obtained, would not have an adverse effect on the consolidatedbusiness assets, properties or condition (financial or otherwise) of Sublesseeor on the ability of Sublessee to perform its obligations under the SublesseeDocuments); and has the corporate power and authority to own or hold under theSublease its properties wherever located or used and to enter into and performits obligations under the Sublessee Documents;

####  

#### (ii)                                  the execution,delivery and performance by Sublessee of the Sublessee Documents to whichSublessee is a party will, on the Commencement Date, have been duly authorizedby all necessary corporate action on the part of Sublessee, do not require anystockholder approval, or approval or consent of any trustee or holders of anyindebtedness or obligations of Sublessee except such as have been duly obtainedor by the Commencement Date will have been duly obtained, and neither theexecution or delivery thereof or the consummation by Sublessee of thetransactions contemplated thereby nor the compliance by Sublessee with any of theterms and provisions of such agreements contravenes any law, judgment,government rule, regulation or order binding on Sublessee or the certificate ofincorporation or by-laws of Sublessee or contravenes the provisions of, orconstitutes a default under, or results in the creation of any Lien (other thanPermitted Liens) upon the property of Sublessee under, any indenture, mortgage,contract or other agreement to which Sublessee is a party or by which it or itsproperties may be bound or affected;

####  

#### (iii)                               neither the executionand delivery by Sublessee of the Sublessee Documents to which Sublessee is aparty nor the performance by Sublessee of its obligations thereunder requirethe consent or approval of, the giving of notice to, or the registration with,or the taking of any other action in respect of, any Federal, state or foreigngovernment authority or agency, except for (A) the

 

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#### orders, permits, waivers, exemptions, authorizations and approvals ofthe regulatory authorities having jurisdiction over the operation of theAircraft by Sublessee required to be obtained on or prior to the CommencementDate, which orders, permits, waivers, exemptions, authorizations and approvalshave been duly obtained and are, or will on the Commencement Date be in fullforce and effect, and (B) such consents, approvals, notices, registrationsand other actions required by the terms of the Sublessee Documents to theextent required to be given or obtained only after the Commencement Date;

####  

#### (iv)                              on the Commencement Datethe Sublessee Documents to which Sublessee is a party will each constitutelegal, valid and binding obligations of Sublessee enforceable against Sublesseein accordance with the terms thereof (except as enforceability may be limitedby (A) general principles of equity, (B) applicable bankruptcy,insolvency, fraudulent conveyance, reorganization, moratorium or similar lawsaffecting the rights of creditors generally, (C) applicable laws which mayaffect the remedies provided therein; which laws, however, do not make theremedies provided therein inadequate for the practical realization of thebenefits provided thereby, except that no representation or warranty is made asto the amount of priority of any recovery under any particular circumstances,and (D) in the case of indemnity provisions contained in such documents,as limited by public policy considerations);

####  

#### (v)                                 there are no pendingor, to the best of Sublessee’s knowledge, threatened actions, suits or proceedingsbefore any court, governmental body, arbitration board, tribunal oradministrative agency which might adversely affect the business, condition(financial or otherwise), operations or properties of Sublessee or Sublessee’sability to perform its obligations under the Sublessee Documents to whichSublessee is a party;

####  

#### (vi)                              except for (A) thefiling for recording pursuant to the Federal Aviation Act of the Sublease withthe Sublease Supplement covering the Aircraft, and (B) the filing offinancing statements (and continuation statements at periodic intervals) withrespect to the security and other interests created by such documents under theUniform Commercial Code, no further action, including any filing or recordingof any document (including any financing statement in respect thereof under Article 9of the Uniform Commercial Code of any applicable jurisdiction), is necessary inorder to establish and perfect Sublessor’s interest in the Aircraft as againstSublessee in any applicable jurisdictions in the United States;

####  

#### (vii)                           there has not occurred anyevent which constitutes an Event of Default under the Sublease or a default oran event of default under any other aircraft, engine, spare parts or facilitylease or sublease or any other agreement, instrument or document betweenSublessor or any of its Affiliates and Sublessee (or any event which with thegiving of notice or the passage of time or both would constitute an Event ofDefault under the Sublease or an event of default under any

 

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#### other aircraft, engine, spare parts or facility lease or subleasebetween Sublessor or any of its Affiliates and Sublessee) which is presentlycontinuing;

####  

#### (viii)                        the Aircraft will be free andclear of all Liens, except Permitted Liens (including, for this purpose, anyLien which would be a Sublessor Lien or Head Lessor Lien but for the proviso toeither such definition);

####  

#### (ix)                                the Aircraft will beduly certified by the FAA as to type and airworthiness, will be insured bySublessee in accordance with the terms of this Sublease and will be in thecondition and state of repair required under the terms of this Sublease;

####  

#### (x)                                   Sublessor, assublessor hereunder, will be entitled to the benefits of 11 U.S.C. Section 1110(or any successor statute containing the material terms of 11 U.S.C. Section 1110)in the event of any reorganization of Sublessee under such Section; and

####  

#### (xi)                                there has not been anymaterial adverse change in the operations or financial condition of Sublesseesince March 31, 2005.

####  

### (b)                                 *General TaxIndemnity*.

###  

#### (i)                                     *Indemnity.*  Except asprovided in Section 29(b)(ii) hereof, Sublessee shall on an After-TaxBasis pay, protect, save and on written demand shall indemnify and holdharmless any Tax Indemnitee from and against any and all Taxes howsoeverimposed against any Tax Indemnitee, Sublessee, Sublessee Person or theAircraft, the Airframe, any Engine, or any Part thereof or interesttherein by any Federal, state or local government or other taxing authority inthe United States or by any foreign government or any political subdivision ortaxing authority thereof or by any territory or possession of the United Statesor by any international authority (“**Taxing Authority**”)upon or in connection with or relating to (A) the construction, financing,refinancing, purchase, acquisition, acceptance, rejection, delivery,nondelivery, transport, ownership, registration, re-registration, insuring,assembly, possession, repossession, operation, location, use, control, condition,maintenance, repair, sale, return, abandonment, installation, storage,redelivery, replacement, leasing, subleasing, modification, rebuilding,importation, exportation, transfer of title, transfer of registration, or otherapplication or disposition of the Aircraft, the Airframe, any Engine, or any Part thereofor any interest in the foregoing, (B) the rentals, receipts or earningsfrom the Aircraft, the Airframe, any Engine, any Part or any interest inthe foregoing, (C) any amount paid or payable pursuant to any OperativeDocument or Sublessee Document or any document related to any OperativeDocument or Sublessee Document, (D) the Aircraft, the Airframe, anyEngine, any Part or any interest in the foregoing, (E) any or all ofthe Operative Documents or the Sublessee Documents or the execution, issuance,delivery or registration of, or the performance under any of the OperativeDocuments or Sublessee Documents and any other documents contemplated hereby orthereby and amendments and

 

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#### supplements hereto and thereto or the execution, delivery orperformance of any thereof or the issuance, acquisition, modification, holdingor subsequent transfer thereof, or (F) the payment of principal of,interest, Make-Whole Amount or other premium on, or (G) otherwise withrespect to or in connection with the transactions contemplated by the OperativeDocuments or the Sublessee Documents.

####  

#### (ii)                                  *Exclusions from General Tax Indemnity.*  The provisions of Section 29(b)(i) shallnot apply:

####  

###### (1)                                  with respect to anyEquity Tax Indemnitee and Sublessor, to any Income Tax (as defined in Section 29(d) hereof)imposed on such Tax Indemnitee by the United States Federal government, *provided*, *however*, thatnotwithstanding the foregoing, Sublessee will indemnify and hold harmless eachEquity Tax Indemnitee and Sublessor for any withholding taxes imposed on orwith respect to the payment of principal, interest, Make-Whole Amount and theSublessor with respect to any withholding tax imposed on any rent payable bySublessor under the Head Lease, including interest and penalties thereon;

######  

###### (2)                                  to any Tax to theextent imposed as a result of a voluntary transfer or disposition by a TaxIndemnitee including, without limitation, the revocation of the trust createdby the Trust Agreement or a transfer or disposition of all or any portion ofits respective equitable or legal ownership or leasehold interest in theAircraft, any Engine, any Part, the Trust Estate, or any Operative Document orSublessee Document or any interest in such Tax Indemnitee, unless such transferor disposition shall occur (A) during the continuance of a Default orEvent of Default under the Lease or this Sublease or upon the termination orcancellation of the Airline Services Agreement, (B) in connection with thetermination of the Head Lease or Sublease, as the case may be, or the action ordirection of Sublessee pursuant to Sections 2, 5 ,6, 7, 8, 9, 10 or 19 of thisSublease or of Sublessor pursuant to Sections 2, 5, 6, 7, 8, 9, 10 or 19 of theHead Lease, as the case may be, or (C) in connection with the substitutionor replacement of the Aircraft, any Engine or Part pursuant to Section 10of the Head Lease;

######  

###### (3)                                  to Taxes to theextent based on or measured by any fees received by the Owner Trustee inconnection with any transaction contemplated by the Operative Documents;

######  

###### (4)                                  to Taxes to theextent imposed with respect to events occurring or matters arising, after theearlier of (x) the return of physical possession of the Aircraft to Sublessoror its designee pursuant to the terms of this Sublease or (y) the commencementof storage pursuant to Section 5(d) hereof; *provided*theexclusion set forth in this subparagraph (4) shall not apply to Taxes tothe extent such Taxes relate to events,

 

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###### periods or matters occurring or arising prior to or simultaneously withsuch time or arise as a result of amounts payable by Sublessee after such time,or occur during the continuance of a Default or Event of Default under thisSublease;

######  

###### (5)                                  to any Tax to theextent arising out of or caused by, or to the extent such Tax would not havebeen incurred but for, (A) the willful misconduct of such Tax Indemniteeor (B) the breach of any representation, covenant or agreement by such TaxIndemnitee in any Operative Document;

######  

###### (6)                                  with respect to anyTax Indemnitee (other than Sublessor and its Affiliates, successors and assignsand their respective directors, officers, employees, agents and servants) toany Tax to the extent such Tax Indemnitee is not entitled to indemnificationpursuant to Section 7(b) of the Participation Agreement.

######  

Nothing contained in Section 29(b)(ii) hereofshall apply to any Tax in the nature of a sales, use, value added, goods andservices, transfer, recording, excise or registration Tax imposed on or withrespect to the Aircraft, any Engine or any Part or interest therein ortitle thereto incurred prior to, or on the date of, the execution and deliveryof this Sublease.  For the avoidance ofdoubt, and notwithstanding any provision herein to the contrary, Sublesseeagrees to indemnify Sublessor on an After-Tax Basis against, and agrees to holdSublessor harmless from, any and all payments, indemnities and gross-upsrequired to be made by Sublessor pursuant to Section 7 of theParticipation Agreement.

 

#### (iii)                               *Calculation of General Tax Indemnity Payments.*  Notwithstanding any provision contained in Section 29(b)(ii) hereof,any payment which Sublessee shall be required to make to, or for the accountof, any Tax Indemnitee, with respect to any Tax (or any payment made inconnection with the payment or contest of any Tax) which is subject toindemnification under this Section 29(b) shall be paid on anAfter-Tax Basis.  Any calculation of anindemnity payment for an inclusion item, and of any gross-up of an indemnity orreverse indemnity payment, will be on the basis of then-actual Federal, state,and local tax rates applicable to such Tax Indemnitee, and based upon the assumptionthat the Tax Indemnitee is fully taxable at such tax rates.

####  

If a Tax Indemnitee(other than Sublessor or any of its Affiliates) shall pay any amount toSublessor pursuant to Section 7(b)(iii) of the ParticipationAgreement for which Sublessee has previously paid an indemnity under this Section 29,Sublessor shall pay such amount to Sublessee within 15 Business Days afterSublessor has received such amount, after deduction of Sublessor’s reasonablecosts and expenses (including any net tax cost) in connection therewith but notin excess of Sublessee’s prior payments with respect to such indemnified Tax.

 

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Any Taxes that areimposed on any Tax Indemnitee as a result of the disallowance or reduction ofany tax benefit (including foreign tax credits) referred to in this subsection asto which Sublessor has made a payment to Sublessee required hereby (or as towhich such Sublessor would have made payment but for Section 29(b)(viii) orwhich benefit was otherwise taken into account in computing Sublessee’sindemnity obligation pursuant to this Section 29(b)) in a taxable yearsubsequent to the utilization by the Tax Indemnitee, or any amount required tobe paid by Sublessor to a Tax Indemnitee pursuant to the penultimate paragraphof Section 7(b)(iii) of the Participation Agreement, shall be treatedas a Tax for which Sublessee is obligated to indemnify the relevant TaxIndemnitee or reimburse Sublessor pursuant to the provisions of this Section 29(b),without regard to the exclusions set forth in Section 29(b)(ii) hereof.

 

#### (iv)                              *General Tax Indemnity – Contests*.  With respect to any Tax Indemnitee that isSublessor or any Affiliate thereof (a “**Sublessor Tax Indemnitee**”)at Sublessee’s written request and with the written consent of Sublessor,Sublessee shall be entitled to contest any claim with respect to any Taximposed on such Sublessor Tax Indemnitee other than an Income Tax either inSublessee’s name or in the name of such Sublessor Tax Indemnitee at Sublessee’ssole cost and expense (a “**Sublessee ControlledContest**”) . If Sublessor receives a written claim from any TaxIndemnitee or any Taxing Authority for any Tax for which Sublessee is obligatedpursuant to Section 29(b)(i), Sublessor shall notify Sublessee promptly ofsuch claim (it being understood and agreed that failure to provide such noticeshall not adversely affect or otherwise prejudice any Tax Indemnitee’s right toan indemnity hereunder except to the extent such failure precludes any contestof such claim).  If the Tax cannot becontested in a Sublessee Controlled Contest for any reason (including, but notlimited to the refusal of the Sublessor or other Tax Indemnitee to consentthereto), upon written request from Sublessee received by Sublessor within ten (10) BusinessDays of such notice Sublessor shall exercise its rights, if any, under Section 7(b)(iv) ofthe Participation Agreement in good faith (if the Tax Indemnitee is other thana Sublessor Tax Indemnitee) or Sublessor shall contest such claim in good faith(if the Tax Indemnitee is a Sublessor Tax Indemnitee) in each case at Sublessee’ssole cost and expense.  Any such contestshall be at such Tax Indemnitee’s or Sublessor’s control and direction.  In any such contest the Tax Indemnitee orSublessor, as the case may be, may in its sole discretion select the forum forsuch contest and determine whether any such contest shall be by (A) resistingpayment of such Tax, (B) paying such Tax under protest or (C) payingsuch Tax and seeking a refund or other repayment thereof.  In no event shall Sublessor be required tocontest, or to request a Tax Indemnitee to contest, or Sublessee be permittedto contest, the imposition of any Tax for which Sublessee is obligated pursuantto this Section 29(b) unless (W) no Default or Event of Default shallhave occurred and be continuing under the Sublease and no Event of Default (assuch term is defined in the Head Lease) shall have occurred and be continuing,(X) Sublessee shall have agreed to pay to Sublessor and to the Tax Indemniteeon demand on an After-Tax Basis all reasonable costs and expenses thatSublessor

 

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#### and the Tax Indemnitee may incur in connection with contesting suchclaim (including, without limitation, all reasonable legal and accounting feesand disbursements), (Y) such action to be taken will not result in a risk ofsale, forfeiture or loss of, or the creation of any Lien on, the Aircraft, theEngines or any Part, other than Permitted Liens or a material risk of loss ofthe Lien of the Trust Indenture or a risk of imposition of criminal penalties,and (Z) if such contest shall be conducted in a manner requiring the payment ofthe claim, Sublessee shall have paid the amount required directly to theappropriate authority or made an advance of the amount thereof to such TaxIndemnitee on an interest-free basis and agreed to indemnify Sublessor and suchTax Indemnitee on an after-tax basis for any cost or Taxes payable with respectto such advance.  In addition, Sublesseeshall not have any right to request Sublessor or any other Tax Indemnitee tocontest a claim unless (x) the amount of indemnity payments that Sublesseewould be required to make if the contest were unsuccessful is at least $***, (y) prior to commencement of anycontest, Sublessee has delivered to Sublessor and, if requested by Sublessor,the Tax Indemnitee a written acknowledgment of Sublessee’s obligation underthis Section 29(b) to indemnify such Sublessor and such Tax Indemniteewith respect to the Tax at issue to the extent that the contest isunsuccessful; and (z) Sublessor and the relevant Tax Indemnitee has received anopinion of independent tax counsel selected by Sublessor that concludes that aReasonable Basis exists with respect to the tax position Sublessee hasasserted.  For the purposes of this Section 29(b),the term “Reasonable Basis” shall have the meaning set forth for such term inFormal Opinion 85-352 issued by the Standing Committee on Ethics and ProfessionalResponsibility of the American Bar Association. Sublessee shall have no right to pursue or appeal or cause any TaxIndemnitee or Sublessor to pursue or appeal an adverse judicial decisionwithout the prior written consent of Sublessor and, if required by Sublessor,the relevant Tax Indemnitee.

####  

If Sublessor receivesfrom any Tax Indemnitee (other than from its Affiliate) a payment with respectto a refund of all or any part of any Tax paid by Sublessee, Sublessor shallpay Sublessee an amount equal to the amount of such payment less any costand/or expenses, including net tax cost, incurred in respect thereof.

 

Nothing contained in thisSection 29(b)(iv) shall require a Sublessor or a Tax Indemnitee tocontest, or permit Sublessee to contest, a claim which such Tax Indemniteewould otherwise be required to contest, if such Tax Indemnitee shall waivepayment by Sublessor and Sublessee of any amount that might otherwise bepayable by Sublessee under this Section 29(b) or Sublessor under Section 7(b) ofthe Tax Indemnity Agreement in respect of such claim and any other claim, thecontest of which would be precluded.  Inaddition, for the avoidance of doubt, Sublessee shall have no right to contestor require any other party to contest any Tax imposed on a Tax Indemnitee in amanner or to the extent that is inconsistent with Sublessor’s rights under theParticipation Agreement.

 

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#### (v)                                 *General Tax Indemnity – Reports.*  If any report, return or statement isrequired to be filed with respect to any Tax which is subject toindemnification under this Section 29(b), Sublessee shall timely file thesame at its sole expense (except for any such report, return or statement whicha Tax Indemnitee has notified Sublessor or Sublessee that such Tax Indemniteeintends to file or which such Tax Indemnitee is required by law to file in itsown name).  Sublessee shall either filesuch report, return or statement so as to show the ownership of the Aircraft inthe Owner Trustee or the Owner Participant where appropriate and send a copy ofsuch report, return or statement to Sublessor, the Tax Indemnitee and OwnerTrustee or, where Sublessee is not so permitted to file such report, return orstatement, it shall notify the Tax Indemnitee and Sublessor of such requirementand prepare and deliver such report, return or statement to the Tax Indemniteeand Sublessor in a manner satisfactory to such Tax Indemnitee and Sublessorwithin a reasonable time prior to the time such report, return or statement isto be filed.  Sublessee shall holdSublessor and the Tax Indemnitee harmless on an After-Tax Basis from andagainst any penalties, interest, fines or additions to Tax caused by theinaccuracy of any report, return or statement prepared and filed by Sublesseeon behalf of Sublessor or any other Tax Indemnitee. Sublessee will provide atSublessee’s expense to Sublessor and the Tax Indemnitee such informationmaintained in the regular course of Sublessee’s business as Sublessor or anyTax Indemnitee may reasonably request in writing that is reasonably necessaryto enable Sublessor or such Tax Indemnitee to comply with their tax filings,audit and litigation requirements.  IfSublessee receives written notice from a Taxing Authority or a Tax Indemniteeor otherwise of a Tax that is imposed upon a Tax Indemnitee but not indemnifiedagainst by Sublessee hereunder, Sublessee will promptly forward a copy of suchnotice to Sublessor and the Tax Indemnitee. Sublessee shall also provide or cause to be provided to Sublessor, uponrequest and at Sublessee’s expense, all documents, records and otherinformation that Sublessor is required to provide any Tax Indemnitee under Section 7(b) ofthe Participation Agreement.

####  

#### (vi)                              *Verification.*  AtSublessee’s written request after Sublessee receives computations showing theamount of any indemnity payable by Sublessee pursuant to Section 29(b)(i),Sublessor shall exercise its rights, if any, under Section 7(b)(vi) ofthe Participation Agreement with respect to verification of suchcomputation.  If Sublessee pays suchindemnity in whole or in part before completion of the verification procedure,appropriate adjustments will be made promptly after completion of the verificationprocedure to take into account any redetermination of the indemnity by theaccounting firm.  Any fee anddisbursements of the accounting firm payable by Sublessor shall be paid bySublessee.  Sublessee will have no rightunder this Section 29(b) to examine any tax return of any Tax Indemniteeor Sublessor.  The sole responsibility ofsuch accounting firm shall be to verify the computations of the amount payablehereunder and the interpretation of this Agreement or any other agreement shallnot be within the scope of such accounting firm’s responsibilities.

 

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#### (vii)                           *General Tax Indemnity – Payment. *Except as provided in Section 29(b)(iv) hereof,Sublessee shall pay any Tax for which it is liable pursuant to Section 29(b)(i) directlyto the appropriate taxing authority if legally permissible or upon demand of aTax Indemnitee or Sublessor shall pay such Tax and any other amounts duehereunder to such Tax Indemnitee or to Sublessor as indicated in such demandwithin ten (10) Business Days of such demand.  Any such demand for payment from a TaxIndemnitee or Sublessor shall specify in reasonable detail the payment and thefacts upon which the right to payment is based. Sublessor shall request that the Tax Indemnitee promptly forward toSublessee a copy of any notice, bill or advice received by it to the extentconcerning any Tax indemnified against hereunder, (*provided*that the failure of the Sublessor to make such request or the failure of theTax Indemnitee to forward such notice, bill or advice shall not adverselyaffect the Sublessor’s or Tax Indemnitee’s rights to indemnificationhereunder).  Within twenty (20) daysafter the date of each payment by Sublessee of any Tax indemnified againsthereunder, Sublessee shall furnish the appropriate Tax Indemnitee (with a copyto Sublessor) the original or a certified copy of a receipt for Sublessee’spayment of such Tax or such other evidence of payment of such Tax as isreasonably acceptable to such Tax Indemnitee.

####  

#### (viii)                        *Application of Payments During Existence of Default or Event ofDefault. *Any amount payableto Sublessee pursuant to the terms of this Section 29(b) shall not bepaid to or retained by Sublessee if at the time of such payment or retention aDefault or Event of Default shall have occurred and be continuing or if anyevent described in Section 10.02 of the Airline Services Agreement givingSublessor the ability to terminate the Airline Services Agreement shall haveoccurred, if any event described in Section 10.03 of the Airline ServicesAgreement shall have occurred or if the Airline Services Agreement shall havebeen terminated or cancelled or shall have been terminated in accordance withits terms, but shall be held by Sublessor and applied pursuant to Section 28hereof.

####  

#### (ix)                                *[Intentionally Omitted]*.

####  

#### (x)                                   *Inclusions*.  IfSublessor is required by any Taxing Authority to include in its income forincome tax purposes, or Sublessor receives an opinion from independent taxcounsel selected by Sublessor and reasonably acceptable to Sublessee, thatSublessor does not have a Reasonable Basis to exclude from its income forincome tax purposes, any amount in respect of, or resulting from (i) anymodification, repair, improvement, addition, substitution or replacement of theAircraft, the Airframe or any Engine or any Part, (ii) any payment ofBasic Rent or Supplemental Rent under the Sublease by or on behalf of Sublesseein an amount greater, or at a time earlier, than the amounts or times providedin the Sublease, (iii) any warranty or indemnity payments or refundsattributable to the Aircraft, the Airframe or any Engine received from themanufacturer which was not remitted to, and retained by, Sublessor, (iv) thetheft, destruction or other loss of the Aircraft, Airframe or any Engine or anyPart; (v) any application of Section

 

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#### 467(b)(2) to the Sublease; (vi)  any payment of indemnitiesto a Tax Indemnitee or Indemnitee (other than Sublessor) or fees, expenses orreimbursement to a trustee, agent or other Person pursuant to this Agreement;or (vii) any act or payment by Sublessee not required under the terms ofthe Sublessee Documents, (herein called a “**Sublessor Inclusion**”),Sublessee shall pay to Sublessor an amount which, on an After-Tax Basis, shallbe equal to the amount of the additional taxes on or measured by gross or netincome (plus any and all fines, penalties, additions to tax and interestcalculated by reference thereto) payable by Sublessor as a result of suchSublessor Inclusion.

####  

#### (xi)                                *Contests Etc.*  Theprovisions of Section 29(b)(iii) (relating to tax savings) and 29(b)(iv) (relatingto contests) of this Agreement shall apply, *mutatis mutandis*,with respect to any Sublessor Inclusion.

####  

#### (xii)                             *Pass-through of Tax Indemnity Agreement Indemnities. *(1)  Indemnity.  If Sublessor is required to pay Head Lessoror Owner Participant any amount (herein called a “**TIALiability**”) pursuant to the Tax Indemnity Agreement, Sublessee shallpay to Sublessor an amount, which, on an After-Tax Basis, shall be equal tosuch TIA Liability.  Such payment shallbe made at least five (5) Business Days prior to the date Sublessor mustpay Head Lessor under the Tax Indemnity Agreement.

####  

###### (2)                                  Exceptions.Sublessee shall not be required to indemnify Sublessor for any TIA Liability tothe extent that such TIA Liability would not have occurred but for any of thefollowing:

######  

(y)                                 Sublessorclaiming deductions for depreciation of the Aircraft for federal income taxpurposes or claiming on any federal income tax return to be the owner of theAircraft for federal income tax purposes;

 

(z)                                   thestatus of Sublessor as a “tax-exempt entity” within the meaning of Section 168(h) ofthe Code but only if such status is not caused by a Sublessee Person.

 

###### (3)                                  Tax Saving.  If Head Lessor or the Owner Participant paysan amount to Sublessor pursuant to Section 4(c) of the Tax IndemnityAgreement, for which Sublessee has previously paid an indemnity to Sublessorpursuant to paragraph (1) hereof, Sublessor shall pay such amount toSublessee within 5 Business Days after Sublessor receives such amount, but notin excess of any payment previously made by Sublessee with respect to such TIALiability and net of any tax liability incurred by Sublessor with respect toreceipt and payment of such amount.

######  

###### (4)                                  Contest.  If Sublessor receives a written claim for anindemnity pursuant to the Tax Indemnity Agreement for which Sublessee would berequired to pay Sublessor an indemnity hereunder, Sublessor

 

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###### shall notify Sublessee thereof in writing (but it being understood andagreed that failure of Sublessor to provide such notice to Sublessee shall notadversely affect or otherwise prejudice any Sublessor’s right to an indemnityhereunder).  If requested by Sublessee inwriting within ten (10) Business Days before the latest day on whichSublessor may request a contest pursuant to Section 6 of the Tax IndemnityAgreement, Sublessor shall exercise its rights, if any, under Section 6 ofthe Tax Indemnity Agreement *provided* thatin no event shall Sublessor be required to initiate or continue (or be requiredto request any other person to initiate or continue) a contest unless: (i) theamount of the obligation on the part of Sublessee to indemnify Sublessorpursuant to subsection (1) hereof shall be at least $***, (ii)  Sublessee agrees toreimburse Sublessor on demand (and complies with such agreement) for all of theOwner Participant’s and Sublessor’s reasonable costs and expenses (including,without limitation, reasonable legal and accounting fees and disbursements)which each may incur in contesting such disallowance, (iii) if OwnerParticipant elects to contest the disallowance by paying the tax claimed(including interest, penalties or additions to tax) and seeking a refund,Sublessee shall advance to Sublessor on an interest free basis the aggregateamount of taxes, interest, penalties and additions to the tax applicable tosuch disallowance and agree to indemnify Sublessor and the Owner Participantfor any adverse tax consequences resulting from such advance, (iv) suchcontest would not entail any risk of criminal penalties, (v) with respectto such disallowance, Sublessee shall have furnished Sublessor at Sublessee’sexpense, with a written opinion of independent tax counsel selected bySublessor that a Reasonable Basis exists to contest such disallowance and priorto filing any appeal an opinion that a successful outcome on appeal is morelikely than not and have posted a bond or other security for such appeal, (vi) noDefault or Event of Default, under any of the Operative Documents by Sublessoror the Airline Services Agreement, has occurred and is continuing, and (vii) Sublesseeshall have delivered to Sublessor a written acknowledge of Sublessee’sobligation to indemnify in full Sublessor pursuant to this Agreement to theextent that the contest is not successful. Sublessor shall have no obligationto cause Owner Participant and Owner Participant shall have no obligation toappeal any adverse decision of an appellate court to the United States SupremeCourt.

######  

#### (xiii)                          *Minimum Indemnity*. The amount of any indemnity payable by Sublessee to Sublessor pursuantto this Section 29 shall in all events be an amount sufficient to restoreSublessor to the position that Sublessor would be in if the SublessorInclusion, TIA Liability or any indemnity otherwise payable pursuant to Section 7of the Participation Agreement that gave rise to Sublessee’s obligationhereunder had not occurred.

####  

### (c)                                  *General Indemnity*.  Sublessee hereby agrees to indemnify eachIndemnitee against, and agrees to protect, defend, save and keep harmless eachthereof from (whether or not the transactions contemplated herein or in any ofthe other Sublessee Documents

 

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### are consummated), any and all liabilities,obligations, losses, damages, penalties, claims, actions, suits, out-of-pocketcosts, expenses and disbursements (including reasonable legal fees and expensesbut excluding internal costs and expenses such as salaries and overhead), ofwhatsoever kind and nature (collectively called “**Expenses**”)imposed on, incurred by or asserted against any Indemnitee, in any way relatingto or arising out of (A) any of the Operative Documents or the SublesseeDocuments or any of the transactions contemplated thereby or the enforcement ofany of the terms thereof or any amendment, modification or waiver in respectthereof, (B) the manufacture, purchase, acceptance or rejection of theAircraft, Airframe or any Engine or Part, (C) the Aircraft (or any portionthereof or any Engine or engine affixed to the Airframe) whether or not arisingout of the finance, refinance, ownership, delivery, nondelivery, storage,sublease, possession, use, non-use, operation, maintenance, registration,reregistration, condition, modification, alteration, replacement, repair,substitution, sale, return or other disposition of the Aircraft (or any portionthereof or any Engine or engine or Part affixed to the Airframe)including, without limitation, latent or other defects, whether or notdiscoverable, strict tort liability, any damage to property or the environment,death of or injury to any person and any claim for patent, trademark orcopyright infringement; *provided* thatthe foregoing indemnity as to any Indemnitee shall not extend to any Expense tothe extent resulting from or arising out of or attributable to one or more ofthe following: (A) any representation or warranty by such Indemnitee inthe Operative Documents being incorrect in any material respect, or (B) thefailure by such Indemnitee to perform or observe any agreement, covenant orcondition in any of the Operative Documents applicable to it including, withoutlimitation, with respect to the creation or existence of a Sublessor Lien(including for this purpose Liens which would be Sublessor Liens but for theproviso in the definition of Sublessor Liens) attributable to it (except to theextent such failure was caused by the failure of Sublessee to perform anyobligation under a Sublessee Document), or (C) the willful misconduct ofsuch Indemnitee, or (D) with respect to any Indemnitee, a disposition bysuch Indemnitee of all or any part of such Indemnitee’s interest in theAirframe, any Engine or in the Operative Documents other than during thecontinuance of a Default or an Event of Default under the Sublease, or (E) exceptto the extent relating to the payment of any Expenses on an After-Tax Basis,any Tax whether or not Sublessee is required to indemnify for such Tax pursuantto Section 29(b) hereof, or (F) except to the extent fairlyattributable to acts, omissions or events occurring prior thereto, acts orevents which occur with respect to the Airframe or any Engine or Part afterthe return of physical possession of the Airframe or such Engine or Part toSublessor pursuant to the terms of the Sublease.  Sublessee further agrees to indemnifySublessor against, and agrees to protect, defend, save and keep harmlessSublessor from (whether or not the transactions contemplated herein or in anyof the other Sublessee Documents are consummated), any and all liabilities,obligations, losses, damages, penalties, claims, actions, suits, out-of-pocketcosts, expenses and disbursements of whatsoever kind and nature imposed on,incurred by or asserted against Sublessor pursuant to Section 7(c) ofthe Participation Agreement.

###  

Sublessee further agrees that any payment or indemnitypursuant to this Section 29(c) in respect of any Expenses or otheramounts payable by Sublessee pursuant to this Section 29(c) shall bepaid on an After-Tax Basis.

 

If, by reason of any Expense payment made to or forthe account of an Indemnitee by Sublessee pursuant to this Section 29(c),such Indemnitee subsequently realizes a tax deduction or credit or anyreduction in Taxes not previously taken into account in computing

 

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such payment, suchIndemnitee shall promptly pay to Sublessee, but only if Sublessee shall havemade all payments then due and owing to such Indemnitee under the SublesseeDocuments, an amount equal to the sum of (I) the actual reduction in Taxesrealized by such Indemnitee which is attributable to such deduction or credit,and (II) the actual reduction in Taxes realized by such Indemnitee as a resultof any payment made by such Indemnitee pursuant to this sentence; *provided*,*however*, thatno Indemnitee shall be obligated to make any payment pursuant to this sentenceto the extent that the amount of such payment would exceed (i) theaggregate amount of all prior payments by Sublessee to such Indemnitee underthis Section 29(c) less (ii) the aggregate amount of all priorpayments with respect to such Tax by such Indemnitee to Sublessee pursuant tothis sentence, with any excess being carried forward to offset Sublessee’sobligations, if any, to make subsequent payments to such Indemnitee under this Section 29(c).

 

Nothing in this Section 29(c) shall beconstrued as a guaranty by Sublessee of the residual value of the Aircraft.

 

If a claim is made against an Indemnitee involving oneor more Expenses and such Indemnitee has notice thereof, such Indemnitee shallpromptly, upon receiving such notice, give notice of such claim to Sublesseeand Sublessor; *provided* that the failure toprovide such notice shall not release Sublessee from any of its obligations toindemnify hereunder, and no payment by Sublessee to an Indemnitee pursuant tothis Section 29(c) shall be deemed to constitute a waiver or releaseof any right or remedy which Sublessee may have against such Indemnitee for anyactual damages as a result of the failure by such Indemnitee to give Sublesseesuch notice.  Sublessee shall beentitled, at its sole cost and expense, acting through counsel acceptable tothe respective Indemnitee, (A) so long as Sublessee has agreed in awriting acceptable to such Indemnitee that Sublessee is liable to suchIndemnitee for such Expense hereunder, in any judicial or administrativeproceeding that involves solely a claim for one or more Expenses, to assumeresponsibility for and control thereof, (B) so long as Sublessee hasagreed in a writing acceptable to such Indemnitee that Sublessee is liable tosuch Indemnitee for such Expense hereunder, in any judicial or administrativeproceeding involving a claim for one or more Expenses and other claims relatedor unrelated to the transactions contemplated by the Operative Documents, toassume responsibility for and control of such claim for Expenses to the extentthat the same may be and is severed from such other claims (and such Indemniteeshall use its reasonable efforts to obtain such severance, *provided*that Sublessee has requested such severance and agrees to pay the reasonableout-of-pocket costs and expenses (including, without limitation, reasonablecounsel fees and disbursements) incurred by such Indemnitee, if any, inconnection with such severance), and (C) in any other case, to beconsulted by such Indemnitee with respect to judicial proceedings subject tothe control of such Indemnitee. Notwithstanding any of the foregoing to the contrary, Sublessee shallnot be entitled to assume responsibility for and control of any such judicialor administrative proceedings (M) while a Default or an Event of Default or anEvent of Default (as such term is defined in the Head Lease) or a Default (assuch term is defined in the Head Lease) of the type referred to in Section 14(a),14(b) or 14(e) of the Head Lease shall have occurred and becontinuing, (N) if such proceedings will involve a risk of the sale, forfeitureor loss of, or the creation of any Lien (other than a Permitted Lien) on theAircraft, the Trust Indenture Estate or the Trust Estate or any part thereof,or (O) if such proceeding could in the good faith opinion of such Indemniteeentail any risk of civil liability or criminal liability or present a conflictof interest making separate representation necessary.  The

 

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affected Indemnitee mayparticipate at its own expense and with its own counsel in any judicialproceeding controlled by Sublessee pursuant to the preceding provisions.

 

The affected Indemnitee shall supply Sublessee withsuch information reasonably requested by Sublessee as is necessary or advisablefor Sublessee to control or participate in any proceeding to the extentpermitted by this Section 29(c). Unless a Default or an Event of Default shall have occurred and becontinuing (in which case the consent of Sublessee shall not be required), suchIndemnitee shall not enter into a settlement or other compromise with respectto any Expense without the prior written consent of Sublessee, which consentshall not be unreasonably withheld or delayed, unless such Indemnitee waivesits right to be indemnified with respect to such Expense under this Section 29(c).

 

Sublessee shall supply the affected Indemnitee andSublessor with such information reasonably requested by such Indemnitee as isnecessary or advisable for such Indemnitee to control or participate in anyproceeding to the extent permitted by this Section 29(c).

 

Upon payment in full of any Expense or Tax pursuant tothis Section 29, Sublessee, or, if any Expense or Tax has been paid byinsurers, the insurers, without any further action, shall be subrogated to anyclaims the affected Indemnitee may have relating thereto; *provided*that Sublessee shall not be so subrogated so long as a Default or an Event ofDefault has occurred and is continuing. Such Indemnitee agrees to give such further reasonable assurances oragreements and to provide such reasonable cooperation to Sublessee or theinsurers to permit Sublessee or the insurers to pursue such claims, if any, tothe extent reasonably requested by Sublessee or the insurers.

 

In the event that Sublessee shall have paid an amountto an Indemnitee pursuant to this Section 29(c), and such Indemniteesubsequently shall be reimbursed in respect of such indemnified amount from anyother Person, such Indemnitee shall promptly pay to Sublessee an amount equalto the amount of such reimbursement (but in no event more than such paymentfrom Sublessee) plus any net tax benefit (or minus any net tax detriment)realized by such Indemnitee as a result of any reimbursement received andpayment made by such Indemnitee pursuant to this sentence; *provided*,that Sublessor shall not be obligated to make any payment pursuant to this Section 29(c) tothe extent that the amount of such payment would exceed (i) the aggregateamount of all prior payments by Sublessee to Sublessor under this Section 29(c) less(ii) the aggregate amount of all prior payments by Sublessor to Sublesseepursuant to this Section 29(c), with any excess being carried forward tooffset Sublessee’s obligations, if any, to make subsequent payments toSublessor under this Section 29(c); *provided, further,*that such Indemnitee shall have no obligation to reimburse Sublessee if (i) aDefault or an Event of Default or an Event of Default (as such term is definedin the Head Lease) has occurred and is continuing or if the Airline ServicesAgreement shall have been terminated or canceled or shall have terminated inaccordance with its terms or (ii) Sublessee has not paid such Indemniteeall amounts required pursuant to this Section 29(c) and any otheramounts then due to such Indemnitee from Sublessee under any of the OperativeDocuments or Sublessee Documents.

 

Sublessee’s obligations under the indemnities providedfor in this Sublease shall be those of a primary obligor, whether or not thePerson indemnified shall also be indemnified

 

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with respect to the samematter under the terms of any other document or instrument, and the Personseeking indemnification from Sublessee pursuant to any provision of thisSublease may proceed directly against Sublessee without first seeking toenforce any other right of indemnification.

 

### (d)                                 *Income Tax.*  For purposes of this Section 29, theterm “**Income Tax**” means any Tax based on ormeasured by net income (other than sales, use, license, rental, ad valorem andvalue added or property Taxes) (including, without limitation, capital gainstaxes, minimum taxes, income taxes collected by withholding and taxes on taxpreference items), and interest, additions to tax, penalties, or other chargesin respect thereof.

###  

### (e)                                  *Survival.*  Notwithstanding anything to the contrarycontained in this Sublease, the provisions of this Section 29 shallsurvive any termination or expiration of this Sublease.

###  

**SECTION 30.  Certain Representations, Warranties andCovenants.**  (a)  Sublessorrepresents and warrants to Sublessee as follows:

 

#### (i)                                     Sublessor is acorporation duly organized and validly existing in good standing under the lawsof its jurisdiction of organization, and has the corporate power and authorityto carry on its business as now conducted, to own or hold under lease itsproperties and to enter into and perform its obligations under, the SublesseeDocuments to which Sublessor is a party;

####  

#### (ii)                                  the SublesseeDocuments to which Sublessor is a party have been duly authorized by allnecessary corporate action on the part of Sublessor, do not require anyapproval not already obtained of stockholders of Sublessor or any approval orconsent not already obtained of any trustee or holders of any indebtedness orobligations of Sublessor, and have been duly executed and delivered bySublessor, and neither the execution and delivery thereof, nor the consummationof the transactions contemplated thereby, nor compliance by Sublessor with anyof the terms and provisions thereof, will contravene any United States Federalor state law, judgment, governmental rule, regulation or order applicable to orbinding on Sublessor (it being understood that no representation or warranty ismade with respect to laws, rules or regulations relating to aviation or tothe nature of the equipment owned by Sublessor) or contravene or result in anybreach of or constitute any default under, or result in the creation of anyLien (other than Liens provided for in the Operative Documents or the SublesseeDocuments) upon any property of Sublessor under, any indenture, mortgage,chattel mortgage, deed of trust, conditional sales contract, bank loan orcredit agreement, corporate charter, by-law or other agreement or instrument towhich Sublessor is a party or by which it or its properties may be bound oraffected; and

####  

#### (iii)                               each of SublesseeDocuments to which Sublessor is a party constitutes a legal, valid and bindingobligation of Sublessor enforceable against Sublessor in accordance with theterms thereof (except as may be limited by (A) general principles ofequity, (B) applicable bankruptcy, insolvency, fraudulent

 

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#### conveyance, reorganization, moratorium or similar laws affecting therights of creditors generally, (C) applicable laws which may affect theremedies provided therein, which laws, however, do not make the remediesprovided therein inadequate for the practical realization of the benefitsprovided thereby, except that no representation or warranty is made as to theamount of priority of any recovery under any particular circumstances, and (D) inthe case of indemnity provisions contained in such documents, as limited bypublic policy considerations).

####  

### (b)                                 Sublesseecovenants and agrees that it shall at all times be a Certificated Air Carrier.

###  

### (c)                                  Sublessee,at its expense, will take, or cause to be taken, such action with respect tothe recording, filing, re-recording and refiling of this Sublease, the SubleaseSupplement, and any financing statements or other instruments as are necessaryto maintain (or as are reasonably requested by Sublessor) the perfection of anysecurity interest that may be claimed to have been created by this Sublease orwill furnish to Sublessor timely notice of the necessity of such action,together with such instruments, in execution form, and such other informationas may be required to enable Sublessor to take such action.  Sublessee shall furnish to Sublessor annuallyafter the execution hereof (but not later than March 15th ofeach year, commencing with the year 2006) an opinion of Daugherty, Fowler,Peregrin & Haught, a Professional Corporation and/or other counselreasonable satisfactory to Sublessor nationally recognized in FAA matterscovering such matters with respect to the interests of Sublessor in theAircraft and the perfection of security interests therein as Sublessor mayreasonably request.  Sublessee willnotify Sublessor of any change in the location of its chief executive office(as such term is used in Article 9 of the Uniform Commercial Code) priorto making such change.

###  

**SECTION 31.  Covenants of Sublessee.**  Sublessee covenants and agrees with Sublessoras follows:

 

Sublessee will, at its own cost and expense, cause tobe done, executed, acknowledged and delivered all and every such further acts,conveyances and assurances as Sublessor shall reasonably require foraccomplishing the purposes of this Sublease and the other Sublessee Documents; *provided* that any instrument or other document so executedby Sublessee will not expand any obligations or limit any rights of Sublesseein respect of the transactions contemplated by any Sublessee Document.  Sublessee, upon delivery of the Aircraftunder this Sublease, shall at all times thereafter cause the same to remainduly registered in the name of Sublessor, except as otherwise required orpermitted hereunder or under this Sublease, under the Federal Aviation Act, orshall furnish to Sublessor such information as may be required to enableSublessor to make application for such registration, and shall promptly furnishto Sublessor such information as may be required (or reasonably requested bySublessor) to enable Sublessor to timely file any reports required to be filedby Sublessor, as the case may be, as a result of its interest in the Aircraftwith any governmental authority.

 

**SECTION 32.  Consent to Jurisdiction.**  Each of the parties hereto (A) herebyirrevocably submits itself to the non-exclusive jurisdiction of the UnitedStates District Court for the Southern District of New York and to thenon-exclusive jurisdiction of the Supreme Court of the State of New York, NewYork County, for the purposes of any suit, action or other proceeding arisingout of this Sublease or any other Operative Document or Sublessee

 

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Document, the subjectmatter of any thereof or any of the transactions contemplated hereby or therebybrought by any party or parties thereto, or their successors or assigns, and (B) herebywaives, and agrees not to assert, by way of motion, as a defense, or otherwise,in any such suit, action or proceeding, to the extent permitted by applicablelaw, that the suit, action or proceeding is brought in an inconvenient forum,that the venue of the suit, action or proceeding is improper, or that thisSublease or any other Operative Document or Sublessee Document or the subjectmatter of any thereof or any of the transactions contemplated hereby or therebymay not be enforced in or by such courts. Sublessee hereby generally consents to service of process at CTCorporation System, 1633 Broadway, New York, New York 10019.

 

**SECTION 33.  Owner for Federal Tax Purposes.**  It is hereby agreed among Sublessor andSublessee that for Federal income tax purposes the Owner will be the owner ofthe Aircraft and Sublessee will be the sublessee thereof, and each party heretoagrees to characterize this Sublease as a lease for Federal income taxpurposes.

 

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## **IN WITNESS WHEREOF,Sublessor and Sublessee have each caused this Sublease to be duly executed asof the day and year first above written.**

 

 
|     | NORTHWEST AIRLINES, INC., |
|----------|---------------------------|
| * * | *  Sublessor*   |
|     |                      |   |
|     |                      |   |
|     | By:                       |   |   |
|     |                      | Name: |
|     |                      | Title: |
|     |                      |   |
|     | MESABA AVIATION, INC.,    |
| * * | *  Sublessee*   |
|     |                      |   |
|     |                      |   |
|     | By:                       |   |   |
|     |                      | Name: |
|     |                      | Title: |

 

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**EXHIBIT AtoSublease Agreement[NW 2005         ]**

 

**SUBLEASE SUPPLEMENT No.       [NW 2005         ]**

 

SUBLEASE SUPPLEMENT NO.     ,dated                   ,20      , between NORTHWEST AIRLINES, INC. (“**Sublessor**”), and MESABA AVIATION, INC. (“**Sublessee**”).

 

Sublessor and Sublessee have heretofore entered intothat certain Sublease Agreement [NW 2005         ],dated as of                         ,200  , relating to one Bombardier Inc. Canadair Regional Jet Model CL-600-2B19  aircraft (herein called the “**Sublease**,” and the defined terms therein being hereinafterused with the same meanings).  TheSublease provides for the execution and delivery from time to time of SubleaseSupplements for the purpose of subleasing the Airframe and Engines under theSublease as and when delivered by Sublessor to Sublessee in accordance with theterms thereof.

 

(1) The Sublease relates to the Airframe andEngines described below, and a counterpart of the Sublease is attached hereto,and made a part hereof, and this Sublease Supplement, together with suchattachment, is being filed for recordation on the date hereof with the FederalAviation Administration as one document.

 

(2) The Sublease Agreement relates to theAirframe and Engines described below, and a counterpart of the SubleaseAgreement, attached and made a part of Sublease Supplement No. 1 dated                               ,20     to the Sublease Agreement, has been recorded by theFederal Aviation Administration on                               ,20    , as one document and assigned Conveyance No.     .

 

NOW, THEREFORE, in consideration of the premises andother good and sufficient consideration, Sublessor and Sublessee hereby agree asfollows:

 

1.                                       Sublessorhereby delivers and subleases to Sublessee under the Sublease and Sublesseehereby accepts and subleases from Sublessor under the Sublease the followingdescribed Bombardier Inc. Canadair Regional Jet Model CL-600-2B19 aircraft (the“**Aircraft**”), which Aircraft as of thedate hereof consists of the following components:

 

#### Airframe: FAA Registration No.                   ;manufacturer’s serial no.           ;and

 

----

(1)                                  Thislanguage for Sublease Supplement No. 1.

 

(2)                                  Thislanguage for other Sublease Supplements.

 

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#### Engines: two (2) General Electric Model CF34-3B1 type engines bearing,respectively, manufacturer’s serial nos.           and             (each of which engines has 750 or more rated takeoff horsepower or theequivalent of such horsepower).

####  

2.                                       TheCommencement Date of the Aircraft is the date of this Sublease Supplement setforth in the opening paragraph hereof. Except as otherwise provided in the Sublease, the Term for the Aircraftshall commence on the Commencement Date and end on the Expiration Date.

 

3.                                       Sublesseehereby confirms its agreement to pay Sublessor Basic Rent for the Aircraftthroughout the Term therefor in accordance with Section 3 of the Sublease.

 

4.                                       Sublesseehereby confirms to Sublessor that Sublessee has accepted the Aircraft for allpurposes hereof and of the Sublease as being airworthy, in good working orderand repair and without defect or inherent vice in title, condition, design,operation or fitness for use.

 

5.                                       Allof the terms and provisions of the Sublease are hereby incorporated byreference in this Sublease Supplement to the same extent as if fully set forthherein.

 

6.                                       ThisSublease Supplement may be executed by the parties hereto in separatecounterparts, each of which when so executed and delivered shall be anoriginal, but all such counterparts shall together constitute but one and thesame instrument.

 

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IN WITNESS WHEREOF, Sublessor and Sublessee havecaused this Sublease Supplement to be duly executed on the day and year firstabove written.

 
|     | NORTHWEST AIRLINES, INC., |
|----------|---------------------------|
| * * | * *                  | *Sublessor* |
|     |                      |   |
|     |                      |   |
|     | By:                       |   |   |
|     |                      | Name: |
|     |                      | Title: |
|     |                      |   |
|     | MESABA AVIATION, INC.,    |
| * * | * *                  | *Sublessee* |
|     |                      |   |
|     |                      |   |
|     | By:                       |   |   |
|     |                      | Name: |
|     |                      | Title: |

 

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| ** ** | **EXHIBIT B**      |
|------------|-------------------------|
| ** ** | **to**                  |
| ** ** | **Sublease  Agreement** |
|       | **[NW 2005  ]**         |

 

**BASIC RENT SCHEDULE**

 

The portion of this Exhibit appearing below thistext is intentionally deleted from the FAA filing counterpart as the partieshereto deem it to contain confidential information.

 

Basic Rent:

 
| **Sublease  Period Date** | ** ** | **Basic Rent** | ** **                                                                 |
|---------------------------|------------|----------------|----------------------------------------------------------------------------|
| September 1, 2005    |       | $              | [            ] |   |
| October 1, 2005      |       |           |                                                                       |
| November 1, 2005     |       |           |                                                                       |
| December 1, 2005     |       |           |                                                                       |
| January 1, 2006      |       |           |                                                                       |
| February 1, 2006     |       |           |                                                                       |
| March 1, 2006        |       |           |                                                                       |
| April 1, 2006        |       |           |                                                                       |
| May 1, 2006          |       |           |                                                                       |
| June 1, 2006         |       |           |                                                                       |
| July 1, 2006         |       |           |                                                                       |
| August 1, 2006       |       |           |                                                                       |
| September 1, 2006    |       |           |                                                                       |
| October 1, 2006      |       |           |                                                                       |
| November 1, 2006     |       |           |                                                                       |
| December 1, 2006     |       |           |                                                                       |
| January 1, 2007      |       |           |                                                                       |
| February 1, 2007     |       |           |                                                                       |
| March 1, 2007        |       |           |                                                                       |
| April 1, 2007        |       |           |                                                                       |
| May 1, 2007          |       |           |                                                                       |
| June 1, 2007         |       |           |                                                                       |
| July 1, 2007         |       |           |                                                                       |
| August 1, 2007       |       |           |                                                                       |
| September 1, 2007    |       |           |                                                                       |
| October 1, 2007      |       |           |                                                                       |
| November 1, 2007     |       |           |                                                                       |
| December 1, 2007     |       |           |                                                                       |
| January 1, 2008      |       |           |                                                                       |
| February 1, 2008     |       |           |                                                                       |
| March 1, 2008        |       |           |                                                                       |
| April 1, 2008        |       |           |                                                                       |
| May 1, 2008          |       |           |                                                                       |
| June 1, 2008         |       |           |                                                                       |
| July 1, 2008         |       |           |                                                                       |
|                           |            |                |                                                                            |  |

 

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| August 1, 2008    |   |   |   |
|------------------------|--------|--------|--------|
| September 1, 2008 |   |   |   |
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| October 1, 2009   |   |   |   |
| November 1, 2009  |   |   |   |
| December 1, 2009  |   |   |   |
| January 1, 2010   |   |   |   |
| February 1, 2010  |   |   |   |
| March 1, 2010     |   |   |   |
| April 1, 2010     |   |   |   |
| May 1, 2010       |   |   |   |
| June 1, 2010      |   |   |   |
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| August 1, 2010    |   |   |   |
| September 1, 2010 |   |   |   |
| October 1, 2010   |   |   |   |
| November 1, 2010  |   |   |   |
| December 1, 2010  |   |   |   |
| January 1, 2011   |   |   |   |
| February 1, 2011  |   |   |   |
| March 1, 2011     |   |   |   |
| April 1, 2011     |   |   |   |
| May 1, 2011       |   |   |   |
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| April 1, 2012     |   |   |   |
| May 1, 2012       |   |   |   |

 

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| June 1, 2012      |   |   |   |
|------------------------|--------|--------|--------|
| July 1, 2012      |   |   |   |
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| January 1, 2014   |   |   |   |
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| January 1, 2015   |   |   |   |
| February 1, 2015  |   |   |   |
| March 1, 2015     |   |   |   |
| April 1, 2015     |   |   |   |
| May 1, 2015       |   |   |   |

 

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| ** ** | **EXHIBIT C**      |
|------------|-------------------------|
| ** ** | **to**                  |
| ** ** | **Sublease  Agreement** |
|       | **[NW 2005  ]**         |

 

STIPULATED LOSS VALUE

 

The Portion of this Exhibit appearing below this text isintentionally deleted from the FAA filing counterpart as the parties heretodeem it to contain confidential information.

 

 
| **Date** | ** ** | **Percentage of  Lessor’s Cost** |
|----------|------------|---------------------------------------|
|     |       |                                  |
|     |       |                                  |
|     |       |                                  |

 

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**EXHIBIT DtoSublease Agreement[NW 2005     ]**

 

**RETURN CONDITIONS**

 

The portion of this Exhibit appearing below thistext is intentionally deleted from the FAA filing counterpart as the partieshereto deem it to contain confidential information.

 

Unless the context shall otherwise require and exceptas set forth herein, the capitalized terms used in this Exhibit shall havethe meanings given to such terms in the Sublease.

 

Definitions

 

*Aircraft Documentation:* meansrecords, manuals, logs and documents delivered with the Aircraft and thosedeveloped and maintained with respect to the Aircraft during the Term,including, without limitation, all of those required by the FAA to bemaintained for FAR Part 121 operation and the Aircraft Documentationlisted in Appendix I hereto.

 

*Approved Air Authority:*  means the Federal Aviation Administration.

 

*APU*:  means the Honeywell model 3800488-3 auxiliarypower unit originally installed on the Aircraft on the Delivery Date or anyauxiliary power unit of the same or another manufacturer and of a comparable orimproved model substituted for such originally installed auxiliary power unit.

 

*Calendar controlled components or parts*:  those components or parts which at specificcalendar-time intervals, in accordance with the Maintenance Program, are to bediscarded, overhauled, or recertified upon reaching such time limit.

 

*Configuration Deviation List*:  the list provided by the Aircraftmanufacturer specifying which parts of the Aircraft that can be removed withoutaffecting the continued service of the Aircraft as the same may be modifiedfrom time to time pursuant to and in accordance with the approval of theGovernmental Authority.

 

*Cycle-controlled components or parts*:  those components or parts which at specificflight-cycle intervals, in accordance with the Maintenance Program,  are to be discarded, overhauled, orrecertified upon reaching such interval.

 

*Flight Hour*:  shall mean each hour or part thereof,measured to two decimal places, elapsing from the moment the wheels of theAirframe leave the ground on take-off to the moment when the wheels of theAirframe touch the ground on landing.

 

*Governmental Authority*:  shall mean (a) the FAA; (b) anynational government, or political subdivision thereof or local jurisdictiontherein; (c) any board, commission, department, division,

 

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organ, instrumentality,court, or agency of any entity described in (b) above, howeverconstituted; and (d) any association, organization, or institution ofwhich any entity described in (b) or (c) above is a member or towhose jurisdiction any such entity is subject or in whose activities any suchentity is a participant but only (except for purposes of defining Law below) tothe extent that any of the preceding have jurisdiction over the Aircraft or itsoperations.

 

*Hour-controlled components or parts*:  those components or parts at specifiedFlight-Hour intervals, in accordance with the Maintenance Program, are to bediscarded, overhauled, or recertified upon reaching such interval.

 

*Law*:  shall mean (a) any statute, decree,constitution, regulation, order, judgment or other directive of anyGovernmental Authority; (b) any treaty, pact, compact or other agreementto which any Governmental Authority is a signatory or party; (c) anyjudicial or administrative interpretation or application of any Law describedin (a) or (b) above; and (d) any amendment or revision of anyLaw described in (a), (b) or (c) above.

 

*Maintenance Manual*:  shall mean Sublessee’s FAA approvedmaintenance manual for the Aircraft which incorporates the procedures, limitsand requirements of the Manufacturer’s maintenance manual and relateddocuments.

 

*Maintenance Program*:  shall mean Sublessee’s FAA approvedmaintenance program which shall define all scheduled maintenance activities,condition monitoring and on-condition programs for Airframe, Engines and Parts,including but not limited to servicing, testing, preventative maintenance,structural inspections, systems checks, overhauls, corrosion controlinspections and corrosion treatments, and compliance with approvedmodifications, service bulletins, and Airworthiness Directives as the same maybe modified from time to time pursuant to and in accordance with the priorwritten approval of the applicable Governmental Authority and which at alltimes (a) complies in all material respects with all FAA requirements forFAR Part 121 operation, the MRB Report and Bombardier Inc.’s MaintenanceRequirement Manual, including incorporation of Bombardier Inc.’s corrosionprevention and control program for aircraft of the same type as the Aircraftand (b) complies in all material respects with General ElectricCorporation’s Engine Management Program for the Engine type.  Substantive Changes to the MaintenanceProgram shall be subject to Sublessor’s prior written approval, such approvalnot to be unreasonably withheld.  “**Substantive Changes**” means (i) changes from block tophase maintenance or vice versa, (ii) scheduled maintenance interval escalationsor (iii) any other changes which could be materially adverse to Sublessoror to the condition of the Aircraft on return or which would impact the basison which the Maintenance Reserve have been calculated.

 

*Maintenance Review Board Report (“MRB Report”)*:  the report published by the MaintenanceReview Board for the Bombardier CL-600-2B19 aircraft detailing the intervalsand description of the maintenance tasks and, where applicable, the life limitsrequired for continued airworthiness of the Aircraft.  Where the intervals specified in the MRBReport differ from the limit specified by the component manufacturer, the MRBReport shall take precedence.

 

*Manufacturer*:shall mean, with respect to the Airframe, Bombardier Inc., and its successorsand assigns, with respect to the Engines, General Electric Aircraft Engines, adivision of General Electric Corporation and, with respect to the APU,Honeywell Corporation.

 

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*Terminating Action*:  the alteration or modification of theAircraft, Airframe, Engine or Part in accordance with mandatory servicebulletins, orders, airworthiness directives, and instructions required toeliminate repetitive inspections or maintenance action.

 

*Time Between Overhauls (“TBO”)*:  the maximum elapse time allowed betweensuccessive overhauls or its equivalent of a Part as specified by theMaintenance Program.

 

ARTICLE 1 - CONDITION OF AIRCRAFT

 

1.0                                                                                 GeneralConditions.

 

At the time of return, the Aircraft shall (i) havebeen maintained in accordance with the Maintenance Program as approved andauthorized by the Governmental Authority, as if the Aircraft were to be kept infurther commercial passenger service by Sublessee, (ii) the Aircraft shallnot have been discriminated against whether by reason of its leased status orotherwise in maintenance, use, operation or in any other manner whatsoever,including, without limitation, as to the type of maintenance program applicableto the Aircraft, including any Engine, or as to compliance with AirworthinessDirectives, and (iii) the Aircraft shall meet the followingrequirements:

 

(i)                                     OperatingCondition - The Aircraft shall be in as good operating condition as on theDelivery Date, reasonable wear and tear excepted, with all of the Aircraftequipment, components, and systems fully operational and serviceable inaccordance with the Maintenance Manual and Sublessee’s FAA approved airplaneflight manual.

 

(ii)                                  Certification- The Aircraft shall have, and be in compliance with, a current and validstandard FAA Certificate of Airworthiness for FAR Part 121 operation.  If requested by Sublessor, Sublessee shallprovide a current and valid FAA Certificate of Airworthiness for Export toCanada or other country specified by Sublessor.

 

(iii)                               GeneralAppearance - The Aircraft shall be clean, cosmetically acceptable, with allcomponents reasonably free of foreign objects, accumulated dirt, grime, greaseand liquids, and be prepared for immediate placement into commercial service.  Any deterioration of paint or otherprotective coatings due to leakage, improper adhesion, impact damage orpresence of foreign materials or liquids shall be repaired and replaced per theMaintenance Manual.

 

(iv)                              InteriorCabin – All ceiling, sidewall, bulkhead, galley, lavatory, overhead bin andcloset panels and doors shall be free from significant or unserviceabledamage.  All seats

 

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shall be serviceable andin good overall condition in accordance with major U.S. carrier standards.  The Aircraft shall be returned in Sublessor’sstandard seating configuration for CRJ-200 or CRJ-440 Aircraft, as directed bySublessor.  If such direction requiresconversion from a CRJ-200 to a CRJ-440 or vice versa, the reasonable costs directlyrelated to such conversion shall be borne by Sublessor.

 

(v)                                 AirworthinessDirectives – The Aircraft shall be in compliance with all FAA requirements forFAR Part 121 operation including all FAA issued airworthiness directives (“**Airworthiness Directives**”) and Manufacturer alert servicebulletins that are issued prior to Sublease expiration and are applicable tothe Aircraft, without special deferment, exemption or alternate means ofcompliance, with terminating action accomplished for all AirworthinessDirectives which require termination be accomplished prior to 180 days afterSublease expiration.

 

(vi)                              DeferredMaintenance – There shall be no open outstanding or deferred maintenance itemsscheduled or unscheduled, routine or non-routine, against the Aircraft.  The Airframe, each Engine, the APU and thelanding gear shall be serviceable and free from defects and discrepancies thatare outside the serviceable limits of the Maintenance Manual.

 

(vii)                           Corrosion– There shall be no evidence of untreated, improperly treated or noticeablecorrosion.  Sublessee shall providedocumentation evidencing full compliance with the Sublessee’s MaintenanceProgram including Sublessee’s FAA approved corrosion prevention and controlprogram and with all applicable Manufacturer recommendations and requirementsfor corrosion prevention and control.

 

(viii)                        Title -The Aircraft shall be returned in compliance with the provisions of clause (ii) ofthe third sentence of Section 5(a) of the Sublease.

 

(ix)                                Alterations,Modifications and Additions

 

Replacement of Parts – Sublessee, at its owncost and expense, shall have replaced all components or Parts which may havefrom time to time become worn out, lost, stolen, destroyed, seized,confiscated, damaged beyond repair or permanently rendered unfit for use forany reason whatsoever.  All replacementParts (a) shall be free and

 

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clear of all Liens, except Permitted Liens, (b) shallbe in good condition and in as good operating condition as, and shall have  a value, utility, maintenance andmodification status at least equal to, the Parts replaced, assuming suchreplaced parts were in the condition and repair required to be maintained bythe terms of the Sublease, and (c) shall have documentation certifyingcompliance with all applicable Governmental Authority regulations, including,without limitation, (1) serviceable tags indicating time since overhaul,and overhaul or repair by a Governmental Authority certified repair station, (ii) overhaulrecords, (iii) documentation of modification status and compliance withapplicable airworthiness directives, and (iv) any other appropriatedocumentation required by the FAA for continued FAR Part 121 operation.

 

1.1                                                                                 Conditionof Airframe.

 

The Aircraft airframe at the time of its return toSublessor shall meet the requirements and shall have such hours and cyclesremaining under Maintenance Program as set forth below:

 

(i)                                     CCheck Inspection – Without regard to any payment made or to be made pursuant toSection 1.8, the Airframe shall have completed, immediately after removalfrom service and prior to return to Sublessor, the next sequential C check, orthe next set of phased C checks which make up the full compliment of a C check,as applicable, and in each case shall include all lesser multiple C checks andall phase checks. If Sublessee has elected to maintain the Aircraft inaccordance with an equalized maintenance check program, the Airframe shall havecompleted immediately after removal from service and prior to return toSublessor the next six (6) equalized maintenance checks which shallinclude all phase checks.  All defectsobserved during such C check which exceed the Sublessee’s Maintenance Manualallowable limits shall be rectified at Sublessee’s expense.

 

(ii)                                  StructuralInspection Tasks - The airframe shall have remaining at least *** of the hours/cycles/calendar daysto the initial threshold or ***of the hour/cycles/calendar days of the repeat inspection interval whichever isapplicable to all structural tasks; *provided* that,without regard to any payment made or to be made pursuant to Section 1.8,the airframe shall have a minimum remaining life of one

 

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C-Check interval beforeany structural inspection task is due;

 

(iii)                               LandingGear Life - The main Landing Gear and the nose Landing Gear shall have at least*** landings, hours or calendarlife remaining, whichever is the most limiting prior to removal for overhaul inaccordance with the  Maintenance Program;*provided* that, without regard to anypayment made or to be made pursuant to Section 1.8, the main Landing Gearand the nose Landing Gear shall each have a minimum remaining life of one C-Checkinterval; and

 

(iv)                              Brakes- Brakes shall have remaining on average *** or more of the full service life on all brakes; *provided* that, without regard to any payment made or to bemade pursuant to Section 1.8, the brakes shall have a minimum remaininglife of one C-Check interval.

 

1.2                                                                                 Conditionof Controlled Components.

 

Aircraft and Engine hour-controlled components orparts, at time of return to Sublessor, shall have remaining, as a minimum, *** of the manufacturers approved hourlimit, before any scheduled removals for overhaul, test, disassembly orreplacement.  Aircraft and Engine lifecycle fatigue (“**LCF**”), controlled components orparts, at time of return to Sublessor, shall have remaining, as a minimum, *** of the manufacturers approvedcycle limits, before any scheduled removals for overhaul, test, disassembly orreplacement; *provided* that, without regard toany payment made or to be made pursuant to Section 1.8,  all components or parts controlled on acalendar basis shall have at least one C check interval (or, if the serviceinterval is less that one C check, 100% of the service interval) remainingbefore scheduled removal for testing, overhaul or replacement.

 

1.3                                                                                 Conditionof Installed Engines.

 

At time of return, each Engine will have at least *** of hours or cycles remaining,whichever is most limiting, before the next scheduled Engine removal forinspection, test or disassembly for replacement of Life Limited Parts.  Cycle limits are as specified in the PowerPlant Limitations section of the Canadair MRB Report.  Additionally, the Engines shall satisfy thefollowing conditions:

 

(i)                                     PowerAssurance Runs – Without regard to any payment made or to be made pursuant to Section 1.8,each Engine shall pass power assurance performance tests without

 

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operational limitationsin accordance with the Manufacturer’s maintenance manual.  The Aircraft and Engines shall be capable ofcertificated full rated performance without limitation throughout the entireoperating envelopes as defined by the Sublessee’s FAA approved airplane flightmanual.

 

(ii)                                  BorescopeInspection - Without regard to any payment made or to be made pursuant to Section 1.8,each Engine shall pass a complete video-taped borescope inspection of allaccessible Engine sections performed in accordance with the Manufacturer’smaintenance manual by Sublessor or Sublessor’s designated representative afterthe Power Assurance Runs during the ground inspection per Article 3.1herein.  Any discrepancies found duringsuch inspection which exceed the Manufacturer’s maintenance manual allowablelimits for unrestricted continued service (without reduced intervalinspections), shall be corrected prior to Return by Sublessee at Sublessee’ssole expense.

 

(iii)                               AdversePerformance Data – No Engine shall be on engineering watch or on a reducedinterval inspection of any nature that could lead to premature removal of theEngine.  If the Engine historical andmaintenance records, power assurance runs and/or trend monitoring data indicatea level of performance deterioration or an abnormal rate of acceleration inperformance deterioration or oil consumption which based on manufacturerspecifications and/or experience indicate the Engine would require maintenanceprior to *** engine flying hoursafter return, Sublessee shall correct or cause to be corrected, such conditionas necessary to rectify all deficient Engine parameters in accordance withManufacturer specifications.

 

(iv)                              APULife -The installed APU shall have remaining at least *** of the MRB HSI or the Sublessee’s demonstrated on-wing meantime between failure (MTBF)  for APUhours and/or cycles, whichever is applicable, before scheduled removal foroverhaul, heavy maintenance, or replacement of hour limited or Life Limited Partsat the time of return.

 

1.4                                                                                 Intentionallyleft blank.

 

1.5                                                                                 ServiceBulletin Kits.

 

At or upon this return of the Aircraft, Sublesseeshall deliver to Sublessor, at no cost to Sublessor, all Service Bulletin Kitsfurnished without charge

 

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by a manufacturer for installation on the Aircraftwhich have not been so installed. Sublessee shall load such kits on board the Aircraft as cargo prior tothe Aircraft departure unless restricted by large size or hazardous materialregulations.  In the event such ServiceBulletin Kits were purchased or manufactured by Sublessee, Sublessor shall havethe exclusive right to purchase such kits at Sublessee’s actual cost for aperiod of 30 days after such return and the non-exclusive right so to purchasesuch kits thereafter.

 

1.6                                                                                 UniqueMarkings.

 

At time of return to Sublessor of the Aircraft,Sublessee shall, at its cost remove from the exterior and interior of theAircraft Sublessee’s operator specific exterior logos and insignias andinterior markings where applicable.  Thearea where such markings were removed or painted over shall blend in with thesurrounding surface in a cosmetically acceptable manner.  In the event that, notwithstanding Sublessee’sobligation to do so, Sublessee does not remove such markings, Sublessor shallhave no obligation to remove such markings prior to the sale, lease, or otherdisposition of the Aircraft by Sublessor after its return.

 

1.7                                                                                 Repairsand Repair Inspections.

 

The Aircraft shall conform to its Type CertificateData Sheet.  All major repairs (asdefined for FAR Part 121 operations by the FAA) and Major Modificationsshall have been performed in accordance with FAA approved data that is returnedwith the Aircraft.

 

All repairs performed by Sublessee or its designeesince the Aircraft delivery to Sublessee, and which exist on  the Aircraft, shall be in accordance with themanufacturer’s approved repair schemes and/or structural repair manual and/orthe recommendations of Advisory Circulars AC25.529-1 or equivalent, and AC25.571-1A or equivalent, and/or Sublessee’s approved Maintenance Manual. TheSublessee shall maintain a damage and repair history log which shall containall major repair approval documentation including, but not limited to, repairschemes and structural repair manual references and damage tolerance analysisperformed if applicable.  The Aircraftshall be returned with all temporary repairs replaced by permanent repairs perthe Manufacturer’s repair manual.  TheAircraft, including the fuselage, wings, flight control surfaces and empenage,shall be free of significant dents, abrasions and loose or pulled rivets.

 

1.8                                                                                 EquivalencyCharge.

 

If the Sublessee does not meet any of the remaininglife conditions set forth in Section 1.1 and 1.2, unless otherwisespecified therein, in place of

 

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correcting the specified hour, cycle or calendar lifedeficiency, Sublessee may elect to pay to Sublessor an Equivalency Charge (fordeficient condition) calculated in accordance with the following formula (ifthe formula results in a positive amount): 

 

Pmt = [A (b-c)]/d

 

Where:

 

“Pmt”                is the EquivalencyCharge payment

 

“A”                          is, inrespect of Engines, APU, Landing Gear or Airframe checks specified in Articles1.1, 1.2 and 1.3, the average of Sublessee’s demonstrated cost for overhauls,bench checks or inspections (whichever is applicable to the section) at thetime of return, or, in respect of the Landing Gear and Engine LCF components,the manufacturer’s list price for replacement parts at the time of return.  When demonstrated average costs for overhaulsor maintenance checks are not available from Sublessee, the average of threequotes from three mutually acceptable repair stations shall be used as the costbasis for the Equivalency Charge calculation;

 

“b”                             is *** (or, if specified, the numberspecified) of the total operating hours/cycles/time (whichever is applicableand most limiting) allowable between such overhaul, inspection, bench check orremovals;

 

“c”                              isthe actual number of operating hours/cycles/time (whichever is applicable andmost limiting) remaining to the next overhaul, inspection, bench check orremovals; and

 

“d”                             isthe total operating hours/cycles/time (whichever is applicable and mostlimiting) allowable between such overhaul, inspection, bench check or removals.

 

Calculation of theEquivalency Charge shall be based on each item identified in the requirementsof Articles 1.1, 1.2 and 1.3 in aggregate. For example, each LCF part shall be assessed on its status as far asaccumulated cycles are concerned and the adjustment amount for each isestablished.  All other parts subject tothis Equivalency Charge shall be similarly assessed and the individual chargesare to be added together.  For example,under this plan, a positive charge on an Engine could offset a negative chargeon the Landing Gear.  If the total netresult is positive (indicating Sublessee returned the Aircraft in a state that,in aggregate, has less than the 50% limit remaining), the net EquivalencyCharge shall be paid by Sublessee to Sublessor. In the event such a total is negative, no payment shall be made toSublessee from Sublessor.

 

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ARTICLE 2 - AIRCRAFT DOCUMENTATION AND SAFETYDEVICES

 

2.1                                                                                 AircraftDocumentation.  Concurrently with returnof the Aircraft to Sublessor, Sublessee shall deliver to Sublessor one (1) copy,in English, of the Aircraft Documentation (including current revisions thereto).It is recognized that the Aircraft Documentation may be titled or describeddifferently than set forth in Appendix I due to Sublessee’s method ofmaintaining the Aircraft Documentation. Accordingly, the information described in the Aircraft Documentationshall be provided to Sublessor in the form and manner under which Sublesseemaintains such information, and shall include data pertinent to theAircraft.  All Aircraft Documentationprovided to Sublessor at time of the Aircraft return shall be listed anddescribed by Sublessee’s title or description with cross-reference to thetitles or descriptions provided in Appendix I, and included as an attachment tothe Aircraft Documentation.  All AircraftDocumentation provided to Sublessor shall be in good condition, readable andcapable of being reproduced using standard reproduction processes, complete, upto date and accurate as to content.  AnyAircraft Documentation, to the extent required by the Governmental Authorities,not returned in its “original” form shall be stamped “Certified True Copy” andboth signed and dated by the Sublessee’s authorized personnel at the time ofits creation. Sublessee shall provide to Sublessor, upon reasonable request,advance copies of any of the Aircraft Documentation as Sublessor may desire orrequire in order to plan or accomplish recertification, modification, sale,lease or other disposition or utilization of the Aircraft upon receipt of suchAircraft by Sublessor.

 

Sublessor shall provide, as part of the AircraftDocumentation, the original certification tags and release notes for all lifelimited and rotable Parts installed after delivery. The certification tags andrelease notes shall provide traceability of the last overhaul and/or repairshop visit to the approved repair facility that conducted the overhaul and/orrepair.

 

Sublessee shall, for the period that the Aircraft wasoperated by it:

 

i.                                          certify,in writing as identified in Appendix I, that the Aircraft has not been involvedin any incidents or accidents.  If theAircraft has been in involved in any incidents or accidents the Sublessee shallcertify in a letter, full disclosure of all such events involving the Aircraftdetailing all relevant details, including but not limited to, any subsequentrepairs; and

 

ii.                                       certify,in writing, that there are no leased or rented parts installed on the Aircraft;and

 

iii.                                    certify,in writing, that Sublessee has no knowledge of parts installed on the Aircraftthat have been manufactured without

 

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appropriate Governmental Authority approval and /or that do not conformto an internationally recognized airworthiness standard and are approved forinstallation in the Aircraft.

 

2.2                                                                                 Remedyfor Non-Compliance. Sublessee shall take action to ensure that the Sublessorand the Governmental Authority are provided with, but not limited to, allrequested guarantees of methods of compliance, component overhaul and recordsmanagement, quality control, part number and serial number verification.  If any such records or other data aremissing, incomplete or otherwise not in accordance with the GovernmentalAuthority standards, Sublessee shall re-accomplish the maintenance tasksnecessary to produce such records in accordance with the Maintenance Programprior to return of the Aircraft or otherwise perform all necessary acts toobtain such records in a manner satisfactory to the Governmental Authority.

 

2.3                                                                                 FlyawayKit.  Concurrently with return of theAircraft, Sublessee shall deliver to Sublessor on board the Aircraft one (1) aircraftship set of Aircraft safety devices for the Landing Gear down-locks, engineplugs or the equivalent.  Loose equipmentwould remain installed on the Aircraft as if Sublessee were to continueoperating the same in continued regular passenger service, each such itemfunctioning in accordance with its intended use.

 

ARTICLE 3 - INSPECTION AND FLIGHTS

 

3.0                                                                                 TestsFlight.  Upon return of the Aircraft, atSublessor’s request Sublessee shall conduct, at Sublessee’s expense and risk ofloss or damage, a test flight of the Aircraft to and from Memphis, Tennessee,Detroit, Michigan or Minneapolis, Minnesota or such other location as mutuallyagreed lasting at least one hour and 30 minutes, during which Sublessee shallconduct demonstration, performance, avionics, systems and flightcharacteristics testing requested by Sublessor to confirm that the Aircraft hasbeen maintained, and is being returned, in accordance with the terms of theSublease.  At its sole cost and expense,Sublessee shall provide the pilot and the first officer for the testflight.  Sublessor may have up to threeadditional technical representatives on board the Aircraft during the testflight.

 

3.1                                                                                 GroundInspection. The Aircraft including the Aircraft Documentation and VendorDocumentation shall be made available to Sublessor for ground inspection bySublessor or its designee at Sublessee’s facilities.  Such inspection shall commence twenty (20)working days (in the case of the Aircraft documentation and VendorDocumentation) and fifteen (15) working days (in the case of the Aircraft)prior to the date of return of the Aircraft to Sublessor.  At Sublessor’s request, Sublessee shallremove the Aircraft from scheduled service and open the areas of the Aircraftas

 

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required to perform the necessary checks as specifiedin Article 1.2 and 1.3.  Inaddition, Sublessee shall allow Sublessor to accomplish its inspection todetermine that the Aircraft, including the Aircraft Documentation and VendorDocumentation are in the condition set forth in Article 2.  During such checks, Sublessor’s personnelshall have the right to reasonably request (and such request shall not beunreasonably denied by Sublessee) that adjacent additional panels or areas beopened in order to allow Sublessor’s personnel to confirm the Aircraft is inthe condition set forth in Articles 1.1, 1.2 and 1.3.

 

Sublessee shall promptly correct any discrepanciesfrom the requirements set out in Articles 1 or 2 which are observed during suchinspection and are communicated in writing by Sublessor to Sublessee.

 

3.2                                                                                 OperationalGround Check.  Promptly after completionof any corrections required under Article 3.1, Sublessee shall conduct anoperations ground check on the Aircraft in accordance with the manufacturer’smaintenance manual criteria for the purpose of demonstrating to Sublessorthe  operation of the systems comply withallowable maintenance manual limitations, including a full fuel tank leak check,pilot and static systems check and hydraulic system internal leak check.Sublessee shall promptly correct those discrepancies that exceed maintenancemanual allowable limits.

 

3.3                                                                                 OperationalTest Flight.  Promptly after completionof any corrections required under Articles 3.1 and 3.2, the Aircraft shall betest flown by Sublessee, using qualified flight test personnel, for the amountof time necessary to satisfactorily demonstrate the airworthiness of theAircraft and the proper functioning of all systems and components. Such FlightTest profile will consist of the items specified in Appendix II hereto.  During such test flight command, care,custody and control of the Aircraft shall remain at all times with Sublessee.  Two (2) of Sublessor’s designatedrepresentatives (or more if mutually agreed and permitted by the FAA) mayparticipate in such flight as observers. Upon completion of such operational flight testing, the representativesof Sublessee and Sublessor participating in such testing shall agree in writingupon any discrepancies required to be corrected by Sublessee in order to complywith Articles 1 and 2.  If any of thediscrepancies referred to in Articles 3.1, 3.2 and 3.3 continue to persist,Sublessor may, at its option, agree to provisionally technically accept theAircraft.  As used herein, “discrepancy(ies)”means (a) for items addressed in the Manufacturer’s maintenance manual, adetected condition that exceeds Manufacturer’s maintenance manual allowablelimits, (b) for items not addressed in the Manufacturer’s maintenancemanual, a detected condition that exceeds allowable limits under Sublessee’s FAA approved airplane flight manualand (c) for items not addressed in the Manufacturer’s maintenance manualor Sublessee’s FAA approved airplane flight manual, a detected condition

 

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that renders the Aircraft not airworthy.  Upon completion of the operational testflight and after Sublessee has corrected any discrepancies in the condition ofthe Aircraft as required under this Exhibit D and that exceedallowable limits, the Aircraft shall be technically accepted by Sublessor’srepresentatives as evidenced by the signed acceptance certificate.

 

3.4                                                                                 FerryFlight to Place of Redelivery.  Upon receiptof the acceptance certificate from Sublessor, the Sublessee shall ferry theAircraft, at its sole cost and expense, to the re-delivery location. All riskof loss or damage to the Aircraft shall remain Sublessee’s responsibility untilthe Aircraft is delivered to Sublessor at the re-delivery location.  Up to two (2) of Sublessor’s designatedrepresentatives (or more if mutually agreed and permitted by the FAA),participating in the inspection or operational test flight relating to thetechnical acceptance, may participate in such ferry flight as observers.

 

3.5                                                                                 FlightCost.  All flights pursuant to Articles3.3. and 3.4 shall be made at Sublessee’s expense. Sublessee shall reimburseSublessor for any costs incurred by Sublessor associated with such flights,including but not limited to costs for fuel, oil, airport fees, insurance,takeoff/landing fees, customs duties, ground handling charges and airwayscommunication charges.

 

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APPENDIX I TO EXHIBIT D

 

AIRCRAFT DOCUMENTATION

 

The term AircraftDocumentation shall be provided in English and shall include the following:

 

1.                                       Allhistorical records for Aircraft including Airframes and Engines, includingoriginal Airworthiness Certificate from country of Manufacturer and Sublessee’sAirworthiness Certificate as issued by the Governmental Authority. Sublesseeshall supply all original (i.e. not copies) certification tags and releasenotes from manufacturers or repair agencies for Parts installed by Sublessee.

 

2.                                       APUhistorical records and schedule of overhaul.

 

3.                                       Copyof the Maintenance Program including a task list indicating when items thereonwere last performed, and copies of job cards for all maintenance checks.

 

4.                                       Airframeand Engines current inspection and maintenance status and operating timesincluding structural sampling inspection records of inspections performed onother of Sublessee’s aircraft where credit for such inspections were appliedagainst the Aircraft.

 

5.                                       Listand status of time, cycle and calendar controlled components and parts -Aircraft and Engines.

 

6.                                       Listand status of Life Limited Parts - Aircraft, Engines and APU.

 

7.                                       Summaryand control status of Airworthiness Directives - Aircraft including Airframe,Engines, auxiliary power unit and Parts and the method of incorporation(i.e.:  repetitive inspections, interimfix or terminating action).

 

8.                                       Listof manufacturer’s service bulletins incorporated and method of incorporationfor Airframe, Engines and equipment. Where only a portion of a service bulletin is accomplished Sublesseeshall identify which portion was accomplished.

 

9.                                       Listof major modifications and/or alterations accomplished on the Aircraft,Engines, and equipment together with all supporting documents required by theFAA including one copy of each modification, alteration, engineering order andassociated drawings.

 

10.                                 Listof major repairs performed on Aircraft. A copy of all supporting documents required by the FAA including allEngineering, Maintenance, Quality Control and regulatory documentationassociated with the major repairs shall be provided.

 

11.                                 Listof Supplemental Type Certificates (STC’s) incorporated together with a copy ofeach certificate and associated data.

 

12.                                 ApprovedAirplane Flight Manual (AFM).

 

13.                                 Flight(operations) manual currently used by present operator.  (FCOM)

 

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14.                                 Weightand balance documents, including last weighing report.

 

15.                                 Sublessee’sthen-current weight and balance supplement - equipment list.

 

16.                                 Crossreference parts catalogue (listing of Aircraft manufacturer’s part numberscorresponding to parts manufacturer’s and current operator’s part numbers forthe same parts) if applicable.

 

17.                                 Flighttest reports - last flight accomplished prior to return.

 

18.                                 Lastaccomplished flight recorder calibration (if the Aircraft is to be deliveredbefore any calibration is required to be accomplished, the Sublessee is toprovide the record of the initial or last certification of the flightrecorder).

 

19.                                 Inventorylist of Aircraft loose equipment.

 

20.                                 Letterdetailing any major incident and/or accidents involving the Aircraft (if none,the letter should so state), certified by Sublessee’s chief inspector orcorporate officer responsible for aircraft maintenance.

 

21.                                 Allrecords required to comply with FAA requirements for FAR Part 121operation and/or initiated by Sublessee for Sublessee’s own benefit.

 

22.                                 Listof current equipment in passenger and flight crew compartments and/or currentinterior arrangement diagram.

 

23.                                 Crossreference list for Service Bulletins and other manufacturer publishedinstructions to Sublessee’s engineering orders.

 

Aircraft Documentation Supplement

 

24.                                 Certificates:

1.                           Certificateof Airworthiness

2.                           NoiseCertificate

3.                           RadioLicense Certificate

4.                           OriginalExport Certificate of Airworthiness delivered in connection with originaldelivery of Aircraft from Bombardier

5.                           Certificateof Sanitary Construction of Galleys

 

25.                                 AircraftStatus Records:

1.                           TechnicalLog Books

2.                           AirframeMaintenance Status Report

3.                           ServiceBulletin Status Report

4.                           AirworthinessDirective Compliance Report (terminated and repetitive)

5.                           LocalModification Status Report List

6.                           LastWeighing Report

7.                           LastCompass Swing

 

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26.                                 AircraftMaintenance Records:

1.                           TestFlight Reports

2.                           All “C”Checks and last lower level maintenance check

3.                           WorkCards for each C-Check multiple (or segment)

4.                           Modificationrecords including accomplishing documents

5.                           CPCPcompliance report

6.                           AgingAircraft compliance report

 

27.                                 AircraftHistory Records:

1.                           AircraftStructural Repair History

2.                           ServiceDifficulty Report

3.                           Accidentor Incident Report

4.                           DamageChart

 

28.                                 EngineRecords:

1.                           Log Books

2.                           Lastoverhaul and repair documents for each module

3.                           AirworthinessDirective Compliance Report (terminated and repetitive)

4.                           Manufacturer’sService Bulletin Status Report

5.                           EngineDisk Sheet

6.                           EngineData Submittal Sheet

7.                           ConditionMonitoring Status Report including trend monitoring data for the immediatelypreceding 90 days of operation

8.                           Back-to-birthtraceability for all life limited parts

9.                           Lasttest cell run performance report

 

30.                                 APURecords:

1.                           LogBook

2.                           Lastoverhaul and repair documents

3.                           Manufacturer’sService Bulletin Status Report

 

31.                                 ComponentRecords (including components installed on Engines and APU):

1.                           TimeMonitored Component Status Report with installed part numbers, serial numbers,remaining hours and cycles (if applicable)

2.                           Serviceabilitytags and other appropriate back-up documentation (including 8130’s) forcurrently installed components replaced since delivery from the Manufacturer

3.                           Serializedlatest shop records, including all serviceable tags, release to service, andrepair orders detailing maintenance checks, inspections, tests, repairs,replacements, restorations, overhauls, modifications and refurbishments

4.                           Back-to-birthtraceability for all life limited parts

 

32.                                 Manuals:

1.                           AirplaneFlight Manual

2.                           QuickReference Handbook

3.                           AircraftOperating Manual

4.                           Weightand Balance Manual Supplement

5.                           WiringDiagram Manual

 

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6.                           SublesseeIllustrated Parts Catalog

7.                           BombardierIllustrated Parts Catalog (if different from item 6)

8.                           Sublessee’sFAA approved Maintenance Manual

9.                           Bombardiermaintenance manual (if different from item 8)

10.                     GE EngineIllustrated Parts Catalog

11.                     GE EngineShop Manual

12.                     SystemsSchematic Manual

13.                     Sublessee’sMinimum Equipment List

14.                     MasterMinimum Equipment List

15.                     ConfigurationDeviation List

16.                     DispatchDeviation Guide

 

33.                                 MiscellaneousTechnical Documents:

1.                           MaintenanceProgram Specifications/Requirements Schedule

2.                           InteriorConfiguration Drawings

3.                           LooseEquipment Inventory List

 

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APPENDIX II TO EXHIBIT D

 

FLIGHT TEST PROFILE

 

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**EXHIBIT EtoSublease Agreement[NW 2005       ]**

 

**MINIMUM LIABILITY AMOUNT**

 

The portion of this Exhibit appearing below thistext is intentionally deleted from the FAA filing counterpart as the partieshereto deem it to contain confidential information.

 

The Minimum Liability Amount shall be $*** per occurrence (or such otherminimum amount as may be reasonably requested by Sublessor from time to time inthe event Sublessee no longer obtains airline liability insurance coverage aspart of the Sublessor’s airline aviation liability insurance placement).

 

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**EXHIBIT A-2**

 

**ENGINE LEASE FORM**

 

 

**ENGINE LEASE AGREEMENT[NW 2005     ]**

 

**Dated as of**

 

**[            ],2005**

 

**Between**

 

**NORTHWEST AIRLINES, INC.,                      Lessor**

 

**AND**

 

**MESABA AVIATION, INC.,                      Lessee**

 

**One General Electric Model CF34-3B1 Engine**

 

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**TABLE OF CONTENTSTOENGINE LEASE AGREEMENT [NW 2005     ]**

 
| SECTION 1.  | Definitions                                                                 |   |
|------------------|-----------------------------------------------------------------------------|--------|
| SECTION 2.  | Acceptance and Lease                                                        |   |
| SECTION 3.  | Term and Rent                                                               |   |
| SECTION 4.  | Lessor’s Representations and Warranties                                |   |
| SECTION 5.  | Return of the Engine                                                        |   |
| SECTION 6.  | Liens                                                                       |   |
| SECTION 7.  | Maintenance and Operation; Possession;  Insignia.                           |   |
| SECTION 8.  | Replacement and Pooling of Parts;  Alterations, Modifications and Additions |   |
| SECTION 9.  | Voluntary Termination                                                       |   |
| SECTION 10. | Loss, Destruction, Requisition, etc. of  Engine                             |   |
| SECTION 11. | Insurance                                                                   |   |
| SECTION 12. | Inspection                                                                  |   |
| SECTION 13. | Assignment                                                                  |   |
| SECTION 14. | Events of Default                                                           |   |
| SECTION 15. | Remedies; Automatic Termination                                             |   |
| SECTION 16. | Lessee’s Cooperation Concerning Certain  Matters                       |   |
| SECTION 17. | Notices                                                                     |   |
| SECTION 18. | No Set-Off, Counterclaim, etc                                               |   |
| SECTION 19. | No Renewal                                                                  |   |
| SECTION 20. | Maintenance Program                                                         |   |
| SECTION 21. | Lessor’s Right to Perform for Lessee                                   |   |
| SECTION 22. | [Intentionally Omitted].                                                    |   |
| SECTION 23. | Service of Process                                                          |   |
| SECTION 24. | Miscellaneous                                                               |   |
| SECTION 25. | [Intentionally Omitted.]                                                    |   |
| SECTION 26. | Covenant of Quiet Enjoyment                                                 |   |
| SECTION 27. | Federal Bankruptcy Code                                                     |   |
| SECTION 28. | Use of Funds                                                                |   |
| SECTION 29. | Lessee’s Representations, Warranties and Indemnities                   |   |
| SECTION 30. | Certain Representations, Warranties and  Covenants                          |   |
| SECTION 31. | Covenants of Lessee                                                         |   |
| SECTION 32. | Consent to Jurisdiction                                                     |   |
| SECTION 33. | Owner for Federal Tax Purposes                                              |   |

 

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EXHIBITS

 
| EXHIBIT A |   | - |   | Form of  Lease Supplement          |
|----------------|--------|---|--------|-----------------------------------------|
| EXHIBIT B |   | - |   | Basic Rent                              |
| EXHIBIT C |   | - |   | Stipulated  Loss Value Schedule         |
| EXHIBIT D |   | - |   | Return Conditions                       |
| EXHIBIT E |   | - |   | Minimum  Liability Amount               |
| EXHIBIT F |   | - |   | Headlease  Variations                   |
| EXHIBIT G |   | - |   | Quick  Engine Change Kit Specifications |

 

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ENGINE LEASE AGREEMENT

[NW 2005     ]

 

This ENGINE LEASE AGREEMENT [NW 2005     ],dated as of [      ], 2005, between NORTHWESTAIRLINES, INC., a corporation organized and existing pursuant to the laws ofthe State of Minnesota (“**Lessor**”), andMESABA AVIATION, INC., a corporation organized and existing pursuant to thelaws of the State of Minnesota (“**Lessee**”);

 

**W I T N E S S E T H:**

 

WHEREAS, Lessor has agreed to lease the Engine toLessee, Lessee has agreed to enter into this Lease for use of the Engine byLessee in its operations in accordance with the Airline Services Agreement andfor no other purpose, and the parties hereto intend this Lease to be anoperating lease; and

 

WHEREAS, Lessor is providing a valuable financialaccommodation to Lessee by making the Engine available to Lessee pursuant tothis Lease, and Lessor is entering into this Lease solely to provide the Engineto Lessee for use in its operations in accordance with the Airline ServicesAgreement; and

 

NOW, THEREFORE, in consideration of the mutualagreements contained herein and for other good and valuable consideration, thereceipt and legal sufficiency of which is hereby acknowledged, Lessee andLessor intending to be legally bound agree as follows:

** **

**SECTION 1.  *Definitions.*** Unless the context otherwise requires, the following terms shall havethe following meanings for all purposes of this Lease and shall be equallyapplicable to both the singular and the plural forms of the terms hereindefined:

 

“*Additional Insured”*means Lessor or such other Person as Lessor may designate*.*

 

*“Affiliate”*means, with respect to any Person, any other Person directly or indirectlycontrolling, controlled by or under common control with such Person.  For the purposes of this definition, “control”(including “controlled by” and “under common control with”) shall mean thepower, directly or indirectly, to direct or cause the direction of themanagement and policies of such person whether through the ownership of votingsecurities or by contract or otherwise. For the avoidance of doubt, Lessor and its Affiliates are not Affiliatesof Lessee.

 

*“After-Tax Basis”*means anamount, which, after deduction of all Federal, state, local and foreign taxesrequired to be paid by or on behalf of the recipient in

 

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respect of the receipt orrealization of such amount, is equal to the payment required under theprovisions of the Lessee Documents that requires payments to be made on anAfter-Tax Basis*.*

 

*“Aircraft”*means any Airframe leased or subleased to Lessee or an Affiliate of Lessee byLessor or an Affiliate of Lessor suitable for Lessee’s installation, use andoperation of the Engine.

 

*“Aircraft Documentation”* has themeaning specified in Exhibit D hereto.

 

*“Airframe”*means: any Bombardier Inc. Canadair Regional Jet Model CL-600-2B19 aircraft(except engines from time to time installed thereon) specified in the lease orsublease of such aircraft between Lessor or an Affiliate of Lessor and Lesseeor an Affiliate of Lessee; and (ii) any and all parts associated therewith(except engines from time to time installed thereon) and covered by suchsublease.

 

*“Airline Services Agreement”*means the Airline Services Agreement dated as of August 29, 2005 betweenLessor and Lessee, as modified, amended or supplemented from time to timepursuant to the terms thereof.

 

*“Bankruptcy Code”*means the Bankruptcy Reform Act of 1978, as amended, or any subsequentlegislation that amends, supplements or supersedes such provisions.

 

*“Base Rate”*means the rate of interest announced publicly by Citibank, N.A. in New York,New York from time to time as its base rate.

 

*“Basic Rent”*means,for the Term, the rent payable for the Engine pursuant to Section 3(b).

 

*“Basic Shop Visit”*means any shop visit, as defined by the Engine Manufacturer that is based on anapproved program of condition monitoring and trend monitoring of performancedeterioration that results in an Engine being restored to full performancestandard.

 

*“Business Day”*means any day other than a Saturday or Sunday or a day on which commercialbanks are required or authorized to close in the City of New York, New York; orMinneapolis, Minnesota.

 

*“‘C’ Check”* means a “C” Check, assuch term is defined in the Maintenance Program relating the Aircraft thatmeets the requirements of a “C” Check as defined in the Bombardier Inc.Maintenance Requirement Manual.

 

*“Certificated Air Carrier”*means a Citizen of the United States holding a carrier operating certificateissued by the Secretary of Transportation pursuant to Chapter 447 of Title 49,United States Code, for aircraft capable of carrying ten or more individuals or6,000 pounds or more of cargo or that otherwise is certified or

 

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registered to the extent required to fall within thepurview of 11 U.S.C. Section 1110 or any analogous successor provision ofthe Bankruptcy Code.

 

*“Citizen of the United States”*has the meaning specified in Section 40102(a)(15) of Title 49 of theUnited States Code or any similar legislation of the United States of Americaenacted in substitution or replacement therefor.

 

*“Code”* meansthe Internal Revenue Code of 1986, as amended.

 

“*Commencement Date*”means the date specified as the Commencement Date in the Lease Supplementdelivered on the Delivery Date.

 

*“Default”* meansany event which with the giving of notice or the lapse of time or both wouldbecome an Event of Default.

 

*“Delivery Date”*of the Engine means the date the Lease Supplement subjecting the Engine to theLease is executed and delivered by the Lessor and the Lessee.

 

*“Dollars”* and *“$”* means the lawful currency of the United States ofAmerica.

 

*“Engine”* meansthe General Electric Model CF34-3B1 type engine identified by manufacturer’sserial number in the initial Lease Supplement, whether or not from time to timethereafter installed on an Airframe or airframe or on any other aircraft; and (ii) anyengine which may from time to time be substituted, pursuant to the termshereof, for such engine, together in each case with Shipping Stand, any QEC,the applicable Aircraft Documentation and any and all Parts normallyincorporated or installed in or attached thereto including any and all Partsremoved therefrom so long as title thereto shall remain vested in the Lessor inaccordance with the terms of Section 8 after removal from such Engine; *provided, however,* that at such time as an engine shall bedeemed part of the property leased hereunder in substitution for the Enginepursuant to the applicable provisions hereof, the replaced Engine shall ceaseto be the Engine hereunder.  The term *“Engines”* means, as of any date of determination, allengines then leased by Lessor or any Affiliate of Lessor to Lessee or anyAffiliate of Lessee, whether under this Lease or under any other engine lease,other than the engines initially leased as part of an Aircraft by Lessor to Lesseeunless the context requires.

 

*“Engine Manufacturer”* meansGeneral Electric Aircraft Engines, a division of General Electric Corporation.

 

*“ERISA”* meansthe Employee Retirement Income Security Act of 1974, as amended from time totime, and the regulations promulgated and rulings issued thereunder.  Section references to ERISA are toERISA, as in effect at the date of the Participation Agreement and anysubsequent provisions of ERISA, amendatory thereof, supplemental thereto orsubstituted therefor.

 

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*“Event of Default”*has the meaning specified in Section 14 hereof.

 

*“Event of Loss”*with respect to the Engine means any of the following events with respect tosuch property: (i) the loss of such property or of the use thereof due tothe destruction of or damage to such property which renders repair uneconomicor which renders such property permanently unfit for normal use by Lessee forany reason whatsoever; (ii) any damage to such property which results inan insurance settlement with respect to such property on the basis of a totalloss, or a constructive or compromised total loss; (iii) the theft ordisappearance of such property, or the confiscation, condemnation, or seizureof, or requisition of title to, or use of, such property (other than arequisition for use by the United States Government or any agency orinstrumentality of any thereof) which in the case of any event referred to inthis clause (iii) (other than a requisition of title) shall have resultedin the loss of possession of such property by Lessee for a period in excess of90 consecutive days or, in the case of a requisition of title, the requisitionof title shall not have been reversed within 60 days from the date of suchrequisition of title; (iv) as a result of any law, rule, regulation, orderor other action by the Federal Aviation Administration, the use of the Engine(or any Aircraft on which the Engine is in use) in the normal course of thebusiness of air transportation shall have been prohibited for a period of 90consecutive days, unless Lessee, prior to the expiration of such 90 day period,shall have undertaken and shall be diligently carrying forward all steps whichare necessary or desirable to permit the normal use of the Engine by Lessee,but in any event if such use shall have been prohibited for a period of twoconsecutive years, *provided* thatno Event of Loss shall be deemed to have occurred if such prohibition has beenapplicable to the entire U.S. registered fleet of Bombardier Inc. CanadairRegional Jet Series [200][440] aircraft of Lessee and Lessee, prior to theexpiration of such two-year period, shall have conformed at least one suchaircraft in its fleet to the requirements of any such law, rule, regulation,order or other action and commenced regular commercial use of the same in suchjurisdiction and shall be diligently carrying forward all steps which arenecessary or desirable to permit the normal use of such aircraft by Lessee, *provided*, *further*, that,notwithstanding any of the foregoing, such prohibition shall constitute anEvent of Loss if such use shall have been prohibited for a period of threeconsecutive years, or if such use shall be prohibited at the expiration of theTerm; or (v) any divestiture of title to or interest in an Engine treatedas an Event of Loss pursuant to Section 7(b) hereof.  An Event of Loss with respect to the Engineshall be deemed to have occurred if an Event of Loss (as defined in the relatedAircraft Lease) occurs with respect to an Aircraft on which the Engine is theninstalled unless no damage occurs to the Engine and the Engine is recovered byLessee, as established to Lessor’s satisfaction within the time periodhereunder for performance of Lessee’s obligations in respect of an Event ofLoss.

 

*“Expenses”* hasthe meaning specified in Section 29(c) hereof.

 

“*ExpirationDate*” means May 1, 2015, or such later date to which theeffectiveness of the Airline Services Agreement shall be extended in accordance

 

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with its terms, such that this Lease and the AirlineServices Agreement shall be coterminous.

 

*“FAR”* means the regulationspromulgated under the Federal Aviation Act.

 

*“Federal Aviation Act”*means that portion of the United States Code comprising those provisionsformerly referred to as the Federal Aviation Act of 1958, as amended, or anysubsequent legislation that amends, supplements or supersedes such provisions.

 

*“Federal Aviation Administration”*and *“FAA”* mean the United States FederalAviation Administration and any agency or instrumentality of the United Statesgovernment succeeding to their functions.

 

*“Flight Hour”* means: with respectto the Engine or any Part, each hour or part thereof, measured to two decimalplaces, which elapses from the time the wheels of the airframe, whether or notan Airframe leased by Lessor to Lessee, on which such Engine or Part isinstalled, leave the ground on take-off and the time when the wheels of suchairframe touch the ground on landing.

 

*“Headlease”*means a lease orother agreement or instrument (other than a bill of sale or other suchinstrument by which Lessor obtained legal title to the Engine) between Lessorand a third-party owner of the Engine, pursuant to which Lessor obtains rightsin and to the Engine leased to Lessee hereunder.

 

*“Headlease Documents”* means theagreements, instruments and other documents identified pursuant to Exhibit Fhereto in the event that the Engine is subject to a Headlease during the Term.

 

*“Headlease Interest”*means any ofHeadlessor (in its capacity as such), any entity serving as Headlessor in itsindividual capacity, and,  but only if aparty to any Headlease Document, any owner participant in or comparablebeneficial owner of Headlessor.

 

*“Headlessor”* means the Persondesignated in the Headlease as the lessor of the Engine.  Except as Lessor and Headlessor may otherwiseagree, the Headlessor shall be the Owner of the Engine.

 

*“Indemnitee”*means (i) Lessor, (ii) each Affiliate of Lessor, (iii) if and solong as the Engine is subject to a Headlease during the Term, such Persons asare identified pursuant to Exhibit F hereto and (iv) the respectivedirectors, officers, employees, agents and servants, successors and permittedassigns of each of the Persons described in clauses (i), (ii) and (iii),inclusive.

 

*“Lease Agreement”, “this LeaseAgreement”, “this Lease”, “this Agreement”, “herein”, “hereof”, “hereunder”, “hereby”*or other like words mean this Engine Lease Agreement [NW 2005    ], as originally executed or as

 

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modified, amended or supplemented pursuant to theapplicable provisions hereof, including, without limitation, supplementationhereof by one or more Lease Supplements entered into pursuant to the applicableprovisions hereof.

 

*“Lease Period”*means each of the monthly periods throughout the Term ending on a Lease PeriodDate.

 

*“Lease Period Date”*means the 1st calendar day of each month during the Term.

 

*“Lease Supplement”*means a Lease Supplement, substantially in the form of Exhibit Ahereto, to be entered into between Lessor and Lessee on the Commencement Datefor the purpose of leasing the Engine under and pursuant to the terms of thisLease Agreement, and any subsequent Lease Supplement entered into in accordancewith the terms hereof.

 

*“Lessee”* meansMesaba Aviation, Inc. a Minnesota corporation, and its successors andpermitted assigns, as lessee under the Lease.

 

*“Lessee Documents”*means the Lease, the Lease Supplement covering the Engine, the acceptancecertificate covering the Engine in the form agreed to by Lessor and Lessee(herein called the “**Lease AcceptanceCertificate**”) and the Airline Services Agreement.

 

*“Lessor Liens”*meansany Lien affecting or disposition of title or interest affecting or in respectof the Engine arising as a result of (i) claims against or affectingLessor not arising from the transactions contemplated by this Lease, (ii) anyact or omission of Lessor not related to the transactions contemplated by thisLease, (iii) Taxes imposed against Lessor which Lessee has not agreed toindemnify against pursuant to this Lease, (iv) [Intentionally Omitted] or (v) claimsagainst Lessor arising out of the voluntary transfer of all or any portion ofLessor’s interest in any Aircraft on which the Engine is then installed,or  in any of the Lessee Documents otherthan a transfer pursuant to Sections 5, 8, 10 or 15 hereof, *provided, however,* that any Lien which is attributablesolely to Lessor and would otherwise constitute a Lessor Lien hereunder shallnot constitute a Lessor Lien hereunder so long as (1) the existence ofsuch Lien poses no material risk of the sale, forfeiture or loss of the Engine,(2) the existence of such Lien does not interfere in any way with Lessee’suse, possession or operation of Engine or of the Aircraft on which it is theninstalled and (3) Lessor is diligently contesting such Lien.

 

*“Lien”* meansany mortgage, pledge, lien, charge, claim, encumbrance, lease, sublease,sub-sublease or security interest.

 

*“Life Limited Parts”* means thoseparts which have a specific hour, cycle and/or calendar life limit as specifiedby the Manufacturer.

 

*“Loss Payment Date”*has the meaning specified in Section 10(a) hereof.

 

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*“Maintenance Program”*has the meaning specified in Exhibit D hereto.

 

*“Major Modifications”*include, but shall not be limited to (i) changes that alter thefundamental nature of an Aircraft as a passenger and cargo carrying aircraft, (ii) changesto the Engine or an engine that affects the performance of an Aircraft or theEngine, (iii) changes that adversely affect interchangeability orreplaceability of Parts, (iv) substitution of different types of equipmentor accessories which are not equivalent in cost, value and/or operationalcapability to the equipment or accessories being replaced, (v) changesthat invalidate or impair any warranty with respect to the Engine or any Part, (vi) changesthat adversely affect the eligibility of an Aircraft or Engine to obtain anairworthiness certificate from the FAA or (vii) any changes that result ina variation from the original type certificate for an Aircraft (other thanchanges between 44 seat and 50 seat configurations of an Aircraft as permittedby the Airline Services Agreement), but shall exclude changes pursuant toairworthiness directives.

 

*“Manufacturer”*means with respect to any Airframe, and where the context permits, anyAircraft, Bombardier Inc., a Canadian Corporation, and its successors and assignsand, with respect to the Engine, General Electric Company, a New Yorkcorporation, and its successors and assigns.

 

*“Minimum Liability Amount*”has the meaning specified in Exhibit E hereto.

 

*“Operative Documents”*and *“Operative Document”* means this Lease,the Lease Supplement covering the Engine, the Acceptance Certificate, anyHeadlease, any Headlease Documents and the Purchase Agreement.

 

*“Owner”* means (i) ifthe Engine is not subject to a Headlease, Lessor (or any permitted assignee orsuccessor thereof) for so long as this Lease remains in effect and title to theEngine remains vested in Lessor pursuant to the terms hereof or (ii) ifand so long as the Engine is subject to a Headlease during .the Term, thelessor of the Engine to Lessor pursuant to such Headlease, unless such lessorand Lessor otherwise agree.

 

*“Parts”* meansall appliances, parts, instruments, appurtenances, accessories, furnishings andother equipment of whatever nature (including QEC parts) (other than thecomplete Engine or a complete other engine) which may from time to time beincorporated or installed in or attached to the Engine or so long as titlethereto shall remain vested in the Owner in accordance with Section 8after removal therefrom.

 

*“Past Due Rate”*means a rate per annum equal to the greater of (a) 5% over the Base Rateand (b) 15%.

 

*“PBH Agreement”* means a maintenance agreement which (i) providesshop repair/overhaul of Engines or Parts on a continuous basis at an agreedupon Flight Hour or cycle based rate, (ii) provides unrestrictedassignment rights to

 

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Lessorand Lessor’s future operators of any Aircraft on which the Engine is installed,and (iii) has been approved in writing by Lessor (including but not limitedto specific Lessor approval of the maintenance provider, rates, payment terms,scope, term, maintenance standard, assignment rights and financial adjustmentsthat are made when an Engine or Part exits such program at termination orexpiration of the PBH Agreement relative to such Engine or Part).

 

*“Permitted Lien”*means any Lien referred to in clauses (i) through (iii) of Section 6hereof.

 

*“Person”* meansany individual, corporation, partnership, limited liability company, jointventure, association, joint-stock company, trust, unincorporated organizationor government or any agency or political subdivision thereof.

 

*“Purchase Agreement”*meansthat certain General Terms Agreement No. CF34-0798-057-A dated July 6,2001, between the Manufacturer and Lessor or Headlessor, as the case may be,relating to the purchase of the Engine, as originally executed or as modified,amended or supplemented in accordance with the terms thereof, but only insofaras the foregoing relates to the Engine.

 

*“QEC”* mean the quick enginechange parts and components, if any, installed on the Engine as identified in Exhibit G.

 

*“Rent”* meansBasic Rent and Supplemental Rent, collectively.

 

*“Shipping Stand”* means an engineshipping stand, designed and manufactured in accordance with Manufacturerrecommendations and requirements, for long distance ground and airtransportation of CF34-3B1 engines.

 

*“Stipulated Loss Value”*with respect to the Engine, as of any date through and including the ExpirationDate, means, the amount specified in Exhibit C hereto opposite theStipulated Loss Value Date with respect to which the amount is determined.

 

*“Stipulated Loss Value Date”*means the [    ] calendar day of each calendar month duringthe Term.

 

*“Supplemental Rent”*means, without duplication, all amounts, liabilities, indemnities andobligations (other than Basic Rent) which Lessee assumes or agrees to pay underany Lessee Document to or on behalf of Lessor or any other Person hereunder orunder any other Lessee Document.  Theparties acknowledge that Supplemental Rent is a general category and,accordingly, agree that any provision of any Lessee Document which calls forthe payment of Supplemental Rent and also calls for the payment of specificitems which are includable in Supplemental Rent is not to be interpreted asrequiring any double payment.

 

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*“Tax Indemnitee”*means (i) Lessor, (ii) the respective directors, officers, employees,agents and servants of Lessor, (iii) if and so long as the Engine issubject to a Headlease during the Term, the other parties identified in Exhibit Fas indemnitees of Lessor under such Headlease and (iv) the respectiveAffiliates, successors and permitted assigns of each of the entities describedin the preceding clauses (i), (ii) and (iii) inclusive.

 

*“Taxes”* meansany and all fees (including, without limitation, license, recording,documentation and registration fees), taxes (including, without limitation,income, gross receipts, sales, rental, use, turnover, value added, property(tangible and intangible), excise and stamp taxes), license, levies, imposts,duties, charges, assessments or withholdings of any nature whatsoever, togetherwith any and all penalties, fines, additions to tax and interest thereon (each,individually a “**Tax**”).

 

*“Term”*meansthe term for which the Engine is leased hereunder pursuant to Section 3(a) hereofcommencing on the Commencement Date and ending on the Expiration Date, or suchearlier date as this Lease may be terminated in accordance with the provisionshereof.

 

**SECTION 2.** ***Acceptance and Lease.***(a) *Generally*.  Lessor hereby agrees to lease to Lesseehereunder, and Lessee hereby agrees to lease from Lessor hereunder, the Engineas evidenced by the execution by Lessor and Lessee of a Lease Supplementleasing the Engine hereunder.  Lesseehereby agrees that such acceptance of the Engine by Lessor shall, withoutfurther act, irrevocably constitute acceptance by Lessee of such Engine for allpurposes of this Lease.  As provided in Section 25hereof, the rights of Lessee hereunder are subject and subordinate to all theterms of the Head Lease, including any amendments or restatements thereto asmay occur from time to time, and the parties intend this Lease to constitute atrue lease.

 

### (b)           *Airline Services Agreement*. Lessee acknowledges that Lessor is providing a valuable financialaccommodation to Lessee by entering into the Operative Documents to which it isa party and this Lease to allow Lessee to obtain the use of the Engine pursuantto the terms of the Airline Services Agreement. As a condition to their rights hereunder, Lessee and Lessor herebyconfirm and ratify the Airline Services Agreement, which is incorporated hereinby reference for all purposes, and agree, as a material term of this Lease andas a material inducement to Lessor to enter into this Lease, to fully performall of their respective obligations under the Airline Services Agreement as apart of this Lease Agreement as though the same were set forth herein.

###  

### (c)           *Engine Headlease. *Notwithstandingany provision of this Lease to the contrary, in the event that the Engine is atany time subject to a Headlease, the terms and conditions set forth on Exhibit Fhereto shall be applicable to the Engine and this Lease during such portion ofthe Term as such Headlease is in effect, and all terms and provisions set forthin this Lease shall be construed in a manner consistent therewith.

 

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**SECTION 3.  *Term andRent.* **(a) *Term*. The Term shall commence on the Commencement Date and end on theExpiration Date or such earlier date as this Lease may be terminated inaccordance with the provisions hereof.

 

### (b)           *Basic Rent.*  Lesseeshall pay Basic Rent with respect to each Lease Period during the Term on each****Lease Period Date during the Term, in consecutive monthlyinstallments in the amounts as provided in the next sentence.  Each such installment of Basic Rent shall bepayable in advance with respect to the month commencing on such Lease PeriodDate and shall be equal to the amount specified for each Lease Period Datespecified in Exhibit B hereto. In addition, Lessee shall pay Basic Rent on the Commencement Date in theamount specified in Exhibit B hereto, allocable to the periodcommencing on the Commencement Date and ending on such date or on (butexcluding) the immediately succeeding Lease Period Date (if other than theCommencement Date).  If Lessee shall forany reason whatsoever fail to return the Engine on the Expiration Date in thecondition specified herein, or return of the Engine is not accepted by Lessorbecause of Lessee’s failure to meet the requirements of this Lease, theobligations of Lessee provided in this Lease and in each other OperativeDocument to which Lessee is a party, including the obligation to pay BasicRent, which, after the Expiration Date, shall be on a per diem basis based on apro rata application of *** ofthe Basic Rent due during the last Lease Period of the Term, shall continue ineffect with respect to the Engine, and the Term shall be deemed to be extendeduntil return of the Engine to Lessor in accordance with the requirements ofthis Lease; *provided* that nothing in this Section shallbe construed as permitting or authorizing Lessee to fail to meet, or consentingto or waiving any failure by Lessee to perform, Lessee’s obligation to returnthe Engine in accordance with the requirements of this Lease and Lessor shallbe entitled to all of the benefits of, and all of its rights and remedies setforth in, Sections 14 and 15 hereof.

###  

### (c)           [Intentionally Omitted]

###  

### (d)           *Supplemental Rent.* Lessee shall pay (or cause to be paid) promptly to Lessor, or towhomsoever shall be entitled thereto, any and all Supplemental Rentconstituting Stipulated Loss Value as the same shall become due and owing andall other amounts of Supplemental Rent within five days after demand or withinsuch other relevant period as may be provided in any Lessee Document, and inthe event of any failure on the part of Lessee to pay any Supplemental Rentwhen due, Lessor shall have all rights, powers and remedies provided for hereinor in any other Lessee Document or by law or equity or otherwise in the case ofnonpayment of Basic Rent. Lessee also will pay to Lessor, or to whomsoevershall be entitled thereto, on demand, as Supplemental Rent, to the extentpermitted by applicable law, interest at the Past Due Rate on any part of anyinstallment of Basic Rent not paid when due for any period for which the sameshall be overdue and on any payment of Supplemental Rent not paid when due forthe period until the same shall be paid.

###  

### (e)           *Payments in General. *Allpayments of Rent shall be made directly by Lessee by wire transfer ofimmediately available funds prior to 10:30 A.M., New York time, on thedate of payment, to Lessor at its account at USBank, Minneapolis, ABA No. 091000022,for the account of Northwest Airlines, Inc., Account No. *** (or such other account of Lessorin the continental United States as Lessor shall direct in a notice to Lesseeat least 10 Business Days prior to the date such payment of Rent is due).  All payments of Supplemental Rent shall be

 

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### made in Dollars in immediately available funds prior to 10:30 A.M.,New York time, on the due date thereof at such office of such other financialinstitution located in the continental United States as the party entitledthereto may so direct at least ten (10) Business Days prior to the duedate thereof.

###  

Notwithstanding anything to the contrary containedherein, if any date on which a payment of Rent becomes due and payable is not aBusiness Day, then such payment shall not be made on such scheduled date butshall be made on the next succeeding Business Day with the same force andeffect as if made on such scheduled date and (*provided*such payment is made on such next succeeding Business Day) no interest shallaccrue on the amount of such payment from and after such scheduled date.

 

**SECTION 4.  *Lessor’sRepresentations and Warranties.* **LESSOR LEASES AND LESSEE TAKES THE ENGINE AND EACH PART THEREOF“AS-IS,” “WHERE-IS.”  LESSOR HAS NOTMADE, NOR SHALL LESSOR BE DEEMED TO HAVE MADE, AND LESSOR HEREBY EXPRESSLYDISCLAIMS AND WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATIONOR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP,CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR APARTICULAR PURPOSE OF THE ENGINE OR ANY PART THEREOF, AS TO THE ABSENCE OFLATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANYINFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OFOBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION ORWARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE ENGINE OR ANY PART THEREOF,except that Lessor (i) represents and warrants that on the Commencement Datethe Engine shall be free of Lessor Liens (including for this purpose Lienswhich would be Lessor Liens but for the proviso in the definition of LessorLiens) and (ii) agrees that it will not directly or indirectly create,incur, assume or suffer to exist any Lessor Lien attributable to it on or withrespect to any Engine, or with respect to any Airframe while the Engine isinstalled thereon not otherwise permitted under the Aircraft Lease relating tosuch Airframe, and it agrees that it will promptly, at its own expense, takesuch action as may be necessary duly to discharge such Lessor Lien.  None of the provisions of this Lease shall bedeemed to amend, modify or otherwise affect the representations, warranties orother obligations (express or implied) of the Manufacturer, any subcontractoror supplier of the Manufacturer with respect to the Engine or any Parts, or torelease the Manufacturer, or any such subcontractor or supplier, from any suchrepresentation, warranty or obligation, or to diminish any right that Lesseemay have with respect to the Engine or any Parts against the Manufacturer orany such subcontractor or supplier under the Purchase Agreement or otherwise.

 

**SECTION 5.  *Return ofthe Engine*.** (a)  Upon the termination of this Leaseat the end of the Term or pursuant to Section 15, Lessee, at its ownexpense, will return the Engine to or at the direction of Lessor at eitherMinneapolis/St. Paul International Airport, St. Paul, Minnesota, or WayneCounty Metropolitan Airport, Detroit, Michigan, as designated by Lessor or atsuch other location in the 48 contiguous states of the United States as may bespecified by Lessor.  At the time of suchreturn, the Engine will be fully serviceable and functioning properly inaccordance with Manufacturer’s specifications. Also, at the time of such return, the Engine

 

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(i) shall have a current and valid FAA serviceable tag, issued byan FAA Part 145 repair station, (ii) shall be free and clear of allLiens (other than Lessor Liens (including for this purpose Liens which would beLessor Liens but for the proviso in the definition of Lessor Liens) and rightsof third parties under pooling, interchange, overhaul, repair or other similaragreements or arrangements (all of which shall be certified to Lessor by Lesseein a certificate delivered concurrently with such return in form and substancesatisfactory to Lessor), (iii) shall be in as good an operating conditionas when delivered by the Manufacturer to Lessor, ordinary wear and tearexcepted and (iv) shall be in compliance with the return conditions setforth in Exhibit D.

 

During the last twelve (12) months of the Term, withreasonable notice, Lessee will cooperate in all reasonable respects with the effortsof Lessor to sell or lease the Engine, including, without limitation,permitting prospective purchasers and lessees to inspect fully the Engine andthe records relating thereto, *provided,* thatsuch cooperation shall not interfere with the operation or maintenance of theEngine by Lessee.  In addition, Lesseeshall notify Lessor in writing of its plans for meeting the return conditionscontained herein at least six months prior to the Expiration Date, and Lesseeshall notify Lessor in writing at any time within the last twelve (12) monthsof the Term prior to initiating any significant shop maintenance or repairs tothe Engine.  Lessor shall have the rightto approve or reject Lessee’s proposed plans for meeting the return conditionscontained herein, with such approval not to be unreasonably withheld.

 

### (b)           *Aircraft Documentation. *Uponthe return of the Engine upon any termination of this Lease in accordance withparagraph (a) of this Section 5, Lessee shall deliver or cause to bedelivered to Lessor or its designee, in English, current and complete AircraftDocumentation relating to the Engine, together with a complete list, bymanufacturer’s serial number and registration number, of each Airframe orairframe on which the Engine has been installed during the Term, including thedates installed and removed, and the Flight Hours and cycles accumulated oneach.

###  

### (c)           *Storage Upon Return. *If,at least ten (10) days prior to termination of this Lease at the end ofthe Term, Lessee receives from Lessor a written request for storage of theEngine upon its return hereunder, Lessee will provide Lessor, or cause Lessorto be provided, with free sheltered storage facilities for, and unrestrictedaccess to, the Engine (maintenance costs and other out-of-pocket costs otherthan packing, storage and security fees to be for the account of Lessor) for aperiod not exceeding sixty (60) days commencing on the date of suchtermination, at a location in the continental United States selected by Lesseeused as a location and suitable for the storage of commercial jet engines andreadily accessible to Lessor.  Lesseewill maintain insurance for the Engine during such period not exceeding sixty(60) days and be reimbursed by Lessor or its designee for the premiums thereon.

###  

### (d)           *PBH Agreements.*  If atreturn of the Engine, the Engine or any Part is being maintained under aPBH Agreement, Lessee shall not be required to satisfy minimum maintenance timeremaining requirements specified in Exhibit D that are directly and fullycovered by such PBH Agreement.

###  

**SECTION 6.  *Liens*. **Lessee will not directly orindirectly create, incur, assume or suffer to exist any Lien on or with respectto the Engine, title thereto or any interest therein or in this Lease, except (i) therespective rights of Lessor and Lessee as herein provided, the rights

 

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of the Owner of the Engine, rights existing under and pursuant to anyPBH Agreement and any other rights existing pursuant to the Operative Documents,(ii) the rights of others under agreements or arrangements to the extentpermitted by the terms of Sections 7(b) and 8(b) hereof, (iii) LessorLiens (including for this purpose Liens which would be Lessor Liens but for theproviso in the definition of Lessor Liens), (iv) Liens for taxes of Lesseeeither not yet due or being contested in good faith by appropriate proceedingsso long as such proceedings do not involve any risk of the sale, forfeiture orloss of the Engine or any interest therein, (v) materialmen’s, mechanics’,workmen’s, repairmen’s, employees’ or other like Liens arising in the ordinarycourse of Lessee’s business (including those arising under maintenanceagreements entered into in the ordinary course of business) securingobligations that are not overdue for a period of more than thirty (30) days orare being contested in good faith by appropriate proceedings so long as suchproceedings do not involve any risk of the sale, forfeiture or loss of theEngine or any interest therein, (vi) Liens arising out of any judgment oraward against Sublessee, unless the judgment secured shall not, within thirty(30) days after the entry thereof, have been discharged, vacated, reversed orexecution thereof stayed pending appeal or shall not have been discharged,vacated or reversed within thirty (30) days after the expiration of such stay,and (vii) any other Lien with respect to which Lessee shall have provideda bond, cash collateral or other security adequate in the sole discretion ofLessor.  Lessee will promptly, at its ownexpense, take (or cause to be taken) such actions as may be necessary duly todischarge any such Lien not excepted above if the same shall arise at any time.

 

**SECTION 7.  *Maintenanceand Operation; Possession; Insignia.*** (a)(I)   Maintenance.  Lessee, at its own cost and expense, shall: (i) continuouslyoperate, maintain, service, repair and overhaul (or cause to be maintained,serviced, repaired and overhauled) the Engine (including, without limitation,all Parts thereof, including the QEC) in compliance with the MaintenanceProgram and in compliance with all FAA requirements for FAR Part 121operation and the Manufacturers’ recommended maintenance program so as to keepthe Engine in as good an operating condition as when delivered by theManufacturer to Lessor, ordinary wear and tear excepted, so as to maintain ineffect all material Manufacturers’ warranties and guaranties and as may benecessary to enable the airworthiness and serviceability certification for theEngine and airworthiness certification for any Airframe or airframe on whichthe Engine may be installed from time to time to be maintained in good standingat all times under the Federal Aviation Act, except when all Bombardier Inc.Canadair Regional Jet Model Series [200][440] aircraft powered by enginesof the same type as the Engine and registered in the United States have beengrounded by the FAA, and utilizing the same manner and standard of maintenance,service, repair and overhaul used by Lessee with respect to similar enginesused by Lessee in similar circumstances and without in any case discriminatingagainst the Engine by reason of its leased status; provided, however, that inall circumstances the Engine shall be maintained by Lessee in accordance withmaintenance standards required by the FAA for FAR Part 121 operation; (ii) maintainor cause to be maintained in English all Aircraft Documentation relating to theEngine and all other records, logs and other materials maintained in respect ofthe Engine; and (iii) promptly furnish or cause to be furnished to Lessorsuch information as may be required to enable Lessor to monitor the maintenancestatus and condition of the Engine and to file any reports required to be filedby Lessor with any governmental authority because of Lessor’s ownership of theEngine or any Aircraft on which the Engine is installed.

 

(II)Operation.  While installed on anAirframe or airframe and while being operated in

 

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any static testing configuration not on an Airframe or airframe, Lesseewill continuously operate the Engine in accordance with its FAA approved flightmanual (which shall comply with all Manufacturer recommendations andrequirements for the Engine type) and the Manufacturer’s maintenancemanual.  Lessee will not maintain, use,service, repair, overhaul or operate the Engine in violation of any law or anyrule, regulation, order or certificate of any government or governmentalauthority (domestic or foreign) having jurisdiction, or in violation of anyairworthiness certificate, license or registration relating to the Airframe orairframe on which the Engine is installed issued by any such authority, exceptto the extent Lessee is contesting in good faith the validity or application ofany such law, rule, regulation or order in any reasonable manner which does notadversely affect Lessor or Lessor’s right, title or interest in the Engine anddoes not involve any risk of sale, forfeiture or loss of the Engine or theAirframe or airframe on which the Engine is installed or any risk of civilliability or criminal liability being imposed on Lessor.  Lessee will not store or operate the Engineor any Airframe or airframe on which the Engine is installed (a) in anyarea excluded from coverage by any insurance required by the terms of Section 11;provided, however, that the failure of Lessee to comply with the provisions ofthis clause (a) shall not give rise to an Event of Default hereunder wheresuch failure is attributable to causes beyond the reasonable control of Lesseeor to Lessee’s response to extraordinary circumstances involving an isolatedoccurrence or isolated series of incidents not in the ordinary course of theregular operations of Lessee and in each such case Lessee is taking allreasonable steps to remedy such failure as soon as is reasonably practicable or(b) other than in operations in accordance with the Airline ServicesAgreement.  Lessee further agrees not tostore or operate the Engine, or any Airframe or airframe on which the Engine isinstalled, outside the United States in any taxable year in a manner that wouldcause more than 20% of the Basic Rent payable under the Lease to be treated asderived from sources outside the United States.

 

### *(b)          Possession.*  Lesseewill not, without the prior written consent of Lessor, in any manner deliver,transfer or relinquish possession of the Engine or any Airframe or airframe onwhich the Engine is installed, or install or permit any Engine to be installedon any airframe other than an Airframe; *provided* that,so long as no Default or Event of Default shall have occurred and be continuingat the time of such delivery, transfer or relinquishment of possession orinstallation and so long as Lessee shall comply with the provisions of Sections7(a) and 11 hereof, Lessee may, without the prior written consent ofLessor:

###  

#### (i)            deliverpossession of the Engine, or an Airframe on which it is then installed, to themanufacturer of either thereof (or for delivery thereto) or to any FAA approvedorganization (or for delivery thereto) for testing, service, repair,maintenance or overhaul work on the Engine or any part of any thereof or suchAirframe or for alterations or modifications in or additions to the Engine orsuch Airframe to the extent required or permitted by the terms of Section 8(c) hereof;or

####  

#### (ii)           tothe extent permitted by Section 8(b) hereof, subject any appliances,Parts or other equipment owned by Lessor and removed from the Engine to anypooling arrangement referred to in Section 8(b) hereof.

 

The rights of any transferee who receives possessionby reason of a transfer permitted by this paragraph (b) shall beeffectively subject and subordinate to all the terms of this

 

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Lease, including, without limitation, the covenants contained in Section 7(a) hereofand Lessor’s rights to repossession pursuant to Section 15 hereof, andLessee shall remain primarily liable hereunder for the performance of all ofthe terms of this Lease to the same extent as if such transfer had notoccurred.  No pooling agreement or otherrelinquishment of possession of the Engine or any Airframe or airframe on whichit is installed shall in any way discharge or diminish any of Lessee’sobligations to Lessor hereunder or constitute a waiver of Lessor’s rights orremedies hereunder.  Notwithstandinganything to the contrary contained herein, Lessee under any and allcircumstances may not sublease or sub-sublease, and is prohibited from enteringinto any sublease or sub-sublease with respect to, the Engine (whether byitself or installed on an Airframe or airframe).

 

### (c)           *Insignia.*  On or priorto the Commencement Date, or as soon as practicable thereafter (but in no eventlater than ten (10) days thereafter), Lessee agrees to affix and maintain(or cause to be affixed and maintained), at its expense, on the Engine anameplate bearing the inscription:

###  

Leased from

 

 

Northwest Airlines Inc.,

 

*Lessor*

 

 

(such nameplate to be replaced, if necessary, with anameplate reflecting the name of any successor Lessor).  Except as above provided, Lessee will notallow the name of any Person to be placed on the Engine, or on any Airframe orairframe on which the Engine is installed, as a designation that might beinterpreted as a claim of ownership; *provided* thatnothing contained in this paragraph shall prohibit Lessee from placing itscustomary colors and insignia on the Engine or such Airframe or airframe.

 

(d)           *Engine Records*.  Nolater than the 10th day of each calendar month during the Term,Lessee shall deliver to Lessor a written report setting forth the followinginformation for the previous calendar month:

 

(i)  the manufacturer’s serial number and theregistration number of each Airframe or airframe on which the Engine wasinstalled or, if not installed on an Airframe or airframe during any portion ofsuch reporting period, the location of the Engine and a description of stepstaken for its preservation and storage;

 

(ii)  the Flight Hours and cycles performed bythe Aircraft on which the Engine was then installed;

 

(iii)  the maintenance inspections and repairsperformed on the Engine in accordance with the Maintenance Program;

 

(iv)  any airworthiness directives accomplishedon the Engine; and

 

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(v)  any Engine malfunctions or performancediscrepancies requiring shop-level repair or special- or reduced-intervalinspections, including the flight log or technical log entries against theEngine relating thereto together with full details of the correctivemaintenance and repair actions taken.

 

The form of such report shall be acceptable to Lessor,and Lessor and Lessee shall promptly develop the form thereof followingexecution and delivery of this Lease.

 

**SECTION 8. *Replacementand Pooling of Parts; Alterations, Modifications and Additions.*  **(a)  *Replacement of Parts*. ** **Lessee,at its own cost and expense, will promptly replace or cause to be replaced allParts which may from time to time become worn out, lost, stolen, destroyed,seized, confiscated, damaged beyond repair or permanently rendered unfit foruse for any reason whatsoever, except as otherwise provided in paragraph (c) ofthis Section 8 or if the Engine has suffered an Event of Loss.  In addition, Lessee may, at its own cost andexpense, remove in the ordinary course of maintenance, service, repair,overhaul or testing, any Parts, whether or not worn out, lost, stolen,destroyed, seized, confiscated, damaged beyond repair or permanently renderedunfit for use, provided that Lessee, except as otherwise provided in paragraph (c) ofthis Section 8, will, at its own cost and expense, promptly replace suchParts.  All replacement Parts shall befree and clear of all Liens (except for Permitted Liens and pooling arrangementsto the extent permitted by paragraph (b) of this Section 8 and exceptin the case of replacement property temporarily installed on an emergencybasis) and shall be serviceable in accordance with the Maintenance Program andFAA requirements for FAR Part 121 operation and shall be in as goodoperating condition as, and shall have a maintenance status, modificationstatus, value and utility at least equal to, the Parts replaced assuming suchreplaced Parts were in the condition and repair required to be maintained bythe terms hereof.  Except as otherwiseprovided in paragraph (c) of this Section 8, all Parts at any timeremoved from the Engine shall remain the property of the Owner, no matter wherelocated, until such time as such Parts shall be replaced by Parts which havebeen incorporated or installed in or attached to the Engine and which meet therequirements for replacement Parts specified above.  Immediately upon any replacement partbecoming incorporated or installed in or attached to the Engine as aboveprovided, without further act (subject only to Permitted Liens and any poolingarrangement to the extent permitted by paragraph (b) of this Section 8and except in the case of replacement property temporarily installed on anemergency basis), (i) title to such replacement Part shall thereuponvest in the Owner, (ii) such replacement Part shall become subject tothe Headlease (if any) and this Lease and be deemed part of the Engine for allpurposes hereof to the same extent as the Parts originally incorporated orinstalled in or attached to the Engine, and (iii) title to the replaced Part shallthereupon vest in Lessee free and clear of all rights of the Owner, and shallno longer be deemed a Part hereunder.

 

### (b)           *Pooling of Parts.* Only after receiving Lessor’s written consent thereto, which shall notbe unreasonably withheld, any Part removed from the Engine as provided inparagraph (a) of this Section 8 may be subjected by Lessee to anormal pooling arrangement customary in the airline industry of which Lessee isa party entered into in the ordinary course of Lessee’s business; *provided* that the Part replacing such removed Part shallbe incorporated or installed in or attached to the Engine in accordance withsuch paragraph (a) as promptly as practicable after the removal of suchremoved Part.  In addition, only afterreceiving Lessor’s written consent thereto, which shall not be unreasonablywithheld, any replacement Part when incorporated or

 

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### installed in or attached to the Engine in accordance with suchparagraph (a) may be owned by any third party subject to such a normalpooling arrangement, *provided* thatLessee, at its expense, as promptly thereafter as practicable, either (i) causestitle to such replacement Part to vest in the Owner in accordance withsuch paragraph (a) by Lessee acquiring title thereto for the benefit of,and transferring such title to, the Owner free and clear of all Liens exceptPermitted Liens (other than pooling arrangements), at which time such temporaryreplacement part shall become a Part or (ii) replaces suchreplacement Part by incorporating or installing in or attaching to theEngine a further replacement Part owned by Lessee free and clear of allLiens except Permitted Liens (other than permitted pooling arrangements) and bycausing title to such further replacement Part to vest in the Owner inaccordance with such paragraph (a).

###  

### (c)           *Alterations, Modifications and Additions.*  Lessee, at its own expense, will make (orcause to be made) such alterations and modifications in and additions to theEngine as may be required from time to time to meet the applicable standards ofthe FAA or any other governmental authority having jurisdiction regardless ofupon whom nominally imposed; *provided, however,*that Lessee may, in good faith, contest the validity or application of any suchlaw, rule, regulation or order in any reasonable manner which does notadversely affect Lessor or its right, title and interest in the Engine or anyAirframe and does not involve any risk of sale, forfeiture or loss of theEngine or any Airframe (or airframe on which it is installed) or any risk ofcivil liability or criminal liability being imposed on Lessor; *provided, further*, that no appliance, part, instrument,appurtenance, accessory, furnishing or other equipment of whatever naturerelating to such alteration, modification or addition may be leased from anyPerson other than Lessor.  In addition,Lessee, at its own expense, may from time to time add further parts oraccessories and make such alterations and modifications in and additions to theEngine as Lessee may deem desirable in the proper conduct of its business; *provided* that no such alteration, modification or additionshall diminish the value, utility or remaining useful life of the Engine belowthe value, utility or remaining useful life thereof immediately prior to suchalteration, modification or addition, assuming the Engine was then in thecondition required to be maintained by the terms of this Lease.  Title to all Parts incorporated or installedin or attached or added to the Engine as the result of such alteration,modification or addition (the “**Additional Parts**”)shall, without further act, vest in the Owner, and the Owner shall not berequired under any circumstances under this Lease to pay directly for anyalteration, modification or addition. Any Part installed by Lessee as above provided prior to the returnof the Engine to Lessor hereunder shall remain the property of the Owner.

###  

Lessee shall not, without Lessor’s prior writtenconsent, make any Major Modifications to the Engine if such Major Modificationsto such Airframe or airframe would affect the value, utility or remaininguseful life of the Engine.

 

**SECTION 9.  *VoluntaryTermination.*** (a)  *Termination by Lessor*. In the event the Engine is installed on an Airframe and the lease ofsuch Aircraft is being terminated, Lessor shall have the right to elect toterminate this Lease concurrently with such Aircraft lease termination on atleast two (2) days advance written notice to Lessee (the “VoluntaryTermination Date”).  On or before theVoluntary Termination Date, Lessee shall simultaneously pay or cause to be paidto or at the direction of Lessor in funds of the type specified in Section 3(e) hereof,an amount equal to the sum of all unpaid Basic Rent with respect to the Enginedue

 

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prior to such Voluntary Termination Date, and all unpaid SupplementalRent due on or prior to the Voluntary Termination Date.

 

### (b)           [Intentionally Omitted].

###  

### (c)           [Intentionally Omitted].

###  

### (d)           *Termination by Lessee.* So long as no Event of Default shall have occurred and be continuing andwith the prior written consent of Lessor, Lessee shall have the right at itsoption at any time during the Term, on at least sixty (60) days prior writtennotice, to terminate this Lease as to the Engine concurrently with replacementof such Engine as provided in this Section 9(d).  In such event, and prior to the date of suchtermination, Lessee shall replace the Engine hereunder by complying with theterms of Section 10(a) to the same extent as if an Event of Loss hadoccurred with respect to the Engine and shall indemnify the Owner for anyadverse tax consequences resulting from such substitution, and the Owner shalltransfer such right, title, and interest as the Owner may have to the replacedEngine as provided in Section 5(b). No termination of this Lease with respect to the replaced Engine ascontemplated by this Section 9(d) shall result in any reduction ofBasic Rent.

###  

**SECTION 10.  *Loss,Destruction, Requisition, etc. of Engine****.*  (a) Event of Loss.  Upon the occurrence of anEvent of Loss with respect to the Engine, whether or not installed on an Airframeor an airframe at the time of such Event of Loss, Lessee shall forthwith (andin any event, within five (5) days after such occurrence) give Lessor andany Headlessor written notice thereof and shall use its best efforts withinforty-five (45) days (and in any event within sixty (60) days) after theoccurrence of such Event of Loss, to convey to the Owner, as replacement forthe Engine, title to another General Electric Model CF34-3B1 type enginesatisfactory to Lessor, free and clear of all Liens (other than PermittedLiens, which engine may upon its transfer to the Owner become subject to anyand all Permitted Liens) and having a value, utility and remaining useful life(including taking into account its cycle and life-limited parts and its maintenancecondition and modification status) at least equal to the Engine subject to suchEvent of Loss assuming no Event of Loss had occurred and that such Engine hadbeen maintained in accordance with this Lease. Under no circumstances shall the occurrence of an Event of Loss withrespect to an Engine while installed on an Airframe or an airframe diminish anyobligations of Lessee pursuant to the related Aircraft Lease in respect of thecircumstances giving rise to such Event of Loss or in respect of any Event ofLoss (as defined in such Aircraft Lease) relating to such Aircraft, nor shallLessee be entitled to any setoff or discharge of any of its obligations underthis Lease or under the Aircraft Lease by virtue of performance of itsobligations under the other such agreement.

 

Prior to or at the time of any such conveyance,Lessee, at its own expense, will:

 

(1)           furnish the Owner with a fullwarranty (as to title) bill of sale, in form and substance reasonablysatisfactory to the Owner, with respect to such replacement engine,

 

(2)           cause a Lease Supplement to be dulyexecuted by Lessee and to be filed for recording pursuant to the FederalAviation Act,

 

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(3)           furnish Lessor with such evidence ofcompliance with the insurance provisions of Section 11 hereof with respectto such replacement engine as Lessor may reasonably request,

 

(4)           furnish Lessor with an opinion ofqualified FAA counsel, as to the due recordation of the Lease Supplement andall other documents or instruments the recordation of which is necessary toperfect and protect the rights of Lessor in the replacement engine,

 

(5)           furnish Lessor with an opinion ofcounsel (which shall be chosen by Lessee) reasonably satisfactory to Lessor tothe effect that (A) the certificates, opinions and other instrumentsand/or property which have been or are therewith delivered to Lessor inconnection with such substitution conform to the requirements of this Lease, (B) thereplacement property has been validly covered by this Lease, the instrumentssubjecting such replacement engine to this Lease have been duly filed forrecordation pursuant to the Federal Aviation Act, and no further action, filingor recording of any document is necessary or advisable in order to establishand perfect the right, title, estate and interest of the Owner to suchreplacement engine, and (C) the full warranty bill of sale referred to inclause (1) constitutes an effective instrument for the conveyance of titleto the replacement engine,

 

(6)           cause a financing statement orstatements with respect to such substituted property to be filed in such placeor places as are deemed necessary or advisable by Lessor or its counsel toperfect its interest in the replacement engine,

 

(7)           furnish Lessor with an opinion ofcounsel (which shall be counsel chosen by Lessee and acceptable to Lessor,reasonably satisfactory to Lessor, to the effect that Lessor will be entitledto the benefits of Section 1110 of the U.S. Bankruptcy Code with respectto the substitute engine, *provided* thatsuch opinion need not be delivered to the extent that immediately prior to suchsubstitution the benefits of Section 1110 of the U.S. Bankruptcy Code werenot, solely by reason of a change in law or governmental interpretationthereof, available to Lessor,

 

(8)           furnish Lessor with an officer’scertificate duly executed by the chairman, vice chairman, president, anyexecute vice president, any senior vice president, or any vice president ofLessee stating (A) that the replacement engine has at least an equalmaintenance status, modification status, value, utility and remaining usefullife as the Engine it replaces assuming no Event of Loss had occurred and suchEngine had been maintained in the condition required hereunder, (B) eachof the conditions specified in this Section 10(b) with respect tosuch replacement engine have been satisfied and that Lessee will not be indefault, by the making and granting of the request for release and the additionof the replacement engine, in the performance of any of the terms and covenantsof this Lease, (C) a description of the Engine which shall be identifiedby manufacturer’s serial number, (D) a description of the replacementengine (including the manufacturer’s name and serial number) as considerationfor the

 

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Engine to be released, (E) thaton the date of the Lease Supplement relating to the replacement engine theOwner will be the legal owner of such replacement engine free and clear of allLiens except Permitted Liens, that such replacement engine will on such date bein good working order and condition and that such replacement engine issubstantially the same as or better than the Engine to be released, (F) themaintenance status, modification status, value, utility and remaining usefullife of the replacement engine as of the date of such certificate (which shallnot be less than the maintenance status, modification status, value, utilityand remaining useful life of the Engine to be released (assuming no Event ofLoss and that such Engine was in the condition and repair required to bemaintained hereunder), (G) that, with respect to the replacement of anEngine pursuant to Section 9(d) hereof, no Event of Default or noDefault has occurred which has not been remedied or waived, and (H) thatthe release of the Engine to be released will not be in contravention of any ofthe provisions hereof, and

 

(9)           assign (or cause to be assigned) tothe Owner the benefit of all manufacturer’s and vendor’s warranties generallyavailable with respect to the substituted property in substantially the samemanner and to substantially the same extent as pursuant to the PurchaseAgreement Assignment,

 

Lessor will transfer, to or at the direction of Lesseewithout recourse or warranty (except, with respect to Lessor, as to absence ofLessor Liens, including for this purpose Liens which would be Lessor Liens butfor the proviso in the definition of Lessor Liens) all of Lessor’s right, titleand interest, if any, in and to (I) the Engine with respect to which such Eventof Loss occurred and furnish to or at the direction of Lessee a bill of sale inform and substance reasonably satisfactory to Lessee, evidencing such transferand (II) all claims, if any, against third parties, for damage to or loss ofthe Engine, and such Engine shall thereupon cease to be the Engine leasedhereunder.  For all purposes hereof, eachsuch replacement engine shall, after such conveyance, be deemed part of theproperty leased hereunder, and shall be deemed an “Engine”, as the case maybe.  No Event of Loss with respect to anEngine under the circumstances contemplated by the terms of this paragraph (b) shallresult in any reduction in Basic Rent.

 

### (b)           *Application of Payments from Governmental Authorities for Requisitionof Title, etc. *Whether or notthe Engine was then installed on an Airframe or an airframe, so much of anypayments (other than insurance proceeds the application of which is providedfor in Section 11) received at any time by Lessor or by Lessee from anygovernmental authority or other Person with respect to an Event of Loss andthat are remaining after reimbursement of Lessor for reasonable costs andexpenses, shall be paid over to, or retained by, Lessee, *provided*that Lessee shall have fully performed, or concurrently therewith will perform,the terms of Section 10(b) with respect to the Event of Loss forwhich such payments are made.

###  

### (c)           *Requisition for Use of an Aircraft by the United States Government.* In the event of the requisition for use by theUnited States Government or any instrumentality or agency thereof, during theTerm, of an Airframe or an airframe on which, in either case, the Engine isinstalled, and the Engine is included within such requisition for use, Lesseeshall promptly notify Lessor of such requisition, and all of Lessee’sobligations under this Lease Agreement with respect to the Engine shallcontinue to the same extent as if such requisition had

 

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### not occurred, *provided*thatif the Engine (with or without such Airframe or airframe) is not returned bysuch government (or instrumentality or agency) prior to the end of the Term,Lessee shall be obligated to return the Engine to or at the direction of Lessorpursuant to, and in all other respects in compliance with the provisions of, Section 5promptly on the date of such return by such government (or instrumentality oragency).  All payments received by Lessoror Lessee from such government (or instrumentality or agency) for, or allocableto, the use of the Engine during the Term shall be paid over to, or retainedby, Lessee; and all payments received by Lessor or Lessee from such government(or instrumentality or agency) for the use of, or allocable to, the Engineafter the end of the Term shall be paid over to, or retained by, Lessor.

###  

### (d)           *Requisition for Use of the Engine by the United States Government.*  In the event of the requisition for use ofthe Engine by the United States Government or any agency or instrumentalitythereof (other than in the circumstances contemplated by subsection (c)),Lessee shall replace the Engine hereunder by complying with the terms of Section 10(a) tothe same extent as if an Event of Loss had occurred with respect thereto, and,upon compliance with Section 10(a), any payments received by Lessor orLessee from such government (or instrumentality or agency) with respect to suchrequisition shall be paid over to, or retained by, Lessee.

###  

### (e)           *Application of Payments During Existence of Default*.  Any amount referred to in this Section 10which is payable to or retainable by Lessee shall not be paid to or retained byLessee if at the time of such payment or retention a Default or an Event ofDefault shall have occurred and be continuing or if the Airline ServicesAgreement shall have been terminated or canceled or shall have been terminatedin accordance with its terms, but shall be held by Lessor and applied inaccordance with Section 28 hereof. At such time as there shall not be continuing any such Default or Eventof Default and the Airline Services Agreement shall not have been terminated orcanceled or shall not have terminated in accordance with its terms, such amountshall be paid to Lessee to the extent not previously applied in accordance withthe preceding sentence.

###  

**SECTION 11.  *Insurance* **(a)  Public Liabilityand Property Damage Insurance.  Lesseewill carry at its expense (i) comprehensive airline third party legalliability insurance or the equivalent (including, without limitation, passengerlegal liability) (and including aircraft war risk and hijacking insurance,unless otherwise agreed by Lessor) insurance and property damage insurance(exclusive of manufacturer’s product liability insurance) with respect to theEngine, in an amount, with respect to third party legal liability insurance(including passenger legal liability) other than aircraft war risk andhijacking insurance, not less than the greater of (x) the amount of publicliability and property damage insurance from time to time applicable to enginesowned or operated by Lessee of the same type as the Engine and (y) the MinimumLiability Amount, and with respect to aircraft war risk and hijackinginsurance, in an amount not less than $***per occurrence and (ii) cargo liability insurance, in the case of bothclause (i) and clause (ii), (A) of the type and covering the samerisks as from time to time applicable to aircraft operated by Lessee of thesame type as the Engine and (B) which is maintained in effect withinsurers of recognized responsibility reasonably acceptable to Lessor.  Any policies of insurance carried inaccordance with this paragraph (a) and any policies taken out insubstitution or replacement for any of such policies (A) shall be amendedto name Lessor (but without imposing on Lessor liability to pay the premiumsfor such insurance) as an additional insured as its interest

 

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may appear, (B) shall provide that in respect of the interest ofLessor in such policies the insurance shall not be invalidated by any action orinaction of Lessee or any other Person and shall insure Lessor regardless ofany breach or violation of any warranty, declaration or condition contained insuch policies by Lessee, and (C) shall provide that if the insurers cancelsuch insurance for any reason whatever or if any change is made in suchinsurance which adversely affects the interest of Lessor, or such insuranceshall lapse for non-payment of premium, such cancellation, lapse or changeshall not be effective as to Lessor for thirty (30) days (seven (7) daysin the case of war risk and allied perils coverage) after issuance to Lessor ofwritten notice by such insurers of such cancellation, lapse or change;provided, however, that if any notice period specified above is not reasonablyobtainable, such policies shall provide for as long a period of prior notice asshall then be reasonably obtainable. Each liability policy (1) shall be primary without right ofcontribution from any other insurance which is carried by Lessor, (2) shallexpressly provide that all of the provisions thereof, except the limits ofliability, shall operate in the same manner as if there were a separate policycovering each insured, and (3) shall waive any right of the insurers toany set-off or counterclaim or any other deduction, whether by attachment orotherwise, in respect of any liability of Lessor or any other AdditionalInsured to the extent of any moneys due to Lessor or such Additional Insured.

 

### (b)           *Insurance Against Loss or Damage to the Engine.*  Lessee shall maintain in effect at itsexpense, with insurers of recognized responsibility, all-risk ground and flightcoverage of the Engine and Parts while installed on any Aircraft and while notso installed (whether such removal is temporary or of indefinite duration) andnot replaced by similar components (including, without limitation, war risk andgovernmental confiscation and expropriation (other than by the government ofregistry of the Aircraft) and hijacking insurance, unless otherwise agreed byLessor); *provided* that such insurance shall atall times while the Engine is subject to this Lease be for an amount not lessthan the Stipulated Loss Value for the Engine. Any policies carried in accordance with this paragraph (b) coveringthe Engine  and any policies taken out insubstitution or replacement for any such policies (i) shall name Lessor asadditional insured, as its interest may appear (but without imposing on suchparty liability to pay premiums with respect to such insurance), (ii) shallprovide that (A) in the event of a loss involving proceeds in excess of $***, the proceeds in respect of suchloss up to an amount equal to the Stipulated Loss Value for the Engine shall bepayable to or at the direction of Lessor (except in the case of a loss withrespect to the Engine while installed on an airframe other than the Airframe,in which case Lessee shall arrange for any payment of insurance proceeds inrespect of such loss to be held for the account of Lessor whether such paymentis made to Lessee or any third party), it being understood and agreed that inthe case of any payment to Lessor or its designee otherwise than in respect ofan Event of Loss, Lessor shall, upon receipt of evidence satisfactory to itthat the damage giving rise to such payment shall have been repaired or thatsuch payment shall then be required to pay for repairs then being made, pay, orexercise such rights as it may have to cause to be paid, the amount of suchpayment to Lessee or its order and (B) the entire amount of any lossinvolving proceeds of $*** orless or the amount of any proceeds of any loss in excess of the Stipulated LossValue for the Engine shall be paid to Lessee or its order unless a Default oran Event of Default shall have occurred and be continuing and the insurers havebeen notified thereof by Lessor, (iii) shall provide that if the insurerscancel such insurance for any reason whatever, or such insurance lapses for non-paymentof premium or if any change is made in the insurance which adversely affectsthe interest of Lessor, such cancellation, lapse or change shall not beeffective as to Lessor for thirty (30) days (seven (7)

 

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### days in the case of hull war risk and allied perils coverage) afterissuance to Lessor of written notice by such insurers of such cancellation,lapse or change, *provided, however,* that if anynotice period specified above is not reasonably obtainable, such policies shallprovide for as long a period of prior notice as shall then be reasonablyobtainable, (iv) shall provide that in respect of the interest of Lessorin such policies the insurance shall not be invalidated by any action orinaction of Lessee or any other Person and shall insure the interest of Lessoras they appear, regardless of any breach or violation of any warranty,declaration or condition contained in such policies by Lessee, (v) shallbe primary without any right of contribution from any other insurance which iscarried by Lessor, and (vii) shall waive any right of the insurers toset-off or counterclaim or any other deduction, whether by attachment orotherwise, in respect of any liability of Lessor or Lessee to the extent of anymoneys due to Lessor.

###  

As between Lessor and Lessee, it is agreed that allinsurance payments received as the result of the occurrence of an Event of Losswill be applied as follows:

 

(x)            ifsuch payments are received with respect to the Engine while not installed on anAirframe, so much of such payments remaining, after reimbursement of Lessor forreasonable costs and expenses, as shall not exceed the Stipulated Loss Value ofthe Engine determined as of the date of such Event of Loss shall be applied byLessee to its obligations under Section 10(a) hereof, or, if suchobligations have already been performed by Lessee, shall be applied toreimburse Lessee in respect of such obligations, and the balance, if any, ofsuch payments remaining thereafter will be paid over to, or retained by,Lessee, provided that if an Event of Default has occurred and is continuing,such balance, if any, shall be paid over to or retained by Lessor as additionalcollateral for Lessee’s obligations hereunder until such time as such Event ofDefault is no longer continuing or this Lease has been terminated (and suchamounts applied by Lessor); and

 

(y)           ifsuch payments are received with respect to an Engine while installed on anAirframe, so much of such payments remaining, after payment by Lessee of anyStipulated Loss Value (as defined in the related Aircraft Lease) payable underthe Aircraft Lease relating to such Airframe after reimbursement of Lessor forreasonable costs and expenses, shall be paid over to, or retained by, Lessee, *provided* that Lessee shall have fully performed, orconcurrently therewith will fully perform, the terms of Section 10(a) withrespect to the Event of Loss for which such payments are made.

 

As between Lessor and Lessee, the insurance paymentsfor any property damage loss to the Engine not constituting an Event of Losswith respect thereto will be applied in payment for repairs or for replacementproperty in accordance with the terms of Sections 7 and 8, if notalready paid for by Lessee, and any balance (or if already paid for by Lessee,all such insurance proceeds) remaining after compliance with such Sections withrespect to such loss shall be paid to Lessee.

 

### (c)           *Reports, etc.*  Lesseewill furnish, or cause to be furnished, to Lessor, on or before theCommencement Date and on or before July 1 in each year thereafter duringthe Term

 

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### commencing July, 2006, a report, signed by Aon Risk Services, Inc.or any other independent firm of insurance brokers reasonably acceptable toLessor (the “**Insurance Brokers**”), describing inreasonable detail the insurance and reinsurance then carried and maintainedwith respect to the Engine and stating the opinion of such firm that theinsurance then carried and maintained with respect to the Engine complies withthe terms hereof; *provided, however,* that allinformation contained in the foregoing report shall not be made available byLessor to anyone except (A) to prospective and permitted transferees ofLessor’s interest who**agree to holdsuch information confidential, (B) to Lessor’s counsel or independentcertified public accountants or independent insurance advisors who agree tohold such information confidential, (C) as may be required by any statute,court or administrative order or decree or governmental ruling or regulation oras may be requested by any regulatory agency or body having authority or (D) asmay be necessary for purposes of protecting the interests of any such Person orfor the enforcement of this Lease by Lessor. Lessee will cause such Insurance Brokers to agree to advise Lessor inwriting of any default in the payment of any premium and of any other act oromission on the part of Lessee of which it has knowledge and which mightinvalidate or render unenforceable, in whole or in part, any insurance on theEngine.  To the extent such agreement isreasonably obtainable, Lessee will also cause such Insurance Brokers to agreeto advise Lessor in writing at least thirty (30) days (seven (7) days inthe case of war risk and allied perils coverage), prior to the expiration ortermination date of any insurance carried and maintained on the Engine pursuantto this Section 11.  In addition,Lessee will also cause such Insurance Brokers to deliver to Lessor, on or priorto the date of expiration of any insurance policy referenced in a previouslydelivered certificate of insurance, a new certificate of insurance,substantially in the same form as delivered by Lessee to such parties on theCommencement Date.  In the event thatLessee shall fail to maintain or cause to be maintained insurance as hereinprovided, Lessor or its designee may at its sole option provide such insuranceand, in such event, Lessee shall, upon demand, reimburse Lessor, asSupplemental Rent, for the cost thereof to Lessor or such designee, as the casemay be, without waiver of any other rights Lessor or such designee may have; *provided, however,* that no exercise by Lessor or suchdesignee of said option shall affect the provisions of this Lease, includingthe provisions of Section 14(g) hereof.

###  

### (d)           *Self-Insurance.* Lessee may not self-insure the risks required to be insured againstpursuant to this Section 11; *provided*, *however*, that while the Engine is installed on an AirframeLessee may self-insure the risks required to be insured against pursuant to Section 11(a) and(b) hereof solely to the extent of any applicable mandatory minimum (or,if applicable, per annum or other period) hull or liability insurancedeductible imposed by the hull or liability insurers.

###  

### (e)           *Additional Insurance by Lessor.*  Lessee may at its own expense carry insurancewith respect to its interest in the Engine in amounts in excess of thatrequired to be maintained by this Section 11; Lessor may carry for its ownaccount at its sole cost and expense insurance with respect to its interest inthe Engine, *provided* that such insurance does notprevent Lessee from carrying the insurance required or permitted by this Section 11or adversely affect such insurance or the cost thereof.

###  

### (f)            *Indemnification by Government in Lieu of Insurance.*  WithLessor’s written consent which may be given or withheld in its sole discretion,notwithstanding any provisions of this Section 11 requiring insurance,Lessee may provide, in lieu of insurance against any risk

 

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### with respect to the Engine, indemnification from, or insurance providedby, the United States Government or any agency or instrumentality thereof theobligations of which are backed by the full faith and credit of the UnitedStates against such risk in an amount which, when added to the amount ofinsurance against such risk maintained by Lessee with respect to the Engine(including permitted self-insurance) shall be at least equal to the amount ofinsurance against such risk otherwise required by this Section 11.

###  

### (g)           *Application of Payments During Existence of Default*.  Any amount referred to in paragraph (b) ofthis Section 11 which is payable to or retainable by Lessee shall not bepaid to or retained by Lessee if at the time of such payment or retention aDefault or an Event of Default shall have occurred and be continuing or if theAirline Services Agreement shall have been terminated or canceled or shall haveterminated in accordance with its terms, but shall be held by Lessor andapplied in accordance with Section 28 hereof.  At such time as there shall not be continuingany such Default or Event of Default and the Airline Services Agreement shallnot have been terminated or canceled or shall not have terminated in accordancewith its terms, such amount shall be paid to Lessee to the extent notpreviously applied in accordance with the preceding sentence.

###  

**SECTION 12.  *Inspection*. **At all times upon notice toLessee, Lessor or its authorized representative may inspect the Engine, whetheror not installed on an Airframe or airframe and inspect and make copies (at itsexpense) of the Aircraft Documentation and other manuals, logs, books andrecords of Lessee relating to the maintenance of the Engine, any suchinspection may, at Lessor’s election, include a visual, walk-around inspection,opening any panels, cowls or the like, Engine borescope inspections, Enginepower assurance runs, ground operation and function checks; provided that noexercise of such inspection right shall unreasonably interfere with thescheduled operation or maintenance of the Engine or any Airframe on which it isthen installed by, or the business of, Lessee unless deemed critical by Lessor.  In addition, upon receipt by Lessee of awritten request from Lessor specifying that Lessor desires to have anauthorized representative observe the next shop visit of the Engine (whether ornot installed on any Airframe or airframe), under any maintenance program or regimenthen maintained by Lessee, Lessee shall cooperate with Lessor to enable Lessor’sauthorized representative to each observe such next shop visit, includingreasonable advance notification to Lessor of the time and place of such shopvisit.  Lessor shall have no duty to makeany such inspection nor shall it incur any liability or obligation by reason ofnot making such inspection.

 

**SECTION 13.  *Assignment*. **Lessee will not, withoutthe prior express written consent of Lessor, assign in whole or in part thisLease or any of its rights or obligations hereunder.  Lessor may assign in whole or in part, orconvey all or any part of its right, title and interest in and to, this Leaseafter giving Lessee ten (10) days notice thereof.  Subject to the foregoing, the terms andprovisions of this Lease shall be binding upon and inure to the benefit ofLessor and Lessee and their respective successors and permitted assigns.

 

**SECTION 14.  *Events ofDefault.* **Eachof the following events shall constitute an Event of Default (whether any suchevent shall be voluntary or involuntary or come about or be effected byoperation of law or pursuant to or in compliance with any judgment, decree ororder of any court or any order, rule or regulation of any administrativeor governmental body)

 

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and each such Event of Default shall continue so long as, but only aslong as, it shall not have been remedied:

 

(a)           Lesseeshall not have made a payment of Basic Rent or Stipulated Loss Value when thesame shall have become due; or

 

(b)           Lesseeshall have failed to make a payment of Supplemental Rent (other than StipulatedLoss Value) after the same shall have become due and such failure shallcontinue for five (5) days; or

 

(c)           Lesseeshall have failed to perform or observe (or caused to be performed and observed) any covenant or agreement to be performed orobserved by it under any Lessee Document other than the Airline ServicesAgreement and such failure shall continue unremedied for a period of twenty(20) days after the            earlier of(x) receipt by Lessee of written notice thereof from Lessor, or (y) insofar asthe failure to perform or observe (or caused to be performed and observed) anycovenant or agreement relates to any material covenant or agreement, an officerof Lessee as the case may be, whose functions and duties would make himfamiliar with the terms of this Lease has knowledge; or

 

(d)           anyrepresentation or warranty made by Lessee herein or any document or certificatefurnished by Lessee in connection herewith or therewith or pursuant hereto orthereto, shall prove to have been incorrect in any material respect at the timemade and such incorrectness shall not have been cured (to the extent of theadverse impact of such incorrectness on the interests of Lessor) within ten (10) daysafter the receipt by Lessee of a written notice from Lessor advising Lessee ofthe existence of such incorrectness; or

 

(e)           thecommencement of an involuntary case or other proceeding in respect of Lessee inan involuntary case under the federal bankruptcy laws, as now or hereafterconstituted, or any other applicable federal or state bankruptcy, insolvency orother similar law in the United States or seeking the appointment of areceiver, liquidator, assignee, custodian, trustee, sequestrator (or similarofficial) of Lessee or for all or substantially all of its property, or seekingthe winding-up or liquidation of its affairs and the continuation of any suchcase or other proceeding undismissed and unstayed for a period of thirty (30)consecutive days or an order, judgment or decree shall be entered in anyproceeding by any court of competent jurisdiction appointing, without theconsent of Lessee, a receiver, trustee or liquidator of Lessee, or of anysubstantial part of its property, or sequestering or attaching any substantialpart of the property of Lessee and any such order, judgment or decree orappointment or sequestration shall be final or shall remain in forceundismissed, unstayed or unvacated for a period of thirty (30) days after thedate of entry thereof; or

 

(f)            thecommencement by Lessee of a voluntary case under the federal bankruptcy laws,as now constituted or hereafter amended, or any other applicable

 

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federal or state bankruptcy, insolvency or other similar law in theUnited States, or the consent by Lessee to the appointment of or takingpossession by a receiver, liquidator, assignee, trustee, custodian,sequestrator (or other similar official) of Lessee or for all or substantiallyall of its property, or the making by Lessee of any assignment for the benefitof creditors, or Lessee shall enter into any agreement, composition, extensionor adjustment with creditors or shall take any corporate action to authorizeany of the foregoing; or

 

(g)           Lesseeshall fail to carry and maintain on or with respect to the Engine (whether or not installed on anAirframe) insurance required to be maintained in accordance with the provisionsof Section 11 hereof; or

 

(h)           Lesseeshall cease to be a Certificated Air Carrier; or

 

(i)            theattachment or taking possession by a creditor of a material part of, or thelevy or enforcement of a distress, execution, sequestration or other processupon any assets, rights or revenues of Lessee and such attachment or order isnot discharged within thirty (30) days; or

 

(j)            anyevent described in Section 10.02 of the Airline Services Agreement givingLessor the ability to terminate the Airline Services Agreement shall haveoccurred; or

 

(k)           anyevent described in Section 10.03 of the Airline Services Agreement shallhave occurred; or

 

(l)            Lesseeshall have materially breached or shall be in default under any materialpurchase agreement, service agreement, maintenance agreement or other materialagreement with any vendor relating to the Engine, including components; or anyAirframe on which the Engine is then installed.

 

**SECTION 15.  *Remedies;Automatic Termination*. **(a) Remedies.Upon the occurrence of any Event of Default and at any time thereafter so longas the same shall be continuing, Lessor may, at its option, declare by writtennotice to Lessee this Lease Agreement to be in default (provided that thisLease shall be deemed to be declared in default without the necessity of suchwritten declaration upon the occurrence of any Event of Default described in Section 14(e) orSection 14(f)); and at any time thereafter, Lessor may do one or more ofthe following with respect to all or any part of the Engine as Lessor in itssole discretion shall elect, to the extent permitted by, and subject tocompliance with any mandatory requirements of, applicable law then in effect:

 

#### (i)            uponthe written demand of Lessor and at Lessee’s expense, cause Lessee toimmediately return the Engine to Lessor or its order in the manner andcondition required by, and otherwise in accordance with all the provisions of, Section 5as if the Engine were being returned at the end of the Term, or Lessor, actingin its individual capacity or as attorney for Lessee, at its option, may enterupon the premises where all or any part of the Engine or any Part islocated and

 

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#### take immediate possession of and remove the same, without the necessityof first instituting proceedings, or by summary proceedings or otherwise, andLessee waives any right it may have under applicable law to a hearing prior torepossession of the Engine or Part (and/or, at Lessor’s option, store thesame at Lessee’s premises until disposal thereof by Lessor), all withoutliability accruing to Lessor for or by reason of such entry or taking ofpossession or removing whether for the restoration of damage to property causedby such action or otherwise.  Lesseeacknowledges and agrees that its obligations to return the Engine in thoseinstances is incontrovertible without prejudice to its right to dispute anyamounts, damages, interests or other amounts claimed by Lessor upon terminationof this Lease and as such this Lease will be incontrovertible written evidenceof such obligation of Lessee to return the Engine which Lessor will be entitledto enforce via injunctive orders. Without limiting any other provision of this Lease or of any otherOperative Document, if an Event of Default has occurred and is continuing,Lessor shall have the right to withhold or set-off against all amountsotherwise payable to Lessee hereunder or under the Airline Services Agreementor under any other aircraft, engine, spare parts or facility lease or sublease betweenLessor or any Affiliate thereof and Lessee, all as security for Lessee’sobligations and liabilities under this Lease and the other Operative Documents,and to use and apply in whole or in part any or all of such amounts andset-offs to and against such obligations and liabilities of Lessee, and anysuch use, application or setoff shall be absolute, final and irrevocable;

####  

#### (ii)           sellthe Engine at public or private sale, as Lessor may determine, or otherwisedispose of, hold, use, operate, lease to others or keep idle the Engine asLessor, in its sole discretion, may determine, all free and clear of any rightsof Lessee and without any duty to account to Lessee with respect to such actionor inaction or for any proceeds with respect thereto, except as hereinafter setforth in this Section 15;

####  

#### (iii)          whetheror not Lessor shall have exercised, or shall thereafter at any time exercise,any of its rights under paragraph (a) or paragraph (b) above withrespect to the Engine, Lessor, by written notice to Lessee specifying a paymentdate which shall be a Lease Period Date not earlier than ten (10) daysfrom the date of such notice (such specified date, the “**TerminationDate**”), may demand that Lessee pay to Lessor, and Lessee shall payLessor, on the Termination Date, as liquidated damages for loss of a bargainand not as a penalty (in lieu of the installments of Basic Rent for the Enginedue for Lease Periods commencing on or after the Termination Date), any unpaidBasic Rent due on or prior to the Termination Date *plus*whichever of the following amounts Lessor, in its sole discretion, shallspecify in such notice (together with interest, if any, on such amount at thePast Due Rate from the Termination Date until the date of actual payment ofsuch amount): (A) an amount equal to the excess, if any, of (I) theStipulated Loss Value for the Engine, computed as of the Termination Date, over(II) the aggregate fair market rental value (computed as hereafter in this Section 15provided) of the Engine for the remainder of the Term, after discounting suchaggregate fair market rental value to the present value thereof as

 

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#### of the Termination Date at an annual rate equal to the Base Rate; or (B) anamount equal to the excess, if any, of the Stipulated Loss Value for suchAircraft, computed as of the Termination Date, over (II) the fair market salesvalue of the Engine (computed as hereafter in Section 15 provided) as ofthe Termination Date;

####  

#### (iv)          inthe event Lessor, pursuant to paragraph (b) above, shall have sold orcaused a sale of the Engine, Lessor, in lieu of exercising its rights underparagraph (c) above with respect to the Engine, may, if it shall so elect,demand that Lessee pay Lessor, and Lessee shall pay to Lessor, on the date ofsuch sale, as liquidated damages for loss of a bargain and not as a penalty (inlieu of the installments of Basic Rent for the Engine due on or after suchdate), any unpaid Basic Rent with respect to the Engine due on or prior to suchdate *plus* the amount of any deficiencybetween (I) the net proceeds of such sale (after deduction of all reasonablecosts of sale) and (II) the Stipulated Loss Value of the Engine, computed as ofthe Stipulated Loss Value Date on or immediately preceding the date of suchsale together with interest, if any, on the amount of such deficiency, at thePast Due Rate, from the date of such sale to the date of actual payment of suchamount; and/or

####  

#### (v)           Lessormay rescind, terminate or cancel this Lease Agreement as to the Engine, and/ormay exercise any other right or remedy which may be available to it underapplicable law or proceed by appropriate court action to enforce the termshereof or to recover damages for breach hereof.

####  

For the purposes of paragraph (iii) above, the “fairmarket rental value” or the “fair market sales value” of the Engine shall bethe rental value or sales value, as the case may be, which would be obtained inan arm’s-length transaction between an informed and willing Lessee or purchaser,as the case may be, under no compulsion to lease or purchase, as the case maybe, and an informed and willing Lessor or seller in possession under nocompulsion to lease or sell, as the case may be, in each case based upon theactual condition and location of the Engine, which value shall be determinedpursuant to an appraisal prepared and delivered by a nationally recognized firmof independent aircraft appraisers chosen by Lessor. The cost of such appraisalor appointment shall be borne by Lessee.

 

In addition, Lessee shall be liable, except asotherwise provided above and without duplication of amounts payable hereunder,for any and all unpaid Rent due hereunder before, after or during the exerciseof any of the foregoing remedies and for all reasonable legal fees and othercosts and expenses (including fees of the appraisers hereinabove referred to)incurred by Lessor by reason of the occurrence of any Event of Default or theexercise of Lessor’s remedies with respect thereto, including all costs andexpenses incurred in connection with the return of the Engine in accordancewith the terms of Section 5 or in placing the Engine in the condition andairworthiness required by such Section.

 

At any sale of the Engine or any part thereof pursuantto this Section 15(a), Lessor  maybid for and purchase such property. Lessor agrees to give Lessee at least ten (10) days prior writtennotice of the date fixed for any public sale of the Engine or of the date on orafter which

 

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will occur the execution of any contract providing for any privatesale.  Except as otherwise expresslyprovided above, no remedy referred to in this Section 15(a) isintended to be exclusive, but each shall be cumulative and in addition to anyother remedy referred to above or otherwise available to Lessor at law or inequity; and the exercise or beginning of exercise by Lessor of any one or moreof such remedies shall not preclude the simultaneous or later exercise byLessor of any or all of such other remedies. No waiver by Lessor of any Event of Default shall in any way be, or beconstrued to be, a waiver of any future or subsequent Event of Default.

 

### (b)           *Automatic Termination*. If the Airline Services Agreement shall be terminated or canceled orshall terminate in accordance with its terms, except for the provisions ofSections 29(b) and 29(c) of this Lease (which shall survive) thisLease shall thereupon terminate forthwith and without notice.  Upon the termination of this Lease asaforesaid and at any time thereafter, Lessor may, to the extent permitted by,and subject to compliance with any mandatory requirements of, applicable lawthen in effect, and at Lessee’s expense, cause Lessee to immediately return,and Lessee shall immediately return, the Engine to Lessor or its order in themanner and condition required by, and otherwise in accordance with all theprovisions of Section 5 as if the Engine were being returned at the end ofthe Term, or Lessor, at its option, may enter upon the premises where all orany part of the Engine is located and take immediate possession of and removethe same, without the necessity of first instituting proceedings, or by summaryproceedings or otherwise, and Lessee waives any right it may have under applicablelaw to a hearing prior to repossession of the Engine or Part (and/or, atLessor’s option, store the same in accordance with the provisions of Section 5(d)),all without liability accruing to Lessor for or by reason of such entry ortaking of possession or removing whether for the restoration of damage toproperty caused by such action or otherwise. Lessee acknowledges and agrees that its obligations to return the Enginein those instances is incontrovertible without prejudice to its right to disputeany amounts, damages, interests or other amounts claimed by Lessor upontermination of this Lease and as such this Lease will be incontrovertiblewritten evidence of such obligation of Lessee to return the Engine which Lessorwill be entitled to enforce via injunctive orders.

###  

In addition, Lessee shall be liable for any and allunpaid Rent due hereunder before or during the occurrence of the eventsreferred to in the preceding paragraph, and all costs and expenses incurred inconnection with the return of the Engine in accordance with the terms of Section 5or in placing the Engine in the condition and airworthiness required by suchSection.

 

**SECTION 16.  *Lessee’s CooperationConcerning Certain Matters.**** *Forthwith upon the execution anddelivery of each Lease Supplement from time to time required by the termshereof and upon the execution and delivery of any amendment to this Lease,Lessee will cause such Lease Supplement or amendment to be duly filed andrecorded, and maintained of record, in accordance with the applicable laws ofthe registry of any aircraft on which the Engine may be installed.  In addition, Lessee will promptly and dulyexecute and deliver to Lessor such further documents (including the filing ofUniform Commercial Code financing statements and continuation statements withrespect to previously filed financing statements) and assurances and take suchfurther action as identified in the annual opinion of counsel required to befurnished pursuant to Section 30(c), and/or as Lessor may, in connectionwith the delivery of the Engine hereunder and from time to time thereafter,reasonably request, in order more effectively to carry out the intent andpurpose of this Lease and to establish and protect the rights and remedies

 

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created or intended to be created in favor of Lessor, hereunder or inrespect thereof, including, without limitation, if requested by Lessor, at theexpense of Lessee, the execution and delivery of supplements or amendmentshereto, each in recordable form, subjecting to the Engine pursuant to the termsthereof and the recording or filing of counterparts thereof, in accordance withthe laws of such jurisdictions as Lessor may from time to time deem advisable.  Lessee agrees to furnish to Lessor, promptlyafter execution and delivery of any supplement and amendment hereto, an opinionof counsel reasonably satisfactory to Lessor as to the due recording or filingof such supplement or amendment. Commencing in 2006 on or before April 30 of each year during theTerm, Lessee will deliver to Lessor a certificate of Lessee, signed by thePresident, a Vice President or the Chief Financial Officer of Lessee to theeffect that the signer is familiar with or has reviewed the relevant terms ofthis Lease and the signer does not have actual knowledge of the existence, asof the date of such certificate, of any condition or event which constitutes aDefault or an Event of Default.  Lesseeagrees that if an officer of Lessee has actual knowledge of the existence of aDefault or an Event of Default, then Lessee shall promptly give to Lessornotice thereof and such other information relating thereto as Lessor mayreasonably request.  Lessee will deliverto Lessor (i) within forty-five (45) days after the end of the first threequarterly periods of each fiscal year of Lessee, a balance sheet of Lessee asof the close of such period, together with related statements of financialperformance and cash flows for such period and, upon filing with the Securitiesand Exchange Commission (and in any event no later than sixty (60) days afterthe end of the first three quarterly periods of each fiscal year of MAIRHoldings, Inc.), the form 10-Q of MAIR Holdings, Inc. for suchperiod; (ii) within one hundred and twenty (120) days after the close ofsuch fiscal year, a balance sheet of Lessee as of the close of such fiscalyear, together with the related statements of financial performance and cashflows for such fiscal year and the form 10-K of MAIR Holdings, Inc. forsuch period, prepared in the case of clause (i) and (ii) inaccordance with generally accepted accounting principles, consistently applied;(iii) within thirty (30) days after the end of each calendar quarter, ifnot previously provided to Lessor, any Securities and Exchange Commissionfilings of Lessee and MAIR Holdings, Inc. during the preceding calendarquarter; (iv) upon filing with the Securities and Exchange Commission (andin any event no later than ninety (90) days after the close of MAIR Holdings, Inc.’sfiscal year), the annual report of MAIR Holdings, Inc. for such fiscalyear; and (v) from time to time, such financial statements and otherinformation relating to Lessee and MAIR Holdings, Inc. as Lessor mayreasonably request.

 

**SECTION 17.  *Notices.*** All notices required under the terms andprovisions hereof shall be by telecopy or other telecommunication means (withsuch telecopy or other telecommunication means to be confirmed in writing), orif such notice is impracticable, by registered, first-class airmail, withpostage prepaid, or by nationally recognized overnight courier service, or bypersonal delivery of written notice and any such notice shall become effectivewhen received, addressed:

 

#### (i)            ifto Lessor, at 2700 Lone Oak Parkway (A4010), Eagan, Minnesota 55121-1534,Attention: Treasurer (Telecopy No. (612) 726-2221), or to such otheraddress or telecopy number as Lessor shall from time to time designate inwriting to Lessee, and

####  

#### (ii)           ifto Lessee, at 1000 BlueGentian Road, Suite 200, Eagan, Minnesota 55121, Attention: President (Telecopy No. (651) 367-5360),or to

 

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#### such other address or telecopy number as Lessee shall from time to timedesignate in writing to Lessor.

####  

**SECTION 18.  *NoSet-Off, Counterclaim, etc.* **ThisLease is a net lease.  All Rent shall bepaid by Lessee to Lessor in funds of the type specified in Section 3(d).  Lessee’s obligation to pay all Rent payablehereunder shall be absolute and unconditional and shall not be affected by anycircumstance, including, without limitation, (i) any set-off,counterclaim, recoupment, defense or other right which Lessee may have againstLessor or anyone else for any reason whatsoever (whether in connection with thetransactions contemplated hereby or any other transactions), including, withoutlimitation, any breach by Lessor of its warranties, agreements or covenantscontained in any of the Operative Documents or Lessee Documents, each of whichrights Lessee expressly waives, (ii) any defect in the title,registration, airworthiness, condition, design, operation, or fitness for useof, or any damage to or loss or destruction of, the Engine, or any interruptionor cessation in or prohibition of the use or possession thereof by Lessee forany reason whatsoever, including, without limitation, any such interruption,cessation or prohibition resulting from the act of any government authority, (iii) anyinsolvency, bankruptcy, reorganization or similar case or proceedings by or againstLessee or any other person, or (iv) any other circumstance, happening, orevent whatsoever, whether or not unforeseen or similar to any of theforegoing.  If for any reason whatsoeverthis Lease shall be terminated in whole or in part by operation of law orotherwise except as specifically provided herein, Lessee nonetheless agreeswithout limitation of the other rights or remedies of Lessor hereunder, to payto Lessor an amount equal to each Rent payment at the time such payment wouldhave become due and payable in accordance with the terms hereof had this Leasenot been terminated in whole or in part. Lessee hereby waives, to the extent permitted by applicable law, any andall rights which it may now have or which at any time hereafter may be conferredupon it, by statute or otherwise, to terminate, cancel, quit or surrender thisLease except in accordance with the express terms hereof.

 

**SECTION 19.  *No Renewal*. **Lessee shall not have theright to renew this Lease.

 

**SECTION 20.  *MaintenanceProgram.* **Lessorshall have the right in its sole discretion upon and after return of the Engineto utilize the Maintenance Program at no cost to Lessor and Lessee herebyagrees that is shall permit Lessor to utilize the Maintenance Program upon andafter return of the Engine at no cost to Lessor.

 

**SECTION 21.  *Lessor’sRight to Perform for Lessee*. **IfLessee fails to make any payment of Rent required to be made by it hereunder orfails to perform or comply with any of its agreements contained herein, thenLessor may itself make such payment or perform or comply with such agreementbut shall not be obligated hereunder to do so, and the amount of such paymentand the amount of the reasonable expenses of Lessor incurred in connection withsuch payment or the performance of or compliance with such agreement, as thecase may be, together with interest thereon at the Past Due Rate, shall bedeemed Supplemental Rent, payable by Lessee upon demand.

 

**SECTION 22.  *[IntentionallyOmitted].***

 

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**SECTION 23.  *Service ofProcess.* **Lessorand Lessee each hereby irrevocably submits itself to the non-exclusivejurisdiction of the United States District Court for the Southern District ofNew York and to the non-exclusive jurisdiction of the Supreme Court of theState of New York, New York County, for the purposes of any suit, action orother proceeding arising out of this Lease, the subject matter hereof or any ofthe transactions contemplated hereby brought by Lessor (or, if and so long asthe Engine is subject to a Headlease, by any other party to the HeadleaseDocuments) or their respective successors or assigns.

 

**SECTION 24.  *Miscellaneous*.**Subject to Section 15(b), any provision of this Leasewhich is prohibited or unenforceable in any jurisdiction shall, as to suchjurisdiction, be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof, and anysuch prohibition or unenforceability in any jurisdiction shall not invalidateor render unenforceable such provision in any other jurisdiction.  No term or provision of this Lease may bechanged, waived, discharged or terminated orally, but only by an instrument inwriting signed by Lessor and Lessee. This Lease shall constitute an agreement of lease, and nothing containedherein shall be construed as conveying to Lessee any right, title or interestin the Engine except as a lessee only. Neither Lessee nor any Affiliate of Lessee will file any tax returns ina manner inconsistent with the foregoing fact or with the Owner’s ownership ofthe Engine.  The section andparagraph headings in this Lease and the table of contents are for convenienceof reference only and shall not modify, define, expand or limit any of theterms or provisions hereof and all references herein to numbered sections,unless otherwise indicated, are to sections of this Lease.  The Exhibits attached hereto are intended tobe an integral part of this Lease and are incorporated into this Lease byreference for all purposes.  **THIS LEASE HAS BEEN DELIVERED IN THE STATE OF NEW YORKAND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THELAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITYAND PERFORMANCE.** This Leasemay be executed by the parties hereto in separate counterparts, each of whichwhen so executed and delivered shall be an original, but all such counterpartsshall together constitute but one and the same instrument.  This Lease, the Airline Services Agreement,and the Lease Supplement contain the complete and exclusive statement of theterms and conditions of the entire Engine lease agreement between Lessor andLessee for the Term.  Nothing in thisLease shall be interpreted or construed as establishing between the parties apartnership, joint venture or other similar arrangement.

 

**SECTION 25. * [IntentionallyOmitted.]***

 

**SECTION 26.  *Covenantof Quiet Enjoyment*.** So long as (a) no Event of Default shallhave occurred and be continuing and (b) the Airline Services Agreementshall not have been terminated or canceled or shall not have terminated inaccordance with its terms, Lessor shall not interfere with Lessee’s continueduse and operation of, and quiet enjoyment of, the Engine.

 

**SECTION 27.  *FederalBankruptcy Code.* **Itis the intention of the parties that the provisions of 11 U.S.C. Section 1110,or any analogous section of the Federal bankruptcy laws, as amended fromtime to time, shall be applicable to the interest of Lessor in the Engine andto any right of Lessor to take possession of the Engine in compliance with theprovisions of this Lease, as the same may be amended, modified or supplementedfrom time to time.

 

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**SECTION 28.  *Use ofFunds.* **If aDefault or an Event of Default shall have occurred and is continuing, or if adefault or an event of default under any other aircraft, engine, spare parts orfacility lease or sublease or any other agreement, instrument or documentbetween Lessor or any Affiliate thereof and Lessee or any Affiliate thereofshall have occurred and is continuing, Lessor shall have the right in its solediscretion to apply any funds of Lessee that it holds including, withoutlimitation, those which are part of Basic Rent and those which are heldpursuant to Sections 10(f)(i) and 11(g)(i) hereof, to cure anyDefault or Event of Default or any default or event of default under anyagreement, instrument or document between Lessor or any Affiliate thereof andLessee or any Affiliate thereof; provided, however, that Lessor shall have noobligation hereunder to apply any such funds. The amount of any such funds soapplied and the amount of the reasonable expenses of Lessor incurred inconnection with such application, together with interest thereon at the PastDue Rate shall be deemed Supplemental Rent, payable by Lessee upon demand.

 

**SECTION 29.  *Lessee’sRepresentations, Warranties and Indemnities*.**(a) In General.  Lessee represents, warrantsand covenants to Lessor that as of the Commencement Date:

 

#### (i)            Lesseeis a Certificated Air Carrier and corporation duly organized and validlyexisting pursuant to the laws of the State of Minnesota; is duly qualified todo business as a foreign corporation in each jurisdiction in which its operationsor the nature of its business requires, other than failures to qualify whichwould not have a material adverse effect on the consolidated business, assets,properties or condition (financial or otherwise) of Lessee and its subsidiariestaken as a whole or on the ability of Lessee to perform its obligations underthe Lessee Documents; has its jurisdiction of organization (as such term isused in Article 9 of the Uniform Commercial Code) in Minnesota; holds alllicenses, certificates, permits and franchises from the appropriate agencies ofthe United States and/or all other governmental authorities having jurisdictionnecessary to conduct its business as presently conducted (other than thoselicenses, certificates, permits and franchises which, if not obtained, wouldnot have an adverse effect on the consolidated business assets, properties orcondition (financial or otherwise) of Lessee or on the ability of Lessee toperform its obligations under the Lessee Documents); and has the corporatepower and authority to own or hold under the Lease its properties whereverlocated or used and to enter into and perform its obligations under the LesseeDocuments;

####  

#### (ii)           theexecution, delivery and performance by Lessee of the Lessee Documents to whichLessee is a party will, on the Commencement Date, have been duly authorized byall necessary corporate action on the part of Lessee, do not require anystockholder approval, or approval or consent of any trustee or holders of anyindebtedness or obligations of Lessee except such as have been duly obtained orby the Commencement Date will have been duly obtained, and neither theexecution or delivery thereof or the consummation by Lessee of the transactionscontemplated thereby nor the compliance by Lessee with any of the terms andprovisions of such agreements contravenes any law, judgment, government rule,regulation or order binding on Lessee or the certificate of

 

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#### incorporation or by-laws of Lessee or contravenes the provisions of, orconstitutes a default under, or results in the creation of any Lien (other thanPermitted Liens) upon the property of Lessee under, any indenture, mortgage,contract or other agreement to which Lessee is a party or by which it or its propertiesmay be bound or affected;

####  

#### (iii)          neitherthe execution and delivery by Lessee of the Lessee Documents to which Lessee isa party nor the performance by Lessee of its obligations thereunder require theconsent or approval of, the giving of notice to, or the registration with, orthe taking of any other action in respect of, any Federal, state or foreigngovernment authority or agency, except for (A) the orders, permits,waivers, exemptions, authorizations and approvals of the regulatory authoritieshaving jurisdiction over the operation of the Aircraft by Lessee required to beobtained on or prior to the Commencement Date, which orders, permits, waivers,exemptions, authorizations and approvals have been duly obtained and are, orwill on the Commencement Date be in full force and effect, and (B) suchconsents, approvals, notices, registrations and other actions required by theterms of the Lessee Documents to the extent required to be given or obtainedonly after the Commencement Date;

####  

#### (iv)          onthe Commencement Date the Lessee Documents to which Lessee is a party will eachconstitute legal, valid and binding obligations of Lessee enforceable againstLessee in accordance with the terms thereof (except as enforceability may belimited by (A) general principles of equity, (B) applicablebankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium orsimilar laws affecting the rights of creditors generally, (C) applicablelaws which may affect the remedies provided therein; which laws, however, donot make the remedies provided therein inadequate for the practical realizationof the benefits provided thereby, except that no representation or warranty ismade as to the amount of priority of any recovery under any particularcircumstances, and (D) in the case of indemnity provisions contained insuch documents, as limited by public policy considerations);

####  

#### (v)           thereare no pending or, to the best of Lessee’s knowledge, threatened actions, suitsor proceedings before any court, governmental body, arbitration board, tribunalor administrative agency which might adversely affect the business, condition(financial or otherwise), operations or properties of Lessee or Lessee’sability to perform its obligations under the Lessee Documents to which Lesseeis a party;

####  

#### (vi)          exceptfor (A) the filing for recording pursuant to the Federal Aviation Act ofthe Lease with the Lease Supplement covering the Engine and (B) the filingof financing statements (and continuation statements at periodic intervals)with respect to the security and other interests created by such documentsunder the Uniform Commercial Code, no further action, including any filing orrecording of any document (including any financing statement in respect thereofunder Article 9 of the Uniform Commercial Code of any applicable

 

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#### jurisdiction), is necessary in order to establish and perfect Lessor’sinterest in the Engine as against Lessee in any applicable jurisdictions in theUnited States;

####  

#### (vii)         therehas not occurred any event which constitutes an Event of Default under theLease or a default or an event of default under any other aircraft, engine,spare parts or facility lease or sublease or any other agreement, instrument ordocument between Lessor or any of its Affiliates and Lessee (or any event whichwith the giving of notice or the passage of time or both would constitute anEvent of Default under the Lease or an event of default under any otheraircraft, engine, spare parts or facility lease or sublease between Lessor orany of its Affiliates and Lessee) which is presently continuing;

####  

#### (viii)        theEngine will be free and clear of all Liens, except Permitted Liens (including,for this purpose, any Lien which would be a Lessor Lien but for the proviso toeither such definition);

####  

#### (ix)           theEngine will be duly certified by the FAA as to type, serviceability andairworthiness, will be insured by Lessee in accordance with the terms of thisLease and will be in the condition and state of repair required under the termsof this Lease;

####  

#### (x)            Lessor,as lessor hereunder, will be entitled to the benefits of 11 U.S.C. Section 1110(or any successor statute containing the material terms of 11 U.S.C Section 1110)in the event of any reorganization of Lessee under such Section; and

####  

#### (xi)           therehas not been any material adverse change in the operations or financialcondition of Lessee since March 31, 2005.

####  

### (b)           *General Tax Indemnity*.

###  

#### (i)            *Indemnity.*  Except as provided in Section 29(b)(ii) hereof,Lessee shall on an After-Tax Basis pay, protect, save and on written demandshall indemnify and hold harmless any Tax Indemnitee from and against any andall Taxes howsoever imposed against any Tax Indemnitee, Lessee, Lessee Personor any Aircraft, Airframe or airframe on which the Engine is installed fromtime to time, the Engine, or any Part thereof or interest therein by anyFederal, state or local government or other taxing authority in the UnitedStates or by any foreign government or any political subdivision or taxingauthority thereof or by any territory or possession of the United States or byany international authority (“**Taxing Authority**”)upon or in connection with or relating to (A) the construction, financing,refinancing, purchase, acquisition, acceptance, rejection, delivery,nondelivery, transport, ownership, registration, re-registration, insuring,assembly, possession, repossession, operation, location, use, control,condition, maintenance, repair, sale, return, abandonment, installation,storage, redelivery, replacement, leasing, subleasing, modification,rebuilding, importation, exportation, transfer of title, transfer ofregistration, or other application or

 

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#### disposition of the Engine or any Part thereof or any interest inthe foregoing, (B) the rentals, receipts or earnings from the Engine orany Part thereof or any interest in the foregoing, (C) any amountpaid or payable pursuant to any Operative Document or Lessee Document or anydocument related to any Operative Document or Lessee Document, (D) anyAircraft, Airframe or airframe on which the Engine is installed from time totime, the Engine or any Part thereof or any interest in the foregoing, (E) anyor all of the Operative Documents or the Lessee Documents or the execution,issuance, delivery or registration of, or the performance under, or otherwisewith respect to any of the Operative Documents or Lessee Documents and anyother documents contemplated hereby or thereby and amendments and supplementshereto and thereto or the execution, delivery or performance of any thereof orthe issuance, acquisition, modification, holding or subsequent transferthereof, or (F) otherwise with respect to or in connection with thetransactions contemplated by the Operative Documents or the Lessee Documents.

####  

#### (ii)           *Exclusions from GeneralTax Indemnity.*  The provisionsof Section 29(b)(i) shall not apply:

####  

###### (1)           toany Income Tax (as defined in Section 29(d) hereof) imposed on Lessorby the United States Federal government;

######  

###### (2)           toany Tax to the extent imposed as a result of a voluntary transfer ordisposition by a Tax Indemnitee including, without limitation, a transfer ordisposition of all or any portion of its equitable or legal ownership orleasehold interest in the Engine, any Part or any Operative Document orLessee Document, or any interest in such Tax Indemnitee, unless such transferor disposition shall occur (A) during the continuance of a Default orEvent of Default under this Lease or the Aircraft Lease with respect to anyAircraft or Airframe on which the Engine is then installed, or upon thetermination or cancellation of the Airline Services Agreement or (B) inconnection with the termination of the Lease or the action or direction ofLessee pursuant to Sections 2, 5 ,6, 7, 8, 9 or 10 of this Lease;

######  

###### (3)           [IntentionallyOmitted];

######  

###### (4)           toTaxes to the extent imposed with respect to events occurring or mattersarising, after the earlier of (x) the return of physical possession of theEngine to Lessor or its designee pursuant to the terms of this Lease or (y) thecommencement of storage pursuant to Section 5(c) hereof; *provided*the exclusion set forth in this subparagraph (4) shallnot apply to Taxes to the extent such Taxes relate to events, periods ormatters occurring or arising prior to or simultaneously with such time or ariseas a result of amounts payable by Lessee after such time or occur during thecontinuance of a Default or Event of Default under this Lease;

 

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###### (5)                                  to any Tax to theextent arising out of or caused by, or to the extent such Tax would not havebeen incurred but for, (A) the willful misconduct of such Tax Indemniteeor (B) the breach of any representation, covenant or agreement by such TaxIndemnitee in any Operative Document; or

######  

###### (6)                                  [IntentionallyOmitted].

######  

Nothing contained in Section 29(b)(ii) hereofshall apply to any Tax in the nature of a sales, use, value added, goods andservices, transfer, recording, excise or registration Tax imposed on or withrespect to the Engine or any Part or interest therein or title thereto,incurred prior to, or on the date of, the execution and delivery of this Lease.

 

For the avoidance ofdoubt, and notwithstanding any provision herein to the contrary, Lessee agreesto indemnify Lessor on an After-Tax Basis against, and agrees to hold Lessorharmless from, any and all payments, indemnities and gross-ups required to bemade by Lessor to or for the benefit of any other Person pursuant to anyagreement between Lessor and such other Person relating to the Engine or any Part thereof.

 

#### (iii)                               *Calculation of General Tax Indemnity Payments.*  Notwithstanding any provision contained in Section 29(b)(ii) hereof,any payment which Lessee shall be required to make to, or for the account of,any Tax Indemnitee, with respect to any Tax (or any payment made in connectionwith the payment or contest of any Tax) which is subject to indemnificationunder this Section 29(b) shall be paid on an After-Tax Basis.  Any calculation of an indemnity payment foran inclusion item, and of any gross-up of an indemnity or reverse indemnitypayment, will be on the basis of then-actual Federal, state, and local taxrates applicable to such Tax Indemnitee, and based upon the assumption that theTax Indemnitee is fully taxable at such tax rates.

####  

Any Taxes that areimposed on any Tax Indemnitee as a result of the disallowance or reduction ofany tax benefit (including foreign tax credits) referred to in this subsection asto which Lessor has made a payment to Lessee required hereby (or as to whichsuch Lessor would have made payment but for Section 29(b)(viii) orwhich benefit was otherwise taken into account in computing Lessee’s indemnityobligation pursuant to this Section 29(b)) in a taxable year subsequent tothe utilization by the Tax Indemnitee, or any amount required to be paid byLessor to a Tax Indemnitee pursuant to any other agreement with such TaxIndemnitee relating to the Engine shall be treated as a Tax for which Lessee isobligated to indemnify the relevant Tax Indemnitee or reimburse Lessor pursuantto the provisions of this Section 29(b), without regard to the exclusionsset forth in Section 29(b)(ii) hereof.

 

#### (iv)                              *General Tax Indemnity – Contests*.  With respect to any Tax Indemnitee that isLessor or any Affiliate thereof (a “**Lessor Tax Indemnitee**”)at

 

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#### Lessee’s written request and with the written consent of Lessor, Lesseeshall be entitled to contest any claim with respect to any Tax imposed on suchLessor Tax Indemnitee other than an Income Tax either in Lessee’s name or inthe name of such Lessor Tax Indemnitee at Lessee’s sole cost and expense (a “**Lessee Controlled Contest**”) . If Lessor receives a writtenclaim from any Tax Indemnitee or any Taxing Authority for any Tax for whichLessee is obligated pursuant to Section 29(b)(i), Lessor shall notifyLessee promptly of such claim (it being understood and agreed that failure toprovide such notice shall not adversely affect or otherwise prejudice any TaxIndemnitee’s right to an indemnity hereunder except to the extent such failureprecludes any contest of such claim).  Ifthe Tax cannot be contested in a Lessee Controlled Contest for any reason(including, but not limited to the refusal of the Lessor or other TaxIndemnitee to consent thereto), upon written request from Lessee received byLessor within ten (10) Business Days of such notice Lessor or such TaxIndemnitee shall contest such claim in good faith at Lessee’s sole cost andexpense.  Any such contest shall be atLessor’s or such Tax Indemnitee’s, as the case may be, control anddirection.  In any such contest the TaxIndemnitee or Lessor, as the case may be, may in its sole discretion select theforum for such contest and determine whether any such contest shall be by (A) resistingpayment of such Tax, (B) paying such Tax under protest or (C) payingsuch Tax and seeking a refund or other repayment thereof.  In no event shall Lessor be required tocontest, or to request a Tax Indemnitee to contest, or Lessee be permitted tocontest, the imposition of any Tax for which Lessee is obligated pursuant tothis Section 29(b) unless (W) no Default or Event of Default shallhave occurred and be continuing, (X) Lessee shall have agreed to pay to Lessorand to the Tax Indemnitee on demand on an After-Tax Basis all reasonable costsand expenses that Lessor and the Tax Indemnitee may incur in connection withcontesting such claim (including, without limitation, all reasonable legal and accountingfees and disbursements), (Y) such action to be taken will not result in a riskof sale, forfeiture or loss of, or the creation of any Lien on, the Engine orany Part, or any Aircraft, Airframe or airframe on which the Engine isinstalled, other than Permitted Liens or a risk of imposition of criminalpenalties, and (Z) if such contest shall be conducted in a manner requiring thepayment of the claim, Lessee shall have paid the amount required directly tothe appropriate authority or made an advance of the amount thereof to such TaxIndemnitee on an interest-free basis and agreed to indemnify Lessor and suchTax Indemnitee on an after-tax basis for any cost or Taxes payable with respectto such advance.  In addition, Lesseeshall not have any right to request Lessor or any other Tax Indemnitee tocontest a claim unless (x) the amount of indemnity payments that Lessee wouldbe required to make if the contest were unsuccessful is at least $***, (y) prior to commencement of anycontest, Lessee has delivered to Lessor and, if requested by Lessor, the TaxIndemnitee a written acknowledgment of Lessee’s obligation under this Section 29(b) toindemnify such Lessor and such Tax Indemnitee with respect to the Tax at issueto the extent that the contest is unsuccessful; and (z) Lessor and the relevantTax Indemnitee has received an opinion of independent tax counsel selected byLessor that concludes that a Reasonable Basis exists with respect to 

 

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#### the tax position Lessee has asserted. For the purposes of this Section 29(b), the term “Reasonable Basis”shall have the meaning set forth for such term in Formal Opinion 85-352 issuedby the Standing Committee on Ethics and Professional Responsibility of theAmerican Bar Association.  Lessee shallhave no right to pursue or appeal or cause any Tax Indemnitee or Lessor topursue or appeal an adverse judicial decision without the prior written consentof Lessor and, if required by Lessor, the relevant Tax Indemnitee.

####  

Nothing contained in thisSection 29(b)(iv) shall require a Lessor or a Tax Indemnitee tocontest, or permit Lessee to contest, a claim which such Tax Indemnitee wouldotherwise be required to contest, if such Tax Indemnitee shall waive payment byLessor and Lessee of any amount that might otherwise be payable by Lessee underthis Section 29(b) in respect of such claim and any other claim, thecontest of which would be precluded.  Inaddition, for the avoidance of doubt, Lessee shall have no right to contest orrequire any other party to contest any Tax imposed on a Tax Indemnitee in amanner or to the extent that is inconsistent with Lessor’s rights under anyOperative Document or Lessee Document.

 

#### (v)                                 *General Tax Indemnity – Reports.*  If any report, return or statement isrequired to be filed with respect to any Tax which is subject toindemnification under this Section 29(b), Lessee shall timely file thesame at its sole expense (except for any such report, return or statement whicha Tax Indemnitee has notified Lessor or Lessee that such Tax Indemnitee intendsto file or which such Tax Indemnitee is required by law to file in its ownname).  Lessee shall either file suchreport, return or statement so as to show the ownership of the Engine in theOwner and send a copy of such report, return or statement to Lessor, the TaxIndemnitee and the Owner or, where Lessee is not so permitted to file suchreport, return or statement, it shall notify the Tax Indemnitee and Lessor ofsuch requirement and prepare and deliver such report, return or statement tothe Tax Indemnitee and Lessor in a manner satisfactory to such Tax Indemniteeand Lessor within a reasonable time prior to the time such report, return orstatement is to be filed.  Lessee shallhold Lessor and the Tax Indemnitee harmless on an After-Tax Basis from andagainst any penalties, interest, fines or additions to Tax caused by theinaccuracy of any report, return or statement prepared and filed by Lessee onbehalf of Lessor or any other Tax Indemnitee. Lessee will provide at Lessee’sexpense to Lessor and the Tax Indemnitee such information as Lessor or any TaxIndemnitee may reasonably request in writing that is reasonably necessary toenable Lessor or such Tax Indemnitee to comply with their tax filings, auditand litigation requirements.  If Lesseereceives written notice from a Taxing Authority or a Tax Indemnitee orotherwise of a Tax that is imposed upon a Tax Indemnitee but not indemnifiedagainst by Lessee hereunder, Lessee will promptly forward a copy of such noticeto Lessor and the Tax Indemnitee.  Lesseeshall also provide or cause to be provided to Lessor, upon request and atLessee’s expense, all documents, records and other information that Lessor isrequired to provide any Tax Indemnitee under any applicable agreements betweenLessor and such Tax Indemnitee.

 

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#### (vi)                              *Verification.*  AtLessee’s written request after Lessee receives computations showing the amountof any indemnity payable by Lessee pursuant to Section 29(b)(i), Lessorshall exercise its rights, if any, under applicable agreements with theclaimant Tax Indemnitee with respect to verification of such computation.  If Lessee pays such indemnity in whole or inpart before completion of the verification procedure, appropriate adjustmentswill be made promptly after completion of the verification procedure to takeinto account any redetermination of the indemnity by the accounting firm.  Any fee and disbursements of the accountingfirm payable by Lessor shall be paid by Lessee. Lessee will have no right under this Section 29(b) to examineany tax return of any Tax Indemnitee or Lessor. The sole responsibility of such accounting firm shall be to verify thecomputations of the amount payable hereunder and the interpretation of thisAgreement or any other agreement shall not be within the scope of suchaccounting firm’s responsibilities.

####  

#### (vii)                           *General Tax Indemnity – Payment. *Except as provided in Section 29(b)(iv) hereof,Lessee shall pay any Tax for which it is liable pursuant to Section 29(b)(i) directlyto the appropriate taxing authority if legally permissible or upon demand of aTax Indemnitee or Lessor shall pay such Tax and any other amounts due hereunderto such Tax Indemnitee or to Lessor as indicated in such demand within ten (10) BusinessDays of such demand.  Any such demand forpayment from a Tax Indemnitee or Lessor shall specify in reasonable detail thepayment and the facts upon which the right to payment is based.  Lessor shall request that the Tax Indemniteepromptly forward to Lessee a copy of any notice, bill or advice received by itto the extent concerning any Tax indemnified against hereunder (*provided* that the failure of the Lessor to make such requestor the failure of the Tax Indemnitee to forward such notice, bill or adviceshall not adversely affect the Lessor’s or Tax Indemnitee’s rights toindemnification hereunder).  Withintwenty (20) days after the date of each payment by Lessee of any Taxindemnified against hereunder, Lessee shall furnish the appropriate TaxIndemnitee (with a copy to Lessor) the original or a certified copy of areceipt for Lessee’s payment of such Tax or such other evidence of payment ofsuch Tax as is reasonably acceptable to such Tax Indemnitee.

####  

#### (viii)                        *Application of Payments During Existence of Default or Event ofDefault. *Any amount payableto Lessee pursuant to the terms of this Section 29(b) shall not bepaid to or retained by Lessee if at the time of such payment or retention a Defaultor Event of Default shall have occurred and be continuing or if the AirlineServices Agreement shall have been terminated or cancelled or shall have beenterminated in accordance with its terms, but shall be held by Lessor andapplied pursuant to Section 28 hereof..

####  

#### (ix)                                *[Intentionally Omitted]*.

####  

#### (x)                                   *Inclusions*.  If Lessoris required by any Taxing Authority to include in its income for income taxpurposes, or Lessor receives an opinion from

 

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#### independent tax counsel selected by Lessor and reasonably acceptable toLessee, that Lessor does not have a Reasonable Basis to exclude from its incomefor income tax purposes, any amount in respect of, or resulting from (i) anymodification, repair, improvement, addition, substitution or replacement of theEngine or any Part, or of any Aircraft, Airframe or airframe on which theEngine is installed from time to time, (ii) any payment of Basic Rent orSupplemental Rent under the Lease by or on behalf of Lessee in an amountgreater, or at a time earlier, than the amounts or times provided in the Lease,(iii) any warranty or indemnity payments or refunds attributable to theEngine received from the Manufacturer which was not remitted to, and retainedby, Lessor, (iv) the theft, destruction or other loss of the Engine or anyPart; (v) any application of Section 467(b)(2) to the Lease; (vi)  any payment of indemnities to a Tax Indemnitee or Indemnitee (other thanLessor) or fees, expenses or reimbursement to a trustee, agent or other Personpursuant to this Agreement, or (vii) any act or payment by Lessee notrequired under the terms of the Lessee Documents (herein called a “**Lessor Inclusion**”), Lessee shall pay to Lessor an amountwhich, on an After-Tax Basis, shall be equal to the amount of the additionaltaxes on or measured by gross or net income (plus any and all fines, penalties,additions to tax and interest calculated by reference thereto) payable byLessor as a result of such Lessor Inclusion.

####  

#### (xi)                                *Contests Etc.*  Theprovisions of Section 29(b)(iii) and 29(b)(iv) of this Agreementshall apply, *mutatis mutandis*, with respect toany Lessor Inclusion.

####  

#### (xii)                             *Minimum Indemnity*. The amount of any indemnity payable by Lessee to Lessor pursuant to thisSection 29 shall in all events be an amount sufficient to restore Lessorto the position that Lessor would be in if the Lessor Inclusion or anyindemnity otherwise payable by Lessor pursuant to any agreement with a TaxIndemnitee that gave rise to Lessee’s obligation hereunder had not occurred.

####  

### (c)*                                  GeneralIndemnity*.  Lessee hereby agrees toindemnify each Indemnitee against, and agrees to protect, defend, save and keepharmless each thereof from (whether or not the transactions contemplated hereinor in any of the other Lessee Documents are consummated), any and allliabilities, obligations, losses, damages, penalties, claims, actions, suits,out-of-pocket costs, expenses and disbursements (including reasonable legalfees and expenses but excluding internal costs and expenses such as salariesand overhead), of whatsoever kind and nature (collectively called “**Expenses**”) imposed on, incurred by or asserted against anyIndemnitee, in any way relating to or arising out of (A) any of theOperative Documents or the Lessee Documents or any of the transactionscontemplated thereby or the enforcement of any of the terms thereof or anyamendment, modification or waiver in respect thereof, (B) the manufacture,purchase, acceptance or rejection of any Aircraft, Airframe, airframe, theEngine or any Part, (C) any Aircraft, Airframe or airframe (or any portionof any thereof) or the Engine or any Part whether or not arising out ofthe finance, refinance, ownership, delivery, nondelivery, storage, sublease,possession, use, non-use, operation, maintenance, registration, reregistration,condition, modification, alteration, replacement, repair, substitution, sale,return or other disposition of any

 

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### Aircraft, Airframe, airframe (or any portionof any thereof) or the Engine or any Part) including, without limitation,latent or other defects, whether or not discoverable, strict tort liability,any damage to property or the environment, death of or injury to any person andany claim for patent, trademark or copyright infringement; *provided*that the foregoing indemnity as to any Indemnitee shall not extend to anyExpense to the extent resulting from or arising out of or attributable to oneor more of the following: (A) any representation or warranty by suchIndemnitee in the Operative Documents being incorrect in any material respect,or (B) the failure by such Indemnitee to perform or observe any agreement,covenant or condition in any of the Operative Documents applicable to itincluding, without limitation, with respect to the creation or existence of aLessor Lien (including for this purpose Liens which would be Lessor Liens butfor the proviso in the definition of Lessor Liens) attributable to it (exceptto the extent such failure was caused by the failure of Lessee to perform anyobligation under a Lessee Document), or (C) the willful misconduct of suchIndemnitee, or (D) with respect to any Indemnitee, a disposition by suchIndemnitee of all or any part of such Indemnitee’s interest in the Engine or inthe Operative Documents other than during the continuance of a Default or anEvent of Default under the Lease, or (E) except to the extent relating tothe payment of any Expenses on an After-Tax Basis, any Tax whether or notLessee is required to indemnify for such Tax pursuant to Section 29(b) hereof,or (F) except to the extent fairly attributable to acts, omissions orevents occurring prior thereto, acts or events which occur with respect to theEngine or any Part after the return of physical possession of the Engineor such Part to Lessor pursuant to the terms of the Lease.  Lessee further agrees to indemnify Lessoragainst, and agrees to protect, defend, save and keep harmless Lessor from(whether or not the transactions contemplated herein or in any of the otherLessee Documents are consummated), any and all liabilities, obligations,losses, damages, penalties, claims, actions, suits, out-of-pocket costs,expenses and disbursements of whatsoever kind and nature imposed on, incurred byor asserted against Lessor pursuant to any indemnification obligations ofLessor under any agreement with any other person relating to the Engine or anyAircraft or Airframe on which it is installed.

###  

Lessee further agrees that any payment or indemnitypursuant to this Section 29(c) in respect of any Expenses or otheramounts payable by Lessee pursuant to this Section 29(c) shall bepaid on an After-Tax Basis.

 

If, by reason of any Expense payment made to or forthe account of an Indemnitee by Lessee pursuant to this Section 29(c),such Indemnitee subsequently realizes a tax deduction or credit or anyreduction in Taxes not previously taken into account in computing such payment,such Indemnitee shall promptly pay to Lessee, but only if Lessee shall have madeall payments then due and owing to such Indemnitee under the Lessee Documents,an amount equal to the sum of (I) the actual reduction in Taxes realized bysuch Indemnitee which is attributable to such deduction or credit, and (II) theactual reduction in Taxes realized by such Indemnitee as a result of anypayment made by such Indemnitee pursuant to this sentence; *provided*,*however*, that no Indemnitee shall be obligated to make anypayment pursuant to this sentence to the extent that the amount of such paymentwould exceed (i) the aggregate amount of all prior payments by Lessee tosuch Indemnitee under this Section 29(c) less (ii) the aggregateamount of all prior payments with respect to such Tax by such Indemnitee toLessee pursuant to this sentence, with any excess being carried forward tooffset Lessee’s obligations, if any, to make subsequent payments to suchIndemnitee under this Section 29(c).

 

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Nothing in this Section 29(c) shall beconstrued as a guaranty by Lessee of the residual value of the Engine.

 

If a claim is made against an Indemnitee involving oneor more Expenses and such Indemnitee has notice thereof, such Indemnitee shallpromptly, upon receiving such notice, give notice of such claim to Lessee andLessor; *provided* that the failure to providesuch notice shall not release Lessee from any of its obligations to indemnifyhereunder, and no payment by Lessee to an Indemnitee pursuant to this Section 29(c) shallbe deemed to constitute a waiver or release of any right or remedy which Lesseemay have against such Indemnitee for any actual damages as a result of thefailure by such Indemnitee to give Lessee such notice.  Lessee shall be entitled, at its sole costand expense, acting through counsel acceptable to the respective Indemnitee, (A) solong as Lessee has agreed in a writing acceptable to such Indemnitee thatLessee is liable to such Indemnitee for such Expense hereunder, in any judicialor administrative proceeding that involves solely a claim for one or moreExpenses, to assume responsibility for and control thereof, (B) so long asLessee has agreed in a writing acceptable to such Indemnitee that Lessee isliable to such Indemnitee for such Expense hereunder, in any judicial or administrativeproceeding involving a claim for one or more Expenses and other claims relatedor unrelated to the transactions contemplated by the Operative Documents, toassume responsibility for and control of such claim for Expenses to the extentthat the same may be and is severed from such other claims (and such Indemniteeshall use its reasonable efforts to obtain such severance, *provided*that Lessee has requested such severance and agrees to pay the reasonableout-of-pocket costs and expenses (including, without limitation, reasonablecounsel fees and disbursements) incurred by such Indemnitee, if any, inconnection with such severance), and (C) in any other case, to beconsulted by such Indemnitee with respect to judicial proceedings subject tothe control of such Indemnitee. Notwithstanding any of the foregoing to the contrary, Lessee shall notbe entitled to assume responsibility for and control of any such judicial oradministrative proceedings (M) while a Default or an Event of Default shallhave occurred and be continuing, (N) if such proceedings will involve a risk ofthe sale, forfeiture or loss of, or the creation of any Lien (other than aPermitted Lien) on the Engine or on any Aircraft, Airframe or airframe on whichthe Engine is installed, or (O) if such proceeding could in the good faithopinion of such Indemnitee entail any risk of civil liability or criminalliability or present a conflict of interest making separate representationnecessary.  The affected Indemnitee mayparticipate at its own expense and with its own counsel in any judicialproceeding controlled by Lessee pursuant to the preceding provisions.

 

The affected Indemnitee shall supply Lessee with suchinformation reasonably requested by Lessee as is necessary or advisable forLessee to control or participate in any proceeding to the extent permitted bythis Section 29(c).  Unless aDefault or an Event of Default shall have occurred and be continuing (in whichcase the consent of Lessee shall not be required), such Indemnitee shall notenter into a settlement or other compromise with respect to any Expense withoutthe prior written consent of Lessee, which consent shall not be unreasonablywithheld or delayed, unless such Indemnitee waives its right to be indemnifiedwith respect to such Expense under this Section 29(c).

 

Lessee shall supply the affected Indemnitee and Lessorwith such information reasonably requested by such Indemnitee as is necessaryor advisable for such Indemnitee to control or participate in any proceeding tothe extent permitted by this Section 29(c).

 

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Upon payment in full of any Expense or Tax pursuant tothis Section 29, Lessee, or, if any Expense or Tax has been paid byinsurers, the insurers, without any further action, shall be subrogated to anyclaims the affected Indemnitee may have relating thereto; *provided*that Lessee shall not be so subrogated so long as a Default or an Event ofDefault has occurred and is continuing. Such Indemnitee agrees to give such further reasonable assurances oragreements and to provide such reasonable cooperation to Lessee or the insurersto permit Lessee or the insurers to pursue such claims, if any, to the extentreasonably requested by Lessee or the insurers.

 

In the event that Lessee shall have paid an amount toan Indemnitee pursuant to this Section 29(c), and such Indemniteesubsequently shall be reimbursed in respect of such indemnified amount from anyother Person, such Indemnitee shall promptly pay to Lessee an amount equal tothe amount of such reimbursement (but in no event more than such payment fromLessee) plus any net tax benefit (or minus any net tax detriment) realized bysuch Indemnitee as a result of any reimbursement received and payment made bysuch Indemnitee pursuant to this sentence; *provided*, thatLessor shall not be obligated to make any payment pursuant to this Section 29(c) tothe extent that the amount of such payment would exceed (i) the aggregateamount of all prior payments by Lessee to Lessor under this Section 29(c) less(ii) the aggregate amount of all prior payments by Lessor to Lesseepursuant to this Section 29(c), with any excess being carried forward tooffset Lessee’s obligations, if any, to make subsequent payments to Lessorunder this Section 29(c); *provided, further,*that such Indemnitee shall have no obligation to reimburse Lessee if (i) aDefault or an Event of Default has occurred and is continuing or if the AirlineServices Agreement shall have been terminated or canceled or shall haveterminated in accordance with its terms or (ii) Lessee has not paid suchIndemnitee all amounts required pursuant to this Section 29(c) andany other amounts then due to such Indemnitee from Lessee under any of theOperative Documents or Lessee Documents.

 

Lessee’s obligations under the indemnities providedfor in this Lease shall be those of a primary obligor, whether or not thePerson indemnified shall also be indemnified with respect to the same matterunder the terms of any other document or instrument, and the Person seekingindemnification from Lessee pursuant to any provision of this Lease may proceeddirectly against Lessee without first seeking to enforce any other right ofindemnification.

 

### (d)                                 *Income Tax.*  For purposes of this Section 29, the term“**Income Tax**” means any Tax based on ormeasured by net income (other than sales, use, license, rental, ad valorem andvalue added or property Taxes) (including, without limitation, capital gainstaxes, minimum taxes, income taxes collected by withholding and taxes on taxpreference items), and interest, additions to tax, penalties, or other chargesin respect thereof.

###  

### (e)                                  *Survival.*  Notwithstanding anything to the contrarycontained in this Lease, the provisions of this Section 29 shall surviveany termination or expiration of this Lease.

###  

**SECTION 30.  *CertainRepresentations, Warranties and Covenants. ***(a)  Lessor represents andwarrants to Lessee as follows:

 

#### (i)                                     Lessor is acorporation duly organized and validly existing in good standing under the lawsof its jurisdiction of organization, and has the corporate

 

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#### power and authority to carry on its business as now conducted, to ownor hold under lease its properties and to enter into and perform itsobligations under, the Lessee Documents to which Lessor is a party;

####  

#### (ii)                                  the Lessee Documentsto which Lessor is a party have been duly authorized by all necessary corporateaction on the part of Lessor, do not require any approval not already obtained ofstockholders of Lessor or any approval or consent not already obtained of anytrustee or holders of any indebtedness or obligations of Lessor, and have beenduly executed and delivered by Lessor, and neither the execution and deliverythereof, nor the consummation of the transactions contemplated thereby, norcompliance by Lessor with any of the terms and provisions thereof, willcontravene any United States Federal or state law, judgment, governmental rule,regulation or order applicable to or binding on Lessor (it being understoodthat no representation or warranty is made with respect to laws, rules orregulations relating to aviation or to the nature of the equipment owned byLessor) or contravene or result in any breach of or constitute any default under,or result in the creation of any Lien (other than Liens provided for in theOperative Documents or the Lessee Documents) upon any property of Lessor under,any indenture, mortgage, chattel mortgage, deed of trust, conditional salescontract, bank loan or credit agreement, corporate charter, by-law or otheragreement or instrument to which Lessor is a party or by which it or itsproperties may be bound or affected; and

####  

#### (iii)                               each of Lessee Documentsto which Lessor is a party constitutes a legal, valid and binding obligation ofLessor enforceable against Lessor in accordance with the terms thereof (exceptas may be limited by (A) general principles of equity, (B) applicablebankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similarlaws affecting the rights of creditors generally, (C) applicable lawswhich may affect the remedies provided therein, which laws, however, do notmake the remedies provided therein inadequate for the practical realization ofthe benefits provided thereby, except that no representation or warranty ismade as to the amount of priority of any recovery under any particularcircumstances, and (D) in the case of indemnity provisions contained insuch documents, as limited by public policy considerations).

####  

### (b)                                 Lesseecovenants and agrees that it shall at all times be a Certificated Air Carrier.

###  

### (c)                                  Lessee,at its expense, will take, or cause to be taken, such action with respect tothe recording, filing, re-recording and refiling of this Lease, the Lease Supplement,and any financing statements or other instruments as are necessary to maintain(or as are reasonably requested by Lessor) the perfection of any securityinterest that may be claimed to have been created by this Lease or will furnishto Lessor timely notice of the necessity of such action, together with suchinstruments, in execution form, and such other information as may be requiredto enable Lessor to take such action. Lessee shall furnish to Lessor annually after the execution hereof (butnot later than March 15th of each year, commencing with theyear 2006) an

 

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### opinion of Daugherty, Fowler, Peregrin &Haught, a Professional Corporation and/or other counsel reasonable satisfactoryto Lessor nationally recognized in FAA matters covering such matters withrespect to the interests of Lessor in the Engine and the perfection of securityinterests therein as Lessor may reasonably request.  Lessee will notify Lessor of any change inthe location of its chief executive office (as such term is used in Article 9of the Uniform Commercial Code) prior to making such change.

###  

**SECTION 31.  *Covenantsof Lessee.* **Lesseecovenants and agrees with Lessor as follows:

 

Lessee will, at its own cost and expense, cause to bedone, executed, acknowledged and delivered all and every such further acts,conveyances and assurances as Lessor shall reasonably require for accomplishingthe purposes of this Lease and the other Lessee Documents; *provided*that any instrument or other document so executed by Lessee will not expand anyobligations or limit any rights of Lessee in respect of the transactionscontemplated by any Lessee Document. Lessee, upon delivery of the Engine under this Lease, shall at all timesthereafter cause the same to remain duly registered in the name of Lessor,except as otherwise required or permitted hereunder or under this Lease, underthe Federal Aviation Act, or shall furnish to Lessor such information as may berequired to enable Lessor to make application for such registration, and shallpromptly furnish to Lessor such information as may be required (or reasonablyrequested by Lessor) to enable Lessor to timely file any reports required to befiled by Lessor, as the case may be, as a result of its interest in the Enginewith any governmental authority.

 

**SECTION 32.  *Consent toJurisdiction. ***Eachof the parties hereto (A) hereby irrevocably submits itself to thenon-exclusive jurisdiction of the United States District Court for the SouthernDistrict of New York and to the non-exclusive jurisdiction of the Supreme Courtof the State of New York, New York County, for the purposes of any suit, actionor other proceeding arising out of this Lease or any other Operative Documentor Lessee Document, the subject matter of any thereof or any of thetransactions contemplated hereby or thereby brought by any party or partiesthereto, or their successors or assigns, and (B) hereby waives, and agreesnot to assert, by way of motion, as a defense, or otherwise, in any such suit,action or proceeding, to the extent permitted by applicable law, that the suit,action or proceeding is brought in an inconvenient forum, that the venue of thesuit, action or proceeding is improper, or that this Lease or any other OperativeDocument or Lessee Document or the subject matter of any thereof or any of thetransactions contemplated hereby or thereby may not be enforced in or by suchcourts.  Lessee hereby generally consentsto service of process at CT Corporation System, 1633 Broadway, New York, NewYork 10019.

 

**SECTION 33.  *Owner forFederal Tax Purposes*. **Itis hereby agreed among Lessor and Lessee that for Federal income tax purposesthe Owner will be the owner of the Engine and Lessee will be the lesseethereof, and each party hereto agrees to characterize this Lease as a lease forFederal income tax purposes.

 

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IN WITNESS WHEREOF, Lessor and Lessee have each causedthis Lease to be duly executed as of the day and year first above written.

 
| * * | NORTHWEST AIRLINES, INC., |
|----------|---------------------------|
| * * | *Lessor*                  |
|     |                      |
|     |                      |
|     | By:                       |   |   |
|     |                      | Name: |
|     |                      | Title: |
|     |                      |
|     |                      |
|     | MESABA AVIATION, INC.,    |
| * * | *Lessee*                  |
| * * | * *                  |
| * * | * *                  |
|     | By:                       |   |   |
|     |                      | Name: |
|     |                      | Title: |

 

A2-51

----

 
| ** ** | **EXHIBIT A**   |
|------------|----------------------|
| ** ** | **to**               |
| ** ** | **Lease  Agreement** |
|       | **[NW 2005  ]**      |

 

**LEASE SUPPLEMENT No.       [NW 2005    ]**

 

LEASE SUPPLEMENT NO.     , dated                   ,20      , between NORTHWEST AIRLINES, INC. (“**Lessor**”), and MESABA AVIATION, INC. (“**Lessee**”).

 

Lessor and Lessee have entered into thatcertain Engine Lease Agreement [NW 2005   ], dated as of [                ],2005, relating to one General Electric Model CF34-3B1 Engine (herein called the“**Lease**,” and the defined terms thereinbeing hereinafter used with the same meanings). The Lease provides for the execution and delivery of a Lease Supplementfor the purpose of leasing the Engine under the Lease as and when delivered byLessor to Lessee in accordance with the terms thereof.

 

(3) The Lease relates to the Engine describedbelow, and a counterpart of the Lease is attached hereto, and made a parthereof, and this Lease Supplement, together with such attachment, is beingfiled for recordation on the date hereof with the Federal AviationAdministration as one document.

 

(4) The Lease Agreement relates to the Enginedescribed below, and a counterpart of the Lease Agreement, attached and made apart of Lease Supplement No. 1 dated                               ,20     to the Lease Agreement, has been recorded by theFederal Aviation Administration on                               ,20    , as one document and assigned Conveyance No.     .

 

NOW, THEREFORE, in consideration of the premises andother good and sufficient consideration, Lessor and Lessee hereby agree asfollows:

 

1.                                       Lessorhereby delivers and subleases to Lessee under the Lease and Lessee herebyaccepts and subleases from Lessor under the Lease the following describedEngine (the “Engine”):

 

----

(3)                                  Thislanguage for Lease Supplement No. 1.

 

(4)                                  Thislanguage for other Lease Supplements.

 

A2-52

----

 

General Electric ModelCF34-3B1 type engine bearing manufacturer’s serial no.       (which engine has 750 or more rated takeoff horsepower or the equivalent ofsuch horsepower)

 

[together with the QEC](5).

 

2.                                       TheCommencement Date of the lease of the Engine is the date of this LeaseSupplement set forth in the opening paragraph hereof.  Except as otherwise provided in the Lease,the Term for the Engine shall commence on the Commencement Date and end on theExpiration Date.

 

3.                                       Lesseehereby confirms its agreement to pay Lessor Basic Rent for the Enginethroughout the Term therefor in accordance with Section 3 of the Lease.

 

4.                                       Lesseehereby confirms to Lessor that Lessee has accepted the Engine for all purposeshereof and of the Lease as being airworthy, serviceable, in good working orderand repair and without defect or inherent vice in title, condition, design,operation or fitness for use.

 

5.                                       Allof the terms and provisions of the Lease are hereby incorporated by referencein this Lease Supplement to the same extent as if fully set forth herein.

 

6.                                       ThisLease Supplement may be executed by the parties hereto in separatecounterparts, each of which when so executed and delivered shall be anoriginal, but all such counterparts shall together constitute but one and thesame instrument.

 

----

(5)                                  Forinclusion only if the Engine has QEC.

 

A2-53

----

 

IN WITNESS WHEREOF, Lessor and Lessee have caused thisLease Supplement to be duly executed on the day and year first above written.

 

 
| * * | NORTHWEST AIRLINES, INC., |
|----------|---------------------------|
| * * | *Lessor*                  |
|     |                      |
|     |                      |
|     | By:                       |   |   |
|     |                      | Name: |
|     |                      | Title: |
|     |                      |
|     |                      |
|     | MESABA AVIATION, INC.,    |
| * * | *Lessee*                  |
| * * | * *                  |
| * * | * *                  |
|     | By:                       |   |   |
|     |                      | Name: |
|     |                      | Title: |

 

A2-54

----

 
| ** ** | **EXHIBIT B**   |
|------------|----------------------|
| ** ** | **to**               |
| ** ** | **Lease  Agreement** |
|       | **[NW 2005  ]**      |

 

 

**BASIC RENT SCHEDULE**

 

The portion of this Exhibit appearing below thistext is intentionally deleted from the FAA filing counterpart as the partieshereto deem it to contain confidential information.

 

Basic Rent:

 
| **Lease  Period Date** | ** ** | **Basic Rent** | ** **                                                                                                                                         |
|------------------------|------------|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------|
| September 1, 2005 |       | $              | [                        ] |   |
| October 1, 2005   |       |           |                                                                                                                                               |
| November 1, 2005  |       |           |                                                                                                                                               |
| December 1, 2005  |       |           |                                                                                                                                               |
| January 1, 2006   |       |           |                                                                                                                                               |
| February 1, 2006  |       |           |                                                                                                                                               |
| March 1, 2006     |       |           |                                                                                                                                               |
| April 1, 2006     |       |           |                                                                                                                                               |
| May 1, 2006       |       |           |                                                                                                                                               |
| June 1, 2006      |       |           |                                                                                                                                               |
| July 1, 2006      |       |           |                                                                                                                                               |
| August 1, 2006    |       |           |                                                                                                                                               |
| September 1, 2006 |       |           |                                                                                                                                               |
| October 1, 2006   |       |           |                                                                                                                                               |
| November 1, 2006  |       |           |                                                                                                                                               |
| December 1, 2006  |       |           |                                                                                                                                               |
| January 1, 2007   |       |           |                                                                                                                                               |
| February 1, 2007  |       |           |                                                                                                                                               |
| March 1, 2007     |       |           |                                                                                                                                               |
| April 1, 2007     |       |           |                                                                                                                                               |
| May 1, 2007       |       |           |                                                                                                                                               |
| June 1, 2007      |       |           |                                                                                                                                               |
| July 1, 2007      |       |           |                                                                                                                                               |
| August 1, 2007    |       |           |                                                                                                                                               |
| September 1, 2007 |       |           |                                                                                                                                               |
| October 1, 2007   |       |           |                                                                                                                                               |
| November 1, 2007  |       |           |                                                                                                                                               |
| December 1, 2007  |       |           |                                                                                                                                               |
| January 1, 2008   |       |           |                                                                                                                                               |
| February 1, 2008  |       |           |                                                                                                                                               |
| March 1, 2008     |       |           |                                                                                                                                               |
| April 1, 2008     |       |           |                                                                                                                                               |
| May 1, 2008       |       |           |                                                                                                                                               |
| June 1, 2008      |       |           |                                                                                                                                               |
| July 1, 2008      |       |           |                                                                                                                                               |
|                        |            |                |                                                                                                                                                    |  |

 

A2-55

----

 
| August 1, 2008    |   |   |   |
|------------------------|--------|--------|--------|
| September 1, 2008 |   |   |   |
| October 1, 2008   |   |   |   |
| November 1, 2008  |   |   |   |
| December 1, 2008  |   |   |   |
| January 1, 2009   |   |   |   |
| February 1, 2009  |   |   |   |
| March 1, 2009     |   |   |   |
| April 1, 2009     |   |   |   |
| May 1, 2009       |   |   |   |
| June 1, 2009      |   |   |   |
| July 1, 2009      |   |   |   |
| August 1, 2009    |   |   |   |
| September 1, 2009 |   |   |   |
| October 1, 2009   |   |   |   |
| November 1, 2009  |   |   |   |
| December 1, 2009  |   |   |   |
| January 1, 2010   |   |   |   |
| February 1, 2010  |   |   |   |
| March 1, 2010     |   |   |   |
| April 1, 2010     |   |   |   |
| May 1, 2010       |   |   |   |
| June 1, 2010      |   |   |   |
| July 1, 2010      |   |   |   |
| August 1, 2010    |   |   |   |
| September 1, 2010 |   |   |   |
| October 1, 2010   |   |   |   |
| November 1, 2010  |   |   |   |
| December 1, 2010  |   |   |   |
| January 1, 2011   |   |   |   |
| February 1, 2011  |   |   |   |
| March 1, 2011     |   |   |   |
| April 1, 2011     |   |   |   |
| May 1, 2011       |   |   |   |
| June 1, 2011      |   |   |   |
| July 1, 2011      |   |   |   |
| August 1, 2011    |   |   |   |
| September 1, 2011 |   |   |   |
| October 1, 2011   |   |   |   |
| November 1, 2011  |   |   |   |
| December 1, 2011  |   |   |   |
| January 1, 2012   |   |   |   |
| February 1, 2012  |   |   |   |
| March 1, 2012     |   |   |   |
| April 1, 2012     |   |   |   |
| May 1, 2012       |   |   |   |

 

A2-56

----

 
| June 1, 2012      |   |   |   |
|------------------------|--------|--------|--------|
| July 1, 2012      |   |   |   |
| August 1, 2012    |   |   |   |
| September 1, 2012 |   |   |   |
| October 1, 2012   |   |   |   |
| November 1, 2012  |   |   |   |
| December 1, 2012  |   |   |   |
| January 1, 2013   |   |   |   |
| February 1, 2013  |   |   |   |
| March 1, 2013     |   |   |   |
| April 1, 2013     |   |   |   |
| May 1, 2013       |   |   |   |
| June 1, 2013      |   |   |   |
| July 1, 2013      |   |   |   |
| August 1, 2013    |   |   |   |
| September 1, 2013 |   |   |   |
| October 1, 2013   |   |   |   |
| November 1, 2013  |   |   |   |
| December 1, 2013  |   |   |   |
| January 1, 2014   |   |   |   |
| February 1, 2014  |   |   |   |
| March 1, 2014     |   |   |   |
| April 1, 2014     |   |   |   |
| May 1, 2014       |   |   |   |
| June 1, 2014      |   |   |   |
| July 1, 2014      |   |   |   |
| August 1, 2014    |   |   |   |
| September 1, 2014 |   |   |   |
| October 1, 2014   |   |   |   |
| November 1, 2014  |   |   |   |
| December 1, 2014  |   |   |   |
| January 1, 2015   |   |   |   |
| February 1, 2015  |   |   |   |
| March 1, 2015     |   |   |   |
| April 1, 2015     |   |   |   |
| May 1, 2015       |   |   |   |

 

A2-57

----

 
| ** ** | **EXHIBIT C**   |
|------------|----------------------|
| ** ** | **to**               |
| ** ** | **Lease  Agreement** |
|       | **[NW 2005  ]**      |

 

 

**STIPULATED LOSS VALUE SCHEDULE**

 

The portion of this Exhibit appearing below thistext is intentionally deleted from the FAA filing counterpart as the partieshereto deem it to contain confidential information.

 
| **Stipulated  Loss Value Date** | ** ** | **Stipulated Loss  Value (In Dollars)** |   |
|---------------------------------|------------|-----------------------------------------|--------|
| September 1, 2005          |       | ***                                     |   |
| October 1, 2005            |       | ***                                     |   |
| November 1, 2005           |       | ***                                     |   |
| December 1, 2005           |       | ***                                     |   |
| January 1, 2006            |       | ***                                     |   |
| February 1, 2006           |       | ***                                     |   |
| March 1, 2006              |       | ***                                     |   |
| April 1, 2006              |       | ***                                     |   |
| May 1, 2006                |       | ***                                     |   |
| June 1, 2006               |       | ***                                     |   |
| July 1, 2006               |       | ***                                     |   |
| August 1, 2006             |       | ***                                     |   |
| September 1, 2006          |       | ***                                     |   |
| October 1, 2006            |       | ***                                     |   |
| November 1, 2006           |       | ***                                     |   |
| December 1, 2006           |       | ***                                     |   |
| January 1, 2007            |       | ***                                     |   |
| February 1, 2007           |       | ***                                     |   |
| March 1, 2007              |       | ***                                     |   |
| April 1, 2007              |       | ***                                     |   |
| May 1, 2007                |       | ***                                     |   |
| June 1, 2007               |       | ***                                     |   |
| July 1, 2007               |       | ***                                     |   |
| August 1, 2007             |       | ***                                     |   |
| September 1, 2007          |       | ***                                     |   |
| October 1, 2007            |       | ***                                     |   |
| November 1, 2007           |       | ***                                     |   |
| December 1, 2007           |       | ***                                     |   |
| January 1, 2008            |       | ***                                     |   |
| February 1, 2008           |       | ***                                     |   |
| March 1, 2008              |       | ***                                     |   |
| April 1, 2008              |       | ***                                     |   |
| May 1, 2008                |       | ***                                     |   |
| June 1, 2008               |       | ***                                     |   |

 

A2-58

----

 
| **Stipulated  Loss Value Date** | ** ** | **Stipulated Loss  Value (In Dollars)** | ** ** |
|---------------------------------|------------|-----------------------------------------|------------|
| July 1, 2008               |       | ***                                     |       |
| August 1, 2008             |       | ***                                     |       |
| September 1, 2008          |       | ***                                     |       |
| October 1, 2008            |       | ***                                     |       |
| November 1, 2008           |       | ***                                     |       |
| December 1, 2008           |       | ***                                     |       |
| January 1, 2009            |       | ***                                     |       |
| February 1, 2009           |       | ***                                     |       |
| March 1, 2009              |       | ***                                     |       |
| April 1, 2009              |       | ***                                     |       |
| May 1, 2009                |       | ***                                     |       |
| June 1, 2009               |       | ***                                     |       |
| July 1, 2009               |       | ***                                     |       |
| August 1, 2009             |       | ***                                     |       |
| September 1, 2009          |       | ***                                     |       |
| October 1, 2009            |       | ***                                     |       |
| November 1, 2009           |       | ***                                     |       |
| December 1, 2009           |       | ***                                     |       |
| January 1, 2010            |       | ***                                     |       |
| February 1, 2010           |       | ***                                     |       |
| March 1, 2010              |       | ***                                     |       |
| April 1, 2010              |       | ***                                     |       |
| May 1, 2010                |       | ***                                     |       |
| June 1, 2010               |       | ***                                     |       |
| July 1, 2010               |       | ***                                     |       |
| August 1, 2010             |       | ***                                     |       |
| September 1, 2010          |       | ***                                     |       |
| October 1, 2010            |       | ***                                     |       |
| November 1, 2010           |       | ***                                     |       |
| December 1, 2010           |       | ***                                     |       |
| January 1, 2011            |       | ***                                     |       |
| February 1, 2011           |       | ***                                     |       |
| March 1, 2011              |       | ***                                     |       |
| April 1, 2011              |       | ***                                     |       |
| May 1, 2011                |       | ***                                     |       |
| June 1, 2011               |       | ***                                     |       |
| July 1, 2011               |       | ***                                     |       |
| August 1, 2011             |       | ***                                     |       |
| September 1, 2011          |       | ***                                     |       |
| October 1, 2011            |       | ***                                     |       |
| November 1, 2011           |       | ***                                     |       |
| December 1, 2011           |       | ***                                     |       |
| January 1, 2012            |       | ***                                     |       |

 

A2-59

----

 
| **Stipulated  Loss Value Date** | ** ** | **Stipulated Loss  Value (In Dollars)** | ** ** |
|---------------------------------|------------|-----------------------------------------|------------|
| February 1, 2012           |       | ***                                     |       |
| March 1, 2012              |       | ***                                     |       |
| April 1, 2012              |       | ***                                     |       |
| May 1, 2012                |       | ***                                     |       |
| June 1, 2012               |       | ***                                     |       |
| July 1, 2012               |       | ***                                     |       |
| August 1, 2012             |       | ***                                     |       |
| September 1, 2012          |       | ***                                     |       |
| October 1, 2012            |       | ***                                     |       |
| November 1, 2012           |       | ***                                     |       |
| December 1, 2012           |       | ***                                     |       |
| January 1, 2013            |       | ***                                     |       |
| February 1, 2013           |       | ***                                     |       |
| March 1, 2013              |       | ***                                     |       |
| April 1, 2013              |       | ***                                     |       |
| May 1, 2013                |       | ***                                     |       |
| June 1, 2013               |       | ***                                     |       |
| July 1, 2013               |       | ***                                     |       |
| August 1, 2013             |       | ***                                     |       |
| September 1, 2013          |       | ***                                     |       |
| October 1, 2013            |       | ***                                     |       |
| November 1, 2013           |       | ***                                     |       |
| December 1, 2013           |       | ***                                     |       |
| January 1, 2014            |       | ***                                     |       |
| February 1, 2014           |       | ***                                     |       |
| March 1, 2014              |       | ***                                     |       |
| April 1, 2014              |       | ***                                     |       |
| May 1, 2014                |       | ***                                     |       |
| June 1, 2014               |       | ***                                     |       |
| July 1, 2014               |       | ***                                     |       |
| August 1, 2014             |       | ***                                     |       |
| September 1, 2014          |       | ***                                     |       |
| October 1, 2014            |       | ***                                     |       |
| November 1, 2014           |       | ***                                     |       |
| December 1, 2014           |       | ***                                     |       |
| January 1, 2015            |       | ***                                     |       |
| February 1, 2015           |       | ***                                     |       |
| March 1, 2015              |       | ***                                     |       |
| April 1, 2015              |       | ***                                     |       |
| May 1, 2015                |       | ***                                     |       |

 

A2-60

----

 
| ** ** | **EXHIBIT D**   |
|------------|----------------------|
| ** ** | **to**               |
| ** ** | **Lease  Agreement** |
|       | **[NW 2005  ]**      |

 

**RETURN CONDITIONS**

 

The portion of this Exhibit appearing below thistext is intentionally deleted from the FAA filing counterpart as the partieshereto deem it to contain confidential information.

 

Unless the context shall otherwise require and exceptas set forth herein, the capitalized terms used in this Exhibit shall havethe meanings given to such terms in the Lease.

 

Definitions

 

*Aircraft Documentation:* meansrecords, manuals, logs and documents delivered with the Engine and thosedeveloped and maintained with respect to the Engine during the Term, including,without limitation, all of those required by the FAA to be maintained for FAR Part 121operation and the Aircraft Documentation listed in Appendix I hereto, and trueand correct excerpts of such records, manuals, logs and documents maintainedwith respect to any Airframe or airframe on which the Engine is installedduring the Term as relate to the Engine and are not duplicative of informationcontained in the other Aircraft Documentation.

 

*Approved Air Authority:*  means the Federal Aviation Administration.

 

*Calendar controlled components or parts*:  those components or parts which at specificcalendar-time intervals, in accordance with the Maintenance Program, are to bediscarded, overhauled, or recertified upon reaching such time limit.

 

*Configuration Deviation List*:  the list provided by the Aircraftmanufacturer specifying which parts of the Aircraft that can be removed withoutaffecting the continued service of the Aircraft as the same may be modifiedfrom time to time pursuant to and in accordance with the approval of theGovernmental Authority.

 

*Governmental Authority*:  shall mean (a) the FAA; (b) anynational government, or political subdivision thereof or local jurisdictiontherein; (c) any board, commission, department, division, organ,instrumentality, court, or agency of any entity described in (b) above,however constituted; and (d) any association, organization, or institutionof which any entity described in (b) or (c) above is a member or towhose jurisdiction any such entity is subject or in whose activities any suchentity is a participant but only (except for purposes of defining Law below) tothe extent that any of the preceding have jurisdiction over the Aircraft or itsoperations.

 

*Law*:  shall mean (a) any statute, decree,constitution, regulation, order, judgment or other directive of anyGovernmental Authority; (b) any treaty, pact, compact or other agreementto which any Governmental Authority is a signatory or party; (c) anyjudicial or administrative interpretation or application of any Law describedin (a) or (b) above; and (d) any amendment or revision of anyLaw described in (a), (b) or (c) above.

 

A2-61

----

 

*LifeLimited Parts* means those parts which have a specific hour,cycle and/or calendar life limit as specified by the Manufacturer.

 

*Maintenance Manual*:  shall mean Lessee’s FAA approved maintenancemanual for the Aircraft and the Engine which incorporates the procedures,limits and requirements of the Manufacturer’s maintenance manual, Manufacturer’sshop manual and other related Manufacturer’s documents.

 

*Maintenance Program*:  shall mean Lessee’s FAA approved maintenanceprogram which shall define all scheduled maintenance activities, conditionmonitoring and on-condition programs for the Engine and any Parts, and for anyAirframe or airframe on which the Engine may be installed (whether or not theEngine is then installed thereon), including but not limited to servicing,testing, preventative maintenance, structural inspections, shop visits, systemschecks, overhauls, corrosion control inspections and corrosion treatments, andcompliance with approved modifications, service bulletins, and AirworthinessDirectives as the same may be modified from time to time pursuant to and inaccordance with the prior written approval of the applicable GovernmentalAuthority and which at all times (a) complies in all material respectswith all FAA requirements for FAR Part 121 operation, the MRB Report andBombardier Inc.’s Maintenance Requirement Manual, and (b) complies in allmaterial respects with General Electric Corporation’s Engine Management Programfor the Engine type.  Substantive Changesto the Maintenance Program shall be subject to Lessor’s prior written approval,such approval not to be unreasonably withheld. “**Substantive Changes**” means (i) changesfrom block to phase maintenance or vice versa, (ii) scheduled maintenanceinterval escalations or (iii) any other changes which could be materiallyadverse to Lessor or to the condition of the Engine on return.

 

*Maintenance Review Board Report (“MRB Report”)*:  the report published by the MaintenanceReview Board for the Bombardier CL-600-2B19 aircraft detailing the intervalsand description of the maintenance tasks and, where applicable, the life limitsrequired for continued airworthiness of the Aircraft.  Where the intervals specified in the MRBReport differ from the limit specified by the component manufacturer, the MRBReport shall take precedence.

 

*Manufacturer*:shall mean, with respect to any Airframe, Bombardier Inc., and its successorsand assigns and with respect to the Engine, General Electric Aircraft Engines,a division of General Electric Corporation.

 

*Terminating Action*:  the alteration or modification of theAircraft, Airframe, Engine or Part in accordance with mandatory servicebulletins, orders, airworthiness directives, and instructions required toeliminate repetitive inspections or maintenance action.

 

ARTICLE 1 - CONDITION OF ENGINE

 

1.0                                                                                 GeneralConditions.

 

At the time of return, the Engine shall (i) havebeen maintained in accordance with the Maintenance Program as approved andauthorized by the Governmental Authority, as if the Engine were to be kept infurther commercial passenger service by Lessee, (ii) the Engine shall nothave been discriminated against whether by reason of its leased status or

 

A2-62

----

 

otherwise in maintenance, use, operation or in anyother manner whatsoever, including, without limitation, as to the type ofmaintenance program applicable to the Engine, or as to compliance withAirworthiness Directives, and (iii) the Engine shall meet thefollowing requirements:

 

(v)           OperatingCondition - The Engine shall be in as good operating condition as on theDelivery Date, reasonable wear and tear excepted, with all of the equipment,components, and systems fully operational and serviceable in accordance withthe Maintenance Manual and Lessee’s FAA approved airplane flight manual.

 

(vi)          Certification- The Engine shall have, and be in compliance with, a current and validserviceable tag, issued by an FAA Part 145 Repair Agency for FAR Part 121operation, it being understood that such serviceable tag is to evidence theEngine passing the test cell performance run required in Section 1.3(i),and, if applicable, evidence satisfactory completion of repairs required inorder to satisfy any other conditions required in this Exhibit D.

 

(vii)         GeneralAppearance - The Engine shall be clean, cosmetically acceptable, with allcomponents reasonably free of foreign objects, accumulated dirt, grime, greaseand liquids, and be prepared for immediate placement into commercialservice.  Any deterioration of paint orother protective coatings due to leakage, improper adhesion, impact damage orpresence of foreign materials or liquids shall be repaired and replaced per theMaintenance Manual.

 

(viii)        AirworthinessDirectives – The Engine shall be in compliance with all FAA requirements forFAR Part 121 operation including all FAA issued airworthiness directives (“**Airworthiness Directives**”) and Manufacturer alert servicebulletins that are issued prior to Lease expiration and are applicable to theEngine, without special deferment, exemption or alternate means of compliance,with terminating action accomplished for all Airworthiness Directives whichrequire termination be accomplished prior to 180 days after Lease expiration.

 

(ix)           DeferredMaintenance – There shall be no open outstanding or deferred maintenance items(including special- or reduced-interval inspections) scheduled or unscheduled,routine or non-routine, against the Engine. The Engine shall be serviceable and free from defects and discrepancies

 

A2-63

----

 

that are outside theserviceable limits of the Maintenance Manual.

 

(x)            Title- The Engine shall be returned in compliance with the provisions of clause (ii) ofthe third sentence of Section 5(a) of the Lease.

 

(xi)           Alterations,Modifications and Additions

 

Replacement of Parts – Lessee, at its owncost and expense, shall have replaced all components or Parts which may havefrom time to time become worn out, lost, stolen, destroyed, seized,confiscated, damaged beyond repair or permanently rendered unfit for use forany reason whatsoever.  All replacementParts (a) shall be free and clear of all Liens, except Permitted Liens, (b) shallbe in good condition and in as good operating condition as, and shall have  a value, utility, maintenance and modificationstatus at least equal to, the Parts replaced, assuming such replaced parts werein the condition and repair required to be maintained by the terms of theLease, and (c) shall have documentation certifying compliance with allapplicable Governmental Authority regulations, including, without limitation, (1) serviceabletags indicating time since overhaul, and overhaul or repair by a GovernmentalAuthority certified repair station, (ii) overhaul records, (iii) documentationof modification status and compliance with applicable airworthiness directives,and (iv) any other appropriate documentation required by the FAA forcontinued FAR Part 121 operation.

 

1.1                                                                                 Intentionallyleft blank.

 

1.2                                                                                 Conditionof Controlled Components.

 

Engine hour, cycle or calendar-controlled componentsor parts, at time of return to Lessor, shall have remaining, as a minimum, *** of the manufacturers approvedhour, cycle or calendar limit (whichever is applicable and most limiting),before any scheduled removals for overhaul, test, disassembly or replacement;provided that, without regard to any payment made or to be made pursuant to Section 1.8,all components or parts controlled on an hour, cycle or calendar basis shallhave at least one C check interval (assuming annual utilization of ***) (or, if the service interval isless than one C check, *** ofthe service interval) remaining before scheduled removal for testing, overhaulor replacement.

 

A2-64

----

 

1.3.                                                                              Conditionof Engine.

 

At time of return, the Engine will have at least *** of hours or cycles remaining,whichever is greater, before the next scheduled Engine removal for inspection,test or disassembly for replacement of Life Limited Parts.  Cycle limits are as specified in the PowerPlant Limitations section of the Canadair MRB Report.  Additionally, the Engine shall satisfy thefollowing conditions:

 

(xii)          TestCell Performance – Without regard to any payment made or to be made pursuant toSection 1.8, the Engine shall pass a full test cell performance runwithout operational limitations in accordance with the Manufacturer’s shopmanual.  The Engine shall be capable ofcertificated full rated performance without limitation throughout the entireoperating envelopes as defined by the Manufacturer’s shop manual.

 

(xiii)         BorescopeInspection – Without regard to any payment made or to be made pursuant to Section 1.8,the Engine shall pass a complete video-taped borescope inspection of allaccessible Engine sections performed in accordance with the Manufacturer’smaintenance manual by Lessor or Lessor’s designated representative after thetest cell performance run per Article 3.2 herein.  Any discrepancies found during suchinspection which exceed the Manufacturer’s maintenance manual allowable limitsfor unrestricted continued service (without special- or reduced-intervalinspections), shall be corrected prior to Return by Lessee at Lessee’s soleexpense.

 

(xiv)        AdversePerformance Data – No Engine shall be on engineering watch or on a special- orreduced-interval inspection of any nature that could lead to premature removalof the Engine.  If the Engine historicaland maintenance records, test cell performance runs, power assurance runsand/or trend monitoring data indicate a level of performance deterioration oran abnormal rate of acceleration in performance deterioration or oilconsumption which based on manufacturer specifications and/or experienceindicate the Engine would require maintenance prior to *** engine flying hoursafter return, Lessee shall correct or cause to be corrected, such condition asnecessary to rectify all deficient Engine parameters in accordance withManufacturer specifications.

 

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1.4                                                                                 Intentionallyleft blank.

 

1.5                                                                                 ServiceBulletin Kits.

 

At or upon this return of the Aircraft, Lessee shalldeliver to Lessor, at no cost to Lessor, all Service Bulletin Kits furnishedwithout charge by a manufacturer for installation on the Engine which have notbeen so installed.  In the event suchService Bulletin Kits were purchased or manufactured by Lessee, Lessor shallhave the exclusive right to purchase such kits at Lessee’s actual cost for aperiod of 30 days after such return and the non-exclusive right so to purchasesuch kits thereafter.

 

1.6                                                                                 Intentionallyleft blank.

 

1.7                                                                                 Repairsand Repair Inspections.

 

All major repairs (as defined for FAR Part 121operations by the FAA) and Major Modifications shall have been performed inaccordance with FAA approved data that is returned with the Engine.

 

All repairs performed by Lessee or its designee sincethe Engine delivery to Lessee, and which exist on  the Engine, shall be in accordance with theManufacturer’s maintenance manual.

 

1.8                                                                                 EquivalencyCharge.

 

If the Lessee does not meet any of the remaining lifeconditions set forth in Section 1.1 and 1.2, unless otherwise specifiedtherein, in place of correcting the specified hour, cycle or calendar lifedeficiency, Lessee may elect to pay to Lessor an Equivalency Charge (fordeficient condition) calculated in accordance with the following formula (ifthe formula results in a positive amount):

 

Pmt = [A(b-c)] / d

 

Where:

 

“Pmt”                is the EquivalencyCharge payment

 

“A”         is,in respect of the Engine the average of Lessee’s demonstrated cost for EngineBasic Shop Visits at the time of return, or, in respect of Engine Life LimitedParts, the manufacturer’s list price for replacement parts at the time ofreturn.  When demonstrated average costsfor Engine Basic Shop Visits are not available from Lessee, the average ofthree quotes from three mutually acceptable FAA approved repair shops shall beused as the cost basis for the Equivalency Charge calculation;

 

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“b”          is*** (or, if specified, thenumber specified) of the total operating hours/cycles/time (whichever isapplicable and most limiting) allowable between, in the case of Life LimitedParts, such component overhaul, component inspection, component bench check orcomponent replacement and, in the case of the Engine, such Engine Basic ShopVisits;

 

“c”          isthe actual number of operating hours/cycles/time (whichever is applicable andmost limiting) remaining to, in the case of Life Limited Parts, the nextoverhaul, inspection, bench check or replacement and, in the case of theEngine, the next Engine Basic Shop Visit; and

 

“d”          isthe total operating hours/cycles/time (whichever is applicable and mostlimiting) allowable between such overhaul, inspection, bench check, replacementor Engine Basic Shop Visits.

 

Calculation of theEquivalency Charge shall be based on each item identified in the requirementsof Articles 1.2 and 1.3 in aggregate. For example, each Life Limited Part shall be assessed on its statusas far as accumulated cycles are concerned and the adjustment amount for eachis established.  All other parts subjectto this Equivalency Charge shall be similarly assessed and the individualcharges are to be added together.  Forexample, under this plan, a positive charge on particular Life Limited Parts orthe Engine could offset a negative charge on other Life Limited Parts.  If the total net result is positive(indicating Lessee returned the Engine in a state that, in aggregate, has less thanthe 50% limit remaining), the net Equivalency Charge shall be paid by Lessee toLessor.  In the event such a total isnegative, no payment shall be made to Lessee from Lessor.

 

ARTICLE 2 - AIRCRAFT DOCUMENTATION AND SAFETYDEVICES

 

2.1                                                                                 AircraftDocumentation.  Concurrently with returnof the Engine to Lessor, Lessee shall deliver to Lessor one (1) copy, inEnglish, of the Aircraft Documentation (including current revisions thereto).It is recognized that the Aircraft Documentation may be titled or describeddifferently than set forth in Appendix I due to Lessee’s method of maintainingthe Aircraft Documentation.  Accordingly,the information described in the Aircraft Documentation shall be provided toLessor in the form and manner under which Lessee maintains such information,and shall include data pertinent to the Engine, provided that such form andmanner is approved by Lessor, such approval not to be unreasonablywithheld.  All Aircraft Documentationprovided to Lessor at time of the Engine return shall be listed and describedby Lessee’s title or description with cross-reference to the titles or descriptionsprovided in Appendix I,

 

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and included as an attachment to the AircraftDocumentation.  All AircraftDocumentation provided to Lessor shall be in good condition, readable andcapable of being reproduced using standard reproduction processes, complete, upto date and accurate as to content.  AnyAircraft Documentation, to the extent required by the Governmental Authorities,not returned in its “original” form shall be stamped “Certified True Copy” andboth signed and dated by the Lessee’s authorized personnel at the time of itscreation. Lessee shall provide to Lessor, upon reasonable request, advancecopies of any of the Aircraft Documentation as Lessor may desire or require inorder to plan or accomplish recertification, modification, sale, lease or otherdisposition or utilization of the Engine upon receipt of such Engine by Lessor.

 

Lessor shall provide, as part of the Aircraft Documentation,the original certification tags and release notes for all life limited androtable Parts installed after delivery. The certification tags and releasenotes shall provide traceability of the last overhaul and/or repair shop visitto the approved repair facility that conducted the overhaul and/or repair.

 

Lessee shall, for the period that the Engine wasoperated by it:

 

i.              certify,in writing as identified in Appendix I, that the Engine has not been involvedin any incidents or accidents.  If the Enginehas been in involved in any incidents or accidents the Lessee shall certify ina letter, full disclosure of all such events involving the Engine detailing allrelevant details, including but not limited to, any subsequent repairs; and

 

ii.             certify,in writing, that there are no leased or rented parts installed on the Engine;and

 

iii.            certify,in writing, that Lessee has no knowledge of parts installed on the Engine thathave been manufactured without appropriate Governmental Authority approval and/or that do not conform to an internationally recognized airworthiness standardand are approved for installation in the Engine.

 

2.2                                                                                 Remedyfor Non-Compliance. Lessee shall take action to ensure that the Lessor and theGovernmental Authority are provided with, but not limited to, all requestedguarantees of methods of compliance, component overhaul and records management,quality control, part number and serial number verification.  If any such records or other data aremissing, incomplete or otherwise not in accordance with the GovernmentalAuthority standards, Lessee shall re-accomplish the maintenance tasks necessaryto produce such records in accordance with the Maintenance Program prior toreturn of the Engine or otherwise perform all necessary

 

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acts to obtain such records in a manner satisfactoryto the Governmental Authority.

 

2.3                                                                                 ShippingStand.  Lessee shall deliver the Engineto Lessor properly installed in its Shipping Stand.

 

ARTICLE 3 - INSPECTION AND FLIGHTS

 

3.0                                                                                 Intentionallyleft blank.

 

3.1                                                                                 GroundInspection. The Engine including the Aircraft Documentation and VendorDocumentation shall be made available to Lessor for ground inspection by Lessoror its designee at Lessee’s facilities. Such inspection shall commence twenty (20) working days (in the case ofthe Aircraft Documentation and Vendor Documentation) and fifteen (15) workingdays (in the case of the Engine) prior to the date of return of the Engine toLessor.  At Lessor’s request, Lesseeshall remove the Engine from scheduled service and open the areas of the Engineas required to perform the necessary checks as specified in Article 1.2and 1.3.  In addition, Lessee shall allowLessor to accomplish its inspection to determine that the Engine, including theAircraft Documentation and Vendor Documentation are in the condition set forthin Article 2.

 

Lessee shall promptly correct any discrepancies fromthe requirements set out in Articles 1 or 2 which are observed during suchinspection and are communicated in writing by Lessor to Lessee.

 

3.2                                                                                 TestCell Run.  Promptly after completion ofany corrections required under Article 3.1, Lessee shall conduct acomplete test cell performance run of the Engine in accordance with theManufacturer’s shop manual for the purpose of demonstrating to Lessor thatthe  operation and performance of theEngine and its systems comply with all performance requirements for the Enginethroughout its certified operating envelope, without limitation or special exceptionin accordance with the Manufacturer’s shop manual.  Lessee shall promptly correct thosediscrepancies that exceed Manufacturer’s shop manual allowable limits.

 

3.3                                                                                 Intentionallyleft blank.

 

3.4                                                                                 Intentionallyleft blank.

 

3.5                                                                                 Intentionallyleft blank.

 

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APPENDIX I TO EXHIBIT D

 

AIRCRAFT DOCUMENTATION

 

The AircraftDocumentation shall be provided in English and shall include the following:

 

1.                                       Allhistorical records for the Engine including original serviceabilitydocumentation and a current, valid unrestricted serviceable tag, and FAA Form 337(or its equivalent), both issued by an FAA Part 145 repair station that iscertified by the FAA and the Manufacturer for the performance of Engine BasicShop Visits on CF34-3B1 engines. Lessee shall supply all original (i.e. notcopies) certification tags and release notes from manufacturers or repairagencies for Parts installed by Lessee.

 

2.                                       Intentionallyleft blank.

 

3.                                       Copyof the Maintenance Program including a task list indicating when items thereonwere last performed.

 

4.                                       Currentinspection and maintenance status and operating times.

 

5.                                       Listand status of time, cycle and calendar controlled components and parts.

 

6.                                       Listand status of Life Limited Parts.

 

7.                                       Summaryand control status of Airworthiness Directives, the method of compliance andincorporation (i.e.: repetitive inspections, interim fix or terminatingaction), and accomplishing documents.

 

8.                                       Listof manufacturer’s service bulletins incorporated and method ofincorporation.  Where only a portion of aservice bulletin is accomplished Lessee shall identify which portion wasaccomplished.

 

9.                                       Listof Major Modifications and/or alterations accomplished on the Engine togetherwith all supporting documents required by the FAA including one copy of eachmodification, alteration, engineering order and associated drawings.

 

10.                                 Listof major repairs performed on the Engine. A copy of all supporting documents required by the FAA including allEngineering, Maintenance, Quality Control and regulatory documentationassociated with the major repairs shall be provided.

 

11.                                 Listof Supplemental Type Certificates (STC’s) incorporated together with a copy ofeach certificate and associated data.

 

12.                                 Intentionallyleft blank..

 

13.                                 Intentionallyleft blank.

 

14.                                 Intentionallyleft blank.

 

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15.                                 Intentionallyleft blank.

 

16.                                 Crossreference parts catalogue (listing of Manufacturer’s part numbers correspondingto parts manufacturer’s and current operator’s part numbers for the same parts)if applicable.

 

17.                                 Intentionallyleft blank.

 

18.                                 Intentionallyleft blank.

 

19.                                 Intentionallyleft blank.

 

20.                                 Letterdetailing any major incident and/or accidents involving the Engine (if none,the letter should so state), certified by Lessee’s chief inspector or corporateofficer responsible for aircraft maintenance.

 

21.                                 Allrecords required to comply with FAA requirements for FAR Part 121operation and/or initiated by Lessee for Lessee’s own benefit.

 

22.                                 Intentionallyleft blank.

 

23.                                 Crossreference list for Service Bulletins and other manufacturer publishedinstructions to Lessee’s engineering orders.

 

Aircraft Documentation Supplement

 

24.                                 Intentionallyleft blank.

 

25.                                 Intentionallyleft blank.

 

26.                                 Intentionallyleft blank.

 

27.                                 Intentionallyleft blank.

 

28.                                 EngineRecords:

1.                           LogBooks

2.                           Lastoverhaul and repair documents for each module

3.                           AirworthinessDirective Compliance Report (terminated and repetitive)

4.                           Manufacturer’sService Bulletin Status Report

5.                           EngineDisk Sheet

6.                           EngineData Submittal Sheet

7.                           ConditionMonitoring Status Report

8.                           Back-to-birthtraceability for all life limited parts

9.                           Lasttest cell run performance report

10.                     FAA Form 337sfor the last Engine Basic Shop Visit and each subsequent shop visit

 

30.                                 Intentionallyleft blank.

 

31.                                 ComponentRecords (components installed in or on the Engine):

1.         TimeMonitored Component Status Report with installed part numbers, serial numbers,remaining hours and cycles (if applicable)

2.         Serviceabilitytags and other appropriate back-up documentation (including 8130s) forcurrently installed components replaced since delivery from the Manufacturer

 

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3.         Serializedlatest shop records, including all serviceable tags, release to service, andrepair orders detailing maintenance checks, inspections, tests, repairs,replacements, restorations, overhauls, modifications and refurbishments

4.         Back-to-birthtraceability for all life limited parts

 

32.                                 Manuals:

1.                           LesseeIllustrated Parts Catalog (if different from item 2)

2.                           BombardierIllustrated Parts Catalog

3.                           Lessee’sFAA approved Maintenance Manual (if different from item 4)

4.                           Bombardiermaintenance manual

5.                           GEEngine Illustrated Parts Catalog

6.                           GEEngine Shop Manual

7.                           Lessee’sMinimum Equipment List

8.                           MasterMinimum Equipment List

9.                           ConfigurationDeviation List

10.                     DispatchDeviation Guide

 

33.                                 MiscellaneousTechnical Documents:

1.                           MaintenanceProgram Specifications/Requirements Schedule

 

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| ** ** | **EXHIBIT E**  |
|------------|---------------------|
| ** ** | **to**              |
| ** ** | **Lease Agreement** |
|       | **[NW 2005 ]**      |

 

**MINIMUM LIABILITY AMOUNT**

 

The portion of this Exhibit appearing below thistext is intentionally deleted from the FAA filing counterpart as the partieshereto deem it to contain confidential information.

 

The Minimum Liability Amount shall be $*** per occurrence (or such otherminimum amount as may be reasonably requested by Lessor from time to time inthe event Lessee no longer obtains airline liability insurance coverage as partof the Lessor’s airline aviation liability insurance placement).

 

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| ** ** | **EXHIBIT F**  |
|------------|---------------------|
| ** ** | **to**              |
| ** ** | **Lease Agreement** |
|       | **[NW 2005 ]**      |

 

**HEADLEASE VARIATIONS**

 

The portion of this Exhibit appearingbelow this text is intentionally deleted from the FAA filing counterpart as the parties hereto deem it to containconfidential information.

 

If and so long as the Engine is subject to aHeadlease at any time during the Term, Lessor shall so notify Lessee in writingand, pursuant to Section 2(c) of the Lease, the terms and conditionsset forth in this Exhibit F shall apply to this Lease from and after thedate specified in such notice until the earlier to occur of the expiration ortermination of such Headlease or of the Term:

 

1.                                       Amended,Modified, Supplemented or Supplemental Definitions.

 

*“Event of Loss”*meansan Event of Loss as defined in Section 1 of the Lease and any other eventor circumstance constituting and “Event of Loss” as defined in the Headlease.

 

*“Headlease Documents”*means the agreements and instruments, identified in the Headlease Notice, amongLessor and one or more other Persons relating to the ownership of, and Lessor’srights in and to, the Engine.

 

*“Headlease Notice”*means any written notice provided by Lessee to Lessor from time to timepursuant to Section 2 of this Exhibit F.

 

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*“Headlease Parties”*means those parties identified in the Headlease Notice that as the parties tothe respective Headlease Documents.

 

“*Headlease Tax IndemnityAgreement*” means a tax indemnity agreement entered into betweenLessor, as headlessee and any Headlease Interest.

 

*“Headlessor Liens”*means any Lien or disposition of title or interest arising as a result of (i) claimsagainst and Headlease Interest not related to the transactions contemplated bythe Headlease Documents or the Operative Documents, (ii) any act oromission of the any of the Head Lease Interests which is not related to thetransactions contemplated by the Headlease Documents or the Operative Documentsor is in violation of any of the terms of the Headlease Documents or theOperative Documents, (iii) claims against any of the Headlease Interestswith respect to Taxes or Expenses against which Lessor is not required toindemnify the Headlease Interests pursuant to the Headlease Documents or (iv) anyclaim against any of the Headlease Interests arising out of any transfer by anythereof of all or any portion of their respective interests in any Aircraft,the Engine, the Trust Estate, the Headlease Documents or the OperativeDocuments other than the transfer of possession of the Engine pursuant to theHeadlease or of any Aircraft; provided, however, that any Lien which isattributable solely to any Headlease Interest (other than the Owner) and wouldotherwise constitute a Headlessor Lien shall not constitute a Headlessor Lienso long as (1) the existence of such Lien poses no material risk of thesale, forfeiture or loss of the Engine or any Aircraft on which the Engine isor may be installed, (2) the existence of such Lien does not interfere inany way with the use, possession or operation of the Engine by Lessee, (3) suchHeadlease Interest is diligently contesting such Lien,

 

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and (4) the existence of such Lien does not pose a material threatof interference with the payment of rent under the Headlease Documents in favorof such Headlease Interest.

 

*“Indemnitee”*meansan Indemnitee as defined in Section 1 of the Lease and shall include, forpurposes of subclause (iii) of such definition, the Headlease Interests,any Lenders, any Indenture Trustee and all other Persons entitled to generalindemnification by Lessor pursuant to the Headlease Documents.

 

*“Indenture Trustee”*meansany indenture trustee or other Person engaged in a similar capacity on behalfof the Lenders under the Headlease Documents.

 

*“Indenture Trustee’s Liens”*anyLien which arises as a result of (A) claims against the Indenture Trusteenot related to its interest in the Engine or the administration of the TrustIndenture Estate pursuant to the Headlease Documents, (B) acts of theIndenture Trustee not permitted by, or failure of the Indenture Trustee to takeany action required by, the Headlease Documents or the Operative Documents tothe extent such acts arise or such failure arises from or constitutes grossnegligence or willful misconduct, (C) claims against the Indenture Trusteerelating to Taxes or Expenses which are excluded from the indemnificationprovided by Lessor pursuant to the Headlease Documents, or (D) claimsagainst the Indenture Trustee arising out of the transfer by the IndentureTrustee of all or any portion of its interest in the Engine, any Aircraft, theTrust Estate, the Trust Indenture Estate, the Headlease Documents or theOperative Documents other than a transfer of the Engine pursuant to the expressrequirements of the Headlease Documents or a transfer of the Engine pursuant tothe Headlease Documents while an

 

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Event ofDefault (as defined in the Headlease) is continuing and prior to the time thatthe Indenture Trustee has received all amounts due pursuant to the TrustIndenture.

 

*“Lender”*means eachPerson holding a Loan Certificate issued pursuant to the Headlease Documents.

 

*“Lender Interests”*means collectively each Lender and the Indenture Trustee.

 

*“Lender Liens”*meansany Lien which arises from acts or claims against any Lender not related to thetransactions contemplated by the Headlease Documents or the OperativeDocuments.

 

*“Loan Certificate”*means any instrument, however styled, issued pursuant to the HeadleaseDocuments to a Lender evidencing a right to payment or repayment of money.

 

*“Loan Documents”*means any instrument (including any Loan Certificate) or agreement evidencingor relating to any loan or other debt financing with respect to the Engine byLessor or any Headlessor, which are disclosed and identified by Lessor toLessee.

 

*“Tax Indemnitee”*means a Tax Indemnitee as defined in Section 1 of the Lease and shallinclude, for purposes of subclause (iii) of such definition, the HeadleaseInterests, any Lenders, any Indenture Trustee and all other Persons entitled totax indemnification by Lessor pursuant to the Headlease Documents.

 

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*“Trust Estate”* meansall right, title and interest of the Owner in and to the Engine and all otherproperty (including but not limited to its rights under the Headlease) at anytime in existence pursuant to the Headlease Documents.

 

*“Trust Indenture Estat*e*”* means the interest (including but not limited to securityinterest and Lien) of the Indenture Trustee in and to such portion of the TrustEstate and such other property as has been pledged, assigned and transferred tothe Indenture Trustee to secure the obligations of the Owner to the Lenderspursuant to the Headlease Documents.

 

2.                                       Contentsof Written Notice to Lessee Concerning Headlease.

 

Lessee shall deliver to Lessor, promptlyfollowing the execution and delivery of Headlease Documents during the Term, awritten statement setting forth the following information together with suchother information as Lessor may determine necessary or appropriate in theadministration of the Headlease Documents and this Lease:

 

(a)          The parties to theHeadlease Documents.

 

(b)                                 The address, telephonenumber and facsimile number of each Headlease Interest and of the IndentureTrustee for purposes of such notices as Lessee may be required to provide tosuch Persons.

 

(c)                                  Thename and date of each of the Headlease Documents and a statement of the partiesthereto.

 

(d)                                 Theterm of the Headlease, excluding any renewals or extensions.

 

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(e)                                  Thebank account or bank accounts to which Lessee is to make payment of any portionof the Rent due hereunder that may be payable to Persons other than Lessor,whether by virtue of assignment, designation as an express beneficiary orotherwise.

 

Any Headlease Notice shall include a true copyof the Headlease and such other Headlease Documents as Lessor determinesnecessary or appropriate for the proper administration of the Headlease andthis Lease.

 

3.                                       AgreementsRegarding Headlease Documents.

 

Lessee hereby acknowledges and agrees that theHeadlease Documents permit Lessor  tomake the Engine available to Lessee pursuant to this Lease, thus providing avaluable financial accommodation to Lessee, and accordingly Lessee agrees thatwhether or not the following terms and conditions shall be set forth in aseparate amendment to, or restatement or replacement of, this Lease, Lesseeshall, at its sole expense:

 

(a)                                  comply with the termsand conditions of the Headlease Documents that set forth actions to beperformed, obligations to be fulfilled and limitations to be observed by thesublessee of the Engine from Lessor;

 

(b)                                 maintaininsurance on the Engine in compliance with the requirements of the Headlease inaddition to the requirements of the Lease, including but not limited to theidentity of named assureds and loss payees, inclusion of coverages and clausesand provision of periodic reports;

 

(c)                                  cooperatewith the exercise of the inspection rights set forth in the HeadleaseDocuments;

 

(d)                                 complyduring the Headlease term with any more comprehensive operating, maintenanceand return conditions set forth in the Headlease Documents;

 

(e)                                  extendthe coverage and benefit of the indemnities (including all procedures relatingthereto) set forth in Sections 9(d), 29(b) and 29(c) to the partiesto the Headlease Documents who are Indemnitees and Tax Indemnitees (whichPersons shall be third party beneficiaries of

 

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such Sections), modified to include any more comprehensiveindemnification provisions undertaken by Lessor as set forth in the HeadleaseDocuments but otherwise on the same terms and conditions as applicable toLessor;

 

(f)                                    complywith the requirements of the Headlease for maintaining insignia on the Enginedisclosing the interests of the Headlease Parties as set forth therein andrecordations of the Headlease Documents, and comply with the requirements ofany Loan Documents for maintaining any Liens granted thereunder relating to theEngine;

 

(g)                                 promptlyfurnish or cause to be furnished to any Headlease Interest such information asmay be required to enable such Persons to monitor the maintenance status andcondition of the Engine and to file any reports required to be filed by suchHeadlease Interest with any governmental authority because of such Person’sownership or beneficial ownership of the Engine;

 

(h)                                 furnishHeadlessor and any Indenture Trustee with original counterparts (or certifiedcopies if only one original counterpart is available) of the information anddocumentation required to be provided to Lessor in connection with an Event ofLoss as specified in Sections 10(a)(3), (4) and (5), (7) and (8) andfile such additional financing statements with respect to a substituted Engineas are deemed necessary or advisable by Headlessor or any Indenture Trustee orits respective counsel;

 

(i)                                     providethe same notices to the Headlease Interests and any Lender Interests withrespect to an Event of Loss or requisition for use of the Engine as it isrequired to provide to Lessor under the Lease, at such address or telecopynumber as the Headlease Interests or Lender Interests shall have furnished toLessor, which Lessor shall furnish to Lessee in the Headlease Notice, or suchother address or telecopy number for any such Person as such Person or Lessorshall provide thereafter to Lessee; and

 

(j)                                     atLessee’s request, enter into a written amendment to, or restatement orreplacement of, the Lease to set forth more comprehensively the integration ofthe Headlease Documents with the undertakings of Lessor and Lessee in theLease.  Whether or not such writtenamendment, restatement or replacement is executed and delivered, Lessor shallhave the right to amend, supplement or otherwise modify the terms of the Leasewithout the consent of Lessee in the event of any amendment, supplement orother modification of the terms of the Headlease.

 

Lessee agrees that the representations and warranties of Lessee setforth in the Lease shall be deemed for the benefit of, and relied upon by, theHeadlease Parties.

 

Lessor and Lessee agree that Lessee shall have no obligation withrespect to Headlessor Liens, Indenture Trustee Liens or Lender Liens at anytime during the Term.  In addition, thefollowing rights and interests shall also be excluded from the obligations ofLessee under Section 6: the respective rights of Lessor and Headlessor asprovided in the Headlease, the rights of Headlessor as owner of the Engine, theLien of any Trust Indenture and any other rights existing pursuant to theHeadlease Documents.

 

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Whenever the Lease permits actions to be taken or omitted by Lessee onthe condition that no civil liability, criminal liability, loss in whole or inpart of interest of any nature, or other adverse consequence be incurred byLessor as a result thereof, such condition shall be deemed to include andextend to any such liability or loss of, or consequence to,  or effect on, the Headlease Interests or anyLender Interests.

 

Headlessor shall be entitled, to the same extent as Lessor (a) toplace additional insurance on the Engine pursuant to Section 11(e) ofthe Lease and (b) to perform for Lessee to the same extent, under the sameconditions and with the same right to receive Supplemental Rent in respect thereof,as Lessor pursuant to Section 21 of the Lease, without in either caselimiting the rights of Lessor under the Lease.

 

Without limiting the effect of Section 18 of the Lease in respectof any circumstance relating to Lessor, Lessee’s obligations to pay Rent underthe Lease shall not be affected by any circumstance relating to any HeadleaseInterest or any Lender Interest, including but not limited to any circumstancerelating to any such Person of a type described in respect of Lessor insubclauses (i) through (iv) of the first sentence thereof.

 

Lessor’s and Lessee’s submissions to jurisdiction and agreementsregarding service of process under Sections 23 and 32 of the Lease shall alsobe applicable to any suit, action or other proceeding arising out of the Lease,the subject matter of the Lease or any of the transactions contemplated by theLease, brought by any Headlease Interest or any Lender Interest.

 

Notwithstanding any other provision of the Lease or this Exhibit F,the Lease is and Lessee’s rights hereunder shall be subject and subordinate toall the terms of the Headlease and the Lien of any Indenture, including,without limitation, Headlessor’s (and any Indenture Trustee’s) rights torepossession of the Engine and to avoid the Lease for any reason upon suchrepossession, and Lessee shall not be permitted to take any action hereundernot permitted to be taken by Lessor as “lessee” in the Head Lease.  Lessee agrees to execute such furtherdocuments confirming such subordination of the Lease as may be reasonablyrequested by Lessor.  Lessee willacknowledge receipt of an executed copy of each of the Headlease Documentsdelivered to it by Lessor.

 

Lessee shall be responsible at its expense for effecting andmaintaining the status of any registration, recordation or other filing(including the amendment of any existing registration, recordation or otherfiling) with respect to the Engine to properly reflect the Headlease Interestsand any Lender Interests, at the Lessor’s request.  Lessor shall provide Lessee with suchinformation as Lessee may reasonably request to enable it to effect andmaintain such registration, recordation or other filing.

 

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4.                                       CertainTax Provisions

 

*Headlease Tax Indemnity Provisions*

 

Indemnity. If Lessor is required to pay any Headlease Interest any amount (hereincalled a “**HTIA Liability**”) pursuant to anyHeadlease Tax Indemnity Agreement, Lessee shall pay to Lessor an amount, which,on an After-Tax Basis, shall be equal to such HTIA Liability.  Such payment shall be made at least five (5) BusinessDays prior to the date Lessor must pay the claimant Headlease Interest underthe Headlease Tax Indemnity Agreement.

 

In addition, Lessee shall indemnify any Tax Indemnitee (as defined inthe Lease, without giving effect to this Exhibit F, for purposes of thisparagraph) under Section 29(b)(i) of the Lease with respect to Taxeshowsoever imposed against such Tax Indemnitee, the Engine, or otherwise, on theproperty or the income or other proceeds with respect to any of the propertyheld by any of the Headlease Interests or the Lender Interests, or on thepayment of principal of, interest or premium on, or other amounts payable on orwith respect to, any Loan Certificates or under any Loan Documents, and whetherimposed by withholding tax or otherwise.

 

Exceptions. Lessee shall not berequired to indemnify Lessor for any HTIA Liability to the extent that suchHTIA Liability would not have occurred but for any of the following:

 

(a)                                  Lessorclaiming deductions for depreciation of the Engine for federal income taxpurposes or claiming on any federal income tax return to be the owner of theEngine for federal income tax purposes (for the avoidance of doubt, theforegoing shall not limit any such claim by Lessor under the Head Lease TaxIndemnity Agreement with respect to any period of time during which noHeadlease is or was in effect); or

 

(b)                                 thestatus of Lessor as a “tax-exempt entity” within the meaning of Section 168(h) ofthe Code but only if such status is not caused by a Lessee Person.

 

Tax Savings.  If a Headlease Interest pays an amount toLessor pursuant to the Headlease Tax Indemnity Agreement, for which Lessee haspreviously paid an indemnity to Lessor pursuant to paragraph (1) hereof,Lessor shall pay such amount to Lessee within 5 Business Days after Lessorreceives such amount, but not in excess of any payment previously made byLessee with respect to such HTIA Liability and net of any tax liabilityincurred by Lessor with respect to receipt and payment of such amount.

 

Contest.  If Lessor receives a written claim for anindemnity pursuant to the Head Lease Tax Indemnity Agreement for which Lesseewould be required to pay Lessor an indemnity hereunder, Lessor shall notifyLessee thereof in writing (but it being understood and agreed that failure ofLessor to provide such notice to Lessee shall not adversely affect or otherwiseprejudice any Lessor’s right to an indemnity hereunder).  If requested by Lessee in writing within ten (10) BusinessDays before the latest day on which Lessor may request a contest pursuant tothe Head Lease Tax Indemnity Agreement, Lessor shall exercise its rights, ifany, under the Head

 

A2-82

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Lease Tax IndemnityAgreement *provided* that in no event shall Lessorbe required to initiate or continue (or be required to request any other personto initiate or continue) a contest unless: (i) the amount of theobligation on the part of Lessee to indemnify Lessor in respect of the HTIALiability shall be at least $50,000, (ii)  Lessee agrees to reimburseLessor on demand (and complies with such agreement) for all of the HeadleaseInterests’ and Lessor’s reasonable costs and expenses (including, withoutlimitation, reasonable legal and accounting fees and disbursements) which eachmay incur in contesting such disallowance, (iii) if the claimant HeadleaseInterest elects to contest the disallowance by paying the tax claimed(including interest, penalties or additions to tax) and seeking a refund,Lessee shall advance to Lessor on an interest free basis the aggregate amountof taxes, interest, penalties and additions to the tax applicable to suchdisallowance and agree to indemnify Lessor and such Headlease Interest for anyadverse tax consequences resulting from such advance, (iv) such contestwould not entail any risk of criminal penalties, (v) with respect to suchdisallowance, Lessee shall have furnished Lessor at Lessee’s expense, with awritten opinion of independent tax counsel selected by Lessor that a ReasonableBasis exists to contest such disallowance and prior to filing any appeal anopinion that a successful outcome on appeal is more likely than not and haveposted a bond or other security for such appeal, (vi) no Default or Eventof Default, under any of the Operative Documents by Lessor or the AirlineServices Agreement, has occurred and is continuing, and (vii) Lessee shallhave delivered to Lessor a written acknowledge of Lessee’s obligation toindemnify in full Lessor pursuant to this Agreement to the extent that thecontest is not successful. Lessor shall have no obligation to cause anyHeadlease Interest and no Headlease Interest shall have any obligation toappeal any adverse decision of an appellate court to the United States SupremeCourt.

 

*Minimum Indemnity*.  The amount of any indemnity payable by Lesseeto Lessor pursuant to, or in connection with, any HTIA Liability shall in allevents be an amount sufficient to restore Lessor to the position that Lessorwould be in if the HTIA Liability or any indemnity otherwise payable to anyHeadlease Interest by Lessor that gave rise to Lessee’s obligation hereunderhad not occurred.

 

5.                                       CertainProvisions Relating to the General Indemnity.

 

Anything to the contraryin Section 29(c) notwithstanding, Lessee shall not be entitled toassume responsibility for and control any judicial or administrativeproceedings relating to a claim made against an Indemnitee, nor shall Lessee beentitled to receive any reimbursement payments that may be received by anIndemnitee in respect of an indemnity payment theretofore made by Lessee tosuch Indemnitee, in either case while an event constituting an event of defaultor an incipient event of default under the Headlease Documents shall haveoccurred and be continuing.

 

A2-83

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| ** ** | **EXHIBIT G**  |
|------------|---------------------|
| ** ** | **to**              |
| ** ** | **Lease Agreement** |
|       | **[NW 2005 ]**      |

 

**QUICK ENGINE CHANGE KITSPECIFICATIONS**

 

[The Engine does not haveQEC installed on the Delivery Date. ]

 

[The Engine has QECinstalled and covered under the Lease on the Delivery Date.  The QEC includes the following components andparts delivered with the Engine on the Delivery Date to the Lessee:

 

1.  Neutral Engine QEC Kit (Optimum)

 

2.  [Right][Left] Hand Engine QEC Kit (Optimum)

 

3.  Consumables

 

and the specific itemsincluded in each of the preceding categories is as identified in the CanadairRegional Jet CF34-3A1/3B1 Quick Engine Kit Listing Document (issue date:25/03/01).]

 

A2-84

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**EXHIBIT B**

**CRJ-200/440 Delivery Schedule**

 

| **Aircraft** | ** ** | **Delivery Date**   | ** ** |
|--------------|------------|---------------------|------------|
| ** **   | ** ** | ** **          | ** ** |
| 1.           |       | September 2005 |       |
|         |       |                |       |
| 2.           |       | September 2005 |       |
|         |       |                |       |
| 3.           |       | ***                 |       |
|         |       |                |       |
| 4.           |       | ***                 |       |
|         |       |                |       |
| 5.           |       | ***                 |       |
|         |       |                |       |
| 6.           |       | ***                 |       |
|         |       |                |       |
| 7.           |       | ***                 |       |
|         |       |                |       |
| 8.           |       | ***                 |       |
|         |       |                |       |
| 9.           |       | ***                 |       |
|         |       |                |       |
| 10.          |       | ***                 |       |
|         |       |                |       |
| 11.          |       | ***                 |       |
|         |       |                |       |
| 12.          |       | ***                 |       |
|         |       |                |       |
| 13.          |       | ***                 |       |
|         |       |                |       |
| 14.          |       | ***                 |       |
|         |       |                |       |
| 15.          |       | ***                 |       |

 

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**EXHIBIT C**

 

**ARJ PAYMENT TERMS**

 

Defined terms in this Exhibit C shall have the meanings assignedto such terms in Attachment B.

 

Section 1.01                                Block Hour Paymentto Mesaba

 

(a)                                  BlockHours Reports.  Mesaba shall provideto Northwest periodic reports with respect to the number of block hours of JetServices flown by Mesaba in accordance with the following schedule in eachcalendar month during the term of this Agreement:

 

| **Day  of the Month  Report Due** | ** ** | **Period Covered by Report** | ** ** |
|-----------------------------------|------------|------------------------------|------------|
| 22                                |       | 1st-15th of Month            |       |
| 4th Business Day                  |       | Complete Previous Month      |       |

 

(b)                                 PaymentSchedule.  Northwest shall remit toMesaba by wire transfer of immediately available funds by the close of businesson the 26th day of each calendar month (or the next banking day if the 26this a bank holiday), as a provisional payment, Mesaba’s Block Hour Payment forJet Services for the period covered by the Block Hours Report furnished byMesaba on the 22nd day of the month. Northwest shall remit to Mesaba by wire transfer of immediatelyavailable funds by the close of business on the 11th day of each month (or thenext banking day if the 11th is a bank holiday), as a final payment, Mesaba’sBlock Hour Payment for the preceding month, less the amount of the provisionalpayment made on the 26th day of the preceding month.  For purposes of this Section 1.01,Mesaba’s Block Hour Payment for any period will be computed by multiplying thethen applicable rate set forth in Attachment A attached hereto by the number ofblock hours reported in Mesaba’s Block Hours Report for such period for JetServices.  Adjustments arising fromNorthwest’s audit of the Block Hours Report may be made within forty-five (45)days following the end of each month.

 

Section 1.02                                Ownership CostReimbursement for Spare and Maintenance Aircraft.  Northwest shall pay to Mesaba in respect ofeach month an amount determined in accordance with the following formula:

 

***

 

The payment due to Mesaba pursuant to this Section 1.02 shall bepaid to Mesaba pursuant to Section 1.01(b) on the twenty-sixth (26th)day of the month immediately following the month with respect to which suchpayment is made.

 

Section 1.03                                IOP Program IncidentAdjustment.  If during any monthcommencing on or after October 1, 1999 during the term of this Agreement,Mesaba cancels one or more flights in connection with one or more IOP ProgramIncidents, Northwest shall pay to Mesaba an amount determined in accordancewith the following formula:

 

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***

 

Any payment due to Mesaba as a result of this Section 1.03 shallbe paid to Mesaba pursuant to Section 1.01(b) on the twenty-sixth (26th)day of the month immediately following the month in which such IOP ProgramIncident(s) occurred.

 

Section 1.04                                Incentives andPenalties.  Mesaba shall be subjectto certain performance incentives and penalties described in Sections 1.04(a),1.04(b) and 1.04(e) below (“Performance Criteria”) which shall beadded to or deducted from the Block Hour Payment.  If Mesaba exceeds any operational criterionan incentive payment shall be made by Northwest.  If Mesaba does not achieve the performancecriterion, then a penalty shall be charged against amounts owing toMesaba.  Any incentive payment or penaltycharge incurred by meeting or failing to meet Performance Criteria shall bemade in the wire transfer due on the 26th day of the month followingthe end of the Performance Period in question pursuant to Section 1.01(b) above.

 

(a)                                  CompletionFactor.  If Mesaba’s completionfactor (calculated in accordance with Section 2.10(b)(i) of theAgreement) is less than ***% fora Performance Period, Northwest shall receive from Mesaba $*** per enplaned Revenue Passengerduring the applicable Performance Period. If Mesaba’s completion factor is greater than ***% for a Performance Period, Northwest shall pay to Mesaba $*** per enplaned Revenue Passengerduring the applicable Performance Period.

 

(b)                                 MinimumOn-Time Reliability.  If Mesaba’sOn-Time Factor (calculated in accordance with Section 2.10(b)(ii) ofthe Agreement) is less than ***%for a Performance Period, Northwest shall receive from Mesaba $*** per enplaned Revenue Passengerduring the applicable Performance Period. If Mesaba’s On-Time Factor is equal to or greater than ***% for a Performance Period,Northwest shall pay to Mesaba $***per enplaned Revenue Passenger during the applicable Performance Period.  The parties acknowledge and agree that theforegoing performance levels are based on Northwest’s internal on-time goal of ***%. In the event Northwest’s on-time goal changes from ***%, the on-time performance levelsthat determine minimum reliability (in Section 2.10(b)(ii)), and penaltyand bonus levels (in Section 1.04 of this Exhibit C) will be modifiedto correspond to the change made by Northwest. Northwest and Mesaba will meet and confer on all components of on-timemetrics on an as-needed basis.

 

(c)                                  Reconciliationof Performance Standards.  For eachPerformance Period, Mesaba shall prepare a reconciliation of its actualperformance to the targeted performance. This reconciliation will be completed and delivered to Northwest on the22nd day of the month after the end of each Performance Period.  Northwest will remit or setoff any incentiveor penalty payment in the next wire transfer due to Mesaba.  Northwest will have the right to audit thereconciliation and shall report any discrepancies to Mesaba.  Any discrepancy not reported to Mesaba inwriting within sixty (60) days of the end of any Performance Period shall bedeemed waived.  The payment of anydiscrepancy from Mesaba shall be handled as a disputed amount in accordancewith Section 5.03 of the Agreement.

 

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(d)                                 Limitationson Incentives and Penalties.  In noevent shall the “net aggregate incentives” paid to Mesaba by Northwest or “netaggregate penalties” paid to Northwest by Mesaba during any calendar year pursuantto this Exhibit C exceed $***.  For the purposes of this Section 1.04(d),the difference between the sum of all incentive payments made by Northwestduring any calendar year to Mesaba pursuant to this Section 1.04 less theaggregate of all payments due to Northwest during the same calendar year byMesaba with Northwest for its failure to achieve the Performance Criteria shallbe the “net aggregate incentives” if the difference is a positive number andshall be “net aggregate penalties” if the difference is a negative number.

 

(e)                                  AdditionalPerformance Criteria.  During theterm of this Agreement, Northwest may introduce other performance criteria forMesaba’s operations pursuant to this Agreement. The parties agree that upon the introduction of such additionalperformance goals for Northwest’s operations, they will meet to develop similarperformance targets for Mesaba, taking into account the differences inoperations between the two companies, and shall use their best commerciallyreasonable efforts to develop a system of incentives and penalties for Mesaba’sperformance with respect thereto in a manner consistent with the performancestandards agreed to herein.

 

Section 1.05                                Annual Payment withRespect to the Margin.

 

(a)                                  Calculationof the Margin.  Not later than ninety(90) days following the end of each fiscal year of Mesaba ending during theterm of this Agreement, Mesaba shall calculate and deliver to Northwest its *** for Jet Services provided underthis Agreement for the fiscal year then ended (the “Margin”) by dividing (x) *** by (y) ***.  The result shall beexpressed as a decimal rounded to the fourth place (e.g., .111171 shall beexpressed as .1112).  The calculationshall be derived from Mesaba’s audited financial statements for such fiscalyear, shall be determined in accordance with GAAP, and shall take into account ***; provided, however, in no eventshall the amount of *** used tocalculate *** exceed $*** in the first such fiscal year orsuch amount adjusted for any increase in the PPI occurring during anysubsequent fiscal year.

 

(b)                                 MarginPayment.  If the Margin is greaterthan *** but is less than orequal to ***, Northwest shallreceive from Mesaba an amount determined as follows:

 

***

 

If the Margin is greater than ***,Northwest shall receive from Mesaba an amount determined as follows:

 

***

 

The amount payable by Mesaba pursuant to this Section 1.05(b) isthe “Margin Payment.”  Northwest shallsetoff any Margin Payment in the next wire transfer due to Mesaba.

 

(c)                                  Auditof the Margin.  Northwest will havethe right to audit the calculation of the Margin and the Margin Payment, andshall report any disputes to Mesaba.  Anydispute not

 

C-3

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reported to Mesaba in writing within sixty (60) days of the receipt ofthe Margin calculation by Northwest shall be deemed waived.  The payment in respect of any dispute shallbe handled as a disputed amount in accordance with Section 5.03 of theAgreement.

 

Section 1.06                                Fuel.  With respect to the Jet Services operated byMesaba pursuant to this Agreement, Northwest shall provide or cause to beprovided, at Northwest’s sole expense, fuel for the Aircraft and into planefueling services.  Mesaba shall operatethe Avro Regional Jet Aircraft in accordance with all manufacturer and vendorstandards and requirements for optimal fuel burn performance and shall promptlyremedy any operating factors that cause or contribute to fuel burn in excess ofsuch optimal burn performance.  Mesabashall provide to Northwest such fuel burn information as is necessary ordesirable to allow Northwest to monitor compliance with any manufacturer orvendor agreement.

 

Section 1.07                                Property Taxes.  Northwest will reimburse Mesaba for propertytaxes paid by Mesaba on the Aircraft in an amount not to exceed USD$*** per Aircraft per month.

 

Section 1.08                                Weight and BalancePayment.  Northwest will pay MesabaUSD$*** per month for weight andbalance services performed by Mesaba with respect to the Aircraft, and suchpayment shall annually be adjusted for CPPI.

 

Section 1.09                                Airport Fees.  Mesaba shall pay all Airport Landing Feesassociated with Scheduled Flights using the Aircraft, and Northwest shallreimburse Mesaba for such fees in a timely manner.

 

C-4

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**Attachment A**

 

**Block Hours Payment Rate and Adjustments**

 

A.                                   The Block HoursPayment Rate

 

***

 

The Block Hours Payment Rate shall be interpolated based on theforegoing schedule when scheduled ***is between two ***.

 

B.                                     Adjustments for ***

 

The calculation of the Block Hour Payment Rate is based upon an ***. The Block Hour Payment Rate shall be adjusted to reflect *** in accordance with the followingformula:

 

***

 

C.                                     Adjustments basedon the Producer Price Index:

 

On January 1 of each year during the term of this Agreementbeginning on January 1, 2006, the portion of the Block Hours Payment Rate *** will be adjusted for the followingtwelve (12) months by increasing the then current portion of the Block HourPayment Rate *** by CPPI.  The portion of the Block Hours Payment Rate *** shall be determined as follows:

 

***

 

C-5

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**Attachment B**

 

**Definitions**

 

For purposes of this Exhibit C, the following terms are defined asset forth below.

 

“Aircraft” shall mean up to thirty-six (36) Avro Regional Jetaircraft which are operated by Mesaba pursuant to this Agreement.

 

“Airport Landing Fees” shall mean all landing fees, custom fees,airport user fees and assessments and amounts payable or assessed for joint orcommon use facilities to the extent such fees and assessments are attributableto or result from Jet Services.

 

“Block Hour Payment” shall mean the payment to be made pursuantto Section 1.01, the amount of which is determined in accordance withAttachment A attached hereto.

 

“Block Hours Report” shall mean the reports to be prepared byMesaba pursuant to Section 1.01(a).

 

“CPPI” means the percent increase, if any, in the PPI, whichincrease occurred during the immediately preceding calendar year, defined as(the simple average of the monthly PPI figures from the prior calendar year/thesimple average of the monthly PPI figures from two years prior)-1, but in noevent in excess of *** and in noevent less than ***.

 

“GAAP” means generally accepted accounting practice andprinciples at the time prevailing in the United States for companies engaged inbusinesses similar to that of Mesaba, consistently applied.

 

“IOP Program Incidents” shall mean Northwest’s request thatMesaba cancel one or more Scheduled Flights as a result of Northwest’sinitiation of its Irregular Operating Procedures Program.

 

“Jet Services” shall mean the provisioning by Mesaba toNorthwest of Scheduled Flights using the Aircraft in accordance with thisAgreement.

 

“Maintenance Aircraft” shall mean one Aircraft, unless bothMesaba and Northwest agree that it shall mean *** Aircraft.

 

“Performance Period” shall mean each six (6) month periodending on a June 30 or December 31 occurring during the term of thisAgreement.

 

“PPI” means Producer Price Index for Commodities, Item Finished Goods- not seasonably adjusted, published by the United States Department of Labor,Bureau of Labor Statistics, and, if no longer published, any comparablesuccessor index selected by Northwest.

 

C-6

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“Revenue Passenger” means a revenue passenger flown on aScheduled Flight or a Charter Flight.

 

“Scheduled Aircraft” shall mean with respect to any month thetotal number of Aircraft which are scheduled to operate Scheduled Flightspursuant to this Agreement during such month; without limiting the foregoing, (i) SpareAircraft and Maintenance Aircraft during the time period an Aircraft has suchstatus shall not be counted as a Scheduled Aircraft and (ii) if during aportion of a month an Aircraft is a Maintenance Aircraft or Spare Aircraft,such Aircraft shall be counted as a Scheduled Aircraft as a fraction, thenumerator of which shall be the number of days during such month such Aircraftis scheduled to operate Scheduled Flights and the denominator of which shall bethe number of days in the applicable month, expressed as decimal rounded to thesecond place (e.g., 8/30 shall be expressed as 0.27).

 

“Scheduled Flights” shall mean (i) revenue passengerflights operated using the Aircraft which, regardless of frequency, are heldout to the public and published in the customary and applicable schedule distributionsystems, such as the OAG, or published by Northwest in its own system timetables or (ii) any Northwest scheduled charter flight operated using theAircraft.

 

“Spare Aircraft” shall mean one Spare Aircraft, unless bothMesaba and Northwest shall agree that it means *** Spare Aircraft.

 

C-7

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**EXHIBIT D**

 

**SAAB PAYMENT TERMS**

 

Defined terms in this Exhibit D shall have the meanings assignedto such terms in Attachment C.

 

Section 1.01                                ASM/PassengerPayment to Mesaba.

 

(a)                                  ASM/PassengerReports.  Mesaba shall provide toNorthwest periodic reports with respect to the number of actual completed ASMsand enplaned Revenue Passengers (each in respect of Regional Airline Services)in accordance with the following schedule in each calendar month duringthe term of this Agreement:

 

| **Day  of the Month  Report Due** | ** ** | **Period Covered by Report** | ** ** |
|-----------------------------------|------------|------------------------------|------------|
| 22                                |       | 1st-15th of Month            |       |
| 4th Business Day                  |       | Complete Previous Month      |       |

 

(b)                                 PaymentSchedule.  Northwest shall remit toMesaba by wire transfer of immediately available funds by the close of businesson the 26th day of each calendar month (or the next banking day if the 26this a bank holiday), as a provisional payment, Mesaba’s ASM/Passenger Paymentfor the period covered by the ASM/Passenger Report furnished by Mesaba on the22nd day of the month.  Northwest shallremit to Mesaba by wire transfer of immediately available funds by the close ofbusiness on the 11th day of each month (or the next banking day ifthe 11th is a bank holiday), as a final payment, Mesaba’sASM/Passenger Payment for the preceding month, less the amount of theprovisional payment made on the 26th day of the preceding month,less the Offset Amount.  For purposes ofthis Section 1.01, Mesaba’s ASM/Passenger Payment for any period will beequal to (i) the then applicable Fleet Adjusted ASM Rate multiplied by thenumber of actual, completed ASMs reported in Mesaba’s ASM/Passenger Report forsuch period for Regional Airline Services plus (ii) the then applicablePassenger Stipend Rate multiplied by the number of enplaned Revenue Passengersreported in Mesaba’s ASM/Passenger Report for such period for Regional AirlineServices.  Adjustments arising fromNorthwest’s audit of the ASM/Passenger Report may be made within forty-five(45) days following the end of each month.

 

### (c)                                  PassengerAmenities.  With respect to ScheduledFlights, Mesaba agrees to provide passenger amenities, including, withoutlimitation, denied boarding compensation, which Northwest provides under Rule 245of the Domestic General Rules No. 1 issued by Airline TariffPublishing Co. and ATA Resolution No. 120.20 or pursuant to any similarcontractual arrangement now existing or hereafter in effect or applicable toNorthwest.  In any Mesaba Service City orHub City, Mesaba agrees (i) to handle oversold Scheduled Flights and thepayment of denied boarding compensation in accordance with Northwest’s standardpolicies and procedures, (ii) to pay the full cost of providing passengeramenities (either directly to the affected passengers or to Northwest asreimbursement for the amounts paid by Northwest to such passengers, providedthat Northwest provides Mesaba with sufficient detail and supportingdocumentation to allow Mesaba to verify the invoiced amount) with the exceptionof denied

 

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### boarding compensation resultingfrom inventory oversales or other actions of Northwest, and (iii) toreport all denied boarding data to Northwest via both the standard NorthwestTicket Agent Report (“TAR”) and the standard Northwest Yield Management FlightClose-Out Denied Boarding Mask (“MASK”). In any Mesaba Service City or Hub City, for denied boarding compensationresulting from inventory oversales or the actions of Northwest, Mesaba will paythe appropriate amount of denied boarding compensation to the affectedpassengers and will invoice Northwest for such amount pursuant to Section 5.03of the Agreement.  Any such invoice willinclude sufficient detail and supporting documentation to allow Northwest toverify the invoiced amount. Notwithstanding the foregoing, Mesaba shall be responsible for anydiscrepancy between the TAR and the MASK, and Northwest will invoice Mesaba forany amounts due based on reconciliation of those two reports; provided thatNorthwest shall invoice Mesaba at the current applicable breakage percentagesused by Northwest in its accounting for denied boarding compensation.  In Northwest Service Cities, Northwest willprovide all passenger amenities, including but not limited to baggage delivery,at its sole cost.

###  

(d)                                 DestinationBy Other Means.  With respect to theRegional Airline Services, if Mesaba transports a Revenue Passenger to his orher destination by another means (bus, train, taxi, etc.) due to a flightcancellation, Northwest shall reimburse Mesaba for ***.  Mesaba shall includesuch reimbursement request in its ASM/Passenger Report pursuant to Section 1.01(a) andpayment of the reimbursement amount shall be included with the next wiretransfer in accordance with Section 1.01(b).  Mesaba shall use its best efforts to minimizethe transportation of passengers by other means and the costs associatedtherewith.

 

Section 1.02                                ASM and ***.

 

(a)                                  ***.  The ***shall be determined in accordance with the following formula:

 

***

 

(b)                                 ***.  The ***shall be determined on a monthly basis in accordance with the followingformula:

 

***

 

Attachment B sets forth an example of the calculation of the ***.

 

(c)                                 ***.  For any quarter during the term of thisAgreement, where Mesaba’s ***,the *** for such *** shall be determined in accordancewith the following formula:

 

***

 

For the purposes of this Section 1.02(c), the followingdefinitions shall also apply:

 

***

 

Attachment B sets forth an example of the calculation of the ***. Any adjustment to the payment due to Mesaba as a result of thedifference between the *** andthe applicable *** shall

 

D-2

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be ***.  The percentage factors by which *** and *** are multiplied may be amended from time to time upon theagreement of Northwest and Mesaba.

 

(d)                                ***.  The ***shall be $*** for the twelvemonth period ending March 31, 2006, and thereafter the *** shall increase $*** for each subsequent twelve (12)month period.  ***  As of the EffectiveDate, the *** includes $*** as compensation for ***, and $*** as compensation for ***.

 

Section 1.03                                Weather RelatedAdjustment.  If during the firstquarter of any calendar year ***due to weather cancellations, ***:

 

***

 

Mesaba shall report the number of *** during the first quarter on or before the fifteenth (15th)day of May.  Any *** as a result of this Section 1.03 shall be ***.

 

Section 1.04                                IOP Program IncidentAdjustment.  If during any quartercommencing on or after October 1, 1999 during the term of this Agreement,Mesaba cancels one or more flights in connection with one or more IOP ProgramIncidents, ***:

 

***

 

Any *** as a result ofthis Section 1.04 shall be ***.

 

Section 1.05                                Incentives andPenalties.  Mesaba shall be subjectto certain performance incentives and penalties described in Sections 1.05(a),1.05(b), 1.05(c), 1.05(d), 1.05(e) and 1.05(f) (“Performance Criteria”)which shall be added to or deducted from the ASM/Passenger Payment.  If Mesaba exceeds any operational criterionan incentive payment shall be made by Northwest.  If Mesaba does not achieve the performancecriterion, then a penalty shall be charged against amounts owing toMesaba.  Any incentive payment or penaltycharge incurred by meeting or failing to meet Performance Criteria shall bemade in the wire transfer due on the 26th day of the month followingthe end of the Performance Period in question pursuant to Section 1.01(b),except that any amount due with respect to the Performance Criteria forcustomer complaints shall be made in the wire transfer on the 26thday of the second month following the end of the Performance Period in questionpursuant to Section 1.01(b).

 

(a)                                  CompletionFactor.  If Mesaba’s completionfactor (calculated in accordance with the Section 2.10(c)(i) of theAgreement) is less than ***% fora Performance Period, Northwest shall receive from Mesaba $*** per enplaned Revenue Passengerduring the applicable Performance Period. If Mesaba’s completion factor is greater than ***% for a Performance Period, Northwest shall pay to Mesaba $*** per enplaned Revenue Passengerduring the applicable Performance Period, and if Mesaba’s completion factor isgreater than ***% for suchPerformance Period, Northwest shall also pay to Mesaba an additional $*** per enplaned Revenue Passengerduring such Performance Period.

 

D-3

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(b)                                 MinimumOn-Time Reliability.  If Mesaba’sOn-Time Factor (calculated in accordance with the Section 2.10(c)(ii) ofthe Agreement) is less than ***%for a Performance Period, Northwest shall receive from Mesaba $*** per enplaned Revenue Passengerduring the applicable Performance Period. If Mesaba’s On-Time Factor is equal to or greater than ***% for aPerformance Period, Northwest shall pay to Mesaba $*** per enplaned RevenuePassenger during the applicable Performance Period, and if Mesaba’s On-TimeFactor is greater than ***% for such Performance Period, Northwest shall alsopay to Mesaba an additional $*** per enplaned Revenue Passenger during suchPerformance Period.  The partiesacknowledge and agree that the foregoing performance levels are based onNorthwest’s internal on-time goal of ***%. In the event Northwest’s on-time goal changes from ***%, the on-timeperformance levels that determine minimum reliability (in Section 2.10(c)(ii) ofthe Agreement), and penalty and bonus levels (in Section 1.05(b) ofthis Exhibit D) will be modified to correspond to the change made byNorthwest.  Northwest and Mesaba willmeet and confer on all components of on-time metrics on an as-needed basis.

 

(c)                                  MishandledLuggage Factor.  If Mesaba’sincidences of mishandled luggage (calculated in accordance with Section 2.10(c)(iii) ofthe Agreement) is greater than *** per *** enplaned Revenue Passengers for aPerformance Period, Northwest shall receive from Mesaba $*** per enplaned RevenuePassenger during the applicable Performance Period.  If Mesaba’s incidences of mishandled luggageis less than *** per *** enplaned Revenue Passengers for a Performance Period,Northwest shall pay to Mesaba $*** per enplaned Revenue Passenger during theapplicable Performance Period, and if Mesaba’s incidences of mishandled luggageis less than *** per *** passengers for such Performance Period, Northwestshall also pay to Mesaba additional $*** per enplaned Revenue Passenger duringsuch Performance Period.

 

(d)                                 CustomerComplaints Factor.  If Mesaba’snumber of customer complaints (calculated in accordance with the Section 2.10(c)(iv) ofthe Agreement) is greater than *** per *** enplaned Revenue Passengers for aPerformance Period, Northwest shall receive from Mesaba $*** per enplaned RevenuePassenger during the applicable Performance Period.  If Mesaba’s number of customer complaints isless than *** per *** enplaned Revenue Passengers, Northwest shall pay toMesaba $*** per enplaned Revenue Passenger, and if Mesaba’s number of customercomplaints is less than *** per *** enplaned Revenue Passengers for suchPerformance Period, Northwest shall also pay to Mesaba an additional $*** perenplaned Revenue Passenger during such Performance Period.

 

(e)                                 Reconciliation ofPerformance Standards.  For eachPerformance Period, (i) Mesaba shall prepare a reconciliation of itsactual performance to the targeted performance with respect to its completionfactor and its on-time factor and (ii) Northwest shall prepare areconciliation of Mesaba’s actual performance to targeted performance withrespect to Mesaba’s incidences of mishandled luggage and its number of customercomplaints.  Such reconciliations will becompleted and delivered to the other within thirty (30) days after the end ofeach Performance Period.  Northwest andMesaba will have the right to audit the reconciliation prepared by the otherand shall report any discrepancies to the other.  Any discrepancy not reported in writing withinsixty (60) days of the end of any Performance Period shall be deemedwaived.  The payment of any discrepancyfrom Mesaba shall be handled as a disputed amount in accordance with Section 5.03of the Agreement.

 

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(f)                                   AdditionalPerformance Criteria.  During theterm of this Agreement, Northwest may propose other performance criteria forMesaba’s operations pursuant to this Agreement. The parties agree that they will meet upon the introduction of such additionalperformance goals for Northwest’s operations, to develop similar performancetargets for Mesaba, taking into account the differences in operations betweenthe two companies, and shall use their best commercially reasonable efforts todevelop a system of incentives and penalties for Mesaba’s performance withrespect thereto in a manner consistent with the performance standards agreed toherein.

 

Section 1.06                                Annual Payments withRespect to the ***.

 

(a)                                  Calculationof the ***.  Not later than ninety(90) days following the end of each fiscal year of Mesaba ending during theterm of this Agreement, Mesaba shall calculate and deliver to Northwest its ***for Regional Airline Services provided under this Agreement for the fiscal yearthen ended *** and its *** for Regional Airline Services provided under thisAgreement for the fiscal year then ended *** by dividing (x) *** by (y) ***.  The *** and the *** shall be expressed as adecimal rounded to the fourth place.  Thecalculation of the *** and the *** shall be derived from Mesaba’s auditedfinancial statements for such fiscal year and shall be determined in accordancewith GAAP.  Attachment B sets forth anexample of the calculation of the ***.

 

(b)                                 ***.  If the *** for such fiscal year is less thanthe applicable *** determined as follows:

 

***

 

(c)                                  ***.  If the *** is greater than *** determined asfollows:

 

***

 

(d)                                 Auditof the ***.  Northwest shall have theright to audit the calculation of the ***, and shall report any disputes toMesaba.  Any dispute not reported toMesaba in writing within thirty (30) days of the receipt of the Margincalculation by Northwest shall be deemed waived.  The payment in respect of any dispute shallbe handled as a disputed amount in accordance with Section 5.03 of theAgreement.

 

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Section 1.07                                Fuel.  Northwest shall provide to Mesaba thefollowing administrative services:  (i) Northwest’snegotiation of fuel supply, fuel storage and into-plane service contracts for theAircraft, (ii) payment of all into-plane and fuel invoices in respect ofthe Aircraft, (iii) monthly reconciliations with respect to fuel usage,inventory and purchases, and (iv) monthly reports with respect to fuelusage by station, Aircraft type and Aircraft. Mesaba shall pay to Northwest each month during the term of thisAgreement $*** plus an amount equal to $*** multiplied by the number of gallonsof aircraft fuel used by Mesaba during such month.  Northwest shall bill Mesaba on a monthlybasis and payment shall be made in accordance with Section 5.03 of theAgreement.  Mesaba shall have the rightto audit on a semi-annual basis the determination of the number of gallons ofaircraft fuel used and shall report any disputes to Northwest.  Any dispute not reported to Northwest inwriting within ninety (90) days of the conclusion of such audit shall be deemedwaived.

 

Section 1.08                                Deicing and Glycol.  Mesaba shall provide, ***, all deicingservices for its Aircraft at the Hub Cities and the Primary Service Cities andNorthwest shall provide, ***, all deicing services at Complementary ServiceCities.  Northwest and Mesaba shallnegotiate a separate agreement whereby *** will provide glycol and back-updeicing services at the Hub Cities to *** and *** on a monthly basis inaccordance with Section 5.03 of the Agreement for the *** of glycol usedand deicing services provided.  If theamount of glycol used cannot be calculated, then such invoices shall reflectestimates based on average glycol use by Aircraft type and number ofapplications.

 

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**AttachmentA**

 

***

 

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**Attachment B**

 

**Sample Calculations**

 

***

 

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**Attachment C**

 

**Definitions**

 

For purposes of this Exhibit D, the following terms are defined asset forth below.

 

“Aircraft” shall mean up to sixty-three Saab 340 turbopropaircraft which are operated by Mesaba pursuant to this Agreement.

 

“ASM” means an available seat mile, i.e. one aircraft seatscheduled to be flown one statute mile on a Scheduled Flight.

 

“ASM/Passenger Payment” means the payment to be made pursuant toSection 1.01(b) of this Exhibit D.

 

“ASM/Passenger Report” means the reports to be prepared byMesaba pursuant to Section 1.01(a) of this Exhibit D.

 

“***” means the amount determined in accordance with Section 1.02(a) ofthis Exhibit D.

 

“***” shall mean the *** set forth on Attachment A.

 

“CPPI” means the percent increase, if any, in the PPI, whichincrease occurred during the immediately preceding Fiscal Year, defined as (thesimple average of the monthly PPI figures from the prior Fiscal Year/the simpleaverage of the monthly PPI figures from two Fiscal Years prior)-1, but in noevent in excess of *** and in no event less than ***.

 

“Fiscal Year” means the twelve-month period beginning April 1stof each year and ending March 31st of the following year.

 

“***” means the amount determined in accordance with Section 1.02(b) ofthis Exhibit D.

 

“GAAP” means generally accepted accounting practice andprinciples at the time prevailing in the United States for companies engaged inbusinesses similar to that of Mesaba, consistently applied.

 

“Hub Cities” means Minneapolis/St. Paul, Minnesota (“MSP”);Detroit, Michigan (DTW); and Memphis, Tennessee (MEM).

 

“IOP Program Incident” means Northwest’s request that Mesabacancel one or more Scheduled Flights as a result of Northwest’s initiation ofits Irregular Operating Procedures Program.

 

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“Offset Amount” means (i) for purposes of determining thefinal payment in respect of each month in 1999, $***, and (ii) forpurposes of determining the final payment in respect of each month in a yearafter 1999, an amount equal to the prior year’s Offset Amount multiplied by thesum of one plus the percent increase, if any but not decrease, in the averageannual PPI for the previous year, which increase occurred from January 1of the prior year to January 1 of the applicable year.

 

“***” means the amount determined in accordance with Section 1.02(d) ofthis Exhibit D.

 

“Performance Period” means each six (6) month period endingon a June 30 or December 31 occurring during the term of thisAgreement.

 

“PPI” means Producer Price Index for Commodities, Item Finished Goods– not seasonally adjusted, published by the United States Department of Labor,Bureau of Labor Statistics, and, if no longer published, any comparablesuccessor index selected by Northwest.

 

“***” means the amount determined in accordance with Section 1.02(c) ofthis Exhibit D.

 

“Regional Airline Services” means the provisioning by Mesaba toNorthwest of Scheduled Flights using the Aircraft in accordance with thisAgreement.

 

“Scheduled Flights” means revenue passenger flights (other thancharters) operated using the Aircraft which, regardless of frequency, are heldout to the public and published in the customary and applicable schedule distributionsystems, such as the OAG, or published by Northwest in its own systemtimetables.

 

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**EXHIBIT E**

 

**CRJ PAYMENT TERMS**

 

Unless otherwise indicated, all section references in this Exhibit Erefer to the corresponding section of this Exhibit E.

 

Section 1.01.

 

### (d)                                 Reports.  Mesaba shall provide to Northwest periodicreports with respect to estimated and actual: Direct Expenses, Aircraft Days,Block Hours, and Cycles of Regional Airline Service and Non-Scheduled Flights flownby Mesaba with CRJ-200/440 Aircraft (each in respect of Scheduled Flights,Charter Flights and Non-Scheduled Flights) in accordance with the following schedule ineach calendar month during the term of this Agreement:

 
| **Day  of Month Report Due** | ** ** | **Information Included in Report**                                                                                                                               |
|------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |       |                                                                                                                                                             |
| 25                           |       | Estimated  Block Hours and Cycles for 1st – 15th of the following  month and estimated Direct Expenses and Aircraft Days for the entire  following month    |
|                         |       |                                                                                                                                                             |
| 4th Business Day             |       | Estimated  Block Hours and Cycles for the 16th to the end of the current  month and actual Aircraft Days, Block Hours and Cycles for the entire  preceding month |
|                         |       |                                                                                                                                                             |
| 14                           |       | Actual  Direct Expenses for the entire preceding month                                                                                                           |

 

### (b)                                 PaymentSchedule.  Northwest shall remit toMesaba by wire transfer of immediately available funds by the close of businesson the 1st day of each calendar month (or the next banking day if the 1st is abank holiday), as a pre-payment, Mesaba’s estimated Block Hour Payment, CyclePayment, Aircraft Days Payment, Monthly Payment,  Direct Expense Payment, associated MarginPayment and any payments due pursuant to Section 1.04 below for the periodcovered by the report furnished by Mesaba on the 25th day of the precedingmonth.

###  

Northwestshall remit to Mesaba by wire transfer of immediately available funds by theclose of business on the 16th day of each month (or the next banking day if the16th is a bank holiday), as a pre-payment Mesaba’s estimated Block HourPayment, Cycle Payment, any payments due pursuant to Section 1.04, andassociated Margin Payment for the period covered by the report furnished byMesaba on the 4th business day of the month.  In addition, the payment due on the 16thof the month shall include an adjustment to true-up the Block Hour Payment,Cycle Payment, Aircraft Day Payment, Direct Expense Payment and Margin Payment madein the preceding month to reflect actual information for the entire month withrespect to Block Hours, Cycles, Aircraft Days, Direct Expenses and MarginPayment.  Any underpayment or

 

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overpaymentfor the prior month will be treated as an increase or decrease to the paymenton the 16th of the current month.

 

Northwestshall review the estimates of Block Hours, Cycles, Direct Expenses and AircraftDays for reasonableness.  To the extentestimates are deemed unreasonable, Mesaba, upon request from Northwest, shallprovide supporting documentation for the estimates.

 

For purposesof this Section 1.01, the above-referenced payments to Mesaba shall becalculated as follows for any applicable period:

 

##### the Block Hour Payment, which will be equal to the then applicableBlock Hour Rate multiplied by Block Hours provided pursuant to Section 1.01(a) for such period for Scheduled Flights, Non-Scheduled Flights andCharter Flights, plus

#####  

##### the Cycle Payment, which will be equal to the then applicable CycleRate multiplied by Cycles provided pursuant to Section 1.01(a) forsuch period for Scheduled Flights, Non-Scheduled Flights and Charter Flights,plus

#####  

the AircraftDays Payment, which will be equal to the then applicable Aircraft Days Ratemultiplied by Aircraft Days provided pursuant to Section 1.01 (a) forsuch period for Scheduled Flights, Non-Scheduled Flights and Charter Flights,plus

 

the MonthlyPayment, which will be equal to the then applicable Monthly Rate, plus

 

##### the Direct Expense Payment, which will be determined in accordance withSection 1.03 below, plus

#####  

##### the IOP Payment, if any, which will be determined in accordance with Section 1.05below, plus

#####  

##### the Monthly Margin Payment, which will be determined in accordance withSection 1.06.

#####  

Adjustmentsarising from Northwest’s audit of Block Hours, Cycles, Direct Expenses orAircraft Days may be made within forty-five (45) days following the end of the fiscalyear.  Any reference to the 30thday of a month in this Section 1.01 will be deemed to mean the last day ofFebruary with respect to that month.

 

Notwithstandingthe foregoing, the only payment to Mesaba associated with operations in August 2005and September 2005 will be the Direct Expense payment for Equipment RentalExpense pursuant to Section 1.03(a) of this Exhibit E and the associatedMargin Payment pursuant to Section 1.06 of this Exhibit E.

 

Section 1.02                                Payment Rates

 

### (a)                                  BlockHour Rate.  The Block Hour Rate forthe time period through March 31, 2006 shall be $***. For each 12-monthperiod beginning with April 1, 2006, the Block Hour

 

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### Rate shall be equal to theBlock Hour Rate for the immediately preceding 12-month period multiplied by ***.

###  

### (b)                                 CycleRate.  The Cycle Rate for the timeperiod through March 31, 2006 shall be $***.  For each 12-month period beginning with April 1,2006, the Cycle Rate shall be equal to the Cycle Rate for the immediatelypreceding 12-month period multiplied by ***.

###  

### (c)                                  AircraftDay Rate.  The Aircraft Days Rate foras delivered CRJ-200/440 Aircraft *** through ***, and CRJ-200/440 Aircraft ***up to *** shall be $***.  The AircraftDays Rate for as delivered CRJ-200/440 Aircraft *** through *** shall be $***.  These rates are applicable for the timeperiod through March 31, 2006.  Foreach 12-month period beginning with April 1, 2006, the Aircraft Days Rateshall be equal to the Aircraft Days Rate for the immediately preceding 12-monthperiod multiplied by ***.

###  

### (d)                                 MonthlyRate.  The Monthly Rate for the timeperiod through March 31, 2006 shall be $***.  For each 12-month period beginning with April 1,2006, the Monthly Rate shall be equal to the Monthly Rate for the immediatelypreceding 12-month period multiplied by ***.

###  

Section 1.03                                Direct Expenses.  Northwest will reimburse Mesaba for thefollowing accrued or paid expenses (“Direct Expenses”) at the Direct Cost toMesaba.  Accruals shall be made inaccordance with GAAP.  At the request ofNorthwest, Mesaba will be responsible for providing Northwest with a copy ofall third party invoices and evidence of payment needed to determine theexpense amount and the timeliness of payment.

 

### (a)                                  EquipmentRental Expense.  Equipment RentalExpense will be reimbursed less any performance guarantee payments or creditsthat Mesaba receives from the manufacturers.

###  

### (b)                                 Enginemaintenance.  The CRJ 200/440 Aircraftengine maintenance performed pursuant to Section 3.07 of the Agreement lessany warranty payments or credits that Mesaba receives, including but notlimited to those from Northwest-selected vendors.  In addition, the cost of materials andcomponents used in connection with unscheduled off-wing maintenance performedby Mesaba (not including maintenance or replacement of line replaceable unitsor QEC items) will be reimbursed to Mesaba as a Direct Expense.  Mesaba shall provide to Northwest, uponreasonable request, documentation detailing the unscheduled event and cost ofeach of the components.  If Northwest andMesaba agree at any time to have such engine work performed by a vendor otherthan General Electric, the reimbursement amount will be adjusted to take intoaccount the new arrangement. Notwithstanding the foregoing, Northwest will not reimburse Mesaba forengine maintenance performed pursuant to Section 3.07 of the Agreementwhich is accomplished unreasonably in advance of the time such maintenance isrequired in accordance with the Maintenance Program or which is accomplishedfor the sole purpose of satisfying return conditions under the Lease, whichwill be split 50/50 pursuant to Section 3.02(c) of the Agreement.

###  

### (c)                                  Airframemaintenance.  The CRJ 200/440airframe maintenance performed pursuant to Section 3.07 of the Agreement lessany warranty payments or credits that Mesaba receives, including but notlimited to those from Northwest-selected vendors.  If Northwest and Mesaba agree at any time tohave the maintenance work performed by a vendor other than

 

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### Bombardier, the reimbursementamount will be adjusted to take into account the new arrangement.  Notwithstanding the foregoing, Northwest willnot reimburse Mesaba for airframe maintenance performed pursuant to Section 3.07of the Agreement which is accomplished unreasonably in advance of the time suchmaintenance is required in accordance with the Maintenance Program or which isaccomplished for the sole purpose of satisfying return conditions under theLease, *** pursuant to Section 3.02(c) of the Agreement.

###  

### (d)                                 CRJ-200/440Aircraft auxiliary power unit (APU) maintenance expense less any warrantypayments or credits that Mesaba receives with respect to any of the foregoingexpenses.

###  

### (e)                                  CRJ-200/440Aircraft avionics maintenance expense less any warranty payments or creditsthat Mesaba receives with respect to any of the foregoing expenses.

###  

### (f)                                    CRJ-200/440Aircraft landing gear overhaul expense less any warranty payments or creditsthat Mesaba receives with respect to any of the foregoing expenses.

###  

(g)                                 AirportLanding Fees.  For the avoidance ofdoubt, Airport Landing Fees do not include airport joint or common use fees forRegional Airline Services operated by Mesaba with CRJ-200/440 Aircraft.

 

(h)                                 Fuelexpense determined in accordance with Section 1.04 below.

 

Notwithstandingthe foregoing, Northwest will not reimburse Mesaba for any late paymentcharges, penalties and/or fees which Mesaba incurs in connection with paymentof the Direct Expenses listed above.

 

Section 1.04                                Fuel

 

(a)                                  FuelAdministration.  Mesaba will join thefuel consortium at a Service City upon Northwest’s request.  Northwest will provide to Mesaba thefollowing fuel-related administrative services: (i) negotiation of fuel supply, fuel storage and into-plane servicecontracts for the CRJ-200/440 Aircraft, (ii) payment of all into-plane andfuel invoices in respect of the CRJ-200/440Aircraft, (iii) monthlyreconciliations (by the 15th of the following month) with respect to fuelboarded, inventory and purchases, and (iv) monthly reports with respect tofuel boarded by station, flight and CRJ-200/440 Aircraft.

 

##### (b)                                 FuelPayment.  Mesaba will pre-pay forfuel for the 1st-15th of the month through a set-off ofthe amount due from the Section 1.01(b) wire transfer on the 1st ofthe month for which the prepay is occurring. Northwest will reimburse Mesaba for this pre-pay amount through the Section 1.01(b) wiretransfer on the 1st of the month. Likewise, Mesaba will pre-pay for fuel for the 16th-end ofthe month through a set-off of the Section 1.01(b) wire transfer onthe 16th of the month for which the prepay is occurring.  Northwest will reimburse Mesaba for thispre-pay amount through the Section 1.01(b) wire transfer on the 16thof the month.  By the 16th of thefollowing month, Northwest will reconcile the pre-paid fuel expense for thepreceding month with the actual expense (at a price, including into-plane feesand taxes, of $***/gallon, the “Fuel Price”), and charge or credit Mesaba withthe difference.  This month endadjustment for

 

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##### the preceding month will be handledvia the Section 1.01(b) wire transfer occurring the 16th day of thefollowing month through additional payment or set-off.

#####  

The pre-paywill be based on using half of Mesaba’s prior month actual boarded volume atthe Fuel Price.

 

Mesaba shallhave the right to audit on a semi-annual basis the determination of the numberof gallons of aircraft fuel boarded and payment of all into-plane and fuelinvoices in respect of the CRJ-200/440 Aircraft and shall report any disputesto Northwest.  Any dispute not reportedto Northwest within thirty (30) days of the conclusion of such audit shall bedeemed waived.

 

(c)                                  Mesaba’sReporting Procedures.  Mesaba willprovide to Northwest the following fuel administrative service assistance whereMesaba is responsible for ground handling the CRJ-220/440 Aircraft:  (i) timely Fuel Management System (“FMS”)data entry at Service Cities, including month-end reconciling to the fixed baseoperator (“FBO”) by the end of the second business day, (ii) FMS coveragewhen regular FMS person is on vacation, leave, etc., (iii) training newMesaba employees on FMS due to turnover, vacation, etc., (iv) addressingproblems at FBO regarding supply of fuel slips and bill of lading receiptsbefore involving the Northwest Fuel Department. Northwest’s Fuel Department shall have the right to audit on a monthlybasis the determination of the number of gallons of aircraft fuel boarded andfuel price paid and shall report any disputes to Mesaba.  Any dispute not reported to Mesaba withinthirty (30) days of the conclusion of such audit shall be deemed waived.

 

(d)                                 FuelBurn Review Procedures.  Northwestand Mesaba agree to review the fuel burn performance (defined as gallons perblock hour) of the CRJ-200/440 Aircraft for compliance with annual performancemeasures including, but not limited to:

 

(i)                                     PlannedFuel On Arrival (FOA)

 

(ii)                                  AuxiliaryPower Unit (APU) Usage

 

Mesaba will beresponsible for the development and setting of the annual performance measuretargets for the CRJ-200/440 Aircraft, each as defined in Attachment B, and anannual budgeted fuel burn rate expressed in gallons per block hour (“All-inRate”), in a timeframe consistent with the development of the annual operatingexpense budget of each party.  The All-inRate shall encompass all scheduled and non-scheduled burned gallons and includethe measures defined in (d)(i-ii) above and those measures the parties mayagree to subsequently add.  The annualtargets for the performance measures and All-in Rate will be subject toNorthwest’s review.  The parties agree towork in good faith to resolve any differences that may exist with respect tosetting annual targets.  In the eventagreement can not be reached on an FOA target, the target will be based on thethen-applicable Northwest Domestic FOA target. Additional performance measures may be identified and added at a futuredate by mutual agreement of the parties for purposes of reviewing the Aircraft’sannual fuel burn.  In the event data isnot yet available for a given measure, no annual target will be set.  The parties agree to use reasonable bestefforts in researching and collecting data for purposes of adding performancemeasures and cooperation may not be unreasonably withheld by either party.

 

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Not later thansixty (60) days following the end of the year for which the targets applied,Mesaba shall (i) deliver to Northwest the analysis and conclusion ofMesaba’s performance for the year then ended with respect to each of the performancemeasures and the All-in Rate, and (ii) provide Northwest with the dataused by Mesaba to determine variances to each of the performance measuretargets and the All-in Rate in a format specified by Northwest.  The analysis shall include, but not be limitedto, adjustment for changes in the operating schedule from the AnnualOperating Plan.  For example, adjustingplanned taxi time or average length of flight to actual experience for the yearcompleted.  Northwest shall have thirty(30) days from the receipt of Mesaba’s analysis to complete its review.  If it is determined that Mesaba exceeded oneor more of the targets for the annual performance measures, and the cause ofexceeding the targets was within the control of Mesaba, a fuel penalty shall beassessed per the formulas set forth in Attachment B (a “Fuel Burn PenaltyPayment”).  If it is mutually determinedby Mesaba and Northwest that Mesaba exceeded the budget for the All-in Rate,after adjusting for variances to target for the performance measures, and thecause of exceeding the budget was within the control of Mesaba, a fuel penaltyshall be assessed per the formula set forth in Attachment B (a “Fuel BurnPenalty Payment”).  Such Fuel Burn PenaltyPayment(s) shall be made in accordance with Section 5.03 of the Agreement.

 

Mesaba and Northwest agree to negotiate in good faith to set a goal forPlanned FOA and APU usage by January 2006, and performance measurement andcompliance with such goal (including any penalties associated therewith) shallbegin as of January 1, 2006.  Mesabaand Northwest shall, immediately following the Effective Date, begin collectingnecessary data to establish a goal for the All-in Rate, and such goal shall beset by January 1, 2007, at which time performance measurement andcompliance with such goal (including any penalties associated therewith) shallbegin.

 

Section 1.05                                IOP Program IncidentAdjustment.  If during any monthduring the term of this Agreement Mesaba cancels one or more Scheduled Flightsin connection with one or more IOP Program Incidents, *** an amount determinedin accordance with the following formula:

 

***

 

Section 1.06                                MonthlyMargin Calculation and Payment.

 

The monthlyMargin Payment for the time period through March 31, 2007 shall becalculated as follows:

 

***

 

EffectiveApril 1, 2007, the monthly Margin Payment shall be calculated as follows:

 

***

 

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Section 1.07                                Non-ScheduledFlight Refund.

 

With respectto each calendar year during the term of this Agreement, Northwest shall withinninety (90) days from the receipt of the final Block Hour Report and CycleReport received pursuant to Section 1.01 of this Exhibit E for theimmediately preceding year, calculate and notify Mesaba of the ratio of actualBlock Hours for Non-Scheduled Flights to actual Block Hours for ScheduledFlights and the ratio of actual Cycles for Non-Scheduled Flights to actualCycles for Scheduled Flights.  In theevent that either ratio exceeds ***, Mesaba shall remit to Northwest (through aset-off of the next wire transfer of amounts due pursuant to this Exhibit E)an amount equal to the following:

 

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RefundCalculation:

 

***

 

Section 1.08                                PerformanceLevels and Incentives/Penalties.

 

(a)                                  Withrespect to Scheduled Flights operated with CRJ-200/440 Aircraft, Mesaba shallbe subject to certain performance levels and incentives/penalties as describedin this Section 1.08(a) (“Performance Criteria”).  If Mesaba does/does not achieve theperformance criterion, then an incentive/penalty shall be applied to amountsowing to Mesaba, provided that the amount of the incentive/penalty for each ofthe Performance Criterion shall not exceed one (1) percentage point of thesum of the Block Hour Payment, Cycle Payment, Aircraft Days Payment, MonthlyPayment, Direct Expense Payment and IOP Payment, if any. Any incentive/penaltyincurred shall be paid or deducted in the wire transfer due on the 16th day ofthe month following the end of the Performance Period in question pursuant to Section 1.01(b) ofthis Exhibit E.  The applicableperformance levels and incentives/penalties are as follows:

 

##### (i)                                     CompletionFactor (calculated in accordance with Section 2.10 (a)(i) of theAgreement):

 
| ** **                             | ** ** | **Additional  Penalty** | ** ** | **Penalty**             | ** ** | **Current  Calendar  Year Goal  Percentage** | ** ** | **Incentives**                                              | ** ** | **Additional  Incentives**             | ** ** |
|----------------------------------------|------------|-------------------------|------------|-------------------------|------------|----------------------------------------------|------------|-------------------------------------------------------------|------------|----------------------------------------|------------|
| Performance Level                      |       | Less than goal less *** |       | Less than goal less *** |       | TBD                                          |       | Greater than or equal to goal but less than  *** above goal |       | Greater than or equal to goal plus *** |       |
| Penalty per enplaned Revenue Passenger |       | ***                     |       | ***                     |       | 0                                            |       | ***                                                         |       | ***                                    |       |

#####  

##### (ii)                                  On-TimeReliability Factors (calculated in accordance with Section 2.10(a)(ii) ofthe Agreement):

#####  

Departure **[(within zero minutes)]**

 
| ** **                             | ** ** | **Additional  Penalty** | ** ** | **Penalty**             | ** ** | **Current  Calendar  Year Goal  Percentage** | ** ** | **Incentives**                                             | ** ** | **Additional  Incentives**             | ** ** |
|----------------------------------------|------------|-------------------------|------------|-------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------|------------|----------------------------------------|------------|
| Performance Level                      |       | Less goal less ***      |       | Less than goal less *** |       | TBD                                          |       | Greater than or equal to goal but less than  goal plus *** |       | Greater than or equal to goal plus *** |       |
| Penalty per enplaned Revenue Passenger |       | ***                     |       | ***                     |       | 0                                            |       | ***                                                        |       | ***                                    |       |

 

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Arrival **[(within zero Minutes)]**

 
| ** **                             | ** ** | **Additional  Penalty** | ** ** | **Penalty**             | ** ** | **Current  Calendar  Year Goal  Percentage** | ** ** | **Incentives**                                             | ** ** | **Additional  Incentives**             | ** ** |
|----------------------------------------|------------|-------------------------|------------|-------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------|------------|----------------------------------------|------------|
| Performance Level                      |       | Less than goal less *** |       | Less than goal less *** |       | TBD                                          |       | Greater than or equal to goal but less than  goal plus *** |       | Greater than or equal to goal plus *** |       |
| Penalty per enplaned Revenue Passenger |       | ***                     |       | ***                     |       | 0                                            |       | ***                                                        |       | ***                                    |       |

 

### (b)                                 Reconciliationof Performance Standards.  For eachPerformance Period, (i) Northwest shall determine the total number ofenplaned Revenue Passengers on Scheduled Flights operated by Mesaba and (ii) Mesabashall prepare a reconciliation of its actual performance to the targetedperformance with respect to its completion factor and its on-time factor. Suchreconciliations will be completed and delivered to the other within thirty (30)days after the end of each Performance Period. Northwest and Mesaba will have the right to audit the reconciliationprepared by the other and shall report any discrepancies to the other.  Any discrepancy not reported in writingwithin sixty (60) days of the end of any Performance Period shall be deemedwaived.  The payment of in respect of anydiscrepancy shall be handled as a disputed amount in accordance with Section 5.03of the Agreement.

###  

### (c)                                  AdditionalPerformance Criteria.  During theterm of this Agreement, Northwest may propose other performance criteria forMesaba’s operations pursuant to this Agreement. The parties agree that they will meet upon the introduction ofadditional performance levels for Northwest’s operations, to develop similarperformance targets for Mesaba, taking into account the differences inoperations between the two companies, and shall use their best commerciallyreasonable efforts to develop a system of performance levels and penalties forMesaba’s performance with respect thereto in a manner consistent with theperformance standards agreed to herein.

###  

Section 1.09                                AviationInsurance.  In the event Mesabaobtains aviation insurance coverage as part of Northwest’s aviation insuranceplacement, the rates used to determine aircraft hull insurance and aviationliability insurance, including war risk liability and hull war risk insurance,shall be adjusted in a manner consistent with the rate changes experienced byNorthwest, when and if the rates are revised, whether it be calendar year orotherwise.

 

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**AttachmentA**

 

**Definitions**

 

For purposes of this Exhibit E, the following terms are defined asset forth below.  (Other defined termsare set forth in Article I of the Agreement).

 

“Aircraft Days” means a CRJ-200 or CRJ-440 Aircraft each dayafter such Aircraft has been placed in service by Mesaba and remains in servicefor Northwest (including non-scheduled Aircraft).  A CRJ-200/440 Aircraft placed in service byMesaba on January 1st would have 31 Aircraft Days in January.

 

“Aircraft Days Payment” means the payment for Aircraft Days tobe made pursuant to Section 1.01 (b) of Exhibit E.

 

“Aircraft Days Rate” shall have the meaning ascribed to suchterm in Section 1.02 of this Exhibit E.

 

“Block Hour Payment” means the payment for Block Hours to bemade pursuant to Section 1.01(b) of this Exhibit E.

 

“Block Hour Rate” shall have the meaning ascribed to such termin Section 1.02 of this Exhibit E.

 

“Block Hour Report” means the report to be prepared by Mesabapursuant to Section 1.01(a) of this Exhibit E.

 

“Charter Flights” means revenue passenger flights using the CRJ-200/440Aircraft (other than Scheduled Flights); provided, however, that theoperational arrangements and the compensation to be received by Mesaba inrespect of such Charter Flights are subject to the same procedures andremuneration as a Scheduled Flight hereunder, unless otherwise mutually agreedby Northwest and Mesaba.  To the extentthat inflight catering (food and beverage) exceeds that normally provided foron a Scheduled Flight, the incremental cost and coordination of the cateringwill be the sole responsibility of Northwest.

 

“CPPI” means the percent increase, if any, in the PPI, whichincrease occurred during the immediately preceding Fiscal Year, defined as (thesimple average of the monthly PPI figures from the prior Fiscal Year/the simpleaverage of the monthly PPI figures from two Fiscal Years prior)-1, but in noevent in excess of ***and in no event less than ***.

 

“Cycle” means an actual takeoff at an origin city and landing ata destination city of a CRJ-200/440 Aircraft in connection with a ScheduledFlight, a Non-Scheduled Flight or a Charter Flight.

 

“Cycle Payment” means the payment for Cycles to be made pursuantto Section 1.01(b) of this Exhibit E.

 

E-10

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“Cycle Rate” shall have the meaning ascribed to such term in Section 1.02of this Exhibit E.

 

“Cycle Report” means the report to be prepared by Mesabapursuant to Section 1.01(a) of this Exhibit E.

 

“Direct Expenses” shall have the meaning ascribed to such term inSection 1.03 of this Exhibit E.

 

“Direct Expense Payment” means the payment for Direct Expensesto be made pursuant to Section 1.01(b) of this Exhibit E.

 

“Equipment Rental Expense” means the Aircraft Rental Expense forthe CRJ-200/440 Aircraft and the CRJ Spare Engine Rental Expense.

 

“Fiscal Year” means the twelve-month period beginning April 1stof each year and ending March 31st of the following year.

 

“Fuel Burn Penalty Payment” shall have the meaning ascribed tosuch term in Section 1.04(d) of this Exhibit E.

 

“Fuel Price” shall have the meaning ascribed to such term in Section 1.04(b) ofthis Exhibit E.

 

“GAAP” means generally accepted accounting practice andprinciples at the time prevailing in the United States for companies engaged inbusinesses similar to that of Mesaba, consistently applied.

 

“IOP Payment” means the payment for IOP Program Incidents to bemade pursuant to Section 1.05 of Exhibit E.

 

“IOP Program Incident” shall mean Northwest’s request thatMesaba cancel one or more Scheduled Flights as a result of Northwest’sinitiation of its Irregular Operating Procedures Program.

 

“Margin” means the operating margin determined in accordancewith Section 1.06 of Exhibit E.

 

“Margin Payment” means the payment to be made pursuant toSections 1.01(b) of Exhibit E.

 

“Market Margin Rate” or “MMR” means the weighted (by revenue)average full year operating margin for the twelve-month period ended March 31,2007 of the publicly traded U.S. domestic regional airlines operating primarilyregional jet aircraft, excluding Pinnacle and any regional carrier underbankruptcy protection; provided, however, that if the result of thiscalculation is greater than ***, the MMR shall be ***, andif the result is less than ***,the MMR shall be ***.  The MMR shall be calculated with respect tothe twelve (12) month period ending March 31, 2007.

 

E-11

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“Monthly Payment” means the payment to be made pursuant to Section 1.01(b) ofExhibit E.

 

“Monthly Rate” shall have the meaning ascribed to such term in Section 1.02of this Exhibit E.

 

“Non-Scheduled Flights” means all flights using the CRJ-200/440 Aircraftwhich are not Scheduled Flights or Charter Flights.

 

“Performance Criteria” shall have the meaning ascribed to such termin Section 1.08(a) of Exhibit E.

 

“Performance Period” means each six (6) month period endingon a June 30 or December 31 occurring during the term of thisAgreement.

 

“PPI” means Producer Price Index for Commodities, Item Finished Goods– not seasonally adjusted, published by the United States Department of Labor,Bureau of Labor Statistics, and, if no longer published, any comparablesuccessor index selected by Northwest.

 

“QECs” means quick engine change kits.

 

“Scheduled Flights” means revenue passenger flights (other thanCharter Flights) using the CRJ-200/440 Aircraft which, regardless of frequency,are held out to the public and published in the customary and applicable schedule distributionsystems, such as the Official Airline Guide, or published by Northwest in itsown system timetables.  In addition,Scheduled Flights shall include all regularly scheduled flights which are notrevenue passenger flights as determined by Northwest in its sole discretion.

 

E-12

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**Attachment B**

 

**CRJ Fuel Burn (Penalty)Formulas**

 

**Note:**The formulas below areto be used for the calculation of Fuel Burn Penalty Payments as they pertain toeach performance measure and the All-in Rate in Section 1.04 of Exhibit E.  The Penalty, while settled on an annualbasis, is based on a monthly calculation. The result of the calculation for each performance measure shall benetted together to produce a net Penalty, if one should exist.  To the extent that formulas do not yet exist(i.e. Cruise Speed and Altitude), the parties mutually agree to document thoseformulas when those performance measures are implemented.  Per Section 1.04, the All-in Rate isfirst adjusted for the variances that exist with respect to each performancemeasure, and then to the extent an unfavorable variance to budget exists, thepenalty formula below for the All-in Rate is applied. A Penalty is assessed ifthe cause of variance is deemed within the control of Mesaba.  An example for a month is illustrated belowin Attachment C hereto.

 

**1.****              Excess Planned Fuel on Arrival (PFOA)**

 

Monthly Penalty:

 

***

 

Definition:

 

Planned Fuel On Arrival (PFOA)is comprised of:

 

1)              Domestic Reserve Fuel. This is a fixedamount of fuel required by FAR to be carried on all operations.

2)              Alternate Fuel.  This is the fuel required to fly from theintended destination to an alternate destination. This fuel is required on somebut not all flights according to FAR and Mesaba’s policies related todestination weather.

3)              Holding fuel (Contingency). This fuel isrequired, by FAR and Mesaba’s policies, for expected holding, potential delaysand deviations.

 

E-13

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**2.****              Excess Auxiliary Power Unit (APU) Burn**

 

Monthly Penalty:

 

***

 

**3.****                                      All-in Rate**(to be applied after adjusting for knownvariances to performance measures above as shown in the sample calculation set forthin Attachment B hereto)

 

Monthly Penalty:

 

***

 

E-14

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**AttachmentC**

**Example ofOne Month Penalty Calculation**

 

***

 

E-15

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**EXHIBIT F**

 

**Pass Travel Privileges**

 

I.                                         Overview

 

It is understood and agreed that Northwest has purchased and thereforecontrols all seat inventory on Northwest coded flights operated by Mesabasubject to the Airline Services Agreement (the “Agreement”) entered into byNorthwest and Mesaba.  Northwest, in itssole discretion, shall set all prices and control all seat inventory on Mesabaflights operated under the Northwest code.

 

Seats on Northwest coded flights operated by Mesaba have an intrinsicvalue to Northwest and by definition persons occupying perishable seats, eitheron a positive space or space available basis, have revenue opportunity costs(displacement, dilution, etc.) to Northwest. Northwest will therefore establish the policies for utilizing itsvaluable and perishable product inventory. Northwest shall have the right, in its sole discretion, to establishpass travel policies for all persons on all Northwest Flights, including thoseoperated by Mesaba.

 

Travel privileges of employees, officers and directors of Mesaba andMesaba’s parent company, MAIR Holdings, Inc. (“MAIR”), shall be governedby this Exhibit F.

 

### Definitions

###  

“Northwest Flights” shall mean all flights operated by Northwest,Mesaba (regional jets and turboprops) and Pinnacle Airlines, Inc. (“Pinnacle”)under the Northwest designator code.  Ifand to the extent Northwest enters into an agreement with any regional carrierother than Mesaba that provides for pass travel on the terms set forth herein,the term “Northwest Flights” shall include the flights operated by such carrierunder the Northwest designator code.

 

“Mesaba/MAIR Business Travel” shall mean employee travel that isrequired to run Mesaba’s or MAIR’s operations, perform employee job functions,meet with vendors, attend company/industry meetings/training, or conductcompany business.

 

By definition, Mesaba/MAIRBusiness Travel to conduct company business would require a meeting withanother person (internal or external) and the vast majority of the trip’sduration should be related to the business objective.  If a pleasure trip is taken in conjunctionwith a business trip, the pleasure portion must be flown space available.  Examples:

 

1.                                       Extendbusiness trip for personal reasons before/after.Example: Business trip from city A to city B. After meeting is complete, employee extends trip by 2 days in city B forpersonal reasons.  Return flight fromcity B is leisure space available at the employee’s normal boarding priority.

 

F-1

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2.                                       RoundRobin.  Business trip from city A toB.  After business is complete, employeetravels from city B to city C for personal reasons, then returns to city A.

 

•                                          Flightsfrom B to C and C to A are leisure space available.

 

Things that would not qualify as “Business” would be

 

•                                          Emergencytravel, funeral travel, etc.

•                                          Familiarizationtrips to visit cities where no business is conducted

•                                          Employeerecognition/rewards

•                                          Anytravel related to personal reasons

•                                          Anytravel by any person who is not an employee, such as a spouse or family member

 

In enforcing Northwest’s business travel policies, Mesaba must exercisegood faith in determining what is valid company business and in doing so mustcomply with Northwest’s business travel definition and policies, as suchdefinitions and policies may be changed from time to time by Northwest in itssole discretion.

 

“Leisure Travel” shall mean any travel that does not qualify as Mesaba/MAIRBusiness Travel.

 

### Travel Privileges of Mesaba/MAIR Employees onNorthwest Flights

###  

1.               Travel Authority Privileges (Cards).

 

Northwestshall have the sole authority to issue travel authority privileges for travelon Northwest Flights (which by definition includes Northwest coded flightsoperated by Mesaba and Pinnacle).  Mesabaand MAIR will not be entitled to issue travel authority privileges on NorthwestFlights; however, Mesaba or MAIR may submit a request for travel on Northwestto the Northwest Pass Bureau and Northwest, in its sole discretion, shalldetermine whether or not to grant any such request.

 

2.               Requests for Business and LeisureTravel Passes on Behalf of Any Person Other Than employees/retirees/familymembers of employees of Mesaba/MAIR.

 

Any requestfor pass travel (positive and space available) on Northwest Flights for anyperson other than employees, retirees or family members of employees of Mesabaor MAIR (for example, employees of airlines other than Mesaba, or travelagents) may be submitted to the Northwest Pass Bureau for approval andNorthwest, in its sole discretion, shall determine whether or not to grant anysuch request.  In this regard, on orbefore September 15, 2005 Mesaba will terminate any pass travel program itmay have for travel agents.  Any passtravel arrangements that Mesaba may have with other airlines are subject toapproval by Northwest, and Mesaba shall promptly terminate any sucharrangements which are in effect as of the date of this Agreement and which arenot approved by Northwest.

 

F-2

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3.               Ticket Donations.

 

Northwest agrees to provide Mesaba/MAIR with *** tickets per year forcharitable donations to be made at Mesaba’s discretion.

 

4.               Collateral (i.e., free tickets,upgrades, Worldclub passes, elite memberships, etc.).

 

Northwest agrees to provide Mesaba/MAIR with $*** per year ofcollateral to be used for Mesaba’s business purposes (i.e., for sales,marketing, service recovery, etc.). Northwest shall determine from time to time the types of collateral tobe made available to Mesaba and the unit cost for each type of collateralproduct.  The list of collateral productsand the unit costs thereof as of the date hereof are set forth on Attachment Aattached hereto.  Ordering will behandled via Northwest’s GMS process.

 

Other Management (exempt) Employees ofMesaba/MAIR.

 

1)              Mesaba/MAIR may designate up to ***management (exempt) employees who will be eligible for *** Business Travel onNorthwest Flights.  Mesaba shall submitthe list of such employees to Northwest annually and Northwest may, in its solediscretion, approve or disapprove any employee whose name appears on such listfor such travel privileges.

2)              All other management (exempt) employeesof Mesaba/MAIR who are not entitled to the travel privileges described in Section 5(1) abovemay travel on Northwest Flights with boarding priority ***, and, to the extentMesaba/MAIR desire that any such employee travel on a Northwest Flight forMesaba/MAIR business purposes with higher priority, Mesaba may submit itsrequest for positive space travel to the Northwest Pass Bureau forapproval.  Northwest, in its solediscretion, shall determine whether or not to grant any such request.

 

Non-Management (Non-Exempt) and ContractEmployees of Mesaba

 

Non-management (non-exempt) and contract employees of Mesaba/MAIR mustrequest approval from the Northwest Pass Bureau for any positive space travelon Northwest Flights for Mesaba/MAIR business purposes.  Northwest, in its sole discretion, shalldetermine whether or not to grant any such request.  Any such approved travel for Mesaba/MAIRbusiness purposes by such employees shall be on a positive space basis.

 

Mesaba Operational Travel Requirements.

 

Deadhead travel and travel for pilot orflight attendant FAA-mandated training.  Mesaba may book travel on Northwest Flightswith boarding priority of *** for pilot and flight attendant deadhead andFAA-mandated travel.  The purpose of suchtravel must be supported by crew scheduling, crew bid reports, trainingschedules or other records of Mesaba’s operations.  Such records must be maintained for not lessthan one (1) year and made available for audit by Northwest upon request.

 

F-3

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Any deadhead booking must contain thefollowing restriction:  “No origin/destor date changes allowed, per Revenue Management.”  Any booking without the above statedrestriction will be subject to a $*** fee.

Any *** booking must be pre-approved by Northwest.  Any *** booking made without Northwest’spre-approval will be subject to a $*** one-way fee.

*** exceptions should be requested fromNorthwest Day-of-Departure (DoD) desk.

 

Upon no circumstance may positive space bookings be used to transportMesaba flight crews to or from their home (i.e., commuting or “Call in Honest”)or for other non-operational purposes.

 

Aircraft on Ground (AOG).

 

In the event Mesaba’s operations require the transportation of Mesaba’smechanics or other required personnel due to AOG, Mesaba shall request approvalfrom the Northwest DoD desk for such travel at boarding priority ***, or ifnecessary, ***.  Northwest, in its solediscretion, shall determine whether or not to grant any such request.

 

Travel byInterview Candidates, Consultants or Vendors of Mesaba/MAIR.

 

Mesaba andMAIR will be entitled to purchase positive space travel on Northwest Flightsfor consultants, vendors and interview candidates of Mesaba or MAIR to attendmeetings at Mesaba or MAIR locations for Mesaba/MAIR business purposes only onthe terms and conditions set forth in the Northwest Pricing Bulletin BN139,attached hereto as Attachment 1. This Pricing Bulletin is subject to change by Northwest on an annualbasis.  In addition, Mesaba or MAIR mayutilize space available travel for interview candidates, consultants or vendorspaying a service fee equal to parents (see service fee chart under leisuretravel) with a boarding priority of ***. For boarding purposes, the date of travel will be used for the senioritydate.

 

Leisure Travelby Employees of Mesaba and Employees of MAIR.

 

It isunderstood that Northwest maintains complete control over the grant of alltravel privileges on all Northwest Flights, including non-revenue spaceavailable boarding priority.  Northwestshall be entitled to all fees and charges collected for pass travel andMesaba/MAIR shall not under any circumstances impose any fees, charges orsurcharges on any pass travel on Northwest Flights operated by Mesaba otherthan those set forth herein or specifically authorized by Northwest.  Mesaba shall be responsible for the paymentto Northwest of pass travel fees and charges and the annual pass travelregistration fees relating to travel by employees of Mesaba and MAIR or theirfamily members, registered domestic partners or companions, and all amountscollected by Mesaba from its employees and MAIR employees shall be collected onbehalf of Northwest and payable to Northwest on a monthly basis as provided in Section III.11.

 

F-4

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Leisure Travelby Mesaba and MAIR Employees on Northwest Flights Operated by Mesaba:

 

Mesaba shalladminister pass travel policies on Northwest Flights operated by Mesaba andPinnacle in a manner that is wholly consistent with Northwest’s policies asthey currently exist and may in the future be changed by Northwest in its solediscretion and shall communicate clearly such policies to the Mesaba and MAIRemployees.  Mesaba shall be responsiblefor enforcing such pass policies with respect to travel by Mesaba and MAIRemployees on Northwest Flights and shall notify Northwest in the event of anyviolations.

 

Mesaba agreesto conform its existing pass travel policies and programs to those of Northwestas soon as reasonably practicable after the date of the Agreement.  Such conforming changes include but are notlimited to the following:

 

1) The spaceavailable boarding priority for Mesaba and MAIR employees on Northwest Flightswill be as follows:  

 
| **Mesaba**                                        | ** ** | **Flights Operated By** | ** ** |
|---------------------------------------------------|------------|-------------------------|------------|
| **Employee  Category**                            | ** ** | **Northwest**           | ** ** | **Mesaba** | ** ** | **Pinnacle** | ** ** |
| Active management (exempt)                        | ** ** | ***  Seniority date     |       | ***  Seniority date |   | ***  Seniority date | ** ** |
| Active  non-management (non-exempt) and contract  |       | ***  Seniority date     |       | ***  Seniority date |   | ***  Seniority date |   |
| Retired management                                |       | ***                     |       | *** |   | *** |   |
| Retired non-management (non-exempt) and  contract |       | ***                     |       | *** |   | *** |   |
| Parents                                           |       | ***  Seniority date     |       | ***  Seniority date |   | ***  Seniority date |   |

 

Mesaba shall under no circumstances granttravel privileges on any Northwest Flights at a boarding priority that deviatesfrom that stated above.

 

A retired employee is an employee who retiredfrom Mesaba while in an active employee status or retired from Mesaba while inan inactive status (i.e. layoff status) and met the definition of early/normalor disability retirement when last on active payroll.

 

Earlyretirement – employee must attain age 55 (pilots age 50) and have ten or moreyears of vesting service.

 

F-5

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Normal retirement– employee must attain age 65 (pilots age 60) and have at least five years ofvesting service.

Disabilityretirement – employee – management/non-management-must be a participant in theplan and have ten or more years of vesting service and be approved by Mesabafor service and be approved by Mesaba for disability retirement.

 

Service Fees for travel by active and retired employees and parents ofactive employees.  Northwest’s currentpass travel policies provide for the following fees for pass travel by activeand retired employees and parents of active employees:

 

Activemanagement (exempt): No service charge. International taxes apply.

Activenon-management (non-exempt) and contract employees shall be subject to thefollowing fees:  (see below)

Retirementmanagement (exempt):  No service chargefor the employee, spouse or domestic partner. International taxes apply. Service fees for eligible dependents are subject to the same servicefees as non-management with less than five years of service as noted below.

Retirementnon-management (non-exempt) and contract employees and eligible family membersshall be subject to the same service fees as non-management with less than fiveyears of service as noted below.

 

 
| ** **                         | ** ** | **Services Fees** | ** ** | ** **        | ** ** |
|------------------------------------|------------|-------------------|------------|-------------------|------------|
| ** **                         | ** ** | **Domestic**      | ** ** | **International** | ** ** | **International** | ** ** |
| ** **                         | ** ** | **Coach***        | ** ** | **First***        | ** ** | **Coach** | ** ** | **First** | ** ** | **Taxes** | ** ** |
| Employee less than 5 years service |       | $***  OW          |       | $ ***  OW    |       | See Attachment 2 |   | See Attachment 2 |   | As applicable |   |
| Employee > 5 years service      |       | ***               |       | $***              |       | *** |   | See Attachment 2 |   | As applicable |   |
| Parent                             |       | $***              |       | $***              |       | See Attachment 2 |   | See Attachment 2 |   | As applicable |   |

 

----

*Fares above are base fare only and do notinclude applicable travel taxes.  Traveltaxes are subject to change by the U.S. Government or applicable country.

 

All passtravel fees and charges shall be subject to change at Northwest’s discretion,provided that fees and charges applicable to employees of Mesaba and MAIR shallbe no higher than those applicable to comparable employees of Northwest, and nofees for Northwest employees will be higher than those for Mesaba and MAIRemployees.

Pass travelfees shall apply to all Northwest Flights (including Mesaba and MAIR employeesflying on Northwest Flights operated by Mesaba – including regional jets andturboprops).

Parents are eligiblefor travel only for active employees. Upon retirement, parents of the employee are no longer eligible fortravel.

 

F-6

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Annualregistration fee applies for all Mesaba and MAIR employees, including officers,using Leisure Travel privileges.  Inaddition, the annual registration fee applies to registered travel companions.

 

3)Companion/Buddy Travel Program.

 

Mesaba mustterminate its existing companion/buddy pass travel program as of October 1,2005.

 

Mesaba mustterminate all pass travel by any persons who are not employees of Mesaba/MAIRor family members of Mesaba/MAIR employees (including without limitationemployees of airlines other than Mesaba or Northwest) on Northwest Flightsoperated by Mesaba unless such travel is specifically permitted hereunder or anauthorized officer of Northwest approves such pass travel in writing.  Northwest shall provide Mesaba with a list ofofficers of Northwest who are authorized to approve pass travel not providedfor herein.

 

Mesaba will be entitled to establish a newcompanion/buddy program for Mesaba and MAIR employees for travel on NorthwestFlights as follows:

 

Each employeeof Mesaba and MAIR will receive *** one-way trips each calendar year on allNorthwest Flights.

The companionof the Mesaba and MAIR employee must travel with the employee.

RegisteredTravel Companions:  Registered travelcompanions of Mesaba and MAIR employees will be entitled to pass privileges onNorthwest flights in accordance with Northwest’s registered travel companionprogram.  The registered travel companionof the Mesaba/MAIR employee may travel unaccompanied at a boarding priority of ***on Northwest Flights.

Fees:  The fees payable by Mesaba and MAIR employeesfor companion/buddy travel on Northwest Flights shall be consistent with thefees payable by Northwest employees for companion travel on Northwest Flightsoperated by Northwest, Mesaba and Pinnacle.

Boardingpriority:

 
| ** **        | ** ** | **Flights Operated By** | ** ** |
|-------------------|------------|-------------------------|------------|
| ** **        | ** ** | **Northwest**           | ** ** | **Mesaba** | ** ** | **Pinnacle** | ** ** |
| Boarding Priority |       | ***                     |       | *** |   | *** |   |

 

Registered Domestic Partners. Registered domestic partners of Mesaba and MAIR employees will beentitled to pass privileges on Northwest Flights in accordance with Northwest’sregistered domestic partner program, provided that registered domestic partnersof Mesaba’s flight attendants will be eligible for pass privileges inaccordance with the terms of the applicable collective bargaining agreement,and Mesaba will use its

 

F-7

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good faithefforts to conform such provision of the collective bargaining agreement toNorthwest’s registered domestic partner program.

 

Mesaba/MAIR employees are eligible for the “Fly Confirmed with Perks”program and the “Fly Confirmed for Less” program under the same terms andconditions as Northwest employees.

 

Booking/Ticketing:

 

Mesaba agrees to maintain a link between itsemployee database system and that of Northwest to facilitate the automatedbooking of travel by Mesaba and MAIR employees.

 

With the automated linking of Mesaba’s andMAIR’s employee database systems, Mesaba and MAIR employees will be permittedto book positive space and space available travel in accordance with theprovisions hereof using Northwest automated system (IVR) and via NorthwestReservations, as needed.

 

All travel must be by electronictickets.  The use of paper tickets, trippasses, Mesaba ticket stock, or other such documents for travel on NorthwestFlights operated by Mesaba shall be strictly prohibited unless arranged by theNorthwest pass bureau.

 

Payment ofFees

 

Northwest shall invoice Mesaba on a monthlybasis for all travel pass fees, registration fees and charges applicable totravel by employees of Mesaba and MAIR, family members, companions andregistered domestic partners of such employees. Travel by Mesaba vendors, interview candidates, etc. hereunder on anyNorthwest Flight will be paid at the time of ticketing and billed to acorporate credit card.  Mesaba shall payto Northwest all invoiced amounts within 30 days after the date of the invoice.Mesaba may elect not to collect from its own employees and MAIR’s employees thepass travel fees and charges applicable to travel on Northwest Flights so longas Mesaba pays such fees and charges to Northwest on behalf of Mesaba’s/MAIR’semployees pursuant to the foregoing.  Anyamounts collected by Mesaba for pass travel on Northwest Flights operated byMesaba shall be collected on behalf of and for the benefit of Northwest andremitted to Northwest on a monthly basis within thirty (30) business days afterthe end of each month.  Mesaba shall haveno right or interest in and to such amounts.

 

Revocation/Termination/Modification/Amendmentof Pass Privileges.

 

All pass travel benefits described herein aredeemed to be privileges and are subject to revocation by Northwest in the eventof a failure to comply with the provisions hereof and the terms and conditionsof Northwest’s pass travel policies, as the same may be changed from time totime by Northwest in its sole discretion. Notwithstanding the foregoing, Northwest agrees that any changes inNorthwest’s pass travel policies during the term of the Airline ServicesAgreement between Northwest and Mesaba shall not (i) reduce the relativeboarding priority to which Mesaba/MAIR employees are entitled to travel onNorthwest

 

F-8

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Flights pursuant to Sections 9 hereof, or (ii) increasethe fees and charges payable by Mesaba/MAIR employees for pass travel benefitson Northwest Flights above those amounts payable by comparable employees ofNorthwest for the same benefits.

 

Audit

 

Northwest shall be entitled to audit allrecords of Mesaba to verify compliance with the provisions hereof.

 

Travel Privileges of Persons Other than MesabaEmployees on Northwest Flights

 

Northwest shall have the right, in is sole discretion, to establishpass travel policies for all persons on all Northwest Flights, including thoseoperated by Mesaba.  Mesaba shalladminister travel and accommodate passengers on Northwest Flights operated byMesaba consistent with all such policies established by Northwest.

 

It isunderstood and agreed that leisure travel benefits for Northwest employees willinclude boarding priority equal to Mesaba employees on Northwest Flightsoperated by Mesaba, based on seniority. Northwest employees traveling with companions/buddies will board withpriority ***.  Northwest’s employeetravel fee structure will apply to all leisure travel by Northwest employees onNorthwest Flights operated by Mesaba and Mesaba shall under no circumstancescharge any additional fees, surcharges or other amounts to Northwest orNorthwest employees traveling on Northwest Flights operated by Mesaba.

 

V.                                     TravelPrivileges of Officers and Board of Directors of Mesaba/MAIR

 

Northwestagrees to issue to the President and CEO of MAIR an *** travel card that isvalid for travel on Northwest Flights by such officer and his or her spouse andeligible dependent children so long as he or she is employed by MAIR.  This card will be valid for Business Travelor Leisure Travel.

 

Mr. PaulFoley, the current President and CEO of MAIR, shall, after his retirement, havethe same retirement pass privileges as are granted to Northwest officers as ofthe Effective Date of the Agreement.

 

Northwestagrees to issue to Carl Pohlad, Chairman of the Board of MAIR, an *** travelcard that is valid for travel on Northwest Flights by Mr. Pohlad and hisspouse and

 

F-9

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eligibledependent children for so long as he is Chairman of the Board of MAIR.  This card will be valid for Business Travelor Leisure Travel.

 

Northwestagrees to issue to John Spanjers, President and Chief Operating Officer ofMesaba, an *** travel card that is valid for travel on Northwest Flights by Mr. Spanjersand his spouse and eligible dependent children so long as he is employed byMesaba.  This card will be valid forBusiness Travel or Leisure Travel.

 

Northwest willissue to other officers of Mesaba and MAIR travel privileges (up to a maximumof *** or a maximum of *** trip events per year) on Northwest Flightsconsistent with the travel privileges to which managing directors of Northwestare entitled from time to time. Currently such privileges are as follows:

 
| Business  Travel: |   | *** travel  card.                                                                                                   |
|-------------------|--------|---------------------------------------------------------------------------------------------------------------------|
|              |   |                                                                                                                |
| Leisure  Travel:  |   | *** trip  events per year plus unlimited *** space available travel as provided to  Northwest management employees. |

 

Members of theBoard of Directors of Mesaba/MAIR who are not employees will be entitled toreceive a *** travel card that is valid for travel by such Board member and hisor her spouse and eligible dependent children on Northwest Flights operated byNorthwest, Mesaba and Pinnacle.  The cardwill be valid for Mesaba/MAIR Business Travel and for Leisure Travel consistentwith the travel privileges to which managing directors of Northwest areentitled from time to time.  The cardwill not be valid for business travel on behalf of any person, company orentity other than Mesaba or MAIR.

 

VI.                                 TravelPrivileges of MLT Employees; Vacation Package Discount for Mesaba/MAIREmployees

 

As long as MLTis a wholly owned subsidiary of Northwest, MLT’s employees and eligible familymembers will have the following travel privileges for travel on NorthwestFlights including those operated by Mesaba:

 

Employees traveling on company business are entitled to *** travel ***.

Employees and eligible family members are eligible for leisure travelon Northwest Flights operated by Mesaba and travel at priority *** or ***(parents without employees) and Northwest’s fee structure will apply.

Companions and registered travel companions are eligible for leisuretravel at priority *** and Northwest’s fee structure will apply.

 

MLT willextend to Mesaba and MAIR employees the same discount program provided toNorthwest employees for vacation packages booked with MLT.

 

F-10

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**Attachment A**

 

**Collateral Product/Unit Prices**

 

***

 

F-11

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Attachment 1

 

Pricing Bulleting BN 139

 

**BN139, REVISION 1 / XJ VENDORFARES**

 

***

 

F-12

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Attachment 2

 

International Service Fees

 

***

 

F-13

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**EXHIBIT G**

 

**NORTHWEST SERVICE CITIES**

 
| ABE | ALLENTOWN/BETHLEHAM/EASTON, PENNSYLVANIA, USA               | PA |
|-----|-------------------------------------------------------------|----|
| ABQ | ALBUQUERQUE-INTERNATIONAL, NEW  MEXICO, USA                 | NM |
| ALB | ALBANY INTERNATIONAL AIRPORT, NEW YORK, USA                 | NY |
| ANC | ANCHORAGE-INTERNATIONAL, ALASKA, USA                        | AK |
| ASE | ASPEN, COLORADO, USA                                        | CO |
| ATL | ATLANTA-HARTSFIELD INTERNATIONAL, GEORGIA, USA              | GA |
| AUS | AUSTIN-ROBERT MUELLER FIELD, TEXAS, USA                     | TX |
| AZO | KALAMAZOO/BATTLE CREEK-INTL, MICHIGAN, USA                  | MI |
| BDL | HARTFORD/SPRNGFIELD-BRADLEY INTL, CONNECTICUT,              | CT |
| BHM | BIRMINGHAM, ALABAMA, USA                                    | AL |
| BIL | BILLINGS-LOGAN INTERNATIONAL, MONTANA, USA                  | MT |
| BIS | BISMARCK/MANDAN, NORTH DAKOTA, USA                          | ND |
| BNA | NASHVILLE, TENNESSEE, USA                                   | TN |
| BOI | BOISE-GOWEN FIELD, IDAHO, USA                               | ID |
| BOS | BOSTON-LOGAN INTERNATIONAL, MASSACHUSETTS, USA              | MA |
| BTR | BATON ROUGE, LOUISIANA, USA                                 | LA |
| BUF | BUFFALO NIAGARA INTERNATIONAL, NEW YORK, USA                | NY |
| BWI | BALTIMORE/WASHINGTON-INTERNATIONAL, MARYLAND, USA           | MD |
| BZN | BOZEMAN, MONTANA, USA                                       | MT |
| CID | CEDAR RAPIDS/IOWA CITY, IOWA, USA                           | IA |
| CLE | CLEVELAND-HOPKINS INTERNATIONAL, OHIO, USA                  | OH |
| CLT | CHARLOTTE, NORTH CAROLINA, USA                              | NC |
| CMH | COLUMBUS-INTERNATIONAL, OHIO, USA                           | OH |
| COS | COLORADO SPRINGS, COLORADO, USA                             | CO |
| CVG | CINCINNATI-CINCINNATI & N KENTUCKY INTL, OHIO, USA | OH |
| DAY | DAYTON-INTERNATIONAL, OHIO, USA                             | OH |
| DCA | WASHINGTON-NATIONAL, DISTRICT OF COLUMBIA, USA              | DC |
| DEN | DENVER-INTERNATIONAL, COLORADO, USA                         | CO |
| DFW | DALLAS/FORT WORTH-INTERNATIONAL, TEXAS, USA                 | TX |
| DLH | DULUTH/SUPERIOR-INTERNATIONAL, MINNESOTA, USA               | MN |
| DSM | DES MOINES-ARPT, IOWA, USA                                  | IA |
| DTW | DETROIT-WAYNE COUNTY INTERNATIONAL, MICHIGAN, USA           | MI |
| EGE | VAIL-EAGLE COUNTY, COLORADO, USA                            | CO |
| EWR | NEWARK LIBERTY INTERNATIONAL, NEW JERSEY, USA               | NJ |
| FAI | FAIRBANKS-INTERNATIONAL, ALASKA, USA                        | AK |
| FAR | FARGO, NORTH DAKOTA, USA                                    | ND |
| FCA | KALISPELL/GLACIER PARK-INTERNATIONAL, MONTANA, USA          | MT |
| FLL | FORT LAUDERDALE-INTERNATIONAL,  FLORIDA, USA                | FL |
| FNT | FLINT, MICHIGAN, USA                                        | MI |
| FSD | SIOUX FALLS, SOUTH DAKOTA, USA                              | SD |

 

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| FWA | FORT WAYNE, INDIANA, USA                                | IN     |
|-----|---------------------------------------------------------|--------|
| GEG | SPOKANE-INTERNATIONAL, WASHINGTON, USA                  | WA     |
| GFK | GRAND FORKS-INTERNATIONAL, NORTH DAKOTA, USA            | ND     |
| GPT | GULFPORT/BILOXI, MISSISSIPPI, USA                       | MS     |
| GRB | GREEN BAY/CLINTONVILLE, WISCONSIN, USA                  | WI     |
| GRR | GRAND RAPIDS-GERALD R FORD INTL, MICHIGAN, USA          | MI     |
| GSO | GREENSBORO/HIGH POINT-INT’L, NORTH CAROLINA, USA   | NC     |
| GSP | GREENVILLE/SPARTANBURG, SOUTH CAROLINA, USA             | SC     |
| GTF | GREAT FALLS-INTERNATIONAL, MONTANA, USA                 | MT     |
| HDN | STEAMBOAT SPRINGS/HAYDEN/CRAIG, COLORADO, USA           | CO     |
| HNL | HONOLULU-INTERNATIONAL, HAWAII, USA                     | HI     |
| HPN | NEW YORK-WESTCHESTER COUNTY, NEW YORK, USA              | NY     |
| IAD | WASHINGTON-DULLES INT’L, DISTRICT OF COLUMBIA, USA | DC     |
| IAH | HOUSTON-INTERCONTINENTAL, TEXAS, USA                    | TX     |
| ICT | WICHITA, KANSAS, USA                                    | KS     |
| IND | INDIANAPOLIS-INTERNATIONAL, INDIANA, USA                | IN     |
| JAC | JACKSON HOLE, WYOMING, USA                              | WY     |
| JAN | JACKSON-INTERNATIONAL, MISSISSIPPI, USA                 | MS     |
| JAX | JACKSONVILLE-INTERNATIONAL, FLORIDA, USA                | FL     |
| JFK | NEW YORK-JOHN F. KENNEDY INTL, NEW YORK, USA            | NY     |
| KOA | KONA/KAILUA, HAWAII, HAWAII, USA                        | HI     |
| LAN | LANSING, MICHIGAN, USA                                  | MI     |
| LAS | LAS VEGAS-MCCARRAN  INTERNATIONAL, NEVADA, USA          | NV     |
| LAX | LOS ANGELES INTERNATIONAL,  CALIFORNIA, USA             | CA     |
| LGA | NEW YORK-LA GUARDIA, NEW YORK, USA                      | NY     |
| LIT | LITTLE ROCK, ARKANSAS, USA                              | AR     |
| LSE | LA CROSSE, WISCONSIN, USA                               | WI     |
| MBS | SAGINAW/BAY CITY/MIDLAND, MICHIGAN, USA                 | MI     |
| MCI | KANSAS CITY-INTERNATIONAL, MISSOURI, USA                | MO     |
| MCO | ORLANDO-INTERNATIONAL, FLORIDA, USA                     | FL     |
| MDT | HARRISBURG-INTERNATIONAL, PENNSYLVANIA, USA             | PA     |
| MDW | CHICAGO-MIDWAY INTERNATIONAL, ILLINOIS, USA             | IL     |
| MEM | MEMPHIS-INTERNATIONAL, TENNESSEE, USA                   | TN     |
| MEX | MEXICO CITY, MEXICO                                     |   |
| MHT | MANCHESTER/CONCORD, NEW HAMPSHIRE, USA                  | NH     |
| MIA | MIAMI-INTERNATIONAL, FLORIDA, USA                       | FL     |
| MKE | MILWAUKEE-GENERAL MITCHELL INT’L, WISCONSIN, USA   | WI     |
| MOT | MINOT-INTERNATIONAL, NORTH DAKOTA, USA                  | ND     |
| MSN | MADISON, WISCONSIN-DANE COUNTY REGIONAL, USA            | WI     |
| MSO | MISSOULA-JOHNSON/BELL FIELD, MONTANA, USA               | MT     |
| MSP | MINNEAPOLIS/ST. PAUL-INTERNATIONAL, MINNESOTA, USA      | MN     |
| MSY | NEW ORLEANS LOUIS ARMSTRONG INTL, LOUISIANA, USA        | LA     |
| MYR | MYRTLE BEACH-MYRTLE BEACH AFB, SOUTH CAROLINA,          | SC     |
| OGG | MAUI, HAWAII, USA                                       | HI     |
| OKC | OKLAHOMA CITY, OKLAHOMA, USA                            | OK     |
| OMA | OMAHA, NEBRASKA, USA                                    | NE     |

 

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| ONT | ONTARIO-INTERNATIONAL, CALIFORNIA, USA             | CA     |
|-----|----------------------------------------------------|--------|
| ORD | CHICAGO-O’HARE INTERNATIONAL, ILLINOIS, USA   | IL     |
| ORF | NORFOLK/VIRGINA BEACH-INTERNATIONAL, VIRGINIA, USA | VA     |
| PBI | WEST PALM BEACH-INTERNATIONAL, FLORIDA, USA        | FL     |
| PDX | PORTLAND-INTERNATIONAL, OREGON, USA                | OR     |
| PHL | PHILADELPHIA-INTERNATIONAL, PENNSYLVANIA, USA      | PA     |
| PHX | PHOENIX-SKY HARBOR INTERNATIONAL, ARIZONA, USA     | AZ     |
| PIT | PITTSBURGH, PENNSYLVANIA, USA                      | PA     |
| PSP | PALM SPRINGS-MUNICIPAL, CALIFORNIA, USA            | CA     |
| PVD | PROVIDENCE, RHODE ISLAND, USA                      | RI     |
| PWM | PORTLAND-INTERNATIONAL, MAINE, USA                 | ME     |
| RAP | RAPID CITY, SOUTH DAKOTA, USA                      | SD     |
| RDU | RALEIGH/DURHAM-INTERNATIONAL, NORTH CAROLINA, USA  | NC     |
| RIC | RICHMOND-INTERNATIONAL, VIRGINIA, USA              | VA     |
| RNO | RENO/TAHOE-INTERNATIONAL,  NEVADA, USA             | NV     |
| ROC | ROCHESTER, NEW YORK, USA                           | NY     |
| RST | ROCHESTER, MINNESOTA, USA                          | MN     |
| RSW | FORT MYERS INTERNATIONAL,  FLORIDA, USA            | FL     |
| SAN | SAN DIEGO-LINDBERGH FIELD, CALIFORNIA, USA         | CA     |
| SAT | SAN ANTONIO-INTERNATIONAL, TEXAS, USA              | TX     |
| SBN | SOUTH BEND REGIONAL, INDIANA, USA                  | IN     |
| SDF | LOUISVILLE INTERNATIONAL AIRPORT, KENTUCKY, USA    | KY     |
| SEA | SEATTLE-SEATTLE TACOMA INTL, WASHINGTON, USA       | WA     |
| SFO | SAN FRANCISCO-INTERNATIONAL, CALIFORNIA, USA       | CA     |
| SJC | SAN JOSE, CALIFORNIA, USA                          | CA     |
| SJU | SAN JUAN-INTERNATIONAL, PUERTO RICO                |   |
| SLC | SALT LAKE CITY-INTERNATIONAL, UTAH, USA            | UT     |
| SMF | SACRAMENTO, CALIFORNIA, USA                        | CA     |
| SNA | SANTA ANA JOHN WAYNE AIRPORT, CALIFORNIA, USA      | CA     |
| SRQ | SARASOTA/BRADENTON, FLORIDA, USA                   | FL     |
| STL | ST. LOUIS-LAMBERT INTERNATIONAL,  MISSOURI, USA    | MO     |
| SUX | SIOUX CITY, IOWA, USA                              | IA     |
| SYR | SYRACUSE-INTERNATIONAL, NEW YORK, USA              | NY     |
| TPA | TAMPA-INTERNATIONAL, FLORIDA, USA                  | FL     |
| TUS | TUCSON-INTERNATIONAL, ARIZONA, USA                 | AZ     |
| TVC | TRAVERSE CITY, MICHIGAN, USA                       | MI     |
| TYS | KNOXVILLE, TENNESSEE, USA                          | TN     |
| VPS | VALPARAISO/FORT WALTON BEACH, FLORIDA, USA         | FL     |
| YEG | EDMONTON-INTERNATIONAL, ALBERTA, CANADA            | AB     |
| YQR | REGINA, SASKATCHEWAN, CANADA                       | SK     |
| YUL | MONTREAL-DORVAL INTERNATIONAL,  QUEBEC, CANADA     | PQ     |
| YVR | VANCOUVER-INTERNATIONAL, BRITISH COLUMBIA, CANADA  | BC     |
| YWG | WINNIPEG INT., MANITOBA, CANADA                    | MB     |
| YXE | SASKATOON, SASKATCHEWAN, CANADA                    | SK     |
| YYC | CALGARY-INTERNATIONAL, ALBERTA, CANADA             | AB     |
| YYZ | TORONTO-PEARSON INTERNATIONAL, ONTARIO, CANADA     | ON     |

 

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**EXHIBIT H**

 

**FACILITIES USE AGREEMENT**

 

This FACILITIES USE AGREEMENT (the “Agreement”) is made andentered into as of this      day of August, 2005 (the “EffectiveDate”) by and between Northwest Airlines, Inc., a Minnesotacorporation (“Northwest”) and Mesaba Aviation, Inc. d/b/a “MesabaAirlines”, a Minnesota corporation (“Mesaba”).

 

WITNESSETH:

 

WHEREAS, Northwest and Mesaba entered into an Airline ServicesAgreement dated as of                             ,          ,(as amended, modified or supplemented from time to time, the “AirlineServices Agreement”); and

 

WHEREAS, pursuant to Section 4.03 of the Airline ServicesAgreement, Northwest agreed to grant Mesaba the right to use certain premisesand facilities leased by Northwest at the                               Airport (the “Airport”) pursuant to that certain                                                   Agreement dated as of                     ,           by and between the                                                  (the “Lessor”) and Northwest (as may be amended, modified andsupplemented from time to time, the “Northwest Lease”) on the terms andconditions set forth herein.

 

NOW, THEREFORE,Northwest and Mesaba, each in consideration of the agreements of the other andintending to be legally bound, agree as follows:

 

Section 1.  Use ofPremises.  During the term of thisAgreement, Northwest hereby agrees to provide Mesaba and its officers,employees, representatives, contractors and agents, on and subject to theterms, conditions and covenants hereinafter set forth, with access to certainof the Premises leased by Northwest pursuant to the Northwest Lease.  Northwest, in its sole discretion, shalldesignate from time to time the portion of such premises and facilities to beused by Mesaba hereunder (said premises and facilities so designated byNorthwest, and together with all improvements and fixtures located thereon, arehereinafter referred to as the “Premises”).  Mesaba’s use of the Premises shall be on anon-exclusive, non-preferential, shared-use basis, said use to be coordinatedwith Northwest’s Manager at the Airport. Nothing in this Agreement shall be deemed to confer upon Mesaba anyinterest in the Premises, right to possess or control the use of the Premises,or any other rights with respect to the Premises other than those expresslyprovided herein.  **NOTWITHSTANDINGANYTHING TO THE CONTRARY IN THIS AGREEMENT, USE OF THE PREMISES IS PROVIDED ONAN “AS IS, WHERE IS” BASIS AND WITH ALL DEFICIENCIES AND FAULTS BOTH KNOWN ANDUNKNOWN.  MESABA ACKNOWLEDGES THAT IT HASMADE A THOROUGH INSPECTION OF THE PREMISES AND ACCEPTS THE USE OF SUCH PREMISES“AS IS, WHERE IS” AND THAT, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN,NORTHWEST MAKES NO REPRESENTATIONS OR WARRANTIES, AND MESABA EXPRESSLY WAIVESALL WARRANTIES, EXPRESSED OR IMPLIED, RELATING TO THE SUITABILITY, FITNESS FORUSE**

 

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**OR FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, DESIGN OR CONDITION OFTHE PREMISES.**

 

Section 2.  Incorporationof the Northwest Lease.  Mesabaexpressly acknowledges and agrees that this Agreement is subject to andconditioned upon all of the terms, covenants and conditions of the NorthwestLease, which terms, covenants and conditions, except as modified or deletedherein, are expressly incorporated into this Agreement by reference as if setforth in full herein to the extent the same apply to the Premises.  Upon request from Mesaba, Northwest shallprovide Mesaba with a full and complete copy of the Northwest Lease.  Mesaba agrees to assume, faithfully perform,carry out and be bound by all of the terms, covenants and conditions of theNorthwest Lease with respect to its use of the Premises at the time and in themanner provided therein as if Mesaba was expressly named as the Lessee underthe Northwest Lease.  Unless otherwiseprovided herein, all references to the “Lessor” in the Northwest Lease shall bedeemed to include both the Lessor and Northwest, and Northwest shall haveagainst Mesaba all rights and remedies conferred upon the Lessor therein, provided,however, that Mesaba agrees to look solely to the Lessor for performance ofthe Lessor’s obligations under the Northwest Lease. Northwest shall not beliable to Mesaba for the failure of the Lessor to perform its obligations underthe Northwest Lease, provided that within a reasonable period of time afterreceipt of notice from Mesaba that Lessor has failed to so perform, Northwestshall use its reasonable efforts to cause the Lessor to perform suchobligations to the extent that the failure of Lessor to do so could adverselyaffect Mesaba’s use of the Premises. Mesaba agrees that it will not do or fail to do anything with respect tothe Premises which would cause a default to occur under the terms of theNorthwest Lease.  If approval of thisAgreement by the Lessor is required pursuant to the provisions of the NorthwestLease, this Agreement is conditioned upon receipt of such approval. In theevent the Lessor does not approve this Agreement, this Agreement shall becanceled immediately and all rights and obligations of the parties hereundershall terminate immediately.

 

Section 3.  Term.  This Agreement commences on the EffectiveDate and shall continue in effect until the earlier of the expiration ortermination of the Northwest Lease or the expiration or termination of theAirline Services Agreement, subject to earlier termination upon the occurrenceof any of the following:  (i) if theNorthwest Lease expires or is terminated for any reason whatsoever, in whichevent this Agreement shall terminate immediately upon the expiration ortermination of the Northwest Lease; (ii) if Northwest terminates thisAgreement pursuant to Section 12 hereof; (iii) if the AirlineServices Agreement is terminated for any reason; (iv) in the event Mesabano longer operates flights pursuant to the Airline Services Agreement to orfrom the Airport; or (v) upon mutual agreement of the parties hereto.

 

Section 4.  Use Fees.During the term of this Agreement, Mesaba shall pay to Northwest for use of thePremises the amounts set forth in Exhibit A attached hereto andincorporated herein by reference (the “Fee”).  Fees or rents shall be paid by Mesaba withinthirty (30) days following the date of Northwest’s invoice to Mesaba, atNorthwest’s address as herein set forth.  The Fee for any fractional month following the commencement or precedingthe end of this Agreement shall be prorated by days.  If any payment due hereunder is not receivedby Northwest on or before the date on which said payment is due, Mesaba agreesto pay interest on any overdue amounts at the rate of one and one-half percent(11⁄2%) per month, but not to exceed

 

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the maximum interest rate legally permissible in the State ofMinnesota, in addition to the amounts due.

 

Section 5.  Taxes, Feesand Other Charges; Liens.  Except asotherwise provided in the Airline Services Agreement, Mesaba shall beresponsible for the payment of all taxes (other than taxes based on or measuredby Northwest’s net income), fees and other charges, including withoutlimitation port or percentage fees assessed against this Agreement, which areimposed by the Airport or any governmental authority against the Lessor,Northwest or Mesaba with respect to this Agreement or Mesaba’s use of thePremises or on any tangible personal property owned by Mesaba, plus allinterest and penalties attributable to such taxes, fees or other charges.Mesaba’s obligations in this Section 5 pertain to all taxes (other thantaxes based on or measured by Northwest’s net income), fees and other chargesincurred or arising during the term of this Agreement, and shall not include orobligate Mesaba to pay or indemnify Northwest for an any Pre-Existing TaxLiabilities (as hereinafter defined). The term “Pre-Existing Tax Liabilities” shall mean any taxes, fees andother charges incurred by or related to the Premises or Northwest’s use orpossession thereof prior to the Effective Date of this Agreement.  In the event that Mesaba enters thisAgreement in the middle of any annual taxation period, the tax liabilities willbe prorated accordingly between Northwest and Mesaba.  At all times during the term of thisAgreement, Mesaba shall keep the Premises free and clear of all liens, leviesand encumbrances arising from or related to any act or omission of Mesaba orany party acting by or through Mesaba. Mesaba will provide to Northwest copies of all reports provided to theAirport with respect to all fees and charges, including without limitation,landing fees, payable with respect to flights operated at the Airport.

 

Section 6.  Use ofPremises; Compliance with Laws and Regulations.  Mesaba shall use the Premises solely for itsNorthwest Airlink operations in accordance with the Airline Services Agreementand for no other purpose without Northwest’s prior written consent. ThePremises may not be sublet, subdivided or used to provide services to other airtransportation companies whether or not such companies are affiliates of Mesabaunless approved in advance by Northwest. Mesaba shall conduct its operations onthe Premises in a reasonable manner and shall not commit or suffer to becommitted any nuisance or act or thing which may disturb the quiet enjoyment ofNorthwest or any other tenant at the Airport. Mesaba acknowledges that Northwest reserves the right to establish fromtime to time reasonable rules, regulations and procedures for the use of thePremises and Mesaba agrees to and shall cause its employees, agents and allpersons using the Premises under it to comply with all such rules, regulationsand procedures. At all times during the term of this Agreement, Mesaba’soperations and activities on the Premises shall be in strict compliance withall laws, rules and regulations of any federal, state, county, city orother governmental authority having jurisdiction over the operation of theAirport.  Mesaba shall pay when due allcosts, fines, fees and assessments that may be levied against it with respectto its operations and activities on the Premises during the Term of thisAgreement.

 

Section 7.  Improvements.  Mesaba shall not erect any structures, makeany improvements to or do any other construction work on the Premises or alter,modify, make additions or improvements to or install any fixtures in anybuilding or structure now existing on the Premises at any time during the termhereof, without the prior written consent of both

 

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Northwest and the Lessor.  Thecosts of any such construction, improvements, alterations, additions ormodifications shall be borne solely by Mesaba. In the event any construction, improvement, alteration, modification oraddition is made without such approvals, Northwest may require Mesaba to removethe same and restore the Premises to their condition prior to suchconstruction, improvement, alteration, modification or addition, and if Mesabafails to do the same, Northwest may effect the removal and restoration andMesaba shall pay the cost thereof to Northwest plus an administrative charge offifteen percent (15%) of such costs. Mesaba shall not remove any improvements made or fixtures installed onthe Premises during the term of this Agreement (unless Northwest requires theirremoval pursuant to this Section 7). At the expiration or earlier termination of this Agreement, title tosuch improvements and fixtures shall automatically vest in Northwest.

 

Section 8.  Maintenanceand Repair. Mesaba shall promptly repair any and all damage to the Premisescaused by its employees, agents, guests and invitees, or resulting from Mesaba’suse of the Premises and shall provide, at its sole expense, janitorial andtrash removal services necessary to maintain a sanitary condition and neatappearance within the Premises. In the event Mesaba fails to perform suchobligations and such failure continues for at least ten (10) daysfollowing Mesaba’s receipt of written notice of such failure from Northwest,Northwest may elect, but shall have no obligation, to perform any work on thePremises that may be necessary by reason of Mesaba’s failure to perform and insuch event Mesaba shall pay to Northwest immediately upon demand therefor thefull cost associated with such work plus an administrative fee of fifteenpercent (15%).  Nothing herein shallimply any duty upon the part of Northwest to do any such work and performancethereof by Northwest shall not constitute a waiver of Mesaba’s default infailing to perform the same.  Northwestshall not be liable for inconvenience, annoyance, disturbance, loss of businessor other damage to Mesaba as a result of any interference with Mesaba’s use ofthe Premises by Northwest.

 

Section 9.  SecurityProcedures.  Mesaba agrees to fullyimplement all procedures and comply with all regulations of the Airport’ssecurity program.  Mesaba will instructits employees and any other representatives of Mesaba including those under contract,as to the security procedures to be followed and responsibilities required tobe performed by Mesaba with respect to its use of the Premises.  Northwest may, from time to time, evaluateMesaba’s compliance with the Airport’s security program.  In the event Mesaba shall fail to implement,perform or observe any of the security procedures on its part to be performed,observed and kept with respect to the Premises, Northwest shall have the rightto immediately take any corrective measures deemed necessary by Northwest,including but not limited to termination of this Agreement in accordance with Section 12hereof.  Mesaba shall indemnify and holdharmless Northwest, its directors, officers, agents and employees, from andagainst any and all costs, claims, judgments and expenses (including attorneys’fees) incurred by Northwest due to any investigation commenced, or penalties orfines imposed, by the Federal Aviation Administration, Transportation SecurityAdministration, the Airport or any other governmental agency havingjurisdiction with respect to the Airport’s security program arising out of orin connection with Mesaba’s use of the Premises.

 

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Section 10.  Limitationof Liability and Indemnity.  Notwithstandingany provision of the Northwest Lease to the contrary, Northwest shall not beliable to Mesaba, or any of Mesaba’s agents, employees, servants or invitees,and Mesaba agrees to release, indemnify, hold harmless and defend Northwest,the Lessor, and their respective officers, directors, employees, agents,successors and assigns, from and against any and all suits, claims, actions,damages, liabilities and expenses (including, without limitation, attorneys’fees, costs and related expenses) for bodily or personal injury or death to anypersons and for any loss of, damage to, or destruction of any property,including loss of use, incidental and consequential damage thereof, arising outof or in any manner connected with the breach, violation, performance ornonperformance of any provision of this Agreement or of the Northwest Lease orthe use of the Premises by Mesaba or any of Mesaba’s agents, representatives,employees, contractors or invitees, whether or not occurring or arising out ofthe negligence, whether sole, joint, concurrent, comparative, active, passive,imputed or any other type, of Northwest, the Lessor or their respectiveofficers, directors, employees or agents; however, the foregoingindemnification shall not apply to any claim or liability resulting from thegross negligence or willful misconduct of Northwest, its officers, directors,employees or agents.  Mesaba’saforementioned indemnification obligations to Northwest shall not include orobligate Mesaba to indemnify Northwest for any Pre-Existing Liabilities (ashereinafter defined) or Post-Termination Liabilities (as hereinafterdefined).  The term “Pre-ExistingLiabilities” shall mean any suits, claims, actions and liabilities (includingwithout limitation any attorneys’ fees, costs and related expenses incurred inconnection therewith) related to the condition or design and any defect of thePremises or Northwest’s use or possession thereof prior to the EffectiveDate.  The term “Post-TerminationLiabilities” shall mean any suits, claims, actions and liabilities (includingwithout limitation any attorneys’ fees, costs and related expenses incurred inconnection therewith) related to the condition or design and any defect of thePremises or Northwest’s or any other party’s use or possession thereof afterTermination, unless such “Post-Termination Liabilities” are found to have beencaused by Mesaba, or unless Mesaba assigns this Agreement pursuant to Section 17(c) below.

 

Section 11.  Insurance.

 

(a)                                  Sublessee shall atall times during the term of this Agreement maintain in full force and effectthe following insurance coverages:

 

(i)                                     Workers’compensation and occupational disease coverage in the form of and in theminimum amounts required by the laws of the states in which Sublessee operates.  Such coverage shall include employer’sliability coverage with limits of not less than $*** per incident.

 

(ii)                                  Commercial generalliability coverage with limits no less than $*** combined single limit peroccurrence.  Such coverage shall includeendorsements for personal injury and contractual liability.

 

(iii)                               Comprehensive aviationbodily injury and property damage liability coverage with limits of not lessthan $*** combined single limit per occurrence, including but not limited toaircraft liability, passenger legal liability, premises and property damageliability, hangar keepers liability and baggage and

 

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cargo liability.  Such coverageshall include personal injury and contractual liability, and shall also includewar risk and allied perils, hijack and confiscation coverage with a limit ofnot less than $*** per incident.

 

(b)                                 Commercial generalliability and comprehensive airline liability insurance coverages shall providecoverage for events which occur during the policy period, are continuing innature and not on a claims made basis, and shall include endorsements that:

 

(i)                                     Underwritersacknowledge that the indemnification and hold harmless provisions of thisAgreement are insured under Sublessee’s blanket contractual liability coverage;

 

(ii)                                  Northwest and theLessor are named as additional insureds on such insurance to the extent of thecontractual liability assumed by Sublessee hereunder;

 

(iii)                               Said insurance isprimary with respect to the matters within such coverage, irrespective of anyinsurance carried by Northwest;

 

(iv)                              Provide that, as respectsthe interests of Northwest and the Lessor, this insurance shall not beinvalidated by any breach of warranty by Sublessee;

 

(v)                                 Provide a severabilityof interests/cross liability endorsement; and

 

(vi)                              Provide that the insurershall waive its subrogation rights against Northwest and the Lessor.

 

(c)                                  Prior to thecommencement of this Agreement, Mesaba shall cause to be delivered to Northwestcertificates of insurance evidencing compliance with the provisions of this Section 11.  All of the insurance coverages referenced inthis Section 11 shall be written through a company or companiessatisfactory to Northwest, and the certificates of insurance shallunconditionally obligate the insurer to notify Northwest in writing at leastthirty (30) days in advance of the effective date of any material change in orcancellation of such insurance.

 

Section 12.  Default andRemedies.  Northwest may terminatethis Agreement or pursue any other remedy provided to the Lessor under theNorthwest Lease if Mesaba fails to cure any default of this Agreement withinten (10) days following receipt of written notice of default fromNorthwest, or under any circumstances in which the Northwest Lease permits theLessor to pursue any such remedies. Termination of this Agreement by Northwest pursuant to this Section 12shall not be construed as a waiver by Northwest of any other rights or remediesit may have at law or in equity. Notwithstanding any other provision of this Agreement, in addition tothe remedies provided herein and in the Northwest Lease, Northwest shall haveall other rights and remedies available at law or in equity.

 

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Section 13.  EnvironmentalMatters.

 

(a)  Covenants.  Mesaba hereby acknowledges and agrees that:

 

(i) Mesaba shall comply with allapplicable Environmental Laws, properly handle, label and dispose of allHazardous Substances utilized by or generated from operations on the Premises,and shall ensure that all persons utilized by Mesaba in its operations on thePremises have been fully and properly trained in the handling of HazardousSubstances.

 

(ii)  Mesaba shall be responsible forobtaining all permits and authorizations required for its operations on thePremises.

 

(iii)  Northwest shall be permittedaccess to the Premises at all times to inspect Mesaba’s operationsthereon.  Northwest may perform anenvironmental audit of the Premises at any time during the term hereof andMesaba agrees to implement any changes to its operations or practices andprocedures requested by Northwest following such audit.

 

(iv)  Mesaba shall provide Northwestwith copies of any notice, correspondence or other communication to or from anygovernmental entity or agency thereof that relates in any way with thecondition of the Premises.

 

(b)  Indemnity. Mesaba shall be responsible for and shall indemnify, defend and holdNorthwest harmless from and against all Losses associated with (i) anyRelease from, in, on or to the Premises of a Hazardous Substance during theTerm of this Agreement (or any holdover by Mesaba after expiration of theterm), (ii) any violation of any Environmental Law in connection with the useof the Premises during the term of this Agreement (or any holdover by Mesabaafter the expiration of the term), or (iii) any investigation of Mesabaordered by a governmental entity with appropriate jurisdiction over thePremises.  The indemnity obligations ofthis Section 13 shall survive the expiration or termination of thisAgreement.

 

(c)  Definitions. For purposes of this Agreement, the following terms shall have themeanings noted:

 

(i)  “Environmental Law” shall mean allapplicable federal, state and local laws, rules, code, regulations, ordinancesand orders with respect to environmental protection or worker health andsafety, including but not limited to the Comprehensive Environmental Response,Compensation and Liability Act of 1980, as amended; the Superfund Amendmentsand Reauthorization Act of 1986, as amended; the Hazardous MaterialsTransportation Act, as amended; the Resources Conservation and Recovery Act, asamended; the Toxic Substance Control Act of 1976, as amended; the Federal CleanAir Act, as amended; the Federal Water Pollution Control Act, as amended; theNational Environmental Policy Act, as amended; any so-called “Superfund” or “Superlien”law; the Occupational Safety and Health Act, as amended; all regulationspromulgated by the United States Environmental Protection Agency; allregulations

 

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promulgated by the Occupational Safety and Health Administration; andall rules adopted pursuant thereto.

 

(ii)  “Hazardous Substance” shall meanall substances defined or listed as “hazardous substances,” “toxic substances,”“hazardous waste,” “toxic pollutants” in, or otherwise regulated under, anyEnvironmental Law, including without limitation petroleum products and wastesand asbestos-containing materials.

 

(iii)  “Release” shall mean any actualor threatened escape, seepage, leakage, spillage, discharge, emission, pumping,emptying or release.

 

Section 14.  Notices.All notices and other communications under this Agreement shall be effectivetwo (2) business days after deposit with the United States Postal Service,first class, postage prepaid, or one (1) business day after delivery viaovernight courier, or when hand delivered or transmitted by facsimile, andshall be in writing and addressed to the parties at the following addresses:

 
| To Northwest: |   | Northwest Airlines, Inc.                                        |
|---------------|--------|----------------------------------------------------------------------|
|          |   | 2700 Lone Oak Parkway (Dept. A1135)                                  |
|          |   | Eagan, MN 55121-1534                                                 |
|          |   | Fax No. (612) 727-6041                                          |
|          |   | Attention: Managing Director - Facilities & Airport Affairs |
|          |   |                                                                 |
| To Mesaba:    |   | Mesaba Aviation, Inc.                                           |
|          |   | 1000 Blue Gentian Road, Suite 200                               |
|          |   | Eagan,                                                               |
|          |   | Fax No. 651-367-5360                                            |
|          |   | Attention: President and Chief Operating Officer                     |
|          |   | With copy to: Vice President of Financer                             |

 

Either party may change the address at which notice is to be made byproviding notice of the change to the other party, in writing, in the mannerprovided for in this Section 14.

 

Section 15.  ForceMajeure.  Neither party shall beliable for any failure to perform its obligations under this Agreement, exceptfor Mesaba’s payment obligations set forth herein, if such failure is due tocauses beyond its control and not the result of its fault or neglect, includingwithout limitation, acts of God, war, the public enemy, epidemics, quarantinerestrictions, fire, fog, flood or other abnormally severe weather condition,epidemics, riots or civil commotion, strikes, lockouts or labor disputes,actions of governments or agencies thereof.

 

Section 16.  Nondiscrimination.  Mesaba agrees that it shall not discriminateagainst any worker, employee or applicant or any member of the public becauseof race, color, creed, religion, national origin, ancestry, age or sex.  Mesaba agrees to undertake an affirmativeaction program as required by 14 CFR Part 152, Subpart E, to ensure thatno persons shall on the grounds of race, color, creed, national origin or sexbe excluded from participating in any employment activities covered in 14 CFR Part 152,Subpart E.

 

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Section 17.  Miscellaneous.

 

(a)                                  LitigationExpenses.  In the event of any legalaction between Northwest and Mesaba to enforce any of the provisions and/orrights hereunder, the unsuccessful party in such action agrees to pay to theother party all reasonable costs and expenses incurred by the successful partyin connection therewith, including, without limitation, court costs andreasonable attorneys’ fees.

 

(b)                                 Integration;Amendment and Modification.  ThisAgreement embodies the entire agreement between the parties hereto relative tothe subject matter hereof and shall not be modified, changed or altered in anyrespect except in writing.

 

(c)                                  Assignment.  Mesaba shall not assign its rights orobligations pursuant to this Agreement or permit any third party to use anyportion of the Premises without the prior written consent of Northwest and theLessor (if required under the Northwest Lease). In the event Northwest consents to any such assignment, Mesaba shall befully responsible to Northwest and the Lessor for and shall indemnify and holdNorthwest and the Lessor harmless with respect to compliance by the assigneewith all of the provisions of this Agreement and the Northwest Lease, exceptand unless Mesaba’s assignment is to Northwest, or to another direct Northwestor Northwest Airlink affiliate.

 

(d)                                 Governing Law.  This Agreement shall be governed by andconstrued in accordance with the laws of the State of Minnesota.

 

(e)                                  Successors andAssigns.  The covenants, agreementsand obligations herein contained shall extend to, bind and inure to the benefitnot only of the parties hereto but their successors and permitted assigns.

 

(f)                                    Survival.  The obligations of Mesaba contained inSections 5, 7, 9, 10, 11, 14 and 17 hereof shall remain in effect and survivethe expiration or termination of this Agreement.

 

(g)                                 Counterparts.  This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original but all of which shallconstitute one agreement.

 

(h)                                 Severability.  If any term of this Agreement shall bejudicially determined to be illegal, invalid or unenforceable at law or inequity, it shall be deemed to be void and of no force and effect to the extentnecessary to bring such term within the provisions of any such applicable lawor laws, and such terms as so modified and the balance of the terms of thisAgreement shall remain enforceable.

 

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IN WITNESS WHEREOF, Northwest and Mesaba haveexecuted this Agreement as of the day and year first above written.

 

 
| NORTHWEST AIRLINES, INC. | MESABA AVIATION, INC. |
|--------------------------|-----------------------|
|                     |                  |
|                     |                  |
| By:                      |                  |   | By: |   |   |
|                     | (Signature)           |   |   | (Signature) |   |
| Name:                    |                  |   | Name: |   |   |
|                     |                  |   |   |   |   |   |
| Its:                     |                  |   | Its: |   |   |
|                          |                       |  |  |  |  |  |  |  |

 

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##### ACKNOWLEDGMENT AND CONSENT

#####  

                                                               ,which is the Lessor under the Northwest Lease, hereby acknowledges receipt ofan executed copy of the foregoing Facilities Use Agreement and consents to theterms thereof.

 
|   |   |
|--------|--------|
|   |
|   |
| By:    |   |   |
|   |   |
| Name:  |   |   |
|   |   |
| Title: |   |   |
|   |   |
| Date:  |   |   |
|        |        |  |  |  |  |  |

 

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**Attachment A**

**Use Fees**

 

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**EXHIBITI**

 

**CANCELLATION CODES**

 

XNO –Northwest Requested Cancellation

 

XPO –Passenger Overfly

 

XSO – AirlinkSpecial Cancel

 

XOZ –Overflight

 

XNS –Northwest Caused Cancellation

 

XDS* –Aircraft Damage Station

 

XQS* –Equipment Station

 

XVS* – ServingStation

 

XXS* –Regional Jet / Saab Substitution

 

XSZ – Schedule Cancellation/ Change (approved by Northwest)

 

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*only atNorthwest Service Cities

 

 

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