LOAN AGREEMENT

Section   Page

SCHEDULES

5.18 (a)(1) UCC Information

5.18 (a)(2) UCC Information Changes

EXHIBITS

This LOAN AGREEMENT (“ Agreement ”) is entered into as of October 10, 2008, among MOKULELE FLIGHT SERVICE, INC., a Hawaii corporation (the “ Borrower ”), each of the Subsidiaries of the Borrower from time to time party hereto (together with any future direct and indirect Subsidiaries of the Borrower, the “ Guarantors ”), and REPUBLIC AIRWAYS HOLDINGS INC., a Delaware corporation (the “ Lender ”).

WHEREAS, the Borrower desires that the Lender extend, and the Lender is willing to provide, a Term Loan on the Effective Date in an aggregate principal amount not to exceed $8,000,000 on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows:

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

“ Administrative Services Agreement ” means a copy of the administrative services agreement dated as of October 8, 2008 attached hereto as Exhibit E .

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

“ Agreement ” has the meaning specified in the preamble.

“ Aircraft and Engine Mortgage ” means any and/or all of the aircraft and engine mortgage and security agreements executed and delivered pursuant to Section 4.01(a)(viii).

“ Airframes ” means any and/or all of the Cessna model 208B aircraft owned or leased by any Loan Party.

“ Airline Services Agreement ” means that certain Amended and Restated Airline Services Agreement dated October 8, 2008 between Borrower and Shuttle America Corporation, a copy of which is attached hereto as Exhibit D .

“ Airline Services Agreement Obligations ” means any payment obligations that are outstanding and owed to Republic by the Borrower pursuant to the terms of the Airline Services Agreement.

“ Applicable Rate ” means a per annum rate equal to 10.00%.

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

“ Bank Control Agreements ” means each deposit account control agreement, dated as of the Effective Date, among the Borrower, the Lender and each respective financial institution as listed on Schedule 5.20 and each deposit account control agreement, dated as of the Effective Date, among each Loan Party other than the Borrower, the Lender and each respective financial institution at which such Loan Party maintains any deposit account.

“ Bankruptcy Code ” means Chapter 11 of 11 U.S.C. §§ 101 et seq. (as heretofore and hereafter amended).

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

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

“ Cape Town Convention ” means the official English language text of the Cape Town Convention on International Interests in Mobile Equipment and the Cape Town Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment prepared under the joint auspices of the International Institute for the Unification of Private Law and the International Civil Aviation Organization, which was signed in Cape Town South Africa on November 16, 2001.

“ Capital Expenditures” means, with respect to the Borrower and its Subsidiaries, for any period the sum of (without duplication) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower or any Subsidiary during such period for items that would be classified as “property or equipment” or comparable items on the consolidated balance sheet of the Borrower and its Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized.

“ Capital Lease Obligations ” means, as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

“ Capital Stock ” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“ Cash Equivalents ” means any of the following types of Investments, to the extent owned by any Loan Party free and clear of all Liens (other than Liens created under the Collateral Documents):

(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 no more than 180 days after such date; (ii) commercial paper issued by domestic corporations or institutions, states or municipalities maturing no more than 180 days after such date if such commercial paper, at the time of the acquisition thereof, has a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iii) certificates of deposit or bankers’ acceptances maturing no more than 180 days after such date and issued or accepted by the 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 net assets of not less than $1,000,000,000 and that has a rating of at least AA from S&P or at least Aa from Moody’s; and (iv) shares of any money market mutual fund registered with the SEC under Rule 2a-7 that guarantees 100% same day liquidity and has net assets not less than $1,000,000,000.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time.

“ CERCLIS ” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

“ Change of Control ” means an event or series of events by which:

 (a)           any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) (other than the Lenders and its Affiliates) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has a right acquire (such right, an “ option right ”), whether such option right is exercisable immediately or only after the passage of time), directly or indirectly, of 20% or more of the voting power or economic interests of the Equity Interests of Borrower, and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or

(b)           William J. Boyer, Jr. ceases to own at least 30% of the Equity Interests of the Borrower (except if the foregoing occurs due solely to the exercise by the Lender of the conversion option provided by Section 2.08 ).

“ Code ” means the Internal Revenue Code of 1986.

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

“ Collateral Documents ” means, collectively, the provisions of Article X of this Agreement, the Aircraft and Engine Mortgages, the Spare Parts Security Agreement, the Bank Control Agreements, the Pledge Agreement and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Lender to secure any of the Obligations or any control agreement entered into by a Loan Party with respect to a Controlled Account.

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

“ Control ” means either (x) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise or (y) the ownership of 15% of a Person.  “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Controlled Account ” means a deposit account or securities account of any Loan Party at a depository bank or other financial institution acceptable to the Lender that has entered into account control agreements in form and substance satisfactory to the Lender, and otherwise established in a manner satisfactory to the Lender.

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

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

“ Disposition ” or “ Dispose ” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, including Slot trades.

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

“ DOT ” means the United States Department of Transportation.

“ Effective Date ” means the first date on which all of the conditions precedent set forth in Section 4.01 are satisfied or waived.

“ Engines ” means any and/or all of the aircraft engines owned by any Loan Party.

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

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

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

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

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

“ Equipment ” has the meaning specified in Section 10.01(a) .

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

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

“ Excluded Assets ” shall mean:

(a)           any permit or license issued by a Governmental Authority to any Loan Party or any agreement or property subject to any agreement to which any Loan Party is a party, in each case, only to the extent and for so long as the terms of such permit, license or agreement or any Laws applicable thereto, validly prohibit the creation by such Loan Party of a security interest in such permit, license, agreement or property in favor of the Lender (after giving effect to Sections 9-406(d), 9-407(a), 9-408(a) or 9-409 of the UCC (or any successor provision or provisions) or any other applicable law (including the Bankruptcy Code) or principles of equity); and

(b)           any Loan Party’s leasehold interest in any aircraft, airframe, engine or part to the extent that the applicable lease validly prohibits the creation by such Loan Party of a security interest in such leasehold interest, and any aircraft, airframe, engine or part subject to a Lien permitted under Section 7.01(b);

provided, however, that Excluded Assets shall not include any Proceeds (as defined in the UCC), substitutions or replacements of any Excluded Assets referred to in clause (a) or (b) (unless such Proceeds, substitutions or replacements would constitute Excluded Assets referred to in clause (a) or (b)).

“ Existing Indebtedness ” means the Indebtedness set forth on Schedule 7.03 .

 “ FAA ” means the Federal Aviation Administration.

“ FRB ” means the Board of Governors of the Federal Reserve System of the United States.

“ GAAP ” means generally accepted accounting principles in the United States as in effect from time to time.

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

“ Guarantors ” means, collectively, each of the existing and future direct and indirect Subsidiaries of the Borrower.

“ Guaranty ” has the meaning specified in Section 11.01 .

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

“ Guaranteed Obligations ” has the meaning specified in Section 11.01 .

“Hangar Property ” means that certain land area situated on the South Ramp at the Honolulu International Airport, designated as Space No. 009-165 and subject to the Hangar Facilities Lease between the State of Hawaii, Department of Transportation, as lessor, and the Borrower, as lessee, (State Lease No. DOT-A-06-0011) and any structures thereon.

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

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

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

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

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

(d)           all obligations of such Person to pay the deferred purchase price of property or services (other than current trade accounts payable in the ordinary course of business);

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

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

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

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

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

“ Indemnified Liabilities ” has the meaning set forth in Section 12.05 .

“ Indemnitees ” has the meaning set forth in Section 12.05 .

“ International Interest ” has the meaning as expressed in the Cape Town Convention.

“ Interest Payment Date ” means the last Business Day of each month and the Maturity Date.

“ Investment ” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor incurs debt of the type referred to in clause (h) of the definition of “ Indebtedness ” set forth in this Section 1.01 in respect of such Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit or all or a substantial part of the business of, such Person.

“ IRS ” means the United States Internal Revenue Service.

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

“ Leis Letter ” means the letter, in form satisfactory to the Lender, from Dorvin D. Leis to the Lender (x) representing to the Lender that he has converted all of his outstanding loans to the Borrower into equity in the Borrower and (y) covenanting that he will make an equity contribution to the Borrower during 2009 in the amount of [*] .

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

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

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

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

“ Material Adverse Effect ” means (a) a material adverse effect upon the business, condition (financial or otherwise), operations, performance, properties or prospects of the Loan Parties taken as a whole; (b) a material impairment of the rights and remedies of the Lender under any Loan Document, or of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party; or (d) a material impairment of the Collateral; provided that a termination of the Mesa Code Share Agreement shall not be deemed a “Material Adverse Effect” for purposes of this Agreement.

“ Maturity Date ” means the earlier of (a) the two year anniversary of the Effective Date and (b) the acceleration of the maturity of the Term Loan in accordance with Section 8.02 .

“Mesa Code Share Agreement” means that certain Code Share Agreement dated as of February 9, 2007 between Mesa Airlines, Inc. and Mokulele Air Group, Inc.

“Minimum Proceeds Amount ” means with respect to any offering of Equity Interests by the Borrower, Net Cash Proceeds greater than $100,000 for each .5% interest in the Borrower on a fully diluted basis (calculated immediately prior to such offering).

“ Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto.

“ Multiemployer Plan ” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“ Net Cash Proceeds ” means with respect to the issuance of any capital stock or other Equity Interest by the Borrower, the excess of (i) the cash received in connection with such issuance over (ii) the underwriting discounts and commissions, and other out-of-pocket expenses, actually incurred by such Loan Party in connection with such issuance.

“ NPL ” means the National Priorities List under CERCLA.

“ Obligations ” means (i) all advances to, and debts, liabilities, obligations, performance obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Term Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue (or would accrue but for the commencement of any case or proceeding under any Debtor Relief Law) after the commencement by or against any Loan Party or any Affiliate thereof of any case or proceeding under any Debtor Relief Laws naming such Person as the debtor in such case or proceeding, regardless of whether such interest and fees are allowed claims in such case or proceeding and (ii) any Airline Services Agreement Obligations.

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

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

“ Participant ” has the meaning specified in Section 12.07(c) .

“ Permitted Liens ” means Liens described (i) in Sections 7.01(a) , and (c) (to the extent such tax liens do not result in a material risk of loss of the applicable asset), (ii) in   Section 7.01(d) , with respect to Airframes and Engines, to the extent permitted by the Aircraft and Engine Mortgages, and (iii) on Schedule 7.01 .

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

“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“ Pledge Agreement ” means that certain Pledge Agreement by William J. Boyer, Jr. and Golden Pacific Land Corporation in favor of the Lender, dated as of the Effective Date.

“ Pledged Collateral ” has the meaning set forth in Section 10.01.

“ Pledged Debt ” means the Indebtedness set forth opposite each Loan Party’s name on and as otherwise described in Schedule II .

“ Pledged Equity ” means the shares of stock and other Equity Interests set forth opposite each Loan Party’s name on and as otherwise described in Schedule I .

“ Pledged Spare Parts ” has the meaning assigned to such term in the Spare Parts Security Agreement.

“Republic ” means Republic Airways Holdings Inc.

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

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

“ Routes ” means each right, license, permit, and other authorization whereby any Loan Party is entitled or permitted to fly between two or more points, either within one country or between two countries.

“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

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

“ Secured Credit Documents ” means, collectively, (i) the Loan Documents and (ii) the Airline Services Agreement.

“Silver Loan” has the meaning specified in Section 6.19.

“Smith Complaint” means the complaint filed with the Hawaii Civil Rights Commission bearing the caption Stephanie L. Smith v. Mokulele Flight Service, Inc. and Rob McKinney, as an individual; FEP No. WH-13805, EEOC Charge No. 37B-2007-00076.

“ Spare Part ” has the meaning specified in the Spare Parts Security Agreement.

“ Spare Parts Security Agreement ” has the meaning specified in Section 4.01(a)(ix).

“ Subordination Agreement ” means each of the Subordination Agreements, dated as of the Effective Date, between the Lender and the subordinated creditor referred to therein and acknowledged by the Borrower.

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

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

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

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

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

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

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

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

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

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

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

1.06   Uniform Commercial Code .

Unless otherwise defined herein, terms used in Article X that are defined in the UCC shall have the meanings assigned to them in the UCC.

2.01   Making of the Term Loan

2.03   Prepayments

The Borrower may not without prior written consent of the Lender, prepay the Term Loan in whole or in part; provided   that , the Borrower may prepay the Term Loan, in whole or in part (x) upon 20 days notice to the Lender (subject to the right of  the Lender, during such period, (I) to exercise its right under Section 2.08 with respect to the amount of the Term Loan proposed to be prepaid, and (II) in the event such prepayment is to occur utilizing any Indebtedness referenced in clause (y)(ii) below, the Lender may elect to reduce the interest rate on that portion of the Term Loan proposed to be so prepaid to the interest rate so offered, and to the extent of such exercise or election by the Lender, as applicable, such prepayment may not occur) and (y) so long as the amount utilized for such prepayment represents either (i) the Net Cash Proceeds of an issuance of additional Equity Interests pursuant to Section 7.17 or (ii) Indebtedness that: (a) is at an interest rate at least 1% lower than the Applicable Rate; and(b) is owed to a Person who is not an Affiliate of the Borrower.

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

4.01   Effective Date Conditions .  The obligation of the Lender to make the Term Loan on the Effective Date pursuant to Sections 2.01(a) and 2.01(b) shall become effective on the first date on which all of the following conditions precedent shall have been satisfied to the satisfaction of the Lender:

The Loan Parties jointly and severally represent and warrant to the Lender that:

5.01   Existence, Qualification and Power; Compliance with Laws; “Air Carrier Status” .  Each Loan Party (a) is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents and (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in the case of clause (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.  The Borrower (and no other Loan Party) is an “air carrier” within the meaning of Section 40102 of Title 49 and holds a certificate under Section 41102 of Title 49 or commuter air carrier authorizations.  Each such Person holds air carrier operating certificates issued pursuant to Chapter 447 of Title 49.  The Borrower is an “air carrier” and is  a “citizen of the United States” as defined in Section 40102(a)(15) of Title 49 (a “ United States Citizen ”).  The Borrower possesses all necessary governmental certificates, franchises, licenses, permits, rights, authorizations and concessions and consents which are material to the operation of the Routes flown by it and the conduct of its business and operations as currently conducted.

5.02   Authorization; No Contravention .  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party are within such Loan Party’s corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law.  Except as set forth on Schedule 5.02 , no Loan Party is in material breach of any material Contractual Obligation.

5.03   Governmental Authorization; Other Consents .  Except for any review by the Department of Transportation in respect of a substantial change of operations and/or a substantial change of ownership of the Borrower pursuant to 14 C.F.R. Part 204, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (i) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents or (iii) the perfection or maintenance of the Liens created under the Collateral Documents except in each case for such consents, exemptions, authorizations, approvals, actions, notices and filings listed on Schedule 5.03 hereto, all of which have been duly obtained, taken, given or made and are in full force and effect.

5.04   Binding Effect .    This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes and each other Loan Document constitutes a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

5.05   [Intentionally Omitted] .

5.06   Litigation .  Except for the Smith Complaint, there are no actions, suits, proceedings, claims or disputes pending or, to the best knowledge of the Borrower, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of the Borrower’s Subsidiaries or against any of their properties or revenues that either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.  The performance of any action by any Loan Party required or contemplated by any of the Loan Documents is not restrained or enjoined (either temporarily, preliminary or permanently).  There are no actions, suits or proceedings pending that challenge the validity of any Loan Document or the applicability or enforceability of any Loan Document which seek to void, avoid, limit, or otherwise adversely affect the security interest created by or in any Loan Document or any payment made pursuant thereto.

5.07   No Default .  No Default has occurred and is continuing or would result from the execution, delivery or performance of this Agreement or any other Loan Document or the transactions contemplated hereby or thereby.

5.08   Ownership of Property

(a)   The Collateral subject to each Aircraft and Engine Mortgage and the Spare Parts Security Agreement is free and clear of all Liens other than Permitted Liens.

(b)   No Loan Party (other than the Borrower) currently owns or will own any interest in any Spare Part.

(c)   No Loan Party (other than the Borrower) currently owns or will own any interest in any Engine or Airframe.

5.09   Environmental Compliance

(a)           None of the properties currently owned or operated by any Loan Party, and, to the best of the Borrower’s knowledge, formerly owned or operated by any Loan Party, is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list; there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or, to the best of the Borrower’s knowledge, on any property formerly owned or operated by any Loan Party, which treatment, storage or disposal could individually, or in the aggregate reasonably be expected to have a Material Adverse Effect; there is no asbestos or asbestos-containing material on any property currently owned by any Loan Party as could individually or in the aggregate reasonably be expected to have a Material Adverse Effect; and to the best of the Borrower’s knowledge Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party in each case as could individually or in the aggregate reasonably be expected to have a Material Adverse Effect.

(b)           No Loan Party is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party have been disposed of in a manner not reasonably expected to result in Material Adverse Effect.

5.10   Insurance .  The properties of the Loan Parties are insured or reinsured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the applicable Loan Party operates.

5.11   Taxes .  Except as set forth on Schedule 5.11, the Loan Parties have filed all Federal, state and other material tax returns and reports required to be filed, and have paid or made adequate provision for payment of all Federal, state and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets that are due and payable, except, in each case, those which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and for which adequate reserves have been provided in accordance with GAAP.  There is no proposed tax assessment against any Loan Party that would, if made, have a Material Adverse Effect.  No Loan Party is party to any tax sharing agreement with any Person.  No Loan Party is aware of any potential Liens on their properties, income or assets as a result of any nonpayment of any such taxes.

5.12   ERISA Compliance . The Borrower has no Plans.

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

5.14   Margin Regulations; Investment Company Act; 

5.15   Disclosure .  All information that has been made available to the Lender by the Borrower or any of its representatives in connection wi