DEBTOR-IN-POSSESSION CREDIT AND SECURITY AGREEMENT

 

DEBTOR-IN-POSSESSION CREDIT AND SECURITY AGREEMENT

 

This DEBTOR-IN-POSSESSION CREDIT AND SECURITY AGREEMENT (this “ Credit Agreement ”) is entered into as of December 27, 2005 by and among ATA AIRLINES, INC., an Indiana corporation and a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code (as hereinafter defined) (the “ Borrower ”), ATA HOLDINGS CORP. (the “ Parent ”), each of the Subsidiaries of the Parent from time to time party hereto, and MATLINPATTERSON ATA HOLDINGS LLC, a Delaware limited liability company (the “Lender”).

 

PRELIMINARY STATEMENTS

 

1.             On October 26, 2004 (the “ Petition Date ”), the Borrower and each of the Guarantors (as hereinafter defined) in existence on the Petition Date filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Indiana (such court, together with any other court having jurisdiction over the Cases from time to time, the “ Bankruptcy Court ”) for relief, and commenced cases (the “ Cases ”), under the Bankruptcy Code (as hereinafter defined) and have continued in the possession of their assets and in the management of their businesses pursuant to Sections 1107 and 1108 of the Bankruptcy Code.

 

2.             The Borrower has requested that the Lender enter into a term credit facility in an aggregate principal amount not to exceed Thirty Million Dollars ($30,000,000), all of the Borrower’s obligations under which are to be jointly and severally guaranteed by the Guarantors.

 

3.             To provide guarantees and security for the repayment of the loans and the payment of the other Obligations (as hereinafter defined), the Borrower and the Guarantors will provide the Lender the following, each as more fully described herein:

 

A.            a joint and several guaranty from the Guarantors of the due and punctual payment and performance of the Obligations of the Borrower hereunder as set forth in Section 10 of this Credit Agreement; and

 

B.            priority Liens (as hereinafter defined) on the Collateral (as hereinafter defined) as set forth in Section 2.10 and Section 9 of this Credit Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

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

 

“ Account Collateral ” has the meaning specified in Section 9.01(g) .

 

 

“ Adjusted EBITDARR ” means, for any period, for the Borrower and its Subsidiaries, an amount equal to (i) Consolidated EBITDARR less (ii) Capital Expenditures.

 

“ 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.

 

“ After-Acquired Intellectual Property ” has the meaning specified in Section 9.04(h)(vi) .

 

“ Agent ” has the meaning specified in Section 9.06(b) .

 

“ Air Transportation Stabilization Act ” means the Air Transportation Safety and System Stabilization Act, P.L. 107-42, and any regulations issued pursuant thereto as the same may be amended from time to time.

 

“ AIR-21 Slots ” means those Slots at LGA and DCA which pursuant to the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“ AIR-21 ”) and the orders of the DOT pursuant thereto cannot be freely transferred by the Loan Parties.

 

“ Amended Reorganization Plan ” means a Chapter 11 plan of reorganization filed in the Cases by the Reorganizing Debtors, containing the conditions set forth in Schedule 1.01(A)  and otherwise satisfactory to the Lender.

 

“ Approval Order ” means an order of the Bankruptcy Court approving (A) the Disclosure Statement; (B) Procedures for the Solicitation; (C) the Transfer and Settlement; (D) the Codeshare Agreement; (E) the Gate Restructuring Term Sheet; (F) this Credit Agreement; and (G) the ATSB Term Sheet, and granting other ancillary relief.

 

“ ATSB ” means the Air Transportation Stabilization Board, created pursuant to Section 102(b) of the Air Transportation Stabilization Act.

 

“ ATSB Cash Use Order ” means the “Second Interim and Final Order Authorizing Debtors’ Use of Cash Collateral and Use, Sale and Lease of Other Pre-Petition Collateral dated December 10, 2004” (Docket No. 718) entered by the Bankruptcy Court with respect to the Cases as such order may be extended, amended, supplemented or modified from time to time.

 

“ ATSB Collateral ” has the meaning ascribed to such term in the DIP Financing Order.

 

“ ATSB Lender Parties ” has the meaning assigned to such term in the ATSB Cash Use Order.

 

“ ATSB Secured Claim ” means the “Secured Claim” as defined in the Order Approving Motion on Shortened and Limited Notice to Approve ATSB Lenders Settlement Agreement entered by the Bankruptcy Court on April 19, 2005.

 

“ ATSB Term Sheet ” means the Term Sheet for the Amended and Restated ATSB Loan Agreement, a copy of which is attached hereto as Exhibit E .

 

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

 

“ Attributable Indebtedness ” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in respect of any operating leases of any Person, an amount equal to seven times the rental payments thereunder scheduled to be paid during the 12 months following such date and (c) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

 

“ Audited Financial Statements ” means the audited consolidated balance sheet of the Borrower, the Parent and its Subsidiaries for the fiscal year ended December 31, 2004, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto.

 

“ Bankruptcy Code ” means the Bankruptcy Reform Act of 1978, as codified in title 11 of the United States Code, 11 U.S.C. Sections 101-1330, as now in effect or hereafter amended.

 

“ Bankruptcy Court ” has the meaning specified in Preliminary Statement 1 to this Credit Agreement.

 

“ 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 Dallas, Texas, Indianapolis, Indiana or New York, New York are authorized or required by law to close.

 

“ Business Plan ” means the Reorganizing Debtors’ OpPlan 6, which is the operating plan for scheduled airline passenger services and all military charter services attached hereto as Exhibit C , as such plan may be amended, supplemented and otherwise modified from time to time with the consent of the Lender.

 

“ Capital Expenditures ” means, with respect to any Person for any period, any expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations).  For purposes of this definition, the purchase price of equipment that is purchased simultaneously with, or within three months after, the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount by which such purchase price exceeds the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such insurance proceeds, as the case may be.

 

“ Card Receivables ” means credit card receivables of any of the Loan Parties to the extent and for so long as such credit card receivables are subject to a security interest in favor of any credit card receivables processor.

 

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“ Carve-Out ” means the following amounts:  (i) quarterly fees required to be paid to the United States Trustee pursuant to 28 U.S.C. ss. 1930(a)(6) and any fees payable to the Clerk of the Bankruptcy Court, (ii) prior to the occurrence of an Event of Default (a) the reasonable expenses of any member of the Creditors Committee which are allowed by the Bankruptcy Court and (b) unpaid professional fees and disbursements incurred prior to the occurrence of an Event of Default by the professionals retained, pursuant to Sections 327 or 1103(a) of the Bankruptcy Code, the Loan Parties or the Creditors Committee which shall be allowed by the Bankruptcy Court (before or after the Event of Default), provided that such fees and disbursements for services rendered after an Event of Default do not exceed, the amounts included in the Business Plan for the period in which rendered, and (iii) following the occurrence of an Event of Default, the reasonable expenses of any member of the Committee and unpaid professional fees and disbursements by the professionals retained pursuant to Sections 327 or 1103(a) of the Bankruptcy Code, by the Loan Parties and the Creditors Committee incurred after the occurrence of an Event of Default which shall be allowed by the Bankruptcy Court not to exceed five hundred thousand dollars ($500,000) in the aggregate; provided, however that the Carve-Out shall not include any fees or expenses incurred by any party in connection with the investigation (including discovery proceedings), initiation or prosecution of any claims, causes of action, adversary proceedings or other litigation against the Lender.

 

“ Cases ” has the meaning specified in Preliminary Statement 1 to this Credit Agreement.

 

“ Chicago Construction Loan ” means two separate loans made to the Borrower by the City of Chicago to fund a jet bridge extension at MDW evidenced by a Loan Agreement, dated as of March 17, 2003 by and among the City of Chicago and the Borrower.

 

“ Chicago Gates ” means all of the Borrower’s right, title, and interest in and to the Chicago Midway Airport Lease, solely with respect to all of the Borrower’s right, title and interest thereunder in and to the eight (8) gates identified at Chicago Midway Airport as Gates 4a, 4b, 10, 12, 16, 18 and 19 in Concourse A, including such gates’ associated ramp space and service facilities at Chicago Midway Airport, provided that upon the effectiveness of the transactions contemplated in the Gate Restructuring Term Sheet, the Borrower’s right, title and interest under the Chicago Midway Airport Lease shall be in and to one (1) gate identified at Chicago Midway Airport as Gate B26.

 

“ Chicago Midway Facilities Lease ” means the Chicago Midway Airport Amended and Restated Airport Use Agreement and Facilities Lease, dated with an effective date of January 1, 1997, as amended and supplemented as of December 10, 2004, and as the same may be amended or supplemented from time to time.

 

“ Closing ” means the closing of the transactions contemplated by this Credit Agreement.

 

“ Closing Date ” means the date when the conditions precedent set forth in Section 4.01 have been satisfied or waived in writing by the Lender.

 

“ Code ” means the Internal Revenue Code of 1986.

 

“ Codeshare Agreement ” means the Amended and Restated Codeshare Agreement to be entered into between the Borrower and Southwest Airlines Co., the terms and conditions of

 

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which shall be satisfactory to the Lender, as such Amended and Restated Codeshare Agreement may be further amended, restated, amended and restated, modified or supplemented from time to time with the consent of the Lender.

 

“ Collateral ” means all of the “Primary Collateral” and the “Collateral” referred to in the Collateral Documents 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 and the Section 1110 Assets.

 

“ Collateral Documents ” means, collectively, the provisions of Article X of this Credit Agreement, security agreements, slot, gate and route security agreements, aircraft mortgages, mortgages, pledge agreements or other similar agreements delivered to the Lender pursuant to Section 6.14 , and each of the other agreements, instruments, supplements or documents that creates or purports to create a Lien in favor of the Lender for the benefit of the Lender.

 

“ Commitment Letter ” means the Commitment Letter entered into among the Lender, MatlinPatterson Global Opportunities Partners II (Cayman), L.P., the Borrower and the Parent dated November 28, 2005, a copy of which is attached hereto as Exhibit F .

 

“ Committee ” means any statutory committee appointed in the Cases.

 

“ Compliance Certificate ” means a certificate substantially in the form of Exhibit B attached hereto.

 

“ Computer Software ” has the meaning specified in Section 9.01(h)(iv) .

 

“ Consolidated EBITDARR ” means, for any period, for the Parent, the Borrower and its Subsidiaries on a consolidated basis, an amount equal to (i) Consolidated Net Income for such period plus, (ii) without duplication, the following to the extent deducted in calculating such Consolidated Net Income:  (a) Consolidated Interest Charges for such period, (b) the provision for federal, state, local and foreign income taxes payable by the Borrower and its Subsidiaries for such period, (c) the amount of depreciation and amortization expense, (d) administrative expenses (including restructuring charges) incurred in connection with the Cases in the amount provided in the Borrower’s Projections, and (e) the aggregate amount of any aircraft rental payments.

 

“ Consolidated Interest Charges ” means, for any period, for the Parent, the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest expense (net of interest income), premium payments, debt discount, fees (including, without limitation, amortization of deferred financing costs related to the Cases), charges and related expenses of the Borrower, the Parent and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent expense of the Borrower, the Parent and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP, it being understood that rent expense that is treated as an operating expense in accordance with GAAP is not included in this calculation.

 

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“ Consolidated Net Income ” means, for any period, for the Borrower, the Parent and its Subsidiaries on a consolidated basis, the net income of the Borrower, the Parent and its Subsidiaries (excluding extraordinary gains and extraordinary losses, in each case, incurred in connection with the Cases) for that period.

 

“ 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 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.

 

“ Controlled ” and “ Controlling ” have meanings correlative thereto.  Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, power to vote 10% or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent.

 

“ Controlled Account ” means a deposit account of any Loan Party maintained with a depositary bank acceptable to the Lender.

 

“ Copyrights ” has the meaning specified in Section 9.01(h)(iii) .

 

“ Conversion Ratio ” means a conversion ratio of $10 to one (1) share of New Common Stock based upon ten million (10,000,000) shares of New Common Stock.

 

“ Creditors Committee ” means the official committee of unsecured creditors of the Loan Parties appointed in the Cases by the United States Trustee on or about November 1, 2004.

 

“ DCA ” shall mean Ronald Reagan Washington National Airport.

 

“ 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.

 

“ Default Rate ” means an interest rate equal to 13% per annum.

 

“ DIP Financing Order ” means a final order of the Bankruptcy Court approving the terms and conditions of the Loan Documents (including, without limitation, the granting of Liens and the priority status referred to in the Loan Documents), which final order shall be in form and substance satisfactory to the Lender in its sole discretion and shall not have been reversed, amended, supplemented, modified, stayed or vacated.

 

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“ Disclosure Statement ” means the Disclosure Statement With Respect To The First Amended Plan of Reorganization filed with the Bankruptcy Court by the Reorganizing Debtors on December 12, 2005.

 

“ Disclosure Statement Financial Projections ” means the Pro Forma Financial Projections which are Exhibit 2 to the Disclosure Statement.

 

“ 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; provided , however , that a Slot trade shall not constitute a Disposition if accomplished in a transaction where the traded Slot is intended to be returned to the applicable Loan Party within 30 days after such trade is consummated (a “ Temporary Slot Disposition ”).

 

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

 

“ DOT ” means the United States Department of Transportation, or any successor authority established in replacement thereof.

 

“ Effective Date ” means the date the Amended Reorganization Plan, in form and substance satisfactory to the Lender, becomes effective.

 

“ 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.

 

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

 

“ Equipment ” has the meaning specified in Section 9.01(c) .

 

“ 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.

 

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

 

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with any Loan Party within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

“ ERISA Event ” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

 

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

 

“ Excluded Assets ” means (i) any retainers paid or deposited before the Petition Date by the Loan Parties to or with their professionals for professional services and expense reimbursement in connection with the Cases; provided , however , that the security interests attach automatically to any reversionary or residual interest any Loan Party may have in such retainer; (ii) any Trust Funds; (iii) Loan Parties’ avoidance actions and proceeds thereof under Sections 544-550 of the Bankruptcy Court or similar applicable State law, and (iv) Card Receivables (but only to the extent the ATSB Lender Parties or Southwest do not hold a security interest therein).

 

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“ Existing Indebtedness ” means Indebtedness of each Loan Party existing on the Petition Date.

 

“ FAA ” means the Federal Aviation Administration.

 

“ Funding Fee ” has the meaning specified in Section 2.05 .  The Funding Fee is referred to in the Commitment letter as the “MP Funding Fee”.

 

“ GAAP ” means generally accepted accounting principles in the United States in effect from time to time as applied by a significant segment of the accounting profession in the United States.

 

“ Gate Leaseholds ” means all of the right, title, privilege, interest, and authority now or hereafter acquired or held by the Borrower or, if applicable, a Guarantor in connection with the right to use or occupy space in any airport or terminal at which the Borrower conducts scheduled operations.

 

“ Gate Restructuring Term Sheet ” means the term sheet dated December 6, 2005 among the Borrower, Southwest and the City of Chicago with respect to the proposed restructuring of certain gates at Chicago’s Midway Airport, a copy of which is attached hereto as Exhibit D .

 

“ 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.

 

“ 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.

 

“ Guaranty ” has the meaning specified in Section 10.01 .

 

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“ Guaranteed Obligations ” has the meaning specified in Section 10.01 .

 

“ Guarantors ” means the Parent, ATA Leisure Corp., ATA Cargo, Inc. and American Trans Air Execujet, Inc.

 

“ 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 trade accounts payable in the ordinary course of business and not past due for more than 60 days after the date on which each such trade payable or account payable was created);

 

(e)           indebtedness (excluding prepaid interest thereon) 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 Obligation;

 

(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.  The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof

 

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as of such date.  The amount of any capital lease, operating lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.  The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date; provided , that the amount outstanding at any time of any Indebtedness issued with the original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP.

 

“ Indemnitees ” has the meaning specified in Section 11.05 .

 

“ Intellectual Property Collateral ” has the meaning specified in Section 9.01(h) .

 

“ Inventory ” has the meaning specified in Section 9.01(d) .

 

“ 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 capital stock 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; provided, however, that deposits made by any Loan Party in the ordinary course of business in connection with the acquisition of aircraft, airframes or engines or the entry into contracts (but excluding deposits to secure Indebtedness) shall not be considered an “Investment”.  For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

 

“ Investment Agreement ” means the Investment Agreement described in the Commitment Letter.

 

“ IP Agreements ” has the meaning specified in Section 9.02(f)(viii) .

 

“ 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.

 

“ Lead Investor ” means the lead investor and plan sponsor in the Borrower’s Reorganization Plan.

 

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“ LGA ” shall mean New York’s LaGuardia Airport.

 

“ Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority, privilege 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).

 

“ Liquidity ” means, on any given date with respect to the Borrower, the Parent and its Subsidiaries, the aggregate amount of all cash held by the Borrower, the Parent and its Subsidiaries.

 

“ Loan ” has the meaning set forth in Section 2.01 .

 

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

 

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

 

“ Material Adverse Change ” means (a) a material adverse effect upon the business, condition (financial or otherwise), operations, performance, properties, assets, liabilities (actual and contingent) or prospects of the Borrower and the Guarantors, taken as a whole, since July 31, 2005; (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; (d) a material impairment of the Collateral taken as a whole; (e) an amendment to, or termination of, the Codeshare Agreement without the prior written consent of the Lender; or (f) the resignation of any senior management or other key employee of the Borrower or any other Loan Party.

 

“ MatlinPatterson ” means MatlinPatterson Global Opportunities Partners II, L.P. and/or its affiliates.

 

“ Maturity Date ” means the earliest of (a) March 31, 2006, (b) the occurrence of an Event of Default and acceleration of the Obligations, and (c) the effective date of a Reorganization Plan.

 

“ Maximum Rate ” has the meaning specified in Section 11.10 .

 

“ MDW ” shall mean Chicago’s Midway Airport.

 

“ Multiemployer Plan ” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

 

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“ Net Cash Proceeds ” means:  (a) with respect to a Disposition of any asset by any Loan Party, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such sale (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by such asset and that is required to be repaid in connection with the sale thereof (other than Indebtedness under the Loan Documents), (B) the reasonable and customary out-of-pocket fees and expenses (including reasonable and customary brokerage and legal counsel fees) incurred by such Loan Party in connection with such sale and (C) taxes reasonably estimated by the Borrower to be actually payable within two years of the date of the relevant asset sale as a result of any gain recognized in connection therewith documented in form and substance reasonably satisfactory to the Lender; and (b) with respect to the issuance of any capital stock or other Equity Interest by Loan Party or the issuance of any Indebtedness by any Loan Party, the excess of (i) the sum of the cash and Cash Equivalents received in connection with such sale or issuance over (ii) the underwriting discounts and commissions, and other out-of-pocket expenses, incurred by such Loan Party in connection with such sale or issuance.

 

“ New Common Stock ” means common stock of the reorganized ATA Holdings Corp. or a new corporation which directly or indirectly owns all of the issued and outstanding capital stock of the Reorganizing Debtors.

 

“ Obligations ” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any 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 after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.  Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents include (a) the obligation to pay principal, interest, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by any Loan Party under any Loan Document, (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing obligations under the Loan Documents that the Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party, and (c) the obligation to reimburse any amount in respect of any of the foregoing obligations.

 

“ Orders ” means the DIP Financing Order, the Approval Order or any other order of the Bankruptcy Court in connection with the Cases.

 

“ 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

 

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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) .

 

“ Pension Plan ” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

 

“ Permitted Sale/Leaseback ” means any transaction pursuant to which a Loan Party sells “equipment” described in Section 1110(a)(3) of the Bankruptcy Code (as in effect on the date hereof) that is subject to a mortgage, conditional sale or security interest on the date hereof (such equipment, the “ Subject Equipment ”) and leases the Subject Equipment back from the buyer or its designee.

 

“ Permitted Senior Liens ” means (a) Liens permitted under Section 7.01 which have priority by operation of law or as provided herein over the Liens granted to the Lender and (b) Liens permitted under Section 7.01(i) or (p) .

 

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

 

“ Petition Date ” has the meaning specified in Preliminary Statement 1 to this Credit Agreement.

 

“ Plan ” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by any Loan Party or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

 

“ Pledged Deb t” has the meaning specified in Section 9.01(f)(ii) .

 

“ Pledged Equity ” has the meaning specified in Section 9.01(f)(i) .

 

“ Post-Petition ,” when used with respect to any agreement or instrument, any claim or proceeding or any other matter, shall refer to an agreement or instrument that was entered into or became effective, a claim or proceeding that first arose or was first instituted, or another matter that first occurred, after the commencement of the Cases.

 

“ Pre-Petition, ” when used with respect to any agreement or instrument, any claim or proceeding or any other matter, shall refer to an agreement or instrument that was entered into or became effective, a claim or proceeding that arose or was instituted, or another matter that occurred, prior to the Petition Date.

 

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“ Pre-Petition Payment ” means a payment (by way of adequate protection or otherwise) of principal or interest or otherwise on account of any Pre-Petition Indebtedness or trade payables or other Pre-Petition claims against the Borrower or any Guarantor.

 

“ Primary Collateral ” has the meaning specified in Section 9.01 .

 

“ Procedures for Solicitation ” means the Procedures for the Solicitation of Acceptances and Rejections of the Amended Reorganization Plan filed with the Bankruptcy Court by the Reorganizing Debtors on September 30, 2005, as the same may be amended with the consent of the Lender.

 

“ Receivables ” has the meaning specified in Section 9.01(e) .

 

“ Register ” has the meaning specified in Section 2.07(b) .

 

“ Regulations ” means the regulations for the Air Carrier Guarantee Loan Program issued pursuant to the Air Transportation Stabilization Act, 14 C.F.R.  Part 1300, as the same may be amended from time to time.

 

“ Related Contracts ” has the meaning specified in Section 9.01(e) .

 

“ Relevant Labor Unions ” means the Association of Flight Attendants, Airline Pilots Association, International, International Association of Machinists and Aerospace Workers and the Communications Workers of America.

 

“ Reorganization Plan ” means a Chapter 11 plan of reorganization filed in any Case by the Borrower and/or any of the Guarantors.

 

“ Reorganizing Debtors ” means, collectively, ATA Airlines, Inc., ATA Holdings Corp., ATA Leisure Corp., ATA Cargo, Inc. and American Trans Air Execujet, Inc.

 

“ Reportable Event ” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

 

“ 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 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

 

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any return of capital to the Borrower’s stockholders, partners or members (or the equivalent Persons thereof).

 

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

 

“ Section 1110 Agreement ” means any agreement of any Loan Party related to Section 1110 Assets, including, without limitation, security agreements, mortgages, trusts, leases, conditional sale agreements or other instruments applicable to such Section 1110 Assets.

 

“ Section 1110 Assets ” means, (i) any “aircraft,” “aircraft engine,” “propeller,” “appliance” or “spare part” of any Loan Party (as defined in Section 40102 of Title 49) as those terms are used in Section 1110(a)(3)(A)(i) of the Bankruptcy Code, (ii) all parts substitutions, renewals and replacements of, improvements, accessions and accumulations incident to each such aircraft, aircraft engine, appliance or spare part and all documents related to any of the foregoing to the extent any such asset constitutes equipment within the scope of Section 1110(a) of the Bankruptcy Code; (iii) any other assets with respect to which the granting of any such security interests would cause a default, directly or indirectly, of any Section 1110 Agreement, other than a default arising from a negative pledge or similar provision in any such Section 1110 Agreement with respect to otherwise unencumbered property, and (iv) any deposit or reserve delivered by a Loan Party to a Section 1110 Beneficiary (as defined below) in connection with the purchase, financing or lease of a Section 1110 Asset; or reserve upon the satisfaction of the obligations secured thereby.

 

“ Section 1110 Beneficiary ” shall mean all counterparties with any of the Loan Parties to any such Section 1110 Agreements.

 

“ Security Collateral ” has the meaning specified in Section 9.01(f) .

 

“ Slot ” means the right and operational authority of a Loan Party to conduct one Instrument Flight Rules (as defined under the FAA regulations) landing or takeoff operation during a specific hour or other periods at LGA, MDW and DCA pursuant to FAA regulations.

 

“ Southwest ” means Southwest Airlines Co., a Texas corporation.

 

“ Southwest Bid ” means that certain Bid Proposal Letter, dated as of December 15, 2004, from Southwest Airlines Co. to ATA Holdings Corp and its debtor affiliates and subsidiaries, pursuant to which Southwest proposed to (a) purchase certain of Debtors’ assets, (b) provide Debtors with debtor-in-possession loan facility, (c) provide debtors with post-bankruptcy financing through long-term debt refinancing, (d) purchase non-voting convertible preferred equity in reorganized Holdings and (e) codeshare with Debtors out of specified airports, as amended, restated, supplemented or modified from time to time.

 

“ Southwest DIP Facility ” means the Secured Debtor-In-Possession Credit and Security Agreement dated as of December 22, 2004, as amended, restated supplemented or modified from time to time, among the Borrower, the guarantors and Southwest, as approved by order of the Bankruptcy Court dated January 10, 2005.

 

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“ 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.

 

“ Superpriority Claim ” shall mean a claim against the Borrower or any Guarantor in any of the Cases pursuant to Section 364(c)(1) of the Bankruptcy Code having priority over any or all administrative expenses and other claims of the kind specified in, or otherwise arising or ordered under, any Sections of the Bankruptcy Code (including, without limitation, Sections 105, 326, 328, 330, 331, 503(b), 507, 546(c) and/or 726 thereof), whether or not such claim or expenses may become secured by a judgment lien or other non-consensual lien, levy or attachment.

 

“ 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.

 

“ Synthetic Lease Obligation ” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or 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).

 

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

 

“ Temporary Slot Disposition ” has the meaning set forth in the definition of “Disposition” set forth in this Section 1.01 .

 

“ Term Note ” has the meaning specified in Section 2.07(a) .

 

“ Title 49 ” means Title 49 of the United States Code, as amended and in effect from time to time, and the regulations promulgated pursuant thereto.

 

“ Trademarks ” has the meaning specified in Section 9.02(f)(ii) .

 

“ Transactions ” means, collectively, (a) the consummation of transactions contemplated by the Loan Documents and (b) the payment of the fees and expenses incurred in connection with the consummation of the foregoing.

 

“ Transfer and Settlement ” means (1) the Midway Gate Restructuring Agreement to transfer certain lease rights to Southwest and to resolve certain issues with the City of Chicago, (2) an amendment to the Codeshare Agreement, and (3) the amendments to the Southwest Bid and Southwest DIP Facility.

 

“ Trust Funds ” has the meaning specified in the ATSB Cash Use Order.

 

“ Unfunded Pension Liability ” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined as of the most recent valuation date in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

 

“ United States ” and “ U.S. ” means the United States of America.

 

“ United States Citizen ” has the meaning specified in Section 5.01 .

 

“ Use or Lose Rule ” means with respect to the Slots, the terms of 14 C.F.R. ss. 93.227.

 

“ UST/Clerk Fees ” has the meaning set forth in the DIP Financing Order.

 

1.02         Other Interpretive Provisions .  With reference to this Credit Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

 

(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.

 

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(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 Credit Agreement or any other Loan Document.

 

1.03         Accounting Terms .

 

(a)           All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Credit Agreement shall be prepared in conformity with, GAAP, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

 

(b)           If at any time any change in GAAP or the application thereof would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Lender shall so request, the Lender and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Lender); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Lender financial statements and other documents required under this Credit Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

1.04         Rounding .  Any financial ratios required to be maintained by the Borrower pursuant to this Credit Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

 

1.05         References to Agreements and Laws .  Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

 

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1.06         Times of Day .  Unless otherwise specified, all references herein to times of day shall be references to Central time (daylight or standard, as applicable).

 

ARTICLE II

THE LOAN FACILITY

 

2.01         The Loan .  Subject to the terms and conditions set forth in Article IV of this Credit Agreement, the Lender shall make a term loan (the “ Loan ”) to the Borrower in an amount equal to Thirty Million Dollars ($30,000,000) on the Closing Date.  Amounts repaid with respect to the Loan may not be reborrowed.

 

2.02         Prepayments .

 

(a)           INTENTIONALLY LEFT BLANK

 

(b)           Mandatory .  (i) If any Loan Party Disposes of any Chicago Gates, the Borrower shall prepay the principal amount of the Loan in an amount equal to: (A) 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by any Loan Party, minus (B) the sum of (i) any required repayments on the ATSB Secured Claim plus (ii) any required repayments to Southwest under the Southwest DIP Facility.

 

(ii)           Upon the issuance by any Loan Party of any of its capital stock or other Equity Interests to any Person other than another Loan Party or the Lender pursuant to the terms of the Investment Agreement (or the receipt of any capital contribution by any Loan Party from any Person other than another Loan Party), the Borrower shall prepay the principal amount of the Loan in an amount equal to: (A) 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by any Loan Party; minus (B) any required repayments to Southwest of the Indebtedness under the Southwest DIP Facility.

 

(iii)          Upon the incurrence or issuance by any Loan Party of any Indebtedness to any Person other than another Loan Party (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 7.03(c) ), the Borrower shall prepay the principal amount of the Loan in an amount equal to: (A) 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by any Loan Party; minus (B) any required repayments to Southwest of the Indebtedness under the Southwest DIP Facility.

 

(c)           Accrued Interest .  All prepayments under this Section 2.02 shall be made together with accrued and unpaid interest to the date of such prepayment on the principal amount so prepaid.

 

2.03         Repayment of Loan .  The Borrower shall repay the outstanding principal amount of the Loan in cash on the Maturity Date; provided , however , that in the event that the Lender or any of its Affiliates is not selected as the Lead Investor under the Reorganizing Debtors’ Reorganization Plan, the Lender shall have the option, exercisable by written notice to the Borrower, to defer the repayment of the principal amount of the Loan and any accrued and unpaid interest thereon to the effective date of such Reorganization Plan and exchange such principal amount and interest for New Common Stock (or such other stock issued to the Lead Investor) at a price per share equal to the price per share paid by the Lead Investor for such New

 

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Common Stock (or other stock); provided , further , that if no Event of Default has occurred prior to the Maturity Date and the Effective Date occurs, the outstanding principal amount of the Loan (including the amount of the Funding Fee) and the accrued and unpaid interest thereon shall be repaid by the issuance of New Common Stock to the Lender on the Effective Date at the Conversion Ratio.  For the avoidance of doubt, the Funding Fee shall be added to (and deemed to constitute part of) the outstanding principal amount of the Loan and be payable (together with interest thereon) in accordance with Section 2.03 .

 

2.04         Interest .

 

(a)           Interest Rate .  Subject to the provision of subsection (b) below, the outstanding principal amount of the Loan shall accrue interest, from the date such Loan is made until such Loan has been paid in full (whether paid in cash or by the issuance of New Common Stock), at a rate equal to 10% per annum.

 

(b)           Default Rate .  Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on (i) the outstanding principal amount of the Loan and all other Obligations, payable in arrears on demand, at a rate per annum equal at all times to the Default Rate.

 

(c)           Payment Date .  Except as set forth in subsection (b) above, interest on the principal amount of the Loan and all other Obligations shall be payable in arrears on the Maturity Date and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment.

 

2.05         Funding Fee .  The Borrower shall pay to the Lender a closing fee (the “ Funding Fee ”) in an amount equal to $3,600,000.  Upon the funding of the Loan by the Lender on the Closing Date, the Funding Fee shall be deemed fully earned and shall be added on the Closing Date to the principal amount of the Loan which shall be payable in accordance with Section 2.03 hereof.

 

2.06         Computation of Interest and Fees .  All computations of interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year).  Interest shall accrue on the principal balance of the Loan (including the principal amount of the Funding Fee) from, and including, the day on which the Loan is made to, and excluding, the day on which the amount of the Loan is paid in full.  Each determination by the Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

2.07         Evidence of Indebtedness .   (a)   The Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to the Lender resulting from the Loan and the additions to the principal amount of the Loan from time to time, including the amounts of principal and interest payable and paid to the Lender from time to time hereunder.  The Borrower shall execute and deliver to the Lender a promissory note payable to the order of the Lender, substantially in the form of Exhibit A , evidencing the aggregate indebtedness of the Borrower to the Lender resulting from the principal amount of the Loan (including the amount of the Funding Fee) (the “ Term Note ”).

 

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(b)           The Borrower shall maintain at its address referred to on the signature page hereto a register for the recordation of the name and address of the Lender and principal amount of and interest on the Loan owing to the Lender from time to time (the “ Register ”).  The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower and the Lender may treat each Person whose name is recorded in the Register as the Lender hereunder for all purposes of this Credit Agreement.  The Term Note (and any interest therein) shall not be transferred by the Lender unless such transfer is recorded in the Register.  The Register shall be available for inspection by the Lender at any reasonable time and from time to time upon reasonable prior notice. The Register shall include a control account in which shall be recorded (i) the date and the principal amount of the Loan (including the amount of the Funding Fee), (ii) the amount of any principal or interest paid by the Borrower to the Lender hereunder, and (iii) the terms of any assignment by the Lender delivered to the Borrower.

 

(c)           Entries made in good faith by the Borrower in the Register pursuant to subsection (b) above, and by the Lender in its account pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to the Lender absent manifest error; provided , however , that the failure of the  Borrower or the Lender to make an entry, or any finding that an entry is incorrect, in the Register or the Lender’s account shall not limit or otherwise affect the obligations of the Borrower under this Credit Agreement.

 

2.08         Payments Generally .

 

(a)           All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Lender in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein.

 

(b)           If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

2.09         Approval of Interest .  Approval of this Credit Agreement by the Bankruptcy Court shall constitute approval of the rates of interest and other amounts payable hereunder and a ruling that they are exempt from any otherwise applicable limitation.

 

2.10         Superpriority Nature of Obligations; No Priming Lien .

 

(a)           Except as set forth in this paragraph, subject to the Carve-Out, the Obligations shall be secured by:

 

(i)            an allowed superpriority administrative expense claim pursuant to Section 364(c)(1) of the Bankruptcy Code in each of the Cases having priority, subject only to the Carve-Out and the obligations of any of the Loan Parties to the ATSB Lenders with respect to the ATSB Secured Claim and pursuant to the ATSB Cash Use Order and of any Loan Parties to Southwest under the Southwest DIP Facility, over all administrative expenses, claims and unsecured claims against the Loan Parties, now existing or hereafter arising, of any kind or nature whatsoever, including, without limitation, administrative

 

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expenses of the kinds specified in, or ordered pursuant to sections 105, 326, 328, 330, 331, 503(b), 507, 546(c), 726 or 1114 of the Bankruptcy Code whether or not such claims or expenses may become secured by a judgment lien or other non-consensual lien, levy or attachment, and shall at all times be senior to the rights of any Loan Party, any Loan Party’s estate, and any successor trustee or estate representative in the Cases or any subsequent proceeding or case under the Bankruptcy Code; and

 

(ii)           pursuant to section 364(c)(3) of the Bankruptcy Code, Liens and security interests in and to all Collateral of the Loan Parties subject only to (i) valid and perfected Liens in existence on the Petition Date and junior to such valid and perfected Liens; (ii) valid, enforceable and nonavoidable Liens existing as of the Petition Date, but perfected after the Petition Date pursuant to section 546(b) of the Bankruptcy Code only to the extent such post-petition perfection is expressly permitted under the Bankruptcy Code; (iii) the Carve-Out; and (iv) Permitted Senior Liens (including Liens granted (A) pursuant to the ATSB Cash Use Order and (B) to Southwest under the Southwest DIP Facility).

 

(b)           Notwithstanding the foregoing, the Loan Parties shall be permitted to pay, as the same may become due and payable, subject to the provisions of the Orders and this Section 2.10 the fees and expenses provided for in the definition of the Carve-Out.  Except for the Carve-Out, no costs or expenses of administration shall be imposed against the Lender or the Collateral under Sections 105, 506(c) or 552 of the Bankruptcy Code, or otherwise.

 

2.11         Waiver of any Priming Rights .  On behalf of themselves and their estates, and for so long as any of the Obligations shall be outstanding, the Borrower and the other Loan Parties hereby irrevocably waive any right, pursuant to Sections 364(c) or 364(d) of the Bankruptcy Code or otherwise, (a) to grant any Lien hereafter of equal or greater priority than the Lien securing the Obligations, or (b) to hereafter approve or incur a claim of equal or greater priority than the Obligations, in both cases other than as provided in the ATSB Cash Use Order and the Southwest DIP Facility.

 

2.12         Payment of Obligations .  Upon the Maturity Date (whether by acceleration or otherwise) of any of the Obligations under this Credit Agreement or any of the other Loan Documents, the Obligations shall be due and payable without further application to or order of the Bankruptcy Court.

 

2.13         No Discharge; Survival of Claims .  The Borrower and each of the other Loan Parties agrees that (a) the Obligations shall not be discharged by the entry of an order confirming a Reorganization Plan (and the Borrower and each of the other Loan Parties, pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge) and (b) the superpriority administrative claim granted to the Lender pursuant to the DIP Financing Order and described in Section 2.10 and the Liens granted to the Lender pursuant to the DIP Financing Order and described in Section 9.01 shall not be affected in any manner by the entry of an order confirming a Reorganization Plan in any Cases.

 

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ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01         Taxes .

 

(a)           Except as otherwise provided in this Section 3.01 , any and all payments by the Borrower to or for the account of the Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of the Lender, taxes imposed on or measured by its overall net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which the Lender, is organized or is otherwise a resident or doing business (other than a jurisdiction in which the Lender is deemed to be doing business solely as a result of entering into, or performing its obligations under, any Loan Document); (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as (“ Taxes ”).  If the Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document, then, except as otherwise provided in this Section 3.01 , (i) the sum payable shall be increased as necessary so that after making all required deductions with respect to Taxes (including deductions applicable to additional sums payable under this Section), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, the Borrower shall furnish to the Lender the original or a certified copy of a receipt evidencing payment thereof to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Lender.

 

(b)           In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise or property, intangible, mortgage recording taxes or similar charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as “ Other Taxes ”).

 

(c)           If the Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Lender, the Borrower shall also pay to the Lender at the time interest is paid, such additional amount that the Lender specifies is necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) that the Lender would have received if such Taxes or Other Taxes had not been imposed.

 

(d)           The Borrower agrees to indemnify the Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by the Lender, (ii) amounts payable under Section 3.01(c)  without duplication and (iii) any liability (including additions to tax, penalties, interest and expenses) arising therefrom or with respect thereto, in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental

 

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Authority; but excluding amounts resulting from the failure to comply with the requirements of Section 11.05 .  Payment under this subsection (d) shall be made within 30 days after the date the Lender makes a demand therefor.

 

(e)           If the Lender determines, in its sole discretion, that it has actually received or realized any refund of tax, any reduction of, or credit against, its withholding or payment of any additional amount by the Borrower pursuant to this Section 3.01 , the Lender shall reimburse the Borrower in an amount equal to the net benefit, after tax, and net of all expenses incurred by the Lender in connection with such refund, reduction, credit or recovery; provided that nothing in this Section 3.01(e)  shall require the Lender to make available its tax returns (or any other information relating to its taxes which it deems to be confidential or interfere with the Lender’s right to arrange its tax affairs in whatever manner it deems fit or to obligate the Lender to claim any credit).  The Borrower shall return such amount to the Lender in the event that such Person is required to repay such refund of tax or is not entitled to such reduction of, or credit against its tax liabilities.

 

(f)            The Lender shall execute and deliver to the Borrower any applicable forms regarding certain identifying information customarily requested for United States withholding tax purposes.

 

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.

 

3.03         Survival .  All of the Borrower’s obligations under this Article III shall survive repayment of all Obligations hereunder.

 

ARTICLE IV

CONDITIONS PRECEDENT TO CLOSING

 

4.01         Conditions to Closing Date .  The obligation of the Lender to make the Loan on the Closing Date shall be subject to the satisfaction of the following conditions precedent:

 

(a)           The Lender’s receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed, and each in form and substance reasonably satisfactory to the Lender and its respective legal counsel:

 

(i)            counterparts of this Credit Agreement, sufficient in number for distribution to the Lender and the Borrower, duly executed by the appropriate Loan Parties;

 

(ii)           the Term Note duly executed by the Borrower;

 

(iii)          a copy of the DIP Financing Order certified by the clerk of the Bankruptcy Court, which Order shall be in the form and substance acceptable to the Lender and shall not have been reversed, amended, supplemented, modified, stayed or vacated;

 

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(iv)          such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Lender may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Credit Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party;

 

(v)           a certificate of a Responsible Officer of each Loan Party either (A) listing all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;

 

(vi)          such documents and certifications as the Lender may reasonably require to evidence that each Loan Party is duly organized or formed, and that each of the Loan Parties is validly existing and in good standing in its jurisdiction of organization; and

 

(vii)         a favorable opinion of Baker & Daniels and general counsel of ATA, counsel to the Loan Parties, addressed to the Lender, in form and substance acceptable to the Lender and its counsel.

 

(b)           The Court shall have entered an enforceable order approving the terms and conditions of the Commitment Letter, the Loan Documents and the Transactions (including without limitation, (a) the finding that the Lender is making the Loan in “good faith” within the meaning of Section 364(e) of the Bankruptcy Code, (b) pursuant to Section 364(c)(3) of the Bankruptcy Code, authorizing and granting the security interests and liens upon certain property of the Borrower’s estate defined under Section 541 of the Bankruptcy Code and otherwise described above, and (c) pursuant to Section 364(c)(1) of the Bankruptcy Code, the granting of the superpriority status and liens referred to herein, and (d) the automatic perfection of all liens referred to herein, the payment of all fees referred to herein, the first priority line referred to herein), such order to be in the form and substance satisfactory to the Lender in its sole discretion and which shall not have been reversed, modified, amended or stayed without the prior written consent of the Lender.  Such order shall also (a) approve the Loan Parties’ waiver of any and all claims and causes of action against the Lender (and its respective affiliates) directly related to any Loan or the negotiation of the terms thereof, and (b) prohibit subsequent granting of liens or priority status superior to, or pari passu with, those provided in connection with the Obligations.

 

(c)           The Lender shall have received the Business Plan and since October 8, 2005 the Borrower and the other Loan Parties shall have operated their respective business in a manner substantially consistent therewith.

 

(d)           The Lender shall have received a Lien on substantially all of the Borrower’s and each of the other Loan Parties’ assets and be satisfied that all such Liens are valid and effective and will be perfected and subordinate only to the Lien securing the ATSB Secured Claim and granted to the ATSB Lender Parties pursuant to the ATSB Cash Use Order, and the Lien of Southwest granted under the Southwest DIP Facility.

 

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(e)           The Lender shall have received consents, in form and substance satisfactory to the Lender, from ATSB and Southwest pursuant to which ATSB and Southwest consent to the Transactions.

 

(f)            The Debtors shall have filed with the Bankruptcy Court the Amended Reorganization Plan and Disclosure Statement in connection therewith, and the Bankruptcy Court shall have entered the Approval Order.

 

(g)           United States Department of Transportation shall have advised the Lender and the Loan Parties, in writing, that the transactions contemplated by the Commitment Letter are not inconsistent with applicable law and rules and United States Department of Transportation’s practice.

 

(h)           All waiting periods imposed by applicable Law (including in particular, 49 USC 41720) in connection with the filing of the Codeshare Agreement shall have expired or been terminated without any action having been taken by any court of competent jurisdiction restraining, preventing or imposing materially adverse conditions upon such transactions.

 

(i)            The Lender shall have received an executed copy of the Codeshare Agreement and the related documentation.  The Court shall have entered an enforceable order approving the terms and conditions of the Codeshare Agreement.

 

(j)            No Material Adverse Change shall have occurred.

 

(k)           No Event of Default or Default shall have occurred and be continuing or would result from the making of the Loan requested to be made on the Closing Date.

 

(l)            All of the representations and warranties contained herein and in the other Loan Documents shall be true and complete in all material respects on and as of the Closing Date, both before and immediately after giving effect to the making of the Loan, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date.

 

(m)          There shall have been paid to the Lender all fees and expenses (including the reasonable legal fees of counsel to the Lender) payable to the Lender pursuant to the Commitment Letter for which an invoice has been submitted to the Borrower.

 

(n)           The Borrower and the other Loan Parties shall have received all material consents and authorizations required pursuant to any material Contractual Obligation with any other Person and shall have obtained all material permits of, and effected all notices to and filings with, any Governmental Authority as may be necessary to allow the Borrower lawfully (A) to execute, deliver and perform, in all material respects, their respective obligations hereunder, under the other Loan Documents to which each of them is, or shall be, a party and under each other agreement or instrument to be executed and delivered by each of them pursuant thereto or in connection therewith, (B) to consummate the Transactions and (C) to create and perfect the Liens on the Collateral in the manner and for the purpose contemplated by the Loan Documents.

 

(o)           The Closing Date shall have occurred on or before December 30, 2005.

 

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(p)           No law, regulation, order, judgment, injunction, stay or decree of any Governmental Authority shall exist, and the Lender shall not have received any notice that any action, suit, investigation, litigation or proceeding is pending or threatened in any court or before any arbitrator or Governmental Authority which, in the reasonable determination of the Lender, (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the ability of the Borrower or any other Loan Party to perform their respective obligations hereunder and under each Loan Document in any material respect, (B) the making of the Loan on the Closing Date or (C) the consummation of the transactions contemplated hereby or contemplated under the other Loan Documents or (ii) would be reasonably expected to result in a Material Adverse Change.

 

(q)           The ATSB Lenders shall have entered into an agreement, the terms and conditions of which shall be satisfactory to the Lender, pursuant to which the ATSB Lender Parties agree that the ATSB Secured Claim shall be restructured on the Effective Date as provided in the ATSB Term Sheet, and any matters which are unresolved in the ATSB Term Sheet shall have been resolved to the satisfaction of the Lender.

 

(r)            The Lender shall be reasonably satisfied with all motions, orders, and other pleadings or related documents to be filed or submitted to the Bankruptcy Court in connection with the Transactions.

 

(s)           The Gate Restructuring Term Sheet shall be in form and substance satisfactory to the Lender.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants 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 (except for ATA Cargo, Inc.) in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) subject to the entry of the DIP Financing Order, 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 each case referred to in clause (b)(i), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Change.  The Borrower is an “air carrier” within the meaning of Section 40102 of Title 49 and holds a certificate under Section 41102 of Title 49 or a commuter air carrier authorization.  The Borrower holds an air carrier operating certificate issued pursuant to Chapter 447 of Title 49.  The Borrower 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 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.

 

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5.02         Authorization; No Contravention .  Following the entry of, and giving effect to, the DIP Financing Order (in the case of the Loan Documents), the execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party and, the consummation of the Transaction, 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 Post-Petition 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.  No Loan Party is in breach of any such Contractual Obligation, the breach of which could be reasonably likely to have a Material Adverse Change.

 

5.03         Governmental Authorization; Other Consents .  Following the entry of, and giving effect to, the DIP Financing Order (in the case of the Loan Documents), 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 Credit Agreement or any other Loan Document or for the consummation of the Transaction, (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 (including the requisite priority set forth in the DIP Financing Order) 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.  All applicable waiting periods in connection with the Transaction have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the Transaction or the rights of the Loan Parties freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

 

5.04         Binding Effect .  This Credit Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Credit Agreement constitutes, and each other Loan Document when so delivered will constitute, subject to the entry of the DIP Financing Order by the Bankruptcy Court, as applicable, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms.

 

5.05         Financial Statements; No Material Adverse Change .

 

(a)           The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower, the Parent and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or

 

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contingent, of the Borrower, the Parent and its Subsidiaries as of the date thereof required to be disclosed by GAAP, including liabilities for taxes, material commitments and Indebtedness.

 

(b)           The unaudited consolidated financial statements of the Borrower, the Parent and its Subsidiaries dated September 30, 2005, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower, the Parent and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

 

(c)           [INTENTIONALLY DELETED]

 

(d)           The consolidated forecasted balance sheets, statements of income and statements of cash flows of the Reorganizing Debtors delivered to the Lender in connection with this Credit Agreement were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Borrower’s best estimate of its future financial performance.

 

5.06         Litigation .  Other than the Cases, except as has been publicly disclosed in any filing made by the Borrower or any other Loan Party with the SEC between December 31, 2003 and the date of this Credit Agreement, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower, the Parent or any of its 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 Change.  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 or any of the Orders or which seek to void, avoid, limit, or otherwise adversely affect the security interest created by or in any Loan Document or any of the Orders or any payment made pursuant thereto.

 

5.07         No Default .  Neither the Borrower nor any other Loan Party is in default under or with respect to, or a party to, any Post Petition Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Change.  No Default has occurred and is continuing or would result from the execution, delivery or performance of this Credit Agreement or any other Loan Document or the transactions contemplated hereby or thereby.

 

5.08         Ownership of Property .  (a) Each Loan Party has a valid leasehold or subleasehold interests in all real property necessary to or used in the ordinary conduct of its business.

 

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(b)           Set forth on Schedule 5.08(b)  hereto is a complete and accurate list of all Liens on Collateral, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the Collateral subject thereto.  The Collateral is subject to no Liens, other than Liens set forth on Schedule 5.08(b) , and as otherwise permitted by Section 7.01 .

 

(c)           Set forth on Schedule 5.08(c)  hereto is a complete and accurate list of all Slots held by any Loan Party on the date hereof.

 

(d)           Set forth on Schedule 5.08(d)  hereto is a complete and accurate list of all Gate Leaseholds contracted or licensed to any Loan Party on the date hereof located at the airports at which the Loan Parties conduct operations.

 

5.09         Environmental Compliance .  The Loan Parties conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that, such effects of Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change on any of the Loan Parties.

 

5.10         Insurance .  All policies of insurance of any kind or nature owned by or issued to the Loan Parties, including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers’ compensation, employee health and welfare, title, property and liability insurance, are in full force and effect, are issued by financially sound and reputable insurance companies not Affiliates of the Borrower and are of a nature and provide such coverage, including, without limitation, war risk and terrorism liability insurance, that is in an amount that is no less than the greater of (i) the maximum amount available to the Borrower from the DOT under the Federal Aviation Insurance Program, as amended by the Air Transportation Stabilization Act and further amended by the Homeland Security Act of 2002 and the maximum (to the extent requested by the Lender) amount available under programs established pursuant to the Terrorism Risk Insurance Act of 2002 and (ii) such amount as is customarily carried by major United States air carriers in the United States domestic airline industry; and the Borrower maintains other insurance that is in its judgment sufficient and in such amounts as is customary in the United States domestic airline industry for major United States air carriers.

 

5.11         Taxes .  Except as otherwise set forth on Schedule 5.11(a) , (a) 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 material 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 diligently conducted and for which adequate reserves have been provided in accordance with GAAP; (b) there is no proposed tax assessment against any Loan Party that would, if made, have a Material Adverse Change; and (c) no Loan Party is party to any tax sharing agreement with any Person other than another Loan Party, other than tax indemnity agreements in leasing transactions.

 

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5.12         ERISA Compliance .

 

(a)           Each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws, except for events that could not reasonably be expected to result in a Material Adverse Change.  Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter has been filed with the IRS with respect thereto and, to the best knowledge of the Loan Parties, nothing has occurred which would prevent, or cause the loss of, such qualification.  As of the date of this Credit Agreement, each Loan Party and each ERISA Affiliate has made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

 

(b)           There are no pending or, to the best knowledge of the Loan Parties, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could be reasonably be expected to result in a Material Adverse Change.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Change.

 

(c)           (i) Other than the filing of the Cases and events related to such filing, no ERISA Event has occurred or is reasonably expected to occur; (ii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iii) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13         Subsidiaries; Equity Interests .  Each Loan Party has no Subsidiaries other than the other Loan Parties and 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, those granted under the ATSB Cash Use Order and those securing the ATSB Secured Claim and those Liens in favor of Southwest under the Southwest DIP Facility.  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.  Each Loan Party has no 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; Public Utility Holding Company Act .

 

(a)           The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System of the United States), or extending credit for the purpose of purchasing or carrying margin stock and no

 

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proceeds of the Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purc