Document:

Exhibit
10.49

LOAN
AGREEMENT [28139]

DATED
AS OF DECEMBER 21, 2006

AMONG

HAWAIIAN AIRLINES, INC.,

As Borrower

C.I.T.
LEASING CORPORATION,

as Administrative Agent and

as Original Lender,

C.I.T.
LEASING CORPORATION,

as Security Agent

AND

THE
LENDERS

FROM TIME TO TIME PARTY HERETO

 

 

Table
of Contents

	
  

  	
   

  	
  Page

  
	
  Article I  The
  Loan

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section
  1.1.  The Loan

  	
   

  	
  1

  
	
  Section
  1.2.  Making the Loan

  	
   

  	
  3

  
	
  Section
  1.3.  Commitment Termination

  	
   

  	
  3

  
	
  Section
  1.4.  Substitute Lenders

  	
   

  	
  3

  
	
  Section
  1.5.  Special Provisions Governing the Loan

  	
   

  	
  4

  
	
  Section
  1.6.  Payments and Computations

  	
   

  	
  6

  
	
  Section
  1.7.  Sharing of Payments, Etc.

  	
   

  	
  6

  
	
  Section
  1.8.  Secured Obligation of Lenders to Mitigate

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  Article
  II  Interest

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section
  2.1.  Rate of Interest

  	
   

  	
  7

  
	
  Section
  2.2.  Interest Periods

  	
   

  	
  7

  
	
  Section
  2.3.  Interest Payments

  	
   

  	
  7

  
	
  Section
  2.4.  Default Rate

  	
   

  	
  8

  
	
  Section
  2.5.  Computation of Interest

  	
   

  	
  8

  
	
  Section
  2.6.  Maximum Rate

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  Article
  III  Representations and Warranties

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section
  3.1.  Representations and Warranties

  	
   

  	
  8

  
	
  (a) Organization;
  Powers

  	
   

  	
  8

  
	
  (b) Authorization;
  Enforceability

  	
   

  	
  8

  
	
  (c) No
  Violation

  	
   

  	
  9

  
	
  (d) Governmental
  Approvals

  	
   

  	
  9

  
	
  (e) Litigation

  	
   

  	
  9

  
	
  (f)  Financial
  Condition

  	
   

  	
  9

  
	
  (g) No
  Default

  	
   

  	
  10

  
	
  (h) Investment
  and Holding Company Status

  	
   

  	
  10

  
	
  (i) Use of
  Proceeds

  	
   

  	
  10

  
	
  (j) Licenses,
  Permits, etc.

  	
   

  	
  10

  
	
  (k) Compliance
  with Laws

  	
   

  	
  10

  
	
  (l) Tax
  Returns

  	
   

  	
  10

  
	
  (m) Information

  	
   

  	
  10

  
	
  Section
  3.2. The Aircraft

  	
   

  	
  11

  
	
  (a) Good
  Title

  	
   

  	
  11

  
	
  (b) Filings

  	
   

  	
  11

  
	
  (c) No
  Event of Loss

  	
   

  	
  11

  
	
  (d) Section
  1110

  	
   

  	
  11

  
	
  (e) Condition

  	
   

  	
  11

  
	
  Section 3.3.  Representations
  and Warranties of the Lenders

  	
   

  	
  11

  

 i
 

 

	
  Article IV  Covenants

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 4.1.Covenants of the Borrower

  	
   

  	
  12

  
	
  (a)  Financial Statements and Other
  Information

  	
   

  	
  12

  
	
  (b)  Existence; Conduct of Business

  	
   

  	
  13

  
	
  (c)  Mergers and Consolidations

  	
   

  	
  13

  
	
  (d)  Delivery of Post-Recording FAA
  Opinion and Post-Registration IR Opinion

  	
   

  	
  15

  
	
  (e)  Compliance with the Security
  Agreement

  	
   

  	
  15

  
	
  (f)  Notice of Default under PBH Agreement

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  Article V  Increased Costs; General Indemnity

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 5.1.  Increased Costs

  	
   

  	
  15

  
	
  Section 5.2.  Capital Adequacy

  	
   

  	
  16

  
	
  Section 5.3.  Withholding of Taxes

  	
   

  	
  17

  
	
  (a)  Payments to Be Free and Clear

  	
   

  	
  17

  
	
  (b)  Grossing-up of Payments

  	
   

  	
  17

  
	
  (c)  Evidence of Exemption from U.S.
  Withholding Tax

  	
   

  	
  18

  
	
  Section 5.4.       (a)
    Other Taxes

  	
   

  	
  20

  
	
            (b)
    Contest of Tax Claims

  	
   

  	
  20

  
	
            (c)
    Non-Parties

  	
   

  	
  22

  
	
  Section 5.5.   Indemnity

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  Article VI  Conditions Precedent

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 6.1.  General Conditions

  	
   

  	
  24

  
	
   

  	
   

  	
   

  
	
  Article VII  Events of Default

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 7.1.  Events of Default

  	
   

  	
  26

  
	
   

  	
   

  	
   

  
	
  Article VIII  The Security Agent and the Administrative
  Agent

  	
   

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 8.1.  Appointment and
  Authorization

  	
   

  	
  28

  
	
  Section 8.2.  Delegation of Duties

  	
   

  	
  28

  
	
  Section 8.3.  Exculpatory Provisions

  	
   

  	
  29

  
	
  Section 8.4.  Reliance by Agents

  	
   

  	
  29

  
	
  Section 8.5.  Notice of Events of Default

  	
   

  	
  29

  
	
  Section 8.6.  Non-Reliance on Agents and
  Other Lenders; Lender Representations

  	
   

  	
  29

  
	
  Section 8.7.  Agents and Affiliates

  	
   

  	
  30

  
	
  Section 8.8.  Indemnification

  	
   

  	
  30

  
	
  Section 8.9.  Successor Agents

  	
   

  	
  30

  

 ii
 

 

	
  ARTICLE IX  Miscellaneous

  	
   

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section
  9.1.  Amendments

  	
   

  	
  30

  
	
  Section
  9.2.  Notices

  	
   

  	
  31

  
	
  Section
  9.3.  Costs and Expenses

  	
   

  	
  31

  
	
  Section
  9.4.  Certain Agreements

  	
   

  	
  31

  
	
  Section
  9.5.  Entire Agreement

  	
   

  	
  32

  
	
  Section
  9.6.  Cumulative Rights and Severability

  	
   

  	
  32

  
	
  Section
  9.7.  Waivers

  	
   

  	
  32

  
	
  Section
  9.8.  Successors and Assigns; Participations; Assignments

  	
   

  	
  32

  
	
  (a)  Successors
  and Assigns

  	
   

  	
  32

  
	
  (b)  Participations

  	
   

  	
  32

  
	
  (c)  Assignments

  	
   

  	
  33

  
	
  (d)  Note
  Register

  	
   

  	
  33

  
	
  Section
  9.9.    Confidentiality

  	
   

  	
  34

  
	
  Section
  9.10.  Counterparts

  	
   

  	
  34

  
	
  Section
  9.11.  Governing Law; Submission to Jurisdiction; Venue

  	
   

  	
  34

  
	
  Section
  9.12.  Waiver of Trial by Jury

  	
   

  	
  35

  
	
  Section
  9.13.  Headings

  	
   

  	
  35

  

 

Schedule 1            Definitions

 

	
  

  	
   

  	
   

  
	
  Exhibit A

  	
   

  	
  Form of Security
  Agreement

  
	
  Exhibit B

  	
   

  	
  Form of Promissory Note

  
	
  Exhibit C

  	
   

  	
  Form of Notice of
  Borrowing

  
	
  Exhibit D

  	
   

  	
  Form of Opinion of
  Special Counsel to the Borrower for Closing

  
	
  Exhibit E

  	
   

  	
  Form of Opinion of
  Borrower’s In-House Legal Counsel for Closing

  
	
  Exhibit F

  	
   

  	
  Form of Transfer
  Supplement

  
	
  Exhibit G

  	
   

  	
  Form of Certificate of
  Non-Bank Status

  
	
  Exhibit H

  	
   

  	
  Form of FAA Counsel’s
  Opinion

  
	
  Exhibit I

  	
   

  	
  Form of Special
  Regulatory Counsel Opinion

  

 

 

 iii

LOAN AGREEMENT
[28139]

THIS LOAN AGREEMENT [28139], dated as of December 21,
2006 (as the same may be amended, modified or supplemented from time to time,
this “Agreement”), is among HAWAIIAN AIRLINES, INC., a Delaware
corporation, as borrower (the “Borrower”), C.I.T. LEASING CORPORATION,
as administrative agent for the Lenders (in such capacity, the “Administrative
Agent”) and as original lender (in such capacity, the “Original Lender”), C.I.T. LEASING
CORPORATION, as the security agent (the “Security Agent”), and such
other lenders as may from time to time be party hereto (together with the
Original Lender, the “Lenders”). 
Certain capitalized terms used herein are defined, and certain rules of
construction are specified, in Schedule 1.

BACKGROUND

l.              The
Lenders have agreed to make a loan to the Borrower to be secured by a Lien on a
certain aircraft and related property owned by the Borrower.

2.             In
connection with such loan, the parties hereto wish to enter into certain
related understandings, as set forth herein.

The parties hereto agree as follows:

ARTICLE I

THE LOAN

Section
1.1.                                The
Loan.

(a)           Commitments.  Subject
to the terms and conditions of this Loan Agreement, on the Funding Date the
Original Lender shall make a loan to the Borrower in the principal amount equal
to the Commitment.  As evidence of the
loan advanced by the Original Lender, on the Funding Date the Borrower shall
issue and deliver to the Original Lender, as provided hereunder, a Note payable
to the Original Lender in an original principal amount equal to the amount of
its Commitment.  The Note shall be
substantially in the form set forth in Exhibit B.

(b)           The Notes:  Amortization.  The
Loan, as evidenced by each Note, shall mature on the Maturity Date, and the
principal of the Loan, as evidenced by each Note, shall be payable in 84
consecutive monthly installments on the Payment Dates, each such installment to
be in the amount set forth in Annex A to such Note opposite the
Payment Date on which such installment is due. 
Annex A to each Note shall be completed based on a mortgage style
amortization based on the Interest Rate applicable on the Funding Date, and
shall include a balloon payment on the Maturity Date in the amount of Seventeen
Million Dollars ($17,000,000), which is forty point five percent (40.5%) of the
original principal amount of the Loan. 
Each payment of the principal amount, if any, and interest or other
amounts due in respect of the Loan shall be applied, first, to the
payment of any amounts due in respect of the Loan (other than principal and
accrued interest on the Loan) to the date of such payment; second, to
the payment of accrued interest on the Loan then due (including any interest on
overdue principal amount, and to the extent permitted by law, interest and
other amounts thereunder); and third, the balance, if any, remaining
thereafter, to the payment of the principal amount of the Loan remaining unpaid
(provided that the Loan shall not be subject to prepayment, except as
provided in Sections 1.1(c), 1.1(d) and 1.5 hereof).

(c)           Optional
Prepayment.

(i)           In
General.  On any
Business Day (a “Prepayment Date”), on not less than three (3) Business
Days’ prior irrevocable written notice from the Borrower to the Administrative
Agent, the Borrower may prepay all, of the outstanding principal amount of the
Loan.  If the Borrower elects to prepay
the Loan, the Borrower shall pay on the Prepayment Date to the Administrative
Agent the outstanding principal amount of the Loan subject to prepayment
together with all accrued and unpaid interest thereon, the Prepayment Fee (if
applicable), and all other amounts then due and payable under the Transaction
Documents.  For the avoidance of doubt if
prepayment is made on or prior to the first anniversary of the Funding Date,
the Prepayment Fee shall be payable together with such prepayment.

(ii)          Limited
Optional Prepayment. 
Notwithstanding anything to the contrary in Section 1.1(c)(i) above and
without limiting the Borrower’s obligations under Sections 5.1, 5.2, 5.3, and
5.4 in the event that the Borrower receives notice from any Lender of any costs
or other amounts that the Borrower is required to pay to such Lender pursuant
to any of Sections 5.1, 5.2, 5.3 or 5.4, the Borrower and such Lender shall
negotiate in good faith in order to arrive at a mutually acceptable alternative
means of restructuring the Loan Amount held by such Lender in order to
mitigate, minimize or eliminate such costs in the future.  In the event that the Borrower and such
Lender are not able to agree, within thirty (30) days following the date of the
notice to the Borrower of amounts due under any of Sections 5.1, 5.2, 5.3 or
5.4, as the case may be, on an alternative means of restructuring the Loan
Amount held by such Lender, then the Borrower shall have the right, exercisable
upon not less than three (3) Business Days’ prior notice to the applicable
Lender (with a copy to the Administrative Agent), to prepay in full the Loan
Amount held by such Lender, together with accrued interest thereon, and any
amounts due to such Lender pursuant to Sections 5.1, 5.2, 5.3 or 5.4, as
applicable.  Any prepayment by the
Borrower pursuant to this Section 1.1(c)(ii) shall be made by the Borrower
directly to the Administrative Agent for the benefit of the applicable Lender,
and no prepayment by the Borrower pursuant to this Section 1.1(c)(ii)
shall have any effect on the Borrower’s obligations with respect to the
remaining outstanding balance of the Loan to any of the other Lenders
hereunder.  For the avoidance of doubt
such prepayment shall not be subject to any Prepayment Fee.

(d)           Mandatory Prepayment.  If an Event of Loss occurs with
respect to the Airframe, the Borrower shall, on the date specified for payment
with respect to such Event of Loss in Section 5.01 of the Security
Agreement (the “Loss Payment Date”), prepay the outstanding principal
amount of the Loan in full, together with accrued interest thereon to the date
of such prepayment.  For the avoidance of
doubt such prepayment shall not be subject to any Prepayment Fee.

(e)           Pro Rata Treatment. 
Except to the extent otherwise provided herein (including, but not
limited to, as otherwise specified in Section 1.1(c)(ii) above and Section 1.4
below):  (a) the borrowing of the
Loan from the Lenders under Section 1.2 shall be made from the Lenders pro
rata according to the amounts of their respective Commitments; (b) each
payment or prepayment of principal of the Loan shall be made for account of the
Lenders pro rata in accordance with the respective unpaid principal amounts of
the Loan held by them (as evidenced by the Notes held by them); and
(c) each payment of interest on the Loan shall be made for account of the
Lenders pro rata in accordance with the amounts of interest on the Loan then
due and payable to the Lenders.

 2
 

Section
1.2.                                Making
the Loan.

(a)           The
Loan shall be requested by the delivery of a Notice of Borrowing in the form of
Exhibit C by the Borrower to the Administrative Agent not later than 4:00 p.m.
(New York City time) at least one (1) Business Day prior to the Funding Date
specified in such notice.  The
Administrative Agent shall give to each Lender prompt notice thereof.  The Notice of Borrowing shall be irrevocable
and binding on the Borrower.  The Notice
of Borrowing shall be in writing specifying therein the (i) the aggregate
amount of the Loan to be funded, (ii) the proposed Funding Date and (iii)
payment instructions.  The Original
Lender shall, before 10:00 a.m. (New York City time) on the scheduled Funding
Date, make available for the account of its Lending Office to the
Administrative Agent’s Account, in immediately available funds, the
Commitment.  After the Administrative
Agent’s receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article VI as confirmed during a closing conference call pursuant
to which the Administrative Agent or its counsel shall indicate such
fulfillment, the Administrative Agent shall transfer such funds to the Borrower
at such account (including an account of the Seller) as is specified in a
written notice given by the Borrower to the Administrative Agent.

(b)           If
for any reason a Closing is not consummated on the Funding Date set forth in
the Notice of Borrowing, the Borrower may, by written notice to the
Administrative Agent given by 5:00 p.m., New York City time on the
scheduled Funding Date, designate a delayed Funding Date for such Closing on or
prior to the Commitment Termination Date.

Section 1.3.           Commitment
Termination.  The
Aggregate Commitment and the Commitment of each Lender shall terminate on the earlier
of (i) the making of the Loan pursuant to Section 1.2(a) above, or (ii) at 5:00
p.m. (New York time) on the Commitment Termination Date.

Section 1.4.           Substitute
Lenders.  In the event
the Borrower is required under the provisions of Sections 5.1, 5.2, 5.3 or 5.4
to make payments to any Lender, a notice has been given to the Borrower under
Section 1.5(e) and the Borrower and a Lender are unable to agree on a
Substitute Basis or an Affected Lender has given notice to the Borrower under
Section 1.5(b) and the Borrower and the Affected Lender are unable to agree on
a Substitute Basis, the Borrower may, so long as no Potential Default or Event
of Default shall have occurred and be continuing, elect to terminate such
Lender (or Affected Lender) as a party to this Agreement; provided that
concurrently with such termination, (i) the Borrower shall pay or cause to be
paid to that Lender (or Affected Lender) all principal, interest, and other
Secured Obligations (including, without limitation, amounts, if any, owed under
Sections 5.1, 5.2, 5.3 or 5.4), but 

 3
 

excluding any Prepayment
Fee, due to such Lender (or Affected Lender) through such date of termination,
(ii) another financial institution reasonably satisfactory to the Borrower and
the Administrative Agent shall agree, as of such date, to become a Lender for
all purposes under this Agreement (whether by assignment or otherwise) and to
assume all obligations of the Lender (or Affected Lender) to be terminated as
of such date, and (iii) all documents necessary, in the reasonable judgment of
the Administrative Agent, to evidence the substitution of such Lender shall
have been received and approved by the Administrative Agent as of such date.

Section 1.5.           Special
Provisions Governing the Loan.  Notwithstanding any other provision of this
Agreement to the contrary, the following provisions shall govern with respect
to the Loans as to the matters covered:

(a)           As
soon as practicable after 11:00 a.m. (London time) on each Interest Rate
Determination Date, the Administrative Agent shall determine the interest rate
that shall apply to the Loan and the Notes for the applicable Interest Period
in accordance with Section 2.2 (which determination shall be prima  facie
evidence of such rate) and shall promptly give notice thereof (in writing or by
telephone confirmed in writing) to the Borrower, the Security Trustee and each
Lender; provided that failure by the Borrower to pay interest on the
Notes in the absence of such notice from the Administrative Agent shall not be
deemed an Event of Default until two (2) Business Days after such notice is
actually given.

(b)           In
the event that on any date the making, maintaining or continuation by any
Lender of its Percentage Share of the Loan as evidenced by its Note has become
unlawful as a result of compliance by such Lender in good faith with any change
that becomes effective after the date hereof in any law, treaty, governmental
rule, regulation, guideline or order (whether or not having the force of law),
then, and in any such event, such Lender shall be an “Affected Lender”
and it shall promptly so notify (by facsimile or by telephone confirmed in
writing) the Borrower, the Administrative Agent, and the Security Trustee.  Thereafter (i) the obligation of the Affected
Lender to make its Percentage Share of the Loan as evidenced by its Note (if
not yet funded) shall be suspended until such notice shall be withdrawn by the
Affected Lender, (ii) the Affected Lender’s obligation to maintain its
outstanding Loan Amount as evidenced by its Note (the “Affected Loan Amount”)
shall be suspended with respect to the Affected Loan Amount until such notice
shall be withdrawn by the Affected Lender, and (iii) the parties shall follow
the procedures set forth in Section 1.5(d) with respect to the Affected Loan
Amount so long as, if following such procedures, the maintaining continuation
of such Affected Loan Amount or the balance of the Loan is not unlawful.  The Borrower may elect to terminate such
Affected Lender as a party to this Agreement in compliance with Section
1.4.  Except as provided in the
immediately preceding sentence, nothing in this Section 1.5(b) shall affect the
obligation of any Lender other than an Affected Lender to make its Percentage
Share of the Loan or maintain its Loan Amount as evidenced by its Notes in
accordance with the terms of this Agreement.

(c)           The
Borrower shall compensate each Lender, within ten (10) Business Days after
written request by such Lender (which request shall set forth in reasonable
detail the basis for requesting such amounts), for all reasonable losses,
costs, expenses and liabilities sustained by such Lender in connection with the
liquidation or re-employment of funds used by it to make or carry its Loan
Amount (collectively, “LIBOR Breakage Costs”) (i) if for any reason
(other than a default by that Lender) a borrowing of the Loan does not occur on
a date specified therefor in a Notice of Borrowing as set forth in Section
1.2(b) and (ii) as a consequence of any default by the Borrower in the
repayment of the Loan when required by the terms of this Agreement.

 4
 

(d)           During
the thirty (30) days following the date of any notice given to the Borrower
pursuant to Section 1.5(b) or 1.5(e), each Affected Lender (or, in the case of
Section 1.5(e), each Lender) and the Borrower shall negotiate in good
faith in order to arrive at a mutually acceptable alternative basis for
determining the interest rate from time to time applicable to the Affected Loan
Amount (or, in the case of Section 1.5(e), the Loan) (the “Substitute Basis”),
such interest rate to be based on an agreed cost-of-funds benchmark plus the
Applicable Margin.  If within the thirty
(30) days following the date of any such notice to the Borrower, any Affected
Lender (or, in the case of Section 1.5(e), any Lender) and the Borrower
shall agree upon a Substitute Basis, such Substitute Basis shall be retroactive
to and effective from the first day of the applicable Interest Periods until
and including the last day of such Interest Periods.  If after thirty (30) days from the date of
such notice, any Affected Lender (or, in the case of Section 1.5(e), any
Lender) and the Borrower shall have failed to agree upon a Substitute Basis,
then each such Affected Lender (or, in the case of Section 1.5(e), each
such Lender) shall certify in writing to the Borrower through the
Administrative Agent (such certification to be conclusive and binding on all of
the parties hereto absent manifest error) the interest rate at which such
Affected Lender (or, in the case of Section 1.5(e), such Lender) is prepared to
make or maintain the Affected Loan Amount (or, in the case of
Section 1.5(e), its Loan Amount) for such Interest Periods, such interest
rate to be retroactive to and effective from the first day of such Interest
Periods.  If no Substitute Basis is
established, upon receipt of notice of the interest rates at which an Affected
Lender (or, in the case of Section 1.5(e), a Lender) is prepared to make or
maintain its affected Loans, the Borrower shall have the right (i) exercisable
upon five (5) Business Days’ prior notice to such Affected Lender (or such
Lender) through the Administrative Agent (A) to continue to borrow the relevant
Loan Amount at the interest rates so advised by such Affected Lender (or such
Lender) (as such rates may be modified, from time to time, at the outset of
each subsequent Interest Period) or (B) to prepay in full the affected Loan
Amount of any such Affected Lender (or any such Lender), together with accrued
interest thereon at the LIBOR Rate plus the Applicable Margin in effect for the
most recent Interest Period and any LIBOR Breakage Costs, but excluding any
Prepayment Fee, whereupon such affected Loan Amount shall become due and
payable on the date specified by the Borrower in such notice or (ii) to substitute
any such Affected Lender (or such Lender) pursuant to the provisions of, and
subject to the conditions contained in, Section 1.4.

(e)           In the event that on any Interest
Rate Determination Date, by reason of circumstances affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining the
interest rate applicable to the Loan on the basis provided for in the
definition of LIBOR Rate, the Administrative Agent shall on such date give
notice (by facsimile or by telephone confirmed in writing) to the Borrower and
each Lender of such circumstance, whereupon the relevant provisions of Section
1.5(d) shall be applicable.

 5
 

Section
1.6.                                Payments
and Computations.

(a)           The
Borrower shall make each payment hereunder and under the Notes not later than
3:00 p.m. (New York City time) on the day when due in Dollars to the
Administrative Agent’s Account (or such other account or accounts as the
Administrative Agent directs in writing) in immediately available funds,
without set-off or counterclaim (except for any required withholding taxes not
subject to indemnification hereunder). 
Any amounts received after such time may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for the purpose of calculating interest thereon.  Unless funds have been paid directly by the
Borrower to each Lender, the Administrative Agent will promptly thereafter but
in no event later than 4:00 p.m. (New York City time) on the date such funds
are received by the Administrative Agent from the Borrower cause to be
distributed like funds to the Lenders for the account of their respective
Lending Offices, in each case to be applied in accordance with the terms of
this Agreement.  If the payment by the
Borrower is received by the Administrative Agent after 3:00 p.m., New York
time, at the place of payment, the Administrative Agent shall make payment
promptly, but not later than 2:00 p.m. New York time on the next succeeding
Business Day.  Upon its acceptance of any
Transfer Supplement and recording of the information contained therein in the
Register pursuant to Section 9.8(d), from and after the effective date
specified in such Transfer Supplement, the Administrative Agent shall make all
payments hereunder and under the Notes in respect of the interest assigned
thereby to the Lender assignee thereunder.

(b)           Whenever any payment
hereunder or under the Notes shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest or other amounts as the case may be; provided, however, that, if such
extension would cause payment of interest on or principal of a Loan to be made
in the next following calendar month, such payment shall be made on the next
preceding Business Day, and such reduction of time shall be given effect in the
computation of the payment of interest hereunder.

Section 1.7.           Sharing
of Payments, Etc.  If
any Lender shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) on account of the Loan
owing to it in excess of its proportionate share of payments on account of the
Secured Obligations, such Lender shall forthwith purchase from the other
Lenders such participation in the applicable Secured Obligations as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender,
such purchase from each Lender shall be rescinded and such Lender shall repay
to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender’s proportionate share (according
to the proportion of (i) the amount of such Lender’s required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered.  The Borrower agrees
that any Lender so purchasing a participation from another Lender pursuant to
this Section 1.7 may, to the fullest extent permitted by law, exercise its
rights of set-off with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such participation.

 6
 

Section 1.8.           Obligation
of Lenders to Mitigate. 
If an event or the existence of a condition occurs that would cause any
Lender to become an Affected Lender or that would entitle such Lender to
receive payments under Section 5.1, 5.2, 5.3 or 5.4, then, upon the request of
the Borrower, such Lender will to the extent not inconsistent with any
applicable legal or regulatory restrictions, use reasonable efforts (i) to
make, fund or maintain the Commitment of such Lender or the Loan Amount of such
Lender through another lending office of such Lender or (ii) take such other
reasonable measures, if as a result thereof the circumstances which would cause
such Lender to be an Affected Lender would cease to exist or the additional
amounts which would otherwise be required to be paid to such Lender pursuant to
Sections 5.1, 5.2, 5.3 or 5.4 would be reduced and if the making, funding or
maintaining of such Commitment or Loan Amount through such other lending office
or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitment or Loan Amount or the
interests of such Lender; provided that such Lender will not be
obligated to utilize such other lending office pursuant to this Section 1.8
unless the Borrower agrees to pay all incremental expenses, if any, incurred by
such Lender as a result of utilizing such other lending office as described in
clause (i) above; provided, further, that such Lender shall have no obligation to designate
another lending office that does not maintain loans comparable to the
Loan.  A certificate as to the amount of
any such expenses (setting forth in reasonable detail the basis for requesting
such amount and the calculation thereof) submitted by such Lender to the
Borrower (with a copy to the Administrative Agent) shall be prima facie evidence of such expenses.

ARTICLE II

INTEREST

Section 2.1.           Rate
of Interest.  Subject
to Section 1.5 hereof, each Note shall bear interest on the unpaid principal
amount thereof for each Interest Period from the date made through maturity
(whether by acceleration or otherwise) at a rate equal to the sum of the LIBOR
Rate for such Interest Period plus  the Applicable
Margin (the “Interest Rate”).  The
applicable Interest Period for determining the rate of interest shall be
established in accordance with Section 2.2.

Section 2.2.           Interest
Periods.  The first
Interest Period shall be the period commencing on the Funding Date, and shall
end on, but shall exclude, the next Interest Payment Date, and thereafter each
successive Interest Period shall commence on (and shall include) the last day
of the next preceding Interest Period and shall end on (but shall exclude) the
next succeeding Interest Payment Date, provided, however, that
notwithstanding anything in this Agreement to the contrary, the final Interest
Period shall end on the Maturity Date; provided, further, however,
that if any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding Business
Day, except that, notwithstanding anything to the contrary contained herein, if
any Interest Period would otherwise expire on a day which is not a Business Day
but is a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business Day.

Section 2.3.           Interest Payments.  Accrued interest on the Loan and each Note
shall be payable in arrears on the last day of each Interest Period; provided,
that (i) interest accrued pursuant to Section 2.4 shall be payable on
demand and (ii) in the event of any repayment or prepayment of the Loan
and any Note (or any portion thereof), accrued interest on the principal amount
repaid or prepaid shall be payable on the date of such repayment or prepayment.

 7
 

Section 2.4.           Default
Rate.  Notwithstanding
Section 2.1, the Borrower shall pay the Lenders and the Administrative
Agent on demand interest on any principal, interest, fee or other amount not
paid hereunder, under any Note or under any other Transaction Document when due
at a rate per annum that is two percent (2%) per annum in excess of the LIBOR
Rate for the relevant Interest Period plus the Applicable Margin (the “Default
Rate”).

Section 2.5.           Computation
of Interest.  Interest
on the Notes shall be computed on the basis of a 360-day year and the actual
number of days elapsed in the period during which such amount accrues.  In computing such amounts, the first day of
the applicable period shall be included, and the last day of the applicable
period shall be excluded; provided that if the Loan or a Note (or any
portion thereof) is repaid on the same day on which it is made, one day’s
interest shall be paid on that Note or the relevant portion thereof.

Section 2.6.           Maximum
Rate.  Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
the Loan or any Note, together with all fees, charges and other amounts which
are treated as interest on the Loan or such Note under applicable law
(collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum
Rate”) which may be contracted for, charged, taken, received or reserved by
the Lender holding the Loan or the relevant portion thereof in accordance with
applicable law, the rate of interest payable in respect of the Loan or such
Note or the relevant portion thereof hereunder, together with all Charges payable
in respect thereof, shall be limited to the Maximum Rate and, to the extent
lawful, the interest and Charges that would have been payable in respect of the
Loan or such Note or the relevant portion thereof but were not payable as a
result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other periods shall
be increased (but not above the Maximum Rate therefor) until such cumulated
amount, together with interest thereon at the LIBOR Rate to the date of
repayment, shall have been received by such Lender.

ARTICLE III

REPRESENTATIONS AND
WARRANTIES

Section 3.1.           Representations
and Warranties.  The
Borrower represents and warrants to the Administrative Agent and each Lender as
of the date of this Agreement that:

(a)           Organization; Powers. 
The Borrower is duly incorporated, validly existing and in good standing
under the laws of Delaware, has all requisite corporate power and authority to
carry on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, would reasonably be expected to result in a
Material Adverse Change, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.  The Borrower is “situated in a Contracting
State” within the meaning and for the purposes of Article 3(1) of the
Consolidated Text.

(b)           Authorization; Enforceability.  The execution and delivery of the Transaction
Documents by the Borrower and the performance by the Borrower of its
obligations thereunder are within the Borrower’s corporate powers, have been
duly authorized by all necessary corporate action of Borrower and do not
require any stockholder approval, or approval or consent of any trustee or
holder of indebtedness or obligations of the Borrower except such as have been
duly 

 8
 

obtained.  This Agreement has been duly executed and
delivered by the Borrower and the other Transaction Documents will be duly
executed and delivered by the Borrower when required by this Agreement.  This Agreement constitutes, and each of the
other Transaction Documents when executed and delivered by the Borrower will
constitute, a legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.

(c)           No Violation.  The
execution and delivery by the Borrower of the Transaction Documents and the
performance by the Borrower of its obligations thereunder do not and will not
(i) violate any provision of the Certificate of Incorporation or By-Laws of the
Borrower, (ii) violate any provision of foreign, federal, state or local law
applicable to or binding on the Borrower or (iii) violate or constitute any
default under, or result in the creation of any Lien (other than as permitted
under the Security Agreement) upon the Aircraft, the Airframe or any Engine
under, any indenture, deed of trust, conditional sales contract, lease, loan or
other material agreement, instrument or document to which the Borrower is party
or by which the Borrower or any of its properties is bound, except for the
lease of the Aircraft by the Seller to the Borrower which shall be terminated
upon the Closing.

(d)           Governmental Approvals. 
The execution and delivery by the Borrower of the Transaction Documents
and the performance by the Borrower of its obligations thereunder do not and
will not require the consent or approval of, or the giving of notice to, or the
registration with, or the recording or filing of any documents with, or the
taking of any other action in respect of, any Governmental Authority, other
than (i) the filings, recordings, notices and other ministerial actions
pursuant to any routine recording, and contractual or regulatory requirements
applicable to it, each of which has been effected or obtained, and (ii) the filings
described in Section 3.2(b).

(e)           Litigation.  Except as
set forth in Holdings’ Annual Report on Form 10-K for 2005 (as amended through
the Funding Date), or in any Quarterly Report on Form 10-Q or Current Report on
Form 8-K filed by Holdings with the SEC subsequent to such Form 10-K (in each
case as amended through the Funding Date), no action, claim or proceeding is
now pending or, to the Actual Knowledge of the Borrower, threatened against the
Borrower before any court, governmental body, arbitration board, tribunal or
administrative agency which, if determined adversely to the Borrower, would be
expected to result in a Material Adverse Change.

(f)            Financial Condition. 
The audited consolidated (from and after June 2, 2005) balance sheet of
Holdings and the Borrower with respect to its most recent fiscal year included
in its Annual Report on Form 10-K for 2005 (as amended through the Funding
Date) filed by Holdings with the SEC, and the related consolidated (from and
after June 2, 2005) statements of operations and cash flows for the year then
ended have been prepared in accordance with GAAP and fairly present in all
material respects the financial condition of Holdings and its consolidated
Subsidiaries (including the Borrower) as of such date and the results of its
operations and cash flows for such period. 
The consolidated balance sheet of Holdings and the Borrower as of June
30, 2006 included in Holdings’ Quarterly Report on Form 10-Q for the period
ended June 30, 2006, and the related consolidated statement of operations and
cash flows for the three months 

 9
 

then ended have been
prepared in accordance with GAAP (subject to normal year-end adjustments) and
fairly present in all material respects the financial condition of Holdings and
its consolidated Subsidiaries (including the Borrower) as of such date and the
results of its operations and cash flows for such period.

(g)           No Default.  No Event
of Default or Potential Default has occurred and is continuing.

(h)           Investment and Holding Company Status.  The Borrower is not (i) an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940 or (ii) a “holding company” as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.

(i)            Use of Proceeds.  No
part of the proceeds of the Loan will be used, whether directly or indirectly,
for any purpose that entails a violation of Regulations U or X of the Board of
Governors of the Federal Reserve System.

(j)            Licenses, Permits, etc. 
The Borrower is a U.S. Air Carrier and holds all licenses, permits and
franchises from the appropriate Governmental Authorities necessary to authorize
the Borrower to lawfully engage in air transportation and to carry on scheduled
commercial passenger service as currently conducted, except where the failure
to so hold any such license, permit or franchise would not be expected to give
rise to a Material Adverse Change.

(k)           Compliance with Laws. 
Each of the Borrower and its Subsidiaries is in compliance with all
laws, regulations and orders of any governmental or regulatory authority or
agency applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Change.

(l)            Tax Returns.  The
Borrower and its Subsidiaries have timely filed all Federal income tax returns
and all other material tax returns that are required to be filed by them and
have paid all Taxes that are material in amount shown to be due pursuant to
such returns or pursuant to any assessment received by the Borrower or any of
its Subsidiaries, other than any such assessment that is being contested in
good faith through appropriate proceedings and against which adequate reserves
are being maintained and the nonpayment of which (individually or in the
aggregate) could not reasonably be expected to cause a material impairment of
the ability of the Borrower to perform, or the Administrative Agent, the
Security Agent or the Lenders to enforce, the obligations of the Borrower under
the Transaction Documents.  The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of the
Borrower, adequate.

(m)          Information.  Holdings’
Annual Report on Form 10-K for 2005 filed with the SEC and each of Holdings’
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K subsequently
filed by Holdings with the SEC, as of the date it was filed with the SEC (or,
if such report has been amended, in each case as amended through the Funding
Date), did not contain any untrue statement of material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 10

(n)           ERISA.     All
the qualified retirement plans of the Borrower and its Affiliates are in
compliance with the minimum funding requirements of ERISA and the Internal
Revenue Code.

Section 3.2.           The
Aircraft.  The Borrower
represents and warrants to the Administrative Agent and each Lender, as of the
Funding Date and on and after giving effect to the Closing (in the case of
Section 3.2(a)), that:

(a)           Good Title.  The
Borrower has good title to the Aircraft free and clear of Liens other than
Permitted Liens.

(b)           Filings.  Except for
(i) the registration of the Aircraft in the name of the Borrower with the
FAA pursuant to the Federal Aviation Act, (ii) the filing with the FAA pursuant
to the FAA Regulations of an AC Form 8050-135 with respect to the sale under the
Warranty Bill of Sale and the international interests (or prospective
international interests) under the Cape Town Convention in the Airframe and the
procurement of an authorization code in respect thereof, (iii) the filing
for recording (and the recording) pursuant to the Federal Aviation Act of the
FAA Bill of Sale and the Security Agreement covering the Aircraft,
(iv) the registration with the International Registry of the sale under
the Warranty Bill of Sale and the international interests (or prospective
international interests) in the Airframe and Engines created by the Transaction
Documents and (v) the filing of financing statements (and continuation
statements at periodic intervals) with respect to the security interests
created by the Transaction Documents with the Secretary of State of Delaware,
no further action, including any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the Uniform
Commercial Code of any applicable jurisdiction), is necessary in order to
establish and perfect the first priority Lien on the Aircraft in favor of the
Security Agent pursuant to the Security Agreement in any applicable
jurisdiction in the United States.

(c)           No Event of Loss.  No
Event of Loss has occurred with respect to the Aircraft or any Engine, and no
circumstance, condition, act or event has occurred that, with the giving of
notice or lapse of time or both gives rise to or constitutes an Event of Loss
with respect to the Aircraft or any Engine.

(d)           Section 1110.  The
Security Agent is entitled to the benefits of Section 1110 of the Bankruptcy
Code with respect to the Aircraft as provided in the Security Agreement in the
event of a case under Chapter 11 of the Bankruptcy Code in which Borrower is a
debtor.

(e)           Condition.  The
Aircraft has been duly certified by the FAA as to type and airworthiness, has
been insured by the Borrower in accordance with the terms of the Security
Agreement, and is in the condition and state of repair required under the terms
of the Security Agreement.

Section 3.3            Representations
and Warranties of the Lenders.  Each Lender represents and warrants as of the
date hereof that:

(a)           it
has not sold, transferred, or assigned all of any part of its rights and
obligations under this Agreement and the Loan to any Person except as provided
in Section 9.8 hereof; and

 11
 

(b)           no
part of the funds used by it to acquire its Notes constitute the assets of any
Plan.  As used herein, “Plan”
means an “employee benefit plan (as such term is defined in Section 3(3) of
ERISA) or any “plan” (as such term is defined in Section 4975(e)(1) of the
Code) which has been established or maintained or contributed to by such Lender
or an Affiliate that, together with such Lender, is treated as a single
employer under Section 414(b), (c) or (m) of the Code; and

ARTICLE IV

COVENANTS

Section 4.1.           Covenants
of the Borrower.  The
Borrower shall comply with the following covenants and agreements, unless the
Required Lenders shall otherwise consent:

(a)           Financial Statements and Other Information.  The Borrower will furnish to the
Administrative Agent and each Lender:

(i)            within
one hundred twenty (120) days after the end of each fiscal year of the
Borrower, a copy of the Form 10-K (excluding exhibits) filed by Holdings with
the SEC for such fiscal year (or in lieu of such copy an e-mail notice that
such report has been filed with the SEC and providing a web site address at
which such report may be accessed, provided that such e-mail notice will
satisfy this requirement only if such report is in fact accessible at such web
site address), or, if no such Form 10-K was so filed, its audited consolidated
balance sheet and related statements of operations, stockholders’ equity and
cash flows as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on by
Holdings’ independent public accountants of recognized national standing to the
effect that such consolidated financial statements present fairly in all
material respects the consolidated financial condition and results of
operations of Holdings and its Subsidiaries (including the Borrower) on a
consolidated basis in accordance with GAAP;

(ii)           within
sixty (60) days after the end of each of the first three fiscal quarters of
each fiscal year of the Borrower, a copy of the Form 10-Q (excluding exhibits)
filed by Holdings with the SEC for such quarterly period (or in lieu of such
copy an e-mail notice that such report has been filed with the SEC and providing
a web site address at which such report may be accessed, provided that
such e-mail notice will satisfy this requirement only if such report is in fact
accessible at such web site address), or if no such Form 10-Q was so filed, its
consolidated balance sheet and related statements of operations and cash flows
as of the end of and for such fiscal quarter (in the case of the statement of
operations) and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, prepared in accordance with GAAP, subject to normal
year-end audit adjustments; and

 12
 

(iii)        promptly following any request therefor,
such other nonconfidential information regarding the Aircraft, the operations,
business affairs and financial condition of the Borrower, or compliance with
the terms of the Transaction Documents, as the Administrative Agent may
reasonably request.

(b)        Existence; Conduct of
Business.  The Borrower will,
and will cause each of its Subsidiaries to:

(i)          do or cause to be done all things
necessary to preserve and maintain its legal existence; provided that
the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 4.1(c); provided  further
that this Section 4.1(b)(i) shall apply to the Subsidiaries of Borrower, if
any, only to the extent that the dissolution, termination or other loss of
legal existence of such Subsidiaries would reasonably be expected to (either
individually or in the aggregate) cause a material impairment of the ability of
the Borrower to perform, or the Security Agent, the Administrative Agent or the
Lenders to enforce, the obligations of the Borrower under the Transaction
Documents.

(ii)         comply with the requirements of all
applicable laws, rules, regulations and orders of governmental or regulatory
authorities if failure to comply with such requirements would reasonably be
expected to (either individually or in the aggregate) cause a material
impairment of the ability of the Borrower to perform, or the Security Agent,
the Administrative Agent or the Lenders to enforce, the obligations of the
Borrower under the Transaction Documents;

(iii)        pay and discharge all Taxes imposed on
it or on its income or profits or on any of its property prior to the date on
which penalties attach thereto, except for any such Taxes the payment of which
are being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained, and the nonpayment of which (either
individually or in the aggregate) could reasonably be expected to cause a
material impairment of the ability of the Borrower to perform, or the Security
Agent, the Administrative Agent or the Lenders to enforce, the obligations of
the Borrower under the Transaction Documents; and

(iv)       permit representatives of any Lender,
during normal business hours and on reasonable notice, to discuss its business
and affairs and that of its Subsidiaries with the Borrower’s officers, all to
the extent reasonably requested by such Lender.

(c)         Mergers and
Consolidations.  The Borrower
will not consolidate with or merge into any other Person or convey, transfer or
lease all or substantially all of its assets as an entirety to any Person
unless:

(x)        if the Borrower is not the surviving
Person,

 13
 

(i)          the Person formed by such
consolidation or into which the Borrower is merged or the Person which acquires
by conveyance, transfer or lease substantially all of the assets of the
Borrower as an entirety shall be a U.S. Air Carrier;

(ii)         the Person formed by such consolidation
or into which the Borrower is merged or the Person which acquires by
conveyance, transfer or lease substantially all of the assets of the Borrower
as an entirety shall execute and deliver to the Security Agent a duly
authorized, valid, binding and enforceable agreement, in form and substance
reasonably satisfactory to the Security Agent, the Administrative Agent and the
Lenders, containing an assumption by such Person of the due and punctual
performance and observance of each covenant and condition of the Transaction
Documents to be performed or observed by the Borrower;

(iii)        immediately after giving effect to such
transaction, no Event of Default shall have occurred and be continuing;

(iv)       all filings and registrations shall have
been made as shall be necessary to preserve the perfection of the Lien of the
Security Agreement on the Aircraft on a first priority and perfected basis
(subject to Permitted Liens); and

(v)        promptly after the consummation of such
transaction, the Borrower shall deliver to the Security Agent a certificate of
the Secretary or an Assistant Secretary of Borrower certifying as to Borrower’s
compliance with the conditions of this Section 4.1(c) and an opinion of
Borrower’s Legal Department or its outside counsel as to Borrower’s compliance
with Sections 4.1(c)(i), 4.l(c)(ii) and 4.1(c)(iv, and

(y)        if the Borrower is the surviving Person,
immediately after giving effect to such transaction, no Event of Default shall
have occurred and be continuing..

Upon any consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of the Borrower as an entirety in
accordance with this Section 4.1(c), the Person formed by such consolidation or
into which the Borrower is merged or to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Borrower under this Agreement and the other Transaction
Documents with the same effect as if such Person had been named as the Borrower
herein.  No such conveyance, transfer or
lease of all or substantially all of the assets of the Borrower as an entirety
shall have the effect of releasing the Borrower or any Person which shall
theretofore have become such in the manner prescribed in this Section 4.1(c)
from the Borrower’s liability in respect of any Transaction Document to which
it is a party.

 14
 

(d)           Delivery of Post-Recording FAA Opinion and Post-Registration IR
Opinion.  Promptly upon the
recording of the FAA Bill of Sale and the Security Agreement covering the
Aircraft pursuant to the Federal Aviation Act and the registration with the
International Registry of the international interests in the Airframe and
Engines created by the Security Agreement, the Borrower will cause special FAA
counsel in Oklahoma City, Oklahoma, to deliver to the Security Agent, the
Administrative Agent and each Lender and the Borrower an opinion as to the due
and valid registration of the Aircraft by the FAA in the name of the Borrower,
the due recording of the Security Agreement and the lack of filing of any
intervening documents with respect to the Aircraft at the FAA, and the valid
registration of the international interests in the Airframe and Engines created
by the Security Agreement with the International Registry.

(e)           Compliance with the Security Agreement.  The Borrower will comply with the terms and
provisions of the Security Agreement.

(f)            Notice of Default under PBH Agreement.  The Borrower agrees to use its best efforts
to provide notice to the Administrative Agent of an event of default under and
as defined in the PBH Agreement promptly after receiving Actual Knowledge
thereof.

ARTICLE V

INCREASED COSTS; GENERAL
INDEMNITY

Section 5.1.           Increased
Costs.  The Borrower
shall pay to each Lender (through the Administrative Agent) from time to time,
within ten (10) Business Days after demand therefor, such additional amount or
amounts as may be necessary to compensate such Lender on a net After-Tax Basis
for any increased costs incurred by such Lender which are attributable to its
making or maintaining its Percentage Share or its Ratable Share of the Loan
hereunder, or any reduction in any amount receivable by such Lender under this
Agreement in respect of the Loan (such increases in costs and reductions in
amounts receivable being herein called “Additional Costs”), resulting
from any change after the date hereof in U.S. federal, state, municipal, or
foreign or supranational laws or regulations (including Regulation D of the
Board of Governors of the Federal Reserve System), or the adoption or making
after the date hereof of any interpretations, directives, or requirements
applying to a class of banks including such Lender under any U.S. federal,
state, municipal, or any foreign laws or regulations (whether or not having the
force of law) by any court, central bank or monetary authority charged with the
interpretation or administration thereof (a “Regulatory Change”), which
imposes or modifies any reserve, special deposit, compulsory loan or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with other liabilities of, such Lender (including its Percentage Share
or its Ratable Share of the Loan or any deposits referred to in the definition
of LIBOR Rate or related definitions) which is not otherwise included in the
determination of the applicable interest rate hereunder.

Each Lender will notify the Borrower of any event
occurring after the date of this Agreement that will entitle such Lender to
compensation pursuant to this Section 5.1 as promptly as practicable, but in
any event within sixty (60) days, after such Lender obtains Actual Knowledge
thereof; provided, however, that such Lender shall be entitled to
payment under this Section 5.1 only for costs incurred from and after the date
sixty (60) days prior to the date that such Lender makes demand therefor; provided,
further that no compensation shall be payable by the Borrower to any
Lender pursuant to this Section 5.1 unless such Lender certifies to the

 15
 

Borrower that (x) such
Lender is assessing to its other borrowers (of loans similar to the Loans)
comparable allocable costs, and (y) such Lender believes that such costs are
generally applicable to lenders similarly situated to and in the same
jurisdiction as such Lender.  Such notice
shall describe in reasonable detail the calculation of the amounts owed under
this Section.  Determinations by a Lender
for purposes of this Section 5.1 of the effect of any Regulatory Change on its
costs of making or maintaining its Percentage Share or its Ratable Share of the
Loan or on amounts receivable by it in respect of the Loan, and of the
additional amounts required to compensate such Lender in respect of any
Additional Costs, shall be prima facie
evidence of the amount owed under this Section 5.1.

Any assignee of a Lender that is not an initial Lender
party to this Loan Agreement shall not be entitled to any greater compensation
under this Section 5.1 by reference to the laws and regulations in effect
as of the date the transfer or sale than that which would have been payable to
the transferor Lender as of the date of the transfer or sale of the Note to
such transferee Lender; provided, however, that, if subsequent to
the date of transfer or sale of the Note there occurs a Regulatory Change, such
transferee Lender shall be entitled to compensation under this Section 5.1 as a
result of such Regulatory Change.

Section 5.2.           Capital
Adequacy.  If (1) the
adoption, after the date of this Loan Agreement, of any applicable governmental
law, rule or regulation regarding capital adequacy, (2) any change, after the
date of this Loan Agreement, in the interpretation or administration of any
such law, rule or regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof or (3)
compliance by a Lender or any corporation or bank controlling a Lender with any
applicable guideline or request of general applicability, issued after the date
of this Loan Agreement, by any central bank or other Governmental Authority
(whether or not having the force of law) that constitutes a change of the
nature described in clause (2) (“Capital Adequacy Change”), has the
effect of (x) requiring an increase in the amount of capital required to
be maintained by a Lender or any corporation or bank controlling a Lender or
(y) reducing the rate of return on assets or capital of such Lender (or
such corporation or bank) and such adoption, change or compliance, as the case
may be, relates to a category of claims or assets that includes such Lender’s
Loan Amount, the Borrower shall pay to such Lender from time to time such
additional amount or amounts as are necessary to compensate such Lender for
such portion of such increase or reduction as shall be reasonably allocable to
such Lender’s Loan Amount; provided, that no such amounts shall be
payable by the Borrower to any Lender pursuant to this Section 5.2 unless
such Lender certifies to the Borrower that (A) such Lender is assessing to its
other borrowers (of loans similar to the Loan) comparable allocable costs, and
(B) such Lender believes that such costs are generally applicable to lenders
similarly situated to and in the same jurisdiction as such Lender.  For the avoidance of doubt, the matters set
forth in the Consultative Document titled “The New Basel Capital Accord” issued
by the Basel Committee on Banking Supervision in April 2003 will not be
treated, for purposes of determining whether any Lender is entitled to
compensation under this Section 5.2, as having been enacted or having come into
effect before the date of this Loan Agreement.

Each Lender will notify the Borrower of any event
occurring after the date of this Agreement that will entitle such Lender to
compensation pursuant to this Section 5.2 as promptly as practicable but in any
event within sixty (60) days, after such Lender obtains Actual Knowledge
thereof; provided, however, such Lender shall be entitled to
payment under this

 16
 

Section 5.2 only for
costs incurred from and after the date sixty (60) days prior to the date that
such Lender makes demand therefor.  Such
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section.  Determinations by a
Lender for purposes of this Section 5.2 of the effect of any increase in the
amount of capital required to be maintained by the bank and of the amount
allocable to such Lender’s obligations to the Borrower hereunder shall be prima facie evidence of the amounts owed under this Section.

Any assignee of a Lender that is not the initial
Lender party to this Loan Agreement shall not be entitled to any greater
compensation under this Section 5.2 by reference to the laws, rules and
regulations regarding capital adequacy in effect as of the date of the transfer
or sale than that which would have been payable to the transferor Lender as of
the date of the transfer or sale of the Note to such transferee Lender; provided,
however, that, if subsequent to the date of transfer or sale of the Note
there occurs a Capital Adequacy Change, such transferee Lender shall be
entitled to compensation under this Section 5.2 as a result of such Capital
Adequacy Change.

Section
5.3.                                Withholding
of Taxes.

(a)            Payments to Be Free and Clear.  All sums payable by the Borrower (or by any
other Person on account of any obligation of the Borrower) under this Agreement
and the other Transaction Documents to or for the benefit of any Lender, the
Administrative Agent, the Security Agent or any other Indemnitee shall (except
to the extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Taxes.

(b)            Grossing-up of Payments. 
If the Borrower or any other Person is required by law to make any
deduction or withholding on account of any Tax from any sum paid or payable by
the Borrower (or by any other Person on account of any obligation of the
Borrower) under any of the Transaction Documents to or for the benefit of any
Lender, the Administrative Agent, the Security Agent or any other Indemnitee:

(i)             the
Borrower shall pay such Tax before the date on which any interest, addition to
Tax or penalties attach thereto, such payment to be made (if the liability to
pay is imposed on the Borrower) for its own account or (if that liability is
imposed on the Administrative Agent, the Security Agent or such Lender, as the
case may be) on behalf of and in the name of the Administrative Agent, the
Security Agent or such Lender;

(ii)            in
the case of any Tax other than an Excluded Tax, the sum payable by the Borrower
(or by any other Person on account of any obligation of the Borrower under the
Transaction Documents) in respect of which the relevant deduction, withholding
or payment is required shall be increased or supplemented by the Borrower to
the extent necessary to ensure that, after the making of that deduction or
withholding, the Administrative Agent, the Security Agent, such Lender or such
other Indemnitee, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or payment
been required or made; and

 17

(iii)          as promptly as practicable (and in any
event within sixty (60) days) after the payment of the sum from which such
deduction or withholding is required by law, the Borrower shall deliver to the
Administrative Agent evidence reasonably satisfactory to the affected parties
of such deduction or withholding and of the remittance thereof to the relevant
taxing or other authority.

Any additional amount
payable in respect of Taxes pursuant to clause (ii) above shall be paid on an
After-Tax Basis.

(c)           Evidence of Exemption from
U.S. Withholding Tax.

(i)            Each Lender that is organized under
the laws of a jurisdiction other than the United States or any state or other
political subdivision thereof shall, to the extent it is entitled to do so,
deliver to the Administrative Agent for transmission to the Borrower, on or
prior to the date of the Closing (in the case of each Lender listed on the
signature pages hereof) or on or prior to the date of the Transfer Supplement
pursuant to which it becomes a Lender (in the case of each other Lender), (x)
two copies of Internal Revenue Service Form W-8BEN or W-8ECI (or applicable
successor forms), completed and executed by such Lender, together with any
other certificate or statement of exemption required under the Internal Revenue
Code or the regulations issued thereunder to establish that such Lender is
entitled to an exemption or reduction in the amount of United States federal
income tax required to be deducted or withheld from any payments to such Lender
of interest, fees or other amounts payable under any of the Transaction
Documents or (y) if such Lender is not a “bank” or other Person described in
Section 881(c)(3) of the Internal Revenue Code and cannot deliver either
Internal Revenue Service Form W-8BEN claiming exemption under a treaty or
W-8ECI, pursuant to clause (x) above, a Certificate re Non-Bank Status together
with two copies of Internal Revenue Service Form W-8BEN (or applicable
successor form), completed and executed by such Lender, together with any other
certificate or statement of exemption required under the Internal Revenue Code
or the regulations issued thereunder to establish that such Lender is entitled
to an exemption from, or reduction in the amount of, United States federal
income tax required to be withheld from payments to such Lender of interest
payable under any of the Transaction Documents.

Each Lender that is
organized under the laws of the United States or any state or other political
subdivision thereof shall deliver to the Administrative Agent for transmission
to the Borrower, at or prior to the Closing (in the case of each Lender listed
on the signature pages hereof) or on or prior to the date of the Transfer
Supplement pursuant to which it becomes a Lender (in the case of each other
Lender), two copies of Internal Revenue Service Form W-9 (or applicable
successor form) completed and executed by such Lender.

(ii)           Each Lender required to deliver any
forms, certificates or other evidence with respect to United States federal
income tax withholding matters pursuant to Section 5.3(c)(i) hereby agrees,
from time to time after the initial

 18
 

delivery by such Lender
of such forms, certificates or other evidence, if reasonably requested in good
faith by the Borrower, to the extent such Lender is entitled to do so, to
deliver to the Administrative Agent for transmission to the Borrower two new
copies of Internal Revenue Service Form W-8BEN or W-8ECI or W-9, or a
Certificate re Non-Bank Status and two new copies of Internal Revenue Service
Form W-8BEN, as the case may be, completed and executed by such Lender,
together with any other certificate or statement of exemption required in order
to confirm or establish that such Lender is entitled to an exemption from, or
reduction in the amount of, United States federal income tax required to be
withheld from payments to such Lender under the Transaction Documents or (y)
notify the Administrative Agent and the Borrower of its inability to deliver
any such forms, certificates or other evidence in which case such Lender shall
not be required to deliver any such form or certificate pursuant to this
Section 5.3(c).

(iii)          The Borrower shall not be required to
pay any additional amount to any Lender under clause (ii) of Section 5.3(b) if
such Lender shall have failed to satisfy the requirements of clause (i) or
(ii)(x) of this Section 5.3(c); provided that if such Lender shall have
satisfied the requirements of Section 5.3(c)(i) at or prior to the Closing (in
the case of each Lender listed on the signature pages hereof) or on the date of
the Transfer Supplement pursuant to which it became a Lender (in the case of
each other Lender), nothing in this Section 5.3(c)(iii) shall relieve the
Borrower of its obligation to pay any additional amounts pursuant to Section
5.3(b) in the event that, as a result of any written change in any applicable
law, treaty or governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof by a Governmental
Authority, such Lender is no longer properly entitled to deliver forms,
certificates or other evidence at a subsequent date establishing the fact that
such Lender is not subject to withholding as described in Section 5.3(c)(i) or
(ii).

(iv)          If the Borrower pays any additional
amount under this Section 5.3 to a Lender and such Lender determines in its
sole discretion (exercised in good faith) that it has actually realized in
connection therewith a net cash benefit (including a net cash benefit which the
relevant taxing authority applies to satisfy any liability of such Lender for
Excluded Taxes) due to any refund or any reduction of, or credit against, its
liabilities for Excluded Taxes in any taxable year, provided no Event of
Default (or an event described in Section 7.1(b) or (f) which, after notice or
lapse of time, or both, would become an Event of Default) shall have occurred
and be continuing, such Lender shall, to the extent it can do so without
prejudice to the retention of such benefit, pay to the Borrower an amount that
the Lender shall, in its sole discretion, determine (subject to confirmation as
provided below) is equal to such net cash benefit which was obtained by the
Lender in such year as a consequence of such refund, reduction or credit
realized in connection with the payment of such additional amount.  A Lender shall, upon written request from the
Borrower, provide to the Borrower a letter from independent accountants
selected by the Lender and reasonably acceptable to the Borrower confirming the
accuracy of the Lender’s calculations

 19
 

of any amount due pursuant to the next-to-last
sentence of Section 5.3(b), or the amount of any net benefit determined by
Lender pursuant to the preceding sentence, provided that the
interpretation of this Agreement or any other Transaction Document shall not be
within the scope of the accountants’ confirmation.  Nothing contained in this Section 5.3(c)(iv)
shall be construed as requiring any Lender to conduct its business or arrange
or alter in any respect its tax or financial affairs so that it is entitled to
receive a refund, reduction or credit or shall require any Lender to provide to
the Borrower or its agents copies of any tax returns or other information with
respect to the Lender’s income, assets or operations. The Borrower shall
reimburse each Lender for all costs and expenses incurred by such Lender in
obtaining such accountants’ letter, provided that the accountants’
letter confirms, in all material respects, such Lender’s determination.

(v)           The
Borrower shall have no obligation to pay to any Lender any additional amount
under Section 5.3(b)(ii) or to indemnify any Lender under Section 5.4 for any
United States federal income tax or withholding tax which was required by law
to be deducted or withheld by the Borrower or the Administrative Agent from any
prior payment to or for the benefit of such Lender pursuant to the Transaction
Documents but which was not deducted or withheld due to the Borrower’s or the
Administrative Agent’s reasonable reliance on an Internal Revenue Service Form
W-8BEN or W-8ECI or W-9 (or applicable successor form) theretofore delivered by
such Lender pursuant to Section 5.3(c)(i) or (ii) if such form was inaccurate
in any material respect when delivered by such Lender and such Lender had
actual knowledge of such inaccuracy at the time such Lender delivered such
form.

Section 5.4.           (a)  Other Taxes. 
In addition to the amounts described elsewhere in this
Article V, the Borrower shall pay, and indemnify and hold harmless on a net
After-Tax Basis, each Lender, the Security Agent and the Administrative Agent
from and against all Other Taxes (other than (i) Taxes imposed by deduction or
withholding from amounts payable by the Borrower to the Security Agent, the
Administrative Agent or Lender, (ii) Excluded Taxes and (iii) Taxes imposed on
or with respect to a transfer (including a participation) of any interest in a
Loan unless such transfer is in connection with an Event of Default or at the
Borrower’s request).

(b)          Contest of Tax
Claims.  If a Lender, the
Security Agent or the Administrative Agent (each a “Tax Indemnitee”)
receives a written claim from any taxing authority for any Tax for which the
Borrower is liable pursuant to Section 5.3 or 5.4 (a “Tax Claim”), such
Tax Indemnitee shall promptly notify the Borrower in writing.  If requested by the Borrower in writing
within thirty (30) days after receipt of such Tax Indemnitee’s written notice (provided
that if a response to such Tax Claim is due less than forty (40) days after the
Borrower’s receipt of such Tax Indemnitee’s notice, the Borrower’s request must
be made within fifteen (15) days or, if longer, the period ending not later
than the tenth (10th) day before the day on which the response to
such Tax Claim is due), such Tax Indemnitee shall in good faith contest or, at
such Tax Indemnitee’s election, permit the Borrower to contest (unless such
contest involves Excluded Taxes or, in such Tax Indemnitee’s reasonable, good
faith judgment, permitting the Borrower to contest may have an adverse effect
on such Tax Indemnitee), in each case in accordance

 20
 

with and to the extent permitted by applicable law and
at the Borrower’s expense, such Tax Claim, provided that no Tax Indemnitee shall have any obligation to
commence or continue the contest of any such Tax Claim unless the following
conditions are satisfied at the time the contest is to be commenced and at all
times during the contest:

(i)            no
Event of Default (or event described in Section 7.1(b) or (f) which, after
notice or lapse of time, or both, would become an Event of Default) shall have
occurred and be continuing,

(ii)           contesting
such Tax Claim would not result in (A) any risk of sale, forfeiture,
confiscation, seizure or loss of, or the imposition of a Lien (other than a
Lien for the Tax that is the subject of such contest, provided that
enforcement of such Lien is stayed until the final determination of such
contest and the Borrower maintains adequate reserves with respect to such Lien)
on, the Aircraft or any part thereof or (B) any risk of imposition of criminal
liability,

(iii)          the
aggregate amount of the Taxes that are to be contested exceeds Twenty-Five
Thousand Dollars ($25,000),

(iv)          such
Tax Indemnitee shall have received a written confirmation of the Borrower that
the Taxes that are the subject of such Tax Claim are Taxes for which the
Borrower is liable pursuant to Section 5.3 or 5.4, provided that the
Borrower shall not be bound by such confirmation to the extent that the final
determination of the contest demonstrates that the Taxes that are the subject
of such Tax Claim are Excluded Taxes,

(v)           the
Borrower, upon the written request of such Tax Indemnitee, shall have provided
such Tax Indemnitee, at the expense of the Borrower, with an opinion of counsel
selected by the Borrower and reasonably acceptable to such Tax Indemnitee to
the effect that there is a substantial basis in law and fact to contest such
Tax Claim and a realistic expectation that a contest of such Tax Claim would be
successful,

(vi)          if
such Tax Indemnitee decides to contest such Tax Claim by paying the Taxes that
are the subject of such Tax Claim and taking action to obtain a refund thereof,
the Borrower shall have made an interest-free advance to such Tax Indemnitee in
an amount equal to the amount of those Taxes and shall indemnify such Tax Indemnitee
and its Affiliates on an After-Tax Basis for any adverse Tax consequences
(taking into account all relevant Tax benefits and Tax detriments) to such Tax
Indemnitee or any of its Affiliates resulting from such interest-free advance,
and

(vii)         the
Borrower shall be paying, on demand and on an After-Tax Basis, all costs and
expenses incurred by such Tax Indemnitee, the Security Agent, the
Administrative Agent or any Lender in connection with the conduct of such
contest (including, without limitation, reasonable attorneys’ and accountants’
fees and disbursements).

 21
 

(c)           Non-Parties.  If a Tax Indemnitee is not a party
to this Agreement, the Borrower may require such Tax Indemnitee to agree in
writing to the terms of Sections 5.3 and 5.4 prior to making any payment to
such Tax Indemnitee under Section 5.3 or 5.4.

Section
5.5.           Indemnity.  (a)  Indemnity Obligation. 
The Borrower agrees to indemnify and hold harmless each Lender, the Security
Agent, the Administrative Agent, and their respective successors, assigns,
directors, officers, employees and agents (hereinafter in this Section 5.5
referred to individually as an “Indemnitee,” and collectively as “Indemnitees”)
on an After-Tax Basis against any and all liabilities, obligations, losses,
damages, penalties, claims, demands, actions, suits, judgments and any and all
costs and expenses (including reasonable attorneys’ fees, disbursements and
other charges) (for the purposes of this Section 5.5 the foregoing are
collectively called “Losses”) of whatsoever kind and nature imposed on,
asserted against or incurred or suffered by any of the Indemnitees arising out
of or by reason of any actual or threatened investigation, litigation, or other
similar proceedings relating to the Security Agreement or the exercise or enforcement
by the Security Agent of any of the terms, rights, or remedies thereunder, or
in any way relating to or arising out of the manufacture, ownership, ordering,
purchase, delivery, control, acceptance, lease, possession, operation,
condition, sale, return or other disposition, or use of the Estate (including
latent or other defects, whether or not discoverable), the violation of the
Laws of any country, state or other governmental authority with respect to or
arising otherwise in connection with the Estate, or any tort (including claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage) with respect to or arising otherwise in connection with the Estate (but
excluding any such Losses to the extent incurred by reason of (i) the
gross negligence or willful misconduct of such Indemnitee or any related
Indemnitee (as defined below), (ii) Taxes, reserve requirements or similar
regulatory requirements imposed by banking authorities except as otherwise
provided in Sections 5.1, 5.2, 5.3 and 5.4 hereof, (iii) breaches by
such Indemnitee or any related Indemnitee of any Transaction Document to which
it is a party, (iv) any representation or warranty made by such Indemnitee
or any related Indemnitee being false in any material respect when made or
deemed made, or (v) to the extent attributable to the failure of the
Security Agent or the Administrative Agent to distribute funds received and
distributable by it in accordance any such Transaction Documents).  For purposes of subclauses (i), (iii) and
(iv) above, an Indemnitee shall be considered a “related” Indemnitee with
respect to another Indemnitee if such Indemnitee is an Affiliate or employer of
such other Indemnitee or a director, officer, employee or agent of such other
Indemnitee, or a successor or assignee of such other Indemnitee.

(b)          Indemnification Procedures.

(i)            Notice.  In case any
action, suit or proceeding shall be brought against any Indemnitee for which
such Indemnitee will seek indemnification under Section 5.5(a), such
Indemnitee shall notify the Borrower within sixty (60) days of the commencement
thereof and the Borrower (or its insurer(s)) may,

 22
 

subject to the
provisions of this Section 5.5, at its expense, participate in and to the
extent that it shall wish (subject to the provisions of the following
subsections), assume and control the defense thereof and, subject to
Section 5.5(b)(iii), settle or compromise the same.  Notwithstanding
the foregoing, the failure of any Indemnitee to notify the Borrower as provided
in this Section 5.5(b)(i) shall not release the Borrower from any of its
obligations to indemnify such Indemnitee hereunder, except to the extent that
such failure results in any additional Losses to the Borrower (in which event
the Borrower shall not be responsible for such additional Losses) or materially
impairs the Borrower’s ability to contest such claim.

(ii)           Control.  The Borrower or
its insurer(s) shall have the right, at its or their expense, to investigate
and, if the Borrower or its insurer(s) shall agree not to dispute liability to
the Indemnitee giving notice of such action, suit or proceeding under
Section 5.5(a) or under any insurance policies pursuant to which coverage
is sought, control the defense of any action, suit or proceeding relating to
any Losses for which indemnification is sought pursuant to this
Section 5.5, and each Indemnitee shall cooperate with the Borrower or its
insurer(s) with respect thereto; provided, that the Borrower shall not
be entitled to control the defense of any such action, suit, proceeding or
compromise any such Losses during the continuance of any Event of Default and
so long as no such cooperation shall entail a material risk of (A) criminal
liability of such Indemnitee, (B) unindemnified civil liability of such
Indemnitee or (C) the sale, loss, forfeiture or seizure of any part of the
Estate.  In connection with any such action, suit or proceeding being
controlled by the Borrower, such Indemnitee shall have the right to participate
therein, at its sole cost and expense.

(iii)          Settlement.  In no event
shall any Indemnitee enter into a settlement or other compromise with respect
to any Losses without the prior written consent of the Borrower, unless such
Indemnitee waives its right to be indemnified with respect to such Losses under
this Section 5.5.

(iv)          Cooperation.  Each
Indemnitee agrees to cooperate with the Borrower and its insurers in the
exercise of their rights to investigate, defend or compromise Losses for which
indemnification may be claimed hereunder.

(v)           Nonparties.  If an
Indemnitee is not a party to this Agreement, the Borrower may require such
Indemnitee to agree in writing to the terms of this Section 5.5 prior to making
any payment to such Indemnitee under this Section 5.5.

(vi)          No Requirement.  Nothing
contained in this Section 5.5(b) shall be deemed to require an Indemnitee to
assume responsibility for or control of any judicial proceeding with respect to
any Losses.

 23
 

ARTICLE
VI

CONDITIONS PRECEDENT

Section 6.1.           General
Conditions.  The
obligation of the Original Lender to make the Loan is subject to the conditions
that on or prior to the Funding Date (unless otherwise indicated):

(a)           The
Borrower shall have delivered to the Administrative Agent (with a copy for each
Original Lender) the following:

(i)            an executed counterpart of this
Agreement;

(ii)           an executed counterpart of the
Security Agreement;

(iii)          a Note (duly executed by the Borrower)
in an original principal amount equal to the Original Lender’s Commitment shall
have been issued to the Original Lender;

(iv)          the broker’s report and insurance
certificate required by Annex B of the Security Agreement;

(v)           copies of the FAA Bill of Sale,
Warranty Bill of Sale and FAA Application for Registration;

(vi)          a copy of the fully executed purchase
agreement respecting the Aircraft between the Borrower and the Seller showing
the amount of the purchase price paid by the Borrower;

(vii)         an opinion of Dow Lohnes PLLC, special regulatory
counsel to the Borrower, substantially in the form of Exhibit I.

(viii)        an opinion of Orrick, Herrington &
Sutcliffe LLP, special counsel to the Borrower, substantially in the form of
Exhibit D to this Agreement;

(ix)           an opinion of the Borrower’s in-house
counsel, substantially in the form of Exhibit E to this Agreement;

(x)            an opinion of FAA Counsel,
substantially in the form of Exhibit H to this Agreement;

(xi)           (1) a certificate of the Secretary or
an Assistant Secretary of the Borrower certifying (i) the resolutions of the
Borrower’s board of directors or executive committee of such board approving
the transactions contemplated by this Agreement, (ii) the name and signature of
each officer who executes a Transaction Document on the Borrower’s behalf (on
which certificate the Administrative Agent, the Security Agent and each Lender
may conclusively rely until a revised certificate is received), (iii) the
Borrower’s certificate of incorporation and (iv) a copy of the Borrower’s
By-Laws and (2) a good standing certificate of the Borrower from the
Secretary of State of the State of Delaware.

 24
 

(xii)          an Officer’s Certificate of the
Borrower, dated as of the Funding Date, stating that its representations and
warranties set forth in Sections 3.1 and 3.2 of this Agreement are true and
correct as of the Funding Date (or, to the extent that any such representation
and warranty expressly relates to an earlier date, true and correct as of such
earlier date); and

(xiii)         within ninety (90) days of the Closing,
the Borrower shall use its reasonable best efforts to procure that the PBH
Agreement Assignment shall have been executed and delivered in favor of the
Security Agent.

(b)           The
Borrower shall have paid to the Original Lender an upfront fee equal to the 25
basis points of the Loan.

(c)           On
the Funding Date, after giving effect to the filing of the FAA Filed Documents,
the Registrations and the Financing Statements, the Security Agent shall have
received a duly perfected first priority security interest in all of the
Borrower’s right, title and interest in the Aircraft, subject only to Inchoate
Liens, and a first priority international interest in the Aircraft and each
Engine.

(d)           No
change shall have occurred after the date of this Agreement in any applicable
law that makes it a violation of law for (a) the Borrower, the Security Agent,
the Administrative Agent or any Lender to execute, deliver and perform the
Transaction Documents to which any of them is a party or (b) any Lender to make
the Loans with respect to the Aircraft.

(e)           On
the Funding Date, no event shall have occurred and be continuing, or would
result from the transactions contemplated hereby, which constitutes an Event of
Default or a Potential Default.

(f)            No
Event of Loss (as defined in the Security Agreement) with respect to the
Airframe or any Engine shall have occurred and no circumstance, condition, act
or event that, with the giving of notice or lapse of time or both, would give
rise to or constitute an Event of Loss with respect to the Aircraft or any
Engine shall have occurred.

(g)           The
Borrower shall have good title to the Aircraft, free and clear of all Liens,
except Permitted Liens.

(h)           The
Security Trustee shall be entitled to the benefits of Section 1110 of the
Bankruptcy Code with respect to the Aircraft as provided in the Security
Agreement in the event of a case under Chapter 11 of the Bankruptcy Code in
which the Borrower is a debtor.

(i)            On
the Funding Date (i) the FAA Filed Documents with respect to the Estate shall
have been duly filed for recordation (or shall be in the process of being so
duly filed for recordation) with the FAA in accordance with the Act, (ii) the
registrations of a prospective international interest relating to the Security
Agreement as to the Airframe and Engines (with no stated lapse date) (the “Registrations”) will have been
made and consented to with the International Registry between Borrower and
Security Agent, in favor of Security Agent, and there shall be no other registrations
with respect to the Airframe or either Engine, which remain effective, with the
International Registry, and (iii) the Financing Statements with respect to the
Estate shall have been duly filed (or shall be in the process of being so duly
filed) in the appropriate jurisdiction.

 25
 

(j)            No
action or proceeding shall have been instituted, nor shall any action be
threatened in writing, before any Governmental Authority, nor shall any order,
judgment or decree have been issued or proposed to be issued by any
Governmental Authority, to set aside, restrain, enjoin or prevent the
completion and consummation of this Agreement or any other Transaction Document
or the transactions contemplated hereby or thereby.

(k)           The
representations and warranties in Sections 3.1 and 3.2 shall be true and
correct in all material respects on and as of such date (except to the extent
such representations and warranties relate solely to an earlier date but then
as of such earlier date).

ARTICLE
VII

EVENTS OF DEFAULT

Section 7.1.           Events
of Default.  Each of
the following events shall constitute an “Event of Default,”
and, to the extent the Cape Town Convention is applicable, shall be the
circumstances that shall constitute a “default” as referred to in Article 17(1)
of the Consolidated Text, in each case whether any such event shall be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body:

(a)           The Borrower shall fail to make any
payment of principal of the Loan or Prepayment Fee on the due date thereof or
the Borrower shall fail to make any payment of interest on the loan within two
(2) days after the due date thereof; or

(b)           The Borrower shall fail to pay any
other amount payable hereunder or under any other Transaction Document when due
and such failure shall continue for a period of five (5) Business Days after
receipt by the Borrower of written notice that such payment is overdue given to
the Borrower by the Security Agent, the Administrative Agent or any Lender; or

(c)           Any representation or warranty made
by the Borrower herein or in any other Transaction Document or any amendment or
modification hereof or thereof or waiver hereunder or thereunder, or in any
report, certificate or other document (other than financial statements and
other documents, including exhibits, filed with the SEC) prepared by the
Borrower and furnished pursuant to or in connection with this Agreement or any
other Transaction Document or any amendment or modification hereof or thereof
or waiver hereunder or thereunder shall prove to have been untrue in any
material respect when made or deemed made; or

(d)           The Borrower shall fail to perform or
observe any term, covenant or agreement contained in this Agreement or any
other Transaction Document on its part to be performed or observed and such
failure shall remain unremedied for a period of thirty (30) days after the
earlier of (i) Actual Knowledge of the Borrower or (ii) written notice thereof
is given to the Borrower by the Administrative Agent or any Lender; provided,
however, that if Borrower shall be diligently undertaking to cure any
such failure which

 26
 

as it relates to
maintenance, service, repair or overhaul of the Aircraft, the Engines or Parts
and, notwithstanding the diligence of Borrower in attempting to cure such
failure, such failure is not cured within said thirty-day period but is curable
with future due diligence, there shall exist no Event of Default under this Section
7.1 so long as Borrower is proceeding with due diligence to cure such failure
and such failure is remedied not later than ninety (90) days after such
original failure; or

(e)           The Borrower shall consent to the
appointment of or the taking of possession by a receiver, trustee or liquidator
of itself or of substantially all of its property, or the Borrower shall admit
in writing its inability to pay its debts generally as they come due, or does
not pay its debts generally as they become due or shall make a general
assignment for the benefit of creditors, or the Borrower shall file a voluntary
petition in bankruptcy or a voluntary petition or an answer seeking
reorganization, liquidation or other relief in a case under any bankruptcy laws
or other insolvency laws (as in effect at such time), or the Borrower shall
seek relief by voluntary petition, answer or consent, under the provisions of
any other bankruptcy or other similar law providing for the reorganization or
winding-up of corporations (as in effect at such time) or the Borrower’s board
of directors shall adopt a resolution authorizing any of the foregoing; or

(f)            An order, judgment or decree shall
be entered by any court of competent jurisdiction appointing, without the
consent of the Borrower, a receiver, trustee or liquidator of the Borrower or
of substantially all of its property, or substantially all of the property of
the Borrower shall be sequestered, and any such order, judgment or decree of
appointment or sequestration shall remain in force undismissed, unstayed and
unvacated for a period of sixty (60) days after the date of entry thereof; or a
petition against the Borrower in a case under any bankruptcy laws or other
insolvency laws (as in effect at such time) is filed and not withdrawn or dismissed
within sixty (60) days thereafter, or if, under the provisions of any law
providing for reorganization or winding-up of corporations which may apply to
the Borrower, any court of competent jurisdiction assumes jurisdiction, custody
or control of the Borrower or of substantially all of its property and such
jurisdiction, custody or control remains in force unrelinquished, unstayed and
unterminated for a period of sixty (60) days; or

(g)           The Borrower shall fail to carry and
maintain, or cause to be carried and maintained, insurance on and in respect of
the Aircraft or any Engine in accordance with the provisions of Article VII of
the Security Agreement; or

(h)           The Borrower shall cease to be a U.S.
Air Carrier; or

(i)            The Security Agreement shall for any
reason cease to be a valid first priority perfected security interest (subject
to Permitted Liens) in favor of the Security Agent in the Borrower’s right,
title and interest in and to the Aircraft under the laws of the United States
of America (assuming the Aircraft is registered with the FAA) and, if the
Aircraft is subject to a lease to a lessee domiciled in any other jurisdiction,
such jurisdiction.

 27

then, if an Event of Default referred to in clause (e) or (f) of this
Section 7.1 shall have occurred and be continuing, (x) the principal of the
Loan then outstanding, together with interest accrued but unpaid thereon, LIBOR
Breakage Costs and all other amounts owing to the Security Agent, the
Administrative Agent and any Lender hereunder or under any other Transaction
Document, shall immediately and without further act become due and payable, and
(y) the Commitments shall automatically terminate, in each case without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower and, if any other Event of Default shall have
occurred and be continuing, then the Administrative Agent shall, upon request
of the Required Lenders, by notice to the Borrower, terminate the Commitments
and declare the unpaid principal of the Loans then outstanding, together with
interest accrued but unpaid thereon, LIBOR Breakage Costs and all other amounts
due to the Security Agent, the Administrative Agent and any Lender hereunder or
under any other Transaction Document, to be forthwith due and payable,
whereupon the Commitments shall terminate and the Loans, all such interest and
all other amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower. 
In addition to any other remedies available to the Security Agent, the
Administrative Agent and the Lenders under the Transaction Documents or at law
or otherwise, if an Event of Default shall have occurred and so long as the
same shall be continuing unremedied, then and in every such case the Security
Agent may exercise any or all of the rights and powers and pursue any and all
of the remedies set forth in the Security Agreement.

ARTICLE
VIII

THE
SECURITY AGENT AND THE ADMINISTRATIVE AGENT

Section 8.1.           Appointment
and Authorization. 
(a)  Each Lender hereby
irrevocably designates and appoints C.I.T. Leasing Corporation as the “Administrative
Agent” and C.I.T. Leasing Corporation as the “Security Agent”
(collectively, the “Agents”) under the Transaction Documents and
authorizes each Agent to take such actions and to exercise such powers as are
delegated to it thereby and to exercise such other powers as are reasonably
incidental thereto.  Neither Agent shall
have any duties other than those expressly set forth in a Transaction Document
or any fiduciary relationship with any Lender, and no implied obligations or
liabilities shall be read into this Agreement, or otherwise exist, against
either Agent.  Neither Agent assumes, nor
shall either Agent be deemed to have assumed, any obligation to, or
relationship of trust or agency with, the Borrower.  Notwithstanding any provision of this
Agreement or any other Transaction Document, in no event shall either Agent
ever be required to take any action which exposes it to personal liability or
which is contrary to the provision of any Transaction Document or applicable
law.

(b)           The
provisions of Articles X and XI of the Security Agreement are agreed by the
Lenders to set forth the duties and responsibilities, and limitations of
liability, of the Security Agent under the Security Agreement.

Section 8.2.           Delegation
of Duties.  Each of the
Agents may execute any of its duties through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to
such duties.

 28
 

Section 8.3.           Exculpatory
Provisions.  Neither
Agent and none of their respective directors, officers, agents or employees
shall be liable to any Lender for any action taken or omitted (i) with the
consent or at the direction of the Required Lenders or (ii) in the absence of
such Agent’s gross negligence or willful misconduct.  Neither Agent shall be responsible to any
Lender or other Person for (a) any recitals, representations, warranties or
other statements made by the Borrower or any of its Affiliates, (b) the value,
validity, effectiveness, genuineness, enforceability or sufficiency of any Transaction
Document, (c) any failure of the Borrower or any of its Affiliates to perform
any obligation or (d) the satisfaction of any condition specified in Article
VI.  Neither Agent shall have any
obligation to any Lender to ascertain or inquire about the observance or
performance of any agreement contained in any Transaction Document or to
inspect the properties, books or records of the Borrower or any of its
Affiliates.

Section 8.4.           Reliance
by Agents.  As between
either Agent and the Lenders, each of the Agents shall in all cases be entitled
to rely, and shall be fully protected in relying, upon any document, other
writing or conversation reasonably believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person and upon advice and
statements of legal counsel (including counsel to the Borrower or any of its
Affiliates), independent accountants and other experts selected by such
Agent.  Each of the Agents shall in all
cases be fully justified in failing or refusing to take any action under any
Transaction Document unless it shall first receive such advice or concurrence
of the Lenders, and assurance of its indemnification, as it deems
appropriate.  Subject to
Section 9.1, neither Agent shall effect any waiver or grant any consent or
make any determination (except as provided in Section 1.5(a)) without the
direction of the Required Lenders.

Section 8.5.           Notice
of Events of Default. 
Neither Agent shall be deemed to have knowledge or notice of the
occurrence of any Potential Default unless it has received notice from any
Lender or the Borrower stating that a Potential Default has occurred hereunder
and describing such Potential Default. 
Promptly upon receiving notice of the occurrence of any Potential
Default, the relevant Agent shall notify each Lender and the other Agent of
such occurrence.  The Agents shall take
such action concerning a Potential Default as may be directed by the Required
Lenders (or, if required for such action, all of the Lenders), but until an
Agent receives such directions, such Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, as such Agent deems
advisable and in the best interests of the Lenders.

Section 8.6.           Non-Reliance
on Agents and Other Lenders; Lender Representations.  Each Lender expressly acknowledges that
neither Agent and none of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by either Agent hereafter taken, including any
review of the affairs of the Borrower or any of its Affiliates, shall be deemed
to constitute any representation or warranty by such Agent.  Each Lender represents and warrants to each of
the Agents that, independently and without reliance upon either Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, it has made and will continue to make its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Borrower and its own decision to
enter into this Agreement and to take, or omit, action under any Transaction
Document.  Except for items specifically
required to be delivered hereunder, neither Agent shall have any duty or

 29
 

responsibility to provide
any Lender with any information concerning the Borrower or any of its
Affiliates that comes into the possession of such Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.

Section 8.7.           Agents
and Affiliates.  Each
of the Agents and its Affiliates may extend credit to, accept deposits from and
generally engage in any kind of business with the Borrower or any of its
Affiliates and, in its role as a Lender, C.I.T. Leasing Corporation may
exercise or refrain from exercising its rights and powers as if it were not
Administrative Agent or Security Agent.

Section 8.8.           Indemnification.  Each Lender shall indemnify and hold harmless
each of the Agents and its officers, directors, employees, representatives and
agents (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably in accordance with its Percentage
Share (or, after the Commitments have been terminated, its Ratable Share) from
and against any and all liabilities, obligations, losses, damages, penalties,
judgments, settlements, costs, expenses and disbursements of any kind
whatsoever (including in connection with any investigative or threatened
proceeding, whether or not such Agent or such Person shall be designated a
party thereto) that may at any time be imposed on, incurred by or asserted
against such Agent or such Person as a result of, or related to, any of the
transactions contemplated by the Transaction Documents or the execution,
delivery or performance of the Transaction Documents or any other document
furnished in connection therewith (but excluding any such liabilities,
obligations, losses, damages, penalties, judgments, settlements, costs,
expenses or disbursements resulting solely from the gross negligence or willful
misconduct of such Agent or such Person as finally determined by a court of
competent jurisdiction).

Section 8.9.           Successor
Agents. 
(a)  The Security Agent may resign or be removed and shall be
replaced in accordance with the terms of Article XIII of the Security
Agreement.

(b)           Each
Agent may, upon at least thirty (30) days notice to the Borrower, the other
Agent and each Lender, resign its position as an Agent.  Such resignation shall not become effective
until a successor Agent acceptable to the Borrower is appointed by the Required
Lenders and has accepted such appointment. 
Upon such acceptance of its appointment as an Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with
all the rights and duties of the retiring Agent, and the retiring Agent shall
be discharged from its duties and obligations under the Transaction
Documents.  After any retiring Agent’s
resignation hereunder, the provisions of Article V and this Article VIII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was an Agent.

ARTICLE
IX

MISCELLANEOUS

Section 9.1.           Amendments.  Neither this Agreement nor
any other Transaction Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the Borrower and the Required Lenders, provided
that no such change, waiver, discharge or termination shall, without the
consent of each Lender affected thereby, (i) extend the final scheduled
maturity of

 30
 

the Loan or any Note, or
reduce the rate or extend the time of payment of interest or fees thereon, or
reduce the principal amount thereof, (ii) increase the Commitment of any
Lender, (iii) release any part of the Estate (except as expressly provided
in the Security Agreement), (iv) amend, modify or waive any provision of this
Section 9.1, (v) reduce the percentage specified in the definition of Required
Lenders, (vi) consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement or (vii) impair any indemnity
under a Transaction Document in favor of such Lender; provided, further, that no such change, waiver, discharge or
termination shall without the consent of the relevant Agent, amend, modify or
waive any provision of Article VIII as same applies to either the Security
Agent or the Administrative Agent or any other provision as same relates to the
rights or obligations of such Agent.

Section 9.2.           Notices.  Unless otherwise specified,
all notices and other communications hereunder shall be in writing (including
by facsimile communication), given to the appropriate Person at its address or
facsimile number set forth on the signature pages hereof, or at such other
address or facsimile number as such Person may specify, and effective when
received at the address specified by such Person.  The number of days for any advance notice
required hereunder may be waived (orally or in writing) by the Person receiving
such notice and, in the case of notices to the Security Agent, the consent of
each Person to which the Security Agent is required to forward such notice.

Section 9.3.           Costs
and Expenses.  The
Borrower agrees to pay promptly after receipt of reasonably detailed invoices,
all reasonable and actual costs and expenses of the Original Lender, the
Security Agent and the Administrative Agent in connection with the preparation,
execution and delivery of the Transaction Documents (whether or not any such
Transaction Document is entered into), including, without limitation the
reasonable fees and expenses of (a) Holland & Knight LLP, special counsel
to the Lenders and the Agents (provided that the Borrower shall not be
obligated to pay any amount in excess of $75,000 respecting such counsel’s
fees) and (b) FAA counsel.  The Borrower
further agrees to pay on demand all reasonable and actual costs and expenses of
the Agents, if any (including, without limitation, reasonable counsel fees and
expenses for one counsel), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of the Transaction Documents
after the occurrence of a Potential Default or an Event of Default.  The Borrower shall pay all reasonable and
actual costs and expenses of the Agents (including, without limitation,
reasonable counsel fees and expenses for one counsel) incurred after the
Closing in connection with any supplements or amendments of the Transaction
Documents (including, without limitation, any related recording and
registration costs) which are (x) requested by the Borrower, or
(y) necessary or required to effectuate the intent of the Transaction
Documents or waivers or consents requested by the Borrower

Section 9.4.           Certain
Agreements.  Each
Lender and each of the Security Agent and the Administrative Agent agrees as to
itself with the Borrower that, so long as no Event of Default shall have
occurred and be continuing, such person shall not (and shall not permit any
Affiliate or other person claiming by, through or under it to) take or cause to
be taken any action contrary to the Borrower’s right to quiet enjoyment of the
Estate, and to possess, use, retain and control the Estate and all revenues,
income and profits derived therefrom without hindrance.

 31
 

Section 9.5.           Entire
Agreement.  The
Transaction Documents constitute the entire understanding of the parties
thereto concerning the subject matter thereof. 
Any previous agreements, whether written or oral, concerning such
matters are superseded thereby.

Section 9.6.           Cumulative
Rights and Severability.  All
rights and remedies of the Lenders, the Security Agent and the Administrative
Agent hereunder and under any other Transaction Document shall be cumulative
and non-exclusive of any rights or remedies such Persons have under law or
otherwise.  To the fullest extent
permitted by law, any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

Section 9.7.           Waivers.  No failure or delay of any
party hereto in exercising any power, right, privilege or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right, privilege or remedy preclude any other or further
exercise thereof or the exercise of any other power, right, privilege or
remedy.  Any waiver hereof shall be
effective only in the specific instance and for the specific purpose for which
such waiver was given.  After any waiver,
each of the Borrower, the Lenders and, the Security Agent and the
Administrative Agent shall be restored to its former position and rights and
any Potential Default waived shall be deemed to be cured and not continuing,
but no such waiver shall extend to (or impair any right consequent upon) any
subsequent or other Potential Default.

Section 9.8.           Successors
and Assigns; Participations; Assignments.

(a)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.  Except as otherwise provided
herein, the Borrower may not assign or transfer any of its rights or delegate
any of its duties without the prior consent of the Security Agent and the
Administrative Agent and each of the Lenders.

(b)           Participations.  Any Lender may sell to one or more Persons
(each a “Participant”) participating interests in the interests of such
Lender hereunder.  Such Lender shall
remain solely responsible for performing its obligations hereunder, and the
Borrower and the Agents shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations hereunder.  Each Participant shall be entitled to the
benefits of Article V; provided that (x) such Participant shall not be
entitled to any greater benefit under Article V than the Lender that sold the
participating interest to the Participant would have been entitled to
thereunder, (y) the Borrower shall not be liable for the payment of amounts
under Article V in respect of the same event, condition or circumstance to
both the Lender that sold the participating interest to the Participant and the
Participant, and (z) no Participant shall be entitled to any benefit thereunder
unless it shall perform such obligations as are imposed on the Lenders under
Article V.  Any claim by such Participant
shall be derivative through the Lender that sold the participating interest to
it and no Participant shall have any direct rights as to the Borrower or
otherwise in respect of the Secured Obligations.  A Lender shall not agreewith a Participant to
restrict such Lender’s right to agree to any amendment, waiver or modification
hereto, except amendments described in the proviso to Section 9.1.

 32
 

(c)           Assignments.  Notwithstanding the foregoing, any Lender may
assign all or a portion of its Commitment and its outstanding Notes to a
Qualified Affiliate of such Lender or assign all, or if less than all, a
portion equal to at least $5,000,000 in the aggregate face amount of Notes and
of such Commitment (and related Secured Obligations) to one or more Eligible
Assignees, each of which assignees referred to in this Section 9.8(c) shall
become a party to this Agreement as a Lender by execution of a supplement
hereto in the form of Exhibit F (a “Transfer Supplement”) hereto, provided
that such transfer or assignment will not be effective until recorded by the
Administrative Agent on the Register pursuant to Section 9.8(d) hereof.  To the extent of any assignment pursuant to
this Section 9.8(c) (other than an assignment to a Qualified Affiliate pursuant
to the preceding sentence), the assigning Lender shall be relieved of its
obligations hereunder with respect to its assigned Commitment.  At the time of each assignment pursuant to
this Section 9.8(c) to a Person which is not already a Lender hereunder, the
respective assignee Lender shall provide to the Borrower and the Administrative
Agent the Internal Revenue Service forms (and, if applicable, a Certificate re
Non-Bank Status) required by Section 5.3 (c)(i).

(d)           Note Register.  The Borrower hereby designates the
Administrative Agent to serve as the Borrower’s agent, solely for purposes of
this Section 9.8(d), to maintain a register (the “Note Register”) on
which it will record the registered holder of the Notes and the registration of
transfers of Notes made pursuant to and in accordance with Section 9.8(c).  The Note Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time
to time upon reasonable prior notice, and the Administrative Agent shall,
reasonably promptly after (a) any person becomes a Lender after the date hereof
and (b) any Lender alters or modifies its name or address, notify the Borrower
of and deliver to the Borrower a written update of the names and addresses of
all Lenders.  Failure to make any such
recordation or any error in such recordation shall not affect the Borrower’s
obligations in respect of the Loan Amount of any Lender.  With respect to any Lender, the transfer of
the Commitment of such Lender and the rights to the principal of, and interest
on, the Loan Amount made pursuant to such Commitment shall not be effective
until such transfer is recorded on the Note Register maintained by the
Administrative Agent with respect to ownership of such Commitment and Loan
Amount and prior to such recordation all amounts owing to the transferor with
respect to such Commitment and Loan Amount shall remain owing to the
transferor.  The registration of
assignment or transfer of all or part of the Commitment and the Loan Amount
shall be recorded by the Administrative Agent on the Note Register only upon
the acceptance by the Administrative Agent of a properly executed and delivered
Transfer Supplement.  Coincident with the
delivery of such a Transfer Supplement to the Administrative Agent for
acceptance and registration of assignment or transfer of all or part of a Loan
Amount, or as soon thereafter as practicable, the assigning or transferor
Lender shall surrender the Notes evidencing such Loan Amount, and thereupon one
or more new Notes of the same series of Notes in the same aggregate principal
amount shall be issued by the Borrower to the assigning or transferor Lender
and/or the new Lender, as appropriate to reflect such assignment.

 33
 

Section 9.9.           Confidentiality.  None of the Security Agent, the
Administrative Agent or any Lender shall disclose any nonpublic information
relating to the Borrower (provided to it by the Borrower) or any Transaction
Document to any other Person without the consent of the Borrower, other than
(a) to such Agent’s or Lender’s Affiliates and its officers, directors,
employees, agents and advisors and, as contemplated by Section 9.8, to actual
or prospective assignees and participants, and then, in all such cases, only
with an undertaking by the party to whom such information is disclosed to keep
such information confidential, (b) as required by any law, rule or regulation
or judicial process, (c) as requested or required by any state, federal or
foreign authority or examiner regulating banks or banking, and (d) to the
extent reasonably necessary in connection with any dispute related to, or
enforcement of, the Transaction Documents.

Section 9.10.        Counterparts.  This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument..

Section
9.11.                         Governing
Law; Submission to Jurisdiction; Venue.

(a)           THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE
WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICT OF LAWS THAT MIGHT APPLY THE LAWS
OF ANY OTHER JURISDICTION.  Each of the
parties hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of the Supreme Court of the State
of New York sitting in New York County and of the United States District Court
of the Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
other Transaction Document, or for recognition or enforcement of any judgment,
and each of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such federal court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Agreement shall affect any right that any party hereto may otherwise have to
bring any action or proceeding relating to this Agreement or the other
Transaction Documents against any other party hereto, or such party’s
properties, in the courts of any jurisdiction. 
Each party hereto further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
it at its address specified pursuant to Section 9.2, such service to become effective
thirty (30) days after such mailing.

(b)           Each
party hereto hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to in clause (a) above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.

 34
 

Section 9.12.        Waiver
of Trial by Jury.  EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 9.13.        Headings   The headings of the various Articles and
Sections herein and in the table of contents hereto are for the
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.

 

 35

 

IN WITNESS WHEREOF,
the parties hereto have caused this Loan Agreement [28139] to be executed and
delivered by their duly authorized officers as of the date hereof.

	
  

  	
   

  	
  C.I.T. LEASING CORPORATION,

  
	
   

  	
   

  	
  as
  Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Kathleen Park

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:     300 South
  Grand Avenue

  
	
   

  	
   

  	
  Los Angeles, CA
  90071

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  Kathleen Park

  
	
   

  	
   

  	
  Telephone:  213-613-2532

  
	
   

  	
   

  	
  Facsimile:  213-613-3566

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.I.T. Leasing Corporation

  
	
   

  	
   

  	
  11 West 42nd Street, 12th Floor

  
	
   

  	
   

  	
  New York, NY 10036

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Chief Counsel

  
	
   

  	
   

  	
  Telephone: 212-461-5504

  
	
   

  	
   

  	
  Facsimile: 212-461-5402

  

 

	
  

  	
   

  	
  C.I.T. LEASING CORPORATION,

  
	
   

  	
   

  	
  as Security
  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Kathleen Park

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:   300 South Grand Avenue

  
	
   

  	
   

  	
       Los
  Angeles, CA 90071

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Kathleen Park

  
	
   

  	
   

  	
  Telephone: 213-613-2532

  
	
   

  	
   

  	
  Facsimile: 213-613-3566

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.I.T. Leasing Corporation

  
	
   

  	
   

  	
  11 West 42nd Street, 12th Floor

  
	
   

  	
   

  	
  New York, NY 10036

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Chief Counsel

  
	
   

  	
   

  	
  Telephone: 212-461-5504

  
	
   

  	
   

  	
  Facsimile: 212-461-5402

  

 

 

	
  

  	
   

  	
  HAWAIIAN AIRLINES, INC.,

  
	
   

  	
   

  	
  as Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:   3375 Koapaka Street

  
	
   

  	
   

  	
   Honolulu,
  HI 96819

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Executive Vice President, Chief

  
	
   

  	
   

  	
                   Financial
  Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone: 808-835-3030

  
	
   

  	
   

  	
  Facsimile:  808-835-3699

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Orrick, Herrington & Sutcliffe LLP

  
	
   

  	
   

  	
  777 S. Figueroa Street, Suite 3200

  
	
   

  	
   

  	
  Los Angeles, CA 90017

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Ronald W. Goldberg

  
	
   

  	
   

  	
  Telephone: 213-629-2020

  
	
   

  	
   

  	
  Facsimile: 213-612 2499

  

 

 

	
  

  	
   

  	
  C.I.T. LEASING CORPORATION,

  
	
   

  	
   

  	
  as Original
  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Kathleen Park

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:  300 South Grand Avenue

  
	
   

  	
   

  	
   Los
  Angeles, CA 90071

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Kathleen Park

  
	
   

  	
   

  	
  Telephone: 213-613-2532

  
	
   

  	
   

  	
  Facsimile: 213-613-3566

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.I.T. Leasing Corporation

  
	
   

  	
   

  	
  11 West 42nd Street, 12th Floor

  
	
   

  	
   

  	
  New York, NY 10036

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Chief Counsel

  
	
   

  	
   

  	
  Telephone: 212-461-5504

  
	
   

  	
   

  	
  Facsimile: 212-461-5402Exhibit 10.50

SECURITY AGREEMENT [28139]

dated as of December 21, 2006

between

HAWAIIAN AIRLINES, INC.,

Borrower

and

C.I.T. LEASING CORPORATION,

Security Agent

_______________________

One Boeing Model 767-300ER Aircraft

Manufacturer’s Serial Number 28139

bearing U.S. Registration N582HA

with Two (2) Pratt and Whitney Model 4060-3 Engines

_______________________

 

 

TABLE OF CONTENTS

 

 

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS 

  	
   

  	
   

  	
  4

  
	
  Section
  1.01

  	
  Definitions

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II [RESERVED]

  	
   

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III REGISTRATION AND MAINTENANCE;
  OPERATION; POSSESSION AND

  LEASES; INSIGNIA

  	
   

  	
  11

  
	
  Section
  3.01

  	
  Registration and Maintenance

  	
   

  	
  11

  
	
  Section
  3.02

  	
  Operation

  	
   

  	
  12

  
	
  Section
  3.03

  	
  Possession and Leases

  	
   

  	
  12

  
	
  Section
  3.04

  	
  Insignia

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV REPLACEMENT AND POOLING OF PARTS;
  ALTERATIONS,

  MODIFICATIONS AND
  ADDITIONS

  	
   

  	
  17

  
	
  Section
  4.01

  	
  Replacement of Parts

  	
   

  	
  17

  
	
  Section
  4.02

  	
  Pooling of Parts; Temporary Replacement Parts

  	
   

  	
  18

  
	
  Section
  4.03

  	
  Alterations, Modifications and Additions

  	
   

  	
  18

  
	
  Section
  4.04

  	
  Improvements Owned by Others

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V LOSS, DESTRUCTION, REQUISITION, ETC

  	
   

  	
  19

  
	
  Section
  5.01

  	
  Event of Loss With Respect to the Aircraft

  	
   

  	
  19

  
	
  Section
  5.02

  	
  Event of Loss With Respect to an Engine

  	
   

  	
  19

  
	
  Section
  5.03

  	
  Application of Payments

  	
   

  	
  21

  
	
  Section
  5.04

  	
  Requisition for Use of the Aircraft by the United
  States Government or the Government of Registry of the Aircraft

  	
   

  	
  21

  
	
  Section
  5.05

  	
  Application of Payments During Existence of Potential
  Defaults or Events of Default

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI INSURANCE

  	
   

  	
  22

  
	
  Section
  6.01

  	
  Borrower’s Obligation to Insure

  	
   

  	
  22

  
	
  Section
  6.02

  	
  Insurance for Own Account

  	
   

  	
  22

  
	
  Section
  6.03

  	
  Application of Insurance Proceeds

  	
   

  	
  22

  
	
  Section
  6.04

  	
  Indemnification by Government in Lieu of Insurance

  	
   

  	
  22

  
	
  Section
  6.05

  	
  Application of Payments During Existence of a
  Potential Default or an Event of Default

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII OTHER COVENANTS OF BORROWER

  	
   

  	
  23

  
	
  Section
  7.01

  	
  Liens

  	
   

  	
  23

  
	
  Section
  7.02

  	
  Inspection

  	
   

  	
  24

  
	
  Section
  7.03

  	
  Amendments, Supplements, Etc

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII [RESERVED]

  	
   

  	
   

  	
  25

  
									

 

 i
 

 

	
  

  	
   

  	
   

  	
   

  
	
  ARTICLE IX REMEDIES

  	
   

  	
   

  	
  25

  
	
  Section
  9.01

  	
  General; Acceleration

  	
   

  	
  25

  
	
  Section
  9.02

  	
  Repossession and Sale

  	
   

  	
  26

  
	
  Section
  9.03

  	
  Taking of Aircraft

  	
   

  	
  27

  
	
  Section
  9.04

  	
  Discontinuance of Proceedings

  	
   

  	
  28

  
	
  Section
  9.05

  	
  Waiver of Past Defaults

  	
   

  	
  28

  
	
  Section
  9.06

  	
  Remedies Cumulative

  	
   

  	
  28

  
	
  Section
  9.07

  	
  Payment After Event of Default, etc

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X DUTIES OF THE SECURITY AGENT

  	
   

  	
  30

  
	
  Section
  10.01

  	
  Notice of Event of Default

  	
   

  	
  30

  
	
  Section
  10.02

  	
  Action Upon Instructions

  	
   

  	
  31

  
	
  Section
  10.03

  	
  Indemnification

  	
   

  	
  31

  
	
  Section
  10.04

  	
  No Duties Except as Specified in Security Agreement
  or Instructions

  	
   

  	
  32

  
	
  Section
  10.05

  	
  No Action Except Under Loan Agreement, Security
  Agreement or Instructions

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI THE SECURITY AGENT

  	
   

  	
  32

  
	
  Section
  11.01

  	
  Acceptance of Duties

  	
   

  	
  32

  
	
  Section
  11.02

  	
  Absence of Duties

  	
   

  	
  32

  
	
  Section
  11.03

  	
  No Representations or Warranties as to Aircraft or
  Documents

  	
   

  	
  33

  
	
  Section
  11.04

  	
  No Segregation of Monies; No Interest

  	
   

  	
  33

  
	
  Section
  11.05

  	
  Reliance; Agents; Advice of Counsel

  	
   

  	
  33

  
	
  Section
  11.06

  	
  Further Assurances; Financing Statements

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII INVESTMENT OF FUNDS

  	
   

  	
  34

  
	
  Section
  12.01

  	
  Investment of Funds

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII SUCCESSOR SECURITY AGENTS

  	
   

  	
  35

  
	
  Section
  13.01

  	
  Resignation of Security Agent; Appointment of
  Successor

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV [RESERVED]

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV MISCELLANEOUS

  	
   

  	
  36

  
	
  Section
  15.01

  	
  Termination of Security Agreement

  	
   

  	
  36

  
	
  Section
  15.02

  	
  No Legal Title to Estate in Lenders

  	
   

  	
  37

  
	
  Section
  15.03

  	
  Sale of Aircraft by the Security Agent is Binding

  	
   

  	
  37

  
	
  Section
  15.04

  	
  Security Agreement for Benefit of the Security Agent
  and Lenders

  	
   

  	
  37

  
	
  Section
  15.05

  	
  No Action Contrary to Borrower’s Rights; Quiet
  Enjoyment

  	
   

  	
  37

  
	
  Section
  15.06

  	
  Notices

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
								

 

 ii
 

 

	
  

  	
   

  	
   

  	
   

  
	
  Section 15.07

  	
  Authorization of Financing Statements

  	
   

  	
  38

  
	
  Section 15.08

  	
  Severability

  	
   

  	
  38

  
	
  Section 15.09

  	
  No Oral Modifications or Continuing Waivers

  	
   

  	
  38

  
	
  Section 15.10

  	
  Successors and Assigns

  	
   

  	
  38

  
	
  Section 15.11

  	
  Headings

  	
   

  	
  38

  
	
  Section 15.12

  	
  Governing Law; Counterpart Form

  	
   

  	
  38

  
	
  Section 15.13

  	
  WAIVER OF JURY TRIAL

  	
   

  	
  39

  
	
  Section 15.14

  	
  Counterparts

  	
   

  	
  39

  

 

 

 

	
  EXHIBIT A

  	
   

  	
  —

  	
  Description of Aircraft

  	 

	
  EXHIBIT B

  	
   

  	
  —

  	
  Schedule of Countries Authorized for Domicile
  of Lessees

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  ANNEX A

  	
  —

  	
  Insurance

  
	
  ANNEX B

  	
  —

  	
  Relevant Loan
  Agreement Definitions

  
						

 

 

 iii

SECURITY AGREEMENT [28139],
dated as of December 21, 2006 (the “Security Agreement”),
between HAWAIIAN AIRLINES, INC. (the
“Borrower”) and C.I.T. LEASING CORPORATION, as Security
Agent hereunder (together with its successors hereunder in such capacity, the “Security Agent”).

WHEREAS, all
capitalized terms used herein shall have the respective meanings set forth or
referred to in Article I hereof;

WHEREAS, the Lenders have agreed
to make a Loan to the Borrower in accordance with the terms of the Loan Agreement
[28139] dated as of December 21, 2006 (the “Loan
Agreement”) among the Borrower, C.I.T. Leasing Corporation, as
Administrative Agent and Original Lender, the Lenders named therein and the
Security Agent.

WHEREAS, the
Borrower desires by this Security Agreement, among other things, to provide for
the assignment, mortgage and pledge by the Borrower to the Security Agent, as
the Estate hereunder, of the Borrower’s right, title and interest in and to the
Aircraft and the payments and other amounts received in respect thereof in
accordance with the terms hereof, as security for, among other things, the
Borrower’s obligations to the Lenders, and for the benefit and security of the
Lenders;

WHEREAS, all things
have been done to make the Notes, when executed by the Borrower, the valid
obligations of the Borrower; and

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

— GRANTING CLAUSE —

NOW, THEREFORE, THIS SECURITY
AGREEMENT WITNESSETH, that, to secure (i) the prompt
payment of the principal of and and interest on, Prepayment Fee (if any), and
all other amounts due with respect to, all Notes from time to time outstanding
under the Loan Agreement and the performance and observance by the Borrower of
all the agreements, covenants and provisions for the benefit of the Security
Agent herein and for the benefit of the Lenders, the Administrative Agent and
the Security Agent in the Loan Agreement and the Notes contained, and the
prompt payment of any and all amounts from time to time owing hereunder and
under the Loan Agreement and the other Transaction Documents (collectively, the
“Secured Obligations”) for the
security and benefit of the Lenders, the Administrative Agent, and the Security
Agent and (ii) the prompt payment of the Other Secured Obligations and the
performance and observance by the Borrower of all the agreements, covenants and
provisions of the Other Transaction Documents for the security and benefit of
the Other Secured Parties, and for the uses and purposes and subject to the
terms and provisions hereof, and in consideration of the premises and of the
covenants herein contained, and of the acceptance of the Notes by the Lenders,
and of the sum of $1 and other good and valuable consideration paid to the
Borrower by the Security Agent at or before the delivery hereof, the receipt
whereof is hereby acknowledged, the Borrower has granted, bargained, sold,
assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does
hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge 

and confirm, unto the Security Agent and its
successors and assigns, a first priority security interest in, a first mortgage
lien upon and, to the extent applicable under the Cape Town Convention, a first
priority international interest in, all right, title and interest of the
Borrower in, to and under the following described property, rights and
privileges (which collectively, including all property hereafter specifically
subjected to the Lien of this Security Agreement, shall constitute the “Estate”), to wit:

1.             the
Aircraft and all Replacement Engines to which the Borrower shall from time to
time acquire title as provided herein, all as more particularly described in
Exhibit A hereto, and all records, logs, manuals, data and inspection,
modification and overhaul records and other documents at any time maintained
with respect to the foregoing property;

2.             all
warranties relating to the Aircraft (including warranties of title,
merchantability, fitness for a particular purpose, quality and freedom from
defects to the extent transferred to the Borrower by the Bills of Sale or otherwise
running in favor of the Borrower, together in each case under this clause 2
with all rights, powers, privileges, options and other benefits of the Borrower
thereunder with respect to the Airframe or the Engines, including, without
limitation, the right to make all waivers and agreements, to give and receive
all notices and other instruments or communications, to take such action upon
the occurrence of a default thereunder, including the commencement, conduct and
consummation of legal, administrative or other proceedings, as shall be
permitted thereby or by law, and to do any and all other things which the
Borrower is or may be entitled to do thereunder;

3.             each
Lease, to the extent assigned under any lease assignment pursuant to Section
3.03(g), together with all rights, powers, privileges, options and other
benefits thereunder, including the right to receive and collect all payments
thereunder and to make all waivers and agreements, to give and receive notices,
and to take all action thereunder or in respect thereof, as and to the extent
provided in the applicable lease assignment;

4.             all
insurance and requisition proceeds with respect to the Aircraft or any part
thereof;

5.             all
logs, manuals, books, flight and other records, maintenance records and other
similar information relating to the Aircraft, including, without limitation,
all such logs, manuals and data required to be maintained by the  FAA or the relevant aeronautical authority or
by the applicable regulatory agency or body of any other jurisdiction in which
the Aircraft may then be registered, as well as all right, title and interest
of the Borrower in, to and under the overhaul, repair and maintenance manuals,
programs and catalogues which are a part of or used in connection with the
maintenance program for the Aircraft, and all claims or rights to payments
thereunder and proceeds therefrom;

6.             all
tolls, rents, revenues, issues, income, products, profits, estate, right,
title, interest and claims whatsoever, at law as well as in equity, which the
Borrower may have or possess on the date hereof or to which the Borrower may
hereafter become legally or equitably entitled, directly or indirectly, from,
in or to the property described in clauses 1 through 5 above inclusive,
including all payments or proceeds payable to the Borrower with respect to the
Aircraft as the result of the sale, lease or other disposition thereof, and all
estate, right, title and interest of every nature whatsoever of the Borrower in
and to the same;

 2
 

7.             all
“general intangibles” (as such term is defined in Article 9 of the Uniform
Commercial Code) of the Borrower relating to the foregoing collateral; and

8.             all
proceeds of the foregoing.

Any
and all properties referred to in this Granting Clause which are hereafter
acquired by the Borrower, shall, without further conveyance, assignment or act
by the Borrower or the Security Agent thereby become and be subject to the
security interest hereby granted as fully and completely as though specifically
described herein.

Notwithstanding any of the foregoing provisions of
this Granting Clause, so long as no Event of Default shall have occurred
and be continuing, the Borrower shall have the right, to the exclusion of the
Security Agent, the Lenders and the Other Secured Parties, (i) to quiet
enjoyment of the Aircraft, the Airframe and the Engines, and to possess, use,
retain and control the Aircraft, the Airframe, the Engines and the Estate, and
all revenues, income and profits derived therefrom and (ii) with respect
to the agreements and instruments included in the Estate pursuant to clauses 2
and 3 of the Granting Clause (the “Assigned Agreements”),
to exercise in the Borrower’s name all rights and powers of the Borrower under
the Assigned Agreements and to retain any recovery or benefit resulting from
the enforcement of any warranty or indemnity or other obligation under the
Assigned Agreements; provided,
further, that upon the
occurrence and during the continuation of an Event of Default, the Security
Agent shall be entitled to enter into any amendment, modification, supplement,
rescission, cancellation or termination of the Assigned Agreements to the
extent reasonably necessary or advisable to protect and preserve the Estate or
the Security Agent’s interest therein.

— HABENDUM CLAUSE —

TO HAVE AND TO HOLD
all and singular the aforesaid property unto the Security Agent, its successors
and assigns, in trust for the benefit and security of the Lenders, the
Administrative Agent and the Security Agent, and for the uses and purposes and
subject to the terms and provisions set forth in this Security Agreement.

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

 3
 

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

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

ARTICLE I

DEFINITIONS

Section 1.01   Definitions.
For all purposes of this Security Agreement the following terms shall have the
following meanings (such definitions to be equally applicable to both the
singular and plural forms of the terms defined).  Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to time in
accordance with the applicable provisions thereof and of the other Transaction
Documents.  Unless otherwise specified,
Section and Article references are to Sections and Articles of
this Security Agreement.  Terms as
defined in the Loan Agreement are included in Annex B hereto.

“Actual Knowledge”
is defined in the Loan Agreement.

“Additional
Insured(s)” means the Security Agent, the Administrative Agent,
the Lenders and the Borrower in its capacity as lessor under any Lease together
with their respective officers, directors, employees, servants, agents,
successors and assigns.

“Administrative Agent”
is defined in the Loan Agreement.

“Affiliate”
is defined in the Loan Agreement.

“After-Tax Basis”
means, with respect to any amount that is required by any Transaction Document
to be paid on an After-Tax Basis, to any Indemnitee (or to any other Person for
the account or benefit of any Indemnitee), payment of such amount, increased to
the extent necessary so that such payment, after subtracting the amount of all
Taxes payable to any taxing authority as a result of the receipt or accrual of
such payment (taking into account any savings in Taxes with respect to the indemnified
Taxes or other liability in respect of which such payment is due), shall be
equal to the amount that is required to be paid on an After-Tax Basis.

“Agreed Value”
means, with respect to the Aircraft, an amount at all times not less than 115%
of the aggregate outstanding principal amount of the Notes.

“Aircraft”
means the Airframe together with the two (2) Engines whether or not such
Engines are installed on the Airframe or any other airframe, and, where the
context permits, all logs, manuals, data and inspection, modification and
overhaul records maintained with respect to the foregoing property; provided,
however, that for purposes of Article VI and Annex A, the term “Aircraft”
shall not include logs, manuals, data or inspection, modification or overhaul
records.

 4
 

“Airframe”
means the Boeing (also shown as BOEING on the International Registry drop-down
menu) Model 767-300ER (also shown as 767-300 on the International Registry
drop-down menu) aircraft (excluding Engines or engines) specified by United
States Registration Number and Manufacturer’s Serial Number in Exhibit A and
any and all related Parts.

“Bills of Sale”
means the FAA Bill of Sale and the Warranty Bill of Sale.

“Business Day”
is defined in the Loan Agreement.

“Cape Town
Convention” means collectively, the official English language
texts of the Convention on International Interests in Mobile Equipment (the “Convention”) and the Protocol to the Convention on
International Interests in Mobile Equipment on Matters Specific to Aircraft
Equipment (the “Protocol”), both signed in Cape
Town, South Africa on November 16, 2001, together with any protocols,
regulations, rules, orders, agreements, instruments, amendments, supplements,
revisions or otherwise that have or will be subsequently made in connection
with the Convention or the Protocol by the “Supervisory Authority” (as defined
in the Consolidated Text), the International Registry or “Registrar” (as
defined in the Consolidated Text) or any other international or national, body
or authority, all as in effect in the United States or other relevant
Contracting State (as used in the Consolidated Text).  All references to articles or sections of the
Cape Town Convention shall mean the article or section of the Consolidated
Text. Except to the extent otherwise defined in the Transaction Documents,
terms used in the Transaction Documents that are defined in the Cape Town
Convention shall when used in relation to the Cape Town Convention have the
meanings ascribed to them in the Cape Town Convention.

“Civil Reserve
Air Fleet Program” or “CRAF”
means the Civil Reserve Air Fleet Program administered by the United States
Government or any substantially similar program.

“Closing”
is defined in the Loan Agreement.

“Consolidated
Text” means the combination of the Convention or the Protocol
(each as defined in the definition of Cape Town Convention) that was authorized
and created pursuant to Resolution No. 1 adopted by the Cape Town Diplomatic
Conference and any reference to a provision of the Consolidated Text is a
reference to the provision of the Convention or the Protocol from which it is
derived.

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

“Eligible Account”
means an account established by and with an Eligible Institution acting at the
request of the Security Agent, with respect to which such Eligible Institution
agrees, for all purposes of the UCC including Article 8 thereof, that (a) such
account shall be a “securities account” (as defined in Section 8-501 of the
UCC), (b) all property (other than cash) credited to such account shall be
treated as a “financial asset” (as defined in Section 8-102(9) of the UCC), (c)
the Security Agent shall be the “entitlement holder” (as defined in Section
8-102(7) of the UCC) in respect of such account, (d) it will comply with all
entitlement orders issued by the Security Agent to the exclusion of the
Borrower, and (e) the “securities intermediary jurisdiction” (under Section
8-110(e) of the UCC) shall be the State of New York.

 5
 

“Eligible
Institution” means a depository institution organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia (or any U.S. branch of a foreign bank), which has a
long-term unsecured debt rating from Moody’s of at least A2 and S&P of at
least A, or its equivalent.

“Engine”
means (i) each of the two (2) Pratt & Whitney (also shown as PRATT
& WHITNEY on the International Registry drop-down menu) Model PW4060 (also
shown as PW4000 94 on the International Registry drop-down menu) engines listed
by Engine Manufacturer’s Serial Numbers in Exhibit A, whether or not from time
to time installed on the Airframe or any other airframe; (ii) any
Replacement Engine which may from time to time be substituted for any Engine
pursuant to the terms hereof; and (iii) in each case, any and all related
Parts.  The term “Engines” means, as of any date of
determination, both Engines then subject to the lien hereof.  At such time as a Replacement Engine shall be
substituted for an Engine pursuant to the terms hereof, such replaced Engine
shall cease to be an Engine hereunder.

“Engine Manufacturer”
means United Technologies Corporation, Pratt & Whitney Division, a Delaware
corporation.

“Estate” is
defined in the granting clause hereof.

“Event of Default”
is defined in the Loan Agreement.

“Event of Loss”
with respect to the Aircraft, Airframe, or any Engine means any of the
following events with respect to such property: 
(i) the loss of such property, or of the use thereof, due to the
destruction of or damage to such property which renders repair uneconomical or
which renders such property permanently unfit for normal use by the Borrower
for any reason whatsoever; (ii) any damage to such property which results
in the receipt of insurance proceeds with respect to such property on the basis
of an actual, constructive or compromised total loss; (iii) theft,
hijacking, disappearance or requisition for use or hire of such property which
deprives the Borrower of possession and/or use of such property for a period in
excess of 180 consecutive days, other than a requisition of use (but not title)
by the U.S. Government or any agency or instrumentality thereof which bears the
full faith and credit of the U.S. Government (it being understood that
activation of the Aircraft under CRAF is not to be regarded as a “confiscation,
condemnation, seizure or requisition for use of hire”); (iv) the
confiscation, condemnation, or seizure, or requisition of title or other
compulsory acquisition of title for any reason, of such property by any
governmental or purported governmental authority (other than a requisition of
use (but not title) by a Permitted Government Entity or any agency or
instrumentality thereof which bears the full faith and credit of such Permitted
Government Entity); (v) as a result of any law, rule, regulation, order or
other action by the FAA or other similar governmental body of the government of
registry of the Aircraft having jurisdiction, use of such type of property in the
normal course of the business of air transportation shall have been prohibited
for a period of twelve (12) consecutive months, or for such longer period, up
to a maximum of six (6) additional months, so long as the Borrower is
diligently attempting to bring the Aircraft, Airframe or any such Engine into
conformity with such law, rule or regulation, and (vi) any event treated as an
Event of Loss pursuant to Section 3.03(d) hereof.

 6
 

An Event of Loss with respect to the Aircraft shall be
deemed to have occurred if an Event of Loss occurs with respect to the
Airframe.

“Expense”
or “Expenses” means any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
suits, out of pocket costs, expenses and disbursements (including reasonable
legal fees and expenses) of whatever kind and nature, other than internal costs
and expenses.

“FAA Application
for Registration” means the application for registration of the
Aircraft in the name of the Borrower filed with the FAA.

“FAA Bill of Sale”
means a bill of sale conveying the Aircraft from the Seller to the Borrower on
AC Form 8050-2 or such other form as may be approved by the FAA.

“Federal Aviation
Act” means subtitle VII of Title 49 of the United
States Code, or any successor provision.

“Federal Aviation
Administration” and “FAA”
mean the United States Federal Aviation Administration and any successor agency
or agencies thereto.

“Foreign Air Carrier”
means any air carrier which is not a U.S. Air Carrier, which is certificated
under the Federal Aviation Act for operations to and from the United States,
and which performs maintenance, preventative maintenance and inspections for
the Aircraft, Airframe and/or any Engine or engine to standards which are
approved by, or which are substantially equivalent to those required by, the
Federal Aviation Administration, the Civil Aviation Authority of the United
Kingdom, the Direction Generale de l’Aviation Civile of the French Republic,
the Luftfahrt Bundesamt of the Federal Republic of Germany, the Nederlandse
Luchtvaart Authoriteit of the Kingdom of the Netherlands, the Ministry of
Transportation of Japan or the Federal Ministry of Transport of Canada (and any
agency or instrumentality of the applicable government succeeding to the
functions of any of the foregoing entities).

“Funding Date”
is defined in the Loan Agreement.

“Inchoate Liens”
mean inchoate Liens of the type described in Section 7.01(ii) for Taxes
not yet due or being contested in good faith and 7.01(iii) (other than, in the
case of said clause (iii), contested Liens).

“Indemnitee”
or “Indemnitees” means the
Security Agent, the Administrative Agent, the Lenders and each of their
respective successors, permitted assigns, directors, officers, and employees.

“International
Registry” has the meaning set forth in the Consolidated Text.

“Lease”
means any lease agreement permitted by the terms of Section 3.03 hereof.

“Lender”
means, at any time, any registered holder of one or more Notes, as reflected in
the Note Register, and shall include the Original Lender.

 7
 

“Lessee”
means any air carrier permitted to lease the Aircraft, the Airframe, or any
Engine as provided in Section 3.03 hereof.

“LIBOR Breakage
Costs” is defined in the Loan Agreement.

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

“Loan”
means the money borrowed on the Funding Date by the Borrower from the Lenders.

“Loan Agreement”
means that certain Loan Agreement [28139], dated as of December 21, 2006,
among the Borrower, the Administrative Agent, the Original Lender, the Lenders
and the Security Agent, as such Loan Agreement may be amended, modified or
supplemented from time to time pursuant to the applicable provisions thereof.

“Maintenance
Program” means the maintenance program for the Aircraft of the
Borrower or a Lessee which is approved by the government of registry of the
Aircraft.

“Mandatory Modification”
is defined in Section 4.03.

“Manufacturer” means The
Boeing Company.

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

“Note”
means the Note originally issued pursuant to the Loan Agreement and any Note
issued in exchange therefor or replacement thereof.

“Note Register”
is defined in the Loan Agreement.

“Optional Modification”
is defined in Section 4.03.

“Original Lender”
means C.I.T. Leasing Corporation.

“Other Loan
Agreement” means each of (a) that certain Loan Agreement [28140]
dated on or about the date hereof and (b) that certain Loan Agreement [28141]
dated on or about the date hereof, each among the Borrower, the Original
Lender, the Security Agent and the Administrative Agent, wherein the Original
Lender provides a direct loan to Borrower for the financing of one or more of
two (2) other Boeing 767-300ER aircraft, as each such Other Loan Agreement may
be amended or supplemented from time to time pursuant to the applicable
provisions thereof, provided that at the relevant time such Original
Lender remains a “Lender” holding an interest not less than the interest held
by “Required Lenders” (as defined in each such Other Loan Agreement) under and
as defined in such Other Loan Agreement.

“Other Security Agreement”
means each Security Agreement as defined in each Other Loan Agreement.

“Other Notes”
means the “Notes” as defined in each Other Loan Agreement.

 8
 

“Other
Transaction Documents” means the “Transaction Documents” as
defined in each Other Loan Agreement.

“Other Secured
Obligations” means the “Secured Obligations” as defined in each
Other Security Agreement.

“Other Secured
Parties” means the “Lenders”, the “Administrative Agent” and the
“Security Agent” as defined in each Other Security Agreement.

“Parts”
means all appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment of whatever nature (other than complete Engines
or engines), which are from time to time incorporated or installed in or
attached to the Airframe or any Engine (other than equipment installed pursuant
to Section 4.04 hereof) and all such items which are subsequently removed
therefrom so long as the Lien of this Security Agreement shall cover the same
pursuant to the terms hereof.

“Permitted
Government Entity” means (i) the U.S. Government or (ii) the
national government of Canada, France, Switzerland, the Netherlands, Germany,
the United Kingdom or Japan or any instrumentality or agency thereof that is
backed by the full faith and credit of such national government, if the
Aircraft is then registered under the laws of such country.

“Permitted
Investments” means those investments described in
Section 12.01 hereof.

“Permitted Lien”
shall have the meaning set forth in Section 7.01 hereof.

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

“Potential Default” is defined in the
Loan Agreement.

“Prepayment Fee”  is defined in the Loan Agreement.

“Replacement
Engine” is defined in Section 5.02.

“Required Lenders”
is defined in the Loan Agreement.

“Secured Obligations”
is defined in the Granting Clause of this Agreement.

“Section 1110”
means 11 U.S.C. § 1110 of the Bankruptcy Code or any successor section of the
federal bankruptcy law in effect from time to time.

“Security Agent
Liens” means any Lien attributable to the Security Agent with
respect to the Aircraft, any interest therein, or any other portion of the
Security Agreement Estate, arising as a result of (a) claims against the
Security Agent in its individual capacity not related to its interest in the Aircraft
or the administration of the Estate pursuant to the Security Agreement, (b)
acts of the Security Agent not permitted by, or failure of the Security Agent
to take any action required by, the Transaction Documents, (c) Taxes against
the Security Agent or any of its 

 9
 

Affiliates not required to be indemnified by Borrower
under the Loan Agreement, or (d) claims against the Security Agent arising out
of the transfer by the Security Agent of all or any portion of its interest in
the Estate, other than a transfer pursuant to the exercise of remedies set
forth in Article IX of the Security Agreement.

“Security Agreement”
has the meaning set forth in the introductory paragraph hereof, as the same may
be amended, modified or supplemented from time to time.

“Seller”
means AWMS I, a Delaware statutory trust.

“S&P
“ means Standard and Poor’s Ratings Services.

“Tax”
or “Taxes” is defined in
the Loan Agreement.

“Threshold Amount”
means $500,000

“Transaction
Documents” is defined in the Loan Agreement.

“UCC” or “Uniform Commercial Code” is defined
in the Loan Agreement.

“U.S.” means
the United States of America (including all states and political subdivisions
thereof).

“U.S. Air Carrier”
means any United States air carrier as to which there is in force a certificate
issued pursuant to Section 41102(a) of the Federal Aviation Act, and
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to chapter 447 of title 49 of the U.S. Code
(or the equivalent authority issued by the Civil Aeronautics Board under the
predecessor regulatory laws, rules and regulations) for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo or which may
operate as an air carrier by certification or otherwise under any successor or
substitute provisions therefor.

“U.S. Government”
means the federal government of the United States, or any instrumentality or
agency thereof the obligations of which are guaranteed by the full faith and
credit of the federal government of the United States.

“War Risk
Insurance” means war risk and allied perils insurance covering
(i) hull risks in respect of the Aircraft and (ii) liability risks in
respect of the Aircraft.

“Warranty Bill of Sale”
is defined in the Loan Agreement.

“Wet Lease”
means any arrangement whereby the Borrower agrees to furnish the Airframe,
Engines or engines installed thereon to a third party pursuant to which such
Airframe, Engines or engines (i) are operated by pilots who are regular
employees of the Borrower, and (ii) such property is maintained by the
Borrower.

 

 10

ARTICLE II

[RESERVED]

ARTICLE III

REGISTRATION AND MAINTENANCE; OPERATION; POSSESSION AND LEASES; INSIGNIA

Section 3.01         Registration and Maintenance.  The Borrower shall:  (1) (a) on the Funding Date, cause
the Aircraft to be duly registered in its name and, at all times thereafter,
cause the Aircraft to remain duly registered in the United States of America in
its name under the Federal Aviation Act (except to the extent that the Aircraft
is registered in another country pursuant to the terms of Section 3.03(g)
hereof) and (b) on the Funding Date, cause this Security Agreement to be
duly filed for recording with the FAA and cause the international interest
granted in the Airframe and Engines pursuant to the Security Agreement to be
registered pursuant to the Cape Town Convention, subject to the Security Agent
providing its consent to the International Registry with respect thereto, and,
at all times thereafter, so long as any Note shall be outstanding or any amount
shall be owing to any Lender, cause the Security Agreement to be maintained of
record as a first priority (subject to Permitted Liens) and perfected mortgage
on the Aircraft (or, in the case of registration of the Aircraft outside of the
United States, cause to be in force and effect documentation appropriate for
that jurisdiction that protects the interests of the Lenders on a first
priority (subject to Permitted Liens) and perfected basis, including, without
limitation, pursuant to the Cape Town Convention, if applicable);
(2) maintain, service, repair, and overhaul (or cause to be maintained,
serviced, repaired, and overhauled) the Aircraft (and any engine which is not
an Engine but which is installed on the Aircraft) (a) so as to keep the
Aircraft in as good an operating condition as when delivered to the Borrower by
the Seller (ordinary wear and tear excepted) and so as to keep the Aircraft in
such condition as may be necessary to enable the airworthiness certification
for the Aircraft to be maintained in good standing at all times under the Federal
Aviation Act (or under the applicable requirements of another country of
registry) except when (i) the Aircraft is being stored and is not
operational, provided, however, during such period of time the
Airframe and each Engine (as applicable) shall be maintained in compliance with
a storage maintenance program applicable to the Airframe and Engines and
approved by the Manufacturer, the Engine Manufacturer and the FAA,
(ii) the Aircraft is being serviced, repaired, maintained, overhauled,
tested or modified, in each case in compliance with the terms hereof, or
(iii)  laws or regulations affecting airworthiness are being contested in
good faith and by appropriate proceedings so long as such proceedings do not
materially adversely affect the Security Agent or its interest in the Aircraft,
and (b) in accordance with the Maintenance Program for the Aircraft and
except during periods when a Lease is in effect, the same standards as the
Borrower uses with respect to aircraft of similar size in its fleet and, during
a period when a Lease is in effect, the same standards used by the Lessee
thereunder with respect to similar aircraft of similar size in its fleet and
operated by such Lessee in similar circumstances; and (3) maintain or
cause to be maintained in English all records, logs and other materials
required to be maintained in respect of the Aircraft by the FAA and the
applicable regulatory agency or body of any other jurisdiction in which the
Aircraft may then be registered.

 11
 

Section 3.02         Operation.  The Borrower will not (and will not permit
any Lessee to) maintain, use, service, repair, overhaul or operate the Aircraft
in violation of any law, rule, regulation, treaty, or order of any government
or governmental authority (domestic or foreign) having jurisdiction over such
activity, or in violation of any airworthiness certificate, license or
registration relating to the Aircraft issued by any such authority, unless
(i) the Borrower or any Lessee is contesting in good faith the validity or
application of any such law, rule, regulation, treaty or order, or requirement
under any certificate, license or registration, so long as such contest does
not involve a material risk of the sale, forfeiture or loss of the Aircraft,
the Airframe, any Engine, or the Security Agent’s interest therein or any
imposition of material civil or any criminal penalties against Security Agent
or any Lender or (ii) it is not possible for the Borrower (or a Lessee) to
comply with the laws of a jurisdiction other than the United States (or other
than any jurisdiction in which the Aircraft is then registered) because of a
conflict with the applicable laws of the United States (or such jurisdiction in
which the Aircraft is then registered), so long as the failure to comply with
the laws of such jurisdiction does not involve a material risk of the sale,
forfeiture or loss of the Aircraft, Airframe, or any Engine or the Security
Agent’s interest therein or any imposition of material civil or any criminal
penalties against Security Agent or any Lender. 
The Borrower will not operate or fly the Aircraft (i) in or to any war
zone or any area of recognized hostility if the indemnities specified in
Section 6.06 or War Risk Insurance, or some combination thereof, has not been
obtained, or (ii) in any area excluded from coverage by any insurance required
to be maintained by the terms of Article VI (or any indemnity issued pursuant
to Section 6.06 hereof in lieu thereof).

Section 3.03         Possession and Leases.  The Borrower will not, without the prior
written consent of the Security Agent, lease or otherwise in any manner
deliver, transfer or relinquish possession of the Airframe or any Engine or
install or permit any Engine to be installed on any airframe other than the
Airframe; provided that so long as no Event of Default shall have
occurred and be continuing at the time of such Lease, delivery, transfer or
relinquishment of possession or installation, the Borrower may, without the
prior written consent of the Security Agent:

(a)           subject or permit any Lessee to
subject any Engine to normal interchange agreements or to normal pooling or
similar arrangements, in each case customary in the airline industry and
entered into by the Borrower (or any Lessee) in the ordinary course of its
business with (x) a U.S. Air Carrier or (y) in connection with any
Lease permitted hereby, any air carrier domiciled in a country listed on
Exhibit B or any other air carrier approved in writing by the Security
Agent, which approved U.S. Air Carrier shall not then be subject to a proceeding
or final order under applicable bankruptcy, insolvency or reorganization laws
unless the bankruptcy court or other government entity has entered an order or
ruling approving normal interchange, pooling or similar arrangements; provided
that (i) no such agreement or arrangement contemplates or requires the
transfer of title to the Airframe or any Engine and (ii) if the Borrower’s
title to any Engine shall be divested under any such agreement or arrangement,
such divestiture shall be deemed to be an Event of Loss with respect to such
Engine and the Borrower shall (or shall cause any Lessee to) comply with
Section 5.02 hereof in respect thereof;

 12
 

(b)           deliver or permit any Lessee to
deliver possession of the Airframe or any Engine (i) to any Person for testing,
service, repair, maintenance or overhaul work on the Airframe or any Engine or
for alterations or modifications in or additions to the Airframe or Engine(s),
or (ii) to any Person for the purpose of transport to a Person referred to
in the preceding clause (i);

(c)           install or permit Lessee to install
an Engine on (1) an airframe owned by the Borrower or such Lessee, free and
clear of all Liens, except (i) Permitted Liens and those that do not apply to
such Engine and (ii) the rights of third parties under normal interchange or
pooling agreements and arrangements which are customary in the airline industry
and do not contemplate or require the transfer of title to such Engine or (2)
an airframe owned by the Borrower (or any Lessee), leased to the Borrower (or
any Lessee), or owned or purchased by the Borrower (or any Lessee) subject to a
conditional sale or other security agreement, provided that
(A) such airframe is free and clear of all Liens, except (i) in the
case of airframes leased to the Borrower (or any Lessee) or owned or purchased
by the Borrower (or any Lessee) subject to a conditional sale or other security
agreement, the rights of the parties to the lease or conditional sale agreement
or other security agreement covering such airframe, or their assignee,
(ii) Permitted Liens, and (iii) the rights of other air carriers
under normal interchange agreements which are customary in the airline industry
and do not contemplate or require the transfer of title to the Engine, and (B) any
such lease, conditional sale or other security agreement provides that such
Engine shall not become subject to the Lien of such lease, conditional sale or
other security agreement, notwithstanding the installation thereof on such
airframe, and the inclusion in such agreement of a provision similar to the
last paragraph of this Section 3.03 shall satisfy such requirement;

(d)           install or permit Lessee to install
an Engine on an airframe owned by the Borrower or Lessee, leased to the
Borrower or purchased by the Borrower or Lessee subject to a conditional sale
or other security agreement under circumstances where paragraph 3.03(c)
above is inapplicable, provided that such installation shall be deemed
an Event of Loss with respect to such Engine and the Borrower shall comply with
Section 5.02 hereof in respect thereof, the Security Agent not intending
hereby to waive any right or interest it may have to or in such Engine under
applicable law until compliance by the Borrower with such Section 5.02;

(e)           transfer or permit any Lessee to
transfer possession of the Airframe or any Engine to the United States of
America or any instrumentality or agency thereof pursuant to CRAF so long as
the Borrower (or such Lessee) shall promptly notify the Security Agent upon
transferring possession of the Airframe or any Engine to the United States of
America or any agency or instrumentality thereof pursuant to such program and
provide the Security Agent with the name and address of the Contracting Office
Representative for the Military Aircraft Command of the United States Air Force
to whom notice must be given in the event the Security Agent desires to give
notice as provided in Article IX hereof;

(f)            transfer or permit any Lessee to
transfer possession of the Airframe, any Engine to the United States of America
or any instrumentality or agency thereof which bears the full faith and credit
of the United States of America; and

 13
 

(g)           provided that no Potential
Default or Event of Default has occurred and is continuing or would result
therefrom, and upon no less than ten (10) days prior written notice to the
Security Agent, enter into a lease of the Aircraft or an Engine with:  (a) any U.S. Air Carrier not then
subject to bankruptcy, reorganization or insolvency proceedings unless the
bankruptcy court or other government entity has entered an order or ruling
approving entry into such lease or similar arrangement; (b) any non-U.S.
air carrier that is a Foreign Air Carrier and is organized under the laws of
and is principally based in and a domiciliary of a country listed in Exhibit B
hereto not then subject to bankruptcy, reorganization or insolvency proceedings
and if at the time of such lease the United States of America maintains normal
diplomatic relations with the country in which such air carrier is based and,
in the case of this clause (b), the Security Agent shall have received evidence
reasonably satisfactory to it (which evidence may consist of one or more legal
opinions in form and substance, and from such counsel, as may be reasonably
acceptable to the Security Agent) that: 
(1) all necessary governmental approvals required for such Aircraft
or Engine to be imported, and if and to the extent it is customary for prudent
international operating leasing companies to obtain the same in such jurisdiction,
exported from the applicable country of domicile upon repossession of such
leased equipment by the Security Agent (and the Borrower as lessor) shall have
been obtained prior to commencement of any such lease; (2) the insurance
requirements of Article VI are satisfied; (3) it is not necessary for the
Security Agent or any Lender to register or qualify to do business in such
jurisdiction solely as a result of the proposed lease; (4) the Security
Agent’s Lien on such Aircraft or Engine, and in such Lease, will be recognized;
(5) the laws of such jurisdiction of domicile require fair compensation by
the government of such jurisdiction payable in a currency freely convertible
into Dollars for the loss of the title to such Aircraft or Engine in the event of
the requisition by such government of title; (6) the agreement of such
non-U.S. air carrier that its rights under the Lease are subject and
subordinate to all of the terms of this Security Agreement is enforceable
against such non-U.S. air carrier under applicable law; (7) there exist no
possessory rights in favor of such Lessee under the laws of such jurisdiction
which would, upon bankruptcy of or other default by the Borrower or Lessee,
prevent or unreasonably delay the return or repossession of such Aircraft or
Engine to the Borrower or the Security Agent in accordance with and when
permitted by the terms of Article IX hereof upon the exercise by the Security
Agent of remedies under Article IX hereof; (8) if the Lessee under such
lease is a governmental entity, such lessee has waived all rights of sovereign
immunity; (9) if such Aircraft is being reregistered or has been
reregistered, such matters described in Section 3.01 as the Security Agent
reasonably deems applicable to such Lease transaction shall have been
accomplished; and (10) the other actions required elsewhere under this
Section 3.03(g) shall have been accomplished.  The currency of payments under such Lease
must be Dollars or a currency freely convertible into Dollars.  Notwithstanding the foregoing, no Engine may
be subject to a Lease unless the associated Airframe is the subject of the same
Lease without the prior written consent of the Security Agent.  If the Lessee is a U.S. Air Carrier, the
Borrower must be entitled as lessor to the benefits of §1110 of the Bankruptcy
Code with respect to the Aircraft in connection with a proceeding under Chapter
11 of the Bankruptcy Code in which the Lessee is the debtor.

 14
 

The rights of any Lessee
or other transferee who receives possession by reason of a transfer permitted
by this Section 3.03 (other than the transfer of an Engine deemed an Event
of Loss) shall be subject and subordinate to, and any Lease permitted by this
Section 3.03, shall expressly provide that it is subject and subordinate
to, all the terms of this Security Agreement, including, without limitation,
the covenants contained in this Security Agreement, including the inspection
rights and the Security Agent’s right to repossess the Aircraft and to avoid
and terminate any Lease upon any Event of Default; provided that in the
case of the use of the Aircraft in CRAF the subject and subordinate
requirements herein shall be subject to the notice specified in Article IX and
other requirements of the CRAF program. 
The Borrower shall remain primarily liable hereunder for the performance
of all of the terms of this Security Agreement (including in the case of any
Lease hereunder), and the terms of any such Lease shall not permit any Lessee
to take any action not permitted to be taken by the Borrower hereunder with
respect to the leased Aircraft or Engine, shall permit the Borrower to cancel
the Lease and repossess the Aircraft upon an event of default thereunder, shall
prohibit any sub-leasing thereunder and may permit the Borrower to cure any default
by the Lessee; provided, however, that the Borrower may procure
such performance from any Lessee pursuant to the relevant Lease, and the
Security Agent hereby agrees to accept such performance by such Lessee in
satisfaction of the Borrower’s obligations hereunder to the extent such
performance, in accordance with this Security Agreement, is received by the
Security Agent; and provided  further that all rights accruing
hereunder to the Borrower (including, without limitation, the right to contest
any law as provided in Section 3.02, the right to relinquish possession of
the Aircraft as provided in Section 3.03, the right to subject Parts to
pooling arrangements as provided in Section 4.02, the right to make
alterations, modifications and additions as provided in Section 4.03
(except that no Lessee shall be entitled to reduce the value of the Aircraft by
utilizing the “obsolete parts” provision therein) and the right to create a
Permitted Lien as provided in Section 7.01) shall likewise accrue to such
Lessee to the extent the Borrower so permits and to the extent such rights may
be subject to any limitation or conditions herein.

The Borrower shall
provide to the Security Agent a certified true and correct copy of any Lease
that is for a term of six (6) months or greater promptly after it is signed.

Any Wet Lease under which
the Borrower maintains operational control of the Aircraft shall not constitute
a Lease or other delivery, transfer or relinquishment of possession for
purposes of this Section 3.03.

The Borrower shall
confirm the assignment hereunder of each Lease with a term in excess of six (6)
months (including pursuant to any voluntary renewals and extensions or rights
to renew or extend) to the Security Agent as security for the obligations
secured hereby by an instrument of assignment which shall be in form and
substance reasonably satisfactory to the Security Agent and shall provide that
so long as no Potential Default or Event of Default shall have occurred and be
continuing, all payments made under such Lease shall be paid to the Borrower
and, during any period when a Potential Default or Event of Default shall have
occurred and be continuing, shall be paid to the Security Agent to be held as
collateral for the obligations secured hereby. 
Unless a Potential Default or Event of Default shall have occurred and
be continuing, the Borrower shall be entitled to exercise all rights as lessor
under any Lease, including with respect to any amendment thereto or any
defaults thereunder, in accordance with this Security Agreement.  During the existence of any Event of Default,
the Security Agent, to the exclusion of the Borrower, shall be entitled to
exercise all rights and remedies as lessor under any Lease that has been
assigned, including with respect to any amendment thereto or any defaults
thereunder.

 15
 

The Security Agent
agrees, for the benefit of the Borrower and for the benefit of any mortgagee or
other holder of a security interest in any engine owned by the Borrower, any
lessor of any engine leased to the Borrower and any conditional vendor of any
engine purchased by the Borrower subject to a conditional sale agreement or any
other security agreement, that no interest shall be created hereunder in any
engine so owned, leased or purchased and that neither the Security Agent nor
its successors or assigns will acquire or claim, as against the Borrower or any
such mortgagee, lessor or conditional vendor or other holder of a security
interest or interest in such engine as the result of such engine being installed
on the Airframe; provided, however, that such agreement of the
Security Agent shall not be for the benefit of any lessor or secured party of
any airframe leased to the Borrower or purchased by the Borrower subject to a
conditional sale or other security agreement or for the benefit of any
mortgagee of or any other holder of a security interest in an airframe owned by
the Borrower, unless such lessor, conditional vendor, other secured party or
mortgagee has agreed (which agreement may be contained in such lease,
conditional sale or other security agreement or mortgage and may consist of a
paragraph similar to this paragraph) that neither it nor its successors or
assigns will acquire, as against the Security Agent, any right, title or
interest in an Engine as a result of such Engine being installed on such
airframe.

During the term of any
Lease, the Borrower shall continue to take all actions which are necessary,
reasonably advisable or customary for secured aircraft lenders to continue the
Security Agent’s security interest in the Aircraft, Airframe and Engines, and
any Lease which is required to be assigned hereunder and all necessary,
reasonably advisable or customary documents shall be duly filed, registered or
recorded in such public offices as may be necessary, reasonably advisable or
customary for secured aircraft lenders to fully preserve and perfect the
priority of the security interest of the Security Agent in the Aircraft,
Airframe and Engines and such Lease. 
With respect to any such Lease to which the Cape Town Convention is
applicable as provided in Article 3 of the Cape Town Convention (whether in
respect of both the Airframe and an Engine or only the Airframe), (A) the
Borrower agrees to have registered with the International Registry a collateral
assignment by the Borrower of such International Interests attributable to such
Lease and (B) the Borrower and the Security Agent shall have received a
favorable opinion of counsel (which counsel and opinion are reasonably
satisfactory to the Security Agent), and a supporting registry search
certificate issued by the International Registry, regarding such
registrations.  The Security Agent agrees
that with respect to any Lease assigned to the Security Agent as provided
herein, upon termination of such Lease, the Security Agent shall assign or
consent to the assignment of the International Interest, if any, attributable
to such Lease to the Borrower, or discharge the assignment, as appropriate.

The Borrower shall pay on
demand all reasonable costs and expenses incurred by the Security Agent or any
Lender in connection with any Lease of the Aircraft, including all reasonable
fees and expenses of legal counsel to the Security Agent in the United States
and in each other applicable jurisdiction.

 16
 

Section 3.04         Insignia.  On or prior to the Funding Date, or as soon
thereafter as reasonably practicable, the Borrower agrees to affix and maintain
(or cause to be affixed and maintained) in the cockpit of the Airframe and on
each Engine (subject to temporary removal during maintenance) a nameplate
bearing the inscription:

Mortgaged to C.I.T. Leasing Corporation, as Security
Agent

(such nameplate to be replaced, if necessary, with a
nameplate reflecting the name of any successor to the Security Agent as
permitted under the Transaction Documents).

Nothing herein contained shall prohibit the Borrower
(or any Lessee) from placing its customary colors and insignia on the Airframe
or any Engine or from otherwise operating the Aircraft in its livery.

ARTICLE IV

REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS AND ADDITIONS

Section 4.01         Replacement of Parts.  The Borrower will promptly replace or cause
to be replaced all Parts which may from time to time become worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever, except as otherwise provided
in Section 4.03.  In addition, the
Borrower may, at its own cost and expense, or may permit a Lessee at its own
cost and expense to, remove (or cause to be removed) in the ordinary course of
maintenance, service, repair, overhaul or testing any Parts, whether or not
worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair
or permanently rendered unfit for use; provided, however, that
the Borrower, except as otherwise provided herein, at its own cost and expense,
will, or will cause, a Lessee at its own cost and expense to, replace such
Parts as promptly as reasonably practicable. 
All replacement parts (other than replacement parts temporarily
installed as provided in Section 4.02) shall be free and clear of all
Liens (except Permitted Liens and any arrangement permitted by
Section 4.02), and shall be in as good an operating condition, and shall
have a value and utility substantially equal to, the Parts replaced, assuming
such replaced Parts were in the condition and repair required to be maintained
by the terms hereof.  All Parts at any
time removed from the Airframe or any Engine shall remain subject to the Lien
of this Security Agreement, no matter where located, until such time as such
Parts shall be replaced by parts which meet the requirements for replacement
parts specified above.  Immediately, upon
any replacement part becoming incorporated or installed in or attached to the
Airframe or any Engine, without further act (subject only to Permitted Liens
and any arrangement permitted by Section 4.02 hereof), (i) such replacement
part shall become subject to the Lien of this Security Agreement and be deemed
a Part for all purposes hereof to the same extent as the Parts originally
incorporated or installed in or attached to the Airframe or such Engine and
(ii) the replaced Part shall no longer be deemed a Part hereunder and shall be
free and clear of the Lien of this Security Agreement.

 17
 

Section 4.02         Pooling of Parts; Temporary Replacement Parts.  Any Part removed from the Airframe or any
Engine as provided in Section 4.01 hereof may be subjected by the Borrower
(or any Lessee) to a pooling arrangement of the type which is permitted for
Engines by paragraph 3.03(a); provided that the part replacing such
removed Part shall be incorporated or installed in or attached to such Airframe
or Engine in accordance with Section 4.01 as promptly as practicable after
the removal of such removed Part.  In
addition, the Borrower (or any Lessee) may use temporary parts or pooled parts
on the Aircraft as temporary replacements for Parts, provided that the
Borrower (or any Lessee) as promptly thereafter as reasonably practicable,
either (1) causes such pooled or temporary replacement part to become
subject to the Lien of this Security Agreement free and clear of all Liens
other than Permitted Liens or (2) replaces such replacement part with a
further replacement part owned by the Borrower (or any Lessee) which meets the
requirements of Section 4.01 and which shall become subject to the Lien of
this Security Agreement, free and clear of all Liens other than Permitted
Liens.

Section 4.03         Alterations, Modifications and Additions.  The Borrower will make (or cause to be made)
such alterations, modifications and additions (each, a “Mandatory
Modification”) to the Airframe and Engines as may be required to
meet the applicable standards of the FAA and any other regulatory agency or
body of the jurisdiction in which the Aircraft may be registered except when
(i) the Aircraft is being temporarily stored and is not operational, or (ii)
the requirement to make such Mandatory Modification is  being contested in good faith and by
appropriate proceedings so long as such proceedings do not materially adversely
affect the Security Agent or its interest in the Aircraft.  In addition, the Borrower, at its own expense
may from time to time make (or permit a Lessee to make) such alterations and
modifications in and additions to the Airframe or any Engine (each, an “Optional Modification”) as the Borrower may deem desirable
in the proper conduct of its business, including removal of Parts which the
Borrower (or Lessee) deems to be obsolete or no longer suitable or appropriate
for use on the Airframe or such Engine (“Obsolete Parts”);
provided that no such alteration, modification, removal or addition
impairs the condition or airworthiness of the Airframe or such Engine, or
materially diminishes the value, utility and remaining useful life of the
Airframe or such Engine below the value, utility or remaining useful life
thereof immediately prior to such Optional Modification (assuming the Airframe
or such Engine was in the condition required by this Security Agreement immediately
prior to such Optional Modification). 
All parts incorporated or installed in or attached or added to the
Airframe or an Engine as the result of such alteration, modification or
addition (except those parts which the Borrower has leased from others and
Parts which may be removed by the Borrower pursuant to the next sentence) (the “Additional
Part” or “Additional Parts”) shall, without
further act, become subject to the Lien of this Security Agreement.  Notwithstanding the foregoing, the Borrower
(or Lessee) may remove any Additional Part, provided that such
Additional Part (i) is in addition to, and not in replacement of or
substitution for, any Part originally incorporated or installed in or attached
to the Airframe or any Engine at the time of delivery thereof hereunder or any
Part in replacement of or substitution for any such Part, (ii) is not required
to be incorporated or installed in or attached or added to the Airframe or any
Engine pursuant to the terms of Article III hereof or the first sentence of
this Section 4.03, and (iii) can be removed from the Airframe or such Engine
without impairing the airworthiness of the Airframe or such Engine or
materially diminishing the value, utility and remaining useful life of the
Airframe or such Engine required to be maintained pursuant to this Security
Agreement which the Airframe or such Engine would have had at such time had
such removal not occurred and such Additional Part had not been incorporated or
installed in or attached to the Airframe or any Engine.  Upon the removal by the Borrower or a Lessee
of any Removable Part or Obsolete Part as provided above, such Part shall no
longer be deemed a Part hereunder and shall be free and clear of the Lien of
this Security Agreement.

 18
 

Section 4.04         Improvements Owned by Others.  Notwithstanding any other provision of this
Security Agreement, the Borrower may install, have installed or permit to be
installed in the Aircraft audio-visual, entertainment, telephonic or other
equipment owned by third parties and leased or otherwise furnished to the
Borrower in the ordinary course of business, provided that such
equipment meets all requirements for removal of Additional Parts as specified
in Section 4.03, and the Lien of this Security Agreement shall not attach
thereto and the rights of the owners therein shall not constitute a default
under the Transaction Documents.

ARTICLE V

LOSS, DESTRUCTION, REQUISITION, ETC.

Section 5.01         Event of Loss With Respect to the Aircraft.  (a) 
Upon the occurrence of an Event of Loss with respect to the Aircraft or
the Airframe, the Borrower shall forthwith but in any event within fifteen (15)
days of such occurrence give each Lender and the Security Agent written notice
of such Event of Loss.

(b)           In connection with an Event of Loss
with respect to the Aircraft or the Airframe, on or before the Business Day
next following the earlier of (x) the one hundred twentieth (120th) day following the occurrence
of such Event of Loss or (y) the third (3rd) Business Day following the receipt of the insurance
proceeds in respect of such Event of Loss, the Borrower shall pay or cause to
be paid to the Security Agent an amount equal to the aggregate amount of
outstanding principal, interest and other amounts then due on or in respect of
the Notes and any other Transaction Document.

Section 5.02         Event
of Loss With Respect to an Engine. 
(a)  Upon the occurrence of an
Event of Loss with respect to an Engine under circumstances in which there has
not occurred an Event of Loss with respect to the Airframe, the Borrower shall
give the Security Agent prompt (but in any event within fifteen (15) days)
written notice thereof.  Within one
hundred twenty (120) days after the occurrence of such Event of Loss (or, in
the case of an Event of Loss described in clause (vi) of the definition
thereof, within one hundred twenty (120) days after the Chief Financial
Officer, Treasurer, any Vice President or other officer of the Borrower has
received Actual Knowledge of such Event of Loss), as replacement for the Engine
with respect to which such Event of Loss occurred, the Borrower shall subject
to the Lien of this Security Agreement another Pratt & Whitney (also shown
as PRATT & WHITNEY on the International Registry drop-down menu) Model
PW4060 (also shown as PW 4000 94 on the International Registry drop-down menu)
engine (or an engine of the same manufacturer of an equivalent or an improved
model and suitable for installation and use on the Airframe and compatible with
the other Engine mortgaged hereunder) (a “Replacement Engine”),
in each case, free and clear of all Liens (other than Permitted Liens) and
having a value, utility and remaining useful life (without regard to hours,
cycles and maintenance schedule) at least equal to the Engine subject to such
Event of Loss, assuming such Engine was maintained in accordance with the
provisions of this Security Agreement.

 19
 

(b)           [Intentionally omitted.]

(c)           Prior to or at the time of any
substitution pursuant to Section 5.02(a) or 5.02(b), the Borrower will (i)
cause a Security Agreement supplement with respect to such Replacement Engine
to be duly executed and filed for recording pursuant to the Federal Aviation
Act, or the applicable laws, rules and regulations of any other jurisdiction in
which the Airframe may then be registered, and register or consent to the
registration with the International Registry of the international interest in
such Replacement Engine for the benefit of the Security Agent under this
Security Agreement and the Security Agreement supplement referred to above (and
the sale to Borrower of such Replacement Engine shall have been registered on
the International Registry); (ii) furnish the Security Agent with an
opinion or opinions of the Borrower’s counsel with a supporting priority search
certificate issued by the International Registry to the effect that such
Replacement Engine is free and clear of all Liens of record with the FAA and
International Registry (other than Permitted Liens), and that upon execution
and filing of the Security Agreement Supplement or other required document
(which Borrower has caused to be prepared) the Replacement Engine will be
subject to the Lien of the Security Agreement on a first priority (subject to
Permitted Liens) and perfected basis (or, if the Aircraft is not then subject
to U.S. registry, having the same priority and perfection required to be
maintained under the Transaction Documents in respect of the property being so
replaced) and that the registrations with the International Registry required
under the preceding clause (i) have been made; (iii) furnish a certificate
signed by a duly authorized officer of the Borrower stating (A) a
description of the Engine suffering the Event of Loss, which shall be
identified by manufacturer’s serial number, (B) a description of the
Replacement Engine (including the manufacturer’s name and serial number),
(C) that on the date of the Security Agreement supplement relating to the
Replacement Engine, the Borrower will be the owner of such Replacement Engine,
free and clear of all Liens except Permitted Liens and (D) that such
Replacement Engine will on such date meet the requirements of
Section 5.02(a) hereof; (iv) furnish the appropriate instruments, in form
and substance reasonably satisfactory to the Security Agent, assigning to the
Security Agent as additional collateral under this Security Agreement the
benefit of manufacturer’s warranties with respect to such Replacement Engine
and a certificate from a firm of independent aircraft appraisers reasonably
satisfactory to the Security Agent confirming that such Replacement Engine has
at least the value, utility and remaining useful life and is in as good an
operating condition as the corresponding Engine subject to such Event of Loss
(in each case without taking into account hours, cycles and maintenance
schedule); and (v) furnish the Security Agent with a certificate of its
regularly retained independent insurance broker to the effect that the
insurance provisions of Article VI with respect to such Replacement Engine have
been complied with.  Upon compliance by
the Borrower with all of the terms of this Section 5.02(c), such Engine
suffering the Event of Loss shall thereupon cease to be an Engine secured
hereunder, and, at the Borrower’s expense, the Security Agent will execute such
documents and provide its consent to the International Registry as Borrower
shall request to release such Engine from the Lien of this Security
Agreement.  For all purposes hereof, each
such Replacement Engine shall, after such compliance, be deemed an “Engine” hereunder.

 20

Section 5.03         Application
of Payments.  Any payments (other than insurance proceeds
in respect of damage or loss not constituting an Event of Loss, the application
of which is provided for in Article VI or any insurance proceeds in excess
of the Secured Obligations) received at any time by the Borrower or the
Security Agent from any governmental authority or other Person with respect to
an Event of Loss will be applied as follows:

1.             If
payments are received with respect to the Airframe (or the Airframe or any
Engines or engines then installed thereon), after reimbursement of the Security
Agent and the Lenders for reasonable costs and expenses, so much of such
payments up to the amount required to be paid by the Borrower pursuant to
Section 5.01 shall be paid to the Security Agent and applied in reduction
of the Borrower’s obligation to pay such amounts, if not already paid by the
Borrower, or, if already paid by the Borrower, shall be applied to reimburse
the Borrower for its payment of such amounts, and following the foregoing
application, the balance, if any, of such payments shall be paid to the
Borrower; and

2.             If
such payments are received with respect to an Engine under circumstances
contemplated by Section 5.02 hereof, so much of such payments remaining
after reimbursement of the Security Agent for reasonable costs and expenses
shall be paid over to, or retained by, the Borrower, provided that the
Borrower shall have fully performed, or will perform, the terms of
Section 5.02(c) with respect to the Event of Loss for which such payments
are made.

Section 5.04         Requisition
for Use of the Aircraft by the United States Government or the Government of
Registry of the Aircraft.  In
the event of the requisition for use of the Airframe, the Engines or engines
installed on the Airframe by the government of the United States of America or
any other government of registry of the Aircraft or any instrumentality or
agency of any thereof or a CRAF activation, in either case not constituting an
Event of Loss, the Borrower shall promptly notify the Security Agent of such
requisition or activation, and all of the Borrower’s obligations under this
Security Agreement with respect to the Aircraft shall continue to the same
extent as if such requisition or activation had not occurred except to the
extent that the performance or observance of any obligation by the Borrower
shall have been prevented or delayed by such requisition (it being understood
that the foregoing exception shall not diminish the Borrower’s obligations once
any such requisitioned Airframe or Engine has been returned to the
Borrower).  All payments received by the
Security Agent or the Borrower from such government for the use of such
Airframe and Engines or engines shall be paid over to, or retained by, the Borrower.  No such requisition shall result in any
reduction of any payments or interest on the Notes due to the Lenders under the
Transaction Documents.

Section 5.05         Application
of Payments During Existence of Potential Defaults or Events of Default.  Any amount referred to in this Article V
which is payable to or retainable by the Borrower shall not be paid to or
retained by the Borrower if at the time of such payment or retention a
Potential Default or an Event of Default shall have occurred and be continuing,
but shall be held by or paid over to the Security Agent as security for the
obligations of the Borrower (or such Lessee) under this Security Agreement and,
if the Security Agent declares this Security Agreement to be in default
pursuant to Article IX hereof, applied against the Borrower’s obligations
hereunder as and when due.  At such time
as there shall not be continuing any such Potential Default or Event of
Default, such amount shall be paid to the Borrower to the extent not previously
applied in accordance with the preceding sentence.

 21
 

ARTICLE VI

INSURANCE

Section 6.01         Borrower’s
Obligation to Insure.  Borrower shall
comply with, or cause to be complied with, each of the provisions of Annex A,
which provisions are hereby incorporated by reference as if set forth in full
herein.

Section 6.02         Insurance
for Own Account.  Nothing in this
Article VI shall limit or prohibit (a) Borrower from maintaining the
policies of insurance required under this Article VI with higher limits than
those specified in this Article VI or other insurance for its own account or
(b) Security Agent or any Lender from obtaining insurance for its own
account (and any proceeds payable under such separate insurance shall be
payable as provided in the policy relating thereto); provided, however,
that no insurance may be obtained or maintained that would limit or otherwise
adversely affect the coverage of any insurance required to be obtained or
maintained by Borrower pursuant to this Article VI, it being understood that
all salvage rights to the Airframe or Engines shall remain with the Borrower’s
insurers at all times.

Section 6.03         Application
of Insurance Proceeds. (a)  All insurance payments received from policies
maintained by the Borrower as the result of the occurrence of an Event of Loss
with respect to the Airframe or the Engines (whether or not installed thereon)
shall be paid to the Security Agent in an amount equal to the Agreed Value, in
the case of an Event of Loss with respect to the Airframe, or an amount equal
to the amount specified with respect to each Engine in Annex A hereto, in the
case of an Event of Loss with respect to an Engine.  The Security Agent and the Borrower shall
proceed diligently and cooperate fully with each other in the recovery of any
and all proceeds of insurance applicable thereto.

(b)           All insurance payments resulting from any property damage
loss to the Airframe or any Engine or any Part thereof not constituting an
Event of Loss with respect thereto (or constituting an Event of Loss solely
with respect to an Engine) will be paid to the Security Agent (unless
such proceeds do not exceed the Threshold Amount, in which case they will be
paid to Borrower) and applied in
payment for repairs or for replacement property, if not already paid for by
Borrower (or to reimburse Borrower for such repairs or replacements already
paid for by Borrower), and any balance remaining with respect to such loss
shall be paid to Borrower or as otherwise may be directed by Borrower, provided
that any amount which is payable to Borrower under this Section 6.03(b) shall
not be paid to Borrower if at the time of such payment a Potential Default or
an Event of Default shall have occurred and be continuing, but shall be applied
pursuant to Section 6.05 hereof.

Section 6.04         Indemnification by Government in Lieu
of Insurance.  Notwithstanding any
provisions of this Article VI requiring insurance, the Security Agent
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft, indemnification from, or insurance provided by, the government of the
United States of America or any agency or instrumentality thereof the
obligations of which are supported by the full faith and credit of the
government of the United States of America, against such risk in an amount which,
when added to the amount of insurance against such risk maintained by the
Borrower (or any Lessee) shall be at least equal to the amount of insurance
against such risk otherwise required by this Article VI (taking into
account self insurance permitted by Annex A).  The Borrower shall furnish to the Security
Agent and to the Lenders, in advance of attachment of such indemnity or
insurance, a certificate of a responsible financial or legal officer of the
Borrower confirming in reasonable detail the amount and scope of such
indemnification or insurance and that such indemnification or insurance
complies with the preceding sentence.

 22
 

Section 6.05         Application
of Payments During Existence of a Potential Default or an Event of Default.  Any amount referred to in this
Article VI which is payable to or retainable by or to be held for the
benefit of the Borrower (or any Lessee) shall not be paid to or retained by or
held for the benefit of the Borrower (or any Lessee) if at the time of such
payment or retention a Potential Default or an Event of Default shall have
occurred and be continuing, but shall be held by or paid over to the Security
Agent, as security for the obligations of the Borrower under this Security
Agreement and, if the Security Agent shall have declared this Security
Agreement to be in default, applied against the Borrower’s obligations
hereunder as and when due.  At such time
as there shall not be continuing any such Potential Default or Event of
Default, such amount shall be paid to the Borrower to the extent not previously
applied in accordance with the preceding sentence.

ARTICLE VII

OTHER COVENANTS OF BORROWER

Section 7.01         Liens.  The Borrower will not directly or indirectly
create, incur, assume or suffer to exist any Lien on or with respect to the
Aircraft, Airframe or Engines, Borrower’s title thereto or any of Borrower’s
interest therein except (i) the rights of the Borrower as herein provided
(including any Lease permitted pursuant to Section 3.03(g)), the Lien
hereof and any other rights existing pursuant to the Transaction Documents,
(ii) Liens for Taxes of the Borrower (or any Lessee) either not yet due or
being contested in good faith by appropriate proceedings, so long as the
continuing existence of such Liens during such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Airframe or any Engine or
any interest therein, (iii) mechanics’, suppliers’, workers’, repairers’,
airport operators’, air traffic control authorities’, employees’ or other like
Liens arising in the ordinary course of the Borrower’s or any Lessee’s business
for amounts that are not overdue or are being contested in good faith by
appropriate proceedings, so long as there is not, or the continuing existence
of such Liens during such proceedings do not involve, any material risk of
sale, forfeiture or loss of the Airframe or any Engine or any interest therein,
(iv) Liens arising out of any judgment or award against the Borrower (or
any Lessee) so long as within 30 days after entry thereof a stay of execution
shall have been entered or such Lien shall have been discharged or vacated, so
long as such Liens do not result in a material risk of the sale, forfeiture or
loss of the Airframe or any Engine or any interest therein, (v) the rights
of others under agreements or arrangements to the extent expressly permitted by
the terms of Sections 3.03 or Article IV hereof, (vi) salvage or
similar rights of insurers under policies required to be maintained by the
Borrower (or Lessee) under Article VI hereof and (vii) any other Lien
with respect to which the Borrower (or any Lessee) shall have provided a bond
or other security in an amount and under terms reasonably satisfactory to the
Security Agent (Liens described in clauses (i) through (vii) being defined as “Permitted Liens”).  The Borrower will promptly, at its own
expense, take (or cause to be taken) such actions as may be necessary duly to
discharge any Lien not a Permitted Lien if the same shall arise at any time.

 23
 

Section 7.02         Inspection.  At all reasonable times while there are Notes
outstanding, the Security Agent, or its authorized representatives, may inspect
the Aircraft (but in no event more often than once yearly if a Potential
Default or Event of Default shall not have occurred and be continuing) and FAA
(or other applicable governmental authority of the country of registry)
required records of the Borrower (or any Lessee) relating to the maintenance of
the Aircraft (at the inspecting party’s expense (other than in the case of an
inspection occurring while a Potential Default or an Event of Default has
occurred and is continuing, in which case the Borrower shall bear the
reasonable cost of such inspection)) and shall keep any information obtained
thereby confidential as provided in Section 9.9 of the Loan
Agreement.  Any such inspection of the
Aircraft shall be upon not less than three (3) Business Days advance notice
from such inspecting party to the Borrower, shall be during normal business
hours and shall be limited to a visual, walk-around inspection (including
on-board inspection), but shall not include opening any panels, bays or the
like without the express written consent of the Borrower; provided that,
so long as no Potential Default or Event of Default shall have occurred and be
continuing, no exercise of such inspection right shall interfere in any
material respect with the normal operation or maintenance of the Aircraft by,
or the business of, the Borrower (or any Lessee).  Upon the written request of any Lender,
Borrower will give, and will use reasonable efforts to cause any Lessee to
give, such Lender notice of the next scheduled “C” check or other heavy
maintenance visit with respect to the Aircraft or any Engine and afford such
Person an opportunity to be present at the same without interfering (so long as
no Potential Default or Event of Default has occurred and is continuing) in any
material respect with the maintenance, operations or business of the Borrower
or such Lessee.  Borrower shall furnish
to the Security Agent such additional information concerning the location,
condition, use and operation of the Aircraft as the Security Agent may
reasonably request.  Neither the Security
Agent nor any Lender shall have any duty to make any such inspection nor shall
any such Person incur any liability or obligation by reason of not making any
such inspection.

Section 7.03         Amendments,
Supplements, Etc.  Forthwith
upon the execution and delivery of each Security Agreement supplement from time
to time required by the terms hereof and upon the execution and delivery of any
amendment to this Security Agreement, the Borrower at its own expense will
cause such Security Agreement supplement or amendment to be duly filed for
recordation, in accordance with the applicable laws of the government of registry
of the Aircraft.  In addition, the
Borrower will promptly and duly execute and deliver to the Security Agent such
further documents and take such further action as the Security Agent may from
time to time reasonably request in order to more effectively carry out the
intent and purpose of this Security Agreement and the other Transaction
Documents and to establish and protect the rights and remedies created or
intended to be created in favor of the Security Agent hereunder and to maintain
the perfection of the Lien created by this Security Agreement, including,
without limitation, if reasonably requested by the Security Agent, at the
expense of Borrower, (x) upon preparation and execution by the appropriate
party, the filing of all UCC financing and continuation statements and all
similar notices required by applicable law at all times to be kept, filed and
recorded in such manner and in such places as the Security Agent may reasonably
request and (y) the registration or consents to registrations, with the
International Registry of international interests granted for the benefit of
Security Agent under this Security Agreement and any amendment or supplement
hereto.

 24
 

ARTICLE VIII

[RESERVED]

ARTICLE IX

REMEDIES

Section 9.01         General;
Acceleration.  (a)  If
an Event of Default shall have occurred and be continuing and so long as the
same shall be continuing unremedied, then and in every such case, the Security
Agent may exercise any or all of the rights and powers and pursue any and all
of the remedies pursuant to this Article IX; shall have and may exercise
all of the rights and remedies of a secured party under the Uniform Commercial
Code; and may exercise remedies available under the Cape Town Convention.

(b)           If an Event of Default referred to in
Section 7.1(e) or (f) of the Loan Agreement shall have occurred, then and
in every such case the unpaid principal of all Notes then outstanding, together
with interest accrued but unpaid thereon, and all other amounts due to the
holders of the Notes thereunder and hereunder and under the other Transaction
Documents, shall, unless the Security Agent acting upon the instructions of the
Required Lenders shall otherwise direct, immediately and without further act
become due and payable, without presentment, demand, protest or notice, all of
which are hereby waived.

(c)           If any other Event of Default shall
have occurred and be continuing, then and in every such case, the Security
Agent, acting at the direction of the Required Lenders,  may at any time, by written notice or notices
to the Borrower, declare all the Notes to be due and payable, whereupon the
unpaid principal of all Notes then outstanding, together with accrued but
unpaid interest thereon, and all other amounts due to the holders of the Notes
thereunder, hereunder and under the other Transaction Documents, shall
immediately and without further act become due and payable without presentment,
demand, protest or other notice, all of which are hereby waived.

(d)           If the principal of the Notes shall
have become due and payable pursuant to this Section 9.01, there shall
also become due and payable, to the fullest extent permitted by law, to each
holder of a Note upon demand, without presentment, protest or notice, all of
which are hereby waived, any LIBOR Breakage Costs payable in connection
therewith.

(e)           Subject to the consent of the
Required Lenders, each Lender shall be entitled, at any sale pursuant to this
Article IX, to credit against any purchase price bid at such sale by such
Lender all or any part of the unpaid obligations owing to such Lender and
secured by the Lien of this Security Agreement. 
The Security Agent and the Lenders shall, upon any such purchase,
acquire good title to the property so purchased, to the extent permitted by
applicable law, free of all rights of redemption.

 25
 

(f)            In addition, the Borrower shall be
liable, except as otherwise provided herein and without duplication of amounts
payable hereunder, for any and all reasonable and actual legal fees and other
costs and expenses incurred by the Security Agent and the Lenders (acting under
common counsel) in connection with the enforcement of any of their respective
rights and remedies hereunder.

Section 9.02         Repossession
and Sale.  At any time during
the continuation of an Event of Default, the Security Agent, in addition to any
rights it might otherwise have at law, may do either or both of the
following:  (a)  upon the
written demand of the Security Agent and at the Borrower’s expense, cause the
Borrower to return promptly, and the Borrower shall return promptly, all or any
part of the Aircraft as the Security Agent may so demand, to the Security Agent
at a major airport on the Borrower’s route system in one of the forty eight
(48) contiguous states of the United States of America chosen by the Security
Agent, or, alternatively, the Security Agent, at its option, may enter upon the
premises where all or any part of the Aircraft is located and take immediate
possession of and remove the same by summary proceedings or otherwise (and, at
the Security Agent’s option, store the same at the Borrower’s premises until
disposal thereof by the Security Agent), all without liability accruing to the
Security Agent for or by reason of such entry or taking of possession or
removal other than for restoration of property damaged by such taking of
possession or removal, unless the Borrower does not cooperate in releasing the
Aircraft; provided  that during any
period the Aircraft is activated under CRAF in accordance with the provisions
of Section 3.03 hereof and in the possession of the government of the
United States of America or an instrumentality or agency thereof, the Security
Agent shall not, on account of any Event of Default, be entitled to do any of
the following in such manner as to limit the Borrower’s control under this
Security Agreement (or any Lessee’s control under any Lease) of the Airframe or
any Engine installed thereon, unless at least sixty (60) days’ (or such lesser
period as may then be applicable under the Military Airlift Command program of the
government of the United States of America) prior written notice of default
hereunder shall have been given by the Security Agent by registered or
certified mail to the Borrower (and any Lessee) with a copy addressed to the
Contracting Office Representative for the Military Airlift Command of the
United States Air Force under the contract with the Borrower (or any Lessee)
relating to the Aircraft; or (b) with or without taking possession thereof,
sell all or any part of the Aircraft at public or private sale, as the Security
Agent may determine, or otherwise dispose of, hold, use, operate or lease to
others, as the Security Agent, in its sole discretion, may determine, all free
and clear of any rights of the Borrower, except as hereinafter set forth in this
Article IX.

At any sale of the Aircraft or any part thereof
pursuant to this Article IX, the Security Agent and, subject to
Section 9.01(e), any Lender, may bid for and purchase such property.  The Security Agent agrees to give the
Borrower commercially reasonable notice of the date fixed for any public sale
of the Airframe or any Engine or of the date on or after which will occur the
execution of any contract providing for any private sale (together with details
thereof).  Except as otherwise expressly
provided above, no remedy referred to in this Article IX is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to the Security Agent at law or in
equity; and the exercise or beginning of exercise by the Security Agent of any
one or more of such remedies shall not preclude the simultaneous or later
exercise by the Security Agent of any or all of such other remedies.  No express or implied waiver by the Security
Agent of any Event of Default shall in any way be, or be construed to be, a
waiver of any future or subsequent Event of Default.

 

 26

Section 9.03  Taking of Aircraft.  (a)  If an Event of Default shall
have occurred and be continuing and the Notes have been accelerated pursuant to
Section 9.01(b) or 9.01(c) hereof, at the request of the Security Agent
the Borrower shall promptly execute and deliver to the Security Agent such
instruments of title and other documents as the Security Agent may deem
necessary or advisable to enable the Security Agent or an agent or
representative designated by the Security Agent, at such time or times and place
or places as the Security Agent may specify, to obtain possession of all or any
part of the Estate to which the Security Agent shall at the time be entitled
hereunder.  If the Borrower shall for any
reason fail to execute and deliver such instruments and documents after such
request by the Security Agent, the Security Agent may (i) obtain a
judgment conferring on the Security Agent the right to immediate possession and
requiring the Borrower to execute and deliver such instruments and documents to
the Security Agent, to the entry of which judgment the Borrower hereby
specifically consents, and (ii) pursue all or part of the Estate wherever
such Estate may be found and may enter any of the premises of the Borrower
wherever it may be or be supposed to be and search for and take possession of
and remove the same.  All reasonable
expenses of obtaining such judgment or of pursuing, searching for and taking
such property shall, until paid, be secured by the Lien of this Security
Agreement.

(b)           Upon every such taking of possession,
the Security Agent may, from time to time, at the expense of the Estate, make
all such expenditures for maintenance, insurance, repairs, replacements,
alterations, additions and improvements to and of the Estate, as it may
reasonably deem proper.  In each such
case, the Security Agent shall have the right to maintain, use, operate, store,
lease, control or manage the Estate and to carry on the business and to
exercise all rights and powers of the Borrower relating to the Estate, as the Security
Agent shall reasonably deem best, including the right to enter into any and all
such agreements with respect to the maintenance, insurance, use, operation,
storage, leasing, control, management or disposition of the Estate or any part
thereof as the Security Agent may reasonably determine; and the Security Agent
shall be entitled to collect and receive directly all tolls, rents, revenues,
issues, income, products and profits of the Estate and every part thereof.  Such tolls, rents, revenues, issues, income,
products and profits shall be applied to pay the expenses of the use,
operation, storage, leasing, control, management or disposition of the Estate
and of conducting the business thereof, and of all maintenance, repairs,
replacements, alterations, additions and improvements, and to make all payments
which the Security Agent may be required or may elect to make, if any, for
taxes, assessments, insurance or other proper and reasonable charges upon the
Estate or any part thereof (including the employment of engineers and
accountants to examine, inspect and make reports upon the properties and books
and records of the Borrower), and all other payments which the Security Agent
may be required or authorized to make under any provision of this, as well as just
and reasonable compensation for the services of the Security Agent, and of all
persons properly engaged and employed by the Security Agent.

(c)           In connection with any sale or other
disposition of the Aircraft or any other part of the Estate, the Security Agent
may disclaim or modify any or all of the warranties specified in Section 9-610
of the Uniform Commercial Code as in effect in any relevant jurisdiction at any
relevant time, and the Borrower hereby irrevocably acknowledges that such
waiver or modification is commercially reasonable.  The Borrower shall be entitled to furnish to
any Person to which the Aircraft or other part of the Estate is sold or
disposed any such warranty so disclaimed or modified as part of any such sale
or disposition.

 27
 

Section 9.04 Discontinuance of Proceedings.  In case the Security Agent shall have
instituted any proceeding to enforce any right, power or remedy under this
Security Agreement by foreclosure, entry or otherwise, and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Security Agent, then and in every such case, the
Security Agent and the Borrower shall, subject to any determination in such
proceedings, be restored to their former positions and rights hereunder with
respect to the Estate, and all rights, remedies and powers of the Security
Agent shall continue as if no such proceedings had been instituted.

Section 9.05 Waiver of Past Defaults.  Upon written instructions from the Required
Lenders, the Security Agent shall waive any past or continuing Event of Default
hereunder and its consequences and upon any such waiver such Event of Default
shall cease to exist and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of this Security Agreement, but no such
waiver shall extend to any subsequent or other Event of Default or impair any
right consequent thereon; provided, however, that in the absence
of written instructions from all Lenders, the Security Agent shall not waive
any Event of Default (i) arising from the Borrower’s failure to pay the
principal of, or interest on, or other amounts due under, any Note then
outstanding, or (ii) in respect of a covenant or provision hereof which,
under the proviso to the first sentence of Section 9.1 to the Loan
Agreement, cannot be waived without the consent of each Lender.

Section 9.06 Remedies Cumulative.  Each and every right, power and remedy given
to the Security Agent specifically or otherwise in this Security Agreement
shall be cumulative and shall be in addition to every other right, power and
remedy herein specifically given or now or hereafter existing at law, in equity
or by statute, and each and every right, power and remedy whether specifically
herein given or otherwise existing may be exercised from time to time and as
often and in such order as may be deemed expedient by the Security Agent, and
the exercise or the beginning of the exercise of any power or remedy shall not
be construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy. 
No delay or omission by the Security Agent in the exercise of any right,
remedy or power or in the pursuit of any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of
the Borrower or to be an acquiescence therein.

Section 9.07 Payment After Event of Default, etc.  All payments received and amounts held or
realized by the Security Agent after an Event of Default shall have occurred
and so long as such Event of Default shall be continuing, or after the Security
Agent shall foreclose or enforce this Security Agreement, or after the Notes
shall have become due and payable as provided in Section 9.01(b) or (c),
as well as all payments or amounts then held by the Security Agent as part of
the Estate, shall be promptly distributed by the Security Agent in the
following order of priority:

first, so much of such payments or
amounts as shall be required to reimburse the Security Agent for any tax,
expense, charge or other loss (including, without limitation, all amounts to be
expended at the expense of, or charged upon the tolls, rents, revenues,

 28
 

issues, income, products
and profits of, the property included in the Estate pursuant to
Section 9.03(b)) incurred by the Security Agent hereunder (to the extent
not previously reimbursed) (including, without limitation, the reasonable
expenses of any sale, taking or other proceeding, reasonable attorneys’ fees
and expenses, court costs, and any other reasonable expenditures incurred or
expenditures or advances made by the Security Agent in the protection, exercise
or enforcement of any right, power or remedy or any damages sustained by the
Security Agent, liquidated or otherwise, upon such Event of Default) shall be
applied by the Security Agent in reimbursement of such expenses;

second, so much of such payments or
amounts remaining as shall be required to reimburse the Lenders in full for
payments made pursuant to Section 10.03 (to the extent not previously
reimbursed) of this Security Agreement shall be distributed to the Lenders, and
if the aggregate amount remaining shall be insufficient to reimburse all such
payments in full, it shall be distributed ratably, without priority of any Note
over any other, in the proportion that the aggregate amount of the unreimbursed
payments made by each such Lender pursuant to Section 10.03 of this
Security Agreement bears to the aggregate amount of the unreimbursed payments
made by all Lenders pursuant to Section 10.03 of this Security Agreement;

third, so much of such payments or
amounts remaining as shall be required to pay in full to the Lenders all other
amounts payable pursuant to the indemnification provisions of the Loan
Agreement or pursuant to any other provision of any Transaction Document and
secured hereunder (other than amounts payable pursuant to clause “second” or “fourth” of this Section 9.07) to the Lenders and
remaining unpaid, including LIBOR Breakage Costs, shall be distributed to the
Lenders, and if the aggregate amount remaining shall be insufficient to pay all
such amounts in full, it shall be distributed ratably, without priority of any
Note over any other, in the proportion that the aggregate amount due each
Lender under this clause “third”
bears to the aggregate amount due all Lenders under this clause “third”;

fourth, so much of such payments or
amounts remaining as shall be required to pay in full all accrued but unpaid
interest to the date of distribution on the Notes, and thereafter the aggregate
unpaid principal amount of the Notes, shall be distributed to the Lenders, and
if the aggregate amount remaining shall be insufficient to pay all such amounts
in full, it shall be distributed ratably, without priority of any one Note over
any other, in the proportion that the principal amount of and all accrued but
unpaid interest to the date of distribution on, each Note bears to the
aggregate principal amount of and all accrued but unpaid interest to the date
of distribution on all Notes;

fifth, so much of such payments or
amounts remaining as shall be required to pay the corresponding amounts
respecting the Other Security Agreements as described in clause “first” above shall be paid to each such Security Agent under
such Other Security Agreements;

 29
 

sixth, so much of such payments or
amounts remaining as shall be required to pay the corresponding amounts
respecting the Other Security Agreements as described in clause “second” above shall be paid to each such Security Agent
under such Other Security Agreements;

seventh, so much of such payments or
amounts remaining as shall be required to pay the corresponding amounts
respecting the Other Transaction Documents as described in clause “third” above shall be paid to the holders of the Other Notes
under such Other Transaction Documents;

eighth, so much of such payments or
amounts remaining as shall be required to pay the corresponding amounts
respecting the Other Notes as described in clause “fourth”
above shall be paid to the holders of the Other Notes;

ninth, the balance, if any, of such
payments or amount remaining thereafter shall be distributed to the Borrower or
as a court of competent jurisdiction shall direct.

ARTICLE X

DUTIES OF THE SECURITY AGENT

Section 10.01 Notice of Event of Default.  (a)  In the event the Security
Agent shall have Actual Knowledge of an Event of Default or of a Potential
Default arising from a failure to pay principal or interest, the Security Agent
shall forthwith give facsimile notice thereof to the Borrower and the Lenders
(promptly confirmed by mail to such Persons). 
Subject to the terms of Sections 9.04 and 10.03, the Security Agent
shall take such action, or refrain from taking such action, with respect to any
such Event of Default (including with respect to the exercise of any rights or
remedies hereunder) as the Security Agent shall be instructed in writing by the
Required Lenders.  Subject to the
provisions of Section 10.03, if the Security Agent shall not have received
instructions as above provided within 20 calendar days after giving notice of
such Event of Default to the Lenders, the Security Agent may, subject to
instructions thereafter received pursuant to the preceding provisions of this
Section 10.01, take such action, or refrain from taking such action, but
shall be under no duty to take or refrain from taking any action, with respect
to any such Event of Default as it shall determine advisable in the best
interests of the Lenders and shall use the same degree of care and skill in
connection therewith as a prudent person would use under the circumstances in
the conduct of such person’s own affairs; provided that the Security
Agent may not sell the Airframe or any Engine without the consent of the
Required  Lenders.  In the event the Security Agent shall at any
time commence to foreclose or otherwise enforce this Security Agreement, the
Security Agent shall forthwith notify the Lenders and the Borrower.  For all purposes of this Security Agreement,
in the absence of Actual Knowledge on its part, the Security Agent shall not be
deemed to have knowledge of any Potential Default, or any Event of Default
unless notified in writing by the Borrower or one or more Lenders.  This Section 10.01, however, is subject
to the condition that, if at any time after the principal of the Notes shall
have become due and payable pursuant to Article IX and before any judgment
or decree for the payment of the money so due, or any thereof, shall be
entered, all overdue payments of interest upon the Notes and all other amounts
payable under the Notes (except the principal of the Notes which by such
declaration shall have become payable) shall have been duly paid, and every
other Potential Default and Event of Default with respect to any covenant or
provision of this Security Agreement shall have been cured, then and in every
such

 30
 

case the Required Lenders may (but shall not be
obligated to), by written instrument filed with the Security Agent, rescind and
annul such acceleration and its consequences; but no such rescission or
annulment shall extend to or affect any subsequent Potential Default or Event
of Default or impair any right consequent thereon.

(b)           Other Notices.  The Security Agent will furnish to each
Lender promptly upon receipt thereof, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and other
instruments furnished to the Security Agent under any Transaction Document to
the extent the same shall not have been otherwise directly distributed to the
Lenders pursuant to the express provision of any other Transaction Document.

Section 10.02 Action Upon Instructions.  (a)  Subject to the terms of
Sections 9.05, 10.01 and 10.03, upon the written instructions at any time
and from time to time of the Required Lenders, the Security Agent shall take
such of the following actions as may be specified in such instructions:  (i) exercise such election or option, or
make such decision or determination, or give such notice, consent, waiver or
approval or exercise such right, remedy or power or take such other action
hereunder or under any other Transaction Document or in respect of any part or
all of the Estate as shall be specified in such instructions and which shall
not be inconsistent with the terms hereof; (ii) take such action with
respect to, or to preserve or protect, the Estate (including the discharge of
Liens) as shall be specified in such instructions and as are consistent with
this Security Agreement; and (iii) take such other action in respect of
the subject matter of this Security Agreement as is consistent with the terms
hereof and the other Transaction Documents. 
The Security Agent will authorize and file or cause to be filed such
continuation statements with respect to financing statements relating to the
security interest created hereunder in the Security Agreement Estate as may be
specified from time to time in written instructions of the Required Lenders
(which instructions may, by their terms, be operative only at a future date and
which shall be accompanied by the execution form of such continuation statement
so to be filed).

(b)           If any Event of Default shall have
occurred and be continuing, on request of the Required Lenders, and subject to
the terms and conditions set forth in this Security Agreement, the Security
Agent shall exercise such remedies under Article IX as shall be specified
in such request.  The Security Agent
agrees to provide to the Lenders concurrently with (or, if commercially
reasonable, prior to) such action by the Security Agent, notice of such action
by the Security Agent, provided that the failure to give any such notice
to such Lenders shall not affect the validity of such action.

Section 10.03 Indemnification.  The Security Agent shall not be required to
take any action or refrain from taking any action under Sections 10.01
(other than the first sentence thereof) or 10.02 or Article IX unless the
Security Agent shall have been indemnified by the Lenders against any
liability, cost or expense (including counsel fees) which may be incurred in connection
therewith.  The Security Agent shall not
be under any obligation to take any action under this Security Agreement and
nothing in this Security Agreement contained shall require the Security Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity

 31
 

against such risk or liability is not reasonably
assured to it.  The Security Agent shall
not be required to take any action under Section 10.01 (other than the
first sentence thereof) or 10.02 or Article IX, nor shall any other provision
of this Security Agreement be deemed to impose a duty on the Security Agent to
take any action, if the Security Agent shall have been advised by counsel that
such action is contrary to the terms hereof or is otherwise contrary to law.

Section 10.04 No Duties Except as Specified in Security
Agreement or Instructions. 
The Security Agent shall not have any duty or obligation to use,
operate, store, lease, control, manage, sell, dispose of or otherwise deal with
the Aircraft or any other part of the Estate, or to otherwise take or refrain
from taking any action under, or in connection with, this Security Agreement or
any part of the Estate, except as expressly provided by the terms of this
Security Agreement or as expressly provided in written instructions from
Lenders as provided in this Security Agreement; and no implied duties or
obligations shall be read into this Security Agreement against the Security
Agent.  The Security Agent agrees that it
will, in its individual capacity and at its own cost and expense promptly take
such action as may be necessary to duly discharge all Security Agent Liens on
any part of the Estate.

Section 10.05 No Action Except Under Loan Agreement,
Security Agreement or Instructions. 
The Security Agent agrees that it will not use, operate, store, lease,
control, manage, sell, dispose of or otherwise deal with the Aircraft or any
other part of the Estate except in accordance with the powers granted or
reserved to, or the authority conferred upon, the Security Agent pursuant to
this Security Agreement and in accordance with the express terms hereof.

ARTICLE XI

THE SECURITY AGENT

Section 11.01 Acceptance of Duties.  The Security Agent accepts the duties hereby
created and applicable to it and agrees to perform the same but only upon the
terms of this Security Agreement and agrees to receive and disburse all monies
constituting part of the Estate in accordance with the terms hereof.  The Security Agent, in its individual
capacity shall not be answerable or accountable under any circumstances, except
(a) for its own willful misconduct or gross negligence or failure to use
ordinary case in the receipt, handling and disbursement of funds, (b) as
provided in the last sentence of Section 10.04, and (c) for
liabilities that may result from the nonperformance of any covenant of the
Security Agent in the Loan Agreement or any other Transaction Document.

Section 11.02 Absence of Duties.  Except in accordance with written
instructions furnished pursuant to Section 10.01 or 10.02, and except as
provided in, and without limiting the generality of, Sections 10.03 and
10.04, the Security Agent shall have no duty (i) to see to any
registration of the Aircraft or any recording or filing of this Security
Agreement or any other document, or to see to the maintenance of any such
registration, recording or filing, (ii) to see to any insurance, whether
or not the Borrower shall be in default with respect thereto, (iii) to see
to the payment or discharge of any Lien of any kind against any part of the
Estate other than Security Agent Liens, (iv) to confirm, verify or inquire
into the failure to receive any financial statements of the Borrower or
(v) to inspect the Aircraft at any time or ascertain or inquire as to

 32
 

the performance or observance of any of the Borrower’s
covenants under this Security Agreement with respect to the Aircraft.  Except as expressly otherwise provided herein
and in the Loan Agreement, the Lenders shall not have any duty or
responsibility hereunder, including, without limitation, any of the duties
mentioned in clauses (i) through (v) above.

Section 11.03  No Representations or Warranties as to
Aircraft or Documents.  THE
SECURITY AGENT DOES NOT MAKE AND SHALL NOT BE DEEMED TO HAVE MADE AND EXPRESSLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, VALUE, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN,
QUALITY, DURABILITY, OPERATION, MERCHANTABILITY, CONSTRUCTION, PERFORMANCE OR
FITNESS FOR USE OR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE
ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR AS TO THE QUALITY
OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT OR ANY ENGINE OR ANY PART
THEREOF OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR
ANY ENGINE OR ANY PART THEREOF WHATSOEVER. 
The Security Agent does not make and shall not be deemed to have made
any representation or warranty as to the validity, legality or enforceability
of this Security Agreement or the Notes or as to the correctness of any
statement contained in any thereof.  The
Lenders make no representation or warranty hereunder whatsoever.

Section 11.04  No Segregation of Monies; No Interest.  Subject to the provisions of Article XII, any
monies paid to or retained by the Security Agent pursuant to any provision
hereof and not then required to be distributed to any Lender need not be
segregated in any manner except to the extent required by law, and may be
deposited under such general conditions as may be prescribed by law, and the
Security Agent shall not (except as otherwise provided in Section 12.01)
be liable for any interest thereon; provided that any payments received
or applied hereunder by the Security Agent shall be accounted for by the
Security Agent so that any portion thereof paid or applied pursuant hereto
shall be identifiable as to the source thereof.

Section 11.05  Reliance; Agents; Advice of Counsel.  The Security Agent shall not incur liability
to anyone in acting upon any signature, instrument, notice, resolution,
request, consent, order, certificate, report, opinion, bond or other document
or paper believed by it to be genuine and believed by it to be signed by the
proper party or parties.  The Security
Agent may accept a copy of a resolution of the Board of Directors of any party
to the Loan Agreement, certified by the Secretary or an Assistant Secretary
thereof as duly adopted and in full force and effect, as conclusive evidence that
such resolution has been duly adopted and that the same is in full force and
effect.  As to the aggregate unpaid
principal amount of Notes outstanding as of any date and any other amounts owed
under such Notes, the Borrower may for all purposes hereof rely on a
certificate signed by any Vice President or other authorized officer of the
Security Agent.  As to any fact or matter
relating to the Borrower the manner of ascertainment of which is not
specifically described herein, the Security Agent may for all purposes hereof
rely on a certificate, signed by a duly authorized officer of the Borrower, as
to such fact or matter, and such certificate shall constitute full protection
to the Security Agent for any action taken or omitted to be taken by it in good
faith in reliance thereon.  The Security
Agent shall assume, and shall be fully

 33
 

protected in assuming, that the Borrower is authorized
to enter into this Security Agreement and to take all action to be taken by it
pursuant to the provisions hereof, and shall not inquire into the authorization
of the Borrower with respect thereto.  In
the administration of the trust hereunder, the Security Agent may execute any
of the trusts or powers hereof and perform its powers and duties hereunder
directly or through agents or attorneys and may, at the expense of the Estate,
advise with counsel, accountants and other skilled persons to be selected and
retained by it, and the Borrower and the Security Agent shall not be liable for
anything done, suffered or omitted in good faith in accordance with the written
advice or written opinion of any such counsel, accountants or other skilled
persons.

Section 11.06 Further
Assurances; Financing Statements.  At
any time and from time to time, upon the request of the Security Agent, the
Borrower shall promptly and duly execute and deliver any and all such further
instruments and documents as may be specified in such request and as are
necessary or desirable to perfect, preserve or protect the security interests
created or intended to be created hereby, or to obtain for the Security Agent
the full benefit of the specific rights and powers herein granted, including,
without limitation, the authorization and delivery of Uniform Commercial Code
financing statements and continuation statements with respect thereto, or
similar instruments relating to the perfection of the security interests
created or intended to be created hereby.

ARTICLE XII

INVESTMENT OF FUNDS

Section 12.01 Investment
of Funds.  Any moneys paid to or
retained by the Security Agent that are required to be paid to the Borrower or
applied for the benefit or at the direction of the Borrower, but which the
Security Agent is entitled to hold under the terms hereof pending the
occurrence of some event or the performance of some act (including, without
limitation, the remedying of a Potential Default or Event of Default), shall,
until paid to Borrower or otherwise applied in accordance with the terms of the
Transaction Documents, be invested by the Security Agent as Borrower (or if an
Event of Default shall have occurred and is continuing, the Security Agent) may
from time-to-time direct in writing (or orally and confirmed in writing) (it
being understood that absent such a direction, there shall be no obligation to
invest such moneys) in (i) marketable securities (a) issued or
directly and unconditionally guaranteed as to interest and principal by the
United States government or (b) issued by any agency or instrumentality of
the United States the obligations of which are backed by the full faith and
credit of the United States, in each case maturing within one year after such
date; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any instrumentality
thereof, in each case maturing within one year after such date and having, at
the time of the acquisition thereof, the highest rating obtainable from either
S&P or Moody’s; (iii) commercial paper not issued by the Borrower
maturing no more than one year after such date and having, at the time of the
acquisition thereof, a rating of at least A-2 from S&P or at least P-2 from
Moody’s; (iv) certificates of deposit or bankers’ acceptances maturing
within one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least “adequately
capitalized” (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of
not less than

 34
 

$500,000,000; (v) shares of any money market
mutual fund that (a) has at least 95% of its assets invested continuously
in the types of investments referred to in clauses (i) and
(ii) above, (b) has net assets of not less than $500,000,000, and
(c) has the highest rating obtainable from either S&P or Moody’s; and
(vi) auction rate preferred securities that have the highest rating
obtainable from either S&P or Moody’s and with a maximum reset date at
least every 30 days  There shall be
promptly remitted to Borrower or its order (but no more frequently than
monthly) any gain (including interest received) realized as a result of any
such investment (net or any, fees, commissions and other expenses, if any,
incurred in connection with such investment) unless a Potential Default or an
Event of Default shall have occurred and be continuing.  The Borrower shall be responsible for any net
loss realized as a result of any such investment and shall reimburse the
Security Agent on demand.  All
investments held by the Security Agent pursuant to this Section 12.01
shall either be (a) registered in the name of, payable to the order of, or
specially endorsed to, the Security Agent, or (b) held in an Eligible Account.

ARTICLE XIII

SUCCESSOR SECURITY AGENTS

Section 13.01 Resignation of Security Agent; Appointment of
Successor.  (a)  The
Security Agent or any successor thereto may resign at any time without cause by
giving at least 30 calendar days’ prior written notice to the Borrower and each
Lender, such resignation to be effective upon the acceptance of the duties of
the Security Agent hereunder by a successor Security Agent.  In addition, the Required Lenders may at any
time remove the Security Agent without cause by an instrument in writing
delivered to the Borrower and the Security Agent, such removal to be effective
upon the acceptance of the duties of the Security Agent hereunder by a
successor Security Agent.  In the case of
the resignation or removal of the Security Agent, the Required Lenders may
appoint a successor Security Agent by an instrument signed by such
Lenders.  If a successor Security Agent
shall not have been appointed within 30 calendar days after such notice of
resignation or removal, the Security Agent, the Borrower or any Lender may
apply to any court of competent jurisdiction to appoint a successor Security
Agent to act until such time, if any, as a successor shall have been appointed
as above provided.  The successor Security
Agent so appointed by such court shall immediately and without further act be
superseded by any successor Security Agent appointed as above provided within
one year from the date of the appointment by such court.

(b)           Any successor Security Agent, however
appointed, shall execute and deliver to the Borrower and to the predecessor
Security Agent an instrument accepting such appointment (including, consenting
to the registration with the International Registry of an assignment of
international interests registered for the benefit of the predecessor Security
Agent relating to the Airframe and any Engines), and thereupon such successor
Security Agent, without further act, shall become vested with all the estates,
properties, rights, powers and duties of the predecessor Security Agent
hereunder in the trusts hereunder applicable to it with like effect as if
originally named the Security Agent herein; but nevertheless upon the written
request of such successor Security Agent, such predecessor Security Agent shall
execute and deliver an instrument transferring to such successor Security
Agent, upon the trusts herein expressed applicable to it, all the estates,
properties, rights and powers of such predecessor Security Agent, and such
predecessor Security Agent shall duly assign, transfer, deliver and pay over to
such successor Security Agent all monies or other property then held by such
predecessor Security Agent hereunder.

 35
 

(c)           Any successor Security Agent, however
appointed, shall, so long as no Event of Default shall be continuing, be
reasonably acceptable to the Borrower, be a “citizen of the United States”
within the meaning of Section 40102(a)(15) of the Federal Aviation Act and
either (x) shall be a Lender or (y) shall be a bank or trust company having a
combined capital and surplus of at least $500,000,000, if there be such an
institution willing, able and legally qualified to perform the duties of the
Security Agent hereunder upon reasonable or customary terms.

(d)           Any corporation into which the
Security Agent may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Security Agent shall be a party, subject to the terms of
paragraph (c) of this Section, be the Security Agent under this Security
Agreement without further act.

ARTICLE XIV

[RESERVED]

ARTICLE XV

MISCELLANEOUS

Section 15.01 Termination of Security Agreement.  Upon payment in full of the principal of and
interest on, Prepayment Fee (if any) and LIBOR Breakage Costs (if any), and all
other amounts due under all Notes and the payment and performance in full of
all other Secured Obligations then due and, if a Potential Default or an Event
of Default shall have occurred and be continuing, payment in full of the Other
Secured Obligations then due and unpaid, the Security Agent shall execute and
deliver to or as directed in writing by the Borrower an appropriate instrument
releasing the Aircraft and the Estate from the Lien of this Security Agreement,
and the Security Agent shall execute and deliver such instrument as aforesaid
and, at the Borrower’s expense, will execute and deliver such other instruments
or documents as may be reasonably requested by the Borrower to give effect to
such release; provided, however, that this Security Agreement and
the trusts created hereby shall earlier terminate and this Security Agreement
shall be of no further force or effect and the rights of the Lenders and the
Security Agent shall terminate (and the Security Agent shall release, by an
appropriate instrument, the Estate and the Aircraft from the Lien of this
Security Agreement) upon any sale or other final disposition by the Security
Agent of all property part of the Estate and the final distribution by the
Security Agent of all monies or other property or proceeds constituting part of
the Estate in accordance with the terms hereof. 
In addition, in connection with the release of the Lien of this Security
Agreement, if an international interest in favor of the Security Agent with
respect to the Airframe and any Engine subject to the Security Agreement shall
have been registered with the International Registry, the Security Agent shall
discharge or consent in writing to the discharge of such registration.  Except as aforesaid otherwise provided, this
Security Agreement and the security interests created hereby shall continue in
full force and effect in accordance with the terms hereof.

 36
 

Section 15.02 No Legal Title to Estate in Lenders.  No Lender shall have legal title to any part of
the Estate.  No transfer, by operation of
law or otherwise, of any Note or other right, title and interest of any Lender
in and to the Estate or hereunder shall operate to terminate this Security
Agreement or entitle such Lender or any successor or transferee of such Lender
to an accounting or to the transfer to it of legal title to any part of the
Estate.

Section 15.03 Sale of Aircraft by the Security Agent is
Binding.  Any sale or other
conveyance of the Aircraft by the Security Agent made pursuant to the terms of
this Security Agreement shall bind the Lenders and shall be effective to
transfer or convey all right, title and interest of the Security Agent, the
Borrower and the Lenders in and to such Aircraft.  No purchaser or other grantee shall be required
to inquire as to the authorization, necessity, expediency or regularity of such
sale or conveyance or as to the application of any sale or other proceeds with
respect thereto by the Security Agent.

Section 15.04 Security Agreement for Benefit of the Security
Agent and Lenders.  Nothing in
this Security Agreement, whether express or implied, shall be construed to give
to any person other than the Borrower, the Security Agent, and the Lenders any
legal or equitable right, remedy or claim under or in respect of this Security
Agreement.

Section 15.05 No Action Contrary to Borrower’s Rights;
Quiet Enjoyment. 
Notwithstanding any of the provisions of this Security Agreement to the
contrary, so long as no Event of Default shall have occurred and be continuing,
the Security Agent agrees that it will not take any action in violation of the
Borrower’s rights, including the right to quiet enjoyment, possession and use
of the Aircraft in accordance with the terms of this Security Agreement by
Borrower or its Lessee.

Section 15.06 Notices.  Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands, authorizations,
directions, consents, waivers or documents provided or permitted by this
Security Agreement to be made, given, furnished or filed shall be in writing,
mailed by certified mail, postage prepaid, or by confirmed telex, or by
confirmed facsimile or electronic mail and (i) if to the Security Agent,
addressed to it at its office at 300 South Grand Avenue, Los Angeles, CA 90071,
Attention: Kathleen Park, facsimile: 213-613-3566, or (ii) if to the
Borrower, addressed to it at its office at 3375 Koapaka Street, Honolulu, HI
96819, Attention: Executive Vice President, Chief Financial Officer and
Treasurer, facsimile: 808-835-3699, or (iii) if to any Lender, addressed
to such party at such address as such party shall have furnished by notice to
the Borrower and the Security Agent, or, until an address is so furnished,
addressed to the address of such party (if any) set forth on the signature
pages of the Loan Agreement.  Whenever
any notice in writing is required to be given by the Borrower or the Security
Agent or any Lender to any of the other of them, such notice shall be deemed
given and such requirement satisfied when such notice is received, if such
notice is received, if such notice is mailed by certified mail, postage
prepaid, or is sent by courier service, or by confirmed facsimile addressed as
provided above.  Any party hereto may
change the address to which notices to such party will be sent by giving notice
of such change to the other parties to this Security Agreement.

 37

 

Section 15.07       Authorization of Financing Statements.  Pursuant
to any applicable law, the Borrower authorizes the Security Agent (which shall
be deemed a permissive right and
not an obligation) to file or record financing statements and other filing or
recording documents or instruments with respect to the Estate without the
signature of the Borrower in such form and in such offices as the Security
Agent and the Required Lenders determine appropriate to perfect the security
interests of the Security Agent under this Security Agreement.

Section 15.08       Severability.  To the fullest extent permitted by law, any
provision of this Security Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

Section 15.09       No Oral Modifications or Continuing Waivers.
 No terms or provisions of this Security
Agreement may be changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by the party or other
Person against whom enforcement of the change, waiver, discharge or termination
is sought and any other party or other Person whose consent is required
pursuant to this Security Agreement.  Any
waiver hereof shall be effective only in the specific instance and for the
specific purpose for which such waiver was given.

Section 15.10       Successors and Assigns.  This Security Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, provided that Borrower may not assign or transfer its
rights and obligations under this Security Agreement without Security Agent’s
prior written consent.

Section 15.11       Headings.  The headings of the various Articles and
Sections herein and in the table of contents hereto are for the
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.

Section 15.12       Governing Law; Counterpart Form.  (a) 
THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICT OF LAWS
THAT MIGHT APPLY THE LAWS OF ANY OTHER JURISDICTION.  THIS SECURITY AGREEMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK.  Each of the
Borrower and Security Agent hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to
this Security Agreement or any other Transaction Document, or for recognition
or enforcement of any judgment, and each of any such action or proceeding may
be heard and determined in such New York State or, to the extent permitted by
law, in such federal court.  Each party
hereto further irrevocably consents to the service of process out of any of the
aforementioned courts in any action or proceeding by the making of copies
thereof by registered or certified mail, postage prepaid, to it at its address 

 38
 

specified pursuant to Section 15.06, such service to
become effective thirty (30 days after such mailing.  Each of the Borrower and Security Agent
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. 
Nothing in this Security Agreement shall affect any right that any party
hereto may otherwise have to bring any action or proceeding relating to this
Security Agreement or the other Transaction Documents against any other party
hereto, or such party’s properties, in the courts of any jurisdiction.

(b)           Each
party hereto hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Security Agreement
brought in the courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.

Section 15.13       WAIVER OF JURY TRIAL.  EACH OF THE BORROWER AND THE SECURITY AGENT
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 15.14       Counterparts.  This Security Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.

*          *          *

 39
 

IN WITNESS WHEREOF,
the parties hereto have caused this Security Agreement to be duly executed by
their respective officers thereunto duly authorized, as of the day and year
first above written, and acknowledge that this Security Agreement has been made
and delivered in the City of New York and shall become effective only upon such
execution and delivery.

	
  

  	
   

  	
  HAWAIIAN AIRLINES, INC.,

  
	
   

  	
   

  	
  as Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Its:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Its:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.I.T LEASING CORPORATION,

  
	
   

  	
   

  	
  as Security
  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Its:

  

 

 

 40

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