exhibit10-74.htm


    Exhibit
10.74

     

     

    CERTAIN
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. THE SYMBOL “[***]” HAS BEEN INSERTED IN PLACE OF THE PORTIONS SO
OMITTED.

     

     

    CREDIT
AGREEMENT

     

    dated as
of January 30, 2009

     

    between

     

    COLGAN
AIR, INC.,

    Borrower

     

    and

     

    EXPORT
DEVELOPMENT CANADA,

    Lender

     

    _______________________________________________________

     

    Vedder
Price P.C.

     


    
      
         


      

      
         


        
          

        

      

      
         


        
          


           

          TABLE
OF CONTENTS

           

          Page

           

        

      

    


    
      	
              Section 1.

            	
              Certain
      Definitions 

            	
              1

            


    

     

    
      	
              Section 2.

            	
              Commitments;
      Borrower’s Notice of Payment Dates; Closing Procedure; Termination
      Date 

            	
              1

            


    

     

    
      	
              Section 3.

            	
              Fees 

            	
              2

            


    

     

    
      	
              Section 4.

            	
              Conditions 

            	
              3

            


    

     

    
      	
              Section 5.

            	
              The
      Certificate 

            	
              6

            


    

     

    
      	
              Section 6.

            	
              Extent
      of Interest of Lenders 

            	
              19

            


    

     

    
      	
              Section 7.

            	
              Borrower’s
      Representations and Warranties 

            	
              19

            


    

     

    
      	
              Section 8.

            	
              Indemnities 

            	
              23

            


    

     

    
      	
              Section 9.

            	
              Covenants
      of the Borrower 

            	
              30

            


    

     

    
      
        	
                Section 10.         Notices                                                                        32

              


      

    

     

    
      
        	
                Section 11.       
      Governing Law; Consent to Jurisdiction; Waiver of Jury Trial                                          33

              


      

    

     

    
      
        	
                Section 12.       
      Invoices and Payment of Expenses                                                         
34

              


      

    

     

    
      
        	
                Section 13.       
      Confidentiality                                                                  
      34

              


      

    

     

    
      
        	
                Section 14.      
      Miscellaneous                                                                      35

              


      

    

     

    


    
      	 
      	 
      	 
      
	
              Schedule I

            	
              -

            	
              Notice
      and Account Information

            
	
              Schedule II

            	
              -

            	
              Advances

            
	
              Schedule III

            	 
      	
              [***]

            
	 
      	 
      	 
      
	
              Exhibit A

            	
              -

            	
              Form
      of Funding Notice

            
	
              Exhibit B

            	
              -

            	
              Form
      of Officer’s Certificate

            
	
              Exhibit C

            	
              -

            	
              Form
      of Assignment Agreement

            
	
              Exhibit D

            	
              -

            	
              Form
      of Consent and Agreement

            
	 
      	 
      	 
      
	
              Annex A

            	
              -

            	
              Definitions

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


        
           

        

      

    


    CREDIT
AGREEMENT

     

    THIS CREDIT AGREEMENT dated as
of January 30, 2009 (this “Agreement”) is between
(i) COLGAN AIR,
INC., a Virginia corporation (the “Borrower”) and (ii) EXPORT DEVELOPMENT
CANADA, as lender (the “Lender”).

     

    W I T N E S S E T
H:

     

    WHEREAS, concurrently with the
execution and delivery of this Agreement, the Borrower and the Lender are
entering into the Mortgage and Security Agreement dated as of the date hereof
(the “Mortgage”)
pursuant to which the Borrower agrees, among other things, that the Loan
Certificate issued hereunder and all other obligations hereunder or under any
other Operative Document will be secured by the mortgage and security interest
created by the Borrower in favor of the Lender.

     

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

     

    Section 1. Certain
Definitions.  Except as otherwise defined in this Agreement,
including its annexes, schedules and exhibits, terms used herein in capitalized
form shall have the meanings attributed thereto in Annex A.

     

    Unless
the context otherwise requires, any reference herein to any of the Operative
Documents refers to such document as it may be modified, amended or supplemented
from time to time in accordance with its terms and the terms of each other
agreement restricting the modification, amendment or supplement
thereof.

     

    Section 2. Commitments; Borrower’s
Notice of Payment Dates; Closing Procedure; Termination
Date.

     

    2.1 During
the Credit Period, the Lender agrees, subject to the terms and conditions of
this Agreement, to make a secured loan to the Borrower in respect of each
Advance falling during the Credit Period, through a Drawing on Borrowing Dates
to be designated pursuant to Section 2.2.  No such Drawing shall
exceed the Maximum Commitment minus the aggregate amount of outstanding Drawings
made or to be made by the Lender on or prior to such Borrowing Date (the
Lender’s “Commitment”);
provided that at no time shall the aggregate amount of Drawings made by the
Lender in respect of an Aircraft (i) exceed [***] of the Net Purchase Price for
such Aircraft in the case of the first ten Aircraft or (ii) exceed [***] of the
Net Purchase Price for such Aircraft in the case of the last five
Aircraft.

     

    As more
particularly set forth in Section 5, the Borrower shall execute and deliver
to the Lender with appropriate insertions the Loan Certificate to evidence the
Maximum Commitment.  Each Drawing shall be evidenced by this
Agreement, the Loan Certificate and notations made from time to time by the
Lender in its books and records, including computer records.  The
Lender shall record in its books and records, including computer records, the
principal amount of the Drawings owing to it from time to
time.  Absent evidence to the contrary, the Lender’s books and records
shall constitute presumptive evidence of the accuracy of the information
contained therein.  Failure by the Lender to make any such notation or
record shall not affect the obligations of the Borrower to the Lender with
respect to the repayment of its Drawings.

     

    2.2  (a) The
Borrower agrees to give the Lender at least three (3) Business Days’ prior
written notice (the “Funding
Notice”) of the Borrowing Date for each Drawing to fund an Advance, which
shall not be a date before the scheduled date set forth in Schedule II for
such Advance (or such later or earlier date as may be agreed to in writing
between the Borrower and the Lender), which notice shall specify any funding
instructions and shall be in substantially the form of
Exhibit A.  On the Business Day next following the execution and
delivery of this Agreement and the satisfaction of the conditions precedent in
Section 4.1 (the “Effective Date”), the Lender
shall allow Drawings (subject to the limitations set forth in Section 2.1)
in respect of certain Advances which were paid by the Borrower prior to the
Effective Date.

        

           (b) In the
event that any Drawing to fund Advances shall not be consummated in accordance
with the terms hereof on the Effective Date or the Borrowing Date specified in a
Funding Notice, the Lender and the Borrower shall cooperate with each other to
arrange a mutually acceptable postponement of such date provided that such date
must fall within the Credit Period and may not be more than sixty (60) days
after the Borrowing Date anticipated in Schedule II (the “Delayed Borrowing
Date”).  In the event that the Drawing to fund Advances shall
not be consummated by 10:00 a.m. (New York time) on the Delayed Borrowing Date
or, if earlier, the date on which the Borrower notifies the Lender that the
Drawing will not occur, the Lender may cancel or terminate any funding
arrangements that it may have made to enable it to fund its Commitments and the
Borrower shall pay to the Lender on demand Break Amount, if any.  In
consideration of making its funds available on the Effective Date or the
specified Borrowing Date, the Borrower shall compensate the Lender for its net
loss of earnings on such funds, by paying the Lender interest on the aggregate
amount thereof (calculated on the basis of a 360-day year and actual days
elapsed) at a rate equal to LIBOR plus the Applicable Margin for the period from
and including the Effective Date or the specified Borrowing Date to but
excluding the earlier of (x) the Business Day on which the Borrowing shall
actually occur, (y) the Business Day on which the Borrower shall notify the
Lender that the Borrowing will not occur prior to the Delayed Borrowing Date (if
such notice is given prior to 10:00 a.m. (New York time) or if later, until the
Business Day subsequent to such notice date), or (z) the Delayed Borrowing
Date.

     

    2.3  On the
Effective Date, the Lender agrees to fund the Drawing for the initial Advance to
Bombardier by wire transferring such amounts to the account or accounts
specified in the applicable Funding Notice, and to such other account as the
Borrower shall direct the Lender in writing, to reimburse the Borrower for
previously funded Advances.  On the Borrowing Date for each subsequent
Drawing specified in a Borrower’s notice referred to in Section 2.2,
subject to the terms and conditions of this Agreement, the Lender agrees to fund
the Drawing for each such Advance directly to Bombardier or, if such Advance
shall have already been paid by Borrower to Bombardier, to reimburse Borrower
for such Advance, by wiring such amounts to the account or accounts specified in
the applicable Funding Notice.  The Borrower agrees that the actual
transfer of the proceeds of Drawings to the bank designated by the Borrower for
credit to Bombardier’s or the Borrower’s account (as applicable) shall
constitute conclusive evidence that the Drawings were made.

     

    Section 3. Fees.

     

    3.1 The Loan
Certificate shall bear interest and be repaid in accordance with the applicable
terms of this Agreement and the Mortgage.

     

    3.2 In
consideration of the Lender’s Commitments hereunder, the Borrower shall pay to
the Lender on the earlier of (i) the Effective Date and (ii) the
thirtieth (30th) day
following the date hereof, an up-front fee equal to [***] of the Maximum
Commitment (the “Arrangement
Fee”).  The Lender shall, at its option, be entitled to offset
any unpaid portion of the Arrangement Fee from the Drawing to be made on the
initial Borrowing Date hereunder.  In addition, the Borrower shall pay
to the Lender on each Interest Payment Date, in arrears on the basis of a year
of 360 days and the actual number of days elapsed, a commitment fee of [***] of
the average daily unused portion of the Maximum Commitment during the preceding
Interest Period (or in the case of the initial Interest Period, from
December 18, 2008) (the “Commitment Fee”).

     

    Section 4. Conditions.

     

    4.1 Conditions Precedent to the
Effectiveness of the Commitments.  It is agreed that the
Commitment of the Lender and the effectiveness of this Agreement are subject to
the satisfaction prior to the Effective Date of the following conditions
precedent:

     

    (a) The
following documents shall have been duly authorized, executed and delivered by
the party or parties thereto, shall each be reasonably satisfactory in form and
substance to the Lender and shall be in full force and effect and executed
counterparts shall have been delivered to the Lender and its
counsel:

     

    (i) this
Agreement;

     

    (ii) the
Mortgage;

     

    (iii) the
Guaranty;

     

    (iv) the
Bombardier Purchase Agreement and the Capacity Purchase Agreement, including
without limitation all amendments, supplements and modification to and including
the Effective Date, each certified by the Secretary or an Assistant Secretary of
the Borrower, as being a true, accurate and complete copy of the
same;

     

    (v) the
Notice of Assignment;

     

    (vi) the
Consent and Agreement; and

     

    (vii) the Loan
Certificate.

     

    (b) The
Lender shall have received the following, in each case in form and substance
reasonably satisfactory to it:

     

    (i) a
certificate of good standing and certified copy of the Certificate of
Incorporation and By-laws of each of the Borrower and the Guarantor and a copy
of resolutions of the board of directors of each of the Borrower and the
Guarantor or the executive committee thereof, certified by the Secretary or an
Assistant Secretary of the Borrower or the Guarantor, as applicable, duly
authorizing the execution, delivery and performance by the Borrower of this
Agreement, the Mortgage and each other document required to be executed and
delivered by the Borrower on the Effective Date, or in the case of the
Guarantor, the Guaranty; and

     

    (ii) a
certificate of the Borrower and the Guarantor as to the Person or Persons
authorized to execute and deliver the Operative Documents to which it is a
party, and any other documents to be executed on behalf of the Borrower or the
Guarantor, as applicable, in connection with the transactions contemplated
hereby and as to the signature of such person or persons.

     

    (c) The
Lender shall have received a certificate of the Borrower that the aggregate
amount of Advances in connection with each Aircraft shall be sufficient when
paid to Bombardier (together with any amounts previously paid to Bombardier and
which are to be reimbursed to Borrower hereunder) in accordance with this
Agreement to satisfy the obligation of the Borrower with respect to all advance
payments due and payable for each such Aircraft.

     

    (d) In
respect of Advances paid prior to the Effective Date, any liens over the
Collateral granted by the Borrower to finance such Advances shall be released
and terminated.

     

    (e) A Uniform
Commercial Code financing statement or statements covering all the security
interests created by or pursuant to the granting clause of the Mortgage shall
have been delivered by the Borrower, and such financing statement or statements
shall have been duly filed in all places deemed necessary or advisable in the
opinion of counsel for the Lender, and any additional Uniform Commercial Code
financing statements deemed advisable by the Lender or its counsel shall have
been delivered by the Borrower and duly filed and all other action shall have
been taken as is deemed necessary or advisable, in the opinion of counsel for
the Lender, to establish and perfect the Lender’s security interest in the
Bombardier Purchase Agreement.

     

    (f) The
Lender shall have received opinions, in form and substance reasonably
satisfactory to, and addressed to, the Lender from:

     

    (i) Vinson
& Elkins LLP, special counsel to the Borrower and Guarantor, as to the due
authorization and execution of the Operative Documents by the Guarantor and as
to the valid, binding and enforceable nature of the Operative Documents, the
creation and perfection of the Lien created by the Mortgage in place on the
Effective Date and as to such other matters as the Lender may reasonably
request;

     

    (ii) Maskell
& Gaba, special counsel to the Borrower, as to the due authorization and
execution of the Operative Documents by the Borrower and as to such other
matters as the Lender may reasonably request in as it relates to Virginia law;
and

     

    (iii) Vedder
Price P.C., as to such other matters required by the Lender.

     

    (g) The
Lender shall have received an opinion addressed to the Lender as to due
authorization, execution and delivery by Bombardier of the Bombardier Purchase
Agreement and the Consent and Agreement, in form and substance reasonably
satisfactory to the addressees thereof.

     

    (h) Since
December 31, 2007, there shall have been no material and adverse change in the
financial or operational condition of the Borrower or the Guarantor and no event
or circumstance shall have occurred which in the reasonable judgment of the
Lender had or would be reasonably likely to have a Material Adverse
Effect.

     

    (i) The
Lender shall have received evidence of the release by The Fauquier Bank of its
Lien on any and all of the Collateral and a disclaimer by The Fauquier Bank of
any interest therein.

     

    4.2 Conditions Precedent to the
Lender’s Participation in each Drawing.  It is agreed that the
obligations of the Lender to lend all or any portion of its Commitment for an
Advance to the Borrower is subject to the satisfaction prior to the Borrowing
Date of the following conditions precedent:

     

    (a) The
Lender shall have received due notice with respect to the Effective Date or the
Borrowing Date for such Advance pursuant to Section 2 (or shall have waived
such notice either in writing or as provided in Section 2).

     

    (b) The
Lender shall have received evidence in form and substance reasonably
satisfactory to them that the Borrower shall have paid to Bombardier all amounts
then due and owing (other than represented by an Advance being funded by a
Drawing on such date and to be paid to Bombardier in accordance with the terms
hereof) as of such date, including, without limitation, any amounts payable to
Bombardier in respect of Advances in which Borrower seeks reimbursement
hereunder.

     

    (c) After the
date of the execution and delivery of this Agreement, no change shall have
occurred in applicable law or regulations thereunder which would make it a
violation of law or regulations for the Lender to fund a Drawing, to acquire the
Loan Certificate or to realize the benefits of the security afforded by the
Mortgage.

     

    (d) On such
Borrowing Date, (A) the representations and warranties of the Borrower
contained in Section 7 and of the Guarantor contained in Section 10 of
the Guaranty shall be true and accurate as though made on and as of such date
except to the extent that such representations and warranties relate solely to
an earlier date (in which case such representations and warranties shall be true
and accurate on and as of such earlier date), (B) no event shall have
occurred and be continuing which constitutes (or would, with the passage of time
or the giving of notice or both, constitute) an Event of Default, and
(C) since December 31, 2007, there shall have been no material and
adverse change in the financial or operational condition of the Borrower or the
Guarantor and no event or circumstance shall have occurred which in the
reasonable judgment of the Lender had or would be reasonably likely to have a
Material Adverse Effect, and the Lender shall have received a certificate from
the Borrower and the Guarantor dated such Borrowing Date certifying each of the
foregoing substantially in the form attached as Exhibit B.

     

    (e) The
Lender shall have received all Fees that are due and payable on or prior to such
Borrowing Date.

     

    (f) The
Lender shall be satisfied that Continental Airlines, Inc. (“Continental”) shall not have
filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code nor
shall an involuntary case of bankruptcy under the U.S. Bankruptcy Code have been
commenced against Continental.

     

    (g) Bombardier
shall have provided a disclosure consent to Lender in a form satisfactory to
Lender.

     

    Section 5. The
Certificate.

     

    5.1 Form of Loan
Certificate.  The Loan Certificate in respect of the Drawings
to fund Advances shall be substantially in the form set forth below, as
follows:

     

    _____________

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    COLGAN
AIR, INC.

     

    LOAN
CERTIFICATE

     

    DRAWINGS
TO FUND ADVANCES

     

    
      	
              No.

            	
              New
      York, New York

            
	
              $

            	
              [Effective
      Date]

            


    

    


    Colgan
Air, Inc. (the “Borrower”) hereby promises to
pay to Export Development Canada (the “Lender”), or registered
transferees, (i) the principal sum of _________________________ United States
Dollars (US$__________), or, if less, the aggregate unpaid principal amount of
all Drawings to fund Advances made by Lender to Borrower pursuant to that
certain Credit Agreement dated as of January 30, 2009 (the “Credit Agreement”) between the
Borrower and Lender, payable in full on the applicable Termination Date,
together with interest on the unpaid principal amount hereof from time to time
outstanding from and including the date hereof until such principal amount is
paid in full.

     

    The
Interest Periods for the Drawings evidenced by this Loan Certificate (and
accordingly the Applicable Rates) can vary in accordance with the definitions of
Applicable Rate and Interest Period in the Credit Agreement.  Interest
in respect of the Drawings to fund Advances shall accrue with respect to each
Interest Period at the Applicable Rate in effect for such Interest Period and
shall be payable in arrears on each Interest Payment Date and on the date this
Loan Certificate is paid in full.  This Loan Certificate shall bear
interest at the Past Due Rate on any principal hereof, and, to the extent
permitted by applicable law, interest and other amounts due hereunder, not paid
when due (whether at stated maturity, by acceleration or otherwise), for any
period during which the same shall be overdue, payable on demand by the
Lender.

     

    Interest
shall be payable with respect to the first but not the last day of each Interest
Period.  Interest shall be calculated on the basis of a year of 360
days and actual number of days elapsed.  If any sum payable hereunder
falls due on a day which is not a Business Day, then such sum shall be payable
on the next succeeding Business Day; provided that, in the case of principal of
and interest hereon payable on an Interest Payment Date, if by virtue of such
extension such payment would fall in the next succeeding month, such sum shall
be payable on the preceding Business Day.

     

    Borrower
hereby acknowledges and agrees that this note is the Loan Certificate referred
to in, evidences indebtedness incurred under, and is subject to the terms and
provisions of, the Credit Agreement including, without limitation, the repayment
in full of the Drawings made in respect of an Aircraft upon the applicable
Termination Date.  The Credit Agreement, to which reference is hereby
explicitly made, sets forth said terms and provisions, including those under
which this Loan Certificate may or must be paid prior to its due date or may
have its due date accelerated.

     

    All
payments of principal, Break Amount, if any, and interest and other amounts to
be made to the Lender hereunder, under the Credit Agreement or under the
Mortgage and Security Agreement dated as of January 30, 2009 (as amended or
supplemented from time to time, the “Mortgage”) between the
Borrower and the Lender, (i) shall be made in accordance with the terms of
the Credit Agreement and the Mortgage, and (ii) are guaranteed by Pinnacle
Airlines Corp. (the “Guarantor”) pursuant to the
terms of the Guaranty dated as of January 30, 2009 from Guarantor (as
amended or supplemented from time to time, the “Guaranty”).

     

    Principal
and interest and other amounts due hereon shall be payable in Dollars in
immediately available funds prior to 10:00  a.m., New York time, on the due
date thereof, to the Lender in accordance with the terms of the Credit Agreement
at such account or accounts at such financial institution or institutions as
Lender hereof shall have designated, in immediately available
funds.  All such payments by the Borrower shall be made free and clear
of and without reduction for or on account of all wire or other like
charges.

     

    Lender,
by its acceptance of this Loan Certificate, agrees that each payment received by
it in respect hereof shall be applied in the manner set forth in
Section 5.4 of the Credit Agreement.

     

    The
Collateral is held by the Lender as security, in part, for this Loan
Certificate.  Reference is hereby made to the Credit Agreement and the
Mortgage for a statement of the rights and obligations of the Lender, and the
nature and extent of the security for this Loan Certificate as well as for a
statement of the terms and conditions of the trusts created by the Mortgage, to
all of which terms and conditions in the Credit Agreement and the Mortgage the
Lender agrees by its acceptance of this Loan Certificate.

     

    There
shall be maintained a Certificate Register for the purpose of registering
transfers and exchanges of this Loan Certificate at the office of the Lender set
forth in the Credit Agreement or at the office of any successor thereto in the
manner provided in Section 5.7 of the Credit Agreement.  As
provided in the Credit Agreement and the Mortgage and subject to certain
limitations set forth therein, this Loan Certificate or any interest herein may,
subject to the next following paragraph, be assigned or transferred, and this
Loan Certificate is exchangeable for a like aggregate original principal amount
of Loan Certificates of any authorized denomination, as requested by the Lender
surrendering the same.

     

    Prior to
the due presentment for registration or transfer of this Loan Certificate, the
Borrower shall deem and treat the person in whose name this Loan Certificate is
registered on the Certificate Register as the absolute owner of this Loan
Certificate and the Lender for the purpose of receiving payment of all amounts
payable with respect to this Loan Certificate and for all other purposes whether
or not this Loan Certificate is overdue, and the Borrower shall not be affected
by notice to the contrary.

     

    This Loan
Certificate is subject to prepayment as permitted by Sections 5.10 and 5.11
of the Credit Agreement and to acceleration by the Lender as provided in
Section 4.1 of the Mortgage, and the Lender, by its acceptance of this Loan
Certificate, agrees to be bound by said provisions.

     

    Terms
defined in the Credit Agreement and in the Mortgage have the same meaning when
used in this Loan Certificate.

     

    This Loan
Certificate shall be governed by and construed in accordance with the law of the
State of New York.

     

    *     *     *

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    IN WITNESS WHEREOF, the
Borrower has caused this Loan Certificate to be executed in its corporate name
by its officer thereunto duly authorized, as of the date hereof.

     

    
      	 
      	
              COLGAN
      AIR, INC.

              By:_____________________________

              Name:  Peter
      Hunt

              Title:  Vice
      President

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    5.2 Terms of Loan Certificate;
Drawings.  (a) Prior to the Effective Date, the Borrower
shall issue a Loan Certificate to the Lender in an aggregate original principal
amount equal to Thirty-Five Million Six Hundred Forty-One Thousand Eight Hundred
Forty-Four United States Dollars (US$35,641,844) in respect of Drawings to fund
Advances.  The Borrower shall be entitled to make Drawings against the
Loan Certificate in accordance with Sections 2.1 and 4.  The Loan
Certificate shall bear interest on the unpaid principal amount thereof from time
to time outstanding from and including the date thereof until such principal
amount is paid in full.  Such interest shall accrue in respect of
Drawings to fund Advances with respect to each Interest Period at the Applicable
Rate in effect for such Interest Period and shall be payable in arrears on each
Interest Payment Date and on the date the Loan Certificate is paid in
full.  The Interest Periods for the Drawings to fund Advances can vary
in accordance with the definitions of Applicable Rate and Interest
Period.  Interest shall be payable with respect to the first but not
the last day of each Interest Period.   Interest hereunder and
under the Loan Certificate shall be calculated on the basis of a year of 360
days and actual number of days elapsed.  The principal of the Drawings
to fund Advances shall be due and payable (for the avoidance of doubt without
Break Amount) on the applicable Termination Date.

     

    (b) If any
sum payable under the Loan Certificate or under the Mortgage falls due on a day
which is not a Business Day, then such sum shall be payable on the next
succeeding Business Day; provided that, in the case of principal of and interest
hereon payable on an Interest Payment Date, if by virtue of such extension such
payment would fall in the next succeeding month, such sum shall be payable on
the next preceding Business Day.

     

    (c) The Loan
Certificate shall bear interest at the Past Due Rate on any principal thereof
and, to the extent permitted by applicable law, interest (other than interest
accrued at the Past Due Rate) and other amounts due thereunder and hereunder,
not paid when due (whether at stated maturity, by acceleration or otherwise),
for any period during which the same shall be overdue, payable on demand by the
Lender.

     

    (d) The Loan
Certificate shall be executed on behalf of the Borrower by one of its authorized
officers.  A Loan Certificate bearing the signatures of individuals
who were at any time the proper officers of the Borrower shall bind the
Borrower, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the delivery of such Loan Certificate or did not hold
such offices at the respective dates of such Loan Certificate.  No
Loan Certificate shall be issued hereunder except that provided for in
Section 5.2(a), and any Loan Certificate issued in exchange or replacement
therefor pursuant to the terms of this Agreement.

     

    5.3 [Intentionally
Omitted].

     

    5.4 Distribution of Funds
Received.  (a)  Provided that no Event of Default has
occurred and is then continuing, each installment of interest payable on the
Loan Certificate shall be applied as soon as possible on or after the date that
such amount is received and becomes immediately available to the
Lender:

     

    First, to the Lender
to the payment in full of the aggregate amount of interest due under the Loan
Certificate in an amount equal to (i) accrued interest at the rate provided
in the Loan Certificate, (ii) any overdue interest thereon, and (iii) Break
Amount, if any; and

     

    Second, the balance,
if any, thereof thereafter remaining to the Borrower or such other Person(s) as
may then lawfully be entitled thereto.

     

    (b) Provided
that no Event of Default has occurred and is then continuing, on the Termination
Date in respect of any or all of the Aircraft, each payment made by the Borrower
as repayment of Drawings in respect of such Termination Date shall be
distributed as promptly as possible on or after the date that such amount is
received and becomes immediately available to the Lender:

     

    First, to the Lender
to the payment in full of the aggregate amount of interest due under the Loan
Certificate in respect of such Aircraft or all Aircraft, as applicable, being in
an amount equal to (i) accrued interest at the rate provided in the Loan
Certificate, and (ii) any overdue interest thereon plus the Break Amount,
if any, due to the Lenders in respect of such payment;

     

    Second, to the Lender
to the payment in full of the outstanding principal amount of the Drawings in
respect of such Aircraft or all Aircraft, as applicable, made by the Lender
which is being repaid; and

     

    Third, the balance,
if any, thereof thereafter remaining to the Borrower or such other Person(s) as
may then lawfully be entitled thereto.

     

    (c) Upon any
partial repayment of the Loan Certificate pursuant to Section 5.11(a)
hereof, the amount paid by Borrower shall be applied against the amounts which
Borrower is obligated to pay in connection with such prepayment pursuant to
Section 5.11(a).

     

    (d) After an
Event of Default shall have occurred, and so long as such Event of Default shall
be continuing, all amounts received by the Lender hereunder and all proceeds
resulting from a sale of any of the Collateral shall be applied in the following
order of priority:

     

    First, to the extent
not theretofore paid by or on behalf of the Borrower, to pay all costs and
expenses of the Lender incurred in connection with the performance of its duties
hereunder or under any other Operative Document, including reasonable attorneys’
fees and expenses, and all reasonable costs and expenses incurred by the Lender
in connection with its entering upon, taking possession of, holding, operating,
managing, selling or otherwise disposing of the Collateral or any part thereof,
any and all Taxes, assessments or other charges of any kind prior to the Lien of
any Operative Document that the Lender determined in good faith to pay or be
paid, and all reasonable amounts payable to the Lender hereunder or under any of
the Operative Documents in respect of any indemnities or other obligations of
the Borrower;

     

    Second, to the Lender
to the payment of any other amount, indebtedness or obligations (other than
principal and interest) due and payable to the Lender under any Operative
Documents, including, without limitation, the Fees and Break Amount, if
any;

     

    Third, to the Lender
to the payment of accrued and unpaid interest (including interest on account of
overdue payments of principal and interest) then due the Lender under this
Agreement or the Loan Certificate;

     

    Fourth, to the Lender
to the payment in full of the principal amount of the Loan Certificate;
and

     

    Fifth, to the Lender
to the payment of all amounts due and payable under any Other Operative
Document;

     

    Sixth, the balance,
if any, thereof thereafter remaining, to the Borrower or such other Person(s) as
may then lawfully be entitled thereto.

     

    5.5 Method of
Payment.  Principal, interest and other amounts due hereunder
or under the Loan Certificate or in respect hereof or thereof shall be payable
in Dollars in immediately available funds prior to 10:00 a.m., New York
time, on the due date thereof, to the Lender at such account specified in
Schedule I hereto (or such other account as shall be notified by Lender to
Borrower).

     

            All such payments by
the Borrower shall be made free and clear of and without reduction on account of
all wire and other like charges.  Prior to the due presentment for
registration of transfer of the Loan Certificate, the Borrower may deem and
treat the Person in whose name the Loan Certificate is registered on the
Certificate Register as the absolute owner of the Loan Certificate for the
purpose of receiving payment of all amounts payable with respect to the Loan
Certificate and for all other purposes whether or not the Loan Certificate shall
be overdue, and the Borrower shall not be affected by any notice to the
contrary.

     

    5.6 Termination of Interest in
Collateral.  The Lender shall have no further interest in, or
other right with respect to, the Collateral with respect to any Aircraft,
provided no Default or Event of Default has occurred and is continuing, when and
if the principal amount of, Break Amount on, if any, interest on and other
amounts due under all Drawings in relation to such Aircraft held by the Lender
and all other sums due to the Lender hereunder and under the other Operative
Documents in respect of such Aircraft shall have been paid in full; provided,
however, that the interests and rights of the Lender in and with respect to the
mortgage and security interests created by the Mortgage shall continue (except
with respect to an Aircraft as to which the related Drawings have been repaid)
after all such amounts have been paid in full so long as the Commitments have
not terminated.  Upon payment in full of any Drawings relating to an
Aircraft as contemplated hereby and provided no Event of Default shall have
occurred and be continuing, the Lender shall release that portion of the
Collateral which relates solely to the applicable Aircraft from the Lien of the
Mortgage.

     

    5.7 Registration, Transfer and
Exchange of Loan Certificate.  The Lender agrees with the
Borrower that the Lender shall keep a register (herein sometimes referred to as
the “Certificate
Register”) in which provision shall be made for the registration of Loan
Certificate.

     

            Prior to the due
presentment for registration of the transfer of the Loan Certificate, the
Borrower shall deem and treat the person in whose name the Loan Certificate is
registered on the Certificate Register as the absolute owner of the Loan
Certificate, and the Lender for the purpose of receiving payment of all amounts
payable with respect to the Loan Certificate, and for all other purposes whether
or not the Loan Certificate is overdue, and the Borrower shall not be affected
by notice to the contrary.

     

            The Certificate
Register shall be kept at the office of the Lender set forth in this Agreement
or at the office of any successor Lender, and the Lender is hereby appointed
“Certificate Registrar” for the purpose of registering Loan Certificates and
transfers of Loan Certificates as herein provided.

     

            Upon surrender for
registration of transfer of the Loan Certificate at the office of the Lender set
forth in this Agreement and upon delivery by the Lender to the Borrower of such
surrendered Loan Certificate, the Borrower shall execute, in the name of the
designated transferee or transferees, one or more new Loan Certificates of a
like aggregate principal amount.

     

            The Lender may assign
to any assignee an interest in the Loan Certificate held by it and the Lender
shall register in the name of such assignee such interest in the Loan
Certificate and thereafter such assignee shall be a Lender for all purposes of
the Operative Documents (subject to any limitations in the instrument of
assignment). 

     

          All
Loan Certificates issued upon any registration of transfer or exchange of Loan
Certificates shall be the valid obligations of the Borrower evidencing the same
obligations, and entitled to the same security and benefits under the Mortgage
and this Agreement, as the Loan Certificate surrendered upon such registration
of transfer.

     

            The Lender may
transfer the Loan Certificate to any Person.  The Borrower shall treat
the Person in whose name each Loan Certificate is registered on the Certificate
Register as the Lender with respect thereto for all purposes hereof until due
presentment for registration of transfer as provided in this
Section 5.7.

     

          The
Lender shall give the Borrower notice of such transfer of a Loan Certificate
under this Section 5.7.

     

    5.8 Mutilated, Destroyed, Lost
or Stolen Loan Certificates.  If any Loan Certificate shall
become mutilated, destroyed, lost or stolen, the Borrower shall, upon the
written request of the Lender, execute and deliver in replacement thereof, a new
Loan Certificate, in the same principal amount, dated the date of such Loan
Certificate and designated as issued under the Mortgage.

     

    If the
Loan Certificate being replaced has become mutilated, such Loan Certificate
shall be furnished to the Borrower by the Lender.

     

    If the
Loan Certificate being replaced has been destroyed, lost or stolen, the Lender
shall furnish to the Borrower such security or indemnity as may be reasonably
required by Borrower to hold the Borrower harmless and evidence satisfactory to
the Borrower of the destruction, loss or theft of such Loan Certificate and of
the ownership thereof, provided, however, that if the Lender is an original
party to this Agreement or an Affiliate thereof, the written notice of such
destruction, loss or theft and such ownership and the written undertaking of the
Lender delivered to the Borrower to hold harmless the Borrower in respect of the
execution and delivery of such new Loan Certificate shall be sufficient
evidence, security and indemnity.

     

    5.9 Payment of Expenses on
Transfer.  Upon the issuance of a new Loan Certificate or new
Loan Certificates pursuant to Section 5.7 or 5.8, the Borrower may require
from the party requesting such new Loan Certificate or Loan Certificates payment
of a sum sufficient to reimburse the Borrower for, or to provide funds for, the
payment of any tax or other governmental charge in connection therewith or any
charges and expenses connected with such tax or other governmental charge paid
or payable by the Borrower, and any out of pocket expenses, including legal fees
(for external counsel) incurred, of the Borrower.

     

    5.10 Prepayment.  (a)  Upon
the occurrence of a cancellation of the Bombardier Purchase Agreement with
respect to any or all of the Aircraft for any reason whatsoever, the aggregate
outstanding principal amount of all Drawings relating to the affected Aircraft
shall become due and payable, and the Borrower shall immediately prepay the Loan
Certificate to the extent of such Drawings, together with accrued interest
thereon to the date of prepayment plus any Break Amount and all other amounts
due thereunder and hereunder and under the other Operative Documents with
respect to such Aircraft to the Lender.

     

    (b) On the
second Business Day prior to the occurrence or anticipated occurrence of a
Pinnacle Event, the Requisite Portion of the Facility Amount shall become due
and payable, and the Borrower shall immediately prepay the Loan Certificate in
an amount equal to the Requisite Portion of the Facility Amount (provided that
if, at the time of such prepayment, the Requisite Portion of the Facility Amount
exceeds the aggregate outstanding principal amount of all Drawings, then the
principal amount to be prepaid shall equal the aggregate outstanding principal
amount of all Drawings), together with accrued interest thereon to the date of
prepayment plus any Break Amount and all other amounts due thereunder and
hereunder and under the other Operative Documents with respect to such Aircraft
to the Lender.  Any prepayment under this Section 5.10(b) shall
be applied on a pro rata basis to the aggregate principal amount of all
Drawings.

     

    (c) In the
event that the Lender is entitled to a payment under Section 5.12 or
Section 8.2, the Borrower and the Lender shall cooperate for a period of 60
days to:

     

    (i) first,
restructure the Drawings for the Lender so as to eliminate the need for any such
payment (it being agreed that the Lender shall have no obligation to proceed
with such restructuring to the extent such restructuring would:

     

    (1) result in
an adverse regulatory consequence for the Lender; or

     

    (2) involve
any unreimbursed or unindemnified cost for the Lender; or

     

    (3) be
inconsistent with the Lender’s internal policies); or

     

    (ii) if no
restructuring can be arranged, attempt, with the Borrower acting as marketing
agent, to find an entity reasonably satisfactory to the Lender to purchase the
Loan Certificate and assume the Lender’s Commitment.

     

    The
Lender shall be paid (by the purchasing entity or the Borrower) the outstanding
principal balance of the Loan Certificate, all accrued and unpaid interest
thereon, any Break Amount incurred (calculated as if such purchase were a
prepayment of the Loan Certificate) and all other amounts owed to the Lender
under any Operative Document as a condition precedent to such
purchase.

     

    In the
event the Borrower is unable to find a purchaser of the Loan Certificate, then,
so long as no Default or Event of Default shall have occurred and be continuing
on at least 5 Business Days’ prior written notice, the Borrower may prepay on
the date specified in its notice of prepayment, in whole the Loan Certificate at
the principal amount thereof together with accrued and unpaid interest thereon
to the date of prepayment plus the Break Amount, if any and all other amounts
due to the Lender hereunder, thereunder and under the other Operative
Documents.

     

    (d) In the
event that the Lender receives a refund directly from Bombardier or that
Borrower or any other person receives from Bombardier any amounts in either case
under the Bombardier Purchase Agreement relating to the Aircraft, a principal
amount of the Drawings (and any Break Amount related thereto) relating to such
Aircraft equal to such refund shall become immediately due and
payable.

     

    (e) Any
notice of prepayment delivered pursuant to Section 5.10(c) shall be
irrevocable and shall identify the amount to be prepaid and the Drawings
relating to an Aircraft subject to prepayment (if applicable).

     

    (f) Voluntary
Prepayment.  So long as no Event of Default has occurred and is
continuing, the Borrower may, at any time after the first Interest Payment Date
and upon thirty (30) days’ irrevocable written notice to the Lender, prepay on
the date specified in such notice in whole, or in part, the Advances then
outstanding, provided that any partial prepayment shall be in an amount at least
equal to an Advance.  Each prepayment will be applied to repayment of
installments in inverse order of maturity.  Amounts prepaid under this
Section 5.10(f) shall not be available for re-borrowing.

     

    5.11 Provisions Relating to
Prepayment.  (a)  In connection with any prepayment to be
made pursuant to Section 5.10 above, the principal amount of the Loan
Certificate so to be prepaid, plus accrued interest thereon to the date of
prepayment, together with the Break Amount, if any, shall become due and payable
on the applicable prepayment date.

     

    (b) On the
date fixed for prepayment under Section 5.10, immediately available funds
in Dollars shall be deposited by the Borrower in the account of the Lender at
the place and by the time and otherwise in the manner provided in
Section 5.5, in an amount equal to the principal amount of Loan Certificate
to be prepaid together with accrued and unpaid interest thereon to the date
fixed for such prepayment, all Break Amounts, if any and all other amounts due
to the Lender under the Operative Documents.

     

    (c) The
Lender shall furnish to the Borrower a certificate setting forth the Break
Amount due to the Lender, which certificate shall be presumptively
correct.

     

    5.12 Increased
Costs.  (a)  The Borrower shall pay directly to the
Lender from time to time such amounts as the Lender may determine to be
necessary to compensate the Lender for any increase in actual costs that the
Lender reasonably determines are attributable to its making or maintaining of
its Commitment or the loans evidenced by the Loan Certificate or funding
arrangements utilized in connection with such loans, or any reduction in any
amount receivable by the Lender hereunder in respect of any of its Commitments,
such loans or such arrangements (such increases in costs and reductions in
amounts receivable being herein called “Additional Costs”), resulting
from any Regulatory Change that:

     

    (i) imposes
any Tax that is the functional equivalent of any reserve, special deposit or
similar requirement of the sort covered by Section 5.12(a)(ii); or

     

    (ii) imposes
or modifies any reserve, special deposit or similar requirements (including any
Reserve Requirement) relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, the Lender (including, without
limitation, any of such loans or any deposits referred to in the definition of
“LIBOR” in Annex A), or any such obligations; or

     

    (iii) imposes
any other condition affecting this Agreement or the Loan Certificate (or any of
such extensions of credit or liabilities) or any such obligation.

     

    (b) Without
limiting the effect of the foregoing provisions of this Section 5.12 (but
without duplication), the Borrower shall pay directly to the Lender from time to
time on request such amounts as the Lender may reasonably determine to be
necessary to compensate the Lender (or, without duplication, the holding company
of which the Lender is a subsidiary) for any increase in actual costs that it
determines are attributable to the maintenance by the Lender (or any lending
office or such holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful so long as
compliance therewith is standard banking practice in the relevant jurisdiction)
of any court or governmental or monetary authority following:

     

    (i) any
Regulatory Change; or

     

    (ii) implementing
any risk-based capital guideline or other similar requirement hereafter issued
by any government or governmental or supervisory authority, of capital in
respect of its Commitments or the Loan Certificate or funding arrangements
utilized in connection with the Loan Certificate; such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on
assets or equity of the Lender (or any lending office or such bank holding
company) could have achieved but for such law, regulation, interpretation,
directive or request.

     

    (c) The
Lender shall notify the Borrower of any event occurring after the date of this
Agreement entitling the Lender to compensation under Sections 5.12(a) or (b) as
promptly as practicable, but in any event within 60 days after the Lender
obtains actual knowledge thereof, provided that, the Lender will use
commercially reasonable efforts (at the Borrower’s expense) to mitigate the
amount of the Additional Costs associated with such event, including designating
a different lending office for the Loan Certificate if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the sole opinion of the Lender, result in any economic, legal or regulatory
disadvantage to the Lender (other than economic disadvantages for which the
Borrower agrees to indemnify the Lender and which indemnity is acceptable to the
Lender in its discretion acting reasonably based on its credit assessment of the
Borrower).

     

    (d) The
Lender will furnish to the Borrower an officer’s certificate setting forth in
reasonable detail:

     

    (i) the
events giving rise to such Additional Costs;

     

    (ii) the basis
for determining and allocating such Additional Costs; and

     

    (iii) the
amount of each request by the Lender for compensation under
Sections 5.12(a) or (b) (subject, however, to any limitations the Lender
may require in respect of disclosure of confidential information relating to its
capital structure), together with a statement that the determinations and
allocations made in respect of the Additional Costs comply with the provisions
of this Section 5.12.

     

    Determinations
and allocations by the Lender for purposes of this Section 5.12 of the
effect of any Regulatory Change pursuant to Section 5.12(a), or of the
effect of capital maintained pursuant to Section 5.12(b), on its costs or
rate of return of maintaining its Commitment or the Loan Certificate or its
funding, or on amounts receivable by it in respect of the Loan Certificate, and
of the amounts required to compensate the Lender under this Section 5.12,
shall be conclusive absent manifest error, provided that such determinations and
allocations are made on a reasonable basis and, in the case of allocations, are
made fairly.

     

    (e) The
Borrower shall not be required to make payments under this Section to the Lender
if (i) a claim hereunder arises through circumstances peculiar to the
Lender and which do not affect commercial lenders in the same jurisdiction
generally; (ii) the Lender is required by Section 5.12(f) to sell the Loan
Certificate to a designated purchaser (which may be the Borrower) but fails to
do so (other than as a result of such designated purchaser failing to purchase
the Loan Certificate); (iii) the Lender is not also seeking indemnification
against similar increased costs, to the extent it is entitled to do so, in
transactions with substantial borrowers (it being agreed that an officer’s
certificate to the contrary from any the Lender shall constitute conclusive
evidence of such fact); or (iv) the claim arises out of a voluntary relocation
by the Lender of its lending office (it being understood that any such
relocation effected pursuant to this Section 5.12 is not
“voluntary”).

     

    (f) If the
Lender gives notice of a claim against the Borrower under Section 5.12(c),
the Borrower shall have the right by notice to the Lender to request the Lender
to sell, without representation or warranty (except for its own acts), the Loan
Certificate on a Business Day not fewer than ten days after the giving of such
notice (the “Purchase
Date”) to a Person (which may be the Borrower) designated by the Borrower
(the “Purchaser”) at a
purchase price equal to either (A) the sum of (i) the aggregate
outstanding principal amount of the Loan Certificate, plus (ii) accrued
interest to the Purchase Date, plus (iii) any Break Amount as if the Loan
Certificate was being prepaid pursuant to Section 5.10, plus (iv) all
other amounts owing to the Lender under the Operative Documents, or (B) a
lesser amount than the preceding clause (A), so long as the Borrower pays
an additional amount sufficient to cover the amount of such shortfall (as
compared to such clause (A)).

     

    5.13 Illegality.  Notwithstanding
any other provision of this Agreement or the Mortgage, if the Lender (the “Illegal Lender”) shall notify
any of the parties hereto that the introduction after the date of this Agreement
of or any change after the date of this Agreement or any other Operative
Document in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for the Lender to make, fund or allow to remain outstanding the Loan
Certificate, then the Lender shall, promptly after becoming aware of the same,
deliver to the Borrower a certificate to that effect, and the Borrower shall
attempt to cure such illegality and in the event such illegality shall not have
been cured, on or before the earlier of (a) the next Interest Payment Date or
(b) thirty (30) days following such notification, the Borrower shall immediately
prepay the aggregate outstanding principal amount of the Loan Certificate in
full, together with accrued interest thereon to the date of prepayment plus all
the Break Amount, if any and all other amounts due thereunder and hereunder and
under the other Operative Documents to such Illegal Lender.

     

    Section 6. Extent of Interest of
Lenders.  The Lender shall not have any further interest in, or
other right with respect to, the Collateral when and if the principal and
interest on the Loan Certificate, any Break Amount and all other sums payable to
the Lender hereunder, under the Mortgage and under the Loan Certificate shall
have been paid in full, provided, however, that the interests and rights of the
Lender in and with respect to the Collateral shall continue after all such
amounts have been paid in full so long as the Commitments have not
terminated.  Upon such termination, the Lender will take such steps as
reasonably requested by the Borrower and at the Borrower’s expense related to
the release of such liens.

     

    Section 7. Borrower’s Representations
and Warranties.  The Borrower represents and warrants that on
the date hereof and on each Borrowing Date:

     

    (a) the
Borrower is a corporation duly organized and validly existing in good standing
pursuant to the laws of the State of Virginia; is duly qualified to do business
as a foreign corporation in each jurisdiction in which its operations or the
nature of its business requires, except where the failure, in each case, to be
so qualified would not have a Material Adverse Effect; is a U.S. Air Carrier;
has its “location” (as such term is defined in Article 9 of the Uniform
Commercial Code) in the State of Virginia; and has the corporate power and
authority to purchase the Aircraft under the Bombardier Purchase Agreement and
to enter into and perform its obligations under the Operative Documents to which
it is a party;

     

    (b) the
execution, delivery and performance by the Borrower of the Operative Documents
to which it is a party have been duly authorized by all necessary corporate
action on the part of the Borrower, do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or obligations
of the Borrower except such as have been duly obtained and are in full force and
effect, and none of the execution, delivery or performance by the Borrower of
such Operative Documents contravenes any law, judgment, government rule,
regulation or order binding on the Borrower or the Certificate of Incorporation
or By-laws of the Borrower or contravenes the provisions of, or constitutes a
default under, or results in the creation of any Lien upon the property of the
Borrower under, any indenture, mortgage, contract or other agreement to which
the Borrower is a party or by which it or its properties may be bound or
affected;

     

    (c) neither
the execution and delivery by the Borrower of the Operative Documents to which
it is a party nor the performance by the Borrower of its obligations thereunder
requires the 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 foreign government authority or agency, except for (A) the orders,
permits, waivers, exemptions, authorizations and approvals of the regulatory
authorities having jurisdiction over the operation of the Aircraft by the
Borrower, which orders, permits, waivers, exemptions, authorizations and
approvals, if any, concurrently required to be obtained and in full force and
effect have been duly obtained and are in full force and effect except for those
orders, permits, waivers, exemptions, authorizations and approvals the failure
to obtain which would not have a Material Adverse Effect, and (B) any
filings, registrations or applications specifically described in this Agreement
(the items referred to in (A) and (B) collectively referred to as “Permits”);

     

    (d) the
Operative Documents to which the Borrower is a party each constitute legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with the terms thereof except as such enforceability may be
limited by equitable principles or applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights
generally;

     

    (e) there is
no pending or (to the Borrower’s knowledge) threatened action or proceeding
before any court, arbitrator or administrative agency that individually (or in
the aggregate in the case of any group of related lawsuits) is expected by the
Borrower to have a Material Adverse Effect;

     

    (f) except
for the filing of financing statements (and continuation statements at periodic
intervals) with respect to the interests created by such documents under the
Uniform Commercial Code of Virginia, no further action, including any filing or
recording of any document (including any financing statement in respect thereof
under Article 9 of the Uniform Commercial Code of any applicable
jurisdiction), is necessary or advisable in order to establish and perfect the
first mortgage Lien on the Collateral in favor of the Lender pursuant to the
Mortgage;

     

    (g) there has
not occurred any event which constitutes a Default or an Event of Default which
is presently continuing;

     

    (h) the
statements of financial position of each of the Borrower and Guarantor as of
December 31, 2007, and the related statements of earnings and cash flow of
each of the Borrower and Guarantor in all material respects for the year then
ended, copies of which have been furnished to the Lender, fairly present the
financial condition of each of the Borrower and Guarantor and subsidiaries of
each, respectively, at such date and the results of operations and cash flow of
the Borrower and Guarantor for the period ended on such date, in accordance with
generally accepted accounting principles consistently applied, and since
December 31, 2007, there has been no material and adverse change in the
financial or operational condition of the Borrower or the Guarantor and no event
or circumstance has occurred which would have a Material Adverse
Effect;

     

    (i) the
Borrower has provided to the Lender a true, accurate and complete copy of the
Bombardier Purchase Agreement and the Bombardier Purchase Agreement is in full
force and effect and neither the Borrower nor, to the knowledge of the Borrower,
Bombardier is in default of any of its material obligations
thereunder.  Except as contemplated by the Mortgage, the Borrower has
neither assigned nor granted any Lien in its rights under the Bombardier
Purchase Agreement in respect of any of the Aircraft or the
Engines;

     

    (j) the
issuance of the Loan Certificate to the Lender will not require registration of
the Loan Certificate pursuant to the Securities Act;

     

    (k) the
Borrower has filed or caused to be filed all Federal, state, local and foreign
tax returns which are required to be filed and has paid or caused to be paid or
provided adequate reserves for the payment of all taxes shown to be due and
payable on such returns or (except to the extent being contested in good faith
and by appropriate proceedings and for the payment of which adequate reserves
have been provided in accordance with generally accepted accounting principles)
on any assessment received by the Borrower, to the extent that such taxes have
become due and payable, except such returns or taxes as to which the failure to
file or pay, as the case may be, could not be reasonably expected to result in a
Material Adverse Effect of the Borrower;

     

    (l) the
Borrower and its subsidiaries are not:

     

    (i) in
default under any indenture, mortgage, lease or credit agreement or under any
other agreement or instrument of a material nature to which the Borrower or its
subsidiaries is now a party or by which it is bound, and no event has occurred
and is continuing which, under the provisions of any such indenture, mortgage,
credit agreement or other material agreement or instrument, with the lapse of
time or the giving of notice, or both, would constitute a default thereunder;
or

     

    (ii) in
violation of any law, order, injunction, decree, rule or regulation applicable
to the Borrower of any court or administrative body, which default or violation
would reasonably be expected to materially and adversely affect the operations
or financial condition of the Borrower or the Borrower’s ability to execute,
deliver and perform its obligations under the Operative Documents;

     

    (m) the
Borrower is not an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940;

     

    (n) none of
the information furnished in writing by or on behalf of the Borrower to the
Lender in connection with the negotiation of this Agreement or delivered
hereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;

     

    (o) no part
of the proceeds of any Drawing hereunder will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the Regulations
of the Board of Governors of the Federal Reserve, including Regulations U
and X;

     

    (p) the
Lender has, or will have upon the filing of necessary UCC-1 financing statements
in Virginia, a duly perfected first priority security interest in the
Collateral;

     

    (q) the
Collateral is free and clear of all Liens (except Liens contemplated in and
otherwise permitted by the Mortgage);

     

    (r)      (i)            there
are no pre-delivery deposit payments or other advances with respect to any
Aircraft other than the Advances listed on Schedule II;

     

    (ii) the
Borrower has paid in full all Advances which have become due and owing with
respect to the Aircraft (including, without limitation, the Advances due and
payable upon the execution of the Bombardier Purchase Agreement) and has not
received, directly or indirectly, any refund or credit from Bombardier with
respect to any portion thereof; and

     

    (iii) Schedule II
sets forth in full and accurate detail, with respect to each
Aircraft:

     

    (1) the
aggregate amount of Advances made by the Borrower prior to the date hereof (net
of any and all refunds and credits received from Boeing prior to the date
hereof) with respect to such Aircraft;

     

    (2) the
scheduled dates and amounts of each Advance due with respect to such Aircraft
after the date hereof; and

     

    (3) the
scheduled delivery month for such Aircraft;

     

    (s) [***];

     

    (t) The
Borrower is in compliance with all applicable laws, regulations and requirements
of governmental authorities (including environmental laws) applicable to it or
its properties and all material agreements, charges and other instruments
binding upon it or its property, other than (except in the case of laws relating
to corruption and bribery) such noncompliance as would not reasonably be
expected to have a Material Adverse Effect; and

     

    (u) There has
been no material adverse change to the Capacity Purchase Agreement, the Capacity
Purchase Agreement remains in full force and effect and the Capacity Purchase
Agreement has been expanded to include the Aircraft for which an Advance is
being funded as of the applicable Borrowing Date.

     

    Section 8. Indemnities.

     

    8.1 General
Indemnity.  Subject to the next following paragraph, the
Borrower hereby agrees to indemnify each Indemnitee against, and agrees to
protect, save and keep harmless each of them from any and all Expenses imposed
on, incurred by or asserted against any Indemnitee arising out of or directly
resulting from:

     

    (a) the
operation, possession, use, maintenance, overhaul, testing, registration,
reregistration, delivery, non-delivery, lease, nonuse, modification, alteration,
or sale of an Aircraft, Airframe or Engine, or any engine used in connection
with any Airframe or any part of any of the foregoing, any lessee or any other
Person whatsoever, including, without limitation, claims for death, personal
injury or property damage or other loss or harm to any person whatsoever and
claims relating to any laws, rules or regulations pertaining to such operation,
possession, use, maintenance, overhaul, testing, registration, reregistration,
delivery, non-delivery, lease, non-use, modification, alteration, sale or return
including environmental control, noise and pollution laws, rules or
regulations;

     

    (b) the
manufacture, design, purchase, acceptance, rejection, delivery, or condition of
an Aircraft, Airframe or Engine, any engine used in connection with any
Airframe, or any part of any of the foregoing including, without limitation,
latent and other defects, whether or not discoverable, or trademark or copyright
infringement;

     

    (c) any
breach of or failure to perform or observe, or any other noncompliance with, any
covenant or agreement to be performed, or other obligation of the Borrower under
any of the Operative Documents, or the falsity of any representation or warranty
of the Borrower in any of the Operative Documents;

     

    (d) the
offer, sale and delivery by the Borrower or anyone acting on behalf of the
Borrower of the Loan Certificate or successor debt obligations issued in
connection with the refunding or refinancing thereof (including, without
limitation, any claim arising out of the Securities Act, the Securities Exchange
Act of 1934, as amended, or any other federal or state statute, law or
regulation, or at common law or otherwise relating to securities (collectively
“Securities
Liabilities”)) (the indemnity provided in this Section 8.1(d) to extend
also to any Person who controls an Indemnitee, its successors, assigns,
employees, directors, officers, servants and agents within the meaning of
Section 15 of the Securities Act); and

     

    (e) purchasing
any Aircraft following an Event of Default, including any costs incurred after
purchasing such Aircraft and prior to resale of such Aircraft and the recovery
of all other amounts owing hereunder following an Event of Default under the
Mortgage or the enforcement against the Borrower of any of the terms thereof
(including, without limitation, Section 3 of the Mortgage).

     

    The
foregoing indemnity shall not extend to any Expense of any Indemnitee to the
extent attributable to one or more of the following:

     

    (a) acts or
omissions involving the willful misconduct or gross negligence of such
Indemnitee or any Person acting on behalf of such Indemnitee;

     

    (b) any Tax,
or increase in Tax liability under any Tax law (such matter being subject to the
indemnity in Sections 8.2 and 8.3); provided, however, that this
clause (b) shall not apply to Taxes taken into consideration in making any
payments on an after-Tax basis;

     

    (c) except to
the extent attributable to acts or events occurring prior thereto, acts or
events (other than acts or events related to the performance by the Borrower of
its obligations pursuant to the terms of the Operative Documents) that occur
after the Mortgage is required to be terminated in accordance with
Section 8.1 of the Mortgage; provided, that nothing in this clause (c)
shall be deemed to exclude or limit any claim that any Indemnitee may have under
applicable law by reason of an Event of Default or for damages from the Borrower
for breach of the Borrower’s covenants contained in the Operative Documents or
to release the Borrower from any of its obligations under the Operative
Documents that expressly provide for performance after termination of the
Mortgage;

     

    (d) to the
extent attributable to any transfer (voluntary or involuntary) by or on behalf
of such Indemnitee of the Loan Certificate or interest therein, except pursuant
to the exercise of remedies under any Operative Document, as otherwise
contemplated in the Operative Documents;

     

    (e) to the
extent attributable to the incorrectness or breach of any representation or
warranty of such Indemnitee or any related Indemnitee contained in or made
pursuant to any Operative Document;

     

    (f) to the
extent attributable to the failure by such Indemnitee or any related Indemnitee
to perform or observe any agreement, covenant or condition on its part to be
performed or observed in any Operative Document;

     

    (g) to the
extent attributable to the offer or sale by such Indemnitee or any related
Indemnitee of any interest in the Collateral, the Loan Certificate, or any
similar interest in violation of the Securities Act or other applicable federal,
state or foreign securities laws (other than any thereof caused by acts or
omissions of the Borrower);

     

    (h) other
than during the continuation of an Event of Default, to the extent attributable
to the authorization or giving or withholding of any future amendments,
supplements, waivers or consents with respect to any Operative Document other
than such as have been requested by the Borrower or as are required by or made
pursuant to the terms of the Operative Documents (unless such requirement
results from the actions of an Indemnitee not required by or made pursuant to
the Operative Documents);

     

    (i) to the
extent attributable to any amount which any Indemnitee expressly agrees to pay
or such Indemnitee expressly agrees shall not be paid by or be reimbursed by the
Borrower; or

     

    (j) for any
lien attributable to such Indemnitee or any related Indemnitee.

     

    For
purposes of this Section 8.1, a Person shall be considered a “related”
Indemnitee with respect to an Indemnitee if such Person is an Affiliate or
employer of such Indemnitee, a director, officer, employee, agent, or servant of
such Indemnitee or any such Affiliate or a successor or permitted assignee of
any of the foregoing.

     

    The
Borrower further agrees that any payment or indemnity pursuant to this
Section 8.1 in respect of any “Expense” shall be in an amount which, after
deduction of all Taxes required to be paid by such recipient with respect to
such payment or indemnity under the laws of any federal, state, or local
government or taxing authority in the United States, or under the laws of any
other country or any taxing authority or governmental subdivision of such
country, or any territory or possession of the United States, or any
international authority, shall be equal to the amount of such Expense the
recipient would have received in the absence of the imposition of such
Taxes.

     

    If a
claim is made against an Indemnitee involving one or more Expenses and such
Indemnitee has notice thereof, such Indemnitee shall after receiving such notice
give notice of such claim to the Borrower; provided that the failure to provide
such notice shall not release the Borrower from any of its obligations to
indemnify hereunder except to the extent that the Borrower is prejudiced as a
result of the failure to give such notice, and no payment by the Borrower to an
Indemnitee pursuant to this Section 8.1 shall be deemed to constitute a
waiver or release of any right or remedy which the Borrower may have against
such Indemnitee for any actual damages as a result of the failure by such
Indemnitee to give the Borrower such notice.

     

    The
Borrower shall be entitled, at its sole cost and expense, so long as the
Borrower has acknowledged in writing its responsibility for such Expense
hereunder:

     

    (a)           in
any judicial or administrative proceeding that involves solely a claim for one
or more Expenses, to assume responsibility for and control thereof,

     

    (b)           in
any judicial or administrative proceeding involving a claim for one or more
Expenses and other claims related or unrelated to the transactions contemplated
by the Operative Documents, to assume responsibility for and control of such
claim for Expenses to the extent that the same may be and is severed from such
other claims (and such Indemnitee shall use its reasonable efforts to obtain
such severance), and

     

    (c)           in
any other case, to be consulted by such Indemnitee with respect to judicial
proceedings subject to the control of such Indemnitee and to be allowed, at the
Borrower’s sole expense, to participate therein.

     

    The
Indemnitee may participate at its own expense and with its own counsel in any
judicial proceeding controlled by the Borrower pursuant to the preceding
provisions.  Notwithstanding any of the foregoing, the Borrower shall
not be entitled to assume responsibility for and control of any such judicial or
administrative proceedings if any Event of Default shall have occurred and be
continuing, if such proceedings will involve a material risk of the sale,
forfeiture or loss of any portion of the Collateral unless the Borrower shall
have posted a bond or other security reasonably satisfactory to the relevant
Indemnitee with respect to such risk or if such proceedings could entail any
risk of criminal liability being imposed on such Indemnitee.

     

    The
Indemnitee shall supply the Borrower with such information reasonably requested
by the Borrower as is necessary or advisable for the Borrower to control or
participate in any proceeding to the extent permitted by this
Section 8.1.  Such Indemnitee shall not enter into a settlement
or other compromise with respect to any Expense without the prior written
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed, unless such Indemnitee waives its right to be indemnified with respect
to such Expense under this Section 8.1.

     

    The
Borrower shall supply the Indemnitee with such information reasonably requested
by the Indemnitee as is necessary or advisable for the Indemnitee to control or
participate in any proceeding to the extent permitted by this
Section 8.1.

     

    Notwithstanding
any other provision of this Section 8.1 to the contrary, in the case of any
Expense indemnified by the Borrower hereunder which is covered by a policy of
insurance maintained by the Borrower, it shall be a condition of such indemnity
with respect to any particular Indemnitee that such Indemnitee shall cooperate
with the insurers in the exercise of their rights to investigate, defend or
compromise such claim as may be required to retain the benefits of such
insurance with respect to such claim.

     

    To the
extent of any payment of any Expense pursuant to this Section 8.1, the
Borrower, without any further action, shall be subrogated to any claims the
Indemnitee may have relating thereto.  The Indemnitee agrees to give
such further assurances or agreements and to cooperate with the Borrower to
permit the Borrower to pursue such claims, if any, to the extent reasonably
requested by the Borrower.

     

    In the
event that the Borrower shall have paid an amount to an Indemnitee pursuant to
this Section 8.1, and such Indemnitee subsequently shall be reimbursed in
respect of such indemnified amount from any other Person, such Indemnitee shall
promptly pay the Borrower the amount of such reimbursement, including interest
received attributable thereto (but net of costs, if any, of recovery of such
amounts), provided that no Default or Event of Default has occurred and is
continuing.

     

    8.2 General Tax
Indemnity.  Whether or not any of the transactions contemplated
hereby shall be consummated, the Borrower agrees to pay, indemnify and hold each
Indemnitee harmless from, all Taxes imposed against any Indemnitee, by any
taxing authority upon or with respect to any of the foregoing, or upon or
relating to or measured by (i) the operation, possession, use, maintenance,
overhaul, testing, registration, reregistration, delivery, non-delivery, lease,
nonuse, modification, alteration, or sale of any Aircraft, Airframe or Engine,
or any engine used in connection with any Airframe or any part of any of the
foregoing by the Borrower, any lessee of the Borrower or any other Person acting
by or on behalf of the Borrower whatsoever, including, without limitation,
claims for death, personal injury or property damage or other loss or harm to
any person whatsoever and claims relating to any laws, rules or regulations
pertaining to such operation, possessions, use, maintenance, overhaul, testing,
registration, reregistration, delivery, non-delivery, lease, nonuse,
modification, alteration, sale or return including environmental control, noise
and pollution laws, rules or regulations; (ii) the manufacture, design,
purchase, acceptance, rejection, delivery, or condition of any Aircraft,
Airframe or Engine, any engine used in connection with any Airframe, or any part
of any of the foregoing including, without limitation, latent and other defects,
whether or not discoverable, or trademark or copyright infringement; or
(iii) upon the rentals, receipts or earnings arising therefrom, or upon or
with respect to the Borrower, or upon the Loan Certificate or other sums payable
thereunder or under or on or with respect to the Operative Documents or any sums
payable thereunder, the execution and delivery of this Agreement or any other
Operative Document, or otherwise with respect to the transactions contemplated
by the Operative Documents, provided that the foregoing indemnity shall not
apply:

     

    (i) In the
case of any Indemnitee, to any Taxes imposed by any taxing authority on, based
on, or measured by, the income (whether denominated an income or a franchise
Tax), receipts, capital, net worth, excess profits, or items of tax preference,
including minimum Taxes and withholding Taxes measured by income of such
Indemnitee from, upon or with respect to the Aircraft or the transactions
contemplated hereby, provided, however, that this
clause (i) shall not exclude (A) any Taxes imposed by any taxing authority
which are sales, use, value-added, rental, excise, license, ad valorem or
property taxes or (B) any Taxes (other than U.S. federal, state or local
income taxes) imposed by any taxing authority due to (y) the place of
incorporation, commercial domicile, or other presence in such jurisdiction of
the Borrower or any user of or person in possession of any Aircraft or any part
thereof (or any affiliate of such person), or (z) any payments made under
any of the Operative Documents being made from the jurisdiction imposing such
Taxes or (C) any Taxes to the extent covered by Section 8.3
below;

     

    (ii) Any Taxes
imposed on an Indemnitee (A) to the extent resulting from the gross
negligence or willful misconduct of such Indemnitee or any Person acting on
behalf of such Indemnitee or (B) to the extent resulting from the material
falsity or material inaccuracy of any representation or warranty of any
Indemnitee or any material misrepresentation or material breach of contract of
any Indemnitee made in connection with or arising under any of the Operative
Documents;

     

    (iii) Any Taxes
imposed on an Indemnitee for the sale of any Aircraft, Airframe or Engine after
an Indemnitee has purchased such Aircraft, Airframe or Engine pursuant to
Section 4 of the Mortgage and the Consent and Agreement;

     

    (iv) Any Taxes
imposed on an Indemnitee arising from the acts or omissions of any Person in
respect of any Aircraft, Airframe, Engine, engine or part thereof incurred in
connection with or following the exercise of any remedies under the
Mortgage;

     

    (v) Any Tax
imposed as a result of a transfer or disposition by an Indemnitee of all or any
portion of its interest in the Loan Certificate, or any Operative Document or
any interest in an Indemnitee, unless in each case pursuant to an exercise of
remedies in the case of an Event of Default or pursuant to Sections 5.12(f)
or 8.3(d) hereof;

     

    (vi) Any Tax
imposed on the Lender based on or measured by any fees received by the Lender in
connection with any transaction contemplated by the Operative
Documents;

     

    (vii) Any Tax
imposed on or with respect to a transferee (or subsequent transferee) of an
original Indemnitee to the extent such Tax, under applicable law in effect on
the date of such transfer, would not have been imposed on or with respect to
such original Indemnitee, unless in each case pursuant to an exercise of
remedies in the case of an Event of Default or pursuant to Section 8.3(d)
hereof;

     

    (viii) Any Tax
imposed on an Indemnitee to the extent such Tax would not have been imposed but
for a present or future connection between such Indemnitee or any Affiliate
thereof and the jurisdiction imposing such Taxes (including, without limitation,
the Indemnitee or an Affiliate thereof being or having been a citizen or
resident thereof, or having been organized, present or engaged in a trade or
business therein, or having, having had, a permanent establishment or fixed
place of business therein), other than a connection arising by reason of the
transactions contemplated by the Operative Documents or the operation, presence,
storage or use of the Aircraft, Airframe, Engine or any part thereof or the
presence, activity or other matter of or in respect of the
Borrower;

     

    (ix) Any Tax
imposed on any Indemnitee under Section 4975 of the Code or under
subtitle B of ERISA or equivalent state law as a result of the use by such
Indemnitee or any of its Affiliates of the assets of an “employee benefit plan”
(as defined in Section 3(3) of ERISA) to fund the Loan Certificate or
otherwise to acquire any interest in the Loan Certificates; or

     

    (x) Any Tax
imposed on an Indemnitee that is incurred as a result of a change by such
Indemnitee of its lending office, unless such change is effected pursuant to
Section 8.3(d) hereof.

     

    8.3 Withholding
Taxes.

     

    (a) Except as
provided in this Section 8.3, the Borrower shall have no liability to the
Lender in the event any withholding Tax is imposed on payments made to the
Lender pursuant to this Agreement, the other Operative Documents, or in respect
of the Loan Certificate.

     

    (b) Notwithstanding
anything to the contrary contained herein or any other Operative Document, the
Borrower agrees that any payment made to or for the benefit of the Lender with
respect to interest, principal, Break Amount or other amounts payable pursuant
to this Agreement and the other Operative Documents on or with respect to the
Loan Certificate (it being understood, including amounts payable pursuant to
Section 5.12 hereof) shall be free of all withholdings or deductions with
respect to United States federal income withholding Taxes (“U.S. Withholding Taxes”), and
in the event that the Borrower shall be required by applicable law to make any
such withholding or deduction for any such U.S. Withholding Taxes (a) the
Borrower shall pay to the Lender an additional amount so that after making all
required withholdings or deductions for U.S. Withholding Taxes from such payment
the Lender receives the same amount it would have received had no such
withholdings or deductions been required, (b) the Borrower shall make all
such withholdings or deductions, (c) the Borrower shall pay such amount
withheld or deducted to the Internal Revenue Service in accordance with
applicable law, and (d) shall indemnify the Lender in respect of such U.S.
Withholding Taxes; provided, however, that the
Borrower shall only have an obligation under this Section 8.3 for U.S.
Withholding Taxes to the extent (i) that the Lender is the initial Lender
hereunder, (ii) that the Lender is a Treaty Lender and such U.S.
Withholding Taxes result from a change in law, the Tax treaty between the United
States and Austria, Canada, France, Germany, Ireland, the Netherlands or the
United Kingdom (each, a “Specified Jurisdiction”), or
interpretation of either thereof that occurs on or after the date the Lender
acquires its interest in the Loan Certificate, or (iii) that the Lender is
a lender whose interest income from the transactions contemplated by the
Operative Documents is income effectively connected with the conduct of a United
States trade or business and such U.S. Withholding Taxes result from a change in
law, the relevant Tax treaty, or interpretation of either thereof that occurs on
or after the date the Lender acquires its interest in the Loan
Certificate.

     

    (c) For
purposes of this Section 8.3, the term “Treaty Lender” shall mean a
person who is a resident of a Specified Jurisdiction and entitled to claim the
benefits of the income Tax treaty between the United States and such Specified
Jurisdiction at the time it acquires its interest in the Loan
Certificate.

     

    (d) The
Lender agrees to investigate alternatives for reducing or avoiding any Taxes
indemnifiable pursuant to this Section 8.3 and to use commercially
reasonable efforts (at the Borrower’s expense) to avoid or minimize any
liability with respect to such Taxes, including, without limitation, by
transferring the Loan Certificate to an Affiliate or to a third party or by
designating a different lending office of the Lender, if such designation or
other action would avoid the need for, or reduce the amount of, any such Taxes;
provided, however, that this
sentence shall not obligate the Lender to take any action that would, in its
reasonable judgment, cause the Lender to incur any economic, legal, or
regulatory disadvantage, unless the Borrower agrees to indemnify the Lender
therefor in a manner reasonably satisfactory to the Lender.

     

    (e) In
addition, the Borrower agrees to pay and indemnify the Lender in respect of any
present or future stamp or documentary Taxes or any other license, excise,
registration, filing or property Taxes imposed by any governmental authority
which arise from (i) the execution, delivery, registration, filing, recording or
perfection of any security interest of or in connection with this Agreement or
other Operative Documents (other than any such Taxes attributable to a voluntary
transfer of the Loan Certificate by the Lender) or (ii) in connection with
an Event of Default.

     

    (f) The
Borrower further agrees that any payment or indemnity pursuant to this
Section 8.3 shall be in an amount which, after deduction of all Taxes
required to be paid by such recipient with respect to such payment or indemnity
under the laws of any federal, state, or local government or taxing authority in
the United States, or under the laws of any other country or any taxing
authority or governmental subdivision of such country, or any territory or
possession of the United States, or any international authority, shall be equal
to the amount the recipient would have received in the absence of the imposition
of such Taxes.

     

    (g) If by
reason of (x) any U.S. Withholding Taxes with respect to which a payment or
indemnity was made or paid by the Borrower to or on behalf of the Lender under
clause (a) of Section 8.3(b), or (y) any additional payments to the Lender
pursuant to Section 8.1, 8.2 or Section 8.3(f) with respect to Taxes
resulting from payment or indemnification of an Expense or from payment or
indemnification pursuant to this Section 8.3 on an after-tax basis, the
Lender realizes a net tax savings (by means of a credit, deduction or
otherwise), the Lender shall pay to the Borrower, as promptly as practicably
after the realization of such net tax saving, the amount of such net tax saving
together with any additional tax saving realized as a result of such payment (it
being understood that the amount and timing of the realization of such tax
saving shall be reasonably determined by the Lender in good faith).

     

    8.4 Interest.  The
Borrower will pay to each Indemnitee on demand, to the extent permitted by
applicable law, interest on any amount of indemnity not paid when due pursuant
to this Section 8 until the same shall be paid, at the Past Due
Rate.

     

    Section 9. Covenants of the
Borrower.  The Borrower hereby covenants for the benefit of the
Lender, as follows:

     

    (a) Borrower
Merger.  The Borrower shall not, without the prior written
consent of the Lender (such consent not to be unreasonably withheld or delayed),
enter into a merger, consolidation, sale or other transaction or series of
transactions (whether related or not) to sell, transfer or otherwise dispose of
all or any substantial part of its business.

     

    (b) U.S. Air
Carrier.  The Borrower covenants and agrees that at all times
it will be a U.S. Air Carrier.

     

    (c) Bombardier Purchase
Agreement.  The Borrower shall:

     

    (i) duly
perform all of its obligations under the Bombardier Purchase Agreement and take
all actions necessary to keep them in full force and effect;

     

    (ii) promptly
upon acquiring actual knowledge of the same, notify the Lender of any material
default (whether by the Borrower, Bombardier or Engine Manufacturer) under or
cancellation, termination or rescission or purported cancellation, termination
or rescission of the Bombardier Purchase Agreement specifying in reasonable
detail the nature of such default, cancellation, rescission or
termination;

     

    (iii) not,
without the Lender’s prior written consent (such consent not to be unreasonably
withheld or delayed), in any way modify, cancel, terminate or amend or consent
to the modification, cancellation, termination or amendment of any material
terms of the Bombardier Purchase Agreement in respect of the Aircraft against
which Drawings are made; and

     

    (iv) not
accept delivery of an Aircraft from Bombardier before or concurrently repaying
to the Lender all amounts owing in respect of the Drawings relating to that
Aircraft.

     

    (d) Further
Assurances.  The Borrower covenants and agrees with the Lender
as follows:

     

    (i) The
Borrower will cause to be done, executed, acknowledged and delivered all and
every such further documents and agreements and assurances as reasonably
necessary and as the Lender shall reasonably require for accomplishing the
purposes of this Agreement and the other Operative Documents; provided that any
instrument or other document so executed by the Borrower will not expand any
obligations or liabilities, or limit any rights of the Borrower in respect of
the transactions contemplated by any Operative Documents;

     

    (ii) The
Borrower, at its expense, will take all actions (including the filing of
financing statements under the Uniform Commercial Code in all applicable
jurisdictions and perfection in any other jurisdiction in relation to any
Operative Document) to (A) cause the lien of the Mortgage to at all times
be and remain a perfected Lien, (B) establish the priority of the Mortgage
with respect to the Collateral, and (C) establish the priority of the
Lender’s security interest in the Aircraft to the extent possible or feasible
prior to delivery (or when manufacturer’s serial numbers are available in
respect of the Airframe and the Engines and the Aircraft are anticipated as
being delivered and there is a possibility that such equipment may be delivered
by Bombardier before the Lender is repaid the Drawings in respect of an
Aircraft).

     

    (iii) The
Borrower shall pay all reasonable costs and expenses (including reasonable costs
and disbursements of counsel) incurred by the Lender after the date hereof in
connection with (A) any supplements or amendments of the Operative
Documents (including, without limitation, any related recording costs) (other
than any supplement or amendment associated with the syndication or transfer of
the Loan Certificate or the sale of participation interests therein),
(B) any Default and any enforcement or collection proceedings resulting
therefrom or in connection with the negotiation of any restructuring or
“work-out” (whether or not consummated), or (C) the enforcement of this
Section 9.

     

    (iv) The
Borrower will at all times comply with all applicable laws and regulations
relating to the Borrower, and its business and the Operative Documents other
than (except in the case of laws relating to corruption and bribery) such
noncompliance as would not reasonably be expected to have a Material Adverse
Effect.

     

    (e) Conduct of Business,
Maintenance of Existence.  The Borrower shall and shall cause
its subsidiaries, if any, to (i) continue to engage in business of the same
general type as conducted by the Borrower and its subsidiaries on the date
hereof and (ii) except as expressly permitted by Section 9(a),
preserve, renew and keep in full force and effect its respective corporate
existence and take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of business of the
Borrower and any of its subsidiaries; provided that the Borrower shall not be
required to maintain, and shall not be required to cause any of its subsidiaries
to maintain, any such rights, privileges or franchises, if the failure to do so
could not reasonably be expected to result in a Material Adverse Effect; comply
with all contractual obligations and requirements of law, except to the extent
that failure to comply therewith could not reasonably be expected to result in a
Material Adverse Effect; and comply with the provisions of their respective
certificates of incorporation, by-laws and other organizational
documents.

     

    (f) Maintenance of Property;
Insurance.  The Borrower shall keep all property (other than
Aircraft in the possession of third party air carriers) useful and necessary in
the respective businesses of the Borrower in good working order consistent with
industry standards and condition, normal wear and tear excepted; maintain or
cause any lessee to maintain with financially sound and reputable insurance
companies insurance on all property material to the business of the Borrower in
at least such amounts and against at least such risks (but including in any
event public liability and product liability) as are usually insured against in
the same general area by companies engaged in the same or a similar business;
and furnish to the Lender, upon written request, information in reasonable
detail as to the insurance carried, together with copies of certificates of
insurance and other evidence of such insurance, if any.

     

    (g) Inspection of Property;
Books and Records; Discussions.  The Borrower shall keep proper
books of records and account in which full, complete and correct entries in
conformity with GAAP and shall be made of all dealings and transactions in
relation to the Borrower’s and its subsidiaries’ respective business and
activities; and permit representatives of the Lender to visit and inspect any of
the Borrower’s properties and examine and, to the extent reasonable, make
abstracts from any of the Borrower’s non-confidential books and records and to
discuss the business, operations, properties and financial and other condition
of the Borrower and its subsidiaries with officers and employees of the
Borrower, in each case at any reasonable time during normal business hours, upon
reasonable notice to a responsible officer of the Borrower, and as often as may
reasonably be desired at reasonable intervals, provided that non-disclosure
agreements are executed or no non-public information is divulged other than to
employees or advisers of the Lender who agree to hold the information
confidential or regulatory agencies which oversee the Lender, it being
understood that the Borrower is the principal subsidiary of a publicly traded
company.

     

    Section 10. Notices.  All
notices, demands, instructions and other communications required or permitted to
be given to or made upon any party hereto shall be in writing and shall be
personally delivered or sent by registered or certified mail, postage prepaid,
or by facsimile, or by prepaid courier service, and shall be effective upon
receipt.

     

    Unless
otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 10, notices, demands, instructions and
other communications in writing shall be given to or made upon the parties
hereto at their addresses (or to their facsimile numbers) as
follows:  (a) if to the Borrower, to the addresses set forth in
Section 6.6 of the Mortgage, (b) if to the Lender, to the address set
forth on Schedule I, or (c) if to any subsequent Lender, addressed to
such Lender at its address set forth in the Certificate Register maintained
pursuant to Section 5.7.

     

    Section 11. Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial.

     

    11.1 This
Agreement shall in all respects be governed by, and construed in accordance
with, the law of the State of New York.

     

    11.2 Each
party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court.  Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement against another party or its
properties in the courts of any jurisdiction.

     

    11.3 Each
party hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any court referred to in Section
11.2.  Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

     

    11.4 Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 10.  Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.

     

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

     

    Section 12. Invoices and Payment of
Expenses.  The Borrower agrees to pay Transaction Expenses (as
defined below) promptly, but in no event later than 30 days after, Lender’s
billing in respect of such Transaction Expenses.  For the purposes
hereof, “Transaction
Expenses” means:

     

    (a) with
respect to the preparation, negotiation, execution and delivery of this
Agreement and the other Operative Documents and the payment or anticipated
payment of each Drawing on each Borrowing Date, the reasonable fees, expenses
and disbursements of the Lender, including, without limitation, the reasonable
fees, expenses and disbursements of Vedder Price P.C., special counsel to the
Lender (the fees of Vedder Price P.C. being capped at [***] in connection with
the preparation, negotiation, execution and delivery of this Agreement and the
other Operative Documents); and

     

    (b) all fees,
taxes (including license, documentary, stamp, excise and property taxes) and
other charges payable in connection with the recording or filing of instruments
and financing statements.

     

    Section 13. Confidentiality.  The
Lender covenants and agrees to keep confidential, and not to disclose to any
third parties, the Operative Documents and all non-public information received
by it from the Borrower, Bombardier or Engine Manufacturer pursuant to the
Operative Documents or the Bombardier Purchase Agreement, if any is so
delivered, provided that such information may be made available:

     

    (a) to
prospective and permitted transferees of the Loan Certificate or the Lender’s
interest in the Collateral, who agree to hold such information confidential on
the terms provided herein and in the Bombardier Purchase Agreement;

     

    (b) to the
Lender’s counsel or independent certified public accountants, independent
insurance advisors or other agents who agree to hold such information
confidential who agree to hold such information confidential on the terms
provided;

     

    (c) as may be
required by applicable law or by any statute, court or administrative order or
decree or governmental ruling or regulation (or, in the case of the Lender, to
any bank examiner or other regulatory personnel);

     

    (d) as may be
necessary for purposes of enforcement of any Operative Document;

     

    (e) as may be
required pursuant to any requirement that such information be disclosed by
virtue of the Lender’s status as an agent of Her Majesty in Right of Canada or
by virtue of any law, regulation, order-in-council, court or administrative
order, or Canadian government policy or by virtue of any international agreement
to which the government of Canada or the Lender is a party, including without
limitation, the WTO Subsidies and Countervailing Measures Agreement;
or

     

    (f) to the
government of Canada.

     

    In
addition to the foregoing, the initial Lender may make publicly available
(i) the name of the Borrower and the Guarantor, (ii) the financial
service provided, (iii) a general description of the commercial
transaction, (iv) the amount of the Drawings in approximate Canadian dollar
range, (v) the name of the manufacturer of the Aircraft and (vi) the
country involved in the transaction.

     

    Section 14. Miscellaneous.

     

    14.1 The
representations, warranties, indemnities and agreements of the Borrower provided
for in this Agreement and each party’s obligations under any and all thereof,
shall survive the expiration or other termination of this Agreement or any other
Operative Document, except as expressly provided herein or therein.

     

    14.2 This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same
instrument.  Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party or parties thereto.

     

    14.3 (a)            This
Agreement shall be binding upon and shall inure to the benefit of, and shall be
enforceable by, the parties hereto and their respective successors and permitted
assigns including each successive holder of the Loan Certificate issued and
delivered pursuant to this Agreement or the Mortgage.

     

    (b) The
Borrower may not assign any of its rights or obligations under this Agreement or
the other Operative Documents except to the extent expressly provided
thereby.

     

    (c) In
addition to the foregoing:

     

    (i) The
Lender may, upon prior notice to Borrower (unless a Default or an Event of
Default shall have occurred and is continuing (in which case no prior notice
shall be required)) assign the Loan Certificate, in whole or in part to any
Person, as provided in Section 5.7, which assignment shall be effected
pursuant to an agreement substantially in the form of
Exhibit C.

     

    (ii) In
addition, the Lender may, upon prior notice to Borrower (unless a Default or an
Event of Default shall have occurred and is continuing (in which case no prior
notice shall be required)) assign, in whole or in part its Commitment to any
financial institution, which assignment shall be effected pursuant to an
agreement substantially in the form of Exhibit C, appropriately modified to
relate to the assignment of a Commitment.

     

    (iii) Effective
upon the assignment of any Commitment, the Lender shall be relieved of its
obligations in respect of such Commitment to the extent the assignee thereof
shall have become obligated in respect thereof.

     

    (iv) Notwithstanding
the above, the Lender may not transfer the Loan Certificate or interest therein
in violation of the Securities Act or applicable foreign or state securities
laws.

     

    (v) In
addition to the foregoing, if the Lender desires to assign or transfer any part
of the Loan Certificate to a special purpose vehicle (“SPV”), as part of an overall
transaction pursuant to which the SPV issues notes, other evidences of
indebtedness, trust certificates or other beneficial interests in the SPV to
investors to fund its purchase of such Loan Certificate (a “Securitization”), the Borrower
agrees to cooperate reasonably with any such Securitization.

     

    (vi) The
Lender shall not have any obligation or duty to the Borrower, or to other
Persons with respect to the transactions contemplated hereby except those
obligations or duties of the Lender expressly set forth in this Agreement and
the other Operative Documents and the Lender shall not be liable for performance
by any other party hereto of such other party’s obligations or duties
hereunder.

     

    *     *     *

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


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

     

    
      	 
      	
              COLGAN AIR, INC., as
      Borrower

              By:

              Name:  Peter
      Hunt

              Title:  Vice
      President

            
	 
      	
              EXPORT DEVELOPMENT
      CANADA, as Lender

              By:

              Name:

              Title:

            
	 
      	
              By:

              Name:

              Title:

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE I

     

    NOTICE & ACCOUNT
INFORMATION

     

    Lender

     

    Notice
to:

     

    Export
Development Canada

     

    [***]

     

    Wiring
Instructions:

     

    [***]


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE II

     

    ADVANCES

     

    
      	 
      	 
      	
              Scheduled

            	
              Final

            	 
      	
              Bombardier

            	 
      
	
              Aircraft

            	
              Aircraft

            	
              Delivery

            	
              Payment

            	
              Payment

            	
              Purchase
      Agreement

            	
              Advances

            
	
              No.

            	
              Type

            	
              Month

            	
              Date

            	
              Number

            	
              Payment Dates

            	
               to be Made

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            	
              [***]

            
	
              TOTAL

            	 
      	 
      	 
      	 
      	 
      	
              [***]

            


    

    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE III

     

    [***]


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT A

     

    FUNDING
NOTICE

     

    ____________,
20__

     

    Export
Development Canada

    151
O’Connor Street

     

    Ottawa,
Ontario, Canada

     

    KIA
IK3

     

    
      	
               
      

            	
              Re:

            	
              Predelivery
      Deposit Payment Financing for Colgan Air, Inc.
-

            


    

     

    
      	
              EDC Reference
      Number [***]

            	 


    

     

    Ladies
and Gentlemen:

     

    Reference
is hereby made to that certain Credit Agreement dated as of January __,
2009 (the “Credit
Agreement”; capitalized terms used herein without definition shall have
the definitions set forth in the Credit Agreement) entered into between Colgan
Air, Inc., as borrower (the “Borrower”), and Export
Development Canada, as lender (the “Lender”).

     

    1. Pursuant
to Section 2.2(a) of the Credit Agreement, Borrower hereby requests a
Drawing in accordance with the following parameters:

     

    (1) Aircraft
Number[s]*:  _________________

     

    (2) Borrowing/Effective
Date:  ______________

     

    (3) Drawing
to fund Advance:  US$__________

     

    (4) Purchase
Installment:  Corresponding to “Payment Number” _____ pursuant to
Schedule II of the Credit Agreement.

     

    2. Please
distribute the proceeds of the Drawing as follows: [Insert payment
instructions]

     

    3. Borrower
hereby confirms that the representations and warranties of the Borrower in
Section 7 of the Credit Agreement are true and accurate on the date hereof
as though made on the date hereof except to the extent that such representations
and warranties relate solely to an earlier date (in which case such
representations and warranties were true and accurate on and as of such earlier
date).

     

    4. In
consideration of the Lender making its funds available on the Borrowing Date
specified in this Funding Notice, in the event that the Drawing does not take
place on the Borrowing Date specified in this Funding Notice, the Borrower shall
compensate the Lender for its net loss on such funds, including any Break
Amounts.  In addition the Borrower agrees to pay the Lender interest
on the aggregate amount thereof (calculated on the basis of a 360-day year and
actual days elapsed) at a rate equal to LIBOR plus the Applicable Margin for the
period from and including the Borrowing Date specified in this Funding Notice to
but excluding the earlier of (x) the Business Day on which the Borrowing Date
shall actually occur, (y) the Business Day on which the Borrower shall notify
the Lender that the Borrowing will not occur prior to the Delayed Borrowing Date
(if such notice is given prior to 10:00 a.m. (New York time) or if later, until
the Business Day subsequent to such notice date), or (z) the Delayed Borrowing
Date.

     

    The terms
and provisions of this Funding Notice shall be binding upon and inure to the
benefit of the Lender and the Borrower and their successors and
assigns.

     

    This
Funding Notice shall be governed by the internal laws of the State of New
York.

     

    
      	 
      	
              Very
      truly yours,

              COLGAN
      AIR, INC.

              By:

              Name:  Peter
      Hunt

              Title:  Vice
      President

            


    

    


    

      

    

     

      * In the
event of Drawings in respect of multiple Aircraft, the form of this Funding
Notice shall be modified accordingly to the Lender’s reasonable
satisfaction.

       

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT B

     

    FORM OF OFFICER’S
CERTIFICATE

     

    This
Certificate, effective as of _________ __, 2009, is given pursuant to
Section 4.2(d) of that certain Credit Agreement dated as of
January 30, 2009 (the “Credit Agreement”) between
Colgan Air, Inc., as Borrower, and Export Development Canada, as
Lender.  Capitalized terms used but not defined herein shall have the
meanings set forth in the Credit Agreement.

     

    The
undersigned officer of the [Colgan Air, Inc.][Pinnacle Airlines Corp.] (the
“Company”) hereby
confirms and certifies that on effective date hereof, (A) the
representations and warranties of the Company contained in [Section 7 to
the Credit Agreement] [Section 10 of the Guaranty] are true and accurate as
of such date except to the extent that such representations and warranties
relate solely to an earlier date (in which case such representations and
warranties shall be true and accurate on and as of such earlier date),
(B) no event has occurred or is continuing which constitutes (or would,
with the passage of time or the giving of notice or both, constitute) an Event
of Default, and (C) since December 31, 2007, there has been no
material and adverse change in the financial or operational condition of the
Company and no event or circumstance has occurred or is occurring which had or
would be reasonably likely to have a Material Adverse Effect.

     

    *      *      *

     

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    In
witness whereof, the undersigned officer of the Company has executed this
Certificate this __ day of __________, ____.

     

    
      	 
      	
              By:________________________________

              Name:

              Title:

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT C

     

    ASSIGNMENT
AGREEMENT

     

    ASSIGNMENT AGREEMENT dated as
of __________, ____ between ________________________________ (the “Assignee”) and
_____________________________ (the “Assignor”).

     

    RECITALS

     

    WHEREAS, the Assignor is the
holder of the Loan Certificate No. ____ dated as of ____________, ____ (the
“Assignor’s Loan
Certificate”) issued under the Credit Agreement, dated as of
January 30, 2009 (the “Credit Agreement”) between
Colgan Air, Inc. (“Borrower”) and Export
Development Canada, as lender (the “Lender”);

     

    WHEREAS, the Assignor proposes
to assign to the Assignee $____________ of the $_____________ Assignor’s Loan
Certificate and a pro rata portion of all of the rights and obligations of the
Assignor under the Credit Agreement and the other Operative Documents (as
defined below) in respect thereof, on the terms and subject to the conditions
set forth herein, and the Assignee proposes to accept the assignment of such
rights and obligations from the Assignor on such terms and subject to such
conditions;

     

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

     

    Section 1. Definitions.  Unless
otherwise defined herein, terms defined in the Credit Agreement are used herein
as therein defined.

     

    Section 2. Assignment.

     

    (a) On
____________, ____ (the “Effective Date”), and on the
terms and subject to the conditions set forth herein, the Assignor will sell,
assign and transfer to the Assignee, without recourse to or representation,
express or implied, by the Assignor (except as expressly set forth in
Section 5 hereof), a $___________ portion of the Assignor’s Loan
Certificate and a pro rata portion of the rights and obligations of the Assignor
under the Credit Agreement and the other Operative Documents in respect thereof
(but not with respect to any indemnity or other claim, interest thereon at the
Past Due Rate and Break Amount, if any, accrued and unpaid as of the Effective
Date or thereafter payable to the Assignor in respect of the period prior to the
Effective Date), and the Assignee shall accept such assignment from the Assignor
and assume all of the obligations of the Assignor accruing from and after the
Effective Date under the Credit Agreement and the other Operative Documents
relating to the Assignor’s Loan Certificate on such terms and subject to such
conditions.

     

    (b) Upon the
satisfaction of the conditions set forth in Section 4, (A) the
Assignee shall, on the Effective Date, succeed to the rights and be obligated to
perform the obligations of the Lender under the Credit Agreement and the other
Operative Documents, and (B) the Assignor shall be released from its
obligations under the Credit Agreement and the other Operative Documents accrued
from and after the Effective Date, in each case to the extent such obligations
have been assumed by the Assignee.

     

    Section 3. Payments.  As
consideration for the sale, assignment and transfer contemplated in
Section 2 hereof, the Assignee shall pay to the Assignor, on the Effective
Date, in lawful currency of the United States and in immediately available
funds, to the account specified below its signature on the signature pages
hereof, an amount equal to $_______________.

     

    Section 4. Conditions.  This
Assignment Agreement shall be effective upon the due execution and delivery of
this Assignment Agreement by the Assignor and the Assignee and the effectiveness
of the assignment contemplated by Section 2 hereof is subject
to:

     

    (a) the
receipt by the Assignor of the payment provided for in Section 3;
and

     

    (b) the
delivery to the Lender of the Assignor’s Loan Certificate, duly endorsed for
[partial] transfer to the Assignee, together with a request in the form attached
hereto as Exhibit A that a new Loan Certificate be issued to the Assignee
and Assignor.

     

    Section 5. Representations and
Warranties of the Assignor.  The Assignor represents and
warrants as follows:

     

    (a) the
Assignor has full power and authority, and has taken all action necessary to
execute and deliver this Assignment Agreement and any other documents required
or permitted to be executed or delivered by it in connection with this
Assignment Agreement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Assignment Agreement, and no governmental
authorizations or other authorizations are required in connection
therewith;

     

    (b) the
Assignor’s interest in the Assignor’s Loan Certificate is free and clear of any
and all Liens created by or through the Assignor;

     

    (c) this
Assignment Agreement constitutes the legal, valid and binding obligation of the
Assignor, enforceable against the Assignor in accordance with its terms;
and

     

    (d) the
Assignor has received no written notice of any Default having occurred and
continuing on the date of execution hereof.

     

    Section 6. Representations and
Warranties of the Assignee.  The Assignee hereby represents and
warrants to the Assignor and Borrower that:

     

    (a) the
Assignee has full power and authority, and has taken all action necessary to
execute and deliver this Assignment Agreement and any and all other documents
required or permitted to be executed or delivered by it in connection with this
Assignment Agreement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Assignment Agreement, and no governmental
authorizations or other authorizations are required in connection
therewith;

     

    (b) this
Assignment Agreement constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with its terms;
and

     

    (c) the
Assignee has fully reviewed the terms of the Operative Documents and has
independently and without reliance upon the Assignor and based on such
information as the Assignee has deemed appropriate, made its own credit analysis
and decision to enter into this Assignment Agreement.

     

    Section 7. Further
Assurances.  The Assignor and the Assignee hereby agree to
execute and deliver such other instruments, and take such other action, as
either party may reasonably request in connection with the transactions
contemplated by this Assignment Agreement.

     

    Section 8. Governing
Law.  This Assignment Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.

     

    Section 9. Notices.  All
communications between the parties or notices in connection herewith shall be in
writing, hand-delivered or sent by ordinary mail or facsimile, addressed as set
forth on the signature pages hereof.  All such communications and
notices shall be effective upon receipt.

     

    Section 10. Binding
Effect.  This Assignment Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.

     

    Section 11. Integration of
Terms.  This Assignment Agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and other writings with respect to the subject matter
hereof.

     

    Section 12. Counterparts.  This
Assignment Agreement may be executed in one or more counterparts, each of which
shall be an original but all of which, taken together, shall constitute one and
the same instrument.

     

    *  *  *

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    IN WITNESS WHEREOF, the
parties have caused this Assignment Agreement to be executed and delivered by
their duly authorized officers as of the date first above written.

     

    
      	 
      	
              [ASSIGNEE]

              By:

              Name:

              Title:

            
	 
      	
              Address
      for Notices:

               

            
	 
      	
              Wire
      Instructions:

               

            
	 
      	
              [ASSIGNOR]

              By:

              Name:

              Title:

            
	 
      	
              Address
      for Notices:

               

            
	 
      	
              Wire
      Instructions:

               

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT D

     

    CONSENT AND
AGREEMENT

     

    


     


    
      
         


      

      
         


        
          

        

      

      
         


        
          


           

        

      

    


    


     

    ANNEX
A

    DEFINITIONS

     

    For all
purposes of the Credit Agreement and the Mortgage the following terms shall have
the following meanings (such definitions to be equally applicable to both the
singular and plural forms of the terms defined).  Any agreement
referred to below shall mean such agreement as amended, supplemented and
modified from time to time in accordance with the applicable provisions thereof
and of the other Operative Documents.  Unless otherwise specified,
Section references are to Sections of the Credit Agreement or the
Mortgage.

     

    “Advance” means each
purchase price installment paid or payable by Borrower in respect of each
Aircraft in accordance with the terms of the Bombardier Purchase Agreement
which, as of the Effective Date, is in the amount and paid or payable on or
before the date set forth in Schedule II to the Credit
Agreement.

     

    “Affiliate” means,
with respect to any Person, any other Person which directly or indirectly
controls, is controlled by, or under common control with, such
Person.  The term “control” means the possession, directly or
indirectly of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

     

    “Aircraft” means each
Airframe together with the related Engines in the configuration (including all
optional features and Buyer Furnished Equipment) specified in the Bombardier
Purchase Agreement, together with, as the context permits, the aircraft and
engine manuals, records and other technical documents delivered
therewith.

     

    “Airframe” means each
Bombardier model DHC-8-402 (Q400) aircraft (excluding Engines or engines from
time-to-time installed thereon) listed by Aircraft No. on Schedule II to
the Credit Agreement.

     

    “Applicable Margin”
means [***] per annum.

     

    “Applicable Rate”
means, for any Interest Period, a rate per annum equal to LIBOR for such
Interest Period plus the Applicable Margin.

     

    “Arrangement Fee” has
the meaning given in Section 3.2 of the Credit Agreement.

     

    “BBA Libor Page” means
the display of British Bankers Association Interest Settlement Rates for United
States Dollar deposits in the London Interbank Market (“BBA Libor”) designated
as Reuters Screen LIBOR01 Page on the service provided by Reuters or its
successor (or such other display as may replace it on any such service or as may
be nominated by Reuters or its successor (or other commercially available source
providing quotations of BBA Libor as designated by the Lender from time to time)
for the purpose of displaying BBA Libor).

     

    “Bombardier” means
Bombardier, Inc., in its capacity as manufacturer of the Aircraft, and its
successors and assigns.

     

    “Bombardier Purchase
Agreement” means Purchase Agreement Number 0604 dated as of
February 17, 2007 together with Aircraft General Terms Agreement dated as
of February 17, 2007, each between Bombardier and the Guarantor, including
the exhibits, amendments or supplements from time to time related thereto but
only insofar as they relate to the Aircraft, and the related letter agreements;
together with the Assignment and Assumption Agreement dated as of April 11,
2007 between Guarantor and Borrower pursuant to which Guarantor assigned all of
its right, title and interest in and to such Purchase Agreement (insofar as it
relates to the Aircraft) to Borrower.

     

    “Borrower” means
Colgan Air, Inc., a Virginia corporation, and its successors and permitted
assigns.

     

    “Borrowing Date” means
the Effective Date and each date on which an Advance is payable in respect of an
Aircraft under the Bombardier Purchase Agreement as set forth in
Schedule II to the Credit Agreement.

     

    “Break Amount” means,
as at any date of determination, that amount reasonably determined by the Lender
to be sufficient to compensate it for any loss, cost or expense directly
attributable to any payment or prepayment of principal on (or the purchase of)
the Loan Certificate if such date is not an Interest Payment
Date.  Such amount shall be set forth in a certificate provided by the
Lender which includes in reasonable detail the basis for the calculations of the
amount being claimed which certificates shall be conclusive absent manifest
error.

     

    “Business Day” means
any day other than a Saturday or Sunday or a day on which commercial banks are
required or authorized to close in Ottawa, Canada, New York, New York and
Memphis, Tennessee.

     

    “Buyer Furnished
Equipment” means the equipment purchased by the Borrower and supplied to
Bombardier to be incorporated into an Aircraft as contemplated by the Bombardier
Purchase Agreement.

     

    “Capacity Purchase
Agreement” shall mean the capacity purchase agreement dated as of
February 2, 2007 between Borrower, Guarantor and Continental Airlines, Inc.
(or such other code share arrangement having terms and with another major
airline acceptable to the Lender).

     

    “Certificate Register”
has the meaning specified in Section 5.7 of the Credit
Agreement.

     

    “Code” means the
Internal Revenue Code of 1986, as amended.

     

    “Collateral” has the
meaning given in the Granting Clause of the Mortgage.

     

    “Commitment”, in
respect of any Advance, has the meaning specified in Section 2.1 of the
Credit Agreement.

     

    “Commitment Fee” has
the meaning given in Section 3.2 of the Credit Agreement.

     

    “Consent and
Agreement” means the Consent and Agreement dated as of the January 30,
2009 among Bombardier, the Borrower and the Lender in the form specified in
Exhibit D to the Credit Agreement.

     

    “Credit Agreement”
means that certain Credit Agreement, dated as of January 30, 2009, between the
Borrower and the Lender as such Credit Agreement may be amended or supplemented
from time to time.

     

    “Credit Period” means
the period from and including the Effective Date to and excluding
[***].

     

    “Default” means any
event which with the giving of notice or the lapse of time or both if not timely
cured or remedied would become an Event of Default pursuant to Section 3 of
the Mortgage.

     

    “Delivery Date” means,
for any Aircraft, the date on which such Aircraft is delivered by Bombardier and
accepted by Borrower or its permitted assignee under the Bombardier Purchase
Agreement.

     

    “Dollars”, “Dollar” and “$” means the lawful
currency of the United States of America.

     

    “Drawing” means any
borrowing made by the Borrower on the Borrowing Date from the Lender pursuant to
Section 2.1 of the Credit Agreement.

     

    “EDGAR” means the
Electronic Date Gathering, Analysis & Retrieval Computer System for the
receipt, acceptance, review and dissemination of documents submitted to the
United States Securities and Exchange Commission in electronic
format.

     

    “Effective Date” has
the meaning specified in Section 2.2(a) of the Credit
Agreement.

     

    “Engine” means in
respect of each Airframe, each of the Pratt & Whitney Canada model
PW150A engines delivered with such Airframe under the Bombardier Purchase
Agreement.

     

    “Engine Manufacturer”
means Pratt & Whitney Canada, together with its successors and
permitted assigns.

     

    “Event of Default” has
the meaning specified in Section 3 of the Mortgage.

     

    “Expense” or “Expenses” means any
and all liabilities, obligations, losses, damages, penalties, claims, actions,
suits, reasonable out of pocket costs, expenses and disbursements (including
reasonable legal fees and expenses) of whatever kind and nature but excluding
Taxes, internal costs and expenses such as salaries, any amounts that would be
included in Break Amounts, and overhead of whatsoever kind and
nature.

     

    “Facility Amount”
means, in respect of the Drawings to finance Advances, US$35,641,844 (the “Initial Commitment”), provided
that upon the occurrence of a Pinnacle Event, such amount shall be reduced by
the Requisite Portion of the Initial Commitment.

     

    “Fees” means,
collectively, the Arrangement Fee and the Commitment Fee.

     

    “Final Payment Date”
means, for any Aircraft, the date set forth in Schedule II to the Credit
Agreement for such Aircraft under the column “Final Payment Date”.

     

    “Funding Notice” has
the meaning given in Section 2.2(a) of the Credit Agreement.

     

    “GAAP” means the
United States’ generally accepted accounting principles, consistently
applied.

     

    “Guarantor” means
Pinnacle Airlines Corp., a Delaware corporation.

     

    “Guaranty” means the
Guaranty dated as of the January 30, 2009 from the Guarantor in favor of the
Lender.

     

    “Indemnitee” or “Indemnitees” means
the Lender and each of its Affiliates, successors, permitted assigns, directors,
officers, and employees.

     

    “Interest Payment
Date” means the last day of each of July and January occurring after the
Effective Date, provided that, if any such date shall not be a Business Day,
then the relevant Interest Payment Date shall be the next succeeding Business
Day, provided further that if by virtue of such extension such payment would
fall in the next succeeding calendar month, such sum shall be payable on the
next preceding Business Day and also provided that no Interest Payment Date may
extend past the Termination Date and the last Interest Payment Date shall be the
Termination Date.

     

    “Interest Period”
means, with respect to each Drawing (i) initially, the period commencing on
the Borrowing Date in respect of such Drawing and ending on the first Interest
Payment Date thereafter, and (ii) thereafter, the period commencing on the
last day of the previous Interest Period and ending on the next Interest Payment
Date or, if earlier, the Termination Date.

     

    “Lender” means Export
Development Canada and its successor and assigns.

     

    “Letter of Offer”
means the Letter of Offer dated December 18, 2008 (Ref:44610-000) from
Lender to Guarantor, as such Letter of Offer may be amended, modified or
supplemented from time to time.

     

    “LIBOR” means, with
respect to the Loan Certificates, for any applicable Interest Period, the
interest rate per annum (calculated on the basis of a 360-day year and the
actual number of days elapsed) at which deposits in Dollars are offered in the
London interbank market, at 11:00 a.m. (London time) two London Business Days
prior to the commencement of such Interest Period for deposits of a duration
equal to six (6) months, as appears on the BBA Libor Page (rounding to the
nearest 1/16th of one percent) or, if not possible to determine LIBOR in this
way, then LIBOR will mean the rates for such deposits as determined by the
Lender by averaging (rounding to the nearest 1/16th of one percent) quotes
furnished by the London Reference Banks.

     

    “Lien” means any
mortgage, pledge, lien, claim, encumbrance, lease, security interest,
international interest or other lien of any kind on property.

     

    “Loan Certificate”
means the loan certificate issued pursuant to Section 5.2 of the Credit
Agreement and any such certificates issued in exchange or replacement therefor
pursuant to Section 5.7 or 5.8 of the Credit Agreement.

     

    “London Business Day”
shall mean any day other than a Saturday or Sunday on which commercial banks are
not authorized or required to close in London, England and which is also a day
on which dealings in Dollar deposits are carried out in the London interbank
market.

     

    “London Reference
Banks” means the London branch of Bank of America, Citibank, N.A.,
Deutsche Bank AG and JP Morgan Chase Bank.

     

    “Material Adverse
Effect” means a material adverse effect on (i) the business,
operations, properties, prospects or financial condition of the Borrower or
Guarantor and their respective subsidiaries on a consolidated basis, or
(ii) the ability of the Borrower or Guarantor to observe or perform its
obligations, liabilities and agreements under the Credit Agreement or any other
Operative Document to which it is a party.

     

    “Maximum Commitment”
means the Facility Amount.

     

    “Mortgage” means the
Mortgage and Security Agreement, dated as of January 30, 2009 between Borrower
and Lender.

     

    “Net Purchase Price”
means, with respect to any Aircraft, the net purchase price of such Aircraft as
contained in the Bombardier Purchase Agreement, less the amount of any credit
memos, discounts, rebates or similar financial incentives that have the effect
of reducing the purchase price of such Aircraft, as reasonably determined by the
Lender.

     

    “Notice of Assignment”
means the Notice of Assignment dated as of January 30, 2009 from Borrower and
Lender to Bombardier.

     

    “Operative Documents”
means the Credit Agreement, the Mortgage, the Guaranty, the Loan Certificate,
the Bombardier Purchase Agreement, the Notice of Assignment and the Consent and
Agreement and any amendments or supplements of any of the
foregoing.

     

    “Other Operative
Document” means any document or instrument (including, without
limitation, any credit agreement or loan agreement or other document or
instrument relating to any indebtedness) entered into by Borrower and/or
Guarantor with Export Development Canada, including without limitation, any
document or instrument entered into in connection with or relating to the
financing contemplated by and/or described in (i) the Revised Letter of
Offer dated September 11, 2007 (REF-880-USA-38767-000) from Export Development
Canada to Guarantor (as such Revised Letter of Offer may be amended, modified or
supplemented from time to time) or (ii) the Letter of Offer.

     

    “Other Secured
Obligations” means any and all moneys, liabilities and obligations which
are now or at any time hereafter may be expressed to be due, owing or payable by
the Borrower or the Guarantor to the Lender, actually or contingently, with
another or others, as principal or surety, on any account whatsoever under any
Other Operative Document or as a consequence of any breach, non-performance,
disclaimer or repudiation by Borrower or Guarantor (or by a liquidator,
receiver, administrative receiver, administrator, or any similar officer in
respect of the Borrower or Guarantor) of any of the Borrower’s or Guarantor’s
obligations to the Lender under any Other Operative Document.

     

    “Past Due Rate” means
a per annum rate equal to the Applicable Rate plus [***] per annum calculated on
the basis of a year of 360 days and actual number of days elapsed and compounded
on a semi-annual basis.

     

    “Person” means any
individual, corporation, limited liability company, partnership, joint venture,
association, joint-stock company, estate or trust, unincorporated organization
or government or any agency or political subdivision thereof.

     

    “Pinnacle Event” shall
mean either (i) the sale, transfer or other disposition of all or a
majority of Pinnacle Airlines, Inc.’s assets and/or capital stock or
(ii) the termination or cancellation of the airline service agreement
between Pinnacle Airlines, Inc. and Northwest Airlines, Inc.

     

    “Regulatory Change”
means, with respect to the Lender, any change that occurs after the date of the
Mortgage in Federal, state or foreign law or regulations (including Regulation
D) or the adoption or making after such date of any interpretation, directive or
request applying to a class of banks or financial institutions including the
Lender of or under any Federal, state or foreign law or regulations (whether or
not having the force of law and whether or not failure to comply therewith would
be unlawful so long as compliance therewith is standard banking practice in the
relevant jurisdiction) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.  For the
avoidance of doubt, the coming into effect of any applicable law or regulations,
policies, orders, directives or guidelines issued by any governmental body,
monetary authority or other regulatory organization (whether or not having the
force of law) with respect to, arising out of, or in connection with the matters
discussed and/or set forth in the proposals set forth in the June 1999
Consultative Paper issued by the Basle Committee or Banking Supervision (as
modified, supplemented, revised and/or superseded by any subsequent proposal,
consultative paper or other document) shall be deemed a Regulatory
Change.

     

    “Requisite Portion”
means, with respect to any prepayment of the Loan Certificate (or Drawings),
[***] in the case of a Pinnacle Event.

     

    “Reserve Requirement”
means the average maximum rate at which reserves (including, without limitation,
any marginal, supplemental or emergency reserves) are required to be maintained
during the Interest Period in respect of the Loan Certificate under Regulation D
by member banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against “Eurocurrency liabilities” (as such term
is used in Regulation D).  Without limiting the effect of the
foregoing, the Reserve Requirement includes any other reserves required to be
maintained by such member banks by reason of any Regulatory Change with respect
to (i) any category of liabilities that includes deposits by reference to
which LIBOR is to be determined or (ii) any category of extensions of
credit or other assets that includes the Loan Certificate.

     

    “Securities Act” means
the Securities Act of 1933, as amended.

     

    “Tax” or “Taxes” means any and
all fees (including, without limitation, license, 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), licenses, levies, imposts, duties, recording charges or fees,
charges, assessments, or withholdings of any nature whatsoever, together with
any assessments, penalties, fines, additions to tax and interest
thereon.

     

    “Termination Date”
means in respect of any Drawing relating to an Aircraft, the earlier of
(i) the Delivery Date of such Aircraft and (ii) the Final Payment
Date.

     

    “U.S. Air Carrier”
means any United States air carrier as to which there is in force a certificate
issued pursuant to Section 40102(a) of the Federal Aviation Act, and which
is a citizen of the United States (as defined in 49 U.S.C.
§ 40102(a)(15)) holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to chapter 447 of title 49 (or
the equivalent authority issued by the Civil Aeronautics Board under the
predecessor regulatory laws, rules and regulations) for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo or which may
operate as an air carrier by certification or otherwise under any successor or
substitute provisions therefor or in the absence thereof.

     

    
      
         


      

      
         


        
          

        

      

      
         


        
        

      

    


    


     

     

    MORTGAGE
AND SECURITY AGREEMENT

     

    Dated as
of

     

    January 30,
2009

     

    between

     

    COLGAN AIR, INC.,

    Borrower

     

    and

     

    EXPORT
DEVELOPMENT CANADA,

    Lender

     

    


     

    ______________________________________________________

     

    Vedder
Price P.C.

     


    
      
         


      

      
         


        
          

        

      

      
         


        
          


           

          TABLE
OF CONTENTS

           

          Page

           

        

      

    


    
      	
              Section 1.

            	
              Definitions 

            	
              4

            


    

     

    
      	
              Section 2.

            	
              Covenants
      of Borrower 

            	
              4

            


    

     

    
      	
              Section 3.

            	
              Events
      of Default 

            	
              6

            


    

     

    
      	
              Section 4.

            	
              Remedies 

            	
              8

            


    

     

    
      	
              Section 5.

            	
              Investment
      of Funds 

            	
              9

            


    

     

    
      	
              Section 6.

            	
              Miscellaneous 

            	
              9

            


    

     

    
      	 
      	 
      	 
      
	
              Schedule I

            	
              -

            	
              [***]

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    MORTGAGE
AND SECURITY AGREEMENT

     

    MORTGAGE AND SECURITY
AGREEMENT, dated as of January 30, 2009 (this “Mortgage”), between COLGAN AIR, INC., a Virginia
corporation (the “Borrower”), and EXPORT DEVELOPMENT CANADA as
Lender (together with its successors hereunder, the “Lender”).

     

    WHEREAS, the Borrower desires
by this Mortgage, among other things to provide for the assignment, mortgage and
pledge by the Borrower to the Lender, of the Collateral including the Borrower’s
right, title and interest in and to the Bombardier Purchase Agreement and the
payments and other amounts received in respect thereof in accordance with the
terms hereof, as security for the Borrower’s obligations to the
Lender;

     

    WHEREAS, all things have been
done to make the Loan Certificate, when executed by the Borrower and issued and
delivered under the Credit Agreement, the valid obligation of the Borrower;
and

     

    WHEREAS, all things necessary
to make this Mortgage the valid, binding and legal obligation of the Borrower,
for the uses and purposes herein set forth and in accordance with its terms,
have been done and performed and have happened.

     

    --
GRANTING CLAUSE --

     

    NOW, THEREFORE, THIS MORTGAGE
WITNESSETH, that, to secure (i) the prompt payment of the principal
of, Break Amount (if any) on, interest on and all other amounts due with respect
to, the Loan Certificates from time to time outstanding hereunder and the
performance and observance by the Borrower of all the agreements, covenants and
provisions for the benefit of the Lender herein and in the Credit Agreement and
the Loan Certificates, and the prompt payment of any and all amounts from time
to time owing hereunder and under the Credit Agreement and the other Operative
Documents by the Borrower to the Lender, and (ii) the prompt payment and
performance of the Other Secured Obligations (the obligations referred to in
clauses (i) and (ii) above being collectively referred to as the “Obligations”), and for the
uses and purposes and subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein contained, and of the
acceptance of the Loan Certificate by the Lender, and of the sum of $1 paid to
the Borrower by the Lender at or before the delivery hereof, the receipt and
sufficiency of which is hereby acknowledged, the Borrower has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Lender, a security interest in and
mortgage lien upon, all right, title and interest of the Borrower in, to and
under the following described property, rights and privileges, other than
Excluded Rights (as defined below) (which, collectively, including all property
hereafter specifically subjected to the Lien of this Mortgage, shall constitute
the “Collateral”), to
wit:

     

    5. The
Bombardier Purchase Agreement, including, without limitation, (i) the right to
purchase each of the Aircraft pursuant to and in accordance with the Bombardier
Purchase Agreement; (ii) all claims for damages in respect of each Aircraft
arising as a result of any default by Bombardier under the Bombardier Purchase
Agreement or by any vendor or other supplier of components or other parts or
equipment installed on or in any of the Aircraft referred to therein, including,
without limitation, all warranty, service life policy and indemnity provisions
contained in the Bombardier Purchase Agreement and all claims thereunder; (iii)
any and all rights of the Borrower to compel performance of the terms of the
Bombardier Purchase Agreement in respect of the Aircraft; and (iv) any and all
rights to receive any credits, refunds, rebates or other discounts due to the
Borrower with respect to the purchase price of the Aircraft (and the Engines)
pursuant to the Bombardier Purchase Agreement (except to the extent specifically
excluded by the terms of the Operative Documents) and all right, title and
interest in and to any payment or performance bonds delivered thereunder,
together with all rights, powers, privileges, options and other benefits of the
Borrower in respect thereof, including, without limitation, the rights to make
all waivers and agreements, to give and receive all notices and other
instruments or communications, and to take such action upon the occurrence of a
default in respect of such provisions, including the commencement, conduct and
consummation of legal, administrative or other proceedings, as shall be
permitted thereby or by law, and to do any and all other things which the
Borrower is or may be entitled to do in respect of such provisions;

     

    6. all
payments or proceeds payable to the Borrower with respect to the Bombardier
Purchase Agreement (as assigned) in respect of the Aircraft or any part thereof
as the result of the sale or other disposition thereof, and all estate, right,
title and interest of every nature whatsoever of the Borrower in and to the same
and every part thereof;

     

    7. all Buyer
Furnished Equipment (whether now owned or hereafter acquired) furnished to
Bombardier to be attached to any of the Aircraft and in relation to which the
Borrower has rights, together with all warranties, indemnities and claims
against any vendor or manufacturer of any such buyer furnished equipment and all
credit memoranda, credits, refunds or other amounts owing from any such vendor
or manufacturer with respect to such equipment;

     

    8. all
monies and securities deposited or required to be deposited with the Lender
pursuant to any term of this Mortgage or required to be held by the Lender
hereunder; and

     

    9. all
proceeds of the foregoing.

     

    Any and
all properties referred to in this Granting Clause which are hereafter acquired
by the Borrower, shall, without further conveyance, assignment or act by the
Borrower become and be subject to the security interest hereby granted as fully
and completely as though specifically described herein.  Anything in
this Mortgage to the contrary notwithstanding, the following rights with respect
to the Bombardier Purchase Agreement are reserved to and retained by the
Borrower and not assigned hereby or subject to any Lien or security interest
hereunder (which, collectively, shall constitute “Excluded
Rights”):

     

    (i)           all
rights and interests in and to the Bombardier Purchase Agreement as and to the
extent that the same relate to aircraft and engines other than the Aircraft and
the Engines, or to any other matters not pertaining to the Aircraft and the
Engines;

     

    (ii)           the
right to demand, accept and retain all rights in and to property, data,
services, product support and other agreements of Bombardier related to the
Aircraft and the Engines under the Bombardier Purchase Agreement which are
available for the benefit of the Borrower only during such times as the Borrower
is the owner or operator of the Aircraft or the Engines; and

     

    (iii)           the
right to obtain services and training pursuant to the Bombardier Purchase
Agreement.

     

    The
Borrower shall at all times remain liable to Bombardier under the Bombardier
Purchase Agreement to perform all of the duties and obligations of the “Buyer”
thereunder to the same extent as if this Mortgage had not been
executed.

     

    The
exercise by the Lender of any of the rights assigned hereunder shall not release
Borrower from any of its duties or obligations to Bombardier under the
Bombardier Purchase Agreement except to the extent that such exercise by the
Lender shall constitute performance of such duties and obligations.

     

    Notwithstanding
any of the foregoing provisions of this Granting Clause, but subject to the
express provisions of the other articles of this Mortgage, so long as the Lender
has not commenced the exercise of remedies under Section 4.1 and/or the
Consent and Agreement, the Borrower shall have the right, to the exclusion of
the Lender and any others claiming by, through or under the Lender, to exercise
in Borrower’s name all rights and powers of the “Buyer” with respect to the
Aircraft under the Bombardier Purchase Agreement, provided, that, the
Borrower may not enter into or consent to any change order or other amendment,
modification or supplement to the Bombardier Purchase Agreement in relation to
the Aircraft, without the written consent and countersignature of the Lender, if
such change order, amendment, modification or supplement would:

     

    A. change
the time of or the amount of any Advance or the manner in which any Advance can
be returned or credited to the Borrower under the Bombardier Purchase
Agreement;

     

    B. postpone
the applicable Delivery Date of any Aircraft beyond the Final Payment
Date;

     

    C. result in
the rescission, cancellation or termination of the Bombardier Purchase
Agreement;

     

    D. have the
effect of changing the model of the Aircraft;

     

    E. have the
effect of changing the configuration of any Aircraft if such change would
materially affect the remarketability or the purchase price of any Aircraft;
or

     

    F. materially
adversely affect the position of the Lender including the value of the rights
granted to the Lender in relation to any and all of the properties referred to
in this Granting Clause.

     

    The
Borrower shall provide to the Lender promptly after the execution of the same
copies, certified by the Borrower, of all material change orders (other than non
charge change orders), amendments, modifications or supplements to the
Bombardier Purchase Agreement (which may omit confidential information) that
affect the Lender’s interest.

     

    --
HABENDUM CLAUSE --

     

    TO HAVE AND TO HOLD all and
singular the aforesaid property unto the Lender, its successors and assigns, and
for the uses and purposes and subject to the terms and provisions set forth in
this Mortgage.

     

    The
Borrower does hereby constitute the Lender the true and lawful attorney of the
Borrower (which appointment is coupled with an interest), irrevocably, with full
power (in the name of the Borrower or otherwise) to ask, require, demand,
receive, compound and give acquittance for any and all monies and claims for
monies due and to become due under or arising out of the Operative Documents and
all other property which now or hereafter constitutes part of the Collateral, to
endorse any checks or other instruments or orders in connection therewith and to
file any claims or to take any action or to institute any proceedings which the
Lender may deem to be necessary or advisable in the premises; provided that the
Lender agrees not to exercise such power of attorney unless an Event of Default
shall be continuing.

     

    The
Borrower does hereby warrant and represent that (except as permitted herein) it
has not assigned or pledged any of its right, title, and interest hereby
assigned to anyone other than the Lender.

     

    IT IS HEREBY COVENANTED AND
AGREED by and between the parties hereto as follows:

     

    Section 1. Definitions

     

    1.1 Definitions.  Except
as otherwise defined in this Mortgage, terms used herein in capitalized form
shall have them meanings attributed thereto in Annex A.

     

    Section 2. Covenants of
Borrower.

     

    2.1 Liens.  The
Borrower will not directly or indirectly create, incur, assume or suffer to
exist any Lien on or with respect to the Collateral, title thereto or any
interest therein except:

     

    (a) the
rights of the Borrower as herein provided, the Lien hereof and any other rights
existing pursuant to the Operative Documents;

     

    (b) Liens for
Taxes of the Borrower either not yet due or being contested in good faith by
appropriate proceedings (and for which adequate reserves have been provided in
accordance with GAAP), so long as the continuing existence of such Liens during
such proceedings does not involve any material risk of the sale, forfeiture or
loss of, the Bombardier Purchase Agreement;

     

    (c) Liens
arising out of any judgment or award against the Borrower with respect to which
an appeal or proceeding for review is being prosecuted diligently and in good
faith, so long as such Liens do not result in a material risk of the sale,
forfeiture or loss of, the Bombardier Purchase Agreement; and

     

    (d) any other
Lien with respect to which the Borrower shall have provided a bond or other
security in an amount and under terms reasonably satisfactory to the
Lender.  The Borrower will promptly, at its own expense, take (or
cause to be taken) such actions as may be necessary duly to discharge any Lien
not excepted above if the same shall arise at any time.

     

    2.2 Amendments, Supplements,
Etc.  Forthwith upon the execution and delivery of any
amendment to this Mortgage, if an applicable legal system is in existence that
provides for filing and/or recording of the Mortgage and amendments or
supplements thereto, the Borrower will cause such amendment to be duly filed and
recorded, and maintained of record, in accordance with all applicable
laws.  In addition, the Borrower will promptly and duly execute and
deliver to the Lender such further documents and take such further action as the
Lender may from time to time reasonably request in order to more effectively
carry out the intent and purpose of this Mortgage and to establish and protect
the rights and remedies created or intended to be created in favor of the Lender
hereunder, including, without limitation, if requested by the Lender, at the
expense of Borrower, the execution and delivery of supplements or amendments
hereto, each in recordable form, in accordance with the laws of such
jurisdiction as the Lender may reasonably request.

     

    2.3 Access to or Furnishing of
Information.  The Borrower agrees to furnish to the
Lender:

     

    (a) as soon
as available, but not later than 90 days after the close of each fiscal
year occurring after the date hereof, (i) an unaudited balance sheet and
related statements of each of the Borrower and Pinnacle Airlines, Inc. at and as
of the end of such fiscal year, together with an unaudited statement of income
and cash flows of each of the Borrower and Pinnacle Airlines, Inc. for such
fiscal year, each of which shall be prepared in accordance with GAAP and (ii) an
audited balance sheet and related statements of the Guarantor at and as of the
end of such fiscal year, together with an audited statement of income and cash
flows of the Guarantor for such fiscal year, each of which shall be prepared in
accordance with GAAP;

     

    (b) as soon
as available, but not later than 45 days after the close of each of the
first three quarters of each fiscal year an unaudited balance sheet of each of
the Borrower, Guarantor and Pinnacle Airlines, Inc. at and as of the end of such
quarter, together with an unaudited statement of income and cash flows of each
of the Borrower, Guarantor and Pinnacle Airlines, Inc. for such quarter, each of
which shall be prepared in accordance with GAAP;

     

    (c) as soon
as available, but not later than 120 days after the close of each fiscal
year of the Borrower occurring while amounts are outstanding under the Credit
Agreement or any Loan Certificate, a certificate of the chief financial officer,
Treasurer, any Vice President, or other officer of the Borrower elected by the
Borrower’s Board of Directors stating that such authorized officer has reviewed
the activities of the Borrower and that, to the knowledge of such authorized
officer, there exists no Default or Event of Default hereunder;

     

    (d) from time
to time, such other non-confidential (except to the extent the recipients are
bound by confidentiality agreements reasonably acceptable to the Borrower) or
non-proprietary information as the Lender may reasonably request;

     

    (e) promptly
after the occurrence thereof and actual knowledge thereof by a responsible
officer of the Borrower, notice of any Event of Default; and

     

    (f) quarterly
updates detailing any required modifications that the Borrower is aware of, and
any optional changes effected in the prior calendar quarter, that would lead to
an increase in the final purchase price of any Aircraft under the Bombardier
Purchase Agreement.

     

    Borrower
shall be deemed compliant with any requirement pursuant to clauses (a) or
(b) above to provide any financial information to the extent such information is
available on EDGAR.

     

    Section 3. Events of
Default.

     

    Each of
the following events shall constitute an Event of Default (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body) and each such Event of Default shall continue so long as, but
only as long as, it shall not have been remedied:

     

    3.1 Payment of Principal or
Interest.  The Borrower shall have failed to make a payment of
any principal or interest on any Loan Certificate after the same shall have
become due;

     

    3.2 Other
Payments.  The Borrower shall have failed to make any payment
of any amount other than principal and interest on any Loan Certificate after
the same shall have become due and such failure shall continue for 5 Business
Days after the Borrower has received notice that such payment is
due;

     

    3.3 Other
Covenants.  The Borrower or the Guarantor shall have failed to
perform or observe, or caused to be performed and observed, in any material
respect, any other covenant or agreement to be performed or observed by it under
any Operative Document, and such failure shall continue unremedied for a period
of 10 Business Days after Borrower’s or Guarantor’s receipt of written notice
from the Lender; provided however that such grace period shall not apply if such
breach gives rise to any reasonable likelihood of the sale, forfeiture or other
loss of any of the Collateral or the Aircraft or any interest
therein;

     

    3.4 Representations and
Warranties.  Any representation or warranty made by the
Borrower or the Guarantor in any Operative Document or any document or
certificate furnished by the Borrower or the Guarantor in connection therewith
or pursuant thereto shall prove to have been materially incorrect or misleading
at the time made;

     

    3.5 Voluntary
Bankruptcy.  The commencement by the Borrower or the Guarantor
of a voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar law in the United States, or the consent by the
Borrower or the Guarantor to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Borrower or the Guarantor or for all or substantially
all of its property, or the making by the Borrower or the Guarantor of any
assignment for the benefit of creditors or the Borrower or the Guarantor shall
take any corporate action to authorize any of the foregoing or to authorize a
general payment moratorium;

     

    3.6 Involuntary
Bankruptcy.  The commencement of an involuntary case or other
proceeding in respect of the Borrower or the Guarantor in an involuntary case
under the federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law in the
United States or seeking the appointment of a receiver liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Borrower or the
Guarantor or for all or substantially all of its property, or seeking the
winding-up or liquidation of its affairs and the continuation of any such case
or other proceeding remains undismissed and unstayed for a period of 90
consecutive days, or an order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without the
consent of the Borrower or the Guarantor, a receiver, trustee or liquidator of
the Borrower or the Guarantor, or for all or substantially all of its property,
or sequestering of all or substantially all of the property of the Borrower or
the Guarantor and any such order, judgment or decree or appointment or
sequestration shall be final or shall remain in force undismissed, unstayed or
unvacated for a period of 90 consecutive days after the date of entry
thereof;

     

    3.7 Perfected Security
Interest.  The Lender shall cease to hold a valid and perfected
security interest in any of the Collateral;

     

    3.8 Breach of Bombardier
Purchase Agreement.  The Borrower breaches or repudiates the
terms of the Bombardier Purchase Agreement and, in the case of a breach, such
breach is not cured within 10 days after the earlier of (i) actual
knowledge by Borrower of such breach and (ii) receipt of notice from Lender
of such breach;

     

    3.9 Cross
Default.  Any event of default, termination event or similar
event, howsoever described, occurs under (i) any aircraft financing in which
Lender and Borrower or Guarantor are parties; (ii) any Other Operative Document;
(iii) the Indenture dated as of February 8, 2005 between Guarantor and
Deutsche Bank National Trust Company in respect of Guarantor’s 31⁄4% Senior
Convertible Notes due February 15, 2025; or (iv) any other document or
agreement whereby any indebtedness (as principal or surety) of the Borrower or
Guarantor is owed to Lender;

     

    3.10 U.S. Air
Carrier.  Borrower ceases to be a U.S. Air Carrier;
or

     

    3.11 Guaranty.  The
Guaranty ceases to be in full force and effect.

     

    3.12 [Intentionally
Omitted].

     

    3.13 Capacity Purchase
Agreement.  The Capacity Purchase Agreement ceases to be in
full force and effect.

     

    Section 4. Remedies.

     

    4.1 General;
Acceleration.  (a) If an Event of Default shall have
occurred and be continuing and so long as the same shall be continuing
unremedied, then and in every such case, the Lender may exercise any or all of
the rights and powers and pursue any and all of the remedies pursuant to this
Section 4, and shall have and may exercise all of the rights and remedies
of a secured party under the Uniform Commercial Code, including, without
limitation, the right to assign its right to purchase the Aircraft from
Bombardier (subject to the Consent and Agreement).

     

    (b) If an
Event of Default referred to in Section 3.5 or 3.6 shall have occurred,
then and in every such case all unfunded Commitments shall be terminated and the
unpaid principal of all Loan Certificates then outstanding, together with
interest accrued but unpaid thereon, and all other amounts due to the Lender
under the Operative Documents, shall immediately and without further act become
due and payable, without presentment, demand, protest or notice, all of which
are hereby waived.

     

    (c) If any
other Event of Default shall have occurred and be continuing, then and in every
such case, the Lender may at any time, by written notice or notices to the
Borrower, (i) terminate all unfunded Commitments and/or (ii) declare
the Loan Certificate to be due and payable, whereupon the unpaid principal of
the Loan Certificate then outstanding, together with accrued but unpaid interest
thereon, and all other amounts due to the Lender under the Operative Documents,
shall immediately and without further act become due and payable without
presentment, demand, protest or other notice, all of which are hereby
waived.

     

    (d) If the
principal of the Loan Certificate shall have become due and payable pursuant to
this Section 4.1, there shall also become due and payable to the Lender
upon demand, without presentment, protest or notice, all of which are hereby
waived, any Break Amount therefor.

     

    (e) The
Lender shall be entitled, at any sale pursuant to this Section 4, to credit
against any purchase price bid at such sale by the Lender all or any part of the
unpaid obligations owing to the Lender and secured by the Lien of this
Mortgage.  The Lender shall, upon any such purchase, acquire good
title to the property so purchased, to the extent permitted by applicable law,
free of all rights of redemption.

     

    (f) The
Lender agrees to give to the Borrower at least 10 days’ prior written revocable
notice of any foreclosure of the Lien of this Mortgage, or of any other action
to cause the Borrower to lose any rights under the Bombardier Purchase Agreement
(which period of notice the parties hereto confirm is commercially
reasonable).

     

    4.2 Discontinuance of
Proceedings.  In case the Lender shall have instituted any
proceeding to enforce any right, power or remedy under this Mortgage by
foreclosure, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Lender, then and in every such case, the Lender and the Borrower shall,
subject to any determination in such proceedings, be restored to their former
positions and rights hereunder with respect to the Collateral, and all rights,
remedies and powers of the Lender shall continue as if no such proceedings had
been instituted.

     

    4.3 Waiver of Past
Defaults.  At its sole discretion, the Lender may waive any
past Default or Event of Default hereunder and its consequences and upon any
such waiver such Default or Event of Default shall cease to exist and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Mortgage, but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent
thereon.

     

    4.4 Remedies
Cumulative.  Each and every right, power and remedy given to
the Lender specifically or otherwise in this Mortgage shall be cumulative and
shall be in addition to every other right, power and remedy herein specifically
given or now or hereafter existing at law, in equity or by statute, and each and
every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Lender, and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy.

     

    No delay
or omission by the Lender in the exercise of any right, remedy or power or in
the pursuit of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of the Borrower or to be an
acquiescence therein.

     

    Section 5. Investment of
Funds.  Any monies held by the Lender as security hereunder for
Borrower’s obligations shall, until paid to Borrower or otherwise applied in
accordance with the terms of the Operative Documents, be invested by the Lender
in an interest bearing account held by the Lender.

     

    Section 6. Miscellaneous.

     

    6.1 Termination of
Mortgage.  Upon (or at any time after) payment in full of the
principal of and interest on and Break Amount, if any, and all other amounts due
under, or otherwise due to the Lender of, the Loan Certificate and provided that
(i) the Commitments shall have terminated, (ii) there shall then be no
other amounts due to the Lender under the Operative Documents, and (iii) no
Default or Event of Default shall have occurred and is continuing, the Lender
shall execute and deliver to or as directed in writing by the Borrower an
appropriate instrument releasing the Collateral from the Lien of this Mortgage,
and the Lender shall execute and deliver such instrument as aforesaid and, at
the Borrower’s expense, will execute and deliver such other instruments or
documents as may be reasonably requested by the Borrower to give effect to such
release; provided, however, that this
Mortgage and the trusts created hereby shall earlier terminate and this Mortgage
shall be of no further force or effect and the rights of the Lender shall
terminate (and the Lender shall release, by an appropriate instrument, the
Collateral from the Lien of this Mortgage) upon any sale or other final
disposition by the Lender of all property constituting part of the Collateral
and the final distribution by the Lender of all monies or other property or
proceeds constituting part of the Collateral in accordance with the terms
hereof.

     

    Except as
aforesaid otherwise provided, this Mortgage and the trusts created hereby shall
continue in full force and effect in accordance with the terms
hereof.

     

    6.2 No Legal Title to Collateral
in Lenders.  The Lender shall not have legal title to any part
of the Collateral.  No transfer, by operation of law or otherwise, of
any Loan Certificate or other right, title and interest of the Lender in and to
the Collateral or hereunder shall operate to terminate this Mortgage or entitle
the Lender or any successor or transferee of the Lender to an accounting or to
the transfer to it of legal title to any part of the Collateral.

     

    6.3 Sale of Collateral by Lender
is Binding.  Any sale or other conveyance of any part of the
Collateral by the Lender made pursuant to the terms of this Mortgage shall bind
the Lender and shall be effective to transfer or convey all right, title and
interest of the Borrower and the Lender in and to such part of the
Collateral.  No purchaser or other grantee shall be required to
inquire as to the authorization, necessity, expediency or regularity of such
sale or conveyance or as to the application of any sale or other proceeds with
respect thereto by the Lender.

     

    6.4 Mortgage for Benefit of
Lender.  Nothing in this Mortgage, whether express or implied,
shall be construed to give to any person, other than the Borrower and the
Lender, any legal or equitable right, remedy or claim under or in respect of
this Mortgage.

     

    6.5 No Action Contrary to
Borrower’s Rights.  Notwithstanding any of the provisions of
this Mortgage to the contrary, so long as no Event of Default shall have
occurred and be continuing, the Lender agrees that neither it nor any Person
claiming by, through or under the Lender, will take any action in violation of
the Borrower’s rights, including the right to purchase the Aircraft under the
Bombardier Purchase Agreement in accordance with the terms of this Mortgage by
Borrower.

     

    6.6 Notices.  Unless
otherwise expressly specified or permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers or documents
provided or permitted by this Mortgage to be made, given, furnished or filed
shall be in writing, mailed by certified mail, postage prepaid, fax or
electronic mail and:

     

    
      	
              (a)  

            	
              if
      the Borrower:

            


    

     

    
      	
               
      

            	
              Colgan
      Air, Inc.

            


    

     

    
      	
               
      

            	
              Address:

            	
              1689
      Nonconnah Blvd., Suite 111

            


    

     

    
      	
               
      

            	
              Memphis,
      TN  38132

            


    

     

    
      	
               
      

            	
              Attention:

            	
              [***]

            


    

     

    
      	
               
      

            	
              Telephone:

            	
              [***]

            


    

     

    
      	
               
      

            	
              Fax:

            	
              [***]

            


    

     

    
      	
               
      

            	
              E-mail:

            	
              [***]

            


    

     

    


     

    
      	
              (b)  

            	
              if
      to the Lender:

            


    

     

    
      	
               
      

            	
              Export
      Development Canada

            


    

     

    
      	
               
      

            	
              Address:

            	
              151
      O’Connor Street

            


    

     

    
      	
               
      

            	
              Ottawa,
      Ontario

            


    

     

    
      	
               
      

            	
              Canada
      K1A 1K3

            


    

     

    
      	
                                    Attention:

            	
              [***]

            


    

     

    
      	
               
      

            	
              Telephone:

            	
              [***]

            


    

     

    
      	
               
      

            	
              Fax:

            	
              [***]

            


    

     

    Whenever
any notice in writing is required to be given by the Borrower or the Lender to
the other, such notice shall be deemed given and such requirement satisfied when
such notice is received, if such notice is received, if such notice is mailed by
certified mail, postage prepaid, or is sent by facsimile, addressed as provided
above.

     

    Any party
hereto may change the address to which notices to such party will be sent by
giving notice of such change to the other parties to this Mortgage.

     

    6.7 Lender’s Right to Perform
for Borrower.  If the Borrower fails to make any payment or to
perform or comply with any of its agreements contained herein, then (but in each
case no earlier than 3 Business Days after notice to Borrower as to the
occurrence of such failure, whether or not it shall yet constitute an Event of
Default hereunder) the Lender may itself make such payment or perform or comply
with such agreement but shall not be obligated hereunder to do so, and the
amount of such payment and the amount of the reasonable expenses of the Lender
incurred in connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest thereon at the
Past Due Rate, shall be payable by Borrower upon demand.

     

    6.8 Severability.  Any
provision of this Mortgage which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     

    6.9 No Oral Modifications or
Continuing Waivers.  No terms or provisions of this Mortgage or
the Loan Certificates may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the party or other Person against
whom enforcement of the change, waiver, discharge or termination is sought and
any other party or other Person whose consent is required pursuant to this
Mortgage; and any waiver of the terms hereof or of the Loan Certificate shall be
effective only in the specific instance and for the specific purpose
given.

     

    6.10 Successors and
Assigns.  All covenants and agreements contained herein shall
be binding upon, and inure to the benefit of, each of the parties hereto and the
successors and permitted assigns of each, all as herein provided.  Any
request, notice, direction, consent, waiver or other instrument or action by the
Lender shall bind the successors and assigns of the Lender.

     

    6.11 Headings.  The
headings of the various Sections herein and in the table of contents hereto
are for the convenience of reference only and shall not define or limit any of
the terms or provisions hereof.

     

    6.12 Governing Law;
Counterparts.  THIS MORTGAGE SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.  This
Mortgage may be executed by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same
instrument.

     

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

     

    6.14 Jurisdiction.

     

    (a) Each
party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court.  Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement against another party or its
properties in the courts of any jurisdiction.

     

    (b) Each
party hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any court referred to in paragraph (a) of
this Section.  Each of the parties hereto hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.

     

    (c) Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 10 of the Credit
Agreement.  Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by
law.

     

    *  *  *


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    IN WITNESS WHEREOF, the
parties hereto have caused this Mortgage to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first written
above.

     

    
      	 
      	
              COLGAN AIR, INC., as
      Borrower

               

               

              By:

              Peter
      Hunt

              Its:         Vice
      President

            
	 
      	
              EXPORT DEVELOPMENT
      CANADA,

              as
      Lender

               

               

              By:

              Its:

              By:

              Its:

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE I

     

    [***]