Document:

exv10w4

 

Exhibit 10.4

SECURITY AGREEMENT

LAURUS MASTER FUND, LTD.

KITTY HAWK, INC.

KITTY HAWK CARGO, INC.

KITTY HAWK AIRCARGO, INC.

KITTY HAWK GROUND, INC.

and

KH GROUND, INC.

Dated: March 29, 2007

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	1.
	 	General Definitions and Terms; Rules of Construction	 	 	1	 
	 
	 	 	 	 	 	 
	2.
	 	Loan Facility	 	 	2	 
	 
	 	 	 	 	 	 
	3.
	 	Repayment of the Loans	 	 	3	 
	 
	 	 	 	 	 	 
	4.
	 	Procedure for Loans	 	 	4	 
	 
	 	 	 	 	 	 
	5.
	 	Interest and Payments	 	 	4	 
	 
	 	 	 	 	 	 
	6.
	 	Security Interest	 	 	5	 
	 
	 	 	 	 	 	 
	7.
	 	Representations, Warranties and Covenants Concerning the Collateral	 	 	6	 
	 
	 	 	 	 	 	 
	8.
	 	Payment of Accounts	 	 	9	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	9.
	 	Collection and Maintenance of Collateral	 	 	10	 
	 
	 	 	 	 	 	 
	10.
	 	Inspections and Appraisals	 	 	10	 
	 
	 	 	 	 	 	 
	11.
	 	Financial Reporting	 	 	10	 
	 
	 	 	 	 	 	 
	12.
	 	Additional Representations and Warranties	 	 	12	 
	 
	 	 	 	 	 	 
	13.
	 	Covenants	 	 	23	 
	 
	 	 	 	 	 	 
	14.
	 	Further Assurances	 	 	31	 
	 
	 	 	 	 	 	 
	15.
	 	Closing Conditions	 	 	31	 
	 
	 	 	 	 	 	 
	16.
	 	Additional Borrowing Conditions	 	 	35	 
	 
	 	 	 	 	 	 
	17.
	 	Representations, Warranties and Covenants of Laurus	 	 	36	 
	 
	 	 	 	 	 	 
	18.
	 	Power of Attorney	 	 	38	 
	 
	 	 	 	 	 	 
	19.
	 	Term of Agreement	 	 	38	 
	 
	 	 	 	 	 	 
	20.
	 	Termination of Lien	 	 	38	 
	 
	 	 	 	 	 	 
	21.
	 	Events of Default	 	 	39	 
	 
	 	 	 	 	 	 
	22.
	 	Remedies	 	 	41	 
	 
	 	 	 	 	 	 
	23.
	 	Waivers	 	 	42	 
	 
	 	 	 	 	 	 
	24.
	 	Expenses	 	 	42	 
	 
	 	 	 	 	 	 
	25.
	 	Assignment	 	 	43	 
	 
	 	 	 	 	 	 
	26.
	 	No Waiver; Cumulative Remedies	 	 	43	 
	 
	 	 	 	 	 	 
	27.
	 	Application of Payments	 	 	44	 
	 
	 	 	 	 	 	 
	28.
	 	Indemnity	 	 	44	 
	 
	 	 	 	 	 	 
	29.
	 	Revival	 	 	44	 
	 
	 	 	 	 	 	 
	30.
	 	Borrowing Agency Provisions	 	 	44	 
	 
	 	 	 	 	 	 
	31.
	 	Cape Town Convention	 	 	45	 
	 
	 	 	 	 	 	 
	32.
	 	Notices	 	 	46	 

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	 	 	 	 	Page
(5)	 
	33.
	 	Governing Law, Jurisdiction and Waiver of Jury Trial	 	 	47	 
	 
	 	 	 	 	 	 
	34.
	 	Limitation of Liability	 	 	48	 
	 
	 	 	 	 	 	 
	35.
	 	Miscellaneous	 	 	48	 
	 
	 	 	 	 	 	 
	36.
	 	Entire Understanding; Maximum Interest	 	 	48	 
	 
	 	 	 	 	 	 
	37.
	 	Severability	 	 	48	 
	 
	 	 	 	 	 	 
	38.
	 	Survival	 	 	48	 
	 
	 	 	 	 	 	 
	39.
	 	Captions	 	 	48	 
	 
	 	 	 	 	 	 
	40.
	 	Counterparts; Telecopier Signatures	 	 	49	 
	 
	 	 	 	 	 	 
	41.
	 	Construction	 	 	49	 
	 
	 	 	 	 	 	 
	42.
	 	Publicity	 	 	49	 
	 
	 	 	 	 	 	 
	43.
	 	Joinder	 	 	49	 
	 
	 	 	 	 	 	 
	44.
	 	Legends	 	 	49	 

ii

 

SECURITY AGREEMENT

     This Security Agreement is made as of March 29, 2007 by and among LAURUS MASTER FUND, LTD., a
Cayman Islands company (“Laurus”), KITTY HAWK, INC., a Delaware corporation (the
“Parent”), and each party listed on Exhibit A attached hereto (each an
“Eligible Subsidiary” and collectively, the “Eligible Subsidiaries”) the Parent and
each Eligible Subsidiary, each a “Company” and collectively, the “Companies”).

BACKGROUND

     The Companies have requested that Laurus make advances available to the Companies; and

     Laurus has agreed to make such advances on the terms and conditions set forth in this
Agreement.

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants and undertakings and the terms and
conditions contained herein, the parties hereto agree as follows:

     1. General Definitions and Terms; Rules of Construction.

     (a) General Definitions. Capitalized terms used in this Agreement shall have the
meanings assigned to them in Annex A or elsewhere in this Agreement.

     (b) Accounting Terms. Any accounting terms used in this Agreement, which are not
specifically defined, shall have the meanings customarily given them in accordance with GAAP and
all financial computations shall be computed, unless specifically provided herein, in accordance
with GAAP consistently applied.

     (c) Other Terms. All other terms used in this Agreement and defined in the UCC, shall
have the meaning given therein unless otherwise defined herein.

     (d) Rules of Construction. All Schedules, Addenda, Annexes and Exhibits hereto or
expressly identified to this Agreement are incorporated herein by reference and taken together with
this Agreement constitute but a single agreement. The words “herein”, “hereof” and “hereunder” or
other words of similar import refer to this Agreement as a whole, including the Exhibits, Addenda,
Annexes and Schedules thereto, as the same may be from time to time amended, modified, restated or
supplemented, and not to any particular section, subsection or clause contained in this Agreement.
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, the feminine and the neuter. The term “or” is not exclusive,
unless the context requires otherwise. The term “including” (or any form thereof) shall not be
limiting or exclusive. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. All references in this Agreement or
in the Schedules, Addenda, Annexes and Exhibits to this Agreement to sections, schedules,
disclosure schedules, exhibits, and attachments shall refer to the corresponding sections,
schedules, disclosure schedules, exhibits, and attachments of or to this Agreement. All references
to any

 

instruments or agreements, including references to any of this Agreement or the Ancillary
Agreements shall include any and all modifications or amendments thereto and any and all extensions
or renewals thereof. If the due date for performance under this Agreement is not a Business Day,
the due date shall be extended automatically to the next Business Day following the original due
date.

     2. Loan Facility.

     (a) Loans.

          (i) Subject to the terms and conditions set forth herein and in the Ancillary Agreements,
Laurus may make loans (the “Loans”) to the Companies from time to time during the Term
which, in the aggregate at any time outstanding, will not exceed the lesser of (x) the Capital
Availability Amount and (y) an amount equal to (I) the Accounts Availability minus (II) such
reserves as Laurus may reasonably in its good faith judgment deem proper and necessary from time to
time and of which Laurus gives the Companies five (5) Business Days prior written notice (provided,
if an Event of Default has occurred and is continuing, no such prior notice shall be required) (the
“Reserves”). The lesser of the amounts derived at any time pursuant to clauses (x) and (y)
of the preceding sentence shall be referred to as the “Formula Amount.” The Companies
shall, jointly and severally, execute and deliver to Laurus on the Closing Date the Note. The
Companies hereby each acknowledge and agree that Laurus’ obligation to purchase the Note from the
Companies on the Closing Date shall be contingent upon the satisfaction (or waiver by Laurus in its
sole discretion) of the items and matters set forth in the closing checklist provided by Laurus to
the Companies on or prior to the Closing Date. The Companies hereby each further acknowledge and
agree that, immediately prior to each borrowing hereunder and immediately after giving effect
thereto, the Companies shall be deemed to have certified to Laurus that at the time of each such
proposed borrowing and also after giving effect thereto (i) there shall exist no Event of Default,
(ii) all representations, warranties and covenants made by the Companies in connection with this
Agreement and the Ancillary Agreements are true, correct and complete and (iii) all of each
Company’s and its respective Subsidiaries’ covenant requirements under this Agreement and the
Ancillary Agreements have been met. The Companies hereby agree to provide a certificate confirming
the foregoing concurrently with each request for a borrowing hereunder.

          (ii) The Companies acknowledge that Laurus must exercise reasonable discretion in all matters
which may increase or decrease the advance percentages used in determining Accounts Availability,
based either on the Companies’ past performance, or on its reasonable business prospects, and each
of the Companies hereby consent to any such increases or decreases which may limit or restrict
advances requested by the Companies.

          (iii) If any interest, fees, costs or charges payable to Laurus hereunder are not paid when
due, each of the Companies shall thereby be deemed to have requested, and Laurus is hereby
authorized at its discretion to make and charge to the Companies’ account, a Loan as of such date
in an amount equal to such unpaid interest, fees, costs or charges.

          (iv) Reserved.

          (v) Laurus will account to Company Agent monthly with a statement of all Loans and other
advances, charges and payments made pursuant to this Agreement, and such account rendered by Laurus
shall be deemed final, binding and conclusive unless Laurus is notified by

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Company Agent in writing to the contrary within thirty (30) days of the date each account was
rendered specifying the item or items to which objection is made.

          (vi) During the Term, the Companies may borrow and prepay Loans in accordance with the terms
and conditions hereof.

          (vii) If any Eligible Account is not paid by the Account Debtor within ninety (90) days after
the date that such Eligible Account was invoiced (a “Delinquent Account”), then, within
three (3) Business Days after obtaining knowledge thereof, (A) the Company Agent shall deliver to
Laurus a certification as to each Company’s Eligible Accounts prepared on a pro forma basis giving
effect to such Delinquent Account and setting forth the Formula Amount on such Business Day and (B)
if the outstanding principal amount of the Loans exceeds the Formula Amount as reflected in such
pro forma certificate, the Companies shall jointly and severally immediately repay Loans in an
amount equal to such excess.

     3. Repayment of the Loans. The Companies (a) may prepay the Obligations from time to
time in accordance with the terms and provisions of the Note; (b) shall jointly and severally repay
on the expiration of the Term (i) the then aggregate outstanding principal balance of the Loans
together with accrued and unpaid interest, fees and charges and; (ii) all other amounts owed Laurus
under this Agreement and the Ancillary Agreements; and (c) shall jointly and severally repay on any
day on which the then aggregate outstanding principal balance of the Loans are in excess of the
Formula Amount at such time, Loans in an amount equal to such excess. Any payments of principal,
interest, fees or any other amounts payable hereunder or under any Ancillary Agreement shall be
made prior to 12:00 noon (New York time) on the due date thereof in immediately available funds.

     4. Procedure for Loans. Company Agent may by written notice request a borrowing of
Loans prior to 11:30 a.m. (New York time) on the Business Day of its request to incur, on such
Business Day, a Loan. Together with each request for a Loan (or at such other intervals as Laurus
may request), Company Agent shall deliver to Laurus a Borrowing Base Certificate in the form of
Exhibit B attached hereto, which shall be certified as true and correct by the Chief
Executive Officer, Chief Financial Officer, Chief Accounting Officer or Treasurer of Company Agent
together with all supporting documentation relating thereto. All Loans shall be disbursed from
whichever office or other place Laurus may designate from time to time and shall be charged to the
Companies’ account on Laurus’ books. The proceeds of each Loan made by Laurus shall be made
available to Company Agent on the Business Day following the Business Day so requested in
accordance with the terms of this Section 4 by way of credit to the applicable Company’s operating
account maintained with such bank as Company Agent designated to Laurus. Any and all Obligations
due and owing hereunder may be charged to the Companies’ account and shall constitute Loans.

     5. Interest and Payments.

     (a) Interest.

          (i) Except as modified by Section 5(a)(iii) below, the Companies shall jointly and severally
pay interest at the Contract Rate on the unpaid principal balance of each Loan until such time as
such Loan is collected in full in good funds in dollars of the United States of America.

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          (ii) Interest and payments shall be computed on the basis of actual days elapsed in a year of
360 days. At Laurus’ option, Laurus may charge the Companies’ account for said interest.

          (iii) Effective upon the occurrence of any Event of Default and for so long as any Event of
Default shall be continuing, the Contract Rate shall automatically be increased as set forth in the
Note (such increased rate, the “Default Rate”), and all outstanding Obligations, including
unpaid interest, shall continue to accrue interest from the date of such Event of Default at the
Default Rate applicable to such Obligations.

          (iv) In no event shall the aggregate interest payable hereunder or under the Note exceed the
maximum rate permitted under any applicable law or regulation, as in effect from time to time (the
“Maximum Legal Rate”), and if any provision of this Agreement or any Ancillary Agreement is
in contravention of any such law or regulation, interest payable under this Agreement and each
Ancillary Agreement shall be computed on the basis of the Maximum Legal Rate (so that such interest
will not exceed the Maximum Legal Rate).

          (v) The Companies shall jointly and severally pay principal, interest and all other amounts
payable hereunder, or under any Ancillary Agreement, without any deduction whatsoever, including
any deduction for any set-off or counterclaim.

     (b) Payment; Certain Closing Conditions.

          (i) Payment. Upon execution of this Agreement by each Company and Laurus, the
Companies shall jointly and severally pay to Laurus Capital Management, LLC, the investment advisor
of Laurus (“LCM”), a non-refundable payment in an amount equal to three and one-half percent
(3.50%) of the Capital Availability Amount. The foregoing payment is referred to herein as the
“LCM Payment.” Such payment shall be deemed fully earned on the Closing Date and shall not be
subject to rebate or proration for any reason.

          (ii) Overadvance Payment. Without affecting Laurus’ rights hereunder in the event the
Loans exceed the Formula Amount (each such event, an “Overadvance”), all such Overadvances
shall bear additional interest at a rate equal to two percent (2%) per month of the amount of such
Overadvances for all times such amounts shall be in excess of the Formula Amount. All amounts that
are incurred pursuant to this Section 5(b)(ii) shall be due and payable by the Companies monthly,
in arrears, on the first business day of each calendar month and upon expiration of the Term.

          (iii) Expenses. The Companies shall jointly and severally reimburse Laurus for its
expenses (including reasonable legal fees and expenses and expenses of Laurus’ due diligence review
of each Company) incurred in connection with the Transactions, including, without limitation, the
preparation and negotiation of this Agreement and the Ancillary Agreements. The Companies have
previously made a non-refundable deposit of $25,000 to Laurus and such amount shall be credited
against the expenses referred to this Section 5(b)(iii). Such expense reimbursement shall be in
addition to, and not in lieu of, due diligence fees of $30,000, which the Companies shall jointly
and severally pay to Laurus in connection with the Transactions. The Companies shall also jointly
and severally pay to Laurus a structuring fee of $50,000. Amounts required to be paid under this
Section 5(b)(iii), including, without limitation, legal fees and expenses of Laurus incurred in
connection with the Transactions, will be paid on the Closing Date.

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          (iv) Financial Information Default. Without affecting Laurus’ other rights and
remedies, in the event any Company fails to deliver the financial information required by Section
11 on or before the date required by this Agreement, the Companies shall jointly and severally pay
Laurus an aggregate fee in the amount of $500.00 per week (or portion thereof) for each such
failure until such failure is cured to Laurus’ satisfaction or waived in writing by Laurus. All
amounts that are incurred pursuant to this Section 5(b)(iv) shall be due and payable by the
Companies monthly, in arrears, on the first business of each calendar month and upon expiration of
the Term.

     6. Security Interest.

     (a) To secure the prompt payment to Laurus of the Obligations, in addition to and not in lieu
of the Aircraft Security Documents, each Company hereby assigns, pledges and grants to Laurus a
continuing security interest in and Lien upon all of the Collateral. All of each Company’s Books
and Records relating to the Collateral shall, until delivered to or removed by Laurus, be kept by
such Company in trust for Laurus until all Obligations have been paid in full. Each confirmatory
assignment schedule or other form of assignment hereafter executed by each Company shall be deemed
to include the foregoing grant, whether or not the same appears therein.

     (b) In addition to the rights of Laurus under the Aircraft Security Documents, each Company
hereby (i) authorizes Laurus to file any financing statements, continuation statements or
amendments thereto that (x) indicate the Collateral (1) as all assets and personal property of such
Company or words of similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC of such jurisdiction, or (2) as being of
an equal or lesser scope or with greater detail, and (y) contain any other information required by
Part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing
statement, continuation statement or amendment and (ii) ratifies its authorization for Laurus to
have filed any initial financial statements, or amendments thereto if filed prior to the date
hereof. Each Company acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement without the prior
written consent of Laurus and agrees that it will not do so without the prior written consent of
Laurus, subject to such Company’s rights under Section 9-509(d)(2) of the UCC.

     (c) Each Company hereby grants to Laurus an irrevocable, non-exclusive license (exercisable
upon the termination of this Agreement due to an occurrence and during the continuance of an Event
of Default without payment of royalty or other compensation to such Company) to use, transfer,
license or sublicense any Intellectual Property now owned, licensed to, or hereafter acquired by
such Company, and wherever the same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored and to all computer and
automatic machinery software and programs used for the compilation or printout thereof, and
represents, promises and agrees that any such license or sublicense is not and will not be in
conflict with the contractual or commercial rights of any third Person; provided, that such license
will terminate on the termination of this Agreement and the payment in full of all Obligations.

     7. Representations, Warranties and Covenants Concerning the Collateral. In addition
to, and not in lieu of, any representations, warranties and covenants made by any Company in the
Ancillary Documents, including, without limitation, the Aircraft Security Documents, each Company
represents, warrants (each of which such representations and warranties shall be deemed repeated
upon the making of each request for a Loan and made as of the time of each and every Loan
hereunder) and covenants with Laurus that:

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     (a) all of the Collateral (i) is owned by it free and clear of all Liens (including any claims
of infringement) except those in Laurus’ favor and Permitted Liens and (ii) is not subject to any
agreement prohibiting the granting of a Lien or requiring notice of or consent to the granting of a
Lien.

     (b) it shall not encumber, mortgage, pledge, assign or grant any Lien in any Collateral or any
other assets to anyone other than Laurus and except for Permitted Liens.

     (c) the Liens granted pursuant to this Agreement, upon due completion of all necessary actions
constitute valid perfected security interests in all of the Collateral in favor of Laurus as
security for the prompt and complete payment and performance of the Obligations, enforceable in
accordance with the terms hereof against any and all of its creditors and purchasers and such
security interest is prior to all other Liens in existence on the date hereof.

     (d) no effective security agreement, mortgage, deed of trust, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part of the Collateral is
or will be on file or of record in any public office, except those relating to Permitted Liens.

     (e) it shall not dispose of any of its properties or assets, or any of the properties or
assets of its Subsidiaries, whether by sale, lease or otherwise except for:

          (i) the sale or other transfer (including, without limitation, installation on leased
Aircraft, trucks and trailers) of Equipment consisting of Spare Parts, Tooling
Equipment and Ground Equipment (as each such term is defined in the Aircraft Mortgage);

          (ii) Equipment consisting of Engines (as defined in the Aircraft Mortgage) and Aircraft so
long as (x) such Equipment is obsolete, is worn-out or is, or will soon be, in need of repairs or
servicing that the Company does not believe, in its reasonable business judgment, are in the
economic best interest of the Company to make, (y) for the 30 (thirty) days prior to such sale or
other disposition the Companies’ Excess Availability exceeds $1,500,000 and (z) at no time during
the thirty (30)-day period prior to such sale or other disposition did the Formula Amount exceed
the outstanding balance of the Loans by less than $1,000,000, and then only to the extent that (1)
the proceeds of any such disposition are used to acquire replacement Equipment which is subject to
Laurus’ first priority security interest or are used to repay Loans or to pay general corporate
expenses, or (2) following the occurrence of an Event of Default which continues to exist the
proceeds of which are remitted to Laurus to be held as cash collateral for the Obligations;

          (iii) the transfer of possession of Equipment pursuant to Civil Reserve Air Fleet Program
administered under Executive Order No. 12056, as amended, or any similar or substitute programs of
the United States government, so long as (A) the Companies promptly notify Laurus of such transfer
of possession and provide Laurus with the name and address of the contracting officer or
representative of the Military Aircraft Command of the United States Air Force to whom notice must
be given in respect of such Equipment and (B) the Companies use their best efforts to assist Laurus
with the assignment of any proceeds thereof;

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          (iv) the consummation of a wet lease, cargo services agreement, charter or similar agreement
in the ordinary course of business (individually and collectively, “Cargo Services Agreements”),
provided, however, the Companies shall promptly notify Laurus of any such Cargo Services Agreement
with a term longer than ninety (90) days; and

          (v) delivery of possession of Equipment to its manufacturer or a certified maintenance
provider for testing, service, repair, maintenance or overhaul work or for alterations or
modifications for a period not to exceed six (6) months (individually and collectively,
“Maintenance Events”), and each Company may temporarily use Equipment loaned from such manufacturer
or certified maintenance provider on an Aircraft while any Equipment is in the possession of such
manufacturer or maintenance provider.

     (f) it shall defend the right, title and interest of Laurus in and to the Collateral
against the claims and demands of all Persons whomsoever, and take such actions, including (i) all
actions necessary to grant Laurus “control” of any Investment Property, Deposit Accounts,
Letter-of-Credit Rights or electronic Chattel Paper owned by it, with any agreements establishing
control to be in form and substance satisfactory to Laurus, (ii) the prompt (but in no event later
than five (5) Business Days following Laurus’ request therefor) delivery to Laurus of all original
Instruments, Chattel Paper, negotiable Documents and certificated Stock owned by it (in each case,
accompanied by stock powers, allonges or other instruments of transfer executed in blank), (iii)
notification of Laurus’ interest in Collateral at Laurus’ request, and (iv) the institution of
litigation against third parties as shall be prudent in order to protect and preserve its and/or
Laurus’ respective and several interests in the Collateral.

     (g) it shall promptly, and in any event within five (5) Business Days after the same is
acquired by it, notify Laurus of any commercial tort claim (as defined in the UCC) acquired by it
and unless otherwise consented by Laurus, it shall enter into a supplement to this Agreement
granting to Laurus a Lien in such commercial tort claim.

     (h) it shall place notations upon its Books and Records and any of its financial statements to
disclose Laurus’ Lien in the Collateral.

     (i) if it retains possession of any Chattel Paper or Instrument with Laurus’ consent, upon
Laurus’ request such Chattel Paper and Instruments shall be marked with the following legend:
“This writing and obligations evidenced or secured hereby are subject to the security interest of
Laurus Master Fund, Ltd.” Notwithstanding the foregoing, upon the reasonable request of Laurus,
such Chattel Paper and Instruments shall be delivered to Laurus.

     (j) it shall perform in a reasonable time all other steps requested by Laurus to create and
maintain in Laurus’ favor a valid perfected first Lien in all Collateral subject only to Permitted
Liens.

     (k) it shall notify Laurus promptly and in any event within three (3) Business Days after
obtaining knowledge thereof (i) of any event or circumstance that, to its knowledge, would cause
Laurus to consider $100,000 or greater, in the aggregate, of any then existing Accounts as no
longer constituting Eligible Accounts (other than Accounts which have been collected) since the
date of the most recently delivered Borrowing Base Certificate; (ii) of any material delay in its
performance of any of its obligations to any Account Debtor; (iii) of any assertion by any Account
Debtor of any material claims, offsets or counterclaims; (iv) of any material allowances, credits

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and/or monies granted by it to any Account Debtor; (v) of all material adverse information
relating to the financial condition of an Account Debtor; (vi) of any material return of goods; and
(vii) of any loss, damage or destruction of any of the Collateral.

     (l) all Eligible Accounts (i) represent complete bona fide transactions which require no
further act under any circumstances on its part to make such Accounts payable by the Account
Debtors, (ii) are not subject to any present or future contingent offsets or counterclaims, and
(iii) do not represent bill and hold sales, consignment sales, guaranteed sales, sale or return or
other similar understandings or obligations of any Affiliate or Subsidiary of such Company. It has
not made, nor will it make, any agreement with any Account Debtor for any extension of time for the
payment of any Account, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction therefrom except in the
ordinary course of its business consistent with historical practice and as previously disclosed to
Laurus in writing.

     (m) it shall not permit any of its Equipment to become a Fixture to real estate or accessions
to other personal property.

     (n) it shall maintain and keep all of its Books and Records concerning the Collateral at its
executive offices listed in Schedule 12(dd).

     (o) it shall maintain and keep the tangible Collateral at the addresses listed in Schedule
12(dd), and will not change such locations (except in connection with Maintenance Events, with
respect to the movement of the Aircraft, trucks, tractors and trailers in the ordinary course of
business or Collateral disposed of as permitted pursuant to Section 7(e) hereof) or open a new
location, without at least thirty (30) days prior written notice to Laurus of such changes or new
location and (ii) prior to such change or opening of a new location where Collateral having a value
of more than $50,000 will be located, it executes and delivers to Laurus such agreements deemed
reasonably necessary or prudent by Laurus, including landlord agreements, mortgagee agreements and
warehouse agreements, each in form and substance satisfactory to Laurus, to adequately protect and
maintain Laurus’ security interest in such Collateral.

     (p) Schedule 7(p) lists all banks and other financial institutions at which it
maintains deposits and/or other accounts, and such Schedule correctly identifies the name, address
and telephone number of each such depository, the name in which the account is held, a description
of the purpose of the account, and the complete account number. It shall not establish any
depository or other bank account with any financial institution (other than the accounts set forth
on Schedule 7(p)) without Laurus’ prior written consent.

     (q) All Inventory manufactured by it in the United States of America shall be produced in
accordance with the requirements of the Federal Fair Labor Standards Act of 1938, as amended and
all rules, regulations and orders related thereto or promulgated thereunder.

     8. Payment of Accounts.

     (a) Each Company will irrevocably direct all of its present and future Account Debtors and
other Persons obligated to make payments constituting Collateral to make such payments directly to
the lockboxes maintained by such Company (the “Lockboxes”) with PNC Bank, National
Association or such other financial institution accepted by Laurus in writing as may be

- 8 -

 

selected by such Company (the “Lockbox Bank”) pursuant to the terms of the certain
agreements among one or more Companies, Laurus and/or the Lockbox Bank dated as of March 28, 2007.
On or prior to the Closing Date, each Company shall and shall cause the Lockbox Bank to enter into
all such documentation acceptable to Laurus pursuant to which, among other things, the Lockbox Bank
agrees to: (a) sweep the Lockbox on a daily basis and deposit all checks received therein to an
account designated by Laurus in writing and (b) comply only with the instructions or other
directions of Laurus concerning the Lockbox. All of each Company’s invoices, account statements
and other written or oral communications directing, instructing, demanding or requesting payment of
any Account of any Company or any other amount constituting Collateral shall conspicuously direct
that all payments be made to the Lockbox or such other address as Laurus may direct in writing.
If, notwithstanding the instructions to Account Debtors, any Company receives any payments, such
Company shall immediately remit such payments to Laurus in their original form with all necessary
endorsements. Until so remitted, such Company shall hold all such payments in trust for and as the
property of Laurus and shall not commingle such payments with any of its other funds or property.

     (b) At Laurus’ election, following the occurrence of an Event of Default which is continuing,
Laurus may notify each Company’s Account Debtors of Laurus’ security interest in the Accounts,
collect them directly and charge the collection costs and expenses thereof to each Company’s and
the Eligible Subsidiaries’ joint and several account.

     9. Collection and Maintenance of Collateral.

     (a) Upon five (5) Business Days prior written notice (provided, if an Event of Default has
occurred and is continuing no such prior notice shall be required), Laurus may verify each
Company’s Accounts from time to time, but not more often than once every three (3) months, unless
an Event of Default has occurred and is continuing or Laurus believes that such verification is
necessary to preserve or protect the Collateral, utilizing an audit control company or any other
agent of Laurus.

     (b) Proceeds of Accounts received by Laurus will be deemed received on the Business Day after
Laurus’ receipt of such proceeds in good funds in dollars of the United States of America to an
account designated by Laurus. Any amount received by Laurus after 12:00 noon (New York time) on
any Business Day shall be deemed received on the next Business Day.

     (c) As Laurus receives the proceeds of Accounts of any Company, it shall (i) apply such
proceeds, as required, to amounts outstanding under the Note, and (ii) remit all such remaining
proceeds (net of interest, fees and other amounts then due and owing to Laurus hereunder) to
Company Agent (for the benefit of the applicable Companies) upon request. Notwithstanding the
foregoing, following the occurrence and during the continuance of an Event of Default, Laurus, at
its option, may (a) apply such proceeds to the Obligations in such order as Laurus shall elect, (b)
hold all such proceeds as cash collateral for the Obligations and each Company hereby grants to
Laurus a security interest in such cash collateral amounts as security for the Obligations and/or
(c) do any combination of the foregoing.

     10. Inspections and Appraisals. At all times during normal business hours, and upon
reasonable prior notice, Laurus, and/or any agent of Laurus shall have the right to (a) have access
to, visit, inspect, review, evaluate and make physical verification and appraisals of each
Company’s properties and the Collateral, (b) inspect, audit and copy (or take originals if
necessary) and make extracts from each Company’s Books and Records, including management letters
prepared

- 9 -

 

by the Accountants, and (c) discuss with each Company’s directors, principal officers, and
independent accountants, each Company’s business, assets, liabilities, financial condition, results
of operations and business prospects. Each Company will deliver to Laurus any instrument necessary
for Laurus to obtain records from any service bureau maintaining records for such Company. If an
Event of Default has occurred and is continuing and any internally prepared financial information,
including that required under this Section is unsatisfactory in any manner to Laurus, Laurus may
request that the Accountants review the same.

     11. Financial Reporting. Company Agent will deliver, or cause to be delivered, to
Laurus each of the following, which shall be in form and detail acceptable to Laurus:

     (a) As soon as available, and in any event within ninety (90) days after the end of each
fiscal year of the Parent (or one hundred five (105) days after the end of any fiscal year for
which the Parent has filed a Form 12b-25 (or successor form) with the SEC extending the filing date
for its Annual Report on Form 10-K for such fiscal year), the Parent’s audited financial statements
and each Company’s unaudited financial statements with a report of independent certified public
accountants of recognized standing selected by the Parent and acceptable to Laurus (the
“Accountants”), which annual financial statements of the Parent shall be without
qualification and without limitation as to the scope of audit and shall include each of the
Parent’s and each of its Subsidiaries’ balance sheet as at the end of such fiscal year and the
related statements of each of the Parent’s and each of its Subsidiaries’ income, retained earnings
and cash flows for the fiscal year then ended, prepared on a consolidating and consolidated basis
to include the Parent and each Subsidiary of the Parent, all in reasonable detail and prepared in
accordance with GAAP, together with (i) if and when available, copies of any management letters
prepared by the Accountants; and (ii) a certificate of the Parent’s President, Chief Executive
Officer or Chief Financial Officer stating that such financial statements have been prepared in
accordance with GAAP and whether or not such officer has knowledge of the occurrence of any Default
or Event of Default hereunder and, if so, stating in reasonable detail the facts with respect
thereto;

     (b) As soon as available and in any event within forty five (45) days after the end of each
fiscal quarter of the Parent (or fifty (50) days after the end of any fiscal quarter for which the
Parent has filed a Form 12b-25 (or successor form) with the SEC extending the filing date for its
Quarterly Report on Form 10-Q for such fiscal quarter), an unaudited/internal balance sheet and
statements of income, retained earnings and cash flows of each of the Parent and each of its
Subsidiaries as at the end of and for such quarter and for the year to date period then ended,
prepared on a consolidating and consolidated basis to include the Parent and each Subsidiary of the
Parent, in reasonable detail and stating in comparative form the figures for the corresponding date
and periods in the previous year, all prepared in accordance with GAAP, subject to year-end
adjustments and accompanied by a certificate of the Parent’s President, Chief Executive Officer or
Chief Financial Officer, stating (i) that such financial statements have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and (ii) whether or not such officer
has knowledge of the occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the facts with respect thereto;

     (c) As soon as available and in any event within thirty (30) days after the end of each
calendar month, an unaudited/internal balance sheet and statements of income, retained earnings and
cash flows of each of the Parent and its Subsidiaries as at the end of and for such month and for
the year to date period then ended, prepared on a consolidating and consolidated basis to include
the Parent and each Subsidiary of the Parent, in reasonable detail and stating in comparative form
the

- 10 -

 

figures for the corresponding date and periods in the previous year, all prepared in
accordance with GAAP, subject to year-end adjustments and accompanied by a certificate of the
Parent’s President, Chief Executive Officer or Chief Financial Officer, stating (i) that such
financial statements have been prepared in accordance with GAAP, subject to year-end audit
adjustments, and (ii) whether or not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder not theretofore reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto;

     (d) Within fifteen (15) days after the end of each month (or more frequently if an Event of
Default has occurred and is continuing), agings of each Company’s Accounts, unaudited trial
balances and their accounts payable and a calculation of each Company’s Accounts and Eligible
Accounts, provided, however, that if Laurus shall request the foregoing information more often than
as set forth in the immediately preceding clause, each Company shall have fifteen (15) days from
each such request to comply with Laurus’ demand;

     (e) Promptly after (i) the filing thereof, copies of the Parent’s most recent registration
statements and annual, quarterly, monthly or other regular reports which the Parent files with the
Securities and Exchange Commission (the “SEC”), unless such information is available to
Parent on the SEC’s EDGAR system, and (ii) the issuance thereof, copies of such financial
statements, reports and proxy statements as the Parent shall send to its stockholders, unless such
information is available to Parent on the SEC’s EDGAR system.

     (f) The Parent shall deliver, or cause the applicable Subsidiary of the Parent to deliver,
such other information, as Laurus shall reasonably request.

     12. Additional Representations and Warranties. Each Company hereby represents and
warrants to Laurus as follows:

     (a) Organization, Good Standing and Qualification. It and each of its Subsidiaries is
a corporation, partnership or limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of its jurisdiction of organization. It and
each of its Subsidiaries has the corporate, limited liability company or partnership, as the case
may be, power and authority to own and operate its properties and assets and, insofar as it is or
shall be a party thereto, to (i) execute and deliver this Agreement and the Ancillary Agreements,
(ii) to issue and sell the Note, (iii) to issue and sell the Warrants and the shares of Common
Stock issuable upon exercise of the Warrants (the “Warrant Shares”), and to (iv) carry out
the provisions of this Agreement and the Ancillary Agreements and to carry on its business as
presently conducted. It and each of its Subsidiaries is duly qualified and is authorized to do
business and is in good standing as a foreign corporation, partnership or limited liability
company, as the case may be, in all jurisdictions in which the nature or location of its activities
and of its properties (both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so has not had, or could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

     (b) Subsidiaries. Each of its direct and indirect Subsidiaries, the direct owner of
each such Subsidiary and its percentage ownership thereof, is set forth on Schedule 12(b).

- 11 -

 

     (c) Capitalization; Voting Rights.

          (i) The authorized capital stock of the Parent, as of the date hereof consists of 110,000,000
shares, of which 100,000,000 are shares of Common Stock, par value $0.000001 per share, 52,925,896
shares of which are issued and outstanding, and 10,000,000 are shares of preferred stock, par value
$0.01 per share of which 15,000 shares have been designated as Series B redeemable Preferred Stock
and 14,550 shares of such series are issued and outstanding. The authorized, issued and
outstanding capital stock of each Subsidiary of each Company is set forth on Schedule
12(c).

          (ii) Except as disclosed on Schedule 12(c), other than: (i) the shares reserved for
issuance under the Parent’s stock option plans; and (ii) shares which may be issued pursuant to
this Agreement and the Ancillary Agreements, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal), proxy or stockholder
agreements, or arrangements or agreements of any kind for the purchase or acquisition from the
Parent of any of its securities. Except as disclosed on Schedule 12(c), neither the offer,
issuance or sale of any of the Note or the Warrants, or the issuance of any of the Warrant Shares,
nor the consummation of any transaction contemplated hereby will result in a change in the price or
number of any securities of the Parent outstanding, under anti-dilution or other similar provisions
contained in or affecting any such securities.

          (iii) All issued and outstanding shares of the Parent’s Common Stock: (i) have been duly
authorized and validly issued and are fully paid and nonassessable; and (ii) were issued in
material compliance with all applicable state and federal laws concerning the issuance of
securities.

          (iv) The rights, preferences, privileges and restrictions of the shares of the Common Stock
are as stated in the Parent’s Certificate of Incorporation, as amended (the “Charter”).
The Warrant Shares have been duly and validly reserved for issuance. When issued in compliance
with the provisions of this Agreement and the Parent’s Charter, the Securities will be validly
issued, fully paid and nonassessable, and will be free of any liens or encumbrances (other than
those granted by Laurus); provided, however, that the Securities may be subject to
restrictions on transfer under state and/or federal securities laws and all other law applicable to
Certified Air Carriers as set forth herein or as otherwise required by such laws at the time a
transfer is proposed. Except as set forth in Schedule 12(c), no Company is presently under
any obligation, and has not granted any rights to register any of its presently outstanding
securities or any of its securities that may hereafter be issued. Except as set forth in
Schedule 12(c), to knowledge of the Companies, none of their stockholders have entered into
any agreement with respect to its voting of equity securities.

     (d) Authorization; Binding Obligations. All corporate, partnership or limited
liability company, as the case may be, action on its and its Subsidiaries’ part (including their
respective officers and directors) necessary for the authorization of this Agreement and the
Ancillary Agreements, the performance of all of its and its Subsidiaries’ obligations hereunder and
under the Ancillary Agreements on the Closing Date and, the authorization, issuance and delivery of
the Note and the Warrant has been taken or will be taken prior to the Closing Date. This Agreement
and the Ancillary Agreements, when executed and delivered and to the extent it is a party thereto,
will be its and its Subsidiaries’ valid and binding obligations enforceable against each such
Person in accordance with their terms, except:

- 12 -

 

          (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors’ rights; and

          (ii) general principles of equity that restrict the availability of equitable or legal
remedies.

     The issuance of the Note is not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the Warrants and the
subsequent exercise of the Warrants for Warrant Shares are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived or complied with.

     (e) Citizenship of Stockholders. As of the Closing Date, each of the stockholders of
record of Kitty Hawk Aircargo, Inc. is a Citizen of the United States.

     (f) Voting Trust. Except as set forth on Schedule 12(f), to the Parent’s
knowledge, there are no voting trusts, proxies, or agreements relating to the voting of the
Parent’s Common Stock by or among the Parent or any of its stockholders.

     (g) Air Carrier. Kitty Hawk Aircargo, Inc. is a Certificated Air Carrier.

     (h) Liabilities; Solvency. (i) Neither it nor any of its Subsidiaries has any
liabilities, except current liabilities incurred in the ordinary course of business and liabilities
disclosed in any Exchange Act Filings.

          (ii) Both before and after giving effect to (a) the Loans incurred on the Closing Date or such
other date as Loans requested hereunder are made or incurred, (b) the disbursement of the proceeds
of, or the assumption of the liability in respect of, such Loans pursuant to the instructions or
agreement of any Company and (c) the payment and accrual of all transaction costs in connection
with the foregoing, each Company and each Subsidiary of each Company, is and will be, Solvent.

     (i) Agreements; Action. Except as set forth on Schedule 12(i) or as disclosed
in any Exchange Act Filings:

          (i) There are no agreements, understandings, instruments, contracts, judgments, orders, writs
or decrees to which it or any of its Subsidiaries is a party or to its knowledge by which it is
bound which may involve: (i) obligations (contingent or otherwise) of, or payments to, it or any
of its Subsidiaries in excess of $500,000 per annum (other than ordinary course obligations); or
(ii) the transfer or license of any patent, copyright, trade secret or other proprietary right to
or from it (other than any commercial “off-the-shelf” software license such as certain
“shrink-wrap” licenses and any other intellectual property licenses which are nonexclusive,
terminable and available to businesses at a market price); or (iii) contractual provisions
restricting the development, manufacture or distribution of its or any of its Subsidiaries’
products or services; or (iv) indemnification by it or any of its Subsidiaries with respect to
infringements of proprietary rights (other than any commercial “off-the-shelf” software license
such as certain “shrink-wrap” licenses and any other intellectual property licenses which are
nonexclusive, terminable and available to businesses at a market price).

          (ii) Since December 31, 2005 (the “Balance Sheet Date”), neither it nor any of its
Subsidiaries has: (i) declared or paid any dividends, or authorized or made any distribution

- 13 -

 

upon or with respect to any class or series of its capital stock, except dividends in the
amount of approximately $407,044.67 paid to holders of the Series B Preferred Stock on June 30,
2006; (ii) incurred any Indebtedness or any other liabilities (other than ordinary course
obligations and obligations with regard to Equipment, Inventory and Aircraft) individually in
excess of $50,000 or, in the case of Indebtedness and/or liabilities individually less than
$50,000, in excess of $100,000 in the aggregate; (iii) made any loans or advances to any Person not
in excess, individually or in the aggregate, of $100,000, other than ordinary advances for travel
expenses; or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its Inventory and Equipment in the ordinary course of business.

     (iii) For the purposes of subsections (i) and (ii) of this Section 12(i), all Indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed transactions involving
the same Person (including Persons it or any of its applicable Subsidiaries has reason to believe
are affiliated therewith or with any Subsidiary thereof) shall be aggregated for the purpose of
meeting the individual minimum dollar amounts of such subsections.

     (iv) The Parent has established and maintains disclosure controls and procedures (the
“Disclosure Controls”) (as defined in Rule 13a-15 under the Exchange Act). Such disclosure
controls and procedures are designed to ensure that material information relating to the Parent,
including its Subsidiaries, is made known to the Parent’s principal executive officer and its
principal financial officer by others within those entities, particularly during the periods in
which the periodic reports required under the Exchange Act are being prepared. Based on the
Parent’s evaluation of internal controls as of the end of the period covered by the Parent’s most
recent quarterly report on Form 10-Q (the “Evaluation Time”), such Disclosure Controls were
effective at the Evaluation Time in timely alerting the Parent’s principal executive officer and
principal financial officer to material information required to be included in the Parent’s
periodic reports required under the Exchange Act. No event, circumstance or event has occurred
since the Evaluation Time that would cause the Parent to believe that the Parent’s Disclosure
Controls are not currently effective in any material respect.

     (v) The Parent makes and keeps books, records, and accounts that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of its assets. It maintains
internal control over financial reporting (“Financial Reporting Controls”) designed by, or
under the supervision of, its principal executive and principal financial officers, and effected by
its board of directors, management, and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP, including those policies and procedures that:

          (1) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of its assets;

          (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that its receipts and expenditures
are being made only in accordance with authorizations of its management and directors; and

          (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of its assets that could have a material effect on the financial
statements.

- 14 -

 

          (vi) The Parent has established and maintains a system of internal control over
financial reporting (as defined in Rule 13a-15 under the Exchange Act). Based on the evaluation of
the Parent’s internal control over financial reporting at the Evaluation Time by the Parent’s Chief
Executive Officer and Chief Financial Officer, such internal control over financial reporting was,
at the Evaluation Time, sufficient to provide reasonable assurance regarding the reliability of the
Parent’s financial reporting and the preparation of Parent financial statements for external
purposes in accordance with GAAP. No event, circumstance or event has occurred since the
Evaluation Time that would cause the Parent to believe that the Parent’s internal controls are not
currently effective in any material respect.

     (j) Obligations to Related Parties. Except as set forth on Schedule 12(j),
neither it nor any of its Subsidiaries has any obligations to their respective officers, directors,
stockholders or employees other than:

          (i) for payment of salary for services rendered and for bonus payments;

          (ii) reimbursement for reasonable expenses incurred on its or its Subsidiaries’ behalf;

          (iii) for other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan approved by its and its
Subsidiaries’ Board of Directors, as applicable); and

          (iv) obligations listed in its and each of its Subsidiary’s financial statements or disclosed
in any of the Parent’s Exchange Act Filings.

Except as described above or set forth on Schedule 12(j), none of its executive officers,
directors or, to the best of its knowledge, key employees, any of its Subsidiaries or any members
of their immediate families, are indebted to it or any of its Subsidiaries, individually or in the
aggregate, in excess of $50,000 or have any direct or indirect ownership interest in any Person
with which it or any of its Subsidiaries is affiliated (other than Parent and its Subsidiaries) or
with which it or any of its Subsidiaries has a material business relationship, or any Person which
competes with it or any of its Subsidiaries, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may compete with it or
any of its Subsidiaries. Except as described above, as disclosed in the Parent’s Exchange Act
Filings or as set forth in Schedule 12(j), none of its executive officers or directors, or
any member of their immediate families, is, directly or indirectly, interested in any material
contract with it or any of its Subsidiaries and no material agreements, understandings or proposed
transactions are contemplated between it or any of its Subsidiaries and any such Person. Except as
set forth on Schedule 12(j), neither it nor any of its Subsidiaries is a guarantor or
indemnitor of any Indebtedness of any other Person (other than Parent and its Subsidiaries).

     (k) Changes. Except as set forth on Schedule 12(k), since the Balance Sheet
Date, except as disclosed in any Exchange Act Filing or in any Schedule to this Agreement or to any
of the Ancillary Agreements, there has not been:

          (i) any change in its or any of its Subsidiaries’ business, assets, liabilities, condition
(financial or otherwise), properties, operations or prospects, which, individually or in the
aggregate, has had, or could reasonably be expected to have, a Material Adverse Effect;

- 15 -

 

          (ii) any resignation or termination of any of its or its Subsidiaries’ executive officers, key
employees or groups of employees;

          (iii) any material change, except in the ordinary course of business, in its or any of its
Subsidiaries’ contingent obligations by way of guaranty, endorsement, indemnity, warranty or
otherwise;

          (iv) any damage, destruction or loss, whether or not covered by insurance, which has had, or
could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

          (v) any waiver by it or any of its Subsidiaries of a valuable right or of a material debt owed
to it;

          (vi) any direct or indirect material loans made by it or any of its Subsidiaries to any of its
or any of its Subsidiaries’ stockholders, employees, executive officers or directors, other than
advances made in the ordinary course of business;

          (vii) any material change in any compensation arrangement or agreement with it or any of its
Subsidiaries and any key employee, executive officer, director or stockholder;

          (viii) any declaration or payment of any dividend (other than as set forth in Section 7(i)(ii)
as to dividends in respect of shares of Series B Preferred Stock) or other distribution of its or
any of its Subsidiaries’ assets;

          (ix) any labor organization activity related to it or any of its Subsidiaries;

          (x) any debt, obligation or liability incurred, assumed or guaranteed by it or any of its
Subsidiaries, except those for immaterial amounts and for current liabilities incurred in the
ordinary course of business;

          (xi) any sale, assignment or transfer of any Intellectual Property or other intangible assets;

          (xii) any change in any material agreement to which it or any of its Subsidiaries is a party
or by which either it or any of its Subsidiaries is bound which, either individually or in the
aggregate, has had, or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;

          (xiii) any other event or condition of any character that, either individually or in the
aggregate, has had, or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect; or

          (xiv) any arrangement or commitment by it or any of its Subsidiaries to do any of the acts
described in subsection (i) through (xiii) of this Section 12(k).

     (l) Title to Properties and Assets; Liens, Etc. Except as set forth on Schedule
12(l), it and each of its Subsidiaries has good and marketable title to their respective
properties and assets, and good title to its leasehold interests, in each case subject to no Lien,
other than Permitted Liens. All material facilities, Equipment, Fixtures, vehicles and other
properties

- 16 -

 

owned or leased by it or any of its Subsidiaries are in good operating condition and repair
(other than the Parked Aircraft) and are reasonably fit and usable for the purposes for which they
are being used. Except as set forth on Schedule 12(l), it and each of its Subsidiaries is
in compliance with all material terms of each lease to which it is a party or is otherwise bound.
Without limiting any provisions of the foregoing Section 12(l), the Aircraft (other than the Parked
Aircraft) are in such condition so as to enable the airworthiness certificate of such Aircraft to
be in good standing under the regulations of the FAA and DOT and have been certified by the FAA as
to type and airworthiness, there is in effect with respect to such Aircraft a current and valid
airworthiness certificate issued by the FAA and there is no fact known to the Companies that
materially adversely affect the value, utility or condition of such Aircraft when compared to the
carrying value of such Aircraft on the Company’s balance sheet or that has not been disclosed to
Laurus.

     (m) Intellectual Property.

          (i) It and each of its Subsidiaries owns or possesses sufficient legal rights to all
Intellectual Property necessary for their respective businesses as now conducted and, to its
knowledge as presently proposed to be conducted, without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind relating to its or
any of its Subsidiary’s owned Intellectual Property, nor is it or any of its Subsidiaries bound by
or a party to any options, licenses or agreements of any kind with respect to the Intellectual
Property of any other Person (other than any commercial “off-the-shelf” software license such as
certain “shrink-wrap” licenses and any other intellectual property licenses which are nonexclusive,
terminable and available to businesses at a market price).

          (ii) Since December 31, 2005, neither it nor any of its Subsidiaries has received any
communications alleging that it or any of its Subsidiaries has violated any of the Intellectual
Property or other proprietary rights of any other Person, nor is it or any of its Subsidiaries
aware of any basis therefor.

          (iii) Neither it nor any of its Subsidiaries believes it is or will be necessary to utilize
any inventions, trade secrets or proprietary information of any of its employees made prior to
their employment by it or any of its Subsidiaries, except for inventions, trade secrets or
proprietary information that have been rightfully assigned to it or any of its Subsidiaries.

     (n) Compliance with Other Instruments. Neither it nor any of its Subsidiaries is in
violation or default of (x) any term of its Charter or bylaws, or (y) any provision of any
Indebtedness, mortgage, indenture, contract, agreement or instrument to which it is party or by
which it is bound or of any judgment, decree, order or writ, which violation or default, in the
case of this clause (y), has had, or could reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect. The execution, delivery and performance of and
compliance with this Agreement and the Ancillary Agreements to which it is a party, and the
issuance of the Note and the other Securities each pursuant hereto and thereto, will not, with or
without the passage of time or giving of notice, result in any such violation or be in conflict
with any term of its Charter or bylaws or result in any such material violation, or be in material
conflict with or constitute a material default under any such provision, or result in the creation
of any Lien upon any of its or any of its Subsidiary’s properties or assets or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to it or any of its Subsidiaries, their businesses or operations or any of their assets
or properties.

- 17 -

 

     (o) Litigation. Except as set forth on Schedule 12(o), there is no action,
suit, proceeding or investigation pending or, to its knowledge, currently threatened against it or
any of its Subsidiaries that prevents it or any of its Subsidiaries from entering into this
Agreement or the Ancillary Agreements, or from consummating the transactions contemplated hereby or
thereby, or which has had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, or could result in any change in its or any of its
Subsidiaries’ current equity ownership, nor is it aware that there is any basis to assert any of
the foregoing. Neither it nor any of its Subsidiaries is a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government agency or
instrumentality which has had, or could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. There is no action, suit, proceeding or investigation by
it or any of its Subsidiaries currently pending or which it or any of its Subsidiaries intends to
initiate which has had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. Except as set forth on Schedule 12 (o), no Company
is a party to or, to its knowledge, target of or subject to any DOT, FAA or TSA investigation,
cease and desist order, civil penalty notice or action, notice of proposed certificate action,
orders suspending, revoking, or modifying or seeking to suspend, revoke or modify its DOT or FAA
authority to engage in air transportation or any similar enforcement action, which could reasonably
be expected to have either individually or in the aggregate a Material Adverse Effect. Except as
set forth on Schedule 12 (o), no Company is aware of any facts, circumstances, conditions
or events that such Company reasonably believes would result in any such action that would have a
Material Adverse Effect upon such Company.

     (p) Tax Returns and Payments. It and each of its Subsidiaries has timely filed all
tax returns (federal, state and local) required to be filed by it or have timely filed for
extensions thereof. All taxes shown to be due and payable on such returns, any assessments
imposed, and all other taxes due and payable by it and each of its Subsidiaries on or before the
Closing Date, have been paid or will be paid prior to the time they become delinquent, other than
those being contested in good faith. Except as set forth on Schedule 12(p), neither it nor
any of its Subsidiaries has been advised:

          (i) that any of its returns, federal, state or other, have, since the Balance Sheet Date, been
or are being audited as of the date hereof; or

          (ii) of any adjustment, deficiency, assessment or court decision in respect of its federal,
state or other taxes.

Neither it nor any of its Subsidiaries has any knowledge of any liability of any tax to be imposed
upon its properties or assets as of the date of this Agreement that is not adequately provided for.

     (q) Employees. Except as set forth on Schedule 12(q), neither it nor any of
its Subsidiaries has any collective bargaining agreements with any of its employees. Except as
disclosed in the Exchange Act Filings, there is no labor union organizing activity pending or, to
its knowledge, threatened with respect to it or any of its Subsidiaries. Except as disclosed in
the Exchange Act Filings or on Schedule 12(q), neither it nor any of its Subsidiaries is a
party to or bound by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To its knowledge, none of its or any of its Subsidiaries’
employees, nor any consultant with whom it or any of its Subsidiaries has contracted, is in
violation of any term of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such

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individual to be employed by, or to contract with, it or any of its Subsidiaries because of
the nature of the business to be conducted by it or any of its Subsidiaries; and to its knowledge
the continued employment by it and its Subsidiaries of their present employees, and the performance
of its and its Subsidiaries contracts with its independent contractors, will not result in any such
violation. To its knowledge, neither it nor any of its Subsidiaries is aware that any of its or
any of its Subsidiaries’ employees is obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency that would interfere with their duties to it or any of its
Subsidiaries. Neither it nor any of its Subsidiaries has received any notice alleging that any
such violation has occurred. Except for employees who have a current effective employment
agreement with it or any of its Subsidiaries, none of its or any of its Subsidiaries’ employees has
been granted the right to continued employment by it or any of its Subsidiaries or to any material
compensation following termination of employment with it or any of its Subsidiaries. Except as set
forth on Schedule 12(q), neither it nor any of its Subsidiaries is aware that any executive
officer, key employee or group of employees intends to terminate his, her or their employment with
it or any of its Subsidiaries, as applicable, nor does it or any of its Subsidiaries have a present
intention to terminate the employment of any executive officer, key employee or group of employees.

     (r) Registration Rights and Voting Rights. Except as set forth on Schedule
12(r) and except as disclosed in Exchange Act Filings, neither it nor any of its Subsidiaries
is presently under any obligation, and neither it nor any of its Subsidiaries has granted any
rights, to register any of its or any of its Subsidiaries’ presently outstanding securities or any
of its securities that may hereafter be issued.

     (s) Compliance with Laws; Permits. Neither it nor any of its Subsidiaries is in
violation of the Sarbanes-Oxley Act of 2002 or any SEC related regulation or rule or any rule of
the Principal Market promulgated thereunder or any other applicable statute, rule, regulation,
order or restriction of any domestic or foreign government or any instrumentality or agency thereof
in respect of the conduct of its business or the ownership of its properties which has had, or
could reasonably be expected to have, either individually or in the aggregate, a Material Adverse
Effect. No governmental orders, permissions, consents, approvals or authorizations are required to
be obtained and no registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement or any Ancillary Agreement and the issuance of any of the
Securities, except (i) those required under the Registration Rights Agreement and (ii) such as have
been duly and validly obtained or filed, or with respect to any filings that must be made after the
Closing Date, as will be filed in a timely manner. It and each of its Subsidiaries has all FAA and
DOT permits and licenses and similar authority necessary for the conduct of its business. It and
each of its Subsidiaries has all other material franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by it, the lack of which
could, either individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.

     (t) Environmental and Safety Laws. Neither it nor any of its Subsidiaries is in
material violation of any applicable local, state, federal, or foreign statute, regulation or rule,
ordinance, order or other law relating to the environment or to the protection of public health and
welfare or occupational health and safety (collectively, “E&S Law”), and to its knowledge,
no material expenditures are or will be required in order to comply with any such E&S Law or to
satisfy any reasonably anticipated liability arising under any E&S Law or the common law. Except
(i) for use in the ordinary course of business in compliance with E&S Law and in a manner that is
not reasonably likely to give rise to material liability or responsibility under any E&S Law or the

- 19 -

 

common law or (ii) as set forth on Schedule 12(t), no Hazardous Materials (as defined
below) are used or have been used, stored, or disposed of by it or any of its Subsidiaries or, to
its knowledge, by any other Person on any property presently or formerly owned, leased or used by
it or any of its Subsidiaries. For the purposes of the preceding sentence, “Hazardous Materials”
shall mean: materials that are listed or defined as “hazardous” or “toxic” or
“pollutants or contaminants” under any E&S Law, including those laws that govern the existence
and/or remedy of contamination on property, the protection of the environment from contamination,
the control of hazardous or other wastes, or other activities involving those types of materials,
including, without limitation, building materials, any petroleum and petroleum
products and byproducts, nuclear materials, asbestos, and polychlorinated biphenyls.

     (u) Valid Offering. Assuming the accuracy of the representations and warranties of
Laurus contained in this Agreement, the offer and issuance of the Securities will be exempt from
the registration requirements of the Securities Act of 1933, as amended (the “Securities
Act”), and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of all applicable state
securities laws.

     (v) Full Disclosure. As of the date of this Agreement, it and each of its
Subsidiaries has provided Laurus with substantially all information requested by Laurus in
connection with Laurus’ decision to enter into this Agreement. Neither this Agreement, the
Ancillary Agreements nor the exhibits and schedules hereto and thereto nor any other document
delivered by it or any of its Subsidiaries to Laurus or its attorneys or agents in connection
herewith or therewith or with the transactions contemplated hereby or thereby, contain any untrue
statement of a material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which they are made, not
misleading, in each case as of their respective dates. Any financial projections and other
estimates provided to Laurus by it or any of its Subsidiaries were based on its and its
Subsidiaries’ experience in the industry and on assumptions of fact and opinion as to future events
which it or any of its Subsidiaries, at the date of the issuance of such projections or estimates,
believed to be reasonable.

     (w) Insurance. It and each of its Subsidiaries has general commercial, product
liability, fire and casualty insurance policies with coverages, which it believes are customary for
companies similarly situated to it and its Subsidiaries in the same or similar business.

     (x) SEC Reports and Financial Statements. Since the Balance Sheet Date, except as set
forth on Schedule 12(x) and excluding filings on Form 8-K, Form 3, Form 4 and Form 5, it
and each of its Subsidiaries has filed all proxy statements, reports and other documents required
to be filed by it under the Exchange Act. The Parent has made available to Laurus: (i) its Annual
Report on Form 10-K for its fiscal years ended December 31, 2005; and (ii) its Quarterly Reports on
Form 10-Q for its fiscal quarters ended March 31, 2006, June 30, 2006 and September 30, 2006, and
the Form 8-K filings which it has made during its fiscal years ending December 31, 2006 and 2007 to
date (collectively, the “SEC Reports”). Except as set forth on Schedule 12(x),
each SEC Report was, at the time of its filing, in substantial compliance with the requirements of
its respective form and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading. Such financial statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes

- 20 -

 

thereto or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed) and fairly present in all material respects the financial
condition, the results of operations and cash flows of the Parent and its Subsidiaries, on a
consolidated basis, as of, and for, the periods presented in each such SEC Report.

     (y) Listing. The Parent’s Common Stock is listed or quoted, as applicable, on the
Principal Market and satisfies all requirements for the continuation of such listing or quotation,
as applicable, and the Parent shall do all things necessary for the continuation of such listing or
quotation, as applicable. The Parent has not received any notice that its Common Stock will be
delisted from, or no longer quoted on, as applicable, the Principal Market or that its Common Stock
does not meet all requirements for such listing or quotation, as applicable.

     (z) No Integrated Offering. Neither it, nor any of its Subsidiaries nor any of its
Affiliates, nor any Person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security under circumstances
that would cause the offering of the Securities pursuant to this Agreement or any Ancillary
Agreement to be integrated with prior offerings by it for purposes of the Securities Act which
would prevent it from issuing the Securities pursuant to Rule 506 under the Securities Act, or any
applicable exchange-related stockholder approval provisions, nor will it or any of its Affiliates
or Subsidiaries take any action or steps that would cause the offering of the Securities to be
integrated with other offerings.

     (aa) Reserved.

     (bb) Dilution. It specifically acknowledges that the Parent’s obligation to issue the
shares of Common Stock upon exercise of the Warrants is binding upon the Parent and enforceable
regardless of the dilution such issuance may have on the ownership interests of other stockholders
of the Parent.

     (cc) Patriot Act. It certifies that, to the best of its knowledge, neither it nor any
of its Subsidiaries has been designated, nor is or shall be owned or controlled, by a “suspected
terrorist” as defined in Executive Order 13224. It hereby acknowledges that Laurus seeks to comply
with all applicable laws concerning money laundering and related activities. In furtherance of
those efforts, it hereby represents, warrants and covenants that: (i) none of the cash or property
that it or any of its Subsidiaries will pay or will contribute to Laurus has been or shall be
derived from, or related to, any activity that is deemed criminal under United States law; and (ii)
no contribution or payment by it or any of its Subsidiaries to Laurus, to the extent that they are
within its or any such Subsidiary’s control shall cause Laurus to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering Control Act of 1986 or
the United States International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. It shall promptly notify Laurus if any of these representations, warranties and covenants
ceases to be true and accurate regarding it or any of its Subsidiaries. It shall provide Laurus
with any additional information regarding it and each Subsidiary thereof that Laurus deems
necessary or convenient to ensure compliance with all applicable laws concerning money laundering
and similar activities. It understands and agrees that if at any time it is discovered that any of
the foregoing representations, warranties and covenants are incorrect, or if otherwise required by
applicable law or regulation related to money laundering or similar activities, Laurus may
undertake appropriate actions to ensure compliance with applicable law or regulation, including but
not limited to segregation and/or redemption of Laurus’ investment in it. It further understands
that Laurus may release confidential information about it and its Subsidiaries and, if applicable,
any underlying beneficial owners, to proper authorities if Laurus, in

- 21 -

 

its sole discretion, determines that it is in the best interests of Laurus in light of
relevant rules and regulations under the laws set forth in subsection (ii) above.

     (dd) Company Name; Locations of Offices, Records and Collateral. Schedule
12(dd) sets forth each Company’s name as it appears in official filings in the state of its
organization, the type of entity of each Company, the organizational identification number issued
by each Company’s state of organization or a statement that no such number has been issued, each
Company’s state of organization, and the location of each Company’s chief executive office,
corporate offices, warehouses, other locations of Collateral and locations where records with
respect to Collateral are kept (including in each case the county of such locations) and, except as
set forth in such Schedule 12(dd), such locations have not changed during the preceding
twelve months. As of the Closing Date, during the prior five years, except as set forth in
Schedule 12(dd), no Company has been known as or conducted business in any other name
(including trade names). Each Company has only one state of organization.

     (ee) ERISA. Based upon the Employee Retirement Income Security Act of 1974
(“ERISA”), and the regulations and published interpretations thereunder: (i) neither it
nor any of its Subsidiaries has engaged in any Prohibited Transactions (as defined in Section 406
of ERISA and Section 4975 of the Code); (ii) it and each of its Subsidiaries has met all applicable
minimum funding requirements under Section 302 of ERISA in respect of its plans; (iii) neither it
nor any of its Subsidiaries has any knowledge of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Title IV of ERISA to terminate
any employee benefit plan(s); (iv) neither it nor any of its Subsidiaries has any fiduciary
responsibility for investments with respect to any plan existing for the benefit of persons other
than its or such Subsidiary’s employees; and (v) neither it nor any of its Subsidiaries has
withdrawn, completely or partially, from any multi-employer pension plan so as to incur liability
under the Multiemployer Pension Plan Amendments Act of 1980.

     13. Covenants. Each Company, as applicable, covenants and agrees with Laurus (which
covenants and agreements shall be binding upon any Subsidiary, if any, as if made by such
Subsidiary as applicable to Subsidiary as well as such Company) that:

     (a) Stop-Orders. Neither the Parent nor any of its Subsidiaries will issue any stop
order or other order impeding the sale and delivery of any of the Securities at such time as the
Securities are registered for public sale or an exemption from such registration is available,
except as required by state and federal securities laws or as permitted by Section 7(d) of the
Registration Rights Agreement. The Parent shall advise Laurus, promptly after it receives notice
of issuance by the SEC, any state securities commission or any other regulatory authority of any
stop order or of any order preventing or suspending any offering of any securities of the Parent,
or of the suspension of the qualification of the Common Stock of the Parent for offering or sale in
any jurisdiction, or the initiation of any proceeding for any such purpose.

     (b) Listing. Within thirty (30) days of the Closing Date, the Parent shall file a
Listing of Additional Shares Application to secure the listing or quotation, as applicable, of the
shares of Common Stock issuable upon exercise of the Warrants on the Principal Market upon which
shares of Common Stock are listed or quoted, as applicable, (subject to official notice of
issuance) and shall maintain such listing or quotation, as applicable, so long as any other shares
of Common Stock shall be so listed or quoted, as applicable. The Parent shall maintain the listing
or quotation, as applicable, of its Common Stock on the Principal Market, and will comply in all
material respects

- 22 -

 

with the Parent’s reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers (“NASD”) and such exchanges, as applicable.

     (c) Market Regulations. To the extent required by law, the Parent shall notify the
SEC, NASD and applicable state authorities of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the Securities to Laurus
and promptly provide copies thereof to Laurus.

     (d) Reporting Requirements. The Parent shall timely file with the SEC all reports
required to be filed by it pursuant to the Exchange Act and refrain from terminating its status as
an issuer required by the Exchange Act to file reports thereunder even if the Exchange Act or the
rules or regulations thereunder would permit such termination.

     (e) Use of Funds. It shall use the proceeds of the Loans (i) to repay in full the
Existing Indebtedness, (ii) so long as no Event of Default has occurred and is continuing or would
result therefrom, to pay dividends to the holders of the Series B Preferred Stock and (iii) for
general working capital purposes only.

     (f) Access to Facilities. It shall, and shall cause each of its Subsidiaries to,
permit any representatives designated by Laurus (or any successor of Laurus), upon reasonable
notice and during normal business hours, at Company’s expense and accompanied by a representative
of Company Agent (provided that no such prior notice shall be required to be given and no such
representative shall be required to accompany Laurus in the event Laurus believes such access is
necessary to preserve or protect the Collateral or following the occurrence and during the
continuance of an Event of Default), to:

          (i) visit and inspect any of its or any such Subsidiary’s properties;

          (ii) examine its or any such Subsidiary’s corporate and financial records (unless such
examination is not permitted by federal, state or local law or by contract) and make copies thereof
or extracts therefrom; and

          (iii) discuss its or any such Subsidiary’s affairs, finances and accounts with its or any such
Subsidiary’s directors, officers and Accountants.

Notwithstanding the foregoing, neither it nor any of its Subsidiaries shall provide any material,
non-public information to Laurus unless Laurus signs a confidentiality agreement and otherwise
complies with Regulation FD, under the federal securities laws.

     (g) Taxes. It shall, and shall cause each of its Subsidiaries to, promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments
and governmental charges or levies imposed upon it and its Subsidiaries’ income, profits, property
or business, as the case may be; provided, however, that any such tax, assessment, charge or levy
need not be paid currently if (i) the validity thereof shall currently and diligently be contested
in good faith by appropriate proceedings, (ii) such tax, assessment, charge or levy shall have no
effect on the Lien priority of Laurus in the Collateral, and (iii) if it and/or such Subsidiary, as
applicable, shall have set aside on its and/or such Subsidiary’s books adequate reserves with
respect thereto in accordance with GAAP; and provided, further, that it shall, and shall cause each
of its Subsidiaries to, pay all such

- 23 -

 

taxes, assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.

          (h) Insurance. It shall keep its assets which are of an insurable character insured
by financially sound and reputable insurers against loss or damage by fire, explosion and other
risks customarily insured against by companies in similar business similarly situated as it; and it
shall maintain, with financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons and property to the extent and in the manner which it reasonably
believes is customary for companies in similar business similarly situated as it and to the extent
available on commercially reasonable terms. It will bear the full risk of loss from any loss of
any nature whatsoever with respect to the assets pledged to Laurus as security for the Obligations.
At its own cost and expense in amounts and with carriers reasonably acceptable to Laurus, it shall
(i) keep all its insurable properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance
and such other hazards, and for such amounts, as is customary in the case of companies engaged in
businesses similar to it including business interruption insurance; (ii) maintain insurance or a
bond in such amounts as is customary in the case of companies engaged in businesses similar to it
insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and
employees who may either singly or jointly with others at any time have access to its assets or
funds either directly or through governmental authority to draw upon such funds or to direct
generally the disposition of such assets; (iii) maintain public liability insurance against claims
for personal injury, death or property damage suffered by others; (iv) maintain all such worker’s
compensation or similar insurance as may be required under the laws of any state or jurisdiction in
which it is engaged in business; and (v) furnish Laurus with (x) copies of all policies and
evidence of the maintenance of such policies, which policies shall include the provision that
Laurus shall be notified in writing of any proposed cancellation or material change in such policy
at least thirty (30) days in advance of such proposed cancellation or change (ten (10) days with
respect to nonpayment of premiums and seven (7) days with respect to war risk and allied perils
coverage) and will have sufficient time and the right to correct any deficiencies justifying such
proposed cancellation or change, (y) excepting its workers’ compensation policy, endorsements to
such policies, in form and substance satisfactory to Laurus, naming Laurus as additional insured,
loss payee, and mortgagee (as its interests may appear) pursuant to a so-called “standard mortgagee
clause”, and (z) evidence that as to Laurus the insurance coverage shall not be impaired or
invalidated by any act or neglect of any company or any tenant or subtenant.

     Notwithstanding anything to the contrary in this Section 13(h), each Company shall at all
times keep the Aircraft (other than the Parked Aircraft) insured with “all risk” hull insurance in
an amount in an amount reasonably satisfactory to Laurus. Furthermore, notwithstanding the
foregoing, in addition, each Company will carry or cause to be carried at its expense (A) aircraft
public liability (including, without limitation, passenger legal liability) (and including aircraft
war risk and hijacking insurance, if and to the extent the same is maintained by such Company with
respect to other aircraft owned or leased, and operated by such Company on the same routes),
insurance and property damage insurance (exclusive of manufacturer’s product liability insurance)
with respect to the Aircraft, in an amount not less than the greater of (x) the amount of public
liability and property damage insurance from time to time applicable to aircraft owned or operated
by such Company of the same type as the Aircraft and (y) $500,000,000 per occurrence (or in amounts
acceptable with industry standards), and (B) cargo liability insurance, in the case of both clause
(i) and clause (ii), (1) of the type and covering the same risks as from time to time applicable to
aircraft operated by such Company of the same type as the Aircraft and (2) which is maintained in
effect with insurers of recognized responsibility. Any

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policies of insurance carried in accordance with this paragraph and any policies taken out in
substitution or replacement for any of such policies (A) shall be amended to name Laurus as
additional insured as its respective interests may appear, (B) shall provide that in respect of the
interest of Laurus in such policies, the insurance shall not be invalidated by any action or
inaction of the any Company, regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by such Company, and (C) shall provide that if the insurers
cancel such insurance for any reason whatever or if any material change is made in such insurance
which adversely affects the interest of Laurus, or such insurance shall lapse for non-payment of
premium, such cancellation , lapse or change shall not be effective as to Laurus for thirty (30)
days (seven (7) days in the case of war risk and allied perils coverage and ten (10) days with
respect to nonpayment of premiums) after issuance to Laurus of written notice by such insurers of
cancellation, lapse or change; provided, however, that if any notice period specified above is not
reasonably obtainable, such policies shall provide for as long a period of prior notice as shall
then be reasonably obtainable. Each liability policy shall waive any right of the insurers to any
set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of
any liability of Laurus to the extent of any moneys due to Laurus.

     Each Company shall instruct the insurance carriers that in the event of any total loss of an
Aircraft or if an Event of Default has occurred and is continuing, the carriers shall make payment
for such loss to Laurus and not to the order of such Company and Laurus jointly. With respect to a
loss other than a total loss of an Aircraft at a time when no Event of Default has occurred and is
continuing, if such loss, when aggregated with all other losses occurring during such fiscal year,
does not exceed $500,000, such Company may adjust and compromise claims with the insurance carrier
and the insurance carrier may make payment directly to such Company. Such Company may elect to
apply such payment toward the repair, replacement or restoration of any property in respect of
which such payment was made by the insurance carrier no later than 150 days following the date of
receipt of such payment; provided, all property purchased with such payment shall made be
subject to the first priority Lien of this Agreement or the Aircraft Security Documents. Any such
payment not applied within the 150-day period set forth in the previous sentence (or earlier, at
the option of such Company) to so repair, replace or restore in accordance with such sentence shall
be paid to Laurus by such Company as a prepayment of the Loans and as a permanent reduction of the
Capital Availability Amount.

     In the event of a total loss of an Aircraft, if an Event of Default has occurred and is
continuing or if such loss when aggregated with all other losses occurring during such fiscal year
exceed $500,000, (i) if any insurance losses are paid by check, draft or other instrument payable
to a Company and Laurus jointly, Laurus may endorse such Company’s name thereon and do such other
things as Laurus may deem in its sole discretion advisable to reduce the same to cash and in such
event, (ii) Laurus is hereby authorized to adjust and compromise claims.

     All loss recoveries received by Laurus upon any such insurance may be applied to the
Obligations, in such order as Laurus in its sole discretion shall determine or shall otherwise be
delivered to the Parent. Any surplus shall be paid by Laurus to the Parent, or applied as may be
otherwise required by law. If an Event of Default has occurred and is continuing, any deficiency
thereon shall be paid, jointly and severally, as applicable, by the Companies to Laurus, on demand.

          (i) Intellectual Property. It shall, and shall cause each of its Subsidiaries to,
maintain in full force and effect its corporate existence, rights and franchises and all licenses
and

- 25 -

 

other rights to use Intellectual Property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business.

     (j) Properties. Except as otherwise set forth in this Agreement as to Parked Aircraft
or in the ordinary course of business, it shall, and shall cause each of its Subsidiaries to, keep
its properties in good repair, working order and condition, reasonable wear and tear excepted, and
from time to time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and it shall, and shall cause each of its Subsidiaries to, at all times
comply with each provision of all leases to which it is a party or under which it occupies or
utilizes such property if the breach of such provision could reasonably be expected to have a
Material Adverse Effect.

     (k) Confidentiality. It shall not, and shall not permit any of its Subsidiaries to,
disclose, and will not include in any public announcement, the name of Laurus, unless expressly
agreed to by Laurus or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. Notwithstanding the foregoing, each
Company and its Subsidiaries may disclose Laurus’ identity and the terms of this Agreement and the
Ancillary Agreements to its current and prospective debt and equity financing sources. Laurus
shall be permitted to discuss, distribute or otherwise transfer any non-public information of the
Companies and their respective Subsidiaries in Laurus’ possession now or in the future to potential
or actual (i) direct or indirect investors in Laurus and (ii) third party assignees or transferees
of all or a portion of the obligations of any Company and/or any of its respective Subsidiaries
hereunder and under the Ancillary Agreement, to the extent that such investor or assignee or
transferee enters into a confidentiality agreement for the benefit of the Parent in such form as
may be necessary to addresses the Parent’s Regulation FD requirements. Laurus acknowledges that,
promptly following execution and delivery of this Agreement, conformed copies of this Agreement and
the Ancillary Agreements and all amendments thereto may (notwithstanding the foregoing) be filed by
the Parent as material agreements with the SEC.

     (l) Required Approvals. It shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Laurus:

          (i) create, incur, assume or suffer to exist any Indebtedness (exclusive of Permitted
Indebtedness) whether secured or unsecured other than (A) each Company’s Indebtedness to Laurus,
(B) each Company’s Indebtedness as set forth on Schedule 13(l)(i) attached hereto and made
a part hereof and (C) any Indebtedness that is subordinated in right of payment, priority,
structure and otherwise to the Obligations on terms and conditions reasonably and mutually
acceptable to the Companies and Laurus and the provider of such subordinated Indebtedness;

          (ii) cancel any Indebtedness owing to it in excess of $50,000 in the aggregate during any
twelve (12) month period (other than in exchange for which cancelled Indebtedness, it receives
reasonably equivalent consideration and fair value), provided, however, the
foregoing shall not authorize or permit the cancellation of any Indebtedness or obligation in any
amount owed by any of any Company’s officers, directors, stockholders or employees;

          (iii) assume, guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except the endorsement of negotiable
instruments by it or its Subsidiaries for deposit or collection or similar transactions in the

- 26 -

 

ordinary course of business or any guarantees and indemnifications respecting Indebtedness
otherwise permitted to be outstanding pursuant to this clause;

     (iv) directly or indirectly declare, pay or make any cash dividend or cash distribution on any
class of its Stock or apply any of its funds, property or assets to the purchase, redemption or
other retirement of any of its or its Subsidiaries’ Stock; provided, however, that
so long as (i) no Event of Default has occurred and is continuing or would result therefrom and
(ii) the aggregate amount of such dividends in any twelve-month (12) period does not exceed
$1,700,000, the Parent may pay quarterly dividends on the Series B Preferred Stock;

     (v) purchase or hold beneficially any Stock or other securities or evidences of Indebtedness
of, make or permit to exist any loans or advances to, or make any investment or acquire any
interest whatsoever in, any other Person, including any partnership or joint venture, except (w)
travel advances, (x) the extension of commercial trade credit in connection with the performance of
services and sale of Equipment in the ordinary course of business, (y) loans to its and its
Subsidiaries’ officers and employees not exceeding at any one time an aggregate of $10,000, other
than advancement of expenses in the ordinary course of business, and (z) loans to its existing
Subsidiaries so long as such Subsidiaries are designated as either a co-borrower hereunder or has
entered into such guaranty and security documentation required by Laurus, including, without
limitation, to grant to Laurus a first priority perfected security interest in substantially all of
such Subsidiary’s assets to secure the Obligations;

     (vi) create or permit to exist any Subsidiary, other than any Subsidiary in existence on the
date hereof and listed in Schedule 12(b) unless such new Subsidiary is a wholly-owned
Subsidiary and is designated by Laurus as either a co-borrower or guarantor hereunder and such
Subsidiary shall have entered into all such documentation required by Laurus, including, without
limitation, to grant to Laurus a first priority perfected security interest in substantially all of
such Subsidiary’s assets to secure the Obligations;

     (vii) directly or indirectly, prepay any Indebtedness (other than to Laurus and in the
ordinary course of business), or repurchase, redeem, retire or otherwise acquire any Indebtedness
(other than to Laurus and in the ordinary course of business) except to make scheduled payments of
principal and interest thereof;

     (viii) enter into any merger, consolidation or other reorganization with or into any other
Person or acquire all or a portion of the assets or Stock of any Person or permit any other Person
to consolidate with or merge with it, unless (1) such Company is the surviving entity of such
merger or consolidation, (2) no Event of Default shall exist immediately prior to and after giving
effect to such merger or consolidation, (3) such Company shall have provided Laurus copies of all
documentation relating to such merger or consolidation and (4) such Company shall have provided
Laurus with at least thirty (30) days’ prior written notice of such merger or consolidation;

     (ix) materially change the nature of the business in which it is presently engaged;

     (x) become subject to (including, without limitation, by way of amendment to or modification
of) any agreement or instrument which by its terms would (under any circumstances) restrict its or
any of its Subsidiaries’ right to perform the provisions of this Agreement or any of the Ancillary
Agreements;

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          (xi) change its fiscal year or make any changes in accounting treatment and reporting
practices without prior written notice to Laurus except as required by GAAP or in the tax reporting
treatment or except as required by law;

          (xii) enter into any transaction with any executive officer, director or Affiliate, except (A)
in the ordinary course or (B) on arms-length terms; or

          (xiii) bill Accounts under any name except the present name of such Company or its trade
names.

     (m) Reissuance of Securities. The Parent shall reissue certificates representing the
Securities without the legends set forth in Section 44 below at such time as:

          (i) the holder thereof is permitted to dispose of such Securities pursuant to Rule 144(k)
under the Securities Act; or

          (ii) upon resale subject to an effective registration statement after such Securities are
registered under the Securities Act.

The Parent agrees to cooperate with Laurus in connection with all resales pursuant to Rule 144(d)
and Rule 144(k) and provide legal opinions necessary to allow such resales provided the Parent and
its counsel receive reasonably requested representations from Laurus and broker, if any.

     (n) Opinion. On the Closing Date, it shall deliver to Laurus an opinion acceptable to
Laurus from each Company’s legal counsel. Each Company will provide, at the Companies’ joint and
several expense, such other legal opinions in the future as are reasonably necessary for the
exercise of the Warrants.

     (o) Legal Name, etc. It shall not, without providing Laurus with 30 days prior
written notice, change (i) its name as it appears in the official filings in the state of its
organization, (ii) the type of legal entity it is, (iii) its organization identification number, if
any, issued by its state of organization, (iv) its state of organization or (v) amend its
certificate of incorporation, by-laws or other organizational document if such amendment would have
an adverse impact on the rights, remedies or interests of Laurus under this Agreement or any of the
Ancillary Agreements.

     (p) Compliance with Laws. The operation of each of its and each of its Subsidiaries’
business is and shall continue to be in compliance in all material respects with all applicable
federal, state and local laws, rules and ordinances, including to all laws, rules, regulations and
orders relating to taxes, payment and withholding of payroll taxes, employer and employee
contributions and similar items, securities, employee retirement and welfare benefits, employee
health and safety and environmental matters.

     (q) Notices. It and each of its Subsidiaries shall promptly inform Laurus in writing
of: (i) the commencement of all proceedings and investigations by or before and/or the receipt of
any notices from, any governmental or nongovernmental body and all actions and proceedings in any
court or before any arbitrator against or in any way concerning any event which could reasonably be
expected to have singly or in the aggregate, a Material Adverse Effect; (ii) any change which has
had, or could reasonably be expected to have, a Material Adverse Effect; (iii) any Event of Default
or Default; and (iv) any default or any event which with the passage of time or

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giving of notice or both would constitute a default under any agreement for the payment of
money to which it or any of its Subsidiaries is a party or by which it or any of its Subsidiaries
or any of its or any such Subsidiary’s properties may be bound the breach of which would have a
Material Adverse Effect.

     (r) Margin Stock. It shall not permit any of the proceeds of the Loans made hereunder
to be used directly or indirectly to “purchase” or “carry” “margin stock” or to repay Indebtedness
incurred to “purchase” or “carry” “margin stock” within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect.

     (s) Offering Restrictions. Except as previously disclosed in the SEC Reports or in
the Exchange Act Filings, or stock or stock options granted to its employees or directors, neither
it nor any of its Subsidiaries shall, prior to the full exercise by Laurus of the Warrants, (x)
enter into any equity line of credit agreement or similar agreement with a floorless pricing
feature or (y) issue, or enter into any agreement to issue, any securities with a floorless
variable/floating conversion and/or pricing feature which are or could be (by conversion or
registration) free-trading securities (i.e. common stock subject to a registration statement).

     (t) Authorization and Reservation of Shares. The Parent shall at all times have
authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise
of the Warrants.

     (u) FIRPTA. Neither it, nor any of its Subsidiaries, is a “United States real
property holding corporation” as such term is defined in Section 897(c)(2) of the Code and Treasury
Regulation Section 1.897-2 promulgated thereunder and it and each of its Subsidiaries shall at no
time take any action or otherwise acquire any interest in any asset or property to the extent the
effect of which shall cause it and/or such Subsidiary, as the case may be, to be a “United States
real property holding corporation” as such term is defined in Section 897(c)(2) of the Code and
Treasury Regulation Section 1.897-2 promulgated thereunder.

     (v) FAA Filings. Upon the execution and delivery of this Agreement, the Aircraft
Security Documents shall be filed for recording with the Federal Aviation Administration.

     (w) Future Stockholders. No Company (other than the Parent) shall issue any shares of
Common Stock to any Person (other than Laurus) which is not a Citizen of the United States, nor
shall any Company (other than the Parent) recognize the sale, transfer or assignment of any of the
currently outstanding shares of the Common Stock of such Company to any Person (other than Laurus)
which is not a Citizen of the United States.

     14. Further Assurances. At any time and from time to time, upon the written request
of Laurus and at the sole expense of Companies, each Company shall promptly and duly execute and
deliver any and all such further instruments and documents and take such further action as Laurus
may reasonably request (a) to obtain the full benefits of this Agreement and the Ancillary
Agreements, (b) to protect, preserve and maintain Laurus’ rights in the Collateral and under this
Agreement or any Ancillary Agreement, and/or (c) to enable Laurus to exercise all or any of the
rights and powers herein granted or any Ancillary Agreement.

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     15. Closing Conditions. The obligations of Laurus to make the Loans shall not become
effective until the date on which each of the following conditions is satisfied or waived in
accordance with Section 26.

     (a) Counterparts of Agreement. Laurus shall have received from each party hereto
either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence
satisfactory to Laurus (which may include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement.

     (b) Notes. Laurus shall have received the duly completed and executed (i) Note and
(ii) Warrant from the Parent.

     (c) Organizational Structure. The organizational structure, capitalization and
ownership of the Companies, both before and after giving effect to the Transactions, shall be as
set forth on Schedules 12(b) and (c) annexed hereto. Laurus shall have had the opportunity
to review, and shall be satisfied with, the Parent’s business plan, state and federal tax
assumptions and the ownership, capital, organization and structure of the Companies, both before
and after giving effect to the Transactions.

     (d) Existence and Good Standing. Laurus shall have received such documents and
certificates as the Laurus or its special counsel may reasonably request relating to the
organization, existence and good standing of each Company, the authorization of the Transactions
and any other legal matters relating to the Companies, this Agreement, the other Ancillary
Agreements or the Transactions, all in form and substance reasonably satisfactory to Laurus and its
counsel.

     (e) Security Interests in Personal and Mixed Property. To the extent not otherwise
satisfied pursuant to Section 6, Laurus shall have received evidence satisfactory to it that the
Companies shall have taken or caused to be taken all such actions, executed and delivered or caused
to be executed and delivered all such agreements, documents and instruments, and made or caused to
be made all such filings and recordings (other than the filing of the UCC termination statements
described in clause (iii) below) that may be necessary or, in the opinion of Laurus, desirable in
order to create in favor of Laurus a valid and (upon such filing and recording) perfected first
priority security interest in the Collateral; provided, however, that to the extent
that Laurus in its sole discretion shall determine that the costs of obtaining a security interest
in any item of Collateral is excessive in relation to the value of the security to be afforded
thereby, Laurus may waive such requirement with respect to such item. Such actions shall include
the following:

     (i) Security Documents. Delivery to Laurus of all the Security Documents, duly
executed by the applicable Company, together with accurate and complete schedules to all such
Security Documents;

     (ii) Lien Searches and UCC Termination Statements. Delivery to Laurus of (A) the
results of recent searches, by one or more Persons satisfactory to Laurus, of all effective Liens
filed with the FAA, UCC financing statements and fixture filings and all judgment and tax lien
filings which may have been made with respect to any personal or mixed property of the Companies,
together with copies of all such filings disclosed by such search, and (B) terminations of Liens
filed with the FAA duly executed by all applicable Persons for filing with the FAA and UCC
termination statements duly executed by all applicable Persons for filing in all applicable
jurisdictions as may be

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necessary to terminate any effective UCC financing statements or fixture filings disclosed in
such search (other than any such financing statements or fixture filings in respect of Liens
permitted to remain outstanding pursuant to the terms of this Agreement);

          (iii) UCC Financing Statements and Fixture Filings. Delivery to Laurus of UCC
financing statements and, where appropriate, fixture filings, duly authorized by the Companies with
respect to all the Collateral of each Company, for filing in all jurisdictions as may be necessary
or, in the opinion of Laurus, desirable to perfect the security interests created in such
Collateral pursuant to the Security Documents;

          (iv) PTO Cover Sheets, Etc. Delivery to Laurus of all cover sheets or other documents
or instruments required to be filed with the PTO in order to create or perfect Liens in respect of
any Intellectual Property; and

          (v) Stock of Subsidiaries. Delivery to Laurus of certificates evidencing one hundred
percent (100%) of the Stock of all Subsidiaries of the Parent, accompanied by stock powers executed
in blank.

     (f) Evidence of Insurance. Laurus shall have received a certificate from the Parent’s
insurance broker or other evidence satisfactory to it that all insurance required to be maintained
pursuant to Section 13(h) is in full force and effect and that Laurus has been named as additional
insured and loss payee and mortgagee thereunder to the extent required under Section 13(h).

     (g) Litigation. No litigation by any entity (private or governmental) shall be
pending or, to the best knowledge of the Parent, threatened, nor shall there exist, in the judgment
of Laurus any action by any governmental authority which restrains, prevents or imposes materially
adverse conditions, with respect to this Agreement, any Ancillary Agreement, the Notes or any
documentation executed in connection herewith or the transactions contemplated hereby (including,
without limitation, the Transactions), or which Laurus shall determine, in its sole discretion, to
have a Material Adverse Effect.

     (h) ERISA and Taxes. Each Company shall have fulfilled all of its obligations under
the minimum funding standards of ERISA and the Code with respect to each employee pension or other
benefit plan and shall be in compliance, in all material respects, with the applicable provisions
of ERISA and the Code, and shall not have incurred any material liability to the Pension Benefit
Guaranty Corporation or any employee pension or other benefit plan under Title IV of ERISA, all to
the reasonable satisfaction of Laurus.

     (i) Registration Rights Agreement. The Parent and Laurus shall have entered into an
agreement on terms reasonably satisfactory to Laurus in the form attached hereto as Exhibit C
regarding certain rights of Laurus.

     (j) Bank Deposit Account. The Companies and the Lockbox Bank shall have executed and
delivered to Laurus the documentation required under Section 8(a) and Laurus shall be satisfied
that Laurus has a perfected first priority security interest in the Lockbox.

     (k) Necessary Governmental Authorizations and Consents; Expiration of Waiting Periods,
Etc. The Companies shall have obtained all Licenses and all consents of other Persons with

- 31 -

 

respect to Liens and agreements listed on Schedule 12(l) (and so identified thereon)
annexed hereto, in each case that are necessary or advisable in connection with the Transactions
contemplated by this Agreement and the Ancillary Agreements, and each of the foregoing shall be in
full force and effect, in each case other than those the failure to obtain or maintain which,
either individually or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect. Except as expressly provided above, all applicable waiting periods shall have
expired or been terminated without any action being taken or threatened by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the Transactions.

     (l) Existing Debt. Laurus shall have received evidence that all principal, interest
and other amounts owing in respect of all Existing Indebtedness of the Companies as of the Closing
Date (other than Indebtedness permitted to remain outstanding in accordance with Section 13(l)(i)
hereof) will be repaid in full.

     (m) Financial Statements; Pro Forma Balance Sheet. Laurus shall have received from
the Parent the certified financial statements and pro forma balance sheet referred to in Section 11
hereof and the same shall not be materially inconsistent with the information previously provided
to Laurus.

     (n) Aircraft Certificate. On the Closing Date, Laurus shall have received a
certificate signed by an authorized officer of each Company to the effect that each Operating
Aircraft has been duly certified by the FAA as to type and each such Aircraft has a current
certificate of airworthiness, and the applicable Company had good title to the Aircraft free and
clear of Liens other than Permitted Liens not of record. To the extent reasonably available,
Laurus shall have received copies of the certificates of airworthiness for the Aircraft issued by
the FAA.

     (o) Financial Officer Certificate. Laurus shall have received a certificate, dated
the Closing Date and signed by the President, a Vice President or a Financial Officer of each
Company, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section
15 on such date.

     (p) Opinions. Laurus shall have received favorable written opinions (addressed to
Laurus and dated the Closing Date) of (i) Haynes & Boone, LLP, counsel to the Companies,
substantially in the form of Exhibit D annexed hereto and covering such matters relating to
the Companies, this Agreement, the other Ancillary Agreements or the Transactions as Laurus shall
request, including the perfection of security interests as Laurus and that Laurus is entitled to
the benefits of 11 U.S.C. Section 1110 with respect to the Aircraft, and (ii) Daugherty Fowler
Peregrin Haught & Jenson, special FAA counsel to Laurus, covering such matters that the Companies
own the Aircraft, subject to no Liens other than Liens in favor of Laurus, that the Liens in favor
of Laurus are first priority perfected Liens and such other matters as Laurus shall request.

     (q) Fees and Expenses. Laurus shall have received all reasonable fees and other
amounts due and payable to such Persons and Laurus’ special counsel at or prior to the Closing
Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Companies hereunder.

     16. Additional Borrowing Conditions. The obligation of Laurus to make the Loans at
any time (including on the Closing Date) is subject to the satisfaction of the following
conditions:

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     (a) Representations and Warranties. The representations and warranties of the
Companies set forth in this Agreement and the other Ancillary Agreements shall be true and correct
in all material respects on and as of the date of such Loan, both before and after giving effect
thereto and to the use of the proceeds thereof (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, such representation or warranty shall be
or have been true and correct as of such specific date and except to the extent the matters set
forth in such representation or warranty has been modified by actions or events that are (i)
specifically permitted or authorized by this Agreement or (ii) not prohibited by this Agreement;
provided, however, that such action or event referred to in the foregoing clauses (i) and (ii) has
not resulted in a Material Adverse Effect); provided, however, nothing in this Section 16(a) shall
require that any Company update or supplement any Schedules.

     (b) Covenants. All of each Company’s and its respective Subsidiaries’ covenant
requirements under this Agreement and the Ancillary Agreements have been met on and as of the date
of such Loan, both before and after giving effect thereto; and

     (c) No Defaults. At the time of and immediately after giving effect to such Loan, no
Default shall have occurred and be continuing.

     17. Representations, Warranties and Covenants of Laurus. Laurus hereby represents,
warrants and covenants to each Company as follows:

     (a) Requisite Power and Authority. Laurus has all necessary power and authority under
all applicable provisions of law to execute and deliver this Agreement and the Ancillary Agreements
and to carry out their provisions. All corporate action on Laurus’ part required for the lawful
execution and delivery of this Agreement and the Ancillary Agreements have been or will be
effectively taken prior to the Closing Date. Upon their execution and delivery, this Agreement and
the Ancillary Agreements shall be valid and binding obligations of Laurus, enforceable in
accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting enforcement of creditors’
rights, and (b) as limited by general principles of equity that restrict the availability of
equitable and legal remedies.

     (b) Investment Representations. Laurus understands that the Securities are being
offered pursuant to an exemption from registration contained in the Securities Act based in part
upon Laurus’ representations contained in this Agreement, including, without limitation, that
Laurus is an “accredited investor” within the meaning of Regulation D under the Securities Act.
Laurus has received or has had full access to all the information it considers necessary or
appropriate to make an informed investment decision with respect to the Note to be issued to it
under this Agreement and the Securities acquired by it upon the exercise of the Warrants.

     (c) Laurus Bears Economic Risk. Laurus has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar to the Parent so
that it is capable of evaluating the merits and risks of its investment in the Parent and has the
capacity to protect its own interests. Laurus must bear the economic risk of this investment until
the Securities are sold pursuant to (i) an effective registration statement under the Securities
Act, or (ii) an exemption from registration is available.

- 33 -

 

     (d) Investment for Own Account. The Securities are being issued to Laurus for its own
account for investment only, and not as a nominee or agent and not with a view towards or for
resale in connection with their distribution.

     (e) Laurus Can Protect Its Interest. Laurus represents that by reason of its, or of
its management’s, business and financial experience, Laurus has the capacity to evaluate the merits
and risks of its investment in the Note, and the Securities and to protect its own interests in
connection with the transactions contemplated in this Agreement, and the Ancillary Agreements.
Further, Laurus is aware of no publication of any advertisement in connection with the transactions
contemplated in the Agreement or the Ancillary Agreements.

     (f) Accredited Investor. Laurus represents that it is an accredited investor within
the meaning of Regulation D under the Securities Act.

     (g) Shorting. Neither Laurus nor any of its Affiliates or investment partners has,
will, or will cause any Person, to directly engage in “short sales” of the Parent’s Common Stock
during the Term.

     (h) Patriot Act. Laurus certifies that, to the best of Laurus’ knowledge, Laurus has
not been designated, and is not owned or controlled, by a “suspected terrorist” as defined in
Executive Order 13224. Laurus seeks to comply with all applicable laws concerning money laundering
and related activities. In furtherance of those efforts, Laurus hereby represents, warrants and
covenants that: (i) none of the cash or property that Laurus will use to make the Loans has been
or shall be derived from, or related to, any activity that is deemed criminal under United States
law; and (ii) no disbursement by Laurus to any Company to the extent within Laurus’ control, shall
cause Laurus to be in violation of the United States Bank Secrecy Act, the United States
International Money Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. Laurus shall promptly notify the
Company Agent if any of these representations ceases to be true and accurate regarding Laurus.
Laurus agrees to provide the Company any additional information regarding Laurus that the Company
deems necessary or convenient to ensure compliance with all applicable laws concerning money
laundering and similar activities. Laurus understands and agrees that if at any time it is
discovered that any of the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, Laurus may undertake
appropriate actions to ensure compliance with applicable law or regulation, including but not
limited to segregation and/or redemption of Laurus’ investment in the Parent. Laurus further
understands that the Parent may release information about Laurus and, if applicable, any underlying
beneficial owners, to proper authorities if the Parent, in its sole discretion, determines that it
is in the best interests of the Parent in light of relevant rules and regulations under the laws
set forth in subsection (ii) above.

     (i) Limitation on Acquisition of Common Stock. Notwithstanding anything to the
contrary contained in this Agreement, any Ancillary Agreement, or any document, instrument or
agreement entered into in connection with any other transaction entered into by and between Laurus
and any Company (and/or Subsidiaries or Affiliates of any Company), Laurus shall not acquire stock
in the Parent (including, without limitation, pursuant to a contract to purchase, by exercising an
option or warrant, by converting any other security or instrument, by acquiring or exercising any
other right to acquire, shares of stock or other security convertible into shares of stock in the
Parent, or otherwise, and such options, warrants, conversion or other rights shall not be
exercisable) to the extent (i) such stock acquisition would cause any interest (including any
original issue discount)

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payable by any Company to Laurus not to qualify as portfolio interest, within the meaning of
Section 881(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) by reason
of Section 881(c)(3) of the Code, taking into account the constructive ownership rules under
Section 871(h)(3)(C) of the Code or (ii) that such stock acquisition by Laurus or its assignee or
right to exercise any such options, warrants, conversions or other rights would result in Kitty
Hawk Aircargo, Inc. failing to qualify as a Citizen of the United States.

     18. Reserved.

     19. Term of Agreement. Laurus’ agreement to make Loans and extend financial
accommodations under and in accordance with the terms of this Agreement or any Ancillary Agreement
shall continue in full force and effect until the expiration of the Term. At Laurus’ election
following the occurrence of an Event of Default, Laurus may terminate this Agreement. The
termination of the Agreement shall not affect any of Laurus’ rights hereunder or any Ancillary
Agreement and the provisions hereof and thereof shall continue to be fully operative until all
transactions entered into, rights or interests created and the Obligations have been irrevocably
disposed of, concluded or liquidated. Notwithstanding the foregoing, Laurus shall release its
security interests at any time after payment to it in immediately available funds of all
Obligations if each Company shall have provided Laurus with an executed release of any and all
claims which such Company may have or thereafter have under this Agreement and all Ancillary
Agreements.

     20. Termination of Lien. The Liens and rights granted to Laurus hereunder and any
Ancillary Agreements and the financing statements filed in connection herewith or therewith shall
continue in full force and effect, notwithstanding the termination of this Agreement or the fact
that any Company’s account may from time to time be temporarily in a zero or credit position, until
all of the Obligations have been paid in immediately available funds or performed in full and this
Agreement has been terminated in accordance with the terms of this Agreement. Laurus shall not be
required to send termination statements to any Company, or to file them with any filing office,
unless and until this Agreement and the Ancillary Agreements shall have been terminated in
accordance with their terms and all Obligations paid in full in immediately available funds.

     21. Events of Default. The occurrence of any of the following shall constitute an
“Event of Default”:

     (a) failure to make payment of any of the Obligations when required hereunder, and, in any
such case, such failure shall continue for a period of five (5) days following the date upon which
any such payment was due;

     (b) failure by any Company or any of its Subsidiaries to pay any taxes when due unless such
taxes are being contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been provided on such Company’s and/or such Subsidiary’s books;

     (c) failure to perform under, and/or committing any breach of, in any material respect, this
Agreement or any covenant contained herein, which failure or breach shall continue without remedy
for a period of thirty (30) days after the occurrence thereof;

     (d) any representation, warranty or statement made by any Company or any of its Subsidiaries
hereunder, in any Ancillary Agreement, any certificate, statement or document delivered pursuant to
the terms hereof, or in connection with the transactions contemplated by this Agreement

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should prove to be false or misleading in any material respect on the date as of which made or
deemed made;

     (e) the occurrence of any default (or similar term) in the observance or performance of any
other agreement or condition relating to any Indebtedness in the outstanding principal amount of
$1,000,000 or more beyond the period of grace (if any), the effect of which default is to cause, or
permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior
to its stated maturity;

     (f) attachments or levies in excess of $250,000 in the aggregate are made upon any Company’s
assets or a judgment is rendered against any Company’s property involving a liability of more than
$250,000 which shall not have been vacated, discharged, stayed or bonded within thirty (30) days
from the entry thereof;

     (g) except as otherwise permitted hereunder, any Lien on any assets having an aggregate fair
market value of $250,000 or more created hereunder or under any Ancillary Agreement for any reason
ceases to be or is not a valid and perfected Lien having a first priority interest (subject to
Permitted Liens);

     (h) any Lien created hereunder or under any Ancillary Agreement for any reason ceases to be or
is not a valid and perfected Lien having a first priority interest;

     (i) any Company or any of its Subsidiaries shall (i) apply for, consent to or suffer to exist
the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general assignment for the
benefit of creditors, (iii) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to
take advantage of any other law providing for the relief of debtors, (vi) acquiesce to without
challenge within ten (10) days of the filing thereof, or failure to have dismissed within thirty
(30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;

     (j) any Company or any of its Subsidiaries shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its present business;

     (k) any Company or any of its Subsidiaries directly or indirectly sells, assigns, transfers,
conveys, or suffers or permits to occur any sale, assignment, transfer or conveyance of any assets
of such Company or any interest therein, except as permitted herein;

     (l) any “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the
Exchange Act, as in effect on the date hereof), other than the holders of the Series B Preferred
Stock as of the date of this Agreement, is or becomes the “beneficial owner” (as defined in Rules
13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 35% or more on a fully
diluted basis of the then outstanding voting equity interest of the Parent, (ii) the Board of
Directors of the Parent shall cease to consist of a majority of the Board of Directors of the
Parent on the date hereof (or directors appointed by a majority of the board of directors in effect
immediately prior to such appointment) or (iii) the Parent or any of its Subsidiaries merges or
consolidates with, or sells all or substantially all of its assets to, any other person or entity;

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     (m) the indictment of any Company or any of its Subsidiaries or any executive officer of any
Company or any of its Subsidiaries under any criminal statute, or commencement of criminal or civil
proceeding against any Company or any of its Subsidiaries or any executive officer of any Company
or any of its Subsidiaries pursuant to which statute or proceeding penalties or remedies sought or
available include forfeiture of any of the property of any Company or any of its Subsidiaries;

     (n) an Event of Default shall occur under and as defined in the Note or in any other Ancillary
Agreement;

     (o) any Company or any of its Subsidiaries shall breach any term or provision of any Ancillary
Agreement to which it is a party (including, without limitation, Section 7(e) of the Registration
Rights Agreement), in any material respect which breach is not cured within any applicable cure or
grace period provided in respect thereof (if any);

     (p) any Company or any of its Subsidiaries attempts to terminate, challenges the validity of,
or its liability under this Agreement or any Ancillary Agreement, or any proceeding shall be
brought to challenge the validity, binding effect of any Ancillary Agreement or any Ancillary
Agreement ceases to be a valid, binding and enforceable obligation of such Company or any of its
Subsidiaries (to the extent such Persons are a party thereto);

     (q) an SEC stop trade order or Principal Market trading suspension of the Common Stock shall
be in effect for five (5) consecutive days or five (5) days during a period of ten (10) consecutive
days, excluding in all cases a suspension of all trading on a Principal Market, provided that the
Parent shall not have been able to cure such trading suspension within thirty (30) days of the
notice thereof or list the Common Stock on another Principal Market within sixty (60) days of such
notice;

     (r) The Parent’s failure to deliver Common Stock to Laurus pursuant to and in the form
required by the Warrants and this Agreement, if such failure to deliver Common Stock shall not be
cured within two (2) Business Days or any Company is required to issue a replacement Note to Laurus
and such Company shall fail to deliver such replacement Note within seven (7) Business Days;

     (s) The DOT determines that Kitty Hawk Aircargo, Inc. is no longer fit to engage in air
transportation; or

     (t) Kitty Hawk Aircargo, Inc. is no longer a Certificated Air Carrier; or the issuance of a
show cause order by DOT proposing to revoke, suspend or cancel the authority of Kitty Hawk
Aircargo, Inc. to operate as a Certificated Air Carrier or the issuance of a letter or other formal
communication from the Office of the Aviation Enforcement and Proceedings Division of DOT alleging
that Kitty Hawk Aircargo, Inc. is no longer a Citizen of the United States.

     22. Remedies. Following the occurrence of an Event of Default, Laurus shall have the
right to demand repayment in full of all Obligations, whether or not otherwise due. Until all
Obligations have been paid in full in immediately available funds, Laurus shall retain its Lien in
all Collateral. Laurus shall have, in addition to all other rights provided herein and in each
Ancillary Agreement, the rights and remedies of a secured party under the UCC, and under other
applicable law, all other legal and equitable rights to which Laurus may be entitled, including the
right to take

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immediate possession of the Collateral, to require each Company to assemble the Collateral
(other than the Parked Aircraft), at Companies’ joint and several expense, and to make it available
to Laurus at a place designated by Laurus which is reasonably convenient to both parties and to
enter any of the premises of any Company or wherever the Collateral shall be located, with or
without force or process of law, and to keep and store the same on said premises until sold (and if
said premises be the property of any Company, such Company agrees not to charge Laurus for storage
thereof), and the right to apply for the appointment of a receiver for such Company’s property.
Further, Laurus may, at any time or times after the occurrence of an Event of Default, sell and
deliver all Collateral held by or for Laurus at public or private sale for cash, upon credit or
otherwise, at such prices and upon such terms as Laurus, in Laurus’ sole discretion, deems
advisable or Laurus may otherwise recover upon the Collateral in any commercially reasonable manner
as Laurus, in its sole discretion, deems advisable. The requirement of reasonable notice shall be
met if such notice is mailed postage prepaid to Company Agent at Company Agent’s address as shown
in Laurus’ records, at least ten (10) days before the time of the event of which notice is being
given. Laurus may be the purchaser at any sale, if it is public. Laurus may, further, at any time
after the occurrence of an Event of Default, but need not, perform or observe any of the covenants
contained in this Agreement or any Ancillary Agreement on behalf and in the name, place and stead
of a Company (or, at the option of Laurus, in Laurus’ name) and may, but need not, take any and all
other actions which Laurus may deem necessary to cure or correct such failure (including the
payment of taxes, satisfaction of Liens, the performance of obligations owed to Account Debtors,
lessors or other obligors, the procurement and maintenance of insurance, the execution of
assignments, security agreements and financing statements, and the endorsement of instruments).
The amount of all monies expended and all costs and expenses (including attorneys’ fees and legal
expenses) incurred by Laurus in connection with or as a result of such performance or observance
shall be charged to the Company’s account as a Loan and added to the Obligations. In connection
with the exercise of the foregoing remedies, Laurus is granted permission to use all of each
Company’s Intellectual Property. The proceeds of sale shall be applied first to all costs and
expenses of sale, including attorneys’ fees, and second to the payment (in whatever order Laurus
elects) of all Obligations. After the payment in full in immediately available funds of all of the
Obligations, and after the payment by Laurus of any other amount required by any provision of law,
including Section 9-608(a)(1) of the UCC (but only after Laurus has received what Laurus considers
reasonable proof of a subordinate party’s security interest), the surplus, if any, shall be paid to
Company Agent (for the benefit of the applicable Companies) or its representatives or to whosoever
may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.
The Companies shall remain jointly and severally liable to Laurus for any deficiency. The parties
hereto each hereby agree that the exercise by any party hereto of any right granted to it or the
exercise by any party hereto of any remedy available to it (including, without limitation, the
issuance of a notice of redemption, a borrowing request and/or a notice of default), in each case,
hereunder or under any Ancillary Agreement shall not constitute confidential information and no
party shall have any duty to the other party to maintain such information as confidential.

     23. Waivers. To the full extent permitted by applicable law, each Company hereby
waives (a) presentment, demand and protest, and notice of presentment, dishonor, intent to
accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all of this Agreement and the Ancillary Agreements or any other
notes, commercial paper, Accounts, contracts, Documents, Instruments, Chattel Paper and guaranties
at any time held by Laurus on which such Company may in any way be liable, and hereby ratifies and
confirms whatever Laurus may do in this regard; (b) all rights to notice and a hearing prior to
Laurus’ taking possession or control of, or to Laurus’ replevy, attachment or levy upon, any
Collateral or any bond or security that might be required by any court prior to allowing Laurus to

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exercise any of its remedies; and (c) the benefit of all valuation, appraisal and exemption
laws. Each Company acknowledges that it has been advised by counsel of its choices and decisions
with respect to this Agreement, the Ancillary Agreements and the transactions evidenced hereby and
thereby.

     24. Expenses. The Companies shall jointly and severally pay all of Laurus’
out-of-pocket costs and expenses, including reasonable fees and disbursements of in-house or
outside counsel and appraisers, in connection with (x) subject to the limitations set forth in
Section 5(b)(iii), the preparation, execution and delivery of this Agreement and the Ancillary
Agreements, and (y) in connection with the prosecution or defense of any action, contest, dispute,
suit or proceeding concerning any matter in any way arising out of, related to or connected with
this Agreement or any Ancillary Agreement. The Companies shall also jointly and severally pay all
of Laurus’ reasonable fees, charges, out-of-pocket costs and expenses, including fees and
disbursements of counsel and appraisers, in connection with (a) the preparation, execution and
delivery of any waiver, any amendment thereto or consent proposed or executed in connection with
the transactions contemplated by this Agreement or the Ancillary Agreements, (b) Laurus’ obtaining
performance of the Obligations under this Agreement and any Ancillary Agreements, including, but
not limited to, the enforcement or defense of Laurus’ security interests, assignments of rights and
Liens hereunder as valid perfected security interests, (c) any attempt to inspect, verify, protect,
collect, sell, liquidate or otherwise dispose of any Collateral, (d) any appraisals or
re-appraisals of any property (real or personal) pledged to Laurus by any Company or any of its
Subsidiaries as Collateral for, or any other Person as security for, the Obligations hereunder and
(e) any consultations in connection with any of the foregoing. The Companies shall also jointly
and severally pay Laurus’ customary bank charges for all bank services (including wire transfers)
performed or caused to be performed by Laurus for any Company or any of its Subsidiaries at any
Company’s or such Subsidiary’s request or in connection with any Company’s loan account with
Laurus. All such costs and expenses together with all filing, recording and search fees, taxes and
interest payable by the Companies to Laurus shall be payable on demand and shall be secured by the
Collateral. If any tax by any Governmental Authority is or may be imposed on or as a result of any
transaction between any Company and/or any Subsidiary thereof, on the one hand, and Laurus on the
other hand, which Laurus is or may be required to withhold or pay (including, without limitation,
as a result of a breach by any Company or any of its Subsidiaries of Section 13(u) herein), each of
the Companies hereby jointly and severally indemnifies and holds Laurus harmless in respect of such
taxes, and the Companies will repay to Laurus the amount of any such taxes which shall be charged
to the Companies’ account; and until the Companies shall furnish Laurus with indemnity therefor (or
supply Laurus with evidence satisfactory to it that due provision for the payment thereof has been
made), Laurus may hold without interest any balance standing to each Company’s credit and Laurus
shall retain its Liens in any and all Collateral.

     25. Assignment. Laurus may assign any or all of the Obligations (other than the
Warrant, which the Companies acknowledge has its own assignment provisions), together with any or
all of the security therefor, to any Person and any such assignee shall succeed to all of Laurus’
rights with respect thereto; provided that Laurus shall not be permitted to effect any such
assignment to a competitor of any Company or to any other Person which is not an institutional
investor or financial institution which Laurus reasonably believes can fully perform the
obligations of Laurus under this Agreement unless an Event of Default has occurred and is
continuing. Upon such assignment, Laurus shall be released from all responsibility for the
Collateral to the extent same is assigned to any transferee. Laurus may from time to time sell or
otherwise grant participations in any of the Obligations and the holder of any such participation
shall, subject to the terms of any agreement between Laurus and such holder, be entitled to the
same benefits as Laurus with respect to any security for the Obligations in which such holder is a
participant. Each Company agrees that

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each such holder may exercise any and all rights of banker’s lien, set-off and counterclaim
with respect to its participation in the Obligations as fully as though such Company were directly
indebted to such holder in the amount of such participation. No Company may assign any of its
rights or obligations hereunder without the prior written consent of Laurus. All of the terms,
conditions, promises, covenants, provisions and warranties of this Agreement shall inure to the
benefit of each of the undersigned, and shall bind the representatives, successors and permitted
assigns of each Company.

     26. No Waiver; Cumulative Remedies. Failure by Laurus to exercise any right, remedy
or option under this Agreement, any Ancillary Agreement or any supplement hereto or thereto or any
other agreement between or among any Company and Laurus or delay by Laurus in exercising the same,
will not operate as a waiver; no waiver by Laurus will be effective unless it is in writing and
then only to the extent specifically stated. Laurus’ rights and remedies under this Agreement and
the Ancillary Agreements will be cumulative and not exclusive of any other right or remedy which
Laurus may have.

     27. Application of Payments. Each Company irrevocably waives the right to direct the
application of any and all payments at any time or times hereafter received by Laurus from or on
such Company’s behalf and each Company hereby irrevocably agrees that Laurus shall have the
continuing exclusive right to apply and reapply any and all payments received at any time or times
hereafter against the Obligations hereunder in such manner as Laurus may deem advisable
notwithstanding any entry by Laurus upon any of Laurus’ books and records.

     28. Indemnity. Each Company hereby jointly and severally indemnifies and holds
Laurus, and its respective affiliates, employees, attorneys and agents (each, an “Indemnified
Person”), harmless from and against any and all suits, actions, proceedings, claims, damages,
losses, liabilities and expenses of any kind or nature whatsoever (including attorneys’ fees and
disbursements and other costs of investigation or defense, including those incurred upon any
appeal) which 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 or any of
the Ancillary Agreements or with respect to the execution, delivery, enforcement, performance and
administration of, or in any other way arising out of or relating to, this Agreement, the Ancillary
Agreements or any other documents or transactions contemplated by or referred to herein or therein
and any actions or failures to act with respect to any of the foregoing, except to the extent that
any such indemnified liability is finally determined by a court of competent jurisdiction to have
resulted solely from such Indemnified Person’s gross negligence or willful misconduct. NO
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY COMPANY OR TO ANY OTHER PARTY OR TO ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED
AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

     29. Revival. The Companies further agree that to the extent any Company makes a
payment or payments to Laurus, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or

- 40 -

 

equitable cause, then, to the extent of such payment or repayment, the obligation or part
thereof intended to be satisfied shall be revived and continued in full force and effect as if said
payment had not been made.

     30. Borrowing Agency Provisions.

     (a) Each Company hereby irrevocably designates Company Agent to be its attorney and agent and
in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments,
documents, writings and further assurances now or hereafter required hereunder, on behalf of such
Company, and hereby authorizes Laurus to pay over or credit all loan proceeds hereunder in
accordance with the request of Company Agent.

     (b) The handling of this credit facility as a co-borrowing facility with a borrowing agent in
the manner set forth in this Agreement is solely as an accommodation to the Companies and at their
request. Laurus shall not incur any liability to any Company as a result thereof. To induce
Laurus to do so and in consideration thereof, each Company hereby indemnifies Laurus and holds
Laurus harmless from and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against Laurus by any Person arising from or incurred by reason of the
handling of the financing arrangements of the Companies as provided herein, reliance by Laurus on
any request or instruction from Company Agent or any other action taken by Laurus with respect to
this Paragraph 30.

     (c) All Obligations shall be joint and several, and the Companies shall make payment upon the
maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the
part of the Companies shall in no way be affected by any extensions, renewals and forbearance
granted by Laurus to any Company, failure of Laurus to give any Company notice of borrowing or any
other notice, any failure of Laurus to pursue to preserve its rights against any Company, the
release by Laurus of any Collateral now or thereafter acquired from any Company, and such agreement
by any Company to pay upon any notice issued pursuant thereto is unconditional and unaffected by
prior recourse by Laurus to any Company or any Collateral for such Company’s Obligations or the
lack thereof.

     (d) Each Company expressly waives any and all rights of subrogation, reimbursement, indemnity,
exoneration, contribution or any other claim which such Company may now or hereafter have against
the other or other Person directly or contingently liable for the Obligations, or against or with
respect to any other’s property (including, without limitation, any property which is Collateral
for the Obligations), arising from the existence or performance of this Agreement, until all
Obligations have been indefeasibly paid in full and this Agreement has been irrevocably terminated.

     (e) Each Company represents and warrants to Laurus that (i) Companies have one or more common
stockholders, directors and officers, (ii) the businesses and corporate activities of Companies are
closely related to, and substantially benefit, the business and corporate activities of Companies,
(iii) the financial and other operations of Companies are performed on a combined basis as if
Companies constituted a consolidated corporate group, (iv) Companies will receive a substantial
economic benefit from entering into this Agreement and will receive a substantial economic benefit
from the application of each Loan hereunder, in each case, whether or not such amount is used
directly by any Company and (v) all requests for Loans hereunder by the Company Agent are for the

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exclusive and indivisible benefit of the Companies as though, for purposes of this Agreement,
the Companies constituted a single entity.

     31. Cape Town Convention. The Companies jointly and severally agree to facilitate any
registration of an International Interest required by Laurus. If requested by Laurus, the Company
shall initiate and consent to the filing of a prospective Contract of Sale. The Companies shall be
a “Registry User Entity” no less than ten (10) days before the Closing Date and, if different, on a
date of acceptance and delivery of any aircraft.

     32. Notices. Any notice or request hereunder may be given to any Company, Company
Agent or Laurus at the respective addresses set forth below or as may hereafter be specified in a
notice designated as a change of address under this Section. Any notice or request hereunder shall
be given by registered or certified mail, return receipt requested, hand delivery, overnight mail
or telecopy (confirmed by mail). Notices and requests shall be, in the case of those by hand
delivery, deemed to have been given when delivered to any officer of the party to whom it is
addressed, in the case of those by mail or overnight mail, deemed to have been given five (5)
Business Days after the date when deposited in the mail or with the overnight mail carrier, and, in
the case of a telecopy, when confirmed.

Notices shall be provided as follows:

	 	 	 	 	 
	 

	 	If to Laurus:
	 	Laurus Master Fund, Ltd.
	 

	 	 	 	c/o M&C Corporate Services Limited
	 

	 	 	 	P.O. Box 309 GT
	 

	 	 	 	Ugland House
	 

	 	 	 	George Town
	 

	 	 	 	South Church Street
	 

	 	 	 	Grand Cayman, Cayman Islands
	 

	 	 	 	Facsimile: 345-949-8080
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Laurus Capital Management, LLC
	 

	 	 	 	335 Madison Avenue, 10th Floor
	 

	 	 	 	New York, New York 10017
	 

	 	 	 	Attention: Portfolio Services
	 

	 	 	 	Telephone: (212) 541-5800
	 

	 	 	 	Telecopier: (212) 541-4410
	 
	 	 	 	 
	 

	 	If to any Company,
or Company Agent:
	 	Kitty Hawk, Inc.
	 

	 	 	 	1515 West 20th Street
	 

	 	 	 	DFW Airport, Texas 75261
	 

	 	 	 	Attention: James Kupferschmid
	 

	 	 	 	Telephone: (972) 456-2000
	 

	 	 	 	Facsimile: (972) 456-2350

- 42 -

 

	 	 	 	 	 
	 

	 	With a copy to:
	 	Haynes and Boone, LLP
	 

	 	 	 	901 Main Street, Suite 3100
	 

	 	 	 	Dallas, Texas 75202
	 

	 	 	 	Attention: Garrett DeVries
	 

	 	 	 	Telephone: (214) 651-5614
	 

	 	 	 	Facsimile: (214) 200-0428

or such other address as may be designated in writing hereafter in accordance with this Section 32
by such Person.

          33. Governing Law, Jurisdiction and Waiver of Jury Trial.

          (a) THIS AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

          (b) EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE HAND, AND LAURUS, ON THE OTHER HAND, PERTAINING
TO THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS; PROVIDED, THAT LAURUS AND EACH COMPANY
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LAURUS. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION
OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE
BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH
COMPANY 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, COMPLAINT AND OTHER PROCESS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO COMPANY AGENT AT THE ADDRESS SET FORTH IN SECTION
29 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF COMPANY AGENT’S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

          (c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN

- 43 -

 

CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED
WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, ANY ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

     34. Limitation of Liability. Each Company acknowledges and understands that in order
to assure repayment of the Obligations hereunder Laurus may be required to exercise any and all of
Laurus’ rights and remedies hereunder and agrees that, except as limited by applicable law, neither
Laurus nor any of Laurus’ agents shall be liable for acts taken or omissions made in connection
herewith or therewith except for actual bad faith.

     35. Miscellaneous. It is the intention of the parties hereto that Laurus will be
entitled to the benefits of 11 U.S.C. Section 1110 in the event of any reorganization of each
Company under Chapter 11 of the Bankruptcy Code.

     36. Entire Understanding; Maximum Interest. This Agreement and the Ancillary
Agreements contain the entire understanding among each Company and Laurus as to the subject matter
hereof and thereof and any promises, representations, warranties or guarantees not herein contained
shall have no force and effect unless in writing, signed by each Company’s and Laurus’ respective
officers. Neither this Agreement, the Ancillary Agreements, nor any portion or provisions thereof
may be changed, modified, amended, waived, supplemented, discharged, cancelled or terminated orally
or by any course of dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged. Nothing contained in this Agreement, any Ancillary Agreement or in any
document referred to herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the maximum rate permitted
by applicable law. In the event that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum rate permitted by such law, any payments in excess of
such maximum shall be credited against amounts owed by the Companies to Laurus and thus refunded to
the Companies.

     37. Severability. Wherever possible each provision of this Agreement or the Ancillary
Agreements shall be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement or the Ancillary Agreements 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
thereof.

     38. Survival. The representations, warranties, covenants and agreements made herein
shall survive any investigation made by Laurus and the closing of the transactions contemplated
hereby to the extent provided therein. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Companies pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be representations and
warranties by the Companies hereunder solely as of the date of such certificate or instrument. All
indemnities set forth herein shall survive the execution, delivery and termination of this
Agreement and the Ancillary Agreements and the making and repaying of the Obligations.

     39. Captions. All captions are and shall be without substantive meaning or content of
any kind whatsoever.

- 44 -

 

     40. Counterparts; Telecopier Signatures. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original and all of which taken together shall
constitute one and the same agreement. Any signature delivered by a party via telecopier
transmission shall be deemed to be any original signature hereto.

     41. Construction. The parties acknowledge that each party and its counsel have
reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the interpretation of this
Agreement or any amendments, schedules or exhibits thereto.

     42. Publicity. Each Company hereby authorizes Laurus to make appropriate
announcements of the financial arrangement entered into by and among each Company and Laurus,
including, without limitation, announcements which are commonly known as tombstones, in such
publications and to such selected parties as Laurus shall in its sole and absolute discretion deem
appropriate, or as required by applicable law.

     43. Joinder. It is understood and agreed that any Person that desires to become a
Company hereunder, or is required to execute a counterpart of this Agreement after the date hereof
pursuant to the requirements of this Agreement or any Ancillary Agreement, shall become a Company
hereunder by (a) executing a Joinder Agreement in form and substance satisfactory to Laurus, (b)
delivering supplements to such exhibits and annexes to this Agreement and the Ancillary Agreements
as Laurus shall reasonably request and (c) taking all actions as specified in this Agreement as
would have been taken by such Company had it been an original party to this Agreement, in each case
with all documents required above to be delivered to Laurus and with all documents and actions
required above to be taken to the reasonable satisfaction of Laurus.

     44. Legends. The Securities shall bear legends as follows;

     (a) The Note shall bear substantially the following legend:

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO KITTY HAWK, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.”

     (b) Any shares of Common Stock issued pursuant to exercise of the Warrants, shall bear a
legend which shall be in substantially the following form until such shares are covered by an
effective registration statement filed with the SEC:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE,
STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD,

- 45 -

 

OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO KITTY HAWK, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”

     (c) The Warrants shall bear substantially the following legend:

     “THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR THE
UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO KITTY HAWK, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.”

[Balance of page intentionally left blank; signature page follows.]

- 46 -

 

     IN WITNESS WHEREOF, the parties have executed this Security Agreement as of the date first
written above.

	 	 	 	 	 	 	 
	 	 	KITTY HAWK, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Chief Financial Officer 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	KITTY HAWK AIRCARGO, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Treasurer 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	KITTY HAWK CARGO, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Treasurer 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	KITTY HAWK GROUND, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Treasurer 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	KH GROUND, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	James Kupferschmid 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Treasurer 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	LAURUS MASTER FUND, LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ David Grin 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	David Grin 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Director 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 

- 47 -

 

Annex A — Definitions

     “Account Debtor” means any Person who is or may be obligated with respect to, or on
account of, an Account.

     “Accountants” has the meaning given to such term in Section 11(a).

     “Accounts” means all “accounts”, as such term is defined in the UCC, now owned or
hereafter acquired by any Person, 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 UCC); (b) all of such Person’s rights in, to and under all purchase orders or
receipts for goods or services; (c) all of such Person’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 rights to payment due
to such Person for Goods or other property sold, leased, licensed, assigned or otherwise disposed
of, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be
incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit card or charge card, or for services rendered or
to be rendered by such Person or in connection with any other transaction (whether or not yet
earned by performance on the part of such Person); and (e) all collateral security of any kind
given by any Account Debtor or any other Person with respect to any of the foregoing.

     “Accounts Availability” means ninety percent (90%) of the net face amount of Eligible
Accounts.

     “Affiliate” means, with respect to any Person, (a) any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common
control with such Person, (b) any other Person that, directly or indirectly, owns or controls,
whether beneficially, or as trustee, guardian or other fiduciary, 25% or more of the Stock having
ordinary voting power in the election of directors of such Person, (c) any other Person who is a
director, officer, joint venturer or partner (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above or (d) in the case of the Companies,
the immediate family members, spouses and lineal descendants of individuals who are Affiliates of
such Companies. For the purposes of this definition, control of a Person shall mean the power
(direct or indirect) to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise; provided however, that the term “Affiliate” shall
specifically exclude Laurus.

     “Aircraft” means the Aircraft identified on Schedule A-1 hereto and includes
aircraft, airframes, engines and related parts that the Parent and/or the Subsidiaries own.

     “Aircraft Mortgage” has the meaning given such term on Schedule A-2 annexed
hereto.

     “Aircraft Protocol” means the official English language text of the Protocol to the
Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft
Equipment, adopted on 16 November 2001 at a diplomatic conference held in Cape Town, as the same
may be amended or modified from time to time.

 

 

     “Aircraft Security Documents” means the documents described and set forth on
Schedule A-2 annexed hereto, including without limitation, the Aircraft Mortgage.

     “Ancillary Agreements” means the Note, the Warrants, the Registration Rights
Agreements, each Security Document and all other agreements, instruments, documents, mortgages,
pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, trust
agreements and guarantees whether heretofore, concurrently, or hereafter executed by or on behalf
of any Company, any of its Subsidiaries or any other Person or delivered to Laurus, relating to
this Agreement or to the transactions contemplated by this Agreement or otherwise relating to the
relationship between or among any Company and Laurus, as each of the same may be amended,
supplemented, restated or otherwise modified from time to time.

     “Balance Sheet Date” has the meaning given such term in Section 12(f)(ii).

     “Books and Records” means all books, records, board minutes, contracts, licenses,
insurance policies, environmental audits, business plans, files, computer files, computer discs and
other data and software storage and media devices, accounting books and records, financial
statements (actual and pro forma), filings with Governmental Authorities and any and all records
and instruments relating to the Collateral or otherwise necessary or helpful in the collection
thereof or the realization thereupon.

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

     “Cape Town Convention” means, collectively, the Aircraft Protocol, the Convention, the
International Registry Procedures and the International Registry Regulations.

     “Capital Availability Amount” means $25,000,000.

     “Certificated Air Carrier” has the meaning given that term in the Aircraft Mortgage.

     “Charter” has the meaning given such term in Section 12(c)(iv).

     “Chattel Paper” means all “chattel paper,” as such term is defined in the UCC,
including electronic chattel paper, now owned or hereafter acquired by any Person.

     “Citizen of the United States” has the meaning specified in Section 40102(a)(15) of
Title 49 of the United States Code or any legislation of the United States of America enacted in
substitution or replacement therefore, as amended from time to time and as then interpreted and
applied by the DOT and/or the FAA, as the case may be.

     “Closing Date” means the date on which any Company shall first receive proceeds of the
initial Loans or the date hereof, if no Loan is made under the facility on the date hereof.

     “Code” has the meaning given such term in Section 17(i).

     “Collateral” means all of each Company’s property and assets, whether real or
personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now

- 2 -

 

has or at any time in the future may acquire any right, title or interests including all of
the following property in which it now has or at any time in the future may acquire any right,
title or interest:

          (a) all Inventory;

          (b) all Equipment;

          (c) all Fixtures;

          (d) all Goods;

          (e) all General Intangibles;

          (f) all Accounts;

          (g) all Deposit Accounts, other bank accounts and all funds on deposit therein;

          (h) all Investment Property;

          (i) all Stock;

          (j) all Chattel Paper;

          (k) all Letter-of-Credit Rights;

          (l) all Instruments;

          (m) all Commercial Tort Claims set forth on Schedule A-3;

          (n) all Books and Records;

          (o) all Intellectual Property;

          (p) all Supporting Obligations including letters of credit and guarantees issued in support of
Accounts, Chattel Paper, General Intangibles and Investment Property;

          (q) the Aircraft;

          (r) (i) all money, cash and cash equivalents and (ii) all cash held as cash collateral to the
extent not otherwise constituting Collateral, all other cash or property at any time on deposit
with or held by Laurus for the account of any Company (whether for safekeeping, custody, pledge,
transmission or otherwise); and

          (s) all products and Proceeds of all or any of the foregoing, tort claims and all claims and
other rights to payment including (i) insurance claims against third parties for loss of, damage
to, or destruction of, the foregoing Collateral and (ii) payments due or to become due under
leases, rentals and hires of any or all of the foregoing and Proceeds payable under, or unearned
premiums with respect to policies of insurance in whatever form.

- 3 -

 

     “Commercial Tort Claims” means the claims described and set forth on Schedule
A-3 annexed hereto.

     “Common Stock” means the shares of stock representing the Parent’s common equity
interests.

     “Company Agent” means Kitty Hawk, Inc.

     “Contract Rate” has the meaning given such term in the Note.

     “Convention” means, the official English language text of the Convention on
International Interests in Mobile Equipment, adopted on 16 November 2001 at a diplomatic conference
held in Cape Town, South Africa, as the same may be amended or modified from time to time.

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

     “Department of Transportation” and “DOT” means the Office of the Secretary of
the United States Department of Transportation and any agent or instrumentality of the United
States government succeeding to its functions.

     “Deposit Accounts” means all “deposit accounts” as such term is defined in the UCC,
now or hereafter held in the name of any Person, including, without limitation, the Lockboxes.

     “Disclosure Controls” has the meaning given such term in Section 12(f)(iv).

     “Documents” means all “documents”, as such term is defined in the UCC, now owned or
hereafter acquired by any Person, wherever located, including all bills of lading, dock warrants,
dock receipts, warehouse receipts, and other documents of title, whether negotiable or
non-negotiable.

     “Eligible Accounts” means each Account of each Company which conforms to the following
criteria: (a) shipment of the merchandise or the rendition of services has been completed; (b) no
return, rejection or repossession of the merchandise has occurred; (c) merchandise or services
shall not have been rejected or disputed by the Account Debtor and there shall not have been
asserted any offset, defense or counterclaim; (d) continues to be in full conformity with the
representations and warranties made by such Company to Laurus with respect thereto; (e) Laurus is,
and continues to be, satisfied with the credit standing of the Account Debtor in relation to the
amount of credit extended; (f) there are no facts existing or threatened which are likely to result
in any adverse change in an Account Debtor’s financial condition and such Account has been
classified as doubtful by the Parent; (g) is documented by an invoice in a form approved by Laurus
and shall not be unpaid more than ninety (90) days from invoice date; (h) not more than twenty-five
percent (25%) of the unpaid amount of invoices due from such Account Debtor remains unpaid more
than ninety (90) days from invoice date; (i) is not evidenced by chattel paper or an instrument of
any kind with respect to or in payment of the Account unless such instrument is duly endorsed to
and in possession of Laurus or represents a check in payment of an Account; (j) the Account Debtor
is located in the United States; provided, however, Laurus may, from time to time,
in the exercise of its sole discretion and based upon satisfaction of certain conditions to be
determined at such time by Laurus, deem certain

- 4 -

 

Accounts as Eligible Accounts notwithstanding that such Account is due from an Account Debtor
located outside of the United States; (k) Laurus has a first priority perfected Lien in such
Account and such Account is not subject to any Lien other than Permitted Liens; (l) does not arise
out of transactions with any employee, officer, director, stockholder or Affiliate of any Company;
(m) is payable to such Company; (n) does not arise out of a bill and hold sale prior to shipment
and does not arise out of a sale to any Person to which such Company is indebted, but only to the
extent of such indebtedness; (o) is net of any returns, discounts, claims, credits and allowances;
(p) if the Account arises out of contracts between such Company, on the one hand, and the United
States, on the other hand, any state, or any department, agency or instrumentality of any of them,
such Company has so notified Laurus, in writing, prior to the creation of such Account, and there
has been compliance with any governmental notice or approval requirements, including compliance
with the Federal Assignment of Claims Act; (q) is a good and valid account representing an
undisputed bona fide indebtedness incurred by the Account Debtor therein named, for a fixed sum as
set forth in the invoice relating thereto with respect to an unconditional sale and delivery upon
the stated terms of goods sold by such Company or work, labor and/or services rendered by such
Company; (r) does not arise out of progress billings prior to completion of the order; (s) such
Account, when aggregated with all other Accounts of such Account Debtor does not exceed twenty-five
percent (25%) of all Eligible Accounts; provided, however, so long as the USPS has
acknowledged the security interest of Laurus pursuant to the Federal Assignment of Claims Act, as
to USPS, such percentage shall be forty percent (40%); (t) such Company’s right to payment is
absolute and not contingent upon the fulfillment of any condition whatsoever; (u) such Company is
able to bring suit and enforce its remedies against the Account Debtor through judicial process;
(v) does not represent interest payments, late or finance charges owing to such Company, and (w) is
otherwise satisfactory to Laurus as determined by Laurus in the exercise of its reasonable business
discretion. In the event any Company requests that Laurus include within Eligible Accounts certain
Accounts of one or more of such Company’s acquisition targets, Laurus shall at the time of such
request consider such inclusion, but any such inclusion shall be at the sole option of Laurus and
shall at all times be subject to the execution and delivery to Laurus of all such documentation
(including, without limitation, guaranty and security documentation) as Laurus may require in its
sole discretion.

     “Eligible Subsidiary” means each Subsidiary of the Parent set forth on Exhibit A
hereto, as the same may be updated from time to time with Laurus’ written consent.

     “Equipment” means all “equipment” as such term is defined in the UCC, now owned or
hereafter acquired by any Person, wherever located, including any and all machinery, apparatus,
equipment, fittings, furniture, Fixtures, motor vehicles and other tangible personal property
(other than Inventory) of every kind and description that may be now or hereafter used in such
Person’s operations or that are owned by such Person or in which such Person may have an interest,
and all parts, accessories and accessions thereto and substitutions and replacements therefor.

     “ERISA” has the meaning given such term in Section 12(bb).

     “Event of Default” means the occurrence of any of the events set forth in Section 21.

     “Excess Availability” means, for the thirty (30)- days prior to any proposed sale or
other disposition of Collateral pursuant to Section 7(e)(ii), the average amount by which the
Formula Amount exceeds the average outstanding balance of the Loans.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

- 5 -

 

     “Exchange Act Filings” means the Parent’s filings under the Exchange Act made prior to
the date of this Agreement.

     “Existing Indebtedness” means the indebtedness described on Exhibit E.

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

     “Federal Aviation Administration” and “FAA” means the United States Federal
Aviation Administration and any agent or instrumentality of the United States government succeeding
to its functions.

     “Financial Reporting Controls” has the meaning given such term in Section 12(i)(v).

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

     “Formula Amount” has the meaning given such term in Section 2(a)(i).

     “GAAP” means generally accepted accounting principles, practices and procedures in
effect from time to time in the United States of America.

     “General Intangibles” means all “general intangibles” as such term is defined in the
UCC, now owned or hereafter acquired by any Person including all right, title and interest that
such Person may now or hereafter have in or under any contract, all Payment Intangibles, customer
lists, Licenses, Intellectual Property, interests in partnerships, joint ventures and other
business associations, permits, proprietary or confidential information, inventions (whether or not
patented or patentable), technical information, procedures, designs, knowledge, know-how, Software,
data bases, data, skill, expertise, experience, processes, models, drawings, materials, Books and
Records, Goodwill (including the Goodwill associated with any Intellectual Property), 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-person, and business interruption insurance, and all unearned premiums),
uncertificated securities, choses in action, deposit accounts, rights to receive tax refunds and
other payments, rights to received dividends, distributions, cash, Instruments and other property
in respect of or in exchange for pledged Stock and Investment Property, and rights of
indemnification.

     “Goods” means all “goods”, as such term is defined in the UCC, now owned or hereafter
acquired by any Person, wherever located, including embedded software to the extent included in
“goods” as defined in the UCC, manufactured homes, fixtures, standing timber that is cut and
removed for sale and unborn young of animals.

     “Goodwill” means all goodwill, trade secrets, proprietary or confidential information,
technical information, procedures, formulae, quality control standards, designs, operating and
training manuals, customer lists, and distribution agreements now owned or hereafter acquired by
any Person.

- 6 -

 

     “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.

     “Indebtedness” of a Person at a particular date means all obligations of such Person
for borrowed money (including the Obligations hereunder) and all obligations evidenced by bonds,
debentures, notes, loan agreements or other similar instruments, and all purchase money
indebtedness which in accordance with GAAP would be classified upon a balance sheet as liabilities
(except capital stock and surplus earned or otherwise) and in any event, without limitation by
reason of enumeration and without duplication, shall include all indebtedness, debt and other
similar monetary obligations for borrowed money of such Person whether direct or guaranteed, and
all premiums, if any, due at the required prepayment dates of such indebtedness, and all
indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness
actually shall have been created, assumed or incurred by such Person, but shall exclude, all
monetary obligations of such Person due under any operating lease and accounts payable in the
ordinary course of business. Any indebtedness of such Person resulting from the acquisition by
such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the
equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether
or not actually so created, assumed or incurred. Notwithstanding anything to the contrary
contained herein, the Series B Preferred Stock shall not constitute Indebtedness.

     “Instruments” means all “instruments”, as such term is defined in the UCC, now owned
or hereafter acquired by any Person, wherever located, including all certificated securities and
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.

     “Intellectual Property” means any and all patents, trademarks, service marks, trade
names, copyrights, trade secrets, Licenses, information and other proprietary rights and processes.

     “International Interest” shall have the meaning ascribed thereto in the Cape Town
Convention.

     “International Registry” means the International Registry of Mobile Assets located in
Dublin, Ireland and established pursuant to the Cape Town Convention, along with any successor
registry thereto.

     “International Registry Procedures” means the official English language text of the
procedures for the International Registry issued by the supervisory authority thereof pursuant to
the Convention and the Aircraft Protocol, as the same may be amended or modified from time to time.

     “International Registry Regulations” means the official English language text of the
regulations for the International Registry issued by the supervisory authority thereof pursuant to
the Convention and the Aircraft Protocol, as the same may be amended or modified from time to time.

     “Inventory” means all “inventory”, as such term is defined in the UCC, now owned or
hereafter acquired by any Person, wherever located, including all inventory, merchandise, goods and
other personal property that are held by or on behalf of such Person 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, or materials or supplies of any kind, nature or
description

- 7 -

 

used or consumed or to be used or consumed in such Person’s business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including all supplies and
embedded software.

     “Investment Property” means all “investment property”, as such term is defined in the
UCC, now owned or hereafter acquired by any Person, wherever located.

     “Letter-of-Credit Rights” means “letter-of-credit rights” as such term is defined in
the UCC, now owned or hereafter acquired by any Person, including rights to payment or performance
under a letter of credit, whether or not such Person, as beneficiary, has demanded or is entitled
to demand payment or performance.

     “License” means any rights under any written agreement now or hereafter acquired by
any Person to use any trademark, trademark registration, copyright, copyright registration or
invention for which a patent is in existence or other license of rights or interests now held or
hereafter acquired by any Person.

     “Lien” means any mortgage, security deed, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), charge, claim or encumbrance,
or preference, priority or other security agreement or preferential arrangement held or asserted in
respect of any asset of any kind or nature whatsoever including any conditional sale or other title
retention agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement under the UCC or
comparable law of any jurisdiction.

     “Loans” has the meaning given such term in Section 2(a)(i) and shall include all other
extensions of credit hereunder and under any Ancillary Agreement.

     “Lockboxes” has the meaning given such term in Section 8(a).

     “Material Adverse Effect” means a material adverse effect on (a) the business, assets,
liabilities, condition (financial or otherwise), properties, operations or prospects of the
Companies and their Subsidiaries (taken as a whole), (b) the Companies’ ability to pay or perform
the Obligations in accordance with the terms hereof or any Ancillary Agreement, (c) the sufficiency
and/or value of the Collateral, the Liens on the Collateral or the priority of any such Lien or (d)
the practical realization of the benefits of Laurus’ rights and remedies under this Agreement and
the Ancillary Agreements.

     “NASD” has the meaning given such term in Section 13(b).

     “Note” means the Secured Revolving Note.

     “Obligations” means all Loans, all advances, debts, liabilities, obligations,
covenants and duties owing by each Company and each of its Subsidiaries to Laurus (or any
corporation that directly or indirectly controls or is controlled by or is under common control
with Laurus) of every kind and description (whether or not evidenced by any note or other
instrument and whether or not for the payment of money or the performance or non-performance of any
act), direct or indirect, absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, whether existing by operation of law or otherwise now existing or
hereafter arising including any

- 8 -

 

debt, liability or obligation owing from any Company and/or each of its Subsidiaries to others
which Laurus may have obtained by assignment or otherwise and further including all interest
(including interest accruing at the then applicable rate provided in this Agreement after the
maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement
after the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest
is allowed or allowable in such proceeding), charges or any other payments each Company and each of
its Subsidiaries is required to make by law or otherwise arising under or as a result of this
Agreement, the Ancillary Agreements or otherwise, together with all reasonable expenses and
reasonable attorneys’ fees chargeable to the Companies’ or any of their Subsidiaries’ accounts or
incurred by Laurus in connection therewith.

     “Operating Aircraft” shall have the meaning assigned thereto in the Aircraft Mortgage
and Security Agreement dated the date hereof between Kitty Hawk Aircargo, Inc. and Laurus.

     “Parked Aircraft” has the meaning given such term in the Aircraft Mortgage.

     “Payment Intangibles” means all “payment intangibles” as such term is defined in the
UCC, now owned or hereafter acquired by any Person, including, a General Intangible under which the
Account Debtor’s principal obligation is a monetary obligation.

     “Permitted Indebtedness” means (a) any Purchase Money Indebtedness not in excess of
$2,000,000 in the aggregate outstanding at any one time, (b) intercompany loans and advances among
the Parent and the Subsidiaries and (c) financing of insurance premiums not in excess of $1,000,000
in the aggregate outstanding at any one time.

     “Permitted Liens” means (a) Liens of carriers, warehousemen, artisans, bailees,
mechanics and materialmen incurred in the ordinary course of business securing sums not overdue;
(b) Liens incurred in the ordinary course of business in connection with worker’s compensation,
unemployment insurance or other forms of governmental insurance or benefits, relating to employees,
securing sums (i) not overdue or (ii) being diligently contested in good faith provided that
adequate reserves with respect thereto are maintained on the books of the Companies and their
Subsidiaries, as applicable, in conformity with GAAP; (c) Liens in favor of Laurus; (d) Liens for
taxes (i) not yet due or (ii) being diligently contested in good faith by appropriate proceedings,
provided that adequate reserves with respect thereto are maintained on the books of the Companies
and their Subsidiaries, as applicable, in conformity with GAAP; and which have no effect on the
priority of Liens in favor of Laurus or the value of the assets in which Laurus has a Lien; (e)
Purchase Money Liens securing Purchase Money Indebtedness to the extent permitted in this Agreement
and (f) Liens specified on Schedule 12(l) hereto.

     “Person” means any individual, sole proprietorship, partnership, limited liability
partnership, joint venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including any instrumentality, division, agency, body
or department thereof), and shall include such Person’s successors and assigns.

     “Principal Market” means the NASD Over The Counter Bulletin Board, NASDAQ Capital
Market, NASDAQ National Market System, American Stock Exchange or New York Stock

- 9 -

 

Exchange (whichever of the foregoing is at the time the principal trading exchange or market
for the Common Stock).

     “Proceeds” means “proceeds”, as such term is defined in the UCC and, in any event,
shall include: (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable
to any Company or any other Person from time to time with respect to any Collateral; (b) any and
all payments (in any form whatsoever) made or due and payable to any Company from time to time in
connection with any requisition, confiscation, condemnation, seizure or forfeiture of any
Collateral by any governmental body, governmental authority, bureau or agency (or any person acting
under color of governmental authority); (c) any claim of any Company against third parties (i) for
past, present or future infringement of any Intellectual Property or (ii) for past, present or
future infringement or dilution of any trademark or trademark license or for injury to the goodwill
associated with any trademark, trademark registration or trademark licensed under any trademark
License; (d) any recoveries by any Company against third parties with respect to any litigation or
dispute concerning any Collateral, 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, Collateral;
(e) all amounts collected on, or distributed on account of, other Collateral, 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 Collateral and all rights arising out of Collateral.

     “Purchase Money Indebtedness” means (a) any Indebtedness incurred for the payment of
all or any part of the purchase price of any fixed asset, including indebtedness under capitalized
leases, (b) any indebtedness incurred for the sole purpose of financing or refinancing all or any
part of the purchase price of any fixed asset, and (c) any renewals, extensions or refinancings
thereof (but not any increases in the principal amounts thereof outstanding at that time).

     “Purchase Money Lien” means any Lien upon any fixed assets that secures the Purchase
Money Indebtedness related thereto but only if such Lien shall at all times be confined solely to
the asset the purchase price of which was financed or refinanced through the incurrence of the
Purchase Money Indebtedness secured by such Lien and only if such Lien secures only such Purchase
Money Indebtedness.

     “Registration Rights Agreements” means that certain Registration Rights Agreement
dated as of the Closing Date by and between the Parent and Laurus and each other registration
rights agreement by and between the Parent and Laurus, as each of the same may be amended, modified
and supplemented from time to time.

     “Registry User Entity” shall have the meaning ascribed thereto in the Cape Town
Convention.

     “SEC” means the Securities and Exchange Commission.

     “SEC Reports” has the meaning given such term in Section 12(x).

     “Secured Revolving Note” means that certain Secured Revolving Note dated as of the
Closing Date made by the Companies in favor of Laurus in the original face amount of $25,000,000,
as the same may be amended, supplemented, restated and/or otherwise modified from time to time.

- 10 -

 

     “Securities” means the Note and the Warrants and the shares of Common Stock, which may
be issued pursuant to exercise of such Warrants.

     “Securities Act” has the meaning given such term in Section 12(u).

     “Security Documents” means the Aircraft Security Documents, all other security
agreements, mortgages, lockbox agreements, cash collateral deposit letters, pledges and other
agreements which are executed by any Company or any of its Subsidiaries in favor of Laurus.

     “Series B Preferred Stock” means the 15,000 shares of the Parent’s preferred stock,
$0.01 par value, which have been designated as Series B redeemable preferred stock.

     “Software” means all “software” as such term is defined in the UCC, now owned or
hereafter acquired by any Person, including all computer programs and all supporting information
provided in connection with a transaction related to any program.

     “Solvent” means, with respect to any Person on a particular date, that on such date
(a) the fair value of the property of such Person is greater than the total amount of liabilities,
including contingent liabilities, of such Person; (b) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured; (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay
as such debts and liabilities mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which such Person’s
property would constitute and unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the
amount that, in light of all the facts and circumstances existing at the time, represents the
amount that can reasonably be expected to become an actual or matured liability.

     “Stock” means all certificated and uncertificated shares, options, warrants,
membership interests, general or limited partnership interests, participation 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 SEC under the Securities Exchange Act of 1934).

     “Subsidiary” means, with respect to any Person, (i) any other Person whose shares of
stock or other ownership interests having ordinary voting power (other than stock or other
ownership interests having such power only by reason of the happening of a contingency) to elect a
majority of the directors or other governing body of such other Person, are owned, directly or
indirectly, by such Person or (ii) any other Person in which such Person owns, directly or
indirectly, more than 50% of the equity interests at such time.

     “Supporting Obligations” means all “supporting obligations” as such term is defined in
the UCC.

     “Term” means the Closing Date through September 30, 2010, subject to acceleration at
the option of Laurus upon the occurrence of an Event of Default hereunder or other termination
hereunder.

- 11 -

 

     “Transactions” means, with respect to the Companies, the execution, delivery and
performance by the Companies of this Agreement and the Ancillary Agreements to which such Company
is a party to such documents, and all transactions contemplated by the foregoing documents.

     “Transportation Security Administration” and “TSA” means the United States
Transportation Security Administration and any agent or instrumentality of the United States
government succeeding to its functions.

     “UCC” means the Uniform Commercial Code as the same may, from time to time be in
effect in the State of New York; provided, 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, Laurus’ Lien on any Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this
Agreement relating to such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions; provided further, that to the extent that UCC is used to
define any term herein or in any Ancillary Agreement and such term is defined differently in
different Articles or Divisions of the UCC, the definition of such term contained in Article or
Division 9 shall govern.

     “USPS” means the United States Postal Service, or any agency or subsidiary thereof, or
any successor thereto.

     “Warrant Shares” has the meaning given such term in Section 12(a).

     “Warrants” means that certain Common Stock Purchase Warrant dated as of the Closing
Date made by the Parent in favor of Laurus and each other warrant made by the Parent in favor
Laurus, as each of the same may be amended, restated, modified and/or supplemented from time to
time.

- 12 -exv10w5

 

Exhibit 10.5

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO KITTY HAWK, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

Right to Purchase up to 8,216,657 Shares of Common Stock of

Kitty Hawk, Inc.

(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

			
	 	 	 
	No. L - 1
	 	Issue Date: March 29, 2007

     KITTY HAWK, INC., a corporation organized under the laws of the State of Delaware (the
“Company”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns (the
“Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as
defined herein) from and after the Issue Date of this Warrant and at any time or from time to time
before 5:00 p.m., New York time, through the close of business March 29, 2012 (the “Expiration
Date”), up to 8,216,657 fully paid and nonassessable shares of Common Stock (as hereinafter
defined), $0.000001 par value per share, at the applicable Exercise Price per share (as defined
below). The number and character of such shares of Common Stock and the applicable Exercise Price
per share are subject to adjustment as provided herein.

     As used herein the following terms, unless the context otherwise requires, have the following
respective meanings:

     (a) The term “Affiliated Transferee” as used in Section 7 shall include (i) a partner,
member or stockholder of the Transferor, (ii) an entity majority owned or controlled (as
such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended) by
the Transferor or by the partners, members or stockholders of the Transferor, and (iii) a
fund or account managed by the same management company as the Transferor or by an affiliate
of such management company.

     (b) The term “Common Stock” includes (i) the Company’s Common Stock, par value
$0.000001 per share; and (ii) any other securities into which or for which any of the
securities described in the preceding clause (i) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or otherwise.

     (c) The term “Company” shall include Kitty Hawk, Inc. and any person or entity which
shall succeed, or assume the obligations of, Kitty Hawk, Inc. hereunder.

 

 

     (d) The term “Event of Default” shall have the meaning given thereto in the Security
Agreement.

     (e) The “Exercise Price” applicable under this Warrant shall be a price of $0.91.

     (f) The term “Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the holder of
the Warrant at any time shall be entitled to receive, or shall have received, on the
exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 3 or otherwise.

     (g) The term “Security Agreement” means the Security Agreement dated as of March 29,
2007 among the Holder, the Company and various Subsidiaries of the Company party thereto, as
amended, modified, restated and/or supplemented from time to time.

     1. Exercise of Warrant.

          1.1 Number of Shares Issuable upon Exercise. From and after the date hereof through
and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this
Warrant in whole or in part (but in increments of no less than 10,000 shares of Common Stock
issuable upon exercise of this Warrant), by delivery of an original or fax copy of an exercise
notice in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common
Stock of the Company, subject to adjustment pursuant to Section 4.

          1.2 Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of
Common Stock as of a particular date (the “Determination Date”) shall mean:

     (a) If the Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or Capital Market of The Nasdaq Stock Market,
Inc. (“Nasdaq”), then the closing or last sale price, respectively, reported for the last
trading day immediately preceding the Determination Date.

     (b) If the Company’s Common Stock is not traded on the American Stock Exchange or
another national exchange or on the Nasdaq but is traded on the NASD Over The Counter
Bulletin Board, then the mean of the average of the closing bid and asked prices reported
for the last trading day immediately preceding the Determination Date.

     (c) Except as provided in clause (d) below, if the Company’s Common Stock is not
publicly traded, then as the Holder and the Company agree or in the absence of agreement by
arbitration in accordance with the rules then in effect of the American Arbitration
Association, before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.

2

 

     (d) If the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s
charter, then all amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up, plus all other
amounts to be payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock
then issuable upon exercise of the Warrant are outstanding at the Determination Date.

          1.3 Company Acknowledgment. The Company will, at the time of the exercise of this
Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to
afford to such holder any rights to which such holder shall continue to be entitled after such
exercise in accordance with the provisions of this Warrant. If the holder shall fail to make any
such request, such failure shall not affect the continuing obligation of the Company to afford to
such holder any such rights.

          1.4 Trustee for Warrant Holders. In the event that a bank or trust company shall have
been appointed as trustee for the holders of this Warrant pursuant to Section 3.2, such bank or
trust company shall have all the powers and duties of a warrant agent (as hereinafter described)
and shall accept, in its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section 1.

     2. Procedure for Exercise.

          2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees that the
shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the
Holder as the record owner of such shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise of this Warrant in full or in part, and in any event within
three (3) trading days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as
such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance
with applicable securities laws, a certificate or certificates for the number of duly and validly
issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such
Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market
Value of one full share, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1
or otherwise.

          2.2 Exercise. (a) Payment may be made either (i) in cash by wire transfer of
immediately available funds or by certified or official bank check payable to the order of the
Company equal to the applicable Exercise Price multiplied by the number of shares of Common Stock
being acquired upon exercise of this Warrant, (ii) by delivery of this Warrant, or shares of Common
Stock and/or Common Stock receivable upon exercise of this Warrant in accordance with the formula
set forth in Section 2.2(b) below, or (iii) by a combination of any of the

3

 

foregoing methods, for the number of shares of Common Stock specified in such Exercise Notice
(as such exercise number shall be adjusted to reflect any adjustment in the total number of shares
of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall
thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

     (b) Notwithstanding any provisions herein to the contrary, if the Fair Market Value of one
share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being exercised) by
surrender of this Warrant at the principal office of the Company together with the properly
endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of
Common Stock computed using the following formula:

	 	 	 	 	 	 	 
	 

	 	X=
	 	Y(A-B)
A	 	 
	 
	 	 	 	 	 	 
	 	 	Where X =	 	the number of shares of Common Stock to be issued to the Holder
	 
	 	 	 	 	 	 
	 	 	Y =	 	the number of shares of Common Stock purchasable under this Warrant or, if
only a portion of this Warrant is being exercised, the portion of this Warrant being
exercised (at the date of such calculation)
	 
	 	 	 	 	 	 
	 	 	A =	 	the Fair Market Value of one share of the Company’s Common Stock (at the date
of such calculation)
	 
	 	 	 	 	 	 
	 	 	B =	 	the Exercise Price per share (as adjusted to the date of such calculation)

     3. Effect of Reorganization, Etc.

          3.1 Reorganization, Consolidation, Merger, Etc. (a) In case at any time or from time
to time, the Company shall (i) effect a reorganization, (ii) consolidate with or merge into any
other person (other than as contemplated in Section 3.1(b) below), or (iii) transfer all or
substantially all of its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a condition to the
consummation of such a transaction, proper and adequate provision shall be made by the Company
whereby the Holder, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash, where applicable) to which such Holder would have been
entitled upon such consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant immediately prior thereto, all subject to further adjustment
thereafter as provided in Section 4.

     (b) Notwithstanding anything to the contrary contained in Section 3.1(a) above, the Holder
agrees that, in the event of a consolidation or merger of the Company with or into any other person
in which the sole consideration is cash, the Holder shall, upon the written request of

4

 

the Company, elect either (i) to exercise this Warrant, in which event such exercise will be
deemed effective immediately prior to the consummation of such transaction or (ii) not to exercise
this Warrant, in which event this Warrant will expire upon the consummation of such transaction.
The Company shall provide the Holder with written notice of its request relating to the foregoing
(together with such reasonable information as the Holder may request in connection with the
contemplated transaction giving rise to such notice), which is to be delivered to the Holder not
less than ten (10) days prior to the closing of the proposed transaction.

          3.2 Dissolution. In the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be
delivered to the Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so instruct
the Company, to a bank or trust company specified by the Holder and having its principal office in
New York, NY as trustee for the Holder.

          3.3 Continuation of Terms. Upon any reorganization, consolidation, merger or transfer
(and any dissolution following any transfer) referred to in this Section 3 (but other than any
consolidation or merger referred to in Section 3.1(b)), this Warrant shall continue in full force
and effect and the terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such transfer, as the
case may be, and shall be binding upon the issuer of any such stock or other securities, including,
in the case of any such transfer, the person acquiring all or substantially all of the properties
or assets of the Company, whether or not such person shall have expressly assumed the terms of this
Warrant. In the event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3 (other than under the circumstances
set forth in Section 3.1(b)), then the Company’s securities and property (including cash, where
applicable) receivable by the Holder will be delivered to the Holder or the Trustee as contemplated
by Section 3.2.

     4. Extraordinary Events Regarding Common Stock; Adjustment of Exercise Price and Number of
Shares Issuable Upon Exercise. In the event that the Company shall (a) issue additional shares
of the Common Stock as a dividend or other distribution on (i) outstanding Common Stock or (ii) any
preferred stock issued by the Company, (b) subdivide its outstanding shares of Common Stock, (c)
combine its outstanding shares of the Common Stock into a smaller number of shares of Common Stock,
then, in each such event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding immediately after
such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4. The number of shares of Common
Stock that the Holder shall thereafter, on the exercise hereof as provided in Section 1, be
entitled to receive shall be adjusted to a number determined by multiplying the number of shares of
Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such
exercise by a fraction of

5

 

which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of
this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date
of such exercise (taking into account the provisions of this Section 4). Notwithstanding the
foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock.

     5. Certificate as to Adjustments. In each case of any adjustment or readjustment in
the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the
Company at its expense will promptly cause its Chief Financial Officer or other appropriate
designee to compute such adjustment or readjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of Common Stock (or
Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise
Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in
effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the
holder and any Warrant agent of the Company (appointed pursuant to Section 11 hereof).

     6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at
all times reserve and keep available, solely for issuance and delivery on the exercise of this
Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of
this Warrant.

     7. Assignment; Exchange of Warrant. (a) Subject to compliance with applicable
securities laws and Section 7(b) below, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a “Transferor”) in whole or in part; provided,
that, so long as no Event of Default shall have occurred and be continuing, the Transferor may make
no more than 10 transfers (except for transfers to Affiliated Transferees). On the surrender for
exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B
attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, a legal opinion from the Transferor’s counsel that such transfer is
exempt from the registration requirements of applicable securities laws, the Company at its expense
(but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or
on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”),
calling in the aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of the Warrant so surrendered by the Transferor.

6

 

     (b) If, at any time when no Event of Default shall have occurred and be continuing, any
Transferor shall propose to sell all or any portion of this Warrant and the rights evidenced hereby
(the “Offered Warrant Rights”) to any Person (a “Proposed Transferee”), other than to an Affiliated
Transferee, such sale shall be conditioned upon the satisfaction of the following conditions
precedent:

     (i) The Transferor shall first offer to sell the Offered Warrant Rights to the Company,
at the same price and on terms identical to those terms that the Transferor intends to sell
the Offered Warrant Rights to the Proposed Transferee; provided that the Company shall have
no right to acquire the Offered Warrant Rights unless the Company acquires all of the
Offered Warrant Rights. If such proposed sale involves consideration other than cash, the
Company shall have the right to elect to pay, in lieu of such non-cash consideration, cash
in an amount equal to the fair market value of such non-cash consideration. Such offer
shall be made by a written notice (the “Notice of Proposed Sale”) delivered to the Company
not less than 15 days prior to the proposed sale. Such Notice of Proposed Sale shall set
forth the identity of the Proposed Transferee, the portion of this Warrant proposed to be
sold (which may be all of this Warrant) and the terms and conditions of the proposed sale,
including price and any other material terms and conditions of the proposed sale.

     (ii) If the Company does not accept the offer made by the Transferor with respect to
all of the Offered Warrant Rights within the 15-day period provided above, then the
Transferor shall have the right for a period of 90 days following the 15th day
after the Company shall have received the Notice of Proposed Sale in accordance with Section
7(b)(i) above, to sell up to all of the Offered Warrant Rights to the Proposed Transferee
and/or any other transferee, but at not less than the price, and upon terms not more
favorable to the Proposed Transferee or other transferee, than were contained in the Notice
of Proposed Sale. Any Offered Warrant Rights not sold within such 90-day period shall
continue to be subject to the requirements of this Section 7.

     8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction of this Warrant, on delivery of a customary affidavit and an indemnity
agreement or security reasonably satisfactory in form and amount to the Company or, in the case of
any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense (but
with payment by the Holder of any applicable taxes or charges, if any) will execute and deliver, in
lieu thereof, a new Warrant of like tenor.

     9. Registration Rights; Lock-Up. (a) The Holder has been granted certain
registration rights by the Company. These registration rights are set forth in a Registration
Rights Agreement entered into by the Company and Holder dated as of March 29, 2007, as the same may
be amended, modified and/or supplemented from time to time.

     (b) Provided that no Event of Default shall have occurred and be continuing, the Holder agrees
that it will not, without the prior written consent of the Company, sell any shares of Common Stock
received upon exercise of this Warrant prior to March 29, 2008 (the “Initial Lock-Up”).
Additionally, following the Initial Lock-Up and provided that no Event of Default

7

 

shall have occurred and be continuing, the Holder agrees that it will not, without the prior
written consent of the Company, sell shares of Common Stock received upon exercise of this Warrant
during a twenty two (22) day trading period in a number that exceeds twenty percent (20%) of the
aggregate dollar trading volume of the Common Stock for the twenty two (22) day trading period
immediately preceding such sales by the Holder, inclusive of the day of such sales. Such
restriction shall in no way affect the Holder’s right to exercise all or any portion of this
Warrant as provided in this Warrant.

     10. Maximum Exercise. Notwithstanding anything herein to the contrary, in no event
shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of
this Warrant upon exercise of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject to a limitation on
conversion analogous to the limitations contained herein) and (2) the number of shares of Common
Stock issuable upon the exercise of the portion of this Warrant with respect to which the
determination of this proviso is being made, would result in beneficial ownership by the Holder and
its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock
(whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more
than 9.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate”
means any person or entity that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a person or entity, as such terms are
used in and construed under Rule 144 under the Securities Act. For purposes of the second
preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as
otherwise provided in clause (1) of such sentence. For any reason at any time, upon written or
oral request of the Holder, the Company shall within two (2) business days confirm orally and in
writing to the Holder the number of shares of Common Stock outstanding as of any given date. The
limitations set forth herein (x) may be waived by the Holder upon provision of no less than
sixty-one (61) days prior written notice to the Company and (y) shall automatically become null and
void following notice to the Company upon the occurrence and during the continuance of an Event of
Default, except that at no time shall the Company be obligated to issue any shares of Common Stock
pursuant to the terms of this Warrant, the Security Agreement or any Ancillary Agreement (as
defined in the Security Agreement) if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which the Company may issue pursuant to the terms of
this Warrant, the Security Agreement or such Ancillary Agreement without violating the rules or
regulations of the Principal Market (as defined in the Security Agreement), except that such
limitation shall not apply in the event that the Company obtains the approval of its stockholders
as required by the applicable rules or regulations of the Principal Market for issuances of Common
Stock in excess of such amount.

     11. Warrant Agent. The Company may, by written notice to the each Holder of the
Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the
exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and
replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such

8

 

issuance, exchange or replacement, as the case may be, shall be made at such office by such
agent.

     12. Transfer on the Company’s Books. Until this Warrant is transferred on the books
of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.

     13. Rights of Shareholders. No Holder shall be entitled to vote or receive dividends
or be deemed the holder of the shares of Common Stock or any other securities of the Company which
may at any time be issuable upon exercise of this Warrant for any purpose (the “Warrant Shares”),
nor shall anything contained herein be construed to confer upon the Holder, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of directors or upon
any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon the recapitalization, issuance of shares, reclassification of
shares, change of nominal value, consolidation, merger, conveyance or otherwise) or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise, in each case,
until the earlier to occur of (x) the date of actual delivery to Holder (or its designee) of the
Warrant Shares issuable upon the exercise hereof or (y) the third business day following the date
such Warrant Shares first become deliverable to Holder, as provided herein.

     14. Notices, Etc. All notices and other communications from the Company to the Holder
shall be mailed by first class registered or certified mail, postage prepaid, at such address as
may have been furnished to the Company in writing by such Holder or, until any such Holder
furnishes to the Company an address, then to, and at the address of, the last Holder who has so
furnished an address to the Company.

     15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. THIS WARRANT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY
THIS WARRANT SHALL BE BROUGHT ONLY IN STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND
BRING AN ACTION OUTSIDE THE STATE OF NEW YORK. The individuals executing this Warrant on behalf of
the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees
and costs. In the event that any provision of this Warrant is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision of this Warrant. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect
the validity or enforceability of any other provision hereof. The Company acknowledges that legal
counsel participated in the preparation of this

9

 

Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be
resolved against the drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]

10

 

     IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	 	 	 	 	 	 	 
	 	 	KITTY HAWK, INC.	 	 
	 
	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 /s/ Helen Manning

	 	By:	 	/s/ James Kupferschmid 	 	 
	 

	 	Name:
	 	 

James Kupferschmid
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 

 

 

EXHIBIT A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

	 	 	 
	TO:

	 	Kitty Hawk, Inc.

1515 West 20th Street

P.O. Box 612787

DFW International Airport, Texas 75261

Attention: Chief Financial Officer

     The undersigned, pursuant to the provisions set forth in the attached Warrant (No.                    ),
hereby irrevocably elects to purchase (check applicable box):

	 	 	 
	                    

	 	                                shares of the common stock covered by such warrant; or
	 
	 	 
	                    

	 	the maximum number of shares of common stock covered by such
warrant pursuant to the cashless exercise procedure set forth in
Section 2.

     The undersigned herewith makes payment of the full Exercise Price for such shares at the price
per share provided for in such Warrant, which is $                    . Such payment takes the form of
(check applicable box or boxes):

	 	 	 
	                    

	 	$                     in lawful money of the United States; and/or
	 
	 	 
	                    

	 	the cancellation of such portion of the attached Warrant as is
exercisable for a total of
                     shares of Common Stock (using
a Fair Market Value of $                     per share for purposes of this
calculation); and/or
	 
	 	 
	                    

	 	the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section
2.2, to exercise this Warrant with respect to the maximum number
of shares of Common Stock purchasable pursuant to the cashless
exercise procedure set forth in Section 2.

     The undersigned requests that the certificates for such shares be issued in the name of, and
delivered to                                                       whose address is
                                                                                .

     The undersigned represents and warrants that all offers and sales by the undersigned of the
securities issuable upon exercise of the within Warrant shall be made pursuant to registration of
the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to
an exemption from registration under the Securities Act.

	 	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(Signature must conform to name of holder
as specified on the face
of the Warrant)	 	 
	 

	 	 	 	 	 	Address:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	 

	 	 

 

 

EXHIBIT B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

     For value received, the undersigned hereby sells, assigns, and transfers unto the person(s)
named below under the heading “Transferees” the right represented by the within Warrant to purchase
the percentage and number of shares of Common Stock of Kitty Hawk, Inc. into which the within
Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of Kitty Hawk, Inc. with full power of substitution in
the premises.

	 	 	 	 	 	 	 
	 	 	 	 	Percentage	 	Number
	Transferees	 	Address	 	Transferred	 	Transferred
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(Signature must conform to name of holder as
specified on the face of the Warrant)	 	 
	 

	 	 	 	 	 	Address:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 	 	 	 	 	 	SIGNED IN THE PRESENCE OF:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(Name)
	 	 
	ACCEPTED AND AGREED:

[TRANSFEREE]	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	(Name)

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