Document:

Exhibit 10.582
 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of August 15,
2008, but shall be effective, nunc pro tunc,
as of January 1, 2008, by and between INLAND WESTERN RETAIL
REAL ESTATE TRUST, INC., a Maryland corporation (the “Company”), and James
Kleifges (the “Executive”).

 

RECITALS:

 

A.            The
Company is a real estate investment trust which owns, operates and acquires
primarily retail real estate throughout the United States (the “Business”).

 

B.            Executive
has served as the Company’s Chief Accounting Officer and has demonstrated
certain unique and particular talents and abilities with regard to the
Business.

 

C.            The
Company desires to continue to assure itself of the availability of the talents
and abilities of Executive, by entering into a new employment agreement to
become effective as of January 1, 2008.

 

D.            Executive
desires to continue to be employed by the Company, subject to the terms,
conditions and covenants hereinafter set forth.

 

E.             As
a condition for the Company to enter into this Agreement, Executive has agreed
to restrict his ability to enter into competition with the Company.

 

NOW, THEREFORE, in consideration of the foregoing and the agreements,
covenants and conditions set forth herein, Executive and the Company hereby
agree as follows:

 

ARTICLE I

EMPLOYMENT

 

1.1           Employment.

 

(a)           The Company hereby
employs and engages Executive, and Executive hereby accepts employment, upon
the terms and conditions set forth in this Agreement. Effective as of January 1,
2008 (the “Effective Date”), Executive shall serve as Chief Accounting Officer,
with duties commensurate with such positions and such other duties and
responsibilities as assigned from time to time by the Company

 

(b)           In addition, Executive shall provide advice,
consultation and services to any other entities which control, are controlled
by or are under common control with the Company now or in the future
(collectively, “Affiliates”), as may be requested by the Company.

 

1.2           Activities and
Duties During Employment. Executive represents and warrants to the Company
that he is free to engage in full-time employment with the Company, and that he
has no prior or other commitments or obligations of any kind to anyone else
which would hinder or interfere with his acceptance of his obligations under
this Agreement, or the exercise of his reasonable commercial efforts as an
employee of the Company. During the Employment Term (as defined below),
Executive agrees:

 

 

(a)           to
faithfully serve and further the interests of the Company in every lawful way,
giving honest, diligent, loyal and cooperative service to the Company and its
Affiliates;

 

(b)           to
comply with all reasonable rules and policies which are consistent with
the terms of this Agreement and which, from time to time, may be adopted by the
Company or its Affiliates; and

 

(c)           to
devote all of his business time, attention and efforts to the faithful and
diligent performance of his services to the Company and its Affiliates.

 

ARTICLE II

TERM

 

2.1           Term.  The term of employment under this Agreement
shall commence on the Effective Date and shall last through and including December 31,
2008 (the “Employment Term”) except as this Agreement may be terminated as
provided in Section 2.2.

 

2.2           Termination.  The Employment Term and employment of
Executive may be terminated as follows:

 

(p)           By the Company
immediately for Cause (as hereinafter defined).

 

(q)           By the Company
immediately without Cause.

 

(r)            Automatically, without
the action of either party, upon the death of the Executive.

 

(d)           By either party upon a determination of
Total Disability (as hereinafter defined) of Executive.

 

(e)           Voluntarily
by Executive, upon two (2) weeks prior written notice.

 

(f)            By
Executive, immediately for Good Reason (as hereinafter defined).

 

(g)           On
expiration of the Employment Term if not extended by the mutual consent of the
Company and Executive.

 

2.3           Definitions of “Cause,”
“Total Disability,” “Good Reason” and “Change of Control.”

 

(a)           For the purpose of this Agreement, “Cause”
shall mean: (i) conduct amounting to fraud, embezzlement, disloyalty or
illegal misconduct in connection with Executive’s duties under this Agreement
and as an employee of the Company; (ii) conduct that the Company
reasonably believes has brought the Company into substantial public disgrace or
disrepute; (iii) failure to perform his duties hereunder as reasonably
directed by the Company after providing written notice of the failure to
Executive and Executive has failed to cure within ten (10) days of
receiving notice; (iv) gross negligence or willful misconduct by the
Executive with respect to the Company, its clients, its employees and its
activities; or (v) material breach by the Executive of this Agreement or
any other agreement to which Executive and the Company are a party or any
material breach by the Executive of any written policy adopted by the Company
concerning conflicts of interest, standards of business 

 

 

conduct or fair employment practices and any other similar matter,
provided that the Company has provided written notice of the breach to
Executive and Executive has failed to cure the breach within ten (10) days
of receiving notice.

 

(b)           For
purposes of this Agreement, Executive shall be determined to have a “Total
Disability” upon the determination of a physician, acceptable to the Company
and Executive that Executive is unable, by reason of accident or illness, to
substantially perform his duties or is expected to be in the condition for
periods totaling six (6) months (whether or not consecutive) during any
period of twelve (12) months. Nothing herein shall limit Executive’s right to
receive any payments to which Executive may be entitled under any disability or
employee benefit plan of the Company or under any disability or insurance
policy or plan. During a period of Total Disability prior to termination
hereunder, Executive shall continue to receive his full compensation (including
base salary) and benefits.

 

(c)           “Good
Reason” will mean any of the following events which have not been cured within
ten (10) days following the Company’s receipt of Executive’s written
notice specifying the events or factors constituting Good Reason:

 

(i)            the Company requires Executive to relocate
his principal residence to a location outside the Greater Chicago Metropolitan
Area in order to perform his duties and responsibilities hereunder;

 

(ii)           the
Executive’s base salary or other compensation and benefits is reduced to less
than the amount of the Base Salary and other compensation and benefits as set
forth in Section 3.1 below;

 

(iii)          a material breach by the Company of the
provisions of this Agreement; or

 

(iv)          following a Change of Control, the assignment
to Executive of duties which constitute a material reduction in Executive’s
title or authority and which are materially inconsistent with Executive’s
position as contemplated by this Agreement.

 

(d)           “Change of Control” shall mean any of the
following events:

 

(i)            the
members of the Company’s board of directors as of the date of this Agreement
fail to constitute a majority of the members of the board; provided, however,
that any individual becoming a member of the board who is nominated or
appointed to the board seat on the recommendation and approval of the Company’s
Nominating and Corporate Governance Committee shall be treated as if he or she
were a member of the board as of the date of this Agreement;

 

(ii)           the
disposition by the Company of all, or substantially all, of the assets of the
Company; or

 

(iii)          the
termination and liquidation of the Company.

 

 

ARTICLE III

COMPENSATION AND BENEFITS

 

3.1           Compensation.

 

(a)           Base
Salary. 
During the Employment Term, the Company shall pay Executive a base
salary (the “Base Salary”) of $250,000.00 per annum.

 

(b)           Annual
Incentive Bonus.  The Company may at the discretion of the
President and Chief Executive Officer and approval of the Board, in addition to
Executive’s Base Salary, pay Executive an Annual Incentive Bonus.

 

(c)           Annual Stock Option Award.  Subject to approval of the 2008 Long-Term
Equity Compensation Plan (the “2008 Equity Award Plan”) by the Company’s
stockholders, no later than June 30 of each fiscal year during the
Employment Term, the Company shall grant Executive an Annual Stock Option Award
to purchase shares of the common stock of the Company (“Annual Stock Options”),
subject to the conditions set forth below and in accordance with the schedule
set forth on Exhibit B, attached hereto and made a part hereof. Twenty
percent (20%) of any Annual Stock Options granted hereunder shall vest on each
successive yearly anniversary of the grant of the Annual Stock Options.  In the event that the 2008 Equity Award Plan
is approved after June 30 of the fiscal year in question, the Annual Stock
Option Award for such year shall be granted as soon as practicable after such
approval.

 

(i)            All
Annual Stock Options shall be issued under, and in accordance with, the 2008
Equity Award Plan; to the extent the terms of any Annual Stock Options awarded
pursuant to this Agreement conflict with the terms of the 2008 Equity Award
Plan, the terms of the 2008 Equity Award Plan shall apply to the minimum extent
necessary to eliminate the conflict. Any Annual Stock Options that have not yet
vested shall be forfeited and redeemed by the Company, without any further
action on the part of the Company or the Executive, if Executive is no longer
employed by the Company for any reason, other than in connection with a
termination as described in Sections 2.2(b), (c) or (d). Executive
may not sell, transfer, hypothecate, pledge or assign any Annual Stock Options
which have not vested.

 

(ii)           Upon the occurrence of any forfeiture of
Annual Stock Options, Executive shall immediately take all actions necessary to
permit the Company to redeem any forfeited Annual Stock Options.

 

(iii)          All Annual Stock Options which may be
issuable hereunder shall be issued in reliance upon the following
representations, warranties and agreements of Executive, each of which shall be
true and correct as of the date of issuance and each of which shall survive the
termination of this Agreement.

 

(A)          Executive
acknowledges that the common stock underlying any Annual Stock Options will be
required to be registered under the Securities Act pursuant to an effective
registration statement subsequent to stockholder approval of the 2008 Equity
Plan;

 

 

(B)           Executive
acknowledges that once the common stock underlying any Annual Stock Options has
been issued to Executive, the common stock may not be subsequently transferred
or sold by Executive except in compliance with the registration requirements of
federal and state securities law or exemptions therefrom;

 

(C)           Executive
acknowledges that an investment in the Company’s common stock is subject to
significant risk, including the risks described, from time to time, in the
Company’s annual reports on Form 10-K. Executive represents and warrants
that he has such knowledge and expertise in financial and business matters as
to be capable of evaluating the merits and risks of an investment in the
Company’s common stock and the ability to bear the economic risk of the
investment; and

 

(D)          Executive represents and warrants that he has
had the opportunity to ask questions of the Company concerning its business and
to obtain any information which he considers necessary to verify the accuracy
of or to amplify upon the Company’s disclosures and that all questions which
have been asked have been answered by the Company to Executive’s satisfaction

 

3.2           Payment.  All Base Salary due Executive hereunder shall
be paid in accordance with the general payroll payment practice of the Company
for executive level employees; except that any payment relating to the
termination of Executive shall be paid as a lump sum payment within fifteen
(15) days of termination.

 

3.3           Business Expenses.

 

(a)           Reimbursement.   The Company shall
reimburse Executive for all ordinary and necessary business expenses incurred
by him in connection with the performance of his duties hereunder. The
reimbursement of business expenses will be governed by the policies for the
Company as they are in effect from time to time during the term of this
Agreement.

 

(b)           Accounting.  Executive shall
provide the Company with an accounting of any expenses, for which reimbursement
is sought including a description of the purpose for which each expense was
incurred. Executive shall provide the Company with such other supporting
documentation and other substantiation of reimbursable expenses as may be
required by Company to conform to Internal Revenue Service or other
requirements. All such reimbursements shall be payable by the Company to
Executive within a reasonable time after receipt by the Company of appropriate
documentation required by the Company.

 

3.4           Other Benefits.  The Company shall provide Executive with such
retirement benefits and group health and other insurance coverage at such
levels and on such terms as the  Company
generally provides to its executive level employees in accordance with its
Company sponsored benefit plans as they are in effect from time to time during
the term of the Agreement.

 

3.5           Compensation Upon
Termination.  If Executive’s
employment hereunder and this Agreement is terminated in accordance with the
provisions of Article II, the Company will be obligated to provide
to Executive compensation and benefits, in lieu of any severance under any
severance plan that the Company may then have in effect, and subject to setoff
for any amounts owed by Executive to the Company or any affiliate of the
Company by reason of any contract, agreement, promissory note, advance, failure
to return 

 

 

Company
property or loan document, as follows:

 

(a)           Upon Termination for Death or Total
Disability.  If Executive’s
employment hereunder and this Agreement is terminated by reason of his death or
Total Disability, under Sections 2.2(c) or (d), then within thirty
(30) days of the date of termination the Company will pay Executive (or his
estate or beneficiaries):

 

(vi)          any Base Salary that has been accrued but not paid as of the
date of termination (the “Accrued Base Salary”);

 

(ii)           any
compensation for unused vacation days accrued as of the termination date in an
amount equal to Executive’s Base Salary multiplied by a fraction, the numerator
of which is the number of accrued unused vacation days and the denominator of
which is 360 (the “Accrued Vacation Payment”);

 

(iii)          any expenses incurred by Executive prior to
the date of termination that may be reimbursed pursuant to this Agreement (the “Accrued
Reimbursable Expenses”);

 

(iv)          any
accrued and vested benefits required to be provided upon death or Total
Disability by the terms of any Company-sponsored benefit plans or programs
exclusive of any Annual Stock Options (the “Accrued Benefits”), together with
any benefits required to be paid or provided in the event of Executive’s death
or Total Disability under applicable law; and

 

(v)           an
amount equal to either the prorated portion of the Annual Incentive Bonus that
Executive received for the last fiscal year completed prior to termination
equal to the relevant Annual Incentive Bonus multiplied by a fraction, the
numerator of which is the number of days in the year prior to the date of death
or Total Disability and the denominator of which is 360, or if the termination
occurs in the first year of the Employment Term, then the prorated portion of
the Annual Incentive Bonus as if the Target bonus was received for that year
(the “Accrued Bonus”) calculated in the same fashion.

 

In addition, if Executive’s employment and this Agreement is terminated
under Sections 2.2(c) or (d), any Annual Stock Options issued to
Executive under this Agreement which have not yet vested shall immediately vest
and shall no longer be subject to forfeiture.

 

(b)           Upon Termination by Company for Cause or
Voluntarily by Executive.  If
Executive’s employment hereunder and this Agreement is terminated under Sections
2.2(a) or (e), within fifteen (15) days of the date of such
termination, the Company will pay Executive:

 

(i)            any Accrued Base Salary;

 

(ii)           any Accrued Vacation Payment;

 

(iii)          any Accrued Reimbursable Expenses; and

 

(iv)          any Accrued Benefits, together with any
benefits required to be paid or provided under applicable law.

 

 

In addition, if Executive’s employment and this Agreement is terminated
under Sections 2.2(a) or (e), any Stock Option Awards issued to
Executive which have not yet vested shall immediately be forfeited by
Executive.

 

(c) Upon Termination by the Company
Without Cause or by Executive for Good Reason.  If Executive’s employment hereunder and this
Agreement is terminated under Sections 2.2(b) or (f), the Company
will pay Executive:

 

(i)            any Accrued Base Salary;

 

(ii)           any
Accrued Vacation Payment;

 

(iii)          any Accrued Reimbursable Expenses;

 

(iv)          any
Accrued Benefits, together with any benefits required to be paid or provided
under applicable law;

 

(v)           any
Accrued Bonus; and

 

(vi)          an
amount equal to 1.00 times the sum of: (A) Executive’s then current per
annum base salary; plus (B) an amount equal to the Annual Incentive Bonus
which was paid to Executive for the fiscal year immediately preceding the year
of termination; provided, however, that the payment to Executive
pursuant to this Section 3.5(c)(vi) shall in no event exceed
an amount which would cause Executive to receive an “excess parachute payment”
as defined in the Internal Revenue Code of 1986, as amended (the “Code”); provided,
however that if the termination occurs within one year of a Change of
Control, then in addition to the amounts described in clauses (i) through
(v) above, the Company will pay Executive an amount equal to 1.5 times
the sum of: (A) Executive’s then current per annum base salary; plus (B) an
amount equal to the Annual Incentive Bonus which was paid to Executive for the
fiscal year immediately preceding the year of termination; plus (C) the
aggregate dollar value of each of the Annual Stock Option Award that was
granted to Executive for the fiscal year immediately preceding the year of
termination; provided, however, that the payment to Executive
pursuant to this Section 3.5(c)(vi) shall in no event exceed
an amount which would cause Executive to receive an “excess parachute payment”
as defined in the Code.

 

In addition, if Executive’s employment
hereunder and this Agreement is terminated under Section 2.2(b),
any Annual Stock Options issued to Executive which have not yet vested shall immediately
vest and shall no longer be subject to forfeiture by Executive. If Executive’s
employment hereunder is terminated under Section 2.2(f), any Annual
Stock Options issued to Executive which have not vested shall immediately be
forfeited by Executive; provided that if this Agreement is terminated
under Section 2.2(f) within one year of a Change of Control, then
any Annual Stock Options issued to Executive under this Agreement shall
immediately vest and shall no longer be subject to forfeiture by Executive.

 

3.6           Cessation of Rights
and Obligations: Survival of Certain Provisions. On the date of expiration
or earlier termination of the Employment Term for any reason, all of the
respective rights, duties, obligations and covenants of the parties, as set forth
herein, shall, except as specifically provided herein to the contrary, cease
and become of no further force or effect as of the date of termination, and
shall only survive as expressly provided for herein.

 

 

ARTICLE IV

CONFIDENTIALITY AND NON-COMPETE AGREEMENT

 

4.1           Non-Disclosure
of Confidential Information. Executive hereby acknowledges and agrees that
the duties and services to be performed by Executive under this Agreement are
special and unique and that as a result of his employment by the Company
hereunder Executive has developed over time and will acquire, develop and use
information of a special and unique nature and value that is not generally
known to the public or to the Company’s industry, including but not limited to,
certain records, secrets, documentation, software programs, price lists,
ledgers and general information, employee records, mailing lists, stockholder
lists, tenant lists and profiles, prospective customer, acquisition candidate
or tenant lists, accounts receivable and payable ledgers, financial and other
records of the Company or its Affiliates, information regarding its
stockholders, tenants or joint venture partners, and other similar matters (all
such information being hereinafter referred to as “Confidential Information”).
Executive further acknowledges and agrees that the Confidential Information is
of great value to the Company and that the restrictions and agreements
contained in this Agreement are reasonably necessary to protect the
Confidential Information and the goodwill of the Company and the
Affiliates.  Accordingly, Executive
hereby agrees that:

 

(a)           Executive
will not, during the Employment Term or at any time thereafter, directly or
indirectly, except in connection with Executive’s performance of his duties
under this Agreement, or as otherwise authorized in writing by the Company for
the benefit of the Company or any Affiliate, divulge to any person, firm,
corporation, limited liability company, partnership or organization, or any
affiliated entity (hereinafter referred to as “Third Parties”), or use or cause
or authorize any Third Parties to divulge or use, the Confidential Information,
except as required by law; and

 

(b)           Upon
the termination of the Employment Term and this Agreement for any reason
whatsoever, Executive shall deliver or cause to be delivered to the Company any
and all Confidential Information, including drawings, notebooks, keys, data and
other documents and materials belonging to the Company or its Affiliates which
is in his possession or under his control relating to the Company or its
Affiliates, regardless of the medium upon which it is stored, and will deliver
to the Company upon termination, any other property of the Company or its
Affiliates which is in his possession or under his control.

 

4.2           Non-Solicitation and Covenant Not to Compete.

 

(a)           General.
Executive acknowledges that the covenants set forth in this Section 4.2
are reasonable in scope and essential to the preservation of the business and the
goodwill of the Company, and are consideration for the amounts to be paid to
Executive hereunder. Executive also acknowledges that the enforcement of the
covenants set forth in this Section 4.2 will not preclude Executive
from being gainfully employed in such manner and to the extent as to provide a
standard of living for himself, the members of his family and the others
dependent upon him of at least the level provided by this Agreement. In
addition, Executive acknowledges that the Company and its Affiliates have
obtained an advantage over their competitors that is characterized by
relationships with clients, principals, tenants and other contacts.

 

(b)           Covenants.
Executive hereby covenants and agrees that, except as permitted by the Company,
during the Employment Term, and any extensions thereof, and for a period of one
(1) year following the expiration, termination or extension of this
Agreement, Executive shall not, directly or 

 

 

indirectly: (i) alone, together or in association
with others, either as a principal, agent, owner, stockholder, officer,
director, partner, employee, lender, investor or in any other capacity, engage
in, have any financial interest in or be in any way connected or affiliated
with, or render advice or services to, Developers Diversified Realty Corp.,
Kimco Realty Corporation or Regency Centers Corporation; (ii) directly or
indirectly divert, take away, solicit or interfere with or attempt to divert,
take away, solicit or interfere with any present or prospective customer, except
on behalf of the Company as an employee thereof; (iii) directly or
indirectly solicit, induce, influence or attempt to solicit, induce or
influence any employee or agent of the Company to leave his employment or
engagement with the Company, or offer employment or engagement to or employ or
engage any such employee of the Company, or assist or attempt to assist any
such employee of the Company in seeking other employment; (iv) in any
manner slander, libel or by other means take action which is or intended, or
could reasonably be expected, to be detrimental to the Company or an Affiliate
or their respective employees or operations; (v) knowingly make or
participate in any “solicitation” of “proxies” or “consents” (as such terms are
used in the proxy rules of the United States Securities and Exchange
Commission) or make proposals for approval of the Company’s stockholders; (vi) knowingly
form, join or participate in a “group” (within the meaning of Section 13(d)(3) of
the Exchange Act) with respect to the Company’s securities; (vii) otherwise
knowingly act to control or seek to control the management, board of directors
or policies of the Company (except with respect to actions taken solely in
Executive’s capacity as an officer of the Company in the exercise of his
fiduciary duties; or (viii) make any agreement to do any of the foregoing
to the extent restricted thereby. As used in this Section 4.2, the
term “Company” shall mean the Company or any Affiliate thereof. As used in this
Section 4.2(b), “customer” and “prospective customer” shall
include: (i) any tenant of the Company’s properties or any other person or
entity with whom the Company is negotiating for the leasing of real property
from the Company or an Affiliate at the time of the termination of this
Agreement or during the six month period immediately prior to such termination;
(ii) any owner or prospective owner of real property the purchase or sale
of which is being negotiated by the Company at the time of the termination of
this Agreement or during the six month period immediately prior to such
termination; or (iii) any joint venture partner of the Company. The
restrictions imposed by this subparagraph 4.2(b) shall not apply to
the ownership of one percent (1%) or less of all of the outstanding securities
of any entity whose securities are listed on a national securities exchange, or
included for quotation on any interdealer quotation system.

 

4.3           Remedies.

 

(a)           Injunctive
Relief. Executive expressly acknowledges
and agrees that the business of the Company is highly competitive and that a
violation of any of the provisions of Sections 4.1 or 4.2 would cause
immediate and irreparable harm, loss and damage to the Company or an Affiliate
not adequately compensable by a monetary award. Executive further acknowledges
and agrees that the time periods and territorial areas provided for herein are
the minimum necessary to adequately protect the business of the Company, the
enjoyment of the Confidential Information and the goodwill of the Company.
Without limiting any of the other remedies available to the Company at law or
in equity, or the Company’s light or ability to collect money damages,
Executive agrees that any actual or threatened violation of any of the
provisions of Sections 4.1 or  4.2
may be immediately restrained or enjoined by any court of competent
jurisdiction, and that a temporary restraining order or emergency, preliminary
or final injunction may be issued in any court of competent jurisdiction, upon
twenty-four (24) hour notice and without bond.

 

(b)           Enforcement.
Executive expressly acknowledges and agrees that the provisions of 

 

 

Sections 4.1 or 4.2
shall be enforced to the fullest extent permissible under the laws and public
policies in each jurisdiction in which enforcement might be sought.
Accordingly, if any particular portion of Sections 4.1 or 4.2 shall ever
be adjudicated as invalid or unenforceable, or if the application thereof to
any party or circumstance shall be adjudicated to be prohibited by or
invalidated by such laws or public policies, such section or sections shall be:
(i) deemed amended to delete therefrom such portions so adjudicated; or (ii) modified
as determined appropriate by such a court, such deletions or modifications to
apply only with respect to the operation of such section or sections in the
particular jurisdictions so adjudicating on the parties and under the
circumstances as to which so adjudicated.

 

ARTICLE V

MISCELLANEOUS

 

5.1           Notices.  All notices or other communications required
or permitted hereunder shall be in writing and shall be deemed given or
delivered: (i) when delivered personally or by commercial messenger; (ii) one
(1) business day following deposit with a recognized overnight courier
service; provided such deposit occurs prior to the deadline imposed by
such service for overnight delivery; (iii) when transmitted, if sent by
facsimile copy, provided confirmation of receipt is received by sender and such
notice is sent by an additional method provided hereunder, in each case above
provided such communication is addressed to the intended recipient thereof as
set forth below:

 

To Executive at his home address.

 

	
  To the Company at:

  	
   

  	
  Inland
  Western Retail Real Estate Trust, Inc.

  
	
   

  	
   

  	
  2901
  Butterfield Road

  
	
   

  	
   

  	
  Oak Brook,
  Illinois 60523

  
	
   

  	
   

  	
  Attn:
  Michael J. O’Hanlon

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
  Telephone: (630) 368-2323

  
	
   

  	
   

  	
  Fax: (630) 645-7229

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Inland
  Western Retail Real Estate Trust, Inc.

  
	
   

  	
   

  	
  2901 Butterfield Road

  
	
   

  	
   

  	
  Oak Brook, Illinois 60523

  
	
   

  	
   

  	
  Attn: Dennis K. Holland

  
	
   

  	
   

  	
  General Counsel and Secretary

  
	
   

  	
   

  	
  Telephone: (630) 368-2861

  
	
   

  	
   

  	
  Fax: (630) 586-6446

  

 

Any party may
change its address for purposes of this paragraph by giving the other party
written notice of the new address in the manner set forth above.

 

5.2           Entire Agreement;
Amendments. Etc. This Agreement contains the entire agreement and
understanding of the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter thereof. No modification,
amendment, waiver or alteration of this Agreement or any provision or term
hereof shall in any event be effective unless the same shall be in writing,
executed by both parties hereto, and any waiver so given shall be effective
only in the specific instance and for the specific purpose for which given.

 

 

5.3           Benefit.  This Agreement shall be binding upon, and
inure to the benefit of, and shall be enforceable by, the heirs, successors and
legal representatives of Executive and the successors, assignees and
transferees of the Company and its current or future Affiliates. This Agreement
or any right or interest hereunder may not be assigned by Executive.

 

5.4           No Waiver. No
failure or delay on the part of any party hereto in exercising any right, power
or remedy hereunder or pursuant hereto shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder or pursuant thereto.

 

5.5           Severability.
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law but, if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. If any part of any covenant or other
provision in this Agreement is determined by a court of law to be overly broad
thereby making the covenant unenforceable, the parties hereto agree, and it is
their desire, that the court shall substitute a judicially enforceable
limitation in its place, and that as so modified the covenant shall be binding
upon the parties as if originally set forth herein.

 

5.6           Compliance and
Headings.  The headings in this
Agreement are intended to be for convenience and reference only, and shall not
define or limit the scope, extent or intent or otherwise affect the meaning of
any portion hereof.

 

5.7           Governing Law.  The parties agree that this Agreement shall
be governed by, interpreted and construed in accordance with the internal laws
of the State of Illinois without regard to its conflicts of law provisions, and
the parties agree that any suit, action or proceeding with respect to this
Agreement shall be brought in the state courts in Chicago, Illinois or in the
U.S. District Court for the Northern District of Illinois. The parties hereto
hereby accept the exclusive jurisdiction of those courts for the purpose of any
such suit, action or proceeding. Venue for any such action, in addition to any
other venue permitted by statute, will be in Chicago, Illinois.

 

5.8           Counterparts.
This Agreement may be executed in one or more counterparts, each of which will
be deemed an original and all of which together will constitute one and the
same instrument.

 

5.9           No Presumption
Against Drafter. Each of the parties hereto has jointly participated in the
negotiation and drafting of this Agreement. In the event an ambiguity or a
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by each of the parties hereto and no presumptions or
burdens of proof shall arise favoring any party by virtue of the authorship of
any provisions of this Agreement.

 

5.10         Enforcement. In
the event either of the parties to this Agreement shall bring an action against
the other party with respect to the enforcement or breach of any provision of
this Agreement, the prevailing party in such action shall recover from the
non-prevailing party the costs incurred by the prevailing party with respect to
such action including court costs and reasonable attorneys’ fees.

 

 

5.11         Recitals.
The Recitals set forth above are hereby incorporated in and made a part of this
Agreement by this reference.

 

[The remainder of this page intentionally
blank]

 

 

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered as of the day and year first above written.

 

	
   

  	
  INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.,

  
	
   

  	
  a Maryland corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael J. O’Hanlon

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael J. O’Hanlon

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James Kleifges

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  James Kleifges

  

 

 

EXHIBIT A

 

[Intentionally Omitted]

 

 

EXHIBIT B

(FORMULA FOR DETERMINING ANNUAL STOCK OPTION
AWARD)

 

I.              The Executive will
be awarded an Annual Stock Option Award only if the Company shall have achieved
a Threshold level of performance in the completed fiscal year immediately
preceding the award. For these purposes, the Company will have achieved a
Threshold level of performance if the Company’s annual growth in FFO per
fully-diluted share for the completed fiscal year immediately preceding the
year in which the award of Annual Stock Options is calculated, when compared to
FFO per fully-diluted share for the next preceding completed fiscal year, is
not less than 80% of the median FFO growth rate for the applicable year as
published by NAREIT for the Retail REIT Shopping Center subsector of the NAREIT
Equity REIT  Total Return Index (or, if not then in existence, a
comparable retail REIT shopping center index mutually agreeable to the Company
and Executive).

 

II.            If the Company
achieves a Threshold level of performance, the Executive’s Annual Stock Option
Award will authorize the Executive to purchase the number of shares equal to
1,000 shares. The strike price for each share underlying each Annual Stock
Option Award will be equal to (i) until such time, if ever, that the
Company’s shares are listed on a national exchange, the market value of shares
established annually by the Company for the purposes of the ERISA valuation; or
(ii) after the Company’s shares are listed on a national exchange, if
ever, the market value of such shares.Exhibit 10.31

 

EXECUTION
COPY

 

 

SECURED SUPER-PRIORITY DEBTOR IN POSSESSION

CREDIT AGREEMENT

 

DATED AS OF AUGUST 4, 2008

 

among

 

FRONTIER AIRLINES HOLDINGS, INC.,

a Debtor and Debtor in Possession,

 

as a Borrower,

 

FRONTIER AIRLINES, INC.,

a Debtor and Debtor in Possession,

 

as a Borrower,

 

LYNX AVIATION, INC.,

a Debtor and Debtor in Possession,

 

as a Borrower,

 

THE LENDERS SIGNATORY HERETO FROM TIME TO TIME,

as Lenders,

 

and

 

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION

as Administrative Agent

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  AMOUNT
  AND TERMS OF CREDIT

  	
   

  	
  2

  
	
   

  	
  1.1

  	
  Credit
  Facilities

  	
   

  	
  2

  
	
   

  	
  1.2

  	
  Prepayments

  	
   

  	
  2

  
	
   

  	
  1.3

  	
  Priority
  and Application of Payments

  	
   

  	
  3

  
	
   

  	
  1.4

  	
  Use
  of Proceeds

  	
   

  	
  4

  
	
   

  	
  1.5

  	
  Interest
  and Applicable Margins

  	
   

  	
  4

  
	
   

  	
  1.6

  	
  Fees

  	
   

  	
  5

  
	
   

  	
  1.7

  	
  Receipt
  of Payments

  	
   

  	
  5

  
	
   

  	
  1.8

  	
  Loan
  Account and Accounting

  	
   

  	
  5

  
	
   

  	
  1.9

  	
  Indemnity

  	
   

  	
  6

  
	
   

  	
  1.10

  	
  Access

  	
   

  	
  6

  
	
   

  	
  1.11

  	
  Taxes

  	
   

  	
  7

  
	
   

  	
  1.12

  	
  Capital
  Adequacy; Increased Costs; Illegality

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  CONDITIONS
  PRECEDENT

  	
   

  	
  9

  
	
   

  	
  2.1

  	
  Stage
  1 Conditions

  	
   

  	
  9

  
	
   

  	
  2.2

  	
  Stage
  2 Conditions

  	
   

  	
  10

  
	
   

  	
  2.3

  	
  Conditions
  to each Borrowing

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
  11

  
	
   

  	
  3.1

  	
  Corporate
  Existence; Compliance with Law

  	
   

  	
  11

  
	
   

  	
  3.2

  	
  Executive
  Offices, Collateral Locations, FEIN

  	
   

  	
  12

  
	
   

  	
  3.3

  	
  Corporate
  Power, Authorization, Enforceable Obligations

  	
   

  	
  12

  
	
   

  	
  3.4

  	
  Financial
  Statements, Projections and Reports

  	
   

  	
  13

  
	
   

  	
  3.5

  	
  Material
  Adverse Effect; Burdensome Restrictions; Default

  	
   

  	
  13

  
	
   

  	
  3.6

  	
  Ownership
  of Property; Real Estate; Liens

  	
   

  	
  14

  
	
   

  	
  3.7

  	
  Labor
  Matters

  	
   

  	
  14

  
	
   

  	
  3.8

  	
  Ventures,
  Subsidiaries and Affiliates; Outstanding Stock and Indebtedness

  	
   

  	
  15

  
	
   

  	
  3.9

  	
  Government
  Regulation

  	
   

  	
  15

  
	
   

  	
  3.10

  	
  Margin
  Regulations

  	
   

  	
  15

  
	
   

  	
  3.11

  	
  Taxes

  	
   

  	
  15

  
	
   

  	
  3.12

  	
  ERISA

  	
   

  	
  16

  
	
   

  	
  3.13

  	
  No
  Litigation

  	
   

  	
  17

  
	
   

  	
  3.14

  	
  Intellectual
  Property

  	
   

  	
  17

  
	
   

  	
  3.15

  	
  Full
  Disclosure

  	
   

  	
  17

  
	
   

  	
  3.16

  	
  Environmental
  Matters

  	
   

  	
  18

  
	
   

  	
  3.17

  	
  Insurance

  	
   

  	
  18

  
	
   

  	
  3.18

  	
  Use
  of Proceeds

  	
   

  	
  19

  
	
   

  	
  3.19

  	
  Deposit

  	
   

  	
  19

  
	
   

  	
  3.20

  	
  Compliance
  With Industry Standards

  	
   

  	
  19

  
	
   

  	
  3.21

  	
  Secured,
  Super-Priority Obligations

  	
   

  	
  19

  
	
   

  	
  3.22

  	
  Certificated
  Air Carrier

  	
   

  	
  20

  
	
   

  	
  3.23

  	
  Slots
  and Gate Interests

  	
   

  	
  20

  
	
   

  	
  3.24

  	
  Section 1110
  Assets

  	
   

  	
  20

  

 

i

 

	
   

  	
  3.25

  	
  Patriot
  Act

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  FINANCIAL
  STATEMENTS AND INFORMATION

  	
   

  	
  21

  
	
   

  	
  4.1

  	
  Reports
  and Notices

  	
   

  	
  21

  
	
   

  	
  4.2

  	
  Communication
  with Accountants

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  	
  21

  
	
   

  	
  5.1

  	
  Maintenance
  of Existence and Conduct of Business

  	
   

  	
  21

  
	
   

  	
  5.2

  	
  Payment
  of Taxes

  	
   

  	
  22

  
	
   

  	
  5.3

  	
  Books
  and Records

  	
   

  	
  22

  
	
   

  	
  5.4

  	
  Insurance

  	
   

  	
  22

  
	
   

  	
  5.5

  	
  Compliance
  with Laws

  	
   

  	
  23

  
	
   

  	
  5.6

  	
  Intellectual
  Property

  	
   

  	
  23

  
	
   

  	
  5.7

  	
  Environmental
  Matters

  	
   

  	
  23

  
	
   

  	
  5.8

  	
  Further
  Assurances

  	
   

  	
  24

  
	
   

  	
  5.9

  	
  Additional
  Collateral Documents

  	
   

  	
  24

  
	
   

  	
  5.10

  	
  Labor
  Contracts

  	
   

  	
  26

  
	
   

  	
  5.11

  	
  Slot
  Utilization

  	
   

  	
  26

  
	
   

  	
  5.12

  	
  ERISA/Labor
  Matters

  	
   

  	
  27

  
	
   

  	
  5.13

  	
  Maintenance
  of Liens and Collateral

  	
   

  	
  28

  
	
   

  	
  5.14

  	
  Use
  of Proceeds

  	
   

  	
  28

  
	
   

  	
  5.15

  	
  Cash
  Management Systems

  	
   

  	
  28

  
	
   

  	
  5.16

  	
  Access

  	
   

  	
  28

  
	
   

  	
  5.17

  	
  Fuel
  Hedging

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE
  COVENANTS

  	
   

  	
  28

  
	
   

  	
  6.1

  	
  Mergers

  	
   

  	
  29

  
	
   

  	
  6.2

  	
  Investments;
  Loans and Advances

  	
   

  	
  29

  
	
   

  	
  6.3

  	
  Indebtedness

  	
   

  	
  29

  
	
   

  	
  6.4

  	
  Affiliate
  Transactions

  	
   

  	
  31

  
	
   

  	
  6.5

  	
  Capital
  Structure and Business

  	
   

  	
  31

  
	
   

  	
  6.6

  	
  Guaranteed
  Indebtedness

  	
   

  	
  32

  
	
   

  	
  6.7

  	
  Liens

  	
   

  	
  32

  
	
   

  	
  6.8

  	
  Sale
  of Stock and Assets

  	
   

  	
  33

  
	
   

  	
  6.9

  	
  Financial
  Covenants

  	
   

  	
  35

  
	
   

  	
  6.10

  	
  Hazardous
  Materials

  	
   

  	
  35

  
	
   

  	
  6.11

  	
  Sale-Leasebacks

  	
   

  	
  35

  
	
   

  	
  6.12

  	
  Restricted
  Payments

  	
   

  	
  35

  
	
   

  	
  6.13

  	
  Change
  of Corporate Name or Location; Change of Fiscal Year

  	
   

  	
  35

  
	
   

  	
  6.14

  	
  Limitation
  on Negative Pledge Clauses

  	
   

  	
  36

  
	
   

  	
  6.15

  	
  No
  Speculative Transactions

  	
   

  	
  36

  
	
   

  	
  6.16

  	
  Real
  Estate Purchases and Leases

  	
   

  	
  36

  
	
   

  	
  6.17

  	
  Subsidiaries

  	
   

  	
  36

  
	
   

  	
  6.18

  	
  Material
  Contracts

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  TERM

  	
   

  	
  37

  
	
   

  	
  7.1

  	
  Termination

  	
   

  	
  37

  
	
   

  	
  7.2

  	
  Survival
  of Obligations Upon Termination of Financing Arrangements

  	
   

  	
  37

  

 

ii

 

	
  8.

  	
  EVENTS
  OF DEFAULT; RIGHTS AND REMEDIES

  	
   

  	
  37

  
	
   

  	
  8.1

  	
  Events
  of Default

  	
   

  	
  37

  
	
   

  	
  8.2

  	
  Remedies

  	
   

  	
  40

  
	
   

  	
  8.3

  	
  Waivers
  by Borrowers

  	
   

  	
  40

  
	
   

  	
  8.4

  	
  Liquidation
  Budget

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  JOINT
  AND SEVERAL LIABILITY

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  SECURITY

  	
   

  	
  41

  
	
   

  	
  10.1

  	
  Security

  	
   

  	
  41

  
	
   

  	
  10.2

  	
  Perfection
  of Security Interests

  	
   

  	
  43

  
	
   

  	
  10.3

  	
  Rights
  of Lenders; Limitations on Lenders’ Obligations

  	
   

  	
  45

  
	
   

  	
  10.4

  	
  Covenants
  of the Borrowers with Respect to Collateral

  	
   

  	
  46

  
	
   

  	
  10.5

  	
  Performance
  by Administrative Agent of the Borrowers’ Obligations

  	
   

  	
  49

  
	
   

  	
  10.6

  	
  Limitation
  on the Administrative Agent’s duty in Respect of Collateral

  	
   

  	
  50

  
	
   

  	
  10.7

  	
  Remedies;
  Rights Upon Default

  	
   

  	
  50

  
	
   

  	
  10.8

  	
  The
  Administrative Agent’s Appointment as Attorney-in-Fact

  	
   

  	
  57

  
	
   

  	
  10.9

  	
  Release
  of Collateral

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  ASSIGNMENT
  AND PARTICIPATIONS; APPOINTMENT OF ADMINISTRATIVE AGENT

  	
   

  	
  58

  
	
   

  	
  11.1

  	
  Assignment
  and Participations

  	
   

  	
  58

  
	
   

  	
  11.2

  	
  Appointment
  of Administrative Agent

  	
   

  	
  60

  
	
   

  	
  11.3

  	
  Rights
  as a Lender

  	
   

  	
  61

  
	
   

  	
  11.4

  	
  Exculpatory
  Provisions

  	
   

  	
  61

  
	
   

  	
  11.5

  	
  Reliance
  by Administrative Agent

  	
   

  	
  62

  
	
   

  	
  11.6

  	
  Delegation
  of Duties

  	
   

  	
  62

  
	
   

  	
  11.7

  	
  Resignation
  of Administrative Agent

  	
   

  	
  62

  
	
   

  	
  11.8

  	
  Non-Reliance
  on Administrative Agent and Other Lenders

  	
   

  	
  63

  
	
   

  	
  11.9

  	
  Collateral
  and Guaranty Matters

  	
   

  	
  63

  
	
   

  	
  11.10

  	
  Indemnification

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  SUCCESSORS
  AND ASSIGNS

  	
   

  	
  65

  
	
   

  	
  12.1

  	
  Successors
  and Assigns

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  MISCELLANEOUS

  	
   

  	
  65

  
	
   

  	
  13.1

  	
  Complete
  Agreement; Modification of Agreement

  	
   

  	
  65

  
	
   

  	
  13.2

  	
  Amendments
  and Waivers

  	
   

  	
  65

  
	
   

  	
  13.3

  	
  Fees
  and Expenses

  	
   

  	
  67

  
	
   

  	
  13.4

  	
  No
  Waiver

  	
   

  	
  68

  
	
   

  	
  13.5

  	
  Remedies

  	
   

  	
  69

  
	
   

  	
  13.6

  	
  Severability

  	
   

  	
  69

  
	
   

  	
  13.7

  	
  Conflict
  of Terms

  	
   

  	
  69

  
	
   

  	
  13.8

  	
  Confidentiality

  	
   

  	
  69

  
	
   

  	
  13.9

  	
  GOVERNING
  LAW

  	
   

  	
  70

  
	
   

  	
  13.10

  	
  Notices

  	
   

  	
  70

  
	
   

  	
  13.11

  	
  Section Titles

  	
   

  	
  72

  
	
   

  	
  13.12

  	
  Counterparts

  	
   

  	
  72

  
	
   

  	
  13.13

  	
  WAIVER
  OF JURY TRIAL

  	
   

  	
  72

  

 

iii

 

	
   

  	
  13.14

  	
  Press
  Releases and Related Matters

  	
   

  	
  73

  
	
   

  	
  13.15

  	
  Advice
  of Counsel

  	
   

  	
  73

  
	
   

  	
  13.16

  	
  No
  Strict Construction

  	
   

  	
  73

  
	
   

  	
  13.17

  	
  Patriot
  Act

  	
   

  	
  73

  

 

iv

 

This
SECURED SUPER-PRIORITY DEBTOR IN POSSESSION CREDIT AGREEMENT (this “Agreement”), dated as of August 4, 2008, among Frontier
Airlines Holdings, Inc., a Delaware corporation (in its individual
capacity, “Frontier Holdings,” and in its
capacity as agent on behalf of the Borrowers, “Borrower
Agent”), Frontier Airlines, Inc., a Colorado corporation (“Frontier Airlines”), and Lynx Aviation, Inc., a
Colorado corporation (“Lynx,” and,
together with Frontier Holdings and Frontier Airlines, the “Borrowers” or the “Borrower”),
each as a debtor and debtor in possession under chapter 11 of the Bankruptcy
Code; Wells Fargo Bank Northwest, National Association, acting in its capacity
as administrative agent and collateral agent for the Lenders (as defined below)
(in such capacity, the “Administrative Agent”);
and the Lenders signatory hereto from time to time.

 

RECITALS

 

WHEREAS,
on April 10, 2008, (the “Petition Date”),
each of the Borrowers filed voluntary petitions for relief (collectively, the “Cases”) under chapter 11 of the Bankruptcy Code with the
United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”); and

 

WHEREAS,
the Borrowers are continuing to operate their respective businesses and manage
their respective properties as debtors and debtors in possession under sections
1107(a) and 1108 of the Bankruptcy Code; and

 

WHEREAS,
the Borrowers have requested that the Lenders provide a secured super-priority
loan of up to $75,000,000 in order to fund the continued operation of the
Borrowers’ businesses as debtors and debtors in possession under the Bankruptcy
Code; and

 

WHEREAS,
the Lenders are willing to make available to the Borrowers Postpetition (as
defined below) loans in an amount up to $30,000,000 upon the terms and subject
to the conditions set forth herein, and to consider providing an additional
$45,000,000 as described herein; and

 

WHEREAS,
each of the Borrowers has agreed to secure its obligations to the
Administrative Agent and the Lenders hereunder with, inter alia, security
interests in, and liens on, all of its property and assets, whether real or personal,
tangible or intangible, now existing or hereafter acquired or arising, with
certain exceptions, all as more fully provided herein; and

 

WHEREAS,
capitalized terms used in this Agreement shall have the meanings ascribed to
them in Annex A and, for purposes of this Agreement and the other Loan
Documents, the rules of construction set forth in Annex A shall govern.
All Annexes, Schedules, Exhibits and other attachments (collectively, “Appendices”) hereto, or expressly identified in this
Agreement, are incorporated herein by reference, and taken together with this
Agreement, shall constitute but a single agreement. These Recitals shall be
construed as part of this Agreement.

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants hereinafter
contained, and for other good and valuable consideration, the parties hereto
agree as follows:

 

 

1.     AMOUNT
AND TERMS OF CREDIT

 

1.1           Credit
Facilities.

 

(a)           Loan.

 

(i)            Subject
to the terms and conditions hereof, each Lender agrees to make to the Borrowers,
jointly and severally, term loans (collectively, the “Loan”
or the “Loans”) in an amount equal to such
Lender’s Pro Rata Share of the following amounts: (i) on the Closing Date,
a term loan in the aggregate principal amount equal to $30,000,000 (the “Stage 1 Loan”), and (ii) in the sole discretion of the
Lenders, on the Stage 2 Closing Date, a term loan in the aggregate principal
amount of up to $45,000,000 (the “Stage 2 Loan”).
The Loans shall be evidenced by promissory notes substantially in the form of Exhibit A
(each a “Note” and collectively the “Notes”). Each Note shall represent the joint and several
obligation of each Borrower to pay the amount of the applicable Lender’s Loan,
together with interest thereon as prescribed in Section 1.5. Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
Commitments shall terminate upon the funding of the Stage 1 Loan pursuant to Section 2.1.

 

(ii)           The
aggregate outstanding principal balance of the Loan shall be due and payable in
full in immediately available funds on the Maturity Date, if not sooner paid in
full. No payment with respect to the Loan may be reborrowed.

 

(iii)          Each
payment of principal with respect to the Loan shall be paid to the
Administrative Agent for the ratable benefit of each Lender, ratably in
proportion to each such Lender’s respective Commitment.

 

1.2           Prepayments.

 

(a)           Voluntary
Prepayments. Borrowers may at any time on at least three (3) Business
Days prior written notice to the Administrative Agent, voluntarily prepay the
Loans; provided that (i) any such prepayment shall be in a minimum amount
of $2,500,000 and integral multiples of $2,500,000 in excess of such amount; (ii) any
such prepayment shall be applied pursuant to Section 1.3; and (iii) any
such prepayment shall be accompanied by the Prepayment Fee, if any, payable
upon such prepayment.

 

(b)           Mandatory
Prepayments.

 

(i)            Upon the
issuance by any Borrower of any of its Stock to any Person other than another
Borrower (or the receipt of any capital contribution by any Borrower from any
Person other than another Borrower), the Borrowers shall prepay an aggregate
principal amount of Loans equal to 100% of all Net Cash Proceeds received
therefrom immediately upon receipt thereof by any Borrower.

 

2

 

(ii)           Immediately
upon the receipt by any Borrower of any Net Cash Proceeds from any Asset Sale,
the Borrowers shall prepay an aggregate principal amount of Loans equal to 100%
of such Net Cash Proceeds, provided, however, that (A) sales of Subject
Assets shall be subject to the terms in the immediately succeeding clauses (iii) and
(iv); (B) with respect to Asset Sales (other than Subject Assets which are
addressed in clause (iii) and (iv) below) permitted pursuant to
clauses (c), (d), (e), (f), (g), (i), (j), or (k) of Section 6.8
hereof, the Borrowers shall not be required to make any prepayment of Loans
with any Net Cash Proceeds received from such Asset Sales; (C) with
respect to Asset Sales permitted by Section 6.8(a) (other than
Subject Assets which are addressed in clause (iii) and (iv) below),
the Borrowers shall not be required to make prepayments of Loans with any Net
Cash Proceeds received from such Asset Sales unless and until the gross proceeds
from such Asset Sales, in the aggregate, exceed $2,000,000; and (D) with
respect to Asset Sales permitted by Section 6.8(b) (other than
Subject Assets which are addressed in clause (iii) and (iv) below),
the Borrowers shall not be required to make prepayments of Loans with any Net
Cash Proceeds received from such Asset Sales unless and until the gross
proceeds from such Asset Sales, in the aggregate, exceed $3,000,000.

 

(iii)          Upon the
sale of any Subject Asset (excluding Subject Assets consisting of (x) spare
parts (which are addressed in clause (iv) below) and (y) up to eight (8) A319
aircraft), Borrowers shall prepay an aggregate principal amount of Loans equal
to (A) if such Subject Asset is an A319 or A320 aircraft, 50% of the
greater of (y) Net Cash Proceeds of such Subject Asset and (z) the
Orderly Liquidation Value of such Subject Asset; and (B) if such Subject
Asset is an A318 aircraft, 50% of the Net Cash Proceeds of such Subject Asset.

 

(iv)          Upon the
sale of any spare part or any rotable or expendable that either (x) is
outside the ordinary course of business or (y) generates Net Cash Proceeds
in an aggregate amount in any month in excess of $100,000, Borrowers shall
prepay an aggregate principal amount of Loans equal to (A) 50% of the
greater of (y) Net Cash Proceeds of such asset and (z) the Orderly
Liquidation Value of such asset.

 

(v)           Immediately
upon the receipt by any Borrower of any Net Cash Proceeds from any Property
Loss Event, the Borrowers shall prepay an aggregate principal amount of Loans
equal to 100% of such Net Cash Proceeds.

 

(c)           No
Implied Consent. Nothing in this Section 1.2 shall be construed to
constitute the Administrative Agent’s or Lender’s consent to any transaction
that is not permitted by other provisions of this Agreement or the other Loan
Documents.

 

1.3           Priority
and Application of Payments.

 

The
Borrowers hereby irrevocably waive the right to direct the application of any
and all payments received from or on behalf of any Borrower, and the Borrowers
and the Lenders hereby irrevocably agree that the Administrative Agent shall
have the continuing exclusive right to apply any and all such payments against
the Obligations as follows: first, to Fees and reimbursable expenses of the
Administrative Agent then due and payable pursuant to any of the 

 

3

 

Loan
Documents; second, to interest then due and payable on the Loan; third, to
prepay the remaining principal amount of the Loan, until the Loan shall have
been paid in full; and fourth, to all other Obligations then due and payable to
the Lenders. All payments and prepayments shall be applied ratably to the
portion thereof held by each Lender as determined by its Pro Rata Share.

 

1.4           Use
of Proceeds.

 

The
Borrowers shall utilize the proceeds of the Loans to provide general working
capital and to pay ordinary operating costs and expenses of the Borrowers to
the extent, and only to the extent, such costs and expenses are consistent in
all material respects with the Projections and permitted by the Bankruptcy Code
or the Bankruptcy Court.

 

1.5           Interest
and Applicable Margins.

 

(a)           (i) 
Subject to clause (e) below, the Borrowers may, at their option (an “Interest Election”) elect to pay interest on the Loans on
each Interest Payment Date (i) entirely in cash (“Cash
Interest”) or (ii) entirely by increasing the outstanding
principal amount of the Loans on the relevant Interest Payment Date by the
amount of interest accrued from the effective date of any such Interest
Election until such Interest Payment Date (“PIK Interest”).  The Borrowers must make an Interest Election
by delivering a notice to the Administrative Agent no later than 5 Business
Days prior to the effective date of any Interest Election, which notice shall
specify (x) whether such Interest Election is made under clause (i) or
(ii) of this Section 1.5(a) and (y) the effective date of
such Interest Election.  An Interest
Election shall remain in effect until the earlier of (A) the delivery by
the Borrowers of a new Interest Election and (B) the Maturity Date. In the
event no Interest Election is made, interest on the Loans shall be PIK
Interest.

 

(b)           Subject
to clause (e) below, Loans shall bear interest at a rate per annum equal
to (i) in the case of Cash Interest, 14.00% per annum and (ii) in the
case of PIK Interest, 16.00% per annum. 
Cash Interest on each Loan shall be payable on each Interest Payment
Date.  PIK Interest on each Loan shall be
payable by increasing the outstanding principal amount of the Loans by the
amount of PIK Interest on each Interest Payment Date. Any interest so added to
the principal amount of the Loans shall bear interest as provided in this Section 1.5
from the date on which such interest has been so added. The obligation of
the  Borrowers to pay PIK Interest shall
be automatically evidenced by this Agreement or, if applicable, any Notes
issued pursuant to this Agreement. 
Unless the context otherwise requires, for all purposes hereof,
references to “principal amount” of the Loans refers to the face amount of the
Loans and not the gross proceeds funded hereunder and includes any PIK Interest
so capitalized and added to the principal amount of the Loans from the date on
which such interest has been so added.

 

(c)           If
any payment on any Loan becomes due and payable on a day other than a Business
Day, the maturity thereof will be extended to the next succeeding Business Day
and, with respect to payments of principal, interest thereon shall be payable
at the then applicable rate during such extension.

 

4

 

(d)           All
computations of interest shall be made by the Administrative Agent on the basis
of a 365/366 day year, in each case for the actual number of days occurring in
the period for which such interest is payable.

 

(e)           So
long as (i) an Event of Default has occurred and is continuing under Section 8.1(a),
(f), (h), (l), (m) or (n) or (ii) any other Event of Default has
occurred and is continuing and the Administrative Agent shall have given
written notice to the Borrowers, the Loans and all other outstanding
Obligations shall bear interest at 2.00% per annum above the rate otherwise
applicable to the Loans (the “Default Rate”).
Interest at the Default Rate shall accrue from the initial date of such Event
of Default until that Event of Default is cured or waived and shall be payable
in cash on each Interest Payment Date.

 

1.6           Fees.

 

(a)           The
Borrowers shall pay to the Administrative Agent for the benefit of each Lender
in accordance with its Pro Rata Share a commitment fee (the “Commitment Fee”) equal to $1,500,000, earned and payable on
the Closing Date.

 

(b)           Upon
any voluntary prepayment of the Loans pursuant to Section 1.2(a), the
Borrowers shall pay a prepayment fee (a “Prepayment Fee”)
equal to one percent (1%) of the principal amount (excluding any interest added
thereto pursuant to Section 1.5) of the Loans prepaid.

 

1.7           Receipt
of Payments.

 

The Borrowers shall make each payment under this Agreement
not later than 2:00 p.m. (New York City time) on the day when due in
immediately available funds in Dollars to any account specified in writing by
Administrative Agent to Borrowers. For purposes of computing interest as of any
date, all payments shall be deemed received on the Business Day on which
immediately available funds therefor are received in the Collection Account
prior to 2:00 p.m. New York City time. Payments received after 2:00 p.m.
New York City time on any Business Day or on a day that is not a Business Day
shall be deemed to have been received on the following Business Day.

 

1.8           Loan
Account and Accounting.

 

The
Administrative Agent shall maintain a loan account (the “Loan Account”)
on its books to record the Loan, all payments made by the Borrowers with
respect to such Loan, and all other debits and credits as provided in this
Agreement with respect to such Loan or any other Obligations with respect to
such Loan. All entries in the Loan Account shall be made in accordance with the
Administrative Agent’s customary accounting practices as in effect from time to
time. The balance in the Loan Account, as recorded on the Administrative
Agent’s most recent printout or other written statement, shall, absent manifest
error, be presumptive evidence of the amounts due and owing to the
Administrative Agent and the Lenders by the Borrowers; provided, that any failure
to so record or any error in so recording shall not limit or otherwise affect
the Borrowers’ duty to pay the Obligations with respect to the Loan. The
Administrative Agent shall render to the Borrower Agent a monthly accounting of
transactions with respect to 

 

5

 

each
Loan setting forth the balance of the Loan Account for the immediately
preceding month. Each Lender may rely on the Loan Account as evidence of the
amount of Obligations with respect to the Loan from time to time owing to it.
Unless the Borrowers notify the Administrative Agent in writing of any
objection to any such accounting (specifically describing the basis for such
objection), within thirty (30) days after the date thereof, each and every such
accounting shall be presumptive evidence of all matters reflected therein. Only
those items expressly objected to in such notice shall be deemed to be disputed
by the Borrowers.

 

1.9           Indemnity.

 

Each
Borrower shall, commencing on the Closing Date, jointly and severally indemnify
and hold harmless each of the Administrative Agent, Lenders and their
respective Affiliates, and each such Person’s respective officers, directors,
employees, attorneys, agents and representatives (each, an “Indemnified Person”), from and against any and all suits,
actions, proceedings, claims, damages, losses, liabilities and expenses
(including reasonable attorneys’ fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) that may be
instituted or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents and the administration of such credit, and
in connection with or arising out of the transactions contemplated hereunder
and thereunder and any actions or failures to act in connection therewith,
including any and all Environmental Liabilities and legal costs and expenses
arising out of or incurred in connection with disputes between or among any
parties to any of the Loan Documents, and associated with Electronic
Transmissions or E-Systems as well as failures caused by the Borrowers’
equipment, software, services or otherwise used in connection therewith
(collectively, “Indemnified Liabilities”);
provided, that no such Borrower shall be liable for any indemnification to an
Indemnified Person to the extent that any such suit, action, proceeding, claim,
damage, loss, liability or expense results from that Indemnified Person’s gross
negligence, bad faith or willful misconduct as finally determined by a court of
competent jurisdiction. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO
ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY
BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY, SPECIAL OR CONSEQUENTIAL
DAMAGES THAT MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED,
SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

 

1.10         Access.

 

Each
Borrower shall, during normal business hours, from time to time upon two (2) Business
Days prior notice to the Borrower Agent as frequently as the Administrative
Agent reasonably determines to be appropriate at the Borrowers’ sole cost and
expense: (i) provide the Administrative Agent and any of its officers,
employees and agents access to its officers and employees, and with prior
notice and the opportunity to be present, advisors of each Borrower, (ii) permit
the Administrative Agent, and any of its officers, employees and agents, to
inspect, audit and make extracts from any Borrower’s Books and Records (subject
to requirements under any confidentiality agreements, if applicable) and (iii) permit
the Administrative Agent, and any 

 

6

 

of
its officers, employees and agents, to have access to properties, facilities
and to the Collateral and to inspect, audit, review, evaluate, conduct field
examinations and make test verifications and counts of the Accounts, Inventory
and other Collateral of any Borrower; provided, that (x) so long as no
Event of Default has occurred and is continuing, such access and inspections
referred to in clauses (i) through (iii) above shall not be permitted
more frequently than twice in any Fiscal Year and (y) during the existence
of any Event of Default, Administrative Agent shall have all rights of access
described above at any time and without having to give any notice to any
Person. The Borrowers shall make available to the Administrative Agent and its
counsel reasonably promptly originals or copies of all Books and Records
(subject to requirements under any confidentiality agreements, if applicable)
of any Borrower that the Administrative Agent may reasonably request. The
Borrowers shall deliver any document or instrument necessary for the
Administrative Agent, as it may from time to time request, to obtain records
from any service bureau or other Person that maintains records for any Borrower
and shall maintain supporting documentation on media, including computer tapes
and discs owned by the Borrowers.

 

1.11         Taxes.

 

(a)           Any
and all payments by the Borrowers hereunder or under the Notes shall be made,
in accordance with this Section 1.11, free and clear of and without
deduction for any and all present or future Taxes. If any Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) unless such Taxes are imposed as the
result of a determination that an applicable Certificate of Exemption (as
defined in Section 1.11(c)) did not entitle a Foreign Person (as defined
in Section 1.11(c)) to an exemption from such Taxes at the time such
Foreign Person became a Lender hereunder, the sum payable shall be increased as
much as shall be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section 1.11)
the Administrative Agent or Lenders, as applicable, receive an amount equal to
the sum they would have received had no such deductions been made, (ii) such
Borrower shall make such deductions, and (iii) such Borrower shall pay the
full amount deducted to the relevant taxing or other authority in accordance
with applicable law. As promptly as reasonably practicable after any such
payment of Taxes, the Borrowers shall furnish to the Administrative Agent the
original or a certified copy of a receipt evidencing payment thereof.

 

(b)           The
Borrowers shall, jointly and severally, indemnify and, within ten (10) days
of demand therefor, pay the Administrative Agent and each Lender for the full
amount of Taxes paid by the Administrative Agent or such Lender, as
appropriate, with respect to payments received from any Borrower hereunder and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes were correctly or legally
asserted unless such Taxes are imposed as the result of a determination that
establishes that an applicable Certificate of Exemption did not in fact entitle
a Foreign Person to an exemption from such Taxes at the time such Foreign
Person became a Lender hereunder.

 

(c)           Each
Person organized under the laws of a jurisdiction outside the United States (a
“Foreign Person”) as to which payments
to be made under this Agreement or under the Notes are completely exempt from
United States withholding tax under an applicable statute or tax treaty shall
provide to the Borrower Agent and the Administrative 

 

7

 

Agent a properly completed and executed IRS Form W-8ECI
or Form W-8BEN or other applicable form, certificate or document prescribed
by the IRS or the United States certifying as to such Foreign Person’s
entitlement to such complete exemption (a “Certificate of Exemption”).
Any Foreign Person that seeks to become a Lender under this Agreement shall
provide a Certificate of Exemption to the Borrower Agent and the Administrative
Agent prior to becoming a Lender hereunder. No Foreign Person may become a
Lender hereunder if such Foreign Person fails to deliver a Certificate of
Exemption in advance of becoming a Lender. For the avoidance of doubt, (i) any
Sale described in Section 11.1(a) to a Foreign Person shall only
become effective upon delivery by the party to whom such Sale is made to the
Borrower Agent and the Administrative Agent of a Certificate of Exemption, and (ii) any
participant or SPV described in Section 11.1(e) shall not be entitled
to any benefit under Section 1.11 unless such participant or SPV delivers
to the Borrower Agent and the Administrative Agent a Certificate of Exemption.
In addition, any Lender that is not a Foreign Person and that is a partnership
or trust for U.S. federal income tax purposes shall not be entitled to any
payment by the Borrowers pursuant to Section 1.11(b) with respect to
any Taxes paid by such Lender with respect to any Foreign Person that is a
partner or owner of an interest in such Lender unless such Lender had obtained
a Certificate of Exemption from such Foreign Person at the later of the times (i) such
Lender became a Lender hereunder and (ii) such Foreign Person became a
partner or owner of an interest in such Lender.

 

(d)           Each
Lender agrees that, as promptly as reasonably practicable after it becomes
aware of any circumstance that would result in any additional payment by the
Borrowers pursuant to Section 1.11(a) or (b), such Lender shall, to
the extent not inconsistent with such Lender’s internal policies of general
application, use reasonable commercial efforts to mitigate any Taxes that would
result in such payments by the Borrowers. If the Borrowers are required to pay
additional amounts to or for the account of any Lender pursuant to this Section 1.11,
then such Lender, at the request of the Borrowers and at the Borrowers’
expense, will change the jurisdiction of its lending office if such change (i) will
eliminate or reduce any such additional payment which may thereafter accrue and
(ii) as determined by such Lender in its sole discretion, is not otherwise
materially disadvantageous to such Lender, provided, that the mere existence of
fees, charges, costs or expenses that the Borrowers have offered and agreed to
pay on behalf of a Lender shall not be deemed to be disadvantageous to such
Lender.

 

1.12         Capital Adequacy; Increased Costs; Illegality.

 

(a)           If
any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline
or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender with any request or directive
regarding capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law), in each case, adopted after the
Closing Date, from any central bank or other Governmental Authority increases
or would have the effect of increasing the amount of capital, reserves or other
funds required to be maintained by such Lender and thereby reducing the rate of
return on such Lender’s capital as a consequence of its obligations hereunder,
then the Borrowers shall from time to time, upon demand by such Lender to the
Borrower Agent (with a copy of such demand to the Administrative Agent) pay to
the Administrative Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to
the amount of that reduction and showing the basis of the 

 

8

 

computation thereof submitted by such Lender to the
Borrower Agent and to the Administrative Agent shall be presumptive evidence of
the matters set forth therein.

 

(b)           If,
due to either (i) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) other than in respect
of taxes (including income taxes) or (ii) the compliance with any
guideline or request from any central bank or other non-tax Governmental
Authority (whether or not having the force of law), in each case occurring
after the Closing Date, there shall be any increase in the cost to any Lender
of agreeing to make or making, funding or maintaining any Loan, then the
Borrowers shall from time to time, upon demand by such Lender to the Borrower Agent
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to the Borrower Agent and to
the Administrative Agent by such Lender, shall be presumptive evidence of the
matters set forth therein. Each Lender agrees that, as promptly as practicable
after it becomes aware of any circumstances referred to above which would
result in any such increased cost, the affected Lender shall, to the extent not
inconsistent with such Lender’s internal policies of general application, use
reasonable commercial efforts to minimize costs and expenses incurred by it and
payable to it by the Borrowers pursuant to this Section 1.12(b).

 

(c)           Failure
on the part of any Lender to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to any period shall not constitute a waiver of such Lender’s right
to demand compensation with respect to such period or any other period,
provided, that the Borrowers shall not be required to compensate a Lender
pursuant to this Section 1.12 for any increased costs or reductions
incurred more than two hundred seventy (270) days prior to the date that such
Lender notifies the Borrower Agent of the circumstance giving rise to such
increased costs or reductions and of such Lender’s intention to claim
compensation therefor.

 

2.     CONDITIONS
PRECEDENT

 

2.1           Stage
1 Conditions.

 

The
obligation of each Lender to make the Stage 1 Loan shall not become effective
until the date (the “Closing Date”)
on which each of the following conditions precedent (in addition to the
conditions precedent set forth in Section 2.3) is satisfied or provided
for in a manner reasonably satisfactory to the Administrative Agent, or duly
waived in writing in accordance with Section 13.2, whereupon each Lender
shall be obligated to fund its Pro Rata Share of the Stage 1 Loan within 1
Business Day of receipt of the notice referred to in Section 2.1(h) below.

 

(a)           Credit
Agreement. The Administrative Agent shall have received counterparts of
this Agreement duly executed by each of Borrowers, the Administrative Agent and
the Lenders.

 

(b)           Interim
Order. The Bankruptcy Court shall have entered the Interim Order, which
order shall be in effect and unstayed as of the Closing Date and which order 

 

9

 

shall not have been reversed, modified or amended as a
whole or in part without the prior written consent of the Administrative Agent.

 

(c)           Loan
Documents. The Administrative Agent shall have received such documents,
instruments and agreements listed on Annex C.

 

(d)           Approvals.
The Administrative Agent shall have received (i) satisfactory evidence
that the Borrowers have obtained all required consents and approvals of all
Persons, including all requisite Governmental Authorities, to the execution,
delivery, performance and consummation of this Agreement and the other Loan
Documents, or (ii) an officer’s certificate in form and substance
reasonably satisfactory to the Administrative Agent affirming that no such
consents or approvals are required.

 

(e)           Payment
of Fees. The Borrowers shall have paid to the Administrative Agent the Fees
required to be paid on the Closing Date and shall have reimbursed the
Administrative Agent for all reasonable and documented fees, costs and expenses
of closing presented as of the Closing Date to the extent required by this
Agreement (including, for the avoidance of doubt, the administrative agency fee
invoiced to the Borrowers prior to the date hereof).

 

(f)            No
Material Adverse Effect. There has been no Material Adverse Effect since
the date of any Borrower’s Form 10-K or 10-Q most recently filed prior to
the Closing Date as updated by subsequent public filings prior to the Closing
Date and other written materials provided to the Administrative Agent or the
Initial Lenders prior to the Closing Date (including, without limitation, the
Projections, and revenue build and cash flow data delivered prior to the
Closing Date).

 

(g)           Motions
and Filings. The Administrative Agent’s reasonable determination that all
motions, orders and other pleadings or related documents to be filed or
submitted to the Bankruptcy Court in connection with the Loan Documents and the
transactions contemplated thereby shall be consistent with the terms hereof.

 

(h)           Notice
of Borrowing.  The Borrower Agent
shall have delivered a notice of borrowing in form and substance reasonably
satisfactory to the Administrative Agent not later than 4 Business Days
following the entry of the Interim Order.

 

2.2           Stage
2 Conditions.

 

The Borrowers may, on any date following the date that is 30
days after the funding of the Stage 1 Loan, by notice in writing to the
Administrative Agent and each Lender, request Stage 2 Loans in an aggregate
principal amount of not more than $45,000,000. 
The Lenders may in their sole discretion having regard to then-current
market conditions and the Borrowers’ business, assets, operations, prospects or
financial or other condition and such other matters as the Lenders may deem
relevant in their sole discretion, provide such loans on such terms and in such
amounts as the Lenders determine in their sole discretion, it being understood
that no Lender is under any obligation to provide or arrange all or any part of
the Stage 2 Loan and nothing herein shall be construed as a commitment from any
Lender to provide or arrange all or any part of the Stage 2 Loan.  In the event that the Lenders agree to
provide the Stage 2 

 

10

 

Loan, the funding of such Loans
shall be subject to such conditions as the Lenders may determine in their sole
discretion, including that the Bankruptcy Court shall have entered the
Supplemental Order and such Supplemental Order shall not have been reversed,
modified or amended without the prior written consent of the Administrative
Agent and shall not be stayed as a whole or in part.

 

2.3           Conditions
to each Borrowing.

 

Without
limitation to Section 2.2 with respect to any Stage 2 Loans, no Lender
shall be obligated to make any Loan hereunder on or after the Closing Date
(including, for the avoidance of doubt, the initial extension of credit
hereunder) unless each of the following conditions precedent is satisfied or
provided for in a manner reasonably satisfactory to the Administrative Agent,
or duly waived in writing in accordance with Section 13.2.

 

(a)           All
representations and warranties in this Agreement and each other Loan Document
shall be true and correct in all material respects (except to the extent any
representation or warranty is qualified by materiality, Material Adverse Effect
or word of like import, in which case such representation or warranty shall be
true and correct in all respects) as of the date such Loan is advanced to the
Borrowers.

 

(b)           No
Default or Event of Default shall have occurred and be continuing.

 

(c)           The
average cost of U.S. Gulf Coast jet aviation fuel, as reported by Platts, over
the thirty (30) days prior to the proposed date of such Loan, is not greater
than $5.00 per gallon.

 

3.     REPRESENTATIONS
AND WARRANTIES

 

To
induce the Lenders and the Administrative Agent to enter into this Agreement,
the Borrowers executing this Agreement, jointly and severally, make the
following representations and warranties (on the Closing Date and on the date
each loan is advanced to the Borrowers) to the Administrative Agent and each
Lender with respect to all Borrowers, each and all of which shall survive the
execution and delivery of this Agreement. 
Each reference in this Article 3 to Disclosure Schedules shall mean
the Disclosure Schedule delivered on the Closing Date, as such Schedules may be
modified by delivery by the Borrowers of updated schedules to the
Administrative Agent on or prior to the Stage 2 Closing Date, which updated
schedules shall be acceptable to the Administrative Agent in its sole
discretion to the extent any updated information provided on any such schedule,
if not so scheduled, would reasonably be likely to have a Material Adverse
Effect.

 

3.1           Corporate
Existence; Compliance with Law.

 

Each
Borrower (a) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation or organization set forth
in Disclosure Schedule 3.1; (b) is duly qualified to conduct business and
is in good standing in each other jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification, except
where the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect; (c) has the 

 

11

 

requisite
power and authority to own, pledge, mortgage or otherwise encumber and operate
its properties, to lease the property it operates under lease and to conduct
its business as now conducted or proposed to be conducted; (d) subject to
the specific representations regarding Environmental Laws, has all licenses,
permits, consents or approvals from or by, and has made all filings with, and
has given all notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct, except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect; (e) is in compliance with its charter and bylaws or partnership or
operating agreement, as applicable; and (f) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law, except to
the extent permitted by the Bankruptcy Code or where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

 

3.2           Executive
Offices, Collateral Locations, FEIN.

 

Each
Borrower’s name (as it appears in official filings in its state of
incorporation or organization), state of incorporation or organization,
organization type, organization number, if any, issued by its state of
incorporation or organization, and the location of each Borrower’s chief
executive office, principal place of business and location and the hangars,
terminals, maintenance facilities, warehouses and premises at which any
Collateral is located are set forth in Disclosure Schedule 3.2, and none of
such Collateral has been kept at any location other than the locations listed
on Disclosure Schedule 3.2 within four (4) months preceding the Closing
Date (or since its acquisition if less than four (4) months prior to the
Closing Date). In addition, Disclosure Schedule 3.2 lists the federal employer
identification number of each Borrower. Each Borrower has only one jurisdiction
of existence, incorporation or organization, as applicable.

 

3.3           Corporate
Power, Authorization, Enforceable Obligations.

 

Upon
the entry by the Bankruptcy Court of the Orders, the execution, delivery and
performance by each Borrower of the Loan Documents to which it is a party and
the creation of all Liens provided for therein: (a) are within such
Person’s power; (b) have been duly authorized by all necessary corporate,
limited liability company or limited partnership action; (c) do not
contravene any provision of such Person’s charter, bylaws or partnership or
operating agreement as applicable; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (e) do
not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, or require any payment to be made under, any material lease,
material agreement, material indebtedness or other material instrument entered
into or assumed by such Person after the commencement of the Cases to which
such Person is a party or by which such Person or any of its property is bound;
(f) do not result in the creation or imposition of any Lien upon any of
the property of such Person other than those in favor of the Administrative
Agent for the benefit of the Lenders, pursuant to the Loan Documents and the
Orders; and (g) do not require the consent or approval of any Governmental
Authority or any other Person, except (i) those referred to in Section 2.1(d),
all of which will have been duly obtained, made or complied with prior to the
Closing Date and (ii) any consents, notices or approvals pursuant to the
Federal Assignment of Claims Act of 1940 or any applicable state, county or
municipal law restricting the assignment of any Accounts for which the Account
Debtor is the United States government or a political 

 

12

 

subdivision
thereof or any state, county or municipality or department, agency or
instrumentality thereof. Each of the Loan Documents shall be duly executed and
delivered by each Borrower and each such Loan Document shall constitute a
legal, valid and binding obligation of such Borrower enforceable against it in
accordance with its terms.

 

3.4           Financial
Statements, Projections and Reports.

 

Except
for the Projections, all Financial Statements concerning the Borrowers and
their Subsidiaries that are referred to below have been prepared in accordance
with GAAP consistently applied throughout the periods covered (except as
disclosed therein and except, with respect to unaudited Financial Statements,
for the absence of footnotes and normal year-end audit adjustments) and present
fairly in all material respects the consolidated financial position of the
Borrowers and their Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.

 

(a)           Financial
Statements. The following Financial Statements have been delivered on the
Closing Date:

 

(i)            The
audited consolidated balance sheet at March 31, 2008, of the Borrowers and
their Subsidiaries and the related consolidated statements of operations,
stockholders equity and other comprehensive income (loss) and for the Fiscal
Year then ended, reported on by KPMG LLP.

 

(ii)           The
unaudited consolidated balance sheet at June 30, 2008 of the Borrowers and
their Subsidiaries and the related consolidated statements of operations and
cash flows for the three (3) months then ended.

 

(b)           Projections.
The Projections delivered to Lenders prior to the Closing Date have been
prepared by the Borrowers and reflect projections for the period beginning on August 1,
2008 on a month-by-month basis at least through May 29, 2009. The
Projections are based upon the same accounting principles (other than
adjustments related to the impact of the Cases) as those used in the
preparation of the financial statements described above and are based on
assumptions believed by the Borrowers to be reasonable at the time such
Projections were delivered in light of conditions and facts known to the
Borrowers as of the date thereof (it being understood that projections by their
nature are inherently uncertain, the Projections are not a guaranty of future
performance, and actual results may differ materially from the Projections).

 

3.5           Material
Adverse Effect; Burdensome Restrictions; Default.

 

Since
March 31, 2008, (a) no Borrower has incurred any obligations,
contingent or noncontingent liabilities, liabilities for Charges, long-term
leases or non ordinary course forward or long-term commitments that are
material and are not reflected in the Projections delivered to Lenders prior to
the Closing Date and that have not been approved by the Bankruptcy Court
pursuant to section 363 of the Bankruptcy Code (to the extent such approval is
required by section 363 of the Bankruptcy Code), (b) no contract, lease or
other agreement or instrument has been entered into or assumed by any Borrower
or has become binding upon any Borrower’s 

 

13

 

assets
and no law or regulation applicable to any Borrower has been adopted that has
or could reasonably be expected to have a Material Adverse Effect and (c) no
Borrower is in default and to the best of the Borrowers’ knowledge no third
party is in default under any material contract, lease or other agreement or
instrument, that alone or in the aggregate could reasonably be expected to have
a Material Adverse Effect.  Since the Closing
Date, no event has occurred, that alone or together with other events, could
reasonably be expected to have a Material Adverse Effect.

 

3.6           Ownership
of Property; Real Estate; Liens.

 

(a)           Each
Borrower warrants that it has good, marketable, legal and valid title to, or
legal and valid leasehold interests in, all of its personal property
constituting Collateral.

 

(b)           No
Borrower owns any real property. The leases and other agreements listed in
Disclosure Schedule 3.6 constitute all of the Material Real Estate Contracts.
Each Borrower has valid and enforceable leasehold interests in all of its
material leased real estate, excluding any leased Real Estate that is occupied
on a month to month or “at will” basis. True, correct and complete copies of
all Material Real Estate Contracts have been delivered to the Initial Lenders
to the extent reasonably requested by the Initial Lenders (and not previously
delivered to them). None of the properties and assets of any Borrower is
subject to any Liens other than Permitted Liens.

 

3.7           Labor
Matters.

 

Except
as set forth on Disclosure Schedule 3.7: (a) no strikes, work stoppages or
other material labor disputes exist, are pending, or to the knowledge of any
Borrower, threatened, against any Borrower, except those that, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect; (b) hours
worked by and payment made to employees of each Borrower to such Borrower’s
knowledge, comply with each federal, state, local or foreign law applicable to
such matters except to the extent that noncompliance could not reasonably be
expected to have a Material Adverse Effect; (c) there is no organizing
activity involving any Borrower pending or, to any Borrower’s knowledge,
threatened by any labor union or group of employees, that, in the aggregate,
would reasonably be expected to have a Material Adverse Effect; (d) there
are no representation proceedings pending or, to any Borrower’s knowledge,
threatened with the National Mediation Board, and no labor organization or
group of employees of any Borrower has made a pending demand for recognition,
that, in the aggregate, would reasonably be expected to have a Material Adverse
Effect; and (e) there are no material complaints or charges against any
Borrower pending or, to any Borrower’s knowledge, threatened to be filed with
any Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by any Borrower of any individual, that, in the aggregate, would
reasonably be expected to have a Material Adverse Effect.  Disclosure Schedule 3.7 sets forth each
domestic collective bargaining agreement to which any Borrower is a party or to
which any Borrower is otherwise bound, and the Borrowers have delivered true
and complete copies of all such agreements to Administrative Agent.

 

14

 

3.8           Ventures,
Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.

 

Except
as set forth in Disclosure Schedule 3.8, no Borrower has any Subsidiaries, is
engaged in any joint venture or partnership with any other Person, or is an
Affiliate of any other Person. All of the issued and outstanding Stock of each
Borrower (other than Frontier Holdings) is owned by each of the Stockholders,
fully paid and non-assessable and in the amounts set forth in Disclosure
Schedule 3.8. Except as set forth in Disclosure Schedule 3.8, there are no
outstanding rights to purchase, options, warrants or similar rights or agreements
pursuant to which any Borrower may be required to issue, sell, repurchase or
redeem any of its Stock or other equity securities or any Stock or other equity
securities of its Subsidiaries. All outstanding Indebtedness and Guaranteed
Indebtedness of each Borrower (except for the Obligations) is described in Section 6.3
(including Disclosure Schedule 6.3).

 

3.9           Government
Regulation.

 

No
Borrower is or, after giving effect to the making of the Loans by Lenders to the
Borrowers and the application of the proceeds thereof, will be required to register as an “investment
company” as such term is defined in the Investment Company Act of 1940.

 

3.10         Margin Regulations.

 

No
Borrower is engaged, nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” as such terms are defined in Regulation U of
the Federal Reserve Board as now and from time to time hereafter in effect
(such securities being referred to herein as “Margin Stock”).
None of the proceeds of the Loans or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing
or carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any Margin Stock
or for any other purpose that might cause any of the Loans or other extensions
of credit under this Agreement to be considered a “purpose
credit” within the meaning of Regulations T, U or X of the Federal
Reserve Board.

 

3.11         Taxes.

 

(a)           Except
as provided on Disclosure Schedule 3.11, all material federal, state, local,
foreign and other tax returns, reports and statements, including information
returns, required by any Governmental Authority to be filed by any Borrower
have been filed with the appropriate Governmental Authority, all such returns,
reports and statements are true and correct in all material respects and,
subject to the automatic stay or their status as pre-petition claims, all
Charges shown to be due and payable on such returns, reports and statements
have been or will be timely paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof, excluding
Charges or other amounts being contested in accordance with Section 5.2(b).
Proper and accurate amounts have been withheld by each Borrower from amounts
paid to its respective employees for all periods in full and complete
compliance in all material respects with all applicable federal, state, local
and foreign laws and such withholdings have been or will be timely paid,
subject to 

 

15

 

the automatic stay, to the respective Governmental
Authorities. Except as provided on Disclosure Schedule 3.11 and other than
pursuant to any lease to which it is a party, to each Borrower’s knowledge,
none of the Borrowers and their respective predecessors are liable for any
Charges: (a) under any agreement (including any tax sharing agreements) or
(b) as a transferee.

 

(b)           No
Borrower has agreed or been requested to make any adjustment under IRC Section 481(a),
by reason of a change in accounting method or otherwise, which would reasonably
be expected to have a Material Adverse Effect.

 

3.12         ERISA.

 

(a)           Disclosure
Schedule 3.12(a) lists as of the Closing Date all Pension Plans and all
Retiree Welfare Plans. Copies of all such listed Plans, together with a copy of
the latest form IRS/DOL 5500-series for each such Plan have been made available
to the Administrative Agent. Except with respect to Multiemployer Plans, each
Qualified Plan has been determined by the IRS to qualify under Section 401
of the IRC, the trusts created thereunder have been determined to be exempt
from tax under the provisions of Section 501 of the IRC and to the
knowledge of any Borrower, nothing has occurred that would cause the loss of
such qualification or tax-exempt status. Except for noncompliance to the extent
permitted under the Bankruptcy Code, each Plan is in compliance in all material
respects both with its terms and with the applicable provisions of ERISA and
the IRC. Each Borrower and all ERISA Affiliates have made all contributions and
paid all amounts due as required under the terms of the Plan or by either Section 412,
430, 431 or 432 of the IRC or Section 302, 303, 304 or 305 of ERISA prior
to the date of commencement of the Cases.

 

(b)           None
of the Borrowers nor any ERISA Affiliate, nor any predecessor of any such
Person sponsors, maintains or contributes to, or has in the past sponsored,
maintained or contributed to a Title IV Plan, or otherwise has or in the past
has had any liability or obligation with respect of a Title IV Plan that can be
enforced against the Borrower or any ERISA affiliate.  Except as set forth in Disclosure Schedule
3.12(b) or which would reasonably be expected not to have a Material
Adverse Effect, (i) no ERISA Event has occurred or is reasonably expected
to occur; (ii) there are no pending, or to the knowledge of any Borrower,
threatened, material claims (other than claims for benefits in the normal
course), sanctions, actions or lawsuits, asserted or instituted against any
Plan or any fiduciary or sponsor thereof or any Borrower with respect to any
Plan; and (iii) except in the case of any ESOP, Stock of all Borrowers and
their ERISA Affiliates makes up, in the aggregate, no more than 10% of the fair
market value of the assets of any Plan measured on the basis of fair market
value as of the latest valuation date of any Plan.

 

(c)           With
respect to any Multiemployer Plan, (i) as of the date of this Agreement,
neither any Borrower nor any ERISA Affiliate has made or suffered a “complete
withdrawal” or a “partial withdrawal” (as respectively defined in Sections 4203
and 4205 of ERISA), (ii) as of the date of this Agreement, no event has
occurred that presents a material risk of a partial withdrawal other than in
connection with the commencement of the Cases, (iii) neither any Borrower
nor any ERISA Affiliate has any contingent liability under Section 4204 of
ERISA, and, to the knowledge of any Borrower, no circumstances exist that
present a 

 

16

 

material risk that any such Multiemployer Plan will go
into reorganization, and (iv) as of the date of this Agreement and as of
any date that a Loan is made, neither any Borrower nor any ERISA Affiliate
would incur withdrawal liability in excess of $1,000,000 in the aggregate if a
complete withdrawal by the Borrowers and the ERISA Affiliates occurred under
each Multiemployer Plan as of such date. 
No Multiemployer Plan has incurred an accumulated funding deficiency,
whether or not waived that could reasonably be expected to have a Material
Adverse Effect.  Except as could not
reasonably be expected to have a Material Adverse Effect, no Multiemployer Plan
is, or is reasonably expected to be, in “endangered status” or “critical
status” within the meaning of Section 432 of the IRC.

 

3.13         No Litigation.

 

Other
than the Cases, no action, claim, lawsuit, demand, investigation or proceeding
is now pending or, to the knowledge of any Borrower, threatened against any
Borrower, before any Governmental Authority or before any arbitrator or panel
of arbitrators (collectively, “Litigation”)
that, individually or in the aggregate, (a) challenges any Borrower’s
right or power to enter into or perform any of its obligations under the Loan
Documents to which it is a party, or the validity or enforceability of any Loan
Document or any action taken thereunder or (b) could reasonably be
expected to have a Material Adverse Effect.

 

3.14         Intellectual Property.

 

Each
Borrower owns or has rights to use all Intellectual Property necessary to
continue to conduct its business as now conducted by it or presently proposed
to be conducted by it, and each U.S. registered Patent, U.S. registered
Trademark, U.S. registered Copyright and U.S. License in effect is listed,
together with application or registration numbers, as applicable, in Disclosure
Schedule 3.14. To the knowledge of any Borrower, each Borrower conducts its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect. Except as
set forth in Disclosure Schedule 3.14, no Borrower is aware of any infringement
claim by any other Person with respect to any material Intellectual Property.

 

3.15         Full Disclosure.

 

No
information contained in this Agreement, any of the other Loan Documents,
Financial Statements or other written reports from time to time prepared by any
Borrower and delivered hereunder or any written statement prepared by any
Borrower and furnished by or on behalf of any Borrower to the Administrative
Agent or any Lender pursuant to the terms of this Agreement (other than any
Projections) contains or will contain, when taken as a whole, any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made and as of the date when
made. Projections from time to time delivered hereunder are or will be based
upon the estimates and assumptions stated therein, all of which the Borrowers
believed at the time of delivery to be reasonable in light of the conditions
and facts known to any Borrower as of such delivery date (it being understood
that projections by their nature are inherently uncertain, such Projections are
not a guaranty of future performance and actual results may differ materially
from those set forth in such Projections).

 

17

 

3.16         Environmental Matters.

 

(a)           Except
as set forth in Disclosure Schedule 3.16 or for any matter for which notice has
been given under Section 5.7, and except for any matter that would not
reasonably be expected to result in any Borrower incurring Environmental
Liabilities in excess of $250,000 individually or $1,000,000 in the aggregate
prior to the Maturity Date: (i) no Borrower has caused or suffered to
occur any material Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its owned or material leased real estate (the “Real Estate”); (ii) the Borrowers are and have been in
material compliance with all Environmental Laws; (iii) the Borrowers have
obtained, and are in material compliance with, all Environmental Permits
required by Environmental Laws for the operations of their respective
businesses as presently conducted or as proposed to be conducted, which
compliance includes obtaining, maintaining and complying with required
Environmental Permits and all such Environmental Permits are valid, uncontested
and in good standing; (iv) there are no existing circumstances or
conditions, including any Releases of Hazardous Materials, which is reasonably
likely to result in a material Environmental Liability; (v) there is no
unstayed Litigation arising under or related to any Environmental Laws,
Environmental Permits or Hazardous Material that seeks damages, penalties,
fines, costs or expenses or injunctive relief against, or that alleges criminal
misconduct by, any Borrower; (vi) no notice has been received by any
Borrower alleging that any Borrower has any material Environmental Liability;
and (vii) the Borrowers have provided to the Administrative Agent material
written information pertaining to any Environmental Liabilities of any
Borrower.

 

(b)           Each
Borrower hereby acknowledges and agrees that the Administrative Agent (i) is
not now, and has not ever been, in control of any of the Real Estate or any Borrower’s
affairs so as to subject the Administrative Agent to any liability under
Environmental Laws, including CERCLA, and (ii) does not have the capacity
through the provisions of the Loan Documents to influence any Borrower’s
conduct with respect to the ownership, operation or management of any of its
Real Estate or compliance with Environmental Laws or Environmental Permits.

 

(c)           None
of the items set forth on Disclosure Schedule 3.16 either individually or in
the aggregate would be reasonably likely to have a Material Adverse Effect.

 

3.17         Insurance.

 

Disclosure
Schedule 3.17 sets forth a list that is correct and complete in all material
respects that lists the name of insurer, coverage, policy number and term of
each insurance policy (collectively, the “Policies”) to
which any of the Borrowers is a party or by which any of their assets or any of
their employees, officers or directors (in such capacity) are covered by
property, fire and casualty, professional liability, public and product
liability, workers’ compensation, extended coverage, business interruption,
directors’ and officers’ liability insurance and other forms of insurance
provided to any of the Borrowers in connection with their respective
businesses.  All Postpetition premiums
required to be paid with respect to the Policies covering all periods up to and
including the Closing Date have been paid. 
Except as set forth on Disclosure Schedule 3.17 hereto, all such
Policies are in full force and effect. 
Except as set 

 

18

 

forth
on Disclosure Schedule 3.17 hereto, none of the Borrowers has received any
notice of default, cancellation or termination with respect to any provision of
any such Policies, or any notice that the Insurer is unwilling to renew any
such Policy following the currently scheduled expiration of such Policy or
intends to materially modify any term of any such renewed Policy as compared to
the existing Policy.  With respect to its
directors’ and officers’ liability insurance policies, none of the Borrowers
has failed to give any notice or present any claim thereunder in due and timely
fashion or as required by any such Policies so as to jeopardize full recovery
under such Policies.  Except as set forth
on Disclosure Schedule 3.17 hereto, none of the Borrowers have any claims
pending under the Policies in a stated amount in excess of $5,000,000.

 

3.18         Use of Proceeds.

 

The
proceeds of the Loans are being used by the Borrowers for the purposes
specified in Section 1.4.

 

3.19         Deposit.

 

Disclosure
Schedule 3.19 lists all banks and other financial institutions at which any
Borrower maintains deposit or other accounts in the United States, and such
Schedule correctly identifies the name, address and telephone number of each
depository, the name in which the account is held and the complete account
number therefor.

 

3.20         Compliance With Industry Standards.

 

Each
Borrower maintains its Books and Records, aircraft, engines, spare parts and
other assets and properties that are used in the conduct of its business in
compliance in all material respects with applicable law, including but not
limited to all rules, regulations and standards of the FAA or any other
applicable Aviation Authority.

 

3.21         Secured, Super-Priority Obligations.

 

(a)           On
and after the Closing Date, the provisions of the Loan Documents and the Orders
are effective to create in favor of the Administrative Agent, for the benefit
of the Lenders, legal, valid and perfected Liens on and security interests
(having the priority provided for herein and in the Orders) in all right, title
and interest of each Borrower in the Collateral, enforceable against each
Borrower that owns an interest in such Collateral, except to the extent the
perfection of such lien would require the recording of a memorandum of lease or
a leasehold mortgage in the applicable real estate records.

 

(b)           Pursuant
to subsections 364(c)(2) and (3) of the Bankruptcy Code and the
Orders, all amounts owing by the Borrowers under the Loan will be secured by a
first priority perfected Lien on the Collateral, subject only to (i) valid,
perfected, nonavoidable and enforceable Liens existing as of the Closing Date
and listed on Disclosure Schedule 3.21, (ii) valid liens in existence on
the Closing Date to the extent perfected subsequent to such date as permitted
by Section 546(b) of the Bankruptcy Code and listed on Disclosure
Schedule 3.21, (iii) the Carve-Out and (iv) Permitted Liens permitted
pursuant to Section 6.7(a), 6.7(c), 6.7(e), 6.7(f), 6.7(g), 6.7(h),
6.7(i), 6.7(j), 6.7(k), 6.7(m), 6.7(n) or 6.7(o).

 

19

 

(c)           Pursuant
to section 364(c)(1) of the Bankruptcy Code and the Orders, all
obligations of the Borrowers at all times will constitute allowed
Super-Priority Claims in each of the Cases having priority over all
administrative expenses of the kind specified in sections 503(b) or 507(b) of
the Bankruptcy Code, subject only to the Carve Out and the First Data Claim
(which claim shall be pari passu or junior to the Obligations in favor of
Administrative Agent).

 

(d)           The
Orders and the transactions contemplated hereby and thereby, are in full force
and effect and have not been vacated, reversed, modified, amended or stayed, in
each case, without the prior written consent of the Administrative Agent.

 

3.22         Certificated Air Carrier.

 

Each
Air Carrier is a Certificated Air Carrier and possesses all necessary
certificates, franchises, licenses, permits, rights, designations,
authorizations, exemptions, concessions and consents that are material to the
operation of the routes flown by it and the conduct of its business and
operations as currently conducted (the “Permits”). Each
Air Carrier is a “citizen of the United States” as defined in Section 40102(a)(15)
of Title 49. Neither the DOT nor FAA nor any other Aviation Authority has taken
any action or proposed or, to such Air Carrier’s knowledge, threatened to take
any action, to amend, modify, suspend, revoke, terminate, cancel, or otherwise
affect such Permits, in each case, in a materially adverse manner.

 

3.23         Slots and Gate Interests.

 

Subject to transfers, exchanges and
other dispositions permitted by this Agreement, Borrowers are utilizing, or
causing to be utilized, in all material respects, the Slots and Gate Interests
as required by the applicable Governmental Authority including each applicable
Airport Authority.  Other than with
respect to Slots at New York LaGuardia Airport and except as could not
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, none of the Borrowers has received any notice from any
Governmental Authority, including any Airport Authority, or is aware of any
other event or circumstance, that would be reasonably likely to impair its
right to hold and use Gate Interests or Slots. 
With respect to Slots at New York LaGuardia Airport, none of the
Companies has received any notice from any Governmental Entity, including any
Airport Authority, or is aware of any other event or circumstance, that would
be reasonably likely to impair in any material respect its right to hold and
use such Slots.  Each Borrower’s Slots
are described on Disclosure Schedule 3.23.

 

3.24         Section 1110 Assets.

 

Each Borrower’s Section 1110
Assets are described on Disclosure Schedule 3.24.

 

3.25         Patriot Act.

 

To
the extent applicable,
each Borrower is in compliance, in all material respects, with the (i) Trading
with the Enemy Act, as amended, and each of the foreign assets control
regulations of the Untied States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any other enabling legislation or executive order
relating thereto, and (ii) Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA 

 

20

 

Patriot
Act of 2001) (the “Patriot Act”).  No part of the proceeds of the Loans will be
used, directly or indirectly, for any payments to any governmental official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to obtain,
retain or direct business or obtain any improper advantage, in violation of the
United States Foreign Corrupt Practices Act of 1977, as amended.

 

3.26         Cross
Collateralization.

 

Except as set forth on Schedule 3.26, no model A319 or
A320 Subject Aircraft secures any purchase money Indebtedness of the Borrowers
with respect to, or Indebtedness for borrowed money of the Borrowers secured
by, any model A318 Subject Aircraft or any aircraft lease obligations of the
Borrowers

 

4.     FINANCIAL
STATEMENTS AND INFORMATION

 

4.1           Reports
and Notices.

 

The Borrowers hereby agree
that from and after the Closing Date and until the Termination Date, they shall
deliver to the Administrative Agent and Lenders, as required, the Financial
Statements, notices, Projections and other information at the times, to the
Persons and in the manner set forth in Annex D.

 

4.2           Communication
with Accountants.

 

Each
Borrower authorizes (a) the Administrative Agent and the Initial Lenders
and (b) so long as an Event of Default has occurred and is continuing,
each Lender, to communicate, with prior notice to the Borrower Agent and the
Borrowers’ opportunity to be present, directly with its independent registered
public accountants and authorizes and shall instruct those accountants to
communicate to the Administrative Agent and such Lender, with notice to the
Borrower Agent, information relating to any Borrower with respect to the
business, results of operations and financial condition of any Borrower as the
Administrative Agent or such Lender shall reasonably request.

 

5.     AFFIRMATIVE
COVENANTS

 

Each Borrower agrees that from and after the Closing Date and until the
Termination Date:

 

5.1           Maintenance
of Existence and Conduct of Business.

 

Except
as otherwise required by the Bankruptcy Code, each Borrower shall (a) except
as otherwise permitted by Section 6.1 or Section 6.8, do or cause to
be done all things necessary to preserve and keep in full force and effect its
legal existence, all rights, permits, licenses, approvals and privileges
(including all Permits) necessary in the conduct of its business, and its
material rights and franchises entered into or assumed after the commencement
of the Cases, and (b) at all times maintain, preserve and protect all of
its assets and properties (including all Collateral) used or useful and
necessary in the conduct of its business, and keep the same in good 

 

21

 

repair,
working order and condition in all material respects (taking into consideration
ordinary wear and tear) and from time to time make, or cause to be made, all
necessary or appropriate repairs, replacements and improvements thereto
consistent with industry practices except as otherwise permitted in the
applicable Loan Documents.

 

5.2           Payment
of Taxes.

 

(a)           Unless
payment thereof is precluded by the Cases and subject to Section 5.2(b),
each Borrower shall pay and discharge or cause to be paid and discharged
promptly all Taxes arising after the Petition Date payable by it, including
Taxes imposed upon it, its income and profits, or any of its operations, its
property (real, personal or mixed) and all Taxes with respect to tax, social
security and unemployment withholding with respect to its employees, before any
thereof shall become past due, except in each case, where the failure to pay or
discharge such Charges would not result in aggregate liabilities in excess of
$500,000.

 

(b)           Each
Borrower may in good faith contest, by appropriate proceedings, the validity or
amount of any Charges, Taxes or claims described in Section 5.2(a);
provided, that (i) adequate reserves with respect to such contest are
maintained on the books of such Borrower, in accordance with GAAP; (ii) no
Lien shall be imposed to secure payment of such Charges, Taxes or claims that
is superior to any of the Liens securing payment of the Obligations and such
contest is maintained and prosecuted continuously and with diligence and
operates to suspend collection or enforcement of such Charges, Taxes and claims
(except where the failure to pay or discharge such Charges would not result in
aggregate liabilities or Liens in excess of $500,000); (iii) none of the
Collateral becomes subject to forfeiture or loss as a result of such contest;
and (iv) such Borrower shall promptly pay or discharge such contested
Charges, Taxes or claims and all additional charges, interest, penalties and
expenses and shall deliver to the Administrative Agent evidence reasonably
acceptable to the Administrative Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Borrower or the conditions set forth in this Section 5.2(b) are no
longer met.

 

(c)           Notwithstanding
the foregoing, this Section 5.2 shall not be construed to require any
Borrower to pay any obligation arising under any agreement with respect to Section 1110
Assets unless such Borrower is authorized by the Bankruptcy Court to make such
payment.

 

5.3           Books
and Records.

 

Each
Borrower shall keep adequate Books and Records with respect to its business
activities in which proper entries, reflecting all financial transactions, are
made in accordance with GAAP and on a basis consistent with the Financial
Statements referred to in Section 3.4(a).

 

5.4           Insurance.

 

The Borrowers shall, at their sole
cost and expense, maintain with financially sound and reputable insurance
companies that are not Affiliates of the Borrowers (except with respect to
health, medical and workers compensation self-insurance), insurance or
reinsurance with respect 

 

22

 

to its properties and business
against loss or damage of the kinds customarily insured against by companies of
a same or similar size engaged in the same or similar business, of such types
and in such amounts (giving effect to health, medical and workers compensation
self insurance) as are customarily carried under similar circumstances by such
other companies (including, without limitation, casualty insurance or
reinsurance on its aircraft as required by any security agreement or lease
relating thereto or as may otherwise be required under any Section 1110
Agreements). Such policies of insurance as in effect on the Closing Date are
described, collectively, in Disclosure Schedule 3.17. Except to the extent that
doing so would cause a default under, or otherwise breach or contravene, any
existing agreement to which any Borrower is party, Borrowers shall use
commercially reasonable efforts to (i) name Administrative Agent, on behalf of Lenders as
an additional insured, as its interests may appear, on each such policy of
insurance and (ii) have each casualty insurance policy contain a loss
payable clause or endorsement, satisfactory in form and substance to
Administrative Agent, that names Administrative Agent, on behalf of the Lenders
as the loss payee thereunder and provides for at least thirty days prior
written notice to Administrative Agent of any modification or cancellation of
such policy.

 

5.5           Compliance
with Laws.

 

Except
as otherwise permitted by the Bankruptcy Code, each Borrower shall comply with
all federal, state, local and foreign laws and regulations applicable to it,
including labor laws, and Environmental Laws and Environmental Permits, and
laws and regulations of any Aviation Authority applicable to it, except to the extent
that the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect (including, without
limitation, as a result of the loss of any material Permit).

 

5.6           Intellectual
Property.

 

Subject
to Section 6.8(g), each Borrower shall own or have rights to use all
Intellectual Property necessary to continue to conduct its business as now
conducted by it or presently proposed to be conducted by it. Each Borrower
shall do or cause to be done all things necessary to preserve and keep in full
force and effect at all times all material registered Patents, Trademarks,
trade names, Copyrights and service marks necessary in the conduct of its
business. Each Borrower shall conduct its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect.

 

5.7           Environmental
Matters.

 

Except
as otherwise required by the Bankruptcy Code, each Borrower shall and shall
cause each Person within its control to: (a) conduct its operations and
keep and maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are necessary to
comply in all material respects with Environmental Laws and Environmental
Permits pertaining to the presence, generation, treatment, storage, use,
disposal, transportation or Release of any Hazardous Material on, at, in,
under, above, to, from or about any of its Real Estate; (c) notify the
Administrative Agent promptly after such Borrower becomes aware of any
violation of Environmental Laws or Environmental Permits or any Release on, at,
in, under, above, to, from 

 

23

 

or
about any Real Estate that is reasonably likely to result in any Borrower
incurring Environmental Liabilities in excess of $250,000 individually or
$1,000,000 in the aggregate in a Fiscal Year; and (d) promptly forward to
the Administrative Agent a copy of any order, notice, request for information
or any communication or report received by such Borrower in connection with any
such violation or Release or any other matter relating to any Environmental
Laws or Environmental Permits that could reasonably be expected to result in
any Borrower incurring Environmental Liabilities in excess of $250,000
individually or $1,000,000 in the aggregate in a Fiscal Year. If the
Administrative Agent at any time has a reasonable basis to believe that there
may be a violation of any Environmental Laws or Environmental Permits by any
Borrower or any Environmental Liability arising thereunder, or a Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate, that, in each case, could reasonably be expected to have a Material
Adverse Effect, then each Borrower shall, upon the Administrative Agent’s
written request (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at the Borrowers’ expense, as the Administrative Agent
may from time to time reasonably request, which shall be conducted by reputable
environmental consulting firms reasonably acceptable to the Administrative
Agent and shall be in form and substance reasonably acceptable to the
Administrative Agent, and (ii) permit the Administrative Agent or their
representatives to have access to all Real Estate (subject, in the case of
leased Real Estate, to the terms of the applicable lease or other agreement
which governs rights of access to leased Real Estate) for the purpose of
conducting such environmental audits and testing as the Administrative Agent
deems appropriate, including subsurface sampling of soil and groundwater;
provided, that the Administrative Agent shall use commercially reasonable
efforts to cause such audits or testing to be conducted in a manner that does
not unreasonably interfere with the operations of the relevant Borrower.
Borrower shall reimburse the Administrative Agent for the reasonable costs of
such audits and tests and the same will constitute a part of the Obligations
secured hereunder.

 

5.8           Further
Assurances.

 

Subject
to Section 5.9(b), each Borrower agrees that it shall, at such Borrower’s
expense and upon the reasonable request of the Administrative Agent, duly
execute and deliver, or cause to be duly executed and delivered, to the
Administrative Agent such further instruments and do and cause to be done such
further acts as may be necessary or reasonably requested by Administrative
Agent to carry out more effectively the provisions and purposes of this
Agreement and each Loan Document.

 

5.9           Additional
Collateral Documents.

 

(a)           To
the extent not delivered to the Administrative Agent on or before the Closing
Date (including in respect of after-acquired property, other than real estate
and interests in real estate that are not owned Real Estate), the Borrowers agree
to do promptly each of the following, unless otherwise agreed by the
Administrative Agent:

 

(i)            deliver
to the Administrative Agent such duly executed supplements and amendments to
this Agreement, in each case in form and substance reasonably satisfactory to
the Administrative Agent and as the Administrative Agent 

 

24

 

reasonably
deems necessary in order to ensure that each Subsidiary of a Borrower is a
Borrower hereunder;

 

(ii)           deliver
to the Administrative Agent such duly executed supplements and amendments to
any of the Collateral Documents, in each case in form and substance reasonably
satisfactory to the Administrative Agent and as the Administrative Agent
reasonably deems necessary in order to (A) effectively grant to the
Administrative Agent for the benefit of the Lenders, a valid, perfected and
enforceable security interest in all assets, personal property or property
interests that constitute Collateral owned by any Borrower and (B) effectively
grant to the Administrative Agent for the benefit of the Lenders, a valid,
perfected and enforceable security interest in all Stock and debt Securities of
any Borrower (other than Frontier Holdings) and each direct Subsidiary of each
Borrower;

 

(iii)          deliver
to the Administrative Agent all certificates, instruments and other documents
representing all Collateral required to be pledged and delivered under the
Collateral Documents and all other Stock and other debt Securities being
pledged pursuant to the joinders, amendments and supplements executed pursuant
to clause (ii) above;

 

(iv)          if any
Borrower discovers that it owns any fee simple interest in real estate, then
within thirty (30) days of such discovery, execute and deliver to the
Administrative Agent, a mortgage granting the Administrative Agent for the
benefit of the Lenders a valid, perfected and enforceable first priority Lien
on such real estate and, if reasonably required by the Administrative Agent, as
soon as reasonably practicable but in any case within sixty (60) days of such
discovery, environmental audits, mortgage title insurance policy, real property
survey, local counsel opinion(s), supplemental casualty insurance and flood
insurance, and such other documents, instruments or agreements reasonably
requested by the Administrative Agent, in each case, in form and substance
reasonably satisfactory to the Administrative Agent;

 

(v)           upon any
aircraft, engines or spare parts of any Borrower becoming free and clear of
liens, and otherwise ceasing to constitute Excluded Collateral, deliver to the
Administrative Agent a mortgage with respect to such aircraft, engines or spare
parts as applicable, in form and substance reasonably satisfactory to the
Administrative Agent;

 

(vi)          to take
such other actions as the Administrative Agent reasonably deems necessary to
ensure the validity or continuing validity of the obligations of all existing
and future Borrowers pursuant to clause (i) above or to create, maintain,
perfect or protect the security interest required to be granted pursuant to
clause (ii) above, including the filing of financing statements or other
recordations in such jurisdictions as may be required by the Collateral
Documents, the Code, the DOT, the FAA or applicable law, or as may be
reasonably requested by the Administrative Agent; and

 

25

 

(vii)         if
requested by the Administrative Agent, deliver to the Administrative Agent
legal opinions relating to the matters described above in connection with the
addition of any Borrower or Collateral acquired after the Closing Date, which
opinions shall be in form and substance consistent with those delivered on the
Closing Date and from counsel reasonably satisfactory to the Administrative
Agent.

 

(b)           Notwithstanding
the foregoing, (i) the Administrative Agent shall not take any security
interest in or require any actions to be taken with respect to (A) prior
to the occurrence of an Event of Default, those assets as to which the
Administrative Agent shall determine, in its reasonable discretion, that the
cost of obtaining such security interest or taking such action are excessive in
relation to the benefit to the Administrative Agent and the Lenders afforded
thereby and (B) any property to the extent that the granting of such a
security interest would constitute a breach or violation of a valid and
effective restriction in place as of the Closing Date in favor of a third party
(including, without limitation, mandatory consent rights; and the parties agree
that the Administrative Agent shall not require any action to be taken with
respect to such consent rights), that would result in the termination of any
Borrower’s interest in such property or give rise to any indemnification
obligations or any rights to terminate or commence the exercise of remedies
under such restrictions but only to the extent and for so long as such
restriction is not terminated or rendered unenforceable or otherwise rendered
ineffective by any applicable law, and (ii) Liens required to be granted
and actions required to be taken pursuant to this Section 5.9 shall all be
subject to exceptions and limitations (including Liens permitted pursuant to Section 6.7)
consistent with those set forth herein as in effect on the Closing Date and (iii) the
Administrative Agent shall not require any Borrower to record any leasehold
mortgage or similar instruments with respect to any leased real property.
Nothing in this Section 5.9(b) shall obligate the Administrative
Agent or any Lender to release its Lien on any Collateral.

 

5.10         Labor Contracts.

 

On or before November 15, 2008, the Borrowers shall
deliver to the Administrative Agent new or revised collective bargaining
agreements or amendments thereto (or otherwise demonstrate that such new or
amended agreements will be effective in the near term) containing concessions
materially consistent with labor cost reductions reflected in the Projections
or have otherwise obtained labor cost savings reasonably projected to be
consistent therewith, and otherwise on terms (including as to the expiration
thereof) reasonably satisfactory to the Administrative Agent with respect to
the following groups: (A) Frontier Airlines Pilots Association and (B) Teamsters
Airline Division representing the Aircraft Technicians, Ground Service
Equipment Technicians and Tool Room Attendants.

 

5.11         Slot Utilization.

 

Subject
to transfers, exchanges and other dispositions permitted by this Agreement,
each Air Carrier will utilize (or arrange for utilization by leasing or
exchanging Slots with other air carriers) the Slots in a manner consistent in
all material respects with applicable regulations, rules, laws and contracts in
order to preserve its right to hold and operate the Slots, taking into 

 

26

 

account
any waivers or other relief granted to any Borrower by the, any other
applicable Governmental Authority or any Airport Authority.

 

5.12         ERISA/Labor Matters.

 

The
Borrowers shall furnish the Administrative Agent (with sufficient copies for each
of Lenders) each of the following:

 

(a)           promptly
and in any event within ten (10) days after any Borrower, any Subsidiary
of the Borrowers or any ERISA Affiliate knows or has reason to know that a
request for a minimum funding waiver under Section 412 of the Code has
been filed with respect to any Multiemployer Plan, a written statement of an
officer of any Borrower describing such waiver request and the action, if any,
such Borrower, its Subsidiaries and ERISA Affiliates propose to take with
respect thereto and a copy of any notice filed with the PBGC or the IRS
pertaining thereto;

 

(b)           promptly
and in any event within three (3) days after any Borrower, any Subsidiary
of the Borrowers or any ERISA Affiliate receives any adverse communication from
a Governmental Authority that could result in an increase to or accelerate the
payment of any liability with respect to a Pension Plan, a copy of such notice;

 

(c)           simultaneously
with the date that any Borrower (i) commences or terminates negotiations
with any collective bargaining agent for the purpose of materially changing any
collective bargaining agreement; (ii) reaches an agreement with any
collective bargaining agent prior to ratification for the purpose of materially
changing any collective bargaining agreement; (iii) ratifies any agreement
reached with a collective bargaining agent for the purpose of materially
changing any collective bargaining agreement; or (iv) becomes subject to a
“cooling off period” under the auspices of the National Mediation Board,
notification of the commencement or termination of such negotiations, a copy of
such agreement or notice of such ratification or a “cooling off period,” as the
case may be;

 

(d)           promptly
and in any event within five (5) business days after any Borrower or any
ERISA Affiliate knows or has reason to know that any ERISA Event has occurred,
a statement describing such ERISA Event and the action, if any, that such
Borrower or ERISA Affiliate has taken and proposes to take with respect thereto
and, on the date any records, documents or other information must be furnished
to the PBGC or other applicable Governmental Authority with respect to such
ERISA Event, a copy of such records, documents and information; and

 

(e)           promptly
and in any event within five (5) business days after receipt thereof by
any Borrower or any ERISA Affiliate from a sponsor of a Multiemployer Plan,
copies of each notice concerning (i)(A) the imposition of withdrawal
liability by such Multiemployer Plan or (B) the reorganization or
termination, within the meaning of Title IV of ERISA, of any such Multiemployer
Plan and (ii) the amount of liability incurred or that may be incurred by
any Borrower or any ERISA Affiliate in connection with any event described in
clause (i).

 

27

 

5.13         Maintenance of Liens and Collateral.

 

Each
Borrower, subject to Section 5.9, shall do or cause to be done all things
necessary to preserve and keep in full force and effect at all times the Liens
securing the Obligations as provided in the Loan Documents.

 

5.14         Use of Proceeds.

 

The
proceeds of the Loans will be used by the Borrowers for the purposes specified
in Section 1.4.

 

5.15         Cash Management Systems.

 

Each
Borrower will establish and will maintain until the Termination Date, the Cash
Management Systems as described in Annex B (the “Cash
Management Systems”).

 

5.16         Access.

 

Each
Borrower shall provide the Administrative Agent access to its properties and to
the Collateral in accordance with Section 1.10.

 

5.17         Fuel Hedging.

 

The Borrowers shall
investigate in good faith and, to the extent deemed appropriate in Borrowers’
commercially reasonable judgment, pursue opportunities to hedge the risks
associated with fluctuations in jet fuel prices, including without limitation
swap and option contracts for West Texas Intermediate Crude Oil, Gulf Coast Jet
A fuel and “crack spread” contracts. 
Borrowers shall, upon reasonable request of the Administrative Agent and
subject to any applicable confidentiality agreement, provide to the
Administrative Agent reasonably detailed reports or other information relating
to its current or contemplated hedging activity and the progress of its
investigation into hedging alternatives.

 

5.18         Liquidity Initiatives.

 

The Borrowers shall use commercially
reasonable efforts to sell or otherwise dispose of no fewer than five (5) A319
aircraft on a time frame materially consistent with the Projections, including,
to the extent that the aircraft disposition transactions that are the subject
of motions filed with the Bankuptcy Court and presently scheduled for hearing
on August 5, 2008 are not consummated, using commercially reasonable
efforts, as soon as reasonably practicable under the circumstances and
consistent with maximizing the net proceeds from the sales or dispositions of
such aircraft, to identify and consummate alternative disposition transactions
with respect to such five (5) A319 aircraft.

 

6.     NEGATIVE
COVENANTS

 

Each
Borrower agrees that from and after the Closing Date until the Termination
Date:

 

28

 

6.1           Mergers.

 

No
Borrower shall directly or indirectly, by operation of law or otherwise, merge
or consolidate with any Person or (other than investments permitted by Section 6.2)
acquire Stock of any Person.

 

6.2           Investments.

 

Except
as otherwise expressly permitted by this Section 6.2, no Borrower shall
make or permit to exist any Investment except (without duplication):

 

(a)           each
Borrower may hold Investments comprised of notes payable, or stock or other
securities issued by Account Debtors to such Borrower pursuant to negotiated
agreements with respect to settlement of such Account Debtor’s Accounts in the
ordinary course of business, consistent with past practices;

 

(b)           each
Borrower may maintain its existing investments in its Subsidiaries as of the
Closing Date summarized on Disclosure Schedule 3.8 or 6.2;

 

(c)           each
Borrower may make investments, subject to Section 5.15, in Permitted
Investments;

 

(d)           each
Borrower may maintain its Investments existing as of the Closing Date
summarized on Disclosure Schedule 6.2;

 

(e)           Investments
may be made by any Borrower in any other Borrower;

 

(f)            each
Borrower may make Investments consisting of (i) currency swap agreements,
currency future or option contracts and other similar agreements designed to
hedge against fluctuations in foreign interest rates and currency values, (ii) interest
rate swap, cap or collar agreements and interest rate future or option
contracts, and (iii) fuel hedges and other derivatives contracts, in each
case, to the extent that such agreement or contract is permitted by Section 6.3
and Section 6.15 and entered into in the ordinary course of business and
not for speculation;

 

(g)           Investments
in fuel consortia in the ordinary course of business consistent with past
practice and consistent with industry practice; and

 

(h)           the
Borrowers may make other Investments in an aggregate amount outstanding at any
one time not to exceed $2,500,000 for all Investments made pursuant to this
clause (h).

 

6.3           Indebtedness.

 

(a)           Subject
to clause (b) below, no Borrower shall create, incur, assume or permit to
exist any Indebtedness, except (without duplication):

 

(i)            Indebtedness
secured by purchase money security interests and Capital Leases (including in
the form of sale-leaseback, synthetic lease or similar transactions or created
in connection with the restructuring of any lease or financing of 

 

29

 

Section 1110
Assets which existed on the Closing Date) to the extent such Indebtedness was
incurred in connection with the restructuring of existing leases as provided in
the parenthetical above or finances the acquisition or construction of
aircraft, equipment and real estate, in each case, consistent in all material
respects with the Projections; provided, that the amount of such Indebtedness
does not exceed 100% of the purchase price or construction cost (including any
capitalized interest and issuance fees) of the subject asset;

 

(ii)           the Loans
and the other Obligations;

 

(iii)          Indebtedness
existing as of the Closing Date described in Disclosure Schedule 6.3
(including, for the avoidance of doubt, Indebtedness that may be incurred from
time to time under revolving lines of credit referred to on Disclosure Schedule
6.3);

 

(iv)          Indebtedness
consisting of intercompany loans and advances made among the Borrowers, provided,
(i) all such Indebtedness shall be evidenced by promissory notes and all
such notes shall be subject to a first priority Lien in favor of Administrative
Agent and (ii) all such Indebtedness shall be unsecured;

 

(v)           Indebtedness
owed to any Lender (or any of its affiliates) or any other Person in connection
with Investments permitted under Section 6.2(f);

 

(vi)          Indebtedness
in respect of any overdrafts and related liabilities arising from treasury,
depository and cash management services or in connection with any automated
clearing house transfers of funds (but subject to compliance with Section 5.15);

 

(vii)         (i) Indebtedness
to credit card processors in connection with credit card processing services
incurred in the ordinary course of business and consistent with past practices
and (ii) the First Data Claim (which claim shall be pari passu or junior
to the Obligations);

 

(viii)        Indebtedness
in respect of letters of credit, surety and appeal bonds in an aggregate
outstanding amount not to exceed $2,500,000;

 

(ix)           Indebtedness
constituting a Permitted Refinancing of Indebtedness referred to in clauses (i) or
(iii) above;

 

(x)            unsecured
Indebtedness (including letters of credit) incurred subsequent to the Closing
Date to provide credit support for (x) obligations arising in the ordinary
course of business and consistent with past practices in connection with credit
card processing services and (y) the Indebtedness described in clause (vi) above;

 

(xi)           Indebtedness
secured solely by the Subject Aircraft;

 

30

 

(xii)          other
unsecured Indebtedness incurred subsequent to the Closing Date in an aggregate
amount not to exceed $2,500,000 outstanding at any time;

 

(xiii)         to the
extent such Indebtedness is Guaranteed Indebtedness, Indebtedness permitted by Section 6.6;
and

 

(xiv)        Indebtedness
financing the making of deposits or predelivery payments in connection with the
acquisition of aircraft, engines and spare parts, in each case to the extent
such acquisition is consistent with the Projections that is expected to be
financed with Indebtedness permitted pursuant to Section 6.3(a)(i).

 

(b)           Notwithstanding
the foregoing, under no circumstance shall Lynx create, incur, assume or permit
to exist any Indebtedness other than (i) Indebtedness existing on the
Closing Date and described on Disclosure Schedule 6.3, (ii) unsecured
Indebtedness at all times less than $250,000 in the aggregate outstanding, (iii) Indebtedness
described in Section 6.3(a)(i) with respect to aircraft, engines and
spare parts, (iv) Indebtedness described in Section 6.3(a)(iv) owing
to Holdings, (v) Indebtedness constituting a Permitted Refinancing of
Indebtedness referred to in clauses (i) or (iii) above, (vi) Indebtedness
described in clause (a)(ii) and (vii) Indebtedness arising in the
ordinary course of business consistent with past practices.

 

(c)           No
Borrower shall, directly or indirectly, voluntarily purchase, redeem, defease
or prepay any principal of, premium, if any, interest or other amount in
respect of any Postpetition Indebtedness prior to its scheduled maturity, other
than (i) the Obligations; (ii) Indebtedness secured by a Lien
permitted under Section 6.7 if the asset securing such Indebtedness on a
first-priority basis has been sold or otherwise disposed of in accordance with Section 6.8;
(iii) Indebtedness subject to any Permitted Refinancing; (iv) other
Indebtedness not in excess of $1,000,000; (v) Indebtedness incurred
subsequent to the Closing Date permitted under Section 6.3(a) (other
than Indebtedness permitted under Section 6.3(a)(iii) or any
Permitted Refinancing thereof); and (vi) as otherwise permitted in Section 6.12.

 

6.4           Affiliate
Transactions.

 

None of the Borrowers will sell or transfer any property or assets to,
or otherwise engage in any other material transactions with, any of its
Affiliates (other than the other Borrowers), except transactions (a) at
prices and on terms and conditions no less favorable to such Borrower than
could be obtained on an arm’s length basis from unrelated third parties and (b) any
dividends, other distributions or payments permitted by Section 6.12.

 

6.5           Capital
Structure and Business.

 

No
Borrower shall amend its charter or bylaws in a manner that would adversely
affect the Administrative Agent or Lenders, or such Borrower’s duty or ability
to repay the Obligations. No Borrower shall engage in any business other than
the businesses currently engaged in by it and businesses that are reasonably
related thereto. No Borrower shall make any changes to its equity capital
structure as in existence on the Closing Date.

 

31

 

6.6           Guaranteed
Indebtedness.

 

No
Borrower shall create, incur, assume or permit to exist any Guaranteed
Indebtedness, except (without duplication) (a) by endorsement of
instruments or items of payment for deposit to the general account of any
Borrower in the ordinary course of business, (b) Guaranteed Indebtedness
incurred for the benefit of any other Borrower if the primary obligation is
expressly permitted by this Agreement, (c) Guaranteed Indebtedness to the
extent constituting Indebtedness permitted by Section 6.3 and (d) to
the extent existing on the Closing Date as set forth in Disclosure Schedule
6.3.

 

6.7           Liens.

 

No
Borrower shall create, incur, assume or permit to exist any Lien on or with
respect to the Collateral or any of its other properties or assets (whether now
owned or hereafter acquired), except for:

 

(a)           Permitted
Encumbrances;

 

(b)           Liens
in existence as of the Closing Date and summarized on Disclosure Schedule 6.7;

 

(c)           Liens
created after the Closing Date by conditional sale or other title retention
agreements (including Capital Leases) or in connection with purchase money
Indebtedness, in each case, permitted in Section 6.3(a)(i); provided, that
(A) such Liens attach only to the assets (including related leases and
subleases thereof and other assets integral to the use thereof including
security deposits from any sublessee collaterally assigned for the benefit of
lessors) subject to such purchase money debt, (B) such Indebtedness is
incurred within one hundred eighty (180) days following such purchase and does
not exceed 100% of the purchase price of the subject assets and (C) either
(x) such Indebtedness does not exceed $1,000,000 in the aggregate
outstanding at any time or (y) such Liens are created in connection with
purchase money Indebtedness financing for the acquisition of aircraft, engines,
spare parts and related equipment, and such acquisition is consistent with the
Projections;

 

(d)           Liens
securing Indebtedness permitted by Section 6.3(a)(vi);

 

(e)           Liens
on the Excluded Accounts and amounts on deposit therein in favor of the
beneficiaries of the amounts on deposit therein to the extent such Liens secure
obligations owed to such beneficiaries and such obligations are otherwise
permitted pursuant this Agreement;

 

(f)            any
interest or title of a licensor, lessor or sublessor granted to others, but
only to the extent permitted by any of the Collateral Documents;

 

(g)           customary
banker’s Liens on the Exempt Accounts and amounts on deposit therein in favor
of the depositary institutions where such Exempt Accounts are maintained to
secure fees, overdrafts, returned checks, similar obligations;

 

32

 

(h)           (i) Liens
in respect of rights of setoff, recoupment and holdback in favor of credit card
processors securing obligations in connection with credit card processing
services incurred in the ordinary course of business and consistent with past
practices and (ii) Liens securing obligations owed to First Data as
described in the First Data Order;

 

(i)            Liens
on cash deposits securing obligations referred to in Section 6.3(a)(viii) that
do not constitute Collateral in an aggregate amount not in excess of
$2,500,000;

 

(j)            Liens
on cash deposits pledged as collateral for Indebtedness permitted under Section 6.3(a)(v) in
connection with Investments permitted under Section 6.2(f);

 

(k)           Liens
securing a Permitted Refinancing of Indebtedness, to the extent such
Indebtedness being refinanced was originally secured in accordance with this Section 6.7;
provided that such Lien does not attach to any additional property or assets of
Borrower or any Subsidiary;

 

(l)            Liens
securing the Loans and the other Obligations;

 

(m)          Liens
created after the Closing Date in connection with operating Leases; provided,
that, such Liens attach only to the assets subject to such Lease (including any
sublease thereof, other assets integral to the use thereof and security
deposits from any sublessee collaterally assigned for the benefit of lessors);

 

(n)           other
Liens so long as the value of the property subject to such Liens, and the
Indebtedness and other obligations secured thereby, do not exceed, in the
aggregate, $500,000; and

 

(o)           Liens
securing Indebtedness permitted by Section 6.3(a)(xiv), to the extent such
lien is solely with respect to the aircraft, engines or spare parts to be
purchased and the purchase contract relating thereto.

 

6.8           Sale
of Stock and Assets.

 

No
Borrower shall sell, transfer, convey, assign or otherwise dispose of any of
its properties or other assets, including the Stock of any of its Subsidiaries
(whether in a public or a private offering or otherwise) or any of its Accounts
(any such disposition being an “Asset Sale”),
other than the following (without duplication):

 

(a)           sales
and other dispositions of assets in the ordinary course of business, swaps,
exchanges, interchange or pooling of assets, in the ordinary course of business
;

 

(b)           sales
or dispositions of surplus, obsolete, negligible or uneconomical assets no
longer used in the business of Borrowers;

 

(c)           sales
or dispositions of Permitted Investments for cash or in exchange for Permitted
Investments (including, for the avoidance of doubt, the sale of auction rate
securities);

 

33

 

(d)           dispositions of Section 1110
Assets (consisting of the return thereof to the party that had provided
financing therefor); provided, that such dispositions, in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect;

 

(e)           sales or dispositions of
Inventory in the ordinary course of business;

 

(f)            sales or dispositions of
other assets in arm’s length transactions at fair market value in an aggregate
amount not to exceed $2,500,000 in the aggregate in any Fiscal Year;

 

(g)           (i) sale, disposition,
exchange or abandonment of Intellectual Property; provided, that such
abandonment is (A) in the ordinary course of business consistent with past
practices and (B) with respect to Intellectual Property that is not
material to the business of the Borrowers and (ii) licensing or
sublicensing of Intellectual Property in the ordinary course of business
consistent with past practices;

 

(h)           sale, disposition, exchange,
lease or abandonment of Slots (other than the sale, disposition, lease or abandonment
(but not exchange) of Slots at New York LaGuardia Airport); provided that such
sale, disposition, exchange or abandonment could not reasonably be expected to
result in a Material Adverse Effect;

 

(i)            sale-leaseback, synthetic
lease or similar transactions to the extent not prohibited by Section 6.11;

 

(j)            the disposition of leasehold
or similar interests in Real Estate that is not owned Real Estate (including
Gate Interests), including through assignment, sublease or lease termination or
rejection, as a whole or in part, or the return, surrender, exchange or
abandonment of any property subject thereto to the extent any such disposition
individually or all such dispositions in the aggregate could not reasonably be
expected to result in a Material Adverse Effect;

 

(k)           rejection of executory
contracts in accordance with an order of the Bankruptcy Court to the extent
such rejections, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect; and

 

(l)            sale or disposition of
Subject Assets, so long such sale is consistent in all material respects with
the Projections;

 

(m)          dispositions of assets by,
or any of the Stock of, Lynx; provided that the proceeds of such sale are
applied as required by Section 1.2(b);

 

provided
further that (i) except for the sale of assets by, or any of the Stock of,
Lynx as permitted by clause (m) above, nothing herein shall permit the
disposition of any material asset owned by Lynx and used by it in the ordinary
course of business other than (A) the sale of Subject Assets consisting of
spare parts pursuant to Section 6.8(l), (B) sales in the ordinary
course of business to the extent otherwise permitted hereunder, (C) sales
of rotables to the extent not generating cash proceeds in excess of $25,000 in
any month and (D) other sales of assets with a value not to exceed
$250,000; it being understood that except for the sale of assets by, or any of
the Stock of, 

 

34

 

Lynx
in each case as permitted in clause (m) above, Lynx shall not be permitted
to sell or dispose of aircraft, engines, order positions, operating
certificates or, to the extent the cash proceeds thereof exceed $25,000 in any
month, rotables and (ii) nothing herein shall permit the disposition of
any Slots other than as specifically provided for in clause (h) above or
Subject Aircraft other than as specifically provided for in clause (l) above.

 

6.9        Financial Covenants.

 

The
Borrowers shall not breach or fail to comply with any of the Financial
Covenants.

 

6.10      Hazardous Materials.

 

No
Borrower shall cause or knowingly permit a Release of any Hazardous Material
on, at, in, under, above, to, from or about any of the Real Estate where such
Release would (a) violate in any respect any Environmental Laws or
Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than in
the case of each of clauses (a) and (b), such violations, Releases or
Environmental Liabilities that could not reasonably be expected to have a
Material Adverse Effect.

 

6.11      Sale-Leasebacks.

 

No
Borrower shall engage in any sale-leaseback, synthetic lease or similar
transaction involving any of its Gate Interests or Slots or owned assets
(including without limitation, any aircraft), except (i) any
sale-leaseback, synthetic lease or similar transaction permitted by Section 6.3(a)(i),
(ii) any sale-leaseback, synthetic lease or similar transaction involving Section 1110
Assets or Subject Assets and (iii) any sale-leaseback or similar
transaction of any owned asset that constitutes a fixture on, or that is used
primarily in the operation of, leased Real Estate, to the extent that such
sale-leaseback occurs in connection with an assignment or rejection of the
lease of such Real Estate followed by a lease-back of all or a portion of such
Real Estate.

 

6.12      Restricted Payments.

 

No
Borrower shall make any Restricted Payment, except (a) payments of
principal of and interest on intercompany loans and advances between the
Borrowers to the extent permitted by Section 6.3, and (b) dividends
and distributions by Frontier to Frontier Holdings.

 

6.13      Change of Corporate Name
or Location; Change of Fiscal Year.

 

No
Borrower shall (a) change its name as it appears in official filings in
the state of its incorporation or other organization, (b) change its chief
executive office or principal place of business, (c) change the type of
entity that it is, (d) change its organization identification number, if
any, issued by its state of incorporation or other organization, or (e) change
its state of incorporation or organization, in each case, without at least
thirty (30) days prior written notice to the Administrative Agent; provided,
that in the case of clauses (b) or (e), any such new location shall be in
the continental United States. No Borrower shall change its Fiscal Year.

 

35

 

6.14      Limitation on Negative
Pledge Clauses.

 

No
Borrower will enter into any agreement (other than the Loan Documents) with any
Person which prohibits or limits the ability of such Borrower to create, incur,
assume or suffer to exist any Lien securing the Obligations upon any of its
properties, assets or revenues, whether now owned or hereafter acquired, other
than agreements that contain (a) prohibitions or limitations existing on
the Closing Date and listed on Disclosure Schedule 6.14, and any extension or
renewal thereof on terms no less favorable to the Borrowers, (b) prohibitions
set forth in the Loan Documents, (c) prohibitions or restrictions imposed
by any agreement relating to secured Indebtedness or other obligations
permitted by this Agreement if such restriction or condition applies only to
property secured or financed by such Indebtedness or other obligations and (d) restrictions
prohibiting Liens contained in agreements relating to the use and occupancy of
airport premises and facilities, operating leases, Capital Leases or Licenses
with respect to properties subject thereto and interests created therein.

 

6.15      No Speculative
Transactions.

 

No
Borrower shall engage in any transaction involving commodity options, futures
contracts or similar transactions, except solely to hedge in the ordinary
course of business.

 

6.16      Real Estate Purchases and
Leases.

 

No
Borrower shall purchase a fee simple ownership interest in real estate. No
Borrower shall modify, amend, extend, cancel, terminate or otherwise change in
any materially adverse manner any term, covenant or condition of any Material
Real Estate Contract unless such modification, amendment, extension,
cancellation, termination or other change, or such new lease, sublease,
usufruct, use agreement or other occupancy or facility agreement could not
reasonably be expected to have a Material Adverse Effect. Nothing contained in
this Section 6.16 shall be deemed to restrict any Borrower’s ability to
reject any agreement for leased real property, in accordance with Section 6.8(j).

 

6.17      Subsidiaries.

 

No
Borrower shall organize or invest in any new Subsidiary.

 

6.18      Material Contracts.

 

Except
to the extent otherwise permitted by this Article 6, no Borrower shall
enter into or assume any contract after the Closing Date that would result in
an obligation (whether contingent or otherwise) of such Borrower in excess of
$5,000,000 without the prior written consent of Administrative Agent except to
the extent consistent in all material respects with the Projections and except
for Permitted Prepetition Payments.

 

36

 

7.     TERM

 

7.1        Termination.

 

The
financing arrangements contemplated hereby shall be in effect until the
Maturity Date, and the Loans and all other Obligations shall be automatically
due and payable in full on such date.

 

7.2        Survival of Obligations
Upon Termination of Financing Arrangements.

 

Except
as otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Borrowers or the rights of the Administrative Agent and
the Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Maturity Date. Except as
otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or
binding upon the Borrowers, and all rights of the Administrative Agent and each
Lender, all as contained in the Loan Documents, shall not terminate or expire,
but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that
the provisions of Article 13, the payment obligations under Sections 1.11
and 1.12, and the indemnities contained in the Loan Documents shall survive the
Termination Date.

 

8.     EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

8.1        Events of Default.

 

The
occurrence of any one or more of the following events (regardless of the reason
therefor) shall constitute an “Event of Default”
hereunder:

 

(a)           The Borrowers (i) fail
to make any payment of principal of the Loans or interest in respect thereof
when due and payable, or (ii) fail to make any payment of any other
Obligations not covered in clause (i) above within three (3) Business
Days of the date when due and payable.

 

(b)           Any Borrower fails or
neglects to perform, keep or observe any of the provisions of Sections 1.2,
1.3, 4.1 or Article 6, or any of the provisions set forth in Annexes B, D
or E.

 

(c)           Any Borrower shall default
in the performance of or compliance with any term contained herein or any of
the other Loan Documents, other than any such term referred to in any other Section of
this Section 8.1, and such default shall not have been remedied or waived
within fifteen (15) days after the earlier of (i) any Responsible Officer
of any Borrower becoming actually aware of such default, and (ii) receipt
by the Borrowers of notice from Administrative Agent or any Lender of such
default.

 

(d)           Except for defaults
resulting directly from the commencement of the Cases and defaults resulting
from obligations (other than the Obligations) with respect to which the
Bankruptcy Code prohibits any Borrower from complying or permits a Borrower 

 

37

 

not to comply, or arising as a result of an
abandonment or rejection of property in accordance with the Bankruptcy Code and
except for any default the existence of which is disputed in good faith by such
Borrower; a default or breach occurs under (y) the First Data Agreement
and First Data exercises any such material remedies, against any Borrower in
connection therewith (including, without limitation, ceasing to process credit
card charges), or (z) any other agreement, document or instrument to which
any Borrower is a party that is not cured within any applicable grace period
therefor, and such default or breach (i) involves the failure to make any
payment when due in respect of any Postpetition Indebtedness or Guaranteed
Indebtedness (other than the Obligations) of any Borrower in excess of
$4,000,000 in the aggregate (including amounts owing to all creditors under any
combined or syndicated credit arrangements), or (ii) causes, or permits
any holder of such Indebtedness or Guaranteed Indebtedness or a trustee to
cause, Postpetition Indebtedness or Guaranteed Indebtedness or a portion
thereof in excess of $4,000,000 in the aggregate to become due prior to its
stated maturity or prior to its regularly scheduled dates of payment, or cash
collateral to be demanded in respect thereof, in each case, regardless of
whether such default is waived, or such right is exercised, by such holder or
trustee.

 

(e)           Any representation or
warranty herein or in any Loan Document or in any written statement, report,
financial statement or certificate made or delivered to the Administrative
Agent or any Lender by any Borrower is untrue or incorrect in any material
respect (or, to the extent any representation or warranty is qualified by
materiality, Material Adverse Effect or words of like import, such representation
or warranty is untrue and incorrect in any respect), in each case, as of the
date when made or deemed made.

 

(f)            The Loan Documents and the
Orders shall, for any reason, cease to create a valid Lien on any of the
Collateral purported to be covered thereby or such Lien shall cease to be a
perfected Lien having the priority provided for herein and in the Orders, or
any Borrower shall so allege in any pleading filed in any court or any
provision of any Loan Document shall, for any reason, cease to be valid and
binding on each Borrower party thereto (or any Borrower shall challenge the
enforceability of any Loan Document or shall assert in writing, or engage in
any action or inaction based on any such assertion, that any provision of any
of the Loan Documents has ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms).

 

(g)           A final unstayed
Postpetition judgment or judgments for the payment of money in excess of
$4,000,000 in the aggregate at any time are outstanding against one or more of
the Borrower s (which judgments are not covered by insurance policies as to
which liability has been accepted by the insurance carrier), and the same are
not, within thirty (30) days after the entry thereof, discharged or bonded pending
appeal, or such judgments are not discharged prior to the expiration of any
such stay.

 

(h)           Any Change of Control
occurs.

 

(i)            Any Air Carrier shall cease
to be a Certificated Air Carrier.

 

(j)            In the case of any Slots or
Gate Interests, any applicable Aviation Authority modifies, suspends, revokes,
terminates, cancels or otherwise takes any action that 

 

38

 

adversely affects any Borrower’s Permits or any
Borrower’s use or occupation or maintenance of or other interest in such Slots
and Gate Interests due to any Borrower’s failure to abide by applicable law or
any contract governing the use of such Slots and Gate Interests, or any
Borrower otherwise ceases to use, occupy or maintain such Slots and Gate
Interests, and with respect to Gate Interests and any Slot other than a Slot at
New York LaGuardia Airport, any event referred to in this clause (j) could
reasonably be expected to have a Material Adverse Effect.

 

(k)           Any ERISA Event shall have
occurred with respect to one or more Plans, but only to the extent that such
ERISA Event, together with all other ERISA Events that have occurred, could
reasonably be expected to have a Material Adverse Effect.

 

(l)            Any of the Cases shall be
dismissed (or the Bankruptcy Court shall make a ruling requiring the dismissal
of the Cases) or converted to a case under chapter 7 of the Bankruptcy Code, or
any Borrower shall file any pleading requesting any such relief; a trustee
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; or an application shall be filed by any Borrower
for the approval of, or the Court shall enter an order granting, (i) other
than the First Data Claim, any Claim having priority senior to or pari passu
with the claims of the Administrative Agent and the Lenders under the Loan
Documents or, without the prior written consent of the Administrative Agent,
any other claim having priority over any or all administrative expenses of the
kind specified in sections 503(b) or 507(b) of the Bankruptcy Code
(other than the Carve-Out) or (ii) any Lien on the Collateral having a
priority senior to or pari passu with the Liens and security interests granted
herein, except as otherwise expressly provided herein (including for the
avoidance of doubt the Liens securing the obligations owed to First Data as
described in the First Data Order (which Liens shall be pari passu to Liens in
favor of Administrative Agent).

 

(m)          (A) Any Borrower shall
file a motion seeking, or the Bankruptcy Court shall enter, an order (i) approving
any payment (as adequate protection or otherwise) on account of any Claim
against any Borrower arising or deemed to have arisen prior to the Petition
Date, other than a Permitted Prepetition Payment, (ii) granting relief
from the automatic stay applicable under section 362 of the Bankruptcy Code to
any holder of any security interest to permit foreclosure or obtain liens on
any assets that have a value in excess of $2,500,000 (it being understood that
neither the relinquishment by the Borrowers of Section 1110 Assets, nor
the foreclosure of security interests in Section 1110 Assets (or in
property in the possession of the applicable secured party) as to which
defaults have not been cured pursuant to Section 1110 of the Bankruptcy
Code, shall be considered to be included in this paragraph) provided that, if
any Borrower would otherwise be permitted under this Agreement to make a
payment to the holder of a security interest in cash or Cash Equivalents (“Cash Collateral”), and the obligation to make such payment
is secured by such Cash Collateral, then in lieu of making such payment, such
Borrower may direct or authorize such secured party to, and such secured party
may, apply such Cash Collateral to satisfy such payment obligation (including by
way of setoff against or foreclosure on such Cash Collateral), (iii) except
to the extent consistent in all material respects with the Projections,
authorizing the sale 

 

39

 

of all or a material portion of such Borrower’s assets
(except as specifically provided in Section 6.8(m)) or (iv) except to
the extent the disposition of assets upon such liquidation would be permitted
under Section 6.8, approving the implementation of liquidation under
chapter 11 of the Bankruptcy Code in any Case or (B) an order confirming a
Plan of Reorganization shall be entered that does not provide for payment in
full of all monetary Obligations (other than the Excluded Obligations) upon the
effectiveness of such Plan of Reorganization.

 

(n)           (i) The Interim Order
shall cease to be in full force and effect and the Final Order shall not have
been entered prior to such cessation, (ii) the Final Order shall not have
been entered by the Bankruptcy Court on or before the 45th day following the
entry of the Interim Order, (iii) from and after the date of entry
thereof, the Final Order shall cease to be in full force and effect, (iv) any
Borrower shall fail to comply with the terms of the Orders, or (v) the
Orders shall be amended, supplemented, stayed, reversed, vacated or otherwise
modified (or any of the Borrowers shall apply for authority to do so) in any
manner that affects the rights or duties of the Administrative Agent or the
Lenders, in each case, without the prior written consent of the Administrative
Agent.

 

8.2        Remedies.

 

(a)           If any Event of Default has
occurred and is continuing, without further order of, application to, or action
by, the Bankruptcy Court, the rate of interest applicable to the Loans shall
increase to the Default Rate (subject to Section 1.5(e)).

 

(b)           If any Event of Default has
occurred and is continuing, without further order of, application to, or action
by, the Bankruptcy Court, (i) the Administrative Agent may (and at the
written request of the Requisite Lenders shall) terminate the Commitments, if any, and/or declare
all or any portion of the Obligations, including all or any portion of any
Loan, to be forthwith due and payable, all without presentment, demand, protest
or further notice of any kind, all of which are expressly waived by the
Borrowers; (ii) the Administrative Agent may (and at the written request
of the Requisite Lenders, shall), without notice except as required by the
Orders, exercise any rights and remedies provided to the Administrative Agent
under the Loan Documents or at law or equity, including all remedies provided
under the Code and (iii) subject solely to any requirement of the giving
of notice by the terms of the Orders, the automatic stay provided in section
362 of the Bankruptcy Code shall be deemed automatically vacated without
further action or order of the Bankruptcy Court and the Administrative Agent
and the Lenders shall be entitled to exercise all of their respective rights
and remedies under the Loan Documents, including, without limitation, all
rights and remedies with respect to the Collateral.

 

8.3        Waivers by Borrowers.

 

Except as otherwise provided for in this Agreement,
by applicable law or the Orders, each Borrower waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held 

 

40

 

by the Administrative Agent
on which any Borrower may in any way be liable, and hereby ratifies and
confirms whatever the Administrative Agent may do in this regard, (b) all
rights to notice and a hearing prior to the Administrative Agent’s taking
possession or control of, or to the Administrative Agent’s replevy, attachment
or levy upon, the Collateral or any bond or security that might be required by
any court prior to allowing the Administrative Agent to exercise any of their
remedies, and (c) the benefit of all valuation, appraisal, marshaling and
exemption laws.

 

8.4        Liquidation Budget.

 

If, on the Carve Out Date, there shall be any
monetary Obligations (other than Excluded Obligations) outstanding, the
Borrowers shall promptly deliver a wind-down budget to the Administrative
Agent. If the Administrative Agent is not reasonably satisfied with such
budget, it may seek whatever relief it deems appropriate before the Bankruptcy
Court, and all parties reserve all rights with respect thereto.

 

9.     JOINT AND SEVERAL LIABILITY

 

Each
Borrower agrees that they will be jointly and severally liable for the
Obligations with each other Borrower and that all other obligations of each
Borrower hereunder and under each Loan Document to which more than one Borrower
is a party shall be joint and several among all such Borrowers party hereto or
thereto.  Each Borrower agrees that each
other Borrower will have authority on behalf of all Borrowers to deal with the
Administrative Agent and each Lender as fully and completely as if each was the
sole Borrower under this Agreement, all without notice to the other
Borrowers.  Notwithstanding the foregoing,
each Borrower agrees that the Administrative Agent and each Lender may, at its
discretion, (a) require joint instruction from some or all of the
Borrowers before taking action under this Agreement or any other Loan Document
and (b) if the Administrative Agent or any Lender received instructions
from any Borrower that are, in the Administrative Agent’s or such Lender’s
opinion, in conflict with instructions received from any other Borrower, comply
with any of these instructions and/or advise each Borrower of the apparent
conflict and/or take no action as to any of these instructions until it
receives instructions from any or all of the Borrowers that are satisfactory to
the Administrative Agent or such Lender. 
Notice provided by the Administrative Agent or any Lender to any
Borrower will be deemed notice to all Borrowers.  Furthermore, each Borrower authorizes
Borrower Agent to act on its behalf.

 

10.  SECURITY

 

10.1      Security.

 

To secure the prompt and complete
payment, performance and observance of all of the Obligations, in addition to other
“Collateral” upon which a Lien is granted under the other Collateral Documents,
each Borrower hereby grants, assigns, conveys, mortgages, pledges, hypothecates
and transfers to Administrative Agent, for itself and for the benefit of the
Lenders, a first priority Lien (subject only to (i) valid, perfected,
nonavoidable and enforceable Liens existing as of the Closing Date and listed
on Disclosure Schedule 3.21, (ii) valid liens in existence at the Closing
Date to the extent perfected thereafter as permitted by Section 546(b) of

 

41

 

the Code, (iii) the Carve-Out
and (iv) Permitted Liens permitted pursuant to Section 6.7(a), (c),
(e), (f), (g), (h), (i), (j), (k), (m), (n) or (o)) in accordance with
sections 364(c)(2) and 364(c)(3) of the Bankruptcy Code upon all of
the following property now owned or at any time hereafter acquired by any
Borrower or in which such Borrower now has or at any time in the future may
acquire any right, title or interest (capitalized terms contained in this
section, unless the context indicates otherwise, or unless defined elsewhere
herein, have the meanings provided for in the Code to the extent the same is
used or defined therein):

 

(i)            all Accounts;

 

(ii)           all Chattel Paper;

 

(iii)          all Documents;

 

(iv)          all General Intangibles
(including payment intangibles and Software);

 

(v)           all Goods,
Inventory and Equipment, including spare parts and Tooling, and other personal
property, whether tangible or intangible or wherever located;

 

(vi)          all Instruments;

 

(vii)         all Investment Property;

 

(viii)        all Vehicles;

 

(ix)           all owned real property
(subject to Section 5.9(b));

 

(x)            the Commercial Tort Claims
described on Disclosure Schedule 10.1;

 

(xi)           all
Deposit Accounts of any Borrower, including all Blocked Accounts and all other
bank accounts and all deposits therein;

 

(xii)          all money, cash or cash
equivalents of any Borrower;

 

(xiii)         all Supporting Obligations
and Letter of Credit Rights of any Borrower;

 

(xiv)        to the
extent not otherwise included, all monies and other property of any kind which
is, after the Closing Date, received by such Borrower in connection with
refunds with respect to taxes, assessments and governmental charges imposed on
such Borrower or any of its property or income;

 

(xv)         to the
extent not otherwise included, all causes of action (other than claims of the
Borrowers under Sections 502(d), 544, 545, 547, 548 and 550 of 

 

42

 

the Bankruptcy Code) and all monies
and other property of any kind received therefrom, and all monies and other
property of any kind recovered by any Borrower; and

 

(xvi)        all
property of any Borrower held by the Administrative Agent or any other Lender,
including all property of every description, in the possession or custody of or
in transit to the Administrative Agent or such Lender for any purpose,
including safekeeping, collection or pledge, for the account of such Borrower
or as to which such Borrower may have any right or power;

 

(xvii)       to the
extent not otherwise included, all Proceeds of each of the foregoing, tort
claims, insurance claims and other rights to payment not otherwise included in
the foregoing and products of the foregoing and all accessions to,
substitutions and replacements for, and rents and profits of, each of the
foregoing;

 

provided,
that “Collateral” shall not include (i) the Excluded Collateral provided
that if and when any property shall cease to be Excluded Collateral, such
property shall be deemed at all times from and after the date such property
ceased to be Excluded Collateral to constitute Collateral and (ii) any
General Intangibles or other rights arising under any contract, instrument,
license or other document if the grant of a security interest therein would
constitute a breach or violation of a valid and effective restriction in favor
of a third party (including, without limitation, mandatory consent rights; and
the parties agree that the Administrative Agent shall not require any actions
to be taken with respect to such consent rights) or give rise to any
indemnification obligations or any right to terminate or commence the exercise
of remedies under such restrictions, but only to the extent, and for so long
as, in the case of clause (ii) such restriction is not terminated or
rendered unenforceable or otherwise deemed ineffective by any applicable law.

 

10.2      Perfection of Security
Interests.

 

(a)           At any time and from time to
time, upon the reasonable request of the Administrative Agent and at the sole
expense of the Borrowers, the Borrowers shall promptly and duly execute and
deliver any and all such further instruments and documents and take such
further actions as the Administrative Agent may deem desirable to obtain the
full benefits of any security interest granted or purported to be granted by
such Borrower hereunder and of the rights and powers herein granted, including (i) upon
the reasonable request of the Administrative Agent, using its commercially
reasonable efforts to secure all consents and approvals necessary or
appropriate for the assignment to or for the benefit of the Administrative
Agent of any License or Contract held by such Borrower and to enforce the
security interests granted hereunder, (ii) unless Administrative Agent
shall otherwise consent in writing (which consent may be revoked), delivering
to Administrative Agent all Collateral consisting of negotiable Documents and
certificated securities (in each case, accompanied by stock powers, allonges or
other instruments of transfer executed in blank) promptly after such Borrower
receives the same, (iii) delivering any requested Chattel Paper or
Instrument to Administrative Agent (in each case accompanied by instruments of
transfer executed in blank), (iv) to the extent required by this Agreement
and not waived by Administrative Agent in writing (which waiver may be revoked)
obtaining authenticated Control Agreements from each issuer of uncertificated
securities, securities intermediary, or commodities intermediary issuing or
holding any financial assets or commodities, in each case constituting
Collateral, to 

 

43

 

or for any Borrower; provided, that the Administrative
Agent shall not deliver a notice that it is exercising exclusive control over
any financial assets or commodities to any such issuer, securities intermediary
or commodities intermediary unless an Event of Default has occurred and is
continuing, (v) in accordance with and to the extent required by Annex B
to this Agreement, obtaining a blocked account or similar agreement with each
bank or financial institution holding a Deposit Account for such Borrower;
provided, that the Administrative Agent shall not deliver a notice that it is
exercising exclusive control over any Deposit Account to any such bank or
financial institution unless an Event of Default has occurred and is
continuing, (vi) for each Borrower that is or becomes the beneficiary of a
letter of credit with a face amount in excess of $1,000,000 promptly, and in
any event within two (2) Business Days after becoming a beneficiary,
notifying Administrative Agent thereof and thereafter, unless the related
Letter of Credit Rights constitute a Supporting Obligation for which the
Administrative Agent’s security interest is perfected, using its commercially
reasonable efforts to cause the issuer and/or confirmation bank with respect to
such Letter of Credit Rights to enter into a tri-party agreement with the
Administrative Agent assigning such Letter of Credit Rights to the
Administrative Agent and directing all payments thereunder to a Blocked
Account, all in form and substance reasonably satisfactory to the
Administrative Agent (vii) taking all steps necessary to grant the
Administrative Agent control of all electronic chattel paper in accordance with
the Code and all “transferable records” as defined in each of the Uniform
Electronic Transactions Act and the Electronic Signatures in Global and
National Commerce Act, (viii) promptly, and in any event within five (5) Business
Days after the same is acquired by it, notifying the Administrative Agent of
any Commercial Tort Claim involving a claim of more than $1,000,000 acquired by
it and if requested by the Administrative Agent, entering into a supplement to
this Agreement, granting to Administrative Agent a Lien in such Commercial Tort
Claim, (ix) maintaining complete and accurate stock records, (x) except
as otherwise provided in clause (vi) hereof, delivering to the
Administrative Agent all documents, certificates and Instruments necessary or
desirable to perfect the Administrative Agent’s Lien on letters of credit on
which such Borrower is named as beneficiary and all acceptances issued in
connection therewith and (xi) taking such other steps as are deemed necessary
or desirable to maintain the Administrative Agent’s security interest in the
Collateral.  Nothing contained in this Section 10.2(a) shall
be deemed to require any Borrower to obtain the consent of any landlord
(including, without limitation, any Aviation Authority) or to obtain or record
any memorandum of lease or leasehold mortgage or similar instrument with
respect to any leased real property.

 

(b)           Each Borrower hereby
irrevocably authorizes the Administrative Agent at any time and from time to
time to file in any filing office in any Uniform Commercial Code jurisdiction
any initial financing statements and amendments thereto that (a) indicate
the Collateral (i) as all assets of such Borrower or words of similar
effect, regardless of whether any particular asset comprised in the Collateral falls
within the scope of Article 9 of the Code in such jurisdiction, or (ii) as
being of an equal or lesser scope or with greater detail, and (b) contain
any other information required by part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether such Borrower is an organization, the
type of organization and any organization identification number issued to such
Borrower, and (ii) in the case of a financing statement filed as a fixture
filing, a sufficient description of real property to which the Collateral
relates. Each Borrower agrees to furnish any such information to the
Administrative Agent promptly upon request. 

 

44

 

Each Borrower also ratifies its authorization for the
Administrative Agent to have filed in any Uniform Commercial Code jurisdiction
any initial financing statements or amendments thereto if filed prior to the
Closing Date.

 

(c)           Notwithstanding subsections (a) and
(b) of this Section 10.2, or any failure on the part of any Borrower
or the Administrative Agent 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 Orders. 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 Agreement or the Orders.

 

10.3      Rights of Lenders;
Limitations on Lenders’ Obligations.

 

(a)           Subject to each Borrower’s
rights and duties under the Bankruptcy Code (including section 365 of the
Bankruptcy Code), it is expressly agreed by each Borrower that, anything herein
to the contrary notwithstanding, each such Borrower shall remain liable under
each of its Contracts and each of its Licenses to observe and perform all the
conditions and obligations to be observed and performed by it thereunder,
unless such Borrower determines in its reasonable good faith judgment that such
Contract or License is no longer valuable to such Borrower’s business,
economically or otherwise. Neither the Administrative Agent nor any Lender
shall have any obligation or liability under any Contract or License by reason
of or arising out of this Agreement or the granting herein of a Lien thereon or
the receipt by Administrative Agent or any Lender of any payment relating to
any Contract or License pursuant hereto. Neither Administrative Agent nor any
Lender shall be required or obligated in any manner to perform or fulfill any
of the obligations of any Borrower under or pursuant to any Contract or
License, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract or License, or to present or file any claims,
or to take any action to collect or enforce any performance or the payment of
any amounts which may have been assigned to it or to which it may be entitled
at any time or times.

 

(b)           Subject to Section 10.5
hereof, the Administrative Agent authorizes each Borrower to collect its
Accounts, provided that such collection is performed in accordance with such
Borrower’s customary procedures, and the Administrative Agent may, upon the
occurrence and during the continuation of any Event of Default and without
notice, other than any requirement of notice provided in the Orders, limit or terminate
said authority at any time.

 

(c)           Subject to any requirement
of notice provided in the Orders, the Administrative Agent may at any time
after an Event of Default has occurred and is continuing without prior notice
to any Borrower, notify Account Debtors and other Persons obligated on the
Collateral that Administrative Agent has a security interest therein, and that
payments shall be made directly to Administrative Agent. Subject to any
requirement of notice provided in the Orders, upon the reasonable request of
Administrative Agent, the Borrowers shall so notify Account Debtors and other
Persons obligated on Collateral. Once any such notice has been given to any
Account Debtor or other Person obligated on the Collateral, the 

 

45

 

affected Borrower shall not give any contrary
instructions to such Account Debtor or other Person without Administrative
Agent’s prior written consent. Subject to any requirement of notice provided in
the Orders, upon the occurrence and during the continuation of an Event of
Default, the Administrative Agent may in its own name, or in the name of
others, communicate with such parties to such Accounts, Contracts, Instruments,
Investment Property and Chattel Paper to verify with such Persons to the
Administrative Agent’s reasonable satisfaction the existence, amount and terms
of any such Accounts, Contracts, Instruments, Investment Property or Chattel
Paper.

 

(d)           Subject to any requirement
of notice provided in the Orders, the Administrative Agent may at any time in
the Administrative Agent’s own name, in the name of a nominee of the
Administrative Agent or in the name of any Borrower communicate (by mail,
telephone, facsimile or otherwise) with Account Debtors to verify with such Persons,
to the Administrative Agent’s satisfaction, the existence, amount, terms of,
and any other matter relating to, Accounts and/or payment intangibles
comprising Collateral; provided that unless an Event of Default shall have
occurred and be continuing, the Administrative Agent shall not do any of the
foregoing except during normal business hours and after giving the Borrower
Agent reasonable prior notice and the affected Borrower opportunity to be
present. If an Event of Default shall have occurred and be continuing, each
Borrower, at its own expense, shall cause the independent certified public
accountants then engaged by such Borrower to prepare and deliver to the
Administrative Agent and each Lender at any time and from time to time promptly
upon the Administrative Agent’s written request the following reports with
respect to each Borrower: (i) a reconciliation of all Accounts; (ii) an
aging of all Accounts; (iii) trial balances; and (iv) a test
verification of such Accounts as the Administrative Agent may request. The
Administrative Agent may at any time in its own name, in the name of a nominee
of the Administrative Agent or in the name of any Borrower communicate (by
mail, telephone, facsimile or otherwise) with parties to Contracts and obligors
in respect of Instruments to verify with such Persons, to the Administrative
Agent’s satisfaction, the existence, amount, terms of, and any other matter
relating to, Instruments, Chattel Paper and/or payment intangibles comprising
Collateral; provided that unless an Event of Default shall have occurred and be
continuing, the Administrative Agent shall not do any of the foregoing except
during normal business hours and after giving the Borrower Agent reasonable
prior notice and the affected Borrower opportunity to be present. Each
Borrower, at its own expense, shall deliver to the Administrative Agent the
results of each physical verification, if any, which such Borrower may in its
discretion have made, or caused any other Person to have made on its behalf, of
all or any portion of its Inventory.

 

10.4      Covenants of the
Borrowers with Respect to Collateral.

 

Each
Borrower covenants and agrees with Administrative Agent, for the benefit of the
Lenders, that from and after the date of this Agreement and until the Termination
Date:

 

(a)           Maintenance of Records. The
Borrowers shall keep and maintain, at their own cost and expense, satisfactory
and complete records of the Collateral, including a record of any and all
payments received and any and all credits granted with respect to the
Collateral and all other dealings with the Collateral, in each case in a manner
consistent with past practice. Upon request by the Administrative Agent, the
Borrowers shall mark their books 

 

46

 

and records pertaining to the Collateral to evidence
this Agreement and the Liens granted hereby. If any Borrower retains possession
of any Chattel Paper or Instruments with the Administrative Agent’s consent,
such Chattel Paper and Instruments shall, if requested by the Administrative
Agent, be marked with the following legend: “This writing and the obligations
evidenced or secured hereby are subject to the security interest of Wells Fargo
Bank Northwest, National Association, as the Administrative Agent, for the
benefit of the Lenders.”

 

(b)           Covenants Regarding Patent,
Trademark and Copyright Collateral.

 

(i)            The
Borrowers shall notify Administrative Agent promptly if any Borrower knows or
has reason to know that any application or registration relating to any
material Patent, Trademark or Copyright (now or hereafter existing) may become
abandoned or dedicated, or of any adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court) regarding any Borrower’s ownership of any
material Patent, Trademark or Copyright, its right to register the same, or to
keep and maintain the same.

 

(ii)           Promptly after
any Borrower, either itself or through the Administrative Agent, employee,
licensee or designee, files an application for the registration of any Patent,
Trademark or Copyright with the United States Patent and Trademark Office or
the United States Copyright Office, the Borrowers shall give the Administrative
Agent written notice of such filing and, upon request of the Administrative
Agent, such Borrower shall execute and deliver any and all Patent Security
Agreements, Copyright Security Agreements or Trademark Security Agreements as
Administrative Agent may request to evidence Administrative Agent’s Lien on
such Patent, Trademark or Copyright, and the General Intangibles of such
Borrower relating thereto or represented thereby.

 

(iii)          The
Borrowers shall take all actions necessary or requested by the Administrative
Agent to maintain and pursue each application, to obtain the relevant
registration and to maintain the registration of each of the Patents,
Trademarks and Copyrights (now or hereafter existing), including the filing of
applications for renewal, affidavits of use, affidavits of noncontestability
and opposition and interference and cancellation proceedings unless such
Borrower reasonably determines that such Patent, Trademark or Copyright Collateral
is in no way material to the conduct of its business or operations.

 

(iv)          In the
event that any of the Patent, Trademark or Copyright Collateral is infringed
upon, or misappropriated or diluted by a third party, such Borrower shall
comply with Section 10.2(a)(viii) of this Agreement. Such Borrower
shall, unless such Borrower reasonably determines that such Patent, Trademark
or Copyright Collateral is in no way material to the conduct of its business or
operations, promptly sue for infringement, misappropriation or dilution and to
recover any and all damages for such infringement, misappropriation or
dilution, and shall take such other actions as Administrative Agent shall deem
appropriate under the circumstances to protect such Patent, Trademark or Copyright
Collateral.

 

47

 

(c)           Further
Identification of Collateral. In addition to any other requirements herein,
the Borrowers will, if so requested by the Administrative Agent, furnish to the
Administrative Agent, as often as the Administrative Agent reasonably requests,
statements and schedules further identifying and describing the Collateral as
the Administrative Agent may reasonably request, all in such detail as the
Administrative Agent may specify.

 

(d)           Notices.
The Borrowers will advise the Administrative Agent promptly, in reasonable
detail of any Lien or claim made or asserted against any of the Collateral
other than in respect of Permitted Liens.

 

(e)           Terminations;
Amendments Not Authorized. Except to the extent permitted by Section 10.4(f),
each Borrower acknowledges that it is not authorized to file any financing
statement or amendment or termination statement with respect to any financing
statement relating to the Collateral and filed pursuant to the terms hereof
without the prior written consent of the Administrative Agent and agrees that
it will not do so without the prior written consent of the Administrative
Agent, subject to such Borrower’s rights under Section 9-509(d)(2) of
the Code.

 

(f)            Authorized
Terminations and Subordinations. The Administrative Agent will promptly
deliver to the Borrower Agent for filing or authorize each Borrower to prepare
and file termination statements and releases in respect of any sales,
transfers, conveyances, assignments or other dispositions of Collateral made in
accordance with Section 6.8 of this Agreement.

 

(g)           [Reserved].

 

(h)           Pledged
Collateral.

 

(i)            All certificates and all promissory
notes and instruments evidencing the Pledged Collateral shall be delivered to
and held by or on behalf of the Administrative Agent, for itself and the
benefit of the Lenders, pursuant hereto. All Pledged Shares shall be
accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to the Administrative Agent and all
promissory notes or other instruments evidencing the Pledged Indebtedness shall
be endorsed by the applicable Borrower;

 

(ii)           Without the prior written consent of
the Administrative Agent, no Borrower will sell, assign, transfer, pledge, or
otherwise encumber any of its rights in or to the Pledged Collateral, or any
unpaid dividends, interest or other distributions or payments with respect to
the Pledged Collateral or grant a Lien in the Pledged Collateral, unless
otherwise expressly permitted by this Agreement;

 

(iii)          Each Borrower will, at its expense,
promptly execute, acknowledge and deliver all such instruments and take all
such actions as the Administrative Agent from time to time may reasonably
request in order to ensure to the Administrative Agent and the Lenders obtain
the benefits of the Liens in and to the Pledged Collateral intended to be
created by this Agreement, including the filing of any 

 

48

 

necessary Code financing
statements, which may be filed by the Administrative Agent with or (to the
extent permitted by law) without the signature of the relevant Borrower, and
will cooperate with the Administrative Agent, at such Borrower’s expense, in
obtaining all necessary approvals and making all necessary filings under federal,
state, local or foreign law in connection with such Liens or any sale or
transfer of the Pledged Collateral;

 

(iv)          Each Borrower has and will defend the
title to the Pledged Collateral and the Liens of the Administrative Agent in
the Pledged Collateral against the claim of any Person (other than the holder
of a Permitted Lien) and will maintain and preserve such Liens (it being
understood that nothing in this clause (iv) will prevent such Borrower
from disposing of Pledged Collateral as otherwise permitted by Section 6.8);
and

 

(v)           Each Borrower will, upon obtaining
ownership of any additional Stock of a Pledged Entity or promissory notes or
instruments representing Pledged Indebtedness or Stock or promissory notes or
instruments otherwise required to be pledged to the Administrative Agent
pursuant to any of the Loan Documents, which Stock, notes or instruments are
not already Pledged Collateral, promptly (and in any event within five (5) Business
Days) deliver to the Administrative Agent a Pledge Amendment, duly executed by
such Borrower, in substantially the form of Exhibit B hereto (a “Pledge Amendment”) in respect of any such additional Stock,
notes or instruments, pursuant to which such Borrower shall pledge to the
Administrative Agent all of such additional Stock, notes and instruments;
provided that such Borrower shall be required to do the foregoing with respect
to any such promissory note or instrument only if requested to do so by the
Administrative Agent pursuant to Section 10.2(a)(ii) of this Agreement.
Borrower hereby authorizes Administrative Agent to attach each Pledge Amendment
to this Agreement and agrees that all Pledged Shares and Pledged Indebtedness
listed on any Pledge Amendment delivered to the Administrative Agent shall for
all purposes hereunder be considered Pledged Collateral.

 

10.5      Performance by Administrative Agent of
the Borrowers’ Obligations.

 

If
any Borrower fails to perform or comply with any of its agreements contained
herein and the Administrative Agent, as provided for by the terms of this
Agreement, shall itself perform or comply, or otherwise cause performance or
compliance, with such agreement, the expenses of the Administrative Agent
incurred in connection with such performance or compliance, together with
interest thereon at the rate then in effect in respect of the Loan, shall be
payable by such Borrower to the Administrative Agent on demand and shall
constitute Obligations secured by the Collateral. Performance of such
Borrower’s obligations as permitted under this Section 10.5 shall in no
way constitute a violation of the automatic stay provided by section 362 of the
Bankruptcy Code and each Borrower hereby waives applicability thereof.
Moreover, the Administrative Agent shall in no way be responsible for the
payment of any costs incurred in connection with preserving or disposing of
Collateral pursuant to section 506(c) of the Bankruptcy Code and the
Collateral may not be charged for the incurrence of any such cost. Each
Borrower, on behalf of 

 

49

 

itself
and it bankruptcy estate, hereby waives any right it may have to surcharge any
of the Collateral for any purpose whatsoever pursuant to section 506(c) of
the Bankruptcy Code.

 

10.6      Limitation on the Administrative Agent’s
duty in Respect of Collateral.

 

The
Administrative Agent and each Lender shall use reasonable care with respect to
the Collateral in its possession or under its control. Neither the
Administrative Agent nor any Lender shall have any other duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of the Administrative Agent or such Lender, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.

 

10.7      Remedies; Rights Upon Default.

 

(a)           In
addition to all other rights and remedies granted to it under the other Loan
Documents and under any other instrument or agreement securing, evidencing or
relating to any of the Secured Obligations, if any Event of Default shall have
occurred and be continuing, the Administrative Agent may exercise all rights
and remedies of a secured party under the Code. Without limiting the generality
of the foregoing, each Borrower expressly agrees that in any such event the
Administrative Agent, without demand of performance or other demand,
advertisement or notice of any kind (except the notice required by the Orders
or the notice specified below of time and place of public or private sale) to
or upon such Borrower or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the Code and other applicable law), may, to the maximum extent
permitted by law, forthwith enter upon the premises of such Borrower where any
Collateral is located through self-help, without judicial process, without
first obtaining a final judgment or giving such Borrower or any other Person
notice and opportunity for a hearing on the Administrative Agent’s claim or action
and may collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, license,
assign, give an option or options to purchase, or sell or otherwise dispose of
and deliver said Collateral (or contract to do so), or any part thereof, in one
or more parcels at a public or private sale or sales, at any exchange at such
prices as it may deem acceptable, for cash or on credit or for future delivery
without assumption of any credit risk. The Administrative Agent or any Lender
shall have the right upon any such public sale or sales and, to the extent
permitted by law, upon any such private sale or sales, to purchase for the
benefit of the Lenders, the whole or any part of said Collateral so sold, free
of any right or equity of redemption, which equity of redemption each Borrower
hereby releases. Such sales may be adjourned and continued from time to time
with or without notice. The Administrative Agent shall have the right to
conduct such sales on any Borrower’s premises or elsewhere and shall have the
right to use any Borrower’s premises without charge for such time or times as
the Administrative Agent may deem necessary or advisable. EACH BORROWER HEREBY
IRREVOCABLY CONSTITUTES AND APPOINTS THE ADMINISTRATIVE AGENT AS THE PROXY AND
ATTORNEY-IN-FACT OF SUCH BORROWER WITH RESPECT TO THE PLEDGED COLLATERAL,
INCLUDING THE RIGHT TO VOTE THE PLEDGED SHARES, WITH FULL POWER OF SUBSTITUTION
TO DO SO. THE APPOINTMENT OF THE ADMINISTRATIVE AGENT AS PROXY 

 

50

 

AND ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND
SHALL BE IRREVOCABLE UNTIL THE TERMINATION DATE. IN ADDITION TO THE RIGHT TO
VOTE THE PLEDGED SHARES, THE APPOINTMENT OF THE ADMINISTRATIVE AGENT AS PROXY
AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS,
POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF THE PLEDGED SHARES WOULD
BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS,
CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS). SUCH
PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION
(INCLUDING ANY TRANSFER OF ANY PLEDGED SHARES ON THE RECORD BOOKS OF THE ISSUER
THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF THE PLEDGED SHARES OR ANY
OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE OF AN EVENT OF DEFAULT.
NOTWITHSTANDING THE FOREGOING, (X) THE ADMINISTRATIVE AGENT SHALL NOT HAVE
ANY DUTY TO EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE
LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO AND (Y) THE
ADMINISTRATIVE AGENT SHALL NOT EXERCISE ANY SUCH RIGHT WITH RESPECT TO ANY
REGULATED SUBSIDIARY UNLESS ANY AND ALL REGULATORY APPROVALS REQUIRED UNDER
APPLICABLE LAW SHALL HAVE BEEN OBTAINED.

 

(b)           If
any Event of Default shall have occurred and be continuing, each Borrower
further agrees, at the Administrative Agent’s request, to assemble the
Collateral and make it available to the Administrative Agent at a place or
places designated by the Administrative Agent, whether at such Borrower’s
premises or elsewhere. Until the Administrative Agent is able to effect a sale,
lease, or other disposition of Collateral, the Administrative Agent shall have
the right to hold or use Collateral, or any part thereof, to the extent that it
deems appropriate for the purpose of preserving Collateral or its value or for
any other purpose deemed appropriate by the Administrative Agent. The
Administrative Agent shall have no obligation to any Borrower to maintain or
preserve the rights of such Borrower as against third parties with respect to
Collateral while Collateral is in the possession of the Administrative Agent.
The Administrative Agent may, if it so elects, seek the appointment of a
receiver or keeper to take possession of Collateral and to enforce any of the
Administrative Agent’s remedies (for the benefit of the Lenders), with respect
to such appointment without prior notice or hearing as to such appointment. The
Administrative Agent shall deposit the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale to a Blocked Account and
such net proceeds shall be applied in accordance with Section 1.3. To the
maximum extent permitted by applicable law, each Borrower waives all claims,
damages, and demands against the Administrative Agent or any Lender arising out
of the repossession, retention or sale of the Collateral except such as arise
solely out of the gross negligence or willful misconduct of the Administrative
Agent or such Lender as finally determined by a court of competent
jurisdiction. Each Borrower agrees that ten (10) days prior notice by
Administrative Agent of the time and place of any public sale or of the time
after which a private sale may take place is reasonable notification of such
matters (it being understood and agreed that, except any notice required by the
Orders, no such notice need be given if with respect to portions of the
Collateral that are perishable or threaten to decline speedily in value or is
of a type that is customarily sold in a recognized market). The Borrowers shall
remain 

 

51

 

liable for any deficiency if the proceeds of any sale
or disposition of the Collateral are insufficient to pay all Secured
Obligations, including any attorneys’ fees and other expenses incurred by the
Administrative Agent or any Lender to collect such deficiency.

 

(c)           Except
as otherwise specifically provided herein, each Borrower hereby waives
presentment, demand, protest or any notice (to the maximum extent permitted by
applicable law) of any kind in connection with this Agreement or any
Collateral.

 

(d)           To
the extent that applicable law imposes duties on the Administrative Agent to
exercise remedies in a commercially reasonable manner, each Borrower
acknowledges and agrees that it is not commercially unreasonable for the
Administrative Agent (i) to fail to incur expenses reasonably deemed
significant by the Administrative Agent to prepare Collateral for disposition
or otherwise to complete raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third
party consents for access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (iii) to fail to exercise collection remedies against Account
Debtors or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral, (iv) to exercise collection remedies
against Account Debtors and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as the Borrowers,
for expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the Collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing internet sites that
provide for the auction of assets of the types included in the Collateral or
that have the reasonable capacity of doing so, or that match buyers and sellers
of assets, (ix) to dispose of assets in wholesale rather than retail
markets, (x) to disclaim disposition warranties, such as title, possession
or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure
the Administrative Agent against risks of loss, collection or disposition of
Collateral or to provide to the Administrative Agent a guaranteed return from
the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Administrative Agent, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist the
Administrative Agent in the collection or disposition of any of the Collateral.
Each Borrower acknowledges that the purpose of this Section 10.7(d) is
to provide non-exhaustive indications of what actions or omissions by the
Administrative Agent would not be commercially unreasonable in the
Administrative Agent’s exercise of remedies against the Collateral and that
other actions or omissions by the Administrative Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this Section 10.7(d).
Without limitation upon the foregoing, nothing contained in this Section 10.7(d) shall
be construed to grant any rights to any Borrower or to impose any duties on the
Administrative Agent that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section 10.7(d).

 

(e)           Neither
the Administrative Agent nor any Lender shall be required to make any demand
upon, or pursue or exhaust any of their rights or remedies against, any 

 

52

 

Borrower, any other obligor, guarantor, pledgor or any
other Person with respect to the payment of the Secured Obligations or to
pursue or exhaust any of their rights or remedies with respect to any Collateral
therefore or any direct or indirect guarantee thereof. Neither the
Administrative Agent nor the Lenders shall be required to marshal the
Collateral or any guarantee of the Secured Obligations or to resort to the
Collateral or any such guarantee in any particular order, and all of its and
their rights hereunder or under any other Loan Document shall be cumulative. To
the extent it may lawfully do so, each Borrower absolutely and irrevocably
waives and relinquishes the benefit and advantage of, and covenants not to
assert against the Administrative Agent or any Lender, any valuation, stay,
appraisement, extension, redemption or similar laws and any and all rights or
defenses it may have as a surety now or hereafter existing which, but for this
provision, might be applicable to the sale of any Collateral made under the
judgment, order or decree of any court, or privately under the power of sale
conferred by this Agreement, or otherwise.

 

(f)            Upon
the occurrence and during the continuation of an Event of Default, the
Administrative Agent is hereby authorized and empowered to transfer and
register in its name or in the name of its nominee the whole or any part of the
Collateral, to exchange certificates or instruments representing or evidencing
Pledged Collateral for certificates or instruments of smaller or larger
denominations, to exercise the voting and all other rights as a holder with
respect thereto, to collect and receive all cash dividends, interest, principal
and other distributions made thereon, to sell in one or more sales after ten (10) days
notice of the time and place of any public sale or of the time at which a
private sale is to take place (which notice the Borrowers agree is commercially
reasonable) the whole or any part of the Collateral (it being understood and
agreed that, except any notice required by the Orders, no such notice need be
given with respect to any portions of the Collateral that are perishable or
threaten to decline speedily in value or is of a type that is customarily sold
in a recognized market) and to otherwise act with respect to the Collateral as
though the Administrative Agent was the outright owner thereof. Any sale shall
be made at a public or private sale at the Administrative Agent’s place of
business, or at any place to be named in the notice of sale, either for cash or
upon credit or for future delivery at such price as the Administrative Agent
may deem fair, and the Administrative Agent may be the purchaser of the whole
or any part of the Collateral so sold and hold the same thereafter in its own
right free from any claim of such Borrower or any right of redemption. Each
sale shall be made to the highest bidder, but the Administrative Agent reserves
the right to reject any and all bids at such sale which, in its discretion, it
shall deem inadequate. Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and the presence of
property at sale are hereby waived and any sale hereunder may be conducted by
an auctioneer or any officer or agent of the Administrative Agent.

 

(g)           If,
at the original time or times appointed for the sale of the whole or any part
of the Collateral, the highest bid, if there be but one sale, shall be
inadequate to discharge in full all the Secured Obligations, or if the
Collateral has been offered for sale in lots, and if at any of such sales, the
highest bid for the lot offered for sale would indicate to the Administrative
Agent, in its discretion, that the proceeds of the sales of the whole of the
Collateral would be unlikely to be sufficient to discharge all the Secured
Obligations, the Administrative Agent may, on one or more occasions and in its
sole discretion, postpone effectuating any of said sales by public announcement
at the time of sale or the time of 

 

53

 

previous postponement of sale, and no other notice of
such postponement or postponements of sale need be given, any other notice
being hereby waived; provided, however, that any sale or sales made after such
postponement shall be after ten (10) days notice to the Borrower Agent.

 

(h)           If,
at any time when the Administrative Agent in its sole discretion determines,
following the occurrence and during the continuance of an Event of Default, that,
in connection with any actual or contemplated exercise of its rights (when
permitted under this Section 10.7(h) to sell the whole or any part of
the Pledged Collateral hereunder, it is necessary or advisable to effect a
public registration of all or part of the Pledged Collateral pursuant to the
Securities Act of 1933, as amended (or any similar statute then in effect) (the
“Act”), such Borrower shall, in an
expeditious manner, cause the Pledged Entities to:

 

(i)            Prepare and file with the U.S.
Securities and Exchange Commission (the “Commission”) a
registration statement with respect to the Pledged Shares and in good faith use
commercially reasonable efforts to cause such registration statement to become
and remain effective;

 

(ii)           Prepare and file with the Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the Act
with respect to the sale or other disposition of the Pledged Shares covered by
such registration statement whenever the Administrative Agent shall desire to
sell or otherwise dispose of the Pledged Shares;

 

(iii)          Furnish to the Administrative Agent
such numbers of copies of a prospectus and a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as the
Administrative Agent may request in order to facilitate the public sale or
other disposition of the Pledged Shares by the Administrative Agent;

 

(iv)          Use commercially reasonable efforts to
register or qualify the Pledged Shares covered by such registration statement
under such other securities or blue sky laws of such jurisdictions within the
United States and Puerto Rico as the Administrative Agent shall request, and do
such other reasonable acts and things as may be required of it to enable the
Administrative Agent to consummate the public sale or other disposition in such
jurisdictions of the Pledged Shares by the Administrative Agent;

 

(v)           Furnish, at the request of the
Administrative Agent, on the date that shares of the Pledged Collateral are
delivered to the underwriters for sale pursuant to such registration or, if the
security is not being sold through underwriters, on the date that the
registration statement with respect to such Pledged Shares becomes effective, (A) an
opinion, dated such date, of the independent counsel representing such
registrant for the purposes of such registration, addressed to the
underwriters, if any, and in the event the Pledged Shares are not being sold
through underwriters, then to the Administrative Agent, in customary form and
covering matters of the type customarily covered in such legal opinions; and (B) a
comfort letter, dated such date, from the independent certified public
accountants of such registrant, addressed to the underwriters, 

 

54

 

if any, and in the event the
Pledged Shares are not being sold through underwriters, then to the
Administrative Agent, in a customary form and covering matters of the type
customarily covered by such comfort letters and as the underwriters or the
Administrative Agent shall reasonably request. The opinion of counsel referred
to above shall additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as the
Administrative Agent may reasonably request. The letter referred to above from
the independent certified public accountants shall additionally cover such
other financial matters (including information as to the period ending not more
than five (5) Business Days prior to the date of such letter) with respect
to the registration in respect of which such letter is being given as the
Administrative Agent may reasonably request; and

 

(vi)          Otherwise use commercially reasonable
efforts to comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable but not later than eighteen (18) months after the effective date of
the registration statement, an earnings statement covering the period of at
least twelve (12) months beginning with the first full month after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Act.

 

(i)            All
expenses incurred in complying with Section 10.7(h) hereof,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers, Inc.),
printing expenses, fees and disbursements of counsel for the registrant, the
fees and expenses of counsel for the Administrative Agent, expenses of the
independent certified public accountants (including any special audits incident
to or required by any such registration) and expenses of complying with the
securities or blue sky laws or any jurisdictions, shall be paid by the
Borrowers.

 

(j)            If,
at any time when the Administrative Agent shall determine to exercise its right
to sell the whole or any part of the Pledged Collateral hereunder, such Pledged
Collateral or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Act, the Administrative Agent may, in its
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as the Administrative Agent may deem necessary or advisable, but
subject to the other requirements of this Section 10.7, and shall not be
required to effect such registration or to cause the same to be effected.
Without limiting the generality of the foregoing, in any such event, the
Administrative Agent in its discretion (x) may, in accordance with applicable
securities laws, proceed to make such private sale notwithstanding that a
registration statement for the purpose of registering such Pledged Collateral
or part thereof could be or shall have been filed under said Act (or similar
statute), (y) may approach and negotiate with a single possible purchaser
to effect such sale, and (z) may restrict such sale to a purchaser who is
an accredited investor under the Act and who will represent and agree that such
purchaser is purchasing for its own account, for investment and not with a view
to the distribution or sale of such Pledged Collateral or any part thereof. In
addition to a private sale as provided above in this Section 10.7, if any
of the Pledged Collateral shall not be freely distributable to the public
without registration under the Act (or similar statute) at the time of any
proposed sale pursuant to this Section 10.7, then the 

 

55

 

Administrative Agent shall not be required to effect
such registration or cause the same to be effected but, in its discretion
(subject only to applicable requirements of law), may require that any sale
hereunder (including a sale at auction) be conducted subject to restrictions:

 

(i)            as to the financial sophistication
and ability of any Person permitted to bid or purchase at any such sale;

 

(ii)           as to the content of legends to be
placed upon any certificates representing the Pledged Collateral sold in such
sale, including restrictions on future transfer thereof;

 

(iii)          as to the representations required to
be made by each Person bidding or purchasing at such sale relating to that
Person’s access to financial information about such Borrower and such Person’s
intentions as to the holding of the Pledged Collateral so sold for investment
for its own account and not with a view to the distribution thereof; and

 

(iv)          as to such other matters as the
Administrative Agent may, in its discretion, deem necessary or appropriate in
order that such sale (notwithstanding any failure so to register) may be
effected in compliance with the Bankruptcy Code and other laws affecting the
enforcement of creditors’ rights and the Act and all applicable state
securities laws.

 

(k)           Each
Borrower recognizes that the Administrative Agent may be unable to effect a
public sale of any or all the Collateral and may be compelled to resort to one
or more private sales thereof. Each Borrower also acknowledges that any such
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall not be deemed to have been made in a
commercially unreasonable manner solely by virtue of such sale being private.
The Administrative Agent shall be under no obligation to delay a sale of any of
the Pledged Collateral for the period of time necessary to permit the Pledged
Entity to register such securities for public sale under the Act, or under
applicable state securities laws, even if such Borrower and the Pledged Entity
would agree to do so.

 

(l)            Each
Borrower agrees to the maximum extent permitted by applicable law that
following the occurrence and during the continuance of an Event of Default it
will not at any time plead, claim or take the benefit of any appraisal,
valuation, stay, extension, moratorium or redemption law now or hereafter in
force in order to prevent or delay the enforcement of this Agreement, or the
absolute sale of the whole or any part of the Pledged Collateral or the
possession thereof by any purchaser at any sale hereunder, and each Borrower
waives the benefit of all such laws to the extent it lawfully may do so. Each
Borrower agrees that it will not interfere with any right, power and remedy of
the Administrative Agent provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise, or the exercise or
beginning of the exercise by the Administrative Agent of any one or more of
such rights, powers or remedies. No failure or delay on the part of the
Administrative Agent to exercise any such right, power or remedy and no notice
or demand which may be given to or made upon the Borrowers by the 

 

56

 

Administrative Agent with respect to any such remedies
shall operate as a waiver thereof, or limit or impair the Administrative
Agent’s right to take any action or to exercise any power or remedy hereunder,
without notice or demand, or prejudice its rights as against any Borrower in
any respect.

 

(m)          Each
Borrower further agrees that a breach of any of the covenants contained in this
Section 10.7 will cause irreparable injury to the Administrative Agent,
that the Administrative Agent shall have no adequate remedy at law in respect
of such breach and, as a consequence, agrees that each and every covenant
contained in this Section 10.7 shall be specifically enforceable against
the Borrowers, and each Borrower hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except
for a defense that the Secured Obligations are not then due and payable in
accordance with the agreements and instruments governing and evidencing such
Obligations.

 

(n)           To
the extent that any rights and remedies under this Section 10.7 would
otherwise be in violation of the automatic stay of section 362 of the
Bankruptcy Code, such stay shall be deemed modified, as set forth in the
Orders, as applicable, to the extent necessary to permit the Administrative
Agent to exercise such rights and remedies.

 

10.8      The Administrative Agent’s Appointment
as Attorney-in-Fact.

 

Each Borrower irrevocably appoints
the Administrative Agent its true and lawful attorney, with full power of
substitution, in the name of such Borrower, any Lender or otherwise, for the
sole use and benefit of the Lenders, but at the Borrowers’ expense, to the
extent permitted by law to exercise, at any time and from time to time while an
Event of Default shall have occurred and be continuing, all or any of the
following powers with respect to all or any of the Collateral: (a) to
demand, sue for, collect, receive and give acquittance for any and all monies
due or to become due upon or by virtue thereof, (b) to settle, compromise,
compound, prosecute or defend any action or proceeding with respect thereto, (c) to
sell, lease, license or otherwise dispose of the same or the proceeds or avails
thereof, as fully and effectually as if the Administrative Agent were the
absolute owner thereof, and (d) to extend the time of payment of any or
all thereof and to make any allowance or other adjustment with reference
thereto.

 

10.9      Release of Collateral.

 

(a)           The
Liens granted pursuant to this Agreement shall automatically terminate, and all
the Collateral shall be automatically released, without further action by the
Administrative Agent and without any further notice or consent to or of any
Lender, on the Termination Date.

 

(b)           Immediately
upon (i) any sale, transfer, conveyance, assignment or other disposition
by any Borrower of any Collateral permitted by this Agreement (or pursuant to a
valid waiver or consent to any transaction otherwise prohibited by this
Agreement), (ii) any Pledged Collateral being cancelled, replaced or
repaid in accordance with the terms of this Agreement, such Collateral shall be
automatically released from the security interest granted pursuant to this
Agreement and the Lien on such Collateral in favor of the Administrative Agent,
for itself and for the benefit of the Lenders, shall automatically terminate
(and, if such 

 

57

 

Collateral consists of all of the equity interests in
Lynx sold pursuant to Section 6.8(m), Lynx shall be released from its
Guaranty) in each case without further action by the Administrative Agent and
without any further notice or consent to or of any Lender.

 

(c)           At
the request of the Borrower, the Administrative Agent shall, and each of the
Secured Parties hereby authorizes and directs the Administrative Agent (without
any further notice or consent to or of any Secured Party) to, subordinate, as
reasonably requested by the holders of any Lien granted after the Closing Date
and permitted by Section 6.7(c) and any Permitted Refinancing
thereof, any part of the Collateral that is subject to such Lien.

 

(d)           At
the request of the Borrowers, the Administrative Agent shall, and each of the
Lenders hereby authorizes and directs the Administrative Agent (without further
notice or consent to or of any Lender) to, execute and deliver or file such
termination or partial release statements and take such other actions
(including return of Collateral) as are necessary to terminate, release or
subordinate Liens pursuant to this Section 10.9 promptly upon the
effectiveness of any such termination, release or subordination. The
Administrative Agent and the Lenders hereby acknowledges and agree that the
Borrowers may use the Collateral to the extent permitted under this Agreement.

 

11.  ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF ADMINISTRATIVE AGENT

 

11.1      Assignment and Participations.

 

(a)           Right
to Assign. Each Lender may sell, transfer, negotiate or assign all or a
portion of its rights and obligations hereunder (including all or a portion of
its Commitments and its rights and obligations with respect to Loans) to any
other Person, provided, that (x) the Lenders or its Affiliates may not,
without the prior written consent of the Borrower, sell, transfer, negotiate or
assign all or any portion of its rights hereunder to any Person, other than a
Lender or an Affiliate of a Lender, that is an air carrier or an affiliate of
an air carrier, and (y) the aggregate outstanding principal amount
(determined as of the effective date of the applicable Assignment) of the Loans
and Commitments subject to any such Sale shall be an integral multiple of
$1,000,000, unless such Sale is made to an existing Lender or an Affiliate or
Approved Fund of any existing Lender, is of the assignor’s (together with its
Affiliates and Approved Funds) entire interest in such Loan or is made with the
prior consent of the Borrowers and the Administrative Agent.

 

(b)           Procedure.
The parties to each Sale made in reliance on clause (a) above (other than
those described in clause (e) below) shall execute and deliver to the
Administrative Agent (which shall keep a copy thereof) an Assignment, together
with any existing Note subject to such Sale (or any affidavit of loss therefor
acceptable to the Administrative Agent), any Certificates of Exemption required
to be delivered pursuant to Section 1.11 (which shall also be delivered to
the Borrower Agent) and payment by the assignee of an assignment fee in the
amount of $3,500. Upon receipt of all the foregoing, and conditioned upon such
receipt and upon the Administrative Agent consenting to such Assignment, from and
after the 

 

58

 

effective date specified in such Assignment, the
Administrative Agent shall record or cause to be recorded in the Loan Account
the information contained in such Assignment.

 

(c)           Effectiveness.
Effective upon the entry of such record in the Loan Account, (i) such
assignee shall become a party hereto and, to the extent that rights and
obligations under the Loan Documents have been assigned to such assignee
pursuant to such Assignment, shall have the rights and obligations of a Lender,
(ii) any applicable Note shall be transferred to such assignee through
such entry and (iii) the assignor thereunder shall, to the extent that
rights and obligations under this Agreement have been assigned by it pursuant
to such Assignment, relinquish its rights (except for those surviving the
termination of the Commitments and the payment in full of the Obligations) and
be released from its obligations under the Loan Documents, other than those
relating to events or circumstances occurring prior to such assignment, and, in
the case of an Assignment covering all or the remaining portion of an assigning
Lender’s rights and obligations under the Loan Documents, such Lender shall
cease to be a party hereto.

 

(d)           Grant
of Security Interests. In addition to the other rights provided in this Section 11.1,
each Lender may grant a security interest in, or otherwise assign as
collateral, any of its rights under this Agreement, whether now owned or
hereafter acquired (including rights to payments of principal or interest on
the Loans), to (A) any federal reserve bank (pursuant to Regulation A of
the Federal Reserve Board), without notice to the Administrative Agent or (B) any
holder of, or trustee for the benefit of the holders of, such Lender’s
Securities by notice to the Administrative Agent; provided, that no such holder
or trustee, whether because of such grant or assignment or any foreclosure
thereon (unless such foreclosure is made through an assignment in accordance
with clause (b) above), shall be entitled to any rights of such Lender
hereunder and no such Lender shall be relieved of any of its obligations
hereunder.

 

(e)           Participants
and SPVs. In addition to the other rights provided in this Section 11.1,
each Lender may, (x) with notice to the Administrative Agent, grant to an
SPV the option to make all or any part of any Loan that such Lender would
otherwise be required to make hereunder (and the exercise of such option by
such SPV and the making of Loans pursuant thereto shall satisfy the obligation
of such Lender to make such Loans hereunder) and such SPV may assign to such
Lender the right to receive payment with respect to any Obligation and (y) without
notice to or consent from the Administrative Agent or the Borrowers, sell
participations to one or more Persons in or to all or a portion of its rights
and obligations under the Loan Documents; provided, that, whether as a result
of any term of any Loan Document or of such grant or participation, (i) no
such SPV or participant shall have a commitment, or be deemed to have made an
offer to commit, to make Loans hereunder, and, except as provided in the
applicable option agreement, none shall be liable for any obligation of such
Lender hereunder, (ii) such Lender’s rights and obligations, and the
rights and obligations of the Borrowers towards such Lender, under any Loan
Document shall remain unchanged and each other party hereto shall continue to
deal solely with such Lender, which shall remain the holder of the Obligations
in the Register, except that (A) each such participant and SPV shall be
entitled to the benefit of Section 1.9, Section 1.11 and Section 1.12,
but, in the case of Section 1.11, only to the extent the Borrower Agent
and the Administrative Agent receive a Certificate of Exemption with respect to
any such participant or SPV that is a 

 

59

 

Foreign Person and in each such case only to the
extent of any amount to which such Lender would be entitled in the absence of
any such grant or participation and (B) each such SPV may receive other
payments that would otherwise be made to such Lender with respect to Loans
funded by such SPV to the extent provided in the applicable option agreement
and set forth in a notice provided to the Administrative Agent by such SPV and
such Lender; provided, that in no case (including pursuant to clause (A) or
(B) above) shall an SPV or participant have the right to enforce any of
the terms of any Loan Document, and (iii) the consent of such SPV or
participant shall not be required (either directly, as a restraint on such
Lender’s ability to consent hereunder or otherwise) for any amendments, waivers
or consents with respect to any Loan Document or to exercise or refrain from
exercising any powers or rights such Lender may have under or in respect of the
Loan Documents (including the right to enforce or direct enforcement of the
Obligations), except for those described in clauses (iii)(B) and (iii)(C) of
Section 13.2(a) with respect to amounts, or dates fixed for payment
of amounts, to which such participant or SPV would otherwise be entitled and,
in the case of participants, except for those described in Section 13.2(a)(vii) (or
amendments, consents and waivers with respect to Section 10.9 to release
all or substantially all of the Collateral). No party hereto shall institute
against any SPV grantee of an option pursuant to this clause (e) any
bankruptcy, reorganization, insolvency, liquidation or similar proceeding,
prior to the date that is one year and one day after the payment in full of all
outstanding commercial paper of such SPV; provided, however, that each Lender
having designated an SPV as such agrees to indemnify each Indemnified Person
against any Liability that may be incurred by, or asserted against, such
Indemnified Person as a result of failing to institute such proceeding
(including a failure to get reimbursed by such SPV for any such Liability). The
agreement in the preceding sentence shall survive the termination of the Commitments
and the payment in full of the Obligations.

 

11.2      Appointment of Administrative Agent

 

(a)           Each
of the Lenders hereby irrevocably appoints Wells Fargo Bank Northwest, National
Association to act on its behalf as the Administrative Agent hereunder and
under the other Loan Documents and authorizes the Administrative Agent to take
such actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto.  The provisions of this Article are
solely for the benefit of the Administrative Agent and the Lenders, and the
Borrowers shall not have rights as a third party beneficiary of any of such
provisions.

 

(b)           The
Administrative Agent shall also act as the “collateral agent” under the Loan
Documents, and each of the Lenders hereby irrevocably appoints and authorizes
the Administrative Agent to act as the agent of such Lender for purposes of
acquiring, holding and enforcing any and all Liens on Collateral granted by any
of the Borrowers to secure any of the Obligations, together with such powers
and discretion as are reasonably incidental thereto.  In this connection, the Administrative Agent,
as “collateral agent” and any co-agents, sub-agents and attorneys-in-fact
appointed by the Administrative Agent pursuant to Section 11.6 for
purposes of holding or enforcing any Lien on the Collateral (or any portion
thereof) granted under the Loan Documents, or for exercising any rights and
remedies hereunder or thereunder at the direction of the Administrative Agent),
shall be entitled to the benefits of all 

 

60

 

provisions of this Article 11, as though such
co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under
the Loan Documents) as if set forth in full herein with respect thereto.

 

11.3      Rights as a Bank.

 

The Person serving as the Administrative Agent
hereunder and its Affiliates may accept deposits from, lend money to, act as
the financial advisor or in any other advisory capacity for and generally
engage in any kind of business with the Borrowers or any Subsidiary or other
Affiliate thereof as if such Person were not the Administrative Agent hereunder
and without any duty to account therefor to the Lenders.

 

11.4      Exculpatory Provisions.

 

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

 

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

 

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

 

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

 

(d)           The
Administrative Agent shall not be liable for any action taken or not taken by
it (i) with the consent or at the request of the Requisite Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 13.2) or (ii) in the absence of
its own gross negligence or willful misconduct. 
The Administrative Agent shall be deemed not to have knowledge of any
Default unless and until notice describing such Default is given to the
Administrative Agent by the Borrowers or a Lender.

 

(e)           The
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or
in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection 

 

61

 

herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein or the occurrence of any Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document, or the
creation, perfection or priority of any Lien purported to be created by the
Collateral Documents, (v) the value or the sufficiency of any Collateral,
or (v) the satisfaction of any condition set forth in Article 2 or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent.

 

11.5      Reliance by Administrative Agent.

 

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

 

11.6      Delegation of Duties.

 

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

 

11.7      Resignation of Administrative Agent.

 

The Administrative Agent may at any time give notice
of its resignation to the Lenders and the Borrowers.  Upon receipt of any such notice of
resignation, the Requisite Lenders shall have the right, in consultation with
the Borrowers, to appoint a successor, which shall be a bank with an office in
the United States, or an Affiliate of any such bank with an office in the
United States.  If no such successor
shall have been so appointed by the Requisite Lenders and shall have accepted
such appointment within 30 

 

62

 

days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may on behalf
of the Lenders, appoint a successor Administrative Agent meeting the
qualifications set forth above; provided that if the Administrative Agent shall
notify the Borrowers and the Lenders that no qualifying Person has accepted
such appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (a) the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any collateral security held
by the Administrative Agent on behalf of the Lenders under any of the Loan
Documents, the retiring Administrative Agent shall continue to hold such
collateral security until such time as a successor Administrative Agent is
appointed) and (b) all payments, communications and determinations
provided to be made by, to or through the Administrative Agent shall instead be
made by or to each Lender directly, until such time as the Requisite Lenders
appoint a successor Administrative Agent as provided for above in this
Section.  Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring (or retired) Administrative Agent, and the retiring
Administrative Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this Section). 
The fees payable by the Borrowers to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrowers and such successor. 
After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Persons in respect of any actions taken
or omitted to be taken by any of them while the retiring Administrative Agent
was acting as Administrative Agent.

 

11.8      Non-Reliance on Administrative Agent
and Other Lenders.

 

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

 

11.9      Collateral and Guaranty Matters.

 

Each of the Lenders irrevocably authorize the
Administrative Agent, at its option and in its discretion,

 

63

 

(a)                                  to release
any Lien on any property granted to or held by the Administrative Agent under
any Loan Document (i) upon the Termination Date, (ii) that is sold or
to be sold as part of or in connection with any sale permitted hereunder or
under any other Loan Document, or (iii) if approved, authorized or
ratified in writing in accordance with Section 13.2;

 

(b)                                 to release
any Borrower from its obligations hereunder if such Person ceases to be a
Subsidiary as a result of a transaction permitted hereunder; and

 

(c)                                  subordinate
any Lien on any property granted to or held by the Administrative Agent under
any Loan Document to the holder of any Permitted Lien to the extent expressly
permitted hereunder.

 

Upon request by the Administrative Agent at any
time, the Requisite Lenders will confirm in writing the Administrative Agent’s
authority to release or subordinate its interest in particular types or items
of property, or to release any Borrower from its obligations hereunder pursuant
to this 11.9.  In each case as specified
in this 11.9, the Administrative Agent will, at the Borrowers’ expense, execute
and deliver to the applicable Loan Party such documents as such Loan Party may
reasonably request to evidence the release of such item of Collateral from the
assignment and security interest granted under the Loan Documents or to
subordinate its interest in such item, or to release any Borrower from its
obligations hereunder, in each case in accordance with the terms of the Loan
Documents and this Section 11.9

 

11.10                     Indemnification.

 

Lenders agree to indemnify the Administrative Agent
(to the extent not reimbursed by Borrowers and without limiting the Obligations
of Borrowers hereunder), ratably according to their respective Pro Rata Shares,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Administrative Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted to be taken
by the Administrative Agent in connection therewith; provided, that no Lender
shall be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent’s gross negligence or willful
misconduct. Without limiting the foregoing, each Lender agrees to reimburse the
Administrative Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and each other Loan Document,
to the extent that the Administrative Agent is not reimbursed for such expenses
by Borrowers.

 

64

 

12.       SUCCESSORS AND ASSIGNS

 

12.1                           Successors
and Assigns.

 

This
Agreement and the other Loan Documents shall be binding on and shall inure to
the benefit of each Borrower, the Administrative Agent, the Lenders and their
respective successors and assigns (including, in the case of any Borrower, a
debtor-in-possession on behalf of such Borrower), except as otherwise provided
herein or therein. No Borrower may assign, transfer, hypothecate or otherwise
convey its rights, benefits, obligations or duties hereunder or under any of
the other Loan Documents without the prior express written consent of the
Administrative Agent and the Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Borrower without the prior express
written consent of the Administrative Agent and Lenders shall be void. The
terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Borrower, the Administrative Agent and
Lenders with respect to the transactions contemplated hereby and no Person
shall be a third party beneficiary of any of the terms and provisions of this
Agreement or any of the other Loan Documents.

 

13.       MISCELLANEOUS

 

13.1                           Complete
Agreement; Modification of Agreement.

 

The
Loan Documents constitute the complete agreement between the parties with
respect to the subject matter thereof and may not be modified, altered or
amended except as set forth in Section 13.2. Any letter of interest,
commitment letter, fee letter or confidentiality agreement, if any, between any
Borrower and the Administrative Agent or any Lender or any of their respective
Affiliates, predating this Agreement and relating to a financing of
substantially similar form, purpose or effect shall be superseded by this
Agreement.

 

13.2                           Amendments
and Waivers.

 

(a)                                  Except as
otherwise expressly provided in this Agreement, the Requisite Lenders (or the
Administrative Agent with the prior written consent of the Requisite Lenders),
on the one hand, and the Borrowers, on the other hand, may from time to time
enter into written amendments, supplements or modifications for the purpose of
adding, deleting or modifying any provision of any Loan Document or changing in
any manner the rights, remedies, obligations and duties of the parties thereto,
and with the written consent of the Requisite Lenders, the Administrative
Agent, on behalf of Lenders, may execute and deliver a written instrument
waiving, on such terms and conditions as may be specified in such instrument,
any of the requirements applicable to any Borrower, as the case may be, party
to any Loan Document, or any Default or Event of Default and its consequences;
provided, that:

 

(i)                                     no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent and the Requisite Lenders affect the rights or duties of
the Administrative Agent under this Agreement or the other Loan Documents; and

 

65

 

(ii)                                  the
Administrative Agent may, with the consent of the Borrowers and Initial Lenders
holding not less than 51% of the outstanding Loans of all Initial Lenders,
amend, modify or supplement any Loan Document to cure any ambiguity,
typographical error, defect or inconsistency;

 

provided, further, that no such amendment,
supplement, modification or waiver shall be effective to, without the prior
written consent, in addition to Lenders required above to take such action, of
each Lender directly affected thereby:

 

(iii)                               (A) modify
the Commitment of such Lender or subject such Lender to any additional
obligation, (B) extend any scheduled final maturity of any Loan owing to
such Lender, (C) waive or reduce, or postpone or cancel any scheduled date
fixed for the payment of principal of or interest on any such Loan or any fees
owing to such Lender (it being understood that any mandatory prepayment
required under Section 1.2(b) does not constitute any scheduled date
fixed for payments), (D) reduce, or release any Borrower from its
obligations to repay, any other Obligation owed to such Lender or (E) consent
to the assignment or transfer by any Borrower of any of its rights and
obligations under this Agreement;

 

(iv)                              amend,
modify or waive any provision of Section 1.2 or 1.3;

 

(v)                                 subordinate
any of the Obligations or Liens securing the Obligations, except as permitted
by this Agreement; or

 

(vi)                              (A) amend,
modify or waive this Section 13.2 or any other provision specifying the
Administrative Agent, Lenders or group of Lenders required for any amendment,
modification or waiver thereof or (B) change the respective percentages
specified in the definition of “Requisite Lenders”;

 

provided,
further, that no such amendment, supplement, modification or waiver shall be
effective to, without the prior written consent of all Lenders:

 

(vii)                           release or
permit any Borrower to sell or otherwise dispose of all or substantially all of
the Collateral provided for in the Collateral Documents; provided, however,
that no waiver, amendment, supplement or modification shall be required for the
Administrative Agent to take additional Collateral pursuant to any Loan
Document.

 

(b)                                 Any
waiver, amendment, supplement or modification pursuant to this Section 13.2
shall apply equally to each of Lenders and shall be binding upon Lenders and
all future holders of any of the Loans, the Notes, and all other Obligations.

 

(c)                                  To the
extent (a) the consent or vote of any Lender is required, but not obtained
(any such Lender whose consent is not obtained as described in this Section 13.2(c) being
referred to as a “Non-Consenting Lender”)
in connection with any proposed amendment, modification, supplement, waiver or
exercise of remedies (a “Proposed 

 

66

 

Change”) and (b) the
Administrative Agent shall have consented to such Proposed Change, at the
request of Borrower and with the consent of the Administrative Agent (not to be
unreasonably withheld), any Person reasonably acceptable to such Administrative
Agent (which Person may be any Lender acting as such Administrative Agent and
shall have consented to such Proposed Change) shall have the right (but not the
obligation) to purchase from such Non-Consenting Lender, and such
Non-Consenting Lender shall, upon the request of such Administrative Agent,
sell and assign to such Person all of the applicable Commitments and Loans of
such Non-Consenting Lender for an amount equal to the principal balance of all
applicable Loans held by such Non-Consenting Lender and all accrued and unpaid
interest and fees with respect thereto through the date of such sale and
purchase (the “Purchase Amount”); provided,
however, that such sale and purchase (and the corresponding assignment) shall
not be effective until (A) such Administrative Agent shall have received
from such Person an agreement in form and substance satisfactory to such
Administrative Agent whereby such Person shall agree to be bound by the terms
hereof and (B) such Non-Consenting Lender shall have received the Purchase
Amount from such Person. Each Lender agrees that, if it becomes a
Non-Consenting Lender, it shall execute and deliver to the Administrative Agent
the Note or Notes evidencing such Commitments or Loans and an Assignment
Agreement to evidence such sale and assignment; provided, however, that the
failure of any Non-Consenting Lender to deliver such Note or Notes or execute
an Assignment Agreement shall not render such sale and purchase (and the
corresponding assignment) invalid.

 

(d)                                 Upon the
Termination Date, the Administrative Agent shall deliver to the Borrowers
termination statements, mortgage releases, reconveyances and other documents
necessary or appropriate to evidence the termination of the Liens securing
payment of the Obligations.

 

13.3                           Fees and
Expenses.

 

The Borrowers shall reimburse the Administrative Agent and each Initial
Lender for all reasonable and documented out-of-pocket fees, costs and expenses
(including the reasonable and documented fees and expenses of all of its
counsel, advisors, consultants and auditors) incurred in connection with the
negotiation, preparation and filing and/or recordation of the Loan Documents
and incurred by it in connection with:

 

(a)                                  any
amendment, modification or waiver of, or consent with respect to, or
termination of, any of the Loan Documents or advice in connection with the
administration of the Loans made pursuant hereto or its rights hereunder or
thereunder;

 

(b)                                 any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
the Administrative Agent, any Lender, any Borrower or any other Person and
whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against any or all of the
Borrowers or any other Person that may be obligated to the Administrative Agent
by virtue of the Loan Documents, including any such litigation, contest,
dispute, suit, proceeding or action 

 

67

 

arising in connection with any work-out or
restructuring of the Loans during the pendency of one or more Events of
Default; provided, that no Person shall be entitled to reimbursement under this
clause (b) in respect of any litigation, contest, dispute, suit,
proceeding or action to the extent any of the foregoing results from such
Person’s gross negligence, bad faith or willful misconduct as finally
determined by a court of competent jurisdiction;

 

(c)                                  any
attempt to enforce any remedies of the Administrative Agent or any Lender
against any or all of the Borrowers or any other Person that may be obligated
to the Administrative Agent or any Lender by virtue of any of the Loan
Documents, including any such attempt to enforce any such remedies in the
course of any work-out or restructuring of the Loans during the pendency of one
or more Events of Default;

 

(d)                                 any
workout or restructuring of the Loans during the pendency of one or more Events
of Default; and

 

(e)                                  efforts to
(i) monitor the Loans or any of the other Obligations, (ii) evaluate,
observe or assess any of the Borrower s or their respective affairs, and (iii) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise
dispose of any of the Collateral, in each case pursuant to and in accordance
with the terms of the Loan Documents;

 

including,
as to each of clauses (a) through (e) above, all reasonable and
documented attorneys’ and other professional and service providers’ fees
arising from such services and other advice, assistance or other
representation, including those in connection with any appellate proceedings,
and all expenses, costs, charges and other fees incurred by such counsel and
others in connection with or relating to any of the events or actions described
in this Section 13.3, all of which shall be payable, on demand, by the
Borrowers to the Administrative Agent and the Initial Lenders and shall be part
of the Obligations; provided however that the Borrowers’ obligation to
reimburse for reasonable and documented attorneys’ fees pursuant to this Section 13.3
shall be limited to one counsel for the Administrative Agent and all Initial
Lenders collectively. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: reasonable and documented fees,
costs and expenses of accountants, environmental advisors, appraisers, investment
bankers, management and other consultants and paralegals; court costs and
expenses; photocopying and duplication expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; charges for any E-System; and
expenses for travel, lodging and food paid or incurred in connection with the
performance of such legal or other advisory services.

 

13.4                           No Waiver.

 

The
Administrative Agent’s or any Lender’s failure, at any time or times, to
require strict performance by the Borrowers of any provision of this Agreement
or any other Loan Document shall not waive, affect or diminish any right of the
Administrative Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 13.2, none of the undertakings,
agreements, warranties, covenants and representations of any Borrower contained
in this Agreement or any of the other 

 

68

 

Loan
Documents and no Default or Event of Default by any Borrower shall be deemed to
have been suspended or waived by the Administrative Agent or any Lender, unless
such waiver or suspension is by an instrument in writing signed by an officer
of or other authorized employee of the Administrative Agent and the applicable
required Lenders and directed to the Borrowers specifying such suspension or
waiver.

 

13.5                           Remedies.

 

The
Administrative Agent’s and Lenders’ rights and remedies under this Agreement
shall be cumulative and nonexclusive of any other rights and remedies that the
Administrative Agent or any Lender may have under any other agreement,
including the other Loan Documents, by operation of law or otherwise. Recourse
to the Collateral shall not be required.

 

13.6                           Severability.

 

Wherever
possible, each provision of this Agreement and the other Loan Documents shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement or any other Loan Document shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement or such other Loan Document.

 

13.7                           Conflict
of Terms.

 

Except
as otherwise provided in this Agreement or any of the other Loan Documents by
specific reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement conflicts with any provision in any of
the other Loan Documents, the provision contained in this Agreement shall
govern and control.

 

13.8                           Confidentiality.

 

The
Administrative Agent and Lender agree to use commercially reasonable efforts
(equivalent to the efforts the Administrative Agent or Lender applies to
maintain the confidentiality of its own confidential information) to maintain
as confidential all confidential information provided to them by the Borrowers
and designated as confidential for a period of two (2) years following
receipt thereof, except that the Administrative Agent and Lender may disclose
such information (a) to Persons employed or engaged by the Administrative
Agent or Lender; (b) to any bona fide assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained
in this Section 13.8 (and any such bona fide assignee or participant or
potential assignee or participant may disclose such information to Persons
employed or engaged by them as described in clause (a) above); (c) as
required or requested by any Governmental Authority or reasonably believed by
the Administrative Agent or Lender to be compelled by any court decree,
subpoena or legal or administrative order or process; (d) as, on the
advice of the Administrative Agent’s or Lender’s counsel, is required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any Litigation to which the Administrative Agent or Lender
is a party related to the Loan Documents or the Loans or other Obligations
thereunder; (f) that ceases to be confidential through no fault of the 

 

69

 

Administrative
Agent or Lender; (g) to its affiliates and its and their directors,
officers, employees, advisors, representatives or agents, and (h) to
ratings agencies.

 

13.9                           GOVERNING
LAW.

 

EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN
DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. EACH BORROWER HEREBY CONSENTS AND AGREES THAT UNITED
STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK SHALL HAVE
NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
THE BORROWERS, THE ADMINISTRATIVE AGENT AND LENDERS PERTAINING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT
THE ADMINISTRATIVE AGENT, LENDERS AND THE BORROWERS ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK COUNTY AND; PROVIDED, FURTHER THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE ADMINISTRATIVE AGENT. EACH BORROWER
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION
THAT SUCH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH
BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL ADDRESSED TO THE BORROWER AGENT AT THE ADDRESS SET FORTH IN
ANNEX F OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF THE BORROWER AGENT’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

 

13.10                     Notices.

 

(a)                                  Except as
otherwise provided herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication shall or

 

70

 

may be given to or served upon any of the parties by
any other parties, or whenever any of the parties desires to give or serve upon
any other parties any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given or
delivered (a) upon the earlier of actual receipt and three (3) Business
Days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section 13.10);
(c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered
by messenger, all of which shall be addressed to the party to be notified and
sent to the address or facsimile number indicated in Annex F or to such other
address (or facsimile number) as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than the Borrowers, Borrower Agent, Lenders
or the Administrative Agent) designated in Annex F to receive copies shall in
no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.

 

(b)                                 Subject to
the provisions of Section 13.10(a), each of the Administrative Agent, the
Borrowers, the Lenders, and each of their Related Persons is authorized (but
not required) to transmit, post or otherwise make or communicate, in its sole
discretion, Electronic Transmissions in connection with any Loan Document and
the transactions contemplated therein; provided, that notices to any Borrower
shall not be made by any posting to an Internet or extranet based site or other
equivalent service but may be made by e-mail or E-fax, if available, so long as
such notices are also sent in accordance with Section 13.10(a). Each
Borrower and each Lender hereby acknowledges and agrees that the use of
Electronic Transmissions is not necessarily secure and that there are risks
associated with such use, including risks of interception, disclosure and abuse
and each indicates it assumes and accepts such risks by hereby authorizing the
transmission of Electronic Transmissions.

 

(c)                                  Subject to
the provisions of Section 13.10(a), (i)(A) no posting to any E-System
shall be denied legal effect merely because it is made electronically, (B) each
E Signature on any such posting shall be deemed sufficient to satisfy any
requirement for a “signature” and (C) each such posting shall be deemed
sufficient to satisfy any requirement for a “writing”, in each case including
pursuant to any Loan Document, any applicable provision of any Uniform
Commercial Code, the federal Uniform Electronic Transactions Act, the
Electronic Signatures in Global and National Commerce Act and any substantive
or procedural Requirement of Law governing such subject matter, (ii) each
such posting that is not readily capable of bearing either a signature or a
reproduction of a signature may be signed, and shall be deemed signed, by attaching
to, or logically associating with such posting, an E-Signature, upon which each
Lender and each Borrower may rely and assume the authenticity thereof, (iii) each
such posting containing a signature, a reproduction of a signature or an
E-Signature shall, for all intents and purposes, have the same effect and
weight as a signed paper original and (iv) each party hereto or
beneficiary hereto agrees not to contest the validity or enforceability of any
posting on any E-System or E-Signature on any such 

 

71

 

posting under the provisions of any applicable
Requirement of Law requiring certain documents to be in writing or signed;
provided, however, that nothing herein shall limit such party’s or beneficiary’s
right to contest whether any posting to any E-System or E-Signature has been
altered after transmission.

 

(d)                                 All uses
of an E-System shall be governed by and subject to, in addition to this Section 13.10,
separate terms and conditions posted or referenced in such E-System and related
contractual obligations executed by the Lenders and the Borrowers in connection
with the use of such E-System.

 

(e)                                  ALL
E-SYSTEMS AND ELECTRONIC TRANSMISSIONS SHALL BE PROVIDED “AS IS” AND “AS
AVAILABLE”. NONE OF THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PERSONS
WARRANTS THE ACCURACY, ADEQUACY OR COMPLETENESS OF ANY E-SYSTEMS OR ELECTRONIC
TRANSMISSION AND DISCLAIMS ALL LIABILITY FOR ERRORS OR OMISSIONS THEREIN. NO
WARRANTY OF ANY KIND IS MADE BY THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED
PERSONS IN CONNECTION WITH ANY E SYSTEMS OR ELECTRONIC COMMUNICATION, INCLUDING
ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OF THIRD-PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE
DEFECTS. The Borrowers agree that the Administrative Agent has no
responsibility for maintaining or providing any equipment, software, services
or any testing required in connection with any Electronic Transmission or
otherwise required for any E-System.

 

13.11                     Section Titles.

 

The
Section titles and Table of Contents contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement between the parties hereto.

 

13.12                     Counterparts.

 

This
Agreement may be executed in any number of separate counterparts, each of which
shall collectively and separately constitute one agreement.

 

13.13                     WAIVER OF
JURY TRIAL.

 

THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE, AMONG THE ADMINISTRATIVE AGENT, LENDERS AND ANY BORROWER ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO, PROVIDED THAT

 

72

 

13.14                     [Reserved]

 

13.15                     Advice of
Counsel.

 

Each
of the parties represents to each other party hereto that it has discussed this
Agreement and, specifically, the provisions of Sections 13.9 and 13.13, with
its counsel.

 

13.16                     No Strict
Construction.

 

The
parties hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.

 

13.17                     Patriot
Act.

 

Each Lender and Administrative Agent
(for itself and not on behalf of any Lender) hereby notifies each Borrower that
pursuant to the requirements of the Patriot Act, it is required to obtain,
verify and record information that identifies each Borrower, which information
includes the name and address of such Borrower and other information that will
allow such Lender or Administrative Agent, as applicable, to identify such
Borrower in accordance with the Patriot Act.

 

[The remainder of this page is intentionally left blank.]

 

73

 

IN
WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.

 

	
   

  	
  FRONTIER
  AIRLINES HOLDINGS, INC., as a

  Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

74

 

	
   

  	
  LYNX
  AVIATION, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

75

 

	
   

  	
  FRONTIER
  AIRLINES, INC., as a Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

76

 

	
   

  	
  WELLS
  FARGO BANK NORTHWEST,

  NATIONAL ASSOCIATION, as Administrative

  Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

77

 

	
   

  	
  REPUBLIC
  AIRWAYS HOLDINGS, INC., as a

  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

78

 

	
   

  	
  CREDIT
  SUISSE, CAYMAN ISLANDS

  BRANCH, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

79

 

	
   

  	
  AQR
  CAPITAL, LLC, as a Lender

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CNH
  PARTNERS, LLC, as a Lender

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

80

 

ANNEX A

TO

CREDIT AGREEMENT

 

DEFINITIONS

 

Capitalized
terms used in the Loan Documents shall have (unless otherwise provided
elsewhere in the Loan Documents) the following respective meanings and all
references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to
the Agreement:

 

“Account Debtor” means any Person who may become obligated to
any Borrower under, with respect to, or on account of, an Account, Chattel
Paper or General Intangibles (including a payment intangible).

 

“Accounts” means all “accounts,” as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, including (a) all
accounts receivable, other receivables, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper or
Instruments), (including any such obligations that may be characterized as an
account or contract right under the Code), (b) all of each Borrower’s
rights in, to and under all purchase orders or receipts for goods or services, (c) all
of each Borrower’s rights to any goods represented by any of the foregoing
(including unpaid sellers’ rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), (d) all
healthcare insurance receivables, and (e) all collateral security of any
kind, now or hereafter in existence, given by any Account Debtor or other
Person with respect to any of the foregoing.

 

“Act” has the meaning ascribed to it in Section 10.7(h).

 

“Administrative Agent” has the meaning ascribed to it in the
Preamble.

 

“Affiliate” means, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, 20% or more of the Stock having
ordinary voting power in the election of directors of such Person, (b) each
Person that controls, is controlled by or is under common control with such
Person, and (c) each of such Person’s joint venturers and partners who are
Affiliates under clause (a) hereof. For the purposes of this definition, “control” of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, that the term “Affiliate,” when used with reference to a
Borrower, shall specifically exclude the Administrative Agent and each Lender.

 

“Aggregate Cash On Hand” means the amount of cash and Cash
Equivalents of the Borrowers that may be classified, in accordance with GAAP,
as “unrestricted” on the consolidated balance sheets of the Borrowers.

 

A-1

 

“Agreement” means this Agreement, as the same may be amended,
supplemented, restated or otherwise modified from time to time.

 

“Air Carrier” means each of Frontier Airlines and Lynx.

 

“Airport Authority” means any city or any public or private
board or other body or organization chartered or otherwise established for the
purpose of administering, operating or managing airports or related facilities,
which in each case is an owner, administrator, operator or manager of one or
more airports or related facilities.

 

“Appendices” has the meaning ascribed to it in the recitals
to the Agreement.

 

“Approved Fund” means, with respect to any Lender, any Person
(other than a natural Person) that (a) is or will be engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar
extensions of credit in the ordinary course of its business and (b) is
advised or managed by (i) such Lender, (ii) any Affiliate of such
Lender or (iii) any Person (other than an individual) or any Affiliate of
any Person (other than an individual) that administers or manages such Lender.

 

“Asset Sale” has the meaning ascribed to it in Section 6.8.

 

“Assignment” means an assignment and assumption agreement
substantially in the form published by the Loan Syndications and Trading
Association or another form reasonably acceptable to the Administrative Agent.

 

“Aviation Authority” means any nation or government or
national or governmental authority of any nation, state, province or other
political subdivision thereof, and any agency, department, regulator, airport
authority, air navigation authority or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government in respect of the regulation of commercial aviation or the
registration, airworthiness or operation of civil aircraft and having
jurisdiction over the Borrowers including, without limitation, the FAA and DOT.

 

“Avoidance Actions” shall mean the
Borrowers’ claims and causes of action arising under Sections 502(d), 544, 545,
547, 548 or 550 of the Bankruptcy Code or any other avoidance action under the
Bankruptcy Code; provided, that “Avoidance
Actions” shall not include any Proceeds of such property.

 

“Bankruptcy Code” means the provisions of Title 11 of the
United States Code, 11 U.S.C. Sections 101 et seq.

 

“Bankruptcy Court” has the meaning ascribed to it in the
Preamble or shall mean any other court having competent jurisdiction over the
Cases.

 

“Blocked Account” means any account of any Borrower that is
subject to a Blocked Account Agreement or a Control Agreement pursuant to Annex
C.

 

A-2

 

“Blocked Account Agreement” means a control agreement, in
form and substance satisfactory to the Administrative Agent, among any
Borrower, the Administrative Agent for the benefit of the Lenders and the
applicable bank or financial institution. Any Blocked Account Agreement
substantially in the form of any Blocked Account Agreement in effect on the
Closing Date shall be deemed to be satisfactory to the Administrative Agent.

 

“Books and Records” means books and records of the Borrowers,
including financial, corporate, operations and sales books, records, books of
account, sales and purchase records, lists of suppliers and customers,
formulae, business reports, plans and projections and all other documents,
logs, surveys, plans, files, records, assessments, correspondence, and other
data and information, financial or otherwise, and all aircraft manuals, log
books and other documents and records, including all data and information
stored on computer-related or other electronic media.

 

“Borrower” or “Borrower” has
the meaning ascribed thereto in the preamble to the Agreement.

 

“Borrower Agent” has the meaning ascribed thereto in the
preamble to the Agreement.

 

“Budget” has the meaning ascribed to it in Section (c) of
Annex D.

 

“Business Day” means any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in the State of
New York.

 

“Capital Lease” means, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person.

 

“Capital Lease Obligation” means, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder
that, in accordance with GAAP, would appear on a balance sheet of such lessee
in respect of such Capital Lease.

 

“Carve-Out” means an amount, that shall not be subject to
liens, rights or claims of the Administrative Agent, the Lenders or First Data,
equal to:

 

(i) the
lesser of (x) Aggregate Cash on Hand on the Carve Out Date and (y) $18,000,000;
plus

 

(ii) 50%
of the amount, if positive, of (x) Aggregate Cash on Hand on the Carve Out
Date minus (y) $18,000,000; plus

 

(iii) following
the receipt by the Administrative Agent and the Lenders of an amount equal to
the aggregate outstanding principal amount of the Loans outstanding hereunder
(excluding any interest added thereto pursuant to Section 1.5), 20% of the
proceeds of any Collateral other than the Collateral owned by Lynx, such that,
until all the monetary Obligations (other than the Excluded Obligations) have
been paid in full, the sharing shall 

 

A-3

 

be
20% in respect of the Carve-Out and 40% to each of (x) First Data and (y) the
Administrative Agent and the Lenders.

 

which
funds shall be used to satisfy (i) any unpaid fees of the U.S. Trustee or
the Clerk of the Bankruptcy Court pursuant to 28 U.S.C. § 1930(a), (ii) any
fees and expenses incurred by any trustee under section 726(b) of the
Bankruptcy Code, (iii) the aggregate allowed unpaid fees and expenses
payable under sections 330 and 331 of the Bankruptcy Code to professional
persons retained pursuant to an order of the Bankruptcy Court by any Borrower
or any Committee and (iv) all other expenses related to a wind-down of the
Borrowers’ estates, such as rent, salaries, utilities and debt service on owned
aircraft until they can be sold.  In the
event the Carve-Out is reduced by any amount during an Event of Default, upon
the effectiveness of any cure or waiver of such Event of Default pursuant to
the terms of this Agreement, the Carve-Out shall be increased by such amount.

 

“Carve Out Date” means the earlier to occur of (i) the
termination of the Commitments and/or acceleration of the Obligations pursuant
to Section 8.2(b) and (ii) the date on which Frontier
voluntarily ceases all flight operations.

 

“Cases” has the meaning ascribed to it in the Preamble.

 

“Cash Collateral” has the meaning ascribed to it in Section 8.1(m).

 

“Cash Equivalents” means Permitted Investments and such other
cash and cash equivalents acceptable to the Administrative Agent.

 

“Cash Interest” has the meaning ascribed to it in Section 1.5(a).

 

“Cash Management Systems” has the meaning ascribed to it in Section 5.15.

 

“CEO Event” means Sean Menke no longer being the President
and Chief Executive Officer of Frontier Holdings.

 

“CERCLA” means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.).

 

“Certificate of Exemption” has the meaning ascribed to it in Section 1.11(c).

 

“Certificated Air Carrier” means a Person holding an air
carrier operating certificate issued pursuant to Chapter 447 of Title 49, for
aircraft capable of carrying ten or more individuals or 6,000 pounds or more of
cargo, or that is otherwise certified or registered to the extent required to
fall within the purview of Section 1110 of the Bankruptcy Code.

 

“Change of Control” means that (i) during any period of
twelve consecutive calendar months, individuals who at the beginning of such
period constituted the board of directors of any Borrower (together with any
new directors whose election by the board of directors of such Borrower or
whose nomination for election by the Stockholders of such Borrower was approved

 

A-4

 

by
a vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason, other than death
or disability, to constitute a majority of the directors then in office or (ii) Frontier
Holdings shall fail to own 100% of the issued and outstanding Stock of Frontier
Airlines or, except to the extent permitted by Section 6.8(m), Lynx.

 

“Charges” means all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable), levies, assessments, charges, liens, claims or
encumbrances (including interest and penalties relating thereto) upon or
relating to (a) the Collateral, (b) the Obligations, (c) the
employees, payroll, income or gross receipts of any Borrower, (d) any
Borrower’s ownership or use of any properties or other assets, or (e) any
other aspect of any Borrower’s business.

 

“Chattel Paper” means any “chattel paper,” as such term is
defined in the Code, including electronic chattel paper, now owned or hereafter
acquired by any Borrower, wherever located.

 

“Claim” has the meaning ascribed to such term in Section 101(5) of
the Bankruptcy Code.

 

“Closing Date” has the meaning specified in Section 2.1.

 

“Code” means the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of New York; provided,
that to the extent that the Code is used to define any term herein or in any
Loan Document and such term is defined differently in different Articles or
Divisions of the Code, the definition of such term contained in Article or
Division 9 shall govern; provided, further, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, the Administrative Agent’s or any
Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as
enacted and in effect in a jurisdiction other than the State of New York, the
term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of
the provisions thereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.

 

“Collateral” means all property and interests in property and
proceeds thereof now owned or hereafter acquired by any Borrower in or upon
which a Lien is granted under this Agreement or any Collateral Documents.

 

“Collateral Documents” means this Agreement and all
agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.

 

“Commercial Tort Claim” means any “commercial tort claim,” as
such term is defined in the Code, now owned or hereafter acquired by any
Borrower.

 

“Commission” has the meaning ascribed to it in Section 10.7(h).

 

“Commitment” means (a) as to any Lender, the commitment
of such Lender to make its Pro Rata Share of the Stage 1 Loan as set forth on
Annex G to the Agreement or in the most recent 

 

A-5

 

Assignment
Agreement executed by such Lender, and (b) as to all Lenders, the
aggregate commitment of all Lenders to make the Stage 1 Loan as to each of
clauses (a) and (b), as such Commitments may be reduced, amortized or
adjusted from time to time in accordance with the Agreement. After advancing
the aggregate amount of the Commitment, each reference to a Lender’s Commitment
shall refer to that Lender’s Pro Rata Share of the outstanding Loan.

 

“Commitment Fee” has the meaning ascribed to it in Section 1.6(a).

 

“Committee” means the official statutory committee of
unsecured creditors approved in the Cases pursuant to section 1102 of the
Bankruptcy Code.

 

“Committee Documents” has the meaning ascribed to it in
clause (j) of Annex D.

 

“Compliance Certificate” has the meaning ascribed to it in
clause (b) of Annex D.

 

“Computer Software” means all computer software and databases
(including, without limitation, source code, object code and all related
documentation).

 

“Contracts” means all “contracts,” as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Borrower may now or hereafter have any right, title or interest, including any
agreement relating to the terms of payment or the terms of performance of any
Account.

 

“Control Agreement” means an agreement, in form and substance
satisfactory to the Administrative Agent, between the Administrative Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities
in the name of any Borrower, (ii) a securities intermediary with respect
to securities, whether certificated or uncertificated, securities entitlements
and other financial assets held in a securities account in the name of any
Borrower, (iii) a futures commission merchant or clearinghouse, as
applicable, with respect to commodity accounts and commodity contracts held by
any Borrower, whereby, among other things, the issuer, securities intermediary
or futures commission merchant limits any security interest in the applicable
financial assets in a manner reasonably satisfactory to the Administrative
Agent, acknowledges the Lien of Administrative Agent for the benefit of the
Lenders on such financial assets, and agrees to follow the instructions or
entitlement orders of the Administrative Agent without further consent by the
affected Borrower. Any Control Agreement substantially in the form of any
Control Agreement (or Blocked Account Agreement) in effect on the Closing Date
shall be deemed to be satisfactory to the Administrative Agent.

 

“Copyright License” means any and all rights now owned or
hereafter acquired by any Borrower under any written agreement granting any
right to use any Copyright or Copyright registration.

 

“Copyright Security Agreements” means the Copyright Security
Agreements made in favor of Administrative Agent for the benefit of the
Lenders, by each applicable Borrower substantially in the form of Exhibit C
hereto.

 

A-6

 

“Copyrights” means all of the following now owned or
hereafter adopted or acquired by any Borrower: (a) all copyrights and
General Intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States, any state or territory thereof, or any other country or any political
subdivision thereof, and (b) all reissues, extensions or renewals thereof.

 

“Court Documents” has the meaning ascribed to it in clause (i) on
Annex D.

 

“Default” means any event that, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.

 

“Default Rate” has the meaning ascribed to it in Section 1.5(e).

 

“Deposit Accounts” means all “deposit accounts” as such term
is defined in the Code, now or hereafter held in the name of any Borrower.

 

“Documents” means any “documents,” as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, wherever located.

 

“Dollars” or “$” means lawful
currency of the United States of America.

 

“DOT” shall mean the United States Department of
Transportation or any analogous successor agency.

 

“E-Fax” means any system used to receive or transmit faxes
electronically.

 

“E-Signature” means the process of attaching to or logically
associating with an Electronic Transmission an electronic symbol, encryption,
digital signature or process (including the name or an abbreviation of the name
of the party transmitting the Electronic Transmission) with the intent to sign,
authenticate or accept such Electronic Transmission.

 

“E-System” means any electronic system, including Intralinks(R) and
any other Internet or extranet-based site, whether such electronic system is
owned, operated or hosted by the Administrative Agent, any of its Related
Persons or any other Person, providing for access to data protected by
passcodes or other security system.

 

“EBITDAR” means, with respect to any Person for any fiscal
period, without duplication, an amount equal to (a) consolidated net
income of such Person for such period, determined in accordance with GAAP,
minus (b) the sum of (i) income tax credits, (ii) interest
income, (iii) gain from extraordinary items for such period, (iv) any
aggregate net gain during such period arising from the sale, exchange or other
disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities) (a “Capital
Asset Sale”), and (v) any other non-

 

A-7

 

cash
gains that have been added in determining consolidated net income, in each case
to the extent included in the calculation of consolidated net income of such
Person for such period in accordance with GAAP, but without duplication, plus (c) the
sum of (i) any provision for income taxes, (ii) Interest Expense, (iii) loss
from extraordinary items for such period, (iv) depreciation and
amortization for such period, (v) amortized debt discount for such period,
(vi) the amount of any deduction to consolidated net income as the result
of any grant to any employee of such Person of any Stock, (vii) depreciation,
amortization and aircraft rent expense for such period, in each case to the
extent included in the calculation of consolidated net income of such Person
for such period in accordance with GAAP, (viii) any aggregate net loss during
such period arising from a Capital Asset Sale, (ix) all other non-cash
charges for such period, (x) costs and expenses, including fees, incurred
directly in connection with the consummation of the transactions contemplated
under the Loan Documents to the extent included in the calculation of
consolidated net income and (xi) expenses incurred with respect to the Chapter
11 reorganization as set forth on Frontier Holdings’ consolidated statement of
income for such period, including (A) professional and other fees, (B) key
employee retention program payments, (C) financing fees, (D) severance
costs and (E) any litigation expenses incurred during or in connection
with the Cases. For purposes of this definition, the following items shall be
excluded in determining consolidated net income of a Person: (1) the
income (or deficit) of any other Person accrued prior to the date it became a
Subsidiary of, or was merged or consolidated into, such Person or any of such
Person’s Subsidiaries; (2) the income (or deficit) of any other Person
(other than a Subsidiary) in which such Person has an ownership interest,
except to the extent any such income has actually been received by such Person
in the form of cash dividends or distributions; (3) any restoration to
income of any contingency reserve, except to the extent that provision for such
reserve was made out of income accrued during such period; (4) any
write-up of any asset; (5) any net gain from the collection of the
proceeds of life insurance policies; (6) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person; (7) in the case of a successor to such
Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets; and (8) any deferred credit representing the excess of equity in
any Subsidiary of such Person at the date of acquisition of such Subsidiary
over the cost to such Person of the investment in such Subsidiary.

 

“Electronic Transmission” means each notice, request,
instruction, demand, report, authorization, agreement, document, file,
information and any other communication transmitted, posted or otherwise made
or communicated by e-mail, E-Fax, Internet or extranet-based site or any other
equivalent electronic service, whether owned, operated or hosted by the
Administrative Agent, any Affiliate of the Administrative Agent or any other
Person.

 

“Environmental Laws” means all applicable federal, state,
local and foreign laws, statutes, ordinances, codes, principles of common law,
rules, standards and regulations, now or hereafter in effect, and any
applicable judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree, order or judgment,
imposing liability or standards of conduct for or relating to the regulation
and protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation). Environmental
Laws include CERCLA; the Hazardous Materials Transportation Act of 1994 (49 

 

A-8

 

U.S.C.
Sections 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Sections 136 et seq.); the Resource Conservation and Recovery Act (42
U.S.C. Sections 6901 et seq.); the Toxic Substances Control Act (15 U.S.C.
Sections 2601 et seq.); the Clean Air Act (42 U.S.C. Sections 7401 et seq.);
the Clean Water Act (33 U.S.C. Sections 1251 et seq.); the Occupational Safety
and Health Act (29 U.S.C. Sections 651 et seq.); and the Safe Drinking Water
Act (42 U.S.C. Sections 300(f) et seq.), and any and all regulations
promulgated thereunder, and all analogous state, local and foreign counterparts
or equivalents and any transfer of ownership notification or approval statutes.

 

“Environmental Liabilities” means, with respect to any
Person, all liabilities, obligations, responsibilities, response, remedial and
removal costs, investigation and feasibility study costs, capital costs,
operation and maintenance costs, losses, damages, punitive damages, property
damages, natural resource damages, consequential damages, treble damages, costs
and expenses (including all reasonable fees, disbursements and expenses of
counsel, experts and consultants), fines, penalties, sanctions and interest
incurred as a result of or related to any claim, suit, action, investigation, proceeding
or demand by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute or common law,
Environmental Laws or Environmental Permits, in each case, in connection with,
or otherwise related to, any Release or threatened Release or presence of a
Hazardous Material (whether on, at, in, under, from or about or in the vicinity
of any real or personal property) or any environmental or Hazardous Material
exposure matter.

 

“Environmental Permits” means all permits, licenses,
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.

 

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

 

“ERISA Affiliate” means, with respect to any Borrower, any
trade or business (whether or not incorporated) that, together with such
Borrower, are treated as a single employer within the meaning of Sections
414(b), (c), (m) or (o) of the IRC.

 

“ERISA Event” means, with respect to any Borrower or any
ERISA Affiliate, (a) the complete or partial withdrawal of any Borrower or
any ERISA Affiliate from any Multiemployer Plan; (b) the institution of
proceedings to terminate a Multiemployer Plan by the PBGC; (c) the failure
by any Borrower or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan; (d) any other event or condition that would reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Multiemployer Plan or for the imposition of liability under Section 4212(c) of
ERISA; (e) the termination of a Multiemployer Plan under Section 4041A
of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241
or 4245 of ERISA; (f) the loss of a Qualified Plan’s qualification or tax
exempt status; (g) any Multiemployer Plan being, or being reasonably
expected to be, in “endangered status” or “critical status” within the meaning
of Section 432 of the IRC; or (h) the imposition of a Lien (or the
occurrence of conditions presenting a material risk of the imposition of a
Lien) on the assets of any Borrower or ERISA Affiliate arising under ERISA or
Subchapter D of Chapter 1 of the IRC.

 

A-9

 

“Escrow Accounts” shall mean accounts of the Borrowers or any
Subsidiary, solely to the extent any such accounts hold funds set aside by the
Borrowers or any Subsidiary to manage the collection and payment of amounts
collected, withheld or incurred by the Borrowers or such Subsidiary for the
benefit of third parties relating to: (a) federal income tax withholding
and backup withholding tax, employment taxes, transportation excise taxes and
security related charges; (b) any and all state and local income tax
withholding, employment taxes and related charges and fees and similar taxes,
charges and fees, including, but not limited to, state and local payroll
withholding taxes, unemployment and supplemental unemployment taxes, disability
taxes, workman’s or workers’ compensation charges and related charges and fees;
(c) state and local taxes imposed on overall gross receipts, sales and use
taxes, fuel excise taxes and hotel occupancy taxes; (d) passenger facility
fees and charges collected on behalf of and owed to various administrators,
institutions, authorities, agencies and entities; (e) other similar
federal, state or local taxes, charges and fees (including without limitation
any amount required to be withheld or collected under applicable law); (f) voluntary and/or other
non-statutorily required employee payroll deductions, whether authorized by the
employee, imposed by court order, agreed to pursuant to collective bargaining
arrangement or otherwise, including (i) employee contributions made for
the purpose of participating in any employer-sponsored retirement plan as
described and defined in Section 401(k) of the IRC (including
repayment of any 401(k) related loans made to the employee but excluding
any funds matched and/or contributed by the employer on behalf of any
employee), (ii) employee payments made for the purpose of participating in
any employer-sponsored medical, dental or related health plan, (iii) employee
payments made for the purpose of satisfying periodic union dues, (iv) employee
payments made for the purpose of purchasing life, accident, disability or other
insurance, (v) employee payments made for the purpose of participating in
any employer-sponsored cafeteria plan as described and defined in Section 125
of the IRC, (vi) employee-directed donations to charitable organizations
and (vii) levys, garnishments and other attachments on employee
compensation (as described in Sections 6305 and 6331 of the IRC, in Section 4913
of Title 10 of D.C.A. or in any analogous provision of other applicable
federal, state or local law) collected on behalf of any Governmental Authority
or any other Person authorized to receive funds of the type described in this
clause (f).

 

“ESOP” means a Pension Plan that is intended to satisfy the
requirements of 4975(e)(7) of the IRC.

 

“Event of Default” has the meaning ascribed to it in Section 8.1.

 

“Excluded Accounts” shall mean (i) the Escrow Accounts, (ii) Restricted
Accounts, and (iii) accounts located outside the United States; provided
that the aggregate amount held in all such accounts referred to in this clause (iii) at
any time does not exceed $350,000.

 

“Excluded Collateral” means, collectively, (i) Excluded
Accounts (other than the Borrowers’ rights to receive any excess funds
remaining in the Escrow Accounts following the payment in full of the taxes,
fees and charges payable from such Escrow Accounts and other than the
Borrowers’ rights to receive any excess funds remaining in the Restricted
Accounts), (ii) Excluded Equipment, (iii) Section 1110 Assets or
Section 1110 Agreements to the extent that the Borrowers are prohibited
from granting liens thereon or assignments thereof under the terms of 

 

A-10

 

any
Section 1110 Agreement in effect at the Closing Date; provided, that any
Proceeds of Section 1110 Assets shall not be Excluded Collateral to the
extent that the Borrowers are entitled to such Proceeds (after payment of
obligations secured or otherwise required to be paid from Proceeds of such Section 1110
Assets)), (iv) any asset subject to the restrictions on Liens set forth in
Section 5.9(b), (v) Avoidance Actions, (vi) to the extent the
Administrative Agent has otherwise consented in writing, any asset excluded as
Collateral (other than any Proceeds thereof that any Borrower is entitled to
receive after payment of obligations secured by or otherwise required to be
paid from such proceeds) in any other Collateral Documents, (vii) any
goods referenced in the “Demand for Reclamation of Goods Sold” dated April 21,
2008 and delivered by Qwest Communications Corporation and any Proceeds from
the sale of any such goods, but only to the extent that such goods are subject
to a valid reclamation claim pursuant to Section 546(c) of the
Bankruptcy Code and (viii) all 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 the applicable federal law.

 

“Excluded Equipment” means Equipment to the extent the
granting of a security interest in such Equipment would constitute a breach or
violation of a valid and effective restriction in favor of a third party or
give rise to any indemnification obligations or any right to terminate or
commence the exercise of remedies under such restrictions, in each case, to the
extent not subject to the automatic stay and only to the extent, and for so
long as, such restriction is not terminated or rendered unenforceable or
otherwise deemed ineffective by the Code or any other applicable law; provided,
that “Excluded Equipment” shall not include Proceeds, substitutions or
replacements of Excluded Equipment (unless such Proceeds, substitutions or
replacements would constitute Excluded Equipment),.

 

“Excluded Obligations” means contingent indemnification and
expense reimbursement obligations.

 

“Exempt Accounts” has the meaning ascribed to it in clause (a) on
Annex B.

 

“FAA” means the Federal Aviation Administration of the United
States of America, and any successor Governmental Authority.

 

“Federal Reserve Board” means the Board of Governors of the
Federal Reserve System.

 

“Fees” means any and all fees payable to the Administrative
Agent or any Lender pursuant to the Agreement or any of the other Loan
Documents, including the Prepayment Fee and the Commitment Fee.

 

“Final Order” means an order approving or authorizing this
Agreement and the other Loan Documents and the incurrence by the Borrowers
hereunder of Postpetition secured and super-priority Indebtedness, in the form
attached hereto as Exhibit F with only such changes as shall be
satisfactory to the Administrative Agent.

 

“Financial Covenants” means the financial covenants set forth
in Annex E.

 

A-11

 

“Financial Statements” means the consolidated and
consolidating income statements, statements of cash flows and balance sheets of
Borrower delivered in accordance with Section 3.4 and Annex D.

 

“First Data” means First Data Merchant Services Corporation.

 

“First Data Agreement” means the letter agreement dated July 9,
2008 from First Data to Borrower Agent.

 

“First Data Claim” means the Super-Priority Claim of First
Data granted pursuant to the First Data Order which such claim shall be pari
passu or junior to the Obligations in favor of Administrative Agent.

 

“First Data Order” means the Order Authorizing the Debtors to
Perform Under Letter Agreement with Sovereign Bank and First Data Merchant
Services Corporation and Merchant Services Bankcard Agreement with Sovereign
Bank and First Data Merchant Services Corporation as Amended Thereby entered by
the Bankruptcy Court on July 10, 2008.

 

“Fiscal Month” means any of the monthly accounting periods of
the Borrowers.

 

“Fiscal Quarter” means any of the quarterly accounting
periods of the Borrowers, ending on March 31, June 30, September 30
and December 31 of each year.

 

“Fiscal Year” means any of the annual accounting periods of
the Borrowers ending on March 31 of each year.

 

“Fixtures” means all “fixtures” as such term is defined in
the Code, now owned or hereafter acquired by any Borrower.

 

“Foreign Person” has the meaning ascribed to it in Section 1.11(c).

 

“Frontier Airlines” has the meaning ascribed thereto in the
preamble to the Agreement.

 

“Frontier Holdings” has the meaning ascribed thereto in the
preamble to the Agreement.

 

“GAAP” means generally accepted accounting principles in the
United States of America, consistently applied.

 

“Gate Interests” shall mean all of the right, title,
privilege, interest, and authority now or hereafter acquired or held by each
Borrower in connection with the right to use or occupy holdroom and passenger
boarding and deplaning space (including, without limitation, hardstand
positions) at any airport terminal located in the United States at which such
Borrower conducts scheduled operations.

 

A-12

 

“General Intangibles” means “general intangibles,” as such
term is defined in the Code, now owned or hereafter acquired by any Borrower,
including all right, title and interest that such Borrower may now or hereafter
have in or under any Contract, all payment intangibles, customer lists,
Licenses, Copyrights, Trademarks, Patents, and all applications therefor and
reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, Software, databases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or Trademark
License), all rights and claims in or under insurance policies (including
insurance for fire, damage, loss and casualty, whether covering personal
property, real property, tangible rights or intangible rights, all liability,
life, key man and business interruption insurance, and all unearned premiums),
uncertificated securities, choses in action, rights to receive tax refunds and
other payments, rights to receive dividends, distributions, cash, Instruments
and other property in respect of or in exchange for pledged Stock and
Investment Property, rights of indemnification, all Books and Records,
correspondence, credit files, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and documents in
the possession or under the control of such Borrower or any computer bureau or
service company from time to time acting for such Borrower.

 

“Governmental Authority” means any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including but not
limited to, any Aviation Authority.

 

“Guaranteed Indebtedness” means, as to any Person, any obligation
of such Person guaranteeing, providing comfort or otherwise supporting any
Indebtedness (“primary obligation”) of any other Person (the “primary obligor”)
in any manner, including any obligation or arrangement of such Person to (a) purchase
or repurchase any such primary obligation, (b) advance or supply funds (i) for
the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, (d) protect
the beneficiary of such arrangement from loss (other than product warranties
given in the ordinary course of business) or (e) indemnify the owner of
such primary obligation against loss in respect thereof. The amount of any
Guaranteed Indebtedness at any time shall be deemed to be an amount equal to
the lesser at such time of (x) the stated or determinable amount of the
primary obligation in respect of which such Guaranteed Indebtedness is incurred
and (y) the maximum amount for which such Person may be liable pursuant to
the terms of the instrument embodying such Guaranteed Indebtedness, or, if not
stated or determinable, the maximum reasonably anticipated liability (assuming
full performance) in respect thereof.

 

“Hazardous Material” means any substance, material or waste
that is regulated by, or forms the basis of liability now or hereafter under,
any Environmental Laws, including any material or 

 

A-13

 

substance
that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous
material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special
waste,” “toxic substance” or other similar term or phrase under any
Environmental Laws, or (b) petroleum or any fraction or by-product
thereof, asbestos, polychlorinated biphenyls (PCB’s), or any radioactive
substance.

 

“IATA” means International Air Transport Association.

 

“Indebtedness” means, with respect to any Person, without
duplication (a) all indebtedness of such Person for borrowed money or for
the deferred purchase price of property payment for which is deferred six (6) months
or more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are not overdue by more than six (6) months unless
being contested in good faith, (b) all reimbursement and other obligations
with respect to letters of credit, bankers’ acceptances and surety bonds,
whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations
and the capitalized amount of remaining lease or similar payments under all
synthetic leases that would appear on the balance sheet of such Person in
accordance with GAAP if such synthetic leases were accounted for as a Capital
Lease, (f) all obligations of such Person under commodity purchase or
option agreements or other commodity price hedging arrangements, in each case
whether contingent or matured, (g) all obligations of such Person under
any foreign exchange contract, currency swap agreement, interest rate swap, cap
or collar agreement or other similar agreement or arrangement designed to alter
the risks of that Person arising from fluctuations in currency values or
interest rates, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (i) the Obligations, and (j) Guaranteed
Indebtedness but excluding any claims arising upon the rejection of unexpired
leases and other executory contracts.

 

“Indemnified Liabilities” has the meaning ascribed to it in Section 1.9.

 

“Indemnified Person” has the meaning ascribed to it in Section 1.9.

 

“Initial Lenders” means the Lenders party hereto on the date
hereof, for so long as such Lenders continue to be Lenders hereunder.

 

“Instruments” means all “instruments,” as such term is
defined in the Code, now owned or hereafter acquired by any Borrower, wherever
located, and, in any event, including all promissory notes and other evidences
of indebtedness, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper.

 

A-14

 

“Intellectual Property” means any and all Licenses, Patents,
Copyrights, Trademarks, and the goodwill associated with such Trademarks, and
technology.

 

“Interest Election” has the meaning ascribed to it in Section 1.5(a).

 

“Interest Expense” means, with respect to any Person for any
fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date.

 

“Interest Payment Date” means the last Business Day of each
month to occur while any Loan is outstanding; provided, that, in addition to
the foregoing, each of (x) the date upon which all of the Commitments have
been terminated and the Loans have been paid in full and (y) the Maturity
Date shall also constitute an Interest Payment Date with respect to any
interest that has then accrued under the Agreement.

 

“Interim Order” means an order, approving or authorizing this
Agreement and the other Loan Documents and the incurrence by the Borrowers
hereunder of Postpetition secured and super-priority Indebtedness on an interim
basis, in the form set forth hereto as Exhibit E with only such changes as
shall be satisfactory to the Administrative Agent.

 

“Inventory” means any “inventory,” as such term is defined in
the Code, now owned or hereafter acquired by any Borrower, wherever located,
and in any event including inventory, merchandise, goods and other personal
property that are held by or on behalf of any Borrower for sale or lease or are
furnished or are to be furnished under a contract of service, or that
constitute raw materials, work in process, finished goods, returned goods,
supplies or materials of any kind, nature or description used or consumed or to
be used or consumed in such Borrower’s business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
all supplies and embedded Software.

 

“Investment”
means (i) any direct or indirect purchase or other acquisition by any
Borrower of, or of a beneficial interest in, any of the Stock of any other
Person (other than a Borrower); (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Borrower from any
Person (other than a Borrower), of any Stock of such Person; and (iii) any
direct or indirect loan, advance or capital contribution by any Borrower to any
other Person (other than a Borrower). The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto, without
any adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment (other than reductions for return on capital as repayment of
Indebtedness and the like). The term “Investment” shall not include deposits or reserves to secure
the performance of leases or the making of deposits or predelivery payments
described in Section 6.3(a)(xiv).

 

“Investment Property” means all “investment property” as such
term is defined in the Code now owned or hereafter acquired by any Borrower,
wherever located, including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Borrower,
including the rights of such Borrower to any 

 

A-15

 

securities
account and the financial assets held by a securities intermediary in such
securities account and any free credit balance or other money owing by any
securities intermediary with respect to that account; (iii) all securities
accounts of any Borrower; (iv) all commodity contracts of any Borrower;
and (v) all commodity accounts held by any Borrower.

 

“IT Assets” means computers, Computer Software, firmware,
middleware, servers, workstations, routers, hubs, switches, data communications
lines and all other information technology equipment and elements and all
associated documentation.

 

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

 

“IRS” means the Internal Revenue Service of the United States
of America.

 

“Lenders” means the Lenders named on the signature pages of
the Agreement and, if any such Lender shall decide to assign all or any portion
of the Obligations in accordance with Section 11.1(a), such term shall
include any assignee of such Lender.

 

“Liabilities” means all claims, actions, suits, judgments,
damages, losses, liability, obligations, responsibilities, fines, penalties,
sanctions, costs, fees, taxes, commissions, charges, disbursements and
expenses, in each case of any kind or nature (including interest accrued
thereon or as a result thereto and fees, charges and disbursements of
financial, legal and other advisors and consultants), whether joint or several,
whether or not indirect, contingent, consequential, actual, punitive, treble or
otherwise.

 

“License” means any Copyright License, Patent License,
Trademark License or other similar license of rights or interests now held or
hereafter acquired by any Borrower.

 

“Lien” means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any capital lease or conditional sale agreement, and any financing
lease having substantially the same economic effect as any of the foregoing).

 

“Litigation” has the meaning ascribed to it in Section 3.13.

 

“Loan” means any loan made by any Lender pursuant to this
Agreement.

 

“Loan Account” has the meaning ascribed to it in Section 1.8.

 

“Loan Documents” means the Agreement, the Notes, the
Collateral Documents and all other agreements, instruments, documents and
certificates executed and delivered to, or in favor of, the Administrative
Agent or any Lender in connection with the Agreement and the transactions
contemplated hereby and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and all other written agreements
whether heretofore, now or hereafter executed by or on behalf of any Borrower
and delivered to the Administrative Agent or any 

 

A-16

 

Lender
in connection with the Agreement or the transactions contemplated thereby.  Any reference in the Agreement or any other
Loan Document to a Loan Document shall include all appendices, exhibits or schedules
thereto, and all amendments, restatements, supplements or other modifications
thereto, and shall refer to the Agreement or such Loan Document as the same may
be in effect at any and all times such reference becomes operative.

 

“Lynx” has the meaning ascribed thereto in the preamble to
the Agreement.

 

“Margin Stock” has the meaning ascribed to it in Section 3.10.

 

“Material Adverse Effect” means a material adverse effect on (i) the
business, assets, operations, prospects or financial or other condition of the
Borrowers individually or taken as a whole (other than the commencement of the
Cases and events customarily leading up to and following the commencement of
the Cases or otherwise reflected in the Projections and other written materials
provided to the Administrative Agent or the Initial Lenders prior to the
Closing Date), (ii) the ability of the Borrowers to pay the Obligations,
or (iii) the Administrative Agent’s or any Lender’s rights and remedies
under the Agreement and the other Loan Documents; provided, that any change in
the cost of U.S. Gulf Coast jet aviation fuel at any time shall, in and of
itself, not be deemed to constitute a Material Adverse Effect.

 

“Material Real Estate Contracts” means (for purposes of the
Agreement only) any lease, usufruct, use agreement, license, permit or other
occupancy or facility use agreement under which a Borrower is a tenant or
counterparty, that relates to major facilities required for a Borrower’s
operations, the loss of the lease, usufruct, use agreement, license, permit or
other occupancy or facility use agreement with respect thereto could reasonably
be expected to result in a Material Adverse Effect.

 

“Maturity Date” means the earliest of (a) Scheduled
Maturity Date, (b) the effective date of a Plan of Reorganization and (c) the
date of termination of Lenders’ obligations to permit existing Loans to remain
outstanding pursuant to Section 8.2(b).

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Multiemployer Plan” means a “multiemployer plan” as defined
in Section 4001(a)(3) of ERISA, and to which any Borrower or ERISA
Affiliate is making, is obligated to make or has made or been obligated to
make, contributions on behalf of participants who are or were employed by any
of them, or with respect to which any Borrower or ERISA Affiliate otherwise
has, or has had, any liability or obligation that can be enforced against the
Borrower or any ERISA affiliate.

 

“Net Cash Proceeds” means:

 

(a)           with respect to any Asset Sale, the
sum of cash and Cash Equivalents received in connection with such Asset Sale if
in excess of $100,000, net of (1) the reasonable cash costs of sale,
assignment or other disposition, (2) taxes paid or reasonably estimated to
be payable as a result thereof, (3) reserves provided, to the extent
required by GAAP, against any 

 

A-17

 

liabilities that are directly attributed to such Asset Sale (provided
that upon release of such reserves, the amount so release will be considered to
be Net Cash Proceeds) and (4) any amount required to be paid or prepaid on
Indebtedness or other obligations (other than the Obligations) secured by the
assets subject to such Asset Sale, or otherwise required to be repaid as a
result of such Asset Sale to the extent actually repaid;

 

(b)           with
respect to the issuance of any capital stock or other Stock by any Borrower,
the sum of the cash and Cash Equivalents received in connection with such
issuance net of the underwriting discounts and commissions, and other
out-of-pocket expenses, incurred by such Loan Party in connection with such
issuance; and

 

(c)           with
respect to any Property Loss Event, the sum of cash and Cash Equivalents
received in connection with such Property Loss Event net of (i) the cost
of collection, adjustment or settlement of any claims by any Borrower in
respect thereof, (ii) any amount required to be paid or prepaid on
Indebtedness or other obligations (other than the Obligations) secured by the
assets subject to such Property Loss Event, or otherwise required to be repaid
as a result of such Property Loss Event to the extent actually repaid or (iii) to
the extent the asset subject to such Property Loss Event does not constitute
Collateral, the amount permitted to be reinvested in the asset the subject of such
Property Loss Event or any replacement asset by the terms of any agreement
governing Indebtedness or other obligations (other than the Obligations)
secured by the assets subject to such Property Loss Event to the extent
actually invested.

 

“Non-Stayed Order” means an order of the Bankruptcy Court
which is in full force and effect, as to which no stay has been entered and
which has not been reversed, modified, vacated or overturned as a whole or in
part.

 

“Note” has the meaning assigned to it in Section 1.1(a).

 

“Obligations” means all loans, advances, debts, liabilities
and obligations of every nature for the performance of covenants, tasks or
duties or for payment of monetary amounts (whether or not such performance is
then required or contingent, or such amounts are liquidated or determinable)
owing by any Borrower to the Administrative Agent or any Lender, and all
covenants and duties regarding such amounts, of any kind or nature, present or
future, whether or not evidenced by any note, agreement, or other instrument,
arising under the Agreement or any of the other Loan Documents. This term
includes all principal, interest (including all interest that accrues after the
commencement of any case or proceeding by or against any Borrower in
bankruptcy, whether or not allowed in such case or proceeding), Fees, expenses,
attorneys’ fees and any other sum chargeable to any Borrower under the
Agreement or any of the other Loan Documents.

 

“Orderly Liquidation Value” means with respect to any
aircraft or spare parts, the net orderly liquidation value of such aircraft or
spare parts as set forth in or scheduled to the Projections, or otherwise
specified in writing to the Administrative Agent prior to the Closing Date.

 

“Orders” means (i) prior to the entry of the Final
Order, the Interim Order and (ii) thereafter, the Final Order.

 

A-18

 

“Patent License” means rights under any written agreement now
owned or hereafter acquired by any Borrower granting any right with respect to
any invention on which a Patent is in existence.

 

“Patent Security Agreements” means the Patent Security
Agreements made in favor of Administrative Agent for the benefit of the Lenders
by each applicable Borrower.

 

“Patents” means all of the following in which any Borrower
now holds or hereafter acquires any interest: (a) all letters patent of
the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or of any
other country, including registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State or any other country, and (b) all reissues,
continuations, continuations-in-part or extensions thereof.

 

“Patriot Act” has the meaning ascribed to it in Section 3.25.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Plan” means a Plan which is an “employee pension
benefit plan” described in Section 3(2) of ERISA.

 

“Permits” has the meaning ascribed to it in Section 3.22.

 

“Permitted Encumbrances” means the following encumbrances: (a) Liens
for taxes or assessments or other governmental Charges not yet due and payable
or which are being contested in accordance with Section 5.2(b); (b) pledges
or deposits of money securing statutory obligations under workmen’s
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA); (c) pledges or
deposits of money securing bids, tenders, contracts (other than contracts for
the payment of money) or leases (other than leases of aircraft) to which any
Borrower is a party as lessee made in the ordinary course of business; (d) workers’,
mechanics’ or similar liens arising in the ordinary course of business, so long
as such Liens are inchoate and unperfected and attach only to Tooling, Fixtures
and/or real estate or being contested in accordance with Section 5.2(b); (e) carriers’,
warehousemen’s, suppliers’ or other similar possessory liens arising in the
ordinary course of business so long as such Liens are inchoate and unperfected
and attach only to Inventory or being contested in accordance with Section 5.2(b);
(f) deposits securing, or in lieu of, surety, appeal or customs bonds in
proceedings to which any Borrower is a party; (g) any attachment or
judgment lien not constituting an Event of Default under Section 8.1(h); (h) zoning
restrictions, easements, licenses, or other restrictions on the use of any real
estate or interests of any Borrower in real estate or other minor
irregularities in title (including leasehold title) thereto, so long as the
same do not materially impair the use or the value of any parcel of owned Real
Estate; (i) presently existing or hereafter created Liens in favor of the
Administrative Agent for the benefit of the Lenders; (j) statutory and
common law landlords’ liens under, and contractual liens granted to a landlord
pursuant to, leases to which any Borrower is a party; (k) (i) leases,
subleases, licenses, permits and similar use rights, entered into with respect
to the owned Real Estate, that are by their express terms subject and
subordinate to the Administrative Agent’s Liens, for the benefit of the
Lenders, in the owned Real Estate, and do not, in the aggregate, 

 

A-19

 

materially
detract from the value of the any parcel of owned Real Estate and (ii) leases,
subleases, licenses, permits and similar use rights, entered into in the
ordinary course of business with respect to any leased real estate, to the
extent they are not prohibited by the Collateral Documents and would not have a
Material Adverse Effect and would not materially and adversely affect the
Administrative Agent’s Liens, for the benefit of the Lenders, in Collateral
stored or located at such location; (l) with respect to Real Estate, other
defects and encumbrances as may be approved by the Administrative Agent, (m) liens
imposed by applicable law on the assets of any Borrower located at an airport
for the benefit of an Aviation Authority and listed on Disclosure Schedule 6.7;
(n) subject, with respect to Blocked Accounts, to the Blocked Account
Agreements, Liens in favor of depositary banks (including set-off rights)
arising as a matter of law and (o) encumbrances and Liens of types
consistent with those described in the other clauses of this definition that
are permitted under the terms of existing financing arrangements with respect
to Section 1110 Assets listed on Disclosure Schedule 6.7.

 

“Permitted Investments” means Investments made in accordance
with the Final Order Authorizing Continued Use of Existing Investment Policy
entered by the Bankruptcy Court on May 2, 2008.

 

“Permitted Liens” means (i) Liens granted by the
Borrowers to the Administrative Agent for the benefit of the Lenders under the
Collateral Documents and (ii) any other Liens permitted to be created or
assumed or to exist pursuant to Section 6.7 of this Agreement.

 

“Permitted Prepetition Payment” means a payment (as adequate
protection or otherwise) on account of any Claim against any Borrower arising
or deemed to have arisen prior to the Petition Date, which payments (i) are
made through the exercise of set-off rights or the application of cash
collateral securing such prepetition obligation, (ii) made pursuant to Section 1110
Agreements or (iii) do not exceed $5,000,000 in the aggregate.

 

“Permitted Refinancing” means, with respect to any Person,
any modification, refinancing, refunding, renewal, extension or replacement
(collectively, a “refinancing”) of any Indebtedness of such Person; provided,
that (a) the principal amount (or accreted value, if applicable) thereof
does not exceed 100% (or, to the extent no payment of principal thereof (except
upon acceleration) is required on or prior to the Scheduled Maturity Date,
105%) of the principal amount (or accreted value, if applicable) of the
Indebtedness so refinanced, except by an amount equal to the unpaid accrued
interest and premium thereon; (b) such refinancing has a final maturity
date equal to or later than the final maturity of the Indebtedness being
refinanced, (c) such refinancing does not reduce the weighted average life
to maturity of the Indebtedness being refinanced, and (d) if the
Indebtedness being refinanced is subordinated in right of payment to the
Obligations, such refinancing is subordinated in right of payment to the
Obligations on terms at least as favorable to Lenders as those contained in the
documentation governing the Indebtedness being refinanced.

 

“Person” means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit
corporation, other entity or government (whether federal, state, county, city, 

 

A-20

 

municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).

 

“Petition Date” has the meaning ascribed to it in the
Preamble.

 

“PIK Interest” shall have the meaning ascribed to it in Section 1.5(a).

 

“Plan” means, at any time, a Pension Plan or Retiree Welfare
Plan that any Borrower or ERISA Affiliate maintains or to which such Borrower
contributes or has an obligation to contribute, or with respect to which any
Borrower or ERISA Affiliate has any liability or obligation that can be
enforced against the Borrower or any ERISA Affiliate.

 

“Plan of Reorganization” means a plan of reorganization in
the Cases under chapter 11 of the Bankruptcy Code.

 

“Pledged Collateral” means all of the following property now
owned or at anytime acquired by a Borrower or in which such Borrower now has or
at any time in the future may acquire any right, title or interest:

 

(a) the
Pledged Shares and the certificates representing the Pledged Shares, and all
dividends, distributions, cash, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares; and

 

(b) any
additional shares of stock of a Pledged Entity from time to time acquired by
any Borrower in any manner (which shares shall be deemed to be part of the
Pledged Shares), and the certificates representing such additional shares, and
all dividends, distributions, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of such stock; and

 

(c) the
Pledged Indebtedness and the promissory notes or instruments evidencing the
Pledged Indebtedness, and all interest, cash, instruments and other property
and assets from time to time received, receivable or otherwise distributed in
respect of the Pledged Indebtedness; and

 

(d) all
additional Indebtedness arising after the Closing Date and owing to any
Borrower and evidenced by promissory notes or other instruments, together with
such promissory notes and instruments, and all interest, cash, instruments and
other property and assets from time to time received, receivable or otherwise
distributed in respect of that Indebtedness.

 

“Pledged Entity” means an issuer of Pledged Collateral.

 

“Pledged Indebtedness” means the Indebtedness evidenced by
promissory notes and instruments listed on Part 2 of Disclosure Schedule
10.4 hereto.

 

A-21

 

“Pledged Shares” means those shares listed on Part 1 of
Disclosure Schedule 10.4 hereto.

 

“Policy” has the meaning ascribed to it in Section 3.17.

 

“Postpetition” means, when used with respect to any
indebtedness, agreement, instrument, claim, proceeding or other matter, any
indebtedness incurred, agreement or instrument first entered into or becoming
effective, or claim or proceeding that first arose or was first instituted, or
another matter that first occurred, after the commencement of the Cases.

 

“Prepayment Fee” has the meaning specified in Section 1.6(b).

 

“Proceeds” means “proceeds,” as such term is defined in the
Code, including (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Borrower from time to time with respect to
any asset, (b) any and all payments (in any form whatsoever) made or due
and payable to any Borrower from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of such property by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Borrower against
third parties (i) for past, present or future infringement of any Patent
or Patent License, or (ii) for past, present or future infringement or
dilution of any Copyright, Copyright License, Trademark or Trademark License,
or for injury to the goodwill associated with any Trademark or Trademark License,
(d) any recoveries by any Borrower against third parties with respect to
any litigation or dispute concerning such property including claims arising out
of the loss or nonconformity of, interference with the use of, defects in, or
infringement of rights in, or damage to, such property, (e) all amounts
collected on, or distributed on account of, other property, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to
payment or other property acquired upon the sale, lease, license, exchange or
other disposition of such property and all rights arising out of such property.

 

“Projections” means the Borrowers’ forecasted consolidated
balance sheets, profit and loss statements and cash flow statements, together
with formatted profit and loss inputs and related information, provided to
Administrative Agent prior to the Closing Date in each case consistent with the
historical Financial Statements of the Borrowers (other than adjustments
related to the impact of the Cases).

 

“Property Loss Event” means (a) any loss of or damage to
property of any Borrower that results in the receipt by such Person of proceeds
of insurance in excess of $1,000,000 for all Property Loss Events in the
aggregate and (b) any taking of property of any Borrower that results in
receipt by such person of a compensation payment in respect thereof in excess
of $1,000,000 for all Property Loss Events in the aggregate.

 

“Proposed Change” has the meaning ascribed to it in Section 13.2(c).

 

“Pro Rata Share” means with respect to all matters relating
to any Lender, (a) prior to the Commitments being terminated pursuant to
this Agreement, the percentage obtained by dividing (i) the aggregate Commitments
of that Lender by (ii) the aggregate Commitments of all Lenders 

 

A-22

 

as
any such percentages may be adjusted by assignments permitted pursuant to Section 11.1
and (b) after the Commitments have been terminated pursuant to the terms
of this Agreement, the percentage obtained by dividing (i) the aggregate
principal amount of the Loans payable to that Lender by (ii) the aggregate
principal amount of the Loans then outstanding.

 

“Purchase Amount” has the meaning ascribed to it in Section 13.2(c).

 

“Qualified Plan” means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.

 

“Real Estate” has the meaning ascribed to it in Section 3.16(a).

 

“Related Person” means, with respect to any Person, any
Affiliates, officers, employees, agents, directors or other Persons acting for
or in concert with such Person.

 

“Relationship Bank” has the meaning ascribed to it in Section (b) of
Annex B.

 

“Release” means any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of
Hazardous Material in the indoor or outdoor environment, including the movement
of Hazardous Material through or in the air, soil, surface water, ground water
or property.

 

“Requirement of Law” means, with respect to any Person, the
common law and all federal, state, local and foreign laws, treaties, rules and
regulations, orders, judgments, decrees and other legal requirements or
determinations of any Governmental Authority or arbitrator, applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.

 

“Requisite Lenders” means Lenders having 51% or more of the
aggregate outstanding amount of all Loans.

 

“Responsible Officer” of a Person means such Person’s Chief
Executive Officer, chief financial officer, president or treasurer.

 

“Restricted Accounts” means (i) the accounts identified
as Restricted Accounts on Disclosure Schedule 3.19, (ii) any deposit
account holding cash and cash equivalents subject to Liens permitted under Section 6.7(h),
Section 6.7(i) or Section 6.7(j) or securing surety or
appeal bonds permitted under Section 6.3(a)(viii) and (iii) accounts
in which deposits received from potential purchasers in connection with the
sale of any aircraft, engine or related equipment by any Borrower prior to any
such sale being consummated are placed.

 

“Restricted Payment” means, with respect to any Borrower (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of Stock; (b) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of such Borrower’s Stock or any
other 

 

A-23

 

payment
or distribution made in respect thereof, either directly or indirectly; (c) any
payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to, any Indebtedness subordinated in right of payment to the
Obligations; and (d) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Borrower now or hereafter outstanding.

 

“Retiree Welfare Plan” means, at any time, a Plan which is an
“employee welfare benefit plan” as described in Section 3(1) of ERISA
that provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant’s termination of
employment, other than continuation coverage provided pursuant to Section 4980B
of the IRC and at the sole expense of the participant or the beneficiary of the
participant.

 

“S&P” means Standard & Poor’s Ratings Services,
a division of the McGraw-Hill Companies.

 

“Scheduled Maturity Date” means April 1, 2009.

 

“Sell” means, with respect to any property, to sell, convey,
transfer, assign, license, lease or otherwise dispose of, any interest therein
or to permit any Person to acquire any such interest, including, in each case,
through a Sale and Leaseback Transaction or through a sale, factoring at
maturity, collection of or other disposal, with or without recourse, of any
notes or accounts receivable. Conjugated forms thereof and the noun “Sale” have correlative meanings.

 

“Section 1110 Agreement” means any agreement related to
property that qualifies as “equipment,” as
such term is used in Section 1110(a)(3) of the Bankruptcy Code,
including, without limitation, security agreements, mortgages, trusts, leases,
conditional sale agreements or other instruments applicable to such property.

 

“Section 1110 Assets” shall mean property that qualifies
as “equipment,” as such term is used in Section 1110(a)(3) of the
Bankruptcy Code.

 

“Secured Obligations” means the Obligations and all other
obligations of any Borrower under any Loan Documents to which it is a party.

 

“Security” means any Stock, voting trust certificate, bond,
debenture, note or other evidence of Indebtedness, whether secured, unsecured, convertible
or subordinated, or any certificate of interest, share or participation in, any
temporary or interim certificate for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing, but shall not
include any evidence of the Obligations.

 

“Slots” shall mean all (i) “slots” as defined in 14 CFR
§ 93.213(a)(2), as that section may be amended or re-codified from time to
time, (ii) an operating authorization for a landing or takeoff operation
at a specified time period at any airport in the United States subject to
orders or regulations issued by the FAA (including, but not limited to, slots
at New York LaGuardia, as defined in the Final Order, Operating Limitations at
New York LaGuardia Airport, Docket No. 

 

A-24

 

FAA
2006-25755-82 dated December 13, 2006), as such order may be amended or
recodified from time to time, and in any subsequent scheduling order or
regulation issued by the FAA, as such order may be amended or recodified from
time to time, and (iii) an authorization granted by a Governmental
Authority to conduct a landing or takeoff during a specific hour or other
period at any United States or foreign airport, in each case of the Borrowers
now held or hereafter acquired (other than “slots” which have been permanently
allocated to another air carrier and in which any Borrower holds temporary use
rights.)

 

“Software” shall mean computer programs whether in source
code or object code form, together with all related documentation.

 

“SPV” means any special purpose funding vehicle identified as
such in a writing by any Lender to the Administrative Agent.

 

“Stage 1 Conditions” means the conditions set forth in Section 2.1
and 2.3.

 

“Stage 1 Loan” has the meaning ascribed to it in Section 1.1.

 

“Stage 2 Closing Date” means the date that the Stage 2 Loan,
if any, is made following satisfaction of applicable conditions thereto.

 

“Stage 2 Loan” has the meaning ascribed to it in Section 1.1.

 

“Stock” means all shares, options, warrants, general or
limited partnership interests, membership interests or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited
liability company or equivalent entity whether voting or nonvoting, including common
stock, preferred stock or any other “equity security” (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by
the Commission under the Securities Exchange Act of 1934).

 

“Stockholder” means, with respect to any Person, each holder
of Stock of such Person.

 

“Subject Aircraft” means the two (2) A320 aircraft,
eleven (11) A319 aircraft, and nine (9) A318 aircraft.

 

“Subject Assets” means, collectively, (i) Subject
Aircraft and (ii) spare parts.

 

“Subsidiary” means, with respect to any Person, (a) any
domestic corporation of which an aggregate of more than 50% of the outstanding
Stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly
or indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of more than 50% of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any domestic
partnership or limited liability company in which such Person and/or one or
more Subsidiaries of such Person 

 

A-25

 

shall
have an interest (whether in the form of voting or participation in profits or
capital contribution) of more than 50% or of which any such Person is a general
partner or may exercise the powers of a general partner. Unless the context
otherwise requires, each reference to a Subsidiary shall be a reference to a
Subsidiary of a Borrower.

 

“Super-Priority Claim” shall mean a claim against any
Borrower in any of the Cases which is an administrative expense claim having
priority over any or all administrative expenses of the kind specified in
sections 503(b) or 507(b) of the Bankruptcy Code.

 

“Supplemental Order” shall mean an order approving or
authorizing the incurrence by the Borrowers hereunder of Postpetition secured
and super-priority Indebtedness in an amount equal to the Stage 2 Loans (if
any), in form and substance satisfactory to the Administrative Agent.

 

“Taxes” means taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of the Administrative Agent or a Lender by the
jurisdictions under the laws of which the Administrative Agent and Lenders are
organized or conduct business or any political subdivision thereof.

 

“Termination Date” means the date on which (a) the Loan
has been repaid in full, (b) all other monetary Obligations (other than
Excluded Obligations) arising under the Loan pursuant to the Agreement and the
other Loan Documents have been completely discharged, and (c) the
Commitment shall have expired or irrevocably been terminated under the
Agreement.

 

“Title 49” means Title 49 of the United States Code, which,
among other things, recodified and replaced the Federal Aviation Act of 1958,
as amended, and the regulations promulgated pursuant thereto or any subsequent
legislation that amends, supplements, or supersedes such provisions.

 

“Title IV Plan” means a Pension Plan (other than a
Multiemployer Plan) that is covered by Title IV of ERISA.

 

“Tooling” means tooling inventory, including but not limited
to dies, molds, tooling, casting patterns, gauges, jigs, racks and stands for
engines, cowls, radome and wheels, aircraft jacks, test benches, test
equipment, lathes, welders, grinders, presses, punches and hoists and other
similar items (whether or not completed or fixed or handheld).

 

“Trademark License” means rights under any written agreement
now owned or hereafter acquired by any Borrower granting any right to use any
Trademark.

 

“Trademark Security Agreements” means the Trademark Security
Agreements made in favor of the Administrative Agent for the benefit of the
Lenders by each applicable Borrower substantially in the form of Exhibit D.

 

“Trademarks” means all of the following now owned or
hereafter adopted or acquired by any Borrower: (a) all trademarks, trade
names, corporate names, business names, trade styles, service 

 

A-26

 

marks,
logos, other source or business identifiers, prints and labels on which any of
the foregoing have appeared or appear, designs and general intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof; (b) all
reissues, extensions or renewals thereof; and (c) all goodwill associated
with or symbolized by any of the foregoing.

 

“Uniform Commercial Code jurisdiction” means any jurisdiction
that has adopted all or substantially all of Article 9 as contained in the
2000 Official Text of the Uniform Commercial Code, as recommended by the
National Conference of Commissioners on Uniform State Laws and the American Law
Institute, together with any subsequent amendments or modifications to the
Official Text.

 

“Vehicles” means all vehicles covered by a certificate of
title law of any state.

 

Rules of
construction with respect to accounting terms used in the Agreement or the
other Loan Documents shall be as set forth in Annex E. All other undefined
terms contained in any of the Loan Documents shall, unless the context
indicates otherwise, have the meanings provided for by the Code to the extent
the same are used or defined therein; in the event that any term is defined
differently in different Articles or Divisions of the Code, the definition
contained in Article or Division 9 shall control. Unless otherwise
specified, references in the Agreement or any of the Appendices to a Section,
subsection or clause refer to such Section, subsection or clause as contained
in the Agreement. The words “herein,” “hereof” and “hereunder” and other words
of similar import refer to the Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection or
clause contained in the Agreement or any such Annex, Exhibit or Schedule.

 

Wherever
from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
feminine and neuter genders. The words “including”, “includes” and “include”
shall be deemed to be followed by the words “without limitation”; the word “or”
is not exclusive; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Borrower, such words are intended to
signify that such Borrower has actual knowledge or awareness of a particular
fact or circumstance or that such Borrower, if it had exercised reasonable
diligence, would have known or been aware of such fact or circumstance.

 

A-27

 

ANNEX B

TO CREDIT AGREEMENT

 

CASH MANAGEMENT SYSTEM

 

Each Borrower shall
establish and maintain the Cash Management Systems described below:

 

(a)                                                  Until the
Termination Date, each Borrower shall cause each of its accounts to be Blocked
Accounts; provided, that (i) Excluded Accounts shall not be required to be
Blocked Accounts and (ii) the Borrowers may maintain additional accounts
in the United States that are not Blocked Accounts to the extent the aggregate
amount held in such accounts shall not exceed $35,000 per account and
$1,000,000 for all such accounts (together with the Excluded Accounts, the “Exempt Accounts”).

 

(b)                                                 The Borrowers
shall only maintain, in their names, deposit accounts at JPMorgan Chase Bank,
N.A., Colorado Business Bank or any bank listed on Disclosure Schedule 3.19
(such bank, a “Relationship Bank”).

 

(c)                                                  The Borrowers
shall cause each deposit account (other than Exempt Accounts) to be subject to
a Blocked Account Agreement. The Borrowers shall cause each investment account
(other than any Exempt Account) to be submitted to a Control Agreement. Each
such Blocked Account Agreement and Control Agreement shall be in form and
substance reasonably satisfactory to the Administrative Agent.

 

(d)                                                 It is
understood and agreed that, notwithstanding anything herein to the contrary,
Blocked Account Agreements and Control Agreements substantially in the same
form as those entered into on the Closing Date will be satisfactory to the
Administrative Agent.

 

(e)                                                  So long as no
Event of Default has occurred and is continuing, Borrower may add or replace a
Relationship Bank; provided, that (i) the Administrative Agent shall have
consented in writing in advance to the addition or replacement of such
Relationship Bank (such consent not to be unreasonably withheld) and (ii) prior
to the time of the opening of an account (other than an Exempt Account) with
such Relationship Bank, the relevant Borrower and such bank shall have executed
and delivered to the Administrative Agent a Blocked Account Agreement or Control
Agreement with respect to such account.

 

(f)                                                    The Blocked
Accounts shall be cash collateral accounts, with all cash, checks and other
similar items of payment in such accounts securing payment of the Loans and all
other Obligations, and in which each applicable Borrower shall have granted a
Lien to the Administrative Agent for the benefit of the Lenders pursuant to the
Agreement and the other Loan Documents.

 

(g)                                                 Administrative
Agent shall not deliver a notice that it is exercising exclusive control over any
Blocked Account or other account subject to a Control Agreement, or otherwise
give instructions or entitlement orders with respect thereto, to any bank or
other financial institution unless an Event of Default has occurred and is
continuing.

 

B-1

 

ANNEX C

TO CREDIT AGREEMENT

 

CLOSING CHECKLIST

 

In addition to, and not in
limitation of, the conditions described in Section 2.1 of the Agreement,
pursuant to Section 2.1(c), the following items must be received by the
Administrative Agent in form and substance reasonably satisfactory to the
Administrative Agent (it being understood that any document delivered
substantially in the form of the applicable Exhibit hereto shall be deemed
to be in form and substance satisfactory to the Administrative Agent) or waived
in writing by the Administrative Agent on or prior to the Closing Date (each
capitalized term used but not otherwise defined herein shall have the meaning
ascribed thereto in Annex A to the Agreement):

 

1.                                       Appendices.  All Appendices to the
Agreement, in form and substance satisfactory to the Administrative Agent (it
being agreed that Appendices substantially identical to the Appendices attached
to the Agreement on the Closing Date shall be deemed to be in form and
substance satisfactory to the Administrative Agent).

 

2.                                       Notes.  Duly executed originals of the
Notes, dated the Closing Date, for each Lender having requested such a Note
prior to the Closing Date.

 

3.                                       Charter and Good Standing.  For
each Borrower, such Person’s (a) charter and all amendments thereto and (b) good
standing certificates in its state of incorporation, each dated a recent date
prior to the Closing Date and certified by the applicable Secretary of State or
other authorized Governmental Authority.

 

4.                                       Bylaws and Resolutions.  For
each Borrower, (a) such Person’s bylaws, together with all amendments
thereto and (b) resolutions of such Person’s Board of Directors or other
equivalent body or committee thereof approving and authorizing the execution,
delivery and performance of the Loan Documents to which such Person is a party
and the transactions to be consummated in connection therewith, each certified
as of the Closing Date by such Person’s corporate secretary or an assistant
secretary as being in full force and effect without any modification or
amendment.

 

5.                                       Incumbency Certificates.  For
each Borrower, signature and incumbency certificates of the officers of each
such Person executing any of the Loan Documents, certified as of the Closing
Date by such Person’s corporate secretary or an assistant secretary as being
true, accurate, correct and complete.

 

6.                                       Officer’s Certificate.  The
Administrative Agent shall have received duly executed originals of a
certificate of the Chief Financial Officer of the Borrower Agent, dated the
Closing Date, stating that, there has been no Material Adverse Effect since the
date of Borrower’s Form 10-K or 10-Q most recently filed prior to the
Closing Date as updated by subsequent public filings prior to the Closing Date
and other written materials provided to the Administrative Agent prior to the
Closing Date (including Projections and reserve build and cash flow data
delivered prior to the Closing Date).

 

C-1

 

7.                                       Audited Financials; Financial Condition.  The
Administrative Agent shall have received not less than two (2) Business
Days prior to the Closing Date the Financial Statements and Projections
referred to in Section 3.4, and the Administrative Agent shall be
satisfied, in its sole discretion, with all of the foregoing.

 

8.                                       Other Documents. 
Delivery of certain notes, instruments, certificates, documents and
agreements of each Borrower as the Administrative Agent may request in its
discretion exercised reasonably in accordance with customary business practices
for comparable asset-based secured super-priority debtor in possession
transactions.

 

9.                                       Security Interests; Filings; Lien Search
Results.  (a) Evidence reasonably satisfactory to
the Administrative Agent that it (for the benefit of Lenders) has a valid and
perfected first priority security interest in the Collateral (or, if
applicable, subject to the relative priorities set forth in the Collateral
Documents), and that all documents and instruments (including financing
statements under the Code) required by law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to perfect
the Lenders’ security interests in the Collateral shall have been filed,
registered or recorded, or shall have been delivered to the Administrative
Agent for filing, registration or recording, and (b) the results of a
recent Lien, tax and judgment search in each relevant jurisdiction, including
the FAA registry, with respect to the Borrowers, revealing no Liens on any of
the assets of the Borrowers, other than Liens permitted hereby and other Liens
acceptable to the Administrative Agent.

 

10.                                 Intellectual Property Security Agreements.  Duly
executed originals of Trademark Security Agreements, Copyright Security
Agreements and Patent Security Agreements, each signed by each Borrower which
owns U.S. registered Trademarks, Copyrights and/or Patents, as applicable, all
in form and substance reasonably satisfactory to the Administrative Agent, together
with all instruments, documents and agreements executed pursuant thereto.

 

11.                                 Cash Management System; Blocked Account
Agreements.  Evidence satisfactory to Administrative Agent
that Cash Management Systems complying with Annex B to the Agreement have been
established and are being maintained in the manner set forth in such Annex B,
together with copies of duly executed tri-party blocked account and Control
Agreements, all as required by Annex B.

 

C-2

 

ANNEX D

TO CREDIT AGREEMENT

 

FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING

 

The
Borrowers shall deliver or cause to be delivered to the Administrative Agent or
to the Administrative Agent and Lenders, as indicated, the following:

 

(a)                                  Monthly
Financials.  To the
Administrative Agent and Lenders, within thirty (30) days after the end of the
first two Fiscal Months of each Fiscal Quarter, financial information regarding
the Borrowers and their Subsidiaries, certified by the Chief Financial Officer
of the Borrower Agent, consisting of consolidated (i) unaudited balance
sheets as of the close of such Fiscal Month and the related statements of
income and cash flows for that portion of the Fiscal Year ending as of the
close of such Fiscal Month and (ii) unaudited statements of income and
cash flows for such Fiscal Month, setting forth in comparative form the figures
for the corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all (except for Projections) prepared in
accordance with GAAP (subject to normal quarter-end or year-end adjustments).
Such financial information shall be accompanied by (A) a statement in
reasonable detail (each, a “Compliance Certificate”)
showing the calculations used in determining compliance with each of the
Financial Covenants that is tested on a monthly basis and (B) the
certification of the Chief Financial Officer of the Borrower Agent that (i) such
financial information (except for Projections) presents fairly in all material
respects in accordance with GAAP (subject to normal year-end adjustments) the
financial position, results of operations and statements of cash flows of such
Borrower and its Subsidiaries, on a consolidated or a consolidating basis (as
applicable) as at the end of such Fiscal Month and for that portion of the
Fiscal Year then ended, and (ii) any other information (except for
Projections) presented is true, correct and complete in all material respects
and that there was no Default or Event of Default in existence as of such time
or, if a Default or Event of Default has occurred and is continuing, describing
the nature thereof and all efforts undertaken to cure such Default or Event of
Default.

 

(b)                                 Quarterly
Financials.  To
Administrative Agent and Lenders, within forty-five (45) days after the end of
the first three Fiscal Quarters of each Fiscal Year, consolidated and
consolidating financial information regarding the Borrower and their
Subsidiaries, certified by the Chief Financial Officer of the Borrower Agent,
consisting of (i) unaudited consolidated balance sheet as of the close of
such Fiscal Quarter and the related statements of income and cash flow for that
portion of the Fiscal Year ending as of the close of such Fiscal Quarter, (ii) unaudited
consolidating balance sheet of Frontier Airlines, Inc. and Lynx Aviation, Inc.,
as of the close of such Fiscal Quarter and the related statements of income and
cash flow for that portion of the Fiscal Year ending as of the close of such
Fiscal Quarter, and (iii) unaudited consolidated statements of income and
cash flows for such Fiscal Quarter, in each case setting forth in comparative
form the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all (except for Projections)
prepared in accordance with GAAP (subject to normal year-end adjustments). Such
financial information shall be accompanied by (A) a statement in
reasonable detail (each, a “Compliance Certificate”)
showing the calculations used in determining compliance with each of the
Financial Covenants that is tested on the last day of 

 

D-1

 

the applicable Fiscal Quarter and (B) the certification
of the Chief Financial Officer of the Borrower Agent that (i) such
financial information (except for Projections) presents fairly in all material
respects in accordance with GAAP (subject to normal year-end adjustments) the
financial position, results of operations and statements of cash flows of such
Borrower and its Subsidiaries, on a consolidated or a consolidating basis (as
applicable) as at the end of such Fiscal Quarter and for that portion of the
Fiscal Year then ended, (ii) any other information (except for
Projections) presented is true, correct and complete in all material respects
and that there was no Default or Event of Default in existence as of such time
or, if a Default or Event of Default has occurred and is continuing, describing
the nature thereof and all efforts undertaken to cure such Default or Event of
Default. In addition, Borrower shall deliver to Administrative Agent and
Lenders, within forty-five (45) days after the end of each Fiscal Quarter, a
management discussion and analysis for Borrower and its Subsidiaries on a
consolidated basis that includes a comparison of performance for that Fiscal
Quarter to the corresponding period in the prior year.

 

(c)                                  13 Week
Rolling Forecasts.  To the
Administrative Agent and Lenders, commencing with the first fiscal month
following the Closing Date, as soon as practicable but no later than the last
day of each week, a statement of projected cash receipts and cash disbursements
for each week of the period of thirteen continuous weeks commencing with the
immediately following week, in a form consistent with the form provided to the
Administrative Agent prior to the Closing Date (the “Budget”).

 

(d)                                 Annual
Audited Financials.  To the
Administrative Agent and Lenders, within ninety (90) days after the end of each
Fiscal Year, consolidated and consolidating financial information regarding the
Borrowers and their Subsidiaries, consisting of (i) audited consolidated
balance sheet as of the close of such Fiscal Year and the related statements of
income and cash flows for the Fiscal Year then ended, and (ii) unaudited
consolidating balance sheets of Frontier Airlines, Inc. and Lynx Aviation, Inc.
as of the close of such Fiscal Year and the related statements of income and
cash flow for the Fiscal Year then ending, all prepared in accordance with
GAAP, in each case, setting forth in comparative form in each case the figures
for the previous Fiscal Year, which Financial Statements shall be prepared in
accordance with GAAP and in the case of the Financial Statements referred to in
(i), certified without qualification (other than going-concern or like
qualification), by KPMG, LLP, another “Big 4 accounting firm or another
independent registered public accounting firm otherwise reasonably acceptable
to the Administrative Agent. Such Financial Statements shall be accompanied by (1) a
statement prepared in reasonable detail showing the calculations used in
determining compliance with each of the Financial Covenants, (2) the
annual letters to such accountants in connection with their audit examination
detailing contingent liabilities and material litigation matters, and (3) the
certification of the Chief Executive Officer or Chief Financial Officer of the
Borrower Agent that all such Financial Statements present fairly in all
material respects in accordance with GAAP the financial position, results of
operations and statements of cash flows of such Borrower and its Subsidiaries
on a consolidated or consolidating basis (as applicable), as at the end of such
Fiscal Year and for the period then ended, and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.

 

D-2

 

(e)                                  Management
Letters.  To the
Administrative Agent and Lenders, within forty-five (45) Business Days after
receipt thereof by any Borrower, copies of all management letters, exception
reports or similar letters or reports received by such Borrower from its
independent registered public accountants.

 

(f)                                    Default
Notices.  To the
Administrative Agent and Lenders, as soon as practicable, and in any event
within five (5) Business Days after an executive officer of any Borrower
has actual knowledge of the existence of any Default, Event of Default or other
event that has had a Material Adverse Effect, telephonic or telecopied notice
specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given
telephonically, shall be promptly confirmed in writing on the next Business
Day.

 

(g)                                 SEC
Filings and Press Releases.  To the Administrative Agent and Lenders,
promptly upon their becoming available, and at a minimum on a quarterly basis,
copies of: (i) all Financial Statements, reports, notices and proxy
statements made publicly available by any Borrower to its security holders; (ii) all
regular and periodic reports and all registration statements and prospectuses,
if any, filed by any Borrower with any securities exchange or with the
Commission or any governmental or private regulatory authority; and (iii) all
press releases and other statements made available by any Borrower to the
public concerning material changes or developments in the business of any such
Person.

 

(h)                                 Litigation.  To the Administrative Agent and Lenders in
writing, promptly upon learning thereof, notice of any unstayed Postpetition
Litigation commenced or threatened against any Borrower that is not, in such
Borrower’s reasonable judgment, covered by insurance and that (i) seeks
damages in excess of $1,000,000, (ii) seeks injunctive relief that could
reasonably be expected to result in costs and/or liabilities or loss of
revenues to Borrowers in excess of $1,000,000, (iii) is asserted or
instituted against any Plan, its fiduciaries or its assets or against any
Borrower or ERISA Affiliate in connection with any Plan, (iv) alleges
criminal misconduct by any Borrower, or (v) alleges the violation of any
law regarding, or seeks remedies in connection with, any Environmental
Liabilities if such Litigation is reasonably likely to result in any Borrower
incurring Environmental Liabilities in excess of $250,000 individually.

 

(i)                                     Documents
Filed with Bankruptcy Court.  To the Administrative Agent and the Lenders,
copies of all pleadings, motions, applications, judicial information, financial
information and other documents filed by or on behalf of the Debtors with the
Bankruptcy Court or the U.S. Trustee in any Case that are not otherwise made
publicly available by filings on the Electronic Case Filing System for such
Case (the “Court Documents”); provided,
however, that any such Court Documents filed under seal and/or subject to
confidentiality and other restrictions prohibiting disclosure to the
Administrative Agent shall not be provided to Administrative Agent.

 

(j)                                     Documents
Provided to Committees.  To the Administrative Agent and the Lenders,
copies of any reports filed in any Case and provided to any creditors’ or other
committee or the U.S. Trustee (“Committee Documents”)
that are not otherwise made publicly available by filings on the Electronic
Case Filing System for such Case; provided, 

 

D-3

 

however, that any such Committee Documents filed under
seal and/or subject to confidentiality and other restrictions prohibiting
disclosure to the Administrative Agent shall not be provided to Administrative
Agent.

 

(k)                                  Weekly
Reports.  To the
Administrative Agent and the Lenders, customary weekly reports concerning the
financial and operating results and cash positions of the Borrowers provided to
the Chief Executive Officer and Chief Financial Officer of Frontier Holdings,
each substantially concurrently with such delivery.

 

(l)                                     Other
Documents.  To the
Administrative Agent and Lenders, such other financial and other information
respecting any Borrower’s business or financial condition as the Administrative
Agent shall, from time to time, reasonably request.

 

Documents required to be delivered
pursuant to paragraphs (b), (d) or (g) (to the extent any such
documents are included in materials otherwise filed with the SEC) may be
delivered electronically and if so delivered, shall be deemed to have been
delivered on the date on which the Borrowers give notice to the Lenders that
such documents have been posted to the Borrowers’ Internet site on the Internet
at www.frontierairlines.com, at www.sec.gov/edaux/searches.html or at another
website identified in such notice and accessible to the Lenders without charge;
provided that the Borrowers shall deliver paper copies of such documents to any
Lender that requests the Borrowers to deliver such paper copies.

 

D-4

 

ANNEX E

TO CREDIT AGREEMENT

 

FINANCIAL COVENANTS

 

The
Borrowers shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP
consistently applied:

 

(a) Minimum
EBITDAR. At the end of each Fiscal Month set forth below, the amount equal
to the sum of EBITDAR for the 4-month period then ended of the Borrowers and
their Subsidiaries on a consolidated basis shall not be less than the amount
set forth below opposite such Fiscal Month.

 

	
  Fiscal Month

  	
   

  	
  EBITDAR

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September

  	
  2008

  	
   

  	
  $

  	
  11,300,000

  	
   

  
	
  October

  	
  2008

  	
   

  	
  $

  	
  4,500,000

  	
   

  
	
  November

  	
  2008

  	
   

  	
  $

  	
  (3,600,000

  	
  )

  
	
  December

  	
  2008

  	
   

  	
  $

  	
  (8,000,000

  	
  )

  
	
  January

  	
  2009

  	
   

  	
  $

  	
  700,000

  	
   

  
	
  February

  	
  2009

  	
   

  	
  $

  	
  1,100,000

  	
   

  
	
  March

  	
  2009

  	
   

  	
  $

  	
  22,000,000

  	
   

  

 

(b) Contingency Budget.  In
order to ensure that the Carve-Out, if implicated, will be adequately funded,
as of 5:00 p.m. on the first Business Day of each week, the Borrowers
shall have Aggregate Cash on Hand of at least $15,000,000.

 

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 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
Borrowers or the Requisite Lenders shall so request, the Administrative Agent,
the Lenders and the Borrowers 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 Requisite Lenders); 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
Borrowers shall provide to the Administrative Agent and the Lenders financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between

 

E-1

 

calculations of such ratio
or requirement made before and after giving effect to such change in GAAP.

 

E-2

 

ANNEX F

TO CREDIT AGREEMENT

 

NOTICE ADDRESSES

 

(A)                             If to Administrative Agent, at

 

Wells Fargo Bank Northwest, National Association

299 S. Main Street, 12th Floor

Salt Lake City, UT 84111

Attention: Corporate Trust Lease Group

Telecopier No.: 801-246-5053

Telephone No.: 801-246-5630

 

with copies to:

 

Fulbright & Jaworski L.L.P.

666 Fifth Avenue

New York, NY 10103-3198

Attention: David A. Rosenzweig

Telecopier No.: 212-318-3400

Telephone No.: 212-318-3000

 

(B)                               If to Borrower Agent or any Borrower, at

Frontier Airlines Holdings, Inc.

7001 Tower Road

Denver, CO 80249

Attention: Office of the Chief Financial Officer

Telecopier No.: 720-374-4379

Telephone No.: 720-374-4200

 

with copies to:

 

Frontier Airlines Holdings, Inc.

7001 Tower Road

Denver, CO 80249

Attention: Office of the General Counsel

 

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY 10017

Attention: Marshall Huebner

Telecopier No.: 212 450 3800

Telephone No.: 212 450 4000

 

F-1

 

ANNEX G

TO CREDIT AGREEMENT

 

COMMITMENTS

 

	
  Lender

  	
   

  	
  Commitment

  	
   

  
	
  Republic Airways Holdings Inc.

  	
   

  	
  $

  	
  12,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Suisse, Cayman Islands Branch

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AQR Capital, LLC, AQR Absolute Return

  Master Account, L.P.

  	
   

  	
  $

  	
  6,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CNH Partners, LLC, CNH Diversified

  Opportunities Master Account, L.P.

  	
   

  	
  $

  	
  1,000,000

  	
   

  

 

G-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}]]