Document:

Exhibit 10.1

 

2005
Omnibus Incentive Compensation Plan

 

Mirant Corporation

 

Effective December 2005

 

1

 

Contents

 

 

	
  Article 1. Establishment, Purpose, and Duration

  	
  1

  
	
   

  	
   

  
	
  Article 2. Definitions

  	
  1

  
	
   

  	
   

  
	
  Article 3. Administration of the Plan

  	
  8

  
	
   

  	
   

  
	
  Article 4. Shares Subject to the Plan

  	
  8

  
	
   

  	
   

  
	
  Article 5. Eligibility and Participation

  	
  10

  
	
   

  	
   

  
	
  Article 6. Stock Options

  	
  11

  
	
   

  	
   

  
	
  Article 7. Stock Appreciation Rights

  	
  12

  
	
   

  	
   

  
	
  Article 8. Restricted Stock and Restricted Stock Units

  	
  14

  
	
   

  	
   

  
	
  Article 9. Performance Units, Performance Shares and Cash-Based
  Awards

  	
  15

  
	
   

  	
   

  
	
  Article 10. Other Stock-Based Awards

  	
  16

  
	
   

  	
   

  
	
  Article 11. Transferability of Awards

  	
  17

  
	
   

  	
   

  
	
  Article 12. Performance Measures

  	
  17

  
	
   

  	
   

  
	
  Article 13. Covered Employee Annual Incentive Award

  	
  18

  
	
   

  	
   

  
	
  Article 14. Nonemployee Director Awards

  	
  19

  
	
   

  	
   

  
	
  Article 15. Dividends and Dividend Equivalents

  	
  19

  
	
   

  	
   

  
	
  Article 16. Effects of Transfer, Leave of Absence, or a Change
  in Status

  	
  19

  
	
   

  	
   

  
	
  Article 17. Rights of Participants

  	
  20

  
	
   

  	
   

  
	
  Article 18. Withholding

  	
  20

  
	
   

  	
   

  
	
  Article 19. Change of Control

  	
  21

  
	
   

  	
   

  
	
  Article 20. Amendment, Modification, Suspension, and Termination

  	
  22

  
	
   

  	
   

  
	
  Article 21. Successors

  	
  23

  
	
   

  	
   

  
	
  Article 22. Miscellaneous Provisions

  	
  23

  

 

2

 

MIRANT CORPORATION

2005 Omnibus Incentive Compensation Plan

 

Article 1. Establishment, Purpose, and Duration

 

1.1          Establishment.
Mirant Corporation, a Delaware corporation (hereinafter referred to as the “Company”),
establishes an incentive compensation plan to be known as the Mirant
Corporation 2005 Omnibus Incentive Plan, as set forth in this document.

 

This Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock
Units, Performance Shares, Performance Units, Cash-Based Awards, Other
Stock-Based Awards, Covered Employee Annual Incentive Awards, and Nonemployee
Director Awards.

 

This Plan
shall become effective upon the Effective Date (as defined in Section 1.3) and shall remain in effect as
provided in Section 1.3 hereof.

 

1.2          Purpose
of the Plan. The purpose of this
Plan is to provide a means whereby Employees and Directors of the Company
develop a sense of proprietorship and personal involvement in the development
and financial success of the Company, and to encourage them to devote their
best efforts to the business of the Company, thereby advancing the interests of
the Company and its shareholders. A further purpose of this Plan is to provide
a means through which the Company may attract able individuals to become
Employees or serve as Directors of the Company and to provide a means whereby
those individuals upon whom the responsibilities of the successful
administration and management of the Company are of importance, can acquire and
maintain stock ownership, thereby strengthening their concern for the welfare
of the Company.

 

1.3          Duration
of the Plan. Following the adoption of the Plan by the Board, the Plan
shall become effective as of the Effective Date (as defined in the Reorganization
Plan), provided that the Reorganization Plan, which shall include the adoption
of the Plan, is approved by a majority of the amount of Allowed Claims (within
the meaning of the Reorganization Plan), within the 12-month period ending on
the Effective Date. The Plan shall continue in effect, subject to the right of
the Board to terminate the Plan at any time pursuant to Article 20, until
all Shares subject to the Plan are delivered pursuant to the Plan’s provisions
and all restrictions on such Shares have lapsed; provided, however, that no
Award may be granted under the Plan more than 10 years after the Effective
Date. Notwithstanding the foregoing, no Incentive Stock Options may be granted
more than 10 years after the earlier of (a) adoption of this Plan by the
Board, or (b) the Effective Date.

 

Article 2. Definitions

 

Whenever used in this Plan, the following capitalized terms shall have
the meanings set forth below:

 

2.1                               “Affiliate” shall mean any
corporation or other entity (including, but not limited to, a partnership or a
limited liability company) that is affiliated with the Company through stock or
equity ownership or otherwise, and is designated as an Affiliate for purposes
of this Plan by the Committee.

 

 

2.2                               “Award” means a Nonqualified Stock
Option, Incentive Stock Option, SAR, Restricted Stock Award, Restricted Stock
Unit, Performance Share, Performance Unit, Cash-Based Award, Other Stock-Based
Award, Covered Employee Annual Incentive Award, and Nonemployee Director Award
granted pursuant to the terms and conditions of the Plan.

 

2.3                               “Award Agreement” means either: (i) a
written agreement entered into by the Company and a Participant setting forth
the terms and provisions applicable to an Award granted under this Plan, or (ii) a
written or electronic statement issued by the Company to a Participant
describing the terms and provisions of such Award, including any amendment or
modification thereof. The Committee may provide for the use of electronic,
internet or other non-paper Award Agreements, and the use of electronic,
internet or other non-paper means for the acceptance thereof and actions
thereunder by a Participant.

 

2.4                               “Beneficial Owner” or “Beneficial Ownership”
shall have the meaning ascribed to such term in Rule 13d-3 promulgated under
the Exchange Act.

 

2.5                               “Board” means the Board of
Directors of the Company.

 

2.6                               “Cash-Based Awards” means an Award
granted to a Participant as described in Article 9.

 

2.7                               “Cause” shall have the meaning
ascribed to such term in a Participant’s Award Agreement.

 

2.8                               “Change of Control” means the
occurrence of any of the following events:

 

(a)                                  Any
“person” (as that term is used in Sections 13 and 14(d)(2) of the
Securities Exchange Act of 1934 (“Exchange Act”)) becomes the beneficial
owner (as that term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of fifty percent (50%) or more of the Company’s capital
stock entitled to vote in the election of directors;

 

(b)                                 Persons
who on 60th day following the Emergence Date constitute the Board
(the “Emergence Directors”) cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority thereof, provided that any
person who becomes a director of the Company subsequent to the 60th
day following the Emergence Date shall be considered an Emergence Director if
such person’s election or nomination for election was approved by a vote of at
least two-thirds (2/3) of the Emergence Directors; but provided further that
any such person whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of members of
the Board or other actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board, including by reason of agreement
intended to avoid or settle any such actual or threatened contest or
solicitation, shall not be considered an Emergence Director;

 

(c)                                  Consummation
of a reorganization, merger, consolidation, sale or other disposition of all or
substantially all of the assets of the Company (a “Business Combination”),

 

 

in each case,
unless, following such Business Combination, all or substantially all of the
individuals and entities who were the beneficial owners of outstanding voting
securities of the Company immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the company resulting from
such Business Combination (including, without limitation, a company which, as a
result of such transaction, owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination, of the outstanding voting securities of the Company;
and

 

(d)                                 Approval
by the shareholders of the Company of a complete liquidation or dissolution of
the Company.

 

2.9                               “Code”
means the U.S. Internal Revenue Code of 1986, as amended from time to time. For
purposes of this Plan, references to sections of the Code shall be deemed to
include references to any applicable regulations thereunder and any successor
or similar provision.

 

2.10                        “Committee”
means the Compensation Committee of the Board or a subcommittee thereof, or
any other committee designated by the Board to administer this Plan. The members
of the Committee shall be appointed from time to time by and shall serve at the
discretion of the Board. If the Committee does not exist or cannot function for
any reason, the Board may take any action under the Plan that would otherwise
be the responsibility of the Committee, except with respect to matters which
under any applicable law, regulation or rule, including any exemptive rule under
Section 16 of the Exchange Act (including Rule 16b-3 thereunder) or
Code Section 162(m), are required to be determined in the sole discretion
of the Committee.

 

2.11                        “Company” means
Mirant Corporation or any successor entity.

 

2.12                        “Covered
Employee” means any Employee who is or may become a “Covered Employee,” as
defined in Code Section 162(m), and who is designated, either as an
individual Employee or a member of a class of Employees, by the Committee
within the shorter of (i) ninety (90) days after the beginning of the
Performance Period, or (ii) twenty-five percent (25%) of the Performance
Period has elapsed, as a “Covered Employee” under this Plan for such applicable
Performance Period.

 

2.13                        “Covered
Employee Annual Incentive Award” means an Award granted to a Covered
Employee as described in Article 13.

 

2.14                        “Director”
means any individual who is a member of the Board of Directors of the
Company.

 

2.15                        “Dividend
Equivalents” means the equivalent value (in cash or Shares) of dividends
that would otherwise be paid on the Shares subject to an Award but that have
not been issued or delivered, as described in Article 15.

 

 

2.16                        “Employee”
means any person designated as an employee of the Company, its Affiliates,
and/or Subsidiaries on the payroll records thereof. An Employee shall not
include any individual during any period he or she is classified or treated by
the Company, its Affiliates, and/or Subsidiaries as an independent contractor,
a consultant, or any employee of
an employment, consulting, or temporary agency or any other entity other than
the Company, its Affiliates, and/or Subsidiaries without regard to whether such
individual is subsequently determined to have been, or is subsequently retroactively
reclassified as a common-law employee of
the Company, its Affiliates, and/or Subsidiaries during such period. As further
outlined in Section 16.2, for purposes of this Plan, upon approval by the
Committee, the term Employee may also include Employees that have been
terminated from the Company subsequent to being granted an Award under the
Plan.

 

2.17                        “Exchange
Act” means the Securities Exchange Act of 1934, as it may be amended from
time to time.

 

2.18                        “Extraordinary
Items” means (i) extraordinary, unusual, and/or nonrecurring items of
gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes
in tax or accounting regulations or laws; or (iv) the effect of a merger
or acquisition, all of which must be identified in the audited financial
statements, including footnotes, or Management Discussion and Analysis section of
the Company’s annual report.

 

2.19                        “Exercise
Price” means the price at which a Share may be purchased by a Participant
pursuant to an Option.

 

2.20                        “Fair
Market Value” or “FMV” means the opening, closing,
actual, high, or low selling prices of a Share reported on the principal
exchange on which the Shares are then listed or admitted for trading, on the
applicable date (or, if the Shares were not traded on such date, then on the
last preceding date on which the Shares were traded), the preceding trading day or an average of trading days during
a specified period within 30 days before and 30 days after the applicable date,
provided that the commitment to grant the Award based on such average of
trading days is irrevocable before the beginning of such specified period, as determined by the Committee in its
discretion. Unless the Committee determines otherwise and specifies in the
Award Agreement, the closing price of a Share reported on the principal
exchange on which the Shares are listed or admitted for trading on the
applicable date, or, if the Shares were not traded on such date, then on the
most recent date on which Shares were traded, shall be used for purposes of
applying the immediately preceding sentence. If the Shares are traded over the counter at the time as of
which a determination of its Fair Market Value is required to be made
hereunder, its Fair Market Value shall be deemed to be equal to the average
between the reported high and low selling prices, closing bid and asked prices,
or opening and closing prices of a Share on the applicable date (or, if such
prices are not reported for such date, then on the last preceding date for
which such prices were reported, or, if the Shares were not traded on such
date, then on the last preceding date
on which the Shares were traded), as determined by the Committee in its
discretion.  In the event Shares are not
publicly traded at the time as of which a determination of their value is
required to be made hereunder, the determination of their Fair Market Value
shall be made by the Committee in such manner through the reasonable application
of such reasonable valuation method as it

 

 

deems
appropriate. Such definition(s) of Fair Market Value shall be specified in each
Award Agreement and may differ depending on whether Fair Market Value is in
reference to the grant, exercise, vesting, settlement, or payout of an Award. The basis for determining FMV shall be
consistently used as determined by the Committee; in addition, if an average of
trading days is used to determine FMV pursuant to the first sentence of this Section 2.20,
such valuation method shall be used consistently for grants of NQSOs and SARs
under the plan and such types of awards under similar programs of the
Company.  Notwithstanding the foregoing
to the contrary, for purposes of the Exercise Price of any ISO, FMV shall be
determined consistent with Code Section 422.  In each case, the Committee shall determine
Fair Market Value in a manner that satisfies the requirements of Code Section 409A,
and shall apply the definition of Fair Market Value consistently to the extent
required by Code Section 409A.

 

2.21                        “Freestanding
SAR” means an SAR that is granted independently of any Option, as described
in Article 7.

 

2.22                        “Grant
Price” means the price established at the time of grant of an SAR pursuant
to Article 7, used to determine whether there is any payment due upon
exercise of the SAR.

 

2.23                        “Incentive
Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6
to an Employee and that is designated as an Incentive Stock Option and
that is intended to meet the requirements of Code Section 422, or any
successor provision.

 

2.24                        “Insider”
means an individual who is, on the relevant date, an officer or Director of the
Company, or a more than ten percent (10%) Beneficial Owner of any class of
the Company’s equity securities that is registered pursuant to Section 12
of the Exchange Act, as determined by the Board in accordance with Section 16
of the Exchange Act.

 

2.25                        “Nonemployee
Director” means a Director who is not an Employee.

 

2.26                        “Nonemployee
Director Award” means any Award granted, whether singly, in combination, or
in tandem, to a Participant who is a Nonemployee Director pursuant to such
applicable terms, conditions, and limitations as the Board or Committee may
establish in accordance with this Plan.

 

2.27                        “Nonqualified
Stock Option” or “NQSO” means an Option to purchase Shares granted to a
Participant under the Plan in accordance with the terms and conditions set
forth in Article 6 where such option is not intended to meet the requirements
of Section 422 of the Code or otherwise does not meet such requirements.

 

2.28                        “Notice” means
notice provided by the Participant to the Company in a manner prescribed by the
Committee.

 

2.29                        “Option” means
a right to purchase a Share granted to a Participant under the Plan in
accordance with the terms and conditions set forth in Article 6. Options
may be either ISOs or NQSOs.

 

 

2.30                        “Other
Stock-Based Awards” means an equity-based or equity-related Award not
otherwise described by the terms of this Plan, granted in accordance with the
terms and conditions set forth in Article 10.

 

2.31                        “Participant”
means any eligible individual as set forth in Article 5 to whom an Award
is granted.

 

2.32                        “Performance-Based
Compensation” means compensation under an Award that is intended to satisfy
the requirements of Code Section 162(m) for certain performance-based
compensation paid to Covered Employees. Notwithstanding the foregoing, nothing
in this Plan shall be construed to mean that an Award which does not satisfy
the requirements for performance-based compensation under Code Section 162(m)
does not constitute performance-based compensation for other purposes,
including Code Section 409A.

 

2.33                        “Performance
Measure” means measures as described in Article 12 on which the
performance goals are based and which are approved by the Company’s
shareholders pursuant to this Plan in order to qualify Awards as
Performance-Based Compensation.

 

2.34                        “Performance
Period” means the period of time during which the performance goals must be
met in order to determine the degree of payout and/or vesting with respect to
an Award.

 

2.35                        “Performance
Share” means an Award granted to a Participant under the Plan in accordance
with the terms and conditions set forth in Article 9, denominated in
Shares, the value of which at the time it is payable is determined as a
function of the extent to which corresponding performance criteria have been
achieved.

 

2.36                        “Performance
Unit” means an Award granted to a Participant under the Plan in accordance
with the terms and conditions set forth in Article 9, denominated in
units, the value of which at the time it is payable is determined as a function
of the extent to which corresponding performance criteria have been achieved.

 

2.37                        “Period of
Restriction” means the period when Restricted Stock or Restricted Stock
Units are subject to a substantial risk of forfeiture (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, in its discretion), as provided in Article 8.

 

2.38                        “Person” shall
have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including
a “group” as defined in Section 13(d) thereof.

 

2.39                        “Plan” means
the Mirant Corporation 2005 Omnibus Incentive Plan.

 

2.40                        “Plan Year”
means any calendar year.

 

 

2.41                        “Reorganization
Plan” means the certain Joint Chapter 11 Plan of Reorganization, filed September 30,
2005, for the Company and its affiliated debtors, as amended and/or
supplemented from time to time.

 

2.42                        “Restricted
Stock” means an Award granted to a Participant under the Plan in accordance
with the terms and conditions set forth in Article 8.

 

2.43                        “Restricted
Stock Unit” means an Award, whose value is equal to a Share, awarded under
the Plan in accordance with the terms and conditions set forth in Article 8.

 

2.44                        “SEC” means
the Securities and Exchange Commission.

 

2.45                        “Service
Vesting Award” means an Award, the vesting of which is contingent solely on
the continued service of the Participant as an Employee or a Director.

 

2.46                        “Share” means
a share of common stock of the Company, $0.01 par value per share.

 

2.47                        “Stock
Appreciation Right” or “SAR” means an Award granted to a Participant under
the Plan and in accordance with the terms and conditions of Article 7. An
SAR may be either a “Tandem SAR” or a “Freestanding SAR,” as defined in Article 7.

 

2.48                        “Subsidiary”
means any corporation or other entity, whether domestic or foreign, in which
the Company has or obtains, directly or indirectly, a proprietary interest of
more than twenty-five percent (25%) by reason of stock ownership or otherwise.

 

2.49                        “Substitute
Awards” means Awards granted or Shares issued by the Company in assumption
of, or in substitution or exchange for, options or other awards previously
granted, or the right or obligation to grant future options or other awards, by
a company acquired by the Company, its Affiliates, and/or Subsidiaries, or with
which the Company, its Affiliates, and/or Subsidiaries combine.

 

2.50                        “Tandem
SAR” means an SAR that is granted in connection with a related Option
pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when
a Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).

 

Article 3. Administration of the Plan

 

3.1          General.
The Committee shall be responsible for administering this Plan, subject to this
Article 3 and the other provisions of this Plan. The Committee may employ
attorneys, consultants, accountants, agents, and other individuals, any of whom
may be an Employee, and the Committee, the Company, and its officers and
Directors shall be entitled to rely upon the advice, opinions, or valuations of
any such individuals. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the
Participants, the Company, and all other interested individuals.

 

3.2          Authority
of the Committee. The Committee shall have full and exclusive discretionary
power to interpret the terms and the intent of this Plan and any Award
Agreement or other agreement

 

 

or document ancillary to or in connection with this Plan, to determine
eligibility for Awards and to adopt such rules, regulations, forms,
instruments, and guidelines for administering this Plan as the Committee may
deem necessary or proper. Such authority shall include, but not be limited to,
selecting Award recipients, establishing all Award terms and conditions,
including the terms and conditions set forth in Award Agreements, granting
Awards as an alternative to or as the form of payment for grants or rights
earned or due under compensation plans or arrangements of the Company, and,
subject to Article 20, adopting modifications and amendments to this Plan
or any Award Agreement, including, without limitation, any that are necessary
to comply with the laws of the countries and other jurisdictions in which the
Company, its Affiliates, and/or Subsidiaries operate.

 

3.3          Delegation.
The Committee may delegate to one or more of its members or to one or more
officers of the Company or to one or more agents or advisors, such
administrative duties or powers as it may deem advisable, and the Committee or any
individuals to whom it has delegated duties or powers as aforesaid may employ
one or more individuals to render advice with respect to any responsibility the
Committee or such individuals may have under this Plan. The Committee may, by
resolution, authorize one or more officers of the Company to do one or both of
the following on the same basis as can the Committee: (a) designate
Employees to be recipients of Awards; and (b) determine the size of any
such Awards; provided, however, (i) the Committee shall not delegate such
responsibilities to any such officer with respect to Awards granted to an
Employee who is considered an Insider; (ii) the resolution providing such
authorization sets forth the total number of Shares and Awards such officer(s)
may grant; and (iii) the officer(s) shall report periodically to the
Committee regarding the nature and scope of the Shares and Awards granted
pursuant to the authority delegated.

 

Article 4. Shares Subject to the Plan

 

4.1          Number of Shares Available for Award. Subject
to adjustment as provided in Section 4.4 herein, the maximum number of
Shares available for issuance to Participants under this Plan (the “Share
Authorization”) shall be 18,575,851 Shares.

 

Subject to the foregoing limit on the number of Shares that may be
delivered in the aggregate under the Plan, the maximum number of Shares that
may be delivered with respect to the following types of Awards shall be as
follows:

 

(a)                                  The
maximum number of Shares that may be issued as ISOs shall be 5,000,000.

 

(b)                                 The
maximum number of Shares that may be issued to Nonemployee Directors shall be
2,500,000 Shares. A Nonemployee Director may not be granted an Award covering
more than 2,500,000 Shares in any Plan Year, except that this annual limit on
Nonemployee Director Awards shall be increased to 5,000,000 Shares for any
Nonemployee Director serving as Chairman of the Board; provided, however, that
in the Plan Year in which an individual is first appointed or elected to the
Board as a Nonemployee Director, such individual may be granted an Award
covering up to an additional 2,500,000 Shares.

 

4.2          Share
Usage. Shares covered by an Award shall only be counted as used to the
extent they are actually issued. Any Shares related to Awards which terminate
by expiration, forfeiture, cancellation, or otherwise without the issuance of
such Shares, are settled in cash in lieu of Shares, or are exchanged with the
Committee’s permission, prior to the issuance of Shares, for Awards not
involving Shares, shall be available again for grant under this Plan. Moreover,
if the

 

 

exercise price of an Option is satisfied by delivering Shares to the
Company (whether by actual delivery or by attestation), only the net number of
Shares actually issued by the Company shall be considered for purposes of
determining the number of Shares remaining available for issuance pursuant to
Awards granted under the Plan. Shares withheld
from an Option or other Award to satisfy minimum tax withholding requirements
will again be available for issuance pursuant to Awards granted under the Plan,
but Shares delivered by a
Participant (whether by actual delivery or by attestation) to satisfy tax
withholding requirements shall not be added back to the number of Shares
available for issuance under the Plan. If an SAR is exercised, only the number
of Shares issued, net of the Shares tendered, if any, will be deemed delivered
for purposes of determining the maximum number of Shares available for delivery
under this Plan. The Shares available for issuance under this Plan may be
authorized and unissued Shares or treasury Shares.

 

4.3          Annual
Award Limits. Unless and until the Committee determines that an Award to a
Covered Employee shall not be designed to qualify as Performance-Based
Compensation, the following limits (each an “Annual Award Limit” and,
collectively, “Annual Award Limits”) shall apply to grants of such Awards under
this Plan:

 

(a)                                  Options: The maximum aggregate number of
Shares subject to Options granted in any one Plan Year to any one Participant
shall be 5,000,000.

 

(b)                                 SARs: The maximum number of Shares subject
to Stock Appreciation Rights granted in any one Plan Year to any one
Participant shall be 5,000,000.

 

(c)                                  Restricted Stock or Restricted Stock Units:
The maximum aggregate grant with respect to Awards of Restricted Stock or
Restricted Stock Units in any one Plan Year to any one Participant shall be
5,000,000 Shares.

 

(d)                                 Performance Shares or Performance Units:
The maximum aggregate grant with respect to Awards of Performance Shares made
in any Plan Year to any one Participant shall be 5,000,000 Shares. The maximum
aggregate amount awarded with respect to Performance Units made in any Plan
Year to any one Participant shall not exceed the value of 5,000,000 Shares.

 

(e)                                  Cash-Based Awards: The maximum aggregate
amount awarded with respect to Cash-Based Awards made in any Plan Year to any
one Participant shall not exceed $20,000,000.

 

(f)                                    Other
Stock-Based Awards. The maximum aggregate grant with respect to Other
Stock-Based Awards made in any one Plan Year to any one Participant shall be
5,000,000 Shares.

 

(g)                                 Covered Employee Annual Incentive Award. The maximum
aggregate amount awarded with respect to Covered Employee Annual Incentive
Awards made in any Plan Year to a Covered Employee shall not exceed $6 million
dollars.

 

4.4          Adjustments
in Authorized Shares. In the event of any corporate event or transaction
(including, but not limited to, a change in the Shares of the Company or the
capitalization of the Company) such as a merger, consolidation, reorganization,
recapitalization, separation, stock

 

 

dividend, stock split, reverse stock split, split up, spin-off, or
other distribution of stock or property of the Company, combination of Shares,
exchange of Shares, dividend in kind, or other like change in capital structure
or distribution (other than normal cash dividends) to shareholders of the
Company, or any similar corporate event or transaction, the Committee, in its
sole discretion, in order to prevent dilution or enlargement of Participants’
rights under this Plan, shall substitute or adjust, as applicable, the number
and kind of Shares that may be issued under this Plan or under particular forms
of Awards, the number and kind of Shares subject to outstanding Awards, the
Exercise Price or Grant Price applicable to outstanding Awards, the Annual
Award Limits, and other value determinations applicable to outstanding Awards.

 

The Committee,
in its sole discretion, may also make appropriate adjustments in the terms of
any Awards under this Plan to reflect or related to such changes or
distributions and to modify any other terms of outstanding Awards, including
modifications of performance goals and changes in the length of Performance
Periods, subject to the requirements of Article 12 in the case of Awards
intended to qualify as Performance-Based Compensation. The Committee shall not
make any adjustment pursuant to this Section 4.4 that would cause an Award
that is otherwise exempt from Code Section 409A to become subject to Section 409A;
or that would cause an Award that is subject to Code Section 409A to fail
to satisfy the requirements of Section 409A.  The determination of the Committee as to the
foregoing adjustments, if any, shall be conclusive and binding on Participants
under this Plan.

 

Subject to the provisions of Article 20, without affecting the
number of Shares reserved or available hereunder, the Committee may authorize
the issuance or assumption of benefits under this Plan in connection with any
merger, consolidation, acquisition of property or stock, or reorganization upon
such terms and conditions as it may deem appropriate, subject to compliance
with the ISO rules under Code Section 422 and deferred compensation rules under
Code Section 409A, where applicable.

 

4.5          Substitute Awards. Any Shares delivered
upon exercise or satisfaction of Substitute Awards shall not reduce the Shares
available for delivery under the Plan; provided, however, that the maximum
number of Shares that may be delivered pursuant to Incentive Stock Options
granted under the Plan shall be the number of Shares set forth in Section 4.1(a),
as adjusted pursuant to Section 4.4.

 

Article 5. Eligibility and Participation

 

5.1          Eligibility.
Individuals eligible to participate in this Plan include all Employees and
Directors.

 

5.2          Actual
Participation. Subject to the provisions of this Plan, the Committee may,
from time to time, select from all eligible individuals, those individuals to
whom Awards shall be granted and shall determine, in its sole discretion, the
nature of any and all terms permissible by law and the amount of each Award.

 

5.3          Nonemployee
Director Awards. Each Director shall be eligible to receive Nonemployee
Director Awards, all in accordance with the terms and conditions of the Plan,
provided that, as of the grant date of such a Nonemployee Director Award, such
Director is not an Employee of the Company.

 

 

Article 6. Stock Options

 

6.1          Grant
of Options. Subject to the terms and provisions of this Plan, Options may
be granted to Participants in such number, and upon such terms, and at any
time and from time to time as shall be determined by the Committee, in its sole
discretion; provided that ISOs may be granted only to eligible Employees of the
Company or of any parent or subsidiary corporation (as permitted under Code Section 422).
However, if a Participant provides services to an Affiliate and/or Subsidiary
and not to the Company, the Participant may be granted an Option only to the
extent that the Company qualifies as a “service recipient” with respect to the
Participant for purposes of Code Section 409A; provided that such
definition of “service recipient” shall be determined by (a) applying Code
Section 1563(a)(1), (2) and (3), for purposes of determining a
controlled group of corporations under Code Section 414(b), using the
language “at least 50 percent” instead of “at least 80 percent” each place it
appears in Code Section 1563(a)(1), (2) and (3), and by applying
Treasury Regulations Section 1.414(c)-2, for purposes of determining
trades or businesses (whether or not incorporated) that are under common
control for purposes of Code Section 414(c), using the language “at least
50 percent” instead of “at least 80 percent” each place it appears in Treasury
Regulations Section 1.414(c)-2, and (b) where the use of Shares with
respect to the grant of an Option to such a Participant is based upon
legitimate business criteria, by applying Code Section 1563(a)(1), (2) and
(3), for purposes of determining a controlled group of corporations under Code Section 414(b),
using the language “at least 20 percent” instead of “at least 80 percent” at
each place it appears in Code Section 1563(a)(1), (2) and (3), and by
applying Treasury Regulations Section 1.414(c)-2, for purposes of
determining trades or businesses (whether or not incorporated) that are under
common control for purposes of Code Section 414(c), using the language “at
least 20 percent” instead of “at least 80 percent” at each place it appears in
Treasury Regulations Section 1.414(c)-2.

 

6.2          Award
Agreement. Each Option grant shall be evidenced by an Award Agreement that
shall specify the Exercise Price, the maximum duration of the Option, the
number of Shares to which the Option pertains, the conditions upon which an
Option shall become vested and exercisable, and such other provisions as the
Committee shall determine which are not inconsistent with the terms of this
Plan. The Award Agreement also shall specify whether the Option is intended to
be an ISO or a NQSO.

 

6.3          Exercise
Price. The Exercise Price for each grant of an Option under this Plan shall
be determined by the Committee, in its discretion, and shall be specified in
the Award Agreement; provided, however, the Exercise Price on the date of grant
must be at least equal to one hundred percent (100%) of the FMV of the Shares
on the date of grant.

 

6.4          Term
of Options. Each Option granted to a Participant shall expire at such time
as the Committee shall determine at the time of grant; provided, however, no
Option shall be exercisable later than the tenth (10th) anniversary
date of its grant. Notwithstanding the foregoing, for Nonqualified Stock
Options granted to Participants outside the United States, the Committee has
the authority to grant Nonqualified Stock Options that have a term greater than
ten (10) years.

 

6.5          Exercise
of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which terms and restrictions need
not be the same for each grant or for each Participant.

 

 

6.6          Payment.
Options granted under this Article 6 shall be exercised by the delivery of
a Notice of exercise to the Company or an agent designated by the Company in a
form specified or accepted by the Committee, or by complying with any
alternative procedures which may be authorized by the Committee, setting forth
the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.

 

A condition of
the issuance of the Shares as to which an Option shall be exercised shall be
the payment of the Exercise Price. The Exercise Price of any Option shall be
payable to the Company in full either: (a) in cash or its equivalent; (b) by
tendering (either by actual delivery or attestation) previously acquired Shares
having an aggregate Fair Market Value at the time of exercise equal to the
Exercise Price prior to their tender to satisfy the Exercise Price if acquired
under this Plan or any other compensation plan maintained by the Company or
have been purchased on the open market); (c) by a combination of (a) and
(b); or (d) any other method approved or accepted by the Committee in its
sole discretion, including, without limitation, if the Committee so determines,
a cashless (broker-assisted) exercise.

 

Subject to any
governing rules or regulations, as soon as practicable after receipt of
written notification of exercise and full payment (including satisfaction of
any applicable tax withholding), the Company shall deliver to the Participant
evidence of book entry Shares, or upon the Participant’s request, Share
certificates in an appropriate amount based upon the number of Shares purchased
under the Option(s).

 

Unless
otherwise determined by the Committee, all payments under all of the methods
indicated above shall be paid in United States dollars.

 

6.7          Restrictions on Share Transferability.
The Committee may impose such restrictions on any Shares acquired pursuant to
the exercise of an Option granted under this Article 6 as it may deem
advisable, including, without limitation, minimum holding period requirements,
restrictions under applicable federal securities laws, under the requirements
of any stock exchange or market upon which such Shares are then listed
and/or traded, or under any blue sky or state or non-U.S. securities laws
applicable to such Shares.

 

6.8          Termination of Employment or Directorship. Each Participant’s Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the Option following termination of the Participant’s employment or provision
of services to the Company, its Affiliates, and/or its Subsidiaries, as the
case may be. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Options issued pursuant to this Article 6,
and may reflect distinctions based on the reasons for termination.

 

6.9          Notification of Disqualifying Disposition.
If any Participant shall make any disposition of Shares issued pursuant to the
exercise of an ISO under the circumstances described in Code Section 421(b) (relating
to certain disqualifying dispositions), such Participant shall notify the
Company of such disposition within ten (10) days thereof.

 

 

Article 7. Stock Appreciation Rights

 

7.1          Grant
of SARs. Subject to the terms and conditions of this Plan, SARs may be
granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SARs. However, if a Participant
provides services to an Affiliate and/or Subsidiary and not to the Company, the
Participant may be granted an SAR only to the extent that the Company qualifies
as a “service recipient” with respect to the Participant for purposes of Code Section 409A;
provided that such definition of “service recipient” shall be determined by (a) applying
Code Section 1563(a)(1), (2) and (3), for purposes of determining a
controlled group of corporations under Code Section 414(b), using the
language “at least 50 percent” instead of “at least 80 percent” each place it
appears in Code Section 1563(a)(1), (2) and (3), and by applying
Treasury Regulations Section 1.414(c)-2, for purposes of determining
trades or businesses (whether or not incorporated) that are under common
control for purposes of Code Section 414(c), using the language “at least
50 percent” instead of “at least 80 percent” each place it appears in Treasury
Regulations Section 1.414(c)-2, and (b) where the use of Shares with
respect to the grant of a SAR to such a Participant is based upon legitimate
business criteria, by applying Code Section 1563(a)(1), (2) and (3),
for purposes of determining a controlled group of corporations under Code Section 414(b),
using the language “at least 20 percent” instead of “at least 80 percent” at
each place it appears in Code Section 1563(a)(1), (2) and (3), and by
applying Treasury Regulations Section 1.414(c)-2, for purposes of
determining trades or businesses (whether or not incorporated) that are under
common control for purposes of Code Section 414(c), using the language “at
least 20 percent” instead of “at least 80 percent” at each place it appears in
Treasury Regulations Section 1.414(c)-2.

 

Subject to the
terms and conditions of this Plan, the Committee shall have complete discretion
in determining the number of SARs granted to each Participant and, consistent
with the provisions of this Plan, in determining the terms and conditions
pertaining to such SARs.

 

The Grant
Price for each grant of a Freestanding SAR shall be determined by the Committee
and shall be specified in the Award Agreement; provided, however, the Grant
Price on the date of grant must be at least equal to one hundred percent (100%)
of the FMV of the Shares on the date of grant. The Grant Price of Tandem SARs
shall be equal to the Exercise Price of the related Option.

 

7.2          SAR Agreement. Each SAR Award shall be
evidenced by an Award Agreement that shall specify the Grant Price, the term of
the SAR, and such other provisions as the Committee shall determine.

 

7.3          Term of SAR. The term of an SAR granted
under this Plan shall be determined by the Committee, in its sole discretion,
and except as determined otherwise by the Committee and specified in the SAR
Award Agreement, no SAR shall be exercisable later than the tenth (10th)
anniversary date of its grant. Notwithstanding the foregoing, for SARs granted
to Participants outside the United States, the Committee has the authority to
grant SARs that have a term greater than ten (10) years.

 

7.4          Exercise of Freestanding SARs.
Freestanding SARs may be exercised upon whatever terms and conditions the
Committee, in its sole discretion, imposes.

 

 

7.5.         Exercise of Tandem SARs. Tandem SARs may
be exercised for all or part of the Shares subject to the related Option upon
the surrender of the right to exercise the equivalent portion of the related
Option. A Tandem SAR may be exercised only with respect to the Shares for which
its related Option is then exercisable.

 

Notwithstanding
any other provision of this Plan to the contrary, with respect to a Tandem SAR
granted in connection with an ISO: (a) the Tandem SAR will expire no later
than the expiration of the underlying ISO; (b) the value of the payout
with respect to the Tandem SAR may be for no more than one hundred percent
(100%) of the excess of the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised over the Exercise Price
of the underlying ISO; and (c) the Tandem SAR may be exercised only when
the Fair Market Value of the Shares subject to the ISO exceeds the Exercise
Price of the ISO.

 

7.6          Settlement of SAR Amount. Upon the
exercise of an SAR, a Participant shall be entitled to receive payment from the
Company in an amount determined by multiplying:

 

(a)                                  The
excess of the Fair Market Value of a Share on the date of exercise over the
Grant Price; by

 

(b)                                 The
number of Shares with respect to which the SAR is exercised.

 

The payment
upon SAR exercise shall be in Shares or cash, as determined by the Committee.

 

7.7          Termination of Employment or Directorship.
Each Award Agreement shall set forth the extent to which the Participant shall
have the right to exercise the SAR following termination of the Participant’s
employment with or provision of services to the Company, its Affiliates, and/or
its Subsidiaries, as the case may be. Such provisions shall be determined in
the sole discretion of the Committee, shall be included in the Award Agreement
entered into with Participants, need not be uniform among all SARs issued
pursuant to this Plan, and may reflect distinctions based on the reasons for
termination.

 

7.8          Other Restrictions. The Committee shall
impose such other conditions and/or restrictions on any Shares received upon
exercise of an SAR granted pursuant to this Plan as it may deem advisable or
desirable. These restrictions may include, but shall not be limited to, a
requirement that the Participant hold the Shares received upon exercise of an
SAR for a specified period of time.

 

Article 8. Restricted Stock and Restricted Stock Units

 

8.1          Grant
of Restricted Stock or Restricted Stock Units. Subject to the terms and
provisions of this Plan, the Committee, at any time and from time to time, may
grant Shares of Restricted Stock and/or Restricted Stock Units to Participants
in such amounts as the Committee shall determine. Restricted Stock Units shall
be similar to Restricted Stock except that no Shares are actually awarded to
the Participant on the date of grant.

 

8.2          Restricted Stock or Restricted Stock Unit
Award Agreement. Each Restricted Stock and/or Restricted Stock Unit grant
shall be evidenced by an Award Agreement that shall specify the Period(s) of
Restriction, the number of Shares of Restricted Stock or the number of
Restricted Stock Units granted, and such other provisions as the Committee
shall determine.

 

 

8.3          Other
Restrictions. The Committee shall impose such other conditions and/or
restrictions on any Shares of Restricted Stock or Restricted Stock Units
granted pursuant to this Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock or each Restricted Stock Unit, restrictions
based upon the achievement of specific performance goals, time-based
restrictions on vesting following the attainment of the performance goals,
time-based restrictions, and/or restrictions under applicable laws or under the
requirements of any stock exchange or market upon which such Shares are listed
or traded, or holding requirements or sale restrictions placed on the Shares by
the Company upon vesting of such Restricted Stock or Restricted Stock Units.

 

To the extent
deemed appropriate by the Committee, the Company may retain the certificates
representing Shares of Restricted Stock in the Company’s possession until such
time as all conditions and/or restrictions applicable to such Shares have been
satisfied or lapse.

 

Except as
otherwise provided in this Article 8, Shares of Restricted Stock covered
by each Restricted Stock Award shall become freely transferable by the
Participant after all conditions and restrictions applicable to such Shares
have been satisfied or lapse (including satisfaction of any applicable tax
withholding obligations), and Restricted Stock Units shall be paid in cash,
Shares, or a combination of cash and Shares as the Committee, in its sole
discretion shall determine.

 

8.4          Certificate
Legend. In addition to any legends placed on certificates pursuant to Section 8.3,
each certificate representing Shares of Restricted Stock granted pursuant to
this Plan may bear a legend such as the following or as otherwise determined by
the Committee in its sole discretion:

 

The sale or
transfer of Shares of stock represented by this certificate, whether voluntary,
involuntary, or by operation of law, is subject to certain restrictions on
transfer as set forth in the Mirant Corporation 2005 Omnibus Incentive Plan,
and in the associated Award Agreement. A copy of this Plan and such Award
Agreement may be obtained from Mirant Corporation.

 

8.5          Voting Rights. Unless otherwise
determined by the Committee and set forth in a Participant’s Award Agreement,
to the extent permitted or required by law, as determined by the Committee,
Participants holding Shares of Restricted Stock granted hereunder may be
granted the right to exercise full voting rights with respect to those Shares
during the Period of Restriction. A Participant shall have no voting rights
with respect to any Restricted Stock Units granted hereunder.

 

8.6          Termination of Employment or Directorship.
Each Award Agreement shall set forth the extent to which the Participant shall
have the right to retain Restricted Stock and/or Restricted Stock Units
following termination of the Participant’s employment with or provision of
services to the Company, its Affiliates, and/or its Subsidiaries, as the case
may be. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Shares of Restricted Stock or
Restricted Stock Units issued pursuant to this Plan, and may reflect
distinctions based on the reasons for termination.

 

8.7          Section 83(b) Election. The
Committee may provide in an Award Agreement that the Award of Restricted Stock
is conditioned upon the Participant making or refraining from making an
election with respect to the Award under Code Section 83(b). If a
Participant makes an election

 

 

pursuant to Code Section 83(b) concerning
a Restricted Stock Award, the Participant shall be required to file promptly a
copy of such election with the Company.

 

8.8          Compliance
With Section 409A.  Unless the
Committee provides otherwise in an Award Agreement, each Restricted Stock Unit
shall be paid in full to the Participant no later than the 15th day of the
third month after the end of the first calendar year in which the Restricted
Stock Unit is no longer subject to a “substantial risk of forfeiture” within
the meaning of Code Section 409A. 
If the Committee provides in an Award Agreement that a Restricted Stock
Unit is intended to be subject to Code Section 409A, the Award Agreement
shall include terms that are designed to satisfy the requirements of Section 409A.

 

Article 9. Performance Units, Performance Shares and Cash-Based
Awards

 

9.1          Grant of Performance Units, Performance
Shares, and Cash-Based Awards. Subject to the terms and provisions of this
Plan, the Committee, at any time and from time to time, may grant Performance
Units, Performance Shares, and/or Cash-Based Awards to Participants in such
amounts and upon such terms as the Committee shall determine.

 

9.2          Value of Performance Units, Performance
Shares, and Cash-Based Awards. Each Performance Unit shall have an
initial value that is established by the Committee at the time of grant. Each
Performance Share shall have an initial value equal to the Fair Market Value of
a Share on the date of grant. Each Cash-Based Award shall have a value as
determined by the Committee. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the value and/or number of Performance Units, Performance Shares or Cash-Based
Awards that will be paid out to the Participant.

 

9.3          Earning of Performance Units, Performance
Shares and Cash-Based Awards. Subject to the terms of this Plan, after
the applicable Performance Period has ended, the holder of Performance Units,
Performance Shares or Cash-Based Awards shall be entitled to receive payout on
the value and number of Performance Units, Performance Shares or Cash-Based
Awards earned by the Participant over the Performance Period, to be determined
as a function of the extent to which the corresponding performance goals
have been achieved.

 

9.4          Form and Timing of Payment of
Performance Units, Performance Shares, and Cash-Based Awards. Payment of
earned Performance Units, Performance Shares or Cash-Based Awards shall be as
determined by the Committee and as evidenced in the Award Agreement. Subject
to the terms of this Plan, the Committee, in its sole discretion, may
pay earned Performance Units, Performance Shares or Cash-Based Awards in
the form of cash or in Shares (or in a combination thereof) equal to the value
of the earned Performance Units, Performance Shares, or Cash-Based Awards as
soon as practicable after the end of the Performance Period and following the
Committee’s determination of actual performance against the Performance
Measures and related goals established by the Committee. Any Shares may be
granted subject to any restrictions deemed appropriate by the Committee. The
determination of the Committee with respect to the form of payout of such
Awards shall be set forth in the Award Agreement pertaining to the grant of the
Award.

 

9.5          Termination of Employment or Directorship.
Each Award Agreement shall set forth the extent to which the Participant shall
have the right to retain Performance Units, Performance Shares, and/or
Cash-Based Awards following termination of the Participant’s employment with or

 

 

provision of services to the
Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such
provisions shall be determined in the sole discretion of the Committee, shall
be included in the Award Agreement entered into with each Participant, need not
be uniform among all Awards of Performance Units, Performance Shares, or
Cash-Based Awards issued pursuant to this Plan, and may reflect distinctions
based on the reasons for termination.

 

9.6          Compliance
With Section 409A.  Unless the
Committee provides otherwise in an Award Agreement, each Performance Share or
Performance Unit shall be paid in full to the Participant no later than the
15th day of the third month after the end of the first calendar year in which
the Performance Share or Performance Unit is no longer subject to a “substantial
risk of forfeiture” within the meaning of Code Section 409A.  If the Committee provides in an Award
Agreement that a Performance Share or Performance Unit is intended to be
subject to Code Section 409A, the Award Agreement shall include terms that
are designed to satisfy the requirements of Section 409A.

 

Article 10. Other Stock-Based Awards

 

10.1        Other Stock-Based Awards. The Committee may
grant other types of equity-based or equity-related Awards not otherwise
described by the terms of this Plan (including the grant or offer for sale of
unrestricted Shares) in such amounts and subject to such terms and conditions,
as the Committee shall determine. Such Awards may involve the transfer of
actual Shares to Participants, or payment in cash or otherwise of amounts based
on the value of Shares and may include, without limitation, Awards designed to comply
with or take advantage of the applicable local laws of jurisdictions other than
the United States.

 

10.2        Value of Other Stock-Based Awards. Each
Other Stock-Based Award shall be expressed in terms of Shares or units based on
Shares, as determined by the Committee. The Committee may establish performance
goals in its discretion. If the Committee exercises its discretion to establish
performance goals, the number and/or value of Other Stock-Based Awards that
will be paid out to the Participant will depend on the extent to which the
performance goals are met.

 

10.3        Payment of Other Stock-Based Awards.
Payment, if any, with respect to an Other Stock-Based Award shall be made in
accordance with the terms of the Award, in cash or Shares as the Committee
determines.

 

10.4        Termination of Employment or Directorship.
The Committee shall determine the extent to which the Participant shall have
the right to receive Other Stock-Based Awards following termination of the
Participant’s employment with or provision of services to the Company, its
Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall
be determined in the sole discretion of the Committee, such provisions may be
included in an Award Agreement entered into with each Participant, but need not
be uniform among all Awards of Other Stock-Based Awards issued pursuant to this
Plan, and may reflect distinctions based on the reasons for termination.

 

10.6        Compliance
With Section 409A.  Unless the
Committee provides otherwise in an Award Agreement, each Cash-Based Award or
Other Stock-Based Award shall be paid in full to the Participant no later than
the 15th day of the third month after the end of the first calendar year in
which the Cash-Based Award or Other Stock-Based Award is no longer subject to a
“substantial risk of forfeiture” within the meaning of Code Section 409A.  If the Committee provides in an Award
Agreement that a Cash-Based Award or Other Stock-Based Award is intended to be
subject to Code

 

 

Section 409A, the Award
Agreement shall include terms that are designed to satisfy the requirements of Section 409A.

 

Article 11. Transferability of Awards

 

11.1        Transferability of Incentive Stock Options.
No ISO granted under this Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, all ISOs granted to a Participant under Article 6
shall be exercisable during his or her lifetime only by such Participant.

 

11.2        All Other Awards. Except as otherwise
provided in a Participant’s Award Agreement or otherwise determined at any time
by the Committee, no Award granted under this Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution; provided that the Board or
Committee may permit further transferability, on a general or a specific basis,
and may impose conditions and limitations on any permitted transferability,
subject to Section 11.1. Further, except as otherwise provided in a
Participant’s Award Agreement or otherwise determined at any time by the
Committee, or unless the Board or Committee decides to permit further
transferability, subject to Section 11.1, all Awards granted to a
Participant under this Plan shall be exercisable during his or her lifetime
only by such Participant. With respect to those Awards (other than ISOs), if
any, that are permitted to be transferred to another individual, references in
this Plan to exercise or payment related to such Awards by or to the
Participant shall be deemed to include, as determined by the Committee, the
Participant’s permitted transferee.

 

Article 12. Performance Measures

 

12.1        Performance
Measures. The objective performance goals upon which the payment or vesting
of an Award to a Covered Employee that is intended to qualify as
Performance-Based Compensation shall be limited to the following Performance
Measures:

 

(a)                                  Net
earnings or net income (before or after taxes);

(b)                                 Earnings
per share;

(c)                                  Net
sales or revenue;

(d)                                 Net
operating profit;

(e)                                  Return
measures (including return on assets, capital, invested capital, equity, sales,
or revenue);

(f)                                    Cash
flow (including, but not limited to, operating cash flow, free cash flow, cash
flow return on equity, and cash flow return on investment);

(g)                                 Earnings
before or after taxes, interest, depreciation, and/or amortization;

(h)                                 Gross
or operating margins;

(i)                                     Productivity
ratios;

(j)                                     Share
price (including, but not limited to, growth measures and total shareholder
return);

(k)                                  Expenses;

(l)                                     Margins;

(m)                               Operating
efficiency;

(n)                                 Market
share;

(o)                                 Customer
satisfaction;

(p)                                 Working
capital; and

 

 

(q)                                 Economic
value added or EVA® (net operating profit after tax minus the sum of
capital multiplied by the cost of capital).

 

Such
performance goals shall be established by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Code
Section 162(m)(4)(C), or any successor provision thereto, and the regulations
thereunder, for performance-based compensation, and may be set forth in the
applicable Award Agreement.  Any
Performance Measure(s) may be used to measure the performance of the Company,
its Affiliates, and/or Subsidiaries as a whole or any business unit of the
Company, its Affiliates, and/or Subsidiaries or any combination thereof, as the
Committee may deem appropriate, or any of the above Performance Measures as
compared to the performance of a group of comparator companies, or published or
special index that the Committee, in its sole discretion, deems appropriate, or
the Company may select Performance Measure (j) above as compared to various
stock market indices. The Committee also has the authority to provide for
accelerated vesting of any Award based on the achievement of performance goals
pursuant to the Performance Measures specified in this Article 12.

 

12.2        Evaluation of
Performance.  Notwithstanding any other provision of this
Plan, payment or vesting of any such Award shall not be made until the
Committee certifies in writing that the applicable performance goals and any
other material terms of such Award were in fact satisfied, except as otherwise
provided in Section 12.3.  The
Committee may provide in any such Award that any evaluation of performance may
include or exclude any of the following events that occurs during a Performance
Period: (a) asset write-downs, (b) litigation or claim judgments or
settlements, (c) the effect of changes in tax laws, accounting principles,
or other laws or provisions affecting reported results, (d) any
reorganization and restructuring programs, (e) extraordinary nonrecurring
items as described in Accounting Principles Board Opinion No. 30 and/or in
management’s discussion and analysis of financial condition and results of
operations appearing in the Company’s annual report to shareholders for the
applicable year, (f) acquisitions or divestitures, and (g) foreign
exchange gains and losses. To the extent such inclusions or exclusions affect
Awards to Covered Employees, they shall be prescribed in a form that meets the
requirements of Code Section 162(m) for deductibility.

 

12.3        Adjustment of Performance-Based Compensation.
Awards that are intended to qualify as Performance-Based Compensation may not
be adjusted upward. The Committee shall retain the discretion to adjust such
Awards downward, either on a formula or discretionary basis or any combination,
as the Committee determines.

 

12.4        Committee Discretion. In the event that
applicable tax and/or securities laws change to permit Committee discretion to
alter the governing Performance Measures without obtaining shareholder approval
of such changes, the Committee shall have sole discretion to make such changes
without obtaining shareholder approval. In addition, in the event that the
Committee determines that it is advisable to grant Awards that shall not
qualify as Performance-Based Compensation, the Committee may make such grants
without satisfying the requirements of Code Section 162(m) and base
vesting of such Awards on performance measures other than those set forth in Section 12.1.

 

 

Article 13. Covered Employee Annual Incentive Award

 

The Committee
may designate Covered Employees who are eligible to receive an annual incentive
award with respect to any Plan
Year based on the attainment of certain goals, which may determine the degree
of the payout and/or vesting which are designed to qualify for the
Performance-Based Exception. The performance measure(s) to be used for purposes
of determining a Covered Employees annual incentive award shall be selected
from the list provided in Article 12 of this Plan. The provisions,
including but not limited to the evaluation of performance and adjustment
provisions set forth in Article 12 of this Plan, shall also be applicable
to any Covered Employee Annual Incentive Award.

 

Article 14. Nonemployee Director Awards

 

Nonemployee
Directors may only be granted Awards under the Plan in accordance with this Article 14
and which shall not be subject to management’s discretion. From time to time,
the Board shall set the amount(s) and type(s) of equity awards that shall be
granted to all Nonemployee Directors on a periodic, nondiscriminatory basis
pursuant to the Plan, as well as any additional amount(s), if any, to be
awarded, also on a periodic, nondiscriminatory basis, based on each of the
following: the number of committees of the Board on which a Nonemployee
Director serves, service of a Nonemployee Director as the chair of a Committee
of the Board, service of a Nonemployee Director as Chairman of the Board, or
the first selection or appointment of an individual to the Board as a
Nonemployee Director. Subject to the limits set forth in Section 4.1(b) and
the foregoing, the Board shall grant such Awards to Nonemployee Directors and
any Nonemployee Chairman of the Board, and grant new Nonemployee Director
Awards, as it shall from time to time determine.

 

Article 15. Dividends and Dividend Equivalents

 

The Committee
may grant dividends or dividend equivalents based on the dividends declared on
Shares that are subject to any Award. The dividends or dividend equivalents may
be credited as of the dividend payment dates, during the period between the
date the Award is granted and the date the Award vests. The dividends or
dividend equivalents may be subject to any limitations and/or restrictions
determined by the Committee. Dividend equivalents shall be converted to cash or
additional Shares by such formula and at such time, and shall be paid at such
times, as may be determined by the Committee. 
Unless the Award Agreement provides otherwise, such dividend equivalents
shall be paid to the Participant at least annually, not later than the 15th day
of the third month following the end of the calendar year in which the dividend
equivalents are credited (or, if later, the 15th day of the third month
following the end of the calendar year in which the dividend equivalents are no
longer subject to a substantial risk of forfeiture within the meaning of Code Section 409A).  Any dividend equivalents that are accumulated
and paid after the date specified in the preceding sentence shall be explicitly
set forth in a separate arrangement that provides for the payment of the
dividend equivalents at a time and in a manner that satisfies the requirements
of Code Section 409A.

 

Article 16. Effects of Transfer, Leave of Absence, or a Change in
Status

 

16.1        Transfer of Employment or Leave of Absence. For
purposes of the Plan, a transfer of an Employee from the Company to an
Affiliate or Subsidiary (or, for purposes of any ISO granted under the Plan,
only a Subsidiary), or vice versa, or from one Affiliate or Subsidiary to
another (or, in the case of an ISO, only from one Subsidiary to another), and a
leave of absence, duly authorized in writing by the Company, shall not be
deemed a termination of employment of the Employee for

 

 

purposes of the Plan or with
respect to any Award (in the case of ISOs, to the extent permitted by the
Code).

 

16.2        Change in Status. The Committee shall have
the discretion to determine the effects upon any Award, upon an individual’s
status as an Employee or Director for purposes of the Plan (including whether a
Participant shall be deemed to have experienced a termination of employment or
other change in status) and upon the exercisability, vesting, termination or
expiration of any Award in the case of: (a) any Participant who is
employed by an entity that ceases to be an Affiliate or Subsidiary (whether due
to a spin-off or otherwise), (b) any transfer of a Participant between
locations of employment with the Company, an Affiliate, and/or Subsidiary or
between the Company, an Affiliate or Subsidiary or between Affiliates or
Subsidiaries, (c) any leave of absence of a Participant, (d) any
change in a Participant’s status from an Employee to a consultant or Director,
or vice versa; and (e) upon approval by the Committee, any Employee who is
terminated by the Company however becomes employed by a partnership, joint
venture, corporation or other entity not meeting the requirements of an Affiliate
or Subsidiary, subject, in each case, to the requirements of Code Section 422
applicable to any ISOs.

 

Article 17. Rights of Participants

 

17.1        Rights or Claims.  No individual shall have any rights or claims
under the Plan except in accordance with the provisions of the Plan and any
applicable Award Agreement. The grant of an Award under the Plan shall not
confer any rights upon the Participant holding such Award other than with such
terms, and subject to such conditions, as are specified in the Plan as being
applicable to such type of Award, or to all Awards, or as are expressly set
forth in the Award Agreement evidencing such Award. Without limiting the
generality of the foregoing, nothing contained in the Plan or in any Award
Agreement shall be deemed to:

 

(a)          Give any Employee or
Director the right to be retained in the service of the Company, its Affiliates
and/or Subsidiaries, whether in any particular position, at any particular rate
of compensation, for any particular period of time or otherwise;

 

(b)         Restrict in any way the
right of the Company, its Affiliates and/or Subsidiaries to terminate, change
or modify any Employee’s employment or any Director’s service as a Director at
any time with or without cause;

 

(c)          Give any Employee or
Director the right to receive any bonus, whether payable in cash or in Shares,
or in any combination thereof, from the Company, its Affiliates and/or
Subsidiaries, nor be construed as limiting in any way the right of the Company,
its Affiliates and/or Subsidiaries to determine, in its sole discretion,
whether or not it shall pay any Employee or Director bonuses, and, if so paid,
the amount thereof and the manner of such payment; or

 

(d)         Give any Participant any
rights whatsoever with respect to an Award except as specifically provided in
the Plan and the Award Agreement.

 

17.2        Adoption of Plan. The adoption of the Plan
shall not be deemed to give any Employee or Director of the Company, its
Affiliates and/or Subsidiaries or any other individual any right to be selected
as a Participant or to be granted an Award.

 

 

Article 18. Withholding

 

18.1        Tax Withholding. The Company, its
Affiliates and/or Subsidiaries are authorized to withhold from any Award
granted or payment due under the Plan the amount of all Federal, state, local
and non-United States taxes due in respect of such Award or payment and to take
any such other action as may be necessary or appropriate in the opinion of the
Committee to satisfy all obligations for the payment of such taxes.

 

The recipient
of any payment or distribution under the Plan shall make arrangements
satisfactory to the Company, as determined in the Committee’s discretion, for
the satisfaction of any withholding tax obligations that arise by reason of any
payment or distribution. The Company shall not be required to make any payment
or distribution under or relating to the Plan or any Award until such
obligations are satisfied or such arrangements are made, as determined by the
Committee in its discretion.

 

18.2        Withholding or Tendering Shares. Without
limiting the generality of Section 18.1, the Committee in its discretion
may permit a Participant to satisfy or arrange to satisfy, in whole or in part,
the withholding tax obligations incident to an Award by: (a) electing to
have the Company withhold a portion of the Award otherwise deliverable to such
Participant pursuant to such Award (provided, however, that the amount of any
Award so withheld shall not exceed the amount necessary to satisfy required
withholding tax obligations using the minimum statutory withholding rates for
Federal, state, local and/or non-United States tax purposes, including payroll
taxes, that are applicable to supplemental taxable income) and/or (b) tendering
to the Company Shares owned by such Participant and purchased or held for the
requisite period of time as may be required to avoid the Company’s, its
Affiliates’ and/or Subsidiaries’ incurring an adverse accounting charge, based,
in each case, on the Fair Market Value of a Share on the payment date as
determined by the Committee.

 

The satisfaction of withholding taxes pursuant to this Article 18
shall be subject to such restrictions as the Committee may impose, including
any restrictions required by applicable law or the rules and regulations
of the SEC.

 

Article 19. Change of Control

 

19.1
Change of Control of the Company.
Notwithstanding any other provision of this Plan to the contrary, the
provisions of this Article 19 shall apply in the event of a Change of
Control, unless otherwise determined by the Committee in connection with the
grant of an Award as reflected in the applicable Award Agreement.

 

Upon a Change
of Control, except to the extent that another Award meeting the requirements of
Section 19.2 (a “Replacement Award”) is provided to the Participant to
replace such Award (the “Replaced Award”), and except as provided in the
following paragraph, all then-outstanding Options and Stock Appreciation Rights
shall become fully vested and exercisable, and all other then-outstanding
Awards that are Service Vesting Awards shall vest in full and be free of
restrictions. In such event, the Committee shall notify the Participant that
his or her Awards shall be fully exercisable for a period of not less than fifteen (15) days from the date of such
notice, contingent upon the consummation of the event giving rise to the Change
of Control, and upon the expiration of such period any unexercised Awards shall
terminate. The treatment of any other Awards shall be as determined by the
Committee in connection with the grant thereof, as reflected in the applicable
Award Agreement.

 

 

If an Award is
subject to Code Section 409A, the Committee may accelerate the vesting of
the Award upon a Change in Control, but the Committee shall not accelerate the
date on which the Award is paid.  The
Committee shall not extend the period to exercise an Option or Stock
Appreciation Right to the extent that the extension would cause the Option or
Stock Appreciation Right to become subject to Code Section 409A.

 

19.2        Replacement Awards. An Award shall meet the
conditions of this Section 19.2 (and hence qualify as a Replacement Award)
if: (i) it has a value at least equal to the value of the Replaced Award
as determined by the Committee in its sole discretion; (ii) it relates to
publicly traded equity securities of the Company or its successor in the Change
of Control or another entity that is affiliated with the Company or its
successor following the Change of Control; and (iii) its other terms and
conditions are not less favorable to the Participant than the terms and
conditions of the Replaced Award (including the provisions that would apply in
the event of a subsequent Change of Control). Without limiting the generality
of the foregoing, the Replacement Award may take the form of a continuation of
the Replaced Award if the requirements of the preceding sentence are satisfied.
The determination of whether the conditions of this Section 19.2 are
satisfied shall be made by the Committee, as constituted immediately before the
Change of Control, in its sole discretion. 
Any such Replacement Awards shall comply with the requirements of Code
Sections 422, 424 and 409A, as the Committee determines applicable.

 

19.3        Termination of Employment. Unless otherwise
determined by the Committee in connection with the grant of an Award as
reflected in the applicable Agreement, upon a termination of employment or
termination of directorship of a Participant occurring in connection with or
during the period of two (2) years after such Change of Control, other
than for Cause, (i) all Replacement Awards held by the Participant shall
become fully vested and (if applicable) exercisable and free of restrictions,
and (ii) all Options and Stock Appreciation Rights held by the Participant
immediately before the termination of employment or termination of directorship
that the Participant held as of the date of the Change of Control or that
constitute Replacement Awards shall remain exercisable for not less than one (1) year
following such termination or until the expiration of the stated term of such
Option or SAR, whichever period is shorter; provided, that if the applicable
Award Agreement provides for a longer period of exercisability, that provision
shall control.

 

Article 20. Amendment, Modification, Suspension, and Termination

 

20.1        Amendment,
Modification, Suspension, and Termination. Subject to Section 20.3,
the Committee may, at any time and from time to time, alter, amend,
modify, suspend, or terminate this Plan and any Award Agreement in whole
or in part; provided, however, that, without the prior approval of the Company’s
shareholders and except as provided in Section 4.4, Options or SARs issued
under this Plan will not be repriced, replaced, or regranted through
cancellation, or by lowering the Exercise Price of a previously granted Option
or the Grant Price of a previously granted SAR, and no material amendment of this Plan shall be made without shareholder approval if
shareholder approval is required by law, regulation, or stock exchange rule.

 

20.2        Adjustment of Awards Upon the
Occurrence of Certain Unusual or Nonrecurring Events. The
Committee may make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4.4
hereof) affecting the Company or the financial statements of the Company or of
changes in applicable laws, regulations, or accounting principles,

 

 

whenever
the Committee determines that such adjustments are appropriate in order to
prevent unintended dilution or enlargement of the benefits or potential
benefits intended to be made available under this Plan. Any such adjustment
made with respect to an Award intended to be an ISO shall be made only to the
extent consistent with such intent, unless the Committee determines otherwise,
and any such adjustment that is made with respect to an Award that is intended
to qualify as Performance-Based Compensation shall be made consistent with the
intent that such Award qualify for the performance-based compensation exception
under Code Section 162(m) (or any successor provision). Additionally, the Committee shall not make any adjustment
pursuant to this Section 20.2 that would cause an Award that is otherwise
exempt from Code Section 409A to become subject to Section 409A; or
that would cause an Award that is subject to Code Section 409A to fail to
satisfy the requirements of Section 409A. The determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under this Plan.

 

20.3        Awards Previously Granted. Notwithstanding
any other provision of this Plan to the contrary (other than Section 20.4),
no termination, amendment, suspension, or modification of this Plan or an Award
Agreement shall adversely affect in any material way any Award previously
granted under this Plan, without the written consent of the Participant holding
such Award.

 

20.4        Amendment to Conform to Law.  Notwithstanding any other provision of this
Plan to the contrary, the Board may amend the Plan or an Award Agreement, to
take effect retroactively or otherwise, as deemed necessary or advisable for
the purpose of conforming the Plan or an Award Agreement to any present or
future law relating to plans of this or similar nature (including, but not
limited to, Code Section 409A), and to the administrative regulations and
rulings promulgated there under.

 

Article 21. Successors

 

All
obligations of the Company under this Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.

 

Article 22. Miscellaneous Provisions

 

22.1        Consent to Terms and Conditions. By
accepting any benefit under the Plan, each Participant and each individual
claiming under or through such Participant shall be conclusively deemed to have
indicated their acceptance and ratification of, and consent to, all of the
terms and conditions of the Plan and any action taken under the Plan by the
Committee, the Company or the Board.

 

22.2        Beneficiary Designation. Each Participant
under this Plan may, from time to time, name any beneficiary or beneficiaries
(who may be named contingently or successively) to whom any benefit under this
Plan is to be paid in case of the Participant’s death before the Participant
receives any or all of such benefit. Each such designation shall revoke
all prior designations by the same Participant, shall be in a form prescribed
by the Committee, and will be effective only when filed by the Participant in
writing with the Company during the Participant’s lifetime. In the absence of
any such beneficiary designation, benefits remaining unpaid or rights remaining
unexercised at the Participant’s death shall be paid or exercised by the
Participant’s executor, administrator, or legal representative.

 

 

22.3        Forfeiture Events.

 

(a)                                  The
Committee may specify in an Award Agreement that the Participant’s rights,
payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of certain
specified events, in addition to any otherwise applicable vesting or
performance conditions of an Award. Such events may include, but shall not be
limited to, termination of employment for Cause, termination of the Participant’s
provision of services to the Company, Affiliate, and/or Subsidiary, violation
of material Company, Affiliate, and/or Subsidiary policies, breach of
noncompetition, confidentiality, or other restrictive covenants that may apply
to the Participant, or other conduct by the Participant that is detrimental to
the business or reputation of the Company, its Affiliates, and/or its
Subsidiaries.

 

(b)                                 If
the Company is required to prepare an accounting restatement due to the
material noncompliance of the Company, as a result of misconduct, with any
financial reporting requirement under the securities laws, if the Participant
knowingly or grossly negligently engaged in the misconduct, or knowingly or
grossly negligently failed to prevent the misconduct, or if the Participant is
one of the individuals subject to automatic forfeiture under Section 304
of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company
the amount of any payment in settlement of an Award earned or accrued during
the twelve- (12-) month period following the first public issuance or filing
with the SEC (whichever just occurred) of the financial document embodying such
financial reporting requirement.

 

22.4        Legend. The certificates for Shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer of such Shares.

 

22.5        Drafting Context. The words “Article” and “Section”
shall refer to provisions of the Plan, unless expressly indicated otherwise.
Wherever any words are used in the Plan or any Award Agreement in the masculine
gender they shall be construed as though they were also used in the feminine
gender in all cases where they would so apply, and wherever any words are used
herein in the singular form they shall be construed as though they were also
used in the plural form in all cases where they would so apply.

 

22.6        Severability. In the event any provision of
the Plan shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining provisions of the Plan, and the Plan
shall be construed and enforced as if the illegal or invalid provision had not
been included.

 

22.7        Requirements of Law. The granting of Awards and the issuance of
Shares under this Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

 

22.8        Delivery of Title. The Company shall have no obligation to
issue or deliver evidence of title for Shares issued under this Plan prior to:

 

(a)                                  Obtaining
any approvals from governmental agencies that the Company determines are
necessary or advisable; and

 

 

(b)                                 Completion
of any registration or other qualification of the Shares under any applicable
national or foreign law or ruling of any governmental body that the Company
determines to be necessary or advisable.

 

22.9        Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

 

22.10      Investment Representations. The Committee may
require each individual receiving Shares in connection with any Award under the
Plan to represent and agree with the Company in writing that such individual is
acquiring Shares for investment without a view to the distribution thereof,
and/or provide such other representations and agreements as the Committee may
prescribe.

 

22.11      Unfunded Plan. The Plan shall be unfunded.
The Company shall not be required to establish any special or separate fund or
to make any other segregation of assets to assure the issuance of Shares or the
payment of cash upon exercise or payment of any Award. Proceeds from the sale
of Shares pursuant to Options granted under the Plan shall constitute general
funds of the Company. The costs and expenses of the Plan shall be borne by the
Company, including expenses of issuing Shares pursuant to any Awards granted
hereunder.

 

22.12      Uncertificated Shares. To the extent that
this Plan provides for issuance of certificates to reflect the transfer of
Shares, the transfer of such Shares may be effected on a noncertificated basis,
to the extent not prohibited by applicable law or the rules of any stock
exchange.

 

22.13      Fractional Shares. An Option or other Award
shall not be exercisable with respect to a fractional Share. No fractional
Shares shall be issued upon the exercise or payment of an Option or other
Award.

 

22.14      Retirement and Welfare Plans. Payments and
other compensation received by a Participant under an Award shall not be deemed
part of such Participant’s regular, recurring compensation for purposes of any
termination, indemnity or severance pay laws and shall not be included in, nor
have any effect on, the determination of benefits under any other employee
benefit plan, contract or similar arrangement provided by the Company, its
Affiliates and/or Subsidiaries, unless expressly so provided by such other
plan, contract or arrangement.

 

22.15      Nonexclusivity of this Plan. Neither the
adoption of the Plan nor anything contained herein shall affect any other
compensation or incentive plans or arrangements of the Company, its Affiliates
and/or Subsidiaries, or prevent or limit the right of the Company, its
Affiliates and/or Subsidiaries to establish any other forms of incentives or
compensation for their Employees or Directors.

 

22.16      No Constraint on Corporate Action. Nothing in
this Plan shall be construed to: (i) limit, impair, or otherwise affect
the Company’s, its Affiliates’ and/or Subsidiaries’ right or power to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure, or to merge or consolidate, or dissolve, liquidate, sell,
or transfer all or any part of its business or assets;

 

 

or, (ii) limit the right
or power of the Company, its Affiliates, and/or Subsidiaries to take any action
which such entity deems to be necessary or appropriate.

 

22.17      Limits of Liability. Any liability of the
Company, its Affiliates and/or Subsidiaries to any Participant with respect to
any Award shall be based solely upon contractual obligations created by the
Plan and the Award Agreement.

 

None of the Company, any Affiliate or Subsidiary or
any member of the Committee or the Board, or any other Person participating in
any determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability, in the
absence of bad faith, to any party for any action taken or not taken in
connection with the Plan, except as may expressly be provided by statute.

 

22.18      Deferred Compensation. If any Award would be
considered deferred compensation as defined under Code Section 409A and
would fail to meet the requirements of Code Section 409A, then such Award
shall be null and void. However, the Committee may permit deferrals of
compensation pursuant to the terms of a Participant’s Award Agreement, a
separate plan, or a subplan which (in each case) meets the requirements of Code
Section 409A. Additionally, to the extent any Award is subject to Code Section 409A,
notwithstanding any provision herein to the contrary, the Plan does not permit
the acceleration of the time or schedule of any distribution related to
such Award, except as permitted by Code Section 409A

 

22.19      Employees Based Outside of the United States.
Notwithstanding any provision of this Plan to the contrary, in order to comply
with the laws in other countries in which the Company, its Affiliates, and/or
its Subsidiaries operate or have Employees or Directors, the Committee, in its
sole discretion, shall have the power and authority to:

 

(a)                                  Determine
which Affiliates and Subsidiaries shall be covered by this Plan;

 

(b)                                 Determine
which Employees and/or Directors outside the United States are eligible to
participate in this Plan;

 

(c)                                  Modify
the terms and conditions of any Award granted to Employees and/or Directors
outside the United States to comply with applicable foreign laws;

 

(d)                                 Establish
subplans and modify exercise procedures and other terms and procedures, to the
extent such actions may be necessary or advisable. Any subplans and
modifications to Plan terms and procedures established under this Section 22.19
by the Committee shall be attached to this Plan document as appendices; and

 

(e)                                  Take
any action, before or after an Award is made, that it deems advisable to obtain
approval or comply with any necessary local government regulatory exemptions or
approvals.

 

Notwithstanding
the above, the Committee may not take any actions hereunder, and no Awards
shall be granted, that would violate applicable law.

 

 

22.20      Governing Law. Except as to matters
concerning the issuance of Shares or other matters of corporate governance,
which shall be determined, and related Plan and Award provisions construed,
under the General Corporation Law of the State of Delaware, the Plan and each
Award Agreement shall be governed by the laws of the State of Delaware,
excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of the Plan to the substantive
law of another jurisdiction. Unless otherwise provided in the Award Agreement,
Participants are deemed to submit to the exclusive jurisdiction and venue of
the federal or state courts of Delaware, to resolve any and all issues that may
arise out of or relate to the Plan or any related Award Agreement.

 

22.21      Indemnification. Subject to requirements of
Delaware law, each individual who is or shall have been a member of the Board,
or a Committee appointed by the Board, or an officer of the Company to whom
authority was delegated in accordance with Article 3, shall be indemnified
and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by the individual in
connection with or resulting from any claim, action, suit, or proceeding to
which the individual may be a party or in which he or she may be involved by
reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by the individual in settlement thereof, with the
Company’s approval, or paid by the individual in satisfaction of any judgment
in any such action, suit, or proceeding against the individual, provided the
individual shall give the Company an opportunity, at its own expense, to handle
and defend the same before the individual undertakes to handle and defend it on
the individuals own behalf, unless such loss, cost, liability, or expense is a
result of the individuals own willful misconduct or except as expressly
provided by statute.

 

The foregoing
right of indemnification shall not be exclusive of any other rights of
indemnification to which such individual may be entitled under the Company’s
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them harmless.

 

22.22      No
Guarantee of Favorable Tax Treatment.  Although
the Company intends to administer the Plan so that Awards will be exempt from,
or will comply with, the requirements of Code Section 409A, the Company
does not warrant that any Award under the Plan will qualify for favorable tax
treatment under Code Section 409A or any other provision of federal,
state, local, or foreign law.  The
Company shall not be liable to any Participant for any tax, interest, or
penalties the Participant might owe as a result of the grant, holding, vesting,
exercise, or payment of any Award under the Plan.Exhibit
10.1

 

EXECUTION
COPY

 

DEBTOR-IN-POSSESSION CREDIT AND SECURITY AGREEMENT

 

Dated as of December 27, 2005

 

 

ATA AIRLINES, INC.,

a Debtor and
Debtor-in-Possession

under Chapter 11 of the
Bankruptcy Code, as the Borrower,

 

 

ATA
HOLDINGS CORP., as Guarantor,

 

 

CERTAIN OF
THE SUBSIDIARIES OF

ATA
HOLDINGS CORP. PARTY HERETO,

as Guarantors,

 

 

and

 

 

MATLINPATTERSON
ATA HOLDINGS LLC,

as Lender

 

 

DEBTOR-IN-POSSESSION CREDIT AND SECURITY AGREEMENT

 

This DEBTOR-IN-POSSESSION CREDIT AND SECURITY
AGREEMENT (this “Credit Agreement”) is entered into as of December 27,
2005 by and among ATA AIRLINES, INC., an Indiana corporation and a debtor and
debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code
(as hereinafter defined) (the “Borrower”), ATA HOLDINGS CORP. (the “Parent”),
each of the Subsidiaries of the Parent from time to time party hereto, and MATLINPATTERSON
ATA HOLDINGS LLC, a Delaware limited liability company (the “Lender”).

 

PRELIMINARY STATEMENTS

 

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

 

2.             The
Borrower has requested that the Lender enter into a term credit facility in an
aggregate principal amount not to exceed Thirty Million Dollars ($30,000,000),
all of the Borrower’s obligations under which are to be jointly and severally
guaranteed by the Guarantors.

 

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

 

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

 

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

 

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

 

ARTICLE I

DEFINITIONS
AND ACCOUNTING TERMS

 

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

 

“Account
Collateral” has the meaning specified in Section 9.01(g).

 

 

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

 

“Affiliate”
means, with respect to any Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.

 

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

 

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

 

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

 

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

 

“Amended
Reorganization Plan” means a Chapter 11 plan of reorganization filed in the
Cases by the Reorganizing Debtors, containing the conditions set forth in Schedule 1.01(A) and
otherwise satisfactory to the Lender.

 

“Approval
Order” means an order of the Bankruptcy Court approving (A) the
Disclosure Statement; (B) Procedures for the Solicitation; (C) the
Transfer and Settlement; (D) the Codeshare Agreement; (E) the Gate
Restructuring Term Sheet; (F) this Credit Agreement; and (G) the ATSB
Term Sheet, and granting other ancillary relief.

 

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

 

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

 

“ATSB
Collateral” has the meaning ascribed to such term in the DIP Financing
Order.

 

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

 

“ATSB
Secured Claim” means the “Secured Claim” as defined in the Order Approving
Motion on Shortened and Limited Notice to Approve ATSB Lenders Settlement
Agreement entered by the Bankruptcy Court on April 19, 2005.

 

“ATSB Term
Sheet” means the Term Sheet for the Amended and Restated ATSB Loan
Agreement, a copy of which is attached hereto as Exhibit E.

 

2

 

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

 

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

 

“Audited
Financial Statements” means the audited consolidated balance sheet of the
Borrower, the Parent and its Subsidiaries for the fiscal year ended December 31,
2004, and the related consolidated statements of income or operations,
shareholders’ equity and cash flows for such fiscal year of the Borrower and
its Subsidiaries, including the notes thereto.

 

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

 

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

 

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

 

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

 

“Business
Plan” means the Reorganizing Debtors’ OpPlan 6, which is the operating plan
for scheduled airline passenger services and all military charter services
attached hereto as Exhibit C, as such plan may be amended,
supplemented and otherwise modified from time to time with the consent of the
Lender.

 

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

 

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

 

3

 

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

 

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

 

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

 

“Chicago
Gates” means all of the Borrower’s right, title, and interest in and to the
Chicago Midway Airport Lease, solely with respect to all of the Borrower’s
right, title and interest thereunder in and to the eight (8) gates identified
at Chicago Midway Airport as Gates 4a, 4b, 10, 12, 16, 18 and 19 in Concourse
A, including such gates’ associated ramp space and service facilities at
Chicago Midway Airport, provided that upon the effectiveness of the
transactions contemplated in the Gate Restructuring Term Sheet, the Borrower’s
right, title and interest under the Chicago Midway Airport Lease shall be in
and to one (1) gate identified at Chicago Midway Airport as Gate B26.

 

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

 

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

 

“Closing
Date” means the date when the conditions precedent set forth in Section 4.01
have been satisfied or waived in writing by the Lender.

 

“Code”
means the Internal Revenue Code of 1986.

 

“Codeshare
Agreement” means the Amended and Restated Codeshare Agreement to be entered
into between the Borrower and Southwest Airlines Co., the terms and conditions
of

 

4

 

which shall be satisfactory to
the Lender, as such Amended and Restated Codeshare Agreement may be further
amended, restated, amended and restated, modified or supplemented from time to
time with the consent of the Lender.

 

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

 

“Collateral
Documents” means, collectively, the provisions of Article X of this
Credit Agreement, security agreements, slot, gate and route security
agreements, aircraft mortgages, mortgages, pledge agreements or other similar
agreements delivered to the Lender pursuant to Section 6.14, and
each of the other agreements, instruments, supplements or documents that
creates or purports to create a Lien in favor of the Lender for the benefit of
the Lender.

 

“Commitment
Letter” means the Commitment Letter entered into among the Lender,
MatlinPatterson Global Opportunities Partners II (Cayman), L.P., the Borrower
and the Parent dated November 28, 2005, a copy of which is attached hereto
as Exhibit F.

 

“Committee”
means any statutory committee appointed in the Cases.

 

“Compliance
Certificate” means a certificate substantially in the form of Exhibit B
attached hereto.

 

“Computer
Software” has the meaning specified in Section 9.01(h)(iv).

 

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

 

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

 

5

 

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

 

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

 

“Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.

 

“Controlled”
and “Controlling” have meanings correlative thereto.  Without limiting the generality of the
foregoing, a Person shall be deemed to be Controlled by another Person if such
other Person possesses, directly or indirectly, power to vote 10% or more of
the securities having ordinary voting power for the election of directors,
managing general partners or the equivalent.

 

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

 

“Copyrights”
has the meaning specified in Section 9.01(h)(iii).

 

“Conversion
Ratio” means a conversion ratio of $10 to one (1) share of New Common
Stock based upon ten million (10,000,000) shares of New Common Stock.

 

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

 

“DCA”
shall mean Ronald Reagan Washington National Airport.

 

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

 

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

 

“Default
Rate” means an interest rate equal to 13% per annum.

 

“DIP
Financing Order” means a final order of the Bankruptcy Court approving the
terms and conditions of the Loan Documents (including, without limitation, the
granting of Liens and the priority status referred to in the Loan Documents),
which final order shall be in form and substance satisfactory to the Lender in
its sole discretion and shall not have been reversed, amended, supplemented,
modified, stayed or vacated.

 

6

 

“Disclosure
Statement” means the Disclosure Statement With Respect To The First Amended
Plan of Reorganization filed with the Bankruptcy Court by the Reorganizing
Debtors on December 12, 2005.

 

“Disclosure
Statement Financial Projections” means the Pro Forma Financial Projections
which are Exhibit 2 to the Disclosure Statement.

 

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

 

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

 

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

 

“Effective
Date” means the date the Amended Reorganization Plan, in form and substance
satisfactory to the Lender, becomes effective.

 

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

 

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

 

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

 

7

 

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

 

“Equipment”
has the meaning specified in Section 9.01(c).

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

“FAA”
means the Federal Aviation Administration.

 

“Funding
Fee” has the meaning specified in Section 2.05.  The Funding Fee is referred to in the
Commitment letter as the “MP Funding Fee”.

 

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

 

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

 

“Gate
Restructuring Term Sheet” means the term sheet dated December 6, 2005
among the Borrower, Southwest and the City of Chicago with respect to the
proposed restructuring of certain gates at Chicago’s Midway Airport, a copy of
which is attached hereto as Exhibit D.

 

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

 

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

 

“Guaranty”
has the meaning specified in Section 10.01.

 

9

 

“Guaranteed
Obligations” has the meaning specified in Section 10.01.

 

“Guarantors”
means the Parent, ATA Leisure Corp., ATA Cargo, Inc. and American Trans
Air Execujet, Inc.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

as of such date.  The amount of any capital lease, operating
lease or Synthetic Lease Obligation as of any date shall be deemed to be the
amount of Attributable Indebtedness in respect thereof as of such date.  The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence
of the contingency giving rise to the obligation, of any contingent obligations
at such date; provided, that the amount outstanding at any time of any
Indebtedness issued with the original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.

 

“Indemnitees”
has the meaning specified in Section 11.05.

 

“Intellectual
Property Collateral” has the meaning specified in Section 9.01(h).

 

“Inventory”
has the meaning specified in Section 9.01(d).

 

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

 

“Investment
Agreement” means the Investment Agreement described in the Commitment
Letter.

 

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

 

“IRS”
means the United States Internal Revenue Service.

 

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

 

“Lead
Investor” means the lead investor and plan sponsor in the Borrower’s
Reorganization Plan.

 

11

 

“LGA”
shall mean New York’s LaGuardia Airport.

 

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

 

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

 

“Loan” has
the meaning set forth in Section 2.01.

 

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

 

“Loan
Parties” means, collectively, the Borrower and each Guarantor.

 

“Material
Adverse Change” means (a) a material adverse effect upon the business,
condition (financial or otherwise), operations, performance, properties,
assets, liabilities (actual and contingent) or prospects of the Borrower and
the Guarantors, taken as a whole, since July 31, 2005; (b) a material
impairment of the rights and remedies of the Lender under any Loan Document, or
of the ability of any Loan Party to perform its obligations under any Loan
Document to which it is a party; (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against any Loan Party of
any Loan Document to which it is a party; (d) a material impairment of the
Collateral taken as a whole; (e) an amendment to, or termination of, the
Codeshare Agreement without the prior written consent of the Lender; or (f) the
resignation of any senior management or other key employee of the Borrower or
any other Loan Party.

 

“MatlinPatterson”
means MatlinPatterson Global Opportunities Partners II, L.P. and/or its
affiliates.

 

“Maturity
Date” means the earliest of (a) March 31, 2006, (b) the
occurrence of an Event of Default and acceleration of the Obligations, and (c) the
effective date of a Reorganization Plan.

 

“Maximum
Rate” has the meaning specified in Section 11.10.

 

“MDW”
shall mean Chicago’s Midway Airport.

 

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

 

12

 

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

 

“New Common
Stock” means common stock of the reorganized ATA Holdings Corp. or a new
corporation which directly or indirectly owns all of the issued and outstanding
capital stock of the Reorganizing Debtors.

 

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

 

“Orders”
means the DIP Financing Order, the Approval Order or any other order of the
Bankruptcy Court in connection with the Cases.

 

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

 

13

 

organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Pledged
Debt” has the meaning specified in Section 9.01(f)(ii).

 

“Pledged
Equity” has the meaning specified in Section 9.01(f)(i).

 

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

 

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

 

14

 

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

 

“Primary
Collateral” has the meaning specified in Section 9.01.

 

“Procedures
for Solicitation” means the Procedures for the Solicitation of Acceptances
and Rejections of the Amended Reorganization Plan filed with the Bankruptcy
Court by the Reorganizing Debtors on September 30, 2005, as the same may
be amended with the consent of the Lender.

 

“Receivables”
has the meaning specified in Section 9.01(e).

 

“Register”
has the meaning specified in Section 2.07(b).

 

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

 

“Related
Contracts” has the meaning specified in Section 9.01(e).

 

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

 

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

 

“Reorganizing
Debtors” means, collectively, ATA Airlines, Inc., ATA Holdings Corp.,
ATA Leisure Corp., ATA Cargo, Inc. and American Trans Air Execujet, Inc.

 

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

 

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

 

“Restricted
Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other Equity
Interest of any Loan Party, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, defeasance, acquisition, cancellation or
termination of any such capital stock or other Equity Interest, or on account
of

 

15

 

any return of capital to the
Borrower’s stockholders, partners or members (or the equivalent Persons
thereof).

 

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

 

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

 

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

 

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

 

“Security
Collateral” has the meaning specified in Section 9.01(f).

 

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

 

“Southwest”
means Southwest Airlines Co., a Texas corporation.

 

“Southwest
Bid” means that certain Bid Proposal Letter, dated as of December 15,
2004, from Southwest Airlines Co. to ATA Holdings Corp and its debtor
affiliates and subsidiaries, pursuant to which Southwest proposed to (a) purchase
certain of Debtors’ assets, (b) provide Debtors with debtor-in-possession
loan facility, (c) provide debtors with post-bankruptcy financing through
long-term debt refinancing, (d) purchase non-voting convertible preferred
equity in reorganized Holdings and (e) codeshare with Debtors out of
specified airports, as amended, restated, supplemented or modified from time to
time.

 

“Southwest
DIP Facility” means the Secured Debtor-In-Possession Credit and Security
Agreement dated as of December 22, 2004, as amended, restated supplemented
or modified from time to time, among the Borrower, the guarantors and Southwest,
as approved by order of the Bankruptcy Court dated January 10, 2005.

 

16

 

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

 

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

 

“Swap
Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all
transactions of any kind, and the related confirmations, which are subject to
the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master
agreement (any such master agreement, together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any Master
Agreement.

 

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

 

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

 

17

 

“Taxes”
has the meaning specified in Section 3.01(a).

 

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

 

“Term Note”
has the meaning specified in Section 2.07(a).

 

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

 

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

 

“Transactions”
means, collectively, (a) the consummation of transactions contemplated by
the Loan Documents and (b) the payment of the fees and expenses incurred
in connection with the consummation of the foregoing.

 

“Transfer
and Settlement” means (1) the Midway Gate Restructuring Agreement to
transfer certain lease rights to Southwest and to resolve certain issues with
the City of Chicago, (2) an amendment to the Codeshare Agreement, and (3) the
amendments to the Southwest Bid and Southwest DIP Facility.

 

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

 

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

 

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

 

“United
States Citizen” has the meaning specified in Section 5.01.

 

“Use or
Lose Rule” means with respect to the Slots, the terms of 14 C.F.R. ss.
93.227.

 

“UST/Clerk
Fees” has the meaning set forth in the DIP Financing Order.

 

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

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

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

 

1.03         Accounting Terms.

 

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

 

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

 

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

 

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

 

19

 

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

 

ARTICLE II

THE LOAN FACILITY

 

2.01         The Loan.  Subject to the terms and conditions set forth
in Article IV of this Credit Agreement, the Lender shall make a term loan
(the “Loan”) to the Borrower in an amount equal to Thirty Million
Dollars ($30,000,000) on the Closing Date. 
Amounts repaid with respect to the Loan may not be reborrowed.

 

2.02         Prepayments.

 

(a)           INTENTIONALLY LEFT BLANK

 

(b)           Mandatory.  (i) If any Loan Party Disposes of any
Chicago Gates, the Borrower shall prepay the principal amount of the Loan in an
amount equal to: (A) 100% of all Net Cash Proceeds received therefrom
immediately upon receipt thereof by any Loan Party, minus (B) the
sum of (i) any required repayments on the ATSB Secured Claim plus (ii) any required repayments to Southwest
under the Southwest DIP Facility.

 

(ii)           Upon the issuance by any Loan Party
of any of its capital stock or other Equity Interests to any Person other than
another Loan Party or the Lender pursuant to the terms of the Investment
Agreement (or the receipt of any capital contribution by any Loan Party from
any Person other than another Loan Party), the Borrower shall prepay the principal
amount of the Loan in an amount equal to: (A) 100% of all Net Cash
Proceeds received therefrom immediately upon receipt thereof by any Loan Party;
minus (B) any required repayments to Southwest of the Indebtedness
under the Southwest DIP Facility.

 

(iii)          Upon the incurrence or issuance by any
Loan Party of any Indebtedness to any Person other than another Loan Party
(other than Indebtedness expressly permitted to be incurred or issued pursuant
to Section 7.03(c)), the Borrower shall prepay the principal amount
of the Loan in an amount equal to: (A) 100% of all Net Cash Proceeds
received therefrom immediately upon receipt thereof by any Loan Party; minus (B) any required repayments to Southwest
of the Indebtedness under the Southwest DIP Facility.

 

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

 

2.03         Repayment of Loan.  The Borrower shall repay the outstanding principal
amount of the Loan in cash on the Maturity Date; provided, however,
that in the event that the Lender or any of its Affiliates is not selected as
the Lead Investor under the Reorganizing Debtors’ Reorganization Plan, the
Lender shall have the option, exercisable by written notice to the Borrower, to
defer the repayment of the principal amount of the Loan and any accrued and
unpaid interest thereon to the effective date of such Reorganization Plan and
exchange such principal amount and interest for New Common Stock (or such other
stock issued to the Lead Investor) at a price per share equal to the price per
share paid by the Lead Investor for such New

 

20

 

Common Stock (or other stock); provided,
further, that if no Event of Default has occurred prior to the Maturity
Date and the Effective Date occurs, the outstanding principal amount of the
Loan (including the amount of the Funding Fee) and the accrued and unpaid
interest thereon shall be repaid by the issuance of New Common Stock to the
Lender on the Effective Date at the Conversion Ratio.  For the avoidance of doubt, the Funding Fee
shall be added to (and deemed to constitute part of) the outstanding principal
amount of the Loan and be payable (together with interest thereon) in
accordance with Section 2.03.

 

2.04         Interest.

 

(a)           Interest Rate.  Subject to the provision of subsection (b) below,
the outstanding principal amount of the Loan shall accrue interest, from the date
such Loan is made until such Loan has been paid in full (whether paid in cash
or by the issuance of New Common Stock), at a rate equal to 10% per annum.

 

(b)           Default Rate.  Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on (i) the
outstanding principal amount of the Loan and all other Obligations, payable in
arrears on demand, at a rate per annum equal at all times to the Default Rate.

 

(c)           Payment Date.  Except as set forth in subsection (b) above,
interest on the principal amount of the Loan and all other Obligations shall be
payable in arrears on the Maturity Date and at such other times as may be
specified herein.  Interest hereunder
shall be due and payable in accordance with the terms hereof before and after
judgment.

 

2.05         Funding Fee.  The Borrower shall pay to the Lender a
closing fee (the “Funding Fee”) in an amount equal to $3,600,000.  Upon the funding of the Loan by the Lender on
the Closing Date, the Funding Fee shall be deemed fully earned and shall be
added on the Closing Date to the principal amount of the Loan which shall be
payable in accordance with Section 2.03 hereof.

 

2.06         Computation of Interest and Fees.  All computations of interest shall be made on
the basis of a 360-day year and actual days elapsed (which results in more fees
or interest, as applicable, being paid than if computed on the basis of a 365-day
year).  Interest shall accrue on the
principal balance of the Loan (including the principal amount of the Funding
Fee) from, and including, the day on which the Loan is made to, and excluding, the
day on which the amount of the Loan is paid in full.  Each determination by the Lender of an
interest rate or fee hereunder shall be conclusive and binding for all
purposes, absent manifest error.

 

2.07         Evidence of Indebtedness.   (a)  
The Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to the Lender
resulting from the Loan and the additions to the principal amount of the Loan
from time to time, including the amounts of principal and interest payable and
paid to the Lender from time to time hereunder. 
The Borrower shall execute and deliver to the Lender a promissory note
payable to the order of the Lender, substantially in the form of Exhibit A,
evidencing the aggregate indebtedness of the Borrower to the Lender resulting
from the principal amount of the Loan (including the amount of the Funding Fee)
(the “Term Note”).

 

21

 

(b)           The Borrower shall maintain at its
address referred to on the signature page hereto a register for the
recordation of the name and address of the Lender and principal amount of and
interest on the Loan owing to the Lender from time to time (the “Register”).  The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower and the Lender may treat each Person whose name is recorded in the
Register as the Lender hereunder for all purposes of this Credit
Agreement.  The Term Note (and any
interest therein) shall not be transferred by the Lender unless such transfer
is recorded in the Register.  The
Register shall be available for inspection by the Lender at any reasonable time
and from time to time upon reasonable prior notice. The Register shall include
a control account in which shall be recorded (i) the date and the
principal amount of the Loan (including the amount of the Funding Fee), (ii) the
amount of any principal or interest paid by the Borrower to the Lender
hereunder, and (iii) the terms of any assignment by the Lender delivered
to the Borrower.

 

(c)           Entries made in good faith by the
Borrower in the Register pursuant to subsection (b) above, and by the
Lender in its account pursuant to subsection (a) above, shall be
prima facie evidence of the amount of principal and interest due and payable or
to become due and payable from the Borrower to the Lender absent manifest
error; provided, however, that the failure of the  Borrower or the Lender to make an entry, or
any finding that an entry is incorrect, in the Register or the Lender’s account
shall not limit or otherwise affect the obligations of the Borrower under this
Credit Agreement.

 

2.08         Payments Generally.

 

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

 

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

 

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

 

2.10         Superpriority Nature of Obligations;
No Priming Lien.

 

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

 

(i)            an
allowed superpriority administrative expense claim pursuant to Section 364(c)(1) of
the Bankruptcy Code in each of the Cases having priority, subject only to the
Carve-Out and the obligations of any of the Loan Parties to the ATSB Lenders
with respect to the ATSB Secured Claim and pursuant to the ATSB Cash Use Order
and of any Loan Parties to Southwest under the Southwest DIP Facility, over all
administrative expenses, claims and unsecured claims against the Loan Parties,
now existing or hereafter arising, of any kind or nature whatsoever, including,
without limitation, administrative

 

22

 

expenses of the kinds specified
in, or ordered pursuant to sections 105, 326, 328, 330, 331, 503(b), 507,
546(c), 726 or 1114 of the Bankruptcy Code whether or not such claims or
expenses may become secured by a judgment lien or other non-consensual lien,
levy or attachment, and shall at all times be senior to the rights of any Loan
Party, any Loan Party’s estate, and any successor trustee or estate
representative in the Cases or any subsequent proceeding or case under the
Bankruptcy Code; and

 

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

 

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

 

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

 

2.12         Payment of Obligations.  Upon the Maturity Date (whether by
acceleration or otherwise) of any of the Obligations under this Credit
Agreement or any of the other Loan Documents, the Obligations shall be due and
payable without further application to or order of the Bankruptcy Court.

 

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

 

23

 

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01         Taxes.

 

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

 

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

 

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

 

(d)           The Borrower agrees to indemnify the
Lender for (i) the full amount of Taxes and Other Taxes (including any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section) paid by the Lender, (ii) amounts payable under Section 3.01(c) without
duplication and (iii) any liability (including additions to tax,
penalties, interest and expenses) arising therefrom or with respect thereto, in
each case whether or not such Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental

 

24

 

Authority; but excluding
amounts resulting from the failure to comply with the requirements of Section 11.05.  Payment under this subsection (d) shall
be made within 30 days after the date the Lender makes a demand therefor.

 

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

 

(f)            The Lender shall execute and deliver
to the Borrower any applicable forms regarding certain identifying information
customarily requested for United States withholding tax purposes.

 

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

 

3.03         Survival.  All of the Borrower’s obligations under this Article III
shall survive repayment of all Obligations hereunder.

 

ARTICLE IV

CONDITIONS PRECEDENT TO CLOSING

 

4.01         Conditions to Closing Date.  The obligation of the Lender to make the Loan
on the Closing Date shall be subject to the satisfaction of the following
conditions precedent:

 

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

 

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

 

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

 

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

 

25

 

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

 

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

 

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

 

(vii)         a favorable opinion of Baker &
Daniels and general counsel of ATA, counsel to the Loan Parties, addressed to
the Lender, in form and substance acceptable to the Lender and its counsel.

 

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

 

(c)           The Lender shall have received the
Business Plan and since October 8, 2005 the Borrower and the other Loan
Parties shall have operated their respective business in a manner substantially
consistent therewith.

 

(d)           The Lender shall have received a Lien
on substantially all of the Borrower’s and each of the other Loan Parties’
assets and be satisfied that all such Liens are valid and effective and will be
perfected and subordinate only to the Lien securing the ATSB Secured Claim and
granted to the ATSB Lender Parties pursuant to the ATSB Cash Use Order, and the
Lien of Southwest granted under the Southwest DIP Facility.

 

26

(e)           The Lender shall have received
consents, in form and substance satisfactory to the Lender, from ATSB and
Southwest pursuant to which ATSB and Southwest consent to the Transactions.

 

(f)            The Debtors shall have filed with
the Bankruptcy Court the Amended Reorganization Plan and Disclosure Statement
in connection therewith, and the Bankruptcy Court shall have entered the
Approval Order.

 

(g)           United States Department of
Transportation shall have advised the Lender and the Loan Parties, in writing,
that the transactions contemplated by the Commitment Letter are not
inconsistent with applicable law and rules and United States Department of
Transportation’s practice.

 

(h)           All waiting periods imposed by
applicable Law (including in particular, 49 USC 41720) in connection with the
filing of the Codeshare Agreement shall have expired or been terminated without
any action having been taken by any court of competent jurisdiction
restraining, preventing or imposing materially adverse conditions upon such
transactions.

 

(i)            The Lender shall have received an
executed copy of the Codeshare Agreement and the related documentation.  The Court shall have entered an enforceable
order approving the terms and conditions of the Codeshare Agreement.

 

(j)            No Material Adverse Change shall
have occurred.

 

(k)           No Event of Default or Default shall
have occurred and be continuing or would result from the making of the Loan
requested to be made on the Closing Date.

 

(l)            All of the representations and
warranties contained herein and in the other Loan Documents shall be true and
complete in all material respects on and as of the Closing Date, both before
and immediately after giving effect to the making of the Loan, except to the
extent that such representations and warranties specifically refer to an
earlier date, in which case they shall be true and correct in all material
respects as of such earlier date.

 

(m)          There shall have been paid to the
Lender all fees and expenses (including the reasonable legal fees of counsel to
the Lender) payable to the Lender pursuant to the Commitment Letter for which
an invoice has been submitted to the Borrower.

 

(n)           The Borrower and the other Loan
Parties shall have received all material consents and authorizations required
pursuant to any material Contractual Obligation with any other Person and shall
have obtained all material permits of, and effected all notices to and filings
with, any Governmental Authority as may be necessary to allow the Borrower
lawfully (A) to execute, deliver and perform, in all material respects,
their respective obligations hereunder, under the other Loan Documents to which
each of them is, or shall be, a party and under each other agreement or
instrument to be executed and delivered by each of them pursuant thereto or in
connection therewith, (B) to consummate the Transactions and (C) to
create and perfect the Liens on the Collateral in the manner and for the
purpose contemplated by the Loan Documents.

 

(o)           The Closing Date shall have occurred
on or before December 30, 2005.

 

27

 

(p)           No law, regulation, order, judgment,
injunction, stay or decree of any Governmental Authority shall exist, and the
Lender shall not have received any notice that any action, suit, investigation,
litigation or proceeding is pending or threatened in any court or before any
arbitrator or Governmental Authority which, in the reasonable determination of
the Lender, (i) purports to enjoin, prohibit, restrain or otherwise affect
(A) the ability of the Borrower or any other Loan Party to perform their
respective obligations hereunder and under each Loan Document in any material
respect, (B) the making of the Loan on the Closing Date or (C) the
consummation of the transactions contemplated hereby or contemplated under the
other Loan Documents or (ii) would be reasonably expected to result in a
Material Adverse Change.

 

(q)           The ATSB Lenders shall have entered
into an agreement, the terms and conditions of which shall be satisfactory to
the Lender, pursuant to which the ATSB Lender Parties agree that the ATSB
Secured Claim shall be restructured on the Effective Date as provided in the
ATSB Term Sheet, and any matters which are unresolved in the ATSB Term Sheet
shall have been resolved to the satisfaction of the Lender.

 

(r)            The Lender shall be reasonably
satisfied with all motions, orders, and other pleadings or related documents to
be filed or submitted to the Bankruptcy Court in connection with the
Transactions.

 

(s)           The Gate Restructuring Term Sheet
shall be in form and substance satisfactory to the Lender.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

The Borrower
represents and warrants to the Lender that:

 

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

 

28

 

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

 

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

 

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

 

5.05         Financial
Statements; No Material Adverse Change.

 

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

 

29

 

contingent, of the Borrower,
the Parent and its Subsidiaries as of the date thereof required to be disclosed
by GAAP, including liabilities for taxes, material commitments and
Indebtedness.

 

(b)           The
unaudited consolidated financial statements of the Borrower, the Parent and its
Subsidiaries dated September 30, 2005, and the related consolidated
statements of income or operations, shareholders’ equity and cash flows for the
fiscal quarter ended on that date (i) were prepared in accordance with
GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, and (ii) fairly present the financial
condition of the Borrower, the Parent and its Subsidiaries as of the date
thereof and their results of operations for the period covered thereby,
subject, in the case of clauses (i) and (ii), to the absence of footnotes
and to normal year-end audit adjustments.

 

(c)           [INTENTIONALLY
DELETED]

 

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

 

5.06         Litigation.  Other than the Cases, except as has been
publicly disclosed in any filing made by the Borrower or any other Loan Party
with the SEC between December 31, 2003 and the date of this Credit
Agreement, there are no actions, suits, proceedings, claims or disputes pending
or, to the knowledge of the Borrower after due and diligent investigation,
threatened or contemplated, at law, in equity, in arbitration or before any
Governmental Authority, by or against the Borrower, the Parent or any of its
Subsidiaries or against any of their properties or revenues that either
individually or in the aggregate could reasonably be expected to have a
Material Adverse Change.  The performance
of any action by any Loan Party required or contemplated by any of the Loan
Documents is not restrained or enjoined (either temporarily, preliminary or
permanently).  There are no actions,
suits or proceedings pending that challenge the validity of any Loan Document
or the applicability or enforceability of any Loan Document or any of the
Orders or which seek to void, avoid, limit, or otherwise adversely affect the
security interest created by or in any Loan Document or any of the Orders or
any payment made pursuant thereto.

 

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

 

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

 

30

 

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

 

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

 

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

 

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

 

5.10         Insurance.  All policies of insurance of any kind or
nature owned by or issued to the Loan Parties, including, without limitation,
policies of life, fire, theft, product liability, public liability, property
damage, other casualty, employee fidelity, workers’ compensation, employee
health and welfare, title, property and liability insurance, are in full force
and effect, are issued by financially sound and reputable insurance companies
not Affiliates of the Borrower and are of a nature and provide such coverage,
including, without limitation, war risk and terrorism liability insurance, that
is in an amount that is no less than the greater of (i) the maximum amount
available to the Borrower from the DOT under the Federal Aviation Insurance
Program, as amended by the Air Transportation Stabilization Act and further
amended by the Homeland Security Act of 2002 and the maximum (to the extent
requested by the Lender) amount available under programs established pursuant
to the Terrorism Risk Insurance Act of 2002 and (ii) such amount as is
customarily carried by major United States air carriers in the United States
domestic airline industry; and the Borrower maintains other insurance that is
in its judgment sufficient and in such amounts as is customary in the United
States domestic airline industry for major United States air carriers.

 

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

 

31

 

5.12         ERISA
Compliance.

 

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

 

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

 

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

 

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

 

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

 

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

 

32

 

proceeds of the Loan will be
used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.

 

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

 

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

 

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

 

5.17         Intellectual
Property Licenses, Etc.

 

(a)           The
Loan Parties own all right, title and interest in and to, or possess the right
to use, the intellectual property that is reasonably necessary for the
operation of their respective businesses.

 

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

 

(c)           Except
as specifically disclosed in Schedule 5.17(c), no claim or
litigation has been asserted or is pending or, to the best knowledge of the
Loan Parties, threatened, that, either

 

33

 

individually or in the
aggregate, could reasonably be expected to have a Material Adverse Change,
alleging that the Loan Parties’ rights in or use of the intellectual property
or the operation of the businesses of the Loan Parties infringe,
misappropriate, or otherwise violate the rights of any other Person.  To the best knowledge of the Loan Parties, no
Person is engaging in any activity that infringes, misappropriates, or
otherwise violates the intellectual property.

 

5.18         Security/Priority.

 

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

 

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

 

(c)           On
and after the entry of the DIP Financing Order and after giving effect thereto,
all Obligations owing by the Borrower and by the Guarantors in respect thereof
will be secured by, subject to the Carve-Out, those Liens granted under the
ATSB Cash Use Order, those Liens securing the ATSB Secured Claim and those
Liens in favor of Southwest under the Southwest DIP Facility, pursuant to Section 364(c)(3) of
the Bankruptcy Code, best priority liens granted to the Lender on all Collateral
that is subject to valid and perfected liens in existence on the Petition Date
or to valid liens in existence on the Petition Date that subsequently are
perfected pursuant to Section 546(b) of the Bankruptcy Code, subject
only to such existing or subsequently perfected liens.

 

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

 

5.19         Entry
of the Orders.  The DIP Financing Order
was entered by the Bankruptcy Court on December 14, 2005 and has not have
been stayed, amended, vacated, reversed or rescinded in any respect.  On the date of the making of the Loan, the DIP
Financing Order will have been entered and will not have been amended, stayed,
vacated or rescinded in any respect that is adverse to the Lender.  Upon the maturity (whether by the
acceleration or otherwise) of any of the Obligations of the Borrower and each
Guarantor hereunder and under the other Loan Documents, the Lender shall,
subject to the provisions of Section 8.02, be entitled to immediate
payment of such Obligations, and to enforce the remedies provided for
hereunder, without further application to or order by the Bankruptcy Court.

 

34

 

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

 

5.21         Representations
and Warranties as to Collateral.

 

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

 

(b)           Each
Loan Party is the legal and beneficial owner or lessee of the Collateral of
such Loan Party.

 

5.22         Aircraft
Leases; Contracts Outside the Ordinary Course.  Except as set forth in Schedule 5.22
hereof, the Borrower has not assumed or rejected any pre-Petition aircraft
leases  or entered into any post-Petition
aircraft leases.  Except for contracts
approved by the Bankruptcy Court, since the Petition Date, the Borrower has not
entered into any contracts outside the ordinary course of business.

 

ARTICLE VI

AFFIRMATIVE COVENANTS

 

So long as the Obligations hereunder (other than contingent
indemnification obligations which are not then due and payable) shall remain
unpaid or unsatisfied, the Parent and the Borrower shall, and shall (except in
the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.11)
cause each Loan Party to:

 

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

 

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

 

(b)           as
soon as available, but in any event within 45 days after the end of each of the
first three fiscal quarters of each fiscal year of the Borrower, a consolidated
balance sheet of the Borrower, the Parent and its Subsidiaries as at the end of
such fiscal quarter, and the related

 

35

 

consolidated statements of
income or operations, shareholders’ equity and cash flows for such fiscal
quarter and for the portion of the Borrower’s fiscal year then ended, setting
forth in each case in comparative form the figures for the corresponding fiscal
quarter of the previous fiscal year and the corresponding portion of the
previous fiscal year, all in reasonable detail and certified by the Chief
Executive Officer or the Chief Financial Officer of the Borrower as fairly
presenting the financial condition, results of operations, shareholders’ equity
and cash flows of the Borrower, the Parent and its Subsidiaries in accordance
with GAAP, subject only to normal year-end audit adjustments and the absence of
footnotes;

 

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

 

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

 

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

 

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

 

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

 

36

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

37

 

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

 

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

 

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

 

6.03         Notices.  Promptly notify the Lender:

 

(a)           of
the occurrence of any Default;

 

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

 

(c)           of
the occurrence of any ERISA Event;

 

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

 

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

 

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

 

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

 

6.04         Payment
of Obligations.  Pay, discharge or
satisfy promptly when due, but no later than within 30 days after the same
shall become due and payable, all its obligations and liabilities of whatever
nature that constitute administrative expenses under Section 503(b) of
the Bankruptcy Code, including (a) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets attributed
to the period after the Petition Date to the

 

38

 

extent permitted or required by
the Bankruptcy Code or the Bankruptcy Court to be paid, (b) all lawful
claims which, if unpaid, would by law become a Lien upon its property; and (c) all
Indebtedness, within 30 days after the same shall become due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness unless, in each case, (i) the
Bankruptcy Code or an order of the Bankruptcy Court precludes making such
payment or (ii) the same are being contested in good faith by appropriate
proceedings diligently conducted and adequate reserves in accordance with GAAP
are being maintained by the Loan Party.

 

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

 

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

 

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

 

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

 

(c)           The
Borrower and each Loan Party (other than Ambassadair Travel Club, Inc.,
Amber Travel, Inc. and C8 Airlines, Inc., formerly named Chicago
Express Airlines, Inc., as

 

39

 

each of those Loan Parties have
ceased business operations) shall continue to maintain in full force and effect
business interruption insurance on its property in an amount not less than an
amount of such insurance in effect as of the date hereof for such property.

 

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

 

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

 

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

 

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

 

6.11         Use
of Proceeds.  Use the proceeds of the
Loan to provide general working capital and for other general corporate
purposes of the Loan Parties.

 

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

 

40

 

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

 

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

 

6.15         Compliance
with Terms of Leaseholds.  Make all
Post-Petition payments and otherwise perform all obligations in respect of all
leases of real property (including, without limitation, arrangements with
respect to Gate Leaseholds to which the Borrower, the Parent or any of its
Subsidiaries is a party), to the extent necessary to keep such leases in full
force and effect and not allow such leases to lapse or be terminated or any
rights to renew such leases to be forfeited or cancelled, notify the Lender of
any default by any party with respect to such leases and cooperate with the
Lender in all respects to cure any such default, and cause each of the Parent’s
Subsidiaries to do so.  The Borrower
shall not be in violation of this Section 6.15 by reason of: (i) its
sale or assignment of any of the Gate Leaseholds to Southwest, or with Lender’s
consent, any assignment or relinquishment of any Gate Leaseholds to the City of
Chicago; or (ii) its termination, cancellation, rejection, failure to
renew or assignment of any Gate Leaseholds or any other leases of real property
with approval of the Bankruptcy Court pursuant to any order issued in the Cases
prior to November 30, 2005, or as contemplated by the Disclosure Statement
Financial Projections.

 

6.16         FAA
and DOT Matters; Citizenship.  (a) Maintain
at all times its status at the DOT, as applicable, as an “air carrier” within
the meaning of Section 40102(a)(2) of Title 49,

 

41

 

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

 

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

 

6.18         ATSB
and Southwest Information Requests. 
Comply with any reasonable request from the ATSB for information in
connection with the ATSB Loan and from Southwest in connection with the
Southwest DIP Facility.

 

6.19         Gate
Utilization.  Utilize all of its Gate
Leaseholds in a manner sufficient to comply with applicable lease provisions
governing such Gate Leaseholds. The Borrower shall not be in violation of this Section 6.19
by reason of: (i) its sale or assignment of any of the Gate Leaseholds to
Southwest, or with Lender’s consent, any assignment or relinquishment of any
Gate Leaseholds to the City of Chicago; or (ii) its termination,
cancellation, rejection, failure to renew or assignment of any Gate Leaseholds
or any other leases of real property with approval of the Bankruptcy Court
pursuant to any order issued in the Cases prior to November 30, 2005, or
as contemplated by the Disclosure Statement Financial Projections.

 

6.20         Disclosure
Statement and Plan of Reorganization. 
File with the Bankruptcy Court on or prior to December 12, 2005 the
disclosure statement (with a copy of the Amended Reorganization Plan attached
as an exhibit thereto) in substantially the form described in the term sheet
delivered by the Borrower and accepted by the Lender describing such Amended Reorganization
Plan for all of the Cases, in each case on terms satisfactory to the Lender,
and obtain approval of such disclosure statement and confirmation of such
Amended Reorganization Plan on or prior to January 31, 2006.

 

ARTICLE VII

NEGATIVE COVENANTS

 

So long as the Obligations hereunder (other
than contingent indemnification obligations which are not then due and payable)
shall remain unpaid or unsatisfied, the Borrower shall not, nor shall it permit
any other Loan Party to, directly or indirectly:

 

7.01         Liens.  Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, or sign or file or suffer to exist under the Uniform
Commercial Code of any jurisdiction a financing statement that names the

 

42

 

Borrower, the Parent or any of
its Subsidiaries as debtor, or sign or suffer to exist any security agreement
authorizing any secured party thereunder to file such financing statement, or
assign any accounts or other right to receive income, other than the following:

 

(a)           Liens
pursuant to any Loan Document;

 

(b)           Liens
existing on the Petition Date;

 

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

 

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

 

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

 

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

 

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

 

(h)           Liens securing judgments and
attachments not constituting an Event of Default under Section 8.01(g) or
securing appeal or other surety bonds related to such judgments;

 

(i)            Liens securing Indebtedness
permitted under Section 7.03(c)(ii); provided that (i) such
Liens do not at any time encumber any property other than the property financed
by such Indebtedness and (ii) with respect to capital leases, such Liens
do not at any time extend to or cover any Collateral or assets other than the
assets subject to such capital leases;

 

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

 

43

 

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

 

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

 

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

 

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

 

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

 

(p)           Liens securing Indebtedness permitted
under Section 7.03(c)(vi), (viii) and (ix).

 

7.02         Investments.  Make or hold any Investments, except:

 

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

 

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

 

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

 

(d)           Guarantees permitted by Section 7.04;

 

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

 

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

 

(g)           Investments in the Trust Funds.

 

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

 

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

 

44

 

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

 

(c)           in the case of the Loan Parties,

 

(i)            Indebtedness under the Loan
Documents;

 

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

 

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

 

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

 

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

 

(vi)          the ATSB Secured Claim in an amount
not to exceed $110,000,000;

 

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

 

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

 

(ix)           Indebtedness under the Southwest DIP
Facility.

 

45

 

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

 

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

 

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

 

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

 

7.06         Dispositions.  Make any Disposition of assets, except:

 

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

 

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

 

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

 

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

 

(e)           Dispositions
permitted by Section 7.05;

 

(f)            Dispositions
by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.06;
provided that (i) at the time of such Disposition, no Default shall exist
or

 

46

 

would result from such
Disposition, (ii) the aggregate book value of all property Disposed of in
reliance on this clause (f) in any fiscal year shall not exceed
$15,000,000; (iii) the purchase price for such asset shall be paid to the
Borrower or such Subsidiary in cash equal to not less than 93% of the purchase
price; and (iv) such Disposition shall not be a Disposition of any Gate
Leaseholds, other than a Disposition by way of an assignment or transfer of a
Gate Leasehold to Southwest in accordance with the Gate Restructuring Term
Sheet or with Lender’s consent;

 

(g)           abandonment
of intellectual property pursuant to Section 9.04;

 

(h)           licensing
and sublicensing of intellectual property consistent with the Borrower’s past
practices in the ordinary course of business;

 

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

 

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

 

(k)           the
termination or rejection of any lease or the return, surrender or abandonment
of any property subject thereto, other than any such termination or rejection
which is with respect to a lease of Section 1110 Assets or to which Lender
has consented or which has been approved by the Bankruptcy Court prior to November 30,
2005, or which is pursuant to or provided for in the Amended Reorganization
Plan;

 

(l)            Dispositions
permitted by the Collateral Documents; and

 

(m)          Permitted
Sale/Leasebacks;

 

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

 

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

 

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

 

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

 

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

 

47

 

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

 

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

 

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

 

7.11         Financial
and Performance Covenants.

 

(a)           Minimum
Consolidated EBITDARR.   (i) Permit
Consolidated EBITDARR for each calendar month beginning on November 1,
2005 and ending with February 28, 2006, to be less than 75% of the
projected EBITDARR for each such month as derived from the in the Disclosure
Statement Financial Projections; nor (ii) permit cumulative Consolidated
EBITDARR for each month beginning on November 1, 2005 and ending on February 28,
2006 to be less than 80% of the cumulative Consolidated EBITDARR for each such
calendar month as set forth in the Disclosure Statement Financial Projections.

 

(b)           Minimum
Adjusted EBITDARR.   (i) Permit
Adjusted EBITDARR for each month beginning on November 1, 2005 and ending
with February 28, 2006 to be less than 75% of the projected Adjusted
EBITDARR for each such month as derived from the Disclosure Statement Financial
Projections; nor (ii) permit cumulative Adjusted EBITDARR for each month
beginning on November 1, 2005 and ending on February 28, 2006 to be
less than 80% of the cumulative Adjusted EBITDARR for each such month as
derived from the Disclosure Statement Financial Projections.

 

(c)           Liquidity.  (i)  
Permit Liquidity on any day during the calendar months beginning on November 1,
2005 through February 28, 2006 to be less than 75% of the projected
Liquidity for the last day of each such calendar month as set forth in the
Disclosure Statement Financial Projections with respect to Parent and its
Subsidiaries, including Borrower, on a consolidated basis.

 

48

 

(d)           Maintain
Minimum Cash Position.

 

TO BE DETERMINED

 

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

 

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

 

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

 

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

 

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

 

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

 

7.18         Chapter
11 Claims.  Incur, create, assume,
suffer to exist or permit any Superpriority Claim that is pari passu with or
senior to any of the claims of the Lender against the Borrower and the
Guarantors except with respect to the Carve-Out, the ATSB Secured Claim and the
obligations of Southwest under the Southwest DIP Facility.

 

7.19         Limitation
on Prepayments and Pre-Petition Obligations.  Except as otherwise allowed pursuant to the
DIP Financing Order or any other order of the Bankruptcy Court, (a) make
any payment or prepayment on or redemption or acquisition for value (including,
without limitation, by way of depositing with the trustee with respect thereto
money or securities before the due date for the purpose of paying when due) of
any Pre-Petition Indebtedness or other Pre-Petition obligations of the Borrower
or any Guarantor, (b) pay any interest on any Pre-Petition Indebtedness of
the Borrower or any Guarantor (whether in cash, in kind securities or
otherwise), or (c) make any payment or create or permit any Lien pursuant
to Section 361 of the Bankruptcy Code (or pursuant to any other provision
of the Bankruptcy Code authorizing adequate protection), or apply to the
Bankruptcy Court for the authority to do any of the foregoing; provided,
however, that notwithstanding the foregoing, the Borrower and the Guarantors
may (and may file motions seeking to) (i) make payments in respect of
Indebtedness or obligations under any security agreement, lease or conditional
sale contract relating to “equipment” (as that term is defined in Section 1110(a)(3) of
the Bankruptcy Code as in effect on the date hereof), (ii) pay cure costs
with respect to executory contracts or unexpired leases that the Borrower or
Guarantors have been allowed by the Bankruptcy Court to assume under Section 365
of the Bankruptcy Code, (iii) make or pay accrued payroll and related
expenses and employee benefits as of the Petition Date, (iv) pay sales and
use taxes, (v) pay other Pre-Petition Payments in an

 

49

 

amount not to exceed the
amounts, if any, specified in the DIP Financing Order in the aggregate, (vi) pay
all obligations required to be paid pursuant to Section 6.04 and other
provisions of this Credit Agreement, (vii) make payments for
administrative expenses that are allowed and payable under Sections 330 and 331
of the Bankruptcy Code, (viii) make payments permitted by the First Day
Orders, (ix) make adequate protection payments to the ATSB Lender Parties
and other secured creditors as may be required by the ATSB Cash Use Order, (x)
make payments to Southwest for the reimbursement of expenses as provided in the
Southwest DIP Facility Order, the Transfer and Settlement, or other order of
the Bankruptcy Court, and (xi) make payments to such other claimants and in
such amounts as may be consented to by the Lender and approved by the
Bankruptcy Court.

 

7.20         Change
in Capital Structure.  Make any
material change in its equity capital structure as in existence on the Petition
Date except pursuant to the Amended Reorganization Plan.

 

7.21         Aircraft
Leases and Material Contracts. 
Assume or reject any pre-Petition aircraft lease or enter into any
post-Petition aircraft lease except as set forth on Schedule 5.22
or enter into any material contract not in the ordinary course of business
without the consent of the Lender.

 

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

 

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

 

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

 

(b)           Specific
Covenants.  The Borrower or any Loan
Party fails to perform or observe any term, covenant or agreement contained in
any of (i) Section 6.03 (Notices), 6.05 (Preservation of
Existence), 6.10 (Inspection Rights), 6.11 (Use of Proceeds),
6.12 (Covenant to Give Security), 6.17 (Cash Management) or 6.20
(FAA Matters), 6.19 (Slot Utilization) and 6.20 (Gate
Utilization) and such failure continues for one (1) Business Day after
the earlier of the date on which (A) a Responsible Officer becomes aware
of such failure or (B) written notice thereof shall have been given to the
Borrower by the Lender, (ii) Article VII or (iii) Section 6.01
or 6.02 (provided, however, that the Loan Parties’ failure to obtain a
consent of the City of Chicago to transfer to the Lender the Midway Hangar
Property pursuant to the Asset Acquisition Agreement shall not constitute a
Default or an Event of Default under this Credit Agreement, notwithstanding any
other provision of this Credit Agreement to the contrary) and such failure
continues for ten (10) Business Days after the earlier of the date on
which (A) a Responsible Officer becomes aware of such failure or (B) written
notice thereof shall have been given to the Borrower by the Lender; or

 

(c)           Other
Defaults.  Any Loan Party fails to
perform or observe any other covenant or agreement (not specified in subsection (a) or
(b) above or subsection (n) below) contained in any

 

50

 

Loan Document on its part to be
performed or observed and such failure continues unremedied for ten (10) Business
Days after the earlier of the date on which (A) a Responsible Officer
becomes aware of such failure or (B) written notice thereof shall have
been given to the Borrower by the Lender; or

 

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

 

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

 

(f)            Judgments.  There is entered against any Loan Party or
any Subsidiary (i) a final judgment or order for the payment of money in
an aggregate amount exceeding $500,000, as an administrative expense of the
kind specified in Section 503(b) of the Bankruptcy Code (to the
extent not covered by independent third-party insurance as to which the insurer
is rated at least “A” by A.M. Best Company, has been notified of such
claim and does not dispute coverage), or (ii) any one or more non-monetary
final judgments that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Change and, in either
case, there is a period of ten (10) consecutive Business Days during which
a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect; or

 

(g)           ERISA.  (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of

 

51

 

any Loan Party under Title IV
of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate
amount in excess of $500,000 or (ii) any Loan Party or any ERISA Affiliate
fails to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan where such withdrawal liability is in an
aggregate amount in excess of $500,000; or

 

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

 

(i)            INTENTIONALLY
LEFT BLANK

 

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

 

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

 

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

 

52

 

(m)          Modification
of Orders.  An order of the
Bankruptcy Court shall be entered reversing, amending, supplementing or staying
for a period in excess of three (3) Business Days, vacating or otherwise
modifying in a manner that is adverse to the Lender any of the DIP Financing
Order; or

 

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

 

(o)           Material
Adverse Change.  (i) There has
occurred any event or circumstance that would give rise to a Material Adverse
Change since July 31, 2005, (ii) there shall be a change or
modification in the ATSB Cash Use Order which has a Material Adverse Change on
the Borrower or any other Loan Party; or

 

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

 

(q)           DIP
Financing Order.  The entry of the DIP
Financing Order shall not have occurred by December 16, 2005; or the DIP
Financing Order shall not be in full force and effect; or the DIP Financing
Order shall have been reversed, amended, supplemented, modified, stayed or
vacated; or

 

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

 

(s)           Reorganization
Plan.  An order shall be entered by
the Bankruptcy Court confirming an amended plan of reorganization which is not
the Amended Reorganization Plan or liquidation in any of the Cases (or any Loan
Party shall propose a plan of reorganization which is not the Amended
Reorganization Plan or liquidation in any of the Cases); or

 

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

 

53

 

(u)           Amended
Reorganization Plan.  The Amended
Reorganization Plan shall not have been confirmed on or prior to January 31,
2006; or the plan conditions of the Amended Reorganization Plan shall not have
been satisfied on or prior to February 28, 2006; or the Amended
Reorganization Plan shall have amended, supplemented or otherwise modified in a
manner which materially adversely affects MatlinPatterson without the consent
of the Lender; or

 

(v)           Defaults
Under Investment Agreement.  The
Borrower or any Guarantor fails to perform or observe any term or condition
contained in the Investment Agreement; or

 

(w)          Lead
Investor.  The Borrower or any other
Loan Party selects a Person or Persons other than the Lender or its affiliates
as the Lead Investor; or

 

(x)            Business
Plan.  The Borrower and the other
Loan Parties shall have failed to perform the operating and financial
objectives in accordance with the progress points and the metrics set forth in
the Business Plan.

 

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

 

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

 

(b)           terminate
any further commitment to lend to the Borrower; and

 

(b)           (i) exercise
all rights and remedies available to it in respect of the Collateral; or (ii) exercise
all rights and remedies available to the Lender under the Loan Documents, the
DIP Financing Order or applicable Laws.

 

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

 

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

 

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

 

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

 

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

 

54

 

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

 

ARTICLE IX

SECURITY

 

9.01         Grant
of Security.  To induce the Lender to
make the Loan to implement the DIP Financing Order without in any way
diminishing or limiting the effect of the DIP Financing Order or the security
interest, pledge and lien granted thereunder, the Borrower, the Parent and each
other Loan Party hereby grants to the Lender, as security for the full and
prompt payment when due of the Obligations of such Loan Party under the Loan
Documents a continuing third priority Lien and security interest in and to all
Primary Collateral (as defined below) of such Loan Party (subject only to (i) Liens
granted to Southwest under the Southwest DIP Facility and valid and perfected
Liens in existence on the Petition Date and junior to such valid and perfected
Liens, (ii) valid, enforceable and nonavoidable Liens existing as of the
Petition Date, but perfected after the Petition Date pursuant to section 546(b) of
the Bankruptcy Code, only to the extent such Post-Petition perfection is
expressly permitted under the Bankruptcy Code, (iii) the Carve-Out and (iv) Permitted
Senior Liens) in accordance with Subsection 364(c)(2) of the
Bankruptcy Code.

 

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

 

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

 

(a)           (1) all
property owned or leased (except as provided below in this clause (i)(1)) by
any of the Loan Parties as of the date hereof at the Chicago Midway Airport in
which the Lender does not already hold a valid, enforceable and perfected lien
or security interest and the proceeds

 

55

 

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

 

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

 

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

 

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

 

(e)           all
accounts (including, without limitation, health-care-insurance receivables),
chattel paper (including, without limitation, tangible chattel paper and
electronic chattel paper), instruments (including, without limitation,
promissory notes), deposit accounts, letter-of-credit rights, general
intangibles (including, without limitation, payment intangibles) and other

 

56

 

obligations of any kind, whether or not arising out of or in connection
with the sale or lease of goods or the rendering of services and whether or not
earned by performance, and all rights now or hereafter existing in and to all
supporting obligations and in and to all security agreements, mortgages, Liens,
leases, letters of credit and other contracts securing or otherwise relating to
the foregoing property (any and all of such accounts, chattel paper,
instruments, deposit accounts, letter-of-credit rights, general intangibles and
other obligations, to the extent not referred to in clause(f), (g) or (h) below,
being the “Receivables,” and any and all such supporting obligations,
security agreements, mortgages, Liens, leases, letters of credit and other contracts
to the extent not referred to in clause (f), (g) or (h) below being
the “Related Contracts”);

 

(f)            the
following (the “Security Collateral”):

 

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

 

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

 

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

 

(g)           the
following (collectively, the “Account Collateral”):

 

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

 

57

 

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

 

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

 

(h)           the
following (collectively, the “Intellectual Property Collateral”):

 

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

 

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

 

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

 

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

 

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

 

(vi)          all registrations and applications for
registration for any of the foregoing, executed by such Loan Party to the
Lender from time to time), together with all reissues,

 

58

 

divisions,
continuations, continuations-in-part, extensions, renewals and reexaminations
thereof;

 

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

 

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

 

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

 

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

 

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

 

9.02         Further
Assurances.

 

(a)           Each
Loan Party agrees that from time to time, at the expense of such Loan Party,
such Loan Party will promptly execute and deliver, or otherwise authenticate,
all further instruments and documents, and take all further action that may be
necessary or desirable, or that the Lender may reasonably request, in order to
perfect and protect any pledge or security interest granted or purported to be
granted by such Loan Party hereunder or to enable the Lender to exercise and
enforce its rights and remedies hereunder with respect to any Collateral of
such Loan Party.  Without limiting the
generality of the foregoing, each Loan Party will within a commercially
reasonable time with respect to Collateral of such Loan Party:  (i) at the request of the Lender, mark
conspicuously each document included in Inventory, each chattel paper included
in Receivables, each Related Contract, and each of its records pertaining to
such Collateral with a legend, in form and substance reasonably satisfactory to
the Lender, indicating that such document, chattel paper, Related Contract, or
Collateral is subject to the security interest granted hereby; (ii) execute
or authenticate and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary

 

59

 

or desirable, or as the Lender
may reasonably request, in order to perfect and preserve the security interest
granted or purported to be granted by such Loan Party hereunder; (iii) at
the request of the Lender, deliver to the Lender certificates representing
Security Collateral that constitutes certificated securities, accompanied by
undated stock or bond powers executed in blank; (iv) at the request of the
Lender, take all action reasonably necessary to ensure within the time required
hereunder that the Lender has control of Collateral consisting of deposit
accounts, electronic chattel paper, investment property, letter-of-credit
rights and transferable records as provided in Sections 9-104, 9-105, 9-106 and
9-107 of the Uniform Commercial Code and in Section 16 of the Uniform
Electronics Transactions Act, as in effect in the jurisdiction governing such
transferable record; (v) at the request of the Lender, take all action
reasonably necessary to ensure that the Lender’s security interest is noted on
any certificate of ownership related to any Collateral evidenced by a
certificate of ownership; (vi) at the reasonable request of the Lender,
cause the Lender to be the beneficiary under all letters of credit that
constitute Collateral, with the exclusive right to make all draws under such
letters of credit, and with all rights of a transferee under Section 5-114(e) of
the Uniform Commercial Code; and (viii) deliver to the Lender evidence
that all other action that the Lender may deem reasonably necessary or
desirable in order to perfect and protect the security interest created by such
Loan Party in the Collateral under this Credit Agreement has been taken.

 

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

 

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

 

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

 

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

 

(a)           Subject
to each Loan Party’s rights and duties under the Bankruptcy Code (including Section 365
of the Bankruptcy Code), and anything herein to the contrary

 

60

 

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

 

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

 

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

 

9.04         Covenants
of the Loan Parties with Respect to Collateral.  Each Loan Party hereby covenants and agrees
with the Lender that from and after the date of this Credit

 

61

 

Agreement and until the
Obligations (other than contingent indemnification obligations which are not
then due and payable) are fully satisfied:

 

(a)           Delivery
and Control of Pledged Equity.

 

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

 

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

 

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

 

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

 

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

 

(c)           Indemnification
with Respect to Collateral.  In any
suit, proceeding or action brought by the Lender relating to any Collateral for
any sum owing thereunder or to enforce any provision of any Collateral in each
case, brought by the Lender in accordance with this Credit Agreement, such Loan
Party will save, indemnify and keep the Lender harmless from and against all
expense, loss or damage suffered by the Lender by reason of any defense,
setoff, counterclaim, recoupment or reduction of liability whatsoever of the
obligor thereunder, arising out of a breach by such Loan Party of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its

 

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successors from such Loan
Party, and all such obligations of such Loan Party shall be and remain
enforceable against and only against such Loan Party and shall not be
enforceable against the Lender.

 

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

 

(e)           Limitations
on Modifications of Receivables. 
Except with respect to intercompany Receivables among the Loan Parties,
such Loan Party will not, without the Lender’s prior written consent, grant any
extension of the time of payment under or in respect of any of the Receivables
or Related Contracts, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
any of the foregoing which are done in the ordinary course of business,
consistent with past practices, and trade discounts granted in the ordinary
course of business of such Loan Party.

 

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

 

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

 

(h)           As
to Intellectual Property Collateral.

 

(i)            With respect to each item of its
Intellectual Property Collateral, each Loan Party agrees to take, at its
expense, all necessary steps, including, without limitation, in the U.S. Patent
and Trademark Office, the U.S. Copyright Office and any other applicable U.S.
Governmental Authority, to (A) maintain the validity and enforceability of
such Intellectual Property Collateral and maintain such Intellectual Property
Collateral in full force and effect, and (B) pursue the registration and
maintenance of each patent, trademark, or copyright registration or
application, now or hereafter included in such Intellectual Property Collateral
of such Loan Party, including, without limitation, the payment of required fees
and taxes, the filing of responses to office actions issued by the U.S. Patent
and Trademark Office, the U.S. Copyright Office or other applicable U.S.
Governmental Authorities, the filing of applications for renewal or extension,
the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the
filing of divisional, continuation, continuation-in-part, reissue and renewal applications
or extensions, the payment of maintenance fees and the participation in
interference, reexamination, opposition, cancellation, infringement and
misappropriation proceedings.  No Loan
Party

 

63

 

shall, without the written consent of the
Lender, discontinue use of or otherwise abandon any Intellectual Property
Collateral, or abandon any right to file an application for patent, trademark,
or copyright, unless such Loan Party shall have determined prior to such
cessation of use or abandonment that such use or the pursuit or maintenance of
such Intellectual Property Collateral is no longer desirable in the conduct of
such Loan Party’s business and that the loss thereof would not be reasonably
likely to have a Material Adverse Change, in which case, such Loan Party will
give prompt notice of any such abandonment to the Lender.

 

(ii)           Each Loan Party agrees promptly to
notify the Lender if such Loan Party becomes aware (A) that any material
item of the Intellectual Property Collateral has become abandoned, placed in
the public domain, invalid or, unenforceable, or of any adverse determination
or development regarding such Loan Party’s ownership of any of the material
Intellectual Property Collateral or its right to register the same or to keep
and maintain and enforce the same, or (B) of any adverse determination or
the institution of any proceeding (including, without limitation, the
institution of any proceeding in the U.S. Patent and Trademark Office or any court)
regarding any material item of the Intellectual Property Collateral.

 

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

 

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

 

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

 

(vi)          Each Loan Party agrees that should it
obtain an ownership interest in any item of the type set forth in Section 9.01(h) that
is not on the date hereof a part of the Intellectual Property Collateral (“After-Acquired
Intellectual Property”) (i) the provisions of this Credit Agreement
shall automatically apply thereto, and (ii) any such After-Acquired
Intellectual Property and, in the case of trademarks, the goodwill symbolized
thereby, shall automatically become part of the Intellectual Property
Collateral subject to

 

64

 

the terms and conditions of this Credit
Agreement with respect thereto.  At the
end of each month, each Loan Party shall give prompt written notice to the
Lender identifying the After-Acquired Intellectual Property acquired during
such month (if any), and such Loan Party shall execute and deliver to the
Lender with such written notice, or otherwise authenticate, an IP Security
Agreement Supplement covering such After-Acquired Intellectual Property which
shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright
Office and any other applicable Governmental Authorities necessary to perfect
the security interest hereunder in such After-Acquired Intellectual Property.

 

9.05         Performance
by Lender of the Loan Parties’ Obligations.

 

(a)           Lender
Appointed Attorney-in-Fact.  Each
Loan Party hereby irrevocably appoints the Lender such Loan Party’s
attorney-in-fact, with full authority in the place and stead of such Loan Party
and in the name of such Loan Party or otherwise, from time to time, in the
Lender’s discretion after the occurrence and during the continuance of an Event
of Default, and after the Lender has complied with the notice provisions of the
DIP Financing Order, to take any action and to execute any instrument that the
Lender may deem necessary or advisable to accomplish the purposes of this
Credit Agreement, including, without limitation:

 

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

 

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

 

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

 

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

 

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

 

(c)           Lender
Not Liable.  The Lender shall in no
way be responsible for the payment of any costs incurred in connection with
preserving or disposing of Collateral pursuant to Section

 

65

 

506(c) of the Bankruptcy
Code (excluding the Carve-Out) and the Collateral may not be charged for the
incurrence of any such cost.

 

9.06         The
Lender’s Duties.

 

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

 

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

 

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

 

(a)           The
Lender may, subject only to compliance with the notice provisions of the DIP
Financing Order, exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party upon default under the Uniform
Commercial Code (whether or not the Uniform Commercial Code applies to the affected
Collateral) and also may:  (i) require
each Loan Party to, and each Loan Party hereby agrees that it will at its
expense and upon request of the Lender forthwith, assemble all or part of the
Collateral as directed by the Lender and make it available to the Lender at a
place and time to be designated by the Lender that is reasonably convenient to
such Loan Party and the Lender; (ii) without notice except as specified
below or in the Orders, sell the

 

66

 

Collateral or any part thereof
in one or more parcels at public or private sale, at any of the Lender’s
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as are commercially reasonable; (iii) occupy any premises owned
or leased by any of the Loan Parties where the Collateral or any part thereof
is assembled or located for a reasonable period in order to effectuate its
rights and remedies hereunder or under law, without obligation to such Loan
Party in respect of such occupation; and (iv) exercise any and all rights
and remedies of any of the Loan Parties under or in connection with the
Collateral, or otherwise in respect of the Collateral, including, without
limitation, (A) any and all rights of such Loan Party to demand or
otherwise require payment of any amount under, or performance of any provision
of, the Receivables, the Related Contracts and the other Collateral, (B) withdraw,
or cause or direct the withdrawal, of all funds with respect to the Account Collateral
and (C) exercise all other rights and remedies with respect to the Receivables,
the Related Contracts and the other Collateral, including, without limitation,
those set forth in Section 9-607 of the Uniform Commercial Code.  Each Loan Party agrees that, to the extent
notice of sale shall be required by law, at least 10 days’ notice to such Loan
Party of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification.  The Lender shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given.  The Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to
which it was so adjourned.

 

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

 

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

 

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

 

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

 

67

 

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

 

9.08         Modifications.

 

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

 

(i)            except for the Carve-Out having
priority over the Obligations, no costs or expenses of administration which
have been or may be incurred in any of the Cases or any conversion of the same
or in any other proceedings related thereto, and no priority claims, are or
will be prior to or on a parity with any claim of the Lender or the Lender
against the Loan Parties in respect of any of the Obligations;

 

(ii)           the liens and security interests
granted herein and in the Orders shall constitute valid and perfected liens and
security interest in the Primary Collateral (subject only to (A) the
Carve-Out, (B) valid and perfected liens in existence on the Petition Date
and junior to such valid and perfected Liens and (C) the Liens securing
the ATSB Secured Claim and the Liens securing the obligations under the
Southwest DIP Facility, and shall be prior to all other Liens and security
interests, now existing or hereafter arising, in favor of any other creditor or
any other Person whatsoever; and

 

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

 

9.09         Release;
Termination.

 

(a)           Upon
any sale, lease, transfer or other disposition of any item of Collateral of any
Loan Party in accordance with the terms of the Loan Documents, such Collateral
shall be released from the assignment and security interest granted hereby, and
in connection therewith, the Lender will, at such Loan Party’s expense, execute
and deliver to such Loan Party such documents as such Loan Party shall
reasonably request to evidence the release of such item of Collateral (other
than Inventory sold in the ordinary course of business) from the assignment and
security interest granted hereby; provided, however, that (i) at the time
of such request and such release no Default shall have occurred and be
continuing, (ii) the proceeds of any such sale, lease, transfer or other
disposition required to be applied, or any payment to be made in connection
therewith, in accordance with Section 2.02, shall, to the extent so
required, be paid or made to, or in accordance with the instructions of, the
Lender when and as required under

 

68

 

Section 2.02,
and (iii) in the case of Collateral sold or disposed of, the release of a
Lien created hereby will not be effective until the receipt by the Lender of
the Net Cash Proceeds, to the extent required under Section 2.02,  arising from the sale or disposition of such
Collateral.

 

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

 

ARTICLE X

GUARANTY

 

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

 

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

 

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

 

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

 

69

 

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

 

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

 

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

 

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

 

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

 

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

 

10.03       Waivers
and Acknowledgments.

 

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

 

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

 

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

 

70

 

or any Collateral, and (ii) any
defense based on any right of setoff or counterclaim against or in respect of
the Obligations of such Guarantor hereunder.

 

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

 

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

 

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

 

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

 

71

 

Guarantor of an interest in the
Guaranteed Obligations resulting from the payment made by such Guarantor
pursuant to this Guaranty.

 

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

 

10.06       Continuing
Guaranty; Assignments.  This Guaranty
is a continuing guaranty and each Guarantor agrees that the Guaranteed
Obligations of such Guarantor under this Guaranty shall be primary obligations
of such Guarantor, shall not be subject to any counterclaim, set-off,
abatement, deferment or defense based upon any claim that such Guarantor may
have against the Lender, the Borrower, any other Guarantor or any other Person
and shall (a) remain in full force and effect until the latest of (i) the
payment in full in cash of all of the Guaranteed Obligations and all other
amounts payable under this Guaranty, and (ii) the Maturity Date, (b) be
binding upon each Guarantor and its successors and assigns and (c) inure
to the benefit of, and be enforceable by, the Lender and its successors,
transferees and assigns.  Without
limiting the generality of clause (c) of the immediately preceding
sentence, the Lender may assign or otherwise transfer all or any portion of its
rights and obligations under this Credit Agreement to any other Person, and
such other Person shall thereupon become vested with all the benefits in
respect thereof granted to the Lender under this Article X.

 

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

 

ARTICLE XI

MISCELLANEOUS

 

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

 

72

 

ranking of the security
interest under the Southwest DIP Facility), and each such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

 

11.02       Notices
and Other Communications; Facsimile Copies.

 

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

 

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

 

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

 

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

 

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

 

73

 

Bell Boyd & Lloyd LLC,
70 West Madison Street, Chicago, Illinois 60602, Fax: (312) 827-8000, Attention:
David F. Heroy, Esq. and Steven A. Domanowski, Esq.).

 

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

 

11.04       Attorney
Costs, Expenses and Taxes.  The
Borrower agrees (a) to pay or reimburse the Lender for all reasonable
out-of-pocket costs and expenses incurred in connection with the development,
preparation, negotiation and execution of this Credit Agreement and the other
Loan Documents and any amendment, waiver, consent or other modification of the
provisions hereof and thereof (whether or not the transactions contemplated
hereby or thereby are consummated), and the consummation and administration of
the transactions contemplated hereby and thereby, including all Attorney Costs
(including, without limitation, specialty and local counsel), shall be paid
upon the funding of the Loan, and (b) to pay or reimburse the Lender for
all costs and expenses incurred in connection with the enforcement of any
rights or remedies under this Credit Agreement or the other Loan Documents
(including all such costs and expenses incurred during any legal proceeding,
including any proceeding under any Debtor Relief Law), including all Attorney
Costs.  The foregoing costs and expenses
shall include all search, filing, recording, title insurance and appraisal
charges and fees and taxes related thereto, and other out-of-pocket expenses
incurred by the Lender and the cost of independent public accountants and other
outside experts retained by the Lender. 
All amounts due under this Section 11.04(b) shall be
payable within ten Business Days after demand therefor.  If any Loan Party fails to pay when due any
costs, expenses or other amounts payable by it hereunder or under any Loan
Document, including, without limitation, Attorney Costs and indemnities, such
amount may be paid on behalf of such Loan Party by the Lender, in its sole
discretion.

 

11.05       Indemnification
by the Loan Parties.  Whether or not
the transactions contemplated hereby are consummated, each Loan Party shall
defend (with counsel satisfactory to Lender), protect, indemnify and hold
harmless Lender, each affiliate or subsidiary of Lender, and each of their
respective shareholders, members, officers, directors, managers, employees, attorneys,
advisors and agents (collectively, the “Indemnitees”) from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature (including, without limitation, the disbursements and the Attorney Costs
in connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto),
which may be imposed on, incurred by, or asserted against, any Indemnified
Party (whether direct, indirect or consequential and whether based on any
federal, state or local laws or regulations, including, without limitation,
securities laws and regulations, environmental laws and commercial laws and
regulations, under common law or in equity, or based on contract or otherwise)
in any manner relating to or arising out of this Credit Agreement, the
Transaction, or any act, event or transaction related or attendant thereto, the
making or issuance and the management of the Loan or the use or intended use of
the proceeds of the Loan; except to the

 

74

 

extent that direct damages (as
opposed to special), indirect, consequential or punitive damages (including,
without limitation, any loss of products, business or anticipated savings) are
determined in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from the willful misconduct or gross negligence
of such Indemnified Party.  To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
Laws.  Any liability, obligation, loss,
damage, penalty, cost or expense covered by this indemnity shall be paid to
each Indemnified Party on demand, and, failing prompt payment, shall, together
with interest thereon at the highest rate then applicable to the Loan hereunder
from the date incurred by each Indemnified Party until paid by Loan Parties, be
added to the Liabilities of Borrower and be secured by the Collateral.  The provisions of this Section 11.05
shall survive the satisfaction and payment of the Obligations and the termination
of this Credit Agreement and conclusive agreements.

 

11.06       Payments
Set Aside.  To the extent that any
payment by or on behalf of the Borrower is made to the Lender, or the Lender
exercises its right of setoff, and such payment or the proceeds of such setoff
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Lender in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any proceeding under any Debtor
Relief Law or otherwise, then to the extent of such recovery, the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such setoff
had not occurred.

 

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

 

11.08       Confidentiality.  The Lender agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential); (b) to the extent requested by any regulatory
authority; (c) to the extent required by applicable Laws or regulations or
by any subpoena or similar legal process; (d) to any other party to this
Credit Agreement; (e) to the extent reasonably required in connection with
the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Credit Agreement or the enforcement of rights hereunder; (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of, or any prospective assignee of, any of
its rights or obligations under this Credit Agreement or (ii) any direct
or indirect contractual counterparty or prospective counterparty (or such
contractual counterparty’s or prospective

 

75

 

counterparty’s professional
advisor) to any credit derivative transaction relating to obligations of the
Loan Parties; (g) with the consent of the Borrower; (h) to the extent
such Information (i) becomes publicly available other than as a result of
a breach of this Section or (ii) becomes available to the lender on a
nonconfidential basis from a source other than the Borrower.  For the purposes of this Section, “Information”
means all information received from any Loan Party relating to any Loan Party
or its business, other than any such information that is available to the
Lender on a nonconfidential basis prior to disclosure by any Loan Party;
provided that, in the case of information received from a Loan Party after the
date hereof, such information is clearly identified in writing at the time of
delivery as confidential.  Any Person
required to maintain the confidentiality of Information as provided in this Section shall
be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

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

 

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

 

76

 

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

 

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

 

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

 

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

 

11.15       Governing
Law.

 

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

 

(b)           EACH
PARTY TO THIS CREDIT AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS
FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND

 

77

 

ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE JURISDICTION OF THE BANKRUPTCY COURT.  THE BORROWER AND THE LENDER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO.  THE BORROWER AND THE LENDER WAIVES PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY
ANY OTHER MEANS PERMITTED BY APPLICABLE LAW.

 

11.16       Waiver
of Right to Trial by Jury.  EACH
PARTY TO THIS CREDIT AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN
DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS CREDIT AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

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

 

11.18       Break-Up
Fee.  In the event that, without the
consent of the Lender, any person other than the Lender is selected as the Lead
Investor in the Borrower and ATA Holdings Corp. or their successors or as the
co-proponent of the Amended Reorganization Plan, or the Debtors propose or the
Bankruptcy Court otherwise confirms a plan of reorganization in the Cases in
which the Lender is not the Lead Investor or co-proponent, then so long as the
Lender has not breached its obligations under the Commitment Letter, the Lender
(or such other Person as the Lender may designate, including without limitation
one or more Affiliates) shall be entitled to receive, in addition to the
Funding Fee, a cash payment equal to $2,700,000.

 

[signatures on following pages]

 

78

 

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

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  ATA AIRLINES, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Hunt

  	
   

  
	
   

  	
  Name:

  	
  Brian T. Hunt

  	
   

  
	
   

  	
  Title:

  	
  Vice President and General Counsel

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sean Frick

  	
   

  
	
   

  	
  Name:

  	
  Sean Frick

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Chief Restructuring Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  7337 W. Washington Street

  	
   

  
	
   

  	
   

  	
  Indianapolis, Indiana 46231-1328

  	
   

  
	
   

  	
   

  	
  Facsimile: (317) 282-7091

  	
   

  
	
   

  	
   

  	
  Tax ID: 35-1305077

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Jurisdiction of Incorporation: Indiana

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GUARANTORS:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ATA HOLDINGS CORP.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sean Frick

  	
   

  
	
   

  	
  Name:

  	
  Sean Frick

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Chief Restructuring
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Jurisdiction of Incorporation:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ATA LEISURE CORP.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sean Frick

  	
   

  
	
   

  	
  Name:

  	
  Sean Frick

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Chief Restructuring
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Jurisdiction of Incorporation:

  	
   

  
					

 

79

 

	
   

  	
  ATA CARGO, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sean Frick

  	
   

  
	
   

  	
  Name:

  	
  Sean Frick

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Chief Restructuring
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Jurisdiction of Incorporation:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN TRANS AIR EXECUJET, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sean Frick

  	
   

  
	
   

  	
  Name:

  	
  Sean Frick

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Chief Restructuring
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Jurisdiction of Incorporation:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MATLINPATTERSON ATA HOLDINGS LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Jurisdiction of Incorporation: Delaware

  

 

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Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00095-of-00352.parquet"}]]