SUPPLEMENT TO MASTER PURCHASE AGREEMENT

ARTICLE 1

SUBJECT MATTER OF SALE

1.1

Subject to the provisions of the Agreement and this Supplement PA 0436-5, Bombardier will sell and Buyer will purchase twelve (12) additional Bombardier DHC-8Q Series 400 model DHC-8-402 aircraft manufactured pursuant to Detail Specification number DS8-400 Rev. 1 Amend NC, Detail Specification for the DHC-8-402 dated April 2002, listed in Schedule 1 attached hereto, as same may be modified from time to time in accordance with the Agreement and this Supplement PA 0436-5 (the “Specification”) as supplemented to reflect the incorporation of the Buyer selected optional features (“Buyer Selected Optional Features”) set forth in Schedule 2 hereto (individually or collectively the “Aircraft”).

ARTICLE 2.0

PRICE

ARTICLE 3.0

PAYMENT

3.1

Bombardier has previously received a deposit for certain of the Aircraft, as set forth in Article 3.2.2 to this Supplement.

3.2

Payment Terms:

3.2.1

Buyer shall make payment or cause payment to be made for each of the Aircraft as follows:

(a)

[***] of the net Aircraft Purchase Price upon execution of this Supplement PA 0436-5;

(b)

[***] of the net Aircraft Purchase Price fifteen (15) months prior to its Scheduled Delivery Date;

(c)

[***] of the net Aircraft Purchase Price twelve (12) months prior to its Scheduled Delivery Date;

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

(d)

[***] * of the net Aircraft Purchase Price nine (9) months prior to its Scheduled Delivery Date;

(e)

[***] of the net Aircraft Purchase Price six (6) months prior to its Scheduled Delivery Date; and

(f)

the balance of the Aircraft Purchase Price shall be received on or before the Delivery Date of such Aircraft to Buyer.

3.2.2

The sum of [***] United States Dollars paid by Buyer pursuant to Supplement No. PA 0436-1, as amended, and currently held by Bombardier against the current [***] in Supplement No. MPA0436-1 and [***] in Supplement No. MPA0436-3 thereunder, (the “Transfer Deposit”), shall be transferred and retained by Bombardier against the Aircraft purchased pursuant to this Supplement No. MPA 0436-5. The Transfer Deposit shall be applied against Buyer’s obligations as they become due under this Agreement.

3.3

For the sole purpose of the calculations set forth in Article 3.2.1 (a) through (f) above, the Aircraft Purchase Price shall be the Aircraft Purchase Price [***].

3.4

Buyer shall make all payments due under this Agreement in electronic funds transfer by deposit on or before the due date to Bombardier’s account in the following manner:

ARTICLE 4.0

DELIVERY PROGRAM

4.1

The Aircraft shall be offered for inspection and acceptance to Buyer at Bombardier’s facility in Downsview, Ontario during the months set forth below: (the “Scheduled Delivery Dates”).

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

ARTICLE 5.0

BUYER INFORMATION

5.1

Pursuant to Article 7.1 of the Agreement, Buyer will provide the information set forth in Article 7.1 of the Agreement as soon as practicable following execution of this Supplement PA 0436-5.

ARTICLE 6.0

NON-EXCUSABLE DELAY

6.1

If delivery of the Aircraft is delayed by causes not excused under Article 13.1 of the Agreement (a “Non-Excusable Delay”), Bombardier shall pay Buyer [***] for any such delayed Aircraft.

6.2

The period of days referred to in Article 14.3 of the Agreement is sixty (60) days.

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

8.1

Technical Data Provided

8.2

List Of Technical Data

*

Note: for items 5, 6, and 7, Bombardier may provide in electronic format, if available at the time of delivery.

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

8.3

Shipment

8.4

Revision Service

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

8.5

Vendor Manuals

ARTICLE 9.0 

WARRANTY

9.1

The period of months referred to in Annex B, Article 1.2.1 (a) of the Agreement is forty-eight (48) months.

9.2

The period of months referred to in Annex B, Article 1.2.1 (b) of the Agreement is forty-eight (48) months.

9.3

The period of months referred to in Annex B, Article 1.2.1 (c) of the Agreement is forty-eight (48) months.

9.4

The period of months referred to in Annex B, Article 1.2.1 (d) of the Agreement is forty-eight (48) months.

ARTICLE 10.0

 COVERED COMPONENTS

(a)

Upper and lower wing skins and stringers between front to rear spars;

(b)

Wing spar caps, webs and uprights;

(c)

Main box (front spar to rear spar) wing ribs;

(d)

Main box splice plates, fittings;

(e)

Wing to nacelle structural attachments;

(f)

Wing to fuselage structural attachments;

(g)

Support structure in the wing to spoilers, spoiler actuators and ailerons;

(h)

Main gear support structure; and

(i)

Engine support fittings.

(a)

External surface skins and doublers, stringers, circumferential frames between forward pressure bulkhead and aft pressure dome, excluding all systems, insulation, lining and decorative clips and brackets;

(b)

Window and windshield structure but excluding the windows and windshields;

(c)

Primary structure frames around body openings for passenger doors, cargo/baggage doors and emergency exits;

(d)

Nose gear support structure;

(e)

Floor beams and supporting structure in the flight compartment and cabin including the lavatory, excluding seat tracks in both areas;

(f)

Forward pressure bulkhead and aft pressure dome; and

(g)

Floor beams and supporting structure in the baggage compartment providing same is not damaged through abusive handling of baggage or cargo.

(a)

Fuselage external surface skins, stringers and frames between aft pressure dome and rear fin spar frame;

(b)

Fin skins and stiffeners between front and rear spars;

(c)

Fin front, centre and rear spar caps, webs and uprights;

(d)

Main box (front spar to rear spar) fin ribs;

(e)

Fin hinge and actuator support structure for rudder and elevator;

(f)

Fore rudder structure and hinge and actuator brackets; and

(g)

Aft rudder forward cell structure and hinge and radius rod brackets.

(a)

Tailplane skins and stringers;

(b)

Tailplane spar caps, webs and uprights;

(c)

Tailplane main box (front spar to rear spar) ribs;

(d)

Tailplane hinge support structure for elevator;

(e)

Elevator forward cell structure and hinge and actuator brackets; and

(f)

Horizontal tail structure attachments.

For and on behalf of

For and on behalf of

HORIZON AIR INDUSTRIES, INC.

BOMBARDIER INC.

Bombardier Aerospace

Rudi Schmidt

David MacNeil

Vice President and Treasurer

Senior Account Executive, Contracts

Regional Aircraft

Date:___________________

Date__________________

Ross Gray

Director, Contracts

Regional Aircraft

Date:_______________

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

1.

Economic adjustment will be calculated using the following Economic Adjustment Formula:

Pp

= Aircraft Purchase Price;

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

2.

For the purpose of the Economic Adjustment Formula and the calculation of the economic adjustment:

(a)

the Canadian labour index shall be the North American Industrial Classification System (N.A.I.C.S.) Code 3364 for Average Hourly Earnings (including overtime) for Aerospace Products and Parts manufacturing (Canada) published by Statistics Canada in Catalogue 72-002 “Employment Earnings and Hours”, Table 6;

(b)

the U.S. labour index shall be the index published by the U.S. Department of Labor, Bureau of Labor Statistics in the North American Industrial Classification System (N.A.I.C.S.) Code 3364 for Average Hourly Earnings of Production Workers for Manufacturing, Aerospace products and parts (US).; (The U.S. labour index provided in the Bureau of Labor Statistics (B.L.S.) Code 372 for Average Hourly Earnings for Aircraft and Parts as published by the U.S. Department of Labor, Bureau of Labor Statistics in “Employment and Earnings” Table B-15, has been discontinued)

(c)

the material index shall be the index provided in the Producer Price Index for Code 10 Metals and Metals Products as published by the U.S. Department of Labor, Bureau of Labor Statistics in “Producer Prices and Price Indexes” Table 6;

(d)

the indices used for the calculation of the Aircraft Purchase Price of each Aircraft shall be the last indices received by Bombardier in the month prior to the delivery of the relevant Aircraft; and

(e)

in the event that Bombardier shall be prevented from calculating the Aircraft Purchase Price of each Aircraft due to any delay in the publication of the required indices, Bombardier shall use the last provisionally published indices, and in the event that provisional indices are not available, Bombardier shall extrapolate from the last three (3) months of published indices.

3.

In the calculation of the Aircraft Purchase Price the following guidelines in respect of decimal places shall apply:

(a)

All average indices in the Economic Adjustment Formula shall be calculated to the applicable one or two decimal places;

(b)

The Economic Adjustment Formula shall be calculated to four decimal places; and

(c)

The Aircraft Purchase Price resulting from the Economic Adjustment Formula shall be corrected to the nearest dollar.

4.

In the event that any index referred to be discontinued or restated, or if the methodology employed by the relevant authority in determining the index is substantially revised, then a mutually agreed to index will be substituted prior to delivery of the Aircraft.

5.

Pursuant to Article 4.2 of the Agreement, the Base Price of each Aircraft shall be adjusted for economic fluctuations. Such adjustment shall be based on the Economic Adjustment Formula (the “Formula”) as defined in Article 4.2, and more particularly set forth in this Schedule above.

1.0

Upon delivery of and payment in full for each Aircraft, Bombardier will issue to Buyer a credit memorandum in the amount of [***] *. Each credit memorandum shall be subject to escalation to the date of delivery in accordance with the Economic Adjustment Formula provided in Schedule 3 to this supplement [***] and shall be used by Buyer to reduce the balance of the Aircraft Purchase Price payable on delivery of each such Aircraft.

2.0

Buyer acknowledges that the amount of the credit memorandum referenced in Article 1.0 above has been offered to Buyer [***].

3.0

In the event of the termination of the Agreement, this Schedule shall become automatically null and void.

4.0

The provisions of this Schedule are personal to Buyer and shall not be assigned or otherwise disposed of by Buyer without the prior written consent of Bombardier.

5.0

This Schedule constitutes an integral part of the Agreement and subject to the terms and conditions contained therein.

HORIZON AIR INDUSTRIES, INC.

BOMBARDIER INC.

Bombardier Aerospace

Rudi Schmidt

David MacNeil

Vice President and Treasurer

Senior Account Executive, Contracts

Regional Aircraft

Date: October      , 2005

Date: October      , 2005

Ross Gray

Director, Contracts, Americas

Regional Aircraft

Date: October      , 2005

*

Indicates that certain information contained herein has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

1.0

AIRCRAFT CONFIGURATION