-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ln3e3J3d1kuRvtr4Dz+iQ7IwdfaP9f6ZQtdCu7Uj9TGttXGPdWqGY530solK62p0 crtH3u6ucCwrmZZr8jZc/g== 0000903423-98-000251.txt : 19980721 0000903423-98-000251.hdr.sgml : 19980721 ACCESSION NUMBER: 0000903423-98-000251 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19980717 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD AIRLINES INC /NEW/ CENTRAL INDEX KEY: 0000278327 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 431145889 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-59405 FILM NUMBER: 98668361 BUSINESS ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N SIXTH ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3145893000 MAIL ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N 6TH ST CITY: ST LOUIS STATE: MO ZIP: 63101 S-4 1 As filed with the Securities and Exchange Commission on July 17, 1998 Registration No. 333-________ ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------ TRANS WORLD AIRLINES, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 4512 43-1145889 (State of (Primary Standard Industrial (I.R.S. Employer Incorporation) Classification Code Number) Identification No.) One City Centre 515 N. Sixth Street St. Louis, Missouri 63101 (314) 589-3000 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------ Gerald L. Gitner Copies to: Chairman and Chief Executive Officer David W. Hirsch, Esq. One City Centre, 515 N. Sixth Street Cleary, Gottlieb, Steen & Hamilton St. Louis, Missouri 63101 One Liberty Plaza New York, New York 10006 (314) 589-3000 (212) 225-2000 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) ------------ Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. |_| If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. |_| CALCULATION OF REGISTRATION FEE ============================================================================== Title of Each Proposed Proposed Class of Amount Maximum Maximum Amount of Securities to be to be Offering Price Aggregate Registration Registered Registered Per Unit Offering Price Fee - ------------------------------------------------------------------------------ 10 1/4% Senior Secured Notes due 2003... $14,500,000 (1) 100% (2) $14,500,000 $4,278 ============================================================================== - ------------------- (1) Plus accrued interest, if any, from the date of issuance. (2) Calculated pursuant to Rule 457(f). The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. ============================================================================== XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX X Information contained herein is subject to completion X X or amendment. A registration statement relating to these X X securities has been filed with the Securities and Exchange X X Commission. These securities may not be sold nor may offers to X X buy be accepted prior to the time the registration statement X X becomes effective. This prospectus shall not constitute an offer X X to sell or the solicitation of an offer to buy nor shall there be X X any sale of these securities in any state in which such offer, X X solicitation or sale would be unlawful prior to registration or X X qualification under the securities laws of any such state. X XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Subject to Completion, dated July 17, 1998 PROSPECTUS $14,500,000 OFFER TO EXCHANGE 10 1/4% SENIOR SECURED NOTES DUE 2003 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OUTSTANDING 10 1/4% SENIOR SECURED NOTES DUE 2003 OF TRANS WORLD AIRLINES, INC. ------------------ THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED. Trans World Airlines, Inc., a Delaware corporation ("TWA" or the "Company"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying letter of transmittal (the "Letter of Transmittal" and, together with this Prospectus, the "Exchange Offer") to exchange its $14.5 million principal amount of 10 1/4% Senior Secured Notes due 2003 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this Prospectus is a part (including all amendments, including post-effective amendments, and exhibits thereto, the "Registration Statement"), for an equal principal amount at maturity of its outstanding 10 1/4% Senior Secured Notes due 2003 (the "Old Notes," and together with the Exchange Notes, the "Notes"), of which $14.5 million aggregate principal amount at maturity is outstanding as of the date hereof. The Notes were issued in partial payment of the aggregate purchase price of $27.5 million for one Boeing 767-231 ETOPS airframe and two associated engines (collectively, the "Aircraft"). Concurrently with the issuance of the Notes, the Company issued $13.0 million principal amount of 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "Equity Notes") to or as directed by the Owner Trustee (as defined) in payment of the balance of the purchase price for the Aircraft. The Company will accept for exchange any and all Old Notes that are validly tendered and not withdrawn on or prior to 5:00 P.M., New York City time, on the date the Exchange Offer expires (the "Expiration Date"), which will be , 1998 (30 days following the commencement of the Exchange Offer), unless the Exchange Offer is extended. Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New York City time, on the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. Old Notes may be tendered only in integral multiples of maturity of $1,000. See "The Exchange Offer." The Notes will bear interest from the date of issuance at a rate of 10 1/4% per annum (subject to possible increases as described herein) payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 1998. The Notes will be subject to mandatory redemption by way of sinking fund payments made in cash sufficient to redeem an aggregate principal amount of Notes equal to $920,000 on each of June 15, 2001 and June 15, 2002 (subject to possible reductions or elimination as described herein) (or, if the aggregate principal amount of Notes outstanding on any such redemption date is less than the principal amount required to be redeemed on such date, then the aggregate principal amount of Notes outstanding shall be redeemed), at a redemption price equal to 100% plus accrued and unpaid interest and Special Interest (as defined), if any, to the redemption date. The obligation of the Company to make such mandatory redemptions may be satisfied in whole or in part by delivering to the Trustee (as defined) Notes acquired by the Company through open market purchases. Upon a Change in Control (as defined), each holder of Notes shall have the right to require the Company to purchase all, or any part of, such holder's Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Special Interest, if any, to the purchase date. There can be no assurance that the Company will have sufficient funds available at the time of any Change in Control to make any debt payment (including repurchases of Notes) required by the foregoing. Upon a sale of the Aircraft, the Company will be required to make an Offer to Purchase (as defined) all the Notes then outstanding, at a purchase price of 102% of the principal amount thereof, if the sale occurs before the first anniversary of the date of original issuance of the Notes, or at a purchase price equal to 101% of the principal amount thereof, if the sale occurs following such date, in either case, together with accrued and unpaid interest and Special Interest, if any, to and including the purchase date. Following a sale by the Company of the Aircraft, the interest rate borne by any unpurchased Notes would increase by 1.50% per annum, and the lien on the Collateral (as defined) would be released. In the event that there shall occur a Total Loss (as defined) with respect to the Aircraft, the Company will be required to make an Offer to Purchase all the Notes then outstanding. The obligation of the Company to make such Offer to Purchase upon a sale of or Total Loss with respect to the Aircraft may be satisfied in whole or in part by delivering to the Trustee Notes acquired by the Company through open market purchases. See "Description of Exchange Notes." The Notes will represent senior secured obligations of the Company and will rank pari passu in right of payment with all other senior obligations of the Company. The Notes will be secured by a lien on the Aircraft. THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO HOLDERS OF OLD NOTES ON OR ABOUT , 1998. (Continued on page 2) ------------------- The securities offered hereby involve a high degree of risk. See "Risk Factors" beginning on page 13. ------------------- These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission, nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. --------------- The date of this Prospectus is July , 1998. The Exchange Notes will be obligations of the Company evidencing the same indebtedness as the Old Notes. The Exchange Notes will be issued under and entitled to the benefits of the same Indenture (as defined) pursuant to which the Old Notes were issued such that the Exchange Notes and Old Notes will be treated as a single class of debt securities under the Indenture. The form and terms of the Exchange Notes are generally the same as the form and terms of the Old Notes, except that (i) the exchange has been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof, and (ii) holders of the Exchange Notes will not be entitled to any of the registration rights of holders of Old Notes under the Registration Rights Agreement (as defined), which rights will terminate upon the consummation of the Exchange Offer. See "Description of the Exchange Notes." Based on interpretations by the staff of the Securities and Exchange Commission ("SEC" or the "Commission"), as set forth in no-action letters issued to Exxon Capital Holdings Corporation (available May 13, 1988) (the "Exxon Capital Letter"), Morgan Stanley & Co. Incorporated (available June 5, 1991) (the "Morgan Stanley Letter"), Mary Kay Cosmetics, Inc. (available June 5, 1991) and Warnaco, Inc. (available October 11, 1991), the Company believes that a holder who exchanges Old Notes for Exchange Notes pursuant to the Exchange Offer may offer for resale, resell and otherwise transfer such Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act, provided, that (i) such Exchange Notes are acquired in the ordinary course of such holder's business, (ii) such holder is not engaged in, and does not intend to engage in, a distribution of such Exchange Notes and has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes, and (iii) such holder is not an affiliate of the Company (as defined under Rule 405 of the Securities Act) or a broker-dealer tendering Old Notes acquired directly from the Company for its own account. However, the staff of the Commission has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as in such other circumstances. A holder who exchanges Old Notes for Exchange Notes pursuant to the Exchange Offer with the intention to participate in a distribution of the Exchange Notes may not rely on the staff's position enunciated in the Exxon Capital Letter, the Morgan Stanley Letter or similar letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." EXCEPT AS DESCRIBED IN THIS PARAGRAPH, THIS PROSPECTUS MAY NOT BE USED FOR ANY OFFER, SALE OR OTHER TRANSFER OF EXCHANGE NOTES. Prior to this Exchange Offer, there has been no public market for the Old Notes or Exchange Notes. The Old Notes have traded in the National Association of Securities Dealers, Inc. Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market. If a public market were to develop, the Exchange Notes could trade at prices that may be higher or lower than their principal amount at maturity. The Company intends to apply for listing of the Exchange Notes on the American Stock Exchange. However, there can be no assurance that an active public market for the Exchange Notes will develop. See "Risk Factors--Risk Factors Relating to the Notes and the Exchange Offer--Absence of Public Trading Market." THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THIS EXCHANGE OFFER. THE COMPANY HAS AGREED TO PAY THE EXPENSES OF THE EXCHANGE OFFER. NO UNDERWRITER IS BEING USED IN CONNECTION WITH THIS EXCHANGE OFFER. 2 No person has been authorized to give any information or to make any representations not contained in this Prospectus in connection with the offer of securities made by this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by the Company or by any underwriter, dealer or agent. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than those to which it relates. Neither the delivery of this Prospectus nor any sale of, or offer to sell, the securities offered hereby shall, under any circumstances, create an implication that there has been no change in the affairs of the Company since the date hereof or that the information herein is correct as of any time subsequent to its date. 3 AVAILABLE INFORMATION TWA is currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission. Reports, proxy statements and other information filed by the Company with the Commission may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices located at Room 1400, 75 Park Place, New York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such materials may be obtained from the Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates, and such reports, proxy statements and other information regarding the Company can also be inspected at the offices of the American Stock Exchange, 86 Trinity Place, New York, New York 10006-1881, on which the Company's Common Stock, $.01 par value per share (the "Common Stock") is listed. The Commission maintains a Worldwide Web site that contains reports, proxy and information statements and other materials that are filed through the Commission's Electronic Data Gathering, Analysis and Retrieval System. This web site can be accessed at http://www.sec.gov. None of the information contained in such web site shall be deemed to constitute a part of this Prospectus or be incorporated herein for any purpose. This Prospectus contains summaries, believed to be accurate in all material respects, of certain terms of certain agreements; however, in each such case, reference is made to the actual agreements (copies of which will be made available upon request to the Company) for complete information with respect thereto, and all such summaries are qualified in their entirety by this reference. This Prospectus forms a part of the Registration Statement, including all amendments (including post-effective amendments) and exhibits thereto, which the Company has filed under the Securities Act with respect to the securities offered hereby. This Prospectus does not contain all the information otherwise set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement and the exhibits filed as part thereof. The Registration Statement may be inspected at the public reference facilities maintained by the Commission at the addresses set forth above. Statements contained herein concerning any document filed as an exhibit are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company hereby incorporates by reference in this Prospectus the following documents filed with the Commission pursuant to the requirements of the Exchange Act (File No. 001-07815): 1. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as amended on June 30, 1998 (the "1997 10-K"); 2. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (the "10-Q"); 3. The Company's Current Report on Form 8-K filed January 28, 1998; and 4. The Company's Proxy Statement and Notice of Meeting relating to the Annual Meeting of Stockholders held on May 19, 1998. In addition, all subsequent documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the securities offered hereby shall be deemed to be incorporated herein by reference and to be a part hereof from the date of filing such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is 4 deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. This Prospectus incorporates documents by reference which are not presented herein or delivered herewith. These documents are available without charge upon the written or oral request of each person, including any beneficial owner, to whom this Prospectus is delivered. Requests should be made to the Corporate Secretary of Trans World Airlines, Inc., One City Centre, 515 N. Sixth Street, St. Louis, Missouri 63101, telephone (314) 589-3285. In order to ensure timely delivery of the documents, any request should be made at least five business days before the Expiration Date of the Exchange Offer. FORWARD-LOOKING STATEMENTS This Prospectus (including information included or incorporated by reference herein) includes "Forward-looking Statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements regarding the Company's expected financial position, business and financing plans, including the Company's plans and strategy for improving its operational and financial performance, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from such expectations ("cautionary statements") are disclosed in or incorporated by reference into this Prospectus, including, without limitation, in conjunction with the forward-looking statements included in or incorporated by reference into this Prospectus and under "Risk Factors." All subsequent written and oral forward-looking statements attributable to the Company, its subsidiaries or persons acting on the Company's or its subsidiaries' behalf are expressly qualified in their entirety by the cautionary statements. 5 PROSPECTUS SUMMARY This summary does not purport to be complete and is qualified by reference to the detailed information and financial statements appearing elsewhere in or incorporated by reference into this Prospectus. Terms not defined in this summary are defined elsewhere herein. The Company TWA is the eighth largest U.S. air carrier (based on revenue passenger miles ("RPMs") for the full year 1997), whose primary business is transporting passengers, cargo and mail. During 1997, the Company carried approximately 23.4 million passengers and flew approximately 25.1 billion RPMs. As of March 31, 1998, the Company provided regularly scheduled jet service to 89 cities in the United States, Mexico, Europe, the Middle East, Canada and the Caribbean. As of March 31, 1998, the Company operated a fleet of 181 jet aircraft. TWA's North American operations have a primarily domestic hub in St. Louis at Lambert International Airport ("St. Louis") and a domestic-international hub at New York's John F. Kennedy International Airport ("JFK"). TWA is the predominant carrier at St. Louis, with approximately 360 scheduled daily departures as of March 31, 1998 and approximately a 74.5% share of airline passenger enplanements in St. Louis for the full year 1997, excluding all commuter flights. Given its location in the center of the country, St. Louis is well-suited to function as an omni-directional hub for both north-south and east-west transcontinental traffic. Therefore, TWA believes it can offer more frequencies and connecting opportunities to many travelers in its key Midwestern markets than competing airlines. TWA's international operations are concentrated at JFK, from which TWA currently serves 26 domestic and international cities with approximately 40 daily departures. JFK is both the Company's and the industry's largest international gateway from North America. As of March 31, 1998, the Company offered non-stop flights from JFK to 8 cities in Europe and the Middle East as well as 17 destinations in the United States and the Caribbean. As described in the 1997 10-K, during 1997, the Company implemented certain steps to refocus and improve the operating and financial performance of its JFK operations. TWA is a Delaware corporation organized in 1978 and is the successor to the business of its predecessor corporation, Transcontinental & Western Air, Inc., originally formed in 1934. The Company's principal executive offices are located at One City Centre, 515 N. Sixth Street, St. Louis, Missouri 63101, and its telephone number is (314) 589-3000. The Private Placement Old Notes.............. On June 16, 1998 (the "Issue Date"), the Company issued and delivered the Old Notes to or as directed by First Security Bank, National Association, as owner trustee (the "Owner Trustee") under the trust agreement N607TW dated as of March 28, 1995 between 767 Leasing HY, LLC, as successor beneficiary (the "Beneficiary") to Internationale Nederlanden Aviation Lease Delaware, Inc. (currently known as ING Lease Delaware, Inc.), the beneficiary named therein, and the Owner Trustee. The Old Notes were subsequently reoffered and resold to Qualified Institutional Buyers (as defined in Rule 144A under the Securities Act) pursuant to Rule 144A under the Securities Act, to institutional investors that are Accredited Investors (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and in offshore transactions complying with Rule 903 or Rule 904 of Regulation S under the Securities Act. 6 Exchange Offer Exchange Notes......... Up to $14,500,000 aggregate principal amount of 10 1/4% Senior Secured Notes due 2003 of the Company. The terms of the Exchange Notes and the Old Notes are identical in all respects, except that the offer of the Exchange Notes will have been registered under the Securities Act and therefore, the Exchange Notes will not be subject to certain transfer restrictions and registration rights and related provisions for an increase in the interest rate payable on the Old Notes under certain circumstances if the Company defaults with respect to its registration requirements under the Registration Rights Agreement (as defined below) applicable to the Old Notes. Exchange Offer......... The Company is offering, upon the terms and subject to the conditions of the Exchange Offer, to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Old Notes. See "The Exchange Offer" for a description of the procedures for tendering Old Notes. In connection with the private placement of Old Notes (the "Private Placement"), the Company entered into the Registration Rights Agreement (the "Registration Rights Agreement") dated as of June 16, 1998 among the Company, Lazard Freres & Co. LLC ("Lazard") and the Owner Trustee, which grants holders of the Old Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy obligations of the Company under the Registration Rights Agreement. The date of acceptance for exchange of the Exchange Notes will be the first business day following the Expiration Date. Tenders, Expiration Date; Withdrawal....... The Exchange Offer will expire at 5:00 p.m., New York City time, on _________, 1998, or such later date and time to which it is extended. The tender of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder of Notes (a "Holder") thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Accounting Treatment... No gain or loss for accounting purposes will be recognized by the Company upon the consummation of the Exchange Offer. See "The Exchange Offer--Accounting Treatment." Federal Income Tax Consequences........... The exchange pursuant to the Exchange Offer will not result in any income, gain or loss to the Holders of the Notes or the Company for federal income tax purposes. See "Certain Federal Income Tax Considerations--Tax Consequences to United States Holders." 7 Use of Proceeds........ The Company will not receive any proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer. Exchange Agent......... First Security Bank, National Association is serving as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. Consequences of Exchanging Old Notes Pursuant to the Exchange Offer The Company has not requested, and does not intend to request, an interpretation by the staff of the Commission with respect to whether the Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for sale, resold or otherwise transferred by any holder without compliance with the registration and prospectus delivery provisions of the Securities Act. Based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder of such Exchange Notes, other than broker-dealers which must sell in accordance with the provisions set forth below and other than any holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and such holder is not engaged in and does not intend to engage in, a distribution of such Exchange Notes and has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes or who is an affiliate of the Company may not rely on such interpretations by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. Each broker-dealer (whether or not it is also an "affiliate" of the Company) that receives Exchange Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." By executing the Letter of Transmittal, each holder of Old Notes will represent to the Company that, among other things, (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is such holder, (ii) neither the holder of Old Notes, nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes, (iii) if the holder is not a broker-dealer, or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Old Notes, neither the holder nor any such other person is engaged in or intends to participate in the distribution of such Exchange Notes and (iv) neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or, if such Holder is an "affiliate," that such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the tendering Holder is a broker-dealer (whether or not it is also an "affiliate") that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." To comply with the securities laws of certain jurisdictions, it may be necessary to qualify for sale or register the Exchange Notes prior to offering or selling such Exchange Notes. The Company does not currently intend to take any action to register or qualify the Exchange Notes for resale in any such jurisdictions. Following the consummation of the Exchange Offer, holders of Old Notes not tendered will not have any further registration rights and the Old Notes will continue to be subject to certain restrictions on transfer. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Failure to comply with such requirements in such instance may result in such Holder incurring liability under the Securities Act for which such Holder is not indemnified by the Company. See "The Exchange Offer--Consequences of Failure to Exchange." 8 Summary Description of the Exchange Notes The terms of the Exchange Notes and the Old Notes are identical in all respects, except that the offer of the Exchange Notes has been registered under the Securities Act and, therefore, the Exchange Notes will not be subject to certain transfer restrictions, registration rights and related provisions requiring an increase in the interest rate on the Old Notes under certain circumstances if the Company defaults with respect to its registration requirements under the Registration Rights Agreement applicable to the Old Notes. Exchange Notes Offered................ Up to $14,500,000 aggregate principal amount of Exchange Notes of the Company. Maturity Date.......... June 15, 2003. Interest............... 10 1/4% per annum (subject to possible increases as described herein), payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 1998. The Exchange Notes will bear interest from June 16, 1998. Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on such Old Notes accrued from June 16, 1998 to the date of the issuance of the Exchange Notes. Consequently, holders who exchange their Old Notes for Exchange Notes will receive the same interest payment on December 15, 1998 (the first interest payment date with respect to the Old Notes and the Exchange Notes) that they would have received had they not accepted the Exchange Offer. Sale of Collateral..... In connection with and prior to the sale of the Aircraft, the Company will be required to commence an Offer to Purchase Notes in an aggregate principal amount equal to the aggregate principal amount of Notes outstanding on the date of commencement of such Offer to Purchase, at a purchase price equal to 102% of the principal amount thereof, if such Offer to Purchase is commenced prior to the first anniversary of the Issue Date, or 101% of the principal amount thereof, if such Offer to Purchase is commenced on or after the first anniversary of the Issue Date, plus, in each case, accrued and unpaid interest and Special Interest, if any, on such Notes to and including the Payment Date (as defined). The Company will deposit an amount in cash equal to the purchase price with respect to the Offer to Purchase with the Trustee on or prior to the date of sale of the Aircraft. Such cash amount shall remain on deposit with the Trustee until the payment of such purchase price on the applicable Payment Date with respect to such Offer to Purchase. As of the day immediately following the Payment Date with respect to any such Offer to Purchase, the interest rate borne by any Notes then outstanding will automatically increase by 1.50% per annum, and the lien on the Collateral will be released. The Company may satisfy in whole or in part its obligation to make an Offer to Purchase in connection with a sale of the Aircraft by delivering to the Trustee Notes acquired by the Company 9 through open market purchases. Such Notes shall be credited by the Trustee against the principal amount of Notes required to be purchased at 100% of their principal amount. See "Description of Exchange Notes-- Collateral--Use of Collateral; Total Loss; Release and Termination of Lien." Total Loss............. In the event that there shall occur a Total Loss with respect to the Aircraft, the Company will be required to make an Offer to Purchase Notes in an aggregate principal amount equal to the aggregate principal amount of Notes outstanding on the date such Offer to Purchase is required to be commenced hereunder, at a purchase price equal to 100% of such aggregate principal amount, plus accrued and unpaid interest and Special Interest, if any, on such Notes, to and including the date of purchase. The Company shall commence the Offer to Purchase within 30 days after the date of such Total Loss. The Company may satisfy in whole or in part its obligation to make an Offer to Purchase in connection with a Total Loss of the Aircraft by delivering to the Trustee Notes acquired by the Company through open market purchases. Such obligation shall be credited at 100% of the principal amount of Notes delivered to the Trustee. See "Description of Exchange Notes--Collateral--Use of Collateral; Total Loss; Release and Termination of Lien." Sinking Fund........... The Notes will be subject to mandatory redemption by way of sinking fund payments made in cash sufficient to redeem an aggregate principal amount of Notes equal to $920,000 on each of June 15, 2001 and June 15, 2002 (subject to possible reductions or elimination as described herein) (or, if the aggregate principal amount of Notes outstanding on any such redemption date is less than the principal amount required to be redeemed on such date, then the aggregate principal amount of Notes outstanding shall be redeemed), at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Special Interest, if any, to the Mandatory Redemption Date (as defined). The Company may satisfy in whole or in part its obligation to make such sinking fund payments by delivering to the Trustee Notes acquired by the Company through open market purchases. The obligation of the Company to make any sinking fund payment will be automatically terminated if the Aircraft is sold or is the subject of a Total Loss. See "Description of Exchange Notes--Sinking Fund." Change in Control...... Upon a Change in Control, each holder of Notes shall have the right for a limited period to require the Company to repurchase all or any part of such holder's Notes at a price, in cash, equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Special Interest, if any, to the date fixed for repurchase. There can be no assurance 10 that the Company will have sufficient funds available at the time of any Change in Control to make any debt payment (including repurchases of Notes) required by the foregoing. In the event the Company fails to repurchase the Notes upon a Change in Control, it would be in default under the Indenture and the maturity of substantially all of its long-term debt could be accelerated. See "Description of Exchange Notes-- Repurchase of Notes Upon a Change in Control." Ranking................ The Notes will represent senior secured obligations of the Company and will rank pari passu in right of payment with all other senior obligations of the Company. Collateral............. The Notes will be secured by a lien on one Boeing 767-231 ETOPS airframe and two associated Pratt & Whitney JT9D- 7R4D engines. See "Description of Exchange Notes--Collateral." Section 1110 Protection............. The Trustee has received an opinion of Company Counsel (as defined) that the Trustee, on behalf of the holders of the Notes, will be entitled, subject to certain conditions, to the benefits of Section 1110 of the U.S. Bankruptcy Code, as amended (the "Bankruptcy Code"), with respect to the Aircraft in the event of a case under Chapter 11 of the Bankruptcy Code in which the Company is a debtor. See "Description of Exchange Notes--Certain Bankruptcy Issues." Certain Covenants...... The indenture governing the Notes (the "Indenture") and certain related security documents will contain provisions relating to the preservation of and release of Collateral, including a prohibition against the Company allowing certain additional liens against such Collateral. The Indenture will not contain any financial covenants and will not limit the Company's ability to incur additional indebtedness. Exchange Offer; Registration Rights.... Pursuant to the Registration Rights Agreement, in the event that applicable law or interpretations of the staff of the Commission do not permit the Company to effect this Exchange Offer or if certain holders of the Old Notes notify the Company that they are not permitted to participate in, or would not receive freely transferable Exchange Notes pursuant to, the Exchange Offer, the Company has agreed to use its reasonable best efforts to cause to become effective a registration statement (the "Shelf Registration Statement") with respect to the resale of the Old Notes and to keep the Shelf Registration Statement effective for a period of two years from the date of original issuance of the Old Notes or such shorter period that will terminate when Old Notes covered by the Shelf Registration Statement have been sold pursuant thereto or can be sold pursuant to Rule 144(k). Should the Company fail for any reason to comply 11 with certain of its registration obligations under the Registration Rights Agreement, Special Interest will be payable with respect to the Notes and the Exchange Notes that are, at the time of the Company's failure to comply with such obligations, subject to certain transfer restrictions under the Securities Act. See "The Exchange Offer." Lack of Prior Market for the Exchange Notes......... The Exchange Notes are being offered to holders of the Old Notes. The Exchange Notes will be new securities for which there is currently no established trading market, and none may develop. The Company intends to apply for listing of the Exchange Notes on the American Stock Exchange. If the Exchange Notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar securities, the performance of the Company and certain other factors. Risk Factors The Notes offered hereby involve a high degree of risk. See "Risk Factors." 12 RISK FACTORS In addition to the other information appearing in this Prospectus, the following risk factors should be considered carefully in evaluating the Company and its business before participating in the Exchange Offer or investing in the Exchange Notes. Risk Factors Related to the Company Substantial Indebtedness The Company is highly leveraged and has and will continue to have significant debt service obligations. As of March 31, 1998, the Company's ratio of long-term debt and capital leases (including current maturities, but net of unamortized discounts) to shareholders' equity was 5.39 to 1. As of March 31, 1998, after giving effect to the issuance on April 21, 1998 of the Company's 11 3/8% Senior Secured Notes due 2003 (the "April Secured Notes") and the Company's Mandatory Conversion Equity Notes due 1999 (the "April Equity Notes" and, together with the April Secured Notes, the "April Notes"), the issuance on June 16, 1998 of the Notes and the Equity Notes and the conversion into Common Stock of the April Equity Notes on July 7, 1998 and the Equity Notes on July 13, 1998, the aggregate principal amount of the Company's total outstanding indebtedness would have been approximately $1,204.9 million ($1,173.8 net of unamortized discounts), and the ratio of such long-term debt and capital leases (including current maturities, but net of unamortized discounts) to stockholders' equity would have been 4.68 to 1. The Company's estimated minimum payment obligations under noncancelable operating leases in effect at March 31, 1998 were approximately $284.1 million for 1998 and approximately $3,346.0 million for periods thereafter. These amounts exclude payment obligations of the Company that will arise from financing arrangements relating to the 24 MD-83 aircraft that are more fully described under "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Commitments" in the 10-Q. Over the last several years, the Company's earnings have not been sufficient to cover fixed charges. The Company's earnings were not sufficient to cover fixed charges by $80.6 million and $105.7 million for the three months ended March 31, 1998 and March 31, 1997, respectively, $94.1 million for the year ended December 31, 1997, $280.0 million for the year ended December 31, 1996, $32.3 million for the four months ended December 31, 1995, $338.3 million for the eight months ended August 31, 1995, $435.0 million for the year ended December 31, 1994, $88.4 million for the two months ended December 31, 1993 and $364.7 million for the ten months ended October 31, 1993. See "Capitalization" included herein and "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations--General" and the Consolidated Financial Statements in the 1997 10-K and the 10-Q. The degree to which the Company is leveraged could have important consequences to holders of the Notes offered hereby, including the following: (i) the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes may be impaired; (ii) a substantial portion of the Company's cash flow from operations must be dedicated to the payment of principal and interest on the Company's existing indebtedness; (iii) the Company is placed at a relative competitive disadvantage to its less highly leveraged competitors and is more vulnerable to economic downturns; and (iv) such indebtedness contains restrictive and other covenants, that, if not complied with, may result in an event of default that, if not cured or waived, could have a material adverse effect on the Company (including, under certain circumstances, a cross-default of other debt). Capital Expenditure Requirements The Company's capital expenditures for 1998 are currently anticipated to total approximately $90.4 million compared to capital expenditures totaling approximately $100.1 million for 1997. The Company's capital expenditures budget for 1998 includes $60.0 million for flight equipment-related expenditures (including pre-delivery deposits for aircraft and the purchase of aircraft engines and spare parts). See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Certain Other Capital Requirements" in the 1997 10-K for a discussion of the potential additional expenditures that may be required by the Company in order to address the year 2000-related technology issues. While the Company is seeking financing for certain of its planned capital expenditures, a substantial portion of such expenditures are expected to utilize internally generated funds. The inability to finance or otherwise fund such expenditures could have a material adverse effect on the ability of the Company to continue to implement its strategic plan. 13 Liquidity The Company's ability to improve its financial position and meet its financial obligations will depend upon a variety of factors including: significantly improved operating results, favorable domestic and international airfare pricing environments, absence of adverse general economic conditions, more effective operating cost controls and efficiencies and the Company's ability to attract new capital and maintain adequate liquidity. On December 31, 1997, the Company's total cash and cash equivalents balance was approximately $237.8 million (including amounts held in the Company's international operations and by subsidiaries that, based upon various monetary regulations and other factors, might not be immediately available to the Company). This balance represented an increase of approximately $56.2 million from the Company's corresponding cash balance at December 31, 1996. This increase in the Company's cash balance resulted primarily from the proceeds from various capital markets offerings during 1997 and asset dispositions offset by capital expenditures and debt repayments. Due to improvements in operating results experienced by the Company, cash used by operations in 1997 was reduced from the prior year. On March 31, 1998, the Company had total cash and cash equivalents of $346.1 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Liquidity" in the 1997 10-K and the 10-Q. The Company has no unused credit lines and must satisfy all of its working capital and capital expenditure requirements from cash provided by operating activities, from external capital sources or from the sale of assets. See "The Company--Business Strategy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Liquidity" in the 1997 10-K for a description of the actions taken by the Company to improve its liquidity during 1997. As a result of the financings consummated in the fourth quarter of 1997 and the repayment of certain debt in connection therewith, assets with an approximate appraised value of $165.0 million were released from collateral liens. Since that time, the Company has sold and subsequently leased back 15 B-727 aircraft and sold two L-1011 aircraft leaving assets with an approximate appraised value of $100.0 million free and clear of liens and encumbrances. Further pledging of these unencumbered assets, however, may be limited by negative pledge restrictions in outstanding indebtedness. Substantially all of the Company's other strategic assets have been pledged to secure various issues of outstanding indebtedness of the Company. To the extent that pledged assets are sold, the applicable financing agreements generally require the sale proceeds to be applied to repay the corresponding indebtedness. To the extent that the Company's access to capital is constrained, the Company may not be able to make certain capital expenditures or to continue to implement certain other aspects of its strategic plan, and the Company may therefore be unable to achieve the full benefits expected therefrom. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources--Availability of NOLs" in the 1997 10-K and the 10- Q for a discussion of the status of the Company's net operating loss carryforwards. The Company's long-term viability as well as its ability to meet its existing debt and other obligations and future capital commitments depends upon the Company's financial and operating performance, which in turn is subject to, among other things, prevailing economic conditions and certain other financial, business and other factors beyond the Company's control. As discussed in the 1997 10-K and the 10-Q, in late 1996 and early 1997, the Company began implementing certain operational changes that are intended to improve the Company's financial results through, among other things, improved operational reliability; higher yields and load factors; increased fuel, pilot and other aircraft operating efficiencies; and a decrease in maintenance-related expenditures, employee headcount and JFK-related operating costs. Although management believes that such operational changes will be successful and that the Company's cash flow from its operations and financing activities should therefore be sufficient in the foreseeable future to meet the Company's debt and other obligations and future capital commitments, the airline industry in general and the Company in particular are subject to significant risks and uncertainties referred to in this Prospectus including under these Risk Factors and in the 1997 10-K and the 10-Q under "Management's Discussion and Analysis of Financial Condition and Results of Operations--General" and "--Liquidity and Capital Resources." Therefore, there can be no assurance that the Company's operating results and financing activities will be sufficient in the foreseeable future to meet its debt and other obligations and future capital commitments. Prior Operating Losses and Future Uncertainties Relating to Results of Operations; Results for the First Quarter of 1998 The Company's long-term viability depends on its ability to achieve and maintain profitable operations. Although the airline industry has generally seen strengthened performance in recent years, particularly since 1995 when many airlines reported record profits, the Company has reported significant net losses. For example, the Company reported a net loss of 14 $227.5 million for the combined 12-month period ended December 31, 1995 (including extraordinary gains related to the '95 Reorganization (as defined below)), while reporting an operating profit of $25.1 million (including $58.0 million of non-cash expense relating to the distribution of stock to employees as part of the restructurings effected in 1995 (the "'95 Reorganization")), which represented the Company's first operating profit since 1989. The Company's reported net loss of $284.8 million for 1996 represented a $57.3 million increase over the 1995 net loss, while the Company reported a $198.5 million operating loss for 1996 (including special charges of $85.9 million), which represented a $223.6 million decline from its operating profit in 1995. The Company's 1997 financial results reflected a net loss of $110.8 million, which represented an improvement of $174.0 million over the $284.8 million net loss for the full year 1996, and a $29.3 million operating loss, which represented a $169.2 million improvement over the $198.5 million operating loss reported for the full year 1996. For a discussion of such operating results and the substantial net losses incurred during such periods, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "The Company--Business Strategy" in the 1997 10-K. Although the Company has taken a number of actions that management believes will improve future results, the Company will incur additional expenses relating to these actions, including pilot training and aircraft leases, and there can be no assurance that such actions will make the Company's future operations profitable. See "--Liquidity; Substantial Indebtedness; Capital Expenditure Requirements" and "The Company--Business Strategy" in the 1997 10-K. The Company's financial results for the first quarter 1998 reflect an operating loss of $68.7 million and a net loss before extraordinary items of $54.1 million for the three months ended March 31, 1998, including a non-cash operating expense of $26.5 million relating to the distribution in July 1998 of Common Stock to employee stock plans. These results compare with an operating loss of $99.5 million and a net loss before extraordinary items of $70.0 million in the first quarter 1997. Excluding the effect of non-cash expense associated with earned stock compensation, the first quarter 1998 operating loss was $42.2 million compared to the first quarter 1997 operating loss of $98.2 million. Similarly calculated, the net loss before extraordinary items for the first quarter 1998 and 1997 were $38.0 million and $69.3 million, respectively. Operating revenue for the first quarter 1998 was $765.4 million versus $762.3 million in the first quarter 1997 despite a slight reduction in capacity from the first quarter 1997 to 1998 resulting from the replacement of B747 and L-1011 aircraft with smaller B767, B757 and MD-80 aircraft. The Company has historically experienced significant variations in quarterly and annual operating revenues and operating expenses and expects such variations to continue. Due to the greater demand for air travel during the summer months, airline industry revenues for the third quarter of the year are generally significantly greater than revenues in the first and fourth quarters of the year and moderately greater than revenues in the second quarter of the year. In the past, given the Company's historical dependence on summer leisure travel, the Company's results of operations have been particularly sensitive to such seasonality. While the Company, through an acceleration of its fleet renewal program and restructuring of its JFK operations, anticipates that the deseasonalization of operations affected thereby will reduce quarter-to-quarter fluctuations in the future, there can be no assurance that such deseasonalization will occur. The Company's results of operations have also been impacted by numerous other factors that are not necessarily seasonal. Among the uncertainties that might adversely impact the Company's future results of operations are: (i) competitive pricing and scheduling initiatives; (ii) the availability and cost of capital; (iii) increases in fuel and other operating costs; (iv) insufficient levels of air passenger traffic resulting from, among other things, war, threat of war, terrorism or changes in the economy; (v) governmental limitations on the ability of the Company to service certain airports and/or foreign markets; (vi) regulatory requirements necessitating additional capital or operating expenditures; (vii) the outcome of certain ongoing labor negotiations (see "--'94 Labor Agreements"); and (viii) the reduction in yield due to the continued implementation of a discount ticket program entered into by the Company with Karabu Corporation ("Karabu"), a Delaware corporation controlled by Carl Icahn, in connection with the '95 Reorganization on the terms currently applied by Karabu (which terms are, in the opinion of the Company, inconsistent with, and in violation of, the agreement (the "Ticket Agreement") governing such program) (see below and "Management's Discussion and Analysis of Financial Condition and Results of Operations--General" and "Legal Proceedings--Icahn Litigation" in the 10-Q). The Company is unable to predict the potential impact of any such uncertainties upon its future results of operations. On March 20, 1996, the Company filed a petition (the "TWA Petition") in the Circuit Court for St. Louis County, Missouri, commencing a lawsuit against Carl Icahn, Karabu and certain other entities affiliated with Icahn (collectively, the "Icahn Defendants"). The TWA Petition alleged that the Icahn Defendants are violating the Ticket Agreement between the Company and Karabu relating to the discount ticket program and otherwise tortiously interfering with the Company's business expectancy and contractual relationships by, among other things, marketing and selling tickets purchased under the 15 Ticket Agreement to the general public. The TWA Petition sought a declaratory judgment finding that the Icahn Defendants have violated the Ticket Agreement, and also sought liquidated, compensatory and punitive damages, in addition to the Company's costs and attorney's fees. On May 7, 1998 the court denied the TWA Petition and dismissed the Icahn Defendants' counterclaims. The court concluded that the Icahn Defendants could sell discount tickets under the Ticket Agreement to any person who actually uses the ticket, including non-business travelers, and that the Icahn Defendants had not breached the Ticket Agreement. No damages were assessed in respect to either plaintiff's or defendants' petitions. The court's ruling could have an adverse effect on TWA's revenue, which could be significant but the impact of which will depend on a number of factors, including yield, load factors and whether any resulting incremental sales by the Icahn Defendants will be to passengers that would not otherwise have flown on TWA. The Icahn Defendants moved to amend or modify the court's ruling to include a declaratory judgment that the Icahn Defendants are permitted to sell tickets to any person for any purpose, which could include use by the purchaser's family members or friends. TWA opposed this motion and requested that the court clarify the ruling to limit its scope consistent with the reasoning set forth in the decision, specifically that the person purchasing the ticket must use the ticket (with certain enumerated exceptions) and may not purchase a ticket for any other person. The court denied both motions on June 25, 1998. TWA has appealed the denial of its motion for clarification and the court's original ruling. Crash of Flight 800 On July 17, 1996, TWA Flight 800 crashed shortly after departure from JFK en route to Paris, France. There were no survivors among the 230 passengers and crew members aboard the Boeing 747 aircraft. The Company is cooperating fully with all federal, state and local regulatory and investigatory agencies to ascertain the cause of the crash, which to date has not been determined. The National Transportation Safety Board held hearings relating to the crash in December 1997 and is continuing its investigation. While the Company is currently a defendant in a number of lawsuits relating to the crash, it is unable to predict the amount of claims that may ultimately be made against the Company or how those claims might be resolved. The Company maintains substantial insurance coverage and, at this time, management has no reason to believe that such insurance coverage will not be sufficient to cover the claims arising from the crash. Therefore, the Company believes that the resolution of such claims will not have a material adverse effect on its financial condition or results of operations. The Company is unable to identify or predict the extent of any adverse effect on its revenues, yields or results of operations that has resulted or may result from the public perception of the crash or from any future findings by the National Transportation Safety Board. See "Business--Legal Proceedings" in the 1997 10-K. Changes to Management Team Commencing in June 1996, the Company experienced a substantial number of changes in its executive management team. Although the Company believes that a stable executive management team has now been put in place, there can be no assurance that future changes will not occur or, if such changes do occur, that they will not adversely affect future operations. 16 Current Executives of the Company DATE OF ELECTION OR APPOINTMENT AS NAME CURRENT TITLE EXECUTIVE - ------------------- ------------------- ------------------- Gerald L. Gitner(1) Chairman & CEO December 1996 William F. Compton(2) President & COO December 1996 Michael J. Palumbo Senior Vice President & CFO December 1996 Donald M. Casey Executive Vice President, Marketing May 1997 James F. Martin Senior Vice President, Human Resources November 1997 Kathleen A. Soled Senior Vice President & General Counsel January 1998 - ----------------- (1) Mr. Gitner, a director since November 1993, was Vice Chairman and Acting CEO from December 1996 until February 1997. (2) Mr. Compton, a director since November 1993, was Acting Executive Vice President, Operations from December 1996 until March 1997 and Executive Vice President, Operations from March 1997 until December 1997. In addition, David M. Kennedy, a director, served as Acting Executive Vice President and Chief Operating Officer from December 1996 until June 1997. '94 Labor Agreements As of March 31, 1998, the Company had approximately 22,203 full-time employees (based upon full-time equivalents that include part-time employees). Of these, approximately 84.6% were represented by the Air Line Pilots Association ("ALPA") and the International Association of Machinists and Aerospace Workers (the "IAM"). On March 6, 1997, the IAM was certified to replace the Independent Federation of Flight Attendants (the "IFFA") as the bargaining representative of the Company's flight attendants. The Company's currently effective collective bargaining agreement with each such union (collectively, the "'94 Labor Agreements") contain more favorable work rules than in prior contracts and wage levels that the Company believes to be below many other U.S. airlines. The '94 Labor Agreements are three-year agreements that became amendable as of August 31, 1997. Negotiations on a new collective bargaining agreement with the IAM with regard to the flight attendants commenced in July 1997 and are currently ongoing, and negotiations regarding the Company's ground employees represented by the IAM commenced in February 1997 and are currently ongoing. Negotiations on a new collective bargaining agreement with ALPA commenced in June 1997, and a tentative agreement was reached on July 11, 1998, subject to ratification. Under the Railway Labor Act (the "RLA"), workers whose contracts have become amendable are required to continue to work under the "status quo" (i.e., under the terms of employment antedating the amendable date) until the RLA's procedures are exhausted. Under the RLA, the Company and its unions are obligated to continue to bargain until agreement is reached or until a mediator is appointed and concludes that negotiations are deadlocked and mediation efforts have failed. The mediator must then further attempt to induce the parties to agree to arbitrate the dispute. If either party refuses to arbitrate, then the mediator must notify the parties that his efforts have failed and, after a 30-day cooling-off period, a strike or other direct action may be taken by the parties. At the request of the IAM, a mediator was appointed on August 6, 1997 with respect to ground employees represented by the IAM. On March 27, 1998, at the request of the IAM, a mediator was appointed with respect to the flight attendants represented by the IAM. In the opinion of management, the Company's financial resources are not as great as those of most of its competitors, and, therefore, management believes that any substantial increase in its labor costs as a result of any new labor agreements or any cessation or disruption of operations due to any strike or work action could be particularly damaging to the Company. See "Business--Employees" in the 1997 10-K. In connection with certain wage scale adjustments afforded to non-contract employees, employees previously represented by the IFFA have asserted and won an arbitration ruling with respect to the comparability of wage concessions made in 1994 that, if sustained, would require that the Company provide additional compensation to such employees. The Company estimates that at December 31, 1997 such additional compensation that would be payable pursuant to the arbitration ruling would be approximately $12.0 million. The Company denies any such obligation and is pursuing an appeal of the arbitration ruling and a court award affirming the ruling. Effective September 1, 1997, the Company also reduced the overall compensation and benefits package for non-contract employees so as to offset, in the Company's view, any claims by 17 such employees previously represented by IFFA for any retroactive or prospective wage increases. As such, no liability has been recorded by the Company. Age of Fleet; Noise At March 31, 1998, the average age of the Company's operating aircraft fleet was 16.5 years, making the Company's fleet one of the oldest of U.S. air carriers. As a result, the Company has incurred increased overall operating costs due to the higher maintenance, fuel and other operating costs associated with older aircraft. During 1997, the Company acquired 27 new or later-model used aircraft. The Company expects to continue the process of acquiring a number of new and later-model used aircraft. As of March 31, 1998, the Company's fleet included 55 aircraft that did not meet the noise reduction requirements under the Airport Noise and Capacity Act of 1990 (the "Noise Act") and must therefore be retired or substantially modified by the end of 1999. Although the Company has plans to meet the Noise Act's noise reduction requirement, there can be no assurance that such plans will be achieved. In addition, in 1990 the Federal Aviation Association (the "FAA") issued several Airworthiness Directives ("ADs") mandating changes to maintenance programs for older aircraft to ensure the oldest portion of the nation's fleet remains airworthy. Many of the Company's aircraft are currently affected by these aging aircraft ADs. In 1996 and 1997, the Company spent approximately $3.4 million and $4.2 million, respectively, to comply with aging aircraft maintenance requirements. Based on information currently available to the Company and its current fleet plan, the Company estimates that costs associated with complying with these aging aircraft maintenance requirements will aggregate an additional approximately $19.8 million through the year 2001. These cost estimates assume, among other things, that newer aircraft will replace certain of the Company's existing aircraft and that, as a result, certain aircraft will be retired by the Company before the Company would be required to make certain aging aircraft maintenance expenditures. There can be no assurance that the Company will be able to implement fully its fleet plan or that the cost of complying with aging aircraft maintenance requirements will not be significantly increased. See "--Liquidity; Substantial Indebtedness; Capital Expenditure Requirements" above and "Business--Regulatory Matters--Noise Abatement" and "--Aging Aircraft Maintenance" in the 1997 10-K. Corporate Governance Provisions; Special Voting Arrangements As a result of provisions of the '94 Labor Agreements, the Company's Third Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") and Amended and Restated By-laws (the "By-laws") contain provisions (the "Blocking Coalition Provisions") that allow certain corporate actions requiring board approval, including mergers, consolidations and sale of all or substantially all the assets of the Company, to be blocked by a vote of six (four union-elected directors and two other directors) of the Company's fifteen directors, who together constitute a "Blocking Coalition." Actions subject to disapproval by the Blocking Coalition include: (a) any sale, transfer or disposition, in a single or series of transactions, of at least 20% of the Company's assets, except for transactions in the ordinary course of business, including aircraft transactions as part of a fleet management plan; (b) any merger of the Company into or with, or consolidation of the Company with, any other entity; (c) any business combination within the meaning of Section 203 of the Delaware General Corporation Law (the "DGCL"); (d) any dissolution or liquidation of the Company; (e) any filing of a petition for bankruptcy, reorganization or receivership under any state or federal bankruptcy, reorganization or insolvency law; (f) any repurchase, retirement or redemption of the Company's capital stock or other securities prior to their scheduled maturity or expiration, except for redemptions out of the proceeds of any substantially concurrent offering of comparable or junior securities and mandatory redemptions of any redeemable preferred stock of the Company; (g) any acquisition of assets, not related to the Company's current business as an air carrier, in a single transaction or a series of related transactions exceeding $50 million adjusted annually by the consumer price index; or (h) any sale of the Company's capital stock or securities convertible into capital stock of the Company to any person if (i) at the time of issuance or (ii) assuming conversion of all outstanding securities of the Company convertible into capital stock, such person or entity would beneficially own at least 20% of the capital stock of the Company. Anti-takeover Provisions in Certificate of Incorporation and By-laws; Rights Plan The Certificate of Incorporation and the By-laws contain provisions that authorize the Board of Directors to issue preferred stock without stockholder approval, prohibit action by written consent of the stockholders, authorize only the Chairman of the Board of Directors or a majority of the Board of Directors to call special meetings of the stockholders and require advance notice for director nominations. These provisions of the Certificate of Incorporation and the By-laws and the Blocking Coalition Provisions, as well as federal laws limiting foreign ownership of U.S. flag carriers and the prohibition 18 on certain business combinations contained in Section 203 of the DGCL, could have the effect of delaying, deferring or preventing a change in control or the removal of existing management. In addition, the Board of Directors declared a dividend distribution of one right (a "Right") for each outstanding share of Common Stock and employee preferred stock issued to its union employees in three series (the "Employee Preferred Stock") and made such Right payable to holders of record as of the close of business on January 12, 1996, and thereafter each share of Common Stock or Employee Preferred Stock issued by the Company has had one Right attendant to it. The Rights are intended to protect the Company's stockholders from certain non-negotiated takeover attempts that present the risk of a change of control on terms that may be less favorable to the Company's stockholders than would be available in a transaction negotiated with and approved by the Board of Directors of the Company. See "Description of Capital Stock--Rights Plan" and "Certain Provisions of the Certificate of Incorporation, the By-laws and Delaware Law" below, and "Business--Regulatory Matters-- Foreign Ownership of Shares" in the 1997 10-K. Certain Potential Future Earnings Charges There are a number of uncertainties relating to agreements with employees of the Company, the resolution of which could result in significant non-cash charges to the Company's future operating results. Shares granted or purchased at a discount under the Employee Stock Incentive Program (the "ESIP") will generally result in a charge equal to the fair market value of shares granted plus the discount for shares purchased at the time when such shares are earned. On February 17, 1998, the first target price of $11.00 was realized and therefore a grant will be made on July 15, 1998 in an amount sufficient to increase the employee ownership by 2.0% based on the then outstanding amount of Common Stock and Employee Preferred Stock. In addition, on March 4, 1998, the average market price of the Company's Common Stock over a 30-day period exceeded the $12.10 target price necessary to earn the 1998 grant. As a result, on July 15, 1998, the Company was required to make an additional contribution to the relevant employee trusts based on the then outstanding amount of its Common Stock and Employee Preferred Stock in an amount sufficient to increase the employee ownership by 1.5%. Based on the number of outstanding shares of Common Stock and Employee Preferred Stock at July 15, 1998, the aggregate contribution pursuant to the 1997 and 1998 grants was 2,377,084. As a result of the grants earned in 1998, an aggregate non-cash charge was recorded in the first quarter of 1998 in the amount of $26.5 million in connection with such issuance. In addition, an aggregate non-cash charge of $1.0 million will be recorded in the third quarter of 1998 to reflect the actual number of shares issued on July 15, 1998. If the ESIP's target prices for the Common Stock are realized, the minimum aggregate charge for the years 1999 to 2002 (the 1997 and 1998 target prices having been met) would be approximately $[102.6] million based upon such target prices and the number of shares of Common Stock and Employee Preferred Stock outstanding at July 15, 1998. The charge for any year, however, could be substantially higher if the then market price of the Common Stock exceeds certain target prices. See "Business--Employees" in the 1997 10-K. Fresh Start Reporting In connection with the '95 Reorganization, the Company adopted fresh start reporting in accordance with the American Institute of Certified Public Accountants' Statement of Position 90-7 "--Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). The fresh start reporting common equity value of the Company was determined by the Company, with the assistance of its financial advisors, to be approximately $270.0 million based, in part, on assumptions as to future results of operations. The carrying value of the Company's assets does not reflect historical cost but rather reflects current values determined by the Company as of the August 23, 1995 effective date of the '95 Reorganization (the "'95 Effective Date") (including values for intangible assets such as routes, gates and slots of approximately $458.4 million). The difference between (i) the equity valuation of the Company plus the estimated fair market value of the Company's liabilities and (ii) the estimated fair market value of its identifiable assets was allocated to "reorganization value in excess of amounts allocable to identifiable assets" in the amount of approximately $839.1 million. In future periods, these intangible assets will be evaluated for recoverability based upon estimated future cash flows. If expectations are not substantially achieved, charges to future operations for impairment of these assets might be required and such charges could be material. Due to the significant adjustments relating to the '95 Reorganization and the adoption of fresh start reporting, the pre-reorganization consolidated financial statements are not comparable to the post-reorganization consolidated financial statements. A vertical black line is shown in the Consolidated Financial Statements in the 1997 10-K to separate the Company's post-reorganization Consolidated Financial Statements from its pre-'95 Reorganization consolidated financial statements since they have not been prepared on a consistent basis of accounting. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 19 to the Consolidated Financial Statements in the 1997 10-K. 19 In the fourth quarter of 1996, the Company reported a special charge of $26.7 million relating to the write-down of the carrying value of the Company's JFK-Athens route authority, reflecting the Company's decision to terminate service on such route after April 18, 1997. Risk Factors Related to the Industry Competition The airline industry operates in an intensely competitive environment. The Company competes with one or more major airlines on most of its routes (including on all routes between major cities) and with various forms of surface transportation. The airline industry is also cyclical due to, among other things, a close relationship of yields and traffic to general U.S. and worldwide economic conditions. Small fluctuations in passenger revenue per available seat mile ("RASM") and cost per available seat mile ("CASM") can have a significant impact on the Company's financial results. Airline profit levels are highly sensitive to, and during recent years have been adversely affected by, among other things, changes in fuel costs, fare levels and passenger demand. Vigorous price competition exists, and the Company and its competitors have frequently offered sharply reduced discount fares in many markets. Airlines, including TWA, use discount fares and other promotions to stimulate traffic during normally slack travel periods, to generate cash flow and to increase relative market share in selected markets. The Company has often elected to initiate or match discount or promotional fares in certain markets in order to compete vigorously in those discounted markets or to stimulate traffic. Passenger demand and fare levels have also been affected adversely by, among other factors, the state of the economy and international events. The airline industry has consolidated as a result of mergers and liquidations and more recently through alliances, and further consolidation may occur in the future. This consolidation has, among other things, enabled certain of the Company's major competitors to expand their international operations and increase their domestic market presence. Additionally, many of the major U.S. carriers have announced plans for alliances with other major U.S. carriers. Such alliances could further intensify the competitive environment. In addition, certain of the Company's competitors have in recent years established alliances with one or more large foreign carriers, allowing those competitors to strengthen their overall operations by, among other things, transporting passengers connecting with or otherwise traveling on the alliance carriers. Although the Company has established a code share arrangement with one foreign carrier and has filed an application with the Department of Transportation (the "DOT") to establish an alliance with another foreign carrier, it does not have an alliance with a large foreign carrier. The emergence and growth of low-cost, low-fare carriers in domestic markets represent an intense competitive challenge for the Company, which has higher operating costs than many of such low-fare carriers and fewer financial resources than many of its major competitors. In many cases, such low-cost carriers have initiated or triggered price discounting. In part as a result of the industry consolidation referred to above, aircraft, skilled labor and gates at most airports continue to be readily available to start-up carriers. To the extent new carriers or other lower cost competitors enter markets in which the Company operates, such competition could have a material adverse effect on the Company. Certain of the traditional carriers that compete with the Company have implemented, or are in the process of implementing, measures to reduce their operating costs, including the creation of low-cost regional jet airline affiliates. In addition, the Company is more highly leveraged and has significantly less liquidity (and in certain cases, a higher cost structure) than certain of its competitors, several of which have available lines of credit, significant unencumbered assets and/or greater access to capital markets. Accordingly, the Company may be less able than certain of its competitors to withstand a prolonged recession in the airline industry or prolonged periods of competitive pressure. Demand for air transportation has historically tended to mirror general economic conditions. During the most recent economic recession in the United States, the change in industry capacity failed to mirror the reduction in demand for domestic air transportation due primarily to continued delivery of new aircraft. While in the period following such recession, industry capacity leveled off, such capacity has again begun to expand. The Company expects that the airline industry will remain extremely competitive for the foreseeable future. Aircraft Fuel Since fuel costs constitute a significant portion of the Company's operating costs (approximately 15.6% in 1996 and approximately 14.3% in 1997), significant increases in fuel costs would materially and adversely affect the Company's 20 operating results. Fuel prices continue to be susceptible to, among other factors, political events and market factors beyond the Company's control, and the Company cannot predict near or longer-term fuel prices. In the event of a fuel supply shortage resulting from a disruption of oil imports or otherwise, higher fuel prices or curtailment of scheduled service could result. During 1996, the Company's average per gallon cost of fuel increased approximately 22.3% versus 1995, from approximately 57.0(cent) per gallon to approximately 69.8(cent) per gallon. During 1997, the Company's average per gallon cost of fuel decreased approximately 5.6%, from approximately 69.8(cent) per gallon to approximately 65.9(cent) per gallon. During the first quarter of 1998, the Company's average per gallon cost of fuel decreased approximately 25.0%, from approximately 74.1(cent) per gallon to approximately 55.6(cent) per gallon, over the same period in 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1997 10-K and the 10-Q. A one-cent change in the cost per gallon of fuel (based on consumption during 1997) impacts operating expense by approximately $609,000 per month. Increases in fuel prices may have a greater proportionate and more immediate impact on the Company than many of its competitors because of the composition of its fleet and because the Company does not currently maintain substantial reserves of fuel required for its operations or otherwise hedge the cost of anticipated purchases of fuel. See "Business--Aircraft Fuel" in the 1997 10-K. Regulatory Matters The airline industry is subject to extensive federal and international government regulations relating to airline safety, security and scheduling, as well as to local, state, federal and international environmental laws. Adoption of newly proposed regulations relating to these matters could increase the Company's cost of compliance with governmental regulations and could therefore increase operating expenses and, in some cases, restrict the operations of airlines, including the Company, thereby adversely affecting the Company's results of operations. During the last several years, the FAA has issued a number of maintenance directives and other regulations relating to, among other things, collision avoidance systems, airborne windshear avoidance systems, noise abatement and increased inspection requirements, including added requirements for aging aircraft. The Company believes, based on its current fleet, that it will incur substantial capital expenditures to comply with the aging aircraft and noise abatement regulations. The Company expects that a number of aircraft will be retired before major aging aircraft modifications and noise compliance will be required; however, required capital expenditures will vary depending upon changes in the Company's fleet composition. Management expects that the cost of compliance will be funded through a combination of internally generated funds and utilization of cost sharing and/or funding provisions under certain lease agreements and loan agreements. See "--Risk Factors Related to the Company--Liquidity; Substantial Indebtedness; Capital Expenditure Requirements" above. Additional laws and regulations have been proposed from time to time that could significantly increase the cost of airline operations by, for instance, imposing additional requirements or restrictions on operations. For example, several airports have recently sought to increase substantially the rates charged to airlines, and the ability of airlines to contest such increases has been restricted by federal legislation, DOT resolutions and judicial decisions. In addition, laws and regulations have also been considered from time to time that would prohibit or restrict the ownership and/or transfer of airline routes or takeoff and landing slots. Also, the award of international routes to U.S. carriers (and their retention) is regulated by treaties and related agreements between the United States and foreign governments which are amended from time to time. The Company cannot predict what laws and regulations will be adopted or what changes to international air transportation treaties will be effected, if any, or how they will affect the Company. See "Business--Regulatory Matters" in the 1997 10-K. Management believes that the Company benefited from the expiration on December 31, 1995 of the aviation trust fund tax (the "Ticket Tax"), which imposed certain taxes including a 10% air passenger tax on tickets for domestic flights, a 6.25% air cargo tax and a $6 per person international departure tax. The Ticket Tax was reinstated on August 27, 1996 and expired again on December 31, 1996. At the end of February 1997, the Ticket Tax was reinstated effective March 7, 1997 through September 30, 1997. Congress has passed tax legislation reimposing and significantly modifying the Ticket Tax, effective October 1, 1997. The legislation includes the imposition of new excise tax and significant fee tax formulas over a multiple year period, an increase in the international departure tax, the imposition of a new arrivals tax, and the extension of the Ticket Tax to cover items such as the sale of frequent flier miles. Management believes that the reimposition and modification of the Ticket Tax will have a negative impact on the Company, although neither the amount of such negative impact nor the benefit previously realized by its expiration can be precisely determined. However, management believes that the recent tax legislation and any other increases of the Ticket Tax will result in higher costs to the Company and/or, if 21 passed on to consumers in the form of increased ticket prices, might have an adverse effect on passenger traffic, revenue and/or margins. See "Business--Regulatory Matters" in the 1997 10-K. Risk Factors Relating to the Notes and the Exchange Offer Certain Bankruptcy Considerations If the Company were to become a debtor in a proceeding under Title 11 of the Bankruptcy Code, it is likely that there would be delays in payment with respect to the Notes and delays in or prevention from enforcing remedies and other rights that may otherwise be available to holders of the Notes, including rights with respect to the Collateral. It is also possible that holders of Notes would not ultimately receive repayment, in whole or in part, of the Notes. The Trustee has received an opinion of Company Counsel that the Trustee, on behalf of the holders of the Notes, will be entitled, subject to certain conditions, to the benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the Bankruptcy Code in which the Company is a debtor. See "Description of Exchange Notes--Certain Bankruptcy Issues." Ranking of the Notes The Notes will represent senior secured obligations of the Company and will rank pari passu in right of payment with other senior obligations of the Company. None of the Company's outstanding indebtedness is senior to the Notes. As of March 31, 1998, after giving effect to the issuance of the April Notes, the Notes and the Equity Notes and the conversion of the April Equity Notes on July 7, 1998 and the Equity Notes on July 13, 1998, the aggregate principal amount of the Company's total outstanding indebtedness, including accrued interest, would have been approximately $1,235.6 million. While unsecured indebtedness ranks pari passu with the Notes in right of payment, the holders of the Notes may, to the exclusion of unsecured creditors, seek recourse against the Collateral as security for the Notes unless and until the Notes are satisfied in full. See "Description of Exchange Notes--Collateral" and "--Certain Bankruptcy Issues." The Notes are not guaranteed by any subsidiary of the Company and as a result will effectively rank junior to all creditors (including trade creditors) of, and holders of preferred stock issued by, subsidiaries of the Company. As of March 31, 1998, except for the wholly-owned, bankruptcy remote subsidiary of the Company that issued $100.0 million aggregate principal amount of receivables securitization notes, the subsidiaries of the Company did not have any outstanding indebtedness or preferred stock. The Notes will contain no limitations on the Company's ability to incur additional indebtedness. See "Description of Exchange Notes." Sufficiency of Collateral There can be no assurances that the proceeds of any sale of Collateral pursuant to the Indenture and Collateral Documents (as defined) following a default would be sufficient to satisfy all payments due on the Notes. No appraisal has been or will be obtained with respect to the Collateral. If such proceeds were not sufficient to repay all such amounts due on the Notes, then holders (to the extent not repaid from the proceeds of the sale of Collateral) would have only an unsecured claim against the Company's remaining assets. In addition, the ability of holders to realize upon the Collateral may be subject to certain federal bankruptcy law limitations and, due to the nature of the Collateral, significant restrictions imposed by governmental authorities including the DOT and FAA. U.S. citizenship is a condition of registering aircraft with the FAA. Restrictions on the ability of non-U.S. citizens to register the Aircraft in the United States could impact the marketability of the Collateral. Change in Control; Cross Default Provisions Upon a Change in Control, each holder of Notes will have the right, for a limited period of time, to require the Company to repurchase all or any part of such holder's Notes at a price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Special Interest, if any, to the date fixed for repurchase. However, there can be no assurance that upon the occurrence of such a Change in Control, the Company will have sufficient funds available at the time to be able to repurchase the Notes. In the event the Company fails to repurchase the Notes upon a Change in Control, it would be in default under the Indenture and the maturity of substantially all of its long-term debt could be accelerated. See "Description of Exchange Notes--Repurchase of Notes Upon a Change in Control." 22 Lack of Prior Market for the Exchange Notes The Exchange Notes are being offered to the holders of the Old Notes. The Old Notes were offered and sold in June 1998 to Qualified Institutional Buyers and to instutional Accredited Investor and in offshore transactions complying with Rule 903 or Rule 904 of Regulation S under the Securities Act and are eligible for trading in the PORTAL market. The Exchange Notes will constitute a new issue of securities for which there is currently no established trading market, and the Exchange Notes may not be widely distributed. Accordingly, no assurance can be given that an active trading market for the Exchange Notes will develop. If a market for any of the Exchange Notes does develop, the price of such Exchange Notes may fluctuate and liquidity may be limited. If a market for any of the Exchange Notes does not develop, purchasers may be unable to resell such Exchange Notes for an extended period of time, if at all. The Company has agreed to list the Exchange Notes on the American Stock Exchange or on such other stock exchange or market as the Common Stock is then principally traded no later than the earliest to occur of (i) the effectiveness of the Registration Statement and (ii) the effectiveness of the Shelf Registration Statement, provided that such Exchange Notes meet the minimum requirements for listing on any such exchange or market, and, if applicable, to maintain such listing for so long as any of the Exchange Notes is outstanding. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of such securities. There can be no assurance that the market for the Old Notes or the Exchange Notes will not be subject to similar disruptions. Any such disruptions may have an adverse effect on holders of the Old Notes or the Exchange Notes. Consequences of Failure to Exchange Holders of Old Notes who do not exchange their Old Notes for Exchange Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to the Securities Act and applicable state securities laws. The Company does not intend to register the Old Notes under the Securities Act. The Company believes that, based upon interpretations contained in letters issued to third parties by the staff of the SEC, Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by each Holder thereof (other than a broker-dealer, as set forth below, and any such Holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Notes are acquired in the ordinary course of such Holder's business and such Holder is not engaged in, and does not intend to engage in, a distribution of such Exchange Notes and has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. Eligible Holders wishing to accept the Exchange Offer must represent to the Company in the Letter of Transmittal that (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is such holder, (ii) neither the holder of Old Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Old Notes, neither the holder nor any such other person is engaged in or intends to participate in a distribution of the Exchange Notes and (iv) neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 or a broker-dealer tendering Old Notes acquired directly from the Company for its own account or if such holder is an "affiliate," that such holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Each broker-dealer (whether or not it is also an "affiliate") that receives Exchange Notes for its own account pursuant to the Exchange Offer must represent that the Old Notes tendered in exchange therefor were acquired as a result of market-making activities or other trading activities and must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with the resales of Exchange Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." However, to comply with the securities laws of certain jurisdictions, if applicable, the Exchange Notes may not 23 be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is available and is complied with. The Company does not currently intend to take any action to register or qualify the Exchange Notes for resale in any such jurisdictions. In the event the Exchange Offer is consummated, the Company will not be required to register the transfer of the Old Notes under the Securities Act or any applicable securities laws. In such event, holders of Old Notes seeking liquidity in their investment would have to rely on exemptions to the registration requirements under such laws. The Old Notes currently may be sold to Qualified Institutional Buyers and to institutional Accredited Investors and in offshore transactions complying with Rule 903 or Rule 904 of Regulation S under the Securities Act or pursuant to another available exemption under the Securities Act without registration under the Securities Act. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the reduction in the principal amount of Old Notes outstanding could have an adverse effect upon, and increase the volatility of the market price for, the untendered and tendered but unaccepted Old Notes. Exchange Offer Procedures To participate in the Exchange Offer, and avoid the restrictions on Old Notes, each holder of Old Notes must transmit a properly completed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to the First Security Bank, National Association (the "Exchange Agent") at the address set forth below under "The Exchange Offer--Procedures for Tendering--Exchange Agent" on or prior to the Expiration Date. In addition, (i) certificates for such Old Notes must be received by the Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation of a book-entry transfer of such Old Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company ("DTC") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with the guaranteed delivery procedures. See "The Exchange Offer." 24 THE COMPANY TWA is the eighth largest U.S. air carrier (based on RPMs for the full-year 1997), whose primary business is transporting passengers, cargo and mail. During 1997, the Company carried approximately 23.4, million passengers and flew approximately 25.1 billion RPMs. As of March 31, 1998, the Company provided regularly scheduled jet service to 89 cities in the United States, Mexico, Europe, the Middle East, Canada and the Caribbean. As of March 31, 1998, the Company operated a fleet of 181 jet aircraft. TWA's North American operations have a primarily domestic hub at St. Louis and a domestic-international hub at JFK. TWA is the predominant carrier at St. Louis, with approximately 360 scheduled daily departures as of March 31, 1998 and approximately a 74.5% share of airline passenger enplanements in St. Louis for the full year 1997, excluding all commuter flights. Given its location in the center of the country, St. Louis is well-suited to function as an omni-directional hub for both north-south and east-west transcontinental traffic. Therefore, TWA believes it can offer more frequencies and connecting opportunities to many travelers in its key Midwestern markets than competing airlines. TWA's international operations are concentrated at JFK, from which TWA currently serves 26 domestic and international cities with approximately 40 daily departures. JFK is both the Company's and the industry's largest international gateway from North America. As of March 31, 1998, the Company offered non-stop flights from JFK to 8 cities in Europe and the Middle East as well as 17 destinations in the United States and the Caribbean. As described in the 1997 10-K, during 1997, the Company implemented certain steps to refocus and improve the operating and financial performance of its JFK operations. TWA is a Delaware corporation organized in 1978 and is the successor to the business of its predecessor corporation, Transcontinental & Western Air, Inc., originally formed in 1934. The Company's principal executive offices are located at One City Centre, 515 N. Sixth Street, St. Louis, Missouri 63101, and its telephone number is (314) 589-3000. USE OF PROCEEDS The Company will not receive any proceeds from the Exchange Offer. The Company has agreed to pay the expenses of the Exchange Offer. No underwriter is being used in connection with the Exchange Offer. 25 THE EXCHANGE OFFER Purpose of the Exchange Offer On June 16, 1998, the Company issued and delivered one security evidencing the Notes in definitive fully registered form in the principal amount of $14.5 million to or as directed by the Owner Trustee. The Old Notes were subsequently reoffered and resold to Qualified Institutional Buyers pursuant Rule 144A under the Securities Act and in offshore transactions complying with Rule 903 or Rule 904 of Regulation S under the Securities Act. In connection with the issuance and sale of the Old Notes, the Company entered into the Registration Rights Agreement with Lazard and the Owner Trustee, which obligated the Company to (i) file the Registration Statement of which this Prospectus is a part for the Exchange Offer within 60 days after the Issue Date, (ii) use its reasonable best efforts to cause the Registration Statement to become effective within 150 days after the Issue Date and (iii) consummate the Exchange Offer within 180 days of the Issue Date. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement. The Exchange Offer is being made pursuant to the Registration Rights Agreement to satisfy the Company's obligations thereunder. Based on interpretations by the staff of the Commission, as set forth in no-action letters issued to Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991), Mary Kay Cosmetics, Inc. (available June 5, 1991) and Warnaco, Inc. (available October 11, 1991), the Company believes that a holder who exchanges Old Notes for Exchange Notes pursuant to the Exchange Offer may offer for resale, resell and otherwise transfer such Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act; provided, that (i) such Exchange Notes are acquired in the ordinary course of such holder's business, (ii) such holder is not engaged in, and does not intend to engage in, a distribution of such Exchange Notes and has no arrangement with any person to participate in the distribution of such Exchange Notes, and (iii) such holder is not an affiliate of the Company (as defined under Rule 405 of the Securities Act). However, the staff of the Commission has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as in such other circumstances. A holder who exchanges Old Notes for Exchange Notes pursuant to the Exchange Offer with the intention to participate in a distribution of the Exchange Notes may not rely on the staff's position enunciated in the Exxon Capital Letter, the Morgan Stanley Letter or similar letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes (other than a resale of an unsold allotment from the original sale of the Notes) received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." Terms of the Exchange Offer Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), the Company will accept any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue a principal amount at maturity of Exchange Notes in exchange for an equal principal amount at maturity of outstanding Old Notes validly tendered pursuant to the Exchange Offer and not withdrawn prior to the Expiration Date. Old Notes may only be tendered in integral multiples at maturity of $1,000. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer. The terms of the Exchange Notes and the Old Notes are substantially identical in all material respects, except that (i) the exchange will be registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer of such Exchange Notes, and (ii) holders of the Exchange Notes will not be entitled to any of the registration rights of holders of Old Notes under the Registration Rights Agreement, which rights will terminate upon the consummation 26 of the Exchange Offer. See "Description of Exchange Notes." The Exchange Notes will evidence the same indebtedness as the Old Notes. The Exchange Notes will be issued under and entitled to the benefits of the Indenture pursuant to which the Old Notes were issued such that the Exchange Notes and Old Notes will be treated as a single class of debt securities under the Indenture. As of the date of this Prospectus, $14.5 million aggregate principal amount at maturity of the Old Notes are outstanding. This Prospectus, together with the Letter of Transmittal, is being sent to all registered holders of the Old Notes. Holders of Old Notes do not have any appraisal or dissenters' rights under the DGCL or the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement and the applicable requirements of the Exchange Act, and the rules and regulations of the Commission thereunder. Old Notes which are not tendered and were not prohibited from being tendered for exchange in the Exchange Offer will remain outstanding and continue to accrue interest and to be subject to transfer restrictions, but will not be entitled to any rights or benefits under the Registration Rights Agreement. Upon satisfaction or waiver of all the conditions to the Exchange Offer, the Company will accept, promptly after the Expiration Date, all Old Notes properly tendered and not withdrawn and will issue Exchange Notes in exchange therefor promptly after acceptance of the Old Notes. For purposes of the Exchange Offer, the Company shall be deemed to have accepted properly tendered Old Notes for exchange when, as and if, the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purposes of receiving the Exchange Notes from the Company. In all cases, issuance of Exchange Notes for Old Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of such Old Notes, a properly completed and duly executed Letter of Transmittal and all other required documents; provided, however, that the Company reserves the absolute right to waive any defects or irregularities in the tender or conditions of the Exchange Offer. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Old Notes are submitted for a greater principal amount at maturity than the holder desires to exchange, such unaccepted or nonexchanged Old Notes or substitute Old Notes evidencing the unaccepted portion, as appropriate, will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Holders who tender Old Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "--Fees and Expenses." Expiration Date; Extension; Amendments The term "Expiration Date" shall mean 5:00 p.m., New York City time, on ___________, 1998 (30 days following the commencement of the Exchange Offer), unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" will mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the registered holders an announcement thereof, prior to 9:00 a.m., New York City time, on the next business day after the then Expiration Date. The Company reserves the right, in its sole discretion, (i) to delay accepting any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "--Conditions" shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment in a manner reasonably calculated to inform the holders of Old Notes of such amendment. 27 Without limiting the manner in which the Company may choose to make a public announcement of any delay, extension, amendment or termination of the Exchange Offer, the Company shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. Interest on the Exchange Notes The Exchange Notes will bear interest from June 16, 1998 at the rate of 10 1/4% per annum, payable semi-annually in arrears, in cash, on June 15 and December 15 of each year, commencing December 15, 1998. Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on the Old Notes accrued from June 16, 1998 until the date of the issuance of the Exchange Notes. Consequently, holders who exchange their Old Notes for Exchange Notes will receive the same interest payment on December 15, 1998 (the first interest payment date with respect to the Old Notes and the Exchange Notes) that they would have received had they not accepted the Exchange Offer. Conditions Notwithstanding any other term of the Exchange Offer, the Company will not be required to exchange any Exchange Notes for any Old Notes, and may terminate or amend the Exchange Offer before the acceptance of any Old Notes for exchange, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which seeks to restrain or prohibit the Exchange Offer or, in the Company's judgment, would materially impair the ability of the Company to proceed with the Exchange Offer, (b) any law, statute, rule or regulation is proposed, adopted or enacted, or any existing law, statute, rule, order or regulation is interpreted, by any government or governmental authority which, in the Company's judgment, would materially impair the ability of the Company to proceed with the Exchange Offer, or (c) the Exchange Offer or the consummation thereof would otherwise violate or be prohibited by applicable law. If the Company determines in its sole discretion that any of these conditions are not satisfied, the Company may (i) refuse to accept any Old Notes and return all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Old Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders who tendered such Old Notes to withdraw their tendered Old Notes, or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Old Notes which have not been withdrawn. If the Company's waiver constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered holders, and the Company will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition or may be waived by the Company in whole or in part at any time and from time to time in its sole discretion. The Company's failure at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, and each such right will be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Company concerning the events described above will be final and binding on all parties. NO VOTE OF THE COMPANY'S SECURITYHOLDERS IS REQUIRED TO EFFECT THE EXCHANGE OFFER AND NO SUCH VOTE (OR PROXY THEREFOR) IS BEING SOUGHT HEREBY. Procedures for Tendering Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must (i) complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Old Notes (unless such tender is being effected pursuant to the procedure for book-entry transfer described below) and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date, or (ii) comply with the guaranteed delivery procedures described below. Delivery of all documents must be made to the Exchange Agent at its address set forth herein. Each broker-dealer that receives Exchange Notes for its own account in exchange for Old Notes, where such Notes were acquired by such broker-dealer as a result of market-making 28 activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with the resale of such Exchange Notes. See "Plan of Distribution." The tender of Old Notes by a holder as set forth below will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner(s) whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Old Notes, either make appropriate arrangement to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal (described below), as the case may be, must be guaranteed by an "eligible guarantor institution" (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If a person other than the registered holder of any Old Notes listed therein signs the Letter of Transmittal, such Old Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Old Notes, with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in- fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Company will determine, in its sole discretion, all questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes, and the Company's determination will be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. In addition, the Company reserves the right in its sole discretion to purchase or make offers for any Old Notes that remain outstanding subsequent to the Expiration Date or, as set forth above under "Conditions," to terminate the Exchange 29 Offer and, to the extent permitted by applicable law, to purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. By tendering, each holder will represent to the Company that, among other things, (i) the Notes to be acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of such holder, (ii) such holder has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes and (iii) such holder is not an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, or that if it is an "affiliate," it will comply with applicable registration and prospectus delivery requirements of the Securities Act. Book-Entry Transfer Within two business days after the date of this Prospectus, the Exchange Agent will make a request to establish an account with respect to the Old Notes at the book-entry transfer facility for the Old Notes, DTC, for purposes of the Exchange Offer. Any financial institution that is a participant in DTC's systems may make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account with respect to the Old Notes in accordance with DTC's procedures for such transfer. Although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, an appropriate Letter of Transmittal with any required signature guarantee and all other required documents must in each case be transmitted to and received and confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Guaranteed Delivery Procedures Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot deliver their Old Notes, the Letter of Transmittal or any other required documents to the Exchange Agent prior to the Expiration Date or (iii) who cannot complete the procedures for book-entry transfer of Old Notes to the Exchange Agent's account with DTC prior to the Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) On or prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution (by facsimile transmission, mail or hand delivery) a properly completed and duly executed notice of guaranteed delivery substantially in the form provided by the Company (the "Notice of Guaranteed Delivery"), setting forth the name and address of the holder, the certificate number(s) of such Old Notes (if possible) and the principal amount at maturity of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five business trading days after the Expiration Date, (i) the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Old Notes and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, or (ii) that book-entry transfer of such Old Notes into the Exchange Agent's account at DTC will be effected and confirmation of such book-entry transfer will be delivered to the Exchange Agent; and (c) Such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Old Notes in proper form for transfer and all other documents required by the Letter of Transmittal, or confirmation of book-entry transfer of the Old Notes into the Exchange Agent's account at DTC, are received by the Exchange Agent within three American Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. Withdrawal of Tenders Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. 30 To withdraw a tender of Old Notes in the Exchange Offer, the Exchange Agent must receive at its address set forth herein a telegram, telex, facsimile transmission or letter indicating notice of withdrawal prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount at maturity of such Old Notes), (iii) include a statement that such holder is withdrawing its election to have such Old Notes exchanged, (iv) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accomplished by documents of transfer sufficient to have the Trustee with respect to the Old Notes register the transfer of such Old Notes into the name of the person withdrawing the tender and (v) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. If Old Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Old Notes or otherwise comply with DTC's procedures. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes which have been tendered but which are not accepted for payment will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the Expiration Date. Untendered Old Notes Holders of Old Notes whose Old Notes are not tendered or are tendered but not accepted in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and preferences and subject to the limitations applicable thereto under the Indenture. Following consummation of the Exchange Offer, the holders of Old Notes will continue to be subject to the existing restrictions upon transfer contained in the legend thereon. In general, the Old Notes may not be offered for resale or resold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company will have no further obligations to such holders, other than Lazard insofar as it holds Old Notes it obtained from the Company in the initial issuance or any holder that is not eligible to participate in the Exchange Offer or does not receive freely tradable Exchange Notes in the Exchange Offer, to provide for the registration under the Securities Act of the Old Notes held by them after the Expiration Date. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. Exchange Agent First Security Bank, National Association has been appointed as Exchange Agent of the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By mail, overnight courier or hand: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Department (registered or certified mail recommended) Telephone: 801/246-5630 Facsimile: 801/246-5053 Delivery to an address other than as set forth above or transmission of instructions via facsimile to a number other than as set forth above will not constitute a valid delivery. 31 Fees and Expenses The Company will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, officers and regular employees of the Company and its affiliates may make additional solicitation by telegraph, facsimile transmission, telephone or in person. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will pay the cash expenses to be incurred in connection with the Exchange Offer. Such expenses include registration fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. The Company will pay any and all transfer taxes applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered, or if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, satisfactory evidence of the payment of the amount of any such transfer taxes must be submitted with the Letter of Transmittal (whether imposed on the registered holder or any other person). Certificates representing Exchange Notes will not be issued to such persons until satisfactory evidence of the payment of such taxes, or an exemption therefrom, is submitted. Consequences of Failure to Exchange Upon consummation of the Exchange Offer, holders that were not prohibited from participating in the Exchange Offer and did not tender their Old Notes will not have any registration rights under the Registration Rights Agreement with respect to such nontendered Old Notes and, accordingly, such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered for resale or resold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not intend to register the Old Notes under the Securities Act. The Exchange Notes may not be offered or sold unless they have been registered or qualified for sale under applicable state securities laws or an exemption from registration or qualification is available and is complied with. The Registration Rights Agreement requires the Company to register the Exchange Notes in any jurisdiction requested by the holders, subject to certain limitations. To the extent the Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes could be adversely affected. Resale of the Exchange Notes Under existing interpretations of the staff of the Commission contained in several no-action letters to third parties, the Exchange Notes would in general be freely transferable after the Exchange Offer without further registration under the Securities Act. However, any purchaser of Old Notes who intends to participate in the Exchange Offer for the purpose of distributing the Exchange Notes (i) would not be able to rely on the interpretations of the staff of the Commission, (ii) will not be able to tender its Old Notes in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Notes unless such sale or transfer is made pursuant to an exemption from such requirements. By executing the Letter of Transmittal, each holder of the Old Notes will represent that (i) it is not an affiliate of the Company or if such Holder is an "affiliate," that such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (ii) any Exchange Notes to be received by it were acquired in the ordinary course of its business and (iii) at the time of commencement of the Exchange Offer, it had no arrangement with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes. In addition, in connection with any resales of Exchange Notes, any broker-dealer (a "Participating 32 Broker-Dealer") who acquired the Notes for its own account as a result of market-making or other trading activities must deliver a prospectus meeting the requirements of the Securities Act. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes (other than a resale of an unsold allotment from the original sale of the Old Notes) with this Prospectus. Under the Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use this Prospectus as it may be amended or supplemented from time to time, in connection with the resale of such Exchange Notes. Other Participation in the Exchange Offer is voluntary and holders should carefully consider whether to accept. Holders of the Old Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. Upon consummation of the Exchange Offer, holders who were not prohibited from participating in the Exchange Offer and who did not tender their Old Notes will not have any registration rights under the Registration Rights Agreement with respect to such nontendered Old Notes and such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. Accordingly, such Old Notes may not be offered, sold, pledged or otherwise transferred except (i) to a person whom the seller reasonably believes is a "Qualified Institutional Buyer" within the meaning of Rule 144A under the Securities Act purchasing for its own account or for the account of a Qualified Institutional Buyer in a transaction meeting the requirements of Rule 144A, (ii) in an offshore transaction complying with Rule 904 of Regulation S under the Securities Act, (ii) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), (iv) pursuant to an effective registration statement under the Securities Act or (v) to the Company and, in each case, in accordance with all other applicable securities laws. Accounting Treatment The Exchange Notes will be recorded in the Company's accounting records at the same carrying value as the Old Notes as reflected in the Company's accounting records on the date of the exchange. Accordingly, the Company will recognize no gain or loss for accounting purposes upon the consummation of the Exchange Offer. The expenses of the Exchange Offer will be amortized over the remaining term of the Exchange Notes. RATIO OF EARNINGS TO FIXED CHARGES For purposes of determining the ratio of earnings to fixed charges, "earnings" consist of earnings before income taxes, extraordinary items and fixed charges (excluding capitalized interest) and "fixed charges" consist of interest (including capitalized interest) on all debt and that portion of rental expense that management believes to be representative of interest. Earnings were not sufficient to cover fixed charges as follows (in millions): for the three months ended March 31, 1998 and 1997, $80.6 and $105.7, respectively; for the years ended December 31, 1997 and 1996, $94.1 and $280.0, respectively; for the four months ended December 31, 1995, $32.3; for the eight months ended August 31, 1995, $338.3; for the year ended December 31, 1994, $435.0; for the two months ended December 31, 1993, $88.4; and for the ten months ended October 31, 1993, $364.7. 33 CAPITALIZATION The following table sets forth the consolidated cash and the capitalization of the Company as of March 31, 1998 and as adjusted to give effect to the issuance on April 21, 1998 of the April Notes, the issuance on June 16, 1998 of the Notes and the Equity Notes and the conversion into Common Stock of the April Equity Notes on July 7, 1998 and the Equity Notes on July 13, 1998. This information should be read in conjunction with the Consolidated Financial Statements incorporated by reference in this Prospectus. March 31, 1998 ------------------- As Actual Adjusted ------ -------- (in millions) Cash and cash equivalents(1) ................... $346.1 $346.1 ====== ====== Long-term debt and capital lease obligations (net of unamortized discounts and including current maturities, as applicable):(2) 10 1/4% Senior Secured Notes due 2003 ......... -- 14.5 11 3/8% Senior Secured Notes due 2003 ......... -- 43.2 11 3/8% Senior Notes due 2006 ................. 150.0 150.0 9.80% Airline Receivable Asset Backed Notes, Series 1997 ................... 100.0 100.0 11 1/2% Senior Secured Notes due 2004 ......... 138.4 138.4 12% Senior Secured Notes due 2002 ............. 43.5 43.5 8% IAM Backpay Notes. ......................... 13.7 13.7 PBGC Notes. ................................... 117.1 117.1 Various secured notes, 4.0% to 12.4%, due 1997-2001 ............................... 36.7 36.7 Installment Purchase Agreements, 10.00% to 10.53%, due 2002-2003 ............. 115.3 115.3 Boeing Co. 757 Purchase Agreements, 11.85% to 12.38%, due 2015 .................. 147.9 147.9 IRS Deferral Note ............................. 4.8 4.8 Predelivery Financing Agreement ............... 6.4 6.4 Worldspan Note 31.2 31.2 Capital lease obligations ..................... 211.1 211.1 ------ ----- Total long-term debt and and capital lease obligations ............. 1,116.1 1,173.8 ------ ----- Stockholders' equity: Preferred Stock, $0.01 par value; 137,500,000 shares authorized: 8% Preferred Stock, 4,025,000 shares authorized; 3,869,000 shares issued and outstanding and as adjusted ........... -- -- 9 1/4% Preferred Stock, 1,725,000 shares authorized; 1,725,000 shares issued and outstanding and as adjusted ................ -- -- Employee Preferred Stock, $0.01 par value; 6,959,860 shares authorized; 6,020,145 shares issued and outstanding and as adjusted (3) ............. 0.1 0.1 Common Stock, $0.01 par value; 150,000,000 shares authorized; 51,946,129 shares issued and outstanding; 56,462,755 shares issued and outstanding, as adjusted(4) ................................ 0.5 0.5 Additional paid-in capital .................. 687.8 731.2 Accumulated deficit ......................... (481.3) (481.3) --------- -------- Total stockholders' equity ............... 207.1 250.6 --------- -------- Total capitalization ..................... $1,323.2 $1,424.4 ======== ======== 34 ----------------------- (1) Includes cash and cash equivalents held in the Company's international operations and by its subsidiaries that, based upon foreign monetary regulations and other factors, might not be immediately available to the Company. (2) Current maturities of long-term debt and capital lease obligations at March 31, 1998 were $49.2 million and $36.6 million, respectively. (3) Composed of 3,191,759 shares of the Company's IAM Preferred Stock, 962,892 shares of the Company's IFFA Preferred Stock, and 1,865,494 shares of the Company's ALPA Preferred Stock distributed and allocated to employees through employee stock ownership plans for the benefit of employees represented by IAM and ALPA (collectively, the "Employee Preferred Stock"). (4) As adjusted column includes 3,290,901 shares of Common Stock issued upon conversion of the April Equity Notes and 1,225,719 shares of Common Stock issued upon conversion of the Equity Notes. Actual and as adjusted columns do not include approximately (i) approximately 10.9 million shares of Common Stock initially reserved for issuance upon conversion of the 9 1/4% Cumulative Convertible Exchangeable Preferred Stock, (ii) approximately 6.3 million shares of Common Stock reserved for issuance upon exercise of warrants issued in connection with the March 1997 offering of the Company's 50,000 Units, each consisting of (x) one 12% Senior Secured Note due 2002, in the principal amount of $1,000, and (y) one Redeemable Warrant to purchase 126.26 shares of Common Stock at an exercise price of approximately $7.92 per share, (iii) approximately 9.5 million shares of Common Stock reserved for issuance upon conversion of the 8% Cumulative Convertible Exchangeable Preferred Stock, (iv) approximately 3.7 million shares of Common Stock that may be issued upon exercise of outstanding stock options granted to officers and employees of the Company under the Key Employee Stock Incentive Plan at prices ranging from $4.64 to $18.37 per share and Common Stock issuable upon the exercise of warrants, and (v) shares of Common Stock that may be granted or sold at a discount to employees under the ESIP. See "Risk Factors--Risk Factors Related to the Company--Corporate Governance Provisions; Special Voting Arrangements" above and "Business--Employees" in the 1997 10-K and the 10-Q. 35 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial and operating data presented below relates to periods in the three months ended March 31, 1998 and 1997, the years ended December 31, 1997 and 1996, the four months ended December 31, 1995, the eight months ended August 31, 1995, the year ended December 31, 1994, the two months ended December 31, 1993 and the ten months ended October 31, 1993. This data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements in the 1997 10-K and the 10-Q. The consolidated financial data for the above periods other than the three months ended March 31, 1998 and 1997 was derived from the audited consolidated financial statements of the Company. Certain amounts have been reclassified to conform with presentations adopted in 1997. During the period from 1992 through 1995, TWA underwent two separate Chapter 11 reorganizations, the first in 1992-93 and the second in 1995. In connection with the '95 Reorganization, TWA has applied fresh start reporting in accordance with SOP 90-7, which has resulted in the creation of a new reporting entity for accounting purposes and the Company's assets and liabilities being adjusted to reflect fair values on the '95 Effective Date. A description of the adjustments to the financial statements arising from the consummation of the '95 Reorganization and the application of fresh start reporting is contained in Note 19 to the Consolidated Financial Statements in the 1997 10-K. For accounting purposes, the '95 Effective Date is deemed to be September 1, 1995. Because of the application of fresh start reporting, the financial statements for periods after the '95 Reorganization are not comparable in all respects to the financial statements for periods prior to the reorganization. Similarly, the Consolidated Financial Statements for the periods prior to the '93 Reorganization are not consistent with periods subsequent to the '93 Reorganization. Accordingly, a vertical black line separates these periods. Preferred stock dividend requirements and earnings per share of the predecessor companies have not been presented as these amounts are not meaningful.
Reorganized Company ------------------------------------------------------------------- Four Months Three Months Ended Year Ended Ended March 31, December 31, December 31, -------------------- ------------------- 1998 1997 1997 1996 1995 ---- ---- ---- ---- ---- (Dollars in thousands, except per share amounts) Statement of Operations Data: Operating revenues ........ $ 765,389 $ 762,306 $ 3,327,952 $ 3,554,407 $ 1,098,474 Operating income (loss)(1) ............... (68,707) (99,486) (29,260) (198,527) 10,446 Loss before income taxes and extraordinary items(2) ................ (79,558) (105,193) (89,335) (274,577) (32,268) Provision (credit) for income taxes ............ (25,418) (35,161) 527 450 1,370 Loss before extraordinary items ..... (54,140) (70,032) (89,862) (275,027) (33,638) Extraordinary items, net of income taxes(3) ......... (1,380) (1,532) (20,973) (9,788) 3,500 Net income (loss) ......... (55,520) (71,564) (110,835) (284,815) (30,138) Ratio of earnings to fixed charges(4) .............. -- -- -- -- -- Per share amounts(5): Loss before extraordinary items ................... $ (1.04) $ (1.51) $ (1.98) $ (6.60) $ (1.15) Net loss .................. (1.06) (1.54) (2.37) (7.27) (1.05) Prior Predecessor Predecessor Company Company ---------------------------------------- ----------- Eight Months Two Months Ten Months Ended Year Ended Ended Ended August 31, December 31, December 31, October 31, 1995 1994 1993 1993 ---- ---- ---- ---- (Dollars in thousands, except per share amounts) Statement of Operations Data: Operating revenues ........ 2,218,355 $ 3,407,702 $ 520,821 $ 2,633,937 Operating income (loss)(1) ............... 14,642 (279,494) (58,251) (225,729) Loss before income taxes and extraordinary items(2) ................ (338,309) (432,869) (88,140) (362,620) Provision (credit) for income taxes ............ (96) 960 (248) 1,312 Loss before extraordinary items ..... (338,213) (433,829) (87,892) (363,932) Extraordinary items, net of income taxes(3) ......... 140,898 (2,005) -- 1,075,581 Net income (loss) ......... (197,315) (435,834) (87,892) 711,649 Ratio of earnings to fixed charges(4) .............. -- -- -- -- Per share amounts(5): Loss before extraordinary items ................... Net loss ..................
36
Reorganized Company Predecessor Company ----------------------------------------------------- ------------------------- March 31, December 31, ---------------------------------------------------------------- 1998 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- ---- Selected Balance Sheet Data: Cash and cash equivalents(6) ... $ 346,134 $ 237,765 $ 181,586 $ 304,340 $ 138,531 $ 187,717 Current assets ................. 860,591 632,957 625,745 737,301 603,806 728,303 Net working capital (deficiency) (211,471) (303,988) (336,416) (81,913) (1,238,216) (106,703) Flight equipment, net .......... 594,399 626,382 472,495 455,434 508,625 660,797 Total property and equipment, net .......................... 706,718 741,765 614,207 600,066 693,045 886,116 Intangible assets, net ......... 1,103,034 1,118,864 1,184,786 1,275,995 921,659 1,024,846 Total assets ................... 2,974,701 2,773,848 2,681,939 2,868,211 2,512,435 2,958,862 Current maturities of long-term debt and capital leases(7) ... 85,779 88,460 134,948 110,401 1,149,739 108,345 Long-term debt, less current maturities(7) ................ 855,771 736,540 608,485 764,031 -- 1,053,644 Long-term obligations under capital leases, less current maturities ................... 174,520 182,922 220,790 259,630 339,895 376,646 Shareholders' equity (deficiency)(8) .............. 207,151 268,284 238,105 302,855 (417,476) 18,358
- -------------------------------------- (1) Includes special charges of $85.9 million in 1996, $1.7 million in the eight months ended August 31, 1995 and $138.8 million in 1994. For a discussion of these and other non-recurring items, see Note 16 to the Consolidated Financial Statements in the 1997 10-K. (2) The eight months ended August 31, 1995 includes charges of $242.2 million related to reorganization items. The ten months ended October 31, 1993 includes a charge of $342.4 million related to the settlement of pension obligations and income of $268.1 million related to reorganization items. (3) The extraordinary items in 1997 and 1996 are the result of the early extinguishment of certain debt. The extraordinary item in the four months ended December 31, 1995 was the result of the settlement of a debt of a subsidiary, while the extraordinary item in the eight months ended August 31, 1995 represents the gain on the discharge of indebtedness pursuant to the consummation of the '95 Reorganization. The extraordinary item in 1994 represents the charge for a prepayment premium related to the sale and lease back of four McDonnell Douglas MD-80 aircraft. The extraordinary item in 1993 represents the gain on discharge of indebtedness pursuant to the consummation of the '93 Reorganization. (4) For purposes of determining the ratio of earnings to fixed charges, "earnings" consist of earnings before income taxes, extraordinary items and fixed charges (excluding capitalized interest) and "fixed charges" consist of interest (including capitalized interest) on all debt and that portion of rental expense that management believes to be representative of interest. Earnings were not sufficient to cover fixed charges as follows (in millions): for the three months ended March 31, 1998 and 1997, $80.6 and $105.7, respectively; for the years ended December 31, 1997 and 1996, $94.1 and $280.0, respectively; for the four months ended December 31, 1995, $32.3; for the eight months ended August 31, 1995, $338.3; for the year ended December 31, 1994, $435.0; for the two months ended December 31, 1993, $88.4; and for the ten months ended October 31, 1993, $364.7. (5) No effect has been given to stock options, warrants, convertible preferred stock or potential issuances of additional Employee Preferred Stock as the impact would have been anti-dilutive. (6) Includes cash and cash equivalents held in international operations and by subsidiaries which, based upon foreign monetary regulations and other factors, might not be immediately available to the Company. (7) Long-term debt in 1994 was reclassified to current maturities as a result of certain alleged defaults and payment defaults. (8) No dividends were paid on the Company's outstanding common stock during the periods presented above. 37 DESCRIPTION OF NOTES The Company issued the Old Notes and will issue the Exchange Notes under the Indenture dated as of the Issue Date by and between the Company and First Security Bank, National Association, as trustee (the "Trustee"), a copy of which has been filed as an exhibit to the Registration Statement. The Notes are entitled to the benefits of and are subject to those terms set forth in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "TIA"), as in effect on the date of the Indenture. Copies of the Indenture can be obtained from the Company upon request. The following description of material provisions of the Notes, the Indenture, the Registration Rights Agreement and the Collateral Documents is intended as a summary only and is qualified by reference to those documents, including the definitions in those documents of certain terms. Whenever particular articles, sections or defined terms of the Notes, the Indenture, the Registration Rights Agreement or the Collateral Documents are referred to, it is intended that those articles, sections or defined terms are to be incorporated herein by reference. See "--Certain Definitions" for definitions of certain capitalized terms used herein. General The Notes will represent senior secured obligations of the Company and will rank pari passu in right of payment with other senior obligations of the Company. None of the Company's outstanding indebtedness is senior to the Notes. As of March 31, 1998, after giving effect to the issuance of the Notes, the Equity Notes and the April Notes and the conversion of the April Equity Notes and the Equity Notes, the aggregate principal amount of the Company's total outstanding indebtedness, including accrued interest, would have been approximately $1,235.6 million. While unsecured indebtedness ranks pari passu with the Notes in right of payment, the holders of the Notes may, to the exclusion of unsecured creditors, seek recourse against the Collateral as security for the Notes unless and until the Notes are satisfied in full. See "--Collateral" and "--Certain Bankruptcy Issues." The Notes are issued only in fully registered form, without coupons, in minimum denominations of $1,000 and integral multiples of $1,000. Holders will not be charged for any registration of transfer or exchange of the Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with any such transaction. Principal, Maturity and Interest The Notes will be limited to $14.5 million of principal in the aggregate and will mature on June 15, 2003. The Notes will bear interest at the annual rate of 10 1/4% (subject to possible increases as described herein) from the date of original issuance, or from the most recent interest payment date to which interest has been paid or provided for, payable semiannually in arrears on June 15 and December 15 of each year, commencing on December 15, 1998, to the person in whose name the Note is registered at the close of business on the preceding June 1 and December 1, as the case may be. Interest and Special Interest, if any, will be payable to the holders of record as they appear on the register of the Company kept by the registrar on such record dates. Interest and Special Interest, if any, will be computed on the basis of a 360-day year of twelve 30-day months. The Notes will be subject to a sinking fund as set forth under "--Redemptions--Sinking Fund." Principal of, interest on, and Special Interest, if any, with respect to the Notes will be payable, and the transfer of the Notes will be registrable, at the office or agency of the Company maintained for such purposes. In addition, payment of interest and Special Interest, if any, may, at the option of the Company, be made by check mailed to the address of the person entitled thereto as it appears in the register of the holders of Notes; provided, however, that payments on a certificated Note will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in New York City if such payee owns at least $250,000 in aggregate principal amount of certificated Notes and elects payment by wire transfer by giving written notice to the Company and the Trustee to such effect designating such account no later than ten days immediately preceding the relevant due date for payment (or such other date as the Company and the Trustee may accept in their discretion). The Trustee will initially act as paying agent and registrar for the Notes. The Company may change the paying agent and registrar in accordance with the Indenture. 38 Redemptions Redemption. Except as set forth under "--Sinking Fund," "--Repurchase of Notes Upon a Change in Control" and "--Collateral--Use of Collateral; Total Loss; Release and Termination of Lien," the Company will not be required to repurchase or make mandatory redemption payments with respect to the Notes, and the Notes will not at any time be redeemable at the option of the Company. Sinking Fund. The Company shall, until all the Notes are paid or payment thereof has been provided for, deposit, at least one Business Day (as defined herein) prior to each of June 15, 2001 and June 15, 2002 (each such date being hereinafter referred to as a "Mandatory Redemption Date") an amount in cash sufficient to redeem an aggregate principal amount of Notes (the "Mandatory Redemption Amount") equal to $920,000 (or, if the aggregate principal amount of Notes outstanding on any such redemption date is less than the principal amount required to be redeemed on such date, then the aggregate principal amount of Notes outstanding shall be redeemed), at a redemption price equal to 100% plus accrued and unpaid interest and Special Interest, if any, to the Mandatory Redemption Date. At its option the Company may reduce or eliminate its obligation to pay any Mandatory Redemption Amount in cash by delivering to the Trustee at least 45 days before the Mandatory Redemption Date (i) Notes that have been acquired by the Company in open market purchases (and, for avoidance of doubt, not acquired by way of any redemption or Offer to Purchase under the Indenture) and have not been called for redemption pursuant to the Indenture, together with (ii) an Officers' Certificate (as defined in the Indenture) directing the Trustee to cancel the Notes and stating the election of the Company to have credited against such Mandatory Redemption Amount a specified principal amount of Notes so delivered. All Notes made the basis of a credit against a Mandatory Redemption Amount shall be credited at 100% of their principal amount. Although the Company may obtain credit against any Mandatory Redemption Amount in advance of the related Mandatory Redemption Date, any such credit will be applied against Mandatory Redemption Amounts in the order in which they become due. The obligation of the Company to make mandatory redemption payments with respect to the Notes shall be automatically terminated in the event that the Aircraft is sold in accordance with the applicable provisions under "-- Collateral--Use of Collateral; Total Loss; Release and Termination of Lien" below, or is the subject of a Total Loss; provided, that the Company has complied in full with the applicable provisions under "--Collateral--Use of Collateral; Total Loss; Release and Termination of Lien" below, with respect to such sale or Total Loss, as the case may be. The effective date of any such termination shall be the Payment Date with respect to the related Offer to Purchase (so long as the Company does not default in the payment of the purchase price with respect to such Offer to Purchase); provided, however, that such termination shall not apply to any Mandatory Redemption Amount for which a notice of redemption has been given on or prior to such effective date. Repurchase of Notes Upon a Change in Control The Company must commence, within 30 days of the occurrence of a Change in Control, and consummate an Offer to Purchase all Notes then outstanding, at a purchase price equal to 101% of the principal amount thereof on the relevant Payment Date, plus accrued and unpaid interest and Special Interest, if any, to the Payment Date. There can be no assurance that the Company will have sufficient funds available at the time of any Change in Control to make any debt payment (including repurchases of Notes) required by the foregoing covenant (as well as may be contained in other securities or agreements of the Company which might be outstanding at the time). Future indebtedness of the Company may contain prohibitions on the occurrence of certain events that would constitute a Change in Control or require such indebtedness to be purchased upon a Change in Control. Moreover, the exercise by the holders of their right to require the Company to repurchase the Notes could cause a default under such indebtedness, even if the Change in Control itself does not, due to the financial effect of such purchase on the Company. Finally, the Company's ability to pay cash to the holders of Notes following the occurrence of a Change in Control may be limited by the Company's then existing financial resources. The provisions under the Indenture relative to the Company's obligation to make an offer to repurchase the Notes as a 39 result of a Change in Control may be waived or modified with the written consent of the holders of a majority in principal amount of the Notes. One of the events that constitutes a Change in Control under the Indenture is the disposition of "all or substantially all" of the Company's assets. This term has not been interpreted under New York law (the law governing the Indenture) to represent a specific quantitative test. As a consequence, in the event the holders of the Notes elect to require the Company to repurchase the Notes and the Company elects to contest such election, there can be no assurance as to how a court interpreting New York law would interpret the phrase. The Company could, in the future, enter into certain significant transactions that would not constitute a Change in Control with respect to the Change in Control purchase feature of the Notes. The Change in Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a takeover of the Company and, thus, the removal of incumbent management. The Change in Control purchase feature, however, is not the result of, to management's knowledge, any specific effort to obtain control of the Company by means of a merger, tender offer, solicitation or otherwise, nor is it part of a plan by management to adopt a series of anti-takeover provisions. The right to require the repurchase of Notes shall terminate after a discharge of the Company from its obligations under the Notes and the Indenture in accordance therewith. Repurchase of the Notes may, under certain circumstances, constitute a default or event of default under senior indebtedness then outstanding and, in such instances, repurchase of the Notes would be prohibited unless and until such default has been cured or waived. The failure to repurchase the Notes in such instance would constitute an Event of Default (as defined in the Indenture). See "--Events of Default." Merger, Sale or Consolidation Without limitation of the provisions of the Indenture described above regarding a Change in Control, the Company may merge, consolidate or transfer all or substantially all of its properties and assets and the Company may permit any person to consolidate with or merge into the Company, or transfer or lease all or substantially all of its properties and assets to the Company; provided that, among other things, (a) the successor person is the Company or another corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia that expressly assumes the Company's obligations on the Notes and under the Indenture and the other Operative Documents (as defined herein) and (b) immediately before and immediately after giving effect to such transaction, no Default (as defined in the Indenture) or Event of Default shall have occurred and be continuing. Upon any permitted consolidation, merger or conveyance or transfer of the properties and assets of all or substantially all of the assets of the Company, the surviving or acquiring entity, as the case may be (if other than the Company), shall succeed to, and be substituted for, the Company under the Indenture, the Notes and the other Operative Documents, but the predecessor Company in the case of a conveyance or transfer shall not be released from the obligation to pay the principal of, interest on, and Special Interest, if any, with respect to, the Notes. Exchange Offer; Registration Rights Pursuant to the Registration Rights Agreement made and entered into as of the Issue Date (the "Registration Rights Agreement") by and among the Company, the Owner Trustee and Lazard, upon the effectiveness of the Registration Statement, the Company will offer the Exchange Notes in exchange for surrender of the Notes. The Company will keep the Exchange Offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the Exchange Offer is first mailed to the holders of the Notes. For each Note surrendered to the Company pursuant to the Exchange Offer, the holder of such Note will receive an Exchange Note having a principal amount equal to that of the surrendered Note. Under existing Commission interpretations, the Exchange Notes would be freely transferable by holders other than affiliates of the Company after the Exchange Offer without further registration under the Securities Act if the holder of the Exchange Notes represents that it is acquiring the Exchange Notes in the ordinary course of its business, that it has no arrangement or 40 understanding with any person to participate in the distribution of the Exchange Notes and that it is not an affiliate of the Company, as such terms are interpreted by the Commission; provided, however, that Participating Broker-Dealers receiving Exchange Notes in the Exchange Offer will have a prospectus delivery requirement with respect to resales of such Exchange Notes. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to Exchange Notes (other than a resale of an unsold allotment from the original sale of the Notes) with this Prospectus. Under the Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements to use this Prospectus in connection with the resale of such Exchange Notes. A Holder of Old Notes (other than certain specified holders) who wishes to exchange such Old Notes for Exchange Notes in the Exchange Offer will be required to represent that any Exchange Notes to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the Exchange Offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes and that it is not an "affiliate" of the Company, as defined in Rule 405 of the Securities Act, or if it is an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. In the event that applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 180 days of the date of the Registration Rights Agreement, or if the Owner Trustee or Lazard so requests with respect to Notes not eligible to be exchanged for Exchange Notes in the Exchange Offer, or if any holder of Notes is not eligible to participate in the Exchange Offer or does not receive freely tradable Exchange Notes in the Exchange Offer, the Company will, at its cost, (a) as promptly as practicable, file the Shelf Registration Statement covering resales of the Notes or the Exchange Notes, as the case may be, (b) use its reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) use its reasonable best efforts to keep the Shelf Registration Statement effective for a period of two years from the date of original issuance of the Notes or such shorter period that will terminate when Notes covered by the Shelf Registration Statement have been sold pursuant thereto or can be sold pursuant to Rule 144(k) under the Securities Act, or any successor provision thereof. The Company will, in the event a Shelf Registration Statement is filed, among other things, provide to each holder for whom such Shelf Registration Statement was filed copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Notes or the Exchange Notes, as the case may be. A holder selling such Notes or Exchange Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such holder (including certain indemnification obligations). If (i) on or prior to 180 days after the original issuance of the Old Notes, neither the Exchange Offer is consummated nor the Shelf Registration Statement is declared effective; (ii) notwithstanding the filing of the Registration Statement or the effectiveness thereof or the consummation of the Exchange Offer, by the later of (x) 60 days after the date of original issuance of the Old Notes and (y) 30 days after a request made by Lazard or certain other holders of Old Notes pursuant to the Registration Rights Agreement that the Company file a Shelf Registration Statement, a Shelf Registration Statement has not been filed with the Commission or such Shelf Registration Statement has not been declared effective by the Commission within 150 days after any such request; or (iii) after either the Registration Statement or the Shelf Registration Statement is declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions) in connection with resales of Old Notes or Exchange Notes in accordance with and during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (i) through (iii), a "Registration Default," and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then special interest ("Special Interest") on the Old Notes and the Exchange Notes will accrue at a per annum rate of 0.50% for the first 90 days of the Registration Default Period, at a per annum rate of 1.0% for the second 90 days of the Registration Default Period, at a per annum rate of 1.50% thereafter for the remaining portion of the Registration Default Period. From and including the date on which all Registration Defaults have been cured, the accrual of Special Interest will cease. 41 Special Interest is payable in addition to any other interest payable from time to time pursuant to the terms of the Old Notes and the Exchange Notes. A Registration Default shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited or, if required by the rules and regulations under the Securities Act, quarterly unaudited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit holders of the Notes to use the related prospectus or (y) other material events or developments with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in no event shall the Company be required to disclose the business purpose for such suspension if the Company determines in good faith that such business purpose must remain confidential; provided further, however, that in any case if such Registration Default occurs for a continuous period in excess of 45 days, Special Interest shall be payable in accordance with the above paragraph from the day following such 45-day period until the date on which such Registration Default is cured. If the Company effects the Exchange Offer contemplated hereby, it will be entitled (subject to applicable law) to consummate the Exchange Offer 20 business days after the commencement thereof provided that it has accepted all Notes theretofore validly tendered in accordance with the terms of the Exchange Offer. Listing of Notes on the American Stock Exchange The Company has agreed to use its reasonable best efforts to list the Notes on the American Stock Exchange or on such other stock exchange or market as the Common Stock is then principally traded no later than the earliest to occur of (i) the effectiveness of the Registration Statement and (ii) the effectiveness of the initial Shelf Registration Statement; provided that such Notes meet the minimum requirements for listing on any such exchange or market, and, if applicable, to use its reasonable best efforts to maintain such listing for so long as any of the Notes are outstanding. Events of Default The following shall constitute "Events of Default" with respect to the Notes: (i) failure to pay the principal of or Offer to Purchase repurchase amount, if any, with respect to, any Note when such amounts become due and payable at maturity, upon acceleration, redemption or otherwise; (ii) failure to pay interest or Special Interest on the Notes when due, where such failure continues for a 30-day period; (iii) the failure by the Company to comply with its obligations under "--Redemptions--Sinking Fund" or "--Merger, Sale or Consolidation" above or to observe or perform certain other covenants or agreements in the Indenture or the Collateral Documents or the discontinuance or agreement to discontinue substantially all of the Company's commercial airline operations; (iv) any of the Operative Documents cease, without the consent of the Trustee, to be in full force and effect; (v) any representation or warranty of the Company in the Indenture or any of the Collateral Documents shall prove to have been untrue in any material respect when made and such default continues for the period and after the notice specified below, or a default in any material respect in the observance or performance of any other covenant or agreement of the Company in the Notes, the Indenture or any of the Collateral Documents, in each case that continues for the period and after the notice specified below; (vi) a default or event of default shall have occurred and be continuing under any other evidence of indebtedness of the Company or any Significant Subsidiary (as defined in Commission Regulation S-X) of the Company in excess of $10.0 million in principal amount, whether such indebtedness now exists or is created hereafter, which default or event of default results in the acceleration of such indebtedness or the failure to pay such indebtedness at maturity; (vii) any final judgment or judgments for payment of money in excess of $10.0 million in the aggregate shall be rendered against the Company or any of its Significant Subsidiaries and shall remain unstayed, unsatisfied and undischarged for the period and after the notice specified below; and (viii) certain events of bankruptcy, insolvency or reorganization involving the Company or any of its Significant Subsidiaries. The Company is required to deliver to the Trustee within 120 days after the end of each fiscal year of 42 the Company an officer's certificate stating whether or not the signatories know of any default by the Company under the Indenture and the Notes and, if any default exists, describing such default. A default under clause (v), (vi) or (vii) above is not an Event of Default until the Trustee notifies the Company or the holders of at least 25% in principal amount of the then outstanding Notes notify the Company and the Trustee of the default and the Company does not cure the default within 60 days with respect to clauses (v) or (vii), or within 30 days with respect to clause (vi) after receipt of the notice. The notice must specify the default, demand that it be remedied and state that the notice is a "Notice of Default." In case an Event of Default (other than an Event of Default resulting from bankruptcy, insolvency or reorganization of the Company or any of its Significant Subsidiaries) shall have occurred and be continuing, the Trustee, by notice to the Company, or the holders of 25% or more of the principal amount of the Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of the Notes, plus accrued and unpaid interest and Special Interest, if any, to be immediately due and payable. In case an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization of the Company or any of its Significant Subsidiaries shall occur, such amounts shall be due and payable without any declaration or other act on the part of the Trustee or the holders of the Notes. Such declaration of acceleration may be rescinded and past defaults may be waived by the holders of a majority of the principal amount of the Notes then outstanding upon conditions provided in the Indenture, except a default in the payment of principal, or interest on, or Special Interest, if any, with respect to any Note cannot be waived or amended without payment of the amount then due otherwise than for the acceleration. Except to enforce the right to receive payment when due of principal, interest, and Special Interest, if any, no holder of a Note may institute any proceeding with respect to the Indenture or the Notes or for any remedy thereunder unless such holder has previously given to the Trustee written notice of a continuing Event of Default and unless the holders of 25% or more of the principal amount of the Notes then outstanding have requested the Trustee to institute proceedings in respect of such Event of Default and have offered the Trustee reasonable indemnity against loss, liability and expense to be thereby incurred, the Trustee has failed so to act for 60 days after receipt of the same and during such 60-day period the holders of a majority of the principal amount of the Notes then outstanding have not given the Trustee a direction inconsistent with the request. Subject to certain restrictions, the holders of a majority in principal amount of the Notes then outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Collateral or otherwise or exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture, that is unduly prejudicial to the rights of any holder of a Note or that would involve the Trustee in personal liability, and the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Modifications and Waivers of the Indenture Supplemental indentures modifying or amending the Indenture may be made by the Company and the Trustee with the consent of the holders of not less than a majority in aggregate principal amount of the then outstanding Notes; provided, however, that no such modification or amendment may, without the consent of the holders of each Note affected thereby, (a) change the fixed maturity of any Note, reduce the rate or extend the time of payment of interest on, or Special Interest, if any, with respect to, any Note, reduce the principal amount or Special Interest, if any, with respect to (in each case, whether on redemption, repurchase or otherwise), any Note, change the time at which any Note may or must be redeemed as described under "--Redemptions" above, impair the right of a holder to institute suit for payment thereof, or change the place of payment of the Notes, or the currency in which the Notes are payable or (b) reduce the percentage of Notes, the consent of the holders of which is required for any modification or waiver. Without the consent of any holders of the Notes, the Company and the Trustee may amend or supplement the Notes, the Indenture or any Collateral Document to (i) provide for uncertificated Notes in addition to or in place of certificated Notes, (ii) provide for the assumption of the Company's obligations to holders of the Notes in the case of a merger or consolidation or transfer of all or substantially all of the Company's assets, (iii) comply with the TIA or (iv) cure any ambiguity, defect or inconsistency, or make any other change, in each case provided that such action does not materially adversely affect the interests of the holders of the Notes. 43 The holders of a majority in aggregate principal amount of outstanding Notes may waive any past default under the Indenture, except a default in the payment of principal, interest or Special Interest, if any, or default with respect to certain covenants under the Indenture. The consent of the holders of the Notes is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After the amendment under the Indenture becomes effective, the Company is required to mail to holders of the Notes a notice briefly describing such amendment. However, the failure to give such notice to all holders of the Notes, or any defect therein, will not impair or affect the validity of the amendment. No Personal Liability of Directors, Officers, Employees and Stockholders No past, present or future director, officer, employee or stockholder, as such, of the Company shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of the Notes by accepting a Note waives and releases all such liability. Satisfaction and Discharge of the Indenture The Indenture provides that the Company may terminate its obligations under the Indenture and obtain the release of the Collateral at any time by delivering all outstanding Notes to the Trustee for cancellation and paying all sums required to be paid pursuant to the terms of the Indenture. In addition, the Company will be permitted to terminate all of its obligations under the Indenture and obtain the release of the Collateral by irrevocably depositing with the Trustee money or U.S. government obligations sufficient to pay principal of, interest and Special Interest, if any, with respect to the Notes to maturity or redemption and all other sums payable pursuant to the terms of the Indenture, after complying with certain other procedures set forth in the Indenture. Transfer and Exchange A holder may transfer or exchange the Notes in accordance with the Indenture. The Company may require a holder to, among other things, furnish appropriate endorsements and transfer documents and pay any taxes and fees required by law or permitted by the Indenture. The registered holder of a Note may be treated as the owner of it for all purposes. Delivery and Form The Notes are issued in registered form. Reports As soon as practicable after it files with the Commission, the Company shall deliver to the Trustee and to each holder of a Note, at the address as set forth in the register of the Company with respect thereto, copies of the annual reports, quarterly reports and the information, documents and other reports with the Company furnished by it to its stockholders generally. Concurrently with the reports delivered pursuant to the preceding paragraph, the Company is required to furnish the Trustee an officer's certificate to the effect that such officer has conducted or supervised a review of the activities of the Company and of performance under the Indenture and that, to the knowledge of such officer, based on such review, the Company has fulfilled all of its obligations under the Indenture or, if there has been a default, specifying each default known to him, its nature and status. 44 Concerning the Trustee The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest, as described in the TIA, it must eliminate such conflict or resign. The Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee or otherwise distributable to holders of Notes (except money, securities or property held in trust to pay principal and/or interest and Special Interest, if any, on particular Notes) to secure the Company's payment and indemnity obligations to the Trustee (as trustee under the Indenture and under the Security Agreement (defined below)). Governing Law The Indenture provides that it and the Notes will be governed by the laws of the State of New York without regard to principles of conflict of laws. Collateral Pursuant to an Aircraft Mortgage and Security Agreement between the Company and the Trustee (the "Security Agreement") and the Mortgage Supplement referred to therein (the "Mortgage Supplement"; the Security Agreement and the Mortgage Supplement being referred to herein collectively as the "Collateral Documents"), the indebtedness evidenced by the Notes will be secured by a lien on (among other related collateral) (i) the Pledged Airframe (as defined below) and (ii) the Pledged Engines (as defined below). The Pledged Airframe and the Pledged Engines are currently leased to the Company, which lease will be terminated on the Issue Date. The Pledged Airframe, the Pledged Engines and the other collateral under the Collateral Documents are sometimes referred to herein collectively as the "Collateral." Airframe The term "Pledged Airframe" refers to the Boeing 767-231 ETOPS airframe, together with any part, spare part, appliance, accessory, appurtenance, instrument, furnishing, seat or other item of equipment (other than complete engines) installed in or attached to this airframe or removed therefrom but remaining subject to the liens created by the Collateral Documents. The Pledged Airframe was manufactured in 1983. Engines The term "Pledged Engines" refers to the two Pratt & Whitney JT9D-7R4D engines associated with the Pledged Airframe or any other engines that the Trustee and the Company agree will be substituted therefor pursuant to the Security Agreement, together with any part, spare part, appliance, accessory, appurtenance, instrument, furnishing, seat or other item of equipment installed in or attached to the engines or removed therefrom but remaining subject to the liens created by the Collateral Documents. Use of Collateral; Total Loss; Release and Termination of Lien The Indenture and the Collateral Documents provide, among other things, that the Company may (i) use and deal with the Collateral in any manner consistent with the Company's ordinary course of business and (ii) unless an Event of Default has occurred and is continuing, cause certain Collateral to be leased or subleased in accordance with the applicable Collateral Documents. Upon the payment in full of all amounts outstanding under the Notes and the Indenture, the liens created by the Collateral Documents will terminate. In addition, such Indenture and Collateral Documents permit the sale of the Aircraft for cash or any other consideration acceptable to the Company at any time; provided that upon such a sale, the Company will be required 45 to commence an Offer to Purchase Notes in an amount (the "Sale OTP Amount") equal to the aggregate principal amount of Notes outstanding on the date of commencement of such Offer to Purchase, at a purchase price (expressed as a percentage of principal amount of the Notes) equal to (a) 102%, if such Offer to Purchase is commenced prior to the first anniversary of the Issue Date, or (b) 101%, if such Offer to Purchase is commenced on or after the first anniversary of the Issue Date, plus, in either case, accrued and unpaid interest and Special Interest, if any, on such Notes to and including the Payment Date. At least 15 days prior to the date of the commencement of the Offer to Purchase, the Company shall give the Trustee notice of such pending sale and, on or prior to the date of such sale, shall have deposited with the Trustee the purchase price with respect to the Offer to Purchase. Such purchase price shall remain on deposit with the Trustee until the payment of such purchase price on the applicable Payment Date with respect to the Offer to Purchase. As of the day immediately following the Payment Date with respect to the Offer to Purchase, the interest rate borne by any then outstanding Notes will automatically increase by 1.50% per annum, and the Trustee shall release from the liens created by the Collateral Documents all right, title and interest of the Trustee in and to the Collateral. Such increase shall be in addition to Special Interest, if any, then accruing with respect to the Notes, which Special Interest shall continue to accrue in accordance with the provisions of the Notes. In the event that there shall occur a Total Loss with respect to the Aircraft, the Company will be required to make an Offer to Purchase Notes in an aggregate principal amount (the "Total Loss OTP Amount") equal to the aggregate principal amount of Notes outstanding on the date such Offer to Purchase is required to be commenced hereunder, at a purchase price equal to 100% of the aggregate principal amount of Notes to be purchased, plus accrued and unpaid interest and Special Interest, if any, on such Notes, to and including the date of purchase. The Company shall commence the Offer to Purchase within 30 days after the date of any such Total Loss. At its option the Company may reduce or eliminate its obligation to pay any Sale OTP Amount or Total Loss OTP Amount in cash by delivering to the Trustee at least 15 days before the date of commencement of the related Offer to Purchase (i) Notes that have been acquired by the Company in open market purchases (and, for avoidance of doubt, not acquired by way of any redemption or Offer to Purchase under the Indenture) and have not been called for redemption pursuant to the Indenture, together with (ii) an Officers' Certificate directing the Trustee to cancel the Notes and stating the election of the Company to have credited against such Sale OTP Amount or Total Loss OTP Amount, as the case may be, a specified principal amount of Notes so delivered. All Notes made the basis of a credit against a Sale OTP Amount or Total Loss OTP Amount shall be credited at 100% of their principal amount. In case of the failure of the Company to deliver such Officers' Certificate, the Sale OTP Amount or Total Loss OTP Amount, as the case may be, due on the payment date therefor shall be paid entirely in cash without the option to reduce the Company's obligation to make such payment as described above. Under the terms of the Indenture and the Collateral Documents, the Trustee, acting upon instructions from holders of at least 66 2/3% in aggregate principal amount of Notes then outstanding, will determine the circumstances under and the manner in which the Collateral may be disposed of, including, but not limited to, the determination of whether to release all or any portion of the Collateral from the liens created by the Collateral Documents other than in accordance with the terms thereof and of the Indenture. The holders of at least a majority in aggregate principal amount of the Notes then outstanding may determine whether and under what circumstances to foreclose on the Collateral. Upon any foreclosure, cash or other property realized by the Trustee will be applied first to pay the expenses of such foreclosure and fees and other amounts then payable to the Trustee under the Collateral Documents and the Indenture, and thereafter for the equal and ratable benefit of the holders pro rata to the aggregate principal amounts of Notes held by such holders. In connection with any release of Collateral, the Trustee shall determine whether the Trustee has received all documentation required by Section 314 of the TIA (to the extent applicable) to permit such release. Filing and Perfection Requirements for Collateral The security interest in the Collateral was required to be, and was duly perfected generally in accordance with applicable federal, state and local laws. 46 Restriction on Liens The Indenture and the Security Agreement require that the Collateral be maintained free of any liens, other than the liens created by the Security Agreement, any second priority lien created to secure the Equity Notes pursuant to the Equity Notes Documents (as defined), liens for taxes either not yet due and payable, liens for taxes due but whose validity is being contested in good faith by the Company, materialmen's, mechanics' or other similar liens that are not overdue (except to the extent being contested in good faith by appropriate proceedings), judgment liens in existence less than 60 days that are being appealed in good faith and with respect to which a stay of execution pending appeal has been secured or the payment of which is covered in full by insurance (as long as the related judgments do not constitute an Event of Default) and certain other liens permitted under the Security Agreement. Certain Bankruptcy Issues Subject to the provisions of Section 1110 of the Bankruptcy Code described below, the right of the Trustee to repossess and dispose of the Collateral, or otherwise to exercise rights or remedies with respect to the Collateral, upon the occurrence of an Event of Default is likely to be significantly impaired by applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or against the Company prior to the date when, or possibly even after, the Trustee has effected any such action. Under bankruptcy law, secured creditors such as the holders of the Notes are prohibited from repossessing their security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without bankruptcy court approval. Moreover, bankruptcy law permits the debtor to continue to retain and to use collateral even though the debtor is in default under the applicable debt instruments, provided generally that the secured creditor is given "adequate protection." The meaning of the term "adequate protection" may vary according to circumstances, but it is intended in general to protect the value (as determined by the Bankruptcy Court) of the secured creditor's interest in the collateral and may include cash payments or the granting of additional security, if and at such times as the court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term "adequate protection" and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the Notes could be delayed following commencement of a bankruptcy case, whether or when the Trustee could repossess or dispose of the Collateral or whether or to what extent holders would be compensated for any delay in payment or loss of value of the Collateral through the requirement of "adequate protection." Furthermore, in the event that the Bankruptcy Court determines the value of the Collateral is not greater than or equal to all amounts due on the Notes, the holders would, in part, hold "unsecured deficiency" claims. Applicable federal bankruptcy laws do not permit the payment and/or accrual of interest, costs and attorney's fees for "unsecured deficiency" claims or for the related "undersecured" claim during the pendency of a debtor's bankruptcy case. Section 1110 of the Bankruptcy Code provides in relevant part that the right of lessors, conditional vendors and -- with respect to the Collateral -- holders of purchase money equipment security interests, in each case, with respect to covered "equipment" (as defined in Section 1110 of the Bankruptcy Code) to take possession of such equipment in compliance with the provisions of a lease, conditional sale contract or purchase money equipment security agreement, as the case may be, is not affected by (a) the automatic stay provision of the Bankruptcy Code, which provision enjoins, among other things, repossessions by creditors for the duration of the reorganization period, (b) the provision of the Bankruptcy Code allowing the trustee in reorganization to use, sell or lease property of the debtor during the reorganization period, (c) Section 1129 of the Bankruptcy Code (which governs the confirmation of plans of reorganization in Chapter 11 cases) and (d) any power of the bankruptcy court to enjoin a repossession, in each case, unless the debtor in possession or bankruptcy trustee meets certain conditions. Section 1110 provides in relevant part that the right of a lessor, conditional vendor or -- with respect to the Collateral -- holder of a purchase money equipment security interest to take possession of such "equipment" upon the occurrence of an event of default may not be exercised for 60 days from the date of commencement of the reorganization proceedings (unless specifically permitted by the bankruptcy court) and may not be exercised thereafter if, within such 60-day period (or such longer period consented to by the lessor, conditional vendor or holder of a Section 1110-covered security interest), the trustee in reorganization or the debtor in possession, subject to bankruptcy court 47 approval, agrees to perform the debtor's obligations that become due on or after the date of commencement of reorganization proceedings and cures all existing defaults (other than defaults resulting solely from the financial condition, bankruptcy, insolvency or reorganization of the debtor) within certain prescribed time periods. "Equipment" is defined in Section 1110 of the Bankruptcy Code, in part, as an aircraft, aircraft engine, propeller, appliance, or spare part (as defined in Section 40102 of Title 49 of the U.S. Code) that is subject to a security interest granted by, leased to, or conditionally sold to a debtor that is a citizen of the United States (as defined in Section 40102 of Title 49 of the U.S. Code) holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to chapter 447 of title 49 of the U.S. Code for aircraft capable of carrying ten or more individuals or 6,000 pounds or more of cargo. The Trustee has received an opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to the Company ("Company Counsel"), that the Trustee, on behalf of the holders of the Notes, will be entitled, subject to certain conditions, to the benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft in the event of a case under Chapter 11 of the Bankruptcy Code in which the Company is a debtor. The opinion of Company Counsel does not address the availability of Section 1110 to any possible lease or sublease of the Aircraft, nor does it address any part of the Aircraft that does not fall within the definition of "equipment" under Section 1110. The opinion of Company Counsel also does not address the period of time during which the benefits of Section 1110 will remain available because of the Western Pacific Airlines decision described immediately below. On March 10, 1998, the U.S. District Court for the District of Colorado issued an opinion arising from the bankruptcy proceedings of Western Pacific Airlines, Inc. (Civil Action No. 98-K-358). The decision, reversing an order of the bankruptcy court, held that, once an airline debtor reaffirms its obligations and cures its defaults under an aircraft lease within the prescribed period in accordance with Section 1110 of the Bankruptcy Code, the lessor under such lease is not entitled to repossess the aircraft under Section 1110 if the airline subsequently defaults under such lease. On May 1, 1998, the U.S. District Court reaffirmed its prior decision in response to a motion for rehearing and reconsideration by certain parties in the case. Certain parties in the case have been granted their motion for immediate certification of the decision to the Tenth Circuit Court of Appeals. This decision, therefore, casts doubt on the continuing applicability of Section 1110's protections after an airline debtor reaffirms its obligations and cures any defaults with respect to an aircraft lease or mortgage within the original period provided by Section 1110. Settlement Initial settlement in the Notes will be in same-day funds. Investors holding their Notes through DTC will follow settlement practices applicable to United States corporate debt obligations. The Indenture will require that payments in respect of Notes (including principal, interest and Special Interest) meeting certain conditions set forth in the Indenture be made by wire transfer of same-day funds to the accounts specified by the holders thereof or, under certain circumstances, by mailing a check to each such holder's registered address. Certain Definitions "Business Day" means each day that is not a Legal Holiday. "Change in Control" means the occurrence of any of the following events: (i) any person (including any entity or group deemed to be a "person" under Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) is or becomes the direct or indirect beneficial owner (as determined in accordance with Rule 13d-3 under the Exchange Act) of shares of the Company's capital stock representing greater than 50% of the total voting power of all shares of capital stock of the Company entitled to vote in the election of directors under ordinary circumstances or to elect a majority of the Board of Directors, (ii) the Company sells, transfers or otherwise disposes of all or substantially all of its assets, (iii) when, during any period of 12 consecutive months after the Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors (together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a 48 vote of a majority of the directors still in office entitled to vote with respect to such nomination who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, but excluding any of the individuals who at the beginning of such 12-month period constituted such Board but who ceased to be a member of the Board pursuant to the Company's mandatory retirement policy as in effect as of the Issue Date), cease for any reason to constitute a majority of the Board of Directors then in office or (iv) the date of the consummation of the merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, would not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to 50% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate class vote) to which all stockholders of the corporation issuing cash or securities in the merger or consolidation would be entitled in the election of directors or where members of the Board of Directors, immediately prior to the merger or consolidation, would not, immediately after the merger or consolidation, constitute a majority of the board of directors of the corporation issuing cash or securities in the merger or consolidation. "Equity Notes Documents" means the Indenture pursuant to which the Equity Notes are issued and the other Operative Documents (as defined in such Indenture). "Legal Holiday" means a Saturday, Sunday or any other day on which banks located in New York City or the city and state of the Trustee's Corporate Trust Office as of the date of original issuance are authorized or obligated by law to remain closed. "Offer to Purchase" means an offer to purchase all or a portion, as the case may be, of the Notes by the Company from the holders of the Notes commenced by the mailing (by first-class mail, postage prepaid) by the Company (or, if requested by the Company on at least five Business Days' prior notice to the Trustee and at the Company's expense, by the Trustee) of a notice to each holder (and, if mailed by the Company, to the Trustee) at such holder's address appearing in the register, stating: (i) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment; (ii) the purchase price and the date of purchase (which shall be a business day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Note not tendered will continue to accrue interest and Special Interest, if, any, pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price on the Payment Date, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest and Special Interest, if, any, on and after the Payment Date; (v) that holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled "Option of the Holder to Elect Purchase" on the reverse side of the Note completed, to the paying agent at the address specified in the notice at any time beginning with the date of such notice but prior to the close of business on the Business Day immediately preceding the Payment Date, and such holder shall be entitled to receive from the paying agent a non-transferable receipt of deposit evidencing such deposit; (vi) that, unless the Company defaults in making the payment of the purchase price or shall otherwise, in its sole discretion, consent thereto, holders will be entitled to withdraw their election only if the Trustee receives, not later than the close of business on the fifth business day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such holder, the principal amount of Notes delivered for purchase and a statement that such holder is withdrawing his election to have such Notes purchased; and (vii) that holders whose Notes are being purchased only in part will be promptly issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall place such notice in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a financial newspaper of general circulation in New York City. No failure of the Company to give the foregoing notice shall limit any holder's right to exercise a repurchase right. On the Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an officers' certificate specifying the Notes or portions thereof accepted for payment by the Company. The Trustee shall promptly mail to the holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate, and the Company shall promptly execute and mail (or cause to be mailed) to such holders a new Note equal in principal amount to any unpurchased 49 portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples thereof; provided, further, that if the payment date is between a regular record date and the next succeeding interest payment date, Notes to be repurchased must be accompanied by payment of an amount equal to the interest and Special Interest, if any, on the principal amount of the Note being repurchased, and the interest and the Special Interest, if any, on the principal amount of the Note being repurchased will be paid on such next succeeding interest payment date to the registered holder of such Note on the immediately preceding record date. A Note repurchased on an interest payment date need not be accompanied by any such payment, and the interest and Special Interest, if any, on the principal amount of the Note being repurchased, if any, will be paid on such interest payment date to the registered holder of such Note on the corresponding record date. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the paying agent for an Offer to Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase. Both the notice of the Company and the notice of the holder having been given as specified above, the Notes so to be repurchased shall, on the Payment Date become due and payable at the purchase price applicable thereto and from and after such date (unless the Company shall default in the payment of such purchase price) such Notes shall cease to bear interest or Special Interest, if any. If any Note shall not be paid upon surrender thereof for repurchase, the principal shall, until paid, bear interest and Special Interest, if any, from the Payment Date at the rate and in accordance with the provisions set forth in such Note and the Indenture. Any Note that is to be submitted for repurchase only in part shall be delivered pursuant to the above provisions with (if the Company or Trustee so requires) due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the holder thereof or such holder's attorney duly authorized in writing. "Operative Documents" means the Indenture and the Collateral Documents. "Payment Date" with respect to any Offer to Purchase has the meaning specified in the definition herein of Offer to Purchase. "Total Loss" means any of the following in relation to the Aircraft, the Pledged Airframe or any Pledged Engine, and "Total Loss Date" means the date set forth in parentheses after each Total Loss: (i) Destruction, damage beyond repair or being rendered permanently unfit for normal use for any reason whatsoever (the date such event occurs or, if not known, the date on which the Aircraft, the Pledged Airframe or Pledged Engine was last heard of). (ii) Actual, constructive, compromised, arranged or agreed total loss (the earlier of the date on which the loss is agreed or compromised by the insurers or 30 days after the date of notice to the Company's brokers or insurers claiming such total loss). (iii) Requisition of title, confiscation, forfeiture or any compulsory acquisition whatsoever, except for any acquisition of the Aircraft, Pledged Airframe or Pledged Engines by the Air Mobility Command pursuant to the Civil Reserve Air Fleet Program (the date on which the same takes effect). (iv) Sequestration, detention or seizure for more than 30 consecutive days (the earlier of the date on which insurers make payment on the basis of a total loss or the date of expiration of such period). (v) Requisition for use for more than 180 consecutive days (the earlier of the date on which the insurers make payment on the basis of a total loss or the date of expiration of such period). (vi) Loss or loss of use due to theft or disappearance for a period greater than 60 consecutive days (the date of expiration of such period). (vii) Any other occurrence that deprives the Company of use or possession for a period of 180 consecutive days or longer (the 180th day of such period). 50 BOOK-ENTRY, DELIVERY AND FORM General Old Notes resold after the Issue Date within the United States to Qualified Institutional Buyers ("QIBs") in compliance with Rule 144A under the Securities Act or outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act were delivered and available only in global form ("Old Global Notes"). Old Notes resold after the Issue Date to any Accredited Investors were delivered and available only in definitive, fully registered form bearing a legend containing restrictions on transfers ("Old Definitive Notes"). All Exchange Notes issued in the Exchange Offer for Old Notes represented by Old Global Notes or Old Definitive Notes will be represented by one or more Exchange Notes in global form (the "Global Exchange Notes," and together with the Old Global Notes, the "Global Notes"), which will be deposited with, or on behalf of, the DTC and registered in the name of the DTC or its nominee, unless the holder of such Old Notes elects to take physical delivery of its certificates instead of holding its interest through the Global Exchange Notes (collectively referred to herein as the "Non-Global Holders"). Non-Global Holders will be issued in registered form a certificated Exchange Note ("Certificated Exchange Note"). Upon the transfer of any Certificated Exchange Note initially issued to a Non-Global Holder, such Certificated Exchange Note will, unless the transferee requests otherwise or the Global Exchange Note has previously been exchanged in whole for Certificated Exchange Notes, be exchanged for an interest in the Global Exchange Note. Global Notes Upon deposit of the Global Exchange Notes, DTC will credit, on its book-entry registration and transfer system interests in the Global Exchange Notes to the accounts of institutions that have accounts with DTC (including Euroclear and Cedel) ("participants"). Ownership of beneficial interests in the Global Exchange Notes will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the Global Exchange Notes will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC (with respect to participants' interests) for the Global Exchange Notes, or by participants or persons that hold interests through participants (with respect to beneficial interests of persons other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in the Global Exchange Notes. So long as DTC, or its nominee, is the registered holder of any Global Notes, DTC or such nominee, as the case may be, will be considered the sole legal owner and holder of such Notes represented by the Global Notes for all purposes under the Indenture and the Notes. Except as set forth below, owners of beneficial interests in Global Notes will not be entitled to have such Global Notes represented thereby registered in their names, will not receive or be entitled to receive physical delivery of certificates representing Notes in definitive, fully registered form bearing a legend containing the applicable restrictions on transfers ("Definitive Notes") in exchange therefor and will not be considered to be the owners or holders of such Global Notes represented thereby for any purpose under the Notes or the Indenture. The Company understands that under existing industry practice, in the event an owner of a beneficial interest in a Global Note desires to take any action that DTC, as the holder of such Global Note, is entitled to take, DTC would authorize the participants to take such action, and that the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. Any payment of principal, interest or Special Interest due on the Notes on any interest payment date or at maturity will be made available by the Company to the Trustee by such date. As soon as possible thereafter, the Trustee will make such payments to DTC or its nominee, as the case may be, as the registered owner of the Global Notes representing such Notes in accordance with existing arrangements between the Trustee and DTC. The Company expects that DTC or its nominee, upon receipt of any payment of principal, interest or Special Interest in respect of the Global Notes, will credit immediately the accounts of the related participants with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global 51 Note as shown on the records of DTC. The Company also expects that payments by participants to owners of beneficial interests in the Global Notes held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. None of the Company, the Trustee, or any payment agent for the Global Notes will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in any of the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for other aspects of the relationship between DTC and its participants or the relationship between such participants and the owners of beneficial interests in the Global Notes owning through such participants. As long as the Notes are represented by a Global Note, DTC's nominee will be the holder of the Notes and therefore will be the only entity that can exercise a right to repayment or repurchase of the Notes. See "Description of Exchange Notes-- Repurchase of Notes Upon a Change in Control." Notice by participants, or by owners of beneficial interests in a Global Note held through such participants, of the exercise of the option to elect repayment of beneficial interests in Notes represented by a Global Note must be transmitted to DTC in accordance with its procedures on a form required by DTC and provided to participants. In order to ensure that DTC's nominee will timely exercise a right to repayment with respect to a particular Note, the beneficial owner of such Note must instruct the broker or other participant to exercise a right to repayment. Different firms have cut-off times for accepting instructions from their customers and, accordingly, each beneficial owner should consult the broker or other participant through which it holds an interest in a Note in order to ascertain the cut-off time by which such an instruction must be given in order for timely notice to be delivered to DTC. The Company will not be liable for any delay in delivery of notices of the exercise of the option to elect repayment. Unless and until exchanged in whole or in part for Notes in definitive form in accordance with the terms of the Notes, the Global Notes may not be transferred except as a whole by DTC to a nominee of DTC, or by a nominee of DTC to DTC or another nominee of DTC, or by DTC or any such nominee to a successor of DTC or a nominee of each successor. Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among its participants, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Trustee nor the Company will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. The Company and the Trustee may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes. Definitive Notes Upon consummation of the Exchange Offer, Old Global Notes and the Global Exchange Notes shall be exchangeable for corresponding Old Definitive Notes registered in the name of persons other than DTC or its nominee at the option of the holder thereof or if (A) DTC (i) notifies the Company that it is unwilling or unable to continue as depositary for any of the Global Notes or (ii) at any time ceases to be a clearing agency registered under the Exchange Act, (B) there shall have occurred and be continuing an Event of Default (as defined in the Indenture) with respect to the Notes or (C) the Company executes and delivers to the Trustee an order that the Global Notes shall be so exchangeable. Any Definitive Notes or Certificated Exchange Notes will be issued only in fully registered form and shall be issued without coupons in denominations of $1,000 and integral multiples thereof. Any Old Definitive Notes or Certificated Exchange Notes issued in exchange for a Global Note will be registered in such names and in such denominations as DTC shall request. The Clearing System DTC has advised the Company as follows: DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the 52 meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of participants, thereby eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers (which may include Lazard), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, whether directly or indirectly. 53 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following is a general discussion of certain United States federal income tax considerations applicable to the initial holders of the Old Notes who purchased the Old Notes at their "issue price," that is, the first price at which a substantial amount of the Old Notes is sold for money to the public (not including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). This discussion does not address special tax considerations relevant to any person that acquired the Old Notes in exchange for a direct or indirect interest in the Aircraft. This summary is based upon provisions of the Internal Revenue Code of 1986, as amended (the "Code"), regulations, rulings and decisions currently in effect, all of which are subject to change (possibly with retroactive effect). The discussion does not purport to deal with all aspects of the United States federal income taxation that may be relevant to particular investors in light of their particular circumstances (for example, to persons holding Notes as part of a conversion transaction or as part of a hedge or hedging transaction, or as a position in a straddle for tax purposes), nor does it discuss the United States federal income tax considerations applicable to certain types of investors subject to special treatment under the federal income tax laws (for example, dealers in securities or currencies, traders in securities electing to mark to market their securities positions, insurance companies, tax-exempt organizations or financial institutions). In addition, the discussion does not consider the effect of any foreign, state, local or other tax laws that may be applicable to a particular investor. The discussion assumes that investors hold the Notes as "capital assets" within the meaning of Section 1221 of the Code. Prospective investors considering the Exchange Offer should consult their tax advisors with regard to the application of the United States federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction. As used herein, a "United States Holder" is an individual who is a citizen or resident of the United States, a U.S. domestic corporation or any other person that is subject to U.S. federal income tax on a net income basis in respect of its investment in the Notes. Tax Consequences to United States Holders The exchange of the Old Notes for Exchange Notes pursuant to the Exchange Offer will not result in any United States federal income tax consequences to the United States Holders. When a United States Holder exchanges an Old Note for an Exchange Note pursuant to the Exchange Offer, the Holder will have the same adjusted tax basis and holding period in the Exchange Note as in the Old Note immediately before the exchange. Interest and Special Interest, if any, on a Note will generally be taxable to a United States Holder as ordinary interest income at the time it accrues or is received in accordance with the United States Holder's method of accounting for United States federal income tax purposes. Upon the sale or retirement of a Note, a United States Holder will recognize taxable gain or loss equal to the difference between the amount realized on the sale or retirement and such Holder's adjusted tax basis in the Note. Tax Consequences to Non-United States Holders Any payment of interest on a Note by the Company or any paying agent to a holder that is a Non-United States Holder would not be subject to withholding of U.S. federal income tax, provided that (i) the holder does not actually or constructively own 10 percent or more of the combined voting power of all classes of stock of the Company and is not a controlled foreign corporation related to the Company through stock ownership and (ii) the beneficial owner provides a statement signed under penalties of perjury that includes its name and address and certifies that it is a Non-United States Holder in compliance with applicable requirements. Any gain realized on any sale or exchange of Notes by a Non-United States Holder will not be subject to U.S. federal income tax, including withholding tax, unless (i) such gain is effectively connected with the conduct by 54 the holder of a trade or business in the United States or (ii) in the case of gain realized by an individual holder, the holder is present in the United States for 183 days or more in the taxable year of the sale and either (A) such gain or income is attributable to an office or other fixed place of business maintained in the United States by such holder or (B) such holder has a tax home in the United States. A Note held by an individual who is not a citizen or resident of the United States at the time of his death will not be subject to United States federal estate tax as a result of such individual's death, provided that the individual does not own, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of the Company entitled to vote and, at the time of such individual's death, payments with respect to such Note would not have been effectively connected to the conduct by such individual of a trade or business in the United States. As used herein, a "Non-United States Holder" is a holder of a Note that is not a United States person. A "United States person" is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust if (i) a U.S. court is able to exercise primary supervision over the trust's administration and (ii) one or more United States persons have the authority to control all of the trust's substantial decisions. Information Reporting and Backup Withholding In general, information reporting requirements will apply to payments of interest on a Note and to the proceeds of the sale of a Note made to a United States person other than certain exempt recipients (such as corporations). Backup withholding at a 31 percent rate will apply to such payments if the United States person fails to provide its taxpayer identification number or, in the case of interest payments, fails either to report in full interest income or to make certain certifications. Persons holding Notes who are not United States persons may be required to comply with applicable certification procedures to establish that they are not United States persons to avoid the application of such reporting requirements and backup withholding tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the person's U.S. federal income tax liability provided the required information is furnished to the Internal Revenue Service. 55 PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account (a Participating Broker-Dealer) pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. In addition, until _____________, 1998 (90 days after the date of this Prospectus), all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Notes by Participating Broker-Dealers. Exchange Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer or the purchasers of any such Exchange Notes. Any Participating Broker-Dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the reasonable expenses of one counsel for the holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 56 LEGAL MATTERS The validity of the Exchange Notes offered hereby will be passed upon for the Company by Cleary, Gottlieb, Steen & Hamilton, New York, New York. EXPERTS The consolidated financial statements of the Company as of December 31, 1997 and 1996 and for each of the periods in the three-year period ended December 31, 1997 incorporated by reference into this Prospectus, have been audited by KPMG Peat Marwick LLP, independent auditors, as set forth in their report incorporated by reference herein and are incorporated by reference herein in reliance upon the report of such firm given and upon their authority as experts in accounting and auditing. Their report refers to the application of fresh start reporting in connection with the '95 Reorganization. 57 ================================== ================================== No dealer, salesperson or other OFFER TO EXCHANGE person has authorized to give any information or to make any 10 1/4% SENIOR SECURED representations other than those NOTES DUE 2003 contained or incorporated by WHICH HAVE BEEN reference in this Prospectus, and, REGISTERED UNDER THE if given or made, such information SECURITIES ACT or representations must not be OF 1933, AS AMENDED, relied upon. This Prospectus does FOR ANY AND ALL OUTSTANDING not constitute an offer to sell or 10 1/4% SENIOR SECURED a solicitation by anyone in any NOTES DUE 2003 jurisdiction in which such offer or solicitation is not authorized, OF or in which the person making such offer or solicitation is not TRANS WORLD qualfied to do so, or to any AIRLINES, INC person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor the sale made hereunder shall, under any circumstances, create an implication that the informtion ---------- contained herein is correct as of PROSPECTUS any time subsequent to the date ---------- hereof or that there has been no change in the affairs of the Company since the date hereof. TABLE OF CONTENTS Page Available Information.........4 Incorporation of Certain Documents by Reference........4 Forward-Looking Statements....5 Prospectus Summary............6 Risk Factors.................13 The Company..................25 Use of Proceeds..............25 The Exchange Offer...........26 Ratio of Earnings to Fixed Charges................33 Capitalization...............34 Selected Consolidated Financial Data...............36 Description of Exchange Notes........................38 Book-Entry, Delivery and Form.....................51 Certain Federal Income Tax Considerations ..........54 Plan of Distribution.........56 Legal Matters................57 July __, 1998 Experts......................57 ================================== ================================== PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. Indemnification of Directors and Officers Under the Delaware General Corporation Law (the "DGCL"), directors, officers, employees and other individuals may be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative (other than a derivative action) if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of TWA and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of care is applicable in the case of a derivative action, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such an action, and the DGCL requires court approval before there can be any indemnification of expenses where the person seeking indemnification has been found liable to TWA. The eleventh article of TWA's Third Amended and Restated Certificate of Incorporation ("Article Eleventh") provides that the Company shall indemnify any person who was or is a party or is threatened to be made a party to, or testifies in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permitted by law, and the Company may adopt by-laws or enter into agreements with any such person for the purpose of providing for such indemnification. To the extent that a director or officer of the Company has been successful on the merits or otherwise (including without limitation settlement by nolo contendere) in defense of any action, suit or proceeding referred to in the immediately preceding paragraph, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. Expenses incurred by an officer, director, employee or agent in defending or testifying in a civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Company against such expenses as authorized by Article Eleventh and the Company may adopt by-laws or enter into agreements with such persons for the purpose of providing for such advances. The indemnification permitted by Article Eleventh shall not be deemed exclusive of any other rights to which any person may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding an office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. The Company shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of Article Eleventh or otherwise. If the DGCL is amended to further expand the indemnification permitted to directors, officers, employees or agents of the Company, then the Company shall indemnify such persons to the fullest extent permitted by the DGCL, as so amended. II-1 The obligations of the Company to indemnify any person serving as one of its directors, officers or employees as of or following the Company's '93 Reorganization, by reason of such person's past or future service in such a capacity, or as a director, officer or employee of another corporation, partnership or other legal entity, to the extent provided in Article Eleventh or in similar constituent documents or by statutory law or written agreement of or with the Company, shall be deemed and treated as executory contracts assumed by the Company pursuant to the Company's '93 Reorganization. Accordingly, such indemnification obligations survive and were unaffected by the entry of the order confirming the Company's '93 Reorganization. The obligations of the Company to indemnify any person who, as of the '93 Reorganization, was no longer serving as one of its directors, officers or employees, which indemnity obligation arose by reason of such person's prior service in any such capacity, or as a director, officer or employee of another corporation, partnership or other legal entity, to the extent provided in the certificate of incorporation, by-laws or other constituent documents or by statutory law or written agreement of or with TWA were terminated and discharged pursuant to Section 502(e) of the United States Bankruptcy Code or otherwise, as of the date the '93 Reorganization was confirmed. Nothing contained in the Third Amended and Restated Certificate of Incorporation of the Company shall be deemed to reinstate any obligation of the Corporation to indemnify any person or entity, which was otherwise released under or in connection with the Comprehensive Settlement Agreement entered into pursuant to the '93 Reorganization. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission (the "Commission"), such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. ITEM 21. Exhibits (a) Exhibits *2.1 --Joint Plan of Reorganization, dated May 12, 1995 (Appendix B to the Registrant's Registration Statement on Form S-4, Registration Number 33-84944, as amended) *2.2 --Modifications to Joint Plan of Reorganization, dated July 14, 1995 and Supplemental Modifications to Joint Plan of Reorganization dated August 2, 1995 (Exhibit 2.5 to 6/95 10-Q) *2.3 --Findings of Fact, Conclusions of Law and Order Confirming Modified Joint Plan of Reorganization, dated August 4, 1995, with Exhibits A-B attached (Exhibit 2.6 to 6/95 10-Q) *2.4 --Final Decree, dated December 28, 1995, related to the '95 Reorganization (Exhibit 2.7 to 12/31/95 Form 10-K) *4.1 --Voting Trust Agreement, dated November 3, 1993, between TWA and LaSalle National Trust, N.A. as trustee (Exhibit 4.3 to 9/93 10-Q) *4.2 --IAM Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated August 31, 1993, between TWA, the IAM Plan Trustee Committee and the IAM Trustee (Exhibit to 9/93 10-Q) II-2 *4.3 --IFFA Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated August 31, 1993, between TWA, the IFFA Plan Trustee Committee and the IFFA Trustee (Exhibit 4.5 to 9/93 10-Q) *4.4 --Trans World Airlines, Inc. Employee Stock Ownership Plan, dated August 31, 1993, First Amendment thereto, dated October 31, 1993, and related Trust Agreement, dated August 31, 1993, between TWA and the ESOP Trustee (Exhibit 4.6 to 9/93 10-Q) *4.5 --ALPA Stock Trust, dated August 31, 1993, between TWA and the ALPA Trustee (Exhibit 4.7 to 9/93 10-Q) *4.6 --Stockholders Agreement, dated November 3, 1993, among TWA, LaSalle National Trust, N.A., as Voting Trustee and the ALPA Trustee, IAM Trustee, IFFA Trustee and Other Employee Trustee (each as defined herein), as amended by the Addendum to Stockholders dated November 3, 1993 (Exhibit 4.8 to 9/93 10-Q) *4.7 --Registration Rights Agreement, dated November 3, 1993, between TWA and the Initial Significant Holders (Exhibit 4.9 to 9/93 10-Q) *4.8 --Indenture between TWA and Harris Trust and Savings Bank, dated November 3, 1993 relating to TWA's 8% Senior Secured Notes Due 2000 (Exhibit 4.11 to 9/93 10-Q) *4.9 --Indenture between TWA and American National Bank and Trust Company of Chicago, N.A., dated November 3, 1993 relating to TWA's 8% Secured Notes Due 2001 (Exhibit 4.12 to 9/93 10-Q) *4.10 --The TWA Air Line Pilots 1995 Employee Stock Ownership Plan, effective as of January 1, 1995 (Exhibit 4.12 to 9/95 10-Q) *4.11 --TWA Air Line Pilots Supplemental Stock Plan, effective September 1, 1994 (Exhibit 4.13 to 9/95 10-Q) *4.12 --TWA Air Line Pilots Supplemental Stock Plan Trust, effective August 23, 1995 (Exhibit 4.14 to 9/95 10-Q) *4.13 --TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement, effective August 23, 1995 (Exhibit 4.15 to 9/95 10-Q) *4.14 --Form of Indenture relating to TWA's 8% Convertible Subordinated Debentures Due 2006 (Exhibit 4.16 to Registrant's Registration Statement on Form S-3, No. 333-04977) *4.15 --Indenture dated as of March 31, 1997 between TWA and First Security Bank, National Association relating to TWA's 12% Senior Secured Notes due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.16 --Form of 12% Senior Secured Note due 2002 (contained in Indenture filed as Exhibit 4.15 to 12/31/97 Form 10-K) *4.17 --Registration Rights Agreement dated as of March 31, 1997 between the Company and the Initial Purchaser relating to the 12% Senior Secured Notes due 2002 and the warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.17 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.18 --Warrant Agreement dated as of March 31, 1997 between the Company and American Stock Transfer & Trust Company, as Warrant Agent, relating to warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.18 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.19 --Form of Indenture relating to TWA's 9 1/4% Convertible Subordinated Debentures due 2007 (Exhibit 4.19 to Registrant's Registration Statement on Form S-3, No. 33-44689) II-3 *4.20 --Registration Rights Agreement dated as of December 2, 1997 between the Company and the Initial Purchasers (Exhibit 4.20 to Registrant's Registration Statement on Form S-3, No. 33-44689) *4.21 --Indenture dated as of December 9, 1997 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's Registration Statement on Form S-3, No. 33-44661) *4.22 --Form of 11 1/2% Senior Secured Note due 2004 (contained in Indenture filed as Exhibit 4.21 to 12/31/97 Form 10-K) *4.23 --Registration Rights Agreement dated as of December 9, 1997 among the Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as initial purchasers, relating to TWA's 11 1/2% Senior Secured Notes due 2004 (Exhibit 4.23 to Registrant's Registration Statement on Form S-3, No. 33-44661) *4.24 --Sale and Service Agreement dated as of December 30, 1997 between TWA and Constellation Finance LLC, as purchaser, relating to TWA's receivables (Exhibit 4.24 to Registrant's Registration Statement on Form S-3, No. 33-44661) *4.25 --Registration Rights Agreement dated as of March 3, 1998 between the Company and the Initial Purchaser *4.26 --Indenture dated as of March 3, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 3/8% Senior Notes due 2006 *4.27 --Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998 among TWA, First Security Bank, National Association, as Owner Trustee and Seven Sixty Seven Leasing, Inc. *4.28 --Indenture dated as of April 21, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 3/8% Senior Secured Notes due 2003 *4.29 --Form of 11 3/8% Senior Secured Notes due 2003 (contained as Exhibit 1 to Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.28) 4.30 --Indenture dated as of April 21, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's Mandatory Conversion Equity Notes due 1999 4.31 --Form of Mandatory Conversion Equity Note due 1999 (contained as Exhibit A to Indenture in Exhibit 4.30) *4.32 --Registration Rights Agreement dated as of April 21, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 11 3/8% Senior Secured Notes Due 2003 (Exhibit 4.31 to Registrant's Registration Statement on Form S-3, filed with the SEC on June 16, 1998) *4.33 --Registration Rights Agreement dated as of April 21, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the Mandatory Conversion Equity Notes Due 1999 (Exhibit 4.32 to Registrant's Registration Statement on Form S-3, filed with the SEC on June 16, 1998) 4.34 --Indenture dated as of June 16, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 10 1/4% Senior Secured Notes due 2003 4.35 -- Form of 10 1/4% Senior Secured Notes due 2003 (contained as Exhibit 1 to Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.34) 4.36 -- Registration Rights Agreement dated as of June 16,1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 10 1/4 % Senior Secured Notes Due 2003 II-4 4.37 --Indenture dated as of June 16, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 10 1/4% Mandatory Conversion Equity Notes due 1999 4.38 --Form of 10 1/4% Mandatory Conversion Equity Notes due 1999 (contained as Exhibit A to Indenture in Exhibit 4.37) 4.39 --Registration Rights Agreement dated as of June 16, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 10 1/4% Mandatory Conversion Equity Notes Due 1999 5 --Opinion of Cleary, Gottlieb, Steen & Hamilton, Counsel to the Registrant, regarding the validity of the securities being registered *12 --Statement re: Computation of Ratio of Fixed Charges (Exhibit 12 to Registrant's Registration Statement on Form S-3, Regis. No. 333-58481) 23.1 --Consent of KPMG Peat Marwick LLP 23.2 --Consent of Cleary, Gottlieb, Steen & Hamilton, Counsel to the Registrant (included in Exhibit 5) 24 --Powers of Attorney 25 --Statement of Eligibility of First Security Bank, National Association 99.1 --Form of Letter of Transmittal 99.2 --Form of Notice of Guaranteed Delivery 99.3 --Form of Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner of Old Notes 99.4 --Form of Letter to Registered Holders and Depository Trust Company Participants 99.5 --Form of Letter to Clients of Depository Trust Company Participants --------------- * Incorporated by reference (b) Schedules All supplementary schedules relating to the Registration Statement are omitted because they are not required or because the required information, where material, is contained in the Consolidated Financial Statements incorporated by reference from the 12/31/97 Form 10-K and 3/31/98 Form 10-Q. ITEM 22. Undertakings (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: II-5 (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, II-5 in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act), that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (d) The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the Trustee to act under subsection (a) of Section 310 of the Trust Indenture Act (the "Act") in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. (e) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4 or 11 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (f) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized in the City of St. Louis, State of Missouri, July 17, 1998. TRANS WORLD AIRLINES, INC. July 17, 1998 By /s/ Michael J. Palumbo --------------------------- Michael J. Palumbo, Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-4 has been signed by the following persons in the capacities and on the dates indicated. Signatures Title Date ---------- ----- ---- /s/ Gerald L. Gitner Director, Chairman of the Board July 17, 1998 - ---------------------- and Chief Executive Officer Gerald L. Gitner (Principal Executive Officer) /s/ Michael J. Palumbo - ---------------------- Senior Vice President and Chief July 17, 1998 Michael J. Palumbo Financial Officer (Principal Financial Officer and Principal Accounting Officer) * Director July 17, 1998 - ---------------------- John W. Bachmann * Director July 17, 1998 - ---------------------- William F. Compton * Director July 17, 1998 - ---------------------- Eugene P. Conese * Director July 17, 1998 - ---------------------- Sherry L. Cooper * Director July 17, 1998 - ---------------------- Edgar M. House * Director July 17, 1998 - ---------------------- Thomas H. Jacobsen * Director July 17, 1998 - ---------------------- Myron Kaplan * Director July 17, 1998 - ---------------------- David M. Kennedy * Director July 17, 1998 - ---------------------- General Merrill A. McPeak * Director July 17, 1998 - ---------------------- Thomas F. Meagher * Director July 17, 1998 - ---------------------- Brent S. Miller * Director July 17, 1998 - ---------------------- William O'Driscoll * Director July 17, 1998 - ---------------------- G. Joseph Reddington * Director July 17, 1998 - ---------------------- Blanche M. Touhill *By: /s/ Kathleen A. Soled July 17, 1998 - -------------------------- Kathleen A. Soled as Attorney-in-fact EXHIBIT INDEX *2.1 --Joint Plan of Reorganization, dated May 12, 1995 (Appendix B to the Registrant's Registration Statement on Form S-4, Registration Number 33-84944, as amended) *2.2 --Modifications to Joint Plan of Reorganization, dated July 14, 1995 and Supplemental Modifications to Joint Plan of Reorganization dated August 2, 1995 (Exhibit 2.5 to 6/95 10-Q) *2.3 --Findings of Fact, Conclusions of Law and Order Confirming Modified Joint Plan of Reorganization, dated August 4, 1995, with Exhibits A-B attached (Exhibit 2.6 6/95 10-Q) *2.4 --Final Decree, dated December 28, 1995, related to the '95 Reorganization (Exhibit 2.7 to 12/31/95 Form 10-K) *4.1 --Voting Trust Agreement, dated November 3, 1993, between TWA and LaSalle National Trust, N.A. as trustee (Exhibit 4.3 to 9/93 10-Q) *4.2 --IAM Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated August 31, 1993, between TWA, the IAM Plan Trustee Committee and the IAM Trustee (Exhibit to 9/93 10-Q) *4.3 --IFFA Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated August 31, 1993, between TWA, the IFFA Plan Trustee Committee and the IFFA Trustee (Exhibit 4.5 to 9/93 10-Q) *4.4 --Trans World Airlines, Inc. Employee Stock Ownership Plan, dated August 31, 1993, First Amendment thereto, dated October 31, 1993, and related Trust Agreement, dated August 31, 1993, between TWA and the ESOP Trustee (Exhibit 4.6 to 9/93 10-Q) *4.5 --ALPA Stock Trust, dated August 31, 1993, between TWA and the ALPA Trustee (Exhibit 4.7 to 9/93 10-Q) *4.6 --Stockholders Agreement, dated November 3, 1993, among TWA, LaSalle National Trust, N.A., as Voting Trustee and the ALPA Trustee, IAM Trustee, IFFA Trustee and Other Employee Trustee (each as defined herein), as amended by the Addendum to Stockholders dated November 3, 1993 (Exhibit 4.8 to 9/93 10-Q) *4.7 --Registration Rights Agreement, dated November 3, 1993, between TWA and the Initial Significant Holders (Exhibit 4.9 to 9/93 10-Q) *4.8 --Indenture between TWA and Harris Trust and Savings Bank, dated November 3, 1993 relating to TWA's 8% Senior Secured Notes Due 2000 (Exhibit 4.11 to 9/93 10-Q) *4.9 --Indenture between TWA and American National Bank and Trust Company of Chicago, N.A., dated November 3, 1993 relating to TWA's 8% Secured Notes Due 2001 (Exhibit 4.12 to 9/93 10-Q) *4.10 --The TWA Air Line Pilots 1995 Employee Stock Ownership Plan, effective as of January 1, 1995 (Exhibit 4.12 to 9/95 10-Q) *4.11 --TWA Air Line Pilots Supplemental Stock Plan, effective September 1, 1994 (Exhibit 4.13 to 9/95 10-Q) *4.12 --TWA Air Line Pilots Supplemental Stock Plan Trust, effective August 23, 1995 (Exhibit 4.14 to 9/95 10-Q) *4.13 --TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement, effective August 23, 1995 (Exhibit 4.15 to 9/95 10-Q) *4.14 --Form of Indenture relating to TWA's 8% Convertible Subordinated Debentures Due 2006 (Exhibit 4.16 to Registrant's Registration Statement on Form S-3, No. 333-04977) *4.15 --Indenture dated as of March 31, 1997 between TWA and First Security Bank, National Association relating to TWA's 12% Senior Secured Notes due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.16 --Form of 12% Senior Secured Note due 2002 (contained in Indenture filed as Exhibit 4.15 to 12/31/97 Form 10-K) *4.17 --Registration Rights Agreement dated as of March 31, 1997 between the Company and the Initial Purchaser relating to the 12% Senior Secured Notes due 2002 and the warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.17 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.18 --Warrant Agreement dated as of March 31, 1997 between the Company and American Stock Transfer & Trust Company, as Warrant Agent, relating to warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.18 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.19 --Form of Indenture relating to TWA's 9 1/4% Convertible Subordinated Debentures due 2007 (Exhibit 4.19 to Registrant's Registration Statement on Form S-3, No. 33-44689) *4.20 --Registration Rights Agreement dated as of December 2, 1997 between the Company and the Initial Purchasers (Exhibit 4.20 to Registrant's Registration Statement on Form S-3, No. 33-44689) *4.21 --Indenture dated as of December 9, 1997 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's Registration Statement on Form S-3, No. 33-44661) *4.22 --Form of 11 1/2% Senior Secured Note due 2004 (contained in Indenture filed as Exhibit 4.21 to 12/31/97 Form 10-K) *4.23 --Registration Rights Agreement dated as of December 9, 1997 among the Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as initial purchasers, relating to TWA's 11 1/2% Senior Secured Notes due 2004 (Exhibit 4.23 to Registrant's Registration Statement on Form S-3, No. 33-44661) *4.24 --Sale and Service Agreement dated as of December 30, 1997 between TWA and Constellation Finance LLC, as purchaser, relating to TWA's receivables (Exhibit 4.24 to Registrant's Registration Statement on Form S-3, No. 33-44661) *4.25 --Registration Rights Agreement dated as of March 3, 1998 between the Company and the Initial Purchaser *4.26 --Indenture dated as of March 3, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 3/8% Senior Notes due 2006 *4.27 --Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998 among TWA, First Security Bank, National Association, as Owner Trustee and Seven Sixty Seven Leasing, Inc. *4.28 --Indenture dated as of April 21, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 3/8% Senior Secured Notes due 2003 *4.29 --Form of 11 3/8% Senior Secured Notes due 2003 (contained as Exhibit 1 to Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.28) 4.30 -- Indenture dated as of April 21, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's Mandatory Conversion Equtiy Notes due 1999 4.31 --Form of Mandatory Conversion Equity Note due 1999 (contained as Exhibit A to Indenture in Exhibit 4.30) *4.32 --Registration Rights Agreement dated as of April 21, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 11 3/8% Senior Secured Notes Due 2003 (Exhibit 4.31 to Registrant's Registration Statement on Form S-3, filed with the SEC on June 16, 1998) *4.33 --Registration Rights Agreement dated as of April 21, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the Mandatory Conversion Equity Notes Due 1999 (Exhibit 4.32 to Registrant's Registration Statement on Form S-3, filed with the SEC on June 16, 1998) 4.34 --Indenture dated as of June 16, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 10 1/4% Senior Secured Notes due 2003 4.35 --Form of 10 1/4% Senior Secured Notes Due 2003 (contained as Exhibit 1 to Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.34) 4.36 --Registration Rights Agreemnt dated as of June 16,1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 10 1/4% Senior Secured Notes Due 2003 4.37 --Indenture dated as of June 16, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 10 1/4% Mandatory Conversion Equity Notes due 1999 4.38 --Form of 10 1/4% Mandatory Conversion Equity Notes due 1999 (contained as Exhibit A to Indenture in Exhibit 4.37) 4.39 --Registration Rights Agreement dated as of June 16, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 10 1/4% Mandatory Conversion Equity Notes Due 1999 5 --Opinion of Cleary, Gottlieb, Steen & Hamilton, Counsel to the Registrant, regarding the validity of the securities being registered *12 --Statement re: Computation of Ratio Earnings to Fixed Charges (Exhibit 12 to Registrant's Registration Statement on Form S-3, Regis. No. 333-58481) 23.1 --Consent of KPMG Peat Marwick LLP 23.2 --Consent of Cleary, Gottlieb, Steen & Hamilton, Counsel to the Registrant (included in Exhibit 5) 24 --Powers of Attorney 25 --Statement of Eligibility of First Security Bank, National Association 99.1 --Form of Letter of Transmittal 99.2 --Form of Notice of Guaranteed Delivery 99.3 --Form of Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner of Old Notes 99.4 --Form of Letter to Registered Holders and Depository Trust Company Participants 99.5 --Form of Letter to Clients of Depository Trust Company Participants --------------- * Incorporated by reference EX-4.30 2 ================================================================= TRANS WORLD AIRLINES, INC. and FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee INDENTURE Dated as of April 21, 1998 $31,800,000 Mandatory Conversion Equity Notes due 1999 ================================================================= TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Definitions ................................. 1 Section 1.2 Rules of Construction ....................... 1 ARTICLE 2. THE SECURITIES Section 2.1 Designation, Form and Dating ................ 1 Section 2.2 Execution, Amount, Authentication and Delivery .................................... 2 Section 2.3 Registrar and Paying Agent .................. 4 Section 2.4 Paying Agent to Hold Payments In Trust ...... 5 Section 2.5 Securityholder Lists ........................ 6 Section 2.6 Transfer and Exchange ....................... 6 Section 2.7 Mutilated, Defaced, Destroyed, Lost and Stolen Securities ........................... 7 Section 2.8 Treasury Securities ......................... 8 Section 2.9 Temporary Securities ........................ 9 Section 2.10 Cancellation ................................ 9 Section 2.11 Defaulted Interest; Interest on Defaulted Principal ................................... 9 Section 2.12 CUSIP Numbers ............................... 10 ARTICLE 3. REDEMPTIONS ..................... 10 ARTICLE 4. COVENANTS, REPRESENTATIONS AND WARRANTIES Section 4.1 Payment of Securities ....................... 10 Section 4.2 Maintenance of Office or Agency ............. 11 -i- TABLE OF CONTENTS (Continued) Page Section 4.3 Limitation on Dividends and Acquisition of Common Stock ................................ 11 Section 4.4 Corporate Existence ......................... 12 Section 4.5 Payment of Taxes and Other Claims ........... 12 Section 4.6 Notices ..................................... 13 Section 4.7 Maintenance of Properties and Insurance ..... 13 Section 4.8 Default Notices and Compliance Certificates . 14 Section 4.9 SEC Reports ................................. 14 Section 4.10 Waiver of Stay, Extension or Usury Laws ..... 15 Section 4.11 Amendment to Certain Agreements ............. 16 Section 4.12 Title to Collateral and Limitation on Liens; Sale of Aircraft; Total Loss With Respect to Aircraft .................................... 16 Section 4.13 Books, Records, Access; Confidentiality ..... 17 Section 4.14 Security Interests .......................... 18 Section 4.15 Repurchase of Securities Upon a Change in Control ..................................... 18 Section 4.16 Restrictions on Becoming an Investment Company ..................................... 19 ARTICLE 5. SUCCESSOR CORPORATION Section 5.1 Covenant Not to Consolidate, Merge, Convey or Transfer Except Under Certain Conditions .................................. 19 Section 5.2 Successor Person Substituted ................ 20 Section 5.3 Limitation on Lease of Properties ........... 20 ARTICLE 6. DEFAULT AND REMEDIES Section 6.1 Events of Default ........................... 20 Section 6.2 Acceleration ................................ 22 Section 6.3 Other Remedies .............................. 23 Section 6.4 Waiver of Past Defaults ..................... 23 Section 6.5 Control by Majority ......................... 23 Section 6.6 Limitation on Suits ......................... 24 -ii- TABLE OF CONTENTS (Continued) Page Section 6.7 Rights of Holders to Receive Payment ........ 24 Section 6.8 Collection Suit by Trustee .................. 25 Section 6.9 Trustee May File Proofs of Claim ............ 25 Section 6.10 Application of Proceeds ..................... 25 Section 6.11 Undertaking for Costs ....................... 26 Section 6.12 Restoration of Rights on Abandonment of ProceedingS ................................. 27 Section 6.13 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default .............. 27 ARTICLE 7. TRUSTEE Section 7.1 Duties of Trustee ........................... 27 Section 7.2 Rights of Trustee ........................... 28 Section 7.3 Individual Rights of Trustee ................ 29 Section 7.4 Trustee's Disclaimer ........................ 29 Section 7.5 Notice of Defaults .......................... 29 Section 7.6 Reports by Trustee to Holders ............... 29 Section 7.7 Compensation and Indemnity .................. 30 Section 7.8 Replacement of Trustee ...................... 30 Section 7.9 Successor Trustee by Merger, etc. ........... 31 Section 7.10 Eligibility; Disqualification ............... 31 Section 7.11 Preferential Collection of Claims Against Company ..................................... 32 ARTICLE 8. DISCHARGE OF INDENTURE Section 8.1 Termination of Company's Obligations ........ 32 Section 8.2 Application of Trust Money .................. 33 Section 8.3 Repayment to Company ........................ 34 Section 8.4 Reinstatement ............................... 34 -iii- TABLE OF CONTENTS (Continued) Page ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1 Without Consent of Holders .................. 35 Section 9.2 With Consent of Holders ..................... 35 Section 9.3 Compliance with Trust Indenture Act ......... 36 Section 9.4 Revocation and Effect of Consents ........... 36 Section 9.5 Notation on or Exchange of Securities ....... 37 Section 9.6 Trustee to Sign Amendments, etc. ............ 37 Section 9.7 Effect of Supplement and/or Amendment ....... 37 ARTICLE 10. SECURITY Section 10.1 Other Operative Documents ................... 37 Section 10.2 Opinions, Certificates and Appraisals ....... 38 Section 10.3 Authorization of Actions to be Taken by the Trustee Under the Operative Documents ....... 38 Section 10.4 Payment of Expenses ......................... 39 Section 10.5 Authorization of Receipt of Funds by the Trustee Under the Operative Documents ....... 39 ARTICLE 11. MISCELLANEOUS Section 11.1 Conflict with Trust Indenture Act of 1939 ... 39 Section 11.2 Notices; Waivers ............................ 39 Section 11.3 Communications by Holders with Other Holders ..................................... 40 Section 11.4 Certificate and Opinion as to Conditions Precedent ................................... 40 Section 11.5 Statements Required in Certificate or Opinion ..................................... 41 Section 11.6 Rules by Trustee, Paying Agent, Registrar ... 42 Section 11.7 Holidays .................................... 42 Section 11.8 Governing Law; Waiver of Jury Trial ......... 42 Section 11.9 No Adverse Interpretation of Other Agreements .................................. 43 -iv- TABLE OF CONTENTS (Continued) Page Section 11.10 No Recourse Against Others .................. 43 Section 11.11 Benefits of Indenture and the Securities Restricted .................................. 43 Section 11.12 Successors and Assigns ...................... 43 Section 11.13 Counterpart Originals ....................... 43 Section 11.14 Severability ................................ 43 Section 11.15 Effect of Headings .......................... 44 ARTICLE 12. RELEASE OF COLLATERAL Section 12.1 Release of Collateral ....................... 44 ARTICLE 13. MANDATORY CONVERSION OF SECURITIES Section 13.1 Mandatory Conversion and Conversion Price ....................................... 44 Section 13.2 Effect of Consolidation, Merger or Conveyance on Conversion .................... 46 Section 13.3 Costs of Conversion ......................... 47 Section 13.4 No Liability to Trustee ..................... 48 Section 13.5 Applicable Laws ............................. 48 Section 13.6 Other Funds ................................. 48 Section 13.7 Release of Collateral Upon Conversion ....... 48 Section 13.8 Company to Provide Stock .................... 48 ARTICLE 14. POSSIBLE SUBORDINATION ............... 49 APPENDIX I Definitions Appendix EXHIBIT A Form of Mandatory Conversion Equity Note EXHIBIT B Form of Aircraft Second Mortgage and Security Agreement -v- INDENTURE dated as of April 21, 1998 between TRANS WORLD AIRLINES, INC., a Delaware corporation (the "Company"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's Mandatory Conversion Equity Notes due 1999 (the "Securities"). ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Definitions. ----------- Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall be a part of this Indenture as if fully set forth in this place. Section 1.2 Rules of Construction. --------------------- The rules of construction for this Indenture are set forth in Section 2 of the Definitions Appendix. ARTICLE 2. THE SECURITIES Section 2.1 Designation, Form and Dating. ---------------------------- The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto (with such appropriate insertions, omissions, substitutions and other variations as are required by this Indenture) and is hereby incorporated in and expressly made a part of this Indenture. The Securities may have imprinted or otherwise reproduced thereon such notations, legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Securities are admitted to trading, or to conform to general usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication and shall be payable, unless previously Tendered, on the dates as specified herein or in the form of the Security. The principal of the Securities shall not bear interest except in the case of a default in payment of such principal or a Registration Default, and in such cases the Securities shall bear interest as specified herein or in the form of the Security. The Person in whose name any Security is registered at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest, if 2 any, payable on such Interest Payment Date to the extent provided by such Security, except if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, in which case defaulted interest shall be paid to the Person in whose name the Outstanding Security is registered at the close of business on the subsequent record date (which shall be not less than five (5) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Company to the Holders of Securities not less than fifteen (15) days preceding such subsequent record date (a "Special Record Date"). Section 2.2 Execution, Amount, Authentication and Delivery. ---------------------------------------------- The Securities shall be signed for the Company by the manual or facsimile signatures of an Officer and a Certifying Officer. The Company's seal shall be affixed to or reproduced on the Securities. Typographical or other errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security which has been duly authenticated and delivered by the Trustee. If an officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $31,800,000 except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Sections 2.6, 2.7, 2.9, 4.15 or 9.5. The Securities shall be known and designated as the "Mandatory Conversion Equity Notes due 1999" of the Company. Their Stated Maturity shall be April 15, 1999, and they shall not bear interest; provided, however, that upon a default in payment of principal on the Securities (whether on acceleration, at maturity, upon tender for repurchase or otherwise) or a Registration Default (and for so long as such default or Registration Default, as the case may be, shall continue uncured and unwaived), they shall bear interest at the rate of 12% per annum, from the date of such default or Registration Default, as the case may be, payable (a) in the case of a Registration Default, monthly in arrears on the 15th day of each month commencing the 15th day of the month next succeeding the month in which such Registration Default occurred, and (b) in the case of a default in payment of principal, payable on demand. In the event a Registration Default shall occur and be continuing and the Company shall have failed to use its reasonable best efforts to avoid or cure such Registration Default, Holders shall be entitled to make a claim for damages incurred as a result of such Registration Default which damages shall not necessarily be limited to the increase in the interest rate hereunder to 12% per annum; provided, however, that any amount of interest paid pursuant to this Section 2.2 shall be credited against any amount of damages to be paid by the Company in connection with such claim. 3 Subject to the limits set forth in the second preceding paragraph of this Indenture, the Trustee shall authenticate Securities for original issue upon written order of the Company signed by an Officer and by a Certifying Officer of the Company. The order shall specify the amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated, shall provide instructions with respect to the delivery thereof and shall be accompanied by the documents specified in Sections 10.2 and 11.4 and by the following (provided, however, that the Trustee shall be authorized conclusively to rely upon the documents specified in Section 11.4): (a) the grant to the Trustee, by assignment, pledge, or otherwise pursuant to the Mortgage, of a security interest in the Collateral; (b) Officers' Certificates or other satisfactory confirmation (i) with respect to the Mortgage and the Collateral, that the Company is the legal and beneficial owner of the Collateral, free and clear of all Liens except Permitted Liens; and (ii) describing the actions taken to make, obtain and accomplish all necessary filings, confirmations and identifications referred to in Section 4.14 hereof; (c) compliance with all applicable provisions of Sections 4.12 and 4.14 hereof; (d) an Officers' Certificate confirming all representations and warranties of the Company contained in this Indenture and the other Operative Documents as of the date of authentication; (e) an Officers' Certificate containing representations and warranties of the type usual and customary to the issuance of the Securities such as, but not limited to, representations regarding due authorization of this Indenture; due authorization of the issuance and delivery of the Securities; that the Securities, when so issued and delivered against delivery of the Aircraft under the Aircraft Sale Agreement will be duly and validly issued, and constitute valid and binding obligations of the Company, enforceable in accordance with their terms; that the Common Stock issuable upon conversion of the Securities has been duly authorized and reserved for issuance and, when issued and delivered by the Company upon conversion of the Securities, will be duly and validly issued, fully paid and non-assessable and free of preemptive rights; that no consent, approval or authorization of, or designation, declaration, or filing with, any governmental authority or any other person or entity is required of the Company in connection with the execution and delivery of this Indenture or the issuance and delivery of the Securities; and that the Securities have been registered under the Securities Act or that registration is not required in connection with the offer, issuance and delivery of the Securities, nor does the Securities Act require registration of the conversion of the Securities into shares of Common Stock as provided in Article 13; (f) an Opinion of Counsel to the effect that the Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Indenture and the other Operative Documents; that the Securities have been duly authorized and validly issued; and that the offer and issuance of the Securities have been registered or will be exempt from the registration requirements under the Securities Act and that the Securities Act does not require 4 registration of the conversion of the Securities into shares of Common Stock as provided in Article 13; and (g) execution and delivery by the Company of the Securities and by all parties thereto of this Indenture and all other Operative Documents; provided, however, that any Securities in fact authenticated by the Trustee upon written order of the Company as set forth in the first sentence of this paragraph shall be deemed to have been duly authenticated hereunder and to constitute an enforceable contractual obligation of the Company and shall be entitled to all the benefits of this Indenture and the other Operative Documents equally and proportionately with any and all other Securities duly authenticated and delivered hereunder, in each case, notwithstanding any failure of the Company to deliver any of the documents specified in Sections 10.2 and 11.4 or above in this sentence. The Securities shall be issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company, any guarantor or any Affiliate of the Company. Section 2.3 Registrar and Paying Agent. -------------------------- The Company shall maintain an office or agency where Securities eligible for transfer or exchange may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Securities may be presented for payment or repurchase ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange ("Register"). Such Register shall be in written form in the English language or any other form capable of being converted into such form within a reasonable time. At all reasonable times such Register shall be open for inspection by the Trustee. The Company may have one or more co-Registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may enter into an appropriate agency agreement with any Agent not a party to this Indenture. Such agency agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar and Paying Agent. 5 Section 2.4 Paying Agent to Hold Payments In Trust. -------------------------------------- Each Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all Payments held by the Paying Agent for the payment of principal of, repurchase or redemption price, if any, of, and interest, if any, on, the Securities (whether such Payment has been paid to it by the Company or any other obligor on the Securities), and shall promptly notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such Payment. The Company at any time may require a Paying Agent to Pay all Payments held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to Pay all Payments held by it to the Trustee and to account for any Payments distributed. Upon doing so the Paying Agent shall have no further liability for the Payments. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of, repurchase or redemption price, if any, of, or interest, if any, on, any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto Payments sufficient to pay the principal, repurchase or redemption price, if any, of, or interest, if any, so becoming due until such Payments shall be Paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of such action or any failure so to act. The Company will, on or before each due date for the payment of the principal of, repurchase or redemption price, if any, of, or interest, if any, on, any of the Securities, deposit with a Paying Agent Payments (in same day funds) sufficient to pay the principal, repurchase or redemption price, if any, of, or interest, if any, so becoming due, such Payments to be held in trust for the benefit of the Persons entitled to such principal, repurchase or redemption price, if any, of, or interest, if any, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all Payments received by it as such agent for the payment of the principal of, repurchase or redemption price, if any, of, or interest, if any, on, the Securities (whether such Payments have been paid to it by the Company or by any other obligor on the Securities) in trust for the benefit of the Persons entitled thereto until such Payments shall be paid to such Persons or otherwise disposed of as herein provided; (b) promptly give the Trustee notice of any failure by the Company (or any other obligor upon the Securities) to make any payment of the principal of, repurchase or redemption price, if any, of, or interest, if any, on, the Securities when the same shall be due and payable; and (c) at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all Payments so held in trust by such Paying Agent. 6 The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, Pay, or direct any Paying Agent to Pay, to the Trustee all Payments held in trust by the Company or such Paying Agent, such Payments to be held by the Trustee upon the same trusts as those upon which such Payments were held by the Company or such Paying Agent; and, upon such Payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such Payments held by it as Paying Agent. Any Payments deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, redemption or repurchase price, if any, of, or interest, if any, on, any Security and unclaimed for two (2) years after such principal, redemption, repurchase price or interest has become due and payable shall be paid to the Company on its request, or (if then held by the Company) shall be discharged from such trust, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof and all liability of the Trustee or such Paying Agent with regard to such Payments, and all liability of the Company as trustee thereof, shall thereupon cease. Section 2.5 Securityholder Lists. -------------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. Section 2.6 Transfer and Exchange. --------------------- When Securities are presented to the Registrar or a co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's request. All Securities presented for registration of transfer, exchange, redemption or payment shall (if so required by the Company or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee, duly executed by the Holder or his attorney duly authorized in writing. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any registration of transfer or exchange, but not for any exchange pursuant to Sections 2.9, 4.15 or 9.5 or any other Tender not involving any transfer of Securities (other than to the Company). No service charge shall be made for any such transaction. In the case of any Security which is Tendered in part only, upon such Tender the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder thereof, without service charge, a new Security or Securities of any authorized 7 denomination as requested by such Holder in aggregate principal amount equal to the non-Tendered portion of the principal of such Security. No Securities will be issued in denominations of less than $1,000 upon tender of the Securities. All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt of the same series and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. Section 2.7 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. ---------------------------------------------- - ----------- In case any temporary or definitive Security shall become mutilated, defaced or be apparently destroyed, lost or stolen, subject to compliance with the following sentence and in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and the Trustee shall authenticate and deliver, a new Security, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and substitution for the Security so apparently destroyed, lost or stolen. In every case the applicant for a substitute Security shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as may reasonably be required by them to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Upon the issuance of any substitute Security pursuant to the preceding paragraph, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Security which has matured or is about to mature, or has been tendered for repurchase pursuant to any of the provisions hereof (as evidenced by an irrevocable written notice from the Holder to the Company and the Trustee), shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Company may, instead of issuing a substitute Security, pay or authorize the payment of such Security (without surrender of such Security except in the case of a mutilated or defaced Security), as applicable, if the applicant for such payment shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as any of them may reasonably require to save each of them harmless from all risks, however remote, and, in every case of apparent destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee and any agent of the Company or the Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Every substitute Security issued pursuant to the provisions of this Section by virtue of the fact that any Security is apparently destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the apparently destroyed, lost or stolen Security shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall also be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities duly authenticated and delivered hereunder. Every substitute Security issued pursuant to the provisions of this Section by virtue of the fact 8 that any Security is mutilated or defaced shall constitute an additional contractual obligation of the Company and shall be entitled to all the benefits of (but shall also be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities of the same series duly authenticated and delivered hereunder. All Securities shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated or defaced or apparently destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.8 Treasury Securities. ------------------- In determining whether the Holders of the required principal amount of Securities have given or concurred in any amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document, Securities owned by the Company (including Securities Tendered), an Affiliate of the Company, any other obligor upon the Securities, any Affiliate of such obligor upon the Securities or any Person who has given or concurred in any such amendment, request, demand, authorization, direction, notice, consent or waiver under the direction of, by agreement with, or as a condition or in consideration of any exchange offer by or transfer of such Person's Securities to the Company, an Affiliate of the Company, any other obligor, any Affiliate of such obligor or any such Person, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such amendment, request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee that neither the Company nor any such other obligor, Affiliate or Person is affiliated with the pledgee or any Affiliate of the pledgee and that the pledgee has the present right (subject to no contrary obligation or understanding) so to act with respect to the Securities on the basis of its best interests as a Holder independently of any direction by or interest of the Company. In case of a dispute as to such right, the Trustee in good faith shall be entitled to rely upon the advice of counsel, including counsel for the Company. Upon request of the Trustee, the Company shall promptly furnish to the Trustee a certificate of a Certifying Officer listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of any of the above-described Persons; and subject to Sections 7.1 and 7.2 herein, the Trustee shall be entitled to accept such certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. The Company shall not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any additional security, to any Holder of Securities as consideration for or as an inducement to giving or concurring in any amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document unless such remuneration is concurrently paid, or such security is concurrently granted, as the case may be, on the same terms ratably to the Holders of all Securities then Outstanding (regardless of 9 whether any such Holder has given or concurred in such amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document). For purposes of this Section and without limiting the generality of the foregoing, Securities which are subject to a binding contract or irrevocable tender offer (including an offer which is in any way conditioned upon or simultaneous with, or requires as a condition precedent (whether by contract or otherwise) or which cannot be effected without, the agreement or consent of the transferor to any amendment, request, demand, authorization, direction, notice, consent or waiver hereunder) pursuant to which ownership (direct or indirect) is to be transferred (including for example, Securities tendered to the Company or any other Person in an exchange transaction) shall be deemed owned by such transferee, and therefore, any such simultaneous agreement or consent by the transferor shall be invalid. Section 2.9 Temporary Securities. -------------------- Until definitive Securities are ready for delivery, the Company may prepare, and, upon written order of the Company, the Trustee shall authenticate, temporary Securities in any authorized denominations. Temporary Securities shall be substantially in the form of definitive Securities of the same series but may have variations that the Company reasonably considers appropriate and necessary for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Securities in exchange for temporary Securities. Until so exchanged, the temporary Securities shall be entitled to the same benefits under this Indenture as definitive Securities of the same series. Section 2.10 Cancellation. ------------ The Company may at any time deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange, repurchase or payment. All Securities purchased pursuant to any Offer to Purchase shall be canceled. The Trustee and no one else shall cancel all Securities surrendered for transfer, exchange, repurchase or cancellation. The Company may not issue new Securities to replace Securities it has paid or that have been converted (upon Tender or otherwise) or which have been delivered to the Trustee for cancellation. The Trustee shall destroy all canceled Securities and, if requested, deliver a certificate of such destruction to the Company. If the Company shall acquire any of the Securities, such acquisition shall not operate as a satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee for cancellation. Section 2.11 Defaulted Interest; Interest on Defaulted Principal. ----------------------------------------- - --------- If the Company defaults in a payment of any interest on the Securities, it shall pay the defaulted interest, plus interest on the defaulted interest at the rate then borne on the Securities to the extent permitted by law and the terms thereof, to the persons who are Securityholders on a subsequent Special Record Date. The Company shall fix the Special Record Date and payment date. At least fifteen (15) days before the Special Record Date, the Company shall mail to each 10 Securityholder a notice that states the Special Record Date, the payment date and the amount of defaulted interest to be paid. If the Company defaults in the payment of principal on the Securities (whether on acceleration at maturity, upon tender for repurchase or otherwise), it shall pay interest on such defaulted principal at the rate of 12% per annum to the Trustee upon demand. The Trustee shall apply any such payment in accordance with the provisions of Section 6.10. Section 2.12 CUSIP Numbers. ------------- The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE 3. REDEMPTIONS The Securities Outstanding shall not be subject to redemption in whole or in part at any time. ARTICLE 4. COVENANTS, REPRESENTATIONS AND WARRANTIES Section 4.1 Payment of Securities. The Company shall pay the principal of, and interest, if any, on, the Securities on the dates and in the manner provided in this Indenture and in the Securities. The Securities shall not bear interest except as set forth in the fifth paragraph of Section 2.2 or in the Securities. All interest due and payable on the Securities shall be paid in cash, except that the Company may at its option, make such Payments by check mailed to the address of the Person entitled thereto as it appears in the Register; provided, however, that such Payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by a Holder with a bank in New York City if such Holder owns at least $250,000 in aggregate principal amount of certificated Securities and elects payment by wire transfer by giving written notice to the Company and the Trustee to such effect designating such account no later than 10 days immediately preceding the relevant due date for payment (or such other date as the Company and the Trustee may accept in their discretion). An installment of principal or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company or any Affiliate thereof) holds on that date 11 Payments designated for and sufficient to pay such installment and the Trustee or Paying Agent is not prohibited from Paying such Payments to the Holders of the Securities pursuant to this Indenture. The Company shall pay interest, if any, at the rate set forth in this Indenture and the Securities and the Company shall pay interest on unpaid interest at the same rate to the extent legally permitted. Section 4.2 Maintenance of Office or Agency. ------------------------------- The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange or for presentation for payment, repurchase or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. At the request of the Company, said office or agency may be the office of an agent appointed by the Trustee for such purpose. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 4.3 Limitation on Dividends and Acquisition of Common Stock. ------------------------------------------ - ------------- The Company will not declare or pay any dividend or make any distribution on its Common Stock, Employee Preferred Stock or other Capital Stock of the Company (other than dividends or distributions payable in the Company's Common Stock or Employee Preferred Stock or options, warrants or other rights to acquire, subscribe for or purchase the Company's Common Stock or Employee Preferred Stock) and will not, and will not permit any of its Subsidiaries to, purchase, redeem or otherwise acquire for value any shares of its Common Stock, Employee Preferred Stock or other Capital Stock of the Company, whether in cash or Property or in obligations of the Company, if, at the time of such declaration, payment, distribution, purchase, redemption or other acquisition or, after giving effect thereto, a Default or Event of Default shall have occurred and be continuing; provided, that notwithstanding anything to the contrary written above, this Section 4.3 shall not apply to: (a) any purchase or redemption of Common Stock or Preferred Stock by the Company or an employee stock ownership or benefit plan (i) from union employees or former union employees, or their respective transferees, pursuant to the terms of agreements with labor unions existing on the date hereof; (ii) from recipients or their transferees of such stock from employee stock ownership or benefit plans 12 subject to ERISA; (iii) from employee stock ownership or benefit plans subject to ERISA in order to provide cash benefits to employees pursuant to the terms of such plans; and (iv) as required by ERISA; (b) any purchase or redemption of Common Stock or Preferred Stock by an employee stock ownership or benefit plan subject to ERISA for an aggregate consideration, without regard to purchases or redemptions pursuant to clause (a) above, of up to $200,000,000; (c) the payment of fixed or mandatory dividends on or scheduled redemptions or exchanges of any of the Company's 8% Preferred Stock and 9 1/4% Preferred Stock and the payment of any interest on the securities issuable upon such exchange; (d) the payment of any dividends on or the purchase, redemption or other acquisition or retirement of the Common Stock or Preferred Stock of the Company within sixty (60) days after the date of declaration of such dividend or the commitment to make such purchase, redemption or other acquisition or retirement, if at said date of declaration or commitment such payment or commitment complied with this Section 4.3; (e) the purchase, redemption, retirement or other acquisition of any shares of the Company's Common Stock or Preferred Stock in exchange for, or out of the proceeds of the substantially concurrent sale of, Common Stock or Preferred Stock of the Company; (f) any consolidation or merger with or into any Person or conveyance or transfer of all or substantially all of the Company's Property to one or more Persons substantially as an entirety, not prohibited by the terms of Section 5.1; and (g) the conversion of Employee Preferred Stock into Common Stock. Section 4.4 Corporate Existence. ------------------- (a) Except as otherwise provided in Article 5, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its Subsidiaries engaged in substantial business activity each in accordance with the respective organizational documents of the Company and each such Subsidiary and the rights (charter and statutory), licenses, permits, approvals and governmental franchises of the Company and each such Subsidiary necessary to the conduct of its respective business; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or to preserve the corporate existence of any such Subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer in the interest of the Company and that termination of the corporate existence is not disadvantageous to the Holders in any material respect. (b) The Company shall continue to be an air carrier certificated under Section 604(b) of the Federal Aviation Act. (c) The Company is and, to the extent required to operate its business as presently conducted and to perform its obligations under this Indenture and the Operative Documents, shall remain a "citizen of the United States" as defined in Section 101(16) of the Federal Aviation Act. Section 4.5 Payment of Taxes and Other Claims. --------------------------------- The Company shall, and shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company and each Subsidiary or upon the income, profits or Property of the Company and each Subsidiary or upon the Collateral and 13 (b) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the Collateral or the other Property of the Company or a Subsidiary; provided, however, that the Company or a Subsidiary, as the case may be, shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (i) the amount, applicability or validity of which is being contested in good faith by appropriate proceedings as permitted by and in accordance with the provisions of the Operative Documents, to the extent applicable, and for which adequate reserves have been established in accordance with GAAP, as in effect from time to time, or (ii) if the Company delivers to the Trustee a Certificate of an Officer stating that such non-payment and non-discharge is in the interest of the Company and not prejudicial in any material respect to the Holders. Nothing contained herein or in the Securities shall be deemed to impose on the Trustee or on the Company any obligation to pay on behalf of the Holder of any Securities any tax, assessment or governmental charge required by any present or future law of the U.S. or of any state, county, municipality or other taxing authority thereof to be paid on behalf of, or withheld from the amount payable to, the Holder of any Securities; rather any tax, assessment or governmental charge shall, to the extent required by law, be withheld from the amounts provided for herein. Section 4.6 Notices. ------- The Company shall notify the Trustee in writing of any of the following promptly (and in any event within five (5) Business Days after an Officer learns of the occurrence thereof) describing the same and, if applicable, the steps being taken by the Person(s) affected with respect thereto: (a) In the event that any Indebtedness of the Company or any Significant Subsidiary of the Company in a principal amount in excess of $10,000,000 (i) is declared due and payable before its stated maturity because of the occurrence of any default (or any event which, with notice or the lapse of time, or both, shall constitute such default) under such Indebtedness or (ii) is not paid at its stated maturity; or (b) Any litigation, arbitration proceeding or governmental proceeding involving damages or potential liability in excess of $10,000,000 is instituted against the Company or any of its Subsidiaries which, if adversely determined, would have a material adverse effect on the business, operations or financial condition of the Company and its Subsidiaries taken as a whole. Section 4.7 Maintenance of Properties and Insurance. --------------------------------------- Except as otherwise provided in this Indenture, the Company shall, and shall cause each of its Subsidiaries to, cause all Collateral and other Properties owned by or leased to it and used or useful in the conduct of the business of the Company or any such Subsidiary, as the case may be, to be maintained and kept in good repair, working order and condition, except for reasonable wear and use, and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary, so that the business carried on in connection therewith may be 14 properly and advantageously conducted at all times, except, in every case, as and to the extent that the Company or any such Subsidiary may be prevented by fire, strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions, enemy action, civil commotion or unavoidable casualty or similar causes beyond the control of the Company or such Subsidiary; provided, however, that subject to all requirements of the Operative Documents, nothing in this Section 4.7 shall prevent the Company or any such Subsidiary from discontinuing the use, operation or maintenance of any such Properties, or disposing of any of them, if such discontinuance or disposal is, in the good faith judgment of an Officer of the Company (or other agent employed by the Company) having managerial responsibility for any such Property (or, in the case of any materially important item, with respect to operations or value, in the good faith judgment of the Company as expressed in a resolution of the Board of Directors), desirable in the conduct of the Company's business or that of its Subsidiaries. For so long as any Collateral or Property is deemed to be useful to the conduct of the business of the Company or its Subsidiaries, the Company shall, or shall cause such Subsidiaries to, maintain appropriate insurance, in accordance with industry practice, on such Collateral and Properties and as required under the provisions of the applicable Operative Documents. Notwithstanding the provisions of this Section 4.7, to the extent there exists any inconsistency between the provisions hereof and the provisions of the Mortgage relating to Property which constitutes Collateral, the provisions of the Mortgage shall prevail as to all Collateral. Section 4.8 Default Notices and Compliance Certificates. ------------------------------------------- Contemporaneously with furnishing quarterly financial reports to the Trustee under Section 4.9(a) or mailing quarterly statements to the Trustee and Holders under Section 4.9(c), the Company shall furnish to the Trustee a Certifying Officer's Certificate to the effect that no Default or Event of Default has occurred or is continuing, or, if there is any such Default or Event of Default, describing it and the steps, if any, being taken to cure it. The Company shall deliver to the Trustee within one hundred twenty (120) days after the end of each fiscal year in which any of the Securities remain Outstanding a certificate of the principal executive officer, principal financial officer or principal accounting officer of the Company (which need not comply with the provisions of Section 11.5) stating whether or not, to the knowledge of the signer after due inquiry, the Company is in compliance with all conditions and covenants under this Indenture and the Operative Documents (determined without regard to any period of grace or requirement of notice), and if the Company is not in compliance with all such conditions and covenants, describing each Default or Event of Default and its status. The first certificate to be delivered by the Company pursuant to this Section 4.8 shall be for the fiscal year ending December 31, 1998. Section 4.9 SEC Reports. ----------- (a) The Company shall deliver to the Trustee as soon as practicable after it files them with the SEC, copies of the annual reports and of the information, documents, and other reports 15 (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Sections 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA ss. 314(a). (b) So long as any of the Securities remain Outstanding, the Company shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders generally, to be mailed to the Holders of such Outstanding Securities at their addresses appearing in the Register. (c) At any time the Company does not have a class of securities registered, or is not otherwise required to file quarterly and other reports under the Exchange Act, the Company will prepare or cause to be prepared, for each of the first three (3) quarters of each fiscal year, an unaudited balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter and related unaudited consolidated statements of income and retained earnings and cash flow of the Company and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through such date, setting forth in each case in comparative form the figures for the corresponding year-to-date period in the previous year, certified by the principal financial officer of the Company, and for each fiscal year, an audited balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and related audited consolidated statements of income and retained earnings and cash flow of the Company and its consolidated Subsidiaries for such year, setting forth in comparative form the figures for the previous year, reported on without a qualification arising out of the scope of the audit, by the Company's independent public accountants. All financial statements will be prepared by a nationally recognized auditing firm and will be prepared in accordance with generally accepted accounting principles, as in effect from time to time, consistently applied, except for changes with which the Company's independent public accountants concur and except that quarterly statements may be subject to year-end adjustments. The Company will cause a copy of the respective financial statements to be mailed to the Trustee and each of the Holders of the Securities within forty-five (45) days after the close of each of the first three (3) quarters of each fiscal year and within one hundred twenty (120) days after the close of each fiscal year, to the addresses set forth in Section 11.2 or, in the case of each of the Holders, to such Holder's address as set forth in the Register of the Securities. Section 4.10 Waiver of Stay, Extension or Usury Laws. --------------------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture and the Operative Documents; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power granted to the Trustee herein and in the Operative 16 Documents, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 4.11 Amendment to Certain Agreements. ------------------------------- The Company shall not enter into or consent to any amendment, supplement or other modification of the Operative Documents except as permitted under Article 9 hereof. Section 4.12 Title to Collateral and Limitation on Liens; -------------------------------------------- Sale of Aircraft; Total Loss With Respect to Aircraft. - ------------------------------------------------------ (a) The Company represents and warrants that it has, and covenants that it shall continue to have, full power and lawful authority to grant, release, convey, assign, transfer, mortgage, pledge, hypothecate and otherwise create the security interests in the Collateral referred to in Article 10; the Company shall warrant, preserve and defend the interest and title of the Trustee to the Collateral, against the claims of all persons and will maintain and preserve the security interests contemplated by Article 10; and the Company shall not, and not permit any of its Subsidiaries to, directly or indirectly, incur, assume or suffer to exist any Lien of any nature whatsoever upon or with respect to the Collateral, other than Permitted Liens. The Company shall cause the Operative Documents, including all necessary financing statements, notifications of secured transactions and other assurances or instruments to be properly recorded, registered and filed and to be kept, recorded, registered and filed in such manner and in such places as may be required by law and shall take all such other actions as may be required in order to make effective the security interests intended to be created in connection with this Indenture. The Company shall furnish to the Trustee the Opinions of Counsel required by Section 10.2 to confirm such action. (b) The Company shall not, directly or indirectly, consummate any sale, lease, transfer or other disposition of any Collateral for so long as any of the Securities remain Outstanding. (c) In the event that there shall occur a Total Loss with respect to any Aircraft, the Company shall (unless the Company is not required to make such Offer to Purchase pursuant to the next succeeding sentence or the provisions of Section 4.12(d)) make an Offer to Purchase an aggregate principal amount of Outstanding Securities (the "Total Loss OTP Amount") equal to (for each Aircraft subject to such Total Loss) (i) the aggregate principal amount of the Securities Outstanding on the date such Offer to Purchase (if any) is required to be commenced hereunder minus (ii) the product of (A) $10,600,000 multiplied by (B) the number of Aircraft remaining that were not subject to such Total Loss, at a purchase price equal to 100% of the aggregate principal amount of Securities to be purchased, plus accrued and unpaid interest, if any, on such Securities, to and including the Payment Date. If the foregoing calculation with respect to any such Total Loss results in a negative number, no Offer to Purchase shall be required with respect to such Total Loss. The Company shall commence such Offer to Purchase (if any) within thirty (30) days after the Total Loss Date with respect to any such Total Loss. Upon Request by the Company and payment by the Company of the purchase price with respect to such Offer to Purchase (if any) and the Trustee's costs (including reasonable legal fees and disbursements) 17 incurred in complying with such Request, the Trustee shall release from the Lien of the Operative Documents, all right, title and interest of the Trustee in and to the Aircraft that was the subject of such Total Loss. (d) At its option the Company may reduce in whole or in part its obligation to pay any Total Loss OTP Amount in cash by delivering to the Trustee at least 15 days before the date the related Offer to Purchase is or would be required to be commenced under Section 4.12(c), (i) Securities which have been acquired by the Company in open market purchases (and, for avoidance of doubt, not acquired by way of any Offer to Purchase hereunder), together with (ii) an Officers' Certificate directing the Trustee to cancel such Securities and stating the election of the Company to have credited against such Total Loss OTP Amount a specified principal amount of Securities so delivered. Each such Officers' Certificate shall state that the Securities forming the basis of such credit do not include any Securities theretofore credited against any Total Loss OTP Amount pursuant to this Section 4.12(d). All Securities made the basis of credit against a Total Loss OTP Amount shall be credited at 100% of their principal amount. Although the Company may obtain credit against any Total Loss OTP Amount in advance of the related Payment Date as provided herein, any such credit shall be applied against such Total Loss OTP Amounts in the order in which they become due. In case of the failure of the Company to deliver such Officers' Certificate, the Total Loss OTP Amount due on the Payment Date therefor shall be paid entirely in cash without the option to reduce the Company's obligation to make such payment as specified in this Section 4.12(d). If the principal amount of the Securities made the basis of a credit against any Total Loss OTP Amount (calculated, for this purpose, as of the date twenty-five days after the Total Loss Date with respect to such Total Loss) equals or exceeds such Total Loss OTP Amount, and the Company has otherwise complied with the applicable provisions of this Section 4.12(d), then the Company shall not be required to make the Offer to Purchase for which such Total Loss OTP Amount was calculated. Such calculations shall be set forth in detail in the Officers' Certificate required under this Section 4.12(d). The Trustee shall promptly authenticate and mail to the Company a new Security or Securities in an aggregate principal amount equal to that portion (if any) of the Securities delivered to the Trustee and not used by the Company as a credit under this Section 4.12(d) (provided, that the Company has previously delivered to the Trustee sufficient executed Securities to enable the Trustee to so authenticate such Securities). Section 4.13 Books, Records, Access; Confidentiality. --------------------------------------- (a) The Company shall, and shall cause each of its Subsidiaries to, (i) maintain complete and accurate books and records in which full and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its respective business and activities, and (ii) permit authorized representatives of the Trustee to visit and inspect the Properties of the Company or its Subsidiaries, and any or all books, records and documents in the possession of the Company relating to the Collateral, including the records, logs, and other materials referred to in Section 2.1(c) of the Mortgage, and to make copies and take extracts therefrom and to visit and inspect the Collateral, all upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested. 18 (b) The Trustee and its authorized representatives referred to in clause (a) above agree not to use any information obtained pursuant to this Section 4.13 for any purpose other than as required in order to discharge their respective duties hereunder and under the Operative Documents and except as otherwise required for such purpose to keep confidential and not to disclose any such information to any person except that (i) the recipient of the information may disclose any information which becomes publicly available other than as a result of disclosure by such recipient, (ii) the recipient of the information may disclose any information which its counsel reasonably concludes is necessary to be disclosed by law or legal process, pursuant to any court or administrative order or ruling or in any pending legal or administrative proceeding or investigation after notice to the Company adequate, subject to applicable laws, to allow the Company to obtain a protective order or other appropriate remedy, provided that the recipient of the information will (if not otherwise required in order to discharge its duties as aforesaid) cooperate at the Company's expense with the Company's efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded any such information required to be so disclosed, and (iii) the recipient of the information may disclose any information necessary to be disclosed pursuant to any provision of the TIA. Section 4.14 Security Interests. ------------------ The Company and its Subsidiaries shall perform any and all acts and execute any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement or other statement) for filing under the provisions of the Federal Aviation Act and the applicable Uniform Commercial Code and the rules and regulations thereunder or any other statute, rule or regulation of any applicable federal, state or local jurisdiction, which are necessary or advisable, from time to time, in order to grant and maintain in favor of the Trustee for the benefit of the Holders a valid, perfected Lien on the Collateral. The Company and its Subsidiaries shall deliver or cause to be delivered to the Trustee from time to time such other documentation, consents, authorizations, approvals and orders in form and substance satisfactory to the Trustee as it shall deem reasonably necessary or advisable to perfect or maintain the Liens for the benefit of the Holders. Section 4.15 Repurchase of Securities Upon a Change in Control. ------------------------------------------------- (a) In the event that there shall occur a Change in Control, the Company shall make an Offer to Purchase all of the Outstanding Securities, at a purchase price equal to 101% of the aggregate principal amount of the Securities Outstanding, plus accrued and unpaid interest, if any, to and including the repurchase date. The right to require such repurchase of Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article 8. (b) The Company shall commence such Offer to Purchase within thirty (30) days after the occurrence of a Change in Control. 19 Section 4.16 Restrictions on Becoming an Investment Company. ---------------------------------------------- The Company shall not become an investment company within the meaning of the Investment Company Act of 1940 as such statute and the regulations thereunder and any successor statute or regulations thereto may from time to time be in effect. ARTICLE 5. SUCCESSOR CORPORATION Section 5.1 Covenant Not to Consolidate, Merge, Convey ------------------------------------------ or Transfer Except Under Certain Conditions. - ------------------------------------------- The Company shall not consolidate with, or merge with or into, or convey or transfer (excluding by way of lease) all or substantially all of its Properties (as determined at the time of such transfer without regard to any prior conveyance or transfer or series of conveyances or transfers made on unrelated transactions) to any other Person, or permit any Person to convey, lease or transfer all or substantially all of its Properties to the Company, unless: (a) The Company shall be the continuing Person or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which all or substantially all of the Properties of the Company are conveyed or transferred (the "surviving Person"): (i) shall be a corporation organized and existing under the laws of the United States of America or any state thereof or the District of Columbia; (ii) shall expressly assume prior to or simultaneously with the consummation of such transaction, by an indenture and other agreements supplemental hereto and to the Operative Documents, executed and delivered to the Trustee in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of, and interest, if any, on, all the Securities and the observance and performance of every covenant, condition and obligation of this Indenture, the Securities and the Operative Documents on the part of the Company to be observed or performed; (b) Immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing hereunder; (c) In the case of any such conveyance or transfer, such conveyance or transfer includes, without limitation, all of the Collateral and in any event such consolidation, merger, conveyance or transfer shall be on such terms as shall fully preserve the Lien and security of each of the Operative Documents, the priority thereof purported to be established thereby and the rights and powers of the Trustee and the Holders of the Securities under each of the Operative Documents; and (d) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that (i) such merger, consolidation, transfer, conveyance, or acquisition of assets and such supplemental indenture (if any) comply with the terms of this Indenture, (ii) this Indenture and the Securities constitute the valid and legally binding obligations of the 20 surviving Person, and (iii) this Indenture and the other Operative Documents are enforceable against the surviving Person in accordance with their terms. Section 5.2 Successor Person Substituted. ---------------------------- Upon any consolidation or merger, or any conveyance or transfer (excluding by way of lease) of all or substantially all of the Properties of the Company in accordance with Section 5.1, the surviving entity formed by such consolidation or into which the Company is merged or the surviving entity to which such conveyance or transfer is made shall succeed to, and be substituted for, and be bound by and obligated to pay the obligations of, and may exercise every right and power of, the Company under this Indenture, the Securities and the Operative Documents with the same effect as if such successor had been named as the Company herein and therein; but the predecessor Company in the event of any such conveyance or transfer shall not be released from the obligation to pay the principal of and interest, if any, with respect to, the Securities. Such surviving entity may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such surviving entity, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such surviving entity thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, transfer or conveyance such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. Section 5.3 Limitation on Lease of Properties. --------------------------------- Without limitation of the prohibitions set forth in the other Operative Documents, the Company shall not lease all or substantially all of its Properties to any Person. ARTICLE 6. DEFAULT AND REMEDIES Section 6.1 Events of Default. ----------------- An "Event of Default" occurs if: 21 (a) the Company defaults in the payment of interest on any Security when the same becomes due and payable and the default continues for thirty (30) days; (b) the Company defaults in the payment of the principal amount of any Securities when the same becomes due and payable at maturity, upon acceleration, redemption, tender for repurchase or otherwise; (c) the Company fails to comply with the agreements or covenants contained in Article 13 hereof or in Sections 4.3 or 4.12 hereof, takes or agrees to take any action prohibited by Section 5.1 hereof, discontinues or agrees to discontinue substantially all of its commercial airlines operations or fails to comply with the covenants contained in Sections 3, 6.3, 6.5 or 6.8 of the Mortgage within the time periods (if any) provided therein; (d) (i) the Company fails in any material respect to comply with any of its other agreements contained in the Securities, this Indenture or the other Operative Documents or (ii) any representation or warranty made by the Company in this Indenture, the other Operative Documents or any Mortgage Supplement or in any certificate of the Company delivered hereunder or under any such document shall prove to have been untrue in any material respect when made, and in any such case such default continues for the period and after the notice specified below; (e) there shall be a default or an event under or with respect to any Indebtedness of the Company or any of its Significant Subsidiaries in excess of $10,000,000 in principal amount, whether such Indebtedness now exists or shall hereafter be created, and the effect of any such default or event is to cause the principal amount of any such Indebtedness to become due, to have the date of payment thereof fixed prior to its stated maturity or the date it would otherwise become due and while any Securities are Outstanding, or to be unpaid at maturity while any Securities are Outstanding; (f) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case or proceeding, (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding, (iii) consents to the appointment of a Custodian (as hereinafter defined) of it or or all or substantially all of its Property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is unable to pay its debts as the same become due; (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: 22 (i) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case or proceeding, (ii) appoints a Custodian of the Company or any of its Significant Subsidiaries for all or substantially all of its properties, or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries, and in each case the order and decree remains unstayed and in effect for sixty (60) consecutive days; (h) final, non-appealable judgments for the payment of money, which judgments, in the aggregate, exceed $10,000,000 shall be rendered against the Company or any of its Significant Subsidiaries by a court of competent jurisdiction and remain undischarged, unstayed and unsatisfied for the period and after the notice specified below; or (i) any of the Operative Documents ceases, without the consent of the Trustee, to be in full force and effect. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. A Default under clause (d), (e) or (h) of this Section 6.1 is not an Event of Default until the Trustee notifies the Company, or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Securities Outstanding notify the Company and the Trustee, of the Default and the Company does not cure the Default within sixty (60) days with respect to clauses (d) and (h), or within thirty (30) days with respect to clause (e), after receipt of the notice; provided, however, that the Company shall be permitted such longer period of time, if any, as may be provided for under the other Operative Documents in respect of any particular Default. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." When a Default is cured, it ceases. Section 6.2 Acceleration. ------------ If an Event of Default (other than an Event of Default specified in Section 6.1(f) or (g)) occurs, and is continuing, the Trustee may, by notice to the Company, or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Securities Outstanding may, by notice to the Company and the Trustee, and the Trustee shall, upon the request of such Holders, declare all unpaid principal of and accrued interest, if any, to the date of acceleration on the Securities Outstanding (if not then due and payable) to be due and payable and upon any such declaration, the same shall become and be immediately due and payable. If an Event of Default specified in Section 6.1(f) or (g) occurs, all unpaid principal of and accrued interest, if any, on the Securities Outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. Upon payment of 23 such principal amount and interest, if any, all of the Company's obligations under the Securities and this Indenture, other than obligations under Sections 7.7 and 8.4, shall terminate. The Holders of a majority in principal amount of the Securities then Outstanding by notice to the Trustee may rescind an acceleration and its consequences if (a) all existing Events of Default, other than the non-payment as to the Securities of the principal and interest, if any, which has become due solely by such declaration of acceleration, have been cured or waived, (b) to the extent the payment of such interest is permitted by law, interest on overdue installments of interest and on overdue principal which has become due otherwise than by such declaration of acceleration, has been paid, (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, and (d) all payments due to the Trustee and any predecessor Trustee under Section 7.7 have been made. Section 6.3 Other Remedies. -------------- If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of and interest, if any, on the Securities or to enforce the performance of any provision of the Securities or this Indenture including, without limitation, instituting proceedings and exercising and enforcing, or directing exercise and enforcement of, all rights and remedies of the Trustee under the other Operative Documents. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. Section 6.4 Waiver of Past Defaults. ----------------------- Subject to Sections 6.7, 9.2 and 9.6, the Holders of a majority in aggregate principal amount of the Securities Outstanding by notice to the Trustee may authorize the Trustee to waive an existing Default or Event of Default and its consequences, except a Default (a) in the payment of principal of, or interest on, any Security as specified in clauses (a) and (b) of Section 6.1 or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Security affected. When a Default or Event of Default is waived, it is cured and ceases, and the Company, the Holders and the Trustee shall be restored to their former positions and rights hereunder respectively; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 6.5 Control by Majority. ------------------- The Holders of a majority in aggregate principal amount of the Securities Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. The Trustee may refuse to follow any direction hereunder or authorization under Section 6.4 that 24 legal counsel to the Trustee determines in good faith conflicts with law or this Indenture, that the Trustee reasonably determines may be unduly prejudicial to the rights of another Securityholder, or that the Trustee reasonably determines may subject the Trustee to personal liability. However, the Trustee shall have no liability for any actions or omissions to act which are in accordance with any such direction or authorization. Section 6.6 Limitation on Suits. ------------------- A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least twenty-five percent (25%) in principal amount of the Securities Outstanding make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within sixty (60) days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Holders of a majority in aggregate principal amount of the Securities Outstanding do not give the Trustee a direction which, in the reasonable opinion of the Trustee, is inconsistent with such request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. Section 6.7 Rights of Holders to Receive Payment. ------------------------------------ Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of and interest on the Security in cash, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. It is hereby expressly understood, intended and agreed that any and all actions which a Holder of the Securities may take to enforce the provisions of this Indenture and/or collect Payments due hereunder or under the Securities, except to the extent that such action is determined to be on behalf of all Holders of the Securities, shall be in addition to and shall not in any way change, adversely affect or impair the rights and remedies of the Trustee or any other Holder of the Securities thereunder or under this Indenture and the other Operative Documents, including the right to foreclose upon and sell the Collateral or any part thereof and to apply any proceeds realized in accordance with the provisions of this Indenture. 25 Section 6.8 Collection Suit by Trustee. -------------------------- If an Event of Default in payment of interest or principal specified in clause (a) or (b) of Section 6.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal and accrued interest remaining unpaid, together with interest on overdue principal and on overdue installments of interest to the extent that payment of such interest is permitted by law, in each case at the rate per annum provided for by the Securities, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.9 Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its Property and shall be entitled and empowered to collect and receive any moneys or other Property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.7, and unless prohibited by law or applicable regulations to vote on behalf of the Holders of Securities for the election of a trustee in bankruptcy or other person performing similar functions. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding except, as aforesaid, for the election of a trustee in bankruptcy or person performing similar functions. Section 6.10 Application of Proceeds. ----------------------- Any moneys collected by the Trustee pursuant to this Article shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal or interest, if any, upon presentation of the several Securities and stamping (or otherwise noting) thereon the payment, or issuing Securities in reduced principal amounts in exchange for the presented Securities if only partially paid, or upon surrender thereof if fully paid: FIRST: To the payment of reasonable costs and expenses actually incurred, including reasonable compensation to the Trustee, its predecessors, if any, and their respective agents and attorneys (including amounts due and unpaid under Section 7.7), 26 and of all reasonable costs, fees, expenses and liabilities incurred, and all advances made, by any and all of the foregoing (including amounts due and unpaid under Section 7.7), except as a result of negligence or bad faith; SECOND: In case the entire principal of the Securities shall not have become and be then due and payable, as to any Securities (a) first to the payment of interest, if any, in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest, at the rate of interest specified in the Securities and (b) second to the payment of principal of the Securities as the same shall become due and payable, such payments to be made ratably to the Persons entitled thereto, without discrimination or preference; THIRD: In case the entire principal of the Securities shall have become and shall be then due and payable, as to any Securities, to the payment of the whole amount then owing and unpaid upon all the Securities for principal and interest, with interest upon the overdue principal, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest, at the same rate as the rate of interest specified in this Indenture or in the Securities; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities, then to the payment of such principal and interest, without preference or priority of either of principal or interest over the other, or any installment of interest over any other installment of interest, or of any Security over any other Security, ratably to the aggregate of such principal, and accrued and unpaid interest; and FOURTH: To the payment of the remainder, if any, after payment in full of the entire principal balance, if any, of the Securities and all interest and other amounts due upon or in respect of such Securities, to the Company or any other Person lawfully entitled thereto. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. --------------------- All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court of competent jurisdiction in its discretion may require in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than ten percent (10%) in principal amount of the Securities Outstanding. 27 Section 6.12 Restoration of Rights on Abandonment of Proceedings. --------------------------------------------------- In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the Securityholders shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Securityholders shall continue as though no such proceedings had been taken. Section 6.13 Powers and Remedies Cumulative; Delay or Omission ------------------------------------------------- Not Waiver of Default. - --------------------- No right or remedy herein conferred upon or reserved to the Trustee or to the Securityholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to the other applicable provisions of this Indenture, every power and remedy given by this Indenture or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. Any right or remedy herein conferred upon or reserved to the Trustee may be exercised by it in its capacity as Trustee, as it may deem most efficacious, if it is then acting in such capacity. ARTICLE 7. TRUSTEE Section 7.1 Duties of Trustee. ----------------- (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) The Trustee need perform only those duties as are specifically set forth in this Indenture and the other Operative Documents and no others. 28 (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or bad faith, except that: (i) This paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1 or of Section 7.2. (ii) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5. (d) The Trustee shall be under no obligation to exercise any of the rights, trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request, order or direction. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1. (f) Funds held in trust for the benefit of the Holders of the Securities by the Trustee or any Paying Agent on deposit with itself or elsewhere shall be held in distinct, identifiable accounts, and other funds or investments of any nature or from any source whatsoever may be held in such accounts, except, in each case, to the extent required by law. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Section 7.2 Rights of Trustee. ----------------- (a) The Trustee may rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper person. Subject to Section 7.1(b)(ii), the Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 11.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. 29 (c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its attorneys and agents and the Trustee shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. Section 7.3 Individual Rights of Trustee. ---------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or Affiliates of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11. Section 7.4 Trustee's Disclaimer. -------------------- The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities or in this Indenture other than its certificate of authentication. Section 7.5 Notice of Defaults. ------------------ If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within ninety (90) days after the occurrence thereof except as otherwise permitted by the TIA. Except in the case of a Default in payment of principal of, or interest on, any Security, the Trustee may withhold the notice if and so long as it, in good faith, determines that withholding the notice is in the interests of the Securityholders. Section 7.6 Reports by Trustee to Holders. ----------------------------- If circumstances require any report to Holders under TIA ss. 313(a), it shall be mailed to Securityholders within sixty (60) days after each May 15 (beginning with the May 15 following the date of this Indenture) as of which such circumstances exist. The Trustee also shall comply with the remainder of TIA ss. 313. The Company shall promptly notify the Trustee if the Securities become listed on or delisted from any stock exchange or other recognized trading market. The Trustee shall, upon the written request of any Holder of Securities but subject to applicable laws and contractual limitations, provide to such Holder copies of any reports, certificates, opinions or other materials of any kind or nature required to be delivered to the Trustee under this Indenture or any of the other Operative Documents or otherwise delivered by or on behalf of the Company to the Trustee. 30 Section 7.7 Compensation and Indemnity. -------------------------- The Company shall pay to the Trustee from time to time reasonable compensation, as agreed upon from time to time, for its services hereunder and under the other Operative Documents. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it in any such capacities. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel and all agents and other persons not regularly in its employ. The Company shall indemnify the Trustee and each predecessor Trustee for, and hold each of them harmless against, any loss or liability incurred by each of them in connection with the administration of this Indenture and its duties hereunder. In connection with any defense of such a claim, the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee or any predecessor Trustee through the negligence or bad faith of such Trustee or each such predecessor Trustee. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a Lien (legal and equitable) prior to the Securities on all money or Property held or collected by the Trustee, in its capacity as Trustee, or otherwise distributable to Securityholders, except money, securities or Property held in trust to pay principal of or interest on particular Securities (including, without limitation, pursuant to Section 8.1(b) hereof). When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(f) or (g) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. Section 7.8 Replacement of Trustee. ---------------------- The Trustee may resign by so notifying the Company and the Holders in writing. The Holders of a majority in aggregate principal amount of the Securities Outstanding may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the Company's consent, which consent shall not be unreasonably refused or delayed. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10; (b) the Trustee is adjudged a bankrupt or an insolvent; (c) a receiver or other public officer takes charge of the Trustee or its Property; (d) the Trustee becomes incapable of acting; or (e) no Default or Event of Default has occurred and is continuing and the Company determines in good faith to remove the Trustee. 31 If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after any such successor Trustee takes office, the Holders of a majority in aggregate principal amount of the Securities Outstanding may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all Property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.7, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. No resignation or removal of the Trustee and no appointment of a successor Trustee, pursuant to this Article, shall become effective until the acceptance of appointment by the successor Trustee under this Section 7.8. If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least ten percent (10%) in principal amount of the Securities Outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder of Securities may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee which shall retain its claim pursuant to Section 7.7. Section 7.9 Successor Trustee by Merger, etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification. ----------------------------- This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent, published annual report of condition. The Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. 32 Section 7.11 Preferential Collection of Claims Against Company. ------------------------------------------------- The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. ARTICLE 8. DISCHARGE OF INDENTURE Section 8.1 Termination of Company's Obligations. ------------------------------------ (a) The Company may terminate its obligations under this Indenture, except those obligations referred to in the last paragraph of Section 8.1(b), if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment Payments have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.3) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder. (b) The Company may terminate all its obligations under this Indenture except those obligations referred to in the immediately succeeding paragraph if (i) the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee or a Paying Agent, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee and any such Paying Agent, as trust funds in trust solely for the benefit of the Holders for that purpose, cash or U.S. Government Obligations maturing as to principal and interest, in such amounts and at such times as are sufficient without consideration of any reinvestment of any such interest to pay the then maximum possible principal of, and the then maximum possible interest on the Securities Outstanding to maturity provided, that the Trustee or such Paying Agent shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of said principal of and interest on the Securities. (ii) No Default or Event of Default with respect to the Securities shall have occurred and be continuing (A) on the date of such deposit described in clause (i), or (B) insofar as paragraph (f) of Section 6.1 is concerned, at any time during the period ending on the 91st day after the date of such deposit or, if longer, ending on the day following the expiration of the longest preference period applicable to the Company in respect of such deposit (it being understood that the condition in this clause (B) is a condition subsequent and shall not be deemed satisfied until the expiration of such period); (iii) Such termination and deposit described in clause (i) shall not (A) cause the Trustee to have a conflicting interest as defined in TIA Section 310(b) or otherwise for purposes of the TIA with respect to any securities of the Company, or (B) result in the 33 trust arising from such deposit to constitute, unless it is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended; (iv) Such termination and deposit described in clause (i) shall not result in a breach or violation of or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound; (v) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such termination and deposit described in clause (i) and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such termination and deposit had not occurred; and (vi) The Company shall have delivered to the Trustee and any Paying Agent an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent and subsequent provided for above in this Section 8.1(b) have been complied with. Notwithstanding the foregoing paragraph, the Company's obligations in Article 13 and in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.1, 4.2, 4.8, 7.7, 7.8, 8.2, 8.3, 8.4 and 10.4 shall survive until the Securities are no longer Outstanding. Thereafter, the Company's obligations in Sections 7.7 and 8.3 shall survive. (c) After the effectiveness of any termination of its obligations (except, in the case of Section 8.1(b), as set forth in the last paragraph thereof), under this Indenture in accordance with Section 8.1(a) or (b) above (such effective date, the "Indenture Discharge Date") and payment of all obligations of the Company accrued under Section 7.7, the Trustee upon Request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified above. Section 8.2 Application of Trust Money. -------------------------- The Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.1, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of, and interest, if any, on, the Securities. The obligations of the Trustee and Paying Agent under this Section 8.2 shall survive, notwithstanding any termination or discharge of the Company's obligations pursuant to Section 8.1, until all Securities are paid in full. The Company shall pay and indemnify the Trustee or Paying Agent, as the case may be, against any tax, fee or other charge imposed on or assessed against the money or U.S. Government Obligations deposited pursuant to Section 8.1(b)(i) or the principal and interest received in respect thereof. 34 Section 8.3 Repayment to Company. -------------------- Anything in Section 8.1(b) to the contrary notwithstanding, the Trustee or Paying Agent, as the case may be, shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations (or other Property and any proceeds therefrom) held by it as provided in Section 8.1(b) which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee and to the Paying Agent, if applicable, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent termination under said Section 8.1(b). The Trustee and the Paying Agent shall Pay to the Company any Payments held by them for the payment of principal and interest that remains unclaimed for two (2) years after the Stated Maturity of such payment of principal or interest, as the case may be; provided, however, that the Trustee or such Paying Agent before making any Payment shall at the expense of the Company cause to be published once in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a newspaper of general circulation in the City of New York and mail to each Holder entitled to such money, notice that such Payments remain unclaimed and that, after a date specified therein which shall be at least thirty (30) days from the date of such publication or mailing, any unclaimed balance of such Payments then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to Payments must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. Section 8.4 Reinstatement. ------------- Anything herein to the contrary notwithstanding, (i) if the Trustee or Paying Agent, as the case may be, is unable to apply any money or U.S. Government Obligations in accordance with Section 8.1 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, or (ii) the deposited money or U.S. Government Obligations (or the proceeds thereof) are, for any reason (including any repayment to the Company under Section 8.3), insufficient in amount, then the Company's obligations under this Indenture shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.1 until such time as the Trustee, or Paying Agent, as the case may be, is permitted to apply all such money or U.S. Government Obligations and the proceeds of the investment thereof in accordance with Section 8.1, or the deficiency is cured in the manner set forth in Section 8.1(b), as the case may be. In such event, the Trustee will invest all such money or the proceeds from U.S. Government Obligations at the Company's request in other U.S. Government Obligations and, upon written notice from the Company, so long as there exists no Event of Default, to the extent and only to the extent provided in the first sentence of Section 8.3 return to the Company any money or U.S. Government Obligations deposited with the Trustee pursuant to Section 8.1. If the Company has made any payment of interest on or principal of any Securities because of an event described in clause (i) of the first sentence of this Section 8.4, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent, as the case may be. 35 ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1 Without Consent of Holders. -------------------------- The Company and the Trustee, as the case may be, may amend or supplement this Indenture, the Securities or the other Operative Documents without notice to or consent of any Securityholder: (a) to provide for uncertificated Securities in addition to or in place of certificated Securities; (b) to provide for the assumption of the Company's obligations to the Holders of the Securities in the case of a merger or consolidation or transfer of all or substantially all of the assets of the Company or otherwise to comply with Article 5; (c) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA; or (d) to cure any ambiguity, defect or inconsistency or to make any other change, in each case, provided that such action does not materially adversely affect the interests of any Securityholder. Section 9.2 With Consent of Holders. ----------------------- Subject to Section 6.7, the Company (by resolution of its Board of Directors if required) and the Trustee may amend or supplement this Indenture, the Securities or the other Operative Documents without notice to any Securityholder but with the written consent of the Required Holders. Subject to Sections 6.4, 6.5 and 6.7, the Required Holders may authorize the Trustee to, and the Trustee, subject to Section 9.6, upon such authorization shall, waive compliance by the Company with any provision of this Indenture, the Securities or the other Operative Documents. However, an amendment, supplement or waiver, including a waiver pursuant to any provision of Section 6.4, may not without the consent of each Securityholder affected: (a) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (b) reduce the rate or extend the time for payment of interest on any Security; (c) reduce the principal of (whether on repurchase or otherwise), or change the fixed maturity of any Security; (d) change the place of payment where, or the coin or currency in which, any Security (or the repurchase price thereof), or interest, if any, thereon, is payable; (e) waive a default in the payment of the principal of, or interest on, any Security; 36 (f) make any changes in Article 3, Sections 2.8, 6.4, 6.7 or 6.10, or the third sentence of this Section 9.2; (g) reduce any amount payable upon exercise of any repurchase rights thereof or otherwise change any repurchase right provision or impair the right of any Holder to institute suit for the enforcement of any such payment on any Security when due or adversely effect any repurchase rights hereunder; or (h) except as otherwise permitted or required under this Indenture, change the Conversion Date or the Conversion Price or otherwise modify or affect Article 13 or any other provision of this Indenture in any manner that would adversely affect any Holder's conversion rights hereunder. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders affected thereby a brief notice describing such amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. Section 9.3 Compliance with Trust Indenture Act. ----------------------------------- Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. Section 9.4 Revocation and Effect of Consents. --------------------------------- Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (a) through (h) of Section 9.2. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; provided, however, that no amendment, supplement or waiver relating to any impairment of the right to receive principal and interest when due and payable consented to by a Holder shall be binding upon any subsequent Holder of a Security or a portion of a Security that evidences the same debt as the 37 consenting Holder's Security unless notation with regard thereto is made upon such Security or the Security representing such portion. Section 9.5 Notation on or Exchange of Securities. ------------------------------------- If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Section 9.6 Trustee to Sign Amendments, etc. ------------------------------- The Trustee shall be entitled to receive and rely upon an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article 9 has been duly authorized by the Company and is authorized or permitted by this Indenture and the other applicable Operative Documents. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.7 Effect of Supplement and/or Amendment. ------------------------------------- Upon the execution of any supplemental indenture and/or any such amendment or supplement to the other Operative Documents pursuant to the provisions of this Article 9, this Indenture and such Operative Documents shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture and the other Operative Documents of the Trustee, the Company and the Holders of Securities shall thereafter be determined, exercised and enforced hereunder and thereunder subject in all respects to such modifications and amendments, and all terms and conditions of any such supplemental indenture and/or any such amendment or supplement to the other Operative Documents shall be and be deemed to be part of the terms and conditions of this Indenture and the other Operative Documents for any and all purposes. ARTICLE 10. SECURITY Section 10.1 Other Operative Documents. ------------------------- To secure the due and punctual payment, performance and observance of the Obligations (but not to exceed, in any event, the aggregate amount of $24,300,000), the Company has simultaneously with the execution of this Indenture entered into or caused to be assigned to the Trustee the other Operative Documents and has made an assignment and pledge of or otherwise transferred or caused to be transferred its right, title and interest in and to the Collateral to the 38 Trustee pursuant to the other Operative Documents and in the manner and to the extent therein provided. Each Securityholder, by accepting a Security, agrees to all of the terms and provisions of each Operative Document (including, without limitation, the provisions providing for the release of Collateral and for the subordination of the Lien of the Mortgage to the Lien of the First Mortgage), as the same may be in effect or may be amended from time to time pursuant to its terms and the terms hereof. The Company will execute, acknowledge and deliver to the Trustee such further assignments, transfers, assurances or other instruments as the Trustee may reasonably require or request, and will do or cause to be done all such acts and things as may be necessary or proper, or as may be reasonably required by the Trustee to assure and confirm to the Trustee the security interest in the Collateral contemplated hereby and by the other Operative Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Securities secured hereby, according to the intent and purposes herein expressed. Section 10.2 Opinions, Certificates and Appraisals. ------------------------------------- (a) The Company shall furnish to the Trustee promptly after the execution and delivery of this Indenture but prior to authentication of any Securities, Opinions of Counsel covering such jurisdictions as the Owner Trustee may reasonably request either (i) stating that in the opinion of such Counsel the actions necessary to be taken under the Federal Aviation Act, the Uniform Commercial Code of all applicable jurisdictions, or otherwise with respect to the recording, registering and filing of this Indenture, the other Operative Documents, financing statements or other instruments to make effective and to perfect the Liens intended to be created by the Mortgage have been taken and reciting with respect to the security interests in the Collateral, the details of such actions, or (ii) stating that, in the opinion of such Counsel, no such action is necessary to make such Liens effective and perfected. (b) [Intentionally omitted.] (c) The release of any Collateral from the terms of the Mortgage will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to the Mortgage or this Indenture, as applicable. To the extent applicable, the Company shall cause TIA ss. 314(d) relating to the release of Property or securities from the Lien of the Mortgage and relating to the substitution therefor of any Property or securities to be subjected to the Lien of the Mortgage, to be complied with. Any certificate or opinion required by TIA ss. 314(d) may be made by an Officer of the Company, except in cases where TIA ss. 314(d) requires that such certificate or opinion be made by an independent person. Section 10.3 Authorization of Actions to be Taken by --------------------------------------- the Trustee Under the Operative Documents. - ----------------------------------------- The Trustee may, in its sole discretion and without the consent of the Securityholders, take all actions it deems necessary or appropriate to (a) enforce any of the terms of the Operative Documents and (b) collect and receive any and all amounts payable in respect of the obligations of the Company hereunder and thereunder. Subject to the provisions of this Indenture and the other Operative Documents, the Trustee shall have power to institute and to maintain such suits 39 and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of the other Operative Documents or this Indenture, and such suits and proceedings as it may deem expedient to preserve or protect its interest and the interests of the Securityholders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Securityholders or of the Trustee). Section 10.4 Payment of Expenses. ------------------- On demand of the Trustee, the Company forthwith shall pay or satisfactorily provide for all reasonable expenditures incurred by the Trustee under this Article 10, and all such sums shall be a Lien upon the Collateral and shall be secured thereby. Section 10.5 Authorization of Receipt of Funds by the ---------------------------------------- Trustee Under the Operative Documents. - ------------------------------------- The Trustee is authorized to receive any funds for the benefit of Securityholders distributed under the Operative Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture and the other Operative Documents. ARTICLE 11. MISCELLANEOUS Section 11.1 Conflict with Trust Indenture Act of 1939. ----------------------------------------- If and to the extent that any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the TIA, such imposed duties shall control. Section 11.2 Notices; Waivers. ---------------- Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with (a) the Company shall be sufficient for every purpose hereunder if in writing (including telecopied communications) and made, given, furnished or filed by personal delivery or mailed by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to or with the Company at: Trans World Airlines, Inc. One City Centre 515 N. 6th Street 40 St. Louis, Missouri 63101 Attention: Senior Vice President & General Counsel Telecopier No.: (314) 589-3267 (b) the Trustee shall be sufficient for every purpose hereunder if in writing (including telecopied communications) and made, given, furnished or filed by personal delivery or mailed by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to or with the Trustee at: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Services Telecopier No.: (801) 246-5053 or to any of the above parties at any other address or telecopier number subsequently furnished in writing by it to each of the other parties listed above. An affidavit by any person representing or acting on behalf of the Company or the Trustee as to such mailing, having any registry receipt required by this Section attached, shall be conclusive evidence of the giving of such demand, notice or communication. Any notice or communication mailed to a Holder shall be mailed to such holder by first-class mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, at such holder's address as it appears on the Register and shall be sufficiently given to such holder if so mailed within the time prescribed. Failure to mail a notice or send a communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. Notices to the Trustee or to the Company are deemed given only when received. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by the Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 11.3 Communications by Holders with Other Holders. -------------------------------------------- Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA ss. 312(c). Section 11.4 Certificate and Opinion as to Conditions Precedent. -------------------------------------------------- Upon any Request or application by the Company to the Trustee to take any action under this Indenture or the other Operative Documents, the Company shall furnish to the Trustee: (a) 41 an Officers' Certificate, and (b) an Opinion of Counsel, each stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, provided, that in the case of any such application or Request as to which the furnishing of an Officers' Certificate or Opinion of Counsel is specifically required by any provision of this Indenture or the other Operative Documents relating to such particular application or Request, no additional certificate or opinion, as the case may be, need be furnished. Section 11.5 Statements Required in Certificate or Opinion. --------------------------------------------- Each certificate or opinion provided for and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture or the other Operative Documents shall include: (a) a statement that the Person signing such certificate or opinion has read such condition or covenant and the definitions herein or therein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and (d) a statement as to whether or not in the opinion of such Person, such condition or covenant has been complied with. Any certificate or opinion of an Officer or an engineer, insurance broker, accountant or other expert may be based, insofar as it relates to legal matters, upon a certificate or opinion of or upon representations by counsel, unless such officer, engineer, insurance broker, accountant or other expert knows that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon the certificate or opinion of or representations by an officer or officers of the Company stating that the information with respect to such factual matters is in possession of the Company, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous and insofar as it relates to legal matters in a jurisdiction or area of law beyond the expertise of such counsel, such counsel may rely upon the opinion of counsel qualified in such other jurisdiction or area of law. Wherever in this Indenture or the other Operative Documents in connection with any application, certificate or report to the Trustee it is provided that the Company shall deliver any document as a condition of the granting of such application or as evidence of the Company's compliance with any term hereof, it is intended that the truth and accuracy at the time of the granting of such application or at the effective date of such certificate or report, as the case may be, of the facts and opinions stated in such document shall in each such case be a condition precedent to the right of the Company to have such application granted or to the sufficiency of such certificate or report. Nevertheless, in the case of any such application, certificate or report, 42 any document required by any provision of this Indenture or the other Operative Documents to be delivered to the Trustee as a condition of the granting of such application or as evidence of such compliance may be received by the Trustee as conclusive evidence of any statement therein contained and shall be full warrant, authority and protection to the Trustee acting on the faith thereof. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Whenever any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements or opinions or other instruments under this Indenture or any other Operative Document such Person may, but need not, consolidate such instruments into one. Section 11.6 Rules by Trustee, Paying Agent, Registrar. ----------------------------------------- The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Registrar, Paying Agent or Tender Agent may make reasonable rules for their respective functions. Section 11.7 Holidays. -------- In the event that any date for the payment of any amount due hereunder shall not be a Business Day, then (notwithstanding any other provision of this Indenture) such payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the due date, and no interest shall accrue from such due date to and including the next succeeding Business Day. Section 11.8 Governing Law; Waiver of Jury Trial. ----------------------------------- (a) The laws of the State of New York shall govern this Indenture and the Securities without regard to principles of conflict of laws. (b) The Company and the Trustee each waive any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise arising out of, connected with, related to or incidental to the relationship established between them in connection with this Indenture. Instead, any disputes resolved in court will be resolved in a bench trial without a jury. 43 Section 11.9 No Adverse Interpretation of Other Agreements. --------------------------------------------- This Indenture may not be used to interpret any agreement of the Company or any of its Subsidiaries which is unrelated to this Indenture, the Securities or the other Operative Documents. Any such agreement may not be used to interpret this Indenture. Section 11.10 No Recourse Against Others. -------------------------- A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. Section 11.11 Benefits of Indenture and the Securities Restricted. --------------------------------------------------- Subject to the provisions of Section 11.12 hereof, nothing in this Indenture or the Securities, express or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto and the Holders, any legal or equitable right, remedy or claim under or in respect of this Indenture or under any covenant, condition, or provision herein contained, all such covenants, conditions and provisions, subject to Section 11.12 hereof, being for the sole benefit of the parties hereto and of the Holders. Section 11.12 Successors and Assigns. ---------------------- This Indenture and all obligations of the Company hereunder shall be binding upon the successors and permitted assigns of the Company, and shall, together with the rights and remedies of the Trustee hereunder, inure to the benefit of the Trustee, the Holders, and their respective successors and assigns. Any assignment in violation hereof shall be null and void ab initio. Section 11.13 Counterpart Originals. --------------------- This Indenture may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. Section 11.14 Severability. ------------ The provisions of this Indenture are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Indenture in any jurisdiction, and a Holder shall have no claim therefor against any party hereto. 44 Section 11.15 Effect of Headings. ------------------ The Article and Section headings and the Table of Contents contained in this Indenture have been inserted for convenience of reference only, and are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Indenture. ARTICLE 12. RELEASE OF COLLATERAL Section 12.1 Release of Collateral. --------------------- The Collateral securing the obligations evidenced by the Securities shall be subject to release from the Lien of this Indenture and the other Operative Documents from and to the extent provided by this Indenture and the other Operative Documents. ARTICLE 13. MANDATORY CONVERSION OF SECURITIES Section 13.1 Mandatory Conversion and Conversion Price. ----------------------------------------- (a) Subject to the other provisions of this Article 13, on the Conversion Date, so long as no Default or Event of Default shall then exist, each then Outstanding Security shall be automatically converted into that number of fully paid and non-assessable shares of Common Stock equal to the sum of (i) the then outstanding principal amount of such Security, plus (ii) accrued and unpaid interest, if any, on such Security to the Conversion Date, divided by the lesser of (A) 0.95 multiplied by the Average Market Price per share of Common Stock or (B) $107/8 (the "Fixed Price") (such lesser amount being hereinafter referred to as the "Conversion Price"); provided, however, that the aggregate number of shares of Common Stock issuable upon any such conversion shall not exceed the Maximum Share Amount. If, on the Conversion Date, the Company has taken all action required to authorize the issuance of the Common Stock in conversion of the Securities and no Default or Event of Default shall then exist, then, notwithstanding that such Securities have not been Tendered, from and after the Conversion Date, all of the Securities shall no longer be deemed Outstanding and all rights relating to such Securities shall terminate, except only the right to receive, upon Tender of the Securities therefore, the Common Stock and cash (if any) pursuant to the provisions hereof, and the Person or Persons entitled to receive the Common Stock issuable upon the conversion shall be treated for all purposes as the record holder or holders of such Common Stock. If all the foregoing conditions have been satisfied, interest, if any, will cease to accrue on the Securities on the Conversion Date. The Fixed Price will be appropriately and equitably adjusted to reflect the effects of any stock dividend, stock split (including a reverse stock split), reclassification, recapitalization, combination or distribution of assets, securities or other Property (in each of the foregoing cases, except if clause (i), (ii) or (iii) of Section 13.2(a) is applicable to any of such 45 events) to holders of Common Stock by the Company in the case of any of the foregoing affecting the Common Stock, the record date, ex-dividend date or similar date of which occurs during the period from the Issue Date through the Conversion Date. Except as expressly provided herein, no other payment or adjustment will be made for dividends or distributions on shares of Common Stock issued upon conversion which were declared for payment to holders of Common Stock of record as of a date prior to the Conversion Date. (b) As promptly as practicable on the Shelf Effective Date, the Company shall send (or cause to be sent) a notice to each Holder and the Trustee (which notice shall be sent to such Holder and the Trustee by telex or telecopier if (with respect to such Holder) such Holder has, at least five Business Days prior thereto, provided such telex or telecopier information to the Company or the Trustee), stating the Shelf Effective Date and, to the extent then known, the following: (i) the Conversion Date, (ii) the Conversion Price, (iii) the office or offices (including, in any event, the office required to be maintained by the Company pursuant to the first paragraph of Section 4.1) to which the Securities should be Tendered for Common Stock, (iv) that unless otherwise notified by such Holder, the certificate or certificates of Common Stock issuable to such Holder on such Conversion Date will be issued in the name of and delivered to the address of such Holder as shown on the Register as of the close of business of the Registrar on such Conversion Date and (v) that interest, if any, will cease to accrue on the Securities on the Conversion Date. Such a notice containing the information in the foregoing clauses (i) through (v) shall in any event be so sent as promptly as practicable on the Conversion Date. (c) As promptly as practicable (but in any event not later than five Business Days) after receipt of a Security at any office set forth in the notice referred to in paragraph (b) above, the Company shall issue, execute and deliver to the Holder of such Security, in such Holder's name and to such Holder's address as shown on the Register as of the close of business of the Registrar on the Conversion Date (or otherwise in accordance with such Holder's written order received by the Company), a certificate or certificates for the number of shares of Common Stock resulting from such conversion, together with any cash adjustment in lieu of fractional shares or cash payable as a result of the Maximum Share Amount, as hereinafter provided. (d) No fractional shares of Common Stock shall be issued upon any conversion of Securities. In lieu of any fraction of a share of Common Stock to which any Holder would otherwise be entitled upon conversion of any Security, the Company shall pay to such Holder (in accordance with paragraph (c) above) a cash adjustment for such fraction in an amount equal to the same fraction of the Conversion Price, together with the amount (if any) by which the Conversion Price per share then in effect exceeds the Closing Price of the Common Stock on the Conversion Date, multiplied by such fraction. (e) The principal amount, if any, of any Security that cannot be converted into Common Stock as a result of the Maximum Share Amount (excluding any amount payable pursuant to paragraph (d) above), shall be paid by the Company to the Holder thereof, together with accrued and unpaid interest, if any, thereon, together with the amount (if any) by which the Conversion Price per share then in effect exceeds the Closing Price of the Common Stock on the Conversion Date, multiplied by the number of shares which could then have been received upon 46 conversion of such portion of the principal amount of such Security. Any such amounts shall be paid in cash in accordance with paragraph (c) above. Section 13.2 Effect of Consolidation, Merger or ---------------------------------- Conveyance on Conversion. - ------------------------ (a) If any of the following shall occur, namely: (i) any consolidation or merger to which the Company is a constituent party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; (ii) any conveyance or transfer of all or substantially all of the assets of the Company; or (iii) any share exchange pursuant to which all of the outstanding shares of Common Stock are converted into or exchanged for other securities or Property (including cash), then the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such consolidation, merger, conveyance, transfer or share exchange, execute and deliver to the Trustee a supplemental indenture providing that immediately after the consummation of such consolidation, merger, conveyance, transfer or share exchange, the Securities shall automatically convert into and the Holder of each Security then outstanding shall have the right thereafter to receive the kind and amount of shares of stock and other securities and Property (including cash) receivable upon such consolidation, merger, conveyance, transfer or share exchange by a holder of the number of shares of Common Stock deliverable upon conversion of such Security immediately prior to the effective date of such consolidation, merger, conveyance, transfer or share exchange, assuming that the Average Market Price is determined utilizing the 20 consecutive Trading Days ending on the Trading Day immediately prior to such effective date. If, in the case of any such consolidation, merger, conveyance, transfer or share exchange, the stock or other securities and Property (including cash) receivable thereupon by a holder of Common Stock include shares of stock or other securities and Property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, conveyance, transfer or share exchange, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders as the Board of Directors shall reasonably consider necessary by reason of the foregoing. If in connection with any such consolidation, merger, conveyance, transfer, or share exchange each holder of shares of Common Stock is entitled to elect to receive either securities, cash or other assets (or any combination thereof) upon completion of such transaction, the Company will provide or cause to be provided to each Holder the right to elect to receive the securities, cash or other assets into which the Securities held by such Holder will be convertible after completion of any such transaction on the same terms and subject to the same conditions applicable to holders of the Common Stock (including, without limitation, notice of the right to elect, limitations on the period in which such election will be made and the effect of failing to exercise the election). In the case of any such consolidation, merger, conveyance, transfer or share exchange, where the Holders of shares of Common Stock will be entitled to receive securities upon completion of such transaction, the Company will cause such successor or purchasers respectively to provide that the securities upon conversion of the Securities will be freely transferable issuable without any restrictions imposed by federal, state or foreign securities laws. The provisions of this Section 13.2 shall similarly apply to successive consolidations, 47 mergers, conveyances, transfers or share exchanges. In the event the Company shall execute a supplemental indenture pursuant to this Section 13.2, the Company shall promptly file with the Trustee (x) an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or securities or Property (including cash) receivable by Holders upon the automatic conversion of their Securities immediately after any such consolidation, merger, conveyance, transfer or share exchange, any adjustment to be made with respect thereto and that all conditions precedent have been complied with and (y) an Opinion of Counsel that all conditions precedent have been complied with. (b) The Trustee, subject to the provisions of Section 7.1, shall not be responsible for any such consolidation, merger, conveyance, transfer or share exchange, the form or substance of any plan relating thereto, or the consequences thereof to any Holder or the correctness of any provision contained in any such supplemental indenture relating to the kind or amount of shares of stock or securities or Property receivable by any Holder upon conversion of Securities immediately after any such consolidation, merger, conveyance, transfer or share exchange. (c) As evidence of the kind and amount of stock or other securities or Property into which Securities will be automatically converted after any such consolidation, merger, conveyance, transfer or share exchange, the Trustee, subject to the provisions of Section 7.1, may accept the certificate of a nationally recognized firm of independent public accountants with respect thereto; and, in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely thereon, and shall not be responsible or accountable to any Holder for any provision in conformity therewith which may be contained in the said supplemental indenture. (d) The Company or the Trustee may retain accountants to make any computation required under this Article 13, and the certificate of a nationally recognized firm of independent public accountants shall be conclusive evidence of the correctness of any computation made under this Article 13. Section 13.3 Costs of Conversion. ------------------- The issuance of certificates for shares of Common Stock issued upon the conversion of Securities shall be made without charge to the Holders for such certificates or for any documentary, stamp or similar issue or transfer tax in respect of the issuance of such certificates; provided, however, that the Company shall not be required to pay any such tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the Holder as shown on the Register as of the close of business of the Registrar on the Conversion Date, and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Nothing herein shall preclude any tax withholding required by applicable law. 48 Section 13.4 No Liability to Trustee. ----------------------- The Trustee shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee shall not be accountable with respect to the validity or value (or the kind or amount) of any Common Stock or of any securities or Property which may at any time be issued or delivered upon the conversion of any Security; and it does not make any representation with respect thereto. The Trustee shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or Property upon the conversion of any Security or to comply with any of the covenants of the Company contained in this Article 13. Section 13.5 Applicable Laws. --------------- Anything herein to the contrary notwithstanding, the rights and obligations of the Holders and the Company to convert the Securities into Common Stock or to vote said stock shall be subject to all applicable laws then in effect. Section 13.6 Other Funds. ----------- Anything elsewhere contained in this Indenture to the contrary notwithstanding, any funds which at any time shall have been deposited by the Company or on its behalf with the Trustee or any other Paying Agent for the purpose of paying any Securities which shall have been converted pursuant to the provisions of this Article 13 into Common Stock, shall forthwith upon such conversion be repaid upon demand to the Company by the Trustee or such other Paying Agent. Section 13.7 Release of Collateral Upon Conversion. ------------------------------------- On or after the effectiveness of the conversion pursuant to this Article 13, upon request by the Company and payment by the Company of the Trustee's costs (including reasonable legal fees and disbursements) incurred in complying with such Request, the Trustee shall release from the Lien of the Operative Documents, all right, title and interest of the Trustee in and to any Collateral. Section 13.8 Company to Provide Stock. ------------------------ The Company shall, prior to issuance of any Securities hereunder, and from time to time as it may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock. 49 All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. The Company will list or cause to have quoted all shares of Common Stock deliverable upon conversion of the Securities on the American Stock Exchange and each other national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. ARTICLE 14. POSSIBLE SUBORDINATION If, on the Business Day immediately succeeding the Issue Date, the Holders (other than Lazard Freres & Co. LLC, as Holder of the Compensation Notes, as defined in the Placement Agreement) do not include at least one of the Owner Trustee, Seven Sixty Seven Leasing, Inc. or any member of the Bank Group, then the Securities shall automatically, without any further act or deed, become unsecured obligations of the Company and shall rank junior in priority to all secured indebtedness of the Company and pari passu with all unsecured indebtedness of the Company, in each case whether such indebtedness is existing on the Issue Date or thereafter incurred, and the Trustee shall be authorized to enter into or execute and deliver such agreements, instruments or other documents as may be reasonably requested by (and at the cost and expense of) the Company to evidence or confirm the release of Liens on the Collateral or such subordination of the Securities. 50 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. TRANS WORLD AIRLINES, INC. By: Name: Title: FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee By: Name: Title: DEFINITIONS APPENDIX Appendix I To the Indenture between Trans World Airlines, Inc. and First Security Bank, National Association, as Trustee dated as of April 21, 1998 for the Company's Mandatory Conversion Equity Notes due 1999 and the Aircraft Second Mortgage and Security Agreement dated as of an even date therewith TABLE OF CONTENTS Page Section 1. Definitions................................... 1 Act........................................... 1 Affiliate..................................... 1 Agent......................................... 1 Aircraft...................................... 1 Aircraft Sale Agreement....................... 1 Airframe...................................... 1 Applicable Percentage......................... 1 Average Market Price.......................... 2 Bank Group.................................... 2 Bankruptcy Law................................ 2 Bills of Sale................................. 2 Board of Directors............................ 2 Business Day.................................. 2 Capital Stock................................. 2 Capitalized Lease Obligation.................. 2 Certificated Air Carrier...................... 2 Certifying Officer............................ 3 Change in Control............................. 3 CL/PK......................................... 3 Closing Price................................. 3 Code.......................................... 4 Collateral.................................... 4 Common Stock.................................. 4 Company....................................... 4 Conversion Date............................... 4 Conversion Price.............................. 4 Corporate Trust Office........................ 4 Custodian..................................... 5 Default....................................... 5 Definitions Appendix.......................... 5 8% Preferred Stock............................ 5 11 3/8% Secured Notes......................... 5 Employee Preferred Stock...................... 5 Engine........................................ 5 ERISA......................................... 5 Event of Default.............................. 5 Exchange Act.................................. 5 FAA........................................... 5 FAA Bill of Sale.............................. 6 Federal Aviation Act.......................... 6 First Mortgage................................ 6 (i) TABLE OF CONTENTS (Continued) Page GAAP.......................................... 6 Holder or Holder of Securities................ 6 Indebtedness.................................. 6 Indenture..................................... 7 Indenture Discharge Date...................... 7 Indenture Trustee............................. 7 Interest Payment Date......................... 7 Issue Date.................................... 7 Legal Holiday................................. 7 Lien.......................................... 7 Maximum Share Amount.......................... 7 Mortgage...................................... 7 Mortgage Supplement........................... 7 9 1/4% Preferred Stock........................ 8 Notes Indenture............................... 8 Notes Trustee................................. 8 Obligations................................... 8 Offer to Purchase............................. 8 Officer....................................... 10 Officers' Certificate......................... 10 Operative Documents........................... 10 Opinion of Counsel............................ 10 Outstanding or outstanding.................... 10 Owner Trustee................................. 11 Parts......................................... 11 Paying Agent.................................. 11 Payment Date.................................. 11 Payments...................................... 11 Permitted Liens............................... 11 Person........................................ 12 Placement Agreement........................... 12 Preferred Stock............................... 12 principal..................................... 12 Property...................................... 12 Record Date................................... 12 Register...................................... 13 Registrar..................................... 13 Registration Default.......................... 13 Registration Rights Agreement................. 13 Replacement Engine............................ 13 Request....................................... 13 Required Holders.............................. 13 SEC........................................... 13 (ii) TABLE OF CONTENTS (Continued) Page Securities.................................... 14 Securities Act................................ 14 Securityholder................................ 14 Seven Leasing................................. 14 Shelf Effective Date.......................... 14 Shelf Registration Statement.................. 14 Significant Subsidiary........................ 14 Special Record Date........................... 14 Stated Maturity............................... 14 Subsidiary.................................... 14 Taxes......................................... 14 Tender........................................ 15 TIA........................................... 15 Total Loss and Total Loss Date................ 15 Total Loss OTP Amount......................... 15 Trading Day................................... 15 Trust Agreement............................... 15 Trust Officer................................. 15 Trustee....................................... 15 TWA........................................... 15 U.S. or United States......................... 15 U.S. Government Obligations................... 15 Warranty Bill of Sale......................... 16 Section 2. Rules of Construction......................... 16 (iii) DEFINITIONS APPENDIX Section 1. Definitions. Unless the context otherwise requires, each of the terms included in this Section 1 shall have the respective meanings given in this Section 1 for all purposes of the Indenture and the other Operative Documents (including this appendix and any other appendices, exhibits or schedules to any thereof) and of such other agreements as may incorporate this appendix by reference except as otherwise specifically provided herein or therein. "Act" means the Federal Aviation Act. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent or co-Registrar or co-Paying Agent. "Aircraft" means each Airframe together with the two associated Engines identified by manufacturer's serial number in the Mortgage Supplement for such Airframe executed and delivered on the Issue Date, whether or not any of such Engines may at any time be installed on such Airframe or installed on any other airframe. "Aircraft Sale Agreement" means the Aircraft Sale and Note Purchase Agreement, made and entered into as of the 9th day of April, 1998, among the Company, the Owner Trustee and Seven Leasing. "Airframe" means each Boeing Model 767-231 ETOPS airframe (excluding any Engines and any other engines, but including any and all Parts which may from time to time be incorporated or installed in, or attached to such airframe, and including any and all Parts removed therefrom so long as the removed Parts remain subject to the Lien of the Mortgage under the terms thereof) purchased by the Company under the Aircraft Sale Agreement and identified by the FAA registration number and manufacturer's serial number in the Mortgage Supplements executed and delivered on the Issue Date. "Applicable Percentage" means (i) with respect to any amendment, supplement or waiver of the Indenture or any other Operative Document that would (A) terminate the Lien of the Mortgage with respect to any Collateral or permit the release of any Collateral (other than releases permitted by the applicable Operative Document, which releases shall not require any consent of the Holders) or permit the creation of any Lien on any Collateral (other than Permitted Liens), (B) increase the aggregate principal amount of Securities that may be issued under the Indenture or (C) modify this definition, 66 2/3%, and (ii) otherwise, a majority. 2 "Average Market Price" means, with respect to Common Stock, the average of the daily Closing Prices per share of Common Stock for the 20 consecutive Trading Days ending on the Trading Day immediately prior to the Conversion Date. The Average Market Price of Common Stock will be appropriately and equitably adjusted to reflect the effects of any stock dividend, stock split (including a reverse stock split), reclassification, recapitalization, combination or distribution of assets, securities or other Property (in each of the foregoing cases, except if clause (i), (ii) or (iii) of Section 13.2(a) of the Indenture is applicable to any of such events) to holders of Common Stock by the Company in the case of any of the foregoing affecting the Common Stock, the record date, ex-dividend date or similar date of which occurs during the period in which the Average Market Price is to be determined. "Bank Group" means any Person who, immediately prior to the issuance of the Securities on the Issue Date, held a beneficial interest (through participation or otherwise) in Seven Leasing, or any Affiliate of any such Person. "Bankruptcy Law" has the meaning provided in Section 6.1 of the Indenture. "Bills of Sale" means, for each Aircraft, the FAA Bill of Sale and the Warranty Bill of Sale. "Board of Directors" means the Board of Directors of the Company or any committee of such board duly authorized to act in respect of any particular matter. "Business Day" means each day which is not a Legal Holiday. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligation" means, as applied to any Person for any period, an obligation of such Person to pay rent or other amounts under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP. "Certificated Air Carrier" means a United States "air carrier" within the meaning of the Act, holding an air carrier operating certificate issued pursuant to chapter 447 of the Act and of the type referred to in 11 U.S.C. ss. 1110, or if such certification shall cease to be available, a carrier of comparable status under the laws of the United States then in force. "Certifying Officer" means an Officer or an assistant secretary of the Company. "Change in Control" means the occurrence of any of the following events: (i) any person (including any entity or group deemed to be a "person" under Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) is or becomes the direct or indirect beneficial owner (as 3 determined in accordance with Rule 13d-3 under the Exchange Act) of shares of the Company's Capital Stock representing greater than 50% of the total voting power of all shares of Capital Stock of the Company entitled to vote in the election of directors of the Company under ordinary circumstances or to elect a majority of the Board of Directors of the Company, (ii) the Person then constituting the "Company" under the Indenture sells, transfers or otherwise disposes of all or substantially all of its assets, (regardless of whether such Person thereupon ceases to constitute the "Company" under the Indenture pursuant to Section 5.2 thereof), (iii) when, during any period of 12 consecutive months after the date of original issuance of the Securities, individuals who at the beginning of any such 12-month period constituted the Board of Directors (together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of majority of the directors still in office entitled to vote with respect to such nomination who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, but excluding any of the individuals who at the beginning of such 12-month period constituted such Board but who ceased to be a member of the Board pursuant to the Company's mandatory retirement policy as in effect as of the Issue Date), cease for any reason to constitute a majority of the Board of Directors then in office or (iv) the date of the consummation of the merger or consolidation of the Person then constituting the "Company" under the Indenture with another corporation where the stockholders of such Person, immediately prior to the merger or consolidation, would not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to 50% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate class vote) to which all stockholders of the corporation issuing cash or securities in the merger or consolidation would be entitled in the election of directors or where members of the Board of Directors of the Person then constituting the "Company" under the Indenture, immediately prior to the merger or consolidation, would not, immediately after the merger or consolidation, constitute a majority of the board of directors of the corporation issuing cash or securities in the merger or consolidation. "CL/PK" means Credit Lyonnais/PK Airfinance, a financial sector corporation organized and existing under and by virtue of the laws of the Grand Duchy of Luxembourg. "Closing Price" means, for any day, the last reported sales price, regular way, per share of Common Stock, or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices, regular way, per share of Common Stock, in either case on the American Stock Exchange, or, if the Common Stock is not listed or admitted to trading on the American Stock Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the closing sales price, regular way, of the Common Stock as quoted by National Association of Securities Dealers Automated Quotation System ('NASDAQ"), or, in case no reported sale takes place, the average of the closing bid and asked prices, regular way, as quoted by NASDAQ or any comparable system, or, if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sales price, regular way, or, in case no reported sale takes place, the average of the closing bid and asked prices, regular way, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. 4 "Code" means the United States Internal Revenue Code of 1986, as amended from time to time, or any similar legislation of the United States enacted to supersede, amend or supplement such Code, and any reference to a provision or provisions of the Code shall also mean and refer to any successor provision or provisions, however designated or distributed. "Collateral" has the meaning specified in Section 2.1 of the Mortgage. "Common Stock" includes any stock of any class of the Company which has no preference in respect to dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company; initially it refers to the common stock, $0.01 par value, of the Company. "Company" means the party named as such in the Indenture or any obligor on the Securities until a successor replaces it pursuant to the Indenture and thereafter means the successor. "Conversion Date" means the first Business Day following the earliest date on which either (a) both of the following statements shall be true: (i) the Shelf Effective Date shall have occurred and (ii) the Common Stock issuable on conversion of the Equity Notes shall be listed on the American Stock Exchange or such other stock exchange or market as the Common Stock of the Company is then principally traded or (b) a transaction contemplated by Section 13.2 (a) of the Indenture has been consummated. "Conversion Price" has the meaning provided in Section 13.1 of the Indenture. "Corporate Trust Office" when used with respect to the Trustee means the office of the Trustee at which at any particular time its corporate trust business is administered and which, at the Issue Date, is located at First Security Bank, National Association, as Trustee, 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Services. "Custodian" has the meaning provided in Section 6.1 of the Indenture. "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "Definitions Appendix" means this Definitions Appendix attached as Appendix I to the Indenture and the Mortgage and constituting a part of the Indenture and each other Operative Document. "8% Preferred Stock" means the 8% Cumulative Convertible Exchangeable Preferred Stock of the Company and dividends on such stock, and payments on account of which are to be deemed equivalent to distributions on such stock. "11 3/8% Secured Notes" means the 11 3/8% Senior Secured Notes due 2003 of the Company issued concurrently with the Securities. 5 "Employee Preferred Stock" means the IFFA Preferred Stock, the ALPA Preferred Stock and the IAM Preferred Stock of the Company and dividends on such stock, and payments on account of which are to be deemed equivalent to distributions on such stock. "Engine" means (i) each of the Pratt & Whitney Model JT9D-7R4D aircraft engines identified by manufacturer's serial number in the Mortgage Supplements executed and delivered on the Issue Date, so long as a Replacement Engine shall not have been substituted therefor pursuant to the Mortgage, and (ii) each Replacement Engine, so long as another Replacement Engine shall not have been substituted therefor pursuant to the Mortgage, whether or not such engine or Replacement Engine, as the case may be, is from time to time installed on an Airframe or installed on another airframe, and including, in each case all Parts incorporated or installed in or attached thereto and any and all Parts removed therefrom so long as such Parts remain subject to the Lien of the Mortgage under the terms thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default" has the meaning provided in Section 6.1 of the Indenture. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "FAA" means the Federal Aviation Administration or similar regulatory authority established to replace it. "FAA Bill of Sale" means, for each Aircraft, the bill of sale for such Aircraft on AC Form 8050-2 or such other form as may be acceptable to the FAA for recordation with it, executed by the Owner Trustee in favor of the Company. "Federal Aviation Act" means Title 49 of the United States Code, "Transportation," as amended from time to time, or any similar legislation of the United States enacted in substitution or replacement thereof. In the event there is enacted any legislation replacing, modifying or repealing, in whole or in part, the Federal Aviation Act, then the term "certificated," when used with reference to the Federal Aviation Act or any particular provision thereof, shall mean authorized to provide, or not prohibited from providing, air transportation services. "First Mortgage" means the Aircraft Mortgage and Security Agreement, dated as of April 21, 1998, between the Company and the Notes Trustee, securing, among other things, the obligations of the Company under the Notes Indenture. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements 6 (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Holder" or "Holder of Securities" means the Person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, with respect to any Person at any date, without duplication, (a) all indebtedness, obligations and other liabilities (contingent or otherwise) of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (b) all obligations and other liabilities (contingent or otherwise) of such Person evidenced by bonds, notes or others similar instruments, (c) all obligations and other liabilities (contingent or otherwise) of such Person in respect of letters of credit or other similar instruments (and reimbursement obligations with respect thereto), (d) all obligations and other liabilities (contingent or otherwise) of such Person to pay the deferred and unpaid purchase price of property or services (other than any such obligations that represent trade payables or accrued expenses incurred in the ordinary course of business), (e) all Capitalized Lease Obligations of such Person, (f) all Indebtedness of others secured by a Lien on any asset or assets of such Person, whether or not such Indebtedness is assumed by such Person (and, if not assumed, such Indebtedness shall be limited to the fair market value of such asset or assets as determined on the date such Indebtedness was incurred), and (g) all Indebtedness of others guaranteed by such Person to the extent of such guarantee. 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 of such Person for any such contingent obligations at such date. A change in GAAP that results in an obligation of the Company existing at the time of such change becoming Indebtedness shall not be deemed an incurrence of such Indebtedness. "Indenture" means the Indenture dated as of April 21, 1998 between the Company and the Trustee, under which the Securities are issued, as amended or supplemented from time to time. "Indenture Discharge Date" means the date of the effectiveness of the termination of the Company's obligations under the Indenture pursuant to Section 8.1(a) or (b) thereof. "Indenture Trustee" means the Trustee. "Interest Payment Date" means the 15th day of each month during which any Security is Outstanding (commencing the 15th day of the month next succeeding the month in which a Registration Default, if any, occurs) and (if a Registration Default has occurred) the date on which the Securities mature, if different. "Issue Date" means the date on which the Securities are originally issued. "Legal Holiday" means a Saturday, Sunday or any other day on which banks located in New York City or the city and state of the Trustee's Corporate Trust Office as of the Issue Date are authorized or obligated by law to remain closed. 7 "Lien" means any conveyance in trust, assignment, mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Maximum Share Amount" means the maximum number of shares of Common Stock that can be issued upon conversion of the Securities on the Conversion Date without causing the Company to be (without prior stockholder approval) in violation of any applicable listing requirement of the American Stock Exchange. "Mortgage" means the Aircraft Second Mortgage and Security Agreement, dated as of April 21, 1998, between the Company and the Trustee in substantially the form attached to the Indenture as Exhibit B. "Mortgage Supplement" means (i) each Second Mortgage and Security Agreement Supplement executed and delivered on the Issue Date for an Aircraft, in substantially the form attached to the Mortgage as Exhibit A, which describes with particularity the Airframe and Engines associated with such Aircraft, (ii) each other Second Mortgage and Security Agreement Supplement from time to time executed and delivered, in substantially the form attached to the Mortgage as Exhibit A, which shall describe with particularity any Replacement Engine and (iii) any other supplement to the Mortgage from time to time executed and delivered in accordance with the provisions of the Mortgage or any other Operative Document. "9 1/4% Preferred Stock" means the 9 1/4% Cumulative Convertible Exchangeable Preferred Stock of the Company and dividends on such stock, and payments on account of which are to be deemed equivalent to distributions on such stock. "Notes Indenture" means the Indenture dated as of April 21, 1998 between the Company and First Security Bank, National Association, as trustee, pursuant to which the Company is issuing the 11 3/8% Secured Notes. "Notes Trustee" means First Security Bank, National Association, as trustee under the Notes Indenture, and its successors and assigns in such capacity. "Obligations" has the meaning provided in Section 2.1 of the Mortgage. "Offer to Purchase" means an offer to purchase all or a portion, as the case may be, of the Securities by the Company from the Holders commenced by the mailing (by first class mail, postage prepaid) by the Company (or if requested by the Company on at least five Business Days' prior notice to the Trustee and at the Company's expense, by the Trustee) of a notice to each Holder (and, if mailed by the Company, to the Trustee) at such Holder's address appearing in the Register, stating: (i) the covenant pursuant to which the offer is being made and that all Securities validly tendered will be accepted for payment, provided, that if Securities in excess of the aggregate principal amount that the Company has offered to purchase are tendered by the Holders, then Securities will be purchased from the tendering Holders pro rata, based on the aggregate principal amount of Securities tendered by each such Holder; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 8 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Security not tendered will continue to accrue interest (if any) pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price on the Payment Date, any Security accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Offer to Purchase will be required to surrender the Security, together with the form entitled "Option of the Holder to Elect Purchase" attached to or on the reverse side of the Security completed, to the Paying Agent at the address specified in the notice at any time beginning with the date of such notice but prior to the close of business on the Business Day immediately preceding the Payment Date (or, if such day is a Legal Holiday, on the next subsequent day which is not a Legal Holiday), and such Holder shall be entitled to receive from the Paying Agent a non-transferable receipt of deposit evidencing such deposit; (vi) that, unless the Company defaults in making the payment of the purchase price or shall otherwise, in its sole discretion, consent thereto, Holders will be entitled to withdraw their election only if the Trustee receives, not later than the close of business on the fifth Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only in part will be promptly issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall place such notice in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a financial newspaper of general circulation in New York City. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. On the Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to an Offer to Purchase, provided, that if Securities in excess of the aggregate principal amount that the Company has offered to purchase are tendered by the Holders, then Securities will be purchased from the tendering Holders pro rata, based on the aggregate principal amount of Securities tendered by each such Holder; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted together with an Officers' Certificate specifying the Securities or portions thereof accepted for payment by the Company. The Trustee shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate, and the Company shall promptly execute and mail (or cause to be mailed) to such Holders a new Security equal in principal amount to any unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof; provided further that if the Payment Date is between a regular Record Date and the next succeeding Interest Payment Date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest, if any, payable on such succeeding Interest Payment Date on the principal amount to be repurchased, and the interest, if any, on the principal amount of the Security being repurchased will be paid on such next succeeding Interest Payment Date to the registered holder of such Security on the immediately preceding Record Date. A Security repurchased on an Interest Payment Date need not be accompanied by any such 9 payment, and the interest on the principal amount of the Security being repurchased, if any, will be paid on such Interest Payment Date to the registered holder of such Security on the corresponding Record Date. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Securities pursuant to an Offer to Purchase. Both the notice of the Company and the notice of the Holder having been given as specified above, the Securities so to be repurchased shall, on the Payment Date become due and payable at the purchase price applicable thereto and from and after such date (unless the Company shall default in the payment of such purchase price) such Securities shall cease to bear interest. If any Security shall not be paid upon surrender thereof for repurchase, the principal shall, until paid, bear interest from the Payment Date at the rate and in accordance with the provisions set forth in such Security and the Indenture. Any Security which is to be submitted for repurchase only in part shall be delivered pursuant to the above provisions with (if the Company or Trustee so requires) due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing. "Officer" means the Chairman of the Board, the President, any Vice President of any grade, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by an Officer and by a Certifying Officer satisfying the requirements of Sections 11.4 and 11.5 of the Indenture. "Operative Documents" means the Indenture, the Mortgage and the Mortgage Supplements. "Opinion of Counsel" means a written opinion from the General Counsel of the Company, legal counsel to the Company or another legal counsel who is reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with Sections 11.4 and 11.5 of the Indenture. The counsel may be an employee of the Company. The acceptance by the Trustee (without written objection to the Company during the fifteen (15) Business Days following receipt) of, or its action on, an opinion of counsel not specifically referred to above shall be sufficient evidence that such counsel is acceptable to the Trustee. "Outstanding" or "outstanding" when used with respect to Securities or a Security, means all Securities theretofore authenticated and delivered under the Indenture, except: (a) Securities theretofore canceled by the Trustee, delivered to the Trustee for cancellation or converted in accordance with Article 13 of the Indenture; (b) Securities for which payment has been deposited with the Trustee or any Paying Agent in trust other than deposits pursuant to Section 8.1 of the Indenture; and 10 (c) Securities which have been paid, or for which other Securities shall have been authenticated and delivered in lieu thereof or in substitution therefor pursuant to the terms of Section 2.7 of the Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by holders in due course. A Security does not cease to be Outstanding because the Company or one of its Affiliates holds the Security; provided, however, that in determining whether the Holders of the requisite aggregate principal amount of Securities Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, Section 2.8 of the Indenture shall be applicable. "Owner Trustee" means First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association), not in its individual capacity (except as otherwise expressly set forth) but as trustee f/b/o Seven Leasing pursuant to the Trust Agreement. "Parts" means any and all appliances, parts, spare parts, instruments, appurtenances, accessories, furnishings, seats and other equipment of whatever nature (other than Engines or engines) which may from time to time be incorporated or installed in or attached to any Airframe or any Engine, or which have been removed therefrom but which remain subject to the Lien of the Mortgage in accordance with the terms thereof, exclusive of any items (i) permitted by the Mortgage to be leased by the Company in the ordinary course of business from third parties (and installed without discrimination with respect to other Boeing Model 767-231 ETOPS aircraft (or improved models) owned or operated by the Company) and (ii) not required in the navigation of the Aircraft in which they are installed. The terms "spare parts" and "appliances" (as used in this definition) shall include, but not be limited to, the definitions assigned to those terms by Section 40102 of Title 49 of the United States Code as amended from time to time or any recodification thereof or any regulation of the FAA. "Paying Agent" has the meaning provided in Section 2.3 of the Indenture, except that for the purposes of Article 8 of the Indenture and any Offer to Purchase, the Paying Agent shall not be the Company. "Payment Date" with respect to any Offer to Purchase, has the meaning specified in the definition herein of Offer to Purchase. "Payments" means such monies as the Company shall cause to be delivered to the Trustee or any Paying Agent for the purpose of paying principal, purchase price or redemption price of, or interest, if any, on the Securities on any Interest Payment Date, Payment Date, redemption date or acceleration; and "Pay" means paying such monies. "Permitted Liens" shall mean any of the following Liens: (a) Liens in favor of the Trustee arising by reason of the Mortgage or any other Operative Document and Liens in favor of the Notes Trustee arising by reason of the First Mortgage or any other Operative Document (as defined in the Notes Indenture); 11 (b) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being contested by the Company in good faith by appropriate proceedings and for which adequate reserves have been established if required in accordance with GAAP, and which Lien presents no material risk of sale, forfeiture or loss of any Collateral; (c) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the Company's ordinary course of business for sums not overdue or being contested by the Company in good faith by appropriate proceedings and for which adequate reserves have been established if required in accordance with GAAP, and which Lien presents no material risk of sale, forfeiture or loss of any Collateral; (d) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders and statutory obligations entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (e) judgment Liens (so long as the related judgments do not, individually or in the aggregate, constitute an Event of Default) in existence less than thirty (30) days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full by insurance; (f) Liens on an Aircraft in favor of a permitted lessee of such Aircraft which result solely from the lease (so long as it is a permitted lease under the Mortgage) on such Aircraft; and (g) Liens on the Aircraft which are "Permitted Liens" arising under, and defined by definitions substantially similar to above subparagraphs (b) and (c) in, the leases (if any) for the Aircraft; provided, however, that such leases are permitted under the Mortgage. "Person" means any individual, corporation, partnership, limited liability issuer, joint venture, association, joint-stock issuer, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Placement Agreement" means the Placement Agreement, dated April 9, 1998, between Lazard Freres & Co. LLC and the Company. "Preferred Stock" as applied to the Capital Stock of any Person means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. 12 "Property" means any interest in any kind of property or asset, whether real, personal or mixed, present or future, or tangible or intangible. "Record Date" means the fifteenth (15th) day preceding any Interest Payment Date, whether or not a Business Day. "Register" has the meaning provided in Section 2.3 of the Indenture. "Registrar" has the meaning provided in Section 2.3 of the Indenture. "Registration Default" means the occurrence of any of the following events: (a) the Company shall fail to file with the SEC the Shelf Registration Statement on or before the sixtieth (60th) day following the Issue Date, (b) the Shelf Effective Date shall not occur on or before the one hundred and fiftieth (150th) day following the Issue Date or (c) the Company shall fail to list, on or prior to the Shelf Effective Date, the Common Stock issuable on conversion of the Equity Notes on the American Stock Exchange or such other stock exchange or market as the Common Stock of the Company is then principally traded. "Registration Rights Agreement" means the Registration Rights Agreement, made and entered into as of April 21, 1998, by and among the Company, Lazard Freres & Co. LLC and the Owner Trustee, relating to the shares of Common Stock to be issuable upon conversion of the Securities. "Replacement Engine" means a Pratt & Whitney Model JT9D-7R4D aircraft engine (or engine of the same or another manufacturer of a comparable or an improved model and suitable for installation and use on an Airframe) (i) which has a value, utility and remaining useful life at least equal to the Engine which it is replacing, assuming such Engine was of the value and utility required by the terms of the Mortgage; provided that any such engine shall be of the same make and model as the other engine then installed on such Airframe, shall be an engine model then being utilized by the Company on other Boeing Model 767-231 ETOPS aircraft operated by the Company and, for so long as such engine has been operated by Company, shall have been maintained, serviced, repaired and overhauled in substantially the same manner as the Company maintains, services, repairs and overhauls similar engines utilized by the Company, and (ii) which shall have been made subject to the Lien of the Mortgage pursuant to Section 2 and Section 3.3 of the Mortgage. "Request" means a written request for the action therein specified signed on behalf of the Company by any Officer and delivered to the Trustee. Each Request shall be accompanied by an Officers' Certificate if and to the extent required by Section 11.4 of the Indenture. "Required Holders" means from time to time the Holders of the Applicable Percentage in principal amount of the Securities then Outstanding. "SEC" means the Securities and Exchange Commission and any government agency succeeding to its functions. 13 "Securities" means the "Securities" (as defined in the preamble to the Indenture and includes the Company's Mandatory Conversion Equity Notes due 1999), as amended or supplemented from time to time, that are issued under the Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Seven Leasing" means Seven Sixty Seven Leasing, Inc., a Delaware corporation. "Shelf Effective Date" means the date that the Shelf Registration Statement shall become effective as declared by the SEC. "Shelf Registration Statement" has the meaning provided in Section 3(a) of the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary which is a Significant Subsidiary within the meaning of Article I of Regulation S-X under the Exchange Act. "Special Record Date" has the meaning provided in Section 2.1 of the Indenture. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including membership or partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. "Taxes" means any and all fees (including, without limitation, license, documentation and registration fees), taxes (including, without limitation, income, gross receipts, sales, rental, use, turnover, value-added, property (tangible and intangible), excise and stamp taxes), levies, imposts, duties, recording charges or fees, charges, assessments or withholdings of any nature whatsoever, together with any and all assessments, penalties, additions to tax, fines or interest thereon. "Tender" means, with respect to any Security, the effective tender of such Security (in whole or in part) for repurchase or conversion in accordance with the provisions of the Indenture. 14 "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Total Loss" and "Total Loss Date" have the meanings provided in Section 1.1 of the Mortgage. "Total Loss OTP Amount" has the meaning provided in Section 4.12 of the Indenture. "Trading Day" means, with respect to any Common Stock, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not generally traded on the exchange or market in which such Common Stock is traded. "Trust Agreement" means the Trust Agreement, dated as of January 24, 1995, between Seven Leasing and First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association). "Trust Officer" means any officer in the corporate trust department of the Trustee, or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Trustee" means the party named as such in the Indenture until a successor replaces it in accordance with the provisions of the Indenture and thereafter means the successor. "TWA" means the Company. "U.S." or "United States" means the United States of America. "U.S. Government Obligations" means securities which are (i) direct obligations of the United State government or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States government, are full faith and credit obligations of the United States government and are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust Company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "Warranty Bill of Sale" means, for each Aircraft, the full warranty (as to title) bill of sale covering such Aircraft executed by the Owner Trustee in favor of the Company. 15 Section 2. Rules of Construction. Unless the context otherwise requires, the following rules of construction shall apply to all purposes of the Indenture and the other Operative Documents (including this appendix) and of such agreements as may incorporate this appendix by reference. (a) a term has the meaning assigned to it; (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms; (c) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) all terms used in Article 9 of the Uniform Commercial Code as in effect in the State of New York that are used but not defined herein shall have the meaning assigned to such terms therein; (e) references to a specific Person shall include the Person and (except as limited by any agreement by which such Person is bound) the successors and assigns of such Person; (f) references to "applicable laws" shall include statutes, ordinances, rules, regulations, court and administrative decisions and conditions, restrictions and limitations in licenses, permits, approvals and authorizations issued or granted by federal, state or local United States or foreign governmental bodies and agencies; (g) unless otherwise specified in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including", and the words "to" and "until" each mean "to but excluding"; (h) words in the singular include the plural, and words in the plural include the singular; (i) provisions apply to successive events and transactions; (j) "herein", "hereto" and other words of similar import in any agreement refer to that agreement as a whole and not to any particular Article, Section or other subsection of that agreement; (k) unless otherwise specified, all references in any Operative Document to Sections, Articles, Exhibits, Appendices and Schedules are to Sections of, Articles of, Exhibits to, Appendices to and Schedules to such Operative Document; (l) all accounting terms used herein and not expressly defined shall have the meanings given to them in accordance with GAAP; and (m) unless otherwise specified, references in this Definitions Appendix to any instrument, contract, agreement or other document shall be deemed to be references to 16 such instrument, agreement or other document as it may be amended, restated, supplemented or otherwise modified from time to time pursuant to and as permitted by the terms thereof, whether or not so stated in any particular definition. EXHIBIT A to INDENTURE [FORM OF FACE OF SECURITY] [Restricted Securities Legend] THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE RESTRICTION TERMINATION DATE WHICH IS THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THESE SECURITIES AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THESE SECURITIES (OR ANY PREDECESSOR OF THESE SECURITIES) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2) (3), OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE, OR TRANSFER (i) PURSUANT TO CLAUSES (C), (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED TO OR ON THE REVERSE SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. 2 IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. 3 No. CUSIP No. $ Mandatory Conversion Equity Note due 1999 TRANS WORLD AIRLINES, INC., a Delaware corporation promises to pay to __________, or registered assigns, the principal sum of __________ Dollars on April 15, 1999. Interest Payment Dates (if any): The 15th day of each month. Record Dates: The 1st day of each month. Additional provisions of this Security are set forth on the other side of this Security. Dated: TRANS WORLD AIRLINES, INC. By:__________________________ Name: Title: Attest: __________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION First Security Bank, National Association, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By:__________________________________ Authorized Signatory [FORM OF REVERSE SIDE OF SECURITY] Mandatory Conversion Equity Note due 1999 This Security is one of a duly authorized issue of securities of the Company designated as its Mandatory Conversion Equity Notes due 1999 (hereinafter called the "Securities"), limited in aggregate principal amount Outstanding to $31,800,000, issued or to be issued pursuant to an Indenture, dated as of April 21, 1998 (hereinafter called the "Indenture") between the Company and First Security Bank, National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture). 1. Interest. This Security shall not bear interest; provided, however, that upon a default in payment of principal on the Securities (whether on acceleration, at maturity, upon tender for repurchase or otherwise) or a Registration Default (as for so long as such default or Registration Default, as the case may be, shall continue uncured and unwaived), this Security shall bear interest at the rate of Twelve percent (12%) per annum, from the date of such default or Registration Default, as the case may be, payable (a) in the case of a Registration Default, monthly in arrears on the 15th day of each month commencing the 15th day of the month next succeeding the month in which such Registration Default occurred, and (b) in the case of a default in payment of principal, payable on demand, in each case until the principal thereof is paid or made available for payment. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company and each Holder of a Security, by the acceptance hereof, agree that in the event a Registration Default shall occur and be continuing and the Company shall have failed to use its reasonable best efforts to avoid or cure such Registration Default, Holders shall be entitled to make a claim for damages incurred as a result of such Registration Default, which damages shall not necessarily be limited to the increase in the interest rate hereunder to 12% per annum; provided, however, that any amount of interest paid pursuant to this provision shall be credited against any amount of damages to be paid by the Company in connection with such claim. 2. Method of Payment. Subject to the provisions of paragraph 8 hereof, the Company will pay interest, if any, on the Securities (except defaulted interest and interest on defaulted principal) to the persons who are registered Holders of Securities at the close of business on the Record Date set forth on the face of this Security next preceding the applicable Interest Payment Date. Defaulted interest and interest on defaulted principal will be paid by the Company in accordance with the applicable provisions of the Indenture. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest, if any, at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York and at any other office or agency maintained by the Company for such purpose in money of the United States that at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest, if any, on the Securities may be by check payable in such money and mailed to a Holder's registered address; provided further, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by a 5 Holder with a bank in New York City if such Holder owns at least $250,000 in aggregate principal amount of certificated Securities and elects payment by wire transfer by giving written notice to the Company and the Trustee to such effect designating such account no later than 10 days immediately preceding the relevant due date for payment (or such other date as the Company and the Trustee may accept in their discretion). If a payment date is a legal holiday at a place of payment, payment may be made at that place on the next succeeding Business Day, and no interest shall accrue for the intervening period. 3. Registrar, Paying Agent and Tender Agent. Initially, the Trustee will act as Registrar and Paying Agent. The Company may change any Paying Agent or Registrar or co-registrar without prior notice to any Securityholder. The Company may act in any such capacity, except in certain circumstances. 4. Indenture. The Company issued the Securities under the Indenture. The terms of the Securities include those stated in the Indenture and those made applicable to the Indenture by the TIA. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and such Act for a statement of such terms. Until converted to Common Stock as described in paragraph 8 hereof and in the Indenture and subject to paragraphs 6 and 9 hereof, the Securities are senior secured obligations of the Company limited to $31,800,000 aggregate principal amount, except as otherwise provided in the Indenture. Terms used in this Security and not defined in this Security shall have the meaning set forth in Section 1 of the Definitions Appendix attached as Appendix I to the Indenture, which shall be a part of this Security as if fully set forth in this place. The rules of construction for this Security are set forth in Section 2 of the Definitions Appendix. 5. Redemption. This Security is not subject to redemption in whole or in part at any time. 6. Security. The Securities are secured by second priority Liens on certain Properties of the Company pursuant to the Mortgage and the other Operative Documents described in the Indenture and such Liens are subject to release as provided herein and in the Mortgage and the other Operative Documents. Enforcement of the Lien of the Mortgage is limited to an aggregate amount of Obligations not exceeding $24,300,000 and is further restricted due to its second priority status, as more fully set forth in the Mortgage, and each Holder, by accepting a Security, agrees to all the provisions thereof. 7. Offers to Purchase. In the event that there shall occur a Change in Control, the Company shall make an Offer to Purchase all of the Outstanding Securities, at a purchase price equal to 101% of the aggregate principal amount of the Securities Outstanding, plus accrued and unpaid interest, if any, to and including the repurchase date. The right to require such repurchase of Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article 8 of the Indenture. The Company shall commence such Offer to Purchase within thirty (30) days after the occurrence of a Change in Control. 6 In the event that there shall occur a Total Loss with respect to any Aircraft, the Company shall (unless the Company is not required to make such Offer to Purchase pursuant to the provisions of Section 4.12 of the Indenture) make an Offer to Purchase an aggregate principal amount of Outstanding Securities (the "Total Loss OTP Amount") equal to (for each Aircraft subject to such Total Loss) (a) the aggregate principal amount of the Securities Outstanding on the date such Offer to Purchase (if any) is required to be commenced under the Indenture, minus (b) the product of (i) $10,600,000 multiplied by (ii) the number of Aircraft remaining that were not subject to such Total Loss, at a purchase price equal to 100% of the aggregate principal amount of Securities to be purchased, plus accrued and unpaid interest, if any, on such Securities, to and including the Payment Date, and the Aircraft that was the subject of such Total Loss shall be released from the Lien of the Operative Documents in accordance with the provisions thereof. The Company shall commence such Offer to Purchase (if any) within thirty (30) days after the Total Loss Date with respect to any such Total Loss. The Company may receive credit against any or all of the Total Loss OTP Amount for open market purchases of Securities as provided in the Indenture. "Offer to Purchase" means an offer to purchase all, or a portion, as the case may be, of the Securities by the Company from the Holders commenced by the mailing (by first class mail, postage prepaid) by the Company (or, if requested by the Company on at least five Business Days' prior notice to the Trustee and at the Company's expense, by the Trustee) of a notice to each Holder (and, if mailed by the Company, to the Trustee) at such Holder's address appearing in the Register, stating: (i) the covenant pursuant to which the offer is being made and that all Securities validly tendered will be accepted for payment, provided, that if Securities in excess of the aggregate principal amount that the Company has offered to purchase are tendered by the Holders, then Securities will be purchased from the tendering Holders pro rata, based on the aggregate principal amount of Securities tendered by each such Holder; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Security not tendered will continue to accrue interest (if any) pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price on the Payment Date, any Security accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Offer to Purchase will be required to surrender the Security, together with the form entitled "Option of the Holder to Elect Purchase" attached to or on the reverse side of the Security completed, to the Paying Agent at the address specified in the notice at any time beginning with the date of such notice but prior to the close of business on the Business Day immediately preceding the Payment Date (or, if such day is a Legal Holiday, on the next subsequent day which is not a Legal Holiday), and such Holder shall be entitled to receive from the Paying Agent a non-transferable receipt of deposit evidencing such deposit; (vi) that, unless the Company defaults in making the payment of the purchase price or shall otherwise, in its sole discretion, consent thereto, Holders will be entitled to withdraw their election only if the Trustee receives, not later than the close of business on the fifth Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only 7 in part will be promptly issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall place such notice in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a financial newspaper of general circulation in New York City. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. On the Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to an Offer to Purchase, provided, that if Securities in excess of the aggregate principal amount that the Company has offered to purchase are tendered by the Holders, then Securities will be purchased from the tendering Holders pro rata, based on the aggregate principal amount of Securities tendered by each such Holder; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted together with an Officers' Certificate specifying the Securities or portions thereof accepted for payment by the Company. The Trustee shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate, and the Company shall promptly execute and mail (or cause to be mailed) to such Holders a new Security equal in principal amount to any unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof; provided further that if the Payment Date is between a regular Record Date and the next succeeding Interest Payment Date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest, if any, payable on such succeeding Interest Payment Date on the principal amount to be repurchased, and the interest, if any, on the principal amount of the Security being repurchased, will be paid on such next succeeding Interest Payment Date to the registered holder of such Security on the immediately preceding Record Date. A Security repurchased on an Interest Payment Date need not be accompanied by any such payment, and the interest, if any, on the principal amount of the Security being repurchased, will be paid on such Interest Payment Date to the registered holder of such Security on the corresponding Record Date. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Securities pursuant to an Offer to Purchase. Both the notice of the Company and the notice of the Holder having been given as specified above, the Securities so to be repurchased shall, on the Payment Date become due and payable at the purchase price applicable thereto and from and after such date (unless the Company shall default in the payment of such purchase price) such Securities shall cease to bear interest. If any Security shall not be paid upon surrender thereof for repurchase, the principal shall, until paid, bear interest from the Payment Date at the rate and in accordance with the provisions set forth in this Security and the Indenture. Any Security which is to be submitted for repurchase only in part shall be delivered pursuant to the above provisions with (if the Company or Trustee so requires) due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing. 8 8. Mandatory Conversion. Subject to the provisions of Article 13 of the Indenture, on the Conversion Date, so long as no Default or Event of Default shall then exist, this Security (if then Outstanding) shall be automatically converted into that number of fully paid and non-assessable shares of Common Stock equal to the sum of (i) the then outstanding principal amount of this Security, plus (ii) accrued and unpaid interest, if any, on this Security to the Conversion Date, divided by the lesser of (A) 0.95 multiplied by the Average Market Price per share of Common Stock or (B) $107/8 (such lesser amount being hereinafter referred to as the "Conversion Price"). Any such conversion is subject to the procedures, restrictions and adjustments to the Conversion Price as set forth in Article 13 of the Indenture, and on or after the effectiveness of the conversion, the Liens on the Collateral are subject to release as provided in the Indenture. 9. Possible Subordination. If, on the Business Day immediately succeeding the Issue Date, the Holders (other than Lazard Freres & Co. LLC, as Holder of the Compensation Notes, as defined in the Placement Agreement) do not include at least one of the Owner Trustee, Seven Sixty Seven Leasing, Inc. or any member of the Bank Group, then this Security shall automatically, without any further act or deed, become an unsecured obligation of the Company and shall rank junior in priority to all secured indebtedness of the Company and pari passu with all unsecured indebtedness of the Company, in each case whether such indebtedness is existing on the Issue Date or thereafter incurred, and the Trustee shall be authorized to enter into or execute and deliver such agreements, instruments or other documents as may be reasonably requested by (and at the cost and expense of) the Company to evidence or confirm the release of Liens on the Collateral or such subordination of the Securities. 10. Denominations, Transfer, Exchange. The Securities shall be issuable only in registered form without coupons and in denominations of $1,000 and integral multiples thereof. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes required by law or permitted by the Indenture. 11. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name the Security is registered with the Registrar as the owner for all purposes. 12. Discharge. Subject to certain conditions set forth in Article 8 of the Indenture, the Company may terminate its obligations under the Securities and the Indenture, except those obligations referred to in Section 8.1(b) of the Indenture, if the Company deposits with the Trustee or a Paying Agent cash or U.S. Government Obligations for the payment of principal of, interest, if any, on the Securities to Stated Maturity. 13. Amendments and Waivers. Subject to certain exceptions, the Indenture, the Securities, or the other Operative Documents may be amended with the consent of the Holders of at least a majority in principal amount of the then Outstanding Securities, and any existing Default, Event of Default or acceleration may be waived with the consent of the Holders of a 9 majority in principal amount of the then Securities Outstanding. Without the consent of any Holder, the Indenture, the Securities or any of the Operative Documents may be amended to, among other things, cure any ambiguity, defect or inconsistency. 14. Defaults and Remedies. Events of Default under the Indenture include the following: default for the period specified in the Indenture in payment of interest, if any, on the Securities; default in payment of the principal amount of any Securities when the same becomes due and payable (at maturity, upon acceleration, redemption, tender for repurchase or otherwise); failure by the Company to comply with specific covenants of the Indenture or of the Mortgage within the time periods provided therein, discontinuing substantially all of its commercial airlines operations, or failure to pay over amounts required under the Mortgage; failure to comply in any material respect with any of its other agreements contained in the Indenture, the other Operative Documents or the Securities; a representation or warranty of the Company in the Indenture, the other Operative Documents or any Mortgage Supplement or in any certificate of the Company delivered under any such document proves to be untrue in any material respect when made; the occurrence of certain defaults under any Indebtedness of the Company or any of its Significant Subsidiaries in excess of $10,000,000 in principal amount; the rendering or domestication of final judgments by a court of competent jurisdiction against the Company or any of its Significant Subsidiaries in an aggregate amount of $10,000,000 or more which remain undischarged for a period (during which execution is not stayed) of sixty (60) days after the date on which the right to appeal has expired; cessation of effectiveness of Operative Documents without the consent of the Trustee; and certain events of bankruptcy, insolvency or reorganization. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of twenty-five percent (25%) in principal amount of the Securities Outstanding may declare all the Securities to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all Securities Outstanding become due and payable immediately without further action or notice. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture and the Mortgage. Enforcement of the Lien of the Mortgage is limited to an aggregate amount of Obligations not exceeding $24,300,000 and is further restricted due to its second priority status, as more fully set forth in the Mortgage. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the then Outstanding Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company must furnish compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety to the more complete description thereof contained in the Indenture and the other Operative Documents. 15. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or Affiliates of the Company with the same rights it would have if it were not Trustee. 10 16. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 18. Unclaimed Money. If money for the payment of principal of, or interest, if any, on, or the purchase price for the Securities remains unclaimed for two (2) years, the Trustee or Paying Agent will pay the money back to the Company at its request. After such payment, Holders entitled to any portion of such money must look to the Company for payment unless an applicable law designates another person. 19. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 20. CUSIP Numbers. The Company in issuing this Security may use a "CUSIP" number (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. 21. Holders' Compliance with Registration Rights Agreement. Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 22. Governing Law. THIS SECURITY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. The Company will furnish to any Holder of this Security, upon written request and without charge, a copy of the Indenture. Request may be made to: Trans World Airlines, Inc., One City Centre, 515 N. 6th Street, St. Louis, Missouri 63101, Attention: Corporate Secretary. 11 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to: (Insert Assignee's Soc. Sec. or Tax I.D. No.) (Print or type assignee's name, address and zip code) and irrevocably appoint ______________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date:______________________________ Signature(s):__________________________ __________________________ _________________________________________ (Sign exactly as your name(s) appear(s) on the other side of this Security) Signature(s) guaranteed by: _________________________________________ (All signatures must be guaranteed by a member of a national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company located in the United States) 12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security repurchased by the Company pursuant to any Offer to Purchase under the Indenture, check the box: |_| If you want to elect to have only part of this Security repurchased by the Company pursuant to any Offer to Purchase under the Indenture, state the amount to be repurchased: $ _________________________________ (in an integral multiple of $1,000) Date:______________________________ Signature(s):__________________________ __________________________ _________________________________________ (Sign exactly as your name(s) appear(s) on the other side of this Security) Signature(s) guaranteed by: _________________________________________ (All signatures must be guaranteed by a member of a national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company located in the United States) 13 CERTIFICATE OF TRANSFER Re: Mandatory Conversion Equity Notes due 1999 (the "Notes") of Trans World Airlines, Inc. (the "Company") This Certificate relates to Notes held in definitive form by ___________ (the "Transferor"). The Transferor has requested the Registrar by written order to exchange or register the transfer of a Note or Notes. In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above captioned Notes and that the transfer of this Note does not require registration under the Securities Act of 1933 (the "Securities Act"), because:* |_| Such Note is being transferred to the Company. |_| Such Note is being transferred pursuant to an effective Registration Statement under the Securities Act. |_| Such Note is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A. |_| Such Note is being transferred pursuant to an offshore transaction in accordance with Rule 904 under the Securities Act. |_| Such Note is being transferred to an Institutional "Accredited Investor" within the meaning of Subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act. |_| Such Note is being transferred in a transaction meeting the requirements of Rule 144 under the Securities Act. The Registrar and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. _________________________________ [INSERT NAME OF TRANSFEROR] By:______________________________ Date:______________________________ ___________________________________ * Please check applicable box. EX-4.34 3 ================================================================= TRANS WORLD AIRLINES, INC. and FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee INDENTURE Dated as of June 16, 1998 $14,500,000 10 1/4% Senior Secured Notes due 2003 TABLE OF CONTENTS Page ---- ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Definitions............................... 1 Section 1.2 Rules of Construction..................... 1 ARTICLE 2. THE SECURITIES Section 2.1 Designation, Form and Dating.............. 1 Section 2.2 Execution, Amount, Authentication and Delivery.............................. 2 Section 2.3 Registrar and Paying Agent................ 4 Section 2.4 Paying Agent to Hold Payments In Trust.... 4 Section 2.5 Securityholder Lists...................... 6 Section 2.6 Transfer and Exchange..................... 6 Section 2.7 Mutilated, Defaced, Destroyed, Lost and Stolen Securities..................... 7 Section 2.8 Treasury Securities....................... 8 Section 2.9 Temporary Securities...................... 9 Section 2.10 Cancellation.............................. 9 Section 2.11 Defaulted Interest; Interest on Defaulted Principal....................... 9 Section 2.12 CUSIP Numbers............................. 10 ARTICLE 3. REDEMPTIONS Section 3.1 No Optional Redemption.................... 10 Section 3.2 Mandatory Redemption...................... 10 Section 3.3 Selection of Securities to be Redeemed.... 12 Section 3.4 Notice of Redemption...................... 12 Section 3.5 Effect of Notice of Redemption............ 12 Section 3.6 Deposit of Redemption Price............... 13 Section 3.7 Securities Redeemed in Part............... 13 -i- TABLE OF CONTENTS (Continued) Page ---- ARTICLE 4. COVENANTS, REPRESENTATIONS AND WARRANTIES Section 4.1 Payment of Securities..................... 13 Section 4.2 Maintenance of Office or Agency........... 14 Section 4.3 Limitation on Dividends and Acquisition of Common Stock........................... 14 Section 4.4 Corporate Existence....................... 15 Section 4.5 Payment of Taxes and Other Claims......... 15 Section 4.6 Notices................................... 16 Section 4.7 Maintenance of Properties and Insurance... 16 Section 4.8 Default Notices and Compliance Certificates.............................. 17 Section 4.9 SEC Reports............................... 17 Section 4.10 Waiver of Stay, Extension or Usury Laws................................ 18 Section 4.11 Amendment to Certain Agreements........... 19 Section 4.12 Title to Collateral and Limitation on Liens; Sale of Aircraft; Total Loss With Respect to Aircraft............. 19 Section 4.13 Books, Records, Access; Confidentiality... 21 Section 4.14 Security Interests........................ 22 Section 4.15 Repurchase of Securities Upon a Change in Control......................... 22 Section 4.16 Restrictions on Becoming an Investment Company................................... 22 Section 4.17 Listing................................... 22 ARTICLE 5. SUCCESSOR CORPORATION Section 5.1 Covenant Not to Consolidate, Merge, Convey or Transfer Except Under Certain Conditions........................ 23 Section 5.2 Successor Person Substituted.............. 24 Section 5.3 Limitation on Lease of Properties......... 24 -ii- TABLE OF CONTENTS (Continued) Page ---- ARTICLE 6. DEFAULT AND REMEDIES Section 6.1 Events of Default......................... 24 Section 6.2 Acceleration.............................. 26 Section 6.3 Other Remedies............................ 27 Section 6.4 Waiver of Past Defaults................... 27 Section 6.5 Control by Majority....................... 28 Section 6.6 Limitation on Suits....................... 28 Section 6.7 Rights of Holders to Receive Payment...... 28 Section 6.8 Collection Suit by Trustee................ 29 Section 6.9 Trustee May File Proofs of Claim.......... 29 Section 6.10 Application of Proceeds................... 29 Section 6.11 Undertaking for Costs..................... 30 Section 6.12 Restoration of Rights on Abandonment of Proceedings............................ 31 Section 6.13 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default................................ 31 ARTICLE 7. TRUSTEE Section 7.1 Duties of Trustee......................... 32 Section 7.2 Rights of Trustee......................... 33 Section 7.3 Individual Rights of Trustee.............. 33 Section 7.4 Trustee's Disclaimer...................... 33 Section 7.5 Notice of Defaults........................ 33 Section 7.6 Reports by Trustee to Holders............. 34 Section 7.7 Compensation and Indemnity................ 34 Section 7.8 Replacement of Trustee.................... 35 Section 7.9 Successor Trustee by Merger, etc.......... 36 Section 7.10 Eligibility; Disqualification............. 36 Section 7.11 Preferential Collection of Claims Against Company........................... 36 -iii- TABLE OF CONTENTS (Continued) Page ---- ARTICLE 8. DISCHARGE OF INDENTURE Section 8.1 Termination of Company's Obligations...... 36 Section 8.2 Application of Trust Money................ 38 Section 8.3 Repayment to Company...................... 38 Section 8.4 Reinstatement............................. 38 ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1 Without Consent of Holders................ 39 Section 9.2 With Consent of Holders................... 39 Section 9.3 Compliance with Trust Indenture Act....... 40 Section 9.4 Revocation and Effect of Consents......... 41 Section 9.5 Notation on or Exchange of Securities..... 41 Section 9.6 Trustee to Sign Amendments, etc........... 41 Section 9.7 Effect of Supplement and/or Amendment..... 41 ARTICLE 10. SECURITY Section 10.1 Other Operative Documents................. 42 Section 10.2 Opinions, Certificates and Appraisals..... 42 Section 10.3 Authorization of Actions to be Taken by the Trustee Under the Operative Documents....................... 43 Section 10.4 Payment of Expenses....................... 43 Section 10.5 Authorization of Receipt of Funds by the Trustee Under the Operative Documents................................. 44 ARTICLE 11. MISCELLANEOUS Section 11.1 Conflict with Trust Indenture Act of 1939................................... 44 Section 11.2 Notices; Waivers.......................... 44 -iv- TABLE OF CONTENTS (Continued) Page ---- Section 11.3 Communications by Holders with Other Holders................................... 45 Section 11.4 Certificate and Opinion as to Conditions Precedent...................... 45 Section 11.5 Statements Required in Certificate or Opinion................................... 45 Section 11.6 Rules by Trustee, Paying Agent, Registrar................................. 47 Section 11.7 Holidays.................................. 47 Section 11.8 Governing Law; Waiver of Jury Trial....... 47 Section 11.9 No Adverse Interpretation of Other Agreements................................ 47 Section 11.10 No Recourse Against Others................ 47 Section 11.11 Benefits of Indenture and the Securities Restricted..................... 47 Section 11.12 Successors and Assigns.................... 48 Section 11.13 Counterpart Originals..................... 48 Section 11.14 Severability.............................. 48 Section 11.15 Effect of Headings........................ 48 ARTICLE 12. RELEASE OF COLLATERAL Section 12.1 Release of Collateral..................... 48 APPENDIX I Definitions Appendix APPENDIX II Rule 144A/Regulation S Appendix (including forms of 10 1/4% Senior Secured Note as Exhibits 1 and 2 thereto) EXHIBIT A Form of Aircraft Mortgage and Security Agreement -v- INDENTURE dated as of June 16, 1998 between TRANS WORLD AIRLINES, INC., a Delaware corporation (the "Company"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 10 1/4% Senior Secured Notes due 2003 (the "Initial Securities") and, if and when issued pursuant to a registered exchange for Initial Securities, the Company's 10 1/4% Senior Secured Notes due 2003 (the "Exchange Securities") and, if and when issued pursuant to a private exchange for Initial Securities, the Company's 10 1/4% Senior Secured Notes due 2003 (the "Private Exchange Securities" and, together with the Exchange Securities and the Initial Securities, the "Securities"). ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall be a part of this Indenture as if fully set forth in this place. Section 1.2 Rules of Construction. The rules of construction for this Indenture are set forth in Section 2 of the Definitions Appendix. ARTICLE 2. THE SECURITIES Section 2.1 Designation, Form and Dating. Provisions relating to the Initial Securities, the Private Exchange Securities and the Exchange Securities are set forth in the Rule 144A/Regulation S Appendix attached hereto as Appendix II (the "Rule 144A Appendix") which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities and the Trustee's certificate of authentication with respect to each thereof shall be substantially in the form of Exhibit 1 to the Rule 144A Appendix (with such appropriate insertions, omissions, substitutions and other variations as are required by this Indenture) and are hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities, and the Trustee's certificates of authentication shall be substantially in the form of Exhibit 2 to the Rule 144A Appendix (with such appropriate insertions, omissions, substitutions and other variations as are required by this Indenture) and are hereby incorporated in and expressly made a part of this Indenture. The 2 Securities may have imprinted or otherwise reproduced thereon such notations, legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Securities are admitted to trading, or to conform to general usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication and shall bear interest from the applicable date set forth herein or in the form of Security and shall be payable, unless previously Tendered, on the dates as specified herein or in the form of the Security. The Person in whose name any Security is registered at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest and Special Interest, if any, payable on such Interest Payment Date to the extent provided by such Security, except if and to the extent the Company shall default in the payment of the interest or Special Interest due on such Interest Payment Date, in which case defaulted interest or Special Interest, as the case may be, shall be paid to the Person in whose name the Outstanding Security is registered at the close of business on the subsequent record date (which shall be not less than five (5) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Company to the Holders of Securities not less than fifteen (15) days preceding such subsequent record date (a "Special Record Date"). Section 2.2 Execution, Amount, Authentication and Delivery. The Securities shall be signed for the Company by the manual or facsimile signatures of an Officer and a Certifying Officer. The Company's seal shall be affixed to or reproduced on the Securities. Typographical or other errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security which has been duly authenticated and delivered by the Trustee. If an officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $14,500,000 except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Sections 2.6, 2.7, 2.9, 4.15 or 9.5, or in conjunction with a Registered Exchange Offer or any Private Exchange (as such terms are defined in the Rule 144A Appendix). The Securities shall be known and designated as the "10 1/4% Senior Secured Notes due 2003" of the Company. Their Stated Maturity shall be June 15, 2003, and, subject to the increases in the rate of interest set forth in Section 4.12 hereof and in the Securities, they shall bear interest at the rate of 10 1/4% per annum, from June 16, 1998 or from the most recent Interest Payment Date to which interest and Special Interest, if any, have been paid or duly provided for, 3 as the case may be, payable semi-annually in arrears on June 15 and December 15, commencing December 15, 1998, until the principal thereof is paid or made available for payment. Subject to the limits set forth in the second preceding paragraph of this Indenture, the Trustee shall authenticate Securities for original issue upon written order of the Company signed by an Officer and by a Certifying Officer of the Company. The order shall specify the amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated, shall provide instructions with respect to the delivery thereof and shall be accompanied by the documents specified in Sections 10.2 and 11.4 and by the following (provided, however, that the Trustee shall be authorized conclusively to rely upon the documents specified in Section 11.4): (a) the grant to the Trustee, by assignment, pledge, or otherwise pursuant to the Mortgage, of a security interest in the Collateral; (b) Officers' Certificates or other satisfactory confirmation (i) with respect to the Mortgage and the Collateral, that the Company is the legal and beneficial owner of the Collateral, free and clear of all Liens except Permitted Liens; and (ii) describing the actions taken to make, obtain and accomplish all necessary filings, confirmations and identifications referred to in Section 4.14 hereof; (c) compliance with all applicable provisions of Sections 4.12 and 4.14 hereof; (d) an Officers' Certificate confirming all representations and warranties of the Company contained in this Indenture and the other Operative Documents as of the date of authentication; (e) an Officers' Certificate containing representations and warranties of the type usual and customary to the issuance of the Securities such as, but not limited to, representations regarding due authorization of this Indenture; due authorization of the issuance and delivery of the Securities; that the Securities, when so issued and delivered against delivery of the Aircraft under the Aircraft Sale Agreement will be duly and validly issued, and constitute valid and binding obligations of the Company, enforceable in accordance with their terms; that no consent, approval or authorization of, or designation, declaration, or filing with, any governmental authority or any other person or entity is required of the Company in connection with the execution and delivery of this Indenture or the issuance and delivery of the Securities; and that the Securities have been registered under the Securities Act or that registration is not required in connection with the offer, issuance and delivery of the Securities; (f) an Opinion of Counsel to the effect that the Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Indenture and the other Operative Documents; that the Securities have been duly authorized and validly issued; and that the offer and issuance of the Securities have been registered or will be exempt from the registration requirements under the Securities Act; and 4 (g) execution and delivery by the Company of the Securities and by all parties thereto of this Indenture and all other Operative Documents; provided, however, that any Securities in fact authenticated by the Trustee upon written order of the Company as set forth in the first sentence of this paragraph shall be deemed to have been duly authenticated hereunder and to constitute an enforceable contractual obligation of the Company and shall be entitled to all the benefits of this Indenture and the other Operative Documents equally and proportionately with any and all other Securities duly authenticated and delivered hereunder, in each case, notwithstanding any failure of the Company to deliver any of the documents specified in Sections 10.2 and 11.4 or above in this sentence. The Securities shall be issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof, except that the Global Securities may be issued in a different denomination. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company, any guarantor or any Affiliate of the Company. Section 2.3 Registrar and Paying Agent. The Company shall maintain an office or agency where Securities eligible for transfer or exchange may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Securities may be presented for payment or repurchase ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange ("Register"). Such Register shall be in written form in the English language or any other form capable of being converted into such form within a reasonable time. At all reasonable times such Register shall be open for inspection by the Trustee. The Company may have one or more co-Registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may enter into an appropriate agency agreement with any Agent not a party to this Indenture. Such agency agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar and Paying Agent. Section 2.4 Paying Agent to Hold Payments In Trust. Each Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all Payments held by the Paying Agent for the payment of principal of, repurchase or redemption price, if any, of, interest on, and Special Interest, if any, with respect to, the Securities (whether 5 such Payment has been paid to it by the Company or any other obligor on the Securities), and shall promptly notify the Trustee of any default by the Company (or any other obligor on the Securities) in making any such Payment. The Company at any time may require a Paying Agent to Pay all Payments held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to Pay all Payments held by it to the Trustee and to account for any Payments distributed. Upon doing so the Paying Agent shall have no further liability for the Payments. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of, repurchase or redemption price, if any, of, interest on, or Special Interest, if any, with respect to, any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto Payments sufficient to pay the principal, repurchase or redemption price, if any, interest or Special Interest, if any, so becoming due until such Payments shall be Paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of such action or any failure so to act. The Company will, on or before each due date for the payment of the principal of, repurchase or redemption price, if any, of, interest on, or Special Interest, if any, with respect to, any of the Securities, deposit with a Paying Agent Payments (in same day funds) sufficient to pay the principal, repurchase or redemption price, if any, interest or Special Interest, if any, so becoming due, such Payments to be held in trust for the benefit of the Persons entitled to such principal, repurchase or redemption price, if any, interest, or Special Interest, if any, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all Payments received by it as such agent for the payment of the principal of, repurchase or redemption price, if any, of, interest on, or Special Interest, if any, with respect to, the Securities (whether such Payments have been paid to it by the Company or by any other obligor on the Securities) in trust for the benefit of the Persons entitled thereto until such Payments shall be paid to such Persons or otherwise disposed of as herein provided; (b) promptly give the Trustee notice of any failure by the Company (or any other obligor upon the Securities) to make any payment of the principal of, repurchase or redemption price, if any, of, interest on, or Special Interest, if any, with respect to, the Securities when the same shall be due and payable; and (c) at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all Payments so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, Pay, or direct any Paying Agent to Pay, to 6 the Trustee all Payments held in trust by the Company or such Paying Agent, such Payments to be held by the Trustee upon the same trusts as those upon which such Payments were held by the Company or such Paying Agent; and, upon such Payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such Payments held by it as Paying Agent. Any Payments deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, redemption or repurchase price, if any, of, interest on or Special Interest, if any, with respect to, any Security and unclaimed for two (2) years after such principal, redemption, repurchase price, interest or Special Interest has become due and payable shall be paid to the Company on its request, or (if then held by the Company) shall be discharged from such trust, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof and all liability of the Trustee or such Paying Agent with regard to such Payments, and all liability of the Company as trustee thereof, shall thereupon cease. Section 2.5 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. Section 2.6 Transfer and Exchange. When Securities are presented to the Registrar or a co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's request. All Securities presented for registration of transfer, exchange, redemption or payment shall (if so required by the Company or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee, duly executed by the Holder or his attorney duly authorized in writing. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any registration of transfer or exchange, but not for any exchange pursuant to Sections 2.9, 3.7, 4.15 or 9.5 or any other Tender not involving any transfer of Securities (other than to the Company). No service charge shall be made for any such transaction. In the case of any Security which is Tendered in part only, upon such Tender the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder thereof, without service charge, a new Security or Securities of any authorized denomination as requested by such Holder in aggregate principal amount equal to the non- 7 Tendered portion of the principal of such Security. No Securities will be issued in denominations of less than $1,000 upon tender of the Securities. All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt of the same series and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. Section 2.7 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In case any temporary or definitive Security shall become mutilated, defaced or be apparently destroyed, lost or stolen, subject to compliance with the following sentence and in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and the Trustee shall authenticate and deliver, a new Security, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and substitution for the Security so apparently destroyed, lost or stolen. In every case the applicant for a substitute Security shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as may be reasonably required by them to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Upon the issuance of any substitute Security pursuant to the preceding paragraph, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Security which has matured or is about to mature, or has been tendered for repurchase pursuant to any of the provisions hereof (as evidenced by an irrevocable written notice from the Holder to the Company and the Trustee), shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Company may, instead of issuing a substitute Security, pay or authorize the payment of such Security (without surrender of such Security except in the case of a mutilated or defaced Security), as applicable, if the applicant for such payment shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as any of them may reasonably require to save each of them harmless from all risks, however remote, and, in every case of apparent destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee and any agent of the Company or the Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Every substitute Security issued pursuant to the provisions of this Section by virtue of the fact that any Security is apparently destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the apparently destroyed, lost or stolen Security shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall also be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities duly authenticated and delivered hereunder. Every substitute Security issued pursuant to the provisions of this Section by virtue of the fact that any Security is mutilated or defaced shall constitute an additional contractual obligation of 8 the Company and shall be entitled to all the benefits of (but shall also be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities of the same series duly authenticated and delivered hereunder. All Securities shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated or defaced or apparently destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.8 Treasury Securities. In determining whether the Holders of the required principal amount of Securities have given or concurred in any amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document, Securities owned by the Company (including Securities Tendered), an Affiliate of the Company, any other obligor upon the Securities, any Affiliate of such obligor upon the Securities or any Person who has given or concurred in any such amendment, request, demand, authorization, direction, notice, consent or waiver under the direction of, by agreement with, or as a condition or in consideration of any exchange offer by or transfer of such Person's Securities to the Company, an Affiliate of the Company, any other obligor, any Affiliate of such obligor or any such Person, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such amendment, request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee that neither the Company nor any such other obligor, Affiliate or Person is affiliated with the pledgee or any Affiliate of the pledgee and that the pledgee has the present right (subject to no contrary obligation or understanding) so to act with respect to the Securities on the basis of its best interests as a Holder independently of any direction by or interest of the Company. In case of a dispute as to such right, the Trustee in good faith shall be entitled to rely upon the advice of counsel, including counsel for the Company. Upon request of the Trustee, the Company shall promptly furnish to the Trustee a certificate of a Certifying Officer listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of any of the above-described Persons; and subject to Sections 7.1 and 7.2 herein, the Trustee shall be entitled to accept such certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. The Company shall not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any additional security, to any Holder of Securities as consideration for or as an inducement to giving or concurring in any amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document unless such remuneration is concurrently paid, or such security is concurrently granted, as the case may be, on the same terms ratably to the Holders of all Securities then Outstanding (regardless of whether any such Holder has given or concurred in such amendment, request, demand, 9 authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document). For purposes of this Section and without limiting the generality of the foregoing, Securities which are subject to a binding contract or irrevocable tender offer (including an offer which is in any way conditioned upon or simultaneous with, or requires as a condition precedent (whether by contract or otherwise) or which cannot be effected without, the agreement or consent of the transferor to any amendment, request, demand, authorization, direction, notice, consent or waiver hereunder) pursuant to which ownership (direct or indirect) is to be transferred (including for example, Securities tendered to the Company or any other Person in an exchange transaction) shall be deemed owned by such transferee, and therefore, any such simultaneous agreement or consent by the transferor shall be invalid. Section 2.9 Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare, and, upon written order of the Company, the Trustee shall authenticate, temporary Securities in any authorized denominations. Temporary Securities shall be substantially in the form of definitive Securities of the same series but may have variations that the Company reasonably considers appropriate and necessary for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Securities in exchange for temporary Securities. Until so exchanged, the temporary Securities shall be entitled to the same benefits under this Indenture as definitive Securities of the same series. Section 2.10 Cancellation. The Company may at any time deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange (including without limitation, Initial Securities exchanged for Exchange Securities, Private Exchange Securities or both), repurchase or payment. All Securities purchased pursuant to any Offer to Purchase shall be canceled. The Trustee and no one else shall cancel all Securities surrendered for transfer, exchange, repurchase or cancellation. The Company may not issue new Securities to replace Securities it has paid (upon Tender or otherwise) or which have been delivered to the Trustee for cancellation. The Trustee shall destroy all canceled Securities and, if requested, deliver a certificate of such destruction to the Company. If the Company shall acquire any of the Securities, such acquisition shall not operate as a satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee for cancellation. Section 2.11 Defaulted Interest; Interest on Defaulted Principal. If the Company defaults in a payment of interest on, or Special Interest, if any, with respect to, the Securities, it shall pay the defaulted interest or Special Interest, as the case may be, plus interest on such defaulted interest or Special Interest, at the rate then borne by the Securities to the extent permitted by law and the terms thereof, to the persons who are Securityholders on a subsequent Special Record Date. The Company shall fix the Special Record Date and payment 10 date. At least fifteen (15) days before the Special Record Date, the Company shall mail to each Securityholder a notice that states the Special Record Date, the payment date and the amount of defaulted interest or Special Interest, as the case may be, to be paid. If the Company defaults in the payment of principal on the Securities (whether on acceleration, at maturity, upon tender for repurchase, or otherwise), it shall pay interest on such defaulted principal at the rate then borne by the Securities to the Trustee upon demand. The Trustee shall apply any such payment in accordance with the provisions of Section 6.10. Section 2.12 CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption and may use such numbers in other notices to Holders regarding the Securities, in each case as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any such notice and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption or other notice shall not be affected by any defect in or omission of such numbers. ARTICLE 3. REDEMPTIONS Section 3.1 No Optional Redemption. The Securities Outstanding shall not at any time be subject to redemption in whole or in part at the option of the Company. Section 3.2 Mandatory Redemption. Subject to the other provisions of this Section 3.2, the Company shall, until all the Securities are paid or payment thereof has been provided for, deposit in accordance with Section 3.6, at least one Business Day prior to June 15 in each year, commencing June 15, 2001 (each such date being hereinafter referred to as a "Mandatory Redemption Date"), an amount in cash sufficient to redeem an aggregate principal amount of Securities (the "Mandatory Redemption Amount") equal to $920,000 on each of June 15, 2001 and June 15, 2002 (or, if the aggregate principal amount of Securities Outstanding on any such Mandatory Redemption Date is less than the principal amount required to so be redeemed, then all the Outstanding Securities shall be redeemed on such date), at a redemption price (expressed as a percentage of principal amount of 100% plus accrued and unpaid interest and Special Interest, if any, to the Mandatory Redemption Date (subject to the right of holders of record on the relevant record date to receive interest and Special Interest, if any, due on the relevant Interest Payment Date). Each such deposit shall be applied to the redemption of Securities on such Mandatory Redemption Date as herein provided. The Trustee shall, on or before the thirtieth day prior to such Mandatory Redemption Date (but not sooner than 45 days before such date), select, in the manner provided 11 in Section 3.3, the Securities to be redeemed on the next Mandatory Redemption Date and cause notice of the redemption thereof to be given in the name and at the expense of the Company in the manner provided in Section 3.4. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner set forth in Sections 3.5 and 3.7. At its option the Company may at any time reduce its obligation to pay any Mandatory Redemption Amount in cash by delivering to the Trustee at least 45 days before the related Mandatory Redemption Date (i) Securities which have been acquired by the Company in open market purchases (and, for avoidance of doubt, not acquired by way of any redemption or Offer to Purchase hereunder) and have not been called for redemption under any provision of this Indenture, together with (ii) an Officers' Certificate directing the Trustee to cancel the Securities and stating the election of the Company to have credited against such Mandatory Redemption Amount on such Mandatory Redemption Date a specified principal amount of Securities so delivered. Each such Officers' Certificate shall state that the Securities forming the basis of such credit do not include any Securities theretofore credited against any Mandatory Redemption Amount pursuant to this Section 3.2. All Securities made the basis of a credit against a Mandatory Redemption Amount shall be credited at 100% of their principal amount. Although the Company may obtain credit against any Mandatory Redemption Amount in advance of the related Mandatory Redemption Date as provided herein, any such credit shall be applied against such Mandatory Redemption Amounts in the order in which they become due. In case of the failure of the Company to deliver such Officers' Certificate, the Mandatory Redemption Amount due on such Mandatory Redemption Date shall be paid entirely in cash without the option to reduce the Company's obligation to make such payment as specified in this Section 3.2. The obligations of the Company under this Section 3.2 shall be automatically terminated in the event that the Aircraft is sold in accordance with Section 4.12(c) or is the subject of a Total Loss, provided, that in each case, the Company has complied in full with the applicable provisions of Section 4.12 with respect to such sale or Total Loss, as the case may be. The effective date of any such termination shall be the Payment Date with respect to the related Offer to Purchase (so long as the Company does not default in the payment of the purchase price with respect to such Offer to Purchase); provided, however, that such termination shall not apply to any Mandatory Redemption Amount for which a notice of redemption has been given under this Section 3.2 on or prior to such effective date. On or after any Mandatory Redemption Date and upon Request (and so long as no Event of Default has occurred and is continuing), the Trustee shall promptly return to the Company any funds it is holding under this Section 3.2 in excess of the Mandatory Redemption Amount (as reduced pursuant to the provisions of this Section 3.2) related to such Mandatory Redemption Date and shall promptly authenticate and mail to the Company a new Security or Securities in an aggregate principal amount equal to that portion (if any) of the Securities delivered to the Trustee and not used by the Company as a credit under this Section 3.2 (provided, however, that the Company has previously delivered to the Trustee sufficient executed Securities to enable the Trustee to so authenticate such Securities). 12 Section 3.3 Selection of Securities to be Redeemed. If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed on either a pro rata basis or by lot. The Trustee shall make the selection from Securities outstanding not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them it selects shall be in amounts of $1,000 or whole multiples of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. Section 3.4 Notice of Redemption. The notice of redemption shall be mailed by first-class mail to each Holder whose Securities are to be redeemed. The notice shall identify the Securities and the principal amount thereof to be redeemed and shall state: (a) the principal amount of each Security held by each such Holder to be redeemed; (b) the redemption date; (c) the redemption price (including the amount of accrued and unpaid interest and Special Interest, if any, to be paid on the Securities called for redemption); (d) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the redemption date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion will be issued; (e) the name and address of the Paying Agent; (f) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (g) that, unless the Company defaults in making the redemption payment, interest on the Securities to be redeemed ceases to accrue on and after the redemption date and the only remaining right of the Holders of such Securities is to receive payment of the redemption price upon surrender to the Paying Agent of the Securities. The Trustee shall act as the Paying Agent for purposes of this Article 3. Section 3.5 Effect of Notice of Redemption. Once a notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date at the redemption price and, on and after such date (unless the 13 Company shall default in the payment of the redemption price), such Securities shall cease to bear interest. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price plus accrued interest and Special Interest, if any, to the redemption date. Section 3.6 Deposit of Redemption Price. On or before 10:00 a.m., Eastern Time, on any redemption date, the Company shall deposit with the Paying Agent money in funds immediately available on such redemption date sufficient to pay the redemption price of and accrued interest on and Special Interest, if any, with respect to, all Securities to be redeemed on that date. Section 3.7 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 4. COVENANTS, REPRESENTATIONS AND WARRANTIES Section 4.1 Payment of Securities. The Company shall pay the principal of, interest on and Special Interest, if any, with respect to, the Securities on the dates and in the manner provided in this Indenture and in the Securities. The Company shall pay interest semi-annually in arrears on each Interest Payment Date, commencing December 15, 1998. Interest shall be paid on each Interest Payment Date in an amount equal to the interest accrued for the period beginning from the Issue Date, or from the most recent date to which interest and Special Interest, if any, have been paid. All interest and Special Interest, if any, due and payable on the Securities shall be paid in cash, except that the Company may at its option, make such Payments by check mailed to the address of the Person entitled thereto as it appears in the Register; provided, however, that such Payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by a Holder with a bank in New York City if such Holder owns at least $250,000 in aggregate principal amount of certificated Securities and elects payment by wire transfer by giving written notice to the Company and the Trustee to such effect designating such account no later than 10 days immediately preceding the relevant due date for payment (or such other date as the Company and the Trustee may accept in their discretion). An installment of principal, interest or Special Interest, if any, shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company or any Affiliate thereof) holds on that date Payments designated for and sufficient to pay such installment and the Trustee 14 or Paying Agent is not prohibited from Paying such Payments to the Holders of the Securities pursuant to this Indenture. The Company shall pay interest and Special Interest, if any, at the rate set forth in this Indenture and the Securities, and the Company shall pay interest on unpaid interest or Special Interest, if any, at the same rate to the extent legally permitted. Section 4.2 Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange or for presentation for payment or repurchase and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. At the request of the Company, said office or agency may be the office of an agent appointed by the Trustee for such purpose. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 4.3 Limitation on Dividends and Acquisition of Common Stock. The Company will not declare or pay any dividend or make any distribution on its Common Stock, Employee Preferred Stock or other Capital Stock of the Company (other than dividends or distributions payable in the Company's Common Stock or Employee Preferred Stock or options, warrants or other rights to acquire, subscribe for or purchase the Company's Common Stock or Employee Preferred Stock) and will not, and will not permit any of its Subsidiaries to, purchase, redeem or otherwise acquire for value any shares of its Common Stock, Employee Preferred Stock or other Capital Stock of the Company, whether in cash or Property or in obligations of the Company, if, at the time of such declaration, payment, distribution, purchase, redemption or other acquisition or, after giving effect thereto, a Default or Event of Default shall have occurred and be continuing; provided, that notwithstanding anything to the contrary written above, this Section 4.3 shall not apply to: (a) any purchase or redemption of Common Stock or Preferred Stock by the Company or an employee stock ownership or benefit plan (i) from union employees or former union employees, or their respective transferees, pursuant to the terms of agreements with labor unions existing on the date hereof; (ii) from recipients or their transferees of such stock from employee stock ownership or benefit plans subject to ERISA; (iii) from employee stock ownership or benefit plans subject to ERISA in 15 order to provide cash benefits to employees pursuant to the terms of such plans; and (iv) as required by ERISA; (b) any purchase or redemption of Common Stock or Preferred Stock by an employee stock ownership or benefit plan subject to ERISA for an aggregate consideration, without regard to purchases or redemptions pursuant to clause (a) above, of up to $200,000,000; (c) the payment of fixed or mandatory dividends on or scheduled redemptions or exchanges of any of the Company's 8% Preferred Stock and 9 1/4% Preferred Stock and the payment of any interest on the securities issuable upon such exchange; (d) the payment of any dividends on or the purchase, redemption or other acquisition or retirement of the Common Stock or Preferred Stock of the Company within sixty (60) days after the date of declaration of such dividend or the commitment to make such purchase, redemption or other acquisition or retirement, if at said date of declaration or commitment such payment or commitment complied with this Section 4.3; (e) the purchase, redemption, retirement or other acquisition of any shares of the Company's Common Stock or Preferred Stock in exchange for, or out of the proceeds of the substantially concurrent sale of, Common Stock or Preferred Stock of the Company; (f) any consolidation or merger with or into any Person or conveyance or transfer of all or substantially all of the Company's Property to one or more Persons substantially as an entirety, not prohibited by the terms of Section 5.1; and (g) the conversion of Employee Preferred Stock into Common Stock. Section 4.4 Corporate Existence. (a) Except as otherwise provided in Article 5, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its Subsidiaries engaged in substantial business activity each in accordance with the respective organizational documents of the Company and each such Subsidiary and the rights (charter and statutory), licenses, permits, approvals and governmental franchises of the Company and each such Subsidiary necessary to the conduct of its respective business; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or to preserve the corporate existence of any such Subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer in the interest of the Company and that termination of the corporate existence is not disadvantageous to the Holders in any material respect. (b) The Company shall continue to be an air carrier certificated under Section 604(b) of the Federal Aviation Act. (c) The Company is and, to the extent required to operate its business as presently conducted and to perform its obligations under this Indenture and the Operative Documents, shall remain a "citizen of the United States" as defined in Section 101(16) of the Federal Aviation Act. Section 4.5 Payment of Taxes and Other Claims. The Company shall, and shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company and each Subsidiary or upon the income, profits or Property of the Company and each Subsidiary or upon the Collateral and (b) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a 16 Lien upon the Collateral or the other Property of the Company or a Subsidiary; provided, however, that the Company or a Subsidiary, as the case may be, shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (i) the amount, applicability or validity of which is being contested in good faith by appropriate proceedings as permitted by and in accordance with the provisions of the Operative Documents, to the extent applicable, and for which adequate reserves have been established in accordance with GAAP, as in effect from time to time, or (ii) if the Company delivers to the Trustee a Certificate of an Officer stating that such non-payment and non-discharge is in the interest of the Company and not prejudicial in any material respect to the Holders. Nothing contained herein or in the Securities shall be deemed to impose on the Trustee or on the Company any obligation to pay on behalf of the Holder of any Securities any tax, assessment or governmental charge required by any present or future law of the U.S. or of any state, county, municipality or other taxing authority thereof to be paid on behalf of, or withheld from the amount payable to, the Holder of any Securities; rather any tax, assessment or governmental charge shall, to the extent required by law, be withheld from the amounts provided for herein. Section 4.6 Notices. The Company shall notify the Trustee in writing of any of the following promptly (and in any event within five (5) Business Days after an Officer learns of the occurrence thereof) describing the same and, if applicable, the steps being taken by the Person(s) affected with respect thereto: (a) In the event that any Indebtedness of the Company or any Significant Subsidiary of the Company in a principal amount in excess of $10,000,000 (i) is declared due and payable before its stated maturity because of the occurrence of any default (or any event which, with notice or the lapse of time, or both, shall constitute such default) under such Indebtedness or (ii) is not paid at its stated maturity; or (b) Any litigation, arbitration proceeding or governmental proceeding involving damages or potential liability in excess of $10,000,000 is instituted against the Company or any of its Subsidiaries which, if adversely determined, would have a material adverse effect on the business, operations or financial condition of the Company and its Subsidiaries taken as a whole. Section 4.7 Maintenance of Properties and Insurance. Except as otherwise provided in this Indenture, the Company shall, and shall cause each of its Subsidiaries to, cause all Collateral and other Properties owned by or leased to it and used or useful in the conduct of the business of the Company or any such Subsidiary, as the case may be, to be maintained and kept in good repair, working order and condition, except for reasonable wear and use, and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times, except, in every case, as and to the extent 17 that the Company or any such Subsidiary may be prevented by fire, strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions, enemy action, civil commotion or unavoidable casualty or similar causes beyond the control of the Company or such Subsidiary; provided, however, that subject to all requirements of the Operative Documents, nothing in this Section 4.7 shall prevent the Company or any such Subsidiary from discontinuing the use, operation or maintenance of any such Properties, or disposing of any of them, if such discontinuance or disposal is, in the good faith judgment of an Officer of the Company (or other agent employed by the Company) having managerial responsibility for any such Property (or, in the case of any materially important item, with respect to operations or value, in the good faith judgment of the Company as expressed in a resolution of the Board of Directors), desirable in the conduct of the Company's business or that of its Subsidiaries. For so long as any Collateral or Property is deemed to be useful to the conduct of the business of the Company or its Subsidiaries, the Company shall, or shall cause such Subsidiaries to, maintain appropriate insurance, in accordance with industry practice, on such Collateral and Properties and as required under the provisions of the applicable Operative Documents. Notwithstanding the provisions of this Section 4.7, to the extent there exists any inconsistency between the provisions hereof and the provisions of the Mortgage relating to Property which constitutes Collateral, the provisions of the Mortgage shall prevail as to all Collateral. Section 4.8 Default Notices and Compliance Certificates. Contemporaneously with furnishing quarterly financial reports to the Trustee under Section 4.9(a) or mailing quarterly statements to the Trustee and Holders under Section 4.9(c), the Company shall furnish to the Trustee a Certifying Officer's Certificate to the effect that no Default or Event of Default has occurred or is continuing, or, if there is any such Default or Event of Default, describing it and the steps, if any, being taken to cure it. The Company shall deliver to the Trustee within one hundred twenty (120) days after the end of each fiscal year in which any of the Securities remain Outstanding a certificate of the principal executive officer, principal financial officer or principal accounting officer of the Company (which need not comply with the provisions of Section 11.5) stating whether or not, to the knowledge of the signer after due inquiry, the Company is in compliance with all conditions and covenants under this Indenture and the Operative Documents (determined without regard to any period of grace or requirement of notice), and if the Company is not in compliance with all such conditions and covenants, describing each Default or Event of Default and its status. The first certificate to be delivered by the Company pursuant to this Section 4.8 shall be for the fiscal year ending December 31, 1998. Section 4.9 SEC Reports. (a) The Company shall deliver to the Trustee as soon as practicable after it files them with the SEC, copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations 18 prescribe) which the Company is required to file with the SEC pursuant to Sections 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA ss. 314(a). (b) So long as any of the Securities remain Outstanding, the Company shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders generally, to be mailed to the Holders of such Outstanding Securities at their addresses appearing in the Register. (c) At any time the Company does not have a class of securities registered, or is not otherwise required to file quarterly and other reports under the Exchange Act, the Company will prepare or cause to be prepared, for each of the first three (3) quarters of each fiscal year, an unaudited balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter and related unaudited consolidated statements of income and retained earnings and cash flow of the Company and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through such date, setting forth in each case in comparative form the figures for the corresponding year-to-date period in the previous year, certified by the principal financial officer of the Company, and for each fiscal year, an audited balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and related audited consolidated statements of income and retained earnings and cash flow of the Company and its consolidated Subsidiaries for such year, setting forth in comparative form the figures for the previous year, reported on without a qualification arising out of the scope of the audit, by the Company's independent public accountants. All financial statements will be prepared by a nationally recognized auditing firm and will be prepared in accordance with generally accepted accounting principles, as in effect from time to time, consistently applied, except for changes with which the Company's independent public accountants concur and except that quarterly statements may be subject to year-end adjustments. The Company will cause a copy of the respective financial statements to be mailed to the Trustee and each of the Holders of the Securities within forty-five (45) days after the close of each of the first three (3) quarters of each fiscal year and within one hundred twenty (120) days after the close of each fiscal year, to the addresses set forth in Section 11.2 or, in the case of each of the Holders, to such Holder's address as set forth in the Register of the Securities. Section 4.10 Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, interest on, or Special Interest, if any, with respect to, the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture and the Operative Documents; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power granted to the Trustee herein and in the Operative Documents, but will suffer and permit the execution of every such power as though no such law had been enacted. 19 Section 4.11 Amendment to Certain Agreements. The Company shall not enter into or consent to any amendment, supplement or other modification of the Operative Documents except as permitted under Article 9 hereof. Section 4.12 Title to Collateral and Limitation on Liens; Sale of Aircraft; Total Loss With Respect to Aircraft. (a) The Company represents and warrants that it has, and covenants that it shall continue to have, full power and lawful authority to grant, release, convey, assign, transfer, mortgage, pledge, hypothecate and otherwise create the security interests in the Collateral referred to in Article 10; the Company shall warrant, preserve and defend the interest and title of the Trustee to the Collateral, against the claims of all persons and will maintain and preserve the security interests contemplated by Article 10; and the Company shall not, and not permit any of its Subsidiaries to, directly or indirectly, incur, assume or suffer to exist any Lien of any nature whatsoever upon or with respect to the Collateral, other than Permitted Liens. The Company shall cause the Operative Documents, including all necessary financing statements, notifications of secured transactions and other assurances or instruments to be properly recorded, registered and filed and to be kept, recorded, registered and filed in such manner and in such places as may be required by law and shall take all such other actions as may be required in order to make effective the security interests intended to be created in connection with this Indenture. The Company shall furnish to the Trustee the Opinions of Counsel required by Section 10.2 to confirm such action. (b) The Company shall not, directly or indirectly, consummate any sale, lease, transfer or other disposition of any Collateral except as permitted in paragraph (c) of this Section 4.12 or in the other Operative Documents. (c) (i) The Company may, at any time after the earlier to occur of the conversion of the Equity Notes into Common Stock or such other securities, cash or other Property, in each case, as provided in and in accordance with Article 13 of the Equity Notes Indenture or the payment in full of the Equity Notes, sell the Aircraft upon compliance with the following requirements: (A) the Company shall (subject to the provisions of Section 4.12(e)) have commenced an Offer to Purchase Securities in an aggregate principal amount (the "Sale OTP Amount") equal to the aggregate principal amount of the Securities Outstanding on the date of the commencement of such Offer to Purchase, at a purchase price (expressed as a percentage of principal amount of Securities to be purchased) equal to (1) 102%, if such Offer to Purchase is commenced prior to the first anniversary of the Issue Date, or (2) 101%, if such Offer to Purchase is commenced on or after the first anniversary of the Issue Date, plus, in either case, accrued and unpaid interest and Special Interest, if any, on such Securities to and including the Payment Date; 20 (B) the Company shall have given the Trustee prior notice of the pending sale of the Aircraft (which notice shall be given by the Company at least 15 days prior to the date of commencement of the Offer to Purchase); (C) the Company shall have deposited with the Trustee an amount in cash equal to the purchase price with respect to the Offer to Purchase for the Aircraft on or prior to the date of sale of the Aircraft (which cash amount shall remain on deposit with the Trustee until the payment of the purchase price on the applicable Payment Date with respect to such Offer to Purchase); and (D) no Event of Default shall have occurred and be continuing or would result from the sale of the Aircraft. (ii) Effective as of the day immediately following the Payment Date with respect to the Offer to Purchase in connection with a sale of the Aircraft, the interest rate borne by the Securities then Outstanding shall be automatically, without any further act or deed, increased by 1.50% per annum. Any such increase shall be in addition to Special Interest, if any, then accruing with respect to such Security which Special Interest shall continue to accrue in accordance with the provisions of such Security. (iii) Upon Request by the Company, payment by the Company of the Trustee's costs (including reasonable legal fees and disbursements) incurred in complying with such Request and satisfaction of the requirements of Section 4.12(c)(i), the Trustee shall release from the Lien of the Operative Documents, all right, title and interest of the Trustee in and to the Collateral and shall (so long as no Event of Default then exists) promptly after the Payment Date with respect to any Offer to Purchase made in connection with such sale, return to the Company any cash held in excess of the purchase price of the Securities tendered for purchase in connection with such Offer to Purchase. The Trustee may enter into any arrangements (including, without limitation, escrow arrangements) as it shall deem necessary or desirable to accomplish the intents and purposes of this Section 4.12(c). (d) In the event that there shall occur a Total Loss with respect to the Aircraft, the Company shall (subject to the provisions of Section 4.12(e)) make an Offer to Purchase an aggregate principal amount of Outstanding Securities (the "Total Loss OTP Amount") equal to the aggregate principal amount of the Securities Outstanding on the date such Offer to Purchase is required to be commenced hereunder, at a purchase price equal to 100% of the aggregate principal amount of Securities to be purchased, plus accrued and unpaid interest and Special Interest, if any, on such Securities, to and including the Payment Date. The Company shall commence such Offer to Purchase within thirty (30) days after the Total Loss Date with respect to any such Total Loss. Upon Request by the Company and payment by the Company of the purchase price with respect to such Offer to Purchase and the Trustee's costs (including reasonable legal fees and disbursements) incurred in complying with such Request, the Trustee shall release from the Lien of the Operative Documents, all right, title and interest of the Trustee in and to the Collateral. 21 (e) At its option the Company may reduce in whole or in part its obligation to pay the Sale OTP Amount or Total Loss OTP Amount in cash by delivering to the Trustee at least 15 days before the date the related Offer to Purchase is or would be required to be commenced under Section 4.12(c) or Section 4.12(d), as the case may be, (i) Securities which have been acquired by the Company in open market purchases (and, for avoidance of doubt, not acquired by way of any redemption or Offer to Purchase hereunder) and have not been called for redemption under any provision of this Indenture, together with (ii) an Officers' Certificate directing the Trustee to cancel such Securities and stating the election of the Company to have credited against such Sale OTP Amount or Total Loss OTP Amount, as the case may be, a specified principal amount of Securities so delivered. All Securities made the basis of a credit against a Sale OTP Amount or Total Loss OTP Amount shall be credited at 100% of their principal amount. In case of the failure of the Company to deliver such Officers' Certificate, the Sale OTP Amount or Total Loss OTP Amount, as the case may be, due on the Payment Date therefor shall be paid entirely in cash without the option to reduce the Company's obligation to make such payment as specified in this Section 4.12(e). The Trustee shall promptly authenticate and mail to the Company a new Security or Securities in an aggregate principal amount equal to that portion (if any) of the Securities delivered to the Trustee and not used by the Company as a credit under this Section 4.12(e) (provided, that the Company has previously delivered to the Trustee sufficient executed Securities to enable the Trustee to so authenticate such Securities). Section 4.13 Books, Records, Access; Confidentiality. (a) The Company shall, and shall cause each of its Subsidiaries to, (i) maintain complete and accurate books and records in which full and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its respective business and activities, and (ii) permit authorized representatives of the Trustee to visit and inspect the Properties of the Company or its Subsidiaries, and any or all books, records and documents in the possession of the Company relating to the Collateral, including the records, logs and other materials referred to in Section 2.1(c) of the Mortgage, and to make copies and take extracts therefrom and to visit and inspect the Collateral, all upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested. (b) The Trustee and its authorized representatives referred to in clause (a) above agree not to use any information obtained pursuant to this Section 4.13 for any purpose other than as required in order to discharge their respective duties hereunder and under the Operative Documents and except as otherwise required for such purpose to keep confidential and not to disclose any such information to any person except that (i) the recipient of the information may disclose any information which becomes publicly available other than as a result of disclosure by such recipient, (ii) the recipient of the information may disclose any information which its counsel reasonably concludes is necessary to be disclosed by law or legal process, pursuant to any court or administrative order or ruling or in any pending legal or administrative proceeding or investigation after notice to the Company adequate, subject to applicable laws, to allow the Company to obtain a protective order or other appropriate remedy, provided that the recipient of the information will (if not otherwise required in order to discharge its duties as aforesaid) 22 cooperate at the Company's expense with the Company's efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded any such information required to be so disclosed, and (iii) the recipient of the information may disclose any information necessary to be disclosed pursuant to any provision of the TIA. Section 4.14 Security Interests. The Company and its Subsidiaries shall perform any and all acts and execute any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement or other statement) for filing under the provisions of the Federal Aviation Act and the applicable Uniform Commercial Code and the rules and regulations thereunder or any other statute, rule or regulation of any applicable federal, state or local jurisdiction, which are necessary or advisable, from time to time, in order to grant and maintain in favor of the Trustee for the benefit of the Holders a valid, perfected Lien on the Collateral. The Company and its Subsidiaries shall deliver or cause to be delivered to the Trustee from time to time such other documentation, consents, authorizations, approvals and orders in form and substance satisfactory to the Trustee as it shall deem reasonably necessary or advisable to perfect or maintain the Liens for the benefit of the Holders. Section 4.15 Repurchase of Securities Upon a Change in Control. (a) In the event that there shall occur a Change in Control, the Company shall make an Offer to Purchase all of the Outstanding Securities, at a purchase price equal to 101% of the aggregate principal amount of the Securities Outstanding, plus accrued and unpaid interest and Special Interest, if any, to and including the repurchase date. The right to require such repurchase of Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article 8. (b) The Company shall commence such Offer to Purchase within thirty (30) days after the occurrence of a Change in Control. Section 4.16 Restrictions on Becoming an Investment Company. The Company shall not become an investment company within the meaning of the Investment Company Act of 1940 as such statute and the regulations thereunder and any successor statute or regulations thereto may from time to time be in effect. Section 4.17 Listing. No later than the earliest to occur of (i) the effectiveness of the initial Exchange Offer Registration Statement and (ii) the effectiveness of the initial Shelf Registration Statement, in either case, filed under (and as defined in) the Registration Rights Agreement, the Company shall use its reasonable best efforts to cause the Exchange Securities and the Private Exchange Securities to be listed on the American Stock Exchange, or such other stock exchange or market 23 as the Common Stock of the Company is then principally traded, provided, that such Securities meet the minimum requirements for listing on any such exchange or market, and, if applicable, to use its reasonable best efforts to maintain such listing for so long as any of the Exchange Securities or Private Exchange Securities are Outstanding. ARTICLE 5. SUCCESSOR CORPORATION Section 5.1 Covenant Not to Consolidate, Merge, Convey or Transfer Except Under Certain Conditions. The Company shall not consolidate with, or merge with or into, or convey or transfer (excluding by way of lease) all or substantially all of its Properties (as determined at the time of such transfer without regard to any prior conveyance or transfer or series of conveyances or transfers made on unrelated transactions) to any other Person, or permit any Person to convey, lease or transfer all or substantially all of its Properties to the Company, unless: (a) The Company shall be the continuing Person or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which all or substantially all of the Properties of the Company are conveyed or transferred (the "surviving Person"): (i) shall be a corporation organized and existing under the laws of the United States of America or any state thereof or the District of Columbia; (ii) shall expressly assume prior to or simultaneously with the consummation of such transaction, by an indenture and other agreements supplemental hereto and to the Operative Documents, executed and delivered to the Trustee in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of, interest on and Special Interest, if any, with respect to, all the Securities and the observance and performance of every covenant, condition and obligation of this Indenture, the Securities and the Operative Documents on the part of the Company to be observed or performed; (b) Immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing hereunder; (c) In the case of any such conveyance or transfer, such conveyance or transfer includes, without limitation, all of the Collateral and in any event such consolidation, merger, conveyance or transfer shall be on such terms as shall fully preserve the Lien and security of each of the Operative Documents, the priority thereof purported to be established thereby and the rights and powers of the Trustee and the Holders of the Securities under each of the Operative Documents; and (d) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that (i) such merger, consolidation, transfer, conveyance, or acquisition of assets and such supplemental indenture (if any) comply with the terms of this Indenture, (ii) this Indenture and the Securities constitute the valid and legally binding obligations of the 24 surviving Person, and (iii) this Indenture and the other Operative Documents are enforceable against the surviving Person in accordance with their terms. Section 5.2 Successor Person Substituted. Upon any consolidation or merger, or any conveyance or transfer (excluding by way of lease) of all or substantially all of the Properties of the Company in accordance with Section 5.1, the surviving entity formed by such consolidation or into which the Company is merged or the surviving entity to which such conveyance or transfer is made shall succeed to, and be substituted for, and be bound by and obligated to pay the obligations of, and may exercise every right and power of, the Company under this Indenture, the Securities and the Operative Documents with the same effect as if such successor had been named as the Company herein and therein, but the predecessor Company in the event of any such conveyance or transfer shall not be released from the obligation to pay the principal of, interest on and Special Interest, if any, with respect to the Securities. Such surviving entity may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such surviving entity, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such surviving entity thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, transfer or conveyance such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. Section 5.3 Limitation on Lease of Properties. Without limitation of the prohibitions set forth in the other Operative Documents, the Company shall not lease all or substantially all of its Properties to any Person. ARTICLE 6. DEFAULT AND REMEDIES Section 6.1 Events of Default. An "Event of Default" occurs if: 25 (a) the Company defaults in the payment of interest on, or Special Interest, if any, with respect to, any Security when the same becomes due and payable and the default continues for thirty (30) days; (b) the Company defaults in the payment of the principal amount of any Securities when the same becomes due and payable at maturity, upon acceleration, redemption, tender for repurchase or otherwise; (c) the Company fails to comply with the agreements or covenants contained in Sections 3.2, 4.3 or 4.12 hereof, takes or agrees to take any action prohibited by Section 5.1 hereof, discontinues or agrees to discontinue substantially all of its commercial airlines operations or fails to comply with the covenants contained in Sections 3, 6.3, 6.5 or 6.8 of the Mortgage within the time periods (if any) provided therein; (d)(i) the Company fails in any material respect to comply with any of its other agreements contained in the Securities, this Indenture or the other Operative Documents or (ii) any representation or warranty made by the Company in this Indenture, the other Operative Documents or any Mortgage Supplement or in any certificate of the Company delivered hereunder or under any such document shall prove to have been untrue in any material respect when made, and in any such case such default continues for the period and after the notice specified below; (e) there shall be a default or an event under or with respect to any Indebtedness of the Company or any of its Significant Subsidiaries in excess of $10,000,000 in principal amount, whether such Indebtedness now exists or shall hereafter be created, and the effect of any such default or event is to cause the principal amount of any such Indebtedness to become due, to have the date of payment thereof fixed prior to its stated maturity or the date it would otherwise become due and while any Securities are Outstanding, or to be unpaid at maturity while any Securities are Outstanding; (f) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case or proceeding, (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding, (iii) consents to the appointment of a Custodian (as hereinafter defined) of it or for all or substantially all of its Property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is unable to pay its debts as the same become due; 26 (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case or proceeding, (ii) appoints a Custodian of the Company or any of its Significant Subsidiaries for all or substantially all of its properties, or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries, and in each case the order and decree remains unstayed and in effect for sixty (60) consecutive days; (h) final, non-appealable judgments for the payment of money, which judgments, in the aggregate, exceed $10,000,000 shall be rendered against the Company or any of its Significant Subsidiaries by a court of competent jurisdiction and remain undischarged, unstayed and unsatisfied for the period and after the notice specified below; or (i) any of the Operative Documents ceases, without the consent of the Trustee, to be in full force and effect. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. A Default under clause (d), (e) or (h) of this Section 6.1 is not an Event of Default until the Trustee notifies the Company, or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Securities Outstanding notify the Company and the Trustee, of the Default and the Company does not cure the Default within sixty (60) days with respect to clauses (d) and (h), or within thirty (30) days with respect to clause (e), after receipt of the notice; provided, however, that the Company shall be permitted such longer period of time, if any, as may be provided for under the other Operative Documents in respect of any particular Default. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." When a Default is cured, it ceases. Section 6.2 Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.1(f) or (g)) occurs, and is continuing, the Trustee may, by notice to the Company, or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Securities Outstanding may, by notice to the Company and the Trustee, and the Trustee shall, upon the request of such Holders, declare all unpaid principal of, accrued interest and Special Interest, if any, to the date of acceleration on the Securities Outstanding (if not then due and payable) to be due and payable and upon any such declaration, the same shall become and be immediately due and payable. If 27 an Event of Default specified in Section 6.1(f) or (g) occurs, all unpaid principal of, accrued interest on and Special Interest, if any, with respect to, the Securities Outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. Upon payment of such principal amount, interest, and Special Interest, if any, all of the Company's obligations under the Securities and this Indenture, other than obligations under Sections 7.7 and 8.4, shall terminate. The Holders of a majority in principal amount of the Securities then Outstanding by notice to the Trustee may rescind an acceleration and its consequences if (a) all existing Events of Default, other than the non-payment as to the Securities of the principal, interest or Special Interest, if any, which has become due solely by such declaration of acceleration, have been cured or waived, (b) to the extent the payment of such interest is permitted by law, interest on overdue installments of interest or Special Interest and on overdue principal which has become due otherwise than by such declaration of acceleration, has been paid, (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, and (d) all payments due to the Trustee and any predecessor Trustee under Section 7.7 have been made. Section 6.3 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, interest on or Special Interest, if any, with respect to the Securities or to enforce the performance of any provision of the Securities or this Indenture including, without limitation, instituting proceedings and exercising and enforcing, or directing exercise and enforcement of, all rights and remedies of the Trustee under the other Operative Documents. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. Section 6.4 Waiver of Past Defaults. Subject to Sections 6.7, 9.2 and 9.6, the Holders of a majority in aggregate principal amount of the Securities Outstanding by notice to the Trustee may authorize the Trustee to waive an existing Default or Event of Default and its consequences, except a Default (a) in the payment of principal of, or interest on, or Special Interest with respect to, any Security as specified in clauses (a) and (b) of Section 6.1 or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Security affected. When a Default or Event of Default is waived, it is cured and ceases, and the Company, the Holders and the Trustee shall be restored to their former positions and rights hereunder respectively; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 28 Section 6.5 Control by Majority. The Holders of a majority in aggregate principal amount of the Securities Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. The Trustee may refuse to follow any direction hereunder or authorization under Section 6.4 that legal counsel to the Trustee determines in good faith conflicts with law or this Indenture, that the Trustee reasonably determines may be unduly prejudicial to the rights of another Securityholder, or that the Trustee reasonably determines may subject the Trustee to personal liability. However, the Trustee shall have no liability for any actions or omissions to act which are in accordance with any such direction or authorization. Section 6.6 Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least twenty-five percent (25%) in principal amount of the Securities Outstanding make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within sixty (60) days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Holders of a majority in aggregate principal amount of the Securities Outstanding do not give the Trustee a direction which, in the reasonable opinion of the Trustee, is inconsistent with such request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. Section 6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of, interest on, and Special Interest, if any, with respect to, the Security in cash, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. It is hereby expressly understood, intended and agreed that any and all actions which a Holder of the Securities may take to enforce the provisions of this Indenture and/or collect Payments due hereunder or under the Securities, except to the extent that such action is 29 determined to be on behalf of all Holders of the Securities, shall be in addition to and shall not in any way change, adversely affect or impair the rights and remedies of the Trustee or any other Holder of the Securities thereunder or under this Indenture and the other Operative Documents, including the right to foreclose upon and sell the Collateral or any part thereof and to apply any proceeds realized in accordance with the provisions of this Indenture. Section 6.8 Collection Suit by Trustee. If an Event of Default in payment of interest or principal specified in clause (a) or (b) of Section 6.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal, accrued interest and Special Interest, if any, remaining unpaid, together with interest on overdue principal and on overdue installments of interest to the extent that payment of such interest is permitted by law, in each case at the rate per annum provided for by the Securities, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.9 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its Property and shall be entitled and empowered to collect and receive any moneys or other Property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.7, and unless prohibited by law or applicable regulations to vote on behalf of the Holders of Securities for the election of a trustee in bankruptcy or other person performing similar functions. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding except, as aforesaid, for the election of a trustee in bankruptcy or person performing similar functions. Section 6.10 Application of Proceeds. Any moneys collected by the Trustee pursuant to this Article shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal, interest, or Special Interest, if any, upon presentation of the several Securities and stamping (or otherwise noting) thereon the payment, or issuing Securities 30 in reduced principal amounts in exchange for the presented Securities if only partially paid, or upon surrender thereof if fully paid: FIRST: To the payment of reasonable costs and expenses actually incurred, including reasonable compensation to the Trustee, its predecessors, if any, and their respective agents and attorneys (including amounts due and unpaid under Section 7.7), and of all reasonable costs, fees, expenses and liabilities incurred and all advances made by any and all of the foregoing (including amounts due and unpaid under Section 7.7), except as a result of negligence or bad faith; SECOND: In case the entire principal of the Securities shall not have become and be then due and payable, as to any Securities (a) first to the payment of interest and Special Interest, if any, in default in the order of the maturity of the installments of such interest and Special Interest, if any, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest or Special Interest, if any, at the rate of interest specified in the Securities and (b) second to the payment of principal of the Securities as the same shall become due and payable, such payments to be made ratably to the Persons entitled thereto, without discrimination or preference; THIRD: In case the entire principal of the Securities shall have become and shall be then due and payable, as to any Securities, to the payment of the whole amount then owing and unpaid upon all the Securities for principal, interest and Special Interest, with interest upon the overdue principal, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest or Special Interest, if any, at the same rate as the rate of interest specified in this Indenture or in the Securities; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities, then to the payment of such principal, interest and Special Interest, if any, without preference or priority of any of principal, interest or Special Interest, if any, over the other, or any installment of interest or Special Interest, if any, over any other installment of interest or Special Interest, if any, or of any Security over any other Security, ratably to the aggregate of such principal, and accrued and unpaid interest and Special Interest; and FOURTH: To the payment of the remainder, if any, after payment in full of the entire principal balance, if any, of the Securities and all interest, Special Interest and other amounts due upon or in respect of such Securities, to the Company or any other Person lawfully entitled thereto. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court of competent jurisdiction in its discretion may require in any suit for the enforcement of any right or remedy under this Indenture or in any 31 suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than ten percent (10%) in principal amount of the Securities Outstanding. Section 6.12 Restoration of Rights on Abandonment of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the Securityholders shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Securityholders shall continue as though no such proceedings had been taken. Section 6.13 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default. No right or remedy herein conferred upon or reserved to the Trustee or to the Securityholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to the other applicable provisions of this Indenture, every power and remedy given by this Indenture or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. Any right or remedy herein conferred upon or reserved to the Trustee may be exercised by it in its capacity as Trustee, as it may deem most efficacious, if it is then acting in such capacity. 32 ARTICLE 7. TRUSTEE Section 7.1 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) The Trustee need perform only those duties as are specifically set forth in this Indenture and the other Operative Documents and no others. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or bad faith, except that: (i) This paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1 or of Section 7.2. (ii) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5. (d) The Trustee shall be under no obligation to exercise any of the rights, trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request, order or direction. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1. (f) Funds held in trust for the benefit of the Holders of the Securities by the Trustee or any Paying Agent on deposit with itself or elsewhere shall be held in distinct, identifiable accounts, and other funds or investments of any nature or from any source whatsoever may be 33 held in such accounts, except, in each case, to the extent required by law. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Section 7.2 Rights of Trustee. (a) The Trustee may rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper person. Subject to Section 7.1(b)(ii), the Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 11.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its attorneys and agents and the Trustee shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. Section 7.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or Affiliates of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11. Section 7.4 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities or in this Indenture other than its certificate of authentication. Section 7.5 Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within ninety (90) days after the occurrence thereof except as otherwise permitted by the TIA. Except in the case of a Default in payment of principal of, or interest on, or Special Interest, if any, with respect to, any Security, the Trustee may withhold the notice if and so long as it, in good faith, determines that withholding the notice is in the interests of the Securityholders. 34 Section 7.6 Reports by Trustee to Holders. If circumstances require any report to Holders under TIA ss. 313(a), it shall be mailed to Securityholders within sixty (60) days after each May 15 (beginning with the May 15 following the date of this Indenture) as of which such circumstances exist. The Trustee also shall comply with the remainder of TIA ss. 313. The Company shall promptly notify the Trustee if the Securities become listed on or delisted from any stock exchange or other recognized trading market. The Trustee shall, upon the written request of any Holder of Securities but subject to applicable laws and contractual limitations, provide to such Holder copies of any reports, certificates, opinions or other materials of any kind or nature required to be delivered to the Trustee under this Indenture or any of the other Operative Documents or otherwise delivered by or on behalf of the Company to the Trustee. Section 7.7 Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation, as agreed upon from time to time, for its services hereunder and under the other Operative Documents. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it in any such capacities. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel and all agents and other persons not regularly in its employ. The Company shall indemnify the Trustee and each predecessor Trustee for, and hold each of them harmless against, any loss or liability incurred by each of them in connection with the administration of this Indenture and its duties hereunder. In connection with any defense of such a claim, the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee or any predecessor Trustee through the negligence or bad faith of such Trustee or each such predecessor Trustee. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a Lien (legal and equitable) prior to the Securities on all money or Property held or collected by the Trustee, in its capacity as Trustee, or otherwise distributable to Securityholders, except money, securities or Property held in trust to pay principal of or interest on particular Securities (including, without limitation, pursuant to Section 8.1(b) hereof). When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(f) or (g) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. 35 Section 7.8 Replacement of Trustee. The Trustee may resign by so notifying the Company and the Holders in writing. The Holders of a majority in aggregate principal amount of the Securities Outstanding may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the Company's consent, which consent shall not be unreasonably refused or delayed. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10; (b) the Trustee is adjudged a bankrupt or an insolvent; (c) a receiver or other public officer takes charge of the Trustee or its Property; (d) the Trustee becomes incapable of acting; or (e) no Default or Event of Default has occurred and is continuing and the Company determines in good faith to remove the Trustee. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after any such successor Trustee takes office, the Holders of a majority in aggregate principal amount of the Securities Outstanding may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all Property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.7, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. No resignation or removal of the Trustee and no appointment of a successor Trustee, pursuant to this Article, shall become effective until the acceptance of appointment by the successor Trustee under this Section 7.8. If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least ten percent (10%) in principal amount of the Securities Outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder of Securities may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee which shall retain its claim pursuant to Section 7.7. 36 Section 7.9 Successor Trustee by Merger, etc.. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent, published annual report of condition. The Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. Section 7.11 Preferential Collection of Claims Against Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. ARTICLE 8. DISCHARGE OF INDENTURE Section 8.1 Termination of Company's Obligations. (a) The Company may terminate its obligations under this Indenture, except those obligations referred to in the last paragraph of Section 8.1(b), if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment Payments have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.3) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder. (b) The Company may terminate all its obligations under this Indenture except those obligations referred to in the immediately succeeding paragraph if (i) the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee or a Paying Agent, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee and any such Paying Agent, as trust funds in trust solely for the benefit of the Holders for that purpose, cash or U.S. Government Obligations maturing as to principal and interest, in such amounts and at such times as are sufficient without consideration of any reinvestment of any such interest to pay the then maximum possible principal of, and the then maximum possible interest and Special Interest with respect to, the Securities Outstanding to maturity, provided, that 37 the Trustee or such Paying Agent shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of said principal, interest and Special Interest, if any, with respect to the Securities. (ii) No Default or Event of Default with respect to the Securities shall have occurred and be continuing (A) on the date of such deposit described in clause (i), or (B) insofar as paragraph (f) of Section 6.1 is concerned, at any time during the period ending on the 91st day after the date of such deposit or, if longer, ending on the day following the expiration of the longest preference period applicable to the Company in respect of such deposit (it being understood that the condition in this clause (B) is a condition subsequent and shall not be deemed satisfied until the expiration of such period); (iii) Such termination and deposit described in clause (i) shall not (A) cause the Trustee to have a conflicting interest as defined in TIA Section 310(b) or otherwise for purposes of the TIA with respect to any securities of the Company, or (B) result in the trust arising from such deposit to constitute, unless it is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended; (iv) Such termination and deposit described in clause (i) shall not result in a breach or violation of or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound; (v) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such termination and deposit described in clause (i) and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such termination and deposit had not occurred; and (vi) The Company shall have delivered to the Trustee and any Paying Agent an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent and subsequent provided for above in this Section 8.1(b) have been complied with. Notwithstanding the foregoing paragraph, the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.1, 4.2, 4.8, 4.17, 7.7, 7.8, 8.2, 8.3, 8.4 and 10.4 shall survive until the Securities are no longer Outstanding. Thereafter, the Company's obligations in Sections 7.7 and 8.3 shall survive. (c) After the effectiveness of any termination of its obligations (except, in the case of Section 8.1(b), as set forth in the last paragraph thereof), under this Indenture in accordance with Section 8.1(a) or (b) above (such effective date, the "Indenture Discharge Date") and payment of all obligations of the Company accrued under Section 7.7, the Trustee upon Request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified above. 38 Section 8.2 Application of Trust Money. The Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.1, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of, and interest and Special Interest, if any, on, the Securities. The obligations of the Trustee and Paying Agent under this Section 8.2 shall survive, notwithstanding any termination or discharge of the Company's obligations pursuant to Section 8.1, until all Securities are paid in full. The Company shall pay and indemnify the Trustee or Paying Agent, as the case may be, against any tax, fee or other charge imposed on or assessed against the money or U.S. Government Obligations deposited pursuant to Section 8.1(b)(i) or the principal and interest received in respect thereof. Section 8.3 Repayment to Company. Anything in Section 8.1(b) to the contrary notwithstanding, the Trustee or Paying Agent, as the case may be, shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations (or other Property and any proceeds therefrom) held by it as provided in Section 8.1(b) which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee and to the Paying Agent, if applicable, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent termination under said Section 8.1(b). The Trustee and the Paying Agent shall Pay to the Company any Payments held by them for the payment of principal, interest and Special Interest, if any, that remains unclaimed for two (2) years after the Stated Maturity of such payment of principal, interest or Special Interest, as the case may be; provided, however, that the Trustee or such Paying Agent before making any Payment shall at the expense of the Company cause to be published once in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a newspaper of general circulation in the City of New York and mail to each Holder entitled to such money, notice that such Payments remain unclaimed and that, after a date specified therein which shall be at least thirty (30) days from the date of such publication or mailing, any unclaimed balance of such Payments then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to Payments must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. Section 8.4 Reinstatement. Anything herein to the contrary notwithstanding, (i) if the Trustee or Paying Agent, as the case may be, is unable to apply any money or U.S. Government Obligations in accordance with Section 8.1 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, or (ii) the deposited money or U.S. Government Obligations (or the proceeds thereof) are, for any reason (including any repayment to the Company under Section 8.3), insufficient in amount, then the Company's obligations under this Indenture shall be revived and reinstated as though no 39 deposit had occurred pursuant to Section 8.1 until such time as the Trustee, or Paying Agent, as the case may be, is permitted to apply all such money or U.S. Government Obligations and the proceeds of the investment thereof in accordance with Section 8.1, or the deficiency is cured in the manner set forth in Section 8.1(b), as the case may be. In such event, the Trustee will invest all such money or the proceeds from U.S. Government Obligations at the Company's request in other U.S. Government Obligations and, upon written notice from the Company, so long as there exists no Event of Default, to the extent and only to the extent provided in the first sentence of Section 8.3 return to the Company any money or U.S. Government Obligations deposited with the Trustee pursuant to Section 8.1. If the Company has made any payment of interest on, principal of, or Special Interest, if any, with respect to any Securities because of an event described in clause (i) of the first sentence of this Section 8.4, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent, as the case may be. ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1 Without Consent of Holders. The Company and the Trustee, as the case may be, may amend or supplement this Indenture, the Securities or the other Operative Documents without notice to or consent of any Securityholder: (a) to provide for uncertificated Securities in addition to or in place of certificated Securities; (b) to provide for the assumption of the Company's obligations to the Holders of the Securities in the case of a merger or consolidation or transfer of all or substantially all of the assets of the Company or otherwise to comply with Article 5; (c) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA; or (d) to cure any ambiguity, defect or inconsistency or to make any other change, in each case, provided that such action does not materially adversely affect the interests of any Securityholder. Section 9.2 With Consent of Holders. Subject to Section 6.7, the Company (by resolution of its Board of Directors if required) and the Trustee may amend or supplement this Indenture, the Securities or the other Operative Documents without notice to any Securityholder but with the written consent of the Required Holders. Subject to Sections 6.4, 6.5 and 6.7, the Required Holders may authorize the Trustee to, and the Trustee, subject to Section 9.6, upon such authorization shall, waive compliance by the 40 Company with any provision of this Indenture, the Securities or the other Operative Documents. However, an amendment, supplement or waiver, including a waiver pursuant to any provision of Section 6.4, may not without the consent of each Securityholder affected: (a) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (b) reduce the rate or extend the time for payment of interest on, or Special Interest, if any, with respect to, any Security; (c) reduce the principal of, or the amount of Special Interest, if any, with respect to (in each case, whether on redemption, repurchase or otherwise), or change the fixed maturity of any Security; (d) change the place of payment where, or the coin or currency in which, any Security (or the repurchase or redemption price thereof), interest thereon, or Special Interest, if any, with respect thereto is payable; (e) waive a default in the payment of the principal of, or interest on, or Special Interest with respect to any Security; (f) make any changes in Sections 2.8, 6.4, 6.7 or 6.10 or the third sentence of this Section 9.2 or change the time at which any Security may or must be redeemed hereunder; or (g) reduce any amount payable upon exercise of any repurchase rights thereof or otherwise change any repurchase right provision or impair the right of any Holder to institute suit for the enforcement of any such payment on any Security when due or adversely effect any repurchase rights hereunder. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders affected thereby a brief notice describing such amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. Section 9.3 Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. 41 Section 9.4 Revocation and Effect of Consents. Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (a) through (g) of Section 9.2. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; provided, however, that no amendment, supplement or waiver relating to any impairment of the right to receive principal, interest and Special Interest, if any, when due and payable consented to by a Holder shall be binding upon any subsequent Holder of a Security or a portion of a Security that evidences the same debt as the consenting Holder's Security unless notation with regard thereto is made upon such Security or the Security representing such portion. Section 9.5 Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Section 9.6 Trustee to Sign Amendments, etc. The Trustee shall be entitled to receive and rely upon an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article 9 has been duly authorized by the Company and is authorized or permitted by this Indenture and the other applicable Operative Documents. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.7 Effect of Supplement and/or Amendment. Upon the execution of any supplemental indenture and/or any such amendment or supplement to the other Operative Documents pursuant to the provisions of this Article 9, this Indenture and such Operative Documents shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture and the other Operative Documents of the Trustee, the Company 42 and the Holders of Securities shall thereafter be determined, exercised and enforced hereunder and thereunder subject in all respects to such modifications and amendments, and all terms and conditions of any such supplemental indenture and/or any such amendment or supplement to the other Operative Documents shall be and be deemed to be part of the terms and conditions of this Indenture and the other Operative Documents for any and all purposes. ARTICLE 10. SECURITY Section 10.1 Other Operative Documents. To secure the due and punctual payment, performance and observance of the Obligations, the Company has simultaneously with the execution of this Indenture entered into or caused to be assigned to the Trustee the other Operative Documents and has made an assignment and pledge of or otherwise transferred or caused to be transferred its right, title and interest in and to the Collateral to the Trustee pursuant to the other Operative Documents and in the manner and to the extent therein provided. Each Securityholder, by accepting a Security, agrees to all of the terms and provisions of each Operative Document (including, without limitation, the provisions providing for the release of Collateral), as the same may be in effect or may be amended from time to time pursuant to its terms and the terms hereof. The Company will execute, acknowledge and deliver to the Trustee such further assignments, transfers, assurances or other instruments as the Trustee may reasonably require or request, and will do or cause to be done all such acts and things as may be necessary or proper, or as may be reasonably required by the Trustee to assure and confirm to the Trustee the security interest in the Collateral contemplated hereby and by the other Operative Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Securities secured hereby, according to the intent and purposes herein expressed. Section 10.2 Opinions, Certificates and Appraisals. (a) The Company shall furnish to the Trustee promptly after the execution and delivery of this Indenture but prior to authentication of any Securities, Opinions of Counsel covering such jurisdictions as the Trustee may reasonably request either (i) stating that in the opinion of such Counsel the actions necessary to be taken under the Federal Aviation Act, the Uniform Commercial Code of all applicable jurisdictions, or otherwise with respect to the recording, registering and filing of this Indenture, the other Operative Documents, financing statements or other instruments to make effective and to perfect the Liens intended to be created by the Mortgage have been taken and reciting with respect to the security interests in the Collateral, the details of such actions, or (ii) stating that, in the opinion of such Counsel, no such action is necessary to make such Liens effective and perfected. (b) The Company shall furnish to the Trustee within one hundred and twenty (120) days after January 1 in each year beginning with January 1, 1999, an Opinion of Counsel, dated as of such date, either (i)(A) stating that, in the opinion of such Counsel, action has been taken 43 with respect to the recording, registering, filing, rerecording, re-registering and refiling (in this section, "recordation") of all supplemental indentures, financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Lien intended to be created by the Mortgage (if not then terminated pursuant to its terms) and the perfection thereof and reciting with respect to the security interests in the Collateral the details of such action or referring to prior Opinions of Counsel in which such details are given, and (B) stating that all financing statements and continuation statements have been executed and filed that are necessary as of such date and during the succeeding seventeen (17) months fully to maintain the Lien of the Securityholders and the Trustee intended to be created hereunder and under the Mortgage with respect to the security interest in the Collateral and the perfection thereof, or (ii) stating that, in the opinion of such Counsel, no such action is necessary to maintain such Lien and the perfection thereof. (c) The release of any Collateral from the terms of the Mortgage will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to the Mortgage or this Indenture, as applicable. To the extent applicable, the Company shall cause TIA ss. 314(d) relating to the release of Property or securities from the Lien of the Mortgage and relating to the substitution therefor of any Property or securities to be subjected to the Lien of the Mortgage, to be complied with. Any certificate or opinion required by TIA ss. 314(d) may be made by an Officer of the Company, except in cases where TIA ss. 314(d) requires that such certificate or opinion be made by an independent person. Section 10.3 Authorization of Actions to be Taken by the Trustee Under the Operative Documents. The Trustee may, in its sole discretion and without the consent of the Securityholders, take all actions it deems necessary or appropriate to (a) enforce any of the terms of the Operative Documents and (b) collect and receive any and all amounts payable in respect of the obligations of the Company hereunder and thereunder. Subject to the provisions of this Indenture and the other Operative Documents, the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of the other Operative Documents or this Indenture, and such suits and proceedings as it may deem expedient to preserve or protect its interest and the interests of the Securityholders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Securityholders or of the Trustee). Section 10.4 Payment of Expenses. On demand of the Trustee, the Company forthwith shall pay or satisfactorily provide for all reasonable expenditures incurred by the Trustee under this Article 10, and all such sums shall be a Lien upon the Collateral and shall be secured thereby. 44 Section 10.5 Authorization of Receipt of Funds by the Trustee Under the Operative Documents. The Trustee is authorized to receive any funds for the benefit of Securityholders distributed under the Operative Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture and the other Operative Documents. ARTICLE 11. MISCELLANEOUS Section 11.1 Conflict with Trust Indenture Act of 1939. If and to the extent that any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the TIA, such imposed duties shall control. Section 11.2 Notices; Waivers. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with (a) the Company shall be sufficient for every purpose hereunder if in writing (including telecopied communications) and made, given, furnished or filed by personal delivery or mailed by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to or with the Company at: Trans World Airlines, Inc. One City Centre 515 N. 6th Street St. Louis, Missouri 63101 Attention: Senior Vice President & General Counsel Telecopier No.: (314) 589-3267 (b) the Trustee shall be sufficient for every purpose hereunder if in writing (including telecopied communications) and made, given, furnished or filed by personal delivery or mailed by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to or with the Trustee at: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Services Telecopier No.: (801) 246-5053 45 or to any of the above parties at any other address or telecopier number subsequently furnished in writing by it to each of the other parties listed above. An affidavit by any person representing or acting on behalf of the Company or the Trustee as to such mailing, having any registry receipt required by this Section attached, shall be conclusive evidence of the giving of such demand, notice or communication. Any notice or communication mailed to a Holder shall be mailed to such holder by first-class mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, at such holder's address as it appears on the Register and shall be sufficiently given to such holder if so mailed within the time prescribed. Failure to mail a notice or send a communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. Notices to the Trustee or to the Company are deemed given only when received. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by the Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 11.3 Communications by Holders with Other Holders. Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA ss. 312(c). Section 11.4 Certificate and Opinion as to Conditions Precedent. Upon any Request or application by the Company to the Trustee to take any action under this Indenture or the other Operative Documents, the Company shall furnish to the Trustee: (a) an Officers' Certificate, and (b) an Opinion of Counsel, each stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, provided, that in the case of any such application or Request as to which the furnishing of an Officers' Certificate or Opinion of Counsel is specifically required by any provision of this Indenture or the other Operative Documents relating to such particular application or Request, no additional certificate or opinion, as the case may be, need be furnished. Section 11.5 Statements Required in Certificate or Opinion. Each certificate or opinion provided for and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture or the other Operative Documents shall include: (a) a statement that the Person signing such certificate or opinion has read such condition or covenant and the definitions herein or therein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to 46 enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and (d) a statement as to whether or not in the opinion of such Person, such condition or covenant has been complied with. Any certificate or opinion of an Officer or an engineer, insurance broker, accountant or other expert may be based, insofar as it relates to legal matters, upon a certificate or opinion of or upon representations by counsel, unless such officer, engineer, insurance broker, accountant or other expert knows that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon the certificate or opinion of or representations by an officer or officers of the Company stating that the information with respect to such factual matters is in possession of the Company, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous and insofar as it relates to legal matters in a jurisdiction or area of law beyond the expertise of such counsel, such counsel may rely upon the opinion of counsel qualified in such other jurisdiction or area of law. Wherever in this Indenture or the other Operative Documents in connection with any application, certificate or report to the Trustee it is provided that the Company shall deliver any document as a condition of the granting of such application or as evidence of the Company's compliance with any term hereof, it is intended that the truth and accuracy at the time of the granting of such application or at the effective date of such certificate or report, as the case may be, of the facts and opinions stated in such document shall in each such case be a condition precedent to the right of the Company to have such application granted or to the sufficiency of such certificate or report. Nevertheless, in the case of any such application, certificate or report, any document required by any provision of this Indenture or the other Operative Documents to be delivered to the Trustee as a condition of the granting of such application or as evidence of such compliance may be received by the Trustee as conclusive evidence of any statement therein contained and shall be full warrant, authority and protection to the Trustee acting on the faith thereof. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Whenever any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements or opinions or other instruments under this Indenture or any other Operative Document such Person may, but need not, consolidate such instruments into one. 47 Section 11.6 Rules by Trustee, Paying Agent, Registrar. The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Registrar or Paying Agent may make reasonable rules for their respective functions. Section 11.7 Holidays. In the event that any date for the payment of any amount due hereunder shall not be a Business Day, then (notwithstanding any other provision of this Indenture) such payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the due date, and no interest or Special Interest, if any, shall accrue from such due date to and including the next succeeding Business Day. Section 11.8 Governing Law; Waiver of Jury Trial. (a) The laws of the State of New York shall govern this Indenture and the Securities without regard to principles of conflict of laws. (b) The Company and the Trustee each waive any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise arising out of, connected with, related to or incidental to the relationship established between them in connection with this Indenture. Instead, any disputes resolved in court will be resolved in a bench trial without a jury. Section 11.9 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any agreement of the Company or any of its Subsidiaries which is unrelated to this Indenture, the Securities or the other Operative Documents. Any such agreement may not be used to interpret this Indenture. Section 11.10 No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. Section 11.11 Benefits of Indenture and the Securities Restricted. Subject to the provisions of Section 11.12 hereof, nothing in this Indenture or the Securities, express or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto and the Holders, any legal or equitable right, remedy or claim under or in respect of this Indenture or under any covenant, condition, or provision herein contained, all such covenants, conditions and provisions, subject to Section 11.12 hereof, being for the sole benefit of the parties hereto and of the Holders. 48 Section 11.12 Successors and Assigns. This Indenture and all obligations of the Company hereunder shall be binding upon the successors and permitted assigns of the Company, and shall, together with the rights and remedies of the Trustee hereunder, inure to the benefit of the Trustee, the Holders, and their respective successors and assigns. Any assignment in violation hereof shall be null and void ab initio. Section 11.13 Counterpart Originals. This Indenture may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. Section 11.14 Severability. The provisions of this Indenture are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Indenture in any jurisdiction, and a Holder shall have no claim therefor against any party hereto. Section 11.15 Effect of Headings. The Article and Section headings and the Table of Contents contained in this Indenture have been inserted for convenience of reference only, and are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Indenture. ARTICLE 12. RELEASE OF COLLATERAL Section 12.1 Release of Collateral. The Collateral securing the obligations evidenced by the Securities shall be subject to release from the Lien of this Indenture and the other Operative Documents from and to the extent provided by this Indenture and the other Operative Documents. 49 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. TRANS WORLD AIRLINES, INC. By: /s/ Michael J. Lichty ............................... Name:............................. Title:............................ FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee By: /s/ Arge Pavlos ............................... Name:............................. Title:............................ DEFINITIONS APPENDIX Appendix I To the Indenture between Trans World Airlines, Inc. and First Security Bank, National Association, as Trustee dated as of June 16, 1998 for the Company's 10 1/4% Senior Secured Notes due 2003 and the Aircraft Mortgage and Security Agreement dated as of an even date therewith TABLE OF CONTENTS Page Section 1. Definitions.................................. 1 Act......................................... 1 Affiliate................................... 1 Agent....................................... 1 Aircraft.................................... 1 Aircraft Sale Agreement..................... 1 Airframe.................................... 1 Applicable Percentage....................... 1 Bankruptcy Law.............................. 1 Bills of Sale............................... 2 Board of Directors.......................... 2 Business Day................................ 2 Capital Stock............................... 2 Capitalized Lease Obligation................ 2 Certificated Air Carrier.................... 2 Certifying Officer.......................... 2 Change in Control........................... 2 Code........................................ 3 Collateral.................................. 3 Common Stock................................ 3 Company..................................... 3 Corporate Trust Office...................... 3 Custodian................................... 3 Default..................................... 3 Definitions Appendix........................ 3 8% Preferred Stock.......................... 3 Employee Preferred Stock.................... 3 Engine...................................... 4 Equity Notes................................ 4 Equity Notes Indenture...................... 4 Equity Notes Trustee........................ 4 ERISA....................................... 4 Event of Default............................ 4 Exchange Act................................ 4 FAA......................................... 4 FAA Bill of Sale............................ 4 Federal Aviation Act........................ 4 GAAP........................................ 4 Global Security............................. 5 Holder or Holder of Securities.............. 5 Indebtedness................................ 5 Indenture................................... 5 (i) TABLE OF CONTENTS (Continued) Page Indenture Discharge Date.................... 5 Indenture Trustee........................... 5 Interest Payment Date....................... 5 Issue Date.................................. 5 Lazard...................................... 6 Legal Holiday............................... 6 Lien........................................ 6 Mandatory Redemption Amount................. 6 Mandatory Redemption Date................... 6 Mortgage.................................... 6 Mortgage Supplement......................... 6 9 1/4% Preferred Stock...................... 6 Obligations................................. 6 Offer to Purchase........................... 6 Officer..................................... 8 Officers' Certificate....................... 8 Operative Documents......................... 8 Opinion of Counsel.......................... 8 Outstanding or outstanding.................. 8 Owner Trustee............................... 9 Parts....................................... 9 Paying Agent................................ 9 Payment Date................................ 9 Payments.................................... 9 Permitted Liens............................. 9 Person...................................... 10 Preferred Stock............................. 10 principal................................... 10 Property.................................... 10 Record Date................................. 10 Register.................................... 10 Registrar................................... 11 Registration Rights Agreement............... 11 Replacement Engine.......................... 11 Request..................................... 11 Required Holders............................ 11 Sale OTP Amount............................. 11 SEC......................................... 11 Second Mortgage............................. 11 Securities.................................. 11 Securities Act.............................. 11 Securityholder.............................. 11 Seven Leasing............................... 11 (ii) TABLE OF CONTENTS (Continued) Page Significant Subsidiary...................... 12 Special Interest............................ 12 Special Record Date......................... 12 Stated Maturity............................. 12 Subsidiary.................................. 12 Taxes....................................... 12 Tender...................................... 12 TIA......................................... 12 Total Loss and Total Loss Date.............. 12 Total Loss OTP Amount....................... 12 Trust Agreement............................. 12 Trust Officer............................... 13 Trustee..................................... 13 TWA......................................... 13 U.S. or United States....................... 13 U.S. Government Obligations................. 13 Warranty Bill of Sale....................... 13 Section 2. Rules of Construction........................ 13 (iii) DEFINITIONS APPENDIX Section 1. Definitions. Unless the context otherwise requires, each of the terms included in this Section 1 shall have the respective meanings given in this Section 1 for all purposes of the Indenture and the other Operative Documents (including this appendix and any other appendices, exhibits or schedules to any thereof) and of such other agreements as may incorporate this appendix by reference except as otherwise specifically provided herein or therein. "Act" means the Federal Aviation Act. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent or co-Registrar or co-Paying Agent. "Aircraft" means the Airframe together with the two associated Engines identified by manufacturer's serial number in the Mortgage Supplement for the Airframe executed and delivered on the Issue Date, whether or not any of such Engines may at any time be installed on the Airframe or installed on any other airframe. "Aircraft Sale Agreement" means the Aircraft Sale and Note Purchase Agreement, made and entered into as of the 16th day of June, 1998, among the Company, the Owner Trustee, Seven Leasing and Lazard. "Airframe" means the Boeing Model 767-231 ETOPS airframe (excluding any Engines and any other engines, but including any and all Parts which may from time to time be incorporated or installed in, or attached to such airframe, and including any and all Parts removed therefrom so long as the removed Parts remain subject to the Lien of the Mortgage under the terms thereof) purchased by the Company under the Aircraft Sale Agreement and identified by the FAA registration number and manufacturer's serial number in the Mortgage Supplement executed and delivered on the Issue Date. "Applicable Percentage" means (i) with respect to any amendment, supplement or waiver of the Indenture or any other Operative Document that would (A) terminate the Lien of the Mortgage with respect to any Collateral or permit the release of any Collateral (other than releases permitted by the applicable Operative Document, which releases shall not require any consent of the Holders) or permit the creation of any Lien on any Collateral (other than Permitted Liens), (B) increase the aggregate principal amount of Securities that may be issued under the Indenture or (C) modify this definition, 66 2/3%, and (ii) otherwise, a majority. "Bankruptcy Law" has the meaning provided in Section 6.1 of the Indenture. 2 "Bills of Sale" means the FAA Bill of Sale and the Warranty Bill of Sale. "Board of Directors" means the Board of Directors of the Company or any committee of such board duly authorized to act in respect of any particular matter. "Business Day" means each day which is not a Legal Holiday. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligation" means, as applied to any Person for any period, an obligation of such Person to pay rent or other amounts under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP. "Certificated Air Carrier" means a United States "air carrier" within the meaning of the Act, holding an air carrier operating certificate issued pursuant to chapter 447 of the Act and of the type referred to in 11 U.S.C. ss. 1110, or if such certification shall cease to be available, a carrier of comparable status under the laws of the United States then in force. "Certifying Officer" means an Officer or an assistant secretary of the Company. "Change in Control" means the occurrence of any of the following events: (i) any person (including any entity or group deemed to be a "person" under Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) is or becomes the direct or indirect beneficial owner (as determined in accordance with Rule 13d-3 under the Exchange Act) of shares of the Company's Capital Stock representing greater than 50% of the total voting power of all shares of Capital Stock of the Company entitled to vote in the election of directors of the Company under ordinary circumstances or to elect a majority of the Board of Directors of the Company, (ii) the Person then constituting the "Company" under the Indenture sells, transfers or otherwise disposes of all or substantially all of its assets (regardless of whether such Person thereupon ceases to constitute the "Company" under the Indenture pursuant to Section 5.2 thereof), (iii) when, during any period of 12 consecutive months after the date of original issuance of the Securities, individuals who at the beginning of any such 12-month period constituted the Board of Directors (together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of majority of the directors still in office entitled to vote with respect to such nomination who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, but excluding any of the individuals who at the beginning of such 12-month period constituted such Board but who ceased to be a member of the Board pursuant to the Company's mandatory retirement policy as in effect as of the Issue Date), cease for any reason to constitute a majority of the Board of Directors then in office or (iv) the date of the consummation of the merger or consolidation of the Person then constituting the "Company" under the Indenture with another 3 corporation where the stockholders of such Person, immediately prior to the merger or consolidation, would not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to 50% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate class vote) to which all stockholders of the corporation issuing cash or securities in the merger or consolidation would be entitled in the election of directors or where members of the Board of Directors of the Person then constituting the "Company" under the Indenture, immediately prior to the merger or consolidation, would not, immediately after the merger or consolidation, constitute a majority of the board of directors of the corporation issuing cash or securities in the merger or consolidation. "Code" means the United States Internal Revenue Code of 1986, as amended from time to time, or any similar legislation of the United States enacted to supersede, amend or supplement such Code, and any reference to a provision or provisions of the Code shall also mean and refer to any successor provision or provisions, however designated or distributed. "Collateral" has the meaning specified in Section 2.1 of the Mortgage. "Common Stock" includes any stock of any class of the Company which has no preference in respect to dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company; initially it refers to the common stock, $0.01 par value, of the Company. "Company" means the party named as such in the Indenture or any obligor on the Securities until a successor replaces it pursuant to the Indenture and thereafter means the successor. "Corporate Trust Office" when used with respect to the Trustee means the office of the Trustee at which at any particular time its corporate trust business is administered and which, at the Issue Date, is located at First Security Bank, National Association, as Trustee, 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Services. "Custodian" has the meaning provided in Section 6.1 of the Indenture. "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "Definitions Appendix" means this Definitions Appendix attached as Appendix I to the Indenture and the Mortgage and constituting a part of the Indenture and each other Operative Document. "8% Preferred Stock" means the 8% Cumulative Convertible Exchangeable Preferred Stock of the Company. "Employee Preferred Stock" means the IFFA Preferred Stock, the ALPA Preferred Stock and the IAM Preferred Stock of the Company. 4 "Engine" means (i) each of the Pratt & Whitney Model JT9D-7R4D aircraft engines identified by manufacturer's serial number in the Mortgage Supplement executed and delivered on the Issue Date, so long as a Replacement Engine shall not have been substituted therefor pursuant to the Mortgage, and (ii) each Replacement Engine, so long as another Replacement Engine shall not have been substituted therefor pursuant to the Mortgage, whether or not such engine or Replacement Engine, as the case may be, is from time to time installed on the Airframe or installed on another airframe, and including, in each case all Parts incorporated or installed in or attached thereto and any and all Parts removed therefrom so long as such Parts remain subject to the Lien of the Mortgage under the terms thereof. "Equity Notes" means the 10 1/4% Mandatory Conversion Equity Notes due 1999 of the Company issued concurrently with the Securities. "Equity Notes Indenture" means the Indenture dated as of the Issue Date between the Company and First Security Bank, National Association, as trustee, pursuant to which the Company is issuing the Equity Notes. "Equity Notes Trustee" means First Security Bank, National Association, as trustee under the Equity Notes Indenture, and its successors and assigns in such capacity. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default" has the meaning provided in Section 6.1 of the Indenture. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "FAA" means the Federal Aviation Administration or similar regulatory authority established to replace it. "FAA Bill of Sale" means the bill of sale for the Aircraft on AC Form 8050-2 or such other form as may be acceptable to the FAA for recordation with it, executed by the Owner Trustee in favor of the Company. "Federal Aviation Act" means Title 49 of the United States Code, "Transportation," as amended from time to time, or any similar legislation of the United States enacted in substitution or replacement thereof. In the event there is enacted any legislation replacing, modifying or repealing, in whole or in part, the Federal Aviation Act, then the term "certificated," when used with reference to the Federal Aviation Act or any particular provision thereof, shall mean authorized to provide, or not prohibited from providing, air transportation services. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other 5 statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Global Security" means a Security that evidences all or part of the Securities of any series and bears the legend set forth in Exhibit 1 to the Rule 144A/Regulation S Appendix to the Indenture. "Holder" or "Holder of Securities" means the Person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, with respect to any Person at any date, without duplication, (a) all indebtedness, obligations and other liabilities (contingent or otherwise) of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (b) all obligations and other liabilities (contingent or otherwise) of such Person evidenced by bonds, notes or other similar instruments, (c) all obligations and other liabilities (contingent or otherwise) of such Person in respect of letters of credit or other similar instruments (and reimbursement obligations with respect thereto), (d) all obligations and other liabilities (contingent or otherwise) of such Person to pay the deferred and unpaid purchase price of property or services (other than any such obligations that represent trade payables or accrued expenses incurred in the ordinary course of business), (e) all Capitalized Lease Obligations of such Person, (f) all Indebtedness of others secured by a Lien on any asset or assets of such Person, whether or not such Indebtedness is assumed by such Person (and, if not assumed, such Indebtedness shall be limited to the fair market value of such asset or assets as determined on the date such Indebtedness was incurred), and (g) all Indebtedness of others guaranteed by such Person to the extent of such guarantee. 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 of such Person for any such contingent obligations at such date. A change in GAAP that results in an obligation of the Company existing at the time of such change becoming Indebtedness shall not be deemed an incurrence of such Indebtedness. "Indenture" means the Indenture dated as of the Issue Date between the Company and the Trustee, under which the Securities are issued, as amended or supplemented from time to time. "Indenture Discharge Date" means the date of the effectiveness of the termination of the Company's obligations under the Indenture pursuant to Section 8.1(a) or (b) thereof. "Indenture Trustee" means the Trustee. "Interest Payment Date" means June 15 and December 15 of each year during which any Security is Outstanding (commencing December 15, 1998) and the date on which the Securities mature, if different. "Issue Date" means June 16, 1998 (the date on which the Securities are originally issued). 6 "Lazard" means Lazard Freres & Co. LLC, a New York limited liability company. "Legal Holiday" means a Saturday, Sunday or any other day on which banks located in New York City or the city and state of the Trustee's Corporate Trust Office as of the Issue Date are authorized or obligated by law to remain closed. "Lien" means any conveyance in trust, assignment, mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Mandatory Redemption Amount" has the meaning provided in Section 3.2 of the Indenture. "Mandatory Redemption Date" has the meaning provided in Section 3.2 of the Indenture. "Mortgage" means the Aircraft Mortgage and Security Agreement, dated as of the Issue Date, between the Company and the Trustee in substantially the form attached to the Indenture as Exhibit A. "Mortgage Supplement" means (i) the Mortgage and Security Agreement Supplement executed and delivered on the Issue Date for the Aircraft, in substantially the form attached to the Mortgage as Exhibit A, which describes with particularity the Airframe and Engines associated with the Aircraft, (ii) each other Mortgage and Security Agreement Supplement from time to time executed and delivered, in substantially the form attached to the Mortgage as Exhibit A, which shall describe with particularity any Replacement Engine and (iii) any other supplement to the Mortgage from time to time executed and delivered in accordance with the provisions of the Mortgage or any other Operative Document. "9 1/4% Preferred Stock" means the 9 1/4% Cumulative Convertible Exchangeable Preferred Stock of the Company. "Obligations" has the meaning provided in Section 2.1 of the Mortgage. "Offer to Purchase" means an offer to purchase all or a portion, as the case may be, of the Securities by the Company from the Holders commenced by the mailing (by first class mail, postage prepaid) by the Company (or, if requested by the Company on at least five Business Days' prior notice to the Trustee and at the Company's expense, by the Trustee) of a notice to each Holder (and, if mailed by the Company, to the Trustee) at such Holder's address appearing in the Register, stating: (i) the covenant pursuant to which the offer is being made and that all Securities validly tendered will be accepted for payment; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Security not tendered will continue to accrue interest and Special Interest (if any) pursuant to its terms (including, if such Offer to Purchase is being made pursuant to Section 4.12(c)(i)(A) of the Indenture, a statement that the rate of interest on such Security is subject to increase in accordance with the provisions of such Section); (iv) that, unless the Company defaults in the payment of the purchase price on 7 the Payment Date, any Security accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest or Special Interest (if any) on and after the Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Offer to Purchase will be required to surrender the Security, together with the form entitled "Option of the Holder to Elect Purchase" attached to or on the reverse side of the Security completed, to the Paying Agent at the address specified in the notice at any time beginning with the date of such notice but prior to the close of business on the Business Day immediately preceding the Payment Date, and such Holder shall be entitled to receive from the Paying Agent a non-transferable receipt of deposit evidencing such deposit; (vi) that, unless the Company defaults in making the payment of the purchase price or shall otherwise, in its sole discretion, consent thereto, Holders will be entitled to withdraw their election only if the Trustee receives, not later than the close of business on the fifth Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only in part will be promptly issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered (which new Securities, if such Offer to Purchase is being made pursuant to Section 4.12(c)(i)(A) or 4.12(d) of the Indenture, will cease to be secured by the Collateral); provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall place such notice in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a financial newspaper of general circulation in New York City. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. On the Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted together with an Officers' Certificate specifying the Securities or portions thereof accepted for payment by the Company. The Trustee shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate, and the Company shall promptly execute and mail (or cause to be mailed) to such Holders a new Security equal in principal amount to any unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof; provided, further, that if the Payment Date is between a regular Record Date and the next succeeding Interest Payment Date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest and Special Interest, if any, payable on such succeeding Interest Payment Date on the principal amount to be repurchased, and the interest on the principal amount of the Security being repurchased, and Special Interest, if any, with respect thereto, will be paid on such next succeeding Interest Payment Date to the registered holder of such Security on the immediately preceding Record Date. A Security repurchased on an Interest Payment Date need not be accompanied by any such payment, and the interest on the principal amount of the Security being repurchased and Special Interest, if any, with respect thereto, will be paid on such Interest Payment Date to the registered holder of such Security on the corresponding Record Date. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after 8 the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Securities pursuant to an Offer to Purchase. Both the notice of the Company and the notice of the Holder having been given as specified above, the Securities so to be repurchased shall, on the Payment Date become due and payable at the purchase price applicable thereto and from and after such date (unless the Company shall default in the payment of such purchase price) such Securities shall cease to bear interest or Special Interest (if any). If any Security shall not be paid upon surrender thereof for repurchase, the principal shall, until paid, bear interest and Special Interest (if any) from the Payment Date at the rate and in accordance with the provisions set forth in such Security and the Indenture. Any Security which is to be submitted for repurchase only in part shall be delivered pursuant to the above provisions with (if the Company or Trustee so requires) due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing. "Officer" means the Chairman of the Board, the President, any Vice President of any grade, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by an Officer and by a Certifying Officer satisfying the requirements of Sections 11.4 and 11.5 of the Indenture. "Operative Documents" means the Indenture, the Mortgage and the Mortgage Supplements. "Opinion of Counsel" means a written opinion from the General Counsel of the Company, legal counsel to the Company or another legal counsel who is reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with Sections 11.4 and 11.5 of the Indenture. The counsel may be an employee of the Company. The acceptance by the Trustee (without written objection to the Company during the fifteen (15) Business Days following receipt) of, or its action on, an opinion of counsel not specifically referred to above shall be sufficient evidence that such counsel is acceptable to the Trustee. "Outstanding" or "outstanding" when used with respect to Securities or a Security, means all Securities theretofore authenticated and delivered under the Indenture, except: (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Securities for which payment has been deposited with the Trustee or any Paying Agent in trust other than deposits pursuant to Section 8.1 of the Indenture; and (c) Securities which have been paid, or for which other Securities shall have been authenticated and delivered in lieu thereof or in substitution therefor pursuant to the terms of 9 Section 2.7 of the Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by holders in due course. A Security does not cease to be Outstanding because the Company or one of its Affiliates holds the Security; provided, however, that in determining whether the Holders of the requisite aggregate principal amount of Securities Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, Section 2.8 of the Indenture shall be applicable. "Owner Trustee" means First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association), not in its individual capacity (except as otherwise expressly set forth) but as trustee under the Trust Agreement. "Parts" means any and all appliances, parts, spare parts, instruments, appurtenances, accessories, furnishings, seats and other equipment of whatever nature (other than Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine, or which have been removed therefrom but which remain subject to the Lien of the Mortgage in accordance with the terms thereof, exclusive of any items (i) permitted by the Mortgage to be leased by the Company in the ordinary course of business from third parties (and installed without discrimination with respect to other Boeing Model 767-231 ETOPS aircraft (or improved models) owned or operated by the Company) and (ii) not required in the navigation of the Aircraft. The terms "spare parts" and "appliances" (as used in this definition) shall include, but not be limited to, the definitions assigned to those terms by Section 40102 of Title 49 of the United States Code as amended from time to time or any recodification thereof or any regulation of the FAA. "Paying Agent" has the meaning provided in Section 2.3 of the Indenture, except that for the purposes of Article 8 of the Indenture and any Offer to Purchase, the Paying Agent shall not be the Company. "Payment Date" with respect to any Offer to Purchase, has the meaning specified in the definition herein of Offer to Purchase. "Payments" means such monies as the Company shall cause to be delivered to the Trustee or any Paying Agent for the purpose of paying principal, purchase price or redemption price of, or interest on, or Special Interest with respect to, the Securities on any Interest Payment Date, Payment Date, redemption date or acceleration; and "Pay" means paying such monies. "Permitted Liens" shall mean any of the following Liens: (a) Liens in favor of the Trustee arising by reason of the Mortgage or any other Operative Document and Liens in favor of the Equity Notes Trustee arising by reason of the Second Mortgage or any other Operative Document (as defined in the Equity Notes Indenture); (b) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being contested by the Company in good 10 faith by appropriate proceedings and for which adequate reserves have been established if required in accordance with GAAP, and which Lien presents no material risk of sale, forfeiture or loss of any Collateral; (c) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the Company's ordinary course of business for sums not overdue or being contested by the Company in good faith by appropriate proceedings and for which adequate reserves have been established if required in accordance with GAAP, and which Lien presents no material risk of sale, forfeiture or loss of any Collateral; (d) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders and statutory obligations entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (e) judgment Liens (so long as the related judgments do not, individually or in the aggregate, constitute an Event of Default) in existence less than sixty (60) days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full by insurance; (f) Liens on the Aircraft in favor of a permitted lessee of the Aircraft which result solely from the lease (so long as it is a permitted lease under the Mortgage) on the Aircraft; and (g) Liens on the Aircraft which are "Permitted Liens" arising under, and defined by definitions substantially similar to above subparagraphs (b) and (c) in, the lease (if any) for the Aircraft; provided, however, that such lease is permitted under the Mortgage. "Person" means any individual, corporation, partnership, limited liability issuer, joint venture, association, joint-stock issuer, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock" as applied to the Capital Stock of any Person means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, present or future, or tangible or intangible. "Record Date" means the fifteenth (15th) day preceding any Interest Payment Date, whether or not a Business Day. "Register" has the meaning provided in Section 2.3 of the Indenture. 11 "Registrar" has the meaning provided in Section 2.3 of the Indenture. "Registration Rights Agreement" means the Registration Rights Agreement, made and entered into as of the Issue Date, by and among the Company, the Owner Trustee and Lazard, relating to the Securities. "Replacement Engine" means a Pratt & Whitney Model JT9D-7R4D aircraft engine (or engine of the same or another manufacturer of a comparable or an improved model and suitable for installation and use on the Airframe) (i) which has a value, utility and remaining useful life at least equal to the Engine which it is replacing, assuming such Engine was of the value and utility required by the terms of the Mortgage; provided that any such engine shall be of the same make and model as the other engine then installed on the Airframe, shall be an engine model then being utilized by the Company on other Boeing Model 767-231 ETOPS aircraft operated by the Company and, for so long as such engine has been operated by the Company, shall have been maintained, serviced, repaired and overhauled in substantially the same manner as the Company maintains, services, repairs and overhauls similar engines utilized by the Company, and (ii) which shall have been made subject to the Lien of the Mortgage pursuant to Section 2 and Section 3.3 of the Mortgage. "Request" means a written request for the action therein specified signed on behalf of the Company by any Officer and delivered to the Trustee. Each Request shall be accompanied by an Officers' Certificate if and to the extent required by Section 11.4 of the Indenture. "Required Holders" means from time to time the Holders of the Applicable Percentage in principal amount of the Securities then Outstanding. "Sale OTP Amount" has the meaning provided in Section 4.12 of the Indenture. "SEC" means the Securities and Exchange Commission and any government agency succeeding to its functions. "Second Mortgage" means the Aircraft Second Mortgage and Security Agreement, dated as of the Issue Date, between the Company and the Equity Notes Trustee, securing, among other things, the obligations of the Company under the Equity Notes Indenture. "Securities" means the "Securities" (as defined in the preamble to the Indenture and includes the Company's 10 1/4% Senior Secured Notes due 2003), as amended or supplemented from time to time, that are issued under the Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Seven Leasing" means 767 Leasing HY, LLC, a Delaware limited liability company. 12 "Significant Subsidiary" means any Subsidiary which is a Significant Subsidiary within the meaning of Article I of Regulation S-X under the Exchange Act. "Special Interest" has the meaning assigned to such term in the Registration Rights Agreement. "Special Record Date" has the meaning provided in Section 2.1 of the Indenture. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including membership or partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. "Taxes" means any and all fees (including, without limitation, license, documentation and registration fees), taxes (including, without limitation, income, gross receipts, sales, rental, use, turnover, value-added, property (tangible and intangible), excise and stamp taxes), levies, imposts, duties, recording charges or fees, charges, assessments or withholdings of any nature whatsoever, together with any and all assessments, penalties, additions to tax, fines or interest thereon. "Tender" means, with respect to any Security, the effective tender of such Security (in whole or in part) for repurchase in accordance with the provisions of the Indenture. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Total Loss" and "Total Loss Date" have the meanings provided in Section 1.1 of the Mortgage. "Total Loss OTP Amount" has the meaning provided in Section 4.12 of the Indenture. "Trust Agreement" means the Trust Agreement N607TW, dated as of March 28, 1995, between Seven Leasing, as assignee of ING Lease Delaware, Inc. (f/k/a Internationale Nederlanden Aviation Lease Delaware, Inc.), and First Security Bank, National Association 13 (f/k/a First Security Bank of Utah, National Association), not in its individual capacity, except as expressly stated therein, but solely as trustee thereunder. "Trust Officer" means any officer in the corporate trust department of the Trustee, or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Trustee" means the party named as such in the Indenture until a successor replaces it in accordance with the provisions of the Indenture and thereafter means the successor. "TWA" means the Company. "U.S." or "United States" means the United States of America. "U.S. Government Obligations" means securities which are (i) direct obligations of the United State government or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States government, are full faith and credit obligations of the United States government and are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust Company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "Warranty Bill of Sale" means the warranty (as to title) bill of sale covering the Aircraft executed by the Owner Trustee in favor of the Company. Section 2. Rules of Construction. Unless the context otherwise requires, the following rules of construction shall apply to all purposes of the Indenture and the other Operative Documents (including this appendix) and of such agreements as may incorporate this appendix by reference. (a) a term has the meaning assigned to it; (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms; (c) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) all terms used in Article 9 of the Uniform Commercial Code as in effect in the State of New York that are used but not defined herein shall have the meaning assigned to such terms therein; 14 (e) references to a specific Person shall include the Person and (except as limited by any agreement by which such Person is bound) the successors and assigns of such Person; (f) references to "applicable laws" shall include statutes, ordinances, rules, regulations, court and administrative decisions and conditions, restrictions and limitations in licenses, permits, approvals and authorizations issued or granted by federal, state or local United States or foreign governmental bodies and agencies; (g) unless otherwise specified in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including", and the words "to" and "until" each mean "to but excluding"; (h) words in the singular include the plural, and words in the plural include the singular; (i) provisions apply to successive events and transactions; (j) "herein", "hereto" and other words of similar import in any agreement refer to that agreement as a whole and not to any particular Article, Section or other subsection of that agreement; (k) unless otherwise specified, all references in any Operative Document to Sections, Articles, Exhibits, Appendices and Schedules are to Sections of, Articles of, Exhibits to, Appendices to and Schedules to such Operative Document; (l) all accounting terms used herein and not expressly defined shall have the meanings given to them in accordance with GAAP; and (m) unless otherwise specified, references in this Definitions Appendix to any instrument, contract, agreement or other document shall be deemed to be references to such instrument, agreement or other document as it may be amended, restated, supplemented or otherwise modified from time to time pursuant to and as permitted by the terms thereof, whether or not so stated in any particular definition. RULE 144A/REGULATION S APPENDIX Appendix II To the Indenture between Trans World Airlines, Inc. and First Security Bank, National Association, as Trustee dated as of June 16, 1998 for the Company's 10 1/4% Senior Secured Notes due 2003 RULE 144A/REGULATION S APPENDIX FOR INITIAL ISSUANCE AND FOR SUBSEQUENT OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A)(1), (2), (3) or (7)) AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S PROVISIONS RELATING TO INITIAL SECURITIES, ------------------------------------------ PRIVATE EXCHANGE SECURITIES --------------------------- AND EXCHANGE SECURITIES ----------------------- 1. Definitions 1.1 Definitions For the purposes of this Appendix the following terms shall have the meanings indicated below: "Definitive Security" means a certificated Security bearing the restricted securities legend set forth in Section 2.3(d) and which is held by an IAI. "Depository" means The Depository Trust Company, its nominees and their respective successors. "Exchange Securities" means the 10 1/4% Senior Secured Notes due 2003 to be issued pursuant to the Indenture in connection with a Registered Exchange Offer pursuant to the Registration Rights Agreement. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Initial Purchaser" means Lazard. "Initial Securities" means the 10 1/4% Senior Secured Notes due 2003, issued under the Indenture on or about the date of the Indenture. "Lazard" means Lazard Freres & Co. LLC. "Owner Trustee" means First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association), not in its individual capacity (except as otherwise expressly set forth) but as trustee under the Trust Agreement N607TW, dated as of March 28, 1995, between 767 Leasing HY, LLC, as assignee of ING Lease Delaware, Inc. (f/k/a Internationale Nederlanden Aviation Lease Delaware, Inc.) and First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association), not in its individual capacity, except as expressly stated therein, but solely as trustee thereunder. 2 "Private Exchange" means the offer by the Company, pursuant to the Registration Rights Agreement, to Lazard to issue and deliver to Lazard, in exchange for the Initial Securities held by Lazard as part of its initial distribution, a like aggregate principal amount of Private Exchange Securities. "Private Exchange Securities" means the 10 1/4% Senior Secured Notes due 2003 to be issued pursuant to the Indenture to Lazard in a Private Exchange. "QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. "Registered Exchange Offer" means the offer by the Company, pursuant to the Registration Rights Agreement, to certain Holders of Initial Securities to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Rights Agreement" means the Registration Rights Agreement, made and entered into as of June 16, 1998, among the Company, the Owner Trustee and Lazard relating to the Registered Exchange Offer. "Sale Agreement" means the Aircraft Sale and Note Purchase Agreement, made and entered into as of the 16th day of June, 1998, among the Company, the Owner Trustee, 767 Leasing HY, LLC and Lazard. "Securities" means the Initial Securities, the Exchange Securities and the Private Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository), or any successor person thereto and shall initially be the Trustee. "Shelf Registration Statement" means the registration statement of the Company, in connection with the offer and sale of Initial Securities or Private Exchange Securities, pursuant to the Registration Rights Agreement. "Transfer Restricted Securities" means Definitive Securities and Securities that bear or are required to bear the legend set forth in Section 2.3(d) hereto. 3 1.2 Other Definitions Defined in this Rule 144A/Regulation S -------------------------------------- Term Appendix in the Section indicated below - ---- --------------------------------------- "Agent Members"..............................................2.1(b) "Global Security"............................................2.1(b) "Indenture".....................................................2.2 "Regulation S"...............................................2.1(a) "Rule 144A"..................................................2.1(a) Unless otherwise indicated, all Section numbers referenced herein are to Sections of this Rule 144A/Regulation S Appendix. 2. The Securities. 2.1 Form and Dating. The Initial Securities are being offered and sold by the Company pursuant to the Sale Agreement. (a) Global Securities. Initial Securities offered and sold to a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") as provided in the Sale Agreement, shall be issued initially in the form of one permanent global Security in definitive, fully registered form without interest coupons with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto (the "144A Global Security"), which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Trustee, at its New York office, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the 144A Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. Initial Securities offered and sold in reliance on Regulation S under the Securities Act ("Regulation S"), as provided in the Sale Agreement, shall be issued initially in the form of one permanent global Security in definitive, fully registered form without interest coupons with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto (the "Regulation S Global Security"), which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Trustee, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or the nominee of the Depository duly executed by the Company and authenticated by the Trustee as hereinafter provided. On or prior to the 40th day after the later of the commencement of the offering and the Closing Date (as defined in the Sale Agreement), beneficial interests in the Regulation S Global Security may only be held for the accounts of designated agents holding on behalf of Morgan Guaranty Trust Company of New York, Brussels office, as operator of the 4 Euroclear System ("Euroclear") or Cedel Bank, societe anonyme ("Cedel"). Following such 40 day period, beneficial interests in the Regulation S Global Security may be held through Euroclear, Cedel or other participants having accounts at the Depository. The aggregate principal amount of the Regulation S Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee, as the case may be, as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to the 144A Global Security and the Regulation S Global Security (each a "Global Security") deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one Global Security in respect of Initial Securities issued pursuant to Rule 144A and one Global Security in respect of Initial Securities issued pursuant to Regulation S that (a) shall each be registered in the name of the Depository for such Global Security or the nominee of such Depository and (b) shall each be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository. Members of, or participants in, the Depository ("Agent Members") shall have no rights under the Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under any Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of any Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Certificated Securities. Except as provided in this Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in any Global Security will not be entitled to receive physical delivery of certificated Securities. Purchasers of Initial Securities who are IAIs and are neither QIBs nor non-U.S. persons within the meaning of Regulation S will receive Definitive Securities; provided, however, that upon transfer of such Definitive Securities to a QIB in reliance on Rule 144A or a non-U.S. person in reliance on Regulation S, such Definitive Securities will, unless the applicable Global Security has previously been exchanged for Definitive Securities, be exchanged for an interest in the applicable Global Security pursuant to the provisions of Section 2.3. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) Initial Securities for original issue on the Issue Date in an aggregate principal amount of $14,500,000 and (2) Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to the Registration Rights Agreement, for a like principal amount of Initial Securities, in each case, upon a written order of the Company 5 signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. The aggregate principal amount of Securities Outstanding at any time may not exceed $14,500,000 except as provided in Section 2.7 of the Indenture of which this Rule 144A/Regulation S Appendix forms a part (as it may be amended, restated, supplemented or otherwise modified from time to time, the "Indenture"). 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Securities. When Definitive Securities are presented to the Registrar or a co-Registrar with a request: (i) to register the transfer of such Definitive Securities; or (ii) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange shall be accompanied by a duly executed Assignment Form in the form attached to Exhibit 1 hereto. (b) Restrictions on Transfer of a Definitive Security for a Beneficial Interest in a Global Security. A Definitive Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (i) certification that such Definitive Security is being transferred (x) to a QIB in accordance with Rule 144A or (y) to a non-U.S. person in accordance with the provisions of Regulation S; and (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to the applicable Global Security to reflect an increase in the aggregate principal amount of the Securities represented by such Global Security, such instructions to contain information regarding the Depository account to be credited with such increase, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of Securities represented by the applicable Global Security to be increased by the aggregate principal amount of the Definitive Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the applicable Global Security equal to the principal amount of the Definitive Security so canceled. If no Global Security is then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order 6 of the Company in the form of an Officers' Certificate, a new Global Security in the appropriate principal amount. (c) Transfer and Exchange of a Global Security. (i) The transfer and exchange of a Global Security or beneficial interests therein shall be effected through the Depository, in accordance with the Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the applicable Global Security. The Registrar shall, in accordance with such instructions, instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the applicable Global Security and to debit the account of the Person making the transfer the beneficial interest in the applicable Global Security being transferred. (ii) Notwithstanding any other provisions of this Rule 144A/Regulation S Appendix (other than the provision set forth in Section 2.4 hereof), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iii) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 hereof or Section 2.9 of the Indenture prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Legends. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Security certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT 7 FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE RESTRICTION TERMINATION DATE WHICH IS THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THESE SECURITIES AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THESE SECURITIES (OR ANY PREDECESSOR OF THESE SECURITIES) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE, OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED TO OR ON THE REVERSE SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED 8 UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE." "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." Each Regulation S Global Security will also bear the following additional legend: ON OR PRIOR TO THE 40TH DAY AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE, TRANSFERS OF INTERESTS IN THE REGULATION S GLOBAL SECURITY TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE SECURITIES ACT. (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security that is represented by a Global Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on such Rule 144. (iii) After a transfer of any Initial Securities or Private Exchange Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all requirements pertaining to legends on such Initial Security or such Private Exchange Security will cease to apply, the requirements requiring any such Initial Security or such Private Exchange Security issued to certain Holders to be issued in global form will cease to apply, and a certificated Initial Security or Private Exchange Security without legends will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities upon exchange of such transferring Holder's certificated Initial Security or Private Exchange Security or directions to transfer such Holder's interest in the relevant Global Security, as applicable. 9 (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will cease to apply and certificated Initial Securities with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated or global form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. (v) Upon consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply, and Private Exchange Securities in definitive form with the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange. (e) Cancellation or Adjustment of a Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for certificated or Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for certificated or Definitive Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to the Custodian, to reflect such reduction. (f) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Securities, Definitive Securities and any Global Security at the Registrar's or co-Registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessment or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.9, 3.7, 4.15 or 9.5 of the Indenture). (iii) The Registrar or co-Registrar shall not be required to register the transfer or exchange of any certificated or Definitive Security tendered for repurchase in whole or in part pursuant to an Offer to Purchase (as defined in Appendix I to the Indenture), except the unredeemed portion of any certificated or Definitive Security being repurchased in part and except to the Company. 10 (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-Registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of, premium, if any, or, interest on, or Special Interest, if any, with respect to, such Security and for all other purposes whatsoever, whether or not such Security is overdue and none of the Company, the Trustee, the Paying Agent, the Register or any co-Registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of the Indenture shall evidence the same debt and shall be entitled to the same benefits under the Indenture as the Securities surrendered upon such transfer or exchange. (g) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of any Global Security, a member of or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of each Global Security). The rights of beneficial owners in each Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under the Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in a Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of the Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Certificated Securities. (a) All or any portion of any Global Security deposited with the Depository or with the Trustee as custodian for the Depository pursuant to Section 2.1 shall be transferable to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such certificated security, in exchange for such interest in the applicable Global Security, only if such transfer complies with Section 2.3 and (i) the 11 Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or if at any time such Depository ceases to be a "clearing agency" registered under the Exchange Act, or (ii) an Event of Default (as defined in the Indenture) has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing such Global Security or Global Securities shall be exchangeable. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository to the Trustee located in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of certificated Initial Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof (except that any Global Security may be issued in a different denomination) and registered in such names as the Depository shall direct. Any certificated Initial Security delivered in exchange for an interest in a Global Security shall, except as otherwise provided by Section 2.3, bear the legend set forth in Section 2.3(d). (c) Subject to the provision of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under the Indenture or the Securities. (d) In the event of the occurrence of any of the events specified in Section 2.4(a), the Company will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons. EXHIBIT 1 to RULE 144A/REGULATION S APPENDIX [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE RESTRICTION TERMINATION DATE WHICH IS THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THESE 2 SECURITIES AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THESE SECURITIES (OR ANY PREDECESSOR OF THESE SECURITIES) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2) (3), OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE, OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED TO OR ON THE REVERSE SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. [Regulation S Global Security Legend] ON OR PRIOR TO THE 40TH DAY AFTER THE LATER OF THE COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE, TRANSFERS OF INTERESTS IN THE REGULATION S GLOBAL SECURITY TO U.S. PERSONS SHALL BE LIMITED TO TRANSFERS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE SECURITIES ACT. No. CUSIP No. $ 10 1/4% Senior Secured Note due 2003 TRANS WORLD AIRLINES, INC., a Delaware corporation promises to pay to __________, or registered assigns, the principal sum of __________ Dollars on June 15, 2003. Interest Payment Dates: June 15 and December 15. Record Dates: June 1 and December 1. Additional provisions of this Security are set forth on the other side of this Security. Dated: TRANS WORLD AIRLINES, INC. By:____________________________ Name: Title: Attest: ____________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION First Security Bank, National Association, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By:_____________________________ Authorized Signatory 2 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 10 1/4% Senior Secured Note due 2003 This Security is one of a duly authorized issue of securities of the Company designated as its 10 1/4% Senior Secured Notes due 2003 (hereinafter called the "Securities"), limited in aggregate principal amount Outstanding to $14,500,000, issued or to be issued pursuant to an Indenture, dated as of June 16, 1998 (hereinafter called the "Indenture") between the Company and First Security Bank, National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture). 1. Interest; Special Interest. The Company promises to pay interest on the principal amount of this Security at the rate of ten and one-quarter percent (10 1/4%) per annum, subject to increase as provided in paragraph 8 below; provided, however, that if a Registration Default (as defined in and subject to the provisions of the Registration Rights Agreement) occurs (each period during which a Registration Default has occurred and is continuing referred to herein as a "Registration Default Period"), additional interest will accrue on this Security at a per annum rate of 0.50% for the first 90 days of the Registration Default Period, at a per annum rate of 1.0% for the second 90 days of the Registration Default Period, at a per annum rate of 1.5% for the third 90 days of the Registration Default Period and at a per annum rate of 1.5% thereafter for the remaining portion of the Registration Default Period (such additional interest is referred to herein as "Special Interest"). The Company will pay interest and Special Interest, if any, semi-annually on the Interest Payment Dates set forth on the face of this Security, commencing December 15, 1998. Interest on the Securities will accrue from June 16, 1998 or the most recent Interest Payment Date to which interest and Special Interest, if any, have been paid. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on and Special Interest, if any, with respect to, the Securities (except defaulted interest and interest on defaulted principal) to the persons who are registered Holders of Securities at the close of business on the Record Date set forth on the face of this Security next preceding the applicable Interest Payment Date. Defaulted interest and interest on defaulted principal will be paid by the Company in accordance with the applicable provisions of the Indenture. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal, interest and Special Interest, if any, at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York and at any other office or agency maintained by the Company for such purpose in money of the United States that at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest on and Special Interest, if any, with respect to, the Securities may be by check payable in such money and mailed to a Holder's registered address; provided further, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by a Holder with a bank in New York City if such Holder owns at least $250,000 in aggregate principal amount of certificated Securities and elects payment by wire transfer by giving written notice to the Company and the Trustee to such effect designating 3 such account no later than 10 days immediately preceding the relevant due date for payment (or such other date as the Company and the Trustee may accept in their discretion). If a payment date is a legal holiday at a place of payment, payment may be made at that place on the next succeeding Business Day, and no interest shall accrue for the intervening period. 3. Registrar, Paying Agent and Tender Agent. Initially, the Trustee will act as Registrar and Paying Agent. The Company may change any Paying Agent or Registrar or co- registrar without prior notice to any Securityholder. The Company may act in any such capacity, except in certain circumstances. 4. Indenture. The Company issued the Securities under the Indenture. The terms of the Securities include those stated in the Indenture and those made applicable to the Indenture by the TIA. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and such Act for a statement of such terms. Subject to paragraph 7 hereof, the Securities are senior secured obligations of the Company limited to $14,500,000 aggregate principal amount, except as otherwise provided in the Indenture. Terms used in this Security and not defined in this Security shall have the meaning set forth in Section 1 of the Definitions Appendix attached as Appendix I to the Indenture, which shall be a part of this Security as if fully set forth in this place. The rules of construction for this Security are set forth in Section 2 of the Definitions Appendix. 5. Mandatory Redemption. The Securities may not be redeemed at any time at the option of the Company. Subject to the provisions of the Indenture, the Company shall, until all the Securities are paid or payment thereof provided for, deposit in accordance with Section 3.6 of the Indenture, at least one Business Day prior to June 15 in each year, commencing June 15, 2001 (each such date being hereinafter referred to as a "Mandatory Redemption Date"), an amount in cash sufficient to redeem an aggregate principal amount of Securities (the "Mandatory Redemption Amount") equal to $920,000 on each of June 15, 2001 and June 15, 2002 (or, if the aggregate principal amount of Securities Outstanding on any such Mandatory Redemption Date is less than the principal amount required to so be redeemed, then all the Outstanding Securities shall be redeemed on such date), at a redemption price (expressed as a percentage of the principal amount) of 100% plus accrued and unpaid interest and Special Interest, if any, to the Mandatory Redemption Date (subject to the right of holders of record on the relevant record date to receive interest and Special Interest, if any, due on the relevant Interest Payment Date). Each such deposit shall be applied to the redemption of Securities on such Mandatory Redemption Date as provided in the Indenture. The Company may at its option receive credit against any or all of the cash portion of the Mandatory Redemption Amount for open market purchases of Securities, and the obligation of the Company to make such mandatory redemptions is subject to automatic termination in connection with any permitted sale of or Total Loss with respect to the Aircraft, all as provided in the Indenture. 6. Notice of Redemption. Notice of any redemption will be mailed at least 30 days but not sooner than 45 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the 4 redemption price of and accrued interest on, and Special Interest, if any, with respect to, all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Security. The Securities are secured by Liens on certain Properties of the Company pursuant to the Mortgage and the other Operative Documents described in the Indenture and such Liens are subject to release as provided herein and in the Mortgage and the other Operative Documents. 8. Offers to Purchase. In the event that there shall occur a Change in Control, the Company shall make an Offer to Purchase all of the Outstanding Securities, at a purchase price equal to 101% of the aggregate principal amount of the Securities Outstanding, plus accrued and unpaid interest and Special Interest, if any, to and including the repurchase date. The right to require such repurchase of Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article 8 of the Indenture. The Company shall commence such Offer to Purchase within thirty (30) days after the occurrence of a Change in Control. In the event that the Company desires to sell the Aircraft as and when permitted in Section 4.12 of the Indenture, the Company shall (subject to the provisions of such Section 4.12) have commenced an Offer to Purchase Securities in an aggregate principal amount (the "Sale OTP Amount") equal to the aggregate principal amount of the Securities Outstanding on the date of the commencement of such Offer to Purchase at a purchase price (expressed as a percentage of principal amount of Securities to be purchased) equal to (a) 102%, if such Offer to Purchase is commenced prior to the first anniversary of the Issue Date, or (b) 101%, if such Offer to Purchase is commenced on or after the first anniversary of the Issue Date, plus in either case, accrued and unpaid interest and Special Interest, if any, on such Securities to and including the Payment Date. Effective as of the day immediately following the Payment Date with respect to the Offer to Purchase in connection with a sale of the Aircraft, the interest rate borne by the Securities then Outstanding shall be subject to automatic increase as set forth in Section 4.12 of the Indenture, and the Aircraft shall be released from the Lien of the Operative Documents in accordance with the provisions thereof. The Company may receive credit against any or all of the Sale OTP Amount for open market purchases of Securities as provided in the Indenture. In the event that there shall occur a Total Loss with respect to the Aircraft, the Company shall (subject to the provisions of Section 4.12 of the Indenture) make an Offer to Purchase an aggregate principal amount of Outstanding Securities (the "Total Loss OTP Amount") equal to the aggregate principal amount of the Securities Outstanding on the date such Offer to Purchase is required to be commenced under the Indenture at a purchase price equal to 100% of the aggregate principal amount of Securities to be purchased, plus accrued and unpaid interest and Special Interest, if any, on such Securities, to and including the Payment Date, and the Aircraft shall be released from the Lien of the Operative Documents in accordance with the provisions thereof. The Company shall commence such Offer to Purchase within thirty (30) days after the 5 Total Loss Date with respect to any such Total Loss. The Company may receive credit against any or all of the Total Loss OTP Amount for open market purchases of Securities as provided in the Indenture. "Offer to Purchase" means an offer to purchase all or a portion, as the case may be, of the Securities by the Company from the Holders commenced by the mailing (by first class mail, postage prepaid) by the Company (or, if requested by the Company on at least five Business Days' prior notice to the Trustee and at the Company's expense, by the Trustee) of a notice to each Holder (and, if mailed by the Company, to the Trustee) at such Holder's address appearing in the Register, stating: (i) the covenant pursuant to which the offer is being made and that all Securities validly tendered will be accepted for payment; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Security not tendered will continue to accrue interest and Special Interest (if any) pursuant to its terms (including, if such Offer to Purchase is being made pursuant to Section 4.12(c)(i)(A) of the Indenture, a statement that the rate of interest on such Security is subject to increase in accordance with the provisions of such Section); (iv) that, unless the Company defaults in the payment of the purchase price on the Payment Date, any Security accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest or Special Interest (if any) on and after the Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Offer to Purchase will be required to surrender the Security, together with the form entitled "Option of the Holder to Elect Purchase" attached to or on the reverse side of the Security completed, to the Paying Agent at the address specified in the notice at any time beginning with the date of such notice but prior to the close of business on the Business Day immediately preceding the Payment Date, and such Holder shall be entitled to receive from the Paying Agent a non-transferable receipt of deposit evidencing such deposit; (vi) that, unless the Company defaults in making the payment of the purchase price or shall otherwise, in its sole discretion, consent thereto, Holders will be entitled to withdraw their election only if the Trustee receives, not later than the close of business on the fifth Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only in part will be promptly issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered (which new Securities, if such Offer to Purchase is being made pursuant to Section 4.12(c)(i)(A) or 4.12(d) of the Indenture, will cease to be secured by the Collateral); provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall place such notice in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a financial newspaper of general circulation in New York City. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. On the Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted together with an Officers' Certificate specifying the Securities or portions thereof accepted for 6 payment by the Company. The Trustee shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate, and the Company shall promptly execute and mail (or cause to be mailed) to such Holders a new Security equal in principal amount to any unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof; provided, further, that if the Payment Date is between a regular Record Date and the next succeeding Interest Payment Date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest and Special Interest, if any, payable on such succeeding Interest Payment Date on the principal amount to be repurchased, and the interest on the principal amount of the Security being repurchased, and Special Interest, if any, with respect thereto, will be paid on such next succeeding Interest Payment Date to the registered holder of such Security on the immediately preceding Record Date. A Security repurchased on an Interest Payment Date need not be accompanied by any such payment, and the interest on the principal amount of the Security being repurchased and Special Interest, if any, with respect thereto, will be paid on such Interest Payment Date to the registered holder of such Security on the corresponding Record Date. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Securities pursuant to an Offer to Purchase. Both the notice of the Company and the notice of the Holder having been given as specified above, the Securities so to be repurchased shall, on the Payment Date become due and payable at the purchase price applicable thereto and from and after such date (unless the Company shall default in the payment of such purchase price) such Securities shall cease to bear interest or Special Interest (if any). If any Security shall not be paid upon surrender thereof for repurchase, the principal shall, until paid, bear interest and Special Interest (if any) from the Payment Date at the rate and in accordance with the provisions set forth in this Security and the Indenture. Any Security which is to be submitted for repurchase only in part shall be delivered pursuant to the above provisions with (if the Company or Trustee so requires) due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing. 9. Denominations, Transfer, Exchange. The Securities shall be issuable only in registered form without coupons and in denominations of $1,000 and integral multiples thereof. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes required by law or permitted by the Indenture. 10. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name this Security is registered with the Registrar as the owner for all purposes. 7 11. Discharge. Subject to certain conditions set forth in Article 8 of the Indenture, the Company may terminate its obligations under the Securities and the Indenture, except those obligations referred to in Section 8.1(b) of the Indenture, if the Company deposits with the Trustee or a Paying Agent cash or U.S. Government Obligations for the payment of principal of, interest on, and Special Interest, if any, with respect to, the Securities to Stated Maturity. 12. Amendments and Waivers. Subject to certain exceptions, the Indenture, the Securities, or the other Operative Documents may be amended with the consent of the Holders of at least a majority in principal amount of the then Outstanding Securities, and any existing Default, Event of Default or acceleration may be waived with the consent of the Holders of a majority in principal amount of the then Securities Outstanding. Without the consent of any Holder, the Indenture, the Securities or any of the Operative Documents may be amended to, among other things, cure any ambiguity, defect or inconsistency. 13. Defaults and Remedies. Events of Default under the Indenture include the following: default for the period specified in the Indenture in payment of interest on, or Special Interest, if any, with respect to the Securities; default in payment of the principal amount of any Securities when the same becomes due and payable (at maturity, upon acceleration, redemption, tender for repurchase or otherwise); failure by the Company to comply with specific covenants of the Indenture or of the Mortgage within the time periods provided therein, discontinuing substantially all of its commercial airlines operations, or failure to pay over amounts required under the Mortgage; failure to comply in any material respect with any of its other agreements contained in the Indenture, the other Operative Documents or the Securities within the time periods (if any) and after the notice (if any) provided in any thereof; a representation or warranty of the Company in the Indenture, the other Operative Documents or any Mortgage Supplement or in any certificate of the Company delivered under any such document proves to be untrue in any material respect when made, and the failure to cure such default within the time periods and after the notice specified in the Indenture; the occurrence of certain defaults under any Indebtedness of the Company or any of its Significant Subsidiaries in excess of $10,000,000 in principal amount; the rendering of final judgments by a court of competent jurisdiction against the Company or any of its Significant Subsidiaries in an aggregate amount of $10,000,000 or more which remain undischarged for a period (during which execution is not stayed) of sixty (60) days after the date on which the right to appeal has expired; cessation of effectiveness of the Operative Documents without the consent of the Trustee; and certain events of bankruptcy, insolvency or reorganization. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of twenty-five percent (25%) in principal amount of the Securities Outstanding may declare all the Securities to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all Securities Outstanding become due and payable immediately without further action or notice. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the then Outstanding Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in 8 their interests. The Company must furnish compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety to the more complete description thereof contained in the Indenture. 14. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or Affiliates of the Company with the same rights it would have if it were not Trustee. 15. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. Unclaimed Money. If money for the payment of principal of, interest on, or Special Interest, with respect to, or the purchase price for the Securities remains unclaimed for two (2) years, the Trustee or Paying Agent will pay the money back to the Company at its request. After such payment, Holders entitled to any portion of such money must look to the Company for payment unless an applicable law designates another person. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. CUSIP Numbers. The Company in issuing this Security may use a "CUSIP" number (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. 20. Holders' Compliance with Registration Rights Agreement. Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 9 The Company will furnish to any Holder of this Security, upon written request and without charge, a copy of the Indenture. Request may be made to: Trans World Airlines, Inc., One City Centre, 515 N. 6th Street, St. Louis, Missouri 63101, Attention: Corporate Secretary. 10 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to: (Insert Assignee's Soc. Sec. or Tax I.D. No.) (Print or type assignee's name, address and zip code) and irrevocably appoint ______________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date:____________________________ Signature(s):__________________________ __________________________ (Sign exactly as your name(s) appear(s) on the other side of this Security) Signature(s) guaranteed by: ________________________________________ (All signatures must be guaranteed by a member of a national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company located in the United States) 11 OPTION OF THE HOLDER TO ELECT PURCHASE If you want to elect to have this Security repurchased by the Company pursuant to any Offer to Purchase under the Indenture, check the box: |_| If you want to elect to have only part of this Security repurchased by the Company pursuant to any Offer to Purchase under the Indenture, state the principal amount to be repurchased: $__________________________________ (in an integral multiple of $1,000) Date:____________________________ Signature(s):__________________________ __________________________ (Sign exactly as your name(s) appear(s) on the other side of this Security) Signature(s) guaranteed by: ________________________________________ (All signatures must be guaranteed by a member of a national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company located in the United States) 12 CERTIFICATE OF TRANSFER Re: 10 1/4% Senior Secured Notes due 2003 (the "Notes") of Trans World Airlines, Inc. (the "Company") This Certificate relates to Notes held in definitive form by ___________ (the "Transferor"). The Transferor has requested the Registrar by written order to exchange or register the transfer of a Note or Notes. In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above captioned Notes and that the transfer of this Note does not require registration under the Securities Act of 1933 (the "Securities Act"), because:* |_| Such Note is being transferred to the Company. |_| Such Note is being transferred pursuant to an effective Registration Statement under the Securities Act. |_| Such Note is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A. |_| Such Note is being transferred pursuant to an offshore transaction in accordance with Rule 904 under the Securities Act. |_| Such Note is being transferred to an Institutional "Accredited Investor" within the meaning of Subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act. |_| Such Note is being transferred in a transaction meeting the requirements of Rule 144 under the Securities Act. The Registrar and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ___________________________ [INSERT NAME OF TRANSFEROR] By:_______________________ Date:_____________________________ __________________________________ * Please check applicable box. EXHIBIT 2 to RULE 144A/REGULATION S APPENDIX [FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] [*/] [**/] No. CUSIP No. $ 10 1/4% Senior Secured Note due 2003 TRANS WORLD AIRLINES, INC., a Delaware corporation promises to pay to __________, or registered assigns, the principal sum of __________ Dollars on June 15, 2003. Interest Payment Dates: June 15 and December 15. Record Dates: June 1 and December 1. Additional provisions of this Security are set forth on the other side of this Security. 2 Dated: TRANS WORLD AIRLINES, INC. By:____________________________ Name: Title: Attest: ___________________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION First Security Bank, National Association, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By:___________________________ Authorized Signatory ________________________ */ If the Security is to be issued in global form add the Global Securities Legend from Exhibit 1 to the Rule 144A/Regulation S Appendix. **/ If the Security is a Private Exchange Security issued in a Private Exchange to the Placement Agent with respect to Securities acquired in other than market making or trading activities, add the Restricted Securities Legend from Exhibit 1 to the Rule 144A/Regulation S Appendix and add the Certificate of Transfer from such Exhibit to the end of this Exhibit 2. 3 [FORM OF REVERSE SIDE OF EXCHANGE OR PRIVATE EXCHANGE SECURITY] 10 1/4% Senior Secured Note due 2003 This Security is one of a duly authorized issue of securities of the Company designated as its 10 1/4% Senior Secured Notes due 2003 (hereinafter called the "Securities"), limited in aggregate principal amount Outstanding to $14,500,000, issued or to be issued pursuant to an Indenture, dated as of June 16, 1998 (hereinafter called the "Indenture") between the Company and First Security Bank, National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture). 1. Interest; Special Interest. The Company promises to pay interest on the principal amount of this Security at the rate of ten and one-quarter percent (10 1/4%) per annum, subject to increase as provided in paragraph 8 below; provided, however, that if a Registration Default (as defined in and subject to the provisions of the Registration Rights Agreement) occurs (each period during which a Registration Default has occurred and is continuing referred to herein as a "Registration Default Period"), additional interest will accrue on this Security at a per annum rate of 0.50% for the first 90 days of the Registration Default Period, at a per annum rate of 1.0% for the second 90 days of the Registration Default Period, at a per annum rate of 1.5% for the third 90 days of the Registration Default Period and at a per annum rate of 1.5% thereafter for the remaining portion of the Registration Default Period (such additional interest is referred to herein as "Special Interest"). The Company will pay interest and Special Interest, if any, semi-annually on the Interest Payment Dates set forth on the face of this Security, commencing December 15, 1998. Interest on the Securities will accrue from June 16, 1998 or the most recent Interest Payment Date to which interest and Special Interest, if any, have been paid. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on and Special Interest, if any, with respect to, the Securities (except defaulted interest and interest on defaulted principal) to the persons who are registered Holders of Securities at the close of business on the Record Date set forth on the face of this Security next preceding the applicable Interest Payment Date. Defaulted interest and interest on defaulted principal will be paid by the Company in accordance with the applicable provisions of the Indenture. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal, interest and Special Interest, if any, at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York and at any other office or agency maintained by the Company for such purpose in money of the United States that at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest on and Special Interest, if any, with respect to, the Securities may be by check payable in such money and mailed to a Holder's registered address; provided further, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by a Holder with a bank in New York City if such Holder owns at least $250,000 in aggregate principal amount of certificated Securities and elects payment by wire transfer by giving written notice to the Company and the Trustee to such effect designating 4 such account no later than 10 days immediately preceding the relevant due date for payment (or such other date as the Company and the Trustee may accept in their discretion). If a payment date is a legal holiday at a place of payment, payment may be made at that place on the next succeeding Business Day, and no interest shall accrue for the intervening period. 3. Registrar, Paying Agent and Tender Agent. Initially, the Trustee will act as Registrar and Paying Agent. The Company may change any Paying Agent or Registrar or co- registrar without prior notice to any Securityholder. The Company may act in any such capacity, except in certain circumstances. 4. Indenture. The Company issued the Securities under the Indenture. The terms of the Securities include those stated in the Indenture and those made applicable to the Indenture by the TIA. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and such Act for a statement of such terms. Subject to paragraph 7 hereof, the Securities are senior secured obligations of the Company limited to $14,500,000 aggregate principal amount, except as otherwise provided in the Indenture. Terms used in this Security and not defined in this Security shall have the meaning set forth in Section 1 of the Definitions Appendix attached as Appendix I to the Indenture, which shall be a part of this Security as if fully set forth in this place. The rules of construction for this Security are set forth in Section 2 of the Definitions Appendix. 5. Mandatory Redemption. The Securities may not be redeemed at any time at the option of the Company. Subject to the provisions of the Indenture, the Company shall, until all the Securities are paid or payment thereof provided for, deposit in accordance with Section 3.6 of the Indenture, at least one Business Day prior to June 15 in each year, commencing June 15, 2001 (each such date being hereinafter referred to as a "Mandatory Redemption Date"), an amount in cash sufficient to redeem an aggregate principal amount of Securities (the "Mandatory Redemption Amount") equal to $920,000 on each of June 15, 2001 and June 15, 2002 (or, if the aggregate principal amount of Securities Outstanding on any such Mandatory Redemption Date is less than the principal amount required to so be redeemed, then all the Outstanding Securities shall be redeemed on such date), at a redemption price (expressed as a percentage of principal amount) of 100% plus accrued and unpaid interest and Special Interest, if any, to the Mandatory Redemption Date (subject to the right of holders of record on the relevant record date to receive interest and Special Interest, if any, due on the relevant Interest Payment Date). Each such deposit shall be applied to the redemption of Securities on such Mandatory Redemption Date as provided in the Indenture. The Company may at its option receive credit against any or all of the cash portion of the Mandatory Redemption Amount for open market purchases of Securities, and the obligation of the Company to make such mandatory redemptions is subject to automatic termination in connection with any permitted sale of or Total Loss with respect to the Aircraft, all as provided in the Indenture. 6. Notice of Redemption. Notice of any redemption will be mailed at least 30 days but not sooner than 45 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the 5 redemption price of and accrued interest on, and Special Interest, if any, with respect to, all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Security. The Securities are secured by Liens on certain Properties of the Company pursuant to the Mortgage and the other Operative Documents described in the Indenture and such Liens are subject to release as provided herein and in the Mortgage and the other Operative Documents. 8. Offers to Purchase. In the event that there shall occur a Change in Control, the Company shall make an Offer to Purchase all of the Outstanding Securities, at a purchase price equal to 101% of the aggregate principal amount of the Securities Outstanding, plus accrued and unpaid interest and Special Interest, if any, to and including the repurchase date. The right to require such repurchase of Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article 8 of the Indenture. The Company shall commence such Offer to Purchase within thirty (30) days after the occurrence of a Change in Control. In the event that the Company desires to sell the Aircraft as and when permitted in Section 4.12 of the Indenture, the Company shall (subject to the provisions of such Section 4.12) have commenced an Offer to Purchase Securities in an aggregate principal amount (the "Sale OTP Amount") equal to the aggregate principal amount of the Securities Outstanding on the date of the commencement of such Offer to Purchase at a purchase price (expressed as a percentage of principal amount of Securities to be purchased) equal to (a) 102%, if such Offer to Purchase is commenced prior to the first anniversary of the Issue Date, or (b) 101%, if such Offer to Purchase is commenced on or after the first anniversary of the Issue Date, plus in either case, accrued and unpaid interest and Special Interest, if any, on such Securities to and including the Payment Date. Effective as of the day immediately following the Payment Date with respect to the Offer to Purchase in connection with a sale of the Aircraft, the interest rate borne by the Securities then Outstanding shall be subject to automatic increase as set forth in Section 4.12 of the Indenture, and the Aircraft shall be released from the Lien of the Operative Documents in accordance with the provisions thereof. The Company may receive credit against any or all of the Sale OTP Amount for open market purchases of Securities as provided in the Indenture. In the event that there shall occur a Total Loss with respect to the Aircraft, the Company shall (subject to the provisions of Section 4.12 of the Indenture) make an Offer to Purchase an aggregate principal amount of Outstanding Securities (the "Total Loss OTP Amount") equal to the aggregate principal amount of the Securities Outstanding on the date such Offer to Purchase is required to be commenced under the Indenture at a purchase price equal to 100% of the aggregate principal amount of Securities to be purchased, plus accrued and unpaid interest and Special Interest, if any, on such Securities, to and including the Payment Date, and the Aircraft shall be released from the Lien of the Operative Documents in accordance with the provisions thereof. The Company shall commence such Offer to Purchase within thirty (30) days after the 6 Total Loss Date with respect to any such Total Loss. The Company may receive credit against any or all of the Total Loss OTP Amount for open market purchases of Securities as provided in the Indenture. "Offer to Purchase" means an offer to purchase all or a portion, as the case may be, of the Securities by the Company from the Holders commenced by the mailing (by first class mail, postage prepaid) by the Company (or, if requested by the Company on at least five Business Days' prior notice to the Trustee and at the Company's expense, by the Trustee) of a notice to each Holder (and, if mailed by the Company, to the Trustee) at such Holder's address appearing in the Register, stating: (i) the covenant pursuant to which the offer is being made and that all Securities validly tendered will be accepted for payment; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Security not tendered will continue to accrue interest and Special Interest (if any) pursuant to its terms (including, if such Offer to Purchase is being made pursuant to Section 4.12(c)(i)(A) of the Indenture, a statement that the rate of interest on such Security is subject to increase in accordance with the provisions of such Section); (iv) that, unless the Company defaults in the payment of the purchase price on the Payment Date, any Security accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest or Special Interest (if any) on and after the Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Offer to Purchase will be required to surrender the Security, together with the form entitled "Option of the Holder to Elect Purchase" attached to or on the reverse side of the Security completed, to the Paying Agent at the address specified in the notice at any time beginning with the date of such notice but prior to the close of business on the Business Day immediately preceding the Payment Date, and such Holder shall be entitled to receive from the Paying Agent a non-transferable receipt of deposit evidencing such deposit; (vi) that, unless the Company defaults in making the payment of the purchase price or shall otherwise, in its sole discretion, consent thereto, Holders will be entitled to withdraw their election only if the Trustee receives, not later than the close of business on the fifth Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only in part will be promptly issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered (which new Securities, if such Offer to Purchase is being made pursuant to Section 4.12(c)(i)(A) or 4.12(d) of the Indenture, will cease to be secured by the Collateral); provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall place such notice in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a financial newspaper of general circulation in New York City. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. On the Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted together with an Officers' Certificate specifying the Securities or portions thereof accepted for 7 payment by the Company. The Trustee shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate, and the Company shall promptly execute and mail (or cause to be mailed) to such Holders a new Security equal in principal amount to any unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof; provided, further, that if the Payment Date is between a regular Record Date and the next succeeding Interest Payment Date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest and Special Interest, if any, payable on such succeeding Interest Payment Date on the principal amount to be repurchased, and the interest on the principal amount of the Security being repurchased, and Special Interest, if any, with respect thereto, will be paid on such next succeeding Interest Payment Date to the registered holder of such Security on the immediately preceding Record Date. A Security repurchased on an Interest Payment Date need not be accompanied by any such payment, and the interest on the principal amount of the Security being repurchased and Special Interest, if any, with respect thereto, will be paid on such Interest Payment Date to the registered holder of such Security on the corresponding Record Date. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Securities pursuant to an Offer to Purchase. Both the notice of the Company and the notice of the Holder having been given as specified above, the Securities so to be repurchased shall, on the Payment Date become due and payable at the purchase price applicable thereto and from and after such date (unless the Company shall default in the payment of such purchase price) such Securities shall cease to bear interest or Special Interest (if any). If any Security shall not be paid upon surrender thereof for repurchase, the principal shall, until paid, bear interest and Special Interest (if any) from the Payment Date at the rate and in accordance with the provisions set forth in this Security and the Indenture. Any Security which is to be submitted for repurchase only in part shall be delivered pursuant to the above provisions with (if the Company or Trustee so requires) due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing. 9. Denominations, Transfer, Exchange. The Securities shall be issuable only in registered form without coupons and in denominations of $1,000 and integral multiples thereof. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes required by law or permitted by the Indenture. 10. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name this Security is registered with the Registrar as the owner for all purposes. 8 11. Discharge. Subject to certain conditions set forth in Article 8 of the Indenture, the Company may terminate its obligations under the Securities and the Indenture, except those obligations referred to in Section 8.1(b) of the Indenture, if the Company deposits with the Trustee or a Paying Agent cash or U.S. Government Obligations for the payment of principal of, interest on, and Special Interest, if any, with respect to, the Securities to Stated Maturity. 12. Amendments and Waivers. Subject to certain exceptions, the Indenture, the Securities, or the other Operative Documents may be amended with the consent of the Holders of at least a majority in principal amount of the then Outstanding Securities, and any existing Default, Event of Default or acceleration may be waived with the consent of the Holders of a majority in principal amount of the then Securities Outstanding. Without the consent of any Holder, the Indenture, the Securities or any of the Operative Documents may be amended to, among other things, cure any ambiguity, defect or inconsistency. 13. Defaults and Remedies. Events of Default under the Indenture include the following: default for the period specified in the Indenture in payment of interest on, or Special Interest, if any, with respect to the Securities; default in payment of the principal amount of any Securities when the same becomes due and payable (at maturity, upon acceleration, redemption, tender for repurchase or otherwise); failure by the Company to comply with specific covenants of the Indenture or of the Mortgage within the time periods provided therein, discontinuing substantially all of its commercial airlines operations, or failure to pay over amounts required under the Mortgage; failure to comply in any material respect with any of its other agreements contained in the Indenture, the other Operative Documents or the Securities within the time periods (if any) and after the notice (if any) provided in any thereof; a representation or warranty of the Company in the Indenture, the other Operative Documents or any Mortgage Supplement or in any certificate of the Company delivered under any such document proves to be untrue in any material respect when made, and the failure to cure such default within the time periods and after the notice specified in the Indenture; the occurrence of certain defaults under any Indebtedness of the Company or any of its Significant Subsidiaries in excess of $10,000,000 in principal amount; the rendering of final judgments by a court of competent jurisdiction against the Company or any of its Significant Subsidiaries in an aggregate amount of $10,000,000 or more which remain undischarged for a period (during which execution is not stayed) of sixty (60) days after the date on which the right to appeal has expired; cessation of effectiveness of the Operative Documents without the consent of the Trustee; and certain events of bankruptcy, insolvency or reorganization. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of twenty-five percent (25%) in principal amount of the Securities Outstanding may declare all the Securities to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all Securities Outstanding become due and payable immediately without further action or notice. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the then Outstanding Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in 9 their interests. The Company must furnish compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety to the more complete description thereof contained in the Indenture. 14. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or Affiliates of the Company with the same rights it would have if it were not Trustee. 15. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. Unclaimed Money. If money for the payment of principal of, interest on, or Special Interest, with respect to, or the purchase price for the Securities remains unclaimed for two (2) years, the Trustee or Paying Agent will pay the money back to the Company at its request. After such payment, Holders entitled to any portion of such money must look to the Company for payment unless an applicable law designates another person. 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. CUSIP Numbers. The Company in issuing this Security may use a "CUSIP" number (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. 20. Holders' Compliance with Registration Rights Agreement. Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 10 The Company will furnish to any Holder of this Security, upon written request and without charge, a copy of the Indenture. Request may be made to: Trans World Airlines, Inc., One City Centre, 515 N. 6th Street, St. Louis, Missouri 63101, Attention: Corporate Secretary. 11 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to: (Insert Assignee's Soc. Sec. or Tax I.D. No.) (Print or type assignee's name, address and zip code) and irrevocably appoint ______________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date:______________________________ Signature(s):__________________________ __________________________ (Sign exactly as your name(s) appear(s) on the other side of this Security) Signature(s) guaranteed by: _________________________________________ (All signatures must be guaranteed by a member of a national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company located in the United States) 12 OPTION OF THE HOLDER TO ELECT PURCHASE If you want to elect to have this Security repurchased by the Company pursuant to any Offer to Purchase under the Indenture, check the box: |_| If you want to elect to have only part of this Security repurchased by the Company pursuant to any Offer to Purchase under the Indenture, state the principal amount to be repurchased: $__________________________________ (in an integral multiple of $1,000) Date:______________________________ Signature(s):__________________________ __________________________ (Sign exactly as your name(s) appear(s) on the other side of this Security) Signature(s) guaranteed by: _________________________________________ (All signatures must be guaranteed by a member of a national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company located in the United States) EXHIBIT A ================================================================= AIRCRAFT MORTGAGE AND SECURITY AGREEMENT Dated as of June 16, 1998 Between TRANS WORLD AIRLINES, INC., as Mortgagor and FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee, as Mortgagee ================================================================= Covering Boeing Model 767-231 ETOPS Aircraft TABLE OF CONTENTS Page 1. DEFINITIONS ............................................ 1 1.1 Definitions ....................................... 1 1.2 Rules of Construction ............................. 3 2. SECURITY INTEREST ...................................... 3 2.1 Granting of Security Interest ..................... 3 2.2 Certain Releases of Lien .......................... 5 2.3 Liability of Mortgagor ............................ 7 2.4 No Segregation of Moneys; No Interest ............. 7 3. OPERATION, REPLACEMENT OF PARTS AND POSSESSION OF AIRCRAFT ............................................ 7 3.1 Operation ......................................... 7 3.2 Transfer of Possession ............................ 8 3.3 Total Loss of Engine and not Airframe; Total Loss of Airframe .................................. 8 3.4 Replacement of Parts .............................. 9 3.5 Installation of Video Equipment and Telephone Systems owned by Third Parties on the Aircraft ................................... 9 3.6 Interchange and Pooling Agreements ................ 10 4. EVENTS OF DEFAULT; DISPOSITION OF COLLATERAL AND APPLICATION OF PROCEEDS ............................ 10 4.1 Judicial Proceedings, etc., Following Event of Default .................................. 10 4.2 Delivery of Collateral, Power of Sale, etc ........ 11 4.3 Right to Possession, etc .......................... 12 4.4 Application of Proceeds ........................... 13 4.5 Matters Involving Manner of Sale .................. 14 (i) TABLE OF CONTENTS (Continued) Page 5. REPRESENTATIONS AND WARRANTIES ......................... 16 5.1 Corporate Status .................................. 16 5.2 Governmental Approvals ............................ 16 5.3 Binding ........................................... 17 5.4 No Breach ......................................... 17 5.5 Filings ........................................... 17 5.6 Licenses .......................................... 17 5.7 No Suits .......................................... 17 5.8 Taxes ............................................. 17 5.9 No Event of Default or Total Loss ................. 18 5.10 Aircraft Certification ............................ 18 5.11 Investment Company Act ............................ 18 5.12 Condition of Aircraft ............................. 18 5.13 Title ............................................. 18 5.14 No Default ........................................ 18 5.15 Mortgage Liens .................................... 18 5.16 Engines ........................................... 18 5.17 FAA Aircraft Registry ............................. 18 5.18 Insurances ........................................ 19 6. COVENANTS .............................................. 19 6.1 This Agreement .................................... 19 6.2 Certain Rights .................................... 19 6.3 Insurance ......................................... 19 (ii) TABLE OF CONTENTS (Continued) Page 6.4 Compliance with Laws .............................. 21 6.5 Subleasing or Leasing ............................. 21 6.6 Further Assurances ................................ 23 6.7 Maintenance ....................................... 23 6.8 Registration ...................................... 24 6.9 Insignia .......................................... 24 6.10 Inspection ........................................ 25 6.11 Alterations, Modifications and Additions .......... 25 6.12 Notice of Change of Mortgagor's Chief Executive Office .................................. 26 7. CONDEMNATION ........................................... 26 7.1 Dedication to CRAF ................................ 26 7.2 Notice to Mortgagee ............................... 27 7.3 Requisition of Engine ............................. 27 7.4 Government Indemnification ........................ 27 7.5 No Geographic Limits .............................. 27 7.6 Notice of Default ................................. 27 7.7 Receipts of Payments .............................. 27 8. GENERAL INDEMNIFICATION ................................ 28 8.1 General Indemnification and Waiver of Certain Claims .................................... 28 8.2 Tax Indemnification ............................... 31 8.3 Survival of Indemnities ........................... 35 9. MISCELLANEOUS .......................................... 35 9.1 Performance by Mortgagee .......................... 35 (iii) TABLE OF CONTENTS (Continued) Page 9.2 Power of Attorney ................................. 36 9.3 Waiver, etc., by Mortgagor ........................ 36 9.4 Amendment, etc .................................... 37 9.5 [Intentionally Omitted.] .......................... 37 9.6 Successors and Assigns ............................ 37 9.7 Severability ...................................... 37 9.8 Governing Law; Waiver of Jury Trial ............... 38 9.9 Notices; Waivers .................................. 38 9.10 No Adverse Interpretation of Other Agreements ..... 38 9.11 Benefits of Agreement Restricted .................. 38 9.12 Counterpart Originals ............................. 38 9.13 Effect of Headings ................................ 38 9.14 Section 1110 of the Bankruptcy Code ............... 38 EXHIBIT A Form of Mortgage Supplement EXHIBIT B Insurance EXHIBIT C Pre-Approved List (iv) AIRCRAFT MORTGAGE AND SECURITY AGREEMENT THIS AIRCRAFT MORTGAGE AND SECURITY AGREEMENT (this "Agreement"), dated as of June 16, 1998, is entered into between TRANS WORLD AIRLINES, INC., a Delaware corporation (together with its successors and permitted assigns, "Mortgagor"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Trustee under the Indenture hereinafter referred to (together with its successors and assigns, "Mortgagee") for the benefit of Mortgagee and the Holders (as defined in such Indenture), in light of the following facts: RECITALS WHEREAS, Mortgagor and First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association), not in its individual capacity, except as expressly stated therein, but solely as Owner Trustee ("Owner Trustee") under the Trust Agreement N607TW dated as of March 28, 1995 between 767 Leasing HY, LLC ("Beneficiary") as assignee of ING Lease Delaware, Inc. (f/k/a Internationale Nederlanden Aviation Lease Delaware, Inc.) and Owner Trustee, have entered into that certain Aircraft Sale and Note Purchase Agreement, made and entered into as of the 16th day of June, 1998 among Mortgagor, Owner Trustee, Beneficiary and Lazard Freres & Co. LLC (the "Aircraft Sale Agreement"), pursuant to which Mortgagor agreed to purchase, and Owner Trustee agreed to sell, the Aircraft (as hereinafter defined); WHEREAS, Mortgagor and Mortgagee are contemporaneously herewith entering into that certain Indenture, dated as of even date herewith (the "Indenture"), pursuant to which Mortgagor will issue its 10 1/4% Senior Secured Notes due 2003 (the "Securities") to a certain holder or holders (the "Holders"), as payment of part of the purchase price of the Aircraft under the Aircraft Sale Agreement; and WHEREAS, it is a condition precedent to Mortgagee's authentication of the Securities that Mortgagor grant to Mortgagee a first priority security interest in the Aircraft in order to secure, among other things, (a) Mortgagor's obligations to the Holders and Mortgagee under the Indenture and (b) Mortgagor's obligation to the Holders and Mortgagee hereunder. NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS 1.1 Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall be a part of this Agreement as if fully set forth in this place. In addition, the following terms shall have the respective meanings set forth below: 2 "CRAF" means the Civil Reserve Air Fleet Program authorized under 10 U.S.C. ss. 9511 et seq. or any substantially similar program. "Government Entity" means any (a) national, state or local government, (b) board, commission, department, division, instrumentality, court, agency or political subdivision thereof and (c) association, organization or institution of which any thereof is a member or in whose activities any thereof is a participant. "Law" means any (a) statute, decree, constitution, regulation, order or any directive of any Government Entity, (b) treaty, pact, compact or other agreement to which any Government Entity is a signatory or party and (c) judicial or administrative interpretation or application of any of the foregoing. "Total Loss" means any of the following in relation to the Aircraft, Airframe or any Engine and "Total Loss Date" means the date set forth in parentheses after each Total Loss: (i) Destruction, damage beyond repair or being rendered permanently unfit for normal use for any reason whatsoever (the date such event occurs or, if not known, the date on which the Aircraft, Airframe or Engine was last heard of). (ii) Actual, constructive, compromised, arranged or agreed total loss (the earlier of the date on which the loss is agreed or compromised by the insurers or thirty (30) days after the date of notice to Mortgagor's brokers or insurers claiming such total loss). (iii) Requisition of title, confiscation, forfeiture or any compulsory acquisition whatsoever, except for an acquisition of the Aircraft, Airframe or Engines by the Air Mobility Command pursuant to CRAF (the date on which the same takes effect). (iv) Sequestration, detention or seizure for more than thirty (30) consecutive days (the earlier of the date on which insurers make payment on the basis of a total loss or the date of expiration of such period). (v) Requisition for use for more than one hundred eighty (180) consecutive days (the earlier of the date on which the insurers make payment on the basis of a total loss or the date of expiration of such period). (vi) Loss or loss of use due to theft or disappearance for a period greater than sixty (60) consecutive days (the date of expiration of such period). (vii) Any other occurrence which deprives Mortgagor of use or possession for a period of one hundred eighty (180) consecutive days or longer (the one hundred eightieth (180th) day of such period). 3 A Total Loss with respect to the Aircraft shall be deemed to have occurred if a Total Loss has occurred with respect to the Airframe constituting part of the Aircraft. 1.2 Rules of Construction. The rules of construction for this Agreement are set forth in Section 2 of the Definitions Appendix. 2. SECURITY INTEREST 2.1 Granting of Security Interest. Mortgagor does hereby transfer, convey, mortgage, hypothecate, assign and grant to Mortgagee a purchase-money security interest in, and mortgage lien on (subject to no prior interests of any Person whatsoever), all right, title, interest, claims and demands of Mortgagor in and to the Properties, rights, interests and privileges described in clauses (a) through (h) below, whether now or hereafter acquired (which Properties, rights, interests and privileges described in clauses (a) through (h) below, including all such Properties, rights, interests and privileges hereafter subjected to the Lien of this Agreement by any Mortgage Supplement, are included in and defined as the "Collateral"), to wit: (a) the Airframe and Engines, each of which Engines is of 750 or more rated takeoff horsepower or the equivalent of such horsepower, and in the case of each such Engine, whether or not such Engine shall be installed in or attached to the Airframe or any other airframe, and the Parts, together with all accessories, equipment, parts and appurtenances appertaining or attached to the Airframe or an Engine, whether now owned or hereafter acquired, and all substitutions, renewals and replacements of and additions, alterations, modifications, improvements, accessions and accumulations to the Airframe, any Engine or any Part; (b) all proceeds from the sale or other disposition of, all proceeds of insurance due to Mortgagor on, and all proceeds of any condemnation or requisition of title or use due to Mortgagor with respect to, any of the Properties described in clause (a) above; (c) all logs, books, records (including, without limitation, all inspection, modification, maintenance and overhaul records), data, manuals and other documents, in each case, maintained in respect of the Airframe or any Engine, including, without limitation, all such logs, books, records, data, manuals and other documents maintained pursuant to requirements of the FAA; (d) the Aircraft Sale Agreement and the Bills of Sale to the extent the same relate to continuing rights of Mortgagor in respect of any warranty, indemnity or agreement, express or implied, as to title, materials, workmanship, design or patent infringement matters with respect to the Airframe or any Engine (reserving to Mortgagor, however, all of Mortgagor's other rights and interest in and to the Aircraft Sale Agreement) together with all rights, powers, privileges, options and other benefits of Mortgagor thereunder (subject to such reservation) with respect to the Airframe or the Engines, including, without limitation, the right to make all waivers and agreements, to give and receive all notices and other instruments or communications, to take such action upon the occurrence of a default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, as shall be permitted thereby or by law, and to do any and all other things which Mortgagor is or 4 may be entitled to do thereunder (subject to such reservation, and all warranties and any other rights of Mortgagor against any manufacturer relating to the Airframe, any Engine or any Part); (e) all moneys and securities now or hereafter paid or deposited or required to be paid or deposited to or with Mortgagee by or for the account of Mortgagor pursuant to any term hereof or held or required to be held by Mortgagee hereunder; (f) all other items of equipment and furnishings, wherever located, appertaining to the Aircraft, including without limitation, the auxiliary power unit bearing Manufacturer's Serial No. P40261 delivered with the Aircraft on the Issue Date, and all substitutions, renewals and replacements thereof and additions, modifications and accessories thereto; (g) all rents, issues, profits, revenues and other income of the Property intended, subjected or required to be subjected to the Lien of this Agreement hereby, by the other Operative Documents or by any Mortgage Supplement; and (h) all proceeds, howsoever arising, of any of the foregoing; TO HAVE AND TO HOLD the Collateral unto Mortgagee, for the benefit of the Holders and Mortgagee and their respective successors and assigns, as security for (i) the due and punctual indefeasible payment in full of (A) all sums, together with interest, Special Interest, or premium, if any, thereon, owing or outstanding under the Securities or that may be or become due and payable to Mortgagee, any of the Holders, or their respective successors and assigns, by Mortgagor under or in connection with the Securities, the Indenture, this Agreement or the other Operative Documents, (B) the reasonable costs and expenses of collection and foreclosure with respect to the indebtedness and obligations secured hereby, whether now existing or hereafter arising, including without limitation reasonable attorneys' fees and other costs and expenses expended or incurred by Mortgagee under or pursuant to this Agreement, the Securities, the Indenture or any other Operative Document or otherwise in connection with discovering, locating, satisfying Liens and charges on, protecting and taking possession of the Collateral or any part thereof, the returning of the Collateral or any part thereof to any place in the continental United States designated by Mortgagee (including, without limitation, costs of repairing, rehabilitating and storing the Collateral or any part thereof), and the enforcement of, or collection of amounts owing or outstanding or due and payable under or in connection with the Securities, the Indenture, and the other agreements and instruments referred to in this clause (i) and (C) interest (to the extent permitted by applicable Law) on all costs and expenses described in this clause (i), at a rate of interest per annum equal to the highest rate that may, under any circumstance (whether or not such circumstance has or could actually occur), be applicable to the Securities thereunder or under the Indenture, computed on the basis of a 360-day year and the actual number of days elapsed; and 5 (ii) the timely and faithful performance and observance by Mortgagor of all agreements, promises and covenants undertaken by it hereunder, in the Indenture and the other instruments, agreements and obligations referred to in clause (i) above (the foregoing, together with all the sums, interest, Special Interest, premium, expenses, costs and other amounts referred to in clause (i) above, being hereinafter referred to collectively as the "Obligations"); provided, however, that, and these presents are subject to the condition that, if Mortgagor shall have paid or caused to be paid in full, and Mortgagor shall have well and faithfully performed and observed, all the Obligations at the time and in the manner specified therefor, and any other indebtedness, obligation or account whatsoever (whether presently existing or subsequently arising) secured hereby, or made provision therefor pursuant to Article 8 of the Indenture then, upon the request of Mortgagor, delivered to Mortgagee, Mortgagee shall, at the cost and expense of Mortgagor, execute and deliver to Mortgagor, such instruments of satisfaction and discharge as may be appropriate (without, however, being under any duty to cause such instruments to be filed or recorded in the public records wherein this Agreement shall have been filed and/or recorded), and otherwise the same shall be and remain in full force and effect. 2.2 Certain Releases of Lien. (a) At any time and from time to time prior to or upon the release of the Lien of this Agreement pursuant to this Section 2.2, upon the Total Loss of an Engine in accordance with the express terms of this Agreement, or the replacement of any Part of the Aircraft in accordance with the express terms of this Agreement, Mortgagee shall, upon the Request of and at the cost and expense of Mortgagor and provided, that no Default or Event of Default shall have occurred and be continuing, release such Engine or such Part, as the case may be, from the Lien of this Agreement so long as the Replacement Engine and Part complies with the terms and conditions of this Agreement on Replacement Engines and Parts. In connection with the release of the Lien on any Engine, Mortgagee shall execute and deliver such instrument as aforesaid upon a Request from Mortgagor, requesting such release and describing the Property so to be released only upon receipt by or deposit with Mortgagee of the following: (i) An Officers' Certificate stating the following: (A) a description of the Engine to be released, which shall be identified by manufacturer's serial number; (B) a description of the Replacement Engine to be received as consideration for the Engine to be released pursuant to the provisions of this Agreement; (C) that no Default or Event of Default has occurred that has not been remedied or waived and that Mortgagor will not be in default, by the making and granting of the request for release, in the performance of any of the terms and covenants of any Operative Document; and 6 (D) that the release of the Engine so to be released will not be inconsistent with any of the provisions of this Agreement, the Indenture or any other Operative Document. (ii) The appropriate instruments transferring title to the Replacement Engine to be received as consideration for the Engine to be released to Mortgagor, subjecting such Replacement Engine to the Lien of this Agreement including, without limitation, any Mortgage Supplement if so required by Mortgagee. (iii) Upon the request of Mortgagee, an Opinion of Counsel (and, as to matters relating to title and perfection under the Federal Aviation Act, an opinion of special FAA counsel) satisfactory to Mortgagee: (A) stating that the certificates, opinions and other instruments and/or Property that have been or are therewith delivered to and deposited with Mortgagee conform to the requirements of this Agreement and that, upon the basis of such application, the Property so sold or disposed of may be released from the Lien of this Agreement in accordance with the provisions of this Agreement, and that all conditions precedent herein provided for relating to such release have been complied with; and (B) stating that Mortgagor has good title to the Replacement Engine to be received as consideration for the Engine to be released, free of any Liens or encumbrances whatsoever, except the Lien hereof and Permitted Liens, that such Replacement Engine has been validly subjected to the Lien of this Agreement, that the instruments subjecting such Replacement Engine to the Lien of this Agreement have been duly filed for recordation pursuant to the Federal Aviation Act and that no further action or filing or recording of any document is necessary or advisable in order to establish and perfect the title of Mortgagor to, and the Lien of this Agreement on, such Replacement Engine. (iv) Uniform Commercial Code financing statements covering the security interests created by this Agreement as are deemed necessary or desirable by Mortgagee to protect the security interests of Mortgagee in the Replacement Engine. (v) to the extent assignable, an assignment to Mortgagee as security under this Agreement of all representations, warranties, agreements and indemnities given to Mortgagor by the manufacturer or vendor of such Replacement Engine. (vi) an appraisal from a nationally recognized firm of independent aircraft appraisers reasonably acceptable to Mortgagee as to the fair market value of the Replacement Engine (which shall not be less than the fair market value of the Engine it replaces, assuming such replaced Engine had been maintained in the 7 condition and repair required hereunder) and of the Aircraft after giving effect to such replacement (which shall not be less than the fair market value of the Aircraft prior to such replacement, assuming the Aircraft had been maintained in the condition required hereunder). (b) In the event of the substitution of a Replacement Engine, all provisions of this Agreement relating to the Airframe or Engine being replaced shall be applicable to such Replacement Engine with the same force and effect as if such Replacement Engine were the same engine, as the case may be, as the Engine being replaced but for the Total Loss with respect to the Engine being replaced. 2.3 Liability of Mortgagor. Mortgagor shall be personally liable hereunder for any and all amounts from time to time due and payable hereunder. Mortgagor hereby agrees that Mortgagee may proceed directly against it in connection with its liability hereunder without first proceeding to enforce its rights or remedies against Mortgagor or in the Collateral. Mortgagor hereby authorizes Mortgagee to exercise in any order any right or remedy it might have, including, without limitation, any right of judicial foreclosure or power of sale of the Collateral, with respect to the Obligations. All rights, powers and remedies of Mortgagee hereunder and under the other Operative Documents are cumulative and not alternative and are in addition to all rights, power and remedies given to Mortgagee by applicable Law. 2.4 No Segregation of Moneys; No Interest. Moneys received by Mortgagee hereunder need not be segregated in any manner except to the extent required by applicable Law or any Operative Document, and may be deposited under such general conditions as may be prescribed by applicable Law, and Mortgagee shall not be liable for any interest thereon, provided that, to the extent such information is or was available to Mortgagee, any payments received or applied hereunder by Mortgagee shall be accounted for by Mortgagee so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. 3. OPERATION, REPLACEMENT OF PARTS AND POSSESSION OF AIRCRAFT 3.1 Operation. Mortgagor agrees that it will not use or operate, or permit any permitted lessee or sublessee (if any) of the Aircraft or any other Person to use or operate the Aircraft in violation of any law or any rule, regulation or order (including, without limitation, concerning alcoholic beverages or prohibited substances) of any Government Entity having jurisdiction (domestic or foreign) or in violation of any airworthiness certificate, license or registration relating to the Aircraft or any Engine issued by any such authority, except to the extent the validity or application of any such law, rule, regulation or order is being contested in good faith and by appropriate proceedings and for the payment of which adequate reserves have been provided and are being maintained on the books of Mortgagor (but only so long as Mortgagee has been given notice of such proceedings and such proceedings do not, in Mortgagee's reasonable opinion, involve any danger of the attachment, sale, forfeiture or loss of the Aircraft, any Engine, or any Part thereof or otherwise materially adversely affect the Lien of this Agreement or subject Mortgagee or any Holder to any risk of civil or criminal penalty). In 8 the event that any such law, rule, regulation or order requires alteration of the Aircraft, any Engine, or any Part thereof, unless the validity thereof is being contested in good faith and by appropriate proceedings and for the payment of which adequate reserves have been provided and are being maintained on the books of Mortgagor (but only so long as Mortgagee has been given notice of such proceedings and such proceedings do not, in Mortgagee's reasonable opinion, involve any danger of the attachment, sale, forfeiture or loss of any item of the Aircraft, any Engine, or any Part thereof or otherwise materially adversely affect the Lien of this Agreement or subject Mortgagee or any Holder to any risk of civil or criminal penalty), Mortgagor will conform thereto or obtain conformance therewith at no expense to Mortgagee and will maintain the Aircraft in proper operating condition under such laws, rules, regulations and orders. Mortgagor agrees that it will not permit the Aircraft or any Engine to be operated, used or located (a) in any area excluded from coverage by the insurance required by the terms of Section 6.3, except in the case of a requisition by the United States of America where Mortgagor obtains indemnity from the United States of America against substantially the same risks and for at least the amounts of the insurance required by Section 6.3 covering such area, or (b) outside the United States or Canada in any recognized or, in the Mortgagor's reasonable judgment, threatened area of hostilities unless, notwithstanding the provisions of Section 6.3, covered by war risk and allied perils insurance, or in either case unless the Aircraft is operated or used under contract with the government of the United States or any agency or instrumentality thereof (backed by the full faith and credit of the United States Government) under which contract such government assumes liability for substantially the same risks in at least the same amounts as would be covered by such insurance. 3.2 Transfer of Possession. Except as expressly set forth herein or in the Indenture, Mortgagor will not, without the prior written consent of Mortgagee, lease, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft or any Engine, except that Mortgagor may install an Engine on another aircraft in Mortgagor's fleet to the extent consistent with Section 6.2 below. 3.3 Total Loss of Engine and not Airframe; Total Loss of Airframe. (a) Upon a Total Loss of any Engine not installed on the Aircraft or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, Mortgagor will give Mortgagee prompt (but in any event, within five Business Days after the Total Loss Date) written notice thereof. Mortgagor will, as soon as reasonably possible and in any event within 120 days of the Total Loss Date with respect to such Total Loss, and on at least five days' written notice to Mortgagee, replace such Engine by duly obtaining title to a Replacement Engine free of all liens and encumbrances other than Permitted Liens and such Replacement Engine will have a value and utility at least equal to, and of the same model, service bulletin, and modification status and in at least as good operating condition as, the Engine which sustained such Total Loss. Such Replacement Engine will be an Engine as defined herein. (b) Mortgagor agrees at its own expense to take such action as Mortgagee may reasonably request in order that any such Replacement Engine becomes the Property of Mortgagor and is subject to the Lien provided by this Agreement. 9 (c) Upon a Total Loss of the Airframe, Mortgagor will give Mortgagee prompt (but in any event, within five Business Days after the Total Loss Date) written notice thereof and will comply with the provisions of Section 4.12 (d) of the Indenture. 3.4 Replacement of Parts. Mortgagor, at its own cost and expense, will promptly replace or cause the replacement of all Parts that may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason whatsoever, with Parts of at least equivalent model, operating condition and modification status as the replaced Part if the replaced Part had been maintained in accordance with the provisions hereof. Mortgagor may substitute for any Part a Part that does not meet the foregoing requirements if a complying Part could not be procured or installed within the available ground time of the Aircraft and as soon as practicable the noncomplying part is removed and replaced by a complying Part. All Parts at any time removed from the Aircraft or any Engine shall remain part of the Aircraft or any Engine no matter where located, until such time as such Parts shall be replaced by Parts which have been incorporated in the Aircraft or any Engine and which meet the requirements for replacement Parts specified above. Immediately upon any replacement Part becoming incorporated or installed in or attached to the Aircraft or any Engine as above provided, without further act, (i) such replacement Part shall be deemed part of the Aircraft or Engine, as applicable, for all purposes hereof to the same extent as the Parts originally incorporated in the Aircraft or Engine, as applicable, and (ii) the replaced Part shall no longer be deemed a Part hereunder. 3.5 Installation of Video Equipment and Telephone Systems owned by Third Parties on the Aircraft. Mortgagor may lease or purchase subject to a security lien equipment for the Aircraft (including video systems and telephone systems) from third parties and install such equipment on the Aircraft. The installation of such equipment on the Aircraft is considered a modification to the Aircraft and Mortgagor must comply (or, with respect to such equipment existing and already installed on the Issue Date, have complied) with the requirements of Section 6.11 prior to the installation of such equipment on the Aircraft. Such equipment will remain the Property of its owner, unless such equipment has not been removed from the Aircraft prior to the repossession of the Aircraft by Mortgagee or the owner or holder of the security interest in such equipment shall not have requested in writing that the same be removed in accordance with this Section (at which time title will pass to Mortgagee). Prior to repossession of the Aircraft by Mortgagee, Mortgagor or the holder of the security interest may remove any such equipment from the Aircraft, so long as Mortgagor restores and repairs any of the alterations made to the Aircraft in connection with the installation of such equipment on the Aircraft to the same condition that the Aircraft was in prior to the installation of such equipment on the Aircraft. In the event that the Aircraft is repossessed by Mortgagee in any manner permitted by this Agreement which does not allow the removal of the equipment prior to such repossession, upon written notice to Mortgagee by any such lessor or holder of a security interest within ten days of such termination requesting removal of the equipment, Mortgagee shall remove or cause to be removed such equipment, restore and repair the Aircraft to the condition that such Aircraft was in prior to the installation of such equipment on the Aircraft and return such equipment to the lessor or holder of the security interest, all of which will be at the cost and expense of the lessor or security holder of such security interest. As a condition precedent to removal and return, the 10 owner or security holder must provide Mortgagee with the security requested by Mortgagee to cover the costs of such removal, restoration and return and the associated downtime. 3.6 Interchange and Pooling Agreements. Mortgagor may subject the Engines and Parts to normal interchange or pooling agreements with responsible international scheduled commercial air carriers customary in the airline industry and entered into by Mortgagor in the ordinary course of its business with respect to its entire Boeing 767-200 fleet so long as (i) in the case of pooling of an Engine, such Engine is returned to Mortgagor within one (1) month, (ii) no reregistration of the Engine occurs, (iii) all other terms of this Agreement continue to be observed with respect to the Engines or Parts, and (iv) Mortgagor continues to be fully responsible to Mortgagee for the performance of all of its obligations hereunder. 4. EVENTS OF DEFAULT; DISPOSITION OF COLLATERAL AND APPLICATION OF PROCEEDS 4.1 Judicial Proceedings, etc., Following Event of Default. If any Event of Default shall occur and be continuing, then, and in any such event, Mortgagee may, forthwith upon notice to Mortgagor (it being understood and agreed that such provision of notice to Mortgagor shall not be deemed to limit or otherwise restrict Mortgagee's rights and remedies hereunder or under any other Operative Document or agreement): (a) apply to a court of competent jurisdiction to obtain specific performance or observance by Mortgagor of any covenant, agreement or undertaking on the part of Mortgagor hereunder that Mortgagor shall have failed to observe or perform or to obtain aid in the execution of any power granted herein; and/or (b) proceed to foreclose against the Collateral or any part thereof pursuant to this Agreement, and according to the applicable Law of the jurisdiction or jurisdictions in which such Collateral or part thereof shall at the time be located, by doing any one or more or all of the acts described in Sections 2.1 or 4.2 and/or the following acts, as Mortgagee, in its sole and complete discretion (acting in good faith), may then elect to: (i) exercise all the rights and remedies, in foreclosure and otherwise, available to it as a mortgagee and secured party under the provisions of applicable Law, including, in any event, all of the rights, powers and remedies under the Uniform Commercial Code of the State of New York; (ii) institute legal proceedings to obtain a judgment conferring on Mortgagee the right to immediate possession or requiring Mortgagor to deliver immediate possession of all or part of the Collateral to Mortgagee; (iii) institute legal proceedings to foreclose upon and against the security interest granted in and by this Agreement, to recover judgment for all Obligations then due and owing, and to collect the same out of any of the Collateral or the proceeds of any sale thereof; (iv) institute legal proceedings for the sale, under the judgment or decree of any court of competent jurisdiction, of any or all of the Collateral; 11 (v) without regard to the adequacy of the security for the Indenture or any other Operative Document or agreement between Mortgagee and Mortgagor, Mortgagor and its Affiliates, by virtue of this Agreement or otherwise, or any other collateral or other security or to the solvency of Mortgagor, institute legal proceedings for the appointment of a receiver or receivers pending foreclosure hereunder or for the sale of any of the Collateral under the order of a court of competent jurisdiction or under other legal process; or (vi) personally, or by agents or attorneys, enter upon any premises where the Collateral or any part thereof may then be located, and take possession of and remove all or any part thereof or render it unusable; and without being responsible for loss or damage to such Collateral, hold, store and keep idle, or lease, operate or otherwise use or permit the use of, the same or any part thereof, for such time and upon such terms as Mortgagee may in its sole and complete discretion deem to be in its own best interests, and demand, collect and retain all hire, earnings and other sums due and to become due in respect of the same from any party whomsoever, accounting for net earnings, if any, arising from such use and charging against all receipts from the use of the same or from the sale thereof, by court proceedings or pursuant to Section 4.2, all other costs, expenses, charges, damages and other losses resulting from such use in good faith. All expenses of obtaining any such judgment, bringing any such legal proceeding or of pursuing, searching for and taking such Property shall, until paid, be secured by the Lien of this Agreement. 4.2 Delivery of Collateral, Power of Sale, etc. If Mortgagee should elect to foreclose upon and against the security interest created in and by this Agreement, Mortgagor shall, upon demand of Mortgagee, deliver to Mortgagee all or any part of the Collateral at such time or times and to such airport within the continental United States of America as Mortgagee may specify; and Mortgagee is hereby authorized and empowered, in accordance with applicable Law and without being responsible for loss or damage to such Collateral incurred other than solely by reason of Mortgagee's willful misconduct, to enter upon any premises where the Collateral or any part thereof may be located and take possession of and remove the same. Mortgagee may thereafter sell and dispose of, or cause to be sold and disposed of, all or any part of the Collateral at one or more public or private sales, at such places and times and on such terms and conditions as Mortgagee may deem fit in good faith, with or without any previous demand to Mortgagor or any other person, or advertisement of any such sale or other disposal upon notice to Mortgagor (it being understood and agreed that such provision of notice to Mortgagor shall not be deemed to limit or otherwise restrict Mortgagee's rights and remedies hereunder or under any other Operative Document or agreement); and for the aforesaid purpose, any other notice of sale, any advertisement and other notice or demand, any right of equity of redemption and any obligation of a prospective purchaser to inquire as to the power and authority of Mortgagee to sell or the application by Mortgagee of the proceeds of sale or otherwise that would otherwise be required by, or available to Mortgagor under, applicable Law are hereby expressly waived by Mortgagor to the fullest extent permitted by such Law. In the event that any mandatory requirement of 12 applicable Law shall obligate Mortgagee to give different, additional or prior notice to Mortgagor of any of the foregoing acts, Mortgagor hereby agrees that, to the extent permitted by applicable Law, a written notice sent to it by mail or by telecopy, so as reasonably to be expected to be delivered to Mortgagor at least ten (10) Business Days before the date of any such act shall be deemed to be reasonable notice of such act and, specifically, reasonable notification of the time after which any private sale or other disposition intended to be made hereunder is to be made. 4.3 Right to Possession, etc. (a) To the fullest extent Mortgagor may lawfully agree, the right of Mortgagee to take possession of and sell any of the Collateral in compliance with the provisions of this Section 4 shall not be affected by the provisions of any applicable reorganization or other similar law or any jurisdiction; and Mortgagor shall not take advantage of any such law or agree to allow any agent, assignee or other party to take advantage of such law in its place, to which end Mortgagor, for itself and all who may claim through it, as far as it or they now or hereafter lawfully may do so, hereby waives, to the fullest extent permitted under applicable Law, any rights or defenses arising under any such law, and all rights to have the Collateral marshaled upon any foreclosure hereof, and hereby agrees that any court having jurisdiction to foreclose upon and against the security interest created in this Agreement may order the sale of the Collateral subject to such jurisdiction as an entirety or severally. (b) Mortgagee shall not have any duty or obligation to use, operate, store, lease, control, manage, sell, dispose of or otherwise deal with the Aircraft or any other part of the Collateral, or otherwise to take or refrain from taking any action under, or in connection with, this Agreement. If an Event of Default shall occur and be continuing and Mortgagee shall have obtained possession of or title to the Aircraft or any Engines, Mortgagee shall not be obligated to use or operate the Aircraft or Engines or cause the Aircraft or Engines to be used or operated directly or indirectly by itself or through agents or other representatives or to lease, license or otherwise permit or provide for the use or operation of the Aircraft or Engines by any other Person, provided, however, that if Mortgagee in its sole discretion elects to so use or operate the Aircraft or Engines, Mortgagee may obtain insurance in kinds, at rates and in amounts satisfactory to it in its reasonable opinion to protect the Collateral and Mortgagee and the Holders against any and all liability for loss or damage to the Aircraft or Engines and for public liability and Property damage resulting from the use or operation of the Aircraft or Engines by application of any funds available in the Collateral to pay for all such insurance or, in lieu of such insurance, Mortgagee is furnished with indemnification from any other Person upon terms and in amounts satisfactory to Mortgagee in its sole discretion to protect the Collateral and Mortgagee, both as Mortgagee and individually, and the Holders, against any and all such liabilities. Upon every taking of possession of any Collateral under this Section 4, Mortgagee may (but shall not be obligated to), from time to time, at the expense of the Collateral, make all such expenditures for maintenance, storage, insurance, leasing, control, management, disposition, repairs, replacements, alterations, additions and improvements to and of the Collateral, as it may deem proper. In each such case, Mortgagee shall have the right to maintain, store, insure, lease, control, modify, alter, sell, transfer, convey or otherwise dispose of or manage the Collateral and to exercise all rights and powers of Mortgagor relating to the Collateral in connection therewith, 13 as Mortgagee shall deem appropriate, including the right to enter into any and all such agreements with respect to the maintenance, insurance, storage, leasing, control, management, disposition, modification or alteration of the Collateral or any part thereof as Mortgagee may determine, all as may be reasonably necessary or desirable for the general upkeep of the Collateral or to prepare any Collateral for sale or other disposition hereunder; and Mortgagee shall be entitled to collect and receive directly all tolls, rents, revenues, issues, income, products and profits of the Collateral and every part thereof, without prejudice, however, to the right of Mortgagee under any provision of this Agreement to collect and receive all cash held by, or required to be deposited with, Mortgagee hereunder. (c) Mortgagor does hereby irrevocably constitute and appoint Mortgagee the true and lawful attorney of Mortgagor (which appointment is coupled with an interest) with full power (in the name of Mortgagor or otherwise) to ask, require, demand and receive any and all moneys and claims for moneys (in each case including insurance and requisition proceeds) due and to become due under or arising out of or which now or hereafter constitute part of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceeding which Mortgagee may deem to be necessary or advisable in the premises; provided, Mortgagee shall not exercise any such rights except upon the occurrence and during the continuance of an Event of Default. 4.4 Application of Proceeds. (a) All payments or proceeds received by Mortgagee under or pursuant to this Agreement the application of which is not otherwise provided for herein shall be applied or in the absolute discretion of Mortgagee (exercised in good faith) retained for application in the manner set forth in Section 6.10 of the Indenture. (b) All payments and proceeds received and amounts realized by Mortgagee after an Event of Default has occurred and is continuing which funds would, but for the provisions of this paragraph (b), be distributed to Mortgagor, shall be held by Mortgagee as collateral security (and part of the Collateral) for the Obligations, may be applied by the Mortgagee in the manner set forth in Section 6.10 of the Indenture, and at such time as no Event of Default shall be continuing, any such funds remaining shall be distributed to Mortgagor to the extent so distributable hereunder or under the Indenture. (c) All payments received by Mortgagee with respect to a Total Loss of any Aircraft shall be held as part of the Collateral until Mortgagor has complied with Section 4.12(d) of the Indenture. On the Payment Date with respect to the Offer to Purchase required under such Section, Mortgagee shall, upon Request, release such payments with respect to such Total Loss to Mortgagor for payment to the Holders of all or any part of the purchase price with respect to such Offer to Purchase. (d) All payments received by Mortgagee with respect to a Total Loss of any Engine not installed on the Aircraft or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, shall be held as part of the Collateral until Mortgagor 14 shall comply with Sections 2.2 and 3.3 with respect to such Engine and shall promptly thereafter be turned over to Mortgagor. (e) All payments received by Mortgagee with respect to loss or damage to the Aircraft not involving a Total Loss shall be held as part of the Collateral and paid over to Mortgagor upon Request therefor and upon receipt by Mortgagee of an Officers' Certificate and such other documents or instruments as Mortgagee may reasonably request to evidence compliance by Mortgagor with its repair or replacement obligations hereunder. (f) All amounts from time to time distributable under this Section 4.4 by Mortgagee to Mortgagor shall be paid by Mortgagee to Mortgagor at its address set forth in Section 11.2 of the Indenture and, to the extent so timely received, in funds of the same type as received. If the payments or proceeds received by Mortgagee under this Agreement or any other Operative Document shall be insufficient to indefeasibly pay in full the Obligations then due and payable to Mortgagee and as set forth above in this Section 4.4, Mortgagor shall forthwith pay any balance of such amounts remaining unpaid to Mortgagee or as Mortgagee directs, and any deficiencies remaining thereafter may be entered as a judgment against Mortgagor in any court of competent jurisdiction. 4.5 Matters Involving Manner of Sale. (a) At any sale pursuant to this Section 4, whether by virtue of judicial proceedings contemplated in Section 4.1 or under the power of sale granted in Section 4.2, it shall not be necessary for Mortgagee or a public officer under order of a court to have present physical or constructive possession of the Collateral to be sold. The recitals contained in any conveyances and receipts made and given by Mortgagee in good faith or such public officer to any purchaser at any sale made pursuant to this Agreement shall, to the extent permitted by applicable Law, conclusively establish the truth and accuracy of the matters therein stated (including, without limiting the generality of the foregoing, the amounts due and payable under the Indenture and any other indebtedness secured hereby, the accrual and nonpayment thereof and advertisement and conduct of such sale in the manner provided herein and by applicable Law); and all prerequisites to such sale shall be presumed to have been satisfied and performed. (b) At any sale or sales made pursuant to this Section 4, Mortgagee, any Holder or their respective agents may bid for or purchase, free from any right or equity of redemption in favor of Mortgagor and any Person claiming by, through or under Mortgagor (all such rights being in this Section 4 waived and released), any part of or all of the Collateral offered for sale, and may make payment on account thereof by using any claim for moneys then due and payable to Mortgagee by Mortgagor as a credit against the purchase price; and Mortgagee, upon compliance with the terms of sale, may hold, retain and dispose of such Collateral without further accountability therefor to Mortgagor or any third party, except as expressly required by applicable Law. In any such sale Mortgagee shall not be obligated to make any representations or warranties with respect to the Collateral or any part thereof, and Mortgagee shall not be chargeable with any of the obligations or liabilities of Mortgagor with 15 respect thereto. Mortgagor hereby agrees (i) that it will indemnify and hold Mortgagee harmless from and against any and all claims with respect to the Collateral asserted before the taking of actual possession or control thereof by Mortgagee or its agents pursuant to this Section 4, or arising out of any act of, or omission to act on the part of, any party other than Mortgagee or any of its agents prior to such taking of actual possession or control by Mortgagee, or arising out of any act of, or omission to act on the part of, Mortgagor or any Person claiming by, through or under Mortgagor or any of its Affiliates or agents before or after the commencement of such actual possession or control by Mortgagee or any of its agents; and (ii) that Mortgagee shall have no liability or obligation arising out of any such claim; except, however, in each of clause (i) and (ii) with respect to claims arising from the willful misconduct of Mortgagee. (c) Nothing herein contained shall be deemed to impair in any manner the absolute right of Mortgagee to sell and convey title to the Collateral to the purchaser(s) at such public or private sale(s) or to grant options with respect to or otherwise to realize upon all or such portion of the Collateral, at such time, and in such order as it may elect in its sole and complete discretion in good faith, or to enforce any one or more remedies relative hereto either successively or concurrently; and Mortgagor hereby agrees that the security interest, options and other rights hereby given to Mortgagee shall remain unimpaired and unprejudiced until all the Collateral shall have been sold or this Agreement shall otherwise have ceased to be of any force or effect according to its terms, and that the enforcement of any right or remedy shall not operate to bar or estop Mortgagee from exercising any other right or remedy available hereunder or under any other Operative Document or agreement between Mortgagee and any of its Affiliates, on the one hand, and Mortgagor or any Person claiming by, through or under Mortgagor and its Affiliates on the other hand, or otherwise, available at law, in equity or otherwise. (d) Upon the completion of any sale under this Section 4, Mortgagor shall deliver, in accordance with the instructions of Mortgagee (including flying the Aircraft or any Engine or causing the same to be flown to such airports in the continental United States as Mortgagee may specify) such Collateral so sold. Mortgagee may execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument or instruments of conveyance, sale and transfer of all of the Property sold; and Mortgagee is hereby irrevocably appointed the true and lawful attorney of Mortgagor, with full power of substitution, in its name and stead, to make all necessary conveyances of the Property thus sold. Nevertheless, if so requested by Mortgagee or by any purchaser, Mortgagor shall confirm any such sale or transfer by executing and delivering to Mortgagee or to such purchaser all proper instruments of conveyance and transfer and releases as may be designated in any such request. 5. REPRESENTATIONS AND WARRANTIES Mortgagor makes the following representations and warranties which shall be true and correct in all material respects as of the Issue Date and such representations and warranties shall survive the execution and delivery of this Agreement and the issuance of the Securities: 5.1 Corporate Status. Mortgagor is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware, is an "air carrier" within the 16 meaning of the Federal Aviation Act operating under a certificate of public convenience and necessity issued pursuant to Section 41102 thereof, holds an "air carrier operating certificate" issued pursuant to chapter 447 of the Act and of the type referred to in 11 U.S.C. ss. 1110, is a "citizen of the United States" as defined in Section 40102(a)(15) of the Act, and has the corporate power and authority to own or hold under lease its Properties and to enter into and perform its obligations under the Operative Documents. It is duly qualified to do business as a foreign corporation in the state of Missouri and in each other state of the United States in which failure to so qualify would have a material adverse effect on its financial condition or on its ability to perform its Obligations. It holds all material licenses, certificates, permits and franchises from the appropriate United States or other governmental agencies necessary to authorize it to engage in air transport and to conduct scheduled passenger service as presently conducted. Its chief executive office (as such term is used in sections 9-103 and 9-401 of the Uniform Commercial Code as in effect in New York and Missouri) is located at One City Centre, 515 North Sixth Street, St. Louis, Missouri 63101. Its correct U.S. tax identification number is 43-1145889. 5.2 Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the FAA or any other Government Entity is required for the valid authorization, execution, delivery and performance by Mortgagor of this Agreement, the Securities, the Indenture or any other Operative Document except as will have been duly effected as of the date of purchase of the Aircraft. 5.3 Binding. The execution, delivery and performance by Mortgagor of the Securities and the other Operative Documents and the consummation or performance by Mortgagor of the transactions contemplated thereby have been duly authorized by all necessary corporate action and do not require any stockholder approval or the approval or consent of or notice to any trustee or holder of any indebtedness or obligations of Mortgagor. This Agreement, the Securities, the Indenture and the other Operative Documents have been duly executed and delivered by Mortgagor and represent the valid, enforceable and binding obligations of Mortgagor except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors' rights. 5.4 No Breach. The execution and delivery of this Agreement, the Securities, the Indenture and the other Operative Documents, the consummation by Mortgagor of the transactions contemplated herein and therein and compliance by Mortgagor with the terms and provisions hereof and thereof do not and will not contravene any Law applicable to Mortgagor, or result in any breach of or constitute any default under or result in the creation of any Lien (except the Liens in favor of the Trustee created hereby or thereby) upon any Property of Mortgagor, pursuant to any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which Mortgagor is a party or by which Mortgagor or its Properties or assets may be bound or affected. 5.5 Filings. Except for filing this Agreement and the Mortgage Supplements with the FAA and filing Uniform Commercial Code financing statements in the offices of the Secretary of 17 State of Missouri and the offices of the Clerks of St. Louis City and Platte Counties, Missouri (all of which filings have been duly made), no filing or recording of any instrument or document is necessary under the Laws of the U.S. in order for this Agreement to create a valid and first priority perfected security interest of record relating to the Aircraft and the other Collateral. 5.6 Licenses. Mortgagor holds all licenses, certificates and permits from applicable Government Entities in the U.S. for the conduct of its business as a certificated air carrier and performance of its obligations under this Agreement, the Securities, the Indenture and the other Operative Documents. 5.7 No Suits. There are no suits, arbitrations, investigations or other proceedings pending or threatened against Mortgagor before any court or administrative agency against or affecting Mortgagor with respect to this Agreement, the Collateral, the Securities, the Indenture or the other Operative Documents or the transactions contemplated thereby. 5.8 Taxes. Mortgagor has filed or caused to be filed all material tax returns which are required to be filed by it and has paid or caused to be paid all Taxes which have been shown to be due and payable by such returns or (except to the extent being contested in good faith and for the payment of which adequate reserves have been provided) tax assessments received by Mortgagor to the extent that such Taxes have become due and payable. 5.9 No Event of Default or Total Loss. There has not occurred any event which constitutes a Default, an Event of Default, a Total Loss or an event which, but for the passage of time or the giving of notice, or both, would constitute a Total Loss, and no such Default, Event of Default, Total Loss or event will result from Mortgagor's purchasing and mortgaging the Collateral as contemplated hereby. 5.10 Aircraft Certification. The Aircraft has been duly certified by the FAA as to type and airworthiness, has a currently valid Standard Certificate of Airworthiness issued by the FAA, has been insured by Mortgagor in accordance with the terms of this Agreement and is in the condition and state of repair required under the terms of this Agreement. 5.11 Investment Company Act. Neither Mortgagor nor any subsidiary thereof is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 5.12 Condition of Aircraft. The Aircraft is fully equipped to operate in United States commercial service and complies with all material governmental requirements governing such service. 5.13 Title. Mortgagor has good and marketable title to the Aircraft, free and clear of all Liens other than Permitted Liens. 5.14 No Default. Mortgagor is not in default in the performance of any term or condition of the Aircraft Sale Agreement. 18 5.15 Mortgage Liens. Mortgagor has and will have at all times full power and authority to grant a Lien on and security interest in the Collateral in the manner set forth in this Agreement, and this Agreement constitutes a valid first priority mortgage Lien on and security interest in the Collateral, duly securing the Obligations. 5.16 Engines. Each Engine is of 750 or more rated takeoff horsepower. 5.17 FAA Aircraft Registry. As of the Issue Date, the Aircraft is duly registered in the name of Mortgagor, the Aircraft is not registered under the laws of any country other than the United States, this Agreement and the Mortgage Supplement covering the Aircraft being purchased by Mortgagor on the Issue Date pursuant to the Aircraft Sale Agreement are in due form for recording with the FAA Aircraft Registry and this Agreement and the Mortgage Supplement has been duly filed for recording with the FAA Aircraft Registry in favor of Mortgagee in accordance with applicable law. 5.18 Insurances. As of the Issue Date, all insurance policies required pursuant to this Agreement are in full force and effect. 6. COVENANTS 6.1 This Agreement. So long as this Agreement remains in effect Mortgagor shall duly observe and perform its obligations under the Securities and the Operative Documents to which it is a party and pay to Mortgagee all amounts due and owing hereunder and under the Securities and the other Operative Documents. All such covenants are specifically incorporated herein and made a part hereof. 6.2 Certain Rights. Mortgagor and Mortgagee agree each for itself and for the benefit of any lessor, seller or secured party of any engines leased, operated or purchased by Mortgagor that neither Mortgagee nor its successors and assigns will acquire or claim, as against such lessor, seller or secured party, any right, title or interest in any such engine as the result of such engine being installed on the Airframe at any time while such engine is subject to such lease, conditional sale or other security agreement and owned by such lessor or seller or subject to a security interest in favor of such secured party; provided, that such agreement of Mortgagor and Mortgagee shall not be for the benefit of any lessor, seller or secured party of any such engines unless such lessor, seller or secured party has agreed to substantially the same extent as provided above (which agreement may be contained in such lease, conditional sale or other security agreement) that neither it nor its successors or assigns will acquire, as against Mortgagor or Mortgagee, any right, title or interest in any Engine as a result of such Engine being installed on any airframe owned by, leased to or held under any security agreement by such lessor, seller or secured party. 6.3 Insurance. (a) Categories of Insurance. From the date of purchase of the Aircraft by Mortgagor through the date which is two (2) years after the Stated Maturity of the Securities, Mortgagor will, at its own expense, effect and maintain in full force and effect the insurance 19 described in this Section 6.3 and in Exhibit B through such brokers and with such insurers which are internationally recognized and have a good reputation. (b) Insurance for Indemnities. The insurance referred to in Section 6.3(a) will in each case include and insure (to the extent of the risks covered by the policies) the indemnity provisions of Section 8.1 and Mortgagor will maintain such insurance of the indemnities for a minimum of two (2) years following the Stated Maturity of the Securities. (c) Renewal. Mortgagor will use its best reasonable efforts to try and provide to Mortgagee at least five (5) Business Days prior to the date of termination or expiration of any insurance, telex or fax confirmation from Mortgagor's insurance brokers that renewed certificates of insurance evidencing the renewal or replacement will be issued on the termination date of the prior certificate. But in any event, not less than one (1) Business Day before the expiration or termination date of any insurance required hereunder, Mortgagor will provide Mortgagee with telex or fax confirmation from Mortgagor's insurance brokers that renewed certificates of insurance evidencing the renewal or replacement of such insurance and complying with this Section 6.3 and Exhibit B will be issued on the termination date of the prior certificate. Within seven (7) days after such renewal, Mortgagor will furnish its brokers' certificates of insurance to Mortgagee. (d) Assignment of Rights by Mortgagee. If Mortgagee assigns all or any of its rights under this Agreement as permitted by this Agreement or the Indenture or otherwise disposes of any interest in the Aircraft to any other Person as permitted by this Agreement or the Indenture, Mortgagor will, upon request, procure that such Person hereunder be added as loss payee and/or additional assured in the policies effected hereunder and enjoy the same rights and insurance enjoyed by Mortgagee under such policies. Mortgagee will nevertheless continue to be covered by such policies. (e) [Intentionally omitted.] (f) Other Insurance. Mortgagee may from time to time by notice to Mortgagor require Mortgagor at Mortgagor's expense to effect such other insurance or such variations to the terms of the existing insurance as may then be customary in the airline industry for aircraft of the same type as the Aircraft and at the time commonly available in the insurance market. (g) Information. Mortgagor will provide Mortgagee with any information reasonably requested by Mortgagee from time to time concerning the insurance maintained with respect to the Aircraft or in connection with any claim being made or proposed to be made thereunder. (h) Currency. All proceeds of insurance pursuant to this Agreement will be payable in Dollars except as may be otherwise agreed by Mortgagee. (i) Grounding of Aircraft. If at any time any of the insurance required pursuant to this Agreement will cease to be in full force and effect, Mortgagor will forthwith 20 ground the Aircraft and keep the Aircraft grounded until such time as such insurance is in full force and effect again. Nothing contained in this paragraph (i) shall be deemed to release Mortgagor from its obligation to maintain insurance as required herein. (j) Failure to Insure. If at any time Mortgagor fails to maintain insurance in compliance with this Section 6.3, Mortgagee will be entitled but not bound to do any of the following (without prejudice to any other rights which it may have under this Agreement by reason of such failure): (i) To effect or maintain insurance satisfactory to Mortgagee or otherwise remedy such failure in such manner as Mortgagee considers appropriate (and Mortgagor will upon demand reimburse Mortgagee in full for any amount so expended in that connection). (ii) At any time while such failure is continuing, to require the Aircraft to remain at any airport or (as the case may be), proceed to and remain at any airport designated by Mortgagee, until such failure is remedied to Mortgagee's satisfaction. (k) Reinsurance. If in the future any reinsurance placed by Mortgagor or a permitted lessee or sublessee (if any) of Mortgagor is maintained on the Aircraft, then such reinsurance will be maintained with reinsurers and brokers approved by Mortgagee. Such reinsurance will contain each of the following terms and will in all other respects (including amount) be satisfactory to Mortgagee: (i) The same terms as the original insurance. (ii) A cut-through and assignment clause satisfactory to Mortgagee. (iii) Payment will be made notwithstanding (A) any bankruptcy, insolvency, liquidation or dissolution of any of the original insurers and/or (B) that the original insurers have made no payment under the original insurance policies. 6.4 Compliance with Laws. Mortgagor shall exercise all due diligence in order to comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, noncompliance with which would have a material adverse effect on Mortgagor. 6.5 Subleasing or Leasing. (a) No Sublease or Lease without Consent. Except as permitted under the Indenture or as set forth below in this Section 6.5, MORTGAGOR WILL NOT SUBLEASE, LEASE OR PART WITH POSSESSION OF THE AIRCRAFT OR ANY ENGINE (EXCEPT FOR MAINTENANCE AND REPAIR) AT ANY TIME WITHOUT THE PRIOR WRITTEN CONSENT OF THE REQUIRED HOLDERS (THE GRANT OR REFUSAL OF WHICH WILL 21 BE IN THE DISCRETION OF SUCH HOLDERS) AND IN ACCORDANCE WITH SUCH REQUIREMENTS AS MAY FROM TIME TO TIME BE AGREED IN WRITING BETWEEN THE REQUIRED HOLDERS AND MORTGAGOR. The wet leasing of the Aircraft in the ordinary course of Mortgagor's business (in which Mortgagor and its crews retain operational control of the Aircraft) will not be considered a sublease of the Aircraft and shall be permitted hereunder so long as no Default or Event of Default then exists. (b) Pre-Approved Subleasing or Leasing. Attached hereto as Exhibit C is a list (the "Pre-Approved List") of airlines to whom the Holders hereby agree Mortgagor may, subject to paragraph (c) below, sublease or lease the Aircraft, without requiring the consent of the Holders. Mortgagor shall have the right to provide Mortgagee and the Holders with a new list (the "New Pre-Approved List") from time to time which the Required Holders shall approve, disapprove or disapprove in part and approve in part within fifteen (15) days of receipt, provided that any such approval will not be unreasonably withheld. In the event that the Required Holders fail to respond within such fifteen (15) day period, Mortgagor will once again deliver the New Pre-Approved List to Mortgagee and the Holders and if the Required Holders then fail to respond within five (5) Business Days of receipt of the New Pre-Approved List (the second time it is sent), the Required Holders shall be deemed not to have consented to the New Pre-Approved List. The New Pre-Approved List, as approved by the Required Holders, shall constitute the Pre-Approved List from the date of such approval. Notwithstanding the foregoing, Mortgagor shall not lease or sublease (including renewals thereof) the Aircraft to any Person otherwise permitted hereunder if at the time such lease or sublease would be entered into or renewed such Person is subject to any bankruptcy, insolvency, liquidation reorganization, dissolution or similar proceeding, is seeking any reorganization or any readjustment of its debts, has substantially all of its Property in the possession of any liquidator, trustee, receiver or similar Person, or is not generally paying its debts as and when they are due. (c) Any Approved Sublease or Lease. Any sublease or lease (hereinafter in this paragraph (c), a "Sublease") of the Aircraft or any Engine will be fully subject to fulfillment of the following conditions: (i) The Mortgagor shall provide at least ten (10) Business Days' prior notice to Mortgagee of any proposed Sublease, setting forth the identity of the sublessee, the Property to be subject to such Sublease and the term of such Sublease, and such Sublease shall contain an express agreement by the sublessee to the effect that: (A) such Sublease is fully subject and subordinate in all respects to this Agreement and to Mortgagee's rights, powers and remedies hereunder, (B) such Sublease shall prohibit any assignment or further sublease of the Property subject thereto, and (C) upon notice of the occurrence of an Event of Default given by Mortgagee to such sublessee, Mortgagee may avoid such Sublease, and the sublessee shall forthwith deliver the Aircraft or Engine to Mortgagee; (ii) All necessary action shall have been taken which is required to continue the perfection of Mortgagee's security interest in the Aircraft and Engine 22 and the Mortgagee's rights under this Agreement and the Sublease and all other necessary documents shall have been filed, registered or recorded in such public offices as may be required to fully preserve the priority of the interest of Mortgagee in the Aircraft and Engine under all applicable Laws; (iii) Mortgagor shall deliver to Mortgagee, promptly after execution thereof, a duly executed copy of such Sublease; (iv) Each Sublease shall be assigned by Mortgagor to Mortgagee as security for Mortgagor's obligations hereunder, and the sublessee shall be required upon the occurrence and during the continuance of an Event of Default to make all payments under such Sublease directly to Mortgagee; provided that if such Event of Default shall cease or shall be waived pursuant to the provisions of the Indenture, Mortgagee shall immediately pay to Mortgagor all funds so received and not yet applied in accordance with the provisions hereof or of the Indenture; (v) Any such Sublease shall include provisions for the maintenance, operation, possession, inspection or insurance of the Property subject thereto that are the same in all material respects as the applicable provisions of this Agreement; (vi) Mortgagor shall furnish to Mortgagee evidence reasonably satisfactory to Mortgagee that the insurance required by Section 6.3 remains in effect; (vii) Mortgagor shall pay or reimburse Mortgagee for all reasonable out-of-pocket fees and expenses, including, without limitation, reasonable fees and disbursements of counsel, incurred by Mortgagee in connection with any such Sublease; (viii) For all purposes of this Section 6.5, the term "Sublease" shall be deemed to include interchange agreements with respect to the Aircraft or Airframe; and (ix) Mortgagor shall remain primarily liable hereunder for the performance of all the terms of this Agreement to the same extent as if such Sublease had not occurred, and no transfer of possession of the Aircraft, the Airframe, any Engine or any Part shall in any way discharge or diminish any of Mortgagor's obligations hereunder or under any other Operative Document. In its sole discretion, Mortgagee may require an Opinion of Counsel in connection with such Sublease, including Mortgagee's rights to repossess the Aircraft in the event of an Event of Default hereunder or under the Sublease. Mortgagor will not amend the terms of any approved Sublease without the prior written consent of the Mortgagee, which will not be unreasonably withheld. 23 6.6 Further Assurances. At any time or from time to time upon the reasonable request of Mortgagee, Mortgagor shall cause the appropriate Person to execute, acknowledge, deliver, and cause to be recorded or registered (if so requested) all such additional instruments and documents and further assurances of title and shall do or cause to be done all such further acts and things as may reasonably be necessary or desirable to effectuate fully the intent and purposes of this Agreement, the Securities, the Operative Documents, and any other agreement entered into in connection therewith. 6.7 Maintenance. So long as the Lien of this Agreement shall not have been discharged, Mortgagor, at its own cost and expense, shall service, repair, maintain, overhaul and test the Airframe and Engines (and each engine and part which is not an Engine or Part, respectively, but is installed on the Airframe) or cause the same to be done in accordance with a maintenance program approved by the FAA (and in compliance with all airworthiness directives thereof), and shall keep or cause to be kept the Airframe and Engines (and each such other engine or part) (i) in such operating condition as may be necessary to enable the airworthiness certification of the Aircraft to be maintained in good standing at all times under the applicable rules and regulations of the FAA and the FAA-approved maintenance program of Mortgagor and (ii) in good operating condition in accordance with all mandatory service bulletins and airworthiness directives of the United States Government and in substantially the same manner as Mortgagor services, repairs, maintains, overhauls and tests similar aircraft operated by Mortgagor in similar circumstances and in accordance with Mortgagor's maintenance program approved by the FAA and without discriminating against the Aircraft with respect to its maintenance, repair, condition or overhaul status based upon the existence of this Agreement. Notwithstanding the foregoing, when aircraft of the same type, model or series as the Airframe (powered by engines of the same type as those with which the Airframe shall be equipped at the time of grounding) have been grounded by the FAA, Mortgagor shall not be required to maintain such certification of airworthiness so long as it continues to comply with all the other provisions of this Agreement with respect to the Aircraft. Nothing herein shall be deemed to prevent Mortgagor from taking the Aircraft out of service for maintenance or modifications permitted hereunder or storage in accordance with applicable FAA requirements, as appropriate and sound practice for such storage. Mortgagor shall maintain or cause to be maintained in the English language all records, logs and other documents required by the FAA to be maintained in respect of the Aircraft. 6.8 Registration. Except as otherwise permitted by this Agreement or as otherwise required by the Federal Aviation Act or rules, regulations, or orders promulgated thereunder, so long as the Lien of this Agreement shall not have been discharged, the Aircraft shall be duly registered in the name of Mortgagor under such Act at all times. Mortgagee shall, at Mortgagor's expense, execute and deliver all such documents as Mortgagor may reasonably request for the purpose of effecting or continuing such registration. 6.9 Insignia. Mortgagor shall for so long as the Aircraft shall be subject to the Lien of this Agreement maintain or cause to be maintained in the cockpit of the Airframe in a location reasonably adjacent to the airworthiness certificate and on each Engine, a metal nameplate identifying the security interest of Mortgagee in the Aircraft, as follows: 24 "Subject to a security interest in favor of [Name of current Mortgagee], as Trustee" Mortgagor will not allow the name of any Person other than Mortgagee, or its successors or assigns, to be placed on the Airframe or any Engine as a designation that might be interpreted as a claim of ownership or of any security interest therein, except that Mortgagor or any permitted lessee may operate the Airframe and Engines in its livery, including its name and logo and except that so long as the Second Mortgage is in effect, Mortgagor may comply with Section 6.9 of the Second Mortgage. 6.10 Inspection. At all reasonable times so long as the Aircraft is subject to the Lien of this Agreement, Mortgagee or its authorized representatives may at its own expense (unless an Event of Default shall have occurred and be continuing, or unless such inspection discloses any material failure by Mortgagor to comply with the provisions of this Agreement in which case, at Mortgagor's expense) and risk conduct a visual walk-around inspection of the Aircraft and any Engine (including, without limitation, a visual walk-around inspection of the Aircraft during any "C" check or other heavy maintenance) and may inspect the books, logs and records of Mortgagor (and make copies of such books, logs and records) relating to the operation and maintenance thereof; provided that (a) any such inspection shall be subject to the safety, security and workplace rules applicable at the location where such inspection is conducted and any applicable governmental rules or regulations and (b) in the case of an inspection during a maintenance visit, such inspection shall not interfere with the normal conduct of such maintenance visit or extend the time required for such maintenance visit or, in any event, at any time interfere with the use or operation of the Airframe or any Engine or with the normal conduct of Mortgagor's business. All information obtained in connection with any such inspection shall be held confidential by Mortgagee and the Holders and shall not be furnished or disclosed by them to anyone other than each other, their bank examiners, regulators, auditors, accountants, agents and legal counsel and any Person with whom any Holder is in good faith conducting negotiations relating to the possible transfer and sale of such Holder's interest in any Security, if such Person shall have entered into an agreement similar to that contained in this Section 6.10 whereby such Person agrees to hold such information confidential, and except as may be required by an order of any court or administrative agency or by any statute, rule, regulation or order of any governmental authority or as may be necessary to enforce the terms of this Agreement. Neither Mortgagee nor any Holder shall have any duty to make any such inspection or incur any liability or obligation by reason of not making any such inspection. No inspection under this Section 6.10 shall relieve Mortgagor of any of its obligations under this Agreement. If requested by Mortgagee, Mortgagor shall give reasonable prior written notice to Mortgagee of the date on which the Aircraft, Airframe or any Engine undergoes its next scheduled maintenance visit and next major check, and with respect to any Engine the next off-the-wing maintenance, and shall advise Mortgagee of the name and location of the relevant maintenance provider and shall, at least five days prior to commencement of such major check or maintenance, make available for inspection by Mortgagee all relevant records, logs and documents relating to the Aircraft. 25 6.11 Alterations, Modifications and Additions. Mortgagor, at its own expense, shall make alterations and modifications in and additions to the Airframe and each Engine as may be required to be made from time to time to comply with the applicable rules and regulations of the FAA, to maintain the Standard Certificate of Airworthiness for the Aircraft and as otherwise required by applicable Law regardless of upon whom such requirements are, by their terms, nominally imposed; provided that Mortgagor may, in good faith, contest the validity or application of any such standard in any reasonable manner which does not materially adversely affect the Lien of this Agreement or subject Mortgagee or any Holder to any risk of civil or criminal penalty. In addition, Mortgagor, at its own expense, may from time to time make or cause to be made such alterations and modifications in and additions to the Airframe and any Engine as Mortgagor may deem desirable in the proper conduct of its business (including, without limitation, removal of Parts), provided further that no such alteration, modification or addition diminishes, in Mortgagee's reasonable judgment, the value, utility, condition, airworthiness or remaining useful life of the Airframe or Engine below the value, utility, condition, airworthiness or remaining useful life thereof immediately prior to such alteration, modification or addition, assuming the Airframe or Engine was then in the condition required to be maintained by the terms of this Agreement, except that the value (but not the utility, condition, airworthiness or remaining useful life) of the Aircraft may be reduced by the value of Parts which Mortgagor deems obsolete or no longer suitable or appropriate for use in the Airframe or Engine which shall have been removed and not replaced, if the aggregate value of all such obsolete or unsuitable Parts removed from the Aircraft and not replaced shall not exceed $500,000. All Parts incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration modification or addition effected by Mortgagor shall be free and clear of any Liens except Permitted Liens and, without further act, become subject to the Lien of this Agreement; provided that Mortgagor may remove any such Part from the Airframe or Engine if (i) such Part is in addition to, and not in replacement of or in substitution for, any Part originally incorporated or installed in or attached to the Airframe or Engine at the time of delivery thereof hereunder or any Part in replacement of, or in substitution for, any such original Part, (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or Engine pursuant to the terms hereof and (iii) such Part can be removed from the Airframe or Engine without diminishing or impairing the value, condition, utility, airworthiness or remaining useful life which the Airframe or Engine would have had at the time of removal had such alteration, modification or addition not been effected by Mortgagor assuming the Aircraft was otherwise maintained in the condition required by this Agreement. Upon the removal by Mortgagor of any such Part as above provided, title thereto shall, without further act, be free and clear of all rights of Mortgagee and such Part shall no longer be deemed a Part hereunder. Any such Part not so removed shall, so long as the Lien of this Agreement shall not have been discharged, remain subject to such Lien. 6.12 Notice of Change of Mortgagor's Chief Executive Office. So long as the Lien of this Agreement shall not have been discharged, Mortgagor shall notify Mortgagee at least 30 days prior to any change in the location of the chief executive office of Mortgagor. 26 7. CONDEMNATION 7.1 Dedication to CRAF. Mortgagor may transfer possession of the Airframe or any Engine to the United States of America or any instrumentality or agency thereof as part of the Civil Reserve Air Fleet Program authorized under 10 U.S.C. ss. 9511 et seq. (or any substantially similar program) ("CRAF Program") for a period which includes (collectively, the "CRAF Program Requisition Period") (a) the entire period of requisition under the CRAF Program and (b) an additional six (6) months after the expiration of the requisition under the CRAF Program. 7.2 Notice to Mortgagee. Mortgagor will promptly notify Mortgagee in writing in the event of the requisition for use of the Aircraft under CRAF activation by the U.S. Government. All of Mortgagor's obligations under this Agreement will continue to the same extent as if such requisition had not occurred. 7.3 Requisition of Engine. If there is a requisition for use of any Engine (but not the Airframe) by the U.S. Government in connection with the CRAF Program, Mortgagor will replace such Engine by complying with the terms of Section 3.3 to the same extent as if a Total Loss had occurred with respect to such Engine. 7.4 Government Indemnification. Any provisions of this Agreement to the contrary notwithstanding, if there is a requisition for use of the Aircraft pursuant to the CRAF Program and/or CRAF activation, Mortgagee agrees that Mortgagor's insurances described in Section 6.3 and in Exhibit B hereof may be supplemented by insurances provided under Title XIII of the Federal Aviation Act of 1958, as amended, and/or U.S. Government indemnification (which Title XIII insurances and indemnification will be, as to the Aircraft, in an amount not less than the Agreed Value (as defined in Exhibit B) and, as to all other insurances, in amounts not less than those established in Exhibit B hereof); provided, however, that Mortgagor will remain responsible for full compliance with all the provisions of this Agreement, to the extent Title XIII and/or the U.S. Government indemnification do not satisfy Mortgagor's obligations under this Agreement and the Indenture. 7.5 No Geographic Limits. If there is a requisition for use of the Aircraft pursuant to the CRAF Program and/or CRAF activation, there will be no limitation on the geographic area in which the Aircraft may be operated so long as, taken as a whole, Mortgagor's insurance, the Title XIII insurance and/or the indemnification provided by the U.S. Government fully cover (without any geographic exclusions) Mortgagor's Section 6.3 and Exhibit B insurance requirements. 7.6 Notice of Default. If an Event of Default occurs under this Agreement during a CRAF Program Requisition Period with respect to the Airframe and Mortgagee elects to pursue its remedies under Section 4 to terminate this Agreement and repossess the Airframe, Mortgagee will so notify the U.S. Government by sending a written communication as follows: Headquarters Air Mobility Command AMC Contracting Office -- XOKA Scott Air Force Base, Illinois 62225-5007 27 7.7 Receipts of Payments. So long as no Event of Default has occurred and is continuing, all payments received by Mortgagee or Mortgagor from such Government Entity in connection with the requisition of the Aircraft under the CRAF Program will be paid over to or retained by Mortgagor. If an Event of Default has occurred and is continuing, all payments received by Mortgagor or Mortgagee from such Government Entity in connection with the requisition of the Aircraft under the CRAF Program may be used by Mortgagee to satisfy any Obligations owing by Mortgagor in the order provided in Section 6.10 of the Indenture. 8. GENERAL INDEMNIFICATION 8.1 General Indemnification and Waiver of Certain Claims. (a) Claims Defined. For the purposes of this Section 8.1, "Claims" shall mean any and all costs, liabilities (including strict or absolute liability without fault in tort or otherwise), losses, damages, penalties, actions or suits or claims which may be imposed on, incurred by, suffered by, or asserted against an Indemnified Person, as defined herein, and, except as otherwise expressly provided in this Section 8.1, shall include all reasonable out-of-pocket costs, disbursements and expenses (including legal fees and expenses) paid or incurred by an Indemnified Person in connection therewith. (b) Indemnified Person Defined. For the purposes of this Section 8.1, "Indemnified Person" means Mortgagee and each Holder, and each of their respective successors, transferees or assigns permitted under the terms of the Securities or the Operative Documents, and all directors, officers, employees, agents, servants and Affiliates of any such Person; provided that, as a condition precedent to any performance by Mortgagor in connection with such indemnity with respect to any Person which is not a signatory to this Agreement, such Person shall adhere to and expressly agree in writing to be bound by all the terms of this Section 8.1. (c) Claims Indemnified. Subject to the exclusions stated in subsection (d) below, Mortgagor hereby indemnifies and agrees to indemnify, defend and hold harmless, on an after-tax basis as defined in Section 8.2(d), each Indemnified Person against Claims arising out of or resulting from: (i) the operation, possession, use, nonuse, purchase, airworthiness, control, return, transfer, maintenance, overhaul, testing, registration, title, lease, reregistration, storage, modification, replacement, repair, substitution, pooling or interchange of the Aircraft, the Airframe, any Engine or any Part, or any engine used in connection with the Airframe, or any part thereof, or any other Property used in connection therewith, or any other Collateral, by Mortgagor, any lessee or any other Person whatsoever, whether or not such operation, possession, use, nonuse, title, lease, purchase, airworthiness, control, return, transfer, maintenance, overhaul, testing, registration, reregistration, storage, modification, replacement, repair, substitution, pooling or interchange is in compliance with the terms of this Agreement or any other Operative Document, including, without limitation, claims for death, personal injury or Property damage or other loss or harm to any 28 Person whatsoever and Claims relating to any laws, rules or regulations pertaining to such operations, possession, use, nonuse, title, lease, purchase, airworthiness, control, return, transfer maintenance, overhaul, testing, registration, reregistration, storage, modification, replacement, repair, substitution, pooling or interchange, including environmental control, noise and pollution laws, rules or regulations; (ii) the manufacture, design, purchase, acceptance, rejection, delivery, nondelivery, condition or ownership of the Aircraft, any Engine or any Part, or any engine used in connection with the Airframe, or any part thereof, or any other Collateral, including, without limitation, latent and other defects, whether or not discoverable, and patent, trademark or copyright infringement; and (iii) any breach of or failure to perform or observe, or any other noncompliance with, any covenant or agreement to be performed by, or other obligation of Mortgagor under, the Securities or any of the Operative Documents, or the falsity, inaccuracy or breach of any representation or warranty of Mortgagor in any of the Operative Documents. (d) Claims Excluded. The following are excluded from Mortgagor's agreement to indemnify under this Section 8.1: (i) Claims attributable to acts or events occurring after the repayment in full of the Securities and the payment and performance of all other Obligations; (ii) Claims which are attributable to Taxes (other than the obligations to "gross up" set forth in Section 8.1(c)), whether or not Mortgagor is required to indemnify therefor under Section 8.2; or (iii) With respect to any particular Indemnified Person, Claims to the extent attributable to the gross negligence or willful misconduct (other than gross negligence or willful misconduct imputed to such Indemnified Person solely by reason of its interest in the Aircraft) of, or to the breach of any contractual obligation by, or the falsity or inaccuracy or breach of any representation or warranty of, such Indemnified Person (unless such breach or falsity or inaccuracy is a result of Mortgagor's failure to comply with the terms of any Operative Document or any representation or warranty therein). (e) Insured Claims. In the case of any Claim indemnified by Mortgagor hereunder which is covered by a policy of insurance maintained by Mortgagor pursuant to Section 6.3 or otherwise, Mortgagor shall not be obligated to indemnify such Indemnified Person with respect to such Claim to the extent of any loss of benefits of such insurance resulting from the failure of such Indemnified Person to cooperate with the insurers in the exercise of their rights to investigate, defend or compromise such Claim as may be required to retain the benefits of such insurance with respect to such Claim. 29 (f) Claims Procedure. An Indemnified Person shall promptly notify Mortgagor of any Claim as to which indemnification is sought, provided that failure of an Indemnified Person to provide such notice shall not release Mortgagor from any of its obligations to indemnify hereunder to the extent such failure does not impair the rights of Mortgagor with respect to the availability or extent of coverage of insurance or otherwise result in any material adverse consequences to Mortgagor. Subject to the rights of insurers under policies of insurance maintained by Mortgagor, Mortgagor shall have the right to investigate, and the right to defend or compromise, employing counsel reasonably acceptable to such Indemnified Person (except as may otherwise be required by any applicable policy of insurance), any Claim for which indemnification is sought under this Section 8.1; provided that, Mortgagor shall not be entitled to defend or compromise any such Claim if an Event of Default shall have occurred and be continuing or if such proceedings involve a material risk of the sale, forfeiture, or loss of, or the creation of any Lien (other than a Permitted Lien) on, the Aircraft or other Collateral, unless Mortgagor shall have posted a bond or other security satisfactory to the relevant Indemnified Persons with respect to such risk. The Indemnified Person shall cooperate with all reasonable requests of Mortgagor in connection with any of the foregoing. Where Mortgagor or the insurers under a policy of insurance maintained by Mortgagor undertake the defense of an Indemnified Person with respect to a Claim, no additional legal fees or expenses of such Indemnified Person in connection with the defense of such Claim shall be indemnified hereunder unless such fees or expenses were incurred at the written request of Mortgagor or such insurers; provided, however, that if (i) in the written opinion of counsel to such Indemnified Person an actual or potential material conflict of interest exists where it is advisable for such Indemnified Person to be represented by separate counsel or (ii) such Indemnified Person has been indicted or otherwise charged in a criminal complaint and such Indemnified Person informs Mortgagor that such Indemnified Person desires to be represented by separate counsel, the reasonable fees and expenses of any such separate counsel shall be borne by Mortgagor. Subject to the requirements of any policy of insurance applicable to a Claim, an Indemnified Person may participate at its own cost and expense in any judicial proceeding controlled by Mortgagor or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by Mortgagor or its insurers to conduct such proceedings, unduly interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 8.1. Nothing contained in this Section 8.1(f) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. Payments required to be made pursuant to this Section 8.1 to each Indemnified Person shall be made directly to such Indemnified Person in immediately available funds within 30 days after written demand upon Mortgagor by such Indemnified Person. To the extent permitted by applicable Law, interest at the highest rate that may, under any circumstance (whether or not such circumstance has or could actually occur), be applicable to the Securities thereunder or under the terms of the Indenture shall be paid, on demand, on any amount or indemnity not paid when due pursuant to this Section 8.1 until the same shall be paid. (g) Subrogation. To the extent that a Claim indemnified by or on behalf of Mortgagor under this Section 8.1 is in fact paid in full by or on behalf of Mortgagor and/or an insurer under a policy of insurance maintained by or on behalf of Mortgagor, Mortgagor and/or 30 such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by Mortgagor hereunder (other than a refund pursuant to a separate insurance policy maintained by an Indemnified Person, it shall (so long as no Default or Event of Default has occurred and is continuing) promptly pay over the amount refunded, together with any interest received with respect to such amount for the period between the indemnification payment and the receipt of such refund, to Mortgagor. (h) Waiver of Certain Claims. Mortgagor hereby waives and releases any claim now or hereafter existing against any Indemnified Person arising out of death or personal injury to personnel of Mortgagor, loss or damage to Property of Mortgagor, or the loss of use of any Property of Mortgagor, which results from or arises out of the condition, use or operation of the Aircraft prior to the payment in full of the Securities and all other Obligations, including, without limitation, any latent or patent defect whether or not discoverable, except as otherwise provided in the Aircraft Sale Agreement. (i) Certain Limitations. The general indemnification provisions of this Section 8.1 are not intended to waive or supersede any specific provisions of, or any rights or remedies Mortgagor or Mortgagee may have under or with respect to, the Aircraft Sale Agreement, the Indenture or any other Operative Document to the extent such provisions, rights or remedies apply to any Claim. (j) Effect of Other Indemnities. The indemnification obligations of Mortgagor under this Section 8.1 shall be those of a primary obligor whether or not an Indemnified Person shall also be indemnified with respect to the same matter under the terms of any other instrument, and the Indemnified Person seeking indemnification from Mortgagor pursuant to this Section 8 may proceed directly against Mortgagor without first seeking to enforce any other right of indemnification. 8.2 Tax Indemnification. (a) Indemnitee Defined. For purposes of this Section 8.2, "Indemnitee" means Mortgagee, the Holders and their respective Affiliates, successors and permitted transferees and assigns. (b) Taxes Indemnified. Subject to the exclusions stated in Section 8.2(c), Mortgagor shall indemnify, pay, defend, protect and hold harmless each Indemnitee against all Taxes, howsoever imposed (whether imposed upon any Indemnitee, Mortgagor, all or any part of the Aircraft, any other Collateral or otherwise), by any federal, state or local government, political subdivision, or taxing authority in the United States, by any government or taxing authority of or in a foreign country or of or in a territory or possession of the United States, or by any international authority, upon or with respect to or in connection with, based upon or measured by, in whole or in part: 31 (i) the Aircraft, the Airframe, the Engines, the Parts, or any other Collateral or any part of any of the foregoing or interest therein; (ii) the manufacture, purchase, financing, ownership, delivery, registration or reregistration, redelivery, leasing, charter, possession, use, location, operation, return, storage, transfer of title, sale, acceptance, rejection or other disposition of or action or event with respect to the Aircraft, the Airframe, the Engines, the Parts, or any other Collateral or any part of any of the foregoing or interest therein; (iii) the rentals, receipts, income or earnings arising from the purchase, financing, ownership, delivery, redelivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe, the Engines, the Parts, or any other Collateral or any part of any of the foregoing or interest therein; (iv) the Securities, their issuance or acquisition, or the payments of any amounts thereunder; (v) the Property, or other proceeds received with respect to the Property, held by Mortgagee hereunder; or (vi) the Operative Documents or amendments or supplements thereto, their execution or the transactions contemplated thereby. (c) Taxes Excluded. The indemnity provided for in Section 8.2(b) shall not extend to any of the following: (i) Taxes on, based on, or measured by income (including gross income), receipts, capital, franchises, excess profits or conduct of business of an Indemnitee, except to the extent Taxes of such type would not have been imposed on such Indemnitee but for the location of the Aircraft, activities or place of incorporation or principal place of business of Mortgagor or any other user of the Aircraft or any Affiliate of any of the foregoing, registration of the Aircraft, or payment of amounts due under any Security or other Operative Document from, the jurisdiction of the taxing authority imposing such Taxes; (ii) Taxes imposed against a transferee of an Indemnitee to the extent of the excess of such Taxes over the amount of such Taxes which would have been imposed had there not been a transfer by an Indemnitee other than Mortgagee or its Affiliates of any interest of such Indemnitee in the Aircraft, any Security, or any Operative Document; (iii) in the case of any Indemnitee, Taxes which arise out of or are caused by (a) the willful misconduct or gross negligence of such Indemnitee or a Related Party (as defined below) with respect to such Indemnitee or (b) such 32 Indemnitee's making a representation under any Operative Document which proves to be untrue; (iv) in the case of any Indemnitee, Taxes upon (x) any voluntary transfer by such Indemnitee or a Related Party with respect to such Indemnitee of all or any portion of its interest in the Aircraft or any part thereof, any Operative Document or any Security (other than transfers which occur or result from the exercise of any rights under Section 4) or (y) any involuntary transfer of the Aircraft or any interest therein or any Security, any Operative Document, or shares of stock by an Indemnitee resulting from any bankruptcy, foreclosure or similar proceedings in which any Indemnitee is the debtor; (v) United States withholding taxes imposed on payments to a foreign Person; (vi) Taxes imposed with respect to any fees received by Mortgagee; or (vii) Taxes imposed by Section 4795 of the Code or any successor provision thereto. For purposes of this Section 8.2, each transferee or assignee of Mortgagee or a Holder shall be a "Related Party" with respect to each other. (d) Calculation of Indemnities. The amount Mortgagor shall be required to pay with respect to any Tax indemnified against under this Section 8.2 or with respect to any claim under Section 8.1 shall be an amount that after taking into account any Taxes, fees and other charges imposed upon the receipt of an indemnity under this Section 8.2 or under Section 8.1 and any Tax benefits recognized upon payment of such Taxes, equals the amount otherwise due under Section 8.1. All computations for the purposes hereof shall be based on the assumption that the Indemnitee is taxable on all of its income at the highest marginal rate in effect on the date payment pursuant to this Section 8 is made. (e) Procedures. Any amount payable to an Indemnitee pursuant to this Section 8.2 shall be paid within 60 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable; provided that such amount need not be paid prior to the earlier of (i) the time such Taxes are paid or (ii) in the case of amounts which are being contested by Mortgagor in good faith or by the Indemnitee pursuant to this Section 8.2, the time such contest is finally resolved. Within 30 days following Mortgagor's receipt of the computation of the amount of the indemnity, Mortgagor may request that an accounting firm to be jointly selected by Mortgagor and such Indemnitee (but not including the accounting firm that regularly prepares the certified financial statements of Mortgagor or such Indemnitee) determine whether such computations of the Indemnitee are correct. The computations of such accounting firm shall be final, binding and conclusive upon the parties, and Mortgagor shall have no right to inspect the books, records or tax returns of the Indemnitee to verify such computation. All fees and expenses payable under this Section 8.2 in connection with such verification shall be borne 33 by Mortgagor, unless such verification discloses an error adverse to Mortgagor of 5% or more of the amount calculated by the Indemnitee, in which case such fees shall be paid by the Indemnitee. (f) Contest. If a written claim is made against an Indemnitee for Taxes with respect to which Mortgagor is liable for payment or indemnity hereunder, such Indemnitee shall give Mortgagor prompt notice in writing of such claim and shall furnish Mortgagor with copies of any requests for information from any taxing authority relating to such Taxes with respect to which Mortgagor may be required to indemnify hereunder, but a failure to give such notice or to furnish such requests shall not diminish Mortgagor's obligations hereunder except to the extent such failure precludes Mortgagor from exercising its contest rights hereunder. The Indemnitee shall in good faith, and at Mortgagor's expense, if timely requested in writing by Mortgagor, contest in the name of the Indemnitee the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if practical; (ii) not paying the same except under protest if protest is necessary and proper; (iii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; or (iv) taking such other action as is reasonably requested by Mortgagor from time to time. Notwithstanding the foregoing provisions of this Section 8.2(f), such Indemnitee shall not be required to take, and shall not be required to permit Mortgagor to take, any administrative or judicial action to contest any such Tax unless (A) Mortgagor shall have agreed to pay such Indemnitee on demand and shall pay all reasonable out-of-pocket costs and expenses which such Indemnitee may incur in connection with contesting such Taxes, (B) no payment Event of Default shall have occurred and be continuing unless Mortgagor shall have posted a satisfactory bond with respect to such claim or provided other security therefor reasonably satisfactory to such Indemnitee, (C) in the event of a contest by or in the name of an Indemnitee or in the event of a judicial contest, upon written request of the Indemnitee Mortgagor shall provide to such Indemnitee within 30 days after such request an Officers' Certificate to the effect that a reasonable basis exists for contesting such claim, (D) prior to commencing any judicial action, Mortgagor acknowledges its liability hereunder on the contested amount, and (E) it shall have been reasonably determined that the action to be taken will not (i) result in the material danger of a sale, forfeiture or loss of the Aircraft or Airframe (except if Mortgagor shall have adequately bonded any Lien that results in such material danger or otherwise made adequate provision reasonably satisfactory to such Indemnitee to protect the interest of such Indemnitee) or (ii) subject such Indemnitee to any material risk of criminal prosecution. To the extent not inconsistent with the provisions contained elsewhere in this Section 8.2(f), the Indemnitee shall have control over the conduct of a contest of a claim hereunder (except to the extent that a contest is being conducted by Mortgagor in accordance with the provisions hereof). Notwithstanding the foregoing, if any Indemnitee shall release, waive, compromise or settle any 34 claim which may be indemnifiable by Mortgagor pursuant to the foregoing provisions of this Section 8.2 without the express written permission of Mortgagor, Mortgagor's obligation to indemnify such Indemnitee with respect to such claim shall terminate to that extent. Nothing contained in this Section 8.2 shall require any Indemnitee to contest, or require any Indemnitee to permit Mortgagor to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.2(f), if such Indemnitee shall waive its rights to any indemnity payment by Mortgagor which would otherwise be payable by Mortgagor pursuant to this Section 8.2 in respect of such claim. (g) Refund. Upon receipt by an Indemnitee of a refund or credit of all or part of any Taxes which Mortgagor shall have paid for such Indemnitee or for which Mortgagor shall have reimbursed, advanced funds to or indemnified such Indemnitee, such Indemnitee shall pay or repay to Mortgagor an amount which, after the subtraction of the amount of any further net tax savings realized by such Indemnitee as a result of the payment under this Section 8.2(g), and the addition of any net tax detriment realized by such Indemnitee as a result of the receipt or accrual of such refund and any interest received or accrued by such Indemnitee in such refund, is equal to the amount of such refund and any interest received or accrued by such Indemnitee on such refund; provided, that such amount shall be reduced by the amount of any payment or indemnity then due from Mortgagor to or on behalf of such Indemnitee pursuant to the Securities or the Operative Documents and not made (and any amount so withheld shall not be payable before such time and to such extent as Mortgagor shall have made such payments or indemnities). Any subsequent loss of such refund and interest as an erroneous refund shall be indemnifiable in accordance with the provisions of this Section 8.2 (disregarding Section 8.2(c)). (h) Return. So long as the Aircraft is subject to the Lien of this Agreement Mortgagor will prepare and file all property tax returns with respect to the Aircraft, except with respect to any such return that Mortgagor is not permitted to file under applicable Law. 8.3 Survival of Indemnities. The agreement and indemnities contained in Sections 8.1 and 8.2 shall survive the discharge of this Agreement (but only with respect to any Person who was entitled to the benefit of such agreements and indemnities at or prior to the time of such termination) but only to the extent relating to claims, obligations and other liabilities arising out of acts or events occurring, or otherwise attributable to the period, prior to the payment in full of the Securities and all other Obligations. 9. MISCELLANEOUS 9.1 Performance by Mortgagee. If Mortgagor shall fail to maintain, or cause to be maintained, any insurance required to be carried pursuant to this Agreement, Mortgagee may obtain the same for the account of Mortgagor; and Mortgagor shall pay to Mortgagee interest (to the extent permitted by applicable Law) at the highest rate that may, under any circumstance (whether or not such circumstance has or could actually occur), be applicable to the Securities thereunder or under the Indenture, computed on the basis of a 360-day year and the actual number of days elapsed, on the amount of any such payment from the date made until the date reimbursed by Mortgagor pursuant hereto. If Mortgagor shall fail in a timely and effective 35 manner to take and complete any other action that it has herein undertaken to perform, strictly in accordance with the provisions hereof, Mortgagee may do or cause the same to be done; and there shall be added to the indebtedness secured hereby any loss, cost or expense incurred by or on behalf of Mortgagee incurring such default or failure, or caused to be suffered by Mortgagee through the incorrectness or breach of any of the covenants, agreements, representations or warranties of Mortgagor herein or by any other default of Mortgagor hereunder; and all sums so lost or expended shall be payable on demand and shall bear interest as provided in the first sentence of this Section 9.1, and Mortgagee shall be subrogated to all of the rights against Mortgagor of any Person to whom it shall have made any payment or payments under the foregoing authority. 9.2 Power of Attorney. Mortgagor hereby irrevocably appoints Mortgagee, and its successors and assigns, the true and lawful attorney of Mortgagor (with the full power of substitution), in the name and place and at the expense of Mortgagor, (i) to give any necessary receipts or acquittance for amounts collected or received pursuant to Section 4 hereof, (ii) at any time after the occurrence of an Event of Default and so long as the same shall be continuing, to make all necessary transfers of all or any part of the Collateral in connection with any sale or other disposition thereof made pursuant to such Section 4, (iii) at any time after the occurrence of any such Event of Default and so long as the same shall be continuing, to execute and deliver for value all necessary instruments of negotiation, assignment and transfer, (iv) at any time after the occurrence of any such Event of Default and so long as the same shall be continuing, to employ legal counsel and to appear in its name in any court in any jurisdiction to commit and compromise and discharge any alleged Lien, charge or other encumbrance asserted against any of the Collateral, in any manner and by any means that shall to it or them, in its or their sole and complete discretion, seem proper; provided, however, that any such undertaking on the part of Mortgagee shall not qualify in any manner or to any extent or degree the obligation of Mortgagor so to defend its title to, and the security interest of Mortgagee in, the Collateral and every part thereof and (v) to file and record such copies or memoranda hereof and financing statements, continuation statements and other instruments or documents with respect to the security interest created hereby as Mortgagee may deem desirable fully to protect its interest hereunder, and for such purpose Mortgagor hereby authorizes Mortgagee to effect any such filings or recordings without the signature of Mortgagor to the extent permitted by applicable Law, Mortgagor hereby ratifying and confirming all that its said attorney shall lawfully do hereunder and pursuant hereto and acknowledging that its said attorney shall have no duty, by virtue of this Section 9.2 or at the risk of otherwise waiving or qualifying the obligation of Mortgagor to do so, to do any of the above acts. 9.3 Waiver, etc., by Mortgagor. To the fullest extent that it may now and hereafter lawfully so agree, Mortgagor hereby agrees that it shall not at any time plead, claim or take the benefit of any appraisal, valuation, extension, moratorium, redemption or other law now or hereafter in effect in any jurisdiction in order to prevent or delay the enforcement of any provision of this Agreement or the indebtedness or agreements secured hereby, or the absolute sale of any portion of or all the Collateral to any purchaser at any sale under Section 4 hereof; and Mortgagor, for itself and all who may claim through it, to the fullest extent that it or they now and hereafter may lawfully so agree, hereby waives the benefit of all such laws. Any sale 36 of, grant of options to purchase or other realization against all or any part of the Collateral shall operate to divest all right, title and interest, at law, in equity and otherwise, of Mortgagor in and to the Collateral so sold, optioned or realized upon, and shall be a perpetual bar, at law, in equity and otherwise, against Mortgagor and against any and all persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through or under Mortgagor. No delay on the part of Mortgagee in exercising any power of sale, Lien or option, or any other right or remedy hereunder, or otherwise, and no notice or demand that may be given to or made upon Mortgagor with respect to any such power, right or remedy, shall constitute a waiver thereof or limit or impair the right of Mortgagee to take any other or similar action or to exercise any power of sale, Lien or option, or any other right or remedy granted in this Agreement or in any other agreement secured hereby or otherwise available to Mortgagee; nor shall any single or partial exercise of any such power, right or remedy preclude any other or further exercise thereof, or the exercise of any power, right or remedy granted in this Agreement or otherwise available to Mortgagee, or prejudice its rights against Mortgagor in any respect. Each and every remedy of Mortgagee shall, to the extent permitted by applicable Law, be cumulative and in addition to any other remedy granted hereunder or now or hereafter available to it at law, in equity or otherwise. 9.4 Amendment, etc. Neither this Agreement nor any provision hereof may be amended, modified, waived or discharged orally, but only by an instrument in writing in accordance with Article 9 of the Indenture. No waiver by Mortgagee of any breach or default of or by Mortgagor under this Agreement, any other agreement or indebtedness secured hereby, or otherwise, shall be deemed a waiver of any other or similar, previous or subsequent breach or default. 9.5 [Intentionally Omitted.] 9.6 Successors and Assigns. This Agreement and all obligations of Mortgagor hereunder shall be binding upon the successors and assigns of Mortgagor permitted under the Indenture, and shall, together with the rights and remedies of Mortgagee hereunder, inure to the benefit of Mortgagee, the Holders, and their respective successors and assigns. Any assignment in violation hereof shall be null and void ab initio. 9.7 Severability. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. Any impairment or invalidity, under the laws of any jurisdiction, of this Agreement, in its aspect as security for any portion of the Obligations, hereunder or under the Securities, the Indenture or the other Operative Documents, for any portion of any other indebtedness or obligation secured hereby, shall not impair or invalidate this Agreement as security for any other portion thereof. 37 9.8 Governing Law; Waiver of Jury Trial. (a) The laws of the State of New York shall govern this Agreement without regard to principles of conflict of laws. (b) Mortgagee and Mortgagor each waive any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise arising out of, connected with, related to or incidental to the relationship established between them in connection with this Agreement. Instead, any disputes resolved in court will be resolved in a bench trial without a jury. 9.9 Notices; Waivers. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement to be made upon, given or furnished to, or filed with the parties hereto and/or the Holders, as the case may be, shall be made, given, furnished or filed in the manner and subject to the provisions of Section 11.2 of the Indenture. 9.10 No Adverse Interpretation of Other Agreements. This Agreement may not be used to interpret any agreement of Mortgagor or any of its Subsidiaries which is unrelated to this Agreement or the other Operative Documents. Any such agreement may not be used to interpret this Agreement. 9.11 Benefits of Agreement Restricted. Subject to the provisions of Section 9.6 hereof, nothing in this Agreement, express or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto and the Holders, any legal or equitable right, remedy or claim under or in respect of this Agreement or under any covenant, condition, or provision herein contained, all such covenants, conditions and provisions, subject to Section 9.6 hereof, being for the sole benefit of the parties hereto and of the Holders. 9.12 Counterpart Originals. This Agreement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. 9.13 Effect of Headings. The Section headings and the Table of Contents contained in this Agreement have been inserted for convenience of reference only, and are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. 9.14 Section 1110 of the Bankruptcy Code. It is the intention of the parties that the security interest created by this Agreement shall be a security interest within the meaning of Section 1110 of the Bankruptcy Code (11 U.S.C. ss. 1110) which shall entitle Mortgagee to all of the benefits of such Section or any similar successor provision with respect to the right to repossess the Airframe, Engines and Parts as provided herein; and in any circumstances where more than one construction of the terms and conditions of this Agreement is possible, a construction which would preserve such benefits shall control over any construction which would not preserve such benefits or would render them doubtful. In that regard, the parties 38 acknowledge and agree that the security interest created by this Agreement is intended to be a purchase-money security interest retained and taken by Mortgagee for the benefit of the holders of the Securities as seller of the Collateral to Mortgagor to secure the purchase price of the Collateral as evidenced by the Operative Documents. To the extent consistent with the provisions of such Section 1110 or any analogous Section of the Federal bankruptcy laws, as amended from time to time, it is hereby expressly agreed and provided that, notwithstanding any other provisions of the Federal bankruptcy laws, as amended from time to time, any right of Mortgagee to take possession of the Aircraft in compliance with the provisions of this Agreement shall not be affected by the provisions of 11 U.S.C. ss. 362 or ss. 363, as amended from time to time, or any analogous provisions of any superseding statute or any power of the bankruptcy court to enjoin such taking of possession. It is the intention of the parties that the entitlement to such benefits shall not be adversely affected by any sale or other transfer of any Security to a subsequent Holder or by any modification of the terms hereof, of the Securities or of the other Operative Documents. 39 IN WITNESS WHEREOF, the parties hereto have, by their indicated officers thereunto duly authorized, caused this Aircraft Mortgage and Security Agreement to be executed as of the day and year first above written. Mortgagor, TRANS WORLD AIRLINES, INC. By:__________________________ Name: Title: Mortgagee, FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee By:__________________________ Name: Title: EXHIBIT A MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. __ Mortgage and Security Agreement Supplement No. __, dated _______, ("Mortgage Supplement"), of TRANS WORLD AIRLINES, INC. (the "Company") under the Agreement (as hereinafter defined). W I T N E S S E T H: WHEREAS, the Aircraft Mortgage and Security Agreement dated as of June __, 1998 (the "Agreement"), between the Company and First Security Bank, National Association, as Trustee under the Indenture referred to in the Agreement (the "Mortgagee"), provides for the execution and delivery of one or more supplements thereto substantially in the form hereof which shall particularly describe the [Aircraft] [Engine(s)]** (such term and other defined terms in the Agreement being used herein with the same meanings) being delivered on [the date thereof]* [insert applicable date]**, and shall specifically grant an equipment security interest in the Company's interest in such [Aircraft]* [Engine(s)]** to the Mortgagee; and [WHEREAS, it is intended that an executed counterpart of the Agreement be duly recorded pursuant to the Federal Aviation Act concurrently with the recording pursuant to such Act of an executed counterpart of this Mortgage Supplement and, accordingly, such executed counterpart of this Mortgage Supplement shall be attached to and constitute a part of the Agreement for all purposes and shall be recorded together with such Agreement pursuant to such Act; and]* [WHEREAS, the Agreement was duly recorded pursuant to the Federal Aviation Act on June __, 1998 and has been assigned Conveyance No. __________; and]** WHEREAS, the Company hereby acknowledges that the [Aircraft]* [Engine(s)]** referred to in Annex A attached hereto and made a part hereof has been delivered to the Company, and is included in the Property of the Company covered by the terms and conditions of the Agreement, subject to the equipment security interest created thereunder; NOW, THEREFORE, in order to secure all Obligations for the benefit of Mortgagee and the Holders, subject to the terms and conditions of the Agreement, and in consideration of the premises and of the covenants contained in the Agreement, and of other good and valuable consideration, the receipt whereof is hereby acknowledged, the Company has transferred, assigned, granted, bargained, sold, conveyed, mortgaged, hypothecated, pledged, set over and confirmed and does hereby transfer, assign, grant, bargain, sell, convey, mortgage, hypothecate, pledge, set over and confirm, a first priority equipment security interest in and a - -------- * For Mortgage Supplement executed and delivered on the Issue Date. ** For Mortgage Supplement executed and delivered after the Issue Date for any Replacement Engine(s). 2 mortgage lien on, the Property comprising all its right, title and interest in and to [each of the Airframe and Engines]* [the Engine(s)]** described in Annex A attached hereto whether or not any such Engine(s) shall be installed in or attached to the Airframe or any other aircraft, to the Mortgagee, its successors and assigns; To have and to hold all and singular the aforesaid Property unto the Mortgagee, its successors, transferees and assigns, for the uses and purposes and subject to the terms and provisions set forth in the Agreement. This Mortgage Supplement shall be construed as supplemental to the Agreement and shall form a part thereof, and the Agreement is hereby incorporated by reference herein and is hereby ratified, approved and confirmed and terms not otherwise defined herein shall have the meanings provided in the Agreement. This Mortgage Supplement is being delivered in the State of New York and shall be in all respects, including all matters of construction, validity and performance, be governed by the laws of the State of New York without regard to principles of conflict of laws. * * * - -------- * For Mortgage Supplement executed and delivered on the Issue Date. ** For Mortgage Supplement executed and delivered after the Issue Date for any Replacement Engine(s). 3 IN WITNESS WHEREOF, the Company has caused this Mortgage Supplement to be duly executed by one of its duly authorized officers, as of the day and year first above written. TRANS WORLD AIRLINES, INC. By:__________________________ Name:________________________ Title:_______________________ Annex A to Mortgage and Security Agreement Supplement No. ___ DESCRIPTION OF AIRFRAME AND ENGINES AIRFRAME FAA Regis- Manufacturer's Manufacturer Model tration No. Serial No. The Boeing _______ _______ _________ Company ENGINES Manufacturer Model Manufacturer's Serial Nos. Pratt & Whitney __________ __________ Pratt & Whitney __________ __________ Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of such horsepower. EXHIBIT B INSURANCE [Refer to the Aircraft Mortgage and Security Agreement dated as of June 16, 1998 between Mortgagor and Mortgagee (the "Agreement"). Capitalized terms used in this Exhibit and not otherwise defined herein or in the insurance policies referred to herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached to the Agreement as Appendix I. If applicable, insurance certificates from the insurers will be provided.] To: First Security Bank, National Association, as Trustee ("Mortgagee") 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Services TRANS WORLD AIRLINES, INC. Boeing 767-231 ETOPS Manufacturer's Serial No.: 22570 FAA Registration Mark: N607TW (the "Aircraft") The following underwriters have subscribed to the insurance policies: [LIST COMPANIES & PERCENTAGES] THIS IS TO CERTIFY THAT, as insurance brokers, we have effected fleet insurance in respect of aircraft owned or operated by Mortgagor (including the Aircraft) as specified below. AIRCRAFT HULL ALL RISKS COVERING: All risks of physical loss or damage to the Aircraft from any cause (subject only to the exclusions as specified below), for an agreed value of the Aircraft in an amount equal to $27,500,000 (the "Agreed Value"). DEDUCTIBLES: US$ 1,000,000 each and every loss. Not applicable to Total Loss/Constructive Total Loss or Arranged Total Loss. GEOGRAPHICAL COVERAGE: Worldwide 2 AVIATION AND AIRLINE GENERAL THIRD PARTY LIABILITY COVERING: Aircraft Third Party, Passenger, Baggage, Cargo and Mail Liability and Airline General Third Party Liability (including but not limited to Premises, Hangarkeepers, Contractual and Products Liability) for combined single limit of not less than US$ 600,000,000 (or such higher amount as Mortgagor may carry on any other aircraft in its fleet) any one accident/occurrence (but in the aggregate in relation to Products Liability), extended to cover Mortgagor's liability under the Agreement to the extent of the risks covered by the policy; including war and allied perils under Extended Coverage Endorsement as per AVN 52; subject only to exclusions as specified below. GEOGRAPHICAL LIMITS: Worldwide HULL WAR AND ALLIED PERILS COVERING: Hull War Risks as per RJM Airline One, but including (i) confiscation or requisition (including by State of Registration), (ii) hijacking or other unlawful seizure or wrongful exercise of control of the Aircraft or crew in flight (including any attempt at such seizure or control) and including "All Risks" Continuation Clause and Extortion Risks (including expenses) and covering claims excluded from Hull All Risks Policy while Aircraft outside Assured's control by reason of perils insured under this policy, for the Agreed Value. DEDUCTIBLE: US$ 1,000,000 GEOGRAPHICAL LIMITS: Worldwide AIRCRAFT SPARES ALL RISKS INSURANCE COVERING: All risks of physical loss or damage to Aircraft Parts or spares or Engines at all times when removed from the Aircraft from whatever cause, subject only to the exclusions specified below, including the risks set down in AVN 48B other than paragraphs (a) and (b) thereof (but including paragraph (a) in respect of transit risks) for limits of: 3 US$ 18,000,000 and covering replacement cost. DEDUCTIBLE: US$ 250,000 each and every loss GEOGRAPHICAL COVERAGE: Worldwide CONTRACTUAL INDEMNITY Mortgagor has insurance coverage for the indemnities agreed to by Mortgagor pursuant to Section 6.3 of the Agreement but only to the extent of the risks covered by the policies. PERIOD OF COVERAGE (ALL POLICIES) From Issue Date to [EXPIRATION DATE] It is further certified that Mortgagee has an interest in respect of the Aircraft under the Agreement. Accordingly, with respect to losses occurring during the period from the Issue Date until the expiry of the Insurance or until the expiry or agreed termination of the Agreement or until the obligations under the Agreement are terminated by any action of Mortgagor or Mortgagee and it is confirmed that the Insurance afforded by the Policy is in full force and effect and it is further agreed that the following provisions are specifically endorsed to the Policy. 1. UNDER THE HULL (ALL RISKS AND HULL WAR AND ALLIED RISKS) AND AIRCRAFT SPARES INSURANCES [MORTGAGEE ONLY-NO OTHER CONTRACT PARTIES] In respect of any claim on the Aircraft that becomes payable on the basis of a total loss, settlement shall be made to, or to the order of Mortgagee and Equity Notes Trustee, as their interests may appear, and no other loss payee, up to the Agreed Value. With respect to repairable damage to the Aircraft or any Engine, Mortgagee will receive all insurance proceeds in excess of US$ 500,000; provided that upon receipt by the insurance broker of written notice of a Default on the part of Mortgagor, all insurance proceeds which otherwise would be payable to Mortgagor will be made directly to Mortgagee. In respect of any other claim, settlement (net of any relevant policy deductible) shall be made with such party(ies) as may be necessary to repair the Aircraft unless otherwise agreed after consultation between the Insurers and the insured and, where necessary under the terms of the Agreement with Mortgagee. Such payments shall only be made provided they are in compliance with all applicable laws and regulations. Insurers agree 50/50 settlement in terms of AVS 103. 4 Insurers have no right to replace the Aircraft on a Total Loss (arranged, constructive or otherwise). Insurers recognize that Mortgagor and Mortgagee have agreed that a Total Loss of the Airframe will constitute a Total Loss of the Aircraft. "Constructive Total Loss" means any physical damage loss for which the cost to repair equals or exceeds one-half of the Agreed Value of the Aircraft. As part of a constructive total loss of the Aircraft, the insured will abandon the Aircraft to the underwriter. In the event of Total Loss of the Aircraft, Insurers agree to pay Mortgagee all amounts up to the Agreed Value based solely upon Mortgagee's (not Mortgagor's) execution of the appropriate form of release/discharge document; Mortgagee may sign any required release in lieu of the Insured in the event of a Total Loss, Constructive Total Loss or Arranged Total Loss. "Cut-through clause": The Reinsurers and the Insurers confirm and agree that in the event of any claim arising under the hull reinsurances where such claim is to be paid to the person named as sole loss payee under the primary insurances, the Reinsurers shall in lieu of payment to the Insurers, their successors in interest and assigns, pay to the person named as sole loss payee under the primary insurances that portion of any loss due for which the Reinsurers would otherwise be liable to pay the Insurers (subject to proof of loss), it being understood and agreed that any such payment by any Reinsurers shall (to the extent of such payment) fully discharge and release such Reinsurer from any and all further liability in connection therewith and provide for payment to be made notwithstanding (a) any bankruptcy, insolvency, liquidation or dissolution of the Insurers; and (b) that the Insurers have made no payment under the original insurance policies. Insurers confirm that if the Airframe and not the Engines suffers a Total Loss, Constructive Total Loss or Arranged Total Loss that Mortgagee will receive the entire Agreed Value regardless of any claim by any third party to the insurance proceeds on account of their engines being installed on the airframe at the time of the Total Loss, Constructive Total Loss or Arranged Total Loss. 2. UNDER THE LEGAL LIABILITY INSURANCE Subject to the provisions of this Endorsement, the Insurance shall operate in all respects as if a separate Policy had been issued covering each party insured hereunder, but this provision shall not operate to include any claim howsoever arising in respect of loss or damage to the Aircraft insured under the Hull or Spares Insurance of the Insured. Notwithstanding the foregoing the total liability of Insurers in respect of any and all Insureds shall not exceed the limits of liability stated in the Policy. The Insurance provided hereunder shall be primary and without right of contribution from any other insurance which may be available to Mortgagee. 5 This Endorsement does not provide coverage for Mortgagee with respect to claims arising out of its legal liability as manufacturer, repairer, or servicing agent of the Aircraft. 3. UNDER ALL INSURANCES Mortgagee, its successors and assigns, and (with respect to Aviation and Airline General Third Party Liability only) its directors, officers and employees for their respective rights and interests, are included as Additional Insured. The cover afforded to Mortgagee by the Policy in accordance with this Endorsement shall not be invalidated by any act or omission (including misrepresentation and non-disclosure) of any other person or party which results in a breach of any term, condition or warranty of the Policy. Additional Insureds shall have no responsibility for premium and insurers shall waive any right of set-off or counterclaim against Additional Insureds. Upon payment of any loss or claim to or on behalf of Mortgagee, Insurers will not have, and shall waive all rights with respect to, subrogation against, any Additional Insured. Except in respect of any provision for Cancellation or Automatic Termination specified in the Policy or any endorsement thereof, cover provided by this Endorsement may only be canceled or materially altered in a manner adverse to Mortgagee by the giving of not less than thirty (30) days notice in writing to the appointed broker except with respect to nonpayment of premium, in which event the Insurers will provide Mortgagee with not less than ten (10) days prior written notice of the cancellation. Notice shall be deemed to commence from the date such notice is given by the Insurers. Such notice will NOT, however, be given at normal expiry date of the Policy or any endorsement. The insurance policy is being delivered in the United States and will in all respects be governed by and construed in accordance with the Laws of the United States or any applicable State thereof. The underwriter consents to the non-exclusive jurisdiction of the federal courts of the United States. 4. EXCEPT AS SPECIFICALLY VARIED OR PROVIDED BY THE TERMS OF THE ENDORSEMENT: MORTGAGOR IS COVERED BY THE POLICY SUBJECT TO ALL TERMS, CONDITIONS, LIMITATIONS, WARRANTIES, EXCLUSIONS AND CANCELLATION PROVISIONS THEREOF. THE POLICY SHALL NOT BE VARIED BY ANY PROVISIONS CONTAINED IN THE AGREEMENT WHICH PURPORT TO SERVE AS AN ENDORSEMENT OR AMENDMENT TO THE POLICY. 6 SUBJECT (save as specifically stated in this Certificate) to policy terms, conditions, limitations and exclusions. EXHIBIT C PRE-APPROVED LIST America West Airlines, Inc. American Airlines, Inc. Air Canada British Airways Plc. Delta Air Lines, Inc. United Airlines, Inc. EX-4.36 4 TRANS WORLD AIRLINES, INC. 10 1/4% Senior Secured Notes Due 2003 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of June 16, 1998, by and among Trans World Airlines, Inc., a Delaware corporation (the "Company"), First Security Bank, National Association, as Owner Trustee (the "Owner Trustee") under the Trust Agreement N607TW dated as of March 28, 1995 between the Owner Trustee and Internationale Nederlanden Aviation Lease Delaware, Inc. (currently known as ING Lease Delaware, Inc.) (the "Original Beneficiary") and Lazard Freres & Co. LLC ("Lazard"). (The Original Beneficiary has assigned its beneficial rights in the trust created by such Trust Agreement to 767 Leasing HY, LLC ("767 Leasing").) Subject to the terms and conditions stated in the Aircraft Sale and Note Purchase Agreement made and entered into as of the 16th day of June, 1998 among the Company, the Owner Trustee, 767 Leasing and Lazard (the "Sale Agreement"), the Owner Trustee will sell to the Company one Boeing 767-231 ETOPS aircraft and its associated engines for $27,500,000, payable by the issuance by the Company of (i) $14,500,000 aggregate principal amount of the Company's 10 1/4% Senior Secured Notes due 2003 (the "Notes") and (ii) $13,000,000 aggregate principal amount of the Company's 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "Equity Notes"). The Notes will be issued pursuant to an indenture dated as of June 16, 1998 (the "Indenture"), between the Company and First Security Bank, National Association, as trustee (the "Trustee"). This Agreement is made pursuant to the Sale Agreement. In order to fulfill its obligations to Owner Trustee under the Sale Agreement, the Company hereby agrees with the Owner Trustee and Lazard for the benefit of the holders of the Notes, the Exchange Notes (as defined below) and the Private Exchange Notes (as defined below) (collectively, the "Holders"), as follows: SECTION 1. EXCHANGE OFFER REGISTRATION The Company shall, at its cost, use its reasonable best efforts to prepare and, not later than 60 days after (or if the 60th day is not a business day, the first business day thereafter) the Issue Date (as defined in the Indenture) of the Notes, file with the Securities and Exchange Commission (the "Commission"), a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Notes (as defined below), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Notes, a like aggregate principal amount of debt securities (the "Exchange Notes") of the Company issued under the Indenture and identical in all material respects to the Notes (except for the transfer restrictions relating to the Notes) that would be registered under the Securities Act. The Company shall use its reasonable best efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act within 2 150 days (or if the 150th day is not a business day, the first business day thereafter) after the Issue Date of the Notes and shall keep the Exchange Offer Registration Statement effective for not less than 20 business days (or longer if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). If the Company effects the Registered Exchange Offer, the Company will be entitled to close the Registered Exchange Offer 20 business days after the commencement thereof; provided, however, that the Company has accepted all the Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer. Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Notes electing to exchange the Notes for Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Notes in the ordinary course of such Holder's business, has no arrangements with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. In connection with such Registered Exchange Offer, the Company shall take such further action, including, without limitation, appropriate filings under state securities laws, as may be necessary to realize the foregoing objective subject to the proviso of Section 3(h). The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder that is a broker-dealer electing to exchange Notes, acquired for its own account as a result of market making activities or other trading activities, for Exchange Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) Lazard selling Exchange Notes acquired in exchange for Notes constituting any portion of an unsold allotment is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Notes; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be 3 delivered by an Exchanging Dealer, such period shall be the lesser of 180 days after the expiration date of the Registered Exchange Offer and the date on which all Exchanging Dealers have sold all Exchange Notes held by them (unless such period is extended pursuant to Section 3(j) below), and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Notes for a period not less than 90 days after the consummation of the Registered Exchange Offer. If, upon consummation of the Registered Exchange Offer, Lazard holds Notes which constitute some or all of the Notes that it acquired pursuant to the Sale Agreement, the Company, simultaneously with the delivery of the Exchange Notes pursuant to the Registered Exchange Offer, shall issue and deliver to Lazard upon the written request of Lazard in exchange (the "Private Exchange") for the Notes held by Lazard, a like principal amount of debt securities of the Company issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United States) to the Notes (the "Private Exchange Notes"). The Notes, the Exchange Notes and the Private Exchange Notes are herein collectively called the "Securities". In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 20 business days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; (d) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all material respects with all applicable law. As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall: (i) accept for exchange all the Notes validly tendered and not withdrawn pursuant to the Registered Exchange Offer or the Private Exchange, as the case may be; (ii) deliver to the Trustee for cancellation all the Notes so accepted for exchange; and 4 (iii) cause the Trustee to authenticate and promptly deliver, to each Holder of the Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of each Holder so accepted for exchange. The Indenture will provide that the Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture, that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that, at the time of the consummation of the Registered Exchange Offer, (i) any Exchange Notes received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Notes or the Exchange Notes within the meaning of the Securities Act, (iii) such Holder is not an "affiliate", as defined in Rule 405 of the Securities Act, of the Company or, if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes, and (v) if such Holder is a broker-dealer, it will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities and it will deliver a prospectus in connection with any resale of such Exchange Notes. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto will comply in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that in no such case shall the Company be responsible for information concerning Lazard included in the Exchange Offer Registration Statement, the prospectus contained therein, or any amendment or supplement thereto, as the case may be. SECTION 2. SHELF REGISTRATION STATEMENT (a) If (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within 180 days of the date of this Agreement, (iii) Lazard so requests with respect to the Notes (or the Private Exchange Notes) not eligible to be exchanged for Exchange Notes in 5 the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradable Exchange Notes on the date of the exchange, the Company shall take the following actions: (i) The Company shall use its reasonable best efforts, at its cost, as promptly as practicable (but in no event more than the later of (i) 60 days after the Issue Date and (ii) 30 days after so required or requested pursuant to this Section 2), to file with the Commission and thereafter shall use its reasonable best efforts to cause to be declared effective a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Notes (as hereinafter defined) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than the Owner Trustee and Lazard) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder (including certain indemnification obligations). (ii) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the Issue Date or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement have been sold pursuant thereto or can be sold pursuant to Rule 144(k) thereof. Subject to Section 6(b), the Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law; provided, however, that the Company shall not be deemed to have voluntarily taken any such action if it enters, in good faith, into negotiations concerning, or executes and delivers any agreement or other document relating to, any business combination, acquisition or disposition. (iii) Notwithstanding any other provision of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 6 (b) No Holder of Securities may include any of its Securities in the Shelf Registration Statement unless such Holder furnishes to the Company in writing, within 10 business days after receipt of a request therefor (which initial request shall be made within 40 days after the Issue Date to the Holders of record on a date not more than 5 days prior to such request), such information and representations and warranties as the Company may reasonably request for use in connection with the Shelf Registration Statement or prospectus or preliminary prospectus included therein. No Holder of Securities shall be entitled to Special Interest, pursuant to Section 6 hereof, if such Holder's Securities are excluded from the Shelf Registration Statement because such Holder failed to furnish the Company in writing such information and representations and warranties reasonably requested by the Company for use in connection with the Shelf Registration Statement or prospectus or preliminary prospectus included therein. Each Holder as to which the Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously provided to the Company by such Holder not misleading. SECTION 3. REGISTRATION PROCEDURES In connection with the Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: (a) The Company shall (i) furnish to the Owner Trustee and Lazard, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein, and in the event that (x) Lazard (with respect to securities acquired in other than market making or trading activity) is participating in the Registered Exchange Offer or (y) either the Owner Trustee or Lazard is making use of the Shelf Registration Statement, shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as the Owner Trustee and Lazard, as applicable, reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by Lazard, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution", reasonably acceptable to Lazard, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Notes received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of Lazard based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of 7 the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders. (b) The Company shall give written notice to the Owner Trustee, Lazard, the Holders of the Securities and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information (provided, however, that with respect to any requests prior to the effectiveness of the Registration Statement, the Company shall be required to give written notice only to the Owner Trustee and to Lazard and its counsel, Hughes Hubbard & Reed LLP); (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) The Company shall use its reasonable best efforts to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Registration Statement. (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). 8 (e) The Company shall deliver to each Exchanging Dealer or Participating Broker-Dealer, to the Owner Trustee, to Lazard, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Owner Trustee, Lazard or any such Holder requests, all exhibits thereto (including those incorporated by reference). (f) The Company shall deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto included in the Shelf Registration Statement by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by such prospectus, or any such amendment or supplement. (g) The Company shall deliver to Lazard, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by Lazard, if necessary, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Notes covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement. (h) Prior to any public offering of the Securities, pursuant to any Registration Statement, the Company shall use its reasonable best efforts to register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified, (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject or (iii) register or qualify Securities or take any other action under the securities or "blue sky" laws of any jurisdiction if, in the judgment of the Board of Directors of the Company, the consequences of such registration, qualification or other action would be unduly burdensome to the Company. (i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and 9 registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement. (j) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Notes or the Exchange Notes or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Owner Trustee, Lazard, the Holders of the Securities and any known Exchanging Dealer or Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Owner Trustee, Lazard, the Holders of the Securities and any such Exchanging Dealer or Participating Broker-Dealer shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2 above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended (i) by the number of days from and including the date of the giving of such notice to and including the date when the Owner Trustee, Lazard, the Holders of the Securities and any known Exchanging Dealer or Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j) or (ii) if earlier, until the date when none of the Securities represent Transfer Restricted Notes (as defined in Section 6(d)). (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, and provide the applicable trustee with printed certificates for the Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (m) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. 10 (n) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (o) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as may be required in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (p) In the case of any Shelf Registration, subject to appropriate confidentiality arrangements being entered into, the Company shall (i) make available at reasonable times for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary, in the judgment of the Holder or any such underwriter, attorney, accountant or agent referred to in this paragraph, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act. (q) In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement covering the matters customarily covered in opinions of counsel requested in underwritten offerings and such other matters as may be reasonably requested by the managing underwriter or underwriters; (ii) its officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested by any underwriters of the applicable Securities; and (iii) its independent public accountants to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. (r) In the case of the Registered Exchange Offer, if requested by the Owner Trustee, Lazard or any known Exchanging Dealer or Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to the Owner Trustee, Lazard or such Exchanging Dealer or Participating Broker-Dealer, signed opinions in the forms set forth in Section 7.04(e) of the Sale Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants to deliver to the Owner 11 Trustee, Lazard or such Exchanging Dealer or Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 7.04(f) of the Sale Agreement, with appropriate date changes. (s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on the Notes so exchanged that such Notes are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall the Notes be marked as paid or otherwise satisfied. (t) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules and the By-Laws of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof,or otherwise, the Company shall assist such broker-dealer in complying with the requirements of such Rules and By-Laws (including without limitation the indemnification of any "qualified independent underwriter" required thereby). (u) The Company will use its reasonable best efforts to cause the Transfer Restricted Notes to be eligible for inclusion in the National Association of Securities Dealers, Inc. Private Offerings, Resales and Trading through Automated Linkages trading system. (v) The Company shall use its reasonable best efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby. (w) The Company agrees that it will not include in the registration contemplated by the Shelf Registration Statement any securities other than the Securities. (x) The Company hereby agrees to use its reasonable best efforts to list the Exchange Notes or the Notes on the American Stock Exchange or on such other stock exchange or market as the common stock, par value $.01 per share, of the Company is then principally traded no later than the earliest to occur of (i) the effectiveness of the initial Exchange Offer Registration Statement and (ii) the effectiveness of the initial Shelf Registration Statement, provided that such Exchange Notes or Notes meet the minimum requirements for listing on any such exchange or market, and, if applicable, to maintain such listing for so long as any of the Exchange Notes or Notes are outstanding. SECTION 4. REGISTRATION EXPENSES The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 1 through 3 hereof (including the reasonable fees and expenses of Hughes Hubbard & Reed LLP, counsel for Lazard, incurred in connection with the Registered Exchange Offer), whether or not the Registered Exchange Offer or a Shelf 12 Registration is filed or becomes effective, and, in the event of a Shelf Registration, shall bear, or reimburse the Holders of the Securities covered thereby for, the reasonable fees and disbursements of one firm of counsel designated by the Holders of a majority in principal amount of the Securities covered thereby to act as counsel for the Holders of the Securities in connection therewith, it being understood that the Company shall not be responsible for the fees and expenses of more than one counsel employed at any one time. The Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and expenses of any Person, including special experts, retained by the Company. The Holders shall bear the expense of any broker's commission or underwriters' discount or commission. SECTION 5. INDEMNIFICATION (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Exchanging Dealer, any Participating Broker-Dealer and each person, if any, who controls such Holder, Exchanging Dealer or Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Exchanging Dealer, any Participating Broker-Dealer and such controlling persons referred to in this Section 5(a) and the Company and its controlling persons referred to in Section 5(b), being collectively referred to herein, as the case may be, as the "indemnified parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each indemnified party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Registration Statement, or arise out of, or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall reimburse, as incurred, the indemnified parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Registration Statement in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein, (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any prospectus relating to such Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any person as to which there is a prospectus delivery requirement (a "Delivering Seller") that sold the Securities to the person asserting any such losses, claims, 13 damages or liabilities to the extent that any such loss, claim, damage or liability of such Delivering Seller results from the fact that there was not sent or given to such person, on or prior to the written confirmation of such sale, a copy of the relevant prospectus, as amended and supplemented, provided that (I) the Company shall have previously furnished copies thereof to such Delivering Seller in accordance with this Agreement and (II) such furnished prospectus, as amended and supplemented, would have corrected any such untrue statement or omission or alleged untrue statement or omission, and (iii) this indemnity agreement will be in addition to any liability which the Company may otherwise have to such indemnified party. The Company shall also indemnify underwriters, selling brokers, dealer-managers and similar securities industry professionals participating in the distribution (in each case as described in the Registration Statement), their officers and directors and each person who controls such persons within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders; provided, however, that the Company shall not indemnify any such party to the extent its liability arises from its failure to comply with the requirements described in Annexes A, B and C hereto. (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company, each other Holder and each person, if any, who controls the Company and each such Holder within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof to which the Company, each other Holder or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company, each such Holder for any legal or other expenses reasonably incurred by the Company, each other Holder or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company, each other Holder or any of their controlling persons. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party, except to the extent that it is prejudiced or harmed in any material respect by failure to give such prompt notice. In case any such action is 14 brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with one counsel (and local counsel as necessary) reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, not to be unreasonably withheld, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and does not include any injunctive relief against such indemnified party. No indemnifying party shall be liable for any amounts paid in settlement of any action or claim without its written consent, which consent shall not be unreasonably withheld. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 5 is applicable in accordance with its terms but for any reason is held to be unavailable or insufficient, then each indemnifying party will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the indemnifying party from persons other than the party to be indemnified), to which the indemnifying party and the party to be indemnified may be subject in such proportion as shall be appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the party to be indemnified, on the other, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or such Holder or such other indemnified person, as the case may be, on the other the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 5(d) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the losses, claims, liabilities, expenses or damages, or actions in respect thereof, referred to above in this Section 5(d) shall be deemed to include, for purpose of this Section 5(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in 15 excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5(d), any person who controls a party to this Agreement within the meaning of the Securities Act or the Exchange Act will have the same rights to contribution as that party, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 5(d), will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 5(d). Except for a settlement entered into pursuant to the penultimate sentence of Section 5(c) hereof, no party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld or delayed). (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. SECTION 6. SPECIAL INTEREST (a) If any of the following events occurs (each such event in clauses (i) through (v) below a "Registration Default"): (i) if by August 15, 1998, neither the Exchange Offer Registration Statement nor a Shelf Registration Statement has been filed with the Commission; (ii) if by November 13, 1998, neither the Exchange Offer Registration Statement nor the Shelf Registration Statement is declared effective; (iii) if by December 13, 1998, neither the Registered Exchange Offer is consummated nor, if required in lieu thereof, the Shelf Registration Statement is declared effective by the Commission; (iv) if, notwithstanding the filing of the Exchange Offer Registration Statement or the effectiveness thereof or the consummation of the Registered Exchange Offer, pursuant to the terms of subparagraph (i) of Section 2(a) hereof, by the later of (x) August 15, 1998 and (y) 30 days after a request made pursuant to Section 2, a Shelf Registration Statement has not been filed with the Commission or such Shelf Registration Statement has not been declared effective by the Commission within 150 days after any such request; or 16 (v) if after either the Exchange Offer Registration Statement or the Shelf Registration Statement is declared effective (A) such Registration Statement thereafter ceases to be effective; or (B) such Registration Statement or the related prospectus ceases to be usable (except as permitted in paragraph (b)) in connection with resales of Transfer Restricted Notes during the periods specified herein, the Company will pay special interest ("Special Interest") to each Holder of Transfer Restricted Notes, during the first 90-day period immediately following such Registration Default at a per annum rate of 0.50% per Transfer Restricted Note held by such Holder. The amount of Special Interest will increase by an additional 0.50% per annum per Transfer Restricted Note, for each subsequent 90-day period until the date on which the Exchange Offer Registration Statement or Shelf Registration Statement is filed or declared effective, as the case may be, or such Registration Statement again becomes effective, or such Registration Statement prospectus becomes usable as the case may be, up to a maximum rate of Special Interest with respect to any Registration Default of 1.50% per annum per Transfer Restricted Note. Such Special Interest is payable in addition to any other interest payable from time to time with respect to the Securities. (b) A Registration Default referred to in Section 6(a)(v) shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited or, if required by the rules and regulations under the Securities Act, quarterly unaudited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events or developments with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in no event shall the Company be required to disclose the business purpose for such suspension if the Company determines in good faith that such business purpose must remain confidential; provided further, however, that in any case if such Registration Default occurs for a continuous period in excess of 45 days, Special Interest shall be payable in accordance with the above paragraph from the day following such 45 day period until the date on which such Registration Default is cured. (c) All accrued Special Interest shall be payable by the Company in cash on the regular interest payment dates with respect to the Notes, the Exchange Notes or the Private Exchange Notes to the Holders of record on the applicable record dates. The parties hereto agree that Special Interest provided in this Section constitutes a reasonable estimate of the damages that will be incurred by the Holders by reason of the failure of the Exchange Offer Registration Statement or the Shelf Registration Statement to be filed, declared effective or to remain effective or such Registration Statement or related prospectus to be usable, as the case may be. (d) "Transfer Restricted Notes" means each Note until (i) the date on which such Transfer Restricted Note has been exchanged by a person other than a broker-dealer for a 17 freely transferable Exchange Note in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of a Transfer Restricted Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Transfer Restricted Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Transfer Restricted Note is distributed to the public pursuant to Rule 144 under the Securities Act or is salable pursuant to Rule 144(k) under the Securities Act. SECTION 7. RULE 144 AND RULE 144A The Company shall use its reasonable best efforts to file on a timely basis all such reports required to be filed under the Exchange Act as, and endeavor in good faith to take such other actions as, are reasonably necessary to enable Holders to sell Transfer Restricted Notes without registration under the Securities Act within the limitation of the exemptions provided under (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (b) Rule 144A under the Securities Act, as such Rule may be amended from time to time, and (c) any similar rules or regulations hereafter adopted by the Commission. Upon request of any Holder of Transfer Restricted Notes, the Company will provide a written statement as to whether it has complied with such requirements and will, at its expense, forthwith upon the request of the Owner Trustee or Lazard, deliver to the Owner Trustee or Lazard a certificate, signed by the Company's principal financial officer, stating (i) the Company's name, address and telephone number (including area code), (ii) the Company's Internal Revenue Service identification number, (iii) the Company's Commission file number, (iv) the number of shares of each class of capital stock outstanding as shown by the most recent report or statement published by the Company, and (v) whether the Company has filed the reports required to be filed under the Exchange Act for a period of at least ninety (90) days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder. SECTION 8. UNDERWRITING If any of the Transfer Restricted Notes covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker(s) and manager(s) that will manage the offering will be selected by the Holders of a majority of the then outstanding Transfer Restricted Notes (determined in accordance with Section 9(d)) included in such offering (after consultation with the Company as to such selection and upon the written consent of the Company, which consent will not be unreasonably withheld or delayed). If requested by the underwriters, the Company will promptly enter into an underwriting agreement reasonably acceptable to the Company with such underwriters for such offering, such agreement to contain such representations and warranties by the Company and such other terms and conditions as are customary for underwriting agreements with respect to secondary offerings, including without limitation, indemnities to the effect and to the extent provided in Section 5 hereof. The Holders of Transfer Restricted Notes on whose behalf such securities are being distributed shall be party to any such underwriting agreement. Such Holders shall not be 18 required by the Company to make any representations or warranties to the underwriters with respect to the Company or the Transfer Restricted Notes (other than that the Holders are conveying such securities free and clear of all pledges, securities interests, liens, charges, encumbrances, agreements, equities, claims and options of whatever nature), and the Holders shall not be required to indemnify the Company or the underwriters (other than with respect to the matters, and to the extent, provided in Section 5). Furthermore, the Company shall make available for inspection by the Holders, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney, accountant or other agent retained by any Holder or underwriter, all financial and other records and other information, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to exercise their due diligence responsibilities. No Holder of Transfer Restricted Notes may participate in any underwritten distribution hereunder unless such holder (a) agrees to sell such Holder's Transfer Restricted Notes on the basis provided in any underwriting arrangements approved in accordance with the terms hereof, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. SECTION 9. MISCELLANEOUS (a) Remedies. Each Holder of Securities, in addition to being entitled to exercise all rights provided herein, and as provided in the Sale Agreement and granted by law, including the recovery of damages, shall be entitled to specific performance of such Holder's rights under this Agreement. Except with respect to the payment of Special Interest in the event of the occurrence of a Registration Default, the Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees in any action for specific performance to waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company has not and shall not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders of Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders of Securities hereunder do not and will not in any way conflict with and are not and will not be inconsistent with the rights granted to the holders of the Company's other securities under any other agreements. No holder of any securities of the Company has rights to the registration of any securities of the Company because of the execution, delivery or performance by the Company of this Agreement or as a result of the filing of the Exchange Offer Registration Statement or the Shelf Registration Statement. (c) No Adverse Action Affecting the Securities. The Company has not taken and will not take, any action, or permit any change to occur with respect to the Securities which would adversely affect the ability of any of the Holders of Securities to include such Securities in a registration undertaken pursuant to this Agreement. 19 (d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Notes. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders of Transfer Restricted Notes whose Transfer Restricted Notes are being sold pursuant to the Shelf Registration Statement and that does not directly or indirectly affect the rights of other Holders of Transfer Restricted Notes may be given by the Holders of a majority of the Transfer Restricted Notes being sold. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder of Securities, at the address set forth on the records of the Company or the Trustee under the Indenture, with a copy to the Trustee, or if to the Owner Trustee or Lazard, at the address set forth in the Sale Agreement; and (ii) if to the Company, initially at its address set forth in the Sale Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed on a business day (or otherwise on the first business day following such answer back); when receipt acknowledged, if telecopied on a business day (or otherwise on the first business day following such acknowledgment); and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Securities. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 20 (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Securities except as provided in the Indenture and the Sale Agreement. Except as set forth in the prior sentence, this Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof. [Remainder of this page is blank.] 21 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TRANS WORLD AIRLINES, INC. By: /s/ Michael J. Lichty ---------------------- Name: Michael J. Lichty Title: Vice President and Deputy Counsel FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but as Owner Trustee By: /s/ Arge Pavlos ---------------------- Name: Arge Pavlos Title: Assistant Trust Officer LAZARD FRERES & CO. LLC By: /s/ Michael S. Liss ---------------------- Name: Michael S. Liss Title: Managing Director ANNEX A Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." ANNEX B Each broker-dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Registered Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until _____, 199_, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus.* The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the reasonable expenses of one counsel for the Holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. - ----------- * In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. ANNEX D _ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ----------------------------------------------------------------- Address: -------------------------------------------------------------- -------------------------------------------------------------- If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-4.37 5 ================================================================= TRANS WORLD AIRLINES, INC. and FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee INDENTURE Dated as of June 16, 1998 $13,000,000 10 1/4% Mandatory Conversion Equity Notes due 1999 ================================================================= TABLE OF CONTENTS Page ---- ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Definitions........................................ 1 Section 1.2 Rules of Construction.............................. 1 ARTICLE 2. THE SECURITIES Section 2.1 Designation, Form and Dating...................... 1 Section 2.2 Execution, Amount, Authentication and Delivery.... 2 Section 2.3 Registrar and Paying Agent........................ 4 Section 2.4 Paying Agent to Hold Payments In Trust............ 4 Section 2.5 Securityholder Lists.............................. 6 Section 2.6 Transfer and Exchange............................. 6 Section 2.7 Mutilated, Defaced, Destroyed, Lost and Stolen Securities................................. 7 Section 2.8 Treasury Securities............................... 8 Section 2.9 Temporary Securities.............................. 9 Section 2.10 Cancellation...................................... 9 Section 2.11 Defaulted Interest; Interest on Defaulted Principal......................................... 9 Section 2.12 CUSIP Numbers..................................... 10 ARTICLE 3. REDEMPTIONS........................... 10 ARTICLE 4. COVENANTS, REPRESENTATIONS AND WARRANTIES Section 4.1 Payment of Securities............................. 10 Section 4.2 Maintenance of Office or Agency................... 11 i TABLE OF CONTENTS (Continued) Page ---- Section 4.3 Limitation on Dividends and Acquisition of Common Stock...................................... 11 Section 4.4 Corporate Existence............................... 12 Section 4.5 Payment of Taxes and Other Claims................. 12 Section 4.6 Notices........................................... 13 Section 4.7 Maintenance of Properties and Insurance........... 13 Section 4.8 Default Notices and Compliance Certificates....... 14 Section 4.9 SEC Reports....................................... 14 Section 4.10 Waiver of Stay, Extension or Usury Laws........... 15 Section 4.11 Amendment to Certain Agreements .................. 16 Section 4.12 Title to Collateral and Limitation on Liens; Sale of Aircraft; Total Loss With Respect to Aircraft.......................................... 16 Section 4.13 Books, Records, Access; Confidentiality........... 17 Section 4.14 Security Interests................................ 18 Section 4.15 Repurchase of Securities Upon a Change in Control........................................... 18 Section 4.16 Restrictions on Becoming an Investment Company........................................... 18 ARTICLE 5. SUCCESSOR CORPORATION Section 5.1 Covenant Not to Consolidate, Merge, Convey or Transfer Except Under Certain Conditions........................................ 18 Section 5.2 Successor Person Substituted...................... 19 Section 5.3 Limitation on Lease of Properties................. 20 ARTICLE 6. DEFAULT AND REMEDIES Section 6.1 Events of Default................................. 20 Section 6.2 Acceleration...................................... 22 Section 6.3 Other Remedies.................................... 22 Section 6.4 Waiver of Past Defaults........................... 23 Section 6.5 Control by Majority............................... 23 Section 6.6 Limitation on Suits............................... 23 ii TABLE OF CONTENTS (Continued) Page ---- Section 6.7 Rights of Holders to Receive Payment.............. 24 Section 6.8 Collection Suit by Trustee........................ 24 Section 6.9 Trustee May File Proofs of Claim.................. 24 Section 6.10 Application of Proceeds........................... 25 Section 6.11 Undertaking for Costs............................. 26 Section 6.12 Restoration of Rights on Abandonment of Proceedings....................................... 26 Section 6.13 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default.................... 27 ARTICLE 7. TRUSTEE Section 7.1 Duties of Trustee................................. 27 Section 7.2 Rights of Trustee................................. 28 Section 7.3 Individual Rights of Trustee...................... 29 Section 7.4 Trustee's Disclaimer.............................. 29 Section 7.5 Notice of Defaults................................ 29 Section 7.6 Reports by Trustee to Holders..................... 29 Section 7.7 Compensation and Indemnity........................ 29 Section 7.8 Replacement of Trustee............................ 30 Section 7.9 Successor Trustee by Merger, etc.................. 31 Section 7.10 Eligibility; Disqualification..................... 31 Section 7.11 Preferential Collection of Claims Against Company........................................... 31 ARTICLE 8. DISCHARGE OF INDENTURE Section 8.1 Termination of Company's Obligations.............. 32 Section 8.2 Application of Trust Money........................ 33 Section 8.3 Repayment to Company.............................. 33 Section 8.4 Reinstatement..................................... 34 iii TABLE OF CONTENTS (Continued) Page ---- ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1 Without Consent of Holders........................ 35 Section 9.2 With Consent of Holders........................... 35 Section 9.3 Compliance with Trust Indenture Act............... 36 Section 9.4 Revocation and Effect of Consents................. 36 Section 9.5 Notation on or Exchange of Securities............. 37 Section 9.6 Trustee to Sign Amendments, etc................... 37 Section 9.7 Effect of Supplement and/or Amendment............. 37 ARTICLE 10. SECURITY Section 10.1 Other Operative Documents......................... 37 Section 10.2 Opinions, Certificates and Appraisals............. 38 Section 10.3 Authorization of Actions to be Taken by the Trustee Under the Operative Documents............. 38 Section 10.4 Payment of Expenses............................... 39 Section 10.5 Authorization of Receipt of Funds by the Trustee Under the Operative Documents............. 39 ARTICLE 11. MISCELLANEOUS Section 11.1 Conflict with Trust Indenture Act of 1939......... 39 Section 11.2 Notices; Waivers.................................. 39 Section 11.3 Communications by Holders with Other Holders........................................... 40 Section 11.4 Certificate and Opinion as to Conditions Precedent......................................... 41 Section 11.5 Statements Required in Certificate or Opinion........................................... 41 Section 11.6 Rules by Trustee, Paying Agent, Registrar......... 42 Section 11.7 Holidays.......................................... 42 Section 11.8 Governing Law; Waiver of Jury Trial............... 42 Section 11.9 No Adverse Interpretation of Other............... Agreements........................................ 43 iv TABLE OF CONTENTS (Continued) Page ---- Section 11.10 No Recourse Against Others........................ 43 Section 11.11 Benefits of Indenture and the Securities Restricted........................................ 43 Section 11.12 Successors and Assigns............................ 43 Section 11.13 Counterpart Originals............................. 43 Section 11.14 Severability...................................... 43 Section 11.15 Effect of Headings................................ 44 ARTICLE 12. RELEASE OF COLLATERAL Section 12.1 Release of Collateral............................. 44 ARTICLE 13. MANDATORY CONVERSION OF SECURITIES Section 13.1 Mandatory Conversion and Conversion Price............................................. 44 Section 13.2 Effect of Consolidation, Merger or Conveyance on Conversion.......................... 45 Section 13.3 Costs of Conversion............................... 47 Section 13.4 No Liability to Trustee........................... 47 Section 13.5 Applicable Laws................................... 48 Section 13.6 Other Funds....................................... 48 Section 13.7 Release of Collateral Upon Conversion............. 48 Section 13.8 Company to Provide Stock.......................... 48 APPENDIX I Definitions Appendix EXHIBIT A Form of 10 1/4% Mandatory Conversion Equity Note EXHIBIT B Form of Aircraft Second Mortgage and Security Agreement v INDENTURE dated as of June 16, 1998 between TRANS WORLD AIRLINES, INC., a Delaware corporation (the "Company"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "Securities"). ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Definitions. ----------- Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall be a part of this Indenture as if fully set forth in this place. Section 1.2 Rules of Construction. --------------------- The rules of construction for this Indenture are set forth in Section 2 of the Definitions Appendix. ARTICLE 2. THE SECURITIES Section 2.1 Designation, Form and Dating. ---------------------------- The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto (with such appropriate insertions, omissions, substitutions and other variations as are required by this Indenture) and is hereby incorporated in and expressly made a part of this Indenture. The Securities may have imprinted or otherwise reproduced thereon such notations, legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Securities are admitted to trading, or to conform to general usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication and shall bear interest from the applicable date set forth herein or in the form of Security and shall be payable, unless previously Tendered, on the dates as specified herein or in the form of the Security. The Person in whose name any Security is registered at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest and Special Interest, if any, payable on such Interest Payment Date to the extent provided by 2 such Security, except if and to the extent the Company shall default in the payment of the interest or Special Interest due on such Interest Payment Date, in which case defaulted interest or Special Interest, as the case may be, shall be paid to the Person in whose name the Outstanding Security is registered at the close of business on the subsequent record date (which shall be not less than five (5) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Company to the Holders of Securities not less than fifteen (15) days preceding such subsequent record date (a "Special Record Date"). Section 2.2 Execution, Amount, Authentication and Delivery. ---------------------------------------------- The Securities shall be signed for the Company by the manual or facsimile signatures of an Officer and a Certifying Officer. The Company's seal shall be affixed to or reproduced on the Securities. Typographical or other errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security which has been duly authenticated and delivered by the Trustee. If an officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $13,000,000 except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Sections 2.6, 2.7, 2.9, 4.15 or 9.5. The Securities shall be known and designated as the "10 1/4% Mandatory Conversion Equity Notes due 1999" of the Company. Their Stated Maturity shall be June 15, 1999, and, subject to the increases in the rate of interest set forth in the Securities, they shall bear interest at the rate of 10 1/4% per annum, from June 16, 1998 or from the most recent Interest Payment Date to which interest and Special Interest, if any, have been paid or duly provided for, as the case may be, payable in arrears on each Interest Payment Date, until the principal thereof is paid or made available for payment. In the event a Registration Default shall occur and be continuing and the Company shall have failed to use its reasonable best efforts to avoid or cure such Registration Default, Holders shall be entitled to make a claim for damages incurred as a result of such Registration Default which damages shall not necessarily be limited to the increases in the interest rate set forth in the Securities; provided, however, that any amount of interest paid pursuant to such increases shall be credited against any amount of damages to be paid by the Company in connection with such claim. Subject to the limits set forth in the second preceding paragraph of this Indenture, the Trustee shall authenticate Securities for original issue upon written order of the Company signed by an Officer and by a Certifying Officer of the Company. The order shall specify the amount of Securities to be authenticated and the date on which the original issue of Securities is to be 3 authenticated, shall provide instructions with respect to the delivery thereof and shall be accompanied by the documents specified in Sections 10.2 and 11.4 and by the following (provided, however, that the Trustee shall be authorized conclusively to rely upon the documents specified in Section 11.4): (a) the grant to the Trustee, by assignment, pledge, or otherwise pursuant to the Mortgage, of a security interest in the Collateral; (b) Officers' Certificates or other satisfactory confirmation (i) with respect to the Mortgage and the Collateral, that the Company is the legal and beneficial owner of the Collateral, free and clear of all Liens except Permitted Liens; and (ii) describing the actions taken to make, obtain and accomplish all necessary filings, confirmations and identifications referred to in Section 4.14 hereof; (c) compliance with all applicable provisions of Sections 4.12 and 4.14 hereof; (d) an Officers' Certificate confirming all representations and warranties of the Company contained in this Indenture and the other Operative Documents as of the date of authentication; (e) an Officers' Certificate containing representations and warranties of the type usual and customary to the issuance of the Securities such as, but not limited to, representations regarding due authorization of this Indenture; due authorization of the issuance and delivery of the Securities; that the Securities, when so issued and delivered against delivery of the Aircraft under the Aircraft Sale Agreement will be duly and validly issued, and constitute valid and binding obligations of the Company, enforceable in accordance with their terms; that the Common Stock issuable upon conversion of the Securities has been duly authorized and reserved for issuance and, when issued and delivered by the Company upon conversion of the Securities, will be duly and validly issued, fully paid and non-assessable and free of preemptive rights; that no consent, approval or authorization of, or designation, declaration, or filing with, any governmental authority or any other person or entity is required of the Company in connection with the execution and delivery of this Indenture or the issuance and delivery of the Securities; and that the Securities have been registered under the Securities Act or that registration is not required in connection with the offer, issuance and delivery of the Securities, nor does the Securities Act require registration of the conversion of the Securities into shares of Common Stock as provided in Article 13; (f) an Opinion of Counsel to the effect that the Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Indenture and the other Operative Documents; that the Securities have been duly authorized and validly issued; and that the offer and issuance of the Securities have been registered or will be exempt from the registration requirements under the Securities Act and that the Securities Act does not require registration of the conversion of the Securities into shares of Common Stock as provided in Article 13; and 4 (g) execution and delivery by the Company of the Securities and by all parties thereto of this Indenture and all other Operative Documents; provided, however, that any Securities in fact authenticated by the Trustee upon written order of the Company as set forth in the first sentence of this paragraph shall be deemed to have been duly authenticated hereunder and to constitute an enforceable contractual obligation of the Company and shall be entitled to all the benefits of this Indenture and the other Operative Documents equally and proportionately with any and all other Securities duly authenticated and delivered hereunder, in each case, notwithstanding any failure of the Company to deliver any of the documents specified in Sections 10.2 and 11.4 or above in this sentence. The Securities shall be issuable only in registered form, without coupons, in denominations of $1,000 and any integral multiple thereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company, any guarantor or any Affiliate of the Company. Section 2.3 Registrar and Paying Agent. -------------------------- The Company shall maintain an office or agency where Securities eligible for transfer or exchange may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Securities may be presented for payment or repurchase ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange ("Register"). Such Register shall be in written form in the English language or any other form capable of being converted into such form within a reasonable time. At all reasonable times such Register shall be open for inspection by the Trustee. The Company may have one or more co-Registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may enter into an appropriate agency agreement with any Agent not a party to this Indenture. Such agency agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar and Paying Agent. Section 2.4 Paying Agent to Hold Payments In Trust. -------------------------------------- Each Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all Payments held by the Paying Agent for the payment of principal of, repurchase price, if any, of, interest on, and Special Interest, if any, with respect to, the Securities (whether such Payment has been paid to it by the Company or any other obligor on the Securities), and shall promptly notify 5 the Trustee of any default by the Company (or any other obligor on the Securities) in making any such Payment. The Company at any time may require a Paying Agent to Pay all Payments held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to Pay all Payments held by it to the Trustee and to account for any Payments distributed. Upon doing so the Paying Agent shall have no further liability for the Payments. If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of, repurchase price, if any, of, interest on, or Special Interest, if any, with respect to, any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto Payments sufficient to pay the principal, repurchase price, if any, interest or Special Interest, if any, so becoming due until such Payments shall be Paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of such action or any failure so to act. The Company will, on or before each due date for the payment of the principal of, repurchase price, if any, of, interest on, or Special Interst, if any, with respect to, any of the Securities, deposit with a Paying Agent Payments (in same day funds) sufficient to pay the principal, repurchase price, if any, interest or Special Interest, if any, so becoming due, such Payments to be held in trust for the benefit of the Persons entitled to such principal, repurchase price, if any, interest or Special Interest, if any, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all Payments received by it as such agent for the payment of the principal of, repurchase price, if any, of, interest on, or Special Interest, if any, with respect to, the Securities (whether such Payments have been paid to it by the Company or by any other obligor on the Securities) in trust for the benefit of the Persons entitled thereto until such Payments shall be paid to such Persons or otherwise disposed of as herein provided; (b) promptly give the Trustee notice of any failure by the Company (or any other obligor upon the Securities) to make any payment of the principal of, repurchase price, if any, of, or interest, if any, on, the Securities when the same shall be due and payable; and (c) at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all Payments so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, Pay, or direct any Paying Agent to Pay, to the Trustee all Payments held in trust by the Company or such Paying Agent, such Payments to be held by the Trustee upon the same trusts as those upon which such Payments were held by the Company or such Paying Agent; and, upon such Payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such Payments held 6 by it as Paying Agent. Any Payments deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, repurchase price, if any, of, interest on or Special Interest, if any, with respect to, any Security and unclaimed for two (2) years after such principal, repurchase price, interest or Special Interest has become due and payable shall be paid to the Company on its request, or (if then held by the Company) shall be discharged from such trust, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof and all liability of the Trustee or such Paying Agent with regard to such Payments, and all liability of the Company as trustee thereof, shall thereupon cease. Section 2.5 Securityholder Lists. -------------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. Section 2.6 Transfer and Exchange. --------------------- When Securities are presented to the Registrar or a co-Registrar with a request to register the transfer or to exchange them for an equal principal amount of Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's request. All Securities presented for registration of transfer, exchange or payment shall (if so required by the Company or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee, duly executed by the Holder or his attorney duly authorized in writing. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any registration of transfer or exchange, but not for any exchange pursuant to Sections 2.9, 4.15 or 9.5 or any other Tender not involving any transfer of Securities (other than to the Company). No service charge shall be made for any such transaction. In the case of any Security which is Tendered in part only, upon such Tender the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder thereof, without service charge, a new Security or Securities of any authorized denomination as requested by such Holder in aggregate principal amount equal to the non- Tendered portion of the principal of such Security. No Securities will be issued in denominations of less than $1,000 upon tender of the Securities. 7 All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same debt of the same series and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange. Section 2.7 Mutilated, Defaced, Destroyed, Lost and --------------------------------------- Stolen Securities. - ----------------- In case any temporary or definitive Security shall become mutilated, defaced or be apparently destroyed, lost or stolen, subject to compliance with the following sentence and in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and the Trustee shall authenticate and deliver, a new Security, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and substitution for the Security so apparently destroyed, lost or stolen. In every case the applicant for a substitute Security shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as may reasonably be required by them to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Upon the issuance of any substitute Security pursuant to the preceding paragraph, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Security which has matured or is about to mature, or has been tendered for repurchase pursuant to any of the provisions hereof (as evidenced by an irrevocable written notice from the Holder to the Company and the Trustee), shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Company may, instead of issuing a substitute Security, pay or authorize the payment of such Security (without surrender of such Security except in the case of a mutilated or defaced Security), as applicable, if the applicant for such payment shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as any of them may reasonably require to save each of them harmless from all risks, however remote, and, in every case of apparent destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee and any agent of the Company or the Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Every substitute Security issued pursuant to the provisions of this Section by virtue of the fact that any Security is apparently destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the apparently destroyed, lost or stolen Security shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall also be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities duly authenticated and delivered hereunder. Every substitute Security issued pursuant to the provisions of this Section by virtue of the fact that any Security is mutilated or defaced shall constitute an additional contractual obligation of the Company and shall be entitled to all the benefits of (but shall also be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities of the same series duly authenticated and delivered hereunder. All Securities shall be 8 held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated or defaced or apparently destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.8 Treasury Securities. ------------------- In determining whether the Holders of the required principal amount of Securities have given or concurred in any amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document, Securities owned by the Company (including Securities Tendered), an Affiliate of the Company, any other obligor upon the Securities, any Affiliate of such obligor upon the Securities or any Person who has given or concurred in any such amendment, request, demand, authorization, direction, notice, consent or waiver under the direction of, by agreement with, or as a condition or in consideration of any exchange offer by or transfer of such Person's Securities to the Company, an Affiliate of the Company, any other obligor, any Affiliate of such obligor or any such Person, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such amendment, request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee that neither the Company nor any such other obligor, Affiliate or Person is affiliated with the pledgee or any Affiliate of the pledgee and that the pledgee has the present right (subject to no contrary obligation or understanding) so to act with respect to the Securities on the basis of its best interests as a Holder independently of any direction by or interest of the Company. In case of a dispute as to such right, the Trustee in good faith shall be entitled to rely upon the advice of counsel, including counsel for the Company. Upon request of the Trustee, the Company shall promptly furnish to the Trustee a certificate of a Certifying Officer listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of any of the above-described Persons; and subject to Sections 7.1 and 7.2 herein, the Trustee shall be entitled to accept such certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. The Company shall not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any additional security, to any Holder of Securities as consideration for or as an inducement to giving or concurring in any amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document unless such remuneration is concurrently paid, or such security is concurrently granted, as the case may be, on the same terms ratably to the Holders of all Securities then Outstanding (regardless of whether any such Holder has given or concurred in such amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document). 9 For purposes of this Section and without limiting the generality of the foregoing, Securities which are subject to a binding contract or irrevocable tender offer (including an offer which is in any way conditioned upon or simultaneous with, or requires as a condition precedent (whether by contract or otherwise) or which cannot be effected without, the agreement or consent of the transferor to any amendment, request, demand, authorization, direction, notice, consent or waiver hereunder) pursuant to which ownership (direct or indirect) is to be transferred (including for example, Securities tendered to the Company or any other Person in an exchange transaction) shall be deemed owned by such transferee, and therefore, any such simultaneous agreement or consent by the transferor shall be invalid. Section 2.9 Temporary Securities. -------------------- Until definitive Securities are ready for delivery, the Company may prepare, and, upon written order of the Company, the Trustee shall authenticate, temporary Securities in any authorized denominations. Temporary Securities shall be substantially in the form of definitive Securities of the same series but may have variations that the Company reasonably considers appropriate and necessary for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Securities in exchange for temporary Securities. Until so exchanged, the temporary Securities shall be entitled to the same benefits under this Indenture as definitive Securities of the same series. Section 2.10 Cancellation. ------------ The Company may at any time deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange, repurchase or payment. All Securities purchased pursuant to any Offer to Purchase shall be canceled. The Trustee and no one else shall cancel all Securities surrendered for transfer, exchange, repurchase or cancellation. The Company may not issue new Securities to replace Securities it has paid or that have been converted (upon Tender or otherwise) or which have been delivered to the Trustee for cancellation. The Trustee shall destroy all canceled Securities and, if requested, deliver a certificate of such destruction to the Company. If the Company shall acquire any of the Securities, such acquisition shall not operate as a satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee for cancellation. Section 2.11 Defaulted Interest; Interest on Defaulted Principal. --------------------------------------------------- If the Company defaults in a payment of any interest on, or Special Interest, if any, with respect to, the Securities, it shall pay the defaulted interest or Special Interest, as the case may be, plus interest on such defaulted interest or Special Interest at the rate then borne by the Securities to the extent permitted by law and the terms thereof, to the persons who are Securityholders on a subsequent Special Record Date. The Company shall fix the Special Record Date and payment date. At least fifteen (15) days before the Special Record Date, the Company shall mail to each Securityholder a notice that states the Special Record Date, the payment date and the amount of defaulted interest to be paid. If the Company defaults in the payment of principal on the Securities (whether on acceleration, at maturity, upon tender for repurchase or otherwise), it shall 10 pay interest on such defaulted principal at the rate then borne by the Securities to the Trustee upon demand. The Trustee shall apply any such payment in accordance with the provisions of Section 6.10. Section 2.12 CUSIP Numbers. ------------- The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee may use "CUSIP" numbers in notices to the Holders regarding the Securities as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any such notice and that reliance may be placed only on the other identification numbers printed on the Securities, and any such notice shall not be affected by any defect in or omission of such numbers. ARTICLE 3. REDEMPTIONS The Securities Outstanding shall not be subject to redemption in whole or in part at any time. ARTICLE 4. COVENANTS, REPRESENTATIONS AND WARRANTIES Section 4.1 Payment of Securities. --------------------- The Company shall pay the principal of, interest on and Special Interest, if any, with respect to, the Securities on the dates and in the manner provided in this Indenture and in the Securities. All interest and Special Interest, if any, due and payable on the Securities shall be paid in cash, except that the Company may at its option, make such Payments by check mailed to the address of the Person entitled thereto as it appears in the Register; provided, however, that such Payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by a Holder with a bank in New York City if such Holder owns at least $250,000 in aggregate principal amount of certificated Securities and elects payment by wire transfer by giving written notice to the Company and the Trustee to such effect designating such account no later than 10 days immediately preceding the relevant due date for payment (or such other date as the Company and the Trustee may accept in their discretion). An installment of principal, interest or Special Interest, if any, shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company or any Affiliate thereof) holds on that date Payments designated for and sufficient to pay such installment and the Trustee or Paying Agent is not prohibited from Paying such Payments to the Holders of the Securities pursuant to this Indenture. 11 The Company shall pay interest and Special Interest, if any, at the rate set forth in this Indenture and the Securities, and the Company shall pay interest on unpaid interest or Special Interest, if any, at the same rate to the extent legally permitted. Section 4.2 Maintenance of Office or Agency. ------------------------------- The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange or for presentation for payment, repurchase or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. At the request of the Company, said office or agency may be the office of an agent appointed by the Trustee for such purpose. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 4.3 Limitation on Dividends and Acquisition --------------------------------------- of Common Stock. --------------- The Company will not declare or pay any dividend or make any distribution on its Common Stock, Employee Preferred Stock or other Capital Stock of the Company (other than dividends or distributions payable in the Company's Common Stock or Employee Preferred Stock or options, warrants or other rights to acquire, subscribe for or purchase the Company's Common Stock or Employee Preferred Stock) and will not, and will not permit any of its Subsidiaries to, purchase, redeem or otherwise acquire for value any shares of its Common Stock, Employee Preferred Stock or other Capital Stock of the Company, whether in cash or Property or in obligations of the Company, if, at the time of such declaration, payment, distribution, purchase, redemption or other acquisition or, after giving effect thereto, a Default or Event of Default shall have occurred and be continuing; provided, that notwithstanding anything to the contrary written above, this Section 4.3 shall not apply to: (a) any purchase or redemption of Common Stock or Preferred Stock by the Company or an employee stock ownership or benefit plan (i) from union employees or former union employees, or their respective transferees, pursuant to the terms of agreements with labor unions existing on the date hereof; (ii) from recipients or their transferees of such stock from employee stock ownership or benefit plans subject to ERISA; (iii) from employee stock ownership or benefit plans subject to ERISA in order to provide cash benefits to employees pursuant to the terms of such plans; and (iv) as required by ERISA; (b) any purchase or redemption of Common Stock or Preferred Stock by an 12 employee stock ownership or benefit plan subject to ERISA for an aggregate consideration, without regard to purchases or redemptions pursuant to clause (a) above, of up to $200,000,000; (c) the payment of fixed or mandatory dividends on or scheduled redemptions or exchanges of any of the Company's 8% Preferred Stock and 9 1/4% Preferred Stock and the payment of any interest on the securities issuable upon such exchange; (d) the payment of any dividends on or the purchase, redemption or other acquisition or retirement of the Common Stock or Preferred Stock of the Company within sixty (60) days after the date of declaration of such dividend or the commitment to make such purchase, redemption or other acquisition or retirement, if at said date of declaration or commitment such payment or commitment complied with this Section 4.3; (e) the purchase, redemption, retirement or other acquisition of any shares of the Company's Common Stock or Preferred Stock in exchange for, or out of the proceeds of the substantially concurrent sale of, Common Stock or Preferred Stock of the Company; (f) any consolidation or merger with or into any Person or conveyance or transfer of all or substantially all of the Company's Property to one or more Persons substantially as an entirety, not prohibited by the terms of Section 5.1; and (g) the conversion of Employee Preferred Stock into Common Stock. Section 4.4 Corporate Existence. ------------------- (a) Except as otherwise provided in Article 5, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its Subsidiaries engaged in substantial business activity each in accordance with the respective organizational documents of the Company and each such Subsidiary and the rights (charter and statutory), licenses, permits, approvals and governmental franchises of the Company and each such Subsidiary necessary to the conduct of its respective business; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or to preserve the corporate existence of any such Subsidiary, if the Board of Directors shall determine that the preservation thereof is no longer in the interest of the Company and that termination of the corporate existence is not disadvantageous to the Holders in any material respect. (b) The Company shall continue to be an air carrier certificated under Section 604(b) of the Federal Aviation Act. (c) The Company is and, to the extent required to operate its business as presently conducted and to perform its obligations under this Indenture and the Operative Documents, shall remain a "citizen of the United States" as defined in Section 101(16) of the Federal Aviation Act. Section 4.5 Payment of Taxes and Other Claims. --------------------------------- The Company shall, and shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company and each Subsidiary or upon the income, profits or Property of the Company and each Subsidiary or upon the Collateral and (b) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the Collateral or the other Property of the Company or a Subsidiary; provided, however, that the Company or a Subsidiary, as the case may be, shall not be required to pay or 13 discharge or cause to be paid or discharged any such tax, assessment, charge or claim (i) the amount, applicability or validity of which is being contested in good faith by appropriate proceedings as permitted by and in accordance with the provisions of the Operative Documents, to the extent applicable, and for which adequate reserves have been established in accordance with GAAP, as in effect from time to time, or (ii) if the Company delivers to the Trustee a Certificate of an Officer stating that such non-payment and non-discharge is in the interest of the Company and not prejudicial in any material respect to the Holders. Nothing contained herein or in the Securities shall be deemed to impose on the Trustee or on the Company any obligation to pay on behalf of the Holder of any Securities any tax, assessment or governmental charge required by any present or future law of the U.S. or of any state, county, municipality or other taxing authority thereof to be paid on behalf of, or withheld from the amount payable to, the Holder of any Securities; rather any tax, assessment or governmental charge shall, to the extent required by law, be withheld from the amounts provided for herein. Section 4.6 Notices. ------- The Company shall notify the Trustee in writing of any of the following promptly (and in any event within five (5) Business Days after an Officer learns of the occurrence thereof) describing the same and, if applicable, the steps being taken by the Person(s) affected with respect thereto: (a) In the event that any Indebtedness of the Company or any Significant Subsidiary of the Company in a principal amount in excess of $10,000,000 (i) is declared due and payable before its stated maturity because of the occurrence of any default (or any event which, with notice or the lapse of time, or both, shall constitute such default) under such Indebtedness or (ii) is not paid at its stated maturity; or (b) Any litigation, arbitration proceeding or governmental proceeding involving damages or potential liability in excess of $10,000,000 is instituted against the Company or any of its Subsidiaries which, if adversely determined, would have a material adverse effect on the business, operations or financial condition of the Company and its Subsidiaries taken as a whole. Section 4.7 Maintenance of Properties and Insurance. --------------------------------------- Except as otherwise provided in this Indenture, the Company shall, and shall cause each of its Subsidiaries to, cause all Collateral and other Properties owned by or leased to it and used or useful in the conduct of the business of the Company or any such Subsidiary, as the case may be, to be maintained and kept in good repair, working order and condition, except for reasonable wear and use, and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times, except, in every case, as and to the extent that the Company or any such Subsidiary may be prevented by fire, strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions, enemy action, civil 14 commotion or unavoidable casualty or similar causes beyond the control of the Company or such Subsidiary; provided, however, that subject to all requirements of the Operative Documents, nothing in this Section 4.7 shall prevent the Company or any such Subsidiary from discontinuing the use, operation or maintenance of any such Properties, or disposing of any of them, if such discontinuance or disposal is, in the good faith judgment of an Officer of the Company (or other agent employed by the Company) having managerial responsibility for any such Property (or, in the case of any materially important item, with respect to operations or value, in the good faith judgment of the Company as expressed in a resolution of the Board of Directors), desirable in the conduct of the Company's business or that of its Subsidiaries. For so long as any Collateral or Property is deemed to be useful to the conduct of the business of the Company or its Subsidiaries, the Company shall, or shall cause such Subsidiaries to, maintain appropriate insurance, in accordance with industry practice, on such Collateral and Properties and as required under the provisions of the applicable Operative Documents. Notwithstanding the provisions of this Section 4.7, to the extent there exists any inconsistency between the provisions hereof and the provisions of the Mortgage relating to Property which constitutes Collateral, the provisions of the Mortgage shall prevail as to all Collateral. Section 4.8 Default Notices and Compliance Certificates. ------------------------------------------- Contemporaneously with furnishing quarterly financial reports to the Trustee under Section 4.9(a) or mailing quarterly statements to the Trustee and Holders under Section 4.9(c), the Company shall furnish to the Trustee a Certifying Officer's Certificate to the effect that no Default or Event of Default has occurred or is continuing, or, if there is any such Default or Event of Default, describing it and the steps, if any, being taken to cure it. The Company shall deliver to the Trustee within one hundred twenty (120) days after the end of each fiscal year in which any of the Securities remain Outstanding a certificate of the principal executive officer, principal financial officer or principal accounting officer of the Company (which need not comply with the provisions of Section 11.5) stating whether or not, to the knowledge of the signer after due inquiry, the Company is in compliance with all conditions and covenants under this Indenture and the Operative Documents (determined without regard to any period of grace or requirement of notice), and if the Company is not in compliance with all such conditions and covenants, describing each Default or Event of Default and its status. The first certificate to be delivered by the Company pursuant to this Section 4.8 shall be for the fiscal year ending December 31, 1998. Section 4.9 SEC Reports. ----------- (a) The Company shall deliver to the Trustee as soon as practicable after it files them with the SEC, copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Sections 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA ss. 314(a). 15 (b) So long as any of the Securities remain Outstanding, the Company shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders generally, to be mailed to the Holders of such Outstanding Securities at their addresses appearing in the Register. (c) At any time the Company does not have a class of securities registered, or is not otherwise required to file quarterly and other reports under the Exchange Act, the Company will prepare or cause to be prepared, for each of the first three (3) quarters of each fiscal year, an unaudited balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter and related unaudited consolidated statements of income and retained earnings and cash flow of the Company and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through such date, setting forth in each case in comparative form the figures for the corresponding year-to-date period in the previous year, certified by the principal financial officer of the Company, and for each fiscal year, an audited balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and related audited consolidated statements of income and retained earnings and cash flow of the Company and its consolidated Subsidiaries for such year, setting forth in comparative form the figures for the previous year, reported on without a qualification arising out of the scope of the audit, by the Company's independent public accountants. All financial statements will be prepared by a nationally recognized auditing firm and will be prepared in accordance with generally accepted accounting principles, as in effect from time to time, consistently applied, except for changes with which the Company's independent public accountants concur and except that quarterly statements may be subject to year-end adjustments. The Company will cause a copy of the respective financial statements to be mailed to the Trustee and each of the Holders of the Securities within forty-five (45) days after the close of each of the first three (3) quarters of each fiscal year and within one hundred twenty (120) days after the close of each fiscal year, to the addresses set forth in Section 11.2 or, in the case of each of the Holders, to such Holder's address as set forth in the Register of the Securities. Section 4.10 Waiver of Stay, Extension or Usury Laws. --------------------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, interest on, or Special Interest, if any, with respect to, the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture and the Operative Documents; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power granted to the Trustee herein and in the Operative Documents, but will suffer and permit the execution of every such power as though no such law had been enacted. 16 Section 4.11 Amendment to Certain Agreements. ------------------------------- The Company shall not enter into or consent to any amendment, supplement or other modification of the Operative Documents except as permitted under Article 9 hereof. Section 4.12 Title to Collateral and Limitation on Liens; -------------------------------------------- Sale of Aircraft; Total Loss With Respect to Aircraft. - ----------------------------------------------------- (a) The Company represents and warrants that it has, and covenants that it shall continue to have, full power and lawful authority to grant, release, convey, assign, transfer, mortgage, pledge, hypothecate and otherwise create the security interests in the Collateral referred to in Article 10; the Company shall warrant, preserve and defend the interest and title of the Trustee to the Collateral, against the claims of all persons and will maintain and preserve the security interests contemplated by Article 10; and the Company shall not, and not permit any of its Subsidiaries to, directly or indirectly, incur, assume or suffer to exist any Lien of any nature whatsoever upon or with respect to the Collateral, other than Permitted Liens. The Company shall cause the Operative Documents, including all necessary financing statements, notifications of secured transactions and other assurances or instruments to be properly recorded, registered and filed and to be kept, recorded, registered and filed in such manner and in such places as may be required by law and shall take all such other actions as may be required in order to make effective the security interests intended to be created in connection with this Indenture. The Company shall furnish to the Trustee the Opinions of Counsel required by Section 10.2 to confirm such action. (b) The Company shall not, directly or indirectly, consummate any sale, lease, transfer or other disposition of any Collateral for so long as any of the Securities remain Outstanding. (c) In the event that there shall occur a Total Loss with respect to the Aircraft, the Company shall (subject to the provisions of Section 4.12(d)) make an Offer to Purchase an aggregate principal amount of Outstanding Securities (the "Total Loss OTP Amount") equal to the aggregate principal amount of the Securities Outstanding on the date such Offer to Purchase is required to be commenced hereunder, at a purchase price equal to 100% of the aggregate principal amount of Securities to be purchased, plus accrued and unpaid interest and Special Interest, if any, on such Securities, to and including the Payment Date. The Company shall commence such Offer to Purchase within thirty (30) days after the Total Loss Date with respect to any such Total Loss. Upon Request by the Company and payment by the Company of the purchase price with respect to such Offer to Purchase and the Trustee's costs (including reasonable legal fees and disbursements) incurred in complying with such Request, the Trustee shall release from the Lien of the Operative Documents, all right, title and interest of the Trustee in and to the Collateral. (d) At its option the Company may reduce in whole or in part its obligation to pay the Total Loss OTP Amount in cash by delivering to the Trustee at least 15 days before the date the related Offer to Purchase is or would be required to be commenced under Section 4.12(c), (i) Securities which have been acquired by the Company in open market purchases (and, for 17 avoidance of doubt, not acquired by way of any Offer to Purchase hereunder), together with (ii) an Officers' Certificate directing the Trustee to cancel such Securities and stating the election of the Company to have credited against the Total Loss OTP Amount a specified principal amount of Securities so delivered. All Securities made the basis of credit against the Total Loss OTP Amount shall be credited at 100% of their principal amount. In case of the failure of the Company to deliver such Officers' Certificate, the Total Loss OTP Amount due on the Payment Date therefor shall be paid entirely in cash without the option to reduce the Company's obligation to make such payment as specified in this Section 4.12(d). The Trustee shall promptly authenticate and mail to the Company a new Security or Securities in an aggregate principal amount equal to that portion (if any) of the Securities delivered to the Trustee and not used by the Company as a credit under this Section 4.12(d) (provided, that the Company has previously delivered to the Trustee sufficient executed Securities to enable the Trustee to so authenticate such Securities). Section 4.13 Books, Records, Access; Confidentiality. --------------------------------------- (a) The Company shall, and shall cause each of its Subsidiaries to, (i) maintain complete and accurate books and records in which full and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its respective business and activities, and (ii) permit authorized representatives of the Trustee to visit and inspect the Properties of the Company or its Subsidiaries, and any or all books, records and documents in the possession of the Company relating to the Collateral, including the records, logs and other materials referred to in Section 2.1(c) of the Mortgage, and to make copies and take extracts therefrom and to visit and inspect the Collateral, all upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested. (b) The Trustee and its authorized representatives referred to in clause (a) above agree not to use any information obtained pursuant to this Section 4.13 for any purpose other than as required in order to discharge their respective duties hereunder and under the Operative Documents and except as otherwise required for such purpose to keep confidential and not to disclose any such information to any person except that (i) the recipient of the information may disclose any information which becomes publicly available other than as a result of disclosure by such recipient, (ii) the recipient of the information may disclose any information which its counsel reasonably concludes is necessary to be disclosed by law or legal process, pursuant to any court or administrative order or ruling or in any pending legal or administrative proceeding or investigation after notice to the Company adequate, subject to applicable laws, to allow the Company to obtain a protective order or other appropriate remedy, provided that the recipient of the information will (if not otherwise required in order to discharge its duties as aforesaid) cooperate at the Company's expense with the Company's efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded any such information required to be so disclosed, and (iii) the recipient of the information may disclose any information necessary to be disclosed pursuant to any provision of the TIA. 18 Section 4.14 Security Interests. ------------------ The Company and its Subsidiaries shall perform any and all acts and execute any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement or other statement) for filing under the provisions of the Federal Aviation Act and the applicable Uniform Commercial Code and the rules and regulations thereunder or any other statute, rule or regulation of any applicable federal, state or local jurisdiction, which are necessary or advisable, from time to time, in order to grant and maintain in favor of the Trustee for the benefit of the Holders a valid, perfected Lien on the Collateral. The Company and its Subsidiaries shall deliver or cause to be delivered to the Trustee from time to time such other documentation, consents, authorizations, approvals and orders in form and substance satisfactory to the Trustee as it shall deem reasonably necessary or advisable to perfect or maintain the Liens for the benefit of the Holders. Section 4.15 Repurchase of Securities Upon a Change in Control. ------------------------------------------------- (a) In the event that there shall occur a Change in Control, the Company shall make an Offer to Purchase all of the Outstanding Securities, at a purchase price equal to 101% of the aggregate principal amount of the Securities Outstanding, plus accrued and unpaid interest and Special Interest, if any, to and including the repurchase date. The right to require such repurchase of Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article 8. (b) The Company shall commence such Offer to Purchase within thirty (30) days after the occurrence of a Change in Control. Section 4.16 Restrictions on Becoming an Investment Company. ---------------------------------------------- The Company shall not become an investment company within the meaning of the Investment Company Act of 1940 as such statute and the regulations thereunder and any successor statute or regulations thereto may from time to time be in effect. ARTICLE 5. SUCCESSOR CORPORATION Section 5.1 Covenant Not to Consolidate, Merge, Convey or --------------------------------------------- Transfer Except Under Certain Conditions. - ---------------------------------------- The Company shall not consolidate with, or merge with or into, or convey or transfer (excluding by way of lease) all or substantially all of its Properties (as determined at the time of such transfer without regard to any prior conveyance or transfer or series of conveyances or transfers made on unrelated transactions) to any other Person, or permit any Person to convey, lease or transfer all or substantially all of its Properties to the Company, unless: 19 (a) The Company shall be the continuing Person or the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which all or substantially all of the Properties of the Company are conveyed or transferred (the "surviving Person"): (i) shall be a corporation organized and existing under the laws of the United States of America or any state thereof or the District of Columbia; (ii) shall expressly assume prior to or simultaneously with the consummation of such transaction, by an indenture and other agreements supplemental hereto and to the Operative Documents, executed and delivered to the Trustee in form reasonably satisfactory to the Trustee, the due and punctual payment of the principal of, interest on and Special Interest, if any, with respect to, all the Securities and the observance and performance of every covenant, condition and obligation of this Indenture, the Securities and the Operative Documents on the part of the Company to be observed or performed; (b) Immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing hereunder; (c) In the case of any such conveyance or transfer, such conveyance or transfer includes, without limitation, all of the Collateral and in any event such consolidation, merger, conveyance or transfer shall be on such terms as shall fully preserve the Lien and security of each of the Operative Documents, the priority thereof purported to be established thereby and the rights and powers of the Trustee and the Holders of the Securities under each of the Operative Documents; and (d) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that (i) such merger, consolidation, transfer, conveyance, or acquisition of assets and such supplemental indenture (if any) comply with the terms of this Indenture, (ii) this Indenture and the Securities constitute the valid and legally binding obligations of the surviving Person, and (iii) this Indenture and the other Operative Documents are enforceable against the surviving Person in accordance with their terms. Section 5.2 Successor Person Substituted. ---------------------------- Upon any consolidation or merger, or any conveyance or transfer (excluding by way of lease) of all or substantially all of the Properties of the Company in accordance with Section 5.1, the surviving entity formed by such consolidation or into which the Company is merged or the surviving entity to which such conveyance or transfer is made shall succeed to, and be substituted for, and be bound by and obligated to pay the obligations of, and may exercise every right and power of, the Company under this Indenture, the Securities and the Operative Documents with the same effect as if such successor had been named as the Company herein and therein; but the predecessor Company in the event of any such conveyance or transfer shall not be released from the obligation to pay the principal of, interest on and Special Interest, if any, with respect to, the Securities. Such surviving entity may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such surviving entity, instead of the Company, and subject to all the terms, 20 conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such surviving entity thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, transfer or conveyance such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. Section 5.3 Limitation on Lease of Properties. --------------------------------- Without limitation of the prohibitions set forth in the other Operative Documents, the Company shall not lease all or substantially all of its Properties to any Person. ARTICLE 6. DEFAULT AND REMEDIES Section 6.1 Events of Default. ----------------- An "Event of Default" occurs if: (a) the Company defaults in the payment of interest on, or Special Interest, if any, with respect to, any Security when the same becomes due and payable and the default continues for thirty (30) days; (b) the Company defaults in the payment of the principal amount of any Securities when the same becomes due and payable at maturity, upon acceleration, tender for repurchase or otherwise; (c) the Company fails to comply with the agreements or covenants contained in Article 13 hereof or in Sections 4.3 or 4.12 hereof, takes or agrees to take any action prohibited by Section 5.1 hereof, discontinues or agrees to discontinue substantially all of its commercial airlines operations or fails to comply with the covenants contained in Sections 3, 6.3, 6.5 or 6.8 of the Mortgage within the time periods (if any) provided therein; (d) (i) the Company fails in any material respect to comply with any of its other agreements contained in the Securities, this Indenture or the other Operative Documents or (ii) any representation or warranty made by the Company in this Indenture, the other Operative Documents or any Mortgage Supplement or in any certificate of the Company delivered hereunder or under any such document shall prove to have been untrue in any material respect when made, and in any such case such default continues for the period and after the notice specified below; 21 (e) there shall be a default or an event under or with respect to any Indebtedness of the Company or any of its Significant Subsidiaries in excess of $10,000,000 in principal amount, whether such Indebtedness now exists or shall hereafter be created, and the effect of any such default or event is to cause the principal amount of any such Indebtedness to become due, to have the date of payment thereof fixed prior to its stated maturity or the date it would otherwise become due and while any Securities are Outstanding, or to be unpaid at maturity while any Securities are Outstanding; (f) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law (as hereinafter defined): (i) commences a voluntary case or proceeding, (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding, (iii) consents to the appointment of a Custodian (as hereinafter defined) of it or for all or substantially all of its Property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is unable to pay its debts as the same become due; (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case or proceeding, (ii) appoints a Custodian of the Company or any of its Significant Subsidiaries for all or substantially all of its properties, or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries, and in each case the order and decree remains unstayed and in effect for sixty (60) consecutive days; (h) final, non-appealable judgments for the payment of money, which judgments, in the aggregate, exceed $10,000,000 shall be rendered against the Company or any of its Significant Subsidiaries by a court of competent jurisdiction and remain undischarged, unstayed and unsatisfied for the period and after the notice specified below; or (i) any of the Operative Documents ceases, without the consent of the Trustee, to be in full force and effect. 22 The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. A Default under clause (d), (e) or (h) of this Section 6.1 is not an Event of Default until the Trustee notifies the Company, or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Securities Outstanding notify the Company and the Trustee, of the Default and the Company does not cure the Default within sixty (60) days with respect to clauses (d) and (h), or within thirty (30) days with respect to clause (e), after receipt of the notice; provided, however, that the Company shall be permitted such longer period of time, if any, as may be provided for under the other Operative Documents in respect of any particular Default. The notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." When a Default is cured, it ceases. Section 6.2 Acceleration. ------------ If an Event of Default (other than an Event of Default specified in Section 6.1(f) or (g)) occurs, and is continuing, the Trustee may, by notice to the Company, or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Securities Outstanding may, by notice to the Company and the Trustee, and the Trustee shall, upon the request of such Holders, declare all unpaid principal of and accrued interest and Special Interest, if any, to the date of acceleration on the Securities Outstanding (if not then due and payable) to be due and payable and upon any such declaration, the same shall become and be immediately due and payable. If an Event of Default specified in Section 6.1(f) or (g) occurs, all unpaid principal of and accrued interest and Special Interest, if any, on the Securities Outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. Upon payment of such principal amount, interest and Special Interest, if any, all of the Company's obligations under the Securities and this Indenture, other than obligations under Sections 7.7 and 8.4, shall terminate. The Holders of a majority in principal amount of the Securities then Outstanding by notice to the Trustee may rescind an acceleration and its consequences if (a) all existing Events of Default, other than the non-payment as to the Securities of the principal, interest or Special Interest, if any, which has become due solely by such declaration of acceleration, have been cured or waived, (b) to the extent the payment of such interest is permitted by law, interest on overdue installments of interest or Special Interest and on overdue principal which has become due otherwise than by such declaration of acceleration, has been paid, (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, and (d) all payments due to the Trustee and any predecessor Trustee under Section 7.7 have been made. Section 6.3 Other Remedies. -------------- If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, interest on or Special Interest, if any, with respect to, the Securities or to enforce the performance of any provision of the Securities or this Indenture including, without limitation, instituting proceedings 23 and exercising and enforcing, or directing exercise and enforcement of, all rights and remedies of the Trustee under the other Operative Documents. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. Section 6.4 Waiver of Past Defaults. ----------------------- Subject to Sections 6.7, 9.2 and 9.6, the Holders of a majority in aggregate principal amount of the Securities Outstanding by notice to the Trustee may authorize the Trustee to waive an existing Default or Event of Default and its consequences, except a Default (a) in the payment of principal of, or interest on, or Special Interest, if any, with respect to, any Security as specified in clauses (a) and (b) of Section 6.1 or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Security affected. When a Default or Event of Default is waived, it is cured and ceases, and the Company, the Holders and the Trustee shall be restored to their former positions and rights hereunder respectively; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 6.5 Control by Majority. ------------------- The Holders of a majority in aggregate principal amount of the Securities Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. The Trustee may refuse to follow any direction hereunder or authorization under Section 6.4 that legal counsel to the Trustee determines in good faith conflicts with law or this Indenture, that the Trustee reasonably determines may be unduly prejudicial to the rights of another Securityholder, or that the Trustee reasonably determines may subject the Trustee to personal liability. However, the Trustee shall have no liability for any actions or omissions to act which are in accordance with any such direction or authorization. Section 6.6 Limitation on Suits. ------------------- A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least twenty-five percent (25%) in principal amount of the Securities Outstanding make a written request to the Trustee to pursue the remedy; 24 (c) such Holder or Holders offer to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within sixty (60) days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Holders of a majority in aggregate principal amount of the Securities Outstanding do not give the Trustee a direction which, in the reasonable opinion of the Trustee, is inconsistent with such request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. Section 6.7 Rights of Holders to Receive Payment. ------------------------------------ Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of, interest on, and Special Interest, if any, with respect to, the Security in cash, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. It is hereby expressly understood, intended and agreed that any and all actions which a Holder of the Securities may take to enforce the provisions of this Indenture and/or collect Payments due hereunder or under the Securities, except to the extent that such action is determined to be on behalf of all Holders of the Securities, shall be in addition to and shall not in any way change, adversely affect or impair the rights and remedies of the Trustee or any other Holder of the Securities thereunder or under this Indenture and the other Operative Documents, including the right to foreclose upon and sell the Collateral or any part thereof and to apply any proceeds realized in accordance with the provisions of this Indenture. Section 6.8 Collection Suit by Trustee. -------------------------- If an Event of Default in payment of interest or principal specified in clause (a) or (b) of Section 6.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal, accrued interest and Special Interest, if any, remaining unpaid, together with interest on overdue principal and on overdue installments of interest to the extent that payment of such interest is permitted by law, in each case at the rate per annum provided for by the Securities, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.9 Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the 25 reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its Property and shall be entitled and empowered to collect and receive any moneys or other Property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.7, and unless prohibited by law or applicable regulations to vote on behalf of the Holders of Securities for the election of a trustee in bankruptcy or other person performing similar functions. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding except, as aforesaid, for the election of a trustee in bankruptcy or person performing similar functions. Section 6.10 Application of Proceeds. ----------------------- Any moneys collected by the Trustee pursuant to this Article shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal, interest, or Special Interest, if any, upon presentation of the several Securities and stamping (or otherwise noting) thereon the payment, or issuing Securities in reduced principal amounts in exchange for the presented Securities if only partially paid, or upon surrender thereof if fully paid: FIRST: To the payment of reasonable costs and expenses actually incurred, including reasonable compensation to the Trustee, its predecessors, if any, and their respective agents and attorneys (including amounts due and unpaid under Section 7.7), and of all reasonable costs, fees, expenses and liabilities incurred, and all advances made, by any and all of the foregoing (including amounts due and unpaid under Section 7.7), except as a result of negligence or bad faith; SECOND: In case the entire principal of the Securities shall not have become and be then due and payable, as to any Securities (a) first to the payment of interest and Special Interest, if any, in default in the order of the maturity of the installments of such interest and Special Interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest or Special Interest, if any, at the rate of interest specified in the Securities and (b) second to the payment of principal of the Securities as the same shall become due and payable, such payments to be made ratably to the Persons entitled thereto, without discrimination or preference; THIRD: In case the entire principal of the Securities shall have become and shall be then due and payable, as to any Securities, to the payment of the whole amount 26 then owing and unpaid upon all the Securities for principal, interest and Special Interest, with interest upon the overdue principal, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest or Special Interest, if any, at the same rate as the rate of interest specified in this Indenture or in the Securities; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities, then to the payment of such principal, interest and Special Interest, without preference or priority of any of principal, interest or Special Interest, if any, over the other, or any installment of interest or Special Interest, if any, over any other installment of interest or Special Interest, if any, or of any Security over any other Security, ratably to the aggregate of such principal, and accrued and unpaid interest and Special Interest; and FOURTH: To the payment of the remainder, if any, after payment in full of the entire principal balance, if any, of the Securities and all interest, Special Interest and other amounts due upon or in respect of such Securities, to the Company or any other Person lawfully entitled thereto. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. --------------------- All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court of competent jurisdiction in its discretion may require in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than ten percent (10%) in principal amount of the Securities Outstanding. Section 6.12 Restoration of Rights on Abandonment of Proceedings. --------------------------------------------------- In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the Securityholders shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Securityholders shall continue as though no such proceedings had been taken. 27 Section 6.13 Powers and Remedies Cumulative; Delay ------------------------------------- or Omission Not Waiver of Default. - --------------------------------- No right or remedy herein conferred upon or reserved to the Trustee or to the Securityholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to the other applicable provisions of this Indenture, every power and remedy given by this Indenture or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. Any right or remedy herein conferred upon or reserved to the Trustee may be exercised by it in its capacity as Trustee, as it may deem most efficacious, if it is then acting in such capacity. ARTICLE 7. TRUSTEE Section 7.1 Duties of Trustee. ----------------- (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) The Trustee need perform only those duties as are specifically set forth in this Indenture and the other Operative Documents and no others. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct or bad faith, except that: 28 (i) This paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1 or of Section 7.2. (ii) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5. (d) The Trustee shall be under no obligation to exercise any of the rights, trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request, order or direction. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1. (f) Funds held in trust for the benefit of the Holders of the Securities by the Trustee or any Paying Agent on deposit with itself or elsewhere shall be held in distinct, identifiable accounts, and other funds or investments of any nature or from any source whatsoever may be held in such accounts, except, in each case, to the extent required by law. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Section 7.2 Rights of Trustee. ----------------- (a) The Trustee may rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper person. Subject to Section 7.1(b)(ii), the Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 11.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its attorneys and agents and the Trustee shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. 29 Section 7.3 Individual Rights of Trustee. ---------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or Affiliates of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11. Section 7.4 Trustee's Disclaimer. -------------------- The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities or in this Indenture other than its certificate of authentication. Section 7.5 Notice of Defaults. ------------------ If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within ninety (90) days after the occurrence thereof except as otherwise permitted by the TIA. Except in the case of a Default in payment of principal of, or interest on, or Special Interest, if any, with respect to, any Security, the Trustee may withhold the notice if and so long as it, in good faith, determines that withholding the notice is in the interests of the Securityholders. Section 7.6 Reports by Trustee to Holders. ----------------------------- If circumstances require any report to Holders under TIA ss. 313(a), it shall be mailed to Securityholders within sixty (60) days after each May 15 (beginning with the May 15 following the date of this Indenture) as of which such circumstances exist. The Trustee also shall comply with the remainder of TIA ss. 313. The Company shall promptly notify the Trustee if the Securities become listed on or delisted from any stock exchange or other recognized trading market. The Trustee shall, upon the written request of any Holder of Securities but subject to applicable laws and contractual limitations, provide to such Holder copies of any reports, certificates, opinions or other materials of any kind or nature required to be delivered to the Trustee under this Indenture or any of the other Operative Documents or otherwise delivered by or on behalf of the Company to the Trustee. Section 7.7 Compensation and Indemnity. -------------------------- The Company shall pay to the Trustee from time to time reasonable compensation, as agreed upon from time to time, for its services hereunder and under the other Operative Documents. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it in any such capacities. 30 Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel and all agents and other persons not regularly in its employ. The Company shall indemnify the Trustee and each predecessor Trustee for, and hold each of them harmless against, any loss or liability incurred by each of them in connection with the administration of this Indenture and its duties hereunder. In connection with any defense of such a claim, the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee or any predecessor Trustee through the negligence or bad faith of such Trustee or each such predecessor Trustee. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a Lien (legal and equitable) prior to the Securities on all money or Property held or collected by the Trustee, in its capacity as Trustee, or otherwise distributable to Securityholders, except money, securities or Property held in trust to pay principal of or interest on particular Securities (including, without limitation, pursuant to Section 8.1(b) hereof). When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(f) or (g) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. Section 7.8 Replacement of Trustee. ---------------------- The Trustee may resign by so notifying the Company and the Holders in writing. The Holders of a majority in aggregate principal amount of the Securities Outstanding may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the Company's consent, which consent shall not be unreasonably refused or delayed. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10; (b) the Trustee is adjudged a bankrupt or an insolvent; (c) a receiver or other public officer takes charge of the Trustee or its Property; (d) the Trustee becomes incapable of acting; or (e) no Default or Event of Default has occurred and is continuing and the Company determines in good faith to remove the Trustee. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after any such successor Trustee takes office, the Holders of a majority in aggregate principal amount of the Securities Outstanding may appoint a successor Trustee to replace the successor Trustee appointed by the Company. 31 A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all Property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.7, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. No resignation or removal of the Trustee and no appointment of a successor Trustee, pursuant to this Article, shall become effective until the acceptance of appointment by the successor Trustee under this Section 7.8. If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least ten percent (10%) in principal amount of the Securities Outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder of Securities may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall continue for the benefit of the retiring Trustee which shall retain its claim pursuant to Section 7.7. Section 7.9 Successor Trustee by Merger, etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification. ----------------------------- This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent, published annual report of condition. The Trustee shall comply with TIA ss. 310(b); provided, however, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. Section 7.11 Preferential Collection of Claims Against Company. ------------------------------------------------- The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. 32 ARTICLE 8. DISCHARGE OF INDENTURE Section 8.1 Termination of Company's Obligations. ------------------------------------ (a) The Company may terminate its obligations under this Indenture, except those obligations referred to in the last paragraph of Section 8.1(b), if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment Payments have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.3) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder. (b) The Company may terminate all its obligations under this Indenture except those obligations referred to in the immediately succeeding paragraph if (i) the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee or a Paying Agent, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee and any such Paying Agent, as trust funds in trust solely for the benefit of the Holders for that purpose, cash or U.S. Government Obligations maturing as to principal and interest, in such amounts and at such times as are sufficient without consideration of any reinvestment of any such interest to pay the then maximum possible principal of, and the then maximum possible interest and Special Interest with respect to, the Securities Outstanding to maturity, provided, that the Trustee or such Paying Agent shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of said principal, interest and Special Interest, if any, with respect to the Securities. (ii) No Default or Event of Default with respect to the Securities shall have occurred and be continuing (A) on the date of such deposit described in clause (i), or (B) insofar as paragraph (f) of Section 6.1 is concerned, at any time during the period ending on the 91st day after the date of such deposit or, if longer, ending on the day following the expiration of the longest preference period applicable to the Company in respect of such deposit (it being understood that the condition in this clause (B) is a condition subsequent and shall not be deemed satisfied until the expiration of such period); (iii) Such termination and deposit described in clause (i) shall not (A) cause the Trustee to have a conflicting interest as defined in TIA Section 310(b) or otherwise for purposes of the TIA with respect to any securities of the Company, or (B) result in the trust arising from such deposit to constitute, unless it is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended; (iv) Such termination and deposit described in clause (i) shall not result in a breach or violation of or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound; 33 (v) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such termination and deposit described in clause (i) and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such termination and deposit had not occurred; and (vi) The Company shall have delivered to the Trustee and any Paying Agent an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent and subsequent provided for above in this Section 8.1(b) have been complied with. Notwithstanding the foregoing paragraph, the Company's obligations in Article 13 and in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.1, 4.2, 4.8, 7.7, 7.8, 8.2, 8.3, 8.4 and 10.4 shall survive until the Securities are no longer Outstanding. Thereafter, the Company's obligations in Sections 7.7 and 8.3 shall survive. (c) After the effectiveness of any termination of its obligations (except, in the case of Section 8.1(b), as set forth in the last paragraph thereof), under this Indenture in accordance with Section 8.1(a) or (b) above (such effective date, the "Indenture Discharge Date") and payment of all obligations of the Company accrued under Section 7.7, the Trustee upon Request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified above. Section 8.2 Application of Trust Money. -------------------------- The Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.1, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of, and interest and Special Interest, if any, on, the Securities. The obligations of the Trustee and Paying Agent under this Section 8.2 shall survive, notwithstanding any termination or discharge of the Company's obligations pursuant to Section 8.1, until all Securities are paid in full. The Company shall pay and indemnify the Trustee or Paying Agent, as the case may be, against any tax, fee or other charge imposed on or assessed against the money or U.S. Government Obligations deposited pursuant to Section 8.1(b)(i) or the principal and interest received in respect thereof. Section 8.3 Repayment to Company. -------------------- Anything in Section 8.1(b) to the contrary notwithstanding, the Trustee or Paying Agent, as the case may be, shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations (or other Property and any proceeds therefrom) held by it as provided in Section 8.1(b) which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee and to the Paying Agent, if applicable, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent termination under 34 said Section 8.1(b). The Trustee and the Paying Agent shall Pay to the Company any Payments held by them for the payment of principal, interest and Special Interest, if any, that remains unclaimed for two (2) years after the Stated Maturity of such payment of principal, interest or Special Interest, as the case may be; provided, however, that the Trustee or such Paying Agent before making any Payment shall at the expense of the Company cause to be published once in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a newspaper of general circulation in the City of New York and mail to each Holder entitled to such money, notice that such Payments remain unclaimed and that, after a date specified therein which shall be at least thirty (30) days from the date of such publication or mailing, any unclaimed balance of such Payments then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to Payments must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. Section 8.4 Reinstatement. ------------- Anything herein to the contrary notwithstanding, (i) if the Trustee or Paying Agent, as the case may be, is unable to apply any money or U.S. Government Obligations in accordance with Section 8.1 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, or (ii) the deposited money or U.S. Government Obligations (or the proceeds thereof) are, for any reason (including any repayment to the Company under Section 8.3), insufficient in amount, then the Company's obligations under this Indenture shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.1 until such time as the Trustee, or Paying Agent, as the case may be, is permitted to apply all such money or U.S. Government Obligations and the proceeds of the investment thereof in accordance with Section 8.1, or the deficiency is cured in the manner set forth in Section 8.1(b), as the case may be. In such event, the Trustee will invest all such money or the proceeds from U.S. Government Obligations at the Company's request in other U.S. Government Obligations and, upon written notice from the Company, so long as there exists no Event of Default, to the extent and only to the extent provided in the first sentence of Section 8.3 return to the Company any money or U.S. Government Obligations deposited with the Trustee pursuant to Section 8.1. If the Company has made any payment of interest on, principal of, or Special Interest, if any, with respect to any Securities because of an event described in clause (i) of the first sentence of this Section 8.4, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent, as the case may be. 35 ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.1 Without Consent of Holders. -------------------------- The Company and the Trustee, as the case may be, may amend or supplement this Indenture, the Securities or the other Operative Documents without notice to or consent of any Securityholder: (a) to provide for uncertificated Securities in addition to or in place of certificated Securities; (b) to provide for the assumption of the Company's obligations to the Holders of the Securities in the case of a merger or consolidation or transfer of all or substantially all of the assets of the Company or otherwise to comply with Article 5; (c) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA; or (d) to cure any ambiguity, defect or inconsistency or to make any other change, in each case, provided that such action does not materially adversely affect the interests of any Securityholder. Section 9.2 With Consent of Holders. ----------------------- Subject to Section 6.7, the Company (by resolution of its Board of Directors if required) and the Trustee may amend or supplement this Indenture, the Securities or the other Operative Documents without notice to any Securityholder but with the written consent of the Required Holders. Subject to Sections 6.4, 6.5 and 6.7, the Required Holders may authorize the Trustee to, and the Trustee, subject to Section 9.6, upon such authorization shall, waive compliance by the Company with any provision of this Indenture, the Securities or the other Operative Documents. However, an amendment, supplement or waiver, including a waiver pursuant to any provision of Section 6.4, may not without the consent of each Securityholder affected: (a) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (b) reduce the rate or extend the time for payment of interest on, or Special Interest, if any, with respect to, any Security; (c) reduce the principal of (whether on repurchase or otherwise), or change the fixed maturity of any Security; (d) change the place of payment where, or the coin or currency in which, any Security (or the repurchase price thereof), interest thereon or Special Interest, if any, with respect thereto, is payable; 36 (e) waive a default in the payment of the principal of, or interest on, or Special Interest with respect to any Security; (f) make any changes in Article 3, Sections 2.8, 6.4, 6.7 or 6.10, or the third sentence of this Section 9.2; (g) reduce any amount payable upon exercise of any repurchase rights thereof or otherwise change any repurchase right provision or impair the right of any Holder to institute suit for the enforcement of any such payment on any Security when due or adversely effect any repurchase rights hereunder; or (h) except as otherwise permitted or required under this Indenture, change the Conversion Date or the Conversion Price or otherwise modify or affect Article 13 or any other provision of this Indenture in any manner that would adversely affect any Holder's conversion rights hereunder. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders affected thereby a brief notice describing such amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. Section 9.3 Compliance with Trust Indenture Act. ----------------------------------- Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. Section 9.4 Revocation and Effect of Consents. --------------------------------- Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (a) through (h) of Section 9.2. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; provided, however, 37 that no amendment, supplement or waiver relating to any impairment of the right to receive principal, interest and Special Interest, if any, when due and payable consented to by a Holder shall be binding upon any subsequent Holder of a Security or a portion of a Security that evidences the same debt as the consenting Holder's Security unless notation with regard thereto is made upon such Security or the Security representing such portion. Section 9.5 Notation on or Exchange of Securities. ------------------------------------- If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Section 9.6 Trustee to Sign Amendments, etc. ------------------------------- The Trustee shall be entitled to receive and rely upon an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article 9 has been duly authorized by the Company and is authorized or permitted by this Indenture and the other applicable Operative Documents. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.7 Effect of Supplement and/or Amendment. ------------------------------------- Upon the execution of any supplemental indenture and/or any such amendment or supplement to the other Operative Documents pursuant to the provisions of this Article 9, this Indenture and such Operative Documents shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture and the other Operative Documents of the Trustee, the Company and the Holders of Securities shall thereafter be determined, exercised and enforced hereunder and thereunder subject in all respects to such modifications and amendments, and all terms and conditions of any such supplemental indenture and/or any such amendment or supplement to the other Operative Documents shall be and be deemed to be part of the terms and conditions of this Indenture and the other Operative Documents for any and all purposes. ARTICLE 10. SECURITY Section 10.1 Other Operative Documents. ------------------------- To secure the due and punctual payment, performance and observance of the Obligations (but not to exceed, in any event, the aggregate amount of $10,250,000), the Company has 38 simultaneously with the execution of this Indenture entered into or caused to be assigned to the Trustee the other Operative Documents and has made an assignment and pledge of or otherwise transferred or caused to be transferred its right, title and interest in and to the Collateral to the Trustee pursuant to the other Operative Documents and in the manner and to the extent therein provided. Each Securityholder, by accepting a Security, agrees to all of the terms and provisions of each Operative Document (including, without limitation, the provisions providing for the release of Collateral and for the subordination of the Lien of the Mortgage to the Lien of the First Mortgage), as the same may be in effect or may be amended from time to time pursuant to its terms and the terms hereof. The Company will execute, acknowledge and deliver to the Trustee such further assignments, transfers, assurances or other instruments as the Trustee may reasonably require or request, and will do or cause to be done all such acts and things as may be necessary or proper, or as may be reasonably required by the Trustee to assure and confirm to the Trustee the security interest in the Collateral contemplated hereby and by the other Operative Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Securities secured hereby, according to the intent and purposes herein expressed. Section 10.2 Opinions, Certificates and Appraisals. ------------------------------------- (a) The Company shall furnish to the Trustee promptly after the execution and delivery of this Indenture but prior to authentication of any Securities, Opinions of Counsel covering such jurisdictions as the Trustee may reasonably request either (i) stating that in the opinion of such Counsel the actions necessary to be taken under the Federal Aviation Act, the Uniform Commercial Code of all applicable jurisdictions, or otherwise with respect to the recording, registering and filing of this Indenture, the other Operative Documents, financing statements or other instruments to make effective and to perfect the Liens intended to be created by the Mortgage have been taken and reciting with respect to the security interests in the Collateral, the details of such actions, or (ii) stating that, in the opinion of such Counsel, no such action is necessary to make such Liens effective and perfected. (b) [Intentionally omitted.] (c) The release of any Collateral from the terms of the Mortgage will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to the Mortgage or this Indenture, as applicable. To the extent applicable, the Company shall cause TIA ss. 314(d) relating to the release of Property or securities from the Lien of the Mortgage and relating to the substitution therefor of any Property or securities to be subjected to the Lien of the Mortgage, to be complied with. Any certificate or opinion required by TIA ss. 314(d) may be made by an Officer of the Company, except in cases where TIA ss. 314(d) requires that such certificate or opinion be made by an independent person. Section 10.3 Authorization of Actions to be Taken by the ------------------------------------------- Trustee Under the Operative Documents. - ------------------------------------- The Trustee may, in its sole discretion and without the consent of the Securityholders, take all actions it deems necessary or appropriate to (a) enforce any of the terms of the Operative 39 Documents and (b) collect and receive any and all amounts payable in respect of the obligations of the Company hereunder and thereunder. Subject to the provisions of this Indenture and the other Operative Documents, the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of the other Operative Documents or this Indenture, and such suits and proceedings as it may deem expedient to preserve or protect its interest and the interests of the Securityholders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitu- tional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Securityholders or of the Trustee). Section 10.4 Payment of Expenses. ------------------- On demand of the Trustee, the Company forthwith shall pay or satisfactorily provide for all reasonable expenditures incurred by the Trustee under this Article 10, and all such sums shall be a Lien upon the Collateral and shall be secured thereby. Section 10.5 Authorization of Receipt of Funds by the Trustee ------------------------------------------------ Under the Operative Documents. - ----------------------------- The Trustee is authorized to receive any funds for the benefit of Securityholders distributed under the Operative Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture and the other Operative Documents. ARTICLE 11. MISCELLANEOUS Section 11.1 Conflict with Trust Indenture Act of 1939. ----------------------------------------- If and to the extent that any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the TIA, such imposed duties shall control. Section 11.2 Notices; Waivers. ---------------- Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with (a) the Company shall be sufficient for every purpose hereunder if in writing (including telecopied communications) and made, given, furnished or filed by personal delivery or mailed by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to or with the Company at: 40 Trans World Airlines, Inc. One City Centre 515 N. 6th Street St. Louis, Missouri 63101 Attention: Senior Vice President & General Counsel Telecopier No.: (314) 589-3267 (b) the Trustee shall be sufficient for every purpose hereunder if in writing (including telecopied communications) and made, given, furnished or filed by personal delivery or mailed by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to or with the Trustee at: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Services Telecopier No.: (801) 246-5053 or to any of the above parties at any other address or telecopier number subsequently furnished in writing by it to each of the other parties listed above. An affidavit by any person representing or acting on behalf of the Company or the Trustee as to such mailing, having any registry receipt required by this Section attached, shall be conclusive evidence of the giving of such demand, notice or communication. Any notice or communication mailed to a Holder shall be mailed to such holder by first-class mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, at such holder's address as it appears on the Register and shall be sufficiently given to such holder if so mailed within the time prescribed. Failure to mail a notice or send a communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. Notices to the Trustee or to the Company are deemed given only when received. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by the Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 11.3 Communications by Holders with Other Holders. -------------------------------------------- Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA ss. 312(c). 41 Section 11.4 Certificate and Opinion as to Conditions Precedent. -------------------------------------------------- Upon any Request or application by the Company to the Trustee to take any action under this Indenture or the other Operative Documents, the Company shall furnish to the Trustee: (a) an Officers' Certificate, and (b) an Opinion of Counsel, each stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, provided, that in the case of any such application or Request as to which the furnishing of an Officers' Certificate or Opinion of Counsel is specifically required by any provision of this Indenture or the other Operative Documents relating to such particular application or Request, no additional certificate or opinion, as the case may be, need be furnished. Section 11.5 Statements Required in Certificate or Opinion. --------------------------------------------- Each certificate or opinion provided for and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture or the other Operative Documents shall include: (a) a statement that the Person signing such certificate or opinion has read such condition or covenant and the definitions herein or therein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and (d) a statement as to whether or not in the opinion of such Person, such condition or covenant has been complied with. Any certificate or opinion of an Officer or an engineer, insurance broker, accountant or other expert may be based, insofar as it relates to legal matters, upon a certificate or opinion of or upon representations by counsel, unless such officer, engineer, insurance broker, accountant or other expert knows that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon the certificate or opinion of or representations by an officer or officers of the Company stating that the information with respect to such factual matters is in possession of the Company, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous and insofar as it relates to legal matters in a jurisdiction or area of law beyond the expertise of such counsel, such counsel may rely upon the opinion of counsel qualified in such other jurisdiction or area of law. Wherever in this Indenture or the other Operative Documents in connection with any application, certificate or report to the Trustee it is provided that the Company shall deliver any document as a condition of the granting of such application or as evidence of the Company's compliance with any term hereof, it is intended that the truth and accuracy at the time of the granting of such application or at the effective date of such certificate or report, as the case may 42 be, of the facts and opinions stated in such document shall in each such case be a condition precedent to the right of the Company to have such application granted or to the sufficiency of such certificate or report. Nevertheless, in the case of any such application, certificate or report, any document required by any provision of this Indenture or the other Operative Documents to be delivered to the Trustee as a condition of the granting of such application or as evidence of such compliance may be received by the Trustee as conclusive evidence of any statement therein contained and shall be full warrant, authority and protection to the Trustee acting on the faith thereof. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Whenever any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements or opinions or other instruments under this Indenture or any other Operative Document such Person may, but need not, consolidate such instruments into one. Section 11.6 Rules by Trustee, Paying Agent, Registrar. ----------------------------------------- The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Registrar or Paying Agent may make reasonable rules for their respective functions. Section 11.7 Holidays. -------- In the event that any date for the payment of any amount due hereunder shall not be a Business Day, then (notwithstanding any other provision of this Indenture) such payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the due date, and no interest or Special Interest, if any, shall accrue from such due date to and including the next succeeding Business Day. Section 11.8 Governing Law; Waiver of Jury Trial. ----------------------------------- (a) The laws of the State of New York shall govern this Indenture and the Securities without regard to principles of conflict of laws. (b) The Company and the Trustee each waive any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise arising out of, connected with, related to or incidental to the relationship established between them in connection with this Indenture. Instead, any disputes resolved in court will be resolved in a bench trial without a jury. 43 Section 11.9 No Adverse Interpretation of Other Agreements. --------------------------------------------- This Indenture may not be used to interpret any agreement of the Company or any of its Subsidiaries which is unrelated to this Indenture, the Securities or the other Operative Documents. Any such agreement may not be used to interpret this Indenture. Section 11.10 No Recourse Against Others. -------------------------- A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. Section 11.11 Benefits of Indenture and the Securities Restricted. --------------------------------------------------- Subject to the provisions of Section 11.12 hereof, nothing in this Indenture or the Securities, express or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto and the Holders, any legal or equitable right, remedy or claim under or in respect of this Indenture or under any covenant, condition, or provision herein contained, all such covenants, conditions and provisions, subject to Section 11.12 hereof, being for the sole benefit of the parties hereto and of the Holders. Section 11.12 Successors and Assigns. ---------------------- This Indenture and all obligations of the Company hereunder shall be binding upon the successors and permitted assigns of the Company, and shall, together with the rights and remedies of the Trustee hereunder, inure to the benefit of the Trustee, the Holders, and their respective successors and assigns. Any assignment in violation hereof shall be null and void ab initio. Section 11.13 Counterpart Originals. --------------------- This Indenture may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. Section 11.14 Severability. ------------ The provisions of this Indenture are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Indenture in any jurisdiction, and a Holder shall have no claim therefor against any party hereto. 44 Section 11.15 Effect of Headings. ------------------ The Article and Section headings and the Table of Contents contained in this Indenture have been inserted for convenience of reference only, and are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Indenture. ARTICLE 12. RELEASE OF COLLATERAL Section 12.1 Release of Collateral. --------------------- The Collateral securing the obligations evidenced by the Securities shall be subject to release from the Lien of this Indenture and the other Operative Documents from and to the extent provided by this Indenture and the other Operative Documents. ARTICLE 13. MANDATORY CONVERSION OF SECURITIES Section 13.1 Mandatory Conversion and Conversion Price. ----------------------------------------- (a) Subject to the other provisions of this Article 13, on the Conversion Date, so long as no Default or Event of Default shall then exist, each then Outstanding Security shall be automatically converted into that number of fully paid and non-assessable shares of Common Stock equal to the sum of (i) the then outstanding principal amount of such Security, plus (ii) accrued and unpaid interest and Special Interest, if any, on such Security to the Conversion Date, divided by the product of (A) 1.00 multiplied by (B) the Closing Price per share of Common Stock on the Trading Day immediately preceding the Conversion Date (such product being hereinafter referred to as the "Conversion Price"); provided, however, that the aggregate number of shares of Common Stock issuable upon any such conversion shall not exceed the Maximum Share Amount. If, on the Conversion Date, the Company has taken all action required to authorize the issuance of the Common Stock in conversion of the Securities and no Default or Event of Default shall then exist, then, notwithstanding that such Securities have not been Tendered, from and after the Conversion Date, all of the Securities shall no longer be deemed Outstanding and all rights relating to such Securities shall terminate, except only the right to receive, upon Tender of the Securities therefore, the Common Stock and cash (if any) pursuant to the provisions hereof, and the Person or Persons entitled to receive the Common Stock issuable upon the conversion shall be treated for all purposes as the record holder or holders of such Common Stock. If all the foregoing conditions have been satisfied, interest and Special Interest, if any, will cease to accrue on the Securities on the Conversion Date. Except as expressly provided herein, no other payment or adjustment will be made for dividends or distributions on shares of Common Stock issued upon conversion which were declared for payment to holders of Common Stock of record as of a date prior to the Conversion Date. 45 (b) As promptly as practicable on the Shelf Effective Date, the Company shall send (or cause to be sent) a notice to each Holder and the Trustee (which notice shall be sent to such Holder and the Trustee by telex or telecopier if (with respect to such Holder) such Holder has, at least five Business Days prior thereto, provided such telex or telecopier information to the Company or the Trustee), stating the Shelf Effective Date and, to the extent then known, the following: (i) the Conversion Date, (ii) the Conversion Price, (iii) the office or offices (including, in any event, the office required to be maintained by the Company pursuant to the first paragraph of Section 4.1) to which the Securities should be Tendered for Common Stock, (iv) that unless otherwise notified by such Holder, the certificate or certificates of Common Stock issuable to such Holder on such Conversion Date will be issued in the name of and delivered to the address of such Holder as shown on the Register as of the close of business of the Registrar on such Conversion Date and (v) that interest and Special Interest, if any, will cease to accrue on the Securities on the Conversion Date. Such a notice containing the information in the foregoing clauses (i) through (v) shall in any event be so sent as promptly as practicable on the Conversion Date. (c) As promptly as practicable (but in any event not later than five Business Days) after receipt of a Security at any office set forth in the notice referred to in paragraph (b) above, the Company shall issue, execute and deliver to the Holder of such Security, in such Holder's name and to such Holder's address as shown on the Register as of the close of business of the Registrar on the Conversion Date (or otherwise in accordance with such Holder's written order received by the Company), a certificate or certificates for the number of shares of Common Stock resulting from such conversion, together with any cash adjustment in lieu of fractional shares or cash payable as a result of the Maximum Share Amount, as hereinafter provided. (d) No fractional shares of Common Stock shall be issued upon any conversion of Securities. In lieu of any fraction of a share of Common Stock to which any Holder would otherwise be entitled upon conversion of any Security, the Company shall pay to such Holder (in accordance with paragraph (c) above) a cash adjustment for such fraction in an amount equal to the same fraction of the Conversion Price. (e) The principal amount, if any, of any Security that cannot be converted into Common Stock as a result of the Maximum Share Amount (excluding any amount payable pursuant to paragraph (d) above), shall be paid by the Company to the Holder thereof, together with accrued and unpaid interest and Special Interest, if any, thereon. Any such amounts shall be paid in cash in accordance with paragraph (c) above. Section 13.2 Effect of Consolidation, Merger or ---------------------------------- Conveyance on Conversion. - ------------------------ (a) If any of the following shall occur, namely: (i) any consolidation or merger to which the Company is a constituent party other than a merger in which the Company is the continuing corporation and which does not result in any reclassification of, or change (other than a change in name, or in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of Common Stock; (ii) any conveyance or transfer of all or substantially all of the assets of the Company; or (iii) any 46 share exchange pursuant to which all of the outstanding shares of Common Stock are converted into or exchanged for other securities or Property (including cash), then the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition precedent to such consolidation, merger, conveyance, transfer or share exchange, execute and deliver to the Trustee a supplemental indenture providing that immediately after the consummation of such consolidation, merger, conveyance, transfer or share exchange, the Securities shall automatically convert into and the Holder of each Security then outstanding shall have the right thereafter to receive the kind and amount of shares of stock and other securities and Property (including cash) receivable upon such consolidation, merger, conveyance, transfer or share exchange by a holder of the number of shares of Common Stock deliverable upon conversion of such Security immediately prior to the effective date of such consolidation, merger, conveyance, transfer or share exchange, assuming that the Closing Price is determined utilizing the Trading Day immediately prior to such effective date. If, in the case of any such consolidation, merger, conveyance, transfer or share exchange, the stock or other securities and Property (including cash) receivable thereupon by a holder of Common Stock include shares of stock or other securities and Property of a corporation other than the successor or purchasing corporation, as the case may be, in such consolidation, merger, conveyance, transfer or share exchange, then such supplemental indenture shall also be executed by such other corporation and shall contain such additional provisions to protect the interests of the Holders as the Board of Directors shall reasonably consider necessary by reason of the foregoing. If in connection with any such consolidation, merger, conveyance, transfer, or share exchange each holder of shares of Common Stock is entitled to elect to receive either securities, cash or other assets (or any combination thereof) upon completion of such transaction, the Company will provide or cause to be provided to each Holder the right to elect to receive the securities, cash or other assets into which the Securities held by such Holder will be convertible after completion of any such transaction on the same terms and subject to the same conditions applicable to holders of the Common Stock (including, without limitation, notice of the right to elect, limitations on the period in which such election will be made and the effect of failing to exercise the election). In the case of any such consolidation, merger, conveyance, transfer or share exchange, where the Holders of shares of Common Stock will be entitled to receive securities upon completion of such transaction, the Company will cause such successor or purchasers respectively to provide that the securities issuable upon conversion of the Securities will be freely transferable without any restrictions imposed by federal, state or foreign securities laws. The provisions of this Section 13.2 shall similarly apply to successive consolidations, mergers, conveyances, transfers or share exchanges. In the event the Company shall execute a supplemental indenture pursuant to this Section 13.2, the Company shall promptly file with the Trustee (x) an Officers' Certificate briefly stating the reasons therefor, the kind or amount of shares of stock or securities or Property (including cash) receivable by Holders upon the automatic conversion of their Securities immediately after any such consolidation, merger, conveyance, transfer or share exchange, any adjustment to be made with respect thereto and that all conditions precedent have been complied with and (y) an Opinion of Counsel that all conditions precedent have been complied with. (b) The Trustee, subject to the provisions of Section 7.1, shall not be responsible for any such consolidation, merger, conveyance, transfer or share exchange, the form or substance of any plan relating thereto, or the consequences thereof to any Holder or the correctness of any 47 provision contained in any such supplemental indenture relating to the kind or amount of shares of stock or securities or Property receivable by any Holder upon conversion of Securities immediately after any such consolidation, merger, conveyance, transfer or share exchange. (c) As evidence of the kind and amount of stock or other securities or Property into which Securities will be automatically converted after any such consolidation, merger, conveyance, transfer or share exchange, the Trustee, subject to the provisions of Section 7.1, may accept the certificate of a nationally recognized firm of independent public accountants with respect thereto; and, in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely thereon, and shall not be responsible or accountable to any Holder for any provision in conformity therewith which may be contained in the said supplemental indenture. (d) The Company or the Trustee may retain accountants to make any computation required under this Article 13, and the certificate of a nationally recognized firm of independent public accountants shall be conclusive evidence of the correctness of any computation made under this Article 13. Section 13.3 Costs of Conversion. ------------------- The issuance of certificates for shares of Common Stock issued upon the conversion of Securities shall be made without charge to the Holders for such certificates or for any documentary, stamp or similar issue or transfer tax in respect of the issuance of such certificates; provided, however, that the Company shall not be required to pay any such tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the Holder as shown on the Register as of the close of business of the Registrar on the Conversion Date, and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Nothing herein shall preclude any tax withholding required by applicable law. Section 13.4 No Liability to Trustee. ----------------------- The Trustee shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same. The Trustee shall not be accountable with respect to the validity or value (or the kind or amount) of any Common Stock or of any securities or Property which may at any time be issued or delivered upon the conversion of any Security; and it does not make any representation with respect thereto. The Trustee shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or Property upon the conversion of any Security or to comply with any of the covenants of the Company contained in this Article 13. 48 Section 13.5 Applicable Laws. --------------- Anything herein to the contrary notwithstanding, the rights and obligations of the Holders and the Company to convert the Securities into Common Stock or to vote said stock shall be subject to all applicable laws then in effect. Section 13.6 Other Funds. ----------- Anything elsewhere contained in this Indenture to the contrary notwithstanding, any funds which at any time shall have been deposited by the Company or on its behalf with the Trustee or any other Paying Agent for the purpose of paying any Securities which shall have been converted pursuant to the provisions of this Article 13 into Common Stock, shall forthwith upon such conversion be repaid upon demand to the Company by the Trustee or such other Paying Agent. Section 13.7 Release of Collateral Upon Conversion. ------------------------------------- On or after the effectiveness of the conversion pursuant to this Article 13, upon request by the Company and payment by the Company of the Trustee's costs (including reasonable legal fees and disbursements) incurred in complying with such Request, the Trustee shall release from the Lien of the Operative Documents, all right, title and interest of the Trustee in and to any Collateral. Section 13.8 Company to Provide Stock. ------------------------ The Company shall, prior to issuance of any Securities hereunder, and from time to time as it may be necessary, reserve, out of its authorized but unissued Common Stock, a sufficient number of shares of Common Stock to permit the conversion of all outstanding Securities into shares of Common Stock. All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim. The Company will use its reasonable best efforts to list or cause to have quoted all shares of Common Stock deliverable upon conversion of the Securities on the American Stock Exchange and each other national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. 49 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. TRANS WORLD AIRLINES, INC. By: /s/ Michael J. Lichty -------------------------- Name: Michael J. Lichty Title: Vice-President & Deputy General Counsel FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee By: /s/ Arge Pavlos -------------------------- Name: Arge Pavlos Title: Assistant Trust Officer DEFINITIONS APPENDIX Appendix I To the Indenture between Trans World Airlines, Inc. and First Security Bank, National Association, as Trustee dated as of June 16, 1998 for the Company's 10 1/4% Mandatory Conversion Equity Notes due 1999 and the Aircraft Second Mortgage and Security Agreement dated as of an even date therewith TABLE OF CONTENTS Page Section 1. Definitions................................... 1 Act........................................... 1 Affiliate..................................... 1 Agent......................................... 1 Aircraft...................................... 1 Aircraft Sale Agreement....................... 1 Airframe...................................... 1 Applicable Percentage......................... 1 Bankruptcy Law................................ 1 Bills of Sale................................. 2 Board of Directors............................ 2 Business Day.................................. 2 Capital Stock................................. 2 Capitalized Lease Obligation.................. 2 Certificated Air Carrier...................... 2 Certifying Officer............................ 2 Change in Control............................. 2 Closing Price................................. 3 Code.......................................... 3 Collateral.................................... 3 Common Stock.................................. 3 Company....................................... 3 Conversion Date............................... 3 Conversion Price.............................. 4 Corporate Trust Office........................ 4 Custodian..................................... 4 Default....................................... 4 Definitions Appendix.......................... 4 8% Preferred Stock............................ 4 Employee Preferred Stock...................... 4 Engine........................................ 4 ERISA......................................... 4 Event of Default.............................. 4 Exchange Act.................................. 4 FAA........................................... 4 FAA Bill of Sale.............................. 5 Federal Aviation Act.......................... 5 First Mortgage................................ 5 GAAP.......................................... 5 Holder or Holder of Securities................ 5 Indebtedness.................................. 5 (ii) TABLE OF CONTENTS (Continued) Page Indenture..................................... 6 Indenture Discharge Date...................... 6 Indenture Trustee............................. 6 Interest Payment Date......................... 6 Issue Date.................................... 6 Lazard........................................ 6 Legal Holiday................................. 6 Lien.......................................... 6 Maximum Share Amount.......................... 6 Mortgage...................................... 6 Mortgage Supplement........................... 6 9 1/4% Preferred Stock........................ 7 Notes Indenture............................... 7 Notes Trustee................................. 7 Obligations................................... 7 Offer to Purchase............................. 7 Officer....................................... 8 Officers' Certificate......................... 8 Operative Documents........................... 9 Opinion of Counsel............................ 9 Outstanding or outstanding.................... 9 Owner Trustee................................. 9 Parts......................................... 9 Paying Agent.................................. 10 Payment Date.................................. 10 Payments...................................... 10 Permitted Liens............................... 10 Person........................................ 11 Preferred Stock............................... 11 principal..................................... 11 Property...................................... 11 Record Date................................... 11 Register...................................... 11 Registrar..................................... 11 Registration Default.......................... 11 Registration Rights Agreement................. 11 Replacement Engine............................ 11 Request....................................... 12 Required Holders.............................. 12 SEC........................................... 12 Securities.................................... 12 Securities Act................................ 12 (ii) TABLE OF CONTENTS (Continued) Page Securityholder................................ 12 Seven Leasing................................. 12 Shelf Effective Date.......................... 12 Shelf Registration Statement.................. 12 Significant Subsidiary........................ 12 Special Interest.............................. 12 Special Record Date........................... 12 Stated Maturity............................... 12 Subsidiary.................................... 13 Taxes......................................... 13 10 1/4% Secured Notes......................... 13 Tender........................................ 13 TIA........................................... 13 Total Loss and Total Loss Date................ 13 Total Loss OTP Amount......................... 13 Trading Day................................... 13 Trust Agreement............................... 13 Trust Officer................................. 14 Trustee....................................... 14 TWA........................................... 14 U.S. or United States......................... 14 U.S. Government Obligations................... 14 Warranty Bill of Sale......................... 14 Section 2. Rules of Construction........................ 14 (iii) DEFINITIONS APPENDIX Section 1. Definitions. Unless the context otherwise requires, each of the terms included in this Section 1 shall have the respective meanings given in this Section 1 for all purposes of the Indenture and the other Operative Documents (including this appendix and any other appendices, exhibits or schedules to any thereof) and of such other agreements as may incorporate this appendix by reference except as otherwise specifically provided herein or therein. "Act" means the Federal Aviation Act. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Registrar, Paying Agent or co-Registrar or co-Paying Agent. "Aircraft" means the Airframe together with the two associated Engines identified by manufacturer's serial number in the Mortgage Supplement for the Airframe executed and delivered on the Issue Date, whether or not any of such Engines may at any time be installed on the Airframe or installed on any other airframe. "Aircraft Sale Agreement" means the Aircraft Sale and Note Purchase Agreement, made and entered into as of the 16th day of June, 1998, among the Company, the Owner Trustee, Seven Leasing and Lazard. "Airframe" means the Boeing Model 767-231 ETOPS airframe (excluding any Engines and any other engines, but including any and all Parts which may from time to time be incorporated or installed in, or attached to such airframe, and including any and all Parts removed therefrom so long as the removed Parts remain subject to the Lien of the Mortgage under the terms thereof) purchased by the Company under the Aircraft Sale Agreement and identified by the FAA registration number and manufacturer's serial number in the Mortgage Supplement executed and delivered on the Issue Date. "Applicable Percentage" means (i) with respect to any amendment, supplement or waiver of the Indenture or any other Operative Document that would (A) terminate the Lien of the Mortgage with respect to any Collateral or permit the release of any Collateral (other than releases permitted by the applicable Operative Document, which releases shall not require any consent of the Holders) or permit the creation of any Lien on any Collateral (other than Permitted Liens), (B) increase the aggregate principal amount of Securities that may be issued under the Indenture or (C) modify this definition, 66 2/3%, and (ii) otherwise, a majority. "Bankruptcy Law" has the meaning provided in Section 6.1 of the Indenture. 2 "Bills of Sale" means the FAA Bill of Sale and the Warranty Bill of Sale. "Board of Directors" means the Board of Directors of the Company or any committee of such board duly authorized to act in respect of any particular matter. "Business Day" means each day which is not a Legal Holiday. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligation" means, as applied to any Person for any period, an obligation of such Person to pay rent or other amounts under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP. "Certificated Air Carrier" means a United States "air carrier" within the meaning of the Act, holding an air carrier operating certificate issued pursuant to chapter 447 of the Act and of the type referred to in 11 U.S.C. ss. 1110, or if such certification shall cease to be available, a carrier of comparable status under the laws of the United States then in force. "Certifying Officer" means an Officer or an assistant secretary of the Company. "Change in Control" means the occurrence of any of the following events: (i) any person (including any entity or group deemed to be a "person" under Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) is or becomes the direct or indirect beneficial owner (as determined in accordance with Rule 13d-3 under the Exchange Act) of shares of the Company's Capital Stock representing greater than 50% of the total voting power of all shares of Capital Stock of the Company entitled to vote in the election of directors of the Company under ordinary circumstances or to elect a majority of the Board of Directors of the Company, (ii) the Person then constituting the "Company" under the Indenture sells, transfers or otherwise disposes of all or substantially all of its assets (regardless of whether such Person thereupon ceases to constitute the "Company" under the Indenture pursuant to Section 5.2 thereof), (iii) when, during any period of 12 consecutive months after the date of original issuance of the Securities, individuals who at the beginning of any such 12-month period constituted the Board of Directors (together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of majority of the directors still in office entitled to vote with respect to such nomination who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, but excluding any of the individuals who at the beginning of such 12-month period constituted such Board but who ceased to be a member of the Board pursuant to the Company's mandatory retirement policy as in effect as of the Issue Date), cease for any reason to constitute a majority of the Board of Directors then in office or (iv) the date of the consummation of the merger or consolidation of the Person then constituting the "Company" under the Indenture with another 3 corporation where the stockholders of such Person, immediately prior to the merger or consolidation, would not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to 50% or more of all votes (without consideration of the rights of any class of stock to elect directors by a separate class vote) to which all stockholders of the corporation issuing cash or securities in the merger or consolidation would be entitled in the election of directors or where members of the Board of Directors of the Person then constituting the "Company" under the Indenture, immediately prior to the merger or consolidation, would not, immediately after the merger or consolidation, constitute a majority of the board of directors of the corporation issuing cash or securities in the merger or consolidation. "Closing Price" means, for any day, the last reported sales price, regular way, per share of Common Stock, or, in case no such reported sale takes place on such date, the average of the reported closing bid and asked prices, regular way, per share of Common Stock, in either case on the American Stock Exchange, or, if the Common Stock is not listed or admitted to trading on the American Stock Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the closing sales price, regular way, of the Common Stock as quoted by National Association of Securities Dealers Automated Quotation System ('NASDAQ"), or, in case no reported sale takes place, the average of the closing bid and asked prices, regular way, as quoted by NASDAQ or any comparable system, or, if the Common Stock is not quoted on NASDAQ or any comparable system, the closing sales price, regular way, or, in case no reported sale takes place, the average of the closing bid and asked prices, regular way, as furnished by any two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. "Code" means the United States Internal Revenue Code of 1986, as amended from time to time, or any similar legislation of the United States enacted to supersede, amend or supplement such Code, and any reference to a provision or provisions of the Code shall also mean and refer to any successor provision or provisions, however designated or distributed. "Collateral" has the meaning specified in Section 2.1 of the Mortgage. "Common Stock" includes any stock of any class of the Company which has no preference in respect to dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company; initially it refers to the common stock, $0.01 par value, of the Company. "Company" means the party named as such in the Indenture or any obligor on the Securities until a successor replaces it pursuant to the Indenture and thereafter means the successor. "Conversion Date" means the first Business Day following the earliest date on which either (a) both of the following statements shall be true: (i) the Shelf Effective Date shall have occurred and (ii) the Common Stock issuable on conversion of the Equity Notes shall be listed on the American Stock Exchange or such other stock exchange or market as the Common Stock 4 of the Company is then principally traded or (b) a transaction contemplated by Section 13.2 (a) of the Indenture has been consummated. "Conversion Price" has the meaning provided in Section 13.1 of the Indenture. "Corporate Trust Office" when used with respect to the Trustee means the office of the Trustee at which at any particular time its corporate trust business is administered and which, at the Issue Date, is located at First Security Bank, National Association, as Trustee, 79 South Main Street, Salt Lake City, Utah 84111, Attention: Corporate Trust Services. "Custodian" has the meaning provided in Section 6.1 of the Indenture. "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "Definitions Appendix" means this Definitions Appendix attached as Appendix I to the Indenture and the Mortgage and constituting a part of the Indenture and each other Operative Document. "8% Preferred Stock" means the 8% Cumulative Convertible Exchangeable Preferred Stock of the Company. "Employee Preferred Stock" means the IFFA Preferred Stock, the ALPA Preferred Stock and the IAM Preferred Stock of the Company. "Engine" means (i) each of the Pratt & Whitney Model JT9D-7R4D aircraft engines identified by manufacturer's serial number in the Mortgage Supplement executed and delivered on the Issue Date, so long as a Replacement Engine shall not have been substituted therefor pursuant to the Mortgage, and (ii) each Replacement Engine, so long as another Replacement Engine shall not have been substituted therefor pursuant to the Mortgage, whether or not such engine or Replacement Engine, as the case may be, is from time to time installed on the Airframe or installed on another airframe, and including, in each case all Parts incorporated or installed in or attached thereto and any and all Parts removed therefrom so long as such Parts remain subject to the Lien of the Mortgage under the terms thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default" has the meaning provided in Section 6.1 of the Indenture. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "FAA" means the Federal Aviation Administration or similar regulatory authority established to replace it. 5 "FAA Bill of Sale" means the bill of sale for the Aircraft on AC Form 8050-2 or such other form as may be acceptable to the FAA for recordation with it, executed by the Owner Trustee in favor of the Company. "Federal Aviation Act" means Title 49 of the United States Code, "Transportation," as amended from time to time, or any similar legislation of the United States enacted in substitution or replacement thereof. In the event there is enacted any legislation replacing, modifying or repealing, in whole or in part, the Federal Aviation Act, then the term "certificated," when used with reference to the Federal Aviation Act or any particular provision thereof, shall mean authorized to provide, or not prohibited from providing, air transportation services. "First Mortgage" means the Aircraft Mortgage and Security Agreement, dated as of the Issue Date, between the Company and the Notes Trustee, securing, among other things, the obligations of the Company under the Notes Indenture. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Holder" or "Holder of Securities" means the Person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, with respect to any Person at any date, without duplication, (a) all indebtedness, obligations and other liabilities (contingent or otherwise) of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (b) all obligations and other liabilities (contingent or otherwise) of such Person evidenced by bonds, notes or other similar instruments, (c) all obligations and other liabilities (contingent or otherwise) of such Person in respect of letters of credit or other similar instruments (and reimbursement obligations with respect thereto), (d) all obligations and other liabilities (contingent or otherwise) of such Person to pay the deferred and unpaid purchase price of property or services (other than any such obligations that represent trade payables or accrued expenses incurred in the ordinary course of business), (e) all Capitalized Lease Obligations of such Person, (f) all Indebtedness of others secured by a Lien on any asset or assets of such Person, whether or not such Indebtedness is assumed by such Person (and, if not assumed, such Indebtedness shall be limited to the fair market value of such asset or assets as determined on the date such Indebtedness was incurred), and (g) all Indebtedness of others guaranteed by such Person to the extent of such guarantee. 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 of such Person for any such contingent obligations 6 at such date. A change in GAAP that results in an obligation of the Company existing at the time of such change becoming Indebtedness shall not be deemed an incurrence of such Indebtedness. "Indenture" means the Indenture dated as of the Issue Date between the Company and the Trustee, under which the Securities are issued, as amended or supplemented from time to time. "Indenture Discharge Date" means the date of the effectiveness of the termination of the Company's obligations under the Indenture pursuant to Section 8.1(a) or (b) thereof. "Indenture Trustee" means the Trustee. "Interest Payment Date" means (a) so long as no Registration Default exists, the date on which the Securities mature and (b) upon the occurrence of a Registration Default, the 15th day of each month during which any Security is Outstanding (commencing the 15th day of the month next succeeding the month in which such Registration Default occurs) and the date on which the Securities mature, if different. "Issue Date" means June 16, 1998 (the date on which the Securities are originally issued). "Lazard" means Lazard Freres & Co. LLC, a New York limited liability company. "Legal Holiday" means a Saturday, Sunday or any other day on which banks located in New York City or the city and state of the Trustee's Corporate Trust Office as of the Issue Date are authorized or obligated by law to remain closed. "Lien" means any conveyance in trust, assignment, mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Maximum Share Amount" means the maximum number of shares of Common Stock that can be issued upon conversion of the Securities on the Conversion Date without causing the Company to be (without prior stockholder approval) in violation of any applicable listing requirement of the American Stock Exchange. "Mortgage" means the Aircraft Second Mortgage and Security Agreement, dated as of the Issue Date, between the Company and the Trustee in substantially the form attached to the Indenture as Exhibit B. "Mortgage Supplement" means (i) the Second Mortgage and Security Agreement Supplement executed and delivered on the Issue Date for the Aircraft, in substantially the form attached to the Mortgage as Exhibit A, which describes with particularity the Airframe and Engines associated with the Aircraft, (ii) each other Second Mortgage and Security Agreement Supplement from time to time executed and delivered, in substantially the form attached to the Mortgage as Exhibit A, which shall describe with particularity any Replacement Engine and (iii) any other supplement to the Mortgage from time to time executed and delivered in accordance with the provisions of the Mortgage or any other Operative Document. 7 "9 1/4% Preferred Stock" means the 9 1/4% Cumulative Convertible Exchangeable Preferred Stock of the Company. "Notes Indenture" means the Indenture dated as of the Issue Date between the Company and First Security Bank, National Association, as trustee, pursuant to which the Company is issuing the 10 1/4% Secured Notes. "Notes Trustee" means First Security Bank, National Association, as trustee under the Notes Indenture, and its successors and assigns in such capacity. "Obligations" has the meaning provided in Section 2.1 of the Mortgage. "Offer to Purchase" means an offer to purchase all or a portion, as the case may be, of the Securities by the Company from the Holders commenced by the mailing (by first class mail, postage prepaid) by the Company (or if requested by the Company on at least five Business Days' prior notice to the Trustee and at the Company's expense, by the Trustee) of a notice to each Holder (and, if mailed by the Company, to the Trustee) at such Holder's address appearing in the Register, stating: (i) the covenant pursuant to which the offer is being made and that all Securities validly tendered will be accepted for payment; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Security not tendered will continue to accrue interest and Special Interest (if any) pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price on the Payment Date, any Security accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest or Special Interest (if any) on and after the Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Offer to Purchase will be required to surrender the Security, together with the form entitled "Option of the Holder to Elect Purchase" attached to or on the reverse side of the Security completed, to the Paying Agent at the address specified in the notice at any time beginning with the date of such notice but prior to the close of business on the Business Day immediately preceding the Payment Date, and such Holder shall be entitled to receive from the Paying Agent a non-transferable receipt of deposit evidencing such deposit; (vi) that, unless the Company defaults in making the payment of the purchase price or shall otherwise, in its sole discretion, consent thereto, Holders will be entitled to withdraw their election only if the Trustee receives, not later than the close of business on the fifth Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only in part will be promptly issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered (which new Securities, if such Offer to Purchase is being made pursuant to Section 4.12(c) of the Indenture, will cease to be secured by the Collateral); provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall place such notice in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a financial newspaper of general circulation in New York City. No failure of the Company to give the foregoing notice shall limit any Holder's 8 right to exercise a repurchase right. On the Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted together with an Officers' Certificate specifying the Securities or portions thereof accepted for payment by the Company. The Trustee shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate, and the Company shall promptly execute and mail (or cause to be mailed) to such Holders a new Security equal in principal amount to any unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof; provided, further, that if the Payment Date is between a regular Record Date and the next succeeding Interest Payment Date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest and Special Interest, if any, payable on such succeeding Interest Payment Date on the principal amount to be repurchased, and the interest on the principal amount of the Security being repurchased, and Special Interest, if any, with respect thereto, will be paid on such next succeeding Interest Payment Date to the registered holder of such Security on the immediately preceding Record Date. A Security repurchased on an Interest Payment Date need not be accompanied by any such payment, and the interest on the principal amount of the Security being repurchased and Special Interest, if any, with respect thereto, will be paid on such Interest Payment Date to the registered holder of such Security on the corresponding Record Date. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Securities pursuant to an Offer to Purchase. Both the notice of the Company and the notice of the Holder having been given as specified above, the Securities so to be repurchased shall, on the Payment Date become due and payable at the purchase price applicable thereto and from and after such date (unless the Company shall default in the payment of such purchase price) such Securities shall cease to bear interest or Special Interest (if any). If any Security shall not be paid upon surrender thereof for repurchase, the principal shall, until paid, bear interest and Special Interest (if any) from the Payment Date at the rate and in accordance with the provisions set forth in such Security and the Indenture. Any Security which is to be submitted for repurchase only in part shall be delivered pursuant to the above provisions with (if the Company or Trustee so requires) due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing. "Officer" means the Chairman of the Board, the President, any Vice President of any grade, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary or the Controller of the Company. "Officers' Certificate" means a certificate signed by an Officer and by a Certifying Officer satisfying the requirements of Sections 11.4 and 11.5 of the Indenture. 9 "Operative Documents" means the Indenture, the Mortgage and the Mortgage Supplements. "Opinion of Counsel" means a written opinion from the General Counsel of the Company, legal counsel to the Company or another legal counsel who is reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with Sections 11.4 and 11.5 of the Indenture. The counsel may be an employee of the Company. The acceptance by the Trustee (without written objection to the Company during the fifteen (15) Business Days following receipt) of, or its action on, an opinion of counsel not specifically referred to above shall be sufficient evidence that such counsel is acceptable to the Trustee. "Outstanding" or "outstanding" when used with respect to Securities or a Security, means all Securities theretofore authenticated and delivered under the Indenture, except: (a) Securities theretofore canceled by the Trustee, delivered to the Trustee for cancellation or converted in accordance with Article 13 of the Indenture; (b) Securities for which payment has been deposited with the Trustee or any Paying Agent in trust other than deposits pursuant to Section 8.1 of the Indenture; and (c) Securities which have been paid, or for which other Securities shall have been authenticated and delivered in lieu thereof or in substitution therefor pursuant to the terms of Section 2.7 of the Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by holders in due course. A Security does not cease to be Outstanding because the Company or one of its Affiliates holds the Security; provided, however, that in determining whether the Holders of the requisite aggregate principal amount of Securities Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, Section 2.8 of the Indenture shall be applicable. "Owner Trustee" means First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association), not in its individual capacity (except as otherwise expressly set forth) but as trustee under the Trust Agreement. "Parts" means any and all appliances, parts, spare parts, instruments, appurtenances, accessories, furnishings, seats and other equipment of whatever nature (other than Engines or engines) which may from time to time be incorporated or installed in or attached to the Airframe or any Engine, or which have been removed therefrom but which remain subject to the Lien of the Mortgage in accordance with the terms thereof, exclusive of any items (i) permitted by the Mortgage to be leased by the Company in the ordinary course of business from third parties (and installed without discrimination with respect to other Boeing Model 767-231 ETOPS aircraft (or improved models) owned or operated by the Company) and (ii) not required in the navigation of the Aircraft. The terms "spare parts" and "appliances" (as used in this definition) shall include, but not be limited to, the definitions assigned to those terms by Section 40102 of Title 49 of the 10 United States Code as amended from time to time or any recodifi- cation thereof or any regulation of the FAA. "Paying Agent" has the meaning provided in Section 2.3 of the Indenture, except that for the purposes of Article 8 of the Indenture and any Offer to Purchase, the Paying Agent shall not be the Company. "Payment Date" with respect to any Offer to Purchase, has the meaning specified in the definition herein of Offer to Purchase. "Payments" means such monies as the Company shall cause to be delivered to the Trustee or any Paying Agent for the purpose of paying principal or purchase price of, or interest on or Special Interest, if any, with respect to, the Securities on any Interest Payment Date, Payment Date or acceleration; and "Pay" means paying such monies. "Permitted Liens" shall mean any of the following Liens: (a) Liens in favor of the Trustee arising by reason of the Mortgage or any other Operative Document and Liens in favor of the Notes Trustee arising by reason of the First Mortgage or any other Operative Document (as defined in the Notes Indenture); (b) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being contested by the Company in good faith by appropriate proceedings and for which adequate reserves have been established if required in accordance with GAAP, and which Lien presents no material risk of sale, forfeiture or loss of any Collateral; (c) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the Company's ordinary course of business for sums not overdue or being contested by the Company in good faith by appropriate proceedings and for which adequate reserves have been established if required in accordance with GAAP, and which Lien presents no material risk of sale, forfeiture or loss of any Collateral; (d) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders and statutory obligations entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (e) judgment Liens (so long as the related judgments do not, individually or in the aggregate, constitute an Event of Default) in existence less than sixty (60) days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full by insurance; 11 (f) Liens on the Aircraft in favor of a permitted lessee of the Aircraft which result solely from the lease (so long as it is a permitted lease under the Mortgage) on the Aircraft; and (g) Liens on the Aircraft which are "Permitted Liens" arising under, and defined by definitions substantially similar to above subparagraphs (b) and (c) in, the lease (if any) for the Aircraft; provided, however, that such lease is permitted under the Mortgage. "Person" means any individual, corporation, partnership, limited liability issuer, joint venture, association, joint-stock issuer, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock" as applied to the Capital Stock of any Person means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, present or future, or tangible or intangible. "Record Date" means the fifteenth (15th) day preceding any Interest Payment Date, whether or not a Business Day. "Register" has the meaning provided in Section 2.3 of the Indenture. "Registrar" has the meaning provided in Section 2.3 of the Indenture. "Registration Default" means the occurrence of any of the following events: (a) the Company shall fail to file with the SEC the Shelf Registration Statement on or before the sixtieth (60th) day following the Issue Date, (b) the Shelf Effective Date shall not occur on or before the one hundred and fiftieth (150th) day following the Issue Date or (c) the Company shall fail to list, on or prior to the Shelf Effective Date, the Common Stock issuable on conversion of the Equity Notes on the American Stock Exchange or such other stock exchange or market as the Common Stock of the Company is then principally traded. "Registration Rights Agreement" means the Registration Rights Agreement, made and entered into as of the Issue Date, by and among the Company, the Owner Trustee and Lazard, relating to the shares of Common Stock to be issuable upon conversion of the Securities. "Replacement Engine" means a Pratt & Whitney Model JT9D-7R4D aircraft engine (or engine of the same or another manufacturer of a comparable or an improved model and suitable for installation and use on the Airframe) (i) which has a value, utility and remaining useful life at 12 least equal to the Engine which it is replacing, assuming such Engine was of the value and utility required by the terms of the Mortgage; provided that any such engine shall be of the same make and model as the other engine then installed on the Airframe, shall be an engine model then being utilized by the Company on other Boeing Model 767-231 ETOPS aircraft operated by the Company and, for so long as such engine has been operated by the Company, shall have been maintained, serviced, repaired and overhauled in substantially the same manner as the Company maintains, services, repairs and overhauls similar engines utilized by the Company, and (ii) which shall have been made subject to the Lien of the Mortgage pursuant to Section 2 and Section 3.3 of the Mortgage. "Request" means a written request for the action therein specified signed on behalf of the Company by any Officer and delivered to the Trustee. Each Request shall be accompanied by an Officers' Certificate if and to the extent required by Section 11.4 of the Indenture. "Required Holders" means from time to time the Holders of the Applicable Percentage in principal amount of the Securities then Outstanding. "SEC" means the Securities and Exchange Commission and any government agency succeeding to its functions. "Securities" means the "Securities" (as defined in the preamble to the Indenture and includes the Company's 10 1/4% Mandatory Conversion Equity Notes due 1999), as amended or supplemented from time to time, that are issued under the Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Securityholder" means the Person in whose name a Security is registered on the Registrar's books. "Seven Leasing" means 767 Leasing HY, LLC, a Delaware limited liability company. "Shelf Effective Date" means the date that the Shelf Registration Statement shall become effective as declared by the SEC. "Shelf Registration Statement" has the meaning provided in Section 3(a) of the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary which is a Significant Subsidiary within the meaning of Article I of Regulation S-X under the Exchange Act. "Special Interest" has the meaning provided in Paragraph No. 1 of the Form of Reverse Side of Security attached to the Indenture as part of Exhibit A. "Special Record Date" has the meaning provided in Section 2.1 of the Indenture. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, 13 including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including membership or partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. "Taxes" means any and all fees (including, without limitation, license, documentation and registration fees), taxes (including, without limitation, income, gross receipts, sales, rental, use, turnover, value-added, property (tangible and intangible), excise and stamp taxes), levies, imposts, duties, recording charges or fees, charges, assessments or withholdings of any nature whatsoever, together with any and all assessments, penalties, additions to tax, fines or interest thereon. "10 1/4% Secured Notes" means the 10 1/4% Senior Secured Notes due 2003 of the Company issued concurrently with the Securities. "Tender" means, with respect to any Security, the effective tender of such Security (in whole or in part) for repurchase or conversion in accordance with the provisions of the Indenture. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Total Loss" and "Total Loss Date" have the meanings provided in Section 1.1 of the Mortgage. "Total Loss OTP Amount" has the meaning provided in Section 4.12 of the Indenture. "Trading Day" means, with respect to any Common Stock, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which securities are not generally traded on the exchange or market in which such Common Stock is principally traded. "Trust Agreement" means the Trust Agreement N607TW, dated as of March 28, 1995, between Seven Leasing, as assignee of ING Lease Delaware, Inc. (f/k/a Internationale Nederlanden Aviation Lease Delaware, Inc.), and First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association), not in its individual capacity, except as expressly stated therein, but solely as trustee thereunder. 14 "Trust Officer" means any officer in the corporate trust department of the Trustee, or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Trustee" means the party named as such in the Indenture until a successor replaces it in accordance with the provisions of the Indenture and thereafter means the successor. "TWA" means the Company. "U.S." or "United States" means the United States of America. "U.S. Government Obligations" means securities which are (i) direct obligations of the United State government or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States government, are full faith and credit obligations of the United States government and are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust Company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. "Warranty Bill of Sale" means, the warranty (as to title) bill of sale covering the Aircraft executed by the Owner Trustee in favor of the Company. Section 2. Rules of Construction. Unless the context otherwise requires, the following rules of construction shall apply to all purposes of the Indenture and the other Operative Documents (including this appendix) and of such agreements as may incorporate this appendix by reference. (a) a term has the meaning assigned to it; (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms; (c) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation"; (d) all terms used in Article 9 of the Uniform Commercial Code as in effect in the State of New York that are used but not defined herein shall have the meaning assigned to such terms therein; (e) references to a specific Person shall include the Person and (except as limited by any agreement by which such Person is bound) the successors and assigns of such Person; 15 (f) references to "applicable laws" shall include statutes, ordinances, rules, regulations, court and administrative decisions and conditions, restrictions and limitations in licenses, permits, approvals and authorizations issued or granted by federal, state or local United States or foreign governmental bodies and agencies; (g) unless otherwise specified in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including", and the words "to" and "until" each mean "to but excluding"; (h) words in the singular include the plural, and words in the plural include the singular; (i) provisions apply to successive events and transactions; (j) "herein", "hereto" and other words of similar import in any agreement refer to that agreement as a whole and not to any particular Article, Section or other subsection of that agreement; (k) unless otherwise specified, all references in any Operative Document to Sections, Articles, Exhibits, Appendices and Schedules are to Sections of, Articles of, Exhibits to, Appendices to and Schedules to such Operative Document; (l) all accounting terms used herein and not expressly defined shall have the meanings given to them in accordance with GAAP; and (m) unless otherwise specified, references in this Definitions Appendix to any instrument, contract, agreement or other document shall be deemed to be references to such instrument, agreement or other document as it may be amended, restated, supplemented or otherwise modified from time to time pursuant to and as permitted by the terms thereof, whether or not so stated in any particular definition. EXHIBIT A to INDENTURE [FORM OF FACE OF SECURITY] [Restricted Securities Legend] THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE RESALE RESTRICTION TERMINATION DATE WHICH IS THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THESE SECURITIES AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THESE SECURITIES (OR ANY PREDECESSOR OF THESE SECURITIES) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2) (3), OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE, OR TRANSFER (i) PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED TO OR ON THE REVERSE SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. 2 IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THE TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. 3 No. CUSIP No. $ 10 1/4% Mandatory Conversion Equity Note due 1999 TRANS WORLD AIRLINES, INC., a Delaware corporation promises to pay to __________, or registered assigns, the principal sum of __________ Dollars on June 15, 1999. Interest Payment Dates: (a) So long as no Registration Default exists, the date on which the Securities mature and (b) upon the occurrence of a Registration Default, the 15th day of each month during which any Security is Outstanding (commencing the 15th day of the month next succeeding the month in which such Registration Default occurs) and the date on which the Securities mature, if different. Record Dates: The 15th day preceding any Interest Payment Date, whether or not a Business Day. Additional provisions of this Security are set forth on the other side of this Security. Dated: TRANS WORLD AIRLINES, INC. By: _______________________ Name: Title: Attest: _______________________ Name: Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION First Security Bank, National Association, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By:_______________________ Authorized Signatory 4 [FORM OF REVERSE SIDE OF SECURITY] 10 1/4% Mandatory Conversion Equity Note due 1999 This Security is one of a duly authorized issue of securities of the Company designated as its 10 1/4% Mandatory Conversion Equity Notes due 1999 (hereinafter called the "Securities"), limited in aggregate principal amount Outstanding to $13,000,000, issued or to be issued pursuant to an Indenture, dated as of June 16, 1998 (hereinafter called the "Indenture") between the Company and First Security Bank, National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture). 1. Interest; Special Interest. The Company promises to pay interest on the principal amount of this Security at the rate of ten and one-quarter percent (10 1/4%) per annum; provided, however, that upon a Registration Default (and for so long as such Registration Default shall continue uncured and unwaived) (each period during which a Registration Default has occurred and is continuing referred to herein as a "Registration Default Period"), additional interest will accrue on this Security at a per annum rate of 0.50% for the first 90 days of the Registration Default Period, at a per annum rate of 1.0% for the second 90 days of the Registration Default Period, at a per annum rate of 1.5% for the third 90 days of the Registration Default Period and at a per annum rate of 1.5% thereafter for the remaining portion of the Registration Default Period (such additional interest is referred to herein as "Special Interest"). The Company will pay interest and Special Interest, if any, on the Interest Payment Dates set forth on the face of this Security. Interest on the Securities will accrue from June 16, 1998 or the most recent Interest Payment Date to which interest and Special Interest, if any, have been paid. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company and each Holder of a Security, by the acceptance hereof, agree that in the event a Registration Default shall occur and be continuing and the Company shall have failed to use its reasonable best efforts to avoid or cure such Registration Default, Holders shall be entitled to make a claim for damages incurred as a result of such Registration Default, which damages shall not necessarily be limited to the increases in the interest rate set forth herein; provided, however, that any amount of interest paid pursuant to this provision shall be credited against any amount of damages to be paid by the Company in connection with such claim. 2. Method of Payment. Subject to the provisions of paragraph 8 hereof, the Company will pay interest on and Special Interest, if any, with respect to, the Securities (except defaulted interest and interest on defaulted principal) to the persons who are registered Holders of Securities at the close of business on the Record Date set forth on the face of this Security next preceding the applicable Interest Payment Date. Defaulted interest and interest on defaulted principal will be paid by the Company in accordance with the applicable provisions of the Indenture. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest and Special Interest, if any, at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York and at any other office or agency maintained by the Company for such purpose in money of the United States that at the time of payment is legal tender for payment of public and private 5 debts; provided, however, that at the option of the Company, payment of interest on and Special Interest, if any, with respect to, the Securities may be by check payable in such money and mailed to a Holder's registered address; provided further, however, that payments on a certificated Security will be made by wire transfer to a U.S. dollar account maintained by a Holder with a bank in New York City if such Holder owns at least $250,000 in aggregate principal amount of certificated Securities and elects payment by wire transfer by giving written notice to the Company and the Trustee to such effect designating such account no later than 10 days immediately preceding the relevant due date for payment (or such other date as the Company and the Trustee may accept in their discretion). If a payment date is a legal holiday at a place of payment, payment may be made at that place on the next succeeding Business Day, and no interest shall accrue for the intervening period. 3. Registrar, Paying Agent and Tender Agent. Initially, the Trustee will act as Registrar and Paying Agent. The Company may change any Paying Agent or Registrar or co-registrar without prior notice to any Securityholder. The Company may act in any such capacity, except in certain circumstances. 4. Indenture. The Company issued the Securities under the Indenture. The terms of the Securities include those stated in the Indenture and those made applicable to the Indenture by the TIA. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and such Act for a statement of such terms. Until converted as described in paragraph 8 hereof and in the Indenture and subject to paragraph 6 hereof, the Securities are senior secured obligations of the Company limited to $13,000,000 aggregate principal amount, except as otherwise provided in the Indenture. Terms used in this Security and not defined in this Security shall have the meaning set forth in Section 1 of the Definitions Appendix attached as Appendix I to the Indenture, which shall be a part of this Security as if fully set forth in this place. The rules of construction for this Security are set forth in Section 2 of the Definitions Appendix. 5. Redemption. This Security is not subject to redemption in whole or in part at any time. 6. Security. The Securities are secured by second priority Liens on certain Properties of the Company pursuant to the Mortgage and the other Operative Documents described in the Indenture and such Liens are subject to release as provided herein and in the Mortgage and the other Operative Documents. Enforcement of the Lien of the Mortgage is limited to an aggregate amount of Obligations not exceeding $10,250,000 and is further restricted due to its second priority status, as more fully set forth in the Mortgage, and each Holder, by accepting a Security, agrees to all the provisions thereof. 7. Offers to Purchase. In the event that there shall occur a Change in Control, the Company shall make an Offer to Purchase all of the Outstanding Securities, at a purchase price equal to 101% of the aggregate principal amount of the Securities Outstanding, plus accrued and unpaid interest, if any, to and including the repurchase date. The right to require such repurchase of Securities shall not continue after a discharge of the Company from its obligations with respect to the Securities in accordance with Article 8 of the Indenture. The Company shall 6 commence such Offer to Purchase within thirty (30) days after the occurrence of a Change in Control. In the event that there shall occur a Total Loss with respect to any Aircraft, the Company shall (subject to the provisions of Section 4.12 of the Indenture) make an Offer to Purchase an aggregate principal amount of Outstanding Securities (the "Total Loss OTP Amount") equal to the aggregate principal amount of the Securities Outstanding on the date such Offer to Purchase (if any) is required to be commenced under the Indenture, at a purchase price equal to 100% of the aggregate principal amount of Securities to be purchased, plus accrued and unpaid interest and Special Interest, if any, on such Securities, to and including the Payment Date, and the Aircraft shall be released from the Lien of the Operative Documents in accordance with the provisions thereof. The Company shall commence such Offer to Purchase (if any) within thirty (30) days after the Total Loss Date with respect to any such Total Loss. The Company may receive credit against any or all of the Total Loss OTP Amount for open market purchases of Securities as provided in the Indenture. "Offer to Purchase" means an offer to purchase all, or a portion, as the case may be, of the Securities by the Company from the Holders commenced by the mailing (by first class mail, postage prepaid) by the Company (or, if requested by the Company on at least five Business Days' prior notice to the Trustee and at the Company's expense, by the Trustee) of a notice to each Holder (and, if mailed by the Company, to the Trustee) at such Holder's address appearing in the Register, stating: (i) the covenant pursuant to which the offer is being made and that all Securities validly tendered will be accepted for payment; (ii) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Payment Date"); (iii) that any Security not tendered will continue to accrue interest and Special Interest (if any) pursuant to its terms; (iv) that, unless the Company defaults in the payment of the purchase price on the Payment Date, any Security accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest or Special Interest, if any, on and after the Payment Date; (v) that Holders electing to have a Security purchased pursuant to the Offer to Purchase will be required to surrender the Security, together with the form entitled "Option of the Holder to Elect Purchase" attached to or on the reverse side of the Security completed, to the Paying Agent at the address specified in the notice at any time beginning with the date of such notice but prior to the close of business on the Business Day immediately preceding the Payment Date, and such Holder shall be entitled to receive from the Paying Agent a non-transferable receipt of deposit evidencing such deposit; (vi) that, unless the Company defaults in making the payment of the purchase price or shall otherwise, in its sole discretion, consent thereto, Holders will be entitled to withdraw their election only if the Trustee receives, not later than the close of business on the fifth Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Securities delivered for purchase and a statement that such Holder is withdrawing his election to have such Securities purchased; and (vii) that Holders whose Securities are being purchased only in part will be promptly issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered (which new Securities, if such Offer to Purchase is being made pursuant to Section 4.12(c) of the Indenture, will cease to be secured by the Collateral); provided that each Security purchased and each new Security 7 issued shall be in a principal amount of $1,000 or integral multiples thereof. The Company shall place such notice in the national edition of The New York Times or The Wall Street Journal or, if such newspapers are not then in circulation, in a financial newspaper of general circulation in New York City. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. On the Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Trustee money sufficient to pay the purchase price of all Securities or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Securities or portions thereof so accepted together with an Officers' Certificate specifying the Securities or portions thereof accepted for payment by the Company. The Trustee shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate, and the Company shall promptly execute and mail (or cause to be mailed) to such Holders a new Security equal in principal amount to any unpurchased portion of the Securities surrendered; provided that each Security purchased and each new Security issued shall be in a principal amount of $1,000 or integral multiples thereof; provided, further, that if the Payment Date is between a regular Record Date and the next succeeding Interest Payment Date, Securities to be repurchased must be accompanied by payment of an amount equal to the interest and Special Interest, if any, payable on such succeeding Interest Payment Date on the principal amount to be repurchased, and the interest on the principal amount of the Security being repurchased, and Special Interest, if any, with respect thereto, will be paid on such next succeeding Interest Payment Date to the registered holder of such Security on the immediately preceding Record Date. A Security repurchased on an Interest Payment Date need not be accompanied by any such payment, and the interest on the principal amount of the Security being repurchased, and Special Interest, if any, with respect thereto, will be paid on such Interest Payment Date to the registered holder of such Security on the corresponding Record Date. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company will comply with Rule 14e-l under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Securities pursuant to an Offer to Purchase. Both the notice of the Company and the notice of the Holder having been given as specified above, the Securities so to be repurchased shall, on the Payment Date become due and payable at the purchase price applicable thereto and from and after such date (unless the Company shall default in the payment of such purchase price) such Securities shall cease to bear interest or Special Interest (if any). If any Security shall not be paid upon surrender thereof for repurchase, the principal shall, until paid, bear interest and Special Interest (if any) from the Payment Date at the rate and in accordance with the provisions set forth in this Security and the Indenture. Any Security which is to be submitted for repurchase only in part shall be delivered pursuant to the above provisions with (if the Company or Trustee so requires) due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing. 8. Mandatory Conversion. Subject to the provisions of Article 13 of the Indenture, on the Conversion Date, so long as no Default or Event of Default shall then exist, this Security (if then Outstanding) shall be automatically converted into that number of fully paid and non- 7 assessable shares of Common Stock equal to the sum of (i) the then outstanding principal amount of this Security, plus (ii) accrued and unpaid interest and Special Interest, if any, on this Security to the Conversion Date, divided by the product of (A) 1.00 multiplied by (B) the Closing Price per share of Common Stock on the Trading Day immediately preceding the Conversion Date. Any such conversion is subject to the procedures, restrictions and adjustments as set forth in Article 13 of the Indenture, and on or after the effectiveness of the conversion, the Liens on the Collateral are subject to release as provided in the Indenture. 9. Denominations, Transfer, Exchange. The Securities shall be issuable only in registered form without coupons and in denominations of $1,000 and integral multiples thereof. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes required by law or permitted by the Indenture. 10. Persons Deemed Owners. The Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name the Security is registered with the Registrar as the owner for all purposes. 11. Discharge. Subject to certain conditions set forth in Article 8 of the Indenture, the Company may terminate its obligations under the Securities and the Indenture, except those obligations referred to in Section 8.1(b) of the Indenture, if the Company deposits with the Trustee or a Paying Agent cash or U.S. Government Obligations for the payment of principal of, interest, if any, on the Securities to Stated Maturity. 12. Amendments and Waivers. Subject to certain exceptions, the Indenture, the Securities, or the other Operative Documents may be amended with the consent of the Holders of at least a majority in principal amount of the then Outstanding Securities, and any existing Default, Event of Default or acceleration may be waived with the consent of the Holders of a majority in principal amount of the then Securities Outstanding. Without the consent of any Holder, the Indenture, the Securities or any of the Operative Documents may be amended to, among other things, cure any ambiguity, defect or inconsistency. 13. Defaults and Remedies. Events of Default under the Indenture include the following: default for the period specified in the Indenture in payment of interest on or Special Interest, if any, with respect to, the Securities; default in payment of the principal amount of any Securities when the same becomes due and payable (at maturity, upon acceleration, tender for repurchase or otherwise); failure by the Company to comply with specific covenants of the Indenture or of the Mortgage within the time periods provided therein, discontinuing substantially all of its commercial airlines operations, or failure to pay over amounts required under the Mortgage; failure to comply in any material respect with any of its other agreements contained in the Indenture, the other Operative Documents or the Securities within the time periods (if any) and after the notice (if any) provided in any thereof; a representation or warranty of the Company in the Indenture, the other Operative Documents or any Mortgage Supplement or in any certificate of the Company delivered under any such document proves to be untrue in 9 any material respect when made, and the failure to cure such default within the time periods and after the notice specified in the Indenture; the occurrence of certain defaults under any Indebtedness of the Company or any of its Significant Subsidiaries in excess of $10,000,000 in principal amount; the rendering of final judgments by a court of competent jurisdiction against the Company or any of its Significant Subsidiaries in an aggregate amount of $10,000,000 or more which remain undischarged for a period (during which execution is not stayed) of sixty (60) days after the date on which the right to appeal has expired; cessation of effectiveness of the Operative Documents without the consent of the Trustee; and certain events of bankruptcy, insolvency or reorganization. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of twenty-five percent (25%) in principal amount of the Securities Outstanding may declare all the Securities to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all Securities Outstanding become due and payable immediately without further action or notice. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture and the Mortgage. Enforcement of the Lien of the Mortgage is limited to an aggregate amount of Obligations not exceeding $10,250,000 and is further restricted due to its second priority status, as more fully set forth in the Mortgage. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in principal amount of the then Outstanding Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company must furnish compliance certificates to the Trustee. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety to the more complete description thereof contained in the Indenture and the other Operative Documents. 14. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or Affiliates of the Company with the same rights it would have if it were not Trustee. 15. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. Authentication. This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 17. Unclaimed Money. If money for the payment of principal of, or interest, if any, on, or the purchase price for the Securities remains unclaimed for two (2) years, the Trustee or Paying Agent will pay the money back to the Company at its request. After such payment, Holders entitled to any portion of such money must look to the Company for payment unless an applicable law designates another person. 10 18. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 19. CUSIP Numbers. The Company in issuing this Security may use a "CUSIP" number (if then generally in use) and, if so, the Trustee may use "CUSIP" numbers in notices to the Holders regarding the Securities as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any such notice and that reliance may be placed only on the other identification numbers printed on the Securities, and any such notice shall not be affected by any defect in or omission of such numbers. 20. Holders' Compliance with Registration Rights Agreement. Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 21. Governing Law. THIS SECURITY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. The Company will furnish to any Holder of this Security, upon written request and without charge, a copy of the Indenture. Request may be made to: Trans World Airlines, Inc., One City Centre, 515 N. 6th Street, St. Louis, Missouri 63101, Attention: Corporate Secretary. 11 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to: (Insert Assignee's Soc. Sec. or Tax I.D. No.) (Print or type assignee's name, address and zip code) and irrevocably appoint ______________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date:____________________________ Signature(s):__________________________ __________________________ (Sign exactly as your name(s) appear(s) on the other side of this Security) Signature(s) guaranteed by: ________________________________________ (All signatures must be guaranteed by a member of a national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company located in the United States) 12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security repurchased by the Company pursuant to any Offer to Purchase under the Indenture, check the box: |_| If you want to elect to have only part of this Security repurchased by the Company pursuant to any Offer to Purchase under the Indenture, state the amount to be repurchased: $ _________________________________ (in an integral multiple of $1,000) Date:______________________________ Signature(s):___________________________ ________________________________________ (Sign exactly as your name(s) appear(s) on the other side of this Security) Signature(s) guaranteed by: ________________________________________ (All signatures must be guaranteed by a member of a national securities exchange or of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company located in the United States) CERTIFICATE OF TRANSFER Re: 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "Notes") of Trans World Airlines, Inc. (the "Company") This Certificate relates to Notes held in definitive form by ___________ (the "Transferor"). The Transferor has requested the Registrar by written order to exchange or register the transfer of a Note or Notes. In connection with such request and in respect of each such Note, the Transferor does hereby certify that the Transferor is familiar with the Indenture relating to the above captioned Notes and that the transfer of this Note does not require registration under the Securities Act of 1933 (the "Securities Act"), because:* |_| Such Note is being transferred to the Company. |_| Such Note is being transferred pursuant to an effective Registration Statement under the Securities Act. |_| Such Note is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A. |_| Such Note is being transferred to an Institutional "Accredited Investor" within the meaning of Subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act. |_| Such Note is being transferred in a transaction meeting the requirements of Rule 144 under the Securities Act. The Registrar and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ____________________________ [INSERT NAME OF TRANSFEROR] By:________________________ Date:_____________________________ __________________________________ * Please check applicable box. EXHIBIT B ================================================================= AIRCRAFT SECOND MORTGAGE AND SECURITY AGREEMENT Dated as of June 16, 1998 Between TRANS WORLD AIRLINES, INC., as Mortgagor and FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee, as Mortgagee ================================================================= Covering Boeing Model 767-231 ETOPS Aircraft TABLE OF CONTENTS Page 1. DEFINITIONS ........................................... 1 1.1 Definitions ...................................... 1 1.2 Rules of Construction ............................ 3 2. SECURITY INTEREST ..................................... 3 2.1 Granting of Security Interest .................... 3 2.2 Certain Releases of Lien ......................... 5 2.3 Liability of Mortgagor ........................... 7 2.4 No Segregation of Moneys; No Interest ............ 7 3. OPERATION, REPLACEMENT OF PARTS AND POSSESSION OF AIRCRAFT ........................................... 7 3.1 Operation ........................................ 7 3.2 Transfer of Possession ........................... 8 3.3 Total Loss of Engine and not Airframe; Total Loss of Airframe ................................. 8 3.4 Replacement of Parts ............................. 9 3.5 Installation of Video Equipment and Telephone Systems owned by Third Parties on the Aircraft ... 9 3.6 Interchange and Pooling Agreements ............... 10 4. EVENTS OF DEFAULT; DISPOSITION OF COLLATERAL; APPLICATION OF PROCEEDS AND LIMITATIONS ON AND SUBORDINATION OF LIEN ................................. 10 4.1 Judicial Proceedings, etc., Following Event of Default ....................................... 10 4.2 Delivery of Collateral, Power of Sale, etc. ...... 12 4.3 Right to Possession, etc. ........................ 12 4.4 Application of Proceeds .......................... 14 (i) TABLE OF CONTENTS (Continued) Page 4.5 Matters Involving Manner of Sale ................. 15 4.6 Limitations on and Subordination of Lien ......... 16 5. REPRESENTATIONS AND WARRANTIES ........................ 17 5.1 Corporate Status ................................. 17 5.2 Governmental Approvals ........................... 17 5.3 Binding .......................................... 18 5.4 No Breach ........................................ 18 5.5 Filings .......................................... 18 5.6 Licenses ......................................... 18 5.7 No Suits ......................................... 18 5.8 Taxes ............................................ 18 5.9 No Event of Default or Total Loss ................ 19 5.10 Aircraft Certification ........................... 19 5.11 Investment Company Act ........................... 19 5.12 Condition of Aircraft ............................ 19 5.13 Title ............................................ 19 5.14 No Default ....................................... 19 5.15 Mortgage Liens ................................... 19 5.16 Engines .......................................... 19 5.17 FAA Aircraft Registry ............................ 19 5.18 Insurances ....................................... 20 6. COVENANTS ............................................. 20 6.1 This Agreement ................................... 20 (ii) TABLE OF CONTENTS (Continued) Page 6.2 Certain Rights ................................... 20 6.3 Insurance ........................................ 20 6.4 Compliance with Laws ............................. 22 6.5 Subleasing or Leasing ............................ 22 6.6 Further Assurances ............................... 24 6.7 Maintenance ...................................... 24 6.8 Registration ..................................... 25 6.9 Insignia ......................................... 25 6.10 Inspection ....................................... 26 6.11 Alterations, Modifications and Additions ......... 26 6.12 Notice of Change of Mortgagor's Chief Executive Office ................................. 27 7. CONDEMNATION .......................................... 27 7.1 Dedication to CRAF ............................... 27 7.2 Notice to Mortgagee .............................. 28 7.3 Requisition of Engine ............................ 28 7.4 Government Indemnification ....................... 28 7.5 No Geographic Limits ............................. 28 7.6 Notice of Default ................................ 28 7.7 Receipts of Payments ............................. 28 8. GENERAL INDEMNIFICATION ............................... 29 8.1 General Indemnification and Waiver of Certain Claims ................................... 29 8.2 Tax Indemnification .............................. 32 8.3 Survival of Indemnities .......................... 36 (iii) TABLE OF CONTENTS (Continued) Page 9. MISCELLANEOUS ......................................... 36 9.1 Performance by Mortgagee ......................... 36 9.2 Power of Attorney ................................ 37 9.3 Waiver, etc., by Mortgagor ....................... 37 9.4 Amendment, etc. .................................. 38 9.5 [Intentionally Omitted.] ......................... 38 9.6 Successors and Assigns ........................... 38 9.7 Severability ..................................... 38 9.8 Governing Law; Waiver of Jury Trial .............. 39 9.9 Notices; Waivers ................................. 39 9.10 No Adverse Interpretation of Other Agreements .... 39 9.11 Benefits of Agreement Restricted ................. 39 9.12 Counterpart Originals ............................ 39 9.13 Effect of Headings ............................... 39 9.14 Section 1110 of the Bankruptcy Code .............. 39 EXHIBIT A Form of Mortgage Supplement EXHIBIT B Insurance EXHIBIT C Pre-Approved List (iv) AIRCRAFT SECOND MORTGAGE AND SECURITY AGREEMENT THIS AIRCRAFT SECOND MORTGAGE AND SECURITY AGREEMENT (this "Agreement"), dated as of June 16, 1998, is entered into between TRANS WORLD AIRLINES, INC., a Delaware corporation (together with its successors and permitted assigns, "Mortgagor"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, as Trustee under the Indenture hereinafter referred to (together with its successors and assigns, "Mortgagee") for the benefit of Mortgagee and the Holders (as defined in such Indenture), in light of the following facts: RECITALS WHEREAS, Mortgagor and First Security Bank, National Association (f/k/a First Security Bank of Utah, National Association), not in its individual capacity, except as expressly stated therein, but soley as Owner Trustee ("Owner Trustee") under the Trust Agreement N607TW, dated as of March 28, 1995 between 767 Leasing HY, LLC ("Beneficiary") as assignee of ING Lease Delaware, Inc. (f/k/a Internationale, Nederlanden Aviation Lease Delaware, Inc.) and Owner Trustee, have entered into that certain Aircraft Sale and Note Purchase Agreement, made and entered into as of the 16th day of June, 1998 among Mortgagor, Owner Trustee, Beneficiary and Lazard Freres & Co. LLC, (the "Aircraft Sale Agreement"), pursuant to which Mortgagor agreed to purchase, and Owner Trustee agreed to sell, the Aircraft (as hereinafter defined); WHEREAS, Mortgagor and Mortgagee are contemporaneously herewith entering into that certain Indenture, dated as of even date herewith (the "Indenture"), pursuant to which Mortgagor will issue its 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "Securities") to a certain holder or holders (the "Holders"), as payment of part of the purchase price of the Aircraft under the Aircraft Sale Agreement; and WHEREAS, it is a condition precedent to Mortgagee's authentication of the Securities that Mortgagor grant to Mortgagee a second priority security interest in the Aircraft in order to secure, among other things, (a) Mortgagor's obligations to the Holders and Mortgagee under the Indenture and (b) Mortgagor's obligation to the Holders and Mortgagee hereunder. NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS 1.1 Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall be a part of this Agreement as if fully set forth in this place. In addition, the following terms shall have the respective meanings set forth below: 2 "CRAF" means the Civil Reserve Air Fleet Program authorized under 10 U.S.C. ss. 9511 et seq. or any substantially similar program. "Government Entity" means any (a) national, state or local government, (b) board, commission, department, division, instrumentality, court, agency or political subdivision thereof and (c) association, organization or institution of which any thereof is a member or in whose activities any thereof is a participant. "Law" means any (a) statute, decree, constitution, regulation, order or any directive of any Government Entity, (b) treaty, pact, compact or other agreement to which any Government Entity is a signatory or party and (c) judicial or administrative interpretation or application of any of the foregoing. "Total Loss" means any of the following in relation to the Aircraft, Airframe or any Engine and "Total Loss Date" means the date set forth in parentheses after each Total Loss: (i) Destruction, damage beyond repair or being rendered permanently unfit for normal use for any reason whatsoever (the date such event occurs or, if not known, the date on which the Aircraft, Airframe or Engine was last heard of). (ii) Actual, constructive, compromised, arranged or agreed total loss (the earlier of the date on which the loss is agreed or compromised by the insurers or thirty (30) days after the date of notice to Mortgagor's brokers or insurers claiming such total loss). (iii) Requisition of title, confiscation, forfeiture or any compulsory acquisition whatsoever, except for an acquisition of the Aircraft, Airframe or Engines by the Air Mobility Command pursuant to CRAF (the date on which the same takes effect). (iv) Sequestration, detention or seizure for more than thirty (30) consecutive days (the earlier of the date on which insurers make payment on the basis of a total loss or the date of expiration of such period). (v) Requisition for use for more than one hundred eighty (180) consecutive days (the earlier of the date on which the insurers make payment on the basis of a total loss or the date of expiration of such period). (vi) Loss or loss of use due to theft or disappearance for a period greater than sixty (60) consecutive days (the date of expiration of such period). (vii) Any other occurrence which deprives Mortgagor of use or possession for a period of one hundred eighty (180) consecutive days or longer (the one hundred eightieth (180th) day of such period). 3 A Total Loss with respect to the Aircraft shall be deemed to have occurred if a Total Loss has occurred with respect to the Airframe constituting part of the Aircraft. 1.2 Rules of Construction. The rules of construction for this Agreement are set forth in Section 2 of the Definitions Appendix. 2. SECURITY INTEREST 2.1 Granting of Security Interest. Mortgagor does hereby transfer, convey, mortgage, hypothecate, assign and grant to Mortgagee a second priority purchase-money security interest in, and second priority mortgage lien on (subject and subordinate only to the first priority interests of the Notes Trustee under the First Mortgage), all right, title, interest, claims and demands of Mortgagor in and to the Properties, rights, interests and privileges described in clauses (a) through (h) below, whether now or hereafter acquired (which Properties, rights, interests and privileges described in clauses (a) through (h) below, including all such Properties, rights, interests and privileges hereafter subjected to the Lien of this Agreement by any Mortgage Supplement, are included in and defined as the "Collateral"), to wit: (a) the Airframe and Engines, each of which Engines is of 750 or more rated takeoff horsepower or the equivalent of such horsepower, and in the case of each such Engine, whether or not such Engine shall be installed in or attached to the Airframe or any other airframe, and the Parts, together with all accessories, equipment, parts and appurtenances appertaining or attached to the Airframe or an Engine, whether now owned or hereafter acquired, and all substitutions, renewals and replacements of and additions, alterations, modifications, improvements, accessions and accumulations to the Airframe, any Engine or any Part; (b) all proceeds from the sale or other disposition of, all proceeds of insurance due to Mortgagor on, and all proceeds of any condemnation or requisition of title or use due to Mortgagor with respect to, any of the Properties described in clause (a) above; (c) all logs, books, records (including, without limitation, all inspection, modification, maintenance and overhaul records), data, manuals and other documents, in each case, maintained in respect of the Airframe or any Engine, including, without limitation, all such logs, books, records, data, manuals and other documents maintained pursuant to requirements of the FAA; (d) the Aircraft Sale Agreement and the Bills of Sale to the extent the same relate to continuing rights of Mortgagor in respect of any warranty, indemnity or agreement, express or implied, as to title, materials, workmanship, design or patent infringement matters with respect to the Airframe or any Engine (reserving to Mortgagor, however, all of Mortgagor's other rights and interest in and to the Aircraft Sale Agreement) together with all rights, powers, privileges, options and other benefits of Mortgagor thereunder (subject to such reservation) with respect to the Airframe or the Engines, including, without limitation, the right to make all waivers and agreements, to give and receive all notices and other instruments or communications, to take such action upon the occurrence of a default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, as 4 shall be permitted thereby or by law, and to do any and all other things which Mortgagor is or may be entitled to do thereunder (subject to such reservation, and all warranties and any other rights of Mortgagor against any manufacturer relating to the Airframe, any Engine or any Part); (e) all moneys and securities now or hereafter paid or deposited or required to be paid or deposited to or with Mortgagee by or for the account of Mortgagor pursuant to any term hereof or held or required to be held by Mortgagee hereunder; (f) all other items of equipment and furnishings, wherever located, appertaining to the Aircraft, including without limitation, the auxiliary power unit bearing Manufacturer's Serial No. P40261 delivered with the Aircraft on the Issue Date, and all substitutions, renewals and replacements thereof and additions, modifications and accessories thereto; (g) all rents, issues, profits, revenues and other income of the Property intended, subjected or required to be subjected to the Lien of this Agreement hereby, by the other Operative Documents or by any Mortgage Supplement; and (h) all proceeds, howsoever arising, of any of the foregoing; TO HAVE AND TO HOLD the Collateral unto Mortgagee, for the benefit of the Holders and Mortgagee and their respective successors and assigns, as security for (subject to Section 4.6): (i) the due and punctual indefeasible payment in full of (A) all sums, together with interest, Special Interest, or premium, if any, thereon, owing or outstanding under the Securities or that may be or become due and payable to Mortgagee, any of the Holders, or their respective successors and assigns, by Mortgagor under or in connection with the Securities, the Indenture, this Agreement or the other Operative Documents, (B) the reasonable costs and expenses of collection and foreclosure with respect to the indebtedness and obligations secured hereby, whether now existing or hereafter arising, including without limitation reasonable attorneys' fees and other costs and expenses expended or incurred by Mortgagee under or pursuant to this Agreement, the Securities, the Indenture or any other Operative Document or otherwise in connection with discovering, locating, satisfying Liens and charges on, protecting and taking possession of the Collateral or any part thereof, the returning of the Collateral or any part thereof to any place in the continental United States designated by Mortgagee (including, without limitation, costs of repairing, rehabilitating and storing the Collateral or any part thereof), and the enforcement of, or collection of amounts owing or outstanding or due and payable under or in connection with the Securities, the Indenture, and the other agreements and instruments referred to in this clause (i) and (C) interest (to the extent permitted by applicable Law) on all costs and expenses described in this clause (i), at a rate of interest per annum equal to the highest rate that may, under any circumstance (whether or not such circumstance has or could actually occur), be applicable to 5 the Securities thereunder or under the Indenture, computed on the basis of a 360-day year and the actual number of days elapsed; and (ii) the timely and faithful performance and observance by Mortgagor of all agreements, promises and covenants undertaken by it hereunder, in the Indenture and the other instruments, agreements and obligations referred to in clause (i) above (the foregoing, together with all the sums, interest, Special Interest, premium, expenses, costs and other amounts referred to in clause (i) above, being hereinafter referred to collectively as the "Obligations"); provided, however, that, and these presents are subject to the condition that, if Mortgagor shall have paid or caused to be paid in full, and Mortgagor shall have well and faithfully performed and observed, all the Obligations at the time and in the manner specified therefor, and any other indebtedness, obligation or account whatsoever (whether presently existing or subsequently arising) secured hereby, or made provision therefor pursuant to Article 8 of the Indenture then, upon the request of Mortgagor, delivered to Mortgagee, Mortgagee shall, at the cost and expense of Mortgagor, execute and deliver to Mortgagor, such instruments of satisfaction and discharge as may be appropriate (without, however, being under any duty to cause such instruments to be filed or recorded in the public records wherein this Agreement shall have been filed and/or recorded), and otherwise the same shall be and remain in full force and effect. 2.2 Certain Releases of Lien. (a) At any time and from time to time prior to or upon the release of the Lien of this Agreement pursuant to this Section 2.2, upon the Total Loss of an Engine in accordance with the express terms of this Agreement, or the replacement of any Part of the Aircraft in accordance with the express terms of this Agreement, Mortgagee shall, upon the Request of and at the cost and expense of Mortgagor and provided, that no Default or Event of Default shall have occurred and be continuing, release such Engine or such Part, as the case may be, from the Lien of this Agreement so long as the Replacement Engine and Part complies with the terms and conditions of this Agreement on Replacement Engines and Parts. In connection with the release of the Lien on any Engine, Mortgagee shall execute and deliver such instrument as aforesaid upon a Request from Mortgagor, requesting such release and describing the Property so to be released only upon receipt by or deposit with Mortgagee of the following: (i) An Officers' Certificate stating the following: (A) a description of the Engine to be released, which shall be identified by manufacturer's serial number; (B) a description of the Replacement Engine to be received as consideration for the Engine to be released pursuant to the provisions of this Agreement; (C) that no Default or Event of Default has occurred that has not been remedied or waived and that Mortgagor will not be in default, by 6 the making and granting of the request for release, in the performance of any of the terms and covenants of any Operative Document; and (D) that the release of the Engine so to be released will not be inconsistent with any of the provisions of this Agreement, the Indenture or any other Operative Document. (ii) The appropriate instruments transferring title to the Replacement Engine to be received as consideration for the Engine to be released to Mortgagor, subjecting such Replacement Engine to the Lien of this Agreement including, without limitation, any Mortgage Supplement if so required by Mortgagee. (iii) Upon the request of Mortgagee, an Opinion of Counsel (and, as to matters relating to title and perfection under the Federal Aviation Act, an opinion of special FAA counsel) satisfactory to Mortgagee: (A) stating that the certificates, opinions and other instruments and/or Property that have been or are therewith delivered to and deposited with Mortgagee conform to the requirements of this Agreement and that, upon the basis of such application, the Property so sold or disposed of may be released from the Lien of this Agreement in accordance with the provisions of this Agreement, and that all conditions precedent herein provided for relating to such release have been complied with; and (B) stating that Mortgagor has good title to the Replacement Engine to be received as consideration for the Engine to be released, free of any Liens or encumbrances whatsoever, except the Lien hereof and Permitted Liens, that such Replacement Engine has been validly subjected to the Lien of this Agreement, that the instruments subjecting such Replacement Engine to the Lien of this Agreement have been duly filed for recordation pursuant to the Federal Aviation Act and that no further action or filing or recording of any document is necessary or advisable in order to establish and perfect the title of Mortgagor to, and the Lien of this Agreement on, such Replacement Engine. (iv) Uniform Commercial Code financing statements covering the security interests created by this Agreement as are deemed necessary or desirable by Mortgagee to protect the security interests of Mortgagee in the Replacement Engine. (v) to the extent assignable, an assignment to Mortgagee as security under this Agreement of all representations, warranties, agreements and indemnities given to Mortgagor by the manufacturer or vendor of such Replacement Engine. 7 (vi) an appraisal from a nationally recognized firm of independent aircraft appraisers reasonably acceptable to Mortgagee as to the fair market value of the Replacement Engine (which shall not be less than the fair market value of the Engine it replaces, assuming such replaced Engine had been maintained in the condition and repair required hereunder) and of the Aircraft after giving effect to such replacement (which shall not be less than the fair market value of the Aircraft prior to such replacement, assuming the Aircraft had been maintained in the condition required hereunder). (b) In the event of the substitution of a Replacement Engine, all provisions of this Agreement relating to the Airframe or Engine being replaced shall be applicable to such Replacement Engine with the same force and effect as if such Replacement Engine were the same engine, as the case may be, as the Engine being replaced but for the Total Loss with respect to the Engine being replaced. 2.3 Liability of Mortgagor. Mortgagor shall be personally liable hereunder for any and all amounts from time to time due and payable hereunder. Mortgagor hereby agrees that Mortgagee may proceed directly against it in connection with its liability hereunder without first proceeding to enforce its rights or remedies against Mortgagor or in the Collateral. Mortgagor hereby authorizes Mortgagee to exercise in any order any right or remedy it might have, including, without limitation, any right of judicial foreclosure or power of sale of the Collateral, with respect to the Obligations. All rights, powers and remedies of Mortgagee hereunder and under the other Operative Documents are cumulative and not alternative and are in addition to all rights, power and remedies given to Mortgagee by applicable Law. 2.4 No Segregation of Moneys; No Interest. Moneys received by Mortgagee hereunder need not be segregated in any manner except to the extent required by applicable Law or any Operative Document, and may be deposited under such general conditions as may be prescribed by applicable Law, and Mortgagee shall not be liable for any interest thereon, provided that, to the extent such information is or was available to Mortgagee, any payments received or applied hereunder by Mortgagee shall be accounted for by Mortgagee so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. 3. OPERATION, REPLACEMENT OF PARTS AND POSSESSION OF AIRCRAFT 3.1 Operation. Mortgagor agrees that it will not use or operate, or permit any permitted lessee or sublessee (if any) of the Aircraft or any other Person to use or operate the Aircraft in violation of any law or any rule, regulation or order (including, without limitation, concerning alcoholic beverages or prohibited substances) of any Government Entity having jurisdiction (domestic or foreign) or in violation of any airworthiness certificate, license or registration relating to the Aircraft or any Engine issued by any such authority, except to the extent the validity or application of any such law, rule, regulation or order is being contested in good faith and by appropriate proceedings and for the payment of which adequate reserves have been provided and are being maintained on the books of Mortgagor (but only so long as 8 Mortgagee has been given notice of such proceedings and such proceedings do not, in Mortgagee's reasonable opinion, involve any danger of the attachment, sale, forfeiture or loss of the Aircraft, any Engine, or any Part thereof or otherwise materially adversely affect the Lien of this Agreement or subject Mortgagee or any Holder to any risk of civil or criminal penalty). In the event that any such law, rule, regulation or order requires alteration of the Aircraft, any Engine, or any Part thereof, unless the validity thereof is being contested in good faith and by appropriate proceedings and for the payment of which adequate reserves have been provided and are being maintained on the books of Mortgagor (but only so long as Mortgagee has been given notice of such proceedings and such proceedings do not, in Mortgagee's reasonable opinion, involve any danger of the attachment, sale, forfeiture or loss of any item of the Aircraft, any Engine, or any Part thereof or otherwise materially adversely affect the Lien of this Agreement or subject Mortgagee or any Holder to any risk of civil or criminal penalty), Mortgagor will conform thereto or obtain conformance therewith at no expense to Mortgagee and will maintain the Aircraft in proper operating condition under such laws, rules, regulations and orders. Mortgagor agrees that it will not permit the Aircraft or any Engine to be operated, used or located (a) in any area excluded from coverage by the insurance required by the terms of Section 6.3, except in the case of a requisition by the United States of America where Mortgagor obtains indemnity from the United States of America against substantially the same risks and for at least the amounts of the insurance required by Section 6.3 covering such area, or (b) outside the United States or Canada in any recognized or, in the Mortgagor's reasonable judgment, threatened area of hostilities unless, notwithstanding the provisions of Section 6.3, covered by war risk and allied perils insurance, or in either case unless the Aircraft is operated or used under contract with the government of the United States or any agency or instrumentality thereof (backed by the full faith and credit of the United States Government) under which contract such government assumes liability for substantially the same risks in at least the same amounts as would be covered by such insurance. 3.2 Transfer of Possession. Except as expressly set forth herein or in the Indenture, Mortgagor will not, without the prior written consent of Mortgagee, lease, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft or any Engine, except that Mortgagor may install an Engine on another aircraft in Mortgagor's fleet to the extent consistent with Section 6.2 below. 3.3 Total Loss of Engine and not Airframe; Total Loss of Airframe. (a) Upon a Total Loss of any Engine not installed on the Aircraft or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, Mortgagor will give Mortgagee prompt (but in any event, within five Business Days after the Total Loss Date) written notice thereof. Mortgagor will, as soon as reasonably possible and in any event within 120 days of the Total Loss Date with respect to such Total Loss, and on at least five days' written notice to Mortgagee, replace such Engine by duly obtaining title to a Replacement Engine free of all liens and encumbrances other than Permitted Liens and such Replacement Engine will have a value and utility at least equal to, and of the same model, service bulletin, and modification status and in at least as good operating condition as, the Engine which sustained such Total Loss. Such Replacement Engine will be an Engine as defined herein. 9 (b) Mortgagor agrees at its own expense to take such action as Mortgagee may reasonably request in order that any such Replacement Engine becomes the Property of Mortgagor and is subject to the Lien provided by this Agreement. (c) Upon a Total Loss of the Airframe, Mortgagor will give Mortgagee prompt (but in any event, within five Business Days after the Total Loss Date) written notice thereof and will comply with the provisions of Section 4.12 (d) of the Indenture. 3.4 Replacement of Parts. Mortgagor, at its own cost and expense, will promptly replace or cause the replacement of all Parts that may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason whatsoever, with Parts of at least equivalent model, operating condition and modification status as the replaced Part if the replaced Part had been maintained in accordance with the provisions hereof. Mortgagor may substitute for any Part a Part that does not meet the foregoing requirements if a complying Part could not be procured or installed within the available ground time of the Aircraft and as soon as practicable the noncomplying part is removed and replaced by a complying Part. All Parts at any time removed from the Aircraft or any Engine shall remain part of the Aircraft or any Engine no matter where located, until such time as such Parts shall be replaced by Parts which have been incorporated in the Aircraft or any Engine and which meet the requirements for replacement Parts specified above. Immediately upon any replacement Part becoming incorporated or installed in or attached to the Aircraft or any Engine as above provided, without further act, (i) such replacement Part shall be deemed part of the Aircraft or Engine, as applicable, for all purposes hereof to the same extent as the Parts originally incorporated in the Aircraft or Engine, as applicable, and (ii) the replaced Part shall no longer be deemed a Part hereunder. 3.5 Installation of Video Equipment and Telephone Systems owned by Third Parties on the Aircraft. Mortgagor may lease or purchase subject to a security lien equipment for the Aircraft (including video systems and telephone systems) from third parties and install such equipment on the Aircraft. The installation of such equipment on the Aircraft is considered a modification to the Aircraft and Mortgagor must comply (or, with respect to such equipment existing and already installed on the Issue Date, have complied) with the requirements of Section 6.11 prior to the installation of such equipment on the Aircraft. Such equipment will remain the Property of its owner, unless such equipment has not been removed from the Aircraft prior to the repossession of the Aircraft by Mortgagee or the owner or holder of the security interest in such equipment shall not have requested in writing that the same be removed in accordance with this Section (at which time title will pass to Mortgagee). Prior to repossession of the Aircraft by Mortgagee, Mortgagor or the holder of the security interest may remove any such equipment from the Aircraft, so long as Mortgagor restores and repairs any of the alterations made to the Aircraft in connection with the installation of such equipment on the Aircraft to the same condition that the Aircraft was in prior to the installation of such equipment on the Aircraft. In the event that the Aircraft is repossessed by Mortgagee in any manner permitted by this Agreement which does not allow the removal of the equipment prior to such repossession, upon written notice to Mortgagee by any such lessor or holder of a security interest within ten days of such termination requesting removal of the equipment, Mortgagee shall remove or cause to be 10 removed such equipment, restore and repair the Aircraft to the condition that such Aircraft was in prior to the installation of such equipment on the Aircraft and return such equipment to the lessor or holder of the security interest, all of which will be at the cost and expense of the lessor or security holder of such security interest. As a condition precedent to removal and return, the owner or security holder must provide Mortgagee with the security requested by Mortgagee to cover the costs of such removal, restoration and return and the associated downtime. 3.6 Interchange and Pooling Agreements. Mortgagor may subject the Engines and Parts to normal interchange or pooling agreements with responsible international scheduled commercial air carriers customary in the airline industry and entered into by Mortgagor in the ordinary course of its business with respect to its entire Boeing 767-200 fleet so long as (i) in the case of pooling of an Engine, such Engine is returned to Mortgagor within one (1) month, (ii) no reregistration of the Engine occurs, (iii) all other terms of this Agreement continue to be observed with respect to the Engines or Parts, and (iv) Mortgagor continues to be fully responsible to Mortgagee for the performance of all of its obligations hereunder. 4. EVENTS OF DEFAULT; DISPOSITION OF COLLATERAL; APPLICATION OF PROCEEDS AND LIMITATIONS ON AND SUBORDINATION OF LIEN 4.1 Judicial Proceedings, etc., Following Event of Default. Subject to Section 4.6, if any Event of Default shall occur and be continuing, then, and in any such event, Mortgagee may, forthwith upon notice to Mortgagor (it being understood and agreed that such provision of notice to Mortgagor shall not be deemed to limit or otherwise restrict Mortgagee's rights and remedies hereunder or under any other Operative Document or agreement): (a) apply to a court of competent jurisdiction to obtain specific performance or observance by Mortgagor of any covenant, agreement or undertaking on the part of Mortgagor hereunder that Mortgagor shall have failed to observe or perform or to obtain aid in the execution of any power granted herein; and/or (b) proceed to foreclose against the Collateral or any part thereof pursuant to this Agreement, and according to the applicable Law of the jurisdiction or jurisdictions in which such Collateral or part thereof shall at the time be located, by doing any one or more or all of the acts described in Sections 2.1 or 4.2 and/or the following acts, as Mortgagee, in its sole and complete discretion (acting in good faith), may then elect to: (i) exercise all the rights and remedies, in foreclosure and otherwise, available to it as a mortgagee and secured party under the provisions of applicable Law, including, in any event, all of the rights, powers and remedies under the Uniform Commercial Code of the State of New York; (ii) institute legal proceedings to obtain a judgment conferring on Mortgagee the right to immediate possession or requiring Mortgagor to deliver immediate possession of all or part of the Collateral to Mortgagee; (iii) institute legal proceedings to foreclose upon and against the security interest granted in and by this Agreement, to recover judgment for all 11 Obligations then due and owing, and to collect the same out of any of the Collateral or the proceeds of any sale thereof; (iv) institute legal proceedings for the sale, under the judgment or decree of any court of competent jurisdiction, of any or all of the Collateral; (v) without regard to the adequacy of the security for the Indenture or any other Operative Document or agreement between Mortgagee and Mortgagor, Mortgagor and its Affiliates, by virtue of this Agreement or otherwise, or any other collateral or other security or to the solvency of Mortgagor, institute legal proceedings for the appointment of a receiver or receivers pending foreclosure hereunder or for the sale of any of the Collateral under the order of a court of competent jurisdiction or under other legal process; or (vi) personally, or by agents or attorneys, enter upon any premises where the Collateral or any part thereof may then be located, and take possession of and remove all or any part thereof or render it unusable; and without being responsible for loss or damage to such Collateral, hold, store and keep idle, or lease, operate or otherwise use or permit the use of, the same or any part thereof, for such time and upon such terms as Mortgagee may in its sole and complete discretion deem to be in its own best interests, and demand, collect and retain all hire, earnings and other sums due and to become due in respect of the same from any party whomsoever, accounting for net earnings, if any, arising from such use and charging against all receipts from the use of the same or from the sale thereof, by court proceedings or pursuant to Section 4.2, all other costs, expenses, charges, damages and other losses resulting from such use in good faith. All expenses of obtaining any such judgment, bringing any such legal proceeding or of pursuing, searching for and taking such Property shall, until paid, be secured by the Lien of this Agreement. 4.2 Delivery of Collateral, Power of Sale, etc. If Mortgagee should elect to foreclose upon and against the security interest created in and by this Agreement, Mortgagor shall, upon demand of Mortgagee, deliver to Mortgagee all or any part of the Collateral at such time or times and to such airport within the continental United States of America as Mortgagee may specify; and Mortgagee is hereby authorized and empowered, in accordance with applicable Law and without being responsible for loss or damage to such Collateral incurred other than solely by reason of Mortgagee's willful misconduct, to enter upon any premises where the Collateral or any part thereof may be located and take possession of and remove the same. Mortgagee may thereafter sell and dispose of, or cause to be sold and disposed of, all or any part of the Collateral at one or more public or private sales, at such places and times and on such terms and conditions as Mortgagee may deem fit in good faith, with or without any previous demand to Mortgagor or any other person, or advertisement of any such sale or other disposal upon notice to Mortgagor (it being understood and agreed that such provision of notice to Mortgagor shall not be deemed to limit or otherwise restrict Mortgagee's rights and remedies hereunder or under any other 12 Operative Document or agreement); and for the aforesaid purpose, any other notice of sale, any advertisement and other notice or demand, any right of equity of redemption and any obligation of a prospective purchaser to inquire as to the power and authority of Mortgagee to sell or the application by Mortgagee of the proceeds of sale or otherwise that would otherwise be required by, or available to Mortgagor under, applicable Law are hereby expressly waived by Mortgagor to the fullest extent permitted by such Law. In the event that any mandatory requirement of applicable Law shall obligate Mortgagee to give different, additional or prior notice to Mortgagor of any of the foregoing acts, Mortgagor hereby agrees that, to the extent permitted by applicable Law, a written notice sent to it by mail or by telecopy, so as reasonably to be expected to be delivered to Mortgagor at least ten (10) Business Days before the date of any such act shall be deemed to be reasonable notice of such act and, specifically, reasonable notification of the time after which any private sale or other disposition intended to be made hereunder is to be made. 4.3 Right to Possession, etc. (a) To the fullest extent Mortgagor may lawfully agree, the right of Mortgagee to take possession of and sell any of the Collateral in compliance with the provisions of this Section 4 shall not be affected by the provisions of any applicable reorganization or other similar law or any jurisdiction; and Mortgagor shall not take advantage of any such law or agree to allow any agent, assignee or other party to take advantage of such law in its place, to which end Mortgagor, for itself and all who may claim through it, as far as it or they now or hereafter lawfully may do so, hereby waives, to the fullest extent permitted under applicable Law, any rights or defenses arising under any such law, and all rights to have the Collateral marshaled upon any foreclosure hereof, and hereby agrees that any court having jurisdiction to foreclose upon and against the security interest created in this Agreement may order the sale of the Collateral subject to such jurisdiction as an entirety or severally. (b) Mortgagee shall not have any duty or obligation to use, operate, store, lease, control, manage, sell, dispose of or otherwise deal with the Aircraft or any other part of the Collateral, or otherwise to take or refrain from taking any action under, or in connection with, this Agreement. If an Event of Default shall occur and be continuing and Mortgagee shall have obtained possession of or title to the Aircraft or any Engines, Mortgagee shall not be obligated to use or operate the Aircraft or Engines or cause the Aircraft or Engines to be used or operated directly or indirectly by itself or through agents or other representatives or to lease, license or otherwise permit or provide for the use or operation of the Aircraft or Engines by any other Person, provided, however, that if Mortgagee in its sole discretion elects to so use or operate the Aircraft or Engines, Mortgagee may obtain insurance in kinds, at rates and in amounts satisfactory to it in its reasonable opinion to protect the Collateral and Mortgagee and the Holders against any and all liability for loss or damage to the Aircraft or Engines and for public liability and Property damage resulting from the use or operation of the Aircraft or Engines by application of any funds available in the Collateral to pay for all such insurance or, in lieu of such insurance, Mortgagee is furnished with indemnification from any other Person upon terms and in amounts satisfactory to Mortgagee in its sole discretion to protect the Collateral and Mortgagee, both as Mortgagee and individually, and the Holders, against any and all such liabilities. Upon every taking of possession of any Collateral under this Section 4, Mortgagee 13 may (but shall not be obligated to), from time to time, at the expense of the Collateral, make all such expenditures for maintenance, storage, insurance, leasing, control, management, disposition, repairs, replacements, alterations, additions and improvements to and of the Collateral, as it may deem proper. In each such case, Mortgagee shall have the right to maintain, store, insure, lease, control, modify, alter, sell, transfer, convey or otherwise dispose of or manage the Collateral and to exercise all rights and powers of Mortgagor relating to the Collateral in connection therewith, as Mortgagee shall deem appropriate, including the right to enter into any and all such agreements with respect to the maintenance, insurance, storage, leasing, control, management, disposition, modification or alteration of the Collateral or any part thereof as Mortgagee may determine, all as may be reasonably necessary or desirable for the general upkeep of the Collateral or to prepare any Collateral for sale or other disposition hereunder; and Mortgagee shall be entitled to collect and receive directly all tolls, rents, revenues, issues, income, products and profits of the Collateral and every part thereof, without prejudice, however, to the right of Mortgagee under any provision of this Agreement to collect and receive all cash held by, or required to be deposited with, Mortgagee hereunder. (c) Mortgagor does hereby irrevocably constitute and appoint Mortgagee the true and lawful attorney of Mortgagor (which appointment is coupled with an interest) with full power (in the name of Mortgagor or otherwise) to ask, require, demand and receive any and all moneys and claims for moneys (in each case including insurance and requisition proceeds) due and to become due under or arising out of or which now or hereafter constitute part of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceeding which Mortgagee may deem to be necessary or advisable in the premises; provided, Mortgagee shall not exercise any such rights except upon the occurrence and during the continuance of an Event of Default. 4.4 Application of Proceeds. Subject to Section 4.6: (a) All payments or proceeds received by Mortgagee under or pursuant to this Agreement the application of which is not otherwise provided for herein shall be applied or in the absolute discretion of Mortgagee (exercised in good faith) retained for application in the manner set forth in Section 6.10 of the Indenture. (b) All payments and proceeds received and amounts realized by Mortgagee after an Event of Default has occurred and is continuing which funds would, but for the provisions of this paragraph (b), be distributed to Mortgagor, shall be held by Mortgagee as collateral security (and part of the Collateral) for the Obligations, may be applied by the Mortgagee in the manner set forth in Section 6.10 of the Indenture, and at such time as no Event of Default shall be continuing, any such funds remaining shall be distributed to Mortgagor to the extent so distributable hereunder or under the Indenture. (c) All payments received by Mortgagee with respect to a Total Loss of any Aircraft shall be held as part of the Collateral until Mortgagor has complied with Section 4.12(c) of the Indenture. On the Payment Date with respect to the Offer to Purchase required under such Section, Mortgagee shall, upon Request, release such payments with respect to such Total Loss 14 to Mortgagor for payment to the Holders of all or any part of the purchase price with respect to such Offer to Purchase. (d) All payments received by Mortgagee with respect to a Total Loss of any Engine not installed on the Aircraft or a Total Loss of an Engine installed on the Airframe not involving a Total Loss of the Airframe, shall be held as part of the Collateral until Mortgagor shall comply with Sections 2.2 and 3.3 with respect to such Engine and shall promptly thereafter be turned over to Mortgagor. (e) All payments received by Mortgagee with respect to loss or damage to the Aircraft not involving a Total Loss shall be held as part of the Collateral and paid over to Mortgagor upon Request therefor and upon receipt by Mortgagee of an Officers' Certificate and such other documents or instruments as Mortgagee may reasonably request to evidence compliance by Mortgagor with its repair or replacement obligations hereunder. (f) All amounts from time to time distributable under this Section 4.4 by Mortgagee to Mortgagor shall be paid by Mortgagee to Mortgagor at its address set forth in Section 11.2 of the Indenture and, to the extent so timely received, in funds of the same type as received. If the payments or proceeds received by Mortgagee under this Agreement or any other Operative Document shall be insufficient to indefeasibly pay in full the Obligations then due and payable to Mortgagee and as set forth above in this Section 4.4, Mortgagor shall forthwith pay any balance of such amounts remaining unpaid to Mortgagee or as Mortgagee directs, and any deficiencies remaining thereafter may be entered as a judgment against Mortgagor in any court of competent jurisdiction. 4.5 Matters Involving Manner of Sale. (a) At any sale pursuant to this Section 4, whether by virtue of judicial proceedings contemplated in Section 4.1 or under the power of sale granted in Section 4.2, it shall not be necessary for Mortgagee or a public officer under order of a court to have present physical or constructive possession of the Collateral to be sold. The recitals contained in any conveyances and receipts made and given by Mortgagee in good faith or such public officer to any purchaser at any sale made pursuant to this Agreement shall, to the extent permitted by applicable Law, conclusively establish the truth and accuracy of the matters therein stated (including, without limiting the generality of the foregoing, the amounts due and payable under the Indenture and any other indebtedness secured hereby, the accrual and nonpayment thereof and advertisement and conduct of such sale in the manner provided herein and by applicable Law); and all prerequisites to such sale shall be presumed to have been satisfied and performed. (b) At any sale or sales made pursuant to this Section 4, Mortgagee, any Holder or their respective agents may bid for or purchase, free from any right or equity of redemption in favor of Mortgagor and any Person claiming by, through or under Mortgagor (all such rights being in this Section 4 waived and released), any part of or all of the Collateral offered for sale, and may make payment on account thereof by using any claim for moneys then 15 due and payable to Mortgagee by Mortgagor as a credit against the purchase price; and Mortgagee, upon compliance with the terms of sale, may hold, retain and dispose of such Collateral without further accountability therefor to Mortgagor or any third party, except as expressly required by applicable Law. In any such sale Mortgagee shall not be obligated to make any representations or warranties with respect to the Collateral or any part thereof, and Mortgagee shall not be chargeable with any of the obligations or liabilities of Mortgagor with respect thereto. Mortgagor hereby agrees (i) that it will indemnify and hold Mortgagee harmless from and against any and all claims with respect to the Collateral asserted before the taking of actual possession or control thereof by Mortgagee or its agents pursuant to this Section 4, or arising out of any act of, or omission to act on the part of, any party other than Mortgagee or any of its agents prior to such taking of actual possession or control by Mortgagee, or arising out of any act of, or omission to act on the part of, Mortgagor or any Person claiming by, through or under Mortgagor or any of its Affiliates or agents before or after the commencement of such actual possession or control by Mortgagee or any of its agents; and (ii) that Mortgagee shall have no liability or obligation arising out of any such claim; except, however, in each of clause (i) and (ii) with respect to claims arising from the willful misconduct of Mortgagee. (c) Except as provided in Section 4.6, nothing herein contained shall be deemed to impair in any manner the absolute right of Mortgagee to sell and convey title to the Collateral to the purchaser(s) at such public or private sale(s) or to grant options with respect to or otherwise to realize upon all or such portion of the Collateral, at such time, and in such order as it may elect in its sole and complete discretion in good faith, or to enforce any one or more remedies relative hereto either successively or concurrently; and Mortgagor hereby agrees that the security interest, options and other rights hereby given to Mortgagee shall remain unimpaired and unprejudiced until all the Collateral shall have been sold or this Agreement shall otherwise have ceased to be of any force or effect according to its terms, and that the enforcement of any right or remedy shall not operate to bar or estop Mortgagee from exercising any other right or remedy available hereunder or under any other Operative Document or agreement between Mortgagee and any of its Affiliates, on the one hand, and Mortgagor or any Person claiming by, through or under Mortgagor and its Affiliates on the other hand, or otherwise, available at law, in equity or otherwise. (d) Upon the completion of any sale under this Section 4, Mortgagor shall deliver, in accordance with the instructions of Mortgagee (including flying the Aircraft or any Engine or causing the same to be flown to such airports in the continental United States as Mortgagee may specify) such Collateral so sold. Mortgagee may execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument or instruments of conveyance, sale and transfer of all of the Property sold; and Mortgagee is hereby irrevocably appointed the true and lawful attorney of Mortgagor, with full power of substitution, in its name and stead, to make all necessary conveyances of the Property thus sold. Nevertheless, if so requested by Mortgagee or by any purchaser, Mortgagor shall confirm any such sale or transfer by executing and delivering to Mortgagee or to such purchaser all proper instruments of conveyance and transfer and releases as may be designated in any such request. 16 4.6 Limitations on and Subordination of Lien. Notwithstanding anything herein or in the Indenture to the contrary, Mortgagee and each of the Holders, by their acceptance of the Securities, agree that the maximum aggregate amount of Obligations that are secured by this Agreement is $10,250,000, and they further agree, for the benefit of the Notes Trustee, the holders of the 10 1/4% Secured Notes and Mortgagor that so long as the First Mortgage shall be in effect: (a) The Lien of this Agreement shall be subject and subordinate to the Lien of the First Mortgage, and in furtherance thereof, Mortgagee and the Holders shall not take any action against the Collateral, or any part thereof, including without limitation, foreclosure, sale or other transfer pursuant to the exercise of remedies contained herein relating to such Collateral, without the prior written consent of the holders of at least 66 2/3% in aggregate principal amount of the 10 1/4% Secured Notes then outstanding, unless and until all obligations under the 10 1/4% Secured Notes and the Notes Indenture have been fully paid or provided for. (b) Mortgagee and the Holders shall be obligated to hold in trust for the benefit of the Notes Trustee and the holders of the 10 1/4% Secured Notes and shall promptly pay over to or as instructed by the Notes Trustee for its benefit and the benefit of the holders of the 10 1/4% Secured Notes (i) any proceeds of or amounts received with respect to the Collateral (including insurance proceeds with respect to loss of or damage to any Collateral) which, under the terms of the First Mortgage or the Notes Indenture are payable to or required to be turned over to the Notes Trustee and (ii) any proceeds realized on foreclosure, sale or other transfer of the Collateral, in each case, until the 10 1/4% Secured Notes shall have been fully paid or provided for. (c) Mortgagee and the Holders, to the full extent that they may lawfully so agree, shall not challenge, hinder or delay any foreclosure, sale or other transfer of the Collateral pursuant to the exercise of remedies in accordance with the First Mortgage and in accordance with the requirements of applicable law, and Mortgagee and the Holders shall have, if any such transaction is challenged by it or any of them, the burden of showing that such transaction was not commercially reasonable and they acknowledge that the fact that a better price could have been obtained by a sale at a different time or in a different method from that selected in the exercise of remedies under the First Mortgage is not of itself sufficient to establish that the sale or sales were not made in a commercially reasonable manner. For purposes of this Section 4.6, the term "Collateral" shall have the definition specified for such term in the First Mortgage. 5. REPRESENTATIONS AND WARRANTIES Mortgagor makes the following representations and warranties which shall be true and correct in all material respects as of the Issue Date and such representations and warranties shall survive the execution and delivery of this Agreement and the issuance of the Securities: 5.1 Corporate Status. Mortgagor is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware, is an "air carrier" within the 17 meaning of the Federal Aviation Act operating under a certificate of public convenience and necessity issued pursuant to Section 41102 thereof, holds an "air carrier operating certificate" issued pursuant to chapter 447 of the Act and of the type referred to in 11 U.S.C. ss. 1110, is a "citizen of the United States" as defined in Section 40102(a)(15) of the Act, and has the corporate power and authority to own or hold under lease its Properties and to enter into and perform its obligations under the Operative Documents. It is duly qualified to do business as a foreign corporation in the state of Missouri and in each other state of the United States in which failure to so qualify would have a material adverse effect on its financial condition or on its ability to perform its Obligations. It holds all material licenses, certificates, permits and franchises from the appropriate United States or other governmental agencies necessary to authorize it to engage in air transport and to conduct scheduled passenger service as presently conducted. Its chief executive office (as such term is used in sections 9-103 and 9-401 of the Uniform Commercial Code as in effect in New York and Missouri) is located at One City Centre, 515 North Sixth Street, St. Louis, Missouri 63101. Its correct U.S. tax identification number is 43-1145889. 5.2 Governmental Approvals. No authorization, approval, consent, license or order of, or registration with, or the giving of notice to the FAA or any other Government Entity is required for the valid authorization, execution, delivery and performance by Mortgagor of this Agreement, the Securities, the Indenture or any other Operative Document except as will have been duly effected as of the date of purchase of the Aircraft. 5.3 Binding. The execution, delivery and performance by Mortgagor of the Securities and the other Operative Documents and the consummation or performance by Mortgagor of the transactions contemplated thereby have been duly authorized by all necessary corporate action and do not require any stockholder approval or the approval or consent of or notice to any trustee or holder of any indebtedness or obligations of Mortgagor. This Agreement, the Securities, the Indenture and the other Operative Documents have been duly executed and delivered by Mortgagor and represent the valid, enforceable and binding obligations of Mortgagor except as enforceability may be limited by bankruptcy, insolvency, reorganization or other Laws of general application affecting the enforcement of creditors' rights. 5.4 No Breach. The execution and delivery of this Agreement, the Securities, the Indenture and the other Operative Documents, the consummation by Mortgagor of the transactions contemplated herein and therein and compliance by Mortgagor with the terms and provisions hereof and thereof do not and will not contravene any Law applicable to Mortgagor, or result in any breach of or constitute any default under or result in the creation of any Lien (except the Liens in favor of the Trustee created hereby or thereby) upon any Property of Mortgagor, pursuant to any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement, corporate charter, by-law or other agreement or instrument to which Mortgagor is a party or by which Mortgagor or its Properties or assets may be bound or affected. 5.5 Filings. Except for filing this Agreement and the Mortgage Supplements with the FAA and filing Uniform Commercial Code financing statements in the offices of the Secretary of 18 State of Missouri and the offices of the Clerks of St. Louis City and Platte Counties, Missouri (all of which filings have been made), no filing or recording of any instrument or document is necessary under the Laws of the U.S. in order for this Agreement to create a valid and second priority perfected security interest of record relating to the Aircraft and the other Collateral. 5.6 Licenses. Mortgagor holds all licenses, certificates and permits from applicable Government Entities in the U.S. for the conduct of its business as a certificated air carrier and performance of its obligations under this Agreement, the Securities, the Indenture and the other Operative Documents. 5.7 No Suits. There are no suits, arbitrations, investigations or other proceedings pending or threatened against Mortgagor before any court or administrative agency against or affecting Mortgagor with respect to this Agreement, the Collateral, the Securities, the Indenture or the other Operative Documents or the transactions contemplated thereby. 5.8 Taxes. Mortgagor has filed or caused to be filed all material tax returns which are required to be filed by it and has paid or caused to be paid all Taxes which have been shown to be due and payable by such returns or (except to the extent being contested in good faith and for the payment of which adequate reserves have been provided) tax assessments received by Mortgagor to the extent that such Taxes have become due and payable. 5.9 No Event of Default or Total Loss. There has not occurred any event which constitutes a Default, an Event of Default, a Total Loss or an event which, but for the passage of time or the giving of notice, or both, would constitute a Total Loss, and no such Default, Event of Default, Total Loss or event will result from Mortgagor's purchasing and mortgaging the Collateral as contemplated hereby. 5.10 Aircraft Certification. The Aircraft has been duly certified by the FAA as to type and airworthiness, has a currently valid Standard Certificate of Airworthiness issued by the FAA, has been insured by Mortgagor in accordance with the terms of this Agreement and is in the condition and state of repair required under the terms of this Agreement. 5.11 Investment Company Act. Neither Mortgagor nor any subsidiary thereof is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 5.12 Condition of Aircraft. The Aircraft is fully equipped to operate in United States commercial service and complies with all material governmental requirements governing such service. 5.13 Title. Mortgagor has good and marketable title to the Aircraft, free and clear of all Liens other than Permitted Liens. 5.14 No Default. Mortgagor is not in default in the performance of any term or condition of the Aircraft Sale Agreement. 19 5.15 Mortgage Liens. Mortgagor has and will have at all times full power and authority to grant a Lien on and security interest in the Collateral in the manner set forth in this Agreement, and this Agreement constitutes a valid second priority mortgage Lien on and security interest in the Collateral, duly securing the Obligations. 5.16 Engines. Each Engine is of 750 or more rated takeoff horsepower. 5.17 FAA Aircraft Registry. As of the Issue Date, the Aircraft is duly registered in the name of Mortgagor, the Aircraft is not registered under the laws of any country other than the United States, this Agreement and the Mortgage Supplement covering the Aircraft being purchased by Mortgagor on the Issue Date pursuant to the Aircraft Sale Agreement are in due form for recording with the FAA Aircraft Registry and this Agreement and the Mortgage Supplement has been duly filed for recording with the FAA Aircraft Registry in favor of Mortgagee in accordance with applicable law. 5.18 Insurances. As of the Issue Date, all insurance policies required pursuant to this Agreement are in full force and effect. 6. COVENANTS. 6.1 This Agreement. So long as this Agreement remains in effect Mortgagor shall duly observe and perform its obligations under the Securities and the Operative Documents to which it is a party and pay to Mortgagee all amounts due and owing hereunder and under the Securities and the other Operative Documents. All such covenants are specifically incorporated herein and made a part hereof. 6.2 Certain Rights. Mortgagor and Mortgagee agree each for itself and for the benefit of any lessor, seller or secured party of any engines leased, operated or purchased by Mortgagor that neither Mortgagee nor its successors and assigns will acquire or claim, as against such lessor, seller or secured party, any right, title or interest in any such engine as the result of such engine being installed on the Airframe at any time while such engine is subject to such lease, conditional sale or other security agreement and owned by such lessor or seller or subject to a security interest in favor of such secured party; provided, that such agreement of Mortgagor and Mortgagee shall not be for the benefit of any lessor, seller or secured party of any such engines unless such lessor, seller or secured party has agreed to substantially the same extent as provided above (which agreement may be contained in such lease, conditional sale or other security agreement) that neither it nor its successors or assigns will acquire, as against Mortgagor or Mortgagee, any right, title or interest in any Engine as a result of such Engine being installed on any airframe owned by, leased to or held under any security agreement by such lessor, seller or secured party. 6.3 Insurance. (a) Categories of Insurance. From the date of purchase of the Aircraft by Mortgagor through the date which is two (2) years after the Stated Maturity of the Securities, Mortgagor will, at its own expense, effect and maintain in full force and effect the insurance 20 described in this Section 6.3 and in Exhibit B through such brokers and with such insurers which are internationally recognized and have a good reputation. (b) Insurance for Indemnities. The insurance referred to in Section 6.3(a) will in each case include and insure (to the extent of the risks covered by the policies) the indemnity provisions of Section 8.1 and Mortgagor will maintain such insurance of the indemnities for a minimum of two (2) years following the Stated Maturity of the Securities. (c) Renewal. Mortgagor will use its best reasonable efforts to try and provide to Mortgagee at least five (5) Business Days prior to the date of termination or expiration of any insurance, telex or fax confirmation from Mortgagor's insurance brokers that renewed certificates of insurance evidencing the renewal or replacement will be issued on the termination date of the prior certificate. But in any event, not less than one (1) Business Day before the expiration or termination date of any insurance required hereunder, Mortgagor will provide Mortgagee with telex or fax confirmation from Mortgagor's insurance brokers that renewed certificates of insurance evidencing the renewal or replacement of such insurance and complying with this Section 6.3 and Exhibit B will be issued on the termination date of the prior certificate. Within seven (7) days after such renewal, Mortgagor will furnish its brokers' certificates of insurance to Mortgagee. (d) Assignment of Rights by Mortgagee. If Mortgagee assigns all or any of its rights under this Agreement as permitted by this Agreement or the Indenture or otherwise disposes of any interest in the Aircraft to any other Person as permitted by this Agreement or the Indenture, Mortgagor will, upon request, procure that such Person hereunder be added as loss payee and/or additional assured in the policies effected hereunder and enjoy the same rights and insurance enjoyed by Mortgagee under such policies. Mortgagee will nevertheless continue to be covered by such policies. (e) [Intentionally omitted.] (f) Other Insurance. Mortgagee may from time to time by notice to Mortgagor require Mortgagor at Mortgagor's expense to effect such other insurance or such variations to the terms of the existing insurance as may then be customary in the airline industry for aircraft of the same type as the Aircraft and at the time commonly available in the insurance market. (g) Information. Mortgagor will provide Mortgagee with any information reasonably requested by Mortgagee from time to time concerning the insurance maintained with respect to the Aircraft or in connection with any claim being made or proposed to be made thereunder. (h) Currency. All proceeds of insurance pursuant to this Agreement will be payable in Dollars except as may be otherwise agreed by Mortgagee. (i) Grounding of Aircraft. If at any time any of the insurance required pursuant to this Agreement will cease to be in full force and effect, Mortgagor will forthwith 21 ground the Aircraft and keep the Aircraft grounded until such time as such insurance is in full force and effect again. Nothing contained in this paragraph (i) shall be deemed to release Mortgagor from its obligation to maintain insurance as required herein. (j) Failure to Insure. If at any time Mortgagor fails to maintain insurance in compliance with this Section 6.3, Mortgagee will be entitled but not bound to do any of the following (without prejudice to any other rights which it may have under this Agreement by reason of such failure): (i) To effect or maintain insurance satisfactory to Mortgagee or otherwise remedy such failure in such manner as Mortgagee considers appropriate (and Mortgagor will upon demand reimburse Mortgagee in full for any amount so expended in that connection). (ii) At any time while such failure is continuing, to require the Aircraft to remain at any airport or (as the case may be), proceed to and remain at any airport designated by Mortgagee, until such failure is remedied to Mortgagee's satisfaction. (k) Reinsurance. If in the future any reinsurance placed by Mortgagor or a permitted lessee or sublessee (if any) of Mortgagor is maintained on the Aircraft, then such reinsurance will be maintained with reinsurers and brokers approved by Mortgagee. Such reinsurance will contain each of the following terms and will in all other respects (including amount) be satisfactory to Mortgagee: (i) The same terms as the original insurance. (ii) A cut-through and assignment clause satisfactory to Mortgagee. (iii) Payment will be made notwithstanding (A) any bankruptcy, insolvency, liquidation or dissolution of any of the original insurers and/or (B) that the original insurers have made no payment under the original insurance policies. 6.4 Compliance with Laws. Mortgagor shall exercise all due diligence in order to comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, noncompliance with which would have a material adverse effect on Mortgagor. 6.5 Subleasing or Leasing. (a) No Sublease or Lease without Consent. Except as permitted under the Indenture or as set forth below in this Section 6.5, MORTGAGOR WILL NOT SUBLEASE, LEASE OR PART WITH POSSESSION OF THE AIRCRAFT OR ANY ENGINE (EXCEPT FOR MAINTENANCE AND REPAIR) AT ANY TIME WITHOUT THE PRIOR WRITTEN CONSENT OF THE REQUIRED HOLDERS (THE GRANT OR REFUSAL OF WHICH WILL 22 BE IN THE DISCRETION OF SUCH HOLDERS) AND IN ACCORDANCE WITH SUCH REQUIREMENTS AS MAY FROM TIME TO TIME BE AGREED IN WRITING BETWEEN THE REQUIRED HOLDERS AND MORTGAGOR. The wet leasing of the Aircraft in the ordinary course of Mortgagor's business (in which Mortgagor and its crews retain operational control of the Aircraft) will not be considered a sublease of the Aircraft and shall be permitted hereunder so long as no Default or Event of Default then exists. (b) Pre-Approved Subleasing or Leasing. Attached hereto as Exhibit C is a list (the "Pre-Approved List") of airlines to whom the Holders hereby agree Mortgagor may, subject to paragraph (c) below, sublease or lease the Aircraft, without requiring the consent of the Holders. Mortgagor shall have the right to provide Mortgagee and the Holders with a new list (the "New Pre-Approved List") from time to time which the Required Holders shall approve, disapprove or disapprove in part and approve in part within fifteen (15) days of receipt, provided that any such approval will not be unreasonably withheld. In the event that the Required Holders fail to respond within such fifteen (15) day period, Mortgagor will once again deliver the New Pre-Approved List to Mortgagee and the Holders and if the Required Holders then fail to respond within five (5) Business Days of receipt of the New Pre-Approved List (the second time it is sent), the Required Holders shall be deemed not to have consented to the New Pre-Approved List. The New Pre-Approved List, as approved by the Required Holders, shall constitute the Pre-Approved List from the date of such approval. Notwithstanding the foregoing, Mortgagor shall not lease or sublease (including renewals thereof) the Aircraft to any Person otherwise permitted hereunder if at the time such lease or sublease would be entered into or renewed such Person is subject to any bankruptcy, insolvency, liquidation reorganization, dissolution or similar proceeding, is seeking any reorganization or any readjustment of its debts, has substantially all of its Property in the possession of any liquidator, trustee, receiver or similar Person, or is not generally paying its debts as and when they are due. (c) Any Approved Sublease or Lease. Any sublease or lease (hereinafter in this paragraph (c), a "Sublease") of the Aircraft or any Engine will be fully subject to fulfillment of the following conditions: (i) The Mortgagor shall provide at least ten (10) Business Days' prior notice to Mortgagee of any proposed Sublease, setting forth the identity of the sublessee, the Property to be subject to such Sublease and the term of such Sublease, and such Sublease shall contain an express agreement by the sublessee to the effect that: (A) such Sublease is fully subject and subordinate in all respects to this Agreement and to Mortgagee's rights, powers and remedies hereunder, (B) such Sublease shall prohibit any assignment or further sublease of the Property subject thereto, and (C) upon notice of the occurrence of an Event of Default given by Mortgagee to such sublessee, Mortgagee may avoid such Sublease, and the sublessee shall forthwith deliver the Aircraft or Engine to Mortgagee; (ii) All necessary action shall have been taken which is required to continue the perfection of Mortgagee's security interest in the Aircraft and Engine 23 and the Mortgagee's rights under this Agreement and the Sublease and all other necessary documents shall have been filed, registered or recorded in such public offices as may be required to fully preserve the priority of the interest of Mortgagee in the Aircraft and Engine under all applicable Laws; (iii) Mortgagor shall deliver to Mortgagee, promptly after execution thereof, a duly executed copy of such Sublease; (iv) Each Sublease shall be assigned by Mortgagor to Mortgagee as security for Mortgagor's obligations hereunder, and the sublessee shall be required upon the occurrence and during the continuance of an Event of Default to make all payments under such Sublease directly to Mortgagee; provided that if such Event of Default shall cease or shall be waived pursuant to the provisions of the Indenture, Mortgagee shall immediately pay to Mortgagor all funds so received and not yet applied in accordance with the provisions hereof or of the Indenture; (v) Any such Sublease shall include provisions for the maintenance, operation, possession, inspection or insurance of the Property subject thereto that are the same in all material respects as the applicable provisions of this Agreement; (vi) Mortgagor shall furnish to Mortgagee evidence reasonably satisfactory to Mortgagee that the insurance required by Section 6.3 remains in effect; (vii) Mortgagor shall pay or reimburse Mortgagee for all reasonable out-of-pocket fees and expenses, including, without limitation, reasonable fees and disbursements of counsel, incurred by Mortgagee in connection with any such Sublease; (viii) For all purposes of this Section 6.5, the term "Sublease" shall be deemed to include interchange agreements with respect to the Aircraft or Airframe; and (ix) Mortgagor shall remain primarily liable hereunder for the performance of all the terms of this Agreement to the same extent as if such Sublease had not occurred, and no transfer of possession of the Aircraft, the Airframe, any Engine or any Part shall in any way discharge or diminish any of Mortgagor's obligations hereunder or under any other Operative Document. In its sole discretion, Mortgagee may require an Opinion of Counsel in connection with such Sublease, including Mortgagee's rights to repossess the Aircraft in the event of an Event of Default hereunder or under the Sublease. Mortgagor will not amend the terms of any approved Sublease without the prior written consent of the Mortgagee, which will not be unreasonably withheld. 24 6.6 Further Assurances. At any time or from time to time upon the reasonable request of Mortgagee, Mortgagor shall cause the appropriate Person to execute, acknowledge, deliver, and cause to be recorded or registered (if so requested) all such additional instruments and documents and further assurances of title and shall do or cause to be done all such further acts and things as may reasonably be necessary or desirable to effectuate fully the intent and purposes of this Agreement, the Securities, the Operative Documents, and any other agreement entered into in connection therewith. 6.7 Maintenance. So long as the Lien of this Agreement shall not have been discharged, Mortgagor, at its own cost and expense, shall service, repair, maintain, overhaul and test the Airframe and Engines (and each engine and part which is not an Engine or Part, respectively, but is installed on the Airframe) or cause the same to be done in accordance with a maintenance program approved by the FAA (and in compliance with all airworthiness directives thereof), and shall keep or cause to be kept the Airframe and Engines (and each such other engine or part) (i) in such operating condition as may be necessary to enable the airworthiness certification of the Aircraft to be maintained in good standing at all times under the applicable rules and regulations of the FAA and the FAA-approved maintenance program of Mortgagor and (ii) in good operating condition in accordance with all mandatory service bulletins and airworthiness directives of the United States Government and in substantially the same manner as Mortgagor services, repairs, maintains, overhauls and tests similar aircraft operated by Mortgagor in similar circumstances and in accordance with Mortgagor's maintenance program approved by the FAA and without discriminating against the Aircraft with respect to its maintenance, repair, condition or overhaul status based upon the existence of this Agreement. Notwithstanding the foregoing, when aircraft of the same type, model or series as the Airframe (powered by engines of the same type as those with which the Airframe shall be equipped at the time of grounding) have been grounded by the FAA, Mortgagor shall not be required to maintain such certification of airworthiness so long as it continues to comply with all the other provisions of this Agreement with respect to the Aircraft. Nothing herein shall be deemed to prevent Mortgagor from taking the Aircraft out of service for maintenance or modifications permitted hereunder or storage in accordance with applicable FAA requirements, as appropriate and sound practice for such storage. Mortgagor shall maintain or cause to be maintained in the English language all records, logs and other documents required by the FAA to be maintained in respect of the Aircraft. 6.8 Registration. Except as otherwise permitted by this Agreement or as otherwise required by the Federal Aviation Act or rules, regulations, or orders promulgated thereunder, so long as the Lien of this Agreement shall not have been discharged, the Aircraft shall be duly registered in the name of Mortgagor under such Act at all times. Mortgagee shall, at Mortgagor's expense, execute and deliver all such documents as Mortgagor may reasonably request for the purpose of effecting or continuing such registration. 6.9 Insignia. Mortgagor shall for so long as the Aircraft shall be subject to the Lien of this Agreement maintain or cause to be maintained in the cockpit of the Airframe in a location reasonably adjacent to the airworthiness certificate and on each Engine, a metal nameplate identifying the security interest of Mortgagee in the Aircraft, as follows: 25 "Subject to a security interest in favor of [Name of current Mortgagee], as Trustee" Mortgagor will not allow the name of any Person other than Mortgagee, or its successors or assigns, to be placed on the Airframe or any Engine as a designation that might be interpreted as a claim of ownership or of any security interest therein, except that Mortgagor or any permitted lessee may operate the Airframe and Engines in its livery, including its name and logo and except that so long as the First Mortgage is in effect, Mortgagor may comply with Section 6.9 of the First Mortgage. 6.10 Inspection. At all reasonable times so long as the Aircraft is subject to the Lien of this Agreement, Mortgagee or its authorized representatives may at its own expense (unless an Event of Default shall have occurred and be continuing, or unless such inspection discloses any material failure by Mortgagor to comply with the provisions of this Agreement in which case, at Mortgagor's expense) and risk conduct a visual walk-around inspection of the Aircraft and any Engine (including, without limitation, a visual walk-around inspection of the Aircraft during any "C" check or other heavy maintenance) and may inspect the books, logs and records of Mortgagor (and make copies of such books, logs and records) relating to the operation and maintenance thereof; provided that (a) any such inspection shall be subject to the safety, security and workplace rules applicable at the location where such inspection is conducted and any applicable governmental rules or regulations and (b) in the case of an inspection during a maintenance visit, such inspection shall not interfere with the normal conduct of such maintenance visit or extend the time required for such maintenance visit or, in any event, at any time interfere with the use or operation of the Airframe or any Engine or with the normal conduct of Mortgagor's business. All information obtained in connection with any such inspection shall be held confidential by Mortgagee and the Holders and shall not be furnished or disclosed by them to anyone other than each other, their bank examiners, regulators, auditors, accountants, agents and legal counsel and any Person with whom any Holder is in good faith conducting negotiations relating to the possible transfer and sale of such Holder's interest in any Security, if such Person shall have entered into an agreement similar to that contained in this Section 6.10 whereby such Person agrees to hold such information confidential, and except as may be required by an order of any court or administrative agency or by any statute, rule, regulation or order of any governmental authority or as may be necessary to enforce the terms of this Agreement. Neither Mortgagee nor any Holder shall have any duty to make any such inspection or incur any liability or obligation by reason of not making any such inspection. No inspection under this Section 6.10 shall relieve Mortgagor of any of its obligations under this Agreement. If requested by Mortgagee, Mortgagor shall give reasonable prior written notice to Mortgagee of the date on which the Aircraft, Airframe or any Engine undergoes its next scheduled maintenance visit and next major check, and with respect to any Engine the next off-the-wing maintenance, and shall advise Mortgagee of the name and location of the relevant maintenance provider and shall, at least five days prior to commencement of such major check or maintenance, make available for inspection by Mortgagee all relevant records, logs and documents relating to the Aircraft. 26 6.11 Alterations, Modifications and Additions. Mortgagor, at its own expense, shall make alterations and modifications in and additions to the Airframe and each Engine as may be required to be made from time to time to comply with the applicable rules and regulations of the FAA, to maintain the Standard Certificate of Airworthiness for the Aircraft and as otherwise required by applicable Law regardless of upon whom such requirements are, by their terms, nominally imposed; provided that Mortgagor may, in good faith, contest the validity or application of any such standard in any reasonable manner which does not materially adversely affect the Lien of this Agreement or subject Mortgagee or any Holder to any risk of civil or criminal penalty. In addition, Mortgagor, at its own expense, may from time to time make or cause to be made such alterations and modifications in and additions to the Airframe and any Engine as Mortgagor may deem desirable in the proper conduct of its business (including, without limitation, removal of Parts), provided further that no such alteration, modification or addition diminishes, in Mortgagee's reasonable judgment, the value, utility, condition, airworthiness or remaining useful life of the Airframe or Engine below the value, utility, condition, airworthiness or remaining useful life thereof immediately prior to such alteration, modification or addition, assuming the Airframe or Engine was then in the condition required to be maintained by the terms of this Agreement, except that the value (but not the utility, condition, airworthiness or remaining useful life) of the Aircraft may be reduced by the value of Parts which Mortgagor deems obsolete or no longer suitable or appropriate for use in the Airframe or Engine which shall have been removed and not replaced, if the aggregate value of all such obsolete or unsuitable Parts removed from the Aircraft and not replaced shall not exceed $500,000. All Parts incorporated or installed in or attached or added to the Airframe or any Engine as the result of any alteration modification or addition effected by Mortgagor shall be free and clear of any Liens except Permitted Liens and, without further act, become subject to the Lien of this Agreement; provided that Mortgagor may remove any such Part from the Airframe or Engine if (i) such Part is in addition to, and not in replacement of or in substitution for, any Part originally incorporated or installed in or attached to the Airframe or Engine at the time of delivery thereof hereunder or any Part in replacement of, or in substitution for, any such original Part, (ii) such Part is not required to be incorporated or installed in or attached or added to the Airframe or Engine pursuant to the terms hereof and (iii) such Part can be removed from the Airframe or Engine without diminishing or impairing the value, condition, utility, airworthiness or remaining useful life which the Airframe or Engine would have had at the time of removal had such alteration, modification or addition not been effected by Mortgagor assuming the Aircraft was otherwise maintained in the condition required by this Agreement. Upon the removal by Mortgagor of any such Part as above provided, title thereto shall, without further act, be free and clear of all rights of Mortgagee and such Part shall no longer be deemed a Part hereunder. Any such Part not so removed shall, so long as the Lien of this Agreement shall not have been discharged, remain subject to such Lien. 6.12 Notice of Change of Mortgagor's Chief Executive Office. So long as the Lien of this Agreement shall not have been discharged, Mortgagor shall notify Mortgagee at least 30 days prior to any change in the location of the chief executive office of Mortgagor. 27 7. CONDEMNATION 7.1 Dedication to CRAF. Mortgagor may transfer possession of the Airframe or any Engine to the United States of America or any instrumentality or agency thereof as part of the Civil Reserve Air Fleet Program authorized under 10 U.S.C. ss. 9511 et seq. (or any substantially similar program) ("CRAF Program") for a period which includes (collectively, the "CRAF Program Requisition Period") (a) the entire period of requisition under the CRAF Program and (b) an additional six (6) months after the expiration of the requisition under the CRAF Program. 7.2 Notice to Mortgagee. Mortgagor will promptly notify Mortgagee in writing in the event of the requisition for use of the Aircraft under CRAF activation by the U.S. Government. All of Mortgagor's obligations under this Agreement will continue to the same extent as if such requisition had not occurred. 7.3 Requisition of Engine. If there is a requisition for use of any Engine (but not the Airframe) by the U.S. Government in connection with the CRAF Program, Mortgagor will replace such Engine by complying with the terms of Section 3.3 to the same extent as if a Total Loss had occurred with respect to such Engine. 7.4 Government Indemnification. Any provisions of this Agreement to the contrary notwithstanding, if there is a requisition for use of the Aircraft pursuant to the CRAF Program and/or CRAF activation, Mortgagee agrees that Mortgagor's insurances described in Section 6.3 and in Exhibit B hereof may be supplemented by insurances provided under Title XIII of the Federal Aviation Act of 1958, as amended, and/or U.S. Government indemnification (which Title XIII insurances and indemnification will be, as to the Aircraft, in an amount not less than the Agreed Value (as defined in Exhibit B) and, as to all other insurances, in amounts not less than those established in Exhibit B hereof); provided, however, that Mortgagor will remain responsible for full compliance with all the provisions of this Agreement, to the extent Title XIII and/or the U.S. Government indemnification do not satisfy Mortgagor's obligations under this Agreement and the Indenture. 7.5 No Geographic Limits. If there is a requisition for use of the Aircraft pursuant to the CRAF Program and/or CRAF activation, there will be no limitation on the geographic area in which the Aircraft may be operated so long as, taken as a whole, Mortgagor's insurance, the Title XIII insurance and/or the indemnification provided by the U.S. Government fully cover (without any geographic exclusions) Mortgagor's Section 6.3 and Exhibit B insurance requirements. 7.6 Notice of Default. If an Event of Default occurs under this Agreement during a CRAF Program Requisition Period with respect to the Airframe and Mortgagee elects to pursue its remedies under Section 4 to terminate this Agreement and repossess the Airframe, Mortgagee will so notify the U.S. Government by sending a written communication as follows: Headquarters Air Mobility Command AMC Contracting Office -- XOKA Scott Air Force Base, Illinois 62225-5007 28 7.7 Receipts of Payments. So long as no Event of Default has occurred and is continuing, all payments received by Mortgagee or Mortgagor from such Government Entity in connection with the requisition of the Aircraft under the CRAF Program will be paid over to or retained by Mortgagor. If an Event of Default has occurred and is continuing, all payments received by Mortgagor or Mortgagee from such Government Entity in connection with the requisition of the Aircraft under the CRAF Program may be used by Mortgagee to satisfy any Obligations owing by Mortgagor in the order provided in Section 6.10 of the Indenture. 8. GENERAL INDEMNIFICATION 8.1 General Indemnification and Waiver of Certain Claims. (a) Claims Defined. For the purposes of this Section 8.1, "Claims" shall mean any and all costs, liabilities (including strict or absolute liability without fault in tort or otherwise), losses, damages, penalties, actions or suits or claims which may be imposed on, incurred by, suffered by, or asserted against an Indemnified Person, as defined herein, and, except as otherwise expressly provided in this Section 8.1, shall include all reasonable out-of-pocket costs, disbursements and expenses (including legal fees and expenses) paid or incurred by an Indemnified Person in connection therewith. (b) Indemnified Person Defined. For the purposes of this Section 8.1, "Indemnified Person" means Mortgagee and each Holder, and each of their respective successors, transferees or assigns permitted under the terms of the Securities or the Operative Documents, and all directors, officers, employees, agents, servants and Affiliates of any such Person; provided that, as a condition precedent to any performance by Mortgagor in connection with such indemnity with respect to any Person which is not a signatory to this Agreement, such Person shall adhere to and expressly agree in writing to be bound by all the terms of this Section 8.1. (c) Claims Indemnified. Subject to the exclusions stated in subsection (d) below, Mortgagor hereby indemnifies and agrees to indemnify, defend and hold harmless, on an after-tax basis as defined in Section 8.2(d), each Indemnified Person against Claims arising out of or resulting from: (i) the operation, possession, use, nonuse, purchase, airworthiness, control, return, transfer, maintenance, overhaul, testing, registration, title, lease, reregistration, storage, modification, replacement, repair, substitution, pooling or interchange of the Aircraft, the Airframe, any Engine or any Part, or any engine used in connection with the Airframe, or any part thereof, or any other Property used in connection therewith, or any other Collateral, by Mortgagor, any lessee or any other Person whatsoever, whether or not such operation, possession, use, nonuse, title, lease, purchase, airworthiness, control, return, transfer, maintenance, overhaul, testing, registration, reregistration, storage, modification, replacement, repair, substitution, pooling or interchange is in compliance with the terms of this Agreement or any other Operative Document, including, without limitation, claims for death, personal injury or Property damage or other loss or harm to any 29 Person whatsoever and Claims relating to any laws, rules or regulations pertaining to such operations, possession, use, nonuse, title, lease, purchase, airworthiness, control, return, transfer maintenance, overhaul, testing, registration, reregistration, storage, modification, replacement, repair, substitution, pooling or interchange, including environmental control, noise and pollution laws, rules or regulations; (ii) the manufacture, design, purchase, acceptance, rejection, delivery, nondelivery, condition or ownership of the Aircraft, any Engine or any Part, or any engine used in connection with the Airframe, or any part thereof, or any other Collateral, including, without limitation, latent and other defects, whether or not discoverable, and patent, trademark or copyright infringement; and (iii) any breach of or failure to perform or observe, or any other noncompliance with, any covenant or agreement to be performed by, or other obligation of Mortgagor under, the Securities or any of the Operative Documents, or the falsity, inaccuracy or breach of any representation or warranty of Mortgagor in any of the Operative Documents. (d) Claims Excluded. The following are excluded from Mortgagor's agreement to indemnify under this Section 8.1: (i) Claims attributable to acts or events occurring after the repayment in full of the Securities and the payment and performance of all other Obligations; (ii) Claims which are attributable to Taxes (other than the obligations to "gross up" set forth in Section 8.1(c)), whether or not Mortgagor is required to indemnify therefor under Section 8.2; or (iii) With respect to any particular Indemnified Person, Claims to the extent attributable to the gross negligence or willful misconduct (other than gross negligence or willful misconduct imputed to such Indemnified Person solely by reason of its interest in the Aircraft) of, or to the breach of any contractual obligation by, or the falsity or inaccuracy or breach of any representation or warranty of, such Indemnified Person (unless such breach or falsity or inaccuracy is a result of Mortgagor's failure to comply with the terms of any Operative Document or any representation or warranty therein). (e) Insured Claims. In the case of any Claim indemnified by Mortgagor hereunder which is covered by a policy of insurance maintained by Mortgagor pursuant to Section 6.3 or otherwise, Mortgagor shall not be obligated to indemnify such Indemnified Person with respect to such Claim to the extent of any loss of benefits of such insurance resulting from the failure of such Indemnified Person to cooperate with the insurers in the exercise of their rights to investigate, defend or compromise such Claim as may be required to retain the benefits of such insurance with respect to such Claim. 30 (f) Claims Procedure. An Indemnified Person shall promptly notify Mortgagor of any Claim as to which indemnification is sought, provided that failure of an Indemnified Person to provide such notice shall not release Mortgagor from any of its obligations to indemnify hereunder to the extent such failure does not impair the rights of Mortgagor with respect to the availability or extent of coverage of insurance or otherwise result in any material adverse consequences to Mortgagor. Subject to the rights of insurers under policies of insurance maintained by Mortgagor, Mortgagor shall have the right to investigate, and the right to defend or compromise, employing counsel reasonably acceptable to such Indemnified Person (except as may otherwise be required by any applicable policy of insurance), any Claim for which indemnification is sought under this Section 8.1; provided that, Mortgagor shall not be entitled to defend or compromise any such Claim if an Event of Default shall have occurred and be continuing or if such proceedings involve a material risk of the sale, forfeiture, or loss of, or the creation of any Lien (other than a Permitted Lien) on, the Aircraft or other Collateral, unless Mortgagor shall have posted a bond or other security satisfactory to the relevant Indemnified Persons with respect to such risk. The Indemnified Person shall cooperate with all reasonable requests of Mortgagor in connection with any of the foregoing. Where Mortgagor or the insurers under a policy of insurance maintained by Mortgagor undertake the defense of an Indemnified Person with respect to a Claim, no additional legal fees or expenses of such Indemnified Person in connection with the defense of such Claim shall be indemnified hereunder unless such fees or expenses were incurred at the written request of Mortgagor or such insurers; provided, however, that if (i) in the written opinion of counsel to such Indemnified Person an actual or potential material conflict of interest exists where it is advisable for such Indemnified Person to be represented by separate counsel or (ii) such Indemnified Person has been indicted or otherwise charged in a criminal complaint and such Indemnified Person informs Mortgagor that such Indemnified Person desires to be represented by separate counsel, the reasonable fees and expenses of any such separate counsel shall be borne by Mortgagor. Subject to the requirements of any policy of insurance applicable to a Claim, an Indemnified Person may participate at its own cost and expense in any judicial proceeding controlled by Mortgagor or its insurers pursuant to the preceding provisions, provided that such party's participation does not, in the opinion of the independent counsel appointed by Mortgagor or its insurers to conduct such proceedings, unduly interfere with such control; and such participation shall not constitute a waiver of the indemnification provided in this Section 8.1. Nothing contained in this Section 8.1(f) shall be deemed to require an Indemnified Person to contest any Claim or to assume responsibility for or control of any judicial proceeding with respect thereto. Payments required to be made pursuant to this Section 8.1 to each Indemnified Person shall be made directly to such Indemnified Person in immediately available funds within 30 days after written demand upon Mortgagor by such Indemnified Person. To the extent permitted by applicable Law, interest at the highest rate that may, under any circumstance (whether or not such circumstance has or could actually occur), be applicable to the Securities thereunder or under the terms of the Indenture shall be paid, on demand, on any amount or indemnity not paid when due pursuant to this Section 8.1 until the same shall be paid. (g) Subrogation. To the extent that a Claim indemnified by or on behalf of Mortgagor under this Section 8.1 is in fact paid in full by or on behalf of Mortgagor and/or an insurer under a policy of insurance maintained by or on behalf of Mortgagor, Mortgagor and/or 31 such insurer, as the case may be, shall be subrogated to the extent of such payment to the rights and remedies of the Indemnified Person on whose behalf such Claim was paid with respect to the transaction or event giving rise to such Claim. Should an Indemnified Person receive any refund, in whole or in part, with respect to any Claim paid by Mortgagor hereunder (other than a refund pursuant to a separate insurance policy maintained by an Indemnified Person, it shall (so long as no Default or Event of Default has occurred and is continuing) promptly pay over the amount refunded, together with any interest received with respect to such amount for the period between the indemnification payment and the receipt of such refund, to Mortgagor. (h) Waiver of Certain Claims. Mortgagor hereby waives and releases any claim now or hereafter existing against any Indemnified Person arising out of death or personal injury to personnel of Mortgagor, loss or damage to Property of Mortgagor, or the loss of use of any Property of Mortgagor, which results from or arises out of the condition, use or operation of the Aircraft prior to the payment in full of the Securities and all other Obligations, including, without limitation, any latent or patent defect whether or not discoverable, except as otherwise provided in the Aircraft Sale Agreement. (i) Certain Limitations. The general indemnification provisions of this Section 8.1 are not intended to waive or supersede any specific provisions of, or any rights or remedies Mortgagor or Mortgagee may have under or with respect to, the Aircraft Sale Agreement, the Indenture or any other Operative Document to the extent such provisions, rights or remedies apply to any Claim. (j) Effect of Other Indemnities. The indemnification obligations of Mortgagor under this Section 8.1 shall be those of a primary obligor whether or not an Indemnified Person shall also be indemnified with respect to the same matter under the terms of any other instrument, and the Indemnified Person seeking indemnification from Mortgagor pursuant to this Section 8 may proceed directly against Mortgagor without first seeking to enforce any other right of indemnification. 8.2 Tax Indemnification. (a) Indemnitee Defined. For purposes of this Section 8.2, "Indemnitee" means Mortgagee, the Holders and their respective Affiliates, successors and permitted transferees and assigns. (b) Taxes Indemnified. Subject to the exclusions stated in Section 8.2(c), Mortgagor shall indemnify, pay, defend, protect and hold harmless each Indemnitee against all Taxes, howsoever imposed (whether imposed upon any Indemnitee, Mortgagor, all or any part of the Aircraft, any other Collateral or otherwise), by any federal, state or local government, political subdivision, or taxing authority in the United States, by any government or taxing authority of or in a foreign country or of or in a territory or possession of the United States, or by any international authority, upon or with respect to or in connection with, based upon or measured by, in whole or in part: 32 (i) the Aircraft, the Airframe, the Engines, the Parts, or any other Collateral or any part of any of the foregoing or interest therein; (ii) the manufacture, purchase, financing, ownership, delivery, registration or reregistration, redelivery, leasing, charter, possession, use, location, operation, return, storage, transfer of title, sale, acceptance, rejection or other disposition of or action or event with respect to the Aircraft, the Airframe, the Engines, the Parts, or any other Collateral or any part of any of the foregoing or interest therein; (iii) the rentals, receipts, income or earnings arising from the purchase, financing, ownership, delivery, redelivery, leasing, possession, use, operation, return, storage, transfer of title, sale or other disposition of the Aircraft, the Airframe, the Engines, the Parts, or any other Collateral or any part of any of the foregoing or interest therein; (iv) the Securities, their issuance or acquisition, or the payments of any amounts thereunder; (v) the Property, or other proceeds received with respect to the Property, held by Mortgagee hereunder; or (vi) the Operative Documents or amendments or supplements thereto, their execution or the transactions contemplated thereby. (c) Taxes Excluded. The indemnity provided for in Section 8.2(b) shall not extend to any of the following: (i) Taxes on, based on, or measured by income (including gross income), receipts, capital, franchises, excess profits or conduct of business of an Indemnitee, except to the extent Taxes of such type would not have been imposed on such Indemnitee but for the location of the Aircraft, activities or place of incorporation or principal place of business of Mortgagor or any other user of the Aircraft or any Affiliate of any of the foregoing, registration of the Aircraft, or payment of amounts due under any Security or other Operative Document from, the jurisdiction of the taxing authority imposing such Taxes; (ii) Taxes imposed against a transferee of an Indemnitee to the extent of the excess of such Taxes over the amount of such Taxes which would have been imposed had there not been a transfer by an Indemnitee other than Mortgagee or its Affiliates of any interest of such Indemnitee in the Aircraft, any Security, or any Operative Document; (iii) in the case of any Indemnitee, Taxes which arise out of or are caused by (a) the willful misconduct or gross negligence of such Indemnitee or a Related Party (as defined below) with respect to such Indemnitee or (b) such 33 Indemnitee's making a representation under any Operative Document which proves to be untrue; (iv) in the case of any Indemnitee, Taxes upon (x) any voluntary transfer by such Indemnitee or a Related Party with respect to such Indemnitee of all or any portion of its interest in the Aircraft or any part thereof, any Operative Document or any Security (other than transfers which occur or result from the exercise of any rights under Section 4) or (y) any involuntary transfer of the Aircraft or any interest therein or any Security, any Operative Document, or shares of stock by an Indemnitee resulting from any bankruptcy, foreclosure or similar proceedings in which any Indemnitee is the debtor; (v) United States withholding taxes imposed on payments to a foreign Person; (vi) Taxes imposed with respect to any fees received by Mortgagee; or (vii) Taxes imposed by Section 4795 of the Code or any successor provision thereto. For purposes of this Section 8.2, each transferee or assignee of Mortgagee or a Holder shall be a "Related Party" with respect to each other. (d) Calculation of Indemnities. The amount Mortgagor shall be required to pay with respect to any Tax indemnified against under this Section 8.2 or with respect to any claim under Section 8.1 shall be an amount that after taking into account any Taxes, fees and other charges imposed upon the receipt of an indemnity under this Section 8.2 or under Section 8.1 and any Tax benefits recognized upon payment of such Taxes, equals the amount otherwise due under Section 8.1. All computations for the purposes hereof shall be based on the assumption that the Indemnitee is taxable on all of its income at the highest marginal rate in effect on the date payment pursuant to this Section 8 is made. (e) Procedures. Any amount payable to an Indemnitee pursuant to this Section 8.2 shall be paid within 60 days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable; provided that such amount need not be paid prior to the earlier of (i) the time such Taxes are paid or (ii) in the case of amounts which are being contested by Mortgagor in good faith or by the Indemnitee pursuant to this Section 8.2, the time such contest is finally resolved. Within 30 days following Mortgagor's receipt of the computation of the amount of the indemnity, Mortgagor may request that an accounting firm to be jointly selected by Mortgagor and such Indemnitee (but not including the accounting firm that regularly prepares the certified financial statements of Mortgagor or such Indemnitee) determine whether such computations of the Indemnitee are correct. The computations of such accounting firm shall be final, binding and conclusive upon the parties, and Mortgagor shall have no right to inspect the books, records or tax returns of the Indemnitee to verify such computation. All fees and expenses payable under this Section 8.2 in connection with such verification shall be borne 34 by Mortgagor, unless such verification discloses an error adverse to Mortgagor of 5% or more of the amount calculated by the Indemnitee, in which case such fees shall be paid by the Indemnitee. (f) Contest. If a written claim is made against an Indemnitee for Taxes with respect to which Mortgagor is liable for payment or indemnity hereunder, such Indemnitee shall give Mortgagor prompt notice in writing of such claim and shall furnish Mortgagor with copies of any requests for information from any taxing authority relating to such Taxes with respect to which Mortgagor may be required to indemnify hereunder, but a failure to give such notice or to furnish such requests shall not diminish Mortgagor's obligations hereunder except to the extent such failure precludes Mortgagor from exercising its contest rights hereunder. The Indemnitee shall in good faith, and at Mortgagor's expense, if timely requested in writing by Mortgagor, contest in the name of the Indemnitee the validity, applicability or amount of such Taxes by: (i) resisting payment thereof if practical; (ii) not paying the same except under protest if protest is necessary and proper; (iii) if the payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; or (iv) taking such other action as is reasonably requested by Mortgagor from time to time. Notwithstanding the foregoing provisions of this Section 8.2(f), such Indemnitee shall not be required to take, and shall not be required to permit Mortgagor to take, any administrative or judicial action to contest any such Tax unless (A) Mortgagor shall have agreed to pay such Indemnitee on demand and shall pay all reasonable out-of-pocket costs and expenses which such Indemnitee may incur in connection with contesting such Taxes, (B) no payment Event of Default shall have occurred and be continuing unless Mortgagor shall have posted a satisfactory bond with respect to such claim or provided other security therefor reasonably satisfactory to such Indemnitee, (C) in the event of a contest by or in the name of an Indemnitee or in the event of a judicial contest, upon written request of the Indemnitee Mortgagor shall provide to such Indemnitee within 30 days after such request an Officers' Certificate to the effect that a reasonable basis exists for contesting such claim, (D) prior to commencing any judicial action, Mortgagor acknowledges its liability hereunder on the contested amount, and (E) it shall have been reasonably determined that the action to be taken will not (i) result in the material danger of a sale, forfeiture or loss of the Aircraft or Airframe (except if Mortgagor shall have adequately bonded any Lien that results in such material danger or otherwise made adequate provision reasonably satisfactory to such Indemnitee to protect the interest of such Indemnitee) or (ii) subject such Indemnitee to any material risk of criminal prosecution. To the extent not inconsistent with the provisions contained elsewhere in this Section 8.2(f), the Indemnitee shall have control over the conduct of a contest of a claim hereunder (except to the extent that a contest is being conducted by Mortgagor in accordance with the provisions hereof). Notwithstanding the foregoing, if any Indemnitee shall release, waive, compromise or settle any 35 claim which may be indemnifiable by Mortgagor pursuant to the foregoing provisions of this Section 8.2 without the express written permission of Mortgagor, Mortgagor's obligation to indemnify such Indemnitee with respect to such claim shall terminate to that extent. Nothing contained in this Section 8.2 shall require any Indemnitee to contest, or require any Indemnitee to permit Mortgagor to contest, a claim which such Indemnitee would otherwise be required to contest pursuant to this Section 8.2(f), if such Indemnitee shall waive its rights to any indemnity payment by Mortgagor which would otherwise be payable by Mortgagor pursuant to this Section 8.2 in respect of such claim. (g) Refund. Upon receipt by an Indemnitee of a refund or credit of all or part of any Taxes which Mortgagor shall have paid for such Indemnitee or for which Mortgagor shall have reimbursed, advanced funds to or indemnified such Indemnitee, such Indemnitee shall pay or repay to Mortgagor an amount which, after the subtraction of the amount of any further net tax savings realized by such Indemnitee as a result of the payment under this Section 8.2(g), and the addition of any net tax detriment realized by such Indemnitee as a result of the receipt or accrual of such refund and any interest received or accrued by such Indemnitee in such refund, is equal to the amount of such refund and any interest received or accrued by such Indemnitee on such refund; provided, that such amount shall be reduced by the amount of any payment or indemnity then due from Mortgagor to or on behalf of such Indemnitee pursuant to the Securities or the Operative Documents and not made (and any amount so withheld shall not be payable before such time and to such extent as Mortgagor shall have made such payments or indemnities). Any subsequent loss of such refund and interest as an erroneous refund shall be indemnifiable in accordance with the provisions of this Section 8.2 (disregarding Section 8.2(c)). (h) Return. So long as the Aircraft is subject to the Lien of this Agreement Mortgagor will prepare and file all property tax returns with respect to the Aircraft, except with respect to any such return that Mortgagor is not permitted to file under applicable Law. 8.3 Survival of Indemnities. The agreement and indemnities contained in Sections 8.1 and 8.2 shall survive the discharge of this Agreement (but only with respect to any Person who was entitled to the benefit of such agreements and indemnities at or prior to the time of such termination) but only to the extent relating to claims, obligations and other liabilities arising out of acts or events occurring, or otherwise attributable to the period, prior to the payment in full of the Securities and all other Obligations. 9. MISCELLANEOUS 9.1 Performance by Mortgagee. If Mortgagor shall fail to maintain, or cause to be maintained, any insurance required to be carried pursuant to this Agreement, Mortgagee may obtain the same for the account of Mortgagor; and Mortgagor shall pay to Mortgagee interest (to the extent permitted by applicable Law) at the highest rate that may, under any circumstance (whether or not such circumstance has or could actually occur), be applicable to the Securities thereunder or under the Indenture, computed on the basis of a 360-day year and the actual number of days elapsed, on the amount of any such payment from the date made until the date reimbursed by Mortgagor pursuant hereto. If Mortgagor shall fail in a timely and effective 36 manner to take and complete any other action that it has herein undertaken to perform, strictly in accordance with the provisions hereof, Mortgagee may do or cause the same to be done; and there shall be added to the indebtedness secured hereby any loss, cost or expense incurred by or on behalf of Mortgagee incurring such default or failure, or caused to be suffered by Mortgagee through the incorrectness or breach of any of the covenants, agreements, representations or warranties of Mortgagor herein or by any other default of Mortgagor hereunder; and all sums so lost or expended shall be payable on demand and shall bear interest as provided in the first sentence of this Section 9.1, and Mortgagee shall be subrogated to all of the rights against Mortgagor of any Person to whom it shall have made any payment or payments under the foregoing authority. 9.2 Power of Attorney. Mortgagor hereby irrevocably appoints Mortgagee, and its successors and assigns, the true and lawful attorney of Mortgagor (with the full power of substitution), in the name and place and at the expense of Mortgagor, (i) to give any necessary receipts or acquittance for amounts collected or received pursuant to Section 4 hereof, (ii) at any time after the occurrence of an Event of Default and so long as the same shall be continuing, to make all necessary transfers of all or any part of the Collateral in connection with any sale or other disposition thereof made pursuant to such Section 4, (iii) at any time after the occurrence of any such Event of Default and so long as the same shall be continuing, to execute and deliver for value all necessary instruments of negotiation, assignment and transfer, (iv) at any time after the occurrence of any such Event of Default and so long as the same shall be continuing, to employ legal counsel and to appear in its name in any court in any jurisdiction to commit and compromise and discharge any alleged Lien, charge or other encumbrance asserted against any of the Collateral, in any manner and by any means that shall to it or them, in its or their sole and complete discretion, seem proper; provided, however, that any such undertaking on the part of Mortgagee shall not qualify in any manner or to any extent or degree the obligation of Mortgagor so to defend its title to, and the security interest of Mortgagee in, the Collateral and every part thereof and (v) to file and record such copies or memoranda hereof and financing statements, continuation statements and other instruments or documents with respect to the security interest created hereby as Mortgagee may deem desirable fully to protect its interest hereunder, and for such purpose Mortgagor hereby authorizes Mortgagee to effect any such filings or recordings without the signature of Mortgagor to the extent permitted by applicable Law, Mortgagor hereby ratifying and confirming all that its said attorney shall lawfully do hereunder and pursuant hereto and acknowledging that its said attorney shall have no duty, by virtue of this Section 9.2 or at the risk of otherwise waiving or qualifying the obligation of Mortgagor to do so, to do any of the above acts. 9.3 Waiver, etc., by Mortgagor. To the fullest extent that it may now and hereafter lawfully so agree, Mortgagor hereby agrees that it shall not at any time plead, claim or take the benefit of any appraisal, valuation, extension, moratorium, redemption or other law now or hereafter in effect in any jurisdiction in order to prevent or delay the enforcement of any provision of this Agreement or the indebtedness or agreements secured hereby, or the absolute sale of any portion of or all the Collateral to any purchaser at any sale under Section 4 hereof; and Mortgagor, for itself and all who may claim through it, to the fullest extent that it or they now and hereafter may lawfully so agree, hereby waives the benefit of all such laws. Any sale 37 of, grant of options to purchase or other realization against all or any part of the Collateral shall operate to divest all right, title and interest, at law, in equity and otherwise, of Mortgagor in and to the Collateral so sold, optioned or realized upon, and shall be a perpetual bar, at law, in equity and otherwise, against Mortgagor and against any and all persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through or under Mortgagor. No delay on the part of Mortgagee in exercising any power of sale, Lien or option, or any other right or remedy hereunder, or otherwise, and no notice or demand that may be given to or made upon Mortgagor with respect to any such power, right or remedy, shall constitute a waiver thereof or limit or impair the right of Mortgagee to take any other or similar action or to exercise any power of sale, Lien or option, or any other right or remedy granted in this Agreement or in any other agreement secured hereby or otherwise available to Mortgagee; nor shall any single or partial exercise of any such power, right or remedy preclude any other or further exercise thereof, or the exercise of any power, right or remedy granted in this Agreement or otherwise available to Mortgagee, or prejudice its rights against Mortgagor in any respect. Each and every remedy of Mortgagee shall, to the extent permitted by applicable Law, be cumulative and in addition to any other remedy granted hereunder or now or hereafter available to it at law, in equity or otherwise. 9.4 Amendment, etc. Neither this Agreement nor any provision hereof may be amended, modified, waived or discharged orally, but only by an instrument in writing in accordance with Article 9 of the Indenture. No waiver by Mortgagee of any breach or default of or by Mortgagor under this Agreement, any other agreement or indebtedness secured hereby, or otherwise, shall be deemed a waiver of any other or similar, previous or subsequent breach or default. 9.5 [Intentionally Omitted.] 9.6 Successors and Assigns. This Agreement and all obligations of Mortgagor hereunder shall be binding upon the successors and assigns of Mortgagor permitted under the Indenture, and shall, together with the rights and remedies of Mortgagee hereunder, inure to the benefit of Mortgagee, the Holders, and their respective successors and assigns. Any assignment in violation hereof shall be null and void ab initio. 9.7 Severability. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. Any impairment or invalidity, under the laws of any jurisdiction, of this Agreement, in its aspect as security for any portion of the Obligations, hereunder or under the Securities, the Indenture or the other Operative Documents, for any portion of any other indebtedness or obligation secured hereby, shall not impair or invalidate this Agreement as security for any other portion thereof. 38 9.8 Governing Law; Waiver of Jury Trial. (a) The laws of the State of New York shall govern this Agreement without regard to principles of conflict of laws. (b) Mortgagee and Mortgagor each waive any right to have a jury participate in resolving any dispute, whether sounding in contract, tort, or otherwise arising out of, connected with, related to or incidental to the relationship established between them in connection with this Agreement. Instead, any disputes resolved in court will be resolved in a bench trial without a jury. 9.9 Notices; Waivers. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement to be made upon, given or furnished to, or filed with the parties hereto and/or the Holders, as the case may be, shall be made, given, furnished or filed in the manner and subject to the provisions of Section 11.2 of the Indenture. 9.10 No Adverse Interpretation of Other Agreements. This Agreement may not be used to interpret any agreement of Mortgagor or any of its Subsidiaries which is unrelated to this Agreement or the other Operative Documents. Any such agreement may not be used to interpret this Agreement. 9.11 Benefits of Agreement Restricted. Subject to the provisions of Section 9.6 hereof, nothing in this Agreement, express or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto and the Holders, any legal or equitable right, remedy or claim under or in respect of this Agreement or under any covenant, condition, or provision herein contained, all such covenants, conditions and provisions, subject to Section 9.6 hereof, being for the sole benefit of the parties hereto and of the Holders. 9.12 Counterpart Originals. This Agreement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. 9.13 Effect of Headings. The Section headings and the Table of Contents contained in this Agreement have been inserted for convenience of reference only, and are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. 9.14 Section 1110 of the Bankruptcy Code. It is the intention of the parties that the security interest created by this Agreement shall be a security interest within the meaning of Section 1110 of the Bankruptcy Code (11 U.S.C. ss. 1110) which shall entitle Mortgagee to all of the benefits of such Section or any similar successor provision with respect to the right to repossess the Airframe, Engines and Parts as provided herein; and in any circumstances where more than one construction of the terms and conditions of this Agreement is possible, a construction which would preserve such benefits shall control over any construction which would not preserve such benefits or would render them doubtful. In that regard, the parties 39 acknowledge and agree that the security interest created by this Agreement is intended to be a purchase-money security interest retained and taken by Mortgagee for the benefit of the holders of the Securities as seller of the Collateral to Mortgagor to secure the purchase price of the Collateral as evidenced by the Operative Documents. To the extent consistent with the provisions of such Section 1110 or any analogous Section of the Federal bankruptcy laws, as amended from time to time, it is hereby expressly agreed and provided that, notwithstanding any other provisions of the Federal bankruptcy laws, as amended from time to time, any right of Mortgagee to take possession of the Aircraft in compliance with the provisions of this Agreement shall not be affected by the provisions of 11 U.S.C. ss. 362 or ss. 363, as amended from time to time, or any analogous provisions of any superseding statute or any power of the bankruptcy court to enjoin such taking of possession. It is the intention of the parties that the entitlement to such benefits shall not be adversely affected by any sale or other transfer of any Security to a subsequent Holder or by any modification of the terms hereof, of the Securities or of the other Operative Documents. 40 IN WITNESS WHEREOF, the parties hereto have, by their indicated officers thereunto duly authorized, caused this Aircraft Second Mortgage and Security Agreement to be executed as of the day and year first above written. Mortgagor, TRANS WORLD AIRLINES, INC. By:__________________________ Name: Title: Mortgagee, FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Trustee By:__________________________ Name: Title: EXHIBIT A SECOND MORTGAGE AND SECURITY AGREEMENT SUPPLEMENT NO. Second Mortgage and Security Agreement Supplement No. __, dated _______, ("Mortgage Supplement"), of TRANS WORLD AIRLINES, INC. (the "Company") under the Agreement (as hereinafter defined). W I T N E S S E T H: WHEREAS, the Second Aircraft Mortgage and Security Agreement dated as of June __, 1998 (the "Agreement"), between the Company and First Security Bank, National Association, as Trustee under the Indenture referred to in the Agreement (the "Mortgagee"), provides for the execution and delivery of one or more supplements thereto substantially in the form hereof which shall particularly describe the [Aircraft]* [Engine(s)]** (such term and other defined terms in the Agreement being used herein with the same meanings) being delivered on [the date thereof]* [insert applicable date],** and shall specifically grant an equipment security interest in the Company's interest in such [Aircraft]* [Engine(s)]** to the Mortgagee; and [WHEREAS, it is intended that an executed counterpart of the Agreement be duly recorded pursuant to the Federal Aviation Act concurrently with the recording pursuant to such Act of an executed counterpart of this Mortgage Supplement and, accordingly, such executed counterpart of this Mortgage Supplement shall be attached to and constitute a part of the Agreement for all purposes and shall be recorded together with such Agreement pursuant to such Act; and]* [WHEREAS, the Agreement was duly recorded pursuant to the Federal Aviation Act on June __, 1998 and has been assigned Conveyance No. __________; and]** WHEREAS, the Company hereby acknowledges that the [Aircraft]* [Engine(s)]** referred to in Annex A attached hereto and made a part hereof has been delivered to the Company, and is included in the Property of the Company covered by the terms and conditions of the Agreement, subject to the equipment security interest created thereunder; NOW, THEREFORE, in order to secure all Obligations for the benefit of Mortgagee and the Holders, subject to the terms and conditions of the Agreement, and in consideration of the premises and of the covenants contained in the Agreement, and of other good and valuable consideration, the receipt whereof is hereby acknowledged, the Company has transferred, assigned, granted, bargained, sold, conveyed, mortgaged, hypothecated, pledged, set over and confirmed and does hereby transfer, assign, grant, bargain, sell, convey, mortgage, hypothecate, pledge, set over and confirm, a second priority equipment security interest in and a - -------- * For Mortgage Supplement executed and delivered on the Issue Date. ** For Mortgage Supplement executed and delivered after the Issue Date for any Replacement Engine(s). 2 mortgage lien on, the Property comprising all its right, title and interest in and to [each of the Airframe and Engines]* [the Engine(s)]** described in Annex A attached hereto whether or not any such Engine(s) shall be installed in or attached to the Airframe or any other aircraft, to the Mortgagee, its successors and assigns; To have and to hold all and singular the aforesaid Property unto the Mortgagee, its successors, transferees and assigns, for the uses and purposes and subject to the terms and provisions set forth in the Agreement. This Mortgage Supplement shall be construed as supplemental to the Agreement and shall form a part thereof, and the Agreement is hereby incorporated by reference herein and is hereby ratified, approved and confirmed and terms not otherwise defined herein shall have the meanings provided in the Agreement. This Mortgage Supplement is being delivered in the State of New York and shall be in all respects, including all matters of construction, validity and performance, be governed by the laws of the State of New York without regard to principles of conflict of laws. * * * - -------- * For Mortgage Supplement executed and delivered on the Issue Date. ** For Mortgage Supplement executed and delivered after the Issue Date for any Replacement Engine(s). 3 IN WITNESS WHEREOF, the Company has caused this Mortgage Supplement to be duly executed by one of its duly authorized officers, as of the day and year first above written. TRANS WORLD AIRLINES, INC. By:_________________________ Name:_______________________ Title:______________________ Annex A to Second Mortgage and Security Agreement Supplement No. ___ DESCRIPTION OF AIRFRAME AND ENGINES AIRFRAME FAA Regis- Manufacturer's Manufacturer Model tration No. Serial No. The Boeing _______ _______ _________ Company ENGINES Manufacturer Model Manufacturer's Serial Nos. Pratt & Whitney __________ __________ Pratt & Whitney __________ __________ Each Engine is of 750 or more "rated take-off horsepower" or the equivalent of such horsepower. EXHIBIT B INSURANCE [Refer to the Aircraft Second Mortgage and Security Agreement dated as of June 16, 1998 between Mortgagor and Mortgagee (the "Agreement"). Capitalized terms used in this Exhibit and not otherwise defined herein or in the insurance policies referred to herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached to the Agreement as Appendix I. If applicable, insurance certificates from the insurers will be provided.] To: First Security Bank, National Association, as Trustee ("Mortgagee") 79 South Main Street Salt Lake City, Utah 84111 Attention: Corporate Trust Services TRANS WORLD AIRLINES, INC. Boeing 767-231 ETOPS Manufacturer's Serial No.: 22570 FAA Registration Mark: N607TW (the "Aircraft") The following underwriters have subscribed to the insurance policies: [LIST COMPANIES & PERCENTAGES] THIS IS TO CERTIFY THAT, as insurance brokers, we have effected fleet insurance in respect of aircraft owned or operated by Mortgagor (including the Aircraft) as specified below. AIRCRAFT HULL ALL RISKS COVERING: All risks of physical loss or damage to the Aircraft from any cause (subject only to the exclusions as specified below), for an agreed value of the Aircraft in an amount equal to $27,500,000 (the "Agreed Value"). DEDUCTIBLES: US$ 1,000,000 each and every loss. Not applicable to Total Loss/Constructive Total Loss or Arranged Total Loss. GEOGRAPHICAL COVERAGE: Worldwide 2 AVIATION AND AIRLINE GENERAL THIRD PARTY LIABILITY COVERING: Aircraft Third Party, Passenger, Baggage, Cargo and Mail Liability and Airline General Third Party Liability (including but not limited to Premises, Hangarkeepers, Contractual and Products Liability) for combined single limit of not less than US$ 600,000,000 (or such higher amount as Mortgagor may carry on any other aircraft in its fleet) any one accident/occurrence (but in the aggregate in relation to Products Liability), extended to cover Mortgagor's liability under the Agreement to the extent of the risks covered by the policy; including war and allied perils under Extended Coverage Endorsement as per AVN 52; subject only to exclusions as specified below. GEOGRAPHICAL LIMITS: Worldwide HULL WAR AND ALLIED PERILS COVERING: Hull War Risks as per RJM Airline One, but including (i) confiscation or requisition (including by State of Registration), (ii) hijacking or other unlawful seizure or wrongful exercise of control of the Aircraft or crew in flight (including any attempt at such seizure or control) and including "All Risks" Continuation Clause and Extortion Risks (including expenses) and covering claims excluded from Hull All Risks Policy while Aircraft outside Assured's control by reason of perils insured under this policy, for the Agreed Value. DEDUCTIBLE: US$ 1,000,000 GEOGRAPHICAL LIMITS: Worldwide AIRCRAFT SPARES ALL RISKS INSURANCE COVERING: All risks of physical loss or damage to Aircraft Parts or spares or Engines at all times when removed from the Aircraft from whatever cause, subject only to the exclusions specified below, including the risks set down in AVN 48B other than paragraphs (a) and (b) thereof (but including paragraph (a) in respect of transit risks) for limits of: 3 US$ 18,000,000 and covering replacement cost. DEDUCTIBLE: US$ 250,000 each and every loss GEOGRAPHICAL COVERAGE: Worldwide CONTRACTUAL INDEMNITY Mortgagor has insurance coverage for the indemnities agreed to by Mortgagor pursuant to Section 6.3 of the Agreement but only to the extent of the risks covered by the policies. PERIOD OF COVERAGE (ALL POLICIES) From Issue Date to [EXPIRATION DATE] It is further certified that Mortgagee has an interest in respect of the Aircraft under the Agreement. Accordingly, with respect to losses occurring during the period from the Issue Date until the expiry of the Insurance or until the expiry or agreed termination of the Agreement or until the obligations under the Agreement are terminated by any action of Mortgagor or Mortgagee and it is confirmed that the Insurance afforded by the Policy is in full force and effect and it is further agreed that the following provisions are specifically endorsed to the Policy. 1. UNDER THE HULL (ALL RISKS AND HULL WAR AND ALLIED RISKS) AND AIRCRAFT SPARES INSURANCES [MORTGAGEE ONLY-NO OTHER CONTRACT PARTIES] In respect of any claim on the Aircraft that becomes payable on the basis of a total loss, settlement shall be made to, or to the order of Mortgagee and Notes Trustee, as their interests may appear, and no other loss payee, up to the Agreed Value. With respect to repairable damage to the Aircraft or any Engine, Mortgagee will receive all insurance proceeds in excess of US$ 500,000; provided that upon receipt by the insurance broker of written notice of a Default on the part of Mortgagor, all insurance proceeds which otherwise would be payable to Mortgagor will be made directly to Mortgagee. In respect of any other claim, settlement (net of any relevant policy deductible) shall be made with such party(ies) as may be necessary to repair the Aircraft unless otherwise agreed after consultation between the Insurers and the insured and, where necessary under the terms of the Agreement with Mortgagee. Such payments shall only be made provided they are in compliance with all applicable laws and regulations. Insurers agree 50/50 settlement in terms of AVS 103. 4 Insurers have no right to replace the Aircraft on a Total Loss (arranged, constructive or otherwise). Insurers recognize that Mortgagor and Mortgagee have agreed that a Total Loss of the Airframe will constitute a Total Loss of the Aircraft. "Constructive Total Loss" means any physical damage loss for which the cost to repair equals or exceeds one-half of the Agreed Value of the Aircraft. As part of a constructive total loss of the Aircraft, the insured will abandon the Aircraft to the underwriter. In the event of Total Loss of the Aircraft, Insurers agree to pay Mortgagee all amounts up to the Agreed Value based solely upon Mortgagee's (not Mortgagor's) execution of the appropriate form of release/discharge document; Mortgagee may sign any required release in lieu of the Insured in the event of a Total Loss, Constructive Total Loss or Arranged Total Loss. "Cut-through clause": The Reinsurers and the Insurers confirm and agree that in the event of any claim arising under the hull reinsurances where such claim is to be paid to the person named as sole loss payee under the primary insurances, the Reinsurers shall in lieu of payment to the Insurers, their successors in interest and assigns, pay to the person named as sole loss payee under the primary insurances that portion of any loss due for which the Reinsurers would otherwise be liable to pay the Insurers (subject to proof of loss), it being understood and agreed that any such payment by any Reinsurers shall (to the extent of such payment) fully discharge and release such Reinsurer from any and all further liability in connection therewith and provide for payment to be made notwithstanding (a) any bankruptcy, insolvency, liquidation or dissolution of the Insurers; and (b) that the Insurers have made no payment under the original insurance policies. Insurers confirm that if the Airframe and not the Engines suffers a Total Loss, Constructive Total Loss or Arranged Total Loss that Mortgagee will receive the entire Agreed Value regardless of any claim by any third party to the insurance proceeds on account of their engines being installed on the airframe at the time of the Total Loss, Constructive Total Loss or Arranged Total Loss. 2. UNDER THE LEGAL LIABILITY INSURANCE Subject to the provisions of this Endorsement, the Insurance shall operate in all respects as if a separate Policy had been issued covering each party insured hereunder, but this provision shall not operate to include any claim howsoever arising in respect of loss or damage to the Aircraft insured under the Hull or Spares Insurance of the Insured. Notwithstanding the foregoing the total liability of Insurers in respect of any and all Insureds shall not exceed the limits of liability stated in the Policy. The Insurance provided hereunder shall be primary and without right of contribution from any other insurance which may be available to Mortgagee. 5 This Endorsement does not provide coverage for Mortgagee with respect to claims arising out of its legal liability as manufacturer, repairer, or servicing agent of the Aircraft. 3. UNDER ALL INSURANCES Mortgagee, its successors and assigns, and (with respect to Aviation and Airline General Third Party Liability only) its directors, officers and employees for their respective rights and interests, are included as Additional Insured. The cover afforded to Mortgagee by the Policy in accordance with this Endorsement shall not be invalidated by any act or omission (including misrepresentation and non-disclosure) of any other person or party which results in a breach of any term, condition or warranty of the Policy. Additional Insureds shall have no responsibility for premium and insurers shall waive any right of set-off or counterclaim against Additional Insureds. Upon payment of any loss or claim to or on behalf of Mortgagee, Insurers will not have, and shall waive all rights with respect to, subrogation against, any Additional Insured. Except in respect of any provision for Cancellation or Automatic Termination specified in the Policy or any endorsement thereof, cover provided by this Endorsement may only be canceled or materially altered in a manner adverse to Mortgagee by the giving of not less than thirty (30) days notice in writing to the appointed broker except with respect to nonpayment of premium, in which event the Insurers will provide Mortgagee with not less than ten (10) days prior written notice of the cancellation. Notice shall be deemed to commence from the date such notice is given by the Insurers. Such notice will NOT, however, be given at normal expiry date of the Policy or any endorsement. The insurance policy is being delivered in the United States and will in all respects be governed by and construed in accordance with the Laws of the United States or any applicable State thereof. The underwriter consents to the non-exclusive jurisdiction of the federal courts of the United States. 4. EXCEPT AS SPECIFICALLY VARIED OR PROVIDED BY THE TERMS OF THE ENDORSEMENT: MORTGAGOR IS COVERED BY THE POLICY SUBJECT TO ALL TERMS, CONDITIONS, LIMITATIONS, WARRANTIES, EXCLUSIONS AND CANCELLATION PROVISIONS THEREOF. THE POLICY SHALL NOT BE VARIED BY ANY PROVISIONS CONTAINED IN THE AGREEMENT WHICH PURPORT TO SERVE AS AN ENDORSEMENT OR AMENDMENT TO THE POLICY. 6 SUBJECT (save as specifically stated in this Certificate) to policy terms, conditions, limitations and exclusions. EXHIBIT C PRE-APPROVED LIST America West Airlines, Inc. American Airlines, Inc. Air Canada British Airways Plc. Delta Air Lines, Inc. United Airlines, Inc. EX-4.39 6 TRANS WORLD AIRLINES, INC. 10 1/4% Mandatory Conversion Equity Notes due 1999 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of June 16, 1998, by and among Trans World Airlines, Inc., a Delaware corporation (the "Company"), First Security Bank, National Association, as Owner Trustee (the "Owner Trustee") under the Trust Agreement N607TW dated as of March 28, 1995 between the Owner Trustee and Internationale Nederlanden Aviation Lease Delaware, Inc. (currently known as ING Lease Delaware, Inc.) (the "Original Beneficiary") and Lazard Freres & Co. LLC ("Lazard"). (The Original Beneficiary has assigned its beneficial rights in the trust created by such Trust Agreement to 767 Leasing HY, LLC ("767 Leasing").) Subject to the terms and conditions stated in the Aircraft Sale and Note Purchase Agreement made and entered into as of the 16th day of June, 1998 among the Company, the Owner Trustee, 767 Leasing and Lazard (the "Sale Agreement"), the Owner Trustee will sell to the Company one Boeing 767-231 ETOPS aircraft and its associated engines for $27,500,000, payable by the issuance by the Company of (i) $14,500,000 aggregate principal amount of the Company's 10 1/4% Senior Secured Notes due 2003 (the "Notes") and (ii) $13,000,000 aggregate principal amount of the Company's 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "Equity Notes"). The Notes will be issued pursuant to an indenture dated as of June 16, 1998 (the "Indenture"), between the Company and First Security Bank, National Association, as trustee (the "Trustee"). This Agreement is made pursuant to the Sale Agreement. In order to fulfill its obligations to the Owner Trustee and Lazard under the Sale Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing of the Sale Agreement. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture (as defined below) governing the Equity Notes. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Act: The Securities Act of 1933, as amended. Closing Date: The date on which the closing of the sale of the Aircraft to the Company in exchange for Senior Notes and Equity Notes to the Owner Trustee is consummated pursuant to the Sale Agreement. Commission: The U.S. Securities and Exchange Commission and any successor federal agency having similar powers. 2 Common Stock: Includes any stock of any class of the Company which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which is not subject to redemption by the Company. Unless the context otherwise requires, all references to Common Stock shall include the associated Rights. Damages Payment Date: The last business day of each month. Effectiveness Target Date: As defined in Section 3. Equity Notes: 10 1/4% Mandatory Conversion Equity Notes due 1999 of the Company. Exchange Act: The Securities Exchange Act of 1934, as amended. Holder: As defined in Section 2(b) hereof. Indenture: The Indenture dated as of June 16, 1998 between the Company and First Security Bank, National Association (the "Trustee"), pursuant to which the Equity Notes have been issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. NASD: National Association of Securities Dealers, Inc. Person: An individual, partnership, corporation, limited liability company, trust or unincorporated organization or other entity, or a government or agency or political subdivision thereof. Private Placement Memorandum: The Private Placement Memorandum, dated June 16, 1998, and all amendments and supplements thereto, relating to the Equity Notes and prepared by the Company pursuant to the Sale Agreement. Prospectus: The prospectus included in the Shelf Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments and supplements to the prospectus included in the Shelf Registration Statement, including post-effective amendments, and all material which may be incorporated by reference into such prospectus. Record Holder: With respect to any Damages Payment Date relating to the Transfer Restricted Securities, each Person who is a Holder of record on the business day immediately preceding such Damages Payment Date. Registrar: As defined in the Indenture. Rights: The Rights of the Company entitling the holder to purchase one one-hundredth of a share of the Company's Series A Participating Preferred Stock, par value $.01 per share, under certain circumstances issued pursuant to the Rights Agreement dated as of 3 December 19, 1995 between the Company and American Stock Transfer & Trust Company, as Rights Agent, supplemented as of March 18, 1996 and as it may be further amended or supplemented from time to time. Shelf Registration Statement: As defined in Section 3(a) hereof. Transfer Restricted Securities: Each share of Common Stock, issued upon conversion of the Equity Notes, until the date on which each such share of Common Stock (i) has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement or (ii) is distributed to the public pursuant to Rule 144 under the Act or is salable pursuant to Rule 144(k) under the Act (or similar provisions then in force). Usable: Complies with the applicable rules and regulations of the Act including, without limitation, Rule 3-12 of Regulation S-X and Item 512 of Regulation S-K. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of record of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities or is entitled to receive Transfer Restricted Securities upon conversion of the Equity Notes. SECTION 3. SHELF REGISTRATION AND LISTING (a) The Company shall file with the Commission, as soon as practicable after the Closing Date, but in no event prior to June 23, 1998 and in any event on or prior to the date 60 days after the Closing Date, a shelf registration statement pursuant to Rule 415 under the Act (the "Shelf Registration Statement") on Form S-3 to cover resales of all Transfer Restricted Securities by the Holders thereof who have provided the information required by Section 3(b) hereof; provided that the Company may file the Shelf Registration Statement on Form S-1 or Form S-2 if Form S-3 is not then available to the Company. The Company will use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission within 150 days after the Closing Date (the "Effectiveness Target Date"). The Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective, subject to the provisions of Section 5 hereof, until the earlier of (i) the sale of all Transfer Restricted Securities covered by the Shelf Registration Statement, and (ii) the expiration of two years after the date of original issuance of the Equity Notes or, if the period applicable under Rule 144(k) under the Act, or any successor provision for such securities is shortened, such shorter period. Subject to the right of the Company to have the Shelf Registration Statement not be effective for periods of time set forth in Section 5 hereof, the Company further agrees to use its reasonable best efforts to prevent the happening of any event that would cause the Shelf Registration Statement to contain a material misstatement or omission or to be not effective and usable for resale of the Transfer Restricted Securities during the period 4 that such Shelf Registration Statement is required to be effective and usable. Upon the occurrence of any event that would cause the Shelf Registration Statement (i) to contain a material misstatement or omission or (ii) to not be effective or usable for resale of Transfer Restricted Securities during the period that such Shelf Registration Statement is required to be effective and usable, the Company shall promptly file an amendment to the Shelf Registration Statement, in the case of clause (i), correcting any such misstatement or omission, and in the case of either clause (i) or (ii), use its reasonable best efforts to cause such amendment to be declared effective and such Shelf Registration Statement to become usable as soon as practicable thereafter. The Company's obligation to maintain an effective Shelf Registration Statement shall be extended for the amount of time that such Shelf Registration shall not have been effective or otherwise usable. (b) No Holder may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless such Holder furnishes to the Company in writing, within 10 business days after receipt of a request therefor (which initial request shall be made within 40 days after the Closing Date to the Holders on a record date not more than 5 days prior to such request), such information and representations and warranties as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder shall be entitled to liquidated damages pursuant to Section 4 hereof if such Holder's Transfer Restricted Securities are excluded from a Shelf Registration Statement because such Holder failed to furnish the Company in writing such information and representations and warranties reasonably requested by the Company for use in connection with such Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously provided to the Company by such Holder not materially misleading. (c) The Company shall use its reasonable best efforts to have the shares of Common Stock issuable upon conversion of the Equity Notes approved for listing on the American Stock Exchange ("ASE"), or on such other stock exchange or market as the Common Stock is then principally traded, no later than the effectiveness date of the Shelf Registration Statement relating to such Common Stock, and, if applicable, to maintain such listing until the earlier to occur of (i) the sale of all Transfer Restricted Securities covered by the Shelf Registration Statement, and (ii) the expiration of two years after the date of issuance of the Equity Notes or, if the period applicable under Rule 144(k) under the Act, or any successor provision relating to the free transferability of the Transfer Restricted Securities, is shortened, such shorter period. SECTION 4. LIQUIDATED DAMAGES Each of the Company, on behalf of itself, the Owner Trustee, on behalf of the Beneficiary, and Lazard, on behalf of itself (and each of them on behalf of each subsequent Holder), agrees that (a) the Holders will suffer damages if (i) the Shelf Registration Statement is not maintained in the manner and within the time periods contemplated by Section 3 hereof or (ii) the Company does not maintain the listing of the Common Stock issuable on the Conversion 5 Date (as defined in the Indenture) on the ASE, or such other stock exchange or market on which the Common Stock is principally traded, within the time period contemplated by Section 3 and (b) it would not be feasible to ascertain the extent of such damages with precision. Accordingly, if (x) the Shelf Registration Statement is filed and declared effective but shall on or after the Conversion Date cease to be effective (without being succeeded immediately by an additional Shelf Registration Statement filed and declared effective) or usable for a period of time which shall exceed 60 days in the aggregate during any year (defined as any period of 365 days commencing on or after the date the Shelf Registration Statement is declared effective) or (y) the Company shall fail to maintain the approval for listing of the shares of Common Stock that constitute the Transfer Restricted Securities in accordance with Section 3(c) (each such event, an "Effectiveness Default"), the Company shall pay liquidated damages until the Shelf Registration Statement again becomes effective and usable or the approval for listing is cured to each Holder who has complied with such Holder's obligations hereunder, during the first 90-day period immediately following the occurrence of any such Effectiveness Default in an amount equal to $0.01 per week per share of Common Stock (subject to adjustment in the event of stock splits, stock recombinations, stock dividends and the like) constituting Transfer Restricted Securities held by such Holder. The amount of the liquidated damages will increase by an additional $0.01 per week per share of Common Stock (subject to adjustment as set forth above) constituting Transfer Restricted Securities held by such Holder for each subsequent 90-day period until the Shelf Registration Statement again becomes effective and usable or the approval for listing is cured, up to a maximum amount of liquidated damages with respect to any such Effectiveness Default of $0.05 per week per share (subject to adjustment as set forth above) of Common Stock constituting Transfer Restricted Securities. All accrued and unpaid liquidated damages shall be paid to Record Holders by wire transfer of immediately available funds or by federal funds check by the Company on each Damages Payment Date. If the Company defaults in a payment of any liquidated damages hereunder, it shall pay the liquidated damages, plus interest on the liquidated damages at the rate of twelve percent (12%) per annum to the extent permitted by law, to the persons who are Holders on the subsequent Damages Payment Date. Following the cure of an Effectiveness Default, liquidated damages will cease to accrue with respect to such Effectiveness Default. All of the Company's obligations to pay accrued but unpaid liquidated damages set forth in the preceding paragraph which are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such security shall have been satisfied in full. The parties hereto agree that the liquidated damages provided in this Section 4 constitute a reasonable estimate of the damages that will be incurred by Holders if, on or after the Conversion Date, after using reasonable best efforts, the Company is unable (x) to maintain the effectiveness of the Shelf Registration Statement for the period required by Section 3(a) or (y) to maintain the approval for listing of the shares of Common Stock that constitute Transfer Restricted Securities for the period required by Section 3(c). It is the intention of the parties that if an Effectiveness Default shall occur as a result of the Company's failure to use its reasonable best efforts to cause the undertakings described in clauses (x) and (y) of the preceding sentence to occur, Holders shall be entitled to any damages appropriate under applicable law, which damages shall not be limited to the liquidated damages under this Section 4; provided that any amounts of 6 interest or liquidated damages paid pursuant to Section 2.2 of the Indenture or Section 4 of this Agreement, respectively, shall be credited against any amounts awarded to Holders by a court of competent jurisdiction. SECTION 5. REGISTRATION PROCEDURES In connection with the Shelf Registration Statement, the Company will use its reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution or disposition thereof, and pursuant thereto the Company will as expeditiously as possible: (a) on or prior to the date 60 days after the Closing Date, prepare and file with the Commission a Shelf Registration Statement relating to the registration on Form S-3 (or, if Form S-3 is not available, on Form S-1 or Form S-2) for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof and shall include or incorporate all required financial statements, reports, schedules, exhibits and other documents; cause to be made, or otherwise cooperate and assist in any filings required to be made with the NASD and use its reasonable best efforts to cause such Shelf Registration Statement to become effective and approved on or prior to the Effectiveness Target Date by such governmental agencies or authorities as may be necessary to enable the selling Holders to consummate the disposition of such Transfer Restricted Securities; provided that before filing a Shelf Registration Statement or any Prospectus, or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the Shelf Registration Statement, the Company shall furnish to such Holders and underwriters, if any, copies of all such documents proposed to be filed, which documents shall be subject to the review of such Holders, and the Company shall not file any Shelf Registration Statement or amendment thereto or any Prospectus or any supplement thereto (including such documents incorporated by reference) to which the Holders of the Transfer Restricted Securities covered by such Shelf Registration Statement or the underwriters, if any, shall reasonably object in writing within four business days after the receipt thereof on the grounds that such Shelf Registration Statement, Prospectus, amendment or supplement does not (x) comply in all material respects with the requirements of the Act or the rules and regulations thereunder or (y) fairly or accurately describe any description or other information pertaining to any of such Holders or concerning the plan of distribution contemplated by such Holders; (b) prepare and file with the Commission such amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep the Shelf Registration Statement effective for the applicable period set forth in Section 3(a) hereof; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rule 424 under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Shelf Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Shelf Registration Statement or supplement to the Prospectus; 7 (c) advise the selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (i) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (ii) of any request by the Commission for amendments to the Shelf Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (iv) if at any time the representations and warranties of the Company contemplated by paragraph (l)(i) below cease to be true and correct, and (v) of the existence of any fact and the happening of any event that makes any statement of a material fact made in the Shelf Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Shelf Registration Statement or the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein in order to make the statements therein not misleading in the light of the circumstances then existing. If at any time the Commission shall issue any stop order suspending the effectiveness of the Shelf Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (d) no less than 24 hours prior to the filing of any document that is to be incorporated by reference into the Shelf Registration Statement or the Prospectus (after the initial filing of the Shelf Registration Statement), provide copies of such document to the selling Holders and underwriters, if any, make the Company's representatives available at reasonable times for discussion of such document and include such information in such document prior to the filing thereof as such selling Holders or underwriters may reasonably and timely request; (e) furnish to each selling Holder and underwriter, if any, without charge, at least one copy of the Shelf Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (f) deliver to each selling Holder and underwriter, if any, without charge, as many copies of the Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and underwriters, if any, in connection with the public offering and sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (g) prior to any public offering of Transfer Restricted Securities, use its reasonable best efforts to cause the Transfer Restricted Securities covered by the Shelf Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the 8 disposition of such Transfer Restricted Securities and otherwise cooperate with the selling Holders and underwriters, if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders and underwriters, if any, may reasonably request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that the Company shall be required neither to register or qualify as a foreign corporation where it is not now so qualified nor to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Shelf Registration Statement, in any jurisdiction where it is not now so subject; (h) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders may request at least two business days prior to any sale of Transfer Restricted Securities made by such Holders; (i) use its reasonable best efforts to cause the Transfer Restricted Securities covered by the Shelf Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (g) above; (j) if any fact or event contemplated by clause (v) of paragraph (c) above shall exist or have occurred, as promptly as practicable thereafter, prepare a supplement or post-effective amendment to the Shelf Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (k) provide CUSIP numbers for all Transfer Restricted Securities not later than the effective date of the Shelf Registration Statement and provide the transfer agent for the Common Stock with printed certificates for the Transfer Restricted Securities; (l) enter into such agreements and take all such other actions consistent with its obligations hereunder in connection therewith and as may be reasonably required in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to the Shelf Registration Statement, and in such connection the Company shall (i) make such representations and warranties to the Holders and underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Sale Agreement; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Holders of the Transfer Restricted Securities 9 being sold and underwriters, if any) addressed to each selling Holder and underwriter, if any, requesting the same and covering such matters as are customarily covered in company counsel opinions to underwriters in primary underwritten offerings; (iii) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the selling Holders and underwriters, if any, requesting the same, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with primary underwritten offerings; and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of the Transfer Restricted Securities being sold and underwriters, if any, to evidence compliance with clause (i) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company pursuant to this clause (1); (m) subject to appropriate confidentiality arrangements being entered into, make available at reasonable times for inspection by the Holders of the Transfer Restricted Securities participating in any disposition pursuant to such Shelf Registration Statement, any underwriters and any attorney or accountant retained by such selling Holders or underwriters, all financial and other records, pertinent corporate documents and properties of the Company and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant at reasonable times in connection with such Shelf Registration Statement subsequent to the filing thereof and prior to its effectiveness; (n) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as reasonably practicable, a consolidated earnings statement (which need not be audited) for the twelve-month period, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Shelf Registration Statement; (o) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible moment; use its reasonable best efforts (i) to prevent the entry of any stop order affecting the Registration Statement and (ii) to remove any such stop order if entered; and (p) cooperate and assist in any filings required to be made with the NASD. The Company agrees that it will not include in the registration contemplated by the Shelf Registration Statement any securities other than the Transfer Restricted Securities. The Company represents and warrants to the Owner Trustee and Lazard that it will not be required to include under the Shelf Registration Statement any other securities. The Owner Trustee, on behalf of the Beneficiary, Lazard, on behalf of itself, and both the Owner Trustee and Lazard, on behalf of each subsequent Holder, agree by acquisition of Transfer Restricted Securities that, upon receipt of any notice from the Company of the existence of any fact or the happening of any event of the kind described in clause (v) of Section 5(c) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the Shelf Registration Statement until such Holder's receipt of the copies of the 10 supplemented or amended Prospectus contemplated by Section 5(j) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will, or will request the managing underwriter or underwriters, if any, to deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities current at the time of receipt of such notice. SECTION 6. REGISTRATION EXPENSES All expenses incident to the Company's performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Shelf Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) fees and expenses of compliance with federal securities or state blue sky laws (including reasonable fees and disbursements of one counsel to the Holders and the underwriters, if any, in connection with blue sky qualifications of the Transfer Restricted Securities); (iii) expenses of printing (including, without limitation, expenses of printing or engraving certificates for the Transfer Restricted Securities, expenses of printing or engraving certificates for the Common Stock and expenses of printing prospectuses), messenger and delivery services and telephone; (iv) fees and disbursements of counsel for the Company and reasonable fees and disbursements of one counsel for the Holders chosen by the Holders of a majority of the outstanding Transfer Restricted Securities (determined as provided in Section 10(d)); (v) fees and disbursements of all independent certified public accountants of the Company (including the expenses of any special audit and "cold comfort" letters required by or incident to such performance); (vi) filing fees associated with any NASD filing required to be made in connection with the Shelf Registration Statement; (vii) fees and expenses of listing the Transfer Restricted Securities on any securities exchange or quotation system in accordance with Section 3(c) hereof; and (viii) securities acts liability insurance, if the Company desires such insurance. All such expenses, including without limitation those described in the foregoing clauses (i) to (viii) are referred to herein as "Registration Expenses." 11 The Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and expenses of any Person, including special experts, retained by the Company. The Holders shall bear the expense of any broker's commission or underwriters' discount or commission. SECTION 7. UNDERWRITING If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker(s) and manager(s) that will manage the offering will be selected by the Holders of a majority of the then outstanding Transfer Restricted Securities (determined in accordance with Section 10(d)) included in such offering (after consultation with the Company as to such selection and upon the written consent of the Company, which consent shall not be unreasonably withheld or delayed). If requested by the underwriters, the Company will promptly enter into an underwriting agreement reasonably acceptable to the Company with such underwriters for such offering, such agreement to contain such representations and warranties by the Company and such other terms and conditions as are customary for underwriting agreements with respect to secondary offerings, including without limitation, indemnities to the effect and to the extent provided in Section 8 hereof. The Holders on whose behalf such securities are being distributed shall be party to any such underwriting agreement. Such Holders shall not be required by the Company to make any representations or warranties to the underwriters with respect to the Company or the Transfer Restricted Securities (other than that the Holders are conveying such securities free and clear of all pledges, security interests, liens, charges, encumbrances, agreements, equities, claims and options of whatever nature), and the Holders shall not be required to indemnify the Company or the underwriters (other than with respect to the matters, and to the extent, provided in Section 8). Furthermore, the Company shall make available for inspection by the Holders, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney, accountant or other agent retained by any Holder or underwriter, all financial and other records and other information, pertinent corporate documents and properties of the Company as shall be reasonably necessary to enable them to exercise their due diligence responsibilities. No Holder may participate in any underwritten distribution hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved in accordance with the terms hereof, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. SECTION 8. INDEMNIFICATION (a) The Company agrees to indemnify and hold harmless each Holder and each person, if any, who controls such Holder within the meaning of the Act or the Exchange Act (each Holder and such controlling persons referred to in this Section 8(a) and the Company and its controlling persons referred to in Section 8(b), being collectively referred to herein, as the case may be, as the "indemnified parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, 12 damages, liabilities or actions relating to purchases and sales of the Transfer Restricted Securities) to which each indemnified party may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration Statement, or arise out of, or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall reimburse, as incurred, the indemnified parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Shelf Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration Statement in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein, (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in the Prospectus relating to such Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any person as to which there is a prospectus delivery requirement (a "Delivering Seller") that sold the Transfer Restricted Securities to the person asserting any such losses, claims, damages or liabilities to the extent that any such loss, claim, damage or liability of such Delivering Seller results from the fact that there was not sent or given to such person, on or prior to the written confirmation of such sale, a copy of the Prospectus, as amended and supplemented, provided that (I) the Company shall have previously furnished copies thereof to such Delivering Seller in accordance with this Agreement and (II) such furnished Prospectus, as amended and supplemented, would have corrected any such untrue statement or omission or alleged untrue statement or omission, and (iii) this indemnity agreement will be in addition to any liability which the Company may otherwise have to such indemnified party. The Company shall also indemnify underwriters, selling brokers, dealer-managers and similar securities industry professionals participating in the distribution (in each case as described in the Shelf Registration Statement), their officers and directors and each person who controls such persons within the meaning of the Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders if requested by such Holders. (b) Each Holder, severally and not jointly, will indemnify and hold harmless the Company, each other Holder and each person, if any, who controls the Company and each such Holder within the meaning of the Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof to which the Company, each other Holder or any such controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to the Shelf Registration Statement, or arise out of or are based 13 upon the omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company and each such Holder for any legal or other expenses reasonably incurred by the Company, each other Holder or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company, each other Holder or any of their respective controlling persons. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party, except to the extent that it is prejudiced or harmed in any material respect by failure to give such prompt notice. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with one counsel (and local counsel as necessary) reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, not to be unreasonably withheld, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and does not include any injunctive relief against such indemnified party. No indemnifying party shall be liable for any amounts paid in settlement of any action or claim without its written consent, which consent shall not be unreasonably withheld. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 8 is applicable in accordance with its terms but for any reason is held to be unavailable or insufficient, then each indemnifying party will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but 14 after deducting any contribution received by the indemnifying party from persons other than the party to be indemnified), to which the indemnifying party and the party to be indemnified may be subject in such proportion as shall be appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the party to be indemnified, on the other, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or such Holder or such other indemnified person, as the case may be, on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the losses, claims, liabilities, expenses or damages, or actions in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purpose of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this Section 8(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8(d), any person who controls a party to this Agreement within the meaning of the Securities Act or the Exchange Act will have the same rights to contribution as that party, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 8(d), will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 8(d). Except for a settlement entered into pursuant to the penultimate sentence of Section 8(c) hereof, no party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld or delayed). (e) The agreements contained in this Section 8 shall survive the sale of the Transfer Restricted Securities pursuant to the Shelf Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. SECTION 9. RULE 144 The Company shall use its reasonable best efforts to file on a timely basis all such reports required to be filed under the Exchange Act as, and endeavor in good faith to take such 15 other actions as, are reasonably necessary to enable Holders to sell Transfer Restricted Securities without registration under the Act within the limitation of the exemptions provided by (a) Rule 144 under the Act, as such Rule may be amended from time to time, and (b) any similar rules or regulations hereafter adopted by the Commission. Upon request of any Holder, the Company will deliver a written statement as to whether it has complied with such requirements and will, at its expense, forthwith upon the request of the Owner Trustee or Lazard, deliver to the Owner Trustee or Lazard a certificate, signed by the Company's principal financial officer, stating (i) the Company's name, address and telephone number (including area code), (ii) the Company's Internal Revenue Service identification number, (iii) the Company's Commission file number, (iv) the number of shares of each class of capital stock outstanding as shown by the most recent report or statement published by the Company, and (v) whether the Company has filed the reports required to be filed under the Exchange Act for a period of at least ninety (90) days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder. SECTION 10. MISCELLANEOUS (a) Remedies. Each Holder, in addition to being entitled to exercise all rights provided herein, and as provided in the Sale Agreement and granted by law, including the recovery of damages, shall be entitled to specific performance of such Holder's rights under this Agreement. Except with respect to the payment of Liquidated Damages in the event of the occurrence of an Effectiveness Default, the Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees in any action for specific performance to waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company has not and shall not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not and will not in any way conflict with and are not and will not be inconsistent with the rights granted to the holders of the Company's securities under any other agreements. No holder of securities of the Company has rights to the registration of any securities of the Company because of the execution, delivery or performance by the Company of this Agreement or as a result of the filing of the Shelf Registration Statement. (c) No Adverse Action Affecting the Transfer Restricted Securities. The Company has not taken and will not take, any action, or permit any change to occur with respect to the Transfer Restricted Securities which would adversely affect the ability of any of the Holders to include such Holder's Transfer Restricted Securities in a registration undertaken pursuant to this Agreement. (d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of 16 Equity Notes assuming conversion thereof into Common Stock or, if the Equity Notes have been converted into Common Stock, the outstanding shares of Common Stock constituting Transfer Restricted Securities, as the case may be. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being sold pursuant to the Shelf Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Holders of a majority of the Transfer Restricted Securities being sold. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight deliver: (i) if to a Holder, at the address set forth on the records of the Company or the Registrar under the Indenture, with a copy to the Registrar, and if to the Owner Trustee or Lazard, at the address set forth in the Sale Agreement; and (ii) if to the Company, initially at its address set forth in the Sale Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed on a business day (or otherwise on the first business day following such answer back); when receipt acknowledged, if telecopied on a business day (or otherwise on the first business day following such acknowledgment); and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon and enforceable by the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE. 17 (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the securities sold pursuant to the Sale Agreement, except as provided in the Indenture and the Sale Agreement. Except as set forth in the prior sentence, this Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (l) Like Treatment of Holders. Neither the Company nor any of its affiliates shall, directly or indirectly, pay or cause to be paid any consideration (immediate or contingent), whether by way of interest, fee, payment for the exchange of Transfer Restricted Securities, or otherwise, to any Holder, for or as an inducement to, or in connection with the solicitation of, any vote, consent, waiver or amendment of any terms or provisions of this Agreement, unless such consideration is required to be paid to all Holders bound by such vote, consent, waiver or amendment whether or not such Holders so consent, vote, waive or agree to amend and whether or not such Holders tender their Transfer Restricted Securities for redemption or conversion. Notwithstanding the foregoing, the Company may pay or cause to be paid consideration to any Holder in connection with any transaction the purpose of which is not to induce or solicit any vote, consent, waiver or amendment of any terms or provisions of this Agreement. 18 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. TRANS WORLD AIRLINES, INC. By: /s/ Michael J. Lichty ---------------------- Name: Michael J. Lichty Title: Vice President and Deputy Counsel FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity but as Owner Trustee By: /s/ Arge Pavlos ---------------------- Name: Arge Pavlos Title: Assistant Trust Officer LAZARD FRERES & CO. LLC By: /s/ Michael S. Liss ---------------------- Name: Michael S. Liss Title: Managing Director EX-5 7 [CGS&H Letterhead] Writer's Direct Dial: (212) 225-2552 July 17, 1998 Trans World Airlines, Inc. One City Centre 515 N. Sixth Street St. Louis, Missouri 63101 Ladies and Gentlemen: We have acted as counsel for Trans World Airlines, Inc., a Delaware corporation (the "Company"), in connection with the registration by the Company under the Securities Act of 1933, as amended (the "Securities Act"), of the exchange offering of $14,500,000 aggregate principal amount of 10 1/4% Senior Secured Notes due 2003 (the "Exchange Notes") for the outstanding $14,500,000 10 1/4% Senior Secured Notes due 2003 (the "Old Notes and, together with the Exchange Notes, the "Notes"). The Old Notes were and the Exchange Notes will be issued pursuant to an indenture dated as of June 16, 1998 (the "Indenture") between the Company and First Security Bank, National Association, as trustee. The Exchange Notes are being registered under a registration statement of the Company on Form S-4 filed today with the Securities and Exchange Commission (the "Commission") under the Securities Act (the "Registration Statement"). We have reviewed the originals or copies certified or otherwise identified to our satisfaction of all such corporate records of the Company and such other instruments and other certificates of public officials, officers and representatives of the Company and such other persons, and we have made such investigations of law, as we have deemed appropriate as a basis for the opinion expressed below. Trans World Airlines, Inc., p. 2 In rendering the opinion expressed below, we have assumed the authenticity of all documents submitted to us as originals and the conformity to the originals of all documents submitted to us as copies. In addition, we have assumed and have not verified the accuracy as to factual matters of each document we have reviewed. Based on the foregoing, and subject to the further assumptions and qualifications set forth below, it is our opinion that the execution and delivery of the Exchange Notes have been duly authorized by all necessary corporate action of the Company, and when the Exchange Notes have been duly executed and delivered by the Company and duly authenticated by the Trustee in the manner provided for in the Indenture and delivered in exchange for the Old Notes in the manner provided for in the Indenture, the Exchange Notes will be the valid and binding obligations of the Company, entitled to the benefits of the Indenture, and enforceable against the Company in accordance with their terms. Insofar as the foregoing opinion relates to the validity, binding effect or enforceability of any agreement or obligation of the Company, (a) we have assumed that each other party to such agreement or obligation has satisfied those legal requirements that are applicable to it to the extent necessary to make such agreement or obligation enforceable against it, and (b) such opinion is subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally and to general principles of equity. In addition, certain of the remedial provisions of the Indenture may be further limited or rendered unenforceable by other applicable laws or judicially adopted principles which, however, in our judgment do not make the remedies provided for therein (taken as a whole) inadequate for the practical realization of the principal benefits purported to be afforded thereby (except for the economic consequences of procedural or other delay). The foregoing opinion is limited to the federal law of the United States of America, the law of the State of New York and the General Corporation Law of the State of Delaware. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our name under the heading "Legal Matters" in the Prospectus included in the Registration Statement. By giving such consent, we do not thereby admit that we are experts with respect to any part of the Registration Statement, including this exhibit, within the meaning of the term "expert" as used in the Securities Act or the rules and regulations of the Commission issued thereunder. Very truly yours, CLEARY, GOTTLIEB, STEEN & HAMILTON By /s/ David W. Hirsch -------------------------------- David W. Hirsch, a Partner EX-23.1 8 Exhibit 23.1 AUDITORS' CONSENT The Board of Directors Trans World Airlines, Inc.: We consent to the use of our report incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. In addition, our report, dated March 4, 1998 refers to the application of fresh start reporting as of September 1, 1995. /s/ KPMG Peat Marwick LLP Kansas City, Missouri July 13, 1998 EX-24 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, John W. Bachman, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 25th day of June, 1998. /s/ John W. Bachman -------------------------------- John W. Bachman POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, William F. Compton, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 26th day of June, 1998. /s/ William F. Compton -------------------------------- William F. Compton POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Eugene P. Conese, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 29th day of June, 1998. /s/ Eugene P. Conese -------------------------------- Eugene P. Conese POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Edgar M. House, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 26th day of June, 1998. /s/ Edgar M. House -------------------------------- Edgar M. House POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Thomas H. Jacobsen, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 26th day of June, 1998. /s/ Thomas H. Jacobsen -------------------------------- Thomas H. Jacobsen POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Myron Kaplan, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 25th day of June, 1998. /s/ Myron Kaplan -------------------------------- Myron Kaplan POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, David M. Kennedy, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 25th day of June, 1998. /s/ David M. Kennedy -------------------------------- David M. Kennedy POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, General Merrill A. McPeak, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 25th day of June, 1998. /s/ General Merrill A. McPeak -------------------------------- General Merrill A. McPeak POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Thomas F. Meagher, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 30th day of June, 1998. /s/ Thomas F. Meagher -------------------------------- Thomas F. Meagher POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Brent S. Miller, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 26th day of June, 1998. /s/ Brent S. Miller -------------------------------- Brent S. Miller POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, William O'Driscoll, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this ____th day of June, 1998. /s/ William O'Driscoll -------------------------------- William O'Driscoll POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, G. Joseph Reddington, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 25th day of June, 1998. /s/ G. Joseph Reddington -------------------------------- G. Joseph Reddington POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, Blanche M. Touhill, a Director of TRANS WORLD AIRLINES, INC. (the "Company"), a Delaware corporation, do constitute and appoint Gerald L. Gitner, Michael J. Palumbo and Kathleen A. Soled, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution for me in my name, place and stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Act of 1933, the Registration Statement on Form S-4 for TRANS WORLD AIRLINES, INC. in connection with the Company's registration of its Exchange Notes issuable in exchange for the Company's 10 1/4% Senior Secured Notes due 2003, and to file the same with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments (including post-effective amendments) and supplements to said Registration Statement, incorporating such changes as any of the said attorneys-in-fact deems appropriate, in the matter of the proposed offering by the Company of the securities registered pursuant to said Registration Statement, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS THEREOF, I have hereunto set my hand this 29th day of June, 1998. /s/ Blanche M. Touhill -------------------------------- Blanche M. Touhill EX-25 10 FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 --------------------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE --------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) FIRST SECURITY BANK, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) NOT APPLICABLE 87-0131890 (Jurisdiction of Incorporation (I.R.S. Employer if not a U.S. national bank) identification No.) 79 SOUTH MAIN STREET SALT LAKE CITY, UTAH 84111 (Address of principal executive offices) (Zip Code) NOT APPLICABLE (Name, address and telephone number of agent for service) TRAN WORLD AIRLINES, INC. (Exact name of obligor as specified in its charter) DELAWARE 43-1145889 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) One City Centre, 515 N. Sixth Street St. Louis, Missouri 63101 (Address or principal executive offices) (Zip Code) Offer To Exchange 10 1/4% Senior Secured Notes Due 2003 (Title of the Indenture securities) Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency, Washington, D.C. 20230; Federal Reserve Bank of San Francisco, San Francisco, CA 94120; Federal Deposit Insurance Corporation, Washington, D.C. 20429. (b) Whether it is authorized to exercise corporate trust powers. The Trustee is authorized to exercise corporate trust powers. Item 2. Affiliations With The Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. Neither the obligor nor any underwriter for the obligor is an affiliate of the Trustee. Item 16. List of Exhibits. List below all exhibits filed as part of this statement of eligibility and qualification. Exhibit 1: copy of the articles of association as now in effect Exhibit 2: certificate of authority to commence business including a certificate of the Comptroller of the Currency evidencing the change of the Trustee's name Exhibit 3: copy of the authorization of the trustee to exercise corporate trust powers Exhibit 4: copy of the bylaws of the trustee Exhibit 5: Not applicable Exhibit 6: Not applicable Exhibit 7: A copy of the latest report published pursuant to law or its supervising or examining authority Exhibit 8: Not applicable Exhibit 9: Not applicable Signature --------- Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, First Security Bank, National Association, a national banking association organized and existing under the laws of the United States, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned thereunder duly authorized, all in the City of Salt Lake City, and State of Utah, on the 29th day of June, 1998. FIRST SECURITY BANK, NATIONAL ASSOCIATION, Trustee By:/s/ Brett R. King ----------------- Brett R. King Assistant Vice President EXHIBIT 1 ARTICLES OF ASSOCIATION OF FIRST SECURITY BANK NATIONAL ASSOCIATION (As Amended) FIRST. The title of this Association, which shall carry on the business of banking under the laws of the United States, shall be "First Security Bank, National Association." SECOND. The place where the main banking house or office of this Association shall be located shall be Ogden, County of Weber, State of Utah. Its general business and its operations of discount and deposit shall also be carried on in said city, and the branch or branches established or maintained by it in accordance with the provisions of Section 36 of Title 12, United States Code. The Board of Directors shall the power to change the location of the main office of this Association (i) to any other authorized branch location within the limits of Ogden, Utah, without the approval of the shareholders of this Association and upon notice to the Comptroller of the Currency or, (ii) to any other place within Ogden, Utah, or within thirty (30) miles of Ogden, Utah, with the approval of the shareholders and the Comptroller of the Currency. The Board of Directors shall have the power to change the location of any branch or branches of this Association to any other location, without the approval of the shareholders of this Association but subject to the approval of the Comptroller of the Currency. THIRD. The Board of Directors of the consolidated association shall consist of not less than five (5) nor more than twenty-five (25) of its shareholders. FOURTH. There shall be an annual meeting of the shareholders the purpose of which shall be the election of Directors and the transaction of whatever other business may be brought before said meeting. It shall be held at the main office of the Bank or other convenient place as the Board of Directors may designate, on the third Monday of March of each year, but if no election is held on that day, it may be held on any subsequent day according to such lawful rules as may be prescribed by the Board of Directors. Nominations for election to the Board of Directors may be made by the Board of Directors or by any stockholder of any outstanding class of capital stock of the Bank entitled to vote for election of directors. Nominations, other than those made by or on behalf of the existing management of the Bank, shall be made in writing and shall be delivered or mailed to the President of the Bank and to the Comptroller of the Currency, Washington, D.C., not less than 14 days nor more than 50 days prior to any meeting of stockholders called for the election of directors, provided, however, that if less than 21 days notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the President of the Bank and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the Bank that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the Bank owned by the notifying shareholder. Nominations not made in accordance herewith may, in his discretion, be disregarded by the Chairman of the meeting, and upon his instructions, the voting inspectors may disregard all votes cast for each such nominee. FIFTH. The authorized amount of capital stock of this Association shall be One Hundred Million Dollars ($100,000,000.00), divided into 4,000,000 shares of common stock of the par value of Twenty-five Dollars ($25.00) each; provided, however, that said capital stock may be increased or decreased from time to time, in accordance with the provision of the laws of the United States. The shareholders of this Association shall not have any pre-emptive rights to acquire unissued shares of this Association. SIXTH. (1) The Board of Directors shall appoint one of its members President of this Association. It may also appoint a Chairman of the Board, and one or more Vice Chairman. The Board of Directors shall have the power to appoint one or more Vice Presidents, at least one of whom shall also be a member of the Board of Directors, and who shall be authorized, in the absence of the President, to perform all acts and duties pertaining to the office of the President; to appoint a Cashier and such other officers and employees as may be required to transact the business of this Association; to fix the salaries to be paid to such officers or employees and appoint others to take their place. (2) The Board of Directors shall have the power to define the duties of officers and employees of this Association and to require adequate bonds from them for the faithful performance of their duties; to make all By-Laws that may be lawful for the general regulation of the business of this Association and the management of its affairs, and generally to do and perform all acts that may be lawful for a Board of Directors to do and perform. (3) Each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, administrative or investigative (other than an action by or in the right of the Association) by reason of the fact that he is or was a director, officer, employee or agent of the Association or is or was serving at the request of the Association as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust, estate or other enterprise or was acting in furtherance of the Association's business shall be indemnified against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Association; provided, however, no indemnification shall be given to a person adjudged guilty of, or liable for, willful misconduct, gross neglect of duty, or criminal acts or where there is a final order assessing civil money penalties or requiring affirmative action by such person in the form of payments to the Association. The termination of any action, suit or proceeding by judgment, order, settlement, or its equivalent, shall not of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Association. (4) Each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Association (such action or suit being known as a "derivative proceeding") to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Association or is or was serving at the request of the Association as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust, estate or other enterprise shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Association; provided, however, that no indemnification shall be given where there is a final order assessing civil money penalties or requiring affirmative action by such person in the form of payments to the Association; and provided further that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Association, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (5) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in (3) or (4) of this Article or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him in connection therewith. (6) Any indemnification under (3) or (4) of this Article (unless ordered by a court) shall be made by the Association only as authorized in the specific case upon a reasonable determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in (3) or (4) of this Article. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in written opinion, or (c) by the stockholders. (7) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Association in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided in (6) of this Article (i) if the Board of Directors determines, in writing, that (1) the director, officer, employee or agent has a substantial likelihood or prevailing on the merits; (2) in the event the director, officer, employee or agent does not prevail, he or she will have the financial capability or reimburse the Association; and (3) payment of expenses by the Association will not adversely affect its safety and soundness; and (ii) upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Association as authorized in this Article. (8) The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors, successors in interest, and administrators of such a person. SEVENTH. This Association shall have succession from the date of its organization certificate until such time as it be dissolved by the act of its shareholders in accordance with the provisions of the banking laws of the United States, or until its franchise becomes forfeited by reason of violation of law, or until terminated by either a general or a special act of Congress, or until its affairs be placed in the hands of a receiver and finally wound up by him. EIGHTH. The Board of Directors of this Association, or any three or more shareholders owning, in the aggregate, not less than ten per centum of the stock of this Association, may call a special meeting of shareholders at any time: Provided, however, that unless otherwise provided by law, not less than ten days prior to the date fixed for any such meeting, a notice of the time, place and purpose of the meeting shall be given by first-class mail, postage prepaid, to all shareholders of record of this Association. These Articles of Association may be amended at any regular or special meeting of the Shareholders by the affirmative vote of the shareholders owning at least a majority of the stock of this Association, subject to the provisions of the banking laws of the United States. The notice of any shareholders' meeting, at which an amendment to the Articles of Association of this Association is to be considered shall be given as hereinabove set forth. EXHIBIT 2 CERTIFICATE TREASURY DEPARTMENT ) Office of ) ss: Comptroller of the Currency ) I, Thomas G. DeShazo, Deputy Comptroller of the Currency, do hereby certify that: Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., the Comptroller of the Currency charters and exercises regulatory and supervisory authority over all national banking associations; On December 9, 1881, The First National Bank of Ogden, Ogden, Utah was chartered as a National Banking Association under the laws of the United States and under Charter No. 2597; The document hereto attached is a true and complete copy of the Comptroller Certificate issued to The First National Bank of Ogden, Ogden, Utah, the original of which certificate was issued by this Office on December 9, 1881; On October 2, 1922, in connection with a consolidation of The First Bank of Ogden, Ogden, Utah, and The Utah National Bank of Ogden, Ogden, Utah, the title was charged to "The First & Utah National Bank of Ogden"; on January 18, 1923, The First & Utah National Bank of Ogden changed its title to "First Utah National Bank of Ogden"; on January 19, 1926, the title was changed to "First National Bank of Ogden"; and on February 24, 1934, the title was changed to "First Security Bank of Utah, National Association"; and First Security Bank of Utah, National Association, Ogden, Utah, continues to hold a valid certificate to do business as a National Banking Association. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and caused the seal of Office of the Comptroller of the Currency to be affixed to these presents at the Treasury Department, in the City of Washington and District of Columbia, this fourth day of April, A.D. 1972. Thomas G. DeShazo ---------------------------------- Deputy Comptroller of the Currency TREASURY DEPARTMENT Comptroller of the Currency, Washington, December 9th, 1881 WHEREAS, by satisfactory evidence presented to the undersigned it has been made to appear that "The First National Bank of Ogden" in Ogden City in the County of Weber, and Territory of Utah has complied with all the provisions of the Revised Statutes of the United States, required to be complied with before an association shall be authorized to commence the business of Banking. Now, therefore, I, John Jay Knox, Comptroller of the Currency, do hereby certify that "The First National Bank of Ogden" in Ogden City in the County of Weber, and Territory of Utah is authorized to commence the business of Banking, as provided in Section Fifty-one hundred and sixty-nine of the Revised Statutes of the United States. In testimony whereof, witness my hand and seal of office this 9th day of December, 1881. John Jay Knox --------------------------- Comptroller of the Currency EXHIBIT 3 FEDERAL RESERVE BOARD WASHINGTON, D.C. I, S.R. Carpenter, Assistant Secretary of the Federal Reserve Board, do hereby certify that it appears from the records of the Federal Reserve Board that: (1) Pursuant to authority vested in the Federal Reserve Board by an Act of Congress approved December 23, 1913, known as the Federal Reserve Act, as amended, the Federal Reserve Board has heretofore granted to the First National Bank of Ogden, Ogden, Utah, the right to act when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with national banks are permitted to act under the laws of the State of Utah; (2) On February 24, 1934, the First National Bank of Ogden, Ogden, Utah, changed its title to First Security Bank of Utah, National Association, under the provisions of an Act of Congress approved May 1, 1886, whereby all of the rights, liabilities and powers of such national bank under its old name devolved upon and inured to the bank under its new name; and (3) Pursuant to the permission heretofore granted by the Federal Reserve Board to the First National Bank of Ogden, Ogden, Utah, as aforesaid, and by virtue of the change in the title of such bank, the First Security Bank of Utah, National Association has authority to act, when not in contravention of State or local law, as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies or other corporations which come into competition with national banks are permitted to act under the laws of the State of Utah, subject to regulations prescribed by the Federal Reserve Board. IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the seal of the Federal Reserve Board to be affixed at the City of Washington, in the District of Columbia, on the 1st day of March, 1934. S.R. Carpenter ------------------------------------------- Assistant Secretary, Federal Reserve Board. FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD March 1, 1934. First Security Bank of Utah, National Association, Ogden, Utah. Dear Sirs: Reference is made to the change in the name of the First National Bank of Ogden, Ogden, Utah, pursuant to the provisions of the Act of May 1, 1886, to First Security Bank of Utah, National Association, and there is enclosed a certificate issued by the Federal Reserve Board showing the trust powers heretofore granted to the bank under its former name and that it is authorized to exercise such powers under its new name. Very truly yours, S.R. Carpenter S.R. Carpenter, Assistant Secretary. Enclosure [GRAPHIC OMITTED] - ----------------------------------------------------------------- Comptroller of the Currency Administrator of National Banks - ----------------------------------------------------------------- Licensing Unit (Applications) 50 Fremont Street, Suite 3900 San Francisco, CA 94105 (415) 545-5900, FAX (415) 545-5925 June 20, 1996 Board of Directors First Security Bank of Utah, N.A. c/o First Security Corporation Attn: Brad D. Hardy, EVP Post Office Box 30006 Salt Lake City, Utah 84130 Re: Merger - First Security Bank of Idaho, N.A., Boise, Idaho into First Security Bank of Utah, N.A., Ogden, Utah, under the title of First Security Bank, N.A., Odgen, Utah. Control No: 96-WE-02-010 Dear Members of the Board: This letter is the official certification of the Comptroller of the Currency to merge First Security Bank of Idaho, National Association, Boise, Idaho into First Security Bank of Utah, National Association, Ogden, Utah, effective as of June 21, 1996. The resulting bank title is First Security Bank, National Association and charter number is 2597. This is also the official authorization given to First Security Bank, National Association to operate the branches of the target institution and to operate the main office of the target institution as a branch. Branches of a national bank target are not listed since they are automatically carried over to the resulting bank and retain their current OCC branch numbers. Please be advised that the Charter Certificate for the merged bank, First Security Bank of Idaho, National Association, must be returned to the Western District Office for cancellation. Very truly yours, Robert G. Tornborg Robert G. Tornborg Acting Director of Bank Supervision - Compliance and Analysis EXHIBIT 4 BY-LAWS OF THE FIRST SECURITY BANK, NATIONAL ASSOCIATION Organized under the National Banking laws of the United States. MEETINGS -------- SECTION 1. Unless otherwise provided by the articles of association a notice of each shareholder's meeting, setting forth clearly the time, place and purpose of the meeting, shall be given, by mail, to each shareholder of record of this bank at lease 10 days prior to the date of such meeting. Any failure to mail such notice or any irregularity therein, shall not affect the validity of such meeting or of any of the proceedings thereat. SECTION 2. A record shall be made of the shareholders represented in person and by proxy, after which the shareholders shall proceed to the transaction of any business that may properly come before the meeting. A record of the shareholder's meeting, giving the names of the shareholders present and the number of shares of stock held by each, the names of the shareholders represented by proxy and the number of shares held by each, and the names of the proxies, shall be entered in the records of the meeting in the minute book of the bank. This record shall show the names of the shareholders and the number of shares voted for each resolution or voted for each candidate for director. Proxies shall be secured for the annual meeting alone, shall be dated, and shall be filed with the records of the meeting. No officer, director, employee, or attorney for the bank may act as proxy. The chairman or Secretary of the meeting shall notify the directors-elect of their election and of the time at which they are required to meet at the banking house for the purpose of organizing the new board. At the appointed time, which as closely as possible shall follow their election, the directors-elect shall convene and organize. The president or cashier shall then forward to the office of the Comptroller of the Currency a letter stating that a meeting of the shareholders was held in accordance with these by-laws, stating the number of shares represented in person and the number of shares represented by proxy, together with a list of the directors elected and the report of the appointment and signatures of officers. OFFICERS -------- SECTION 3. Each officer and employee of this bank shall be responsible for all such moneys, funds, valuables, and property of every kind as may be entrusted to his care or otherwise come into his possession, and shall faithfully and honestly discharge his duties and apply and account for all such moneys, funds, valuables and other property that may come into his hands as such officer or employee and pay over and deliver the same to the order of the Board of Directors or to such person or persons as may be authorized to demand and receive same. SECTION 4. If the Board of Directors shall not require separate bonds, it shall require a blanket bond in an amount deemed by it to be sufficient. SECTION 5. The following is an impression of the seal adopted by the Board of Directors of this bank: (Here in the original resolution was imprinted the Association's seal). SECTION 6. The various branches of this bank shall be open for business during such hours as shall be customary in the vicinity, or as shall be fixed, as to any branch, by the clearing house association of which such branch shall be a member. SECTION 7. The regular meeting of the board of directors shall be held on the first Wednesday after the first Tuesday of each month. When any regular meeting of the board of directors falls upon a holiday, the meeting shall be held on such other day as the board may previously designate. Special meetings may be called by the president, any vice-president, the secretary or the cashier, or at the request of three or more directors. MINUTE BOOK ----------- SECTION 8. The organization papers of this bank, the returns of the elections, the proceedings of all regular and special meetings of the directors and of the shareholders, the by-laws and any amendments thereto, and reports of the committees of directors shall be recorded in the minute book; and the minutes of each meeting shall be signed by the chairman and attest by the secretary of the meeting. TRANSFERS OF STOCK ------------------ SECTION 9. The stock of this bank shall be assignable and transferable only on the books of this bank, subject to the restrictions and provisions of the national banking laws; and a transfer book shall be provided in which all assignments and transfers of stock shall be made. SECTION 10. Certificates of stock, signed by the president or vice-president, and the secretary or the cashier or any assistant cashier, may be issued to shareholders, and when stock is transferred the certificates thereof shall be returned to the association, cancelled, preserved, and new certificates issued. Certificates of stock shall state upon the face thereof that the stock is transferable only upon the books of the association, and shall meet the requirements of section 5139, United States Revised Statutes, as amended. EXPENSES -------- SECTION 11. All the current expenses of the bank shall be paid by the cashier, except that the current expenses of each branch shall be paid by the manager thereof; and such officer shall, every six months, or more often if required, make to the board a report thereof. EXAMINATIONS ------------ SECTION 12. There shall be appointed by the board of directors a committee of three members, exclusive of the active officers of the bank, whose duty it shall be to examine, at least once in each period of eighteen months, the affairs of each branch as well as the head office of the association, count its cash, and compare its assets and liabilities with the accounts of the general ledgers, ascertain whether the accounts are correctly kept and that the condition of the bank corresponds therewith, and whether the bank is in a sound and solvent condition, and to recommend to the board such changes in the manner of doing business, etc., as shall seem to be desirable, the result of which examination shall be reported in writing to the board at the next regular meeting thereafter, provided that the appointment of such committee and the examinations by it may be dispensed with if the board shall cause such examination to be made and reported to the board by accountants approved by it. CHANGES IN BY-LAWS ------------------ SECTION 13. These by-laws may be changed or amended by the vote of a majority of the directors at any regular or special meeting of the board, provided, however, that the directors shall have been given 10 days notice of the intention to change or offer an amended thereto. REPEAL ------ SECTION 14. All by-laws heretofore adopted are repealed. First Security Bank, N.A. P.O. Box 30011 Salt Lake City, UT 84130 EXHIBIT 7 Call Date 03/31/97 ST-BK: 49-0290 FFIEC 031 Page R1-9 Vendor ID: D Cert: 13718 11 Transit Number: 12400001 Transmitted to EDS as 0042861 on 04/30/97 at 19:02:11 CST Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for March 31,1997 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. Schedule RC - Balance Sheet C400 Dollar amounts in thousands - ------------------------------------------------------------------------------- ASSETS 1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD ---- a. Noninterest-bearing balances and currency and coin(1) .......................... 0081 .... 655,052 1.a b. Interest-bearing balances(2) .................. 0071 .... 67 1.b 2. Securities: a. Held-to-maturity securities (from Schedule RC-B, column A) ................ 1754 .... 0 2.a b. Available-for-sale securities (from Schedule RC-B, column B) ................ 1773 ....2,180,112 2.b 3. Federal funds sold and securities purchased under agreements to resell ............. 1350 .... 66,178 3. 4. Loans and lease financing receivables: RCFD ---- a. Loans and leases, net of unearned income (from Schedule RC-C) ....................... 2122 ..7,516,685 ..... 4.a b. LESS: Allowance for loan and lease losses .. 3123 .. 99,148 ..... 4.b c. LESS: Allocated transfer risk revserve ..... 3128 .. 0 ..... 4.c d. Loans and leases, nor of unearned income, allowance, and reserve (items 4.a minus 4.b and 4.c) .................................. 2125 ....7,417,537 4.d 5. Trading assets (from Schedule RC-D) .............. 3545 .... 388,486 5. 6. Premises and fixed assets (including capitalized leases) .............................. 2145 .... 174,816 6. 7. Other real esate owned (from Schedule RC-W) ...... 2150 .... 825 7. 8. Investements in unconsolidated subsidiaries and associated companies (from Schedule RC-M) ........ 2130 .... 0 8. 9. Customers' liability to this bank on acceptances oustanding ....................................... 2155 .... 803 9. 10. Intangible assets (from Scheule RC-W) ............ 2143 .... 157,257 10. 11. Other assets (from Schedule RC-F) ................ 2160 .... 332,647 11. 12. Total assets (sum of items 1 through 11) ......... 2170 ....11,373,780 12. - --------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. First Security Bank, N.A. P.O. Box 30011 Salt Lake City, UT 84130 EXHIBIT 7 Call Date 03/31/97 ST-BK: 49-0290 FFIEC 031 Page R1-10 Vendor ID: D Cert: 13718 12 Transit Number: 12400001 Transmitted to EDS as 0042861 on 04/30/97 at 19:02:11 CST Schedule RC - Continued Dollar Amounts in Thousands - ------------------------------------------------------------------------------- LIABILITIES: 13. Deposits: RCON ---- a. In domestic offices (sum of totals columns A and C from Schedule RC-E, part 1) ...................................... 2200 ...7,079,084 13.a RCON ---- (1) Noninterest-bearing (1) ........6631 ...1,582,595 13.a.1 (2) Interest-bearing ...............6636 ...5,496,489 13.a.2 RCFN ---- b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, part 11) .............................. 2200 51,656 13.b RCFN ---- (1) Noninterest-bearing (1) ........6631 ... 0 ........... 13.b.1 (2) Interest-bearing ...............6636 ... 51,656 ........... 13.b.2 RCFD ---- 14. Federal funds purchased and securities sold under agreements to repurchase ............... 2800 ...1,987,674 14. RCDN ---- 15. a. Demand notes issued to the U.S. Treasury ................................. 2840 ... 20,244 15.a RCFD ---- b. Trading liabilities (from Schedule RC-D) .................................... 3548 ... 130 15.b 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized Leases: ..................................... a. with a remaining maturity of one year or less .............................. 2332 ... 552,757 16.a b. With a remaining maturity of more than one year ............................. 2333 ... 353,202 16.b 17. Not applicable. 18. Bank's liability on acceptances executed and oustanding ..................... 2920 ... 803 18. 19.Subordianted notes and debentures(2) .......... 3200 ... 45,000 19. 20. Other liabilities (from Schedule RC-G) ......... 2930 ... 362,343 20. 21. Total liabilities (sum of items 13 through 20) .................................... 2948 .10,452,893 21. 22. Not applicable. EQUITY CAPITAL RCFD ---- 23. Perpetual preferred stock and related surplus ....................................... 3838 ... 0 23. 24. Common stock .................................. 3230 ... 59,270 24. 25. Surplus (exclude all surplus related to preferred stock) .......................... 3839 285,944 25. 26. a. Undivided profits and capital reserves .... 3632 ... 590,530 26.a b. Net unrealized holding gains (losses) on available-for-sale securities .......... 8434 ...( 14,857) 26.b 27. Cumulative foreign currency translation adjustments .................................. 3284 ... 0 27. 28. Total equity capital (sum of items 23 through 27) .................................. 3210 ... 920,887 28. 29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21 and 28) .. 3300..11,373,780 29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number RCFD Number ---- ------ of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as of any date during 1996 .. 6724 2 M.1 1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 = Review of the bank's financial statements by external auditors 6 = Compilation of the bank's financial statements by external auditors 7 = Other audit procedures (excluding tax preparation work) 8 = No external audit work - ------------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. (2) Includes limited-life preferred stock and related surplus. EX-99.1 11 CGSH Draft 7/8/98 LETTER OF TRANSMITTAL Offer to Exchange 10 1/4% Senior Secured Notes due 2003, which have been registered under the Securities Act of 1933, as amended, for any and all outstanding 10 1/4% Senior Secured Notes due 2003 of Trans World Airlines, Inc. THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON _______, 1998 (THE "EXPIRATION DATE") UNLESS EXTENDED BY TRANS WORLD AIRLINES, INC. EXCHANGE AGENT: FIRST SECURITY BANK, NATIONAL ASSOCIATION By Hand or Overnight By Registered or Delivery: Certified Mail: First Security Bank, First Security Bank, National Association National Association Corporate Trust Department Corporate Trust Department 79 South Main Street 79 South Main Street Salt Lake City, Utah 84111 Salt Lake City, Utah 84111 Facsimile Transmissions: (Eligible Institutions Only) (801) 246-5053 To Confirm by Telephone or for Information Call: (801) 246-5630 Delivery of this Letter of Transmittal to an address other than as set forth above or transmission of this letter of transmittal via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery. The undersigned acknowledges receipt of the Prospectus dated July __, 1998 (the "Prospectus") of Trans World Airlines, Inc. (the "Company") which, together with this Letter of Transmittal (the "Letter of Transmittal"), describes the Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of 10 1/4% Senior Secured Notes due 2003 (the "Exchange Notes") for each $1,000 in principal amount of outstanding 10 1/4% Senior Secured Notes due 2003 (the "Old Notes"). The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the offering of the Exchange Notes will have been registered under the Securities Act of 1933, as amended, and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and certain provisions relating to an increase in the stated rate of interest shall be eliminated. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amounts should be listed on a separate signed schedule affixed hereto. - ------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES TENDERED HEREWITH - ------------------------------------------------------------------------------- Name(s) and Address(es) of | Certificates(s) Tendered Registered Holder(s) | (Attach Signed List (Please fill in) | if Necessary) - ------------------------------------------------------------------------------- | | Aggregate | | | Principle | | | Amount | | | Repre- | Principal | Certificate | sented by | Amount | Holders(s)* | Old Notes* | Tendered** |_____________|_____________|_____________ |_____________|_____________|_____________ |_____________|_____________|_____________ |_____________|_____________|_____________ |_____________|_____________|_____________ |_____________|_____________|_____________ | Total | | - ------------------------------------------------------------------------------- * Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by Old Notes. See Instruction 2. - ------------------------------------------------------------------------------- This Letter of Transmittal is to be used either if certificates for Old Notes are to be forwarded herewith or if delivery of Old Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in "The Exchange Offer--Book-Entry Transfer" in the Prospectus. Delivery of documents to a book-entry transfer facility does not constitute delivery to the Exchange Agent. Unless the context requires otherwise, the term "Holder" for purposes of this Letter of Transmittal means any person in whose name Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder or any person whose Old Notes are held of record by DTC or its nominee who desire to deliver such Old Notes by book-entry transfer at DTC. Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date may tender their Old Notes according to the guaranteed delivery procedure set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." 2 |_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING: Name of Tendering Institution____________________________________ _________________________________________________________________ The Depository Trust Company Account Number___________________________________________________ Transaction Code Number__________________________________________ |_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s)_____________________________________ _________________________________________________________________ Name of Eligible Institution that Guaranteed Delivery _________________________________________________________________ If Delivered by Book-Entry Transfer: Account Number___________________________________________________ |_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:____________________________________________________________ Address:_________________________________________________________ _________________________________________________________________ 3 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the above-described principal amount of Old Notes. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered herewith, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent acts as the agent of the undersigned in connection with the Exchange Offer) to cause the Old Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Old Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered Old Notes or transfer ownership of such Old Notes on the account books maintained by The Depository Trust Company. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Exchange Offer." The undersigned recognizes as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Old Notes tendered hereby and, in such event, the Old Notes not exchanged will be returned to the undersigned at the address shown below the signature of the undersigned. By tendering, each holder of Old Notes represents to the Company that (i) the Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is such holder, (ii) neither the holder of Old Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Old Notes, neither the holder nor any such other person is engaged in or intends to participate in a distribution of the Exchange Notes and (iv) neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act of 1933, as amended (the "Act"), or if such holder is an "affiliate," that such holder will comply with the registration and prospectus delivery requirements of the Act to the extent applicable. If the tendering holder is a broker-dealer (whether or not it is also an "affiliate") that will receive Exchange Notes for its own account in exchange for Old Notes, it represents that the Old Notes to be exchanged for the Exchange Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledges that it will deliver a prospectus meeting the requirements of the Act in connection with any resale of such Exchange Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Act in connection with any resale of such Exchange Notes, the undersigned is not deemed to admit that it is an "underwriter" within the meaning of the Act. All authority herein conferred or agreed to be conferred shall survive the death, bankruptcy or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Old Notes may be withdrawn at any time prior to the Expiration Date. 4 Certificates for all Exchange Notes delivered in exchange for tendered Old Notes or for any Old Notes delivered herewith but not exchanged, in each case registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. TENDERING HOLDER(S) SIGN HERE ______________________________________________________ ______________________________________________________ Signature(s) of Holder(s) Dated:____________, 1998 (Must be signed by registered holder(s) exactly as name(s) appear(s) on certificate(s) for Old Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith or, if the Old Notes are held of record by DTC or its nominee, the person in whose name such Old Notes are registered on the books of DTC. If signature by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person. See Instruction 3.) Name(s): ______________________________________________________ (Please print) Capacity (full title):________________________________ Address:______________________________________________ ______________________________________________________ (Including Zip Code) Area Code and Telephone No.___________________________ ______________________________________________________ Tax Identification No. GUARANTEE OF SIGNATURE(S) (If Required--See Instruction 3) Authorized Signature:_________________________________ Name:_________________________________________________ Title:________________________________________________ Address:______________________________________________ Name of Firm:_________________________________________ Area Code and Telephone No.___________________________ 5 Dated: July __, 1998 INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer 1. Delivery of this Letter of Transmittal and Certificates. Certificates for physically delivered Old Notes or confirmation of any book-entry transfer to the Exchange Agent's account at The Depository Trust Company of Old Notes tendered by book-entry transfer, as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile thereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein on or prior to the Expiration Date. The method of delivery of this Letter of Transmittal, the Old Notes and any other required documents is at the election and risk of the holder and, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. If such delivery is by mail, it is suggested that registered mail with return receipt requested, properly insured, be used. Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis may tender their Old Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution (as defined therein); (ii) on or prior to the Expiration Date the Exchange Agent must have received from such Eligible Institution, a letter, telegram or facsimile transmission setting forth the name and address of the tendering holder, the names in which such Old Notes are registered, if possible, the certificate numbers of the Old Notes to be tendered, and the principal amount at maturity of Old Notes tendered; and (iii) all tendered Old Notes (or a confirmation of any book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal must be received by the Exchange Agent within three American Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission, all as provided in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Old Notes for exchange. 2. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted in all denominations of $1,000 and integral multiples in excess thereof. If less than the entire principal amount of Old Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the principal amount tendered in the box entitled "Principal Amount Tendered." A newly issued certificate for the principal amount of Old Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. To be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent. Any such notice of withdrawal must specify the person named in the Letter of Transmittal as having tendered Old Notes to be withdrawn, identify the Old Notes to be withdrawn (including the certificate number and the principal amount of Old Notes delivered for exchange), include a statement that such holder is withdrawing its election to have such Old Notes exchanged and the name of the registered holder of such Old Notes, and be signed by the holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to the Company that the person withdrawing the tender has succeeded to the beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will return the properly withdrawn Old Notes promptly following receipt of notice of withdrawal. If Old Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must 6 specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn Old Notes or otherwise comply with The Depository Trust Company's procedures. 3. Signature on this Letter of Transmittal; Written Instruments and Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of certificates without alteration, enlargement or any change whatsoever. If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Old Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Old Notes. When this Letter of Transmittal is signed by the registered holder or holders of Old Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Old Notes listed, such Notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Old Notes. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal need not be guaranteed by an Eligible Institution, provided the Old Notes are tendered: (i) by a registered holder of such Old Notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter of Transmittal where the certificates for Exchange Notes to be issued in exchange therefor are to be issued (or any untendered amount of Old Notes are to be reissued) to the registered holder; or (ii) for the account of any Eligible Institution. 4. Transfer Taxes. The Company shall pay all transfer taxes, if any, applicable to the transfer and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If, however, Exchange Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 4, it will not be necessary for transfer tax stamps to be affixed to the Old Notes listed in this Letter of Transmittal. 5. Waiver of Conditions. The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 6. Mutilated, Lost, Stolen or Destroyed Notes. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated below for further instructions. 7 7. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth below. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Company at One City Centre, 515 N. Sixth Street, St. Louis, Missouri 63101, Attention: Paul Rutterer. 8. Irregularities. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittal or Old Notes will be resolved by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of the Company's counsel, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to the particular Old Notes covered by any Letter of Transmittal or tendered pursuant to such letter. None of the Company, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Company's interpretation of the terms and conditions of the Exchange Offer shall be final and binding. 9. Definitions. Capitalized terms used in this Letter of Transmittal and not otherwise defined have the meanings given to such terms in the Prospectus. IMPORTANT: This Letter of Transmittal or a facsimile thereof (together with certificates for Old Notes or confirmation of book-entry transfer and all other required documents) or a Notice of Guaranteed Delivery must be received by the Exchange Agent on or prior to the Expiration Date. 8 EX-99.2 12 CGSH Draft 7/8/98 NOTICE OF GUARANTEED DELIVERY for Offer to Exchange 101/4% Senior Secured Notes due 2003, which have been registered under the Securities Act of 1933, as amended, for any and all outstanding 101/4% Senior Secured Notes due 2003 of Trans World Airlines, Inc. Registered holders of outstanding 10 1/4% Senior Secured Notes due 2003 (the "Old Notes") who wish to tender their Old Notes in exchange for a like principal amount of 10 1/4% Senior Secured Notes due 2003 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended, and, in each case, whose Old Notes are not immediately available or who cannot deliver their Old Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to First Security Bank, National Association (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand, sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight delivery) or mailed to the Exchange Agent. See "Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. The Exchange Agent for the Exchange Offer is: FIRST SECURITY BANK, NATIONAL ASSOCIATION By Hand or Overnight By Registered or Delivery: Certified Mail: First Security Bank, First Security Bank, National Association National Association Corporate Trust Department Corporate Trust Department 79 South Main Street 79 South Main Street Salt Lake City, Utah 84111 Salt Lake City, Utah 84111 Facsimile Transmissions: Facsimile Transmissions: (Eligible Institutions Only) (801) 246-5053 To Confirm by Telephone or for Information Call: (801) 246-5630 Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission of instructions via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution, such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (Not to be used for signature guarantee) The undersigned, a firm that is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch, agency or correspondent in the United States, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth above, the certificates representing the Old Notes, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three American Stock Exchange trading days after the date of execution of this Notice of Guaranteed Delivery. Name of Firm:_________________ ________________________________ Authorized Signature Address:______________________ Title___________________________ ______________________________ Name:___________________________ (Zip Code) (Please type or print) Area Code and Telephone Number: Date:___________________________ ______________________________ NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.3 13 CGSH Draft 7/7/98 INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM OWNER of Trans World Airlines, Inc. 10 1/4% Senior Secured Notes due 2003 To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus dated July __, 1998 (the "Prospectus") of Trans World Airlines, Inc., a Delaware corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), which together constitute the Company's offer (the "Exchange Offer"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to the action to be taken by you relating to the Exchange Offer with respect to the Old Notes held by you for the account of the undersigned. The aggregate face amount in the Old Notes held by you for the account of the undersigned is (fill in amount): $ ___________ of the 10 1/4% Senior Secured Notes due 2003 With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): |_| To TENDER the following Old Notes held by you for the account of the undersigned (insert principal amount of Old Notes to be tendered, if any): $ ____________ of the 10 1/4% Senior Secured Notes due 2003 |_| NOT to TENDER any Old Notes held by you for the account of the undersigned. If the undersigned instructs you to tender the Old Notes held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representation and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the undersigned, (ii) if the undersigned is not a broker-dealer, or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Old Notes, neither the undersigned nor any such other person is engaged in or intends to participate in the distribution of such Exchange Notes, (iii) neither the undersigned nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes, and (iv) neither the undersigned nor any such person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), or if the undersigned is an "affiliate," that the undersigned will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the undersigned is a broker-dealer (whether or not it is also an "affiliate") that will receive Exchange Notes for its own account in exchange for Old Notes, it represents that such Old Notes were acquired as a result of market-making activities or other trading activities, and it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, the undersigned is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act. SIGN HERE Name of beneficial owner(s):_______________________________ Signature(s):______________________________________________ Name(s) (please print):____________________________________ Address:___________________________________________________ ___________________________________________________________ Telephone Number:__________________________________________ Taxpayer Identification or Social Security Number:_________ ___________________________________________________________ ___________________________________________________________ Date:______________________________________________________ 2 EX-99.4 14 CGSH Draft 7/8/98 Offer to Exchange 10 1/4% Senior Secured Notes due 2003, which have been registered under the Securities Act of 1933, as amended, for any and all outstanding 10 1/4% Senior Secured Notes due 2003 of Trans World Airlines, Inc. To Registered Holders and The Depository Trust Company Participants: We are enclosing herewith the material listed below relating to the offer by Trans World Airlines, Inc., a Delaware corporation (the "Company"), to exchange its 10 1/4% Senior Secured Notes due 2003 (the "Exchange Notes"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 10 1/4% Senior Secured Notes due 2003 (the "Old Notes") upon the terms and subject to the conditions set forth in the Company's Prospectus, dated July __, 1998, and the related Letter of Transmittal (which together constitute the "Exchange Offer"). Enclosed herewith are copies of the following documents: 1. Prospectus dated July __, 1998; 2. Letter of Transmittal; 3. Notice of Guaranteed Delivery; 4. Instruction to Registered Holder and/or Book-Entry Transfer Participant from Owner; and 5. Letter which may be sent to your clients for whose account you hold Old Notes in your name or in the name of your nominee, to accompany the instruction form referred to above, for obtaining such client's instruction with regard to the Exchange Offer. WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____________________, 1998, UNLESS EXTENDED. The Exchange Offer is not conditioned upon any minimum number of Old Notes being tendered. Pursuant to the Letter of Transmittal, each holder of Old Notes will represent to the Company, among other things, that (i) the Exchange Notes acquired in the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is such holder, (ii) neither the holder of the Old Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Old Notes, neither the holder nor any such other person is engaged in or intends to participate in a distribution of the Exchange Notes and (iv) neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or if such holder is an "affiliate," that such holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the tendering holder is a broker-dealer (whether or not it is also an "affiliate") that will receive Exchange Notes for its own account in exchange for Old Notes, such holder will represent on behalf of such broker-dealer that the Old Notes to be exchanged for the Exchange Notes were acquired by it as a result of market- making activities or other trading activities, and acknowledge on behalf of such broker-dealer that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, the undersigned is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The enclosed Instruction to Registered Holder and/or Book-Entry Transfer Participant from Owner contains an authorization by the beneficial owners of the Old Notes for you to make the foregoing representations. The Company will not pay any fee or commission to any broker or dealer or to any other persons (other than the Exchange Agent) in connection with the solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Company will pay or cause to be paid any transfer taxes payable on the transfer of Old Notes to it, except as otherwise provided in Instruction 4 of the enclosed Letter of Transmittal. Additional copies of the enclosed material may be obtained from the undersigned. Very truly yours, FIRST SECURITY BANK, NATIONAL ASSOCIATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF TRANS WORLD AIRLINES, INC. OR FIRST SECURITY BANK, NATIONAL ASSOCIATION OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.5 15 CGSH Draft 7/8/98 Offer to Exchange 10 1/4% Senior Secured Notes due 2003, which have been registered under the Securities Act of 1993, as amended, for any and all outstanding 10 1/4% Senior Secured Notes due 2003 of Trans World Airlines, Inc. To Our Clients: We are enclosing herewith a Prospectus, dated July __, 1998, of Trans World Airlines, Inc. (the "Company"), a Delaware corporation, and a related Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by the Company to exchange its 10 1/4% Senior Secured Notes due 2003 (the "Exchange Notes"), pursuant to an offering registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its issued and outstanding 10 1/4% Senior Secured Notes due 2003 (the "Old Notes") upon the terms and subject to the conditions set forth in the Exchange Offer. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______, 1998, UNLESS EXTENDED. The Exchange Offer is not conditioned upon any minimum number of Old Notes being tendered. We are the holder of record and/or participant in the book-entry transfer facility of Old Notes held by us for your account. A tender of such Old Notes can be made only by us as the record holder and/or participant in the book-entry transfer facility and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Old Notes held by us for your account. We request instructions as to whether you wish to tender any or all of the Old Notes held by us for your account pursuant to the terms and conditions of the Exchange Offer. We also request that you confirm that we may on your behalf make the representations contained in the Letter of Transmittal. Pursuant to the Letter of Transmittal, each holder of Old Notes will represent to the Company, among other things, that (i) the Exchange Notes acquired in the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is such holder, (ii) neither the holder of the Old Notes nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but will not receive Exchange Notes for its own account in exchange for Old Notes, neither the holder nor any such other person is engaged in or intends to participate in a distribution of the Exchange Notes and (iv) neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or if such holder is an "affiliate," that such holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If the tendering holder is a broker-dealer (whether or not it is also an "affiliate") that will receive Exchange Notes for its own account in exchange for Old Notes, we will represent on behalf of such broker-dealer that the Old Notes to be exchanged for the Exchange Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledge on behalf of such broker-dealer that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. By acknowledging that it will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes, the undersigned is not deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Very truly yours, -----END PRIVACY-ENHANCED MESSAGE-----